---

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-Q

(Mark One)

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2008

[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission file number 000-30299

LIGHTSCAPE TECHNOLOGIES
INC.(Exact name of registrant as specified in its charter)

|Nevada                                                               | 98-0217653                          
|-------------------------------------------------------------------- | ------------------------------------
|(State or other jurisdiction of incorporation or
      organization) | (I.R.S. Employer Identification No.)

18/F., 318 Hennessy Road, W Square, Wanchai, Hong Kong(Address of principal executive offices)

(852) 2546-1808(Registrants telephone
number, including area code)

N/A(Former name, former address and former
fiscal year, if changed since last report)

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

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

|Large accelerated filer    [  
    ]   |                                                     | Accelerated
      filer                    [  
      ]
|-------------------------------------- | --------------------------------------------------- | ------------------------------------------------------
|                                       |                                                     |                                                       
|Non-accelerated
      filer      [   ] | (Do not
      check if a smaller reporting company) | Smaller reporting company 
  [X]                      

---

- 2 -

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

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the
issuers classes of common stock, as of the latest practicable date:
55,876,410 shares of common stock issued and outstanding as of February 1, 2009.

---

- 3 -

|PART I - FINANCIAL
      INFORMATION                                                                                                                    
|--------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                        
|Item 1. Unaudited
      Consolidated Financial Statements.                                                                                              
|                                                                                                                                                        
|Consolidated
      Balance Sheets as at December 31, 2008 and March 31, 2008                                                                            
|                                                                                                                                                        
|Consolidated Statements of Operations for the three months
      and nine months ended December 31, 2008 and 2007                                       
|                                                                                                                                                        
|Consolidated Statements of Shareholders Equity and
      Comprehensive Income (Loss) for the three months and nine months ended December
      31, 2008
|                                                                                                                                                        
|Consolidated
      Statements of Cash Flows for the nine months ended December 31, 2008 and
      2007                                                  
|                                                                                                                                                        
|Notes
      to Unaudited Consolidated Financial Statements                                                                                              
|                                                                                                                                                        
|Item 2. Managements
      Discussion and Analysis of Financial Condition and Results of
      Operations.                                              
|                                                                                                                                                        
|Item 3. Quantitative
      and Qualitative Disclosures About Market Risk.                                                                               
|                                                                                                                                                        
|Item 4T. Controls and
      Procedures.                                                                                                                 
|                                                                                                                                                        
|PART II - OTHER
      INFORMATION                                                                                                                       
|                                                                                                                                                        
|Item 1. Legal
      Proceedings.                                                                                                                        
|                                                                                                                                                        
|Item 1A. Risk
      Factors.                                                                                                                            
|                                                                                                                                                        
|Item 2. Unregistered
      Sales of Equity Securities and Use of Proceeds.                                                                              
|                                                                                                                                                        
|Item 3. Defaults Upon
      Senior Securities.                                                                                                          
|                                                                                                                                                        
|Item 4. Submission of
      Matters to a Vote of Security Holders.                                                                                      
|                                                                                                                                                        
|Item 5. Other
      Information.                                                                                                                        
|                                                                                                                                                        
|Item 6. Exhibits.                                                                                                                                       

---

- 4 -

Item 1. Financial Statements.











LIGHTSCAPE TECHNOLOGIES INC. AND SUBISIDIARIES INTERIM
CONSOLIDATED FINANCIAL STATEMENTSFOR THE THREE MONTHS AND NINE
MONTHS ENDED DECEMBER 31, 2008 UNAUDITED

---

- 5 -

|LIGHTSCAPE TECHNOLOGIES INC. AND SUBSIDIARIES
|---------------------------------------------
|                                             
|CONSOLIDATED BALANCE SHEETS                  
|Expressed in US
      dollars                

|                                                                        |  | December 31, |  |  | March 31,  | 
|----------------------------------------------------------------------- |  | ------------ |  |  | ---------- | 
|                                                                        |  | 2008         |  |  | 2008       | 
|                                                                        |  | (Unaudited)  |  |  |            | 
|                                                                        |  | $            |  |  | $          | 
|ASSETS                                                                  |  |              |  |  |            | 
|Current assets:                                                         |  |              |  |  |            | 
|Cash and cash
      equivalents                                         |  | 1,545,038    |  |  | 3,976,565  | 
|Accounts receivable, net of
      allowance for doubtful accounts       |  |              |  |  |            | 
|of
      $839,180 on December 31, 2008 and $817,790 on March 31,        |  |              |  |  |            | 
|2008                                                                    |  | 3,289,828    |  |  | 4,438,207  | 
|Costs and
      estimated earnings in excess of billings on uncompleted |  |              |  |  |            | 
|Contracts                                                               |  | 137,617      |  |  | 639,035    | 
|Prepaid expenses
      and other current assets                         |  | 4,086,633    |  |  | 1,742,031  | 
|Inventories                                                             |  | 3,713,141    |  |  | 3,903,798  | 
|Current assets
      of discontinued operations                         |  | 725,001      |  |  | 699,847    | 
|                                                                        |  |              |  |  |            | 
|Total current assets                                                    |  | 13,497,258   |  |  | 15,399,483 | 
|                                                                        |  |              |  |  |            | 
|Intangible assets, net                                                  |  | 1,149,987    |  |  | 1,700,114  | 
|Goodwill                                                                |  | 4,476,574    |  |  | 4,476,574  | 
|Plant and equipment, net                                                |  | 4,805,043    |  |  | 4,650,398  | 
|Net investment in sales-type leases of discontinued
      operations    |  | 58,484       |  |  | 126,521    | 
|                                                                        |  |              |  |  |            | 
|                                                                        |  | 10,490,088   |  |  | 10,953,607 | 
|                                                                        |  |              |  |  |            | 
|TOTAL ASSETS                                                            |  | 23,987,346   |  |  | 26,353,090 | 
|                                                                        |  |              |  |  |            | 
|LIABILITIES AND SHAREHOLDERS EQUITY                                    |  |              |  |  |            | 
|Current liabilities:                                                    |  |              |  |  |            | 
|Bank loans  current portion                                            |  | 49,311       |  |  | -          | 
|Trade payables                                                          |  | 1,461,240    |  |  | 2,413,203  | 
|Amount due to a director                                                |  | 771,208      |  |  | -          | 
|Amount due to a
      director of a subsidiary                          |  | 150,965      |  |  | -          | 
|Accrued expenses and other
      current liabilities                    |  | 1,419,698    |  |  | 763,797    | 
|Obligations
      under capital leases  current portion                |  | 11,196       |  |  | 1,774      | 
|Income tax payable                                                      |  | 10,606       |  |  | 366,281    | 
|Current
      liabilities of discontinued operations                    |  | 276,455      |  |  | 364,191    | 
|                                                                        |  |              |  |  |            | 
|Total current liabilities                                               |  | 4,150,679    |  |  | 3,909,246  | 
|                                                                        |  |              |  |  |            | 
|Non-current liabilities:                                                |  |              |  |  |            | 
|Bank loans  long-term portion                                          |  | 35,806       |  |  | -          | 
|Obligations
      under capital leases  non-current portion            |  | 4,434        |  |  | 5,469      | 
|                                                                        |  |              |  |  |            | 
|Total non-current liabilities                                           |  | 40,240       |  |  | 5,469      | 
|                                                                        |  |              |  |  |            | 
|Total liabilities                                                       |  | 4,190,919    |  |  | 3,914,715  | 

---

- 6 -

|LIGHTSCAPE TECHNOLOGIES INC. AND SUBSIDIARIES
|---------------------------------------------
|                                             
|CONSOLIDATED BALANCE SHEETS (continued)      
|Expressed in US
      dollars                

|                                                          |  | December 31, |   |  | March 31,   |  
|--------------------------------------------------------- |  | ------------ | - |  | ----------- | -
|                                                          |  | 2008         |   |  | 2008        |  
|                                                          |  | (Unaudited)  |   |  |             |  
|                                                          |  | $            |   |  | $           |  
|                                                          |  |              |   |  |             |  
|Minority interest                                         |  | 1,313,539    |   |  | 1,421,702   |  
|                                                          |  |              |   |  |             |  
|COMMITMENTS (see Note 18)                                 |  |              |   |  |             |  
|                                                          |  |              |   |  |             |  
|Shareholders equity:                                     |  |              |   |  |             |  
|Preferred stock, par value of $0.001 each;                |  |              |   |  |             |  
|100,000,000 shares authorized, none issued or outstanding |  |              |   |  |             |  
|                                                          |  |              |   |  |             |  
|Common stock                                              |  |              |   |  |             |  
|Authorized:                                               |  |              |   |  |             |  
|800,000,000 common shares, par value $0.001 per share     |  |              |   |  |             |  
|Issued and
      outstanding:                             |  |              |   |  |             |  
|55,876,410 common shares at December 31, 2008 and at      |  |              |   |  |             |  
|March 31, 2008                                            |  | 55,876       |   |  | 55,876      |  
|Additional paid-in capital                                |  | 34,140,708   |   |  | 34,140,708  |  
|Common stock warrants (see Note 21)                       |  | 344,673      |   |  | 344,673     |  
|Statutory surplus reserves                                |  | 28,944       |   |  | 28,944      |  
|Accumulated other comprehensive income                    |  | 1,069,878    |   |  | 1,082,442   |  
|Accumulated deficit                                       |  | (17,157,191  | ) |  | (14,635,970 | )
|                                                          |  |              |   |  |             |  
|Total shareholders equity                                |  | 18,482,888   |   |  | 21,016,673  |  
|                                                          |  |              |   |  |             |  
|TOTAL LIABILITIES AND SHAREHOLDERS EQUITY                |  | 23,987,346   |   |  | 26,353,090  |  

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

---

- 7 -

|LIGHTSCAPE TECHNOLOGIES INC. AND SUBSIDIARIES                     
|------------------------------------------------------------------
|                                                                  
|CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)                 
|Expressed in US
      dollars (except for number of common shares)

|                                                      |  | Three Months Ended |   |  | Nine Months Ended |  
|----------------------------------------------------- |  | ------------------ | - |  | ----------------- | -
|                                                      |  | December 31,       |   |  | December 31,      |  
|                                                      |  | 2008               |   |  | 2007              |  
|                                                      |  | $                  |   |  | $                 |  
|Revenues:                                             |  |                    |   |  |                   |  
|Advertising revenue                                   |  | -                  |   |  | -                 |  
|LED solutions revenue                                 |  | 1,406,668          |   |  | 2,975,913         |  
|Other revenue                                         |  | 294,631            |   |  | 641,281           |  
|                                                      |  |                    |   |  |                   |  
|Total net revenues                                    |  | 1,701,299          |   |  | 3,617,194         |  
|                                                      |  |                    |   |  |                   |  
|Cost of revenues:                                     |  |                    |   |  |                   |  
|Cost of sales of Advertising revenue                  |  | -                  |   |  | -                 |  
|Cost of sales of LED solutions revenue                |  | (870,190           | ) |  | (2,482,775        | )
|Contract costs of Other revenue                       |  | (244,244           | ) |  | (444,509          | )
|                                                      |  |                    |   |  |                   |  
|Total cost of revenues                                |  | (1,114,434         | ) |  | (2,927,284        | )
|                                                      |  |                    |   |  |                   |  
|Gross profit                                          |  | 586,865            |   |  | 689,910           |  
|                                                      |  |                    |   |  |                   |  
|Allowance for doubtful debts                          |  | 174,709            |   |  | -                 |  
|Amortization                                          |  | (184,928           | ) |  | (133,846          | )
|Depreciation                                          |  | (50,606            | ) |  | (77,561           | )
|Loss on disposal of property, plant and equipment     |  | (65,614            | ) |  | -                 |  
|Selling and marketing expenses                        |  | (276,204           | ) |  | (149,356          | )
|General and administrative expenses                   |  | (976,071           | ) |  | (844,309          | )
|                                                      |  |                    |   |  |                   |  
|Loss from operations                                  |  | (791,849           | ) |  | (515,162          | )
|                                                      |  |                    |   |  |                   |  
|Interest expense                                      |  | (12,726            | ) |  | (1,903            | )
|Interest income                                       |  | 183                |   |  | 3,619             |  
|Gain on redemption of redeemable convertible          |  |                    |   |  |                   |  
|notes and options                                     |  | -                  |   |  | -                 |  
|Other income                                          |  | 9,944              |   |  | 5,446             |  
|                                                      |  |                    |   |  |                   |  
|Loss from continuing operations before income tax     |  |                    |   |  |                   |  
|and minority interests                                |  | (794,448           | ) |  | (507,900          | )
|Income tax benefit                                    |  | 5,084              |   |  | -                 |  
|                                                      |  |                    |   |  |                   |  
|Net loss from continuing operations before            |  |                    |   |  |                   |  
|minority interests                                    |  | (789,364           | ) |  | (507,900          | )
|Minority interests                                    |  | 10,083             |   |  | 19,988            |  
|                                                      |  |                    |   |  |                   |  
|Net loss from continuing operations                   |  | (779,281           | ) |  | (487,912          | )
|                                                      |  |                    |   |  |                   |  
|Discontinued operations                               |  |                    |   |  |                   |  
|Net profit (loss) from discontinued
      operations, |  |                    |   |  |                   |  
|net of income taxes                                   |  | (8,748             | ) |  | (64,015           | )

---

- 8 -

|Net loss attributable to common
      shareholders |  | (788,029   | ) |  | (551,927   | ) |  | (2,521,221 | ) |  | (2,864,561 | )
|-------------------------------------------------- |  | ---------- | - |  | ---------- | - |  | ---------- | - |  | ---------- | -
|                                                   |  |            |   |  |            |   |  |            |   |  |            |  
|Loss per share                                     |  |            |   |  |            |   |  |            |   |  |            |  
|- Basic and diluted                                |  |            |   |  |            |   |  |            |   |  |            |  
|Continuing operations                              |  | (0.01      | ) |  | (0.01      | ) |  | (0.05      | ) |  | (0.07      | )
|Discontinued operations                            |  | -          |   |  | -          |   |  | -          |   |  | -          |  
|Total                                              |  | (0.01      | ) |  | (0.01      | ) |  | (0.05      | ) |  | (0.07      | )
|                                                   |  |            |   |  |            |   |  |            |   |  |            |  
|Weighted average number of common shares           |  |            |   |  |            |   |  |            |   |  |            |  
|outstanding                                        |  |            |   |  |            |   |  |            |   |  |            |  
|- Basic and diluted                                |  | 55,876,410 |   |  | 44,584,019 |   |  | 55,876,410 |   |  | 40,797,592 |  

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

---

- 9 -

|LIGHTSCAPE TECHNOLOGIES INC. AND SUBSIDIARIES                                        
|-------------------------------------------------------------------------------------
|                                                                                     
|CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY AND
      COMPREHENSIVE INCOME (LOSS)
|FOR THE THREE MONTHS AND NINE MONTHS ENDED DECEMBER 31,
      2008 (UNAUDITED)       
|Expressed in US
      dollars (except for number of common shares)                   

|                 |  |                     |  |  |        |  |  |          |  |  |            |  |  |                     |  |  | Total
      Comprehensive (Loss) Income |  |  |             |  
|---------------- |  | ------------------- |  |  | ------ |  |  | -------- |  |  | ---------- |  |  | ------------------- |  |  | --------------------------------------- |  |  | ----------- | -
|                 |  |                     |  |  |        |  |  |          |  |  |            |  |  |                     |  |  | Accumulated Other Comprehensive         |  |  |             |  
|                 |  | Common
      Shares |  |  |        |  |  |          |  |  |            |  |  | (Loss)
      Income |  |  |                                         |  |  |             |  
|                 |  |                     |  |  |        |  |  |          |  |  |            |  |  |                     |  |  |                                         |  |  | Foreign     |  
|                 |  |                     |  |  |        |  |  | Common   |  |  | Additional |  |  | Statutory           |  |  | Unrealized                              |  |  | Currency    |  
|                 |  |                     |  |  |        |  |  | Stock    |  |  | Paid-In    |  |  | Surplus             |  |  | Loss on                                 |  |  | Translation |  
|                 |  | Number              |  |  | Amount |  |  | Warrants |  |  | Capital    |  |  | Reserves            |  |  | Investments                             |  |  | Adjustment  |  
|                 |  |                     |  |  |        |  |  |          |  |  |            |  |  |                     |  |  |                                         |  |  |             |  
|Balance at       |  |                     |  |  |        |  |  |          |  |  |            |  |  |                     |  |  |                                         |  |  |             |  
|April 1, 2008    |  | 55,876,410          |  |  | 55,876 |  |  | 344,673  |  |  | 34,140,708 |  |  | 28,944              |  |  | -                                       |  |  | 1,082,442   |  
|                 |  |                     |  |  |        |  |  |          |  |  |            |  |  |                     |  |  |                                         |  |  |             |  
|Foreign currency |  |                     |  |  |        |  |  |          |  |  |            |  |  |                     |  |  |                                         |  |  |             |  
|translation      |  |                     |  |  |        |  |  |          |  |  |            |  |  |                     |  |  |                                         |  |  |             |  
|adjustment       |  | -                   |  |  | -      |  |  | -        |  |  | -          |  |  | -                   |  |  | -                                       |  |  | 153,294     |  
|Net loss         |  | -                   |  |  | -      |  |  | -        |  |  | -          |  |  | -                   |  |  | -                                       |  |  | -           |  
|                 |  |                     |  |  |        |  |  |          |  |  |            |  |  |                     |  |  |                                         |  |  |             |  
|Balance at       |  |                     |  |  |        |  |  |          |  |  |            |  |  |                     |  |  |                                         |  |  |             |  
|June 30, 2008    |  | 55,876,410          |  |  | 55,876 |  |  | 344,673  |  |  | 34,140,708 |  |  | 28,944              |  |  | -                                       |  |  | 1,235,736   |  
|                 |  |                     |  |  |        |  |  |          |  |  |            |  |  |                     |  |  |                                         |  |  |             |  
|Foreign currency |  |                     |  |  |        |  |  |          |  |  |            |  |  |                     |  |  |                                         |  |  |             |  
|translation      |  |                     |  |  |        |  |  |          |  |  |            |  |  |                     |  |  |                                         |  |  |             |  
|adjustment       |  | -                   |  |  | -      |  |  | -        |  |  | -          |  |  | -                   |  |  | -                                       |  |  | (33,374     | )
|Net loss         |  | -                   |  |  | -      |  |  | -        |  |  | -          |  |  | -                   |  |  | -                                       |  |  | -           |  
|                 |  |                     |  |  |        |  |  |          |  |  |            |  |  |                     |  |  |                                         |  |  |             |  
|Balance at       |  |                     |  |  |        |  |  |          |  |  |            |  |  |                     |  |  |                                         |  |  |             |  
|September 30,    |  |                     |  |  |        |  |  |          |  |  |            |  |  |                     |  |  |                                         |  |  |             |  
|2008             |  | 55,876,410          |  |  | 55,876 |  |  | 344,673  |  |  | 34,140,708 |  |  | 28,944              |  |  | -                                       |  |  | 1,202,362   |  
|                 |  |                     |  |  |        |  |  |          |  |  |            |  |  |                     |  |  |                                         |  |  |             |  
|Foreign currency |  |                     |  |  |        |  |  |          |  |  |            |  |  |                     |  |  |                                         |  |  |             |  
|translation      |  |                     |  |  |        |  |  |          |  |  |            |  |  |                     |  |  |                                         |  |  |             |  
|adjustment       |  | -                   |  |  | -      |  |  | -        |  |  | -          |  |  | -                   |  |  | -                                       |  |  | (132,484    | )
|Net loss         |  | -                   |  |  | -      |  |  | -        |  |  | -          |  |  | -                   |  |  | -                                       |  |  | -           |  
|                 |  |                     |  |  |        |  |  |          |  |  |            |  |  |                     |  |  |                                         |  |  |             |  
|Balance at       |  |                     |  |  |        |  |  |          |  |  |            |  |  |                     |  |  |                                         |  |  |             |  
|December 31,     |  |                     |  |  |        |  |  |          |  |  |            |  |  |                     |  |  |                                         |  |  |             |  
|2008             |  | 55,876,410          |  |  | 55,876 |  |  | 344,673  |  |  | 34,140,708 |  |  | 28,944              |  |  | -                                       |  |  | 1,069,878   |  

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

---

- 10 -

|LIGHTSCAPE TECHNOLOGIES INC. AND SUBSIDIARIES    
|-------------------------------------------------
|                                                 
|CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
|Expressed in US
      dollars                    

|                                                                                  |  | Nine Months        |  
|--------------------------------------------------------------------------------- |  | ------------------ | -
|                                                                                  |  | Ended December 31, |  
|                                                                                  |  | 2008               |  
|                                                                                  |  | $                  |  
|Cash flows from continuing operating activities:                                  |  |                    |  
|Net loss                                                                          |  | (2,532,307         | )
|                                                                                  |  |                    |  
|Adjustment to reconcile net loss from continuing operations
      to              |  |                    |  
|net cash (used in) generated from continuing
      operating activities:          |  |                    |  
|Amortization of intangible assets                                                 |  | 578,282            |  
|Depreciation expense                                                              |  | 393,895            |  
|Bad debts expense                                                                 |  | 72,244             |  
|Gain on redemption
      of redeemable convertible notes and options              |  |                    |  
|Loss on disposal of property, plant
      and equipment                           |  | 65,614             |  
|Minority interest                                                                 |  | (108,164           | )
|Changes in operating assets and liabilities, net of acquisitions:                 |  |                    |  
|Decrease (increase) in operating
      assets:                                    |  |                    |  
|Accounts receivable, net of allowance
      for doubtful debts                    |  | 1,542,187          |  
|Costs and estimated
      earnings in excess of billings on uncompleted contracts |  | 501,418            |  
|Prepaid expenses and other current
      assets                                   |  | (2,448,403         | )
|Inventories                                                                       |  | 233,049            |  
|Increase (decrease) in operating liabilities:                                     |  |                    |  
|Trade payables                                                                    |  | (974,133           | )
|Accrued expenses and other current
      liabilities                              |  | 265,004            |  
|Income tax payable                                                                |  | (371,260           | )
|                                                                                  |  |                    |  
|Net cash (used in) continuing operating activities                                |  | (2,782,574         | )
|Net cash provided by (used in) discontinued operating activities                  |  | 131,579            |  
|Net cash (used in) operating activities                                           |  | (2,650,995         | )
|                                                                                  |  |                    |  
|Cash flows from investing activities:                                             |  |                    |  
|Purchase of plant and equipment                                                   |  | (539,631           | )
|Purchase of intangible asset                                                      |  | (9,730             | )
|Acquisition of a subsidiary                                                       |  | 21,184             |  
|Increase in construction in progress                                              |  |                    |  
|                                                                                  |  |                    |  
|Net cash (used in) investing activities of
      continuing operations            |  | (528,177           | )
|Net cash provided by investing activities of discontinued operations              |  | -                  |  
|Net cash (used in) investing activities                                           |  | (528,177           | )

---

- 11 -

|LIGHTSCAPE TECHNOLOGIES INC. AND SUBSIDIARIES                      
|-------------------------------------------------------------------
|                                                                   
|CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
      (continued)
|Expressed in US
      dollars                                      

|                                                                   |  | Nine Months        |  
|------------------------------------------------------------------ |  | ------------------ | -
|                                                                   |  | Ended December 31, |  
|                                                                   |  | 2008               |  
|                                                                   |  | $                  |  
|                                                                   |  |                    |  
|Cash flows from financing activities:                              |  |                    |  
|Proceed from short-term borrowings                                 |  | 400,896            |  
|Repayment of short-term borrowings                                 |  | (400,896           | )
|Repayment of bank loans                                            |  | (21,472            | )
|Repayment of capital lease obligations                             |  | (2,565             | )
|Net proceeds from issuance of share capital                        |  | -                  |  
|Early redemption of redeemable convertible notes                   |  | -                  |  
|Advance from a director                                            |  | 771,208            |  
|Repayment to a director                                            |  | -                  |  
|Advance from a director of a subsidiary                            |  | 9,646              |  
|                                                                   |  |                    |  
|Net cash provided by financing activities of continuing operations |  | 756,817            |  
|Net cash (used in) financing activities of discontinued operations |  | -                  |  
|Net cash provided by financing activities                          |  | 756,817            |  
|                                                                   |  |                    |  
|Effect of foreign exchange rate changes                            |  | 1,540              |  
|                                                                   |  |                    |  
|Net decrease in cash and cash equivalents                          |  | (2,420,815         | )
|Cash and cash equivalents at beginning of the period               |  | 3,978,500          |  
|                                                                   |  |                    |  
|Cash and cash equivalents at end of the period (a)                 |  | 1,557,685          |  
|                                                                   |  |                    |  
|Supplemental disclosure of cash flows information                  |  |                    |  
|Interest expense paid                                              |  | 22,980             |  
|Income taxes paid                                                  |  | 164,282            |  

(a) Includes $12,647 and $5,738 of cash that is included on the
balance sheet with Current assets from discontinued operations as of December
31, 2008 and 2007, respectively.

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

---

- 12 -

LIGHTSCAPE TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008

NOTE 1. ORGANIZATION AND NATURE OF OPERATIONS

Lightscape Technologies Inc. (Lightscape or the Company)
was incorporated under the laws of the State of Nevada. On April 20, 2007, the
Company changed its name from Global Innovative System Inc. to Lightscape
Technologies Inc. The Company is a holding company, and together with its
subsidiaries (the Group) is principally engaged in three business activities:
(i) light-emitting diode (LED) out-of-home advertising, (ii) LED solutions and
(iii) others including lighting source products.

NOTE 2. ACQUISITION OF A SUBSIDIARY

Pursuant to a Sale and Purchase Agreement dated July 1, 2008
between Tech Team Investment Limited (Tech Team Investment), a wholly-owned
subsidiary of the Company, and Mr. Yeung Wang Hung (the Vendor), sole
shareholder of Golden Cypress Limited (Golden Cypress), the Company acquired
100% of the equity interest of Golden Cypress at a consideration of $128,535 (or
HK$1,000,000). Golden Cypress is a company incorporated in the British Virgin
Islands, which holds a 100% equity interest in Media AV International Pte
Limited (Media AV), a company incorporated in Singapore. Media AV operates an
LED solutions business, including rentals and permanent installations, in
Singapore.

The purchase price has been allocated as follows based on the
estimated fair values of the assets acquired and liabilities assumed as of the
date of acquisition:

|                                                                                   |  | $        |  
|---------------------------------------------------------------------------------- |  | -------- | -
|                                                                                   |  |          |  
|Cash and cash equivalents                                                          |  | 21,184   |  
|Accounts receivable                                                                |  | 459,494  |  
|Prepaid expenses and other current assets                                          |  | 23,252   |  
|Plant and equipment, net                                                           |  | 80,323   |  
|Short-term borrowings                                                              |  | (112,772 | )
|Trade payables                                                                     |  | (8,916   | )
|Amount due to a director                                                           |  | (149,517 | )
|Accrued expenses and other current liabilities                                     |  | (83,524  | )
|Obligations under capital leases                                                   |  | (11,588  | )
|Other tax payable                                                                  |  | (13,351  | )
|                                                                                   |  |          |  
|Net assets                                                                         |  | 204,585  |  
|Excess of net assets over purchase
      consideration allocated against plant and |  |          |  
|equipment                                                                          |  | (76,050  | )
|Net assets after excess allocation                                                 |  | 128,535  |  
|                                                                                   |  |          |  
|Total consideration                                                                |  | 128,535  |  

Total consideration of $128,535 was prepaid on December 10,
2007 and included in prepaid expenses and other current assets in previous
periods.

In accordance with Statement of Financial Accounting Standards
(SFAS) No. 141, the excess of net assets over the purchase consideration has
been allocated on a pro rata basis to all acquired assets except financial
assets. Net book value of plant and equipment immediately after the allocation
was $4,273.

Results of operation of Golden Cypress have been included in
the Consolidated Statements of Operations of the Company for three months and
nine months ended December 31, 2008.

---

- 13 -

LIGHTSCAPE TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008

NOTE 3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES

Principle of Consolidation and Basis of Presentation

The accompanying consolidated financial statements of the Group
are stated in United States dollars and have been prepared in accordance with
generally accepted accounting principles in the United States of America and
include the financial statements of the Company and its majority-owned
subsidiaries. All significant intercompany transactions and balances are
eliminated on consolidation.

The accompanying unaudited consolidated financial statements as
of December 31, 2008 and for the three and nine months ended December 31, 2008
and 2007 have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q and Regulation S-X applicable to smaller reporting companies. In the
opinion of management, these unaudited consolidated interim financial statements
include all adjustments considered necessary to make the financial statements
not misleading. The results of operations for the three and nine months ended
December 31, 2008 are not necessarily indicative of the results for the full
fiscal year ending March 31, 2009. The unaudited consolidated interim financial
statements should be read in conjunction with the Groups audited consolidated
financial statements and notes thereto for the year ended March 31, 2008 as
reported in Form 10-KSB.

Use of Estimates

The preparation of financial statements requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reported period. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand and demand
deposits which are unrestricted as to withdrawal and use, and which have
maturities of three months or less when purchased.

---

- 14 -

LIGHTSCAPE TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008

NOTE 3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)

Accounts Receivables and Allowance for Doubtful Accounts

The Company performs certain credit evaluation procedures and
does not require collateral for financial instruments subject to credit risk.
The Company believes that credit risk is limited because the Company routinely
assesses the financial strength of its customers and, based upon factors
surrounding the credit risk of its customers, establishes an allowance for
uncollectible accounts receivable. As a consequence, the Company believes that
its accounts receivable credit risk exposure beyond such allowances is limited.
The Company recognizes an allowance for doubtful accounts to ensure accounts
receivable are not overstated due to uncollectibility and are 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 reserve for individual accounts is recorded when the Company
becomes aware of a customers inability to meet its financial obligation, such
as in the case of bankruptcy filings or deterioration in the customers
operating results or financial position. If circumstances related to customers
change, estimates of the recoverability of receivables would be further
adjusted. As of December 31, 2008 and March 31, 2008, the allowance for doubtful
accounts was approximately $839,180 and $817,800, respectively.

Inventories

Inventories are stated at the lower of cost or market value.
Cost is determined on the first-in, first-out basis. Write-down of potentially
obsolete or slow-moving inventory is recorded based on managements analysis of
inventory levels and the Companys assessment of estimated obsolescence based
upon assumptions about future demand and market conditions. Further write-down
of the value may be required in the future if there is rapid technological and
structural change in the industry. This may reduce the results of operations of
the Company.

Goodwill

The Company accounts for acquisitions of business in accordance
with SFAS No. 141 Business Combinations, which results in the recognition of
goodwill when the purchase price exceeds the fair value of net assets acquired.
Goodwill is not subject to amortization but will be subject to periodic
evaluation for impairment. Goodwill is stated in the consolidated balance sheet
at cost less accumulated impairment loss.

Intangible Assets

The Company acquired certain intangible assets through the
acquisition of subsidiaries. These intangible assets are comprised of
trademarks, customer lists and relationships, unfulfilled purchase orders,
completed technology for the production of Aihua Ultra-High Pressure Mercury
(AHP) lamps and High Intensity Discharge (HID) lamps, a customer base and a
distributor base. The acquired trademarks were determined to have indefinite
useful lives which are not subject to amortization, unless and until the useful
lives are determined to no longer be indefinite.

---

- 15 -

LIGHTSCAPE TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008

NOTE 3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)

Intangible Assets (continued)

The Company reviews the trademarks annually for impairment or
more frequently if events or changes in circumstances indicate that the asset
might be impaired. The completed technologies for the production of AHP and HID,
distributor base, customer lists and relationships and unfulfilled purchase
orders are subject to amortization over their respective economic useful lives
and reviewed for impairment if the carrying amount of these intangible assets
are determined to be not recoverable or their carrying amounts exceed their fair
market values. If an impairment loss is recognized, the adjusted carrying amount
of the intangible assets would be the new accounting basis.

The estimation of the useful lives of the trademarks, completed
technologies for the production of AHP and HID, distributor base, customer lists
and relationships will be affected by factors such as a change in demand,
unanticipated competition change in technology, legislative action that results
in an uncertain or an adverse change in the regulatory environment or changes in
distribution channels and business climate.

Software and licenses are recognized as intangible assets at
cost less accumulated amortization. These assets are generally amortized over
three years.

Impairment of Long-Lived Assets

The Company reviews long-lived assets for potential impairment
based on a review of projected undiscounted cash flows associated with these
assets. Long-lived assets are included in impairment evaluations when events and
circumstances exist that indicate the carrying amount of these assets may not be
recoverable. Measurement of impairment losses for long-lived assets that the
Company expects to hold and use is based on the estimated fair value of the
assets. Therefore, future changes in the Companys strategy and other changes in
its operations could impact the projected future operating results that are
inherent in estimates of fair value, resulting in impairments in the future.
Additionally, other changes in the estimates and assumptions, including the
discount rate and expected long-term growth rate, which drive the valuation
techniques employed to estimate the fair value of long-lived assets could change
and, therefore, impact the assessments of impairment in the future.

Plant and Equipment and Construction in Progress

Plant and equipment is recorded at cost less accumulated
depreciation. Depreciation is provided on a straight-line basis over the
estimated useful lives of the assets. Estimated useful lives of equipment are as
follows:

|Testing equipment               | 4 years                                                      
|------------------------------- | -------------------------------------------------------------
|Office equipment                | 3  4 years                                                  
|Furniture and fixtures          | 3 - 4 years                                                  
|Leasehold improvements          | shorter of 4 years or the remaining terms of
      the leases
|Motor vehicles                  | 5 - 7 years                                                  
|Moulds                          | 3 years                                                      
|Factory machinery and equipment | 10 - 16 years                                                

---

- 16 -

LIGHTSCAPE TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008

NOTE 3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)

Plant and Equipment and Construction in Progress (continued)

Construction in progress is stated at cost which comprises all
direct costs incurred in relation to the construction.

The cost of construction in progress will not be depreciated
until the construction is completed and the assets are transferred to a specific
category of plant and equipment and put into service.

Expenditures for repairs, maintenance and minor renewals and
betterments are expensed as incurred.

Net Investment in Sales - Type Leases

At the time a sales-type lease is consummated, the Company
records the gross finance receivable, less unearned income. Unearned income is
recognized as lease income using the interest method over the term of the lease
and is included as financing revenue in the Companys consolidated statements of
operations. The Company reviews minimum lease payments receivable for
collectability on a periodic basis. The review consists primarily of an analysis
based upon current information available about the customer as well as the
current economic environment, value of leased assets net of repossession cost
and prior history. Impairment is measured using the fair value of the leased
assets when foreclosure is probable. Using this information, the Company
determines the expected cash flow for the receivable and calculates a
recommended estimate of the potential loss and the probability of loss. For
those accounts in which the loss is probable, the Company records a specific
reserve.

Revenue Recognition

The Company recognizes revenue when it has persuasive evidence
of an arrangement, the product has been delivered and installed or the services
have been provided to the customer, the sales price is fixed or determinable,
and collectability is reasonably assured. In addition to the aforementioned
general policy, the following are specific revenue recognition policies for each
major category of revenue.

Advertising  LED related Out-of-Home (OOH)
advertising revenue from advertising services, net of agency rebates and
commissions, is recognized ratably over the year in which the advertisement is
displayed. Prepayments for the advertising services are deferred and recognized
as revenue when the advertising services are rendered.

LED solutions - The Company sells its products directly
to end users and through distributors. Revenue is recognized when the product is
delivered to the customer and all other revenue recognition criteria are met.
Revenues for LED solutions activities provided on a supply and build basis and
for consultancy services for which the revenue generation process lasts for
several months are recognized on the percentage-of-completion method, measured
either by the ratio of costs incurred up to a given date to estimated total
costs for each contract, or by an assessment from a quantity surveyor as
appointed by our customers.

---

- 17 -

LIGHTSCAPE TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008

NOTE 3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)

Revenue Recognition (continued)

Contract costs include all direct material, labor, subcontract
and other costs and those indirect costs related to contract performance, such
as indirect salaries and wages, equipment repairs and depreciation, insurance
and payroll taxes. Administrative and general expenses are charged to expense as
incurred. Provisions for estimated losses on uncompleted contracts are made in
the period in which such losses are determined. Changes in job performance, job
conditions and estimated profitability, including those changes arising from
contract penalty provisions and final contract settlements may result in
revisions to costs and income and are recognized in the period in which the
revisions are determined. An amount attributable to contract claims is included
in revenues when realization is probable and the amount can be reliably
estimated. The Company generally provides a one-year warranty for workmanship
under its contracts. Warranty claims historically have been inconsequential.

The asset, Costs and estimated earnings in excess of billings
on uncompleted contracts represents revenues recognized in excess of amounts
billed on these contracts. The liability Billings in excess of costs and
estimated earnings on uncompleted contracts represents billings in excess of
revenues recognized on these contracts.

Others This includes sales of lighting source
products, rental income, commission and service income and sales-type lease
income.

Regarding sales of lighting source products, the Company sells
its products directly to end users and through distributors. Revenue is
recognized when the product is delivered to the customer and all other revenue
recognition criteria are met. Revenue from rentals and operating leases without
any acceptance provisions is recognized on a straight-line basis over the term
of the rental or lease. Revenue regarding commission and service income is
recognized when services are rendered. Revenue from sales-type leases is
recognized over the term of the lease, using the effective interest method.

Income Taxes

Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the carrying amounts
of existing assets and liabilities and their respective tax bases as well as
operating loss and tax credit carry forwards. 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. 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. Valuation allowances are established when it is more likely than
not that some or all of the deferred tax assets will not be realized.

---

- 18 -

LIGHTSCAPE TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008

NOTE 3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)

Foreign Currency Translation

The functional currency of the Company is Hong Kong dollars
(HKD). Transactions in other currencies are recorded in HKD at the rates of
exchange prevailing when the transactions occur. Monetary assets and liabilities
denominated in other currencies are measured in HKD at rates of exchange in
effect at the balance sheet dates. Exchange gains and losses are recorded in the
consolidated statements of operations as a component of current period earnings.

For financial reporting purposes, the financial statements of
the Company which are prepared using the functional currency have been
translated into United States dollars. Assets and liabilities are translated at
the exchange rates at the balance sheet dates and revenue and expenses are
translated at the average exchange rate for the period and stockholders equity
is translated at historical exchange rates. Any translation adjustments
resulting from the translation are included in foreign exchange adjustment in
other comprehensive income, a component of stockholders equity.

Segment Information

The Companys segment reporting is prepared in accordance with
SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information (SFAS 131). The management approach required by SFAS 131 requires
that the internal reporting structure used by management for making operating
decisions and assessing performance be used as the source for presenting the
Groups reportable segments.

Fair Value of Financial Instruments

The carrying amounts of cash and cash equivalents, trade
receivables, and trade payables approximate their fair values due to the
short-term maturity of these instruments. The fair value of long-term debts and
capital lease obligations approximate their carrying values based on interest
rates currently available to the Company.

Comprehensive Income

Comprehensive income includes all changes in equity during a
period except those resulting from investments by owners and distributions to
owners.

Stock-based Payment

The Company adopted the SFAS No. 123R, Share-Based Payment
(SFAS 123R) using the modified prospective method. Under SFAS 123R, equity
instruments issued to employees for their services are measured at the
grant-date fair value and recognized in the statement of operations over the
service period.

The Company accounts for stock options and stock issued to
non-employees for goods or services in accordance with the fair value method of
SFAS 123R, which recognizes the value of such services at the fair value of the
equity instrument or of the goods or services, whichever is more readily
determinable.

---

- 19 -

LIGHTSCAPE TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008

NOTE 3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)

Basic and Diluted Earnings (Loss) per Share

The Company reports basic earnings per share in accordance with
SFAS No. 128, Earnings Per Share. Basic earnings per share is computed using
the weighted average number of shares outstanding during the periods presented.
The weighted average number of shares of the Company represents the common stock
outstanding during the period.

Diluted earnings per share is based on the assumption that if
there is no anti-dilutive effect on the basic earnings per share, all dilutive
convertible notes, options and warrants were converted or exercised. Dilution is
computed by applying the treasury stock method. Under this method, options and
warrants are assumed to be exercised at the beginning of the year (or at the
time of issuance, if later), and as if funds obtained thereby were used to
purchase common stock at the average market price during the period.

Recent Accounting Pronouncements

In April 2008, the Financial Accounting Standards Board
(FASB) issued FASB Staff Position (FSP) No. 142-3, Determination of the
Useful Life of Intangible Assets (FSP 142-3). It amends the factors an entity
should consider in developing renewal or extension assumptions used in
determining the useful life of recognized intangible assets under FASB Statement
No. 142, Goodwill and Other Intangible Assets. This new guidance applies
prospectively to intangible assets that are acquired individually or with a
group of other assets in business combinations and asset acquisitions. FSP 142-3
is effective for financial statements issued for fiscal years and interim
periods beginning after December 15, 2008. Early adoption is prohibited. The
adoption of this statement is not expected to have a material effect on the
Companys financial statements.

In May 2008, the FASB issued SFAS No. 162,The Hierarchy of
Generally Accepted Accounting Principles (SFAS 162). SFAS 162 identifies the
sources of accounting principles and the framework for selecting the principles
to be used in the preparation of financial statements of non-governmental
entities that are presented in conformity with generally accepted accounting
principles in the United States. It is effective 60 days following the
Securities and Exchange Commissions approval of the Public Company Accounting
Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in
Conformity With Generally Accepted Accounting Principles. The adoption of this
statement is not expected to have a material effect on the Companys financial
statements.

In December 2007, the FASB issued SFAS No. 141 (revised 2007)
(SFAS 141R), Business Combinations, which replaces SFAS 141. SFAS 141R
retains the purchase method of accounting for acquisitions, but requires a
number of changes, including changes in the way assets and liabilities are
recognized in purchase accounting. It also changes the recognition of assets
acquired and liabilities assumed arising from contingencies, requires the
capitalization of in-process research and development at fair value, and
requires the expensing of acquisition-related costs as incurred. SFAS 141R is
effective for fiscal years beginning on or after December 15, 2008 and will
apply prospectively to business combinations completed on or after that date.
The Companys management believes that this statement will impact the Company in
the event of any future acquisition.

---

- 20 -

LIGHTSCAPE TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008

NOTE 3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)

Recent Accounting Pronouncements (continued)

In December 2007, the FASB issued SFAS No. 160 Noncontrolling
Interests in Consolidated Financial Statements - an amendment of ARB No. 51
(SFAS 160). SFAS 160 applies to all entities that prepare consolidated
financial statements, but will affect only those entities that have an
outstanding noncontrolling interest in one or more subsidiaries or that
deconsolidate a subsidiary. This statement is effective for fiscal years, and
interim periods within those fiscal years, beginning on or after December 15,
2008. Earlier adoption is prohibited. Management does not expect that the
application of this standard will have any significant effect on the Companys
financial statements.

In March 2008, the FASB issued SFAS No. 161, Disclosures about
Derivative Instruments and Hedging Activities-an amendment of FASB Statement No.
133 (SFAS 161). SFAS 161 requires enhanced disclosures about an entitys
derivative and hedging activities, including (a) how and why an entity uses
derivative instruments, (b) how derivative instruments and related hedged items
are accounted for under SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities, and its related interpretations, and (c) how derivative
instruments and related hedged items affect an entitys financial position,
financial performance, and cash flows. SFAS 161 is effective for financial
statements issued for fiscal years and interim periods beginning after November
15, 2008. The Company does not expect that the adoption of the pronouncement
will have a material effect on the Companys financial statements.

In May 2008, the FASB issued FSP Accounting Principles Board
Opinions (APB) 14-1, Accounting for Convertible Debt Instruments that May be
Settled in Cash upon Conversion (Including Partial Cash Settlement)(FSP APB 14-1 or the FSP). The FSP requires cash settled convertible
debt to be bifurcated into debt and equity components and accounted for
separately at issuance. The value assigned to the debt component would be the
estimated fair value, as of the issuance date, of a similar bond without the
conversion feature. The difference between the bond cash proceeds and this
estimated fair value would be recorded as a debt discount and amortized to
interest expense over the life of the bond. The equity component of the
convertible debt securities would be included in the paid-in-capital section of
shareholders equity on the Companys consolidated balance sheets and the
initial carrying values of these debt securities would be correspondingly
reduced. Management does not expect that the application of this standard will
have any significant effect on the Companys financial statements.

In October 2008, the FASB issued FASB FSP SFAS 157-3,
Determining the Fair Value of a Financial Asset When the Market for That Asset
Is Not Active (FSP 157-3). FSP 157-3 clarifies the application of SFAS No.
157, Fair Value Measurements in a market that is not active and provides an
example to illustrate key considerations in determining the fair value of a
financial asset when the market for that financial asset is not active. FSP
157-3 is effective upon issuance, including for prior periods for which
financial statements have not been issued. Revisions resulting from a change in
the valuation technique or its application should be accounted for as a change
in accounting estimate following the guidance in SFAS No. 154, Accounting
Changes and Error Corrections (SFAS 154). However, the disclosure provisions
in SFAS 154 for a change in accounting estimate are not required for revisions
resulting from a change in valuation technique or its application. Management
does not expect that the application of this standard will have any significant
effect on the Companys financial statements.

---

- 21 -

LIGHTSCAPE TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008

NOTE 4. COSTS AND ESTIMATED EARNINGS IN EXCESS OF BILLINGS
ON UNCOMPLETED CONTRACTS

Costs and estimated earnings in excess of billings on
uncompleted contracts as of December 31, 2008 and March 31, 2008 are summarized
as follows:

|                                                         |  | December 31, |  |  | March 31, | 
|-------------------------------------------------------- |  | ------------ |  |  | --------- | 
|                                                         |  | 2008         |  |  | 2008      | 
|                                                         |  | (Unaudited)  |  |  | (Audited) | 
|                                                         |  | $            |  |  | $         | 
|Cumulative costs incurred on uncompleted
      contracts |  | 957,994      |  |  | 1,575,574 | 
|Cumulative estimated earnings to date                    |  | 324,957      |  |  | 1,071,896 | 
|                                                         |  | 1,282,951    |  |  | 2,647,470 | 
|Less: Billings to date                                   |  | 1,145,334    |  |  | 2,008,435 | 
|                                                         |  | 137,617      |  |  | 639,035   | 

**NOTE 5.   PREPAID EXPENSES AND OTHER CURRENT ASSETS**

Prepaid expenses  and other current assets consist of the following:

|                                      |  | December 31, |  |  | March 31, | 
|------------------------------------- |  | ------------ |  |  | --------- | 
|                                      |  | 2008         |  |  | 2008      | 
|                                      |  | (Unaudited)  |  |  | (Audited) | 
|                                      |  | $            |  |  | $         | 
|Trade deposits                        |  | 412,948      |  |  | 1,546     | 
|Rental, utilities and  other deposits |  | 548,340      |  |  | 393,373   | 
|Prepaid expenses                      |  | 1,085,433    |  |  | 863,092   | 
|Other receivables                     |  | 824,567      |  |  | 465,216   | 
|Advertising trade  deposits (i)       |  | 1,210,738    |  |  | -         | 
|Others                                |  | 4,607        |  |  | 18,804    | 
|                                      |  | 4,086,633    |  |  | 1,742,031 | 

(i)            Deposits related to the setup of LED  out-of-home advertising displays and related costs.

NOTE 6. INVENTORIES

Inventories by major category are summarized as follows:

|                 |  | December 31, |  |  | March 31, | 
|---------------- |  | ------------ |  |  | --------- | 
|                 |  | 2008         |  |  | 2008      | 
|                 |  | (Unaudited)  |  |  | (Audited) | 
|                 |  | $            |  |  | $         | 
|Raw materials    |  | 844,366      |  |  | 700,302   | 
|Work in progress |  | 771,936      |  |  | 589,119   | 
|Finished goods   |  | 2,096,839    |  |  | 2,614,377 | 
|                 |  | 3,713,141    |  |  | 3,903,798 | 

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LIGHTSCAPE TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008

NOTE 7. PLANT AND EQUIPMENT, NET

Plant and equipment consist of the following:

|                                |  | December 31, |   |  | March 31,  |  
|------------------------------- |  | ------------ | - |  | ---------- | -
|                                |  | 2008         |   |  | 2008       |  
|                                |  | (Unaudited)  |   |  | (Audited)  |  
|                                |  | $            |   |  | $          |  
|Testing equipment               |  | 381          |   |  | -          |  
|Office equipment                |  | 1,174,880    |   |  | 666,009    |  
|Furniture and fixtures          |  | 28,463       |   |  | 16,428     |  
|Leasehold improvements          |  | 330,363      |   |  | 323,900    |  
|Motor vehicles                  |  | 66,535       |   |  | 56,405     |  
|Factory machinery and equipment |  | 5,471,583    |   |  | 5,349,055  |  
|Total                           |  | 7,072,205    |   |  | 6,411,797  |  
|Less: Accumulated depreciation  |  | (2,267,162   | ) |  | (1,761,399 | )
|Plant and equipment, net        |  | 4,805,043    |   |  | 4,650,398  |  

Equipment held under capital leases and included above is
summarized as follows:

|                                         |  | December 31, |   |  | March 31, |  
|---------------------------------------- |  | ------------ | - |  | --------- | -
|                                         |  | 2008         |   |  | 2008      |  
|                                         |  | (Unaudited)  |   |  | (Audited) |  
|                                         |  | $            |   |  | $         |  
|Office equipment                         |  | 8,869        |   |  | 8,869     |  
|Less: Accumulated depreciation           |  | (5,666       | ) |  | (3,449    | )
|Equipment, net held under capital leases |  | 3,203        |   |  | 5,420     |  

NOTE 8. CONSTRUCTION IN PROGRESS

Construction in progress consists of the following:

|                                                               |  | December 31, |   |  | March 31, |  
|-------------------------------------------------------------- |  | ------------ | - |  | --------- | -
|                                                               |  | 2008         |   |  | 2008      |  
|                                                               |  | (Unaudited)  |   |  | (Audited) |  
|                                                               |  | $            |   |  | $         |  
|Production facilities for Xenon lights                         |  | 1,221,978    |   |  | 1,221,978 |  
|Loss on write-down of production facilities held-for-sale      |  | (916,484     | ) |  | (916,484  | )
|Transferred to current assets of
      discontinued operations |  | (312,394     | ) |  | (305,494  | )
|Foreign currency translation adjustment                        |  | 6,900        |   |  | -         |  
|Construction in progress, net                                  |  | -            |   |  | -         |  

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- 23 -

LIGHTSCAPE TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008

NOTE 9. GOODWILL AND INTANGIBLE ASSETS, NET

Goodwill was recognized upon to the acquisition of equity
interests in Beijing Illumination (Hong Kong) Limited (Beijing Illumination)
and Lightscape Technologies (Macau) Limited (Lightscape Macau) and represents
the costs of the investments over the estimated fair value of the underlying net
assets acquired. Changes to goodwill during the nine months ended December 31,
2008 and the year ended March 31, 2008 are as follows:

|                                       |  | December 31, |  |  | March 31, |  
|-------------------------------------- |  | ------------ |  |  | --------- | -
|                                       |  | 2008         |  |  | 2008      |  
|                                       |  | (Unaudited)  |  |  | (Audited) |  
|                                       |  | $            |  |  | $         |  
|Balance at the beginning of the period |  | 4,476,574    |  |  | 5,003,437 |  
|Impairment losses recognized           |  | -            |  |  | (526,863  | )
|                                       |  |              |  |  |           |  
|Balance at the end of the period       |  | 4,476,574    |  |  | 4,476,574 |  

Impairment Losses on Goodwill for Investment in Beijing
Illumination

The write-down of goodwill of $526,863 was based on the
discounted cash flows analysis as conducted by the management (discounted cash
flows analysis) regarding Beijing Illumination for the year ended March 31,
2008. Management had assessed the basis to ascertain the amount of impairment
losses on goodwill and intangible assets. The discounted cash flows analysis was
carried out on the basis of fair value, which is defined as the price that
would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.

Management takes full responsibility for valuing the assets and
the liabilities of the acquired entity, and had carefully reviewed the
reasonableness of the basis of valuation, valuation assumptions and valuation
methodology, in particular the use of the income approach, which is also known
as the discounted cash flow method (DCF). The fair value of goodwill and
intangible assets were determined by applying a discount rate (the cost of
capital) in the DCF model to determine the net present value of our acquired
subsidiarys future expected cash flows.

---

- 24 -

LIGHTSCAPE TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008

NOTE 9. GOODWILL AND INTANGIBLE ASSETS, NET(continued)

Intangible Assets

Intangible assets arise from the acquisition of interests in
subsidiaries. The costs of the intangible assets were determined during the
allocation of the purchase prices based on the estimated fair values of the
assets acquired and liabilities assumed as of the date of acquisition. Acquired
intangible assets consist of the following:

|                                 |  | December
      31, 2008 |  |  | March
      31, 2008 |  
|-------------------------------- |  | ----------------------- |  |  | -------------------- | -
|                                 |  |                         |  |  | Accumulated          |  
|                                 |  |                         |  |  | amortization         |  
|                                 |  |                         |  |  | and                  |  
|                                 |  | Cost                    |  |  | impairment           |  
|                                 |  | $                       |  |  | $                    |  
|Subject to amortization          |  |                         |  |  |                      |  
|Completed technology  AHP       |  | 1,172,616               |  |  | (1,125,131           | )
|Completed technology  HID       |  | 1,214,012               |  |  | (844,879             | )
|Software and license (i)         |  | 650,807                 |  |  | (506,571             | )
|Customer lists and relationships |  | 45,797                  |  |  | (22,874              | )
|Distributors list                |  | 179,351                 |  |  | (179,351             | )
|Total                            |  | 3,252,583               |  |  | (2,678,806           | )
|                                 |  |                         |  |  |                      |  
|Not subject to amortization      |  |                         |  |  |                      |  
|Trademark                        |  | 566,210                 |  |  | -                    |  
|                                 |  |                         |  |  |                      |  
|Total                            |  | 3,828,793               |  |  | (2,493,875           | )

|(i) | including an addition of $3,730 during the three months
      ended December 31, 2008
|--- | -------------------------------------------------------------------------------------

Amortization expenses charged to net loss from operations for
the nine months ended December 31, 2008 and 2007 were approximately $578,282and
$401,537 respectively. Anticipated amortization expense on intangible assets for
each of the following years is as follows:

|Twelve months ending December 31, |  | $       | 
|--------------------------------- |  | ------- | 
|2009                              |  | 494,517 | 
|2010                              |  | 77,453  | 
|2011                              |  | 6,621   | 
|2012                              |  | 4,580   | 
|2013                              |  | 4,606   | 
|                                  |  | 583,777 | 

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LIGHTSCAPE TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008

NOTE 10. BANK BORROWINGS

Bank borrowings relate to two term loans and one term loan
borrowed from DBS Bank and OCBC Bank, respectively, by Media AV, with principal
of Singapore Dollars (SGD) SGD100,000, SGD50,000 and SGD50,000, respectively.
The commencement dates are April 3, 2007, June 27, 2008 and February 1, 2007,
respectively. The loans are repayable by 36, 24 and 60 monthly installments, and
incur interest at an annual rate of 12.5%, 12.5% and 13.12%, respectively. These
loans are secured by a deed of guarantee and indemnity by a director of Media
AV.

The following is a summary of future repayments related to bank
borrowings for the next five years:

|Twelve months ending December 31, |  | $      | 
|--------------------------------- |  | ------ | 
|2009                              |  | 49,311 | 
|2010                              |  | 26,237 | 
|2011                              |  | 8,133  | 
|2012                              |  | 1,436  | 
|2013                              |  | -      | 
|                                  |  | 85,117 | 

NOTE 11. OBLIGATIONS UNDER CAPITAL LEASES

|                                                                    |  | December 31, |   |  | March 31, |  
|------------------------------------------------------------------- |  | ------------ | - |  | --------- | -
|                                                                    |  | 2008         |   |  | 2008      |  
|                                                                    |  | (Unaudited)  |   |  | (Audited) |  
|                                                                    |  | $            |   |  | $         |  
|Total minimum lease payments, with $nil
      representing interest |  | 15,630       |   |  | 7,243     |  
|Less: Current portion of obligations under capital leases           |  | (11,196      | ) |  | (1,774    | )
|Long-term portion of obligations under
      capital leases         |  | 4,434        |   |  | 5,469     |  

The following is a summary of future minimum lease payments
under capital leases as of December 31, 2008:

|Twelve months ending December 31, |  | $      | 
|--------------------------------- |  | ------ | 
|2009                              |  | 11,196 | 
|2010                              |  | 1,774  | 
|2011                              |  | 1,774  | 
|2012                              |  | 886    | 
|                                  |  | 15,630 | 

The Company entered into capital lease arrangements for leasing
equipment used in its operations. The lease is for a term of five years. For the
nine months ended December 31, 2008, the capital lease arrangement was on a
non-interest bearing basis. The leases are on a fixed repayment basis and
require no contingent rental payments. The interest expenses incurred on these
capital leases were $nil and $nil for the nine months ended December 31, 2008
and 2007, respectively.

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- 26 -

LIGHTSCAPE TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008

NOTE 12. OTHER RESERVES

The other reserves represent the statutory surplus reserve of
the Companys subsidiaries in the Peoples Republic of China (PRC).

Statutory Surplus Reserve

In accordance with the relevant laws and regulations of the PRC
and the subsidiaries articles of association, the subsidiaries are required to
appropriate 10% of their net income, after offsetting any prior years losses,
to the statutory surplus reserve. When the balance of such reserve reaches 50%
of the PRC subsidiaries share capital, any further appropriation is optional.

The statutory surplus reserve can be used to offset prior
years losses, if any, and may be converted into share capital by issuing new
shares to shareholders in proportion to their existing shareholding or by
increasing the par value of the shares currently held by them, provided that the
remaining balance of the reserve after such issue is not less than 25% of share
capital. The statutory surplus reserve is non-distributable.

NOTE 13. TOTAL COMPREHENSIVE LOSS

|                                                          |  | Three Months       |   |  | Nine Months Ended |  
|--------------------------------------------------------- |  | ------------------ | - |  | ----------------- | -
|                                                          |  | Ended December 31, |   |  | December 31,      |  
|                                                          |  | 2008               |   |  | 2007              |  
|                                                          |  | (Unaudited)        |   |  | (Unaudited)       |  
|                                                          |  | $                  |   |  | $                 |  
|Net loss attributable to common shareholders
      of the |  |                    |   |  |                   |  
|Company                                                   |  | (788,029           | ) |  | (551,927          | )
|Foreign currency translation adjustments                  |  | (132,484           | ) |  | (972              | )
|                                                          |  |                    |   |  |                   |  
|Total comprehensive loss                                  |  | (920,513           | ) |  | (552,899          | )

NOTE 14. FOREIGN CURRENCY TRANSACTION LOSS

Foreign currency transaction losses of $10,710 and of $56,271
for the nine months ended December 31, 2008 and 2007, respectively, were
included in determining net losses.

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- 27 -

LIGHTSCAPE TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008

NOTE 15. INCOME TAX

As of December 31, 2008 and March 31, 2008, the components of
deferred tax assets and liabilities were as follows:

|                                                                      |  | At December 31, |   |  | At March 31, |  
|--------------------------------------------------------------------- |  | --------------- | - |  | ------------ | -
|                                                                      |  | 2008            |   |  | 2008         |  
|                                                                      |  | $               |   |  | $            |  
|                                                                      |  |                 |   |  |              |  
|Deferred tax assets                                                   |  |                 |   |  |              |  
|- tax losses                                                          |  | 1,143,448       |   |  | 961,976      |  
|- valuation allowance as of March 31, 2008                            |  | (877,511        | ) |  | (877,511     | )
|- valuation allowance increased during the nine months
      ended    |  | (181,472        | ) |  | -            |  
|December 31, 2008                                                     |  |                 |   |  |              |  
|-Total valuation allowance at December 31, 2008                       |  | (1,058,983      | ) |  | (877,511     | )
|Net deferred tax assets                                               |  | (84,465         | ) |  | 84,465       |  
|                                                                      |  |                 |   |  |              |  
|Deferred tax liabilities                                              |  |                 |   |  |              |  
|- Financial statements tax deduction in excess of
      depreciation |  | (84,465         | ) |  | (84,465      | )
|and amortization expense                                              |  |                 |   |  |              |  
|Net deferred tax                                                      |  | -               |   |  | -            |  

For the operating loss carry forward of approximately
$6,385,969 as of December 31, 2008, $5,261,903 will be carried forward
indefinitely, and $1,124,065 will be carried forward for a maximum period of 5
years.

As at December 31, 2008, the Company had accumulated net
operating loss carryforwards for Hong Kong income tax purposes of approximately
$5,261,903 that are available to offset future taxable income. Realization of
the net operating loss carryforwards is dependent upon future profitable
operations. Accordingly, management has increased the valuation allowance by
$105,144 during the nine months ended December 31, 2008 to reduce the deferred
tax asset associated with the net operating loss carryforwards to $84,465 at
December 31, 2008.

Additionally, as of December 31, 2008, the Company had
accumulated net operating loss carryforwards for Chinese tax purposes of
approximately $1,124,066. Realization of the Chinese tax net operating loss
carryforwards is dependent on future profitable operations, as well as a maximum
five-year carryforward period. Accordingly, management has recorded a valuation
allowance to reduce the deferred tax associated with the net operating loss
carryforwards to zero at December 31, 2008. These tax losses yield deferred tax
assets of approximately $275,234, as of December 31, 2008. The valuation
allowance has increased approximately $76,328 from March 31, 2008 to December
31, 2008, to maintain the deferred tax asset associated with the net operating
loss carryforwards to $Nil at December 31, 2008.

---

- 28 -

LIGHTSCAPE TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008

NOTE 15. INCOME TAX (continued)

The components of profit (loss) before income tax and minority
interests are as follows:

|                  |  | Three Months       |   |  | Nine Months        |  
|----------------- |  | ------------------ | - |  | ------------------ | -
|                  |  | Ended December 31, |   |  | Ended December 31, |  
|                  |  | 2008               |   |  | 2007               |  
|                  |  | $                  |   |  | $                  |  
|Hong Kong         |  | (728,858           | ) |  | (381,409           | )
|Macau             |  | 121,199            |   |  | 74,987             |  
|Singapore         |  | (139,051           | ) |  | -                  |  
|Mainland, the PRC |  | (47,738            | ) |  | (201,478           | )
|                  |  |                    |   |  |                    |  
|                  |  | (794,448           | ) |  | (507,900           | )

Taxes laws applicable to the Company and its subsidiaries are
as follows:

- Tech Team Holdings Limited (TTHL) is a tax-exempted company incorporated
  in the Cayman Islands.
- Under the current BVI law, Tech Team (China) Limiteds, Tech Team
  Investment Limiteds and Powerland Technology Limiteds income are not subject
  to taxation.
- Lightscape Technologies Inc. and Tomi Fuji Energy Pte. Limited also had no
  assessable profits earned or had tax losses brought forward to offset current
  period assessable profit during the periods presented.
- No provision for PRC income tax has been made as Tech Team Development
  (Zhuhai) Limited (TT (Zhuhai)) had no assessable profits earned during the
  three and nine months ended December 31, 2008 and 2007. Preferential tax
  treatment has been agreed with the relevant tax authorities and TT(Zhuhai) is
  exempted from PRC income tax in the first two profitable years and is subject
  to half of the standard statutory tax rate of 15% in the subsequent three
  years. However, as TT (Zhuhai) derived no taxable profits since its
  commencement of operations, this preferential tax treatment has expired and it
  will be required to pay a tax rate of 25% from January 1, 2008 onward.
- Pursuant to the relevant laws and regulations in the PRC, Beijing Aihua
  New Enterprise Lighting Appliance Company Limited (Beijing Aihua) is
  exempted from PRC enterprise income tax for two years starting from its first
  profitable year from January 2004 to December 2005. After it became a wholly
  foreign owned enterprise, Beijing Aihua is required to pay an effective tax
  rate of 12%, a 50% reduction from its normal tax rate of 24%, from January
  2006 to December 2008. From January 1, 2009 onward, Beijing Aihua is required
  to pay a normal 25% tax rate.
- Beijing Illumination is a Hong Kong company which is subject to a tax on
  profits of 16.5% from April 1, 2008 onward.
- Lightscape Macau is a company incorporated in Macau Special Administrative
  Region, which is subject to progressive tax rates to a maximum rate of 12%.
- Other companies are dormant and had no assessable profits earned during
  the periods presented.

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- 29 -

LIGHTSCAPE TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008

NOTE 15. INCOME TAX (continued)

Income tax expense (credit) for the three months and nine
months ended December 31, 2008 and 2007 represents the provision for income tax
in the following jurisdictions:

|               |  | Three Months       |   |  | Nine Months        | 
|-------------- |  | ------------------ | - |  | ------------------ | 
|               |  | Ended December 31, |   |  | Ended December 31, | 
|               |  | 2008               |   |  | 2007               | 
|               |  | $                  |   |  | $                  | 
|Current taxes: |  |                    |   |  |                    | 
|Hong Kong      |  | -                  |   |  | -                  | 
|Macau          |  | -                  |   |  | -                  | 
|Singapore      |  | -                  |   |  | -                  | 
|Mainland, PRC  |  | (5,084             | ) |  | -                  | 
|               |  |                    |   |  |                    | 
|               |  | (5,084             | ) |  | -                  | 

NOTE 16. DISCONTINUED OPERATIONS

The Company accounts for its discontinued operations under the
provisions of SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets (SFAS 144). Accordingly, the results of operations and the
related charges for discontinued operations have been classified as (Loss) from
discontinued operations, net of income taxes on the accompanying Consolidated
Statements of Operations. Assets and liabilities of the discontinued operations
have been reclassified and reflected on the accompanying Consolidated Balance
Sheets as Assets of discontinued operations and Liabilities of discontinued
operations. For comparative purposes, all prior periods presented have been
restated to reflect the reclassifications on a consistent basis.

During the year ended March 31, 2008, in order to more
effectively utilize the financial and other resources within other business
units, including the LED out-of-home advertising business and LED solutions
business, the Company decided to exit the energy-savings solutions business. No
further energy-savings products will be developed, nor will the Company provide
further energy management consulting services.

Remaining assets of the energy savings segment include only
certain receivables and lease receivables less unearned interests under
sales-type leases. Except for the collection of these receivables, the Company
will no longer have any significant continuing involvement in the energy-savings
segment. Therefore, the energy savings segment has been classified as
discontinued operations in accordance with SFAS 144.

Furthermore, the Company has determined to dispose of
construction in progress that was to be used for the production of a proposed
product line of its lighting source business. This asset has been stated at fair
value less costs to sell and is included with current assets of discontinued
operations on the accompanying Consolidated Balance Sheets.

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- 30 -

LIGHTSCAPE TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008

NOTE 16. DISCONTINUED OPERATIONS (continued)

Revenues and net profit (loss) from discontinued operations of
the energy savings business and disposal of construction in progress is as
follows:

|                                               |  | Three Months       |   |  | Nine Months        |  
|---------------------------------------------- |  | ------------------ | - |  | ------------------ | -
|                                               |  | Ended December 31, |   |  | Ended December 31, |  
|                                               |  | 2008               |   |  | 2007               |  
|                                               |  | $                  |   |  | $                  |  
|Operating revenue                              |  | 1,019              |   |  | 13,715             |  
|                                               |  |                    |   |  |                    |  
|Pre-tax profit (loss) from discontinued        |  | (8,748             | ) |  | (64,015            | )
|operations                                     |  |                    |   |  |                    |  
|Income tax credit                              |  | -                  |   |  | -                  |  
|Net profit (loss) from discontinued operations |  | (8,748             | ) |  | (64,015            | )

NOTE 17. CONCENTRATION OF CREDIT RISK

As of December 31, 2008 and March 31, 2008, the Company has a
credit risk exposure of uninsured cash in banks of $401,813 (including cash of
discontinued operations of $5,997) and $3,928,790, respectively. The Company
does not require collateral or other securities to support financial instruments
that are subject to credit risk.

Subsequent to the measures taken by the Hong Kong Monetary
Authority on October 14, 2008 to use the Exchange Fund to guarantee the
repayment of all customer deposits held in Authorised Financial Institutions in
Hong Kong, following the principles of the existing Deposit Protection Scheme,
assurance is made to depositors that their money is fully protected. Hence, cash
of $1,011,212 (including cash of discontinued operations of $6,650) out of a
total of $1,557,685 (including cash of discontinued operations of $12,647) of
the Companys cash held with banks in Hong Kong is now subject to no credit
risk.

On October 16, 2008, the Singapore government announced a
guarantee on deposits of individual and non-bank customers in banks, financial
companies and merchant banks in Singapore until year-end 2010. The guarantee is
backed by $100 billion (SGD $150 billion) of Singapore government reserves.
Hence, $144,660 out of a total of $1,557,685 of the Companys cash held with
banks in Singapore is now subject to no credit risk.

The Company establishes an allowance for doubtful accounts
primarily based upon the age of the receivables and factors surrounding the
credit risk of specific customers.

For the nine months ended December 31, 2008, one customer
accounted for approximately 11.4% of the Companys total revenues. As of
December 31, 2008, there is one customer whose account receivable to the Company
accounted for 15.1% of total accounts receivable.

The Company relies on supplies from numerous vendors. For the
nine months ended December 31, 2008, one vendor accounted for approximately
14.1% of total supply purchases.

The Companys business, assets and operations are currently
focused on the LED out-of-home advertising business and the sales of LED
solutions and specialty lighting source products in Hong Kong, China, Singapore
and Macau, and accordingly, are affected to a significant degree by any
economic, political and legal developments in those regions.

---

- 31 -

LIGHTSCAPE TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008

NOTE 18. COMMITMENTS

The Company has operating lease agreements principally for its
office facilities and factory buildings. Such leases have remaining terms of
approximately 0.75 to 2.55 years. The following is a summary of future minimum
lease payments under operating leases as of December 31, 2008. Rental expense
was $87,882 and $131,431 for the nine months ended December 31, 2008 and 2007,
respectively.

Twelve months ending December 31,

|           |  | $       | 
|---------- |  | ------- | 
|2009       |  | 411,229 | 
|2010       |  | 379,012 | 
|2011       |  | 176,749 | 
|Thereafter |  |         | 
|           |  | 966,990 | 

Royalties

Pursuant to a supplier agreement (the Agreement) dated March
8, 2006, entered into between Beijing Illumination and an independent third
party, the independent third party appointed Beijing Illumination as a
non-exclusive licensed OEM manufacturer with rights to make and distribute
certain products worldwide. Beijing Illumination shall pay to the independent
third party, during the term of the Agreement, 7% of gross revenues of certain
products sold to customers or distributors other than this independent third
party. Such royalty payments shall survive for five years after the termination
of the Agreement. No such royalty payment was accounted for or paid during the
nine months ended December 31, 2008.

NOTE 19. RELATED PARTY BALANCES AND TRANSACTIONS

Related Party Transactions

In 2004, the Company acquired Tomi Fuji Energy Management
Services Limited (TFEMS) by issuing shares of its own stock to TFEMS holding
company, Tomi Fuji Corporation Limited (TFCL). The owner of TFCL guaranteed
certain net profits of TFEMS for the period from the date of acquisition in
early January 2005 to June 30, 2005 (the guaranteed period). TFEMS net
profits during the guarantee period fell short of the guaranteed amount by
approximately $605,000. Management is considering taking appropriate actions to
recoup the damages thereon from the guarantor.

The Company acquired Lightscape Macau in 2006 by payment of
$1,550 (Macau Pataca (MOP) MOP12,400) and issuance of 1,200,000 shares of the
Company upon the condition that Lightscape Macau would make a net profit of not
less than $2,564,103 (HK$20,000,000) for the period from October 1, 2006 to
September 30, 2007 (the guarantee period). Lightscape Macau had a loss during
the guaranteed period and management is taking action to cancel the 1,200,000
shares issued.

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- 32 -

LIGHTSCAPE TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008

NOTE 19. RELATED PARTY BALANCES AND TRANSACTIONS
(continued)

Related Party Balances

The amounts due to a director and a director of a subsidiary
represent cash advances from them and are unsecured, non-interest bearing and
have no fixed repayment terms. The balances related to such advances are as
follows:

December 31,
    
    
    March 31,2008
    
    
    2008$
    
    
    $Amount due to a directorMr. Bondy Tan
    
    771,208
    
    
    -Amount due to a director of a subsidiaryMr. Choong Yip Weng
    
    150,965
    
    
    -


NOTE 20. SEGMENT INFORMATION

The Company is engaged in three main business segments: (i) LED
out-of-home advertising, (ii) LED solutions and (iii) lighting source products.
These represent the Companys reportable segments.

The accounting policies of the operating segments are the same
as those described in the Summary of Principal Accounting Policies (see Note 3).
The Company evaluates performance based on profit or loss from operations,
excluding corporate, general and administrative expenses.

|                                                               |  | Three Months       |   |  | Nine Months        |  
|-------------------------------------------------------------- |  | ------------------ | - |  | ------------------ | -
|                                                               |  | Ended December 31, |   |  | Ended December 31, |  
|                                                               |  | 2008               |   |  | 2007               |  
|                                                               |  | $                  |   |  | $                  |  
|Segment revenues from external customers:                      |  |                    |   |  |                    |  
|Advertising                                                    |  | -                  |   |  | -                  |  
|LED solutions                                                  |  | 1,406,668          |   |  | 2,975,913          |  
|Other                                                          |  | 294,631            |   |  | 641,281            |  
|                                                               |  | 1,701,299          |   |  | 3,617,194          |  
|                                                               |  |                    |   |  |                    |  
|Operating profit (losses):                                     |  |                    |   |  |                    |  
|Advertising                                                    |  | -                  |   |  | -                  |  
|LED solutions                                                  |  | (745,903           | ) |  | 116,924            |  
|Other                                                          |  | (48,545            | ) |  | (624,824           | )
|                                                               |  |                    |   |  |                    |  
|Loss from continuing operations before income tax and minority |  |                    |   |  |                    |  
|interests                                                      |  | (794,448           | ) |  | (507,900           | )

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- 33 -

LIGHTSCAPE TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008

NOTE 20. SEGMENT INFORMATION (continued)

December 31,
    
    
    March 31,2008
    
    
    2008(Unaudited)
    
    
    (Audited)$
    
    
    $Segment assets:Advertising
    
    1,258,504
    
    
    -LED solutions
    
    13,437,509
    
    
    17,333,269Other
    
    8,507,848
    
    
    8,193,45323,203,861
    
    
    25,526,722Assets of discontinued operations
    
    783,485
    
    
    826,36823,987,346
    
    
    26,353,090


Geographical Information:

|                  |  | Three Months       |  |  | Nine Months        | 
|----------------- |  | ------------------ |  |  | ------------------ | 
|                  |  | Ended December 31, |  |  | Ended December 31, | 
|                  |  | 2008               |  |  | 2007               | 
|                  |  | $                  |  |  | $                  | 
|Total sales:      |  |                    |  |  |                    | 
|Mainland, the PRC |  | 271,603            |  |  | 489,207            | 
|Hong Kong         |  | 762,995            |  |  | 2,026,524          | 
|Singapore         |  | 148,197            |  |  | 158,748            | 
|India             |  | 14,679             |  |  | 47,548             | 
|Mexico            |  | -                  |  |  | -                  | 
|Macau             |  | 496,729            |  |  | 801,792            | 
|Others            |  | 7,096              |  |  | 93,375             | 
|                  |  | 1,701,299          |  |  | 3,617,194          | 

The location of the Companys long-lived assets is as follows:

December 31,
    
    
    March 31,2008
    
    
    2008(Unaudited)
    
    
    (Audited)$
    
    
    $Hong Kong
    
    5,613,870
    
    
    6,805,936Singapore
    
    448,225
    
    
    -Mainland, the PRC
    
    4,427,993
    
    
    4,147,67110,490,088
    
    
    10,953,607


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- 34 -

LIGHTSCAPE TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008

NOTE 21. WARRANTS

In connection with the placement of 9,375,000 shares completed
on March 17, 2008, the Company issued warrants to Roth Capital Partners, LLC,
the placement agent, to purchase up to 656,250 shares of the Companys common
stock (representing 7% of the shares placed) as compensation for its placement
services. The warrants have a term of five years, are exercisable immediately
upon issuance and have an exercise price of $0.80 per share.

The warrants have been accounted for as common stock warrants
at fair value in the amount of $344,673, which forms part of shareholders
equity, with the corresponding charge debited directly to additional paid-in
capital, for the year ended March 31, 2008. The valuation was performed by the
management in accordance with Generally Accepted Valuation Methodologies,
including but not limited to, the discounted cash flow method, the
Black-Scholes-Merton option pricing model, and the Binomial option model, as
required by SFAS No. 123 (revised 2004) Share-Based Payment issued by the
FASB.

The following key valuation parameters have been used in
assessing the fair value of the warrants:

|Parameter               | As of March 31, 2008      
|----------------------- | --------------------------
|Stock price             | $1.11                     
|Exercise price          | $0.80                     
|Risk-free rate          | 2.44%                     
|Nature of the warrants  | Call                      
|Expected life           | 5 years                   
|Expected volatility     | 112.62%                   
|Expected dividend yield | 0.00%                     
|Early exercise behavior | 150% of the exercise price

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- 35 -

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

FORWARD-LOOKING STATEMENTS

Forward-Looking Statements

This
quarterly report contains forward-looking statements as that term is defined in
Section 27A of the United States Securities Act of 1933 and Section 21E of the
United States Securities Exchange Act of 1934. These statements relate to future
events or our future financial performance. In some cases, you can identify
forward-looking statements by terminology such as may, should, intends,
expects, plans, anticipates, believes, estimates, predicts,
potential, or continue or the negative of these terms or other comparable
terminology. These statements are only predictions and involve known and unknown
risks, uncertainties and other factors, including the risks in the section
entitled Risk Factors, which may cause our or our industrys actual results,
levels of activity or performance to be materially different from any future
results, levels of activity or performance expressed or implied by these
forward-looking statements.

Although
we believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity or
performance. Except as required by applicable law, including the securities laws
of the United States, we do not intend to update any of the forward-looking
statements to conform these statements to actual results.

In
this quarterly report, unless otherwise specified, all dollar amounts are
expressed in United States dollars and all references to common shares refer
to the common shares in our capital stock. Our financial statements are prepared
in accordance with generally accepted accounting principles in the United States
of America.

As
used in this quarterly report and unless otherwise indicated, the terms we,
us and our refer to Lightscape Technologies Inc. and our subsidiaries.

Company Overview

We
were incorporated under the laws of the State of Nevada under the name Legacy
Bodysentials Inc. on September 14, 1995. On September 25, 1996, we changed our
name to Legacy Minerals Inc. and on May 18, 1998, we changed our name to
Global Commonwealth Inc. On November 12, 1999, we changed our name to Global
Innovative Systems Inc. and on April 20, 2007, we changed our name to
Lightscape Technologies Inc. The name change became effective with NASDAQs
OTC Bulletin Board at the opening for trading on April 23, 2007 under the new
stock symbol LTSC.

We
are a holding company owning subsidiaries engaged in three main business
activities: (i) light-emitting diode (LED) out-of-home advertising, (ii) LED
solutions and (iii) other lighting source products. During the nine months ended
December 31, 2008, approximately 0% of our revenue was derived from our LED
out-of-home advertising business, 65% from our LED solutions business and 35%
from other business.

LED Out-of-Home Advertising Business

We
design, install and operate LED out-of-home advertising billboards. We are
building and expanding our LED out-of-home advertising network (i) through
billboard installations which we complete and operate independently, and (ii)
through installations which we complete and operate through partnerships and/or
joint ventures with major property owners and developers in Asia. We generate
revenue by selling advertising space on our LED out-of-home media network to
advertisers. We have established and are continuing to establish advertising
sales channels for our LED out-of-home advertising network by forming strategic
partnerships with advertising agencies and other media industry partners.

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- 36 -

We
signed a joint venture agreement on February 12, 2008 as part of our efforts to
build an LED out-of-home advertising network in the Peoples Republic of China
(the PRC or China). We entered this joint venture agreement with Beijing
Xintong Media & Cultural Development Co. Ltd. (BX). Pursuant to the terms
of the joint venture agreement, (i) the joint venture company will be named
Beijing Xintong New Vision Media Advertising Co. Ltd. (BXNV), (ii) our company
agreed to contribute to BXNV cash and an LED billboard for the joint ventures
initial installation within ninety business days of signing the agreement, and
(iii) in exchange for these contributions, our company will obtain 50.1%
ownership of BXNV, with the remaining 49.9% to be held by BX. The joint venture
formation process is ongoing. Certain details of the joint venture arrangement
are being finalized, including the process of completing the transfer of the
50.1% share ownership in BXNV from BX to our company (or one of our
subsidiaries), and other minor strategic and operational details. Management
does not believe that there are any material risks to our ultimate receipt of
50.1% ownership of BXNV as originally contemplated by the terms of the joint
venture agreement signed on February 12, 2008. Post-formation, we intend to
account for our 50.1% interest in the joint venture as a subsidiary in our
consolidated financial statements. As such, we will consolidate all profit and
loss, assets and liability items and eliminate the future minority shareholding
portion held by BX, in this case 49.9%, as a minority interest. We expect the
joint venture agreement to close before the end of March 2009.

LED Solutions Business

We
operate in three principal lines of the LED products and services industry: (i)
LED Systems, (ii) original equipment manufacturing (OEM) and Licensing, and
(iii) LED Screen Rental Service. We provide design, installation and digital
control of LED video and lighting systems; OEM and licensing of our proprietary
digital controller software system; and rentals of LED screens and related
hardware.

Other Business

Through
our 76.8% ownership of Beijing Illumination (Hong Kong) Limited (Beijing
Illumination), we research, develop, manufacture and sell lighting source
products. Beijing Illumination, through its wholly-owned subsidiary Beijing
Aihua New Enterprise Lighting Appliance Company Limited (Beijing Aihua),
manufactures and sells the following four main categories of high-intensity
discharge (HID) lighting products: (i) metal halide lamps; (ii) high-pressure
sodium lamps; (iii) xenon lamps; and (iv) special application HID lamps. In
addition to HID lamps, Beijing Illumination has expanded its product mix into
ultra high-pressure mercury lamps.

Critical Accounting Policies

Our
discussion and analysis of our financial condition and results of operations are
based on our consolidated financial statements, which have been prepared in
accordance with U.S. GAAP. The preparation of these financial statements
requires us to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses. We evaluate, on an on-going basis,
our estimates for reasonableness as changes occur in our business environment.
We base our estimates on experience and various other assumptions that we
believe to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions.

Critical
accounting policies are defined as those that are reflective of significant
judgments, estimates and uncertainties, and potentially result in materially
different results under different assumptions and conditions. We believe the
following are our critical accounting policies:

Revenue Recognition

Our
company recognizes revenue when it has persuasive evidence of an arrangement,
the product has been delivered and installed or the services have been provided
to the customer, the sales price is fixed

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- 37 -

or determinable, and collectability is reasonably assured. In
addition to the aforementioned general policy, the following are specific
revenue recognition policies for each major category of revenue.

Advertising  LED out-of-home
advertising revenue from advertising services, net of agency rebates and
commissions, is recognized ratably over the year in which the advertisement is
displayed. Prepayments for the advertising services are deferred and recognized
as revenue when the advertising services are rendered.

LED solutions  Our company
sells its products directly to end users and through distributors. Revenue is
recognized when the product is delivered to the customer and all other revenue
recognition criteria are met. Revenues for LED solutions activities provided on
a supply and build basis and for consultancy services for which the revenue
generation process lasts for several months are recognized on the
percentage-of-completion (PC) method.

American Institute
of Certified Public Accountants (AICPA) Accounting Research Bulletin (ARB)
No. 45, Long-Term Construction-Type Contracts, (1955) and AICPA Statement of
Position (SOP) 81-1, Accounting for Performance of Construction-Type and
Certain Production-Type Contracts, (1981) address revenue recognition for
long-term construction-type contracts. Since most of our companys LED solution
revenue relates to construction contracts, which by their nature are long-term,
the underlying accounting principle known as matching  expenses follow revenues
 would be violated if the revenue from the contract were recognized upon
contract execution or sale of the services.

There are two
acceptable methods of revenue recognition under the preceding pronouncements for
construction contractors.These are not alternative methods, however,
from which contractors are free to choose regardless of the circumstances. One is the PC method and the other is the completed contract
(CC) method. Under the PC method, the construction contractor recognizes
revenue over the life of the construction contract based on the degree of
completion. For example, 50% completion means recognition of one-half of
revenues, costs, and income. Under the CC method, all revenues, costs, and
income are recognized only at completion of the construction project, ordinarily
at the end of the construction contract. The PC method is preferred and
should be used whenever the conditions for its use are satisfied.

SOP 81-1 requires
that the PC method be used in lieu of the CC method when all of the following
are present: (1) reasonably reliable estimates can be made of revenue and costs;
(2) the construction contract specifies the parties rights as to the goods,
consideration to be paid and received, and the resulting terms of payment or
settlement; (3) the contract purchaser has the ability and expectation to
perform all contractual duties; and (4) the contract contractor has the same
ability and expectation to perform.

SOP 81-1 states, Contract costs
generally include direct costs, such as materials, direct labor, and
subcontracts and indirect costs identifiable with or allocable to the
contracts.

Our company always seeks to use the fairest
  approximation of the PC method. LED solutions projects for which our clients
  can provide their quantity surveyors certificate (QC certificate)
  regarding PC, this basis will be applied consistently for estimation and accrual
  of revenue and related costs. In the absence of a QC certificate, our company
  will calculate a projects PC based on the ratio of incurred costs to estimated
  final costs.

Contract costs include all direct
material, labor, subcontract and other costs and those indirect costs related to
contract performance, such as indirect salaries and wages, equipment repairs and
depreciation, insurance and payroll taxes. Administrative and general expenses
are charged to expense as incurred. Provisions for estimated losses on
uncompleted contracts are made in the period in which such losses are
determined. Changes in job performance, job conditions and

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- 38 -

estimated profitability, including
those changes arising from contract penalty provisions and final contract
settlements may result in revisions to costs and income and are recognized in
the period in which the revisions are determined. An amount attributable to
contract claims is included in revenues when realization is probable and the
amount can be reliably estimated. We generally provide a one-year warranty for
workmanship under our contracts. Warranty claims historically have been
inconsequential.

The asset, Costs and estimated
earnings in excess of billings on uncompleted contracts represents revenues
recognized in excess of amounts billed on these contracts. The liability
Billings in excess of costs and estimated earnings on uncompleted contracts
represents billings in excess of revenues recognized on these contracts.

Other This includes sales of
lighting source products, rental income, commission and service income and
sales-type lease income. Regarding sales of lighting source products, our
company sells its products directly to end users and through distributors.
Revenue is recognized when the product is delivered to the customer and all
other revenue recognition criteria are met. Revenue from rentals and operating
leases without any acceptance provisions is recognized on a straight-line basis
over the term of the rental or lease. Revenue regarding commission and service
income is recognized when services are rendered. Revenue from sales-type leases
is recognized over the term of the lease, using the effective interest method.

Foreign Currency Translation

The
functional currency of our company is Hong Kong dollars (HKD). Transactions in
other currencies are recorded in HKD at the rates of exchange prevailing when
the transactions occur. Monetary assets and liabilities denominated in other
currencies are measured in HKD at rates of exchange in effect at the balance
sheet dates. Exchange gains and losses are recorded in the consolidated
statements of operations as a component of current period earnings. For
financial reporting purposes, the financial statements of our company which are
prepared using the functional currency have been translated into United States
dollars. Assets and liabilities are translated at the exchange rates at the
balance sheet dates and revenue and expenses are translated at the average
exchange rate for the period and stockholders equity is translated at
historical exchange rates. Any translation adjustments resulting from the
translation are included in foreign exchange adjustment in other comprehensive
income, a component of stockholders equity.

Impairment of Long-Lived Assets

Our
company reviews long-lived assets for potential impairment based on a review of
projected undiscounted cash flows associated with these assets. Long-lived
assets are included in impairment evaluations when events and circumstances
exist that indicate the carrying amount of these assets may not be recoverable.
Measurement of impairment losses for long-lived assets that our company expects
to hold and use is based on the estimated fair value of the assets. Therefore,
future changes in our companys strategy and other changes in our operations
could impact the projected future operating results that are inherent in
estimates of fair value, resulting in impairments in the future. Additionally,
other changes in the estimates and assumptions, including the discount rate and
expected long-term growth rate, which drive the valuation techniques employed to
estimate the fair value of long-lived assets could change and, therefore, impact
the assessments of impairment in the future.

Accounts Receivables and Allowance for Doubtful Accounts

Our
company performs certain credit evaluation procedures and does not require
collateral for financial instruments subject to credit risk. We believe that
credit risk is limited because our company routinely assesses the financial
strength of our customers and, based upon factors surrounding the credit risk of
our customers, we establish an allowance for uncollectible accounts receivable.
As a consequence, we believe that our accounts receivable credit risk exposure
beyond such allowances is limited. We recognize an allowance for doubtful
accounts to ensure accounts receivable are not overstated due to

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- 39 -

uncollectibility and are 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 reserve for
individual accounts is recorded when our company becomes aware of a customers
inability to meet its financial obligation, such as in the case of bankruptcy
filings or deterioration in the customers operating results or financial
position. If circumstances related to customers change, estimates of the
recoverability of receivables would be further adjusted.

Material Trends and Uncertainties

Periodic
changes occur in our companys industry and business that make it reasonably
likely that aspects of our future operating results will be materially different
from our historical operating results. Sometimes these matters have not
occurred, but their existence is sufficient to raise doubt regarding the
likelihood that historical operating results are an accurate gauge of future
performance. We attempt to identify and describe these trends, events, and
uncertainties to assist investors in assessing the likely future performance of
our company. Investors should understand that these matters typically are new,
sometimes unforeseen, and often are fluid in nature. Moreover, the matters
described below are not the only issues that may result in variances between
past and future performance nor are they necessarily the only material trends,
events, and uncertainties that will affect our company. As a result, investors
are encouraged to use this and other information to judge for themselves the
likelihood that past performance will be indicative of future performance.

We
are building an LED out-of-home advertising network in the PRC, Hong Kong and
other areas of Asia. Following the acquisition of Lightscape Technologies
(Macau) Limited (Lightscape Macau) in 2006, our company entered the LED
solutions business, which includes the design, supply and building of LED
systems, OEM and licensing of our proprietary intelligent lighting control
software, and rental of LED hardware. Our current business strategy is focused
on (i) building and expanding our LED out-of-home advertising network through
installations we complete and operate independently, through existing
partnerships and by establishing new partnerships with major property owners and
developers in Asia, (ii) establishing advertising sales channels for our LED
out-of-home advertising network by forming strategic partnerships with
advertising agencies and other media industry partners and (iii) growing sales
from our LED solutions business, primarily our LED systems segment, through
design, supply and build contracts with high-end real estate developments in
China, Hong Kong, Singapore and other areas of Asia. The future performance of
these specific business segments may materially affect the future performance of
our company. Our company continues to develop, manufacture and sell lighting
source products. However, we are reviewing our plans and strategic options
related to this business unit.

Summary of Key Results

Total
net revenue for the nine months ended December 31, 2008 was $4,344,097, which
represents an 11% decrease from the total net revenue of $4,889,296 for the nine
months ended December 31, 2007.

Operating
expenses for the nine months ended December 31, 2008 were $4,227,129, which
represents a 16% increase over operating expenses of $3,654,558 for the nine
months ended December 31, 2007.

Net
loss for the nine months ended December 31, 2008 was $2,521,221 compared to a
net loss of $2,864,561 for the nine months ended December 31, 2007.

Basic
and fully diluted loss per share for the nine months ended December 31, 2008 was
$0.05 compared to a basic and fully diluted loss per share of $0.07 for the nine
months ended December 31, 2007.

Results of Operations - Three Months Ended December 31,
2008

Our
net loss for the three months ended December 31, 2008 was $788,029 compared to a
net loss of $551,927 for the three months ended December 31, 2007, an increase
in net loss of $236,102, or 43%. The widening of the net loss is primarily
attributable to the decrease in revenue from LED solutions

---

- 40 -

coupled with an increase in operating expenses during the three
months ended December 31, 2008 compared to the three months ended December 31,
2007.

Revenues and Cost of Revenues

Total
net revenue for the three months ended December 31, 2008 was $1,701,299,
representing a 53% decrease from the total net revenue of $3,617,194 for the
three months ended December 31, 2007. The decrease in net revenues is primarily
attributable to the decrease in revenue from LED solutions.

Specifically,
revenue related to our LED out-of-home advertising business remained at $nil for
the three months ended December 31, 2008 as compared to $nil during the three
months ended December 31, 2007. Our LED out-of-home advertising business is
expected to contribute increased revenues in the foreseeable future as we ramp
up several key LED billboard installations which were completed during the three
months ended December 31, 2008 and are expected to begin generating advertising
revenue in the near future. Our company has formed a strategic partnership with
Ogilvy & Mather Group, a major advertising agency in Hong Kong, to sell
advertising space on our LED billboards.

Revenue
related to our LED solutions business decreased to $1,406,668 for the three
months ended December 31, 2008 from $2,975,913 during the three months ended
December 31, 2007, or a decrease of 53%. The decrease in revenues was due
primarily to the completion of fewer LED solutions contracts during the three
months ended December 31, 2008 as compared to a larger number of contracts
completed during the three months ended December 31, 2007. We believe that the
worldwide recessionary fears caused some of our potential clients for LED
solutions to temporarily delay project work, which contributed to our decreased
revenues for the three months ended December 31, 2008. Our LED solutions
business is expected to contribute increased revenues in the foreseeable future
as several key projects are expected to be initiated and/or completed in the
near future.

Sales
from our other business, which includes our lighting source products business,
were $294,631 for the three months ended December 31, 2008, compared to $641,281
for the three months ended December 31, 2007, representing a decrease of 54%.
The decrease in revenues from our other businesses was due primarily to a
decrease in revenue from sales of lighting source products by our subsidiary
Beijing Illumination. The decrease in sales by Beijing Illumination was due
primarily to the effect of a change of local senior executives and internal
restructuring during the three months ended December 31, 2008 and in prior
periods. The purpose of the changes and restructuring was to reduce
manufacturing costs and foster Beijing Illuminations sales and marketing
network in China. Sales and revenue were also lower due to transport
restrictions in Beijing for approximately one month surrounding the Beijing
Olympics, which reduced flows of raw materials transported to and finished goods
shipped from our Beijing factory. We are currently reviewing our plans and
strategic options related to our lighting source products business.

Total
cost of revenues for the three months ended December 31, 2008 was $1,114,434,
which represents a decrease of 62% as compared to total cost of revenues of
$2,927,284 for the three months ended December 31, 2007. The decrease in the
total cost of revenues during the three months ended December 31, 2008
corresponds to the 53% decrease in total sales revenues, but also decreased due
to improved cost control related to our LED solutions business, namely supplies
of LED modules and video screens, and a higher proportion of revenue from LED
consultancy contracts, which are generally of a higher profit margin as compared
to LED supply and build contracts. The lower costs of supplies are a result of
general technological improvements and economies of scale in the manufacture of
LED hardware by our OEM suppliers, and our ability to secure supply contracts on
more favorable terms. As a result, gross profit margin improved to 34% for the
three months ended December 31, 2008 as compared to 19% for the three months
ended December 31, 2007.

Operating Expenses

Operating
expenses for the three months ended December 31, 2008 were $1,378,714, which
represents a 14% increase in operating expenses over $1,205,072 for the three
months ended December 31,

---

- 41 -

2007. Selling and marketing expenses, general and
administrative expenses, and amortization of intangible assets constitute the
main components of our operating expenses.

Selling
and marketing expenses for the three months ended December 31, 2008 increased
approximately 85% to $276,204 from $149,356 for the three months ended December
31, 2007. The increase was mainly due to higher marketing expenses associated
with our attendance and booths at the Hong Kong International Lighting Fair 2008
held in October 2008 as compared to our attendance in October 2007, increased
staff costs incurred in order to build up our project pipeline of LED solutions
contracts, and to establish our sales network for our LED out-of-home
advertising business. Our company anticipates that selling and marketing
expenses will remain steady or increase in the future to support our companys
further expansion in our core LED out-of-home advertising and LED solutions
businesses, however, any such increases are expected to be limited as a result
of a company-wide cost-cutting initiative implemented in January 2009.

General
and administrative expenses increased by 16% during the three months ended
December 31, 2008 to $976,071 from $844,309 for the three months ended December
31, 2007. The increase was mainly due to increased staff, accounting, investor
relations, public relations and business development costs for the three months
ended December 31, 2008 to provide the foundation to support our anticipated
overall business growth, particularly our LED out-of-home advertising and LED
solutions businesses. Our company anticipates that general and administrative
costs will continue to increase in the foreseeable future as our companys
operations continue to expand, however, such increases are expected to be
limited as a result of a company-wide cost-cutting initiative implemented in
January 2009.

Our
company acquired certain intangible assets through the acquisitions of Tomi Fuji
Energy Management Services Limited (TFEMS) and Beijing Illumination. These
intangible assets are comprised of completed technology for the production of
Aihua Ultra-High Pressure Mercury (AHP) and HID lamps, trademarks, a customer
base and a distributors list. Amortization of intangible assets incurred for the
three months ended December 31, 2008 was $184,928 as compared to $133,846 for
the three months ended December 31, 2007.

Decrease
in provision for doubtful debts amounted to $174,709 during the three months
ended December 31, 2008 as compared to $nil for the three months ended December
31, 2007. The decrease was due primarily to the completion of a review of our
doubtful debts provision plan performed by our management. With a view of the
historical pattern of collection of trade receivables under various aging
categories, we subsequently adjusted the provision for doubtful debts to more
accurately present the total trade receivables and their collectability.

Results of Operations - Nine Months Ended December 31,
2008

Our
net loss for the nine months ended December 31, 2008 was $2,521,221 compared to
a net loss of $2,864,561 for the nine months ended December 31, 2007, or an
improvement of 12%.

Revenues and Cost of Revenues

Total
net revenue for the nine months ended December 31, 2008 was $4,344,097,
representing an 11% decrease from the total net revenue of $4,889,296 for the
nine months ended December 31, 2007. The decrease in net revenues is primarily
attributable to the decrease in revenue from our non-core businesses, primarily
our lighting source products business.

Specifically,
revenue related to our LED out-of-home advertising business remained at $nil for
the nine months ended December 31, 2008 as compared to from $nil during the nine
months ended December 31, 2007. Our LED out-of-home advertising business is
expected to contribute increased revenues in the foreseeable future as we ramp
up several key LED billboard installations which were completed during the nine
months ended December 31, 2008 and are expected to begin generating advertising
revenue in the near future. Our company has formed a strategic partnership with
Ogilvy & Mather Group, a major advertising agency in Hong Kong, to sell
advertising space on our LED billboards.

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Revenue
related to our LED solutions business decreased to $2,809,537 for the nine
months ended December 31, 2008 from $2,999,155 during the nine months ended
December 31, 2007, or a decrease of 6%. The decrease in revenues was due
primarily to the completion of slightly fewer LED solutions contracts during the
nine months ended December 31, 2008 as compared to a larger number of contracts
completed during the nine months ended December 31, 2007. Our LED solutions
business is expected to contribute increased revenues in the foreseeable future
as several key projects are expected to be initiated in the near future.

Sales
from our other business, which includes our lighting source products business,
were $1,534,560 for the nine months ended December 31, 2008 compared to
$1,890,141 for the nine months ended December 31, 2007, representing a decrease
of 19%. The decrease in revenues from our other businesses was due primarily to
a decrease in revenue from sales of lighting source products by our subsidiary
Beijing Illumination. The decrease in sales by Beijing Illumination was due
primarily to the effect of a change of local senior executives and internal
restructuring during the nine months ended December 31, 2008 and in prior
periods. The purpose of the changes and restructuring was to reduce
manufacturing costs and foster Beijing Illuminations sales and marketing
network in China. Sales and revenue were also lower due to transport
restrictions in Beijing for approximately one month surrounding the Beijing
Olympics, which reduced flows of raw materials transported to and finished goods
shipped from our Beijing factory. We are currently reviewing our plans and
strategic options related to our lighting source products business.

Total
cost of revenues for the nine months ended December 31, 2008 was $2,972,342,
which represents a decrease of 23% as compared to total cost of revenues of
$3,863,183 for the nine months ended December 31, 2007. The decrease in the
total cost of revenues during the nine months ended December 31, 2008
corresponds to the 11% decrease in sales revenues, but also decreased due to
improved cost control related to our LED solutions business, namely supplies of
LED modules and video screens, and a higher portion of LED consultancy income
which is of a higher profit margin. The lower costs of supplies are a result of
general technological improvements and economies of scale in the manufacture of
LED hardware by our OEM suppliers, and our ability to secure supply contracts on
more favorable terms. As a result, gross profit margin improved to 32% for the
nine months ended December 31, 2008 as compared to 21% for the nine months ended
December 31, 2007.

Operating Expenses

Operating
expenses for the nine months ended December 31, 2008 were $4,227,129, which
represents a 16% increase in operating expenses over $3,654,558 for the nine
months ended December 31, 2007. Selling and marketing expenses, general and
administrative expenses, and amortization of intangible assets constitute the
main components of our operating expenses.

Selling
and marketing expenses for the nine months ended December 31, 2008 increased
approximately 11% to $562,501 from $507,112 for the nine months ended December
31, 2007. The increase was mainly due to higher marketing expenses associated
with our attendance and booths at the Hong Kong International Lighting Fair 2008
held in October 2008 as compared to our attendance in October 2007, increased
staff costs incurred in order to build up our project pipeline of LED solutions
contracts, and to establish our sales network for our LED out-of-home
advertising business. Our company anticipates that selling and marketing
expenses will remain steady or increase in the future to support our companys
further expansion in our core LED out-of-home advertising and LED solutions
businesses, however, such increases are expected to be limited as a result of a
company-wide cost-cutting initiative implemented in January 2009.

General
and administrative expenses increased by 11% during the nine months ended
December 31, 2008 to $2,803,263 from $2,516,306 for the nine months ended
December 31, 2007. The increase was mainly due to increased staff, accounting,
investor relations, public relations and business development costs for the nine
months ended December 31, 2008 to provide the foundation to support our
anticipated overall business growth, particularly our LED out-of-home
advertising and LED solutions businesses. Our company anticipates that general
and administrative costs will continue to increase in the foreseeable future

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as our companys operations continue to expand, however, such
increases are expected to be limited as a result of a company-wide cost-cutting
initiative implemented in January 2009.

Our
company acquired certain intangible assets through the acquisitions of TFEMS and
Beijing Illumination. These intangible assets are comprised of completed
technology for the production of AHP and HID lamps, trademarks, a customer base
and a distributors list. Amortization of intangible assets incurred for the nine
months ended December 31, 2008 was $578,282 as compared to $401,537 for the nine
months ended December 31, 2007.

Bad
debt expenses increased to $72,244 during the nine months ended December 31,
2008 from $nil for the nine months ended December 31, 2007. The increase in bad
debts was due primarily to the increase in allowance for doubtful accounts of
Beijing Illumination. The allowance for doubtful accounts is our best estimate
of the amount of probable credit losses in our existing accounts receivable. We
determine the allowance based on our historical write-off experience related to
accounts receivable.

Income Taxes

We
received income tax credits of $212,061 during the nine months ended December
31, 2008 compared to $nil for the nine months ended December 31, 2007. These tax
credits are related primarily to our operations in Macau and arose as a result
of the finalization of a Complementary Income Tax assessment as issued by the
Macao Finance Service Bureau for the 2007 assessment year, under which $nil tax
is payable as the assessable profits were below the statutory allowance
level.

Liquidity and Capital Resources

Our
principal cash requirements are for operating expenses, including staff costs
and funding costs of inventory.

As
of December 31, 2008, our company had a net working capital surplus of
$9,346,579 compared to a surplus of $11,490,237 as of March 31, 2008,
representing a decrease in working capital of $2,143,658. The cash and cash
equivalents of our company decreased to $1,557,685 as at December 31, 2008 as
compared to $3,978,500 as of March 31, 2008.

Cash Flow Related to Operating Activities

Operating
activities used cash of $2,650,995 for the nine months ended December 31, 2008
as compared to operating activities using cash of $4,101,871 for the nine months
ended December 31, 2007. The decrease in cash used in operating activities was
mainly due to a decrease in accounts receivable as we tightened our credit terms
and stepped up efforts to collect overdue amounts from clients.

Cash Flow Related to Investing Activities

Net
cash used in investing activities amounted to $528,177 during the nine months
ended December 31, 2008 as compared to investing activities using cash of
$243,256 during the nine months ended December 31, 2007. The increase in cash
used in investing activities is attributable primarily to purchases of plant and
equipment by Media AV, a Singaporean subsidiary we acquired on July 1, 2008 to
support our growing LED solutions business in Singapore.

Our
company incurred capital expenditures of $549,361 during the nine months ended
December 31, 2008 and $243,256 for the nine months ended December 31, 2007. The
increase in capital expenditures for the nine months ended December 31, 2008 as
compared to December 31, 2007 was mainly attributable to increased purchases of
plant and equipment by Media AV. As of December 31, 2008, our company did not
have any material commitments for capital expenditures and management does not
anticipate that our company will spend additional material amounts on capital
expenditures in the near future.

Cash Flow Related to Financing Activities

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Financing
activities generated cash of $756,817 for the nine months ended December 31,
2008 as compared to financing activities generating cash of $692,432 for the
nine months ended December 31, 2007. The increase in net cash flow generated by
financing activities was mainly due to a decrease in convertible note
redemptions to $nil for the nine months ended December 31, 2008 as compared to
$6,000,000 for the nine months ended December 31, 2007.

During
the nine months ended December 31, 2008, our company had obtained a short-term
loan secured by accounts receivable of Lightscape Macau. This loan commenced on
September 29, 2008 with a non-bank financial institution at a principal amount
of $400,896 with a maturity date of 60 days, which was subsequently extended to
90 days, at an annual interest rate of 10%. This loan was repaid in full on the
maturity date of December 29, 2008.

Management
believes that additional cash may be necessary in the foreseeable future to
finance our expanding LED out-of-home advertising and LED solutions businesses.
We have not yet achieved sustainable positive cash flows. As such, we will
depend to a large extent on outside capital over the near-term to fund our
capital needs. Such outside capital may be obtained from additional debt or
equity financing. We do not currently have any arrangement for financing and
there is no assurance that capital will be available to meet our continuing
development costs or, if the capital is available, that it will be on terms
acceptable to us.

Off-Balance Sheet Arrangements

Our
company has no outstanding derivative financial instruments, off-balance sheet
guarantees, interest rate swap transactions or foreign currency contracts. Our
company does not engage in trading activities involving non-exchange traded
contracts.

Item 3. Quantitative and Qualitative Disclosures About
Market Risk.

Not
  applicable.

Item 4T. Controls and Procedures.

As
required by Rule 13a-15 under the Securities Exchange Act of 1934, as of the end
of the period covered by this quarterly report, being December 31, 2008, we have
carried out an evaluation of the effectiveness of the design and operation of
our companys disclosure controls and procedures. This evaluation was carried
out under the supervision and with the participation of our management,
including our Chief Executive Officer. Based upon that evaluation, our Chief
Executive Officer concluded that our disclosure controls and procedures are
effective as at the end of the period covered by this report. There have been no
significant changes in our internal controls over financial reporting that
occurred during our most recent fiscal quarter ended December 31, 2008 that have
materially affected, or are reasonably likely to materially affect our internal
controls over financial reporting.

Disclosure
controls and procedures and other procedures that are designed to ensure that
information required to be disclosed in our reports filed or submitted under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported,
within the time period specified in the Securities and Exchange Commissions
rules and forms. Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information required to be
disclosed in our reports filed under the Securities Exchange Act of 1934 is
accumulated and communicated to management, including our Chief Executive
Officer to allow timely decisions regarding required disclosure.

Our
management, including our Chief Executive Officer and Chief Accounting Officer,
does not expect that our disclosure controls and procedures or our internal
controls will prevent all errors and all fraud. A control system, no matter how
well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met. Further, the design
of a control system must reflect the fact that there are resource constraints,
and the benefits of controls must be considered relative to their costs. Because
of the inherent limitations in all control systems, no evaluation of the

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controls can provide absolute assurance that all control issues
and instances of fraud, if any, within our company have been detected.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

We
know of no material, active, or pending legal proceeding against our company,
nor are we involved as a plaintiff in any material proceeding or pending
litigation where such claim or action involves damages for more than 10% of our
current assets as of December 31, 2008. There are no proceedings in which any of
our companys directors, officers, or affiliates, or any registered or
beneficial shareholders, is an adverse party or has a material interest adverse
to our companys interest.

Item 1A. Risk Factors.

Much
of the information included in this quarterly report includes or is based upon
estimates, projections or other forward-looking statements. Such forward-looking
statements include projections or estimates made by us and our management in
connection with our business operations. While these forward-looking statements,
and any assumptions upon which they are based, are made in good faith and
reflect our current judgment regarding the direction of our business, actual
results will almost always vary, sometimes materially, from any estimates,
predictions, projections, assumptions or other future performance suggested
herein.

Such
estimates, projections or other forward-looking statements involve various risks
and uncertainties as outlined below. We caution the reader that important
factors in some cases have affected and, in the future, could materially affect
actual results and cause actual results to differ materially from the results
expressed in any such estimates, projections or other forward-looking
statements. Prospective investors should consider carefully the risk factors set
out below.

Risks Related to Our Business

Our limited operating history makes it difficult to evaluate
our future prospects and results of operations.

We
have a limited operating history. Accordingly, you should consider our future
prospects in light of the risks and uncertainties experienced by early stage
companies in evolving markets such as the growing market for LED out-of-home
advertising and LED systems inthe PRC. Some of these risks and
uncertainties relate to our ability to:

- attract new customers and increased spending per customer;
- increase awareness of our brand and continue to develop customer loyalty;
- respond to competitive market conditions;
- respond to changes in our regulatory environment;
- manage risks associated with intellectual property rights;
- maintain effective control of our costs and expenses;
- raise sufficient capital to sustain and expand our business; and
- attract, retain and motivate qualified personnel.

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If
we are unsuccessful in addressing any of these risks and uncertainties, our
business may be materially and adversely affected.

We may require additional financing, the availability of
which cannot be assured, and if our company is unable to obtain such financing,
our business may fail.

Our
business plan calls for expenses, working capital and capital expenditures
necessary to continue the build-up of our LED out-of-home advertising network
and to complete supply and build contracts for LED systems. However, there is no
assurance that actual cash requirements will not exceed our estimates. We may
need to raise additional funds to:

- support our planned rapid growth;
- develop new or enhanced services and technologies;
- increase our marketing efforts;
- acquire complementary businesses or technologies; and/or
- respond to competitive pressures or unanticipated requirements.

We
depend to a large extent on outside capital over the near-term to fund our
capital needs. Such outside capital may be obtained from additional debt or
equity financing. We do not currently have any arrangement for financing and
there is no assurance that capital will be available to meet our continuing
development costs or, if the capital is available, that it will be on terms
acceptable to us. Disruptions in financial markets and challenging economic
conditions have affected and may continue to affect our ability to raise
capital. The issuance of additional equity securities by us would result in a
dilution in the equity interests of our current stockholders. Obtaining
commercial loans, assuming those loans would be available, would increase our
liabilities and future cash commitments. If we are unable to obtain financing in
the amounts and on terms deemed acceptable to us, we may be unable to implement
our business and growth strategies, respond to changing business or economic
conditions, withstand adverse operating results, consummate desired acquisitions
or compete effectively.

Our operations are cash intensive and our business could be
adversely affected if we fail to maintain sufficient levels of working capital.

We
expend a significant amount of cash in our operations, principally to fund our
procurement of LED-based hardware. Our suppliers typically require payment in
full within 30-60 days after delivery, although some of our suppliers provide us
with credit. In turn, we typically require our customers to make payment in full
on delivery, although we offer some of our long-standing customers credit terms.
We generally fund most of our working capital requirements out of cash flow
generated from operations. If we fail to generate sufficient revenues from our
sales, or if we experience difficulties collecting our accounts receivable, we
may not have sufficient cash flow to fund our operating costs and our
profitability could be adversely affected.

Our operating results may fluctuate from period to period
and if we fail to meet market expectations for a particular period, our share
price may decline.

Our
operating results have fluctuated from period to period and are likely to
continue to fluctuate as a result of a wide range of factors, including a
historical reliance on non-recurring revenue streams. For example, our provision
of LED systems generally consists of large-scale, one-off supply and build
contracts completed for large property developments. Interim reports may not be
indicative of our performance for the year or our future performance, and
period-to-period comparisons may not be meaningful due to a number of reasons
beyond our control. We cannot assure you that our operating results will meet
the expectations of market analysts or our investors. If we fail to meet their
expectations, there may be a decline in our share price.

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If there are any interruptions to or a decline in the
quality of our LED hardware supply channels, our sales could be materially and
adversely affected.

LED
video screens, modules and lighting hardware are the principal component parts
used in our sales. We procure all of our LED hardware from a number of
third-party manufacturers. Our third-party suppliers may not continue to be able
to provide an adequate supply of LED hardware to satisfy our present and future
sales needs. The supply of LED video screens, modules and lighting hardware is
dependent on the output of OEM LED manufacturers. Our current suppliers may not
be able to provide LED video screens, modules and lighting hardware of
sufficient quality to meet our quality control requirements. Any interruptions
to or decline in the amount or quality of our LED hardware supply could
materially disrupt our sales and adversely affect our business. We are
vulnerable to increases in the price of raw materials (particularly of LED
modules and video screens) and other operating costs. If the costs of raw
materials or other costs of sales and distribution of our products and services
increase, and we are unable to entirely offset these increases by raising prices
of our products and services, our profit margins and financial condition could
be adversely affected.

We operate in a highly-competitive industry and our failure
to compete effectively may adversely affect our ability to generate revenue.

Management
is aware of similar products and services which compete directly with our LED
out-of-home advertising and LED systems, and some of the companies developing
and offering these similar products and services have greater financial,
technical and marketing resources, larger LED out-of-home advertising and LED
system distribution networks, and greater brand name recognition than we do.
These companies may develop products and services superior to those of our
company. Such competition will potentially affect our chances of achieving
profitability in the future.

This
may place us at a disadvantage in responding to our competitors pricing
strategies, technological advances, marketing campaigns, alliances and other
initiatives. Some of our competitors conduct more extensive promotional
activities and offer lower prices to customers than we do, which could allow
them to gain greater market share or prevent us from increasing our market
share. In the future, we may need to decrease our prices if our competitors
continue to lower their prices. Our competitors may be able to respond more
quickly to new or changing opportunities, technologies and customer
requirements. Further, to the extent our competitors are able to attract and
retain customers based on product and/or price advantages, our business and
ability to grow could be adversely affected in a material manner. To be
successful, we must establish and strengthen our brand awareness, effectively
differentiate our product and service lines from those of our competitors and
build our strategic partnerships. To achieve this we may have to substantially
increase marketing activities and expenses in order to compete effectively.

Our failure to maintain existing relationships or to obtain
new relationships with companies that allow us to access desirable locations
where we plan to operate our LED out-of-home advertising billboards could harm
our growth potential and our ability to increase our revenues.

Our
ability to generate future revenues from LED out-of-home advertising sales
depends largely upon our ability to secure desirable locations for the
installation and operation of our large-scale out-of-home LED billboards. This,
in turn, requires that we develop and maintain joint venture, strategic and/or
other business relationships with property owners and developers which own the
targeted locations suitable to place our LED billboards. If we are unable to
maintain our existing relationships or to form new relationships with property
owners and developers, our ability to install and operate LED out-of-home
billboards would be negatively impacted. In turn, advertisers may not find
advertising on our LED out-of-home billboards attractive and may not wish to
purchase advertising time slots on our network, which would have a material
negative impact on our ability to grow future revenues.

If we are unable to attract advertisers to advertise on the
LED out-of-home advertising network we are building, we will be unable to
generate advertising fees, which could negatively affect our ability to grow
revenues.

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The
fees we can charge advertisers for time slots on our LED billboard network
depends on the size and quality of our LED billboard network and the demand by
advertisers for advertising time on our network. Advertisers will choose to
advertise on our LED network in part based on the size of our network and the
desirability of the locations where we operate our LED out-of-home billboards.
If we fail to maintain or to increase the number of locations and LED billboards
in our network, advertisers may be unwilling to purchase time on our network
which could negatively affect our ability to grow our revenues in the
future.

We may be subject to government actions based on the content
displayed on and the locations of the LED billboards in the LED out-of-home
advertising network we are building in China.

In
China, The Outdoor Advertising Registration Administrative Regulations stipulate
that outdoor advertisements in China must be registered with the local State
Administration for Industry and Commerce (SAIC), before dissemination.
Advertising distributors are required to submit a registration application form
and other supporting documents for registration, including the content of the
proposed outdoor advertisement. Our company, our subsidiaries and/or our joint
venture company have obtained or are in the process of obtaining such Outdoor
Advertising Registration Certificates for the advertisements displayed and
intended to be displayed on our LED outdoor advertising billboards. However, we
may be subject to government action if advertisements shown on our outdoor LED
network are in violation of relevant PRC advertising laws and regulations or
that the advertisements broadcast on our network have not received required
approval from the relevant local supervisory bodies.

In
addition, the placement and installation of LED billboards in China is subject
to municipal zoning laws and governmental approvals. Our company, our
subsidiaries and/or our joint venture company have obtained or are in the
process of obtaining such municipal government approvals for each of our LED
outdoor advertising billboards currently installed or planned to be installed in
the PRC. If our existing or future LED billboards are installed in violation of
municipal zoning laws or without the required government approvals and are
required to be removed, it would diminish the attractiveness of our LED outdoor
advertising network for advertisers and adversely affect our ability to sell
advertising space on our network which would in turn adversely affect our
ability to grow future revenues.

Rapid technological changes in our industry could render our
products non-competitive or obsolete and consequently affect our ability to
generate revenues.

Currently,
we derive a majority of our revenues from the sale of LED systems and lighting
source products. We expect to derive a greater proportion of future revenues
from our LED out-of-home advertising business. Each of these industries in which
we are active are characterized by rapid technological change, new products and
services, new sales channels, evolving industry standards and changing client
preferences. Our success will depend, in part, upon our ability to make timely
and cost-effective enhancements and additions to our technology and to introduce
new products and services that meet customer demands. We expect new products and
services to be developed and introduced by other companies that compete with our
products and services. The proliferation of new LED products and services in our
markets may reduce demand for our LED products and services. In addition, the
rapid technological advancements in HID lighting products may render our current
lighting source products obsolete. There can be no assurance that we will be
successful in responding to these or other technological changes, to evolving
industry standards or to new products and services offered by our current and
future competitors. In addition, we may not have access to sufficient capital
for our research and development needs in order to develop new products and
services.

We could lose our competitive advantages if we are not able
to protect our proprietary technology and intellectual property rights against
infringement, and any related litigation could be time-consuming and costly.

Our
success and ability to compete depends in part on our proprietary technology
incorporated in our products and solutions, such as our Multimedia and Video
Show Control System used for the

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authoring, control and playback of content on our LED
advertising billboards and LED systems. If any of our competitors copy or
otherwise gain access to our proprietary technology or develop similar
technologies independently, we would not be able to compete as effectively. We
consider our patents and trademarks invaluable to our ability to continue to
develop and maintain the goodwill and recognition associated with our brands.
The measures we take to protect the proprietary technology, and other
intellectual property rights, which presently are based upon a combination of
patent, trademark and trade secret laws, may not be adequate to prevent their
unauthorized use. Further, the laws of foreign countries may provide inadequate
protection of such intellectual property rights. We may need to bring legal
claims to enforce or protect such intellectual property rights. Any litigation,
whether successful or unsuccessful, could result in substantial costs and a
diversion of corporate resources. In addition, notwithstanding any rights we
have secured to our intellectual property, other persons may bring claims
against us claiming that we have infringed on their intellectual property
rights, including claims that our intellectual property rights are not valid.
Any claims against us, with or without merit, could be time-consuming and costly
to defend or litigate, divert our attention and resources, result in the loss of
goodwill associated with our trademarks or require us to make changes to our
technologies.

We may not be able to hire and retain qualified personnel to
support our growth and if we are unable to retain or hire such personnel in the
future, our ability to improve our products and implement our business
objectives could be adversely effected.

To
continue our growth, we will need to recruit additional senior management
personnel, including persons with financial and sales experience. In addition,
we must hire, train and retain a number of other skilled personnel, including
persons with experience in LED system design, creative lighting design,
development of intelligent LED control software, electrical engineering and
operations. Intense competition for these personnel could cause our compensation
costs to increase significantly, which could have a material adverse effect on
our results of operations. Our future success and ability to grow our business
will depend in part on the continued service of these individuals and our
ability to identify, hire and retain additional qualified personnel. If we are
unable to attract and retain qualified employees, we may be unable to meet our
business and financial goals.

We
are highly dependent on our senior management to manage our business and
operations. In particular, we rely substantially on our chief executive officer,
Mr. Bondy Tan, to manage our operations. In addition, we also rely on design,
engineering, sales and marketing personnel with technical and industry knowledge
to market, sell and install our products and services. We do not maintain key
man life insurance on any of our senior management or key personnel. The loss of
any one of them, in particular Mr. Tan, would have a material adverse effect on
our business and operations. Competition for senior management personnel is
intense and the pool of suitable candidates is limited. We may be unable to
locate a suitable replacement for any senior management personnel that we lose.
In addition, if any member of our senior management joins a competitor or forms
a competing company, they may compete with us for customers, business partners
and other key professionals and staff members of our company.

Our company is subject to sales channel risk due to a
concentration of sales to a limited number of customers and any significant
interruption from these customers may have a material adverse effect on our
company.

Approximately
11.4% of our revenue was contributed from one customer for the nine months ended
December 31, 2008. If this or any of our customers ceased doing business with
our company, we would require time to find other customers. If we lose these
customers or are unable to generate recurring revenues from these customers,
there would be a negative impact on our overall performance. We have not entered
into long-term supply contracts with any of these major customers. Therefore,
there can be no assurance that we will maintain or improve the relationships
with these customers, or that we will be able to continue to supply these
customers at current levels or at all. If we cannot maintain long-term
relationships with our major customers, the loss of a significant portion of our
sales to them could have an adverse effect on our business, financial condition
and results of operations.

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Our growth could be impaired if we do not successfully
handle certain risks associated with international business.

There
are risks inherent in doing business in international markets, including:

- fluctuations in currency exchange rates;
- difficulties in staffing and managing foreign operations;
- changes in regulatory requirements, tariffs and other trade barriers;
- potential adverse tax consequences; and
- inadequate protection for intellectual property rights.

One
or more of these factors may make it difficult for us to fully implement our
international business strategies and may have a material adverse effect on our
current or future international operations.

Recent changes in economic conditions and disruptions in
financial markets may adversely affect our business.

Recent
changes in domestic and global economic conditions and disruptions in financial
markets could adversely affect our business. We may experience decreased
customer demand, delayed spending by customers in response to tighter credit and
longer payment cycles for accounts receivable. Any of these events, or any other
events caused by the recent changes in economic conditions and disruptions in
financial markets, may have a material adverse effect on our business, operating
results, and financial condition.

We derive a substantial portion of our revenues from sales
in the PRC and any downturn in the Chinese economy could have a material adverse
effect on our business and financial condition.

A
substantial portion of our revenues are generated from sales in the PRC. We
anticipate that revenues from sales of our products and services in the PRC will
continue to represent a substantial proportion of our total revenues in the near
future. Any significant decline in the condition of the PRC economy could, among
other things, adversely affect consumer buying power and discourage the purchase
of our products and services, which in turn would have a material adverse effect
on our revenues and profitability.

Any changes in the political and economic policies of, or
any new regulations implemented by, the Chinese government could affect, or even
restrict, the operation of our business and our ability to generate revenues.

Our
business is currently focused on the sale of LED out-of-home advertising and LED
products and services in China. Accordingly, our business, results of operations
and financial condition are affected to a significant degree by any economic,
political and legal developments in China.

Since
the late 1970s, the Chinese government has been reforming its economic system.
Although we believe that economic reform and the macroeconomic measures adopted
by the Chinese government has had and will continue to have a positive effect on
the economic development in China, there can be no assurance that the economic
reform strategy will not from time to time be modified or revised. Some
modifications or revisions, if any, could have a material adverse effect on the
overall economic growth of China and the development of specialty lighting
products and services in China. Any such changes would have a material adverse
effect on our business. Furthermore, there is no guarantee that the Chinese
government will not impose other economic or regulatory controls that would have
a material adverse effect on our business. Any changes in the political,
economic and social conditions in China, adjustments in policies by the Chinese
government or changes in laws and regulations on the sale of LED out-of-home

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advertising or LED products and services could affect the
manner in which we operate our business and restrict or prohibit transactions
initiated or conducted by our company. Any such changes or new regulations could
affect our ability to develop and sell our products and therefore affect our
ability to generate revenues.

Our company is subject to foreign exchange rate risk,
particularly fluctuations in the exchange rate between Chinese Renminbi and
United States dollars and between Singapore dollars and United States
dollars.

Our
company may enter sales transactions denominated in Chinese Renminbi and
Singapore dollars. While Singapore dollars are free from to exchange control,
with free conversion of currency, the PRC State Administration for Foreign
Exchange, under the authority of the Peoples Bank of China, controls the
conversion of Renminbi into foreign currencies. The principal regulation
governing foreign currency exchange in China is the Foreign Currency
Administration Rules (1996), as amended. Under the Rules, once various
procedural requirements are met, Renminbi is convertible for current account
transactions, including trade and services, but not for capital account
transactions, including direct investment, loan or investment in securities
outside China, unless the prior approval of the State Administration of Foreign
Exchange of the PRC is obtained. Although the Chinese government regulations now
allow greater convertibility of Renminbi for current account transactions,
significant restrictions still remain.

The
value of the Renminbi is subject to changes in Chinas central government
policies and to international economic and political developments affecting
supply and demand in the China Foreign Exchange Trading System market. Since
1994, the conversion of Renminbi into foreign currencies, including United
States dollars, has been based on rates set by the Peoples Bank of China, which
are set daily based on the previous days interbank foreign exchange market
rates and current exchange rates on the world financial markets. Since 1994, the
official exchange rate generally has been stable, but the Chinese government
recently announced that it will no longer measure its currency exclusively to
the United States dollar but will switch to a managed floating exchange rate
based on market supply and demand with reference to a basket of currencies yet
to be named by the Peoples Bank of China, which will likely increase the
volatility of Renminbi as compared to United States dollars.

Our
company has experienced moderate foreign exchange gains and losses to date due
to the relative stability of the Renminbi up to late July 2006. However, we are
not sure what effect, if any, the decoupling of the Renminbi from the United
States dollar from late July 2006 onward will have on our financial statements
and results of operations. We do not currently engage in hedging activities to
reduce our exposure to exchange rate fluctuation.

The
recent global financial crisis may lead to drastic and unanticipated
fluctuations in the exchange rates of Renminbi and Singapore dollars, which may
affect our company through either foreign exchange gains or losses to be
accounted for in the statement of operations, and which may materially affect
our operating results and financial position.

New or changing government policies or regulations related
to the LED out-of-home advertising or LED products and services industries in
our markets may have an adverse effect on our operations and may require our
company to modify our business plan.

Our
management oversees trends in our market industries by accessing available
market information, including updated governmental policies and regulations
related to such industries from time to time, particularly the LED out-of-home
advertising industry in China. Both short and long-term changes in governmental
policies or regulations affecting the LED out-of-home advertising or LED
products and services industries may trigger our company to take appropriate
measures to re-position our company to achieve our business plan or alter the
business plan as a whole. We cannot assure that our company will be able to
adapt to changing policies and regulations efficiently in order to maintain the
currently anticipated level of business, results of operations or financial
condition.

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If LED-based hardware does not achieve greater market
acceptance, prospects for our growth and profitability may be limited.

Our
companys future success depends on increased market acceptance of LED-based
hardware. Potential customers for LED-based hardware may be reluctant to adopt
LED video and lighting hardware as an alternative to traditional light source
technology because of its higher initial cost and relatively low light output in
comparison with the most powerful traditional lighting sources, or because of
perceived risks relating to LED technologys novelty, complexity, reliability
and quality, usefulness and cost-effectiveness when compared to other lighting
sources available in the market. These factors could adversely affect demand for
our companys LED out-of-home advertising billboards and/or our LED systems. If
acceptance of LED-based hardware does not continue to grow, opportunities to
increase our revenues and operate profitably may be limited.

If advances in LED technology do not continue, we may be
unable to increase our penetration of our existing markets or expand into new
markets.

Our
company does not design or manufacture LEDs or individual LED modules. Our
ability to continue penetrating our existing markets and to expand into new
markets depends on continued advancements in the design and manufacture by
others of LEDs and LED modules. In the LED out-of-home billboard advertising and
high-performance LED color lighting markets that we currently serve, we rely on
continued improvements in the brightness, efficiency and initial cost of color
LEDs. The continued development of LED technologies depends on other companies
research and is out of our control. If advancements in LED technologies occur at
a slower pace than we anticipate, or fail to occur at all, we may be unable to
penetrate additional markets, our revenues would be significantly reduced, and
our future prospects for success may be harmed.

If we fail to develop and maintain an effective system of
internal controls, we may not be able to accurately report our financial results
or prevent fraud; as a result, current and potential shareholders could lose
confidence in our financial reports, which could harm our business and the
trading price of our common stock.

Effective
internal controls are necessary for us to provide reliable financial reports and
effectively prevent fraud. Section 404 of the Sarbanes-Oxley Act of 2002
requires us to evaluate and report on our internal controls over financial
reporting beginning with our annual report on Form 10-KSB for the fiscal year
ended March 31, 2008. The process of strengthening our internal controls and
complying with Section 404 is expensive and time consuming, and requires
significant management attention. We cannot be certain that the measures we
undertake will ensure that we will maintain adequate controls over our financial
processes and reporting in the future. Furthermore, if we are able to rapidly
grow our business, the internal controls that we will need will become more
complex, and significantly more resources will be required to ensure our
internal controls remain effective. Failure to implement required controls, or
difficulties encountered in their implementation, could harm our operating
results or cause us to fail to meet our reporting obligations. If we or our
auditors discover a material weakness in our internal controls, the disclosure
of that fact, even if the weakness is quickly remedied, could diminish
investors confidence in our financial statements and harm our stock price. In
addition, non-compliance with Section 404 could subject us to sanctions by the
Securities and Exchange Commission, lawsuits, delisting by SROs and/or an
assignment of higher risks by investors, which would further reduce our stock
price.

Most of our assets, all of our directors and most of our
officers are outside the United States, with the result that it may be difficult
for investors to enforce within the United States any judgments obtained against
us or any of our directors or officers.

Although
we are organized under the laws of the State of Nevada, our principal executive
office is located in Hong Kong. Outside the United States, it may be difficult
for investors to enforce judgments against us obtained in the United States in
any such actions, including actions predicated upon civil liability provisions
of federal securities laws. In addition, all of our directors and most of our
officers reside outside the United States, and many of the assets of these
persons and our assets are located outside of the United

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- 53 -

States. As a result, it may not be possible for investors to
affect service of process within the United States upon such persons or to
enforce against us or such persons judgments predicated upon the liability
provisions of the United States securities laws. There is substantial doubt as
to the enforceability against us or any of our directors and officers located
outside the United States in original actions or in actions of enforcement of
judgments of United States courts or liabilities predicated on the civil
liability provisions of United States federal securities laws.

Risks Related to Our Industry

The LED out-of-home advertising and LED products and
services industries in the PRC may face increasing competition from both
domestic and foreign companies, as well as increasing industry consolidation,
which may affect our market share and profit margin.

The
specialty lighting industry, including the provision of LED out-of-home
advertising billboards, LED lighting systems, LED screen rental services, and
advanced lighting products, in the PRC is highly competitive. Our products and
services are targeted primarily at property owners and developers, a market in
which we face increasing competition. In addition, there is an increasing trend
of consolidation throughout the industry. We believe that our ability to
maintain our market share and grow our operations within this landscape of
changing and increasing competition is largely dependant upon our ability to
distinguish the quality of our products and services.

In
addition, prior to the entry of the PRC into the World Trade Organization
(WTO), high barriers to entry existed for many potential competitors in our
business through the use of tariffs and restrictive import licensing and
distribution practices. The admission of the PRC to the WTO has lowered some of
the tariffs and other barriers to entry so we can expect that competition will
increase.

We
cannot assure you that our current or potential competitors will not develop
products or services of a comparable or superior quality to ours, or adapt more
quickly than we do to evolving consumer preferences or market trends. In
addition, our competitors may merge or form alliances to achieve a scale of
operations or sales network which would make it difficult for us to compete.
Increased competition may also lead to price wars or negative brand advertising,
which may adversely affect our market share and profit margin. We cannot assure
you that we will be able to compete effectively with our current or potential
competitors.

Risks Related to Our Common Stock

A decline in the price of our common stock could affect our
ability to raise further working capital and adversely impact our operations.

A
prolonged decline in the price of our common stock could result in a reduction
in the liquidity of our common stock and a reduction in our ability to raise
capital. Because our operations have been primarily financed through the sale of
equity securities, a decline in the price of our common stock could be
especially detrimental to our liquidity and our continued operations. Any
reduction in our ability to raise equity capital in the future would force us to
reallocate funds from other planned uses and would have a negative effect on our
business plans and operations, including our ability to develop new products and
continue our current operations. If the stock price declines, there can be no
assurance that we will be able to raise additional capital or generate funds
from operations sufficient to meet our obligations. We believe the following
factors could cause the market price of our common stock to continue to
fluctuate widely and could cause our common stock to trade at a price below the
price at which you purchase your shares:

- actual or anticipated variations in our quarterly operating results;
- announcements of new services, products, acquisitions or strategic
  relationships by us or our competitors;

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- 54 -

- trends or conditions in the energy management services industry;
- changes in accounting treatments or principles;
- changes in earnings estimates by securities analysts and in analyst
  recommendations;
- changes in market valuations of other energy management services companies;
  and
- general political, economic and market conditions.

The
market price for our common stock may also be affected by our ability to meet or
exceed expectations of analysts or investors. Any failure to meet these
expectations, even if minor, could have a material adverse affect the market
price of our common stock.

If we issue additional shares in the future, it will result
in the dilution of our existing stockholders.

Our
certificate of incorporation authorizes the issuance of 800,000,000 shares of
common stock and 100,000,000 shares of preferred stock. Our board of directors
has the authority to issue additional shares up to the authorized capital stated
in the certificate of incorporation. Our board of directors may choose to issue
some or all of such shares to acquire one or more businesses or to provide
additional financing in the future. The issuance of any such shares will result
in a reduction of the book value or market price of the outstanding shares of
our common stock. If we issue any such additional shares, such issuance also
will cause a reduction in the proportionate ownership and voting power of all
other stockholders. Further, any such issuance may result in a change of control
of our corporation.

If a market for our common stock does not develop,
stockholders may be unable to sell their shares.

There
is currently a limited market for our common stock, which trades through the OTC
Bulletin Board. Trading of stock through the OTC Bulletin Board is frequently
thin and highly volatile. There is no assurance that a sufficient market will
develop in the stock, in which case it could be difficult for stockholders to
sell their stock.

The market price for our common stock may be volatile and
subject to wide fluctuations, which may adversely affect the price at which you
can sell our shares.

The
market price for our common stock may be volatile and subject to wide
fluctuations in response to factors including the following:

- actual or anticipated fluctuations in our quarterly operations results;
- changes in financial estimates by securities research analysts;
- conditions in foreign or domestic specialty lighting markets;
- changes in the economic performance or market valuations of other specialty
  lighting companies;
- announcements by us or our competitors of new products, acquisitions,
  strategic partnerships, joint ventures or capital commitments;
- addition or departure of key personnel;
- fluctuations of exchange rates between the Renminbi and the U.S. dollar;

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- 55 -

- intellectual property litigation; and
- general economic or political conditions in the PRC.

In
addition, the securities market has from time to time experienced significant
price and volume fluctuations that are not related to the operating performance
of particular companies. These market fluctuations may also materially and
adversely affect the market price of our stock.

Trading of our stock may be restricted by the Securities and
Exchange Commissions penny stock regulations which may limit a stockholders
ability to buy and sell our stock.

The
Securities and Exchange Commission has adopted regulations which generally
define penny stock to be any equity security that has a market price (as
defined) less than $5.00 per share or an exercise price of less than $5.00 per
share, subject to certain exceptions. Our securities are covered by the penny
stock rules, which impose additional sales practice requirements on
broker-dealers who sell to persons other than established customers and
accredited investors. The term accredited investor refers generally to
institutions with assets in excess of $5,000,000 or individuals with a net worth
in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly
with their spouse. The penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document in a form prepared by the Securities and
Exchange Commission which provides information about penny stocks and the nature
and level of risks in the penny stock market. The broker-dealer also must
provide the customer with current bid and offer quotations for the penny stock,
the compensation of the broker-dealer and its salesperson in the transaction and
monthly account statements showing the market value of each penny stock held in
the customers account. The bid and offer quotations, and the broker-dealer and
salesperson compensation information, must be given to the customer orally or in
writing prior to effecting the transaction and must be given to the customer in
writing before or with the customers confirmation. In addition, the penny stock
rules require that prior to a transaction in a penny stock not otherwise exempt
from these rules, the broker-dealer must make a special written determination
that the penny stock is a suitable investment for the purchaser and receive the
purchasers written agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for the stock that is subject to these penny stock rules. Consequently,
these penny stock rules may affect the ability of broker-dealers to trade our
securities. We believe that the penny stock rules discourage investor interest
in and limit the marketability of, our common stock.

The Financial Industry Regulatory Authority, or FINRA, has
adopted sales practice requirements, which may limit a stockholders ability to
buy and sell our shares.

In
addition to the penny stock rules described above, FINRA has adopted rules
requiring that in recommending an investment to a customer, a broker-dealer must
have reasonable grounds for believing that the investment is suitable for that
customer. Prior to recommending speculative low-priced securities to their
non-institutional customers, broker-dealers must make reasonable efforts to
obtain information about the customers financial status, tax status, investment
objectives and other information. Under interpretations of these rules, FINRA
believes that there is a high probability that speculative low-priced securities
will not be suitable for at least some customers. FINRA requirements make it
more difficult for broker-dealers to recommend that their customers buy our
common stock, which may limit our shareholders ability to buy and sell our
stock and which may have an adverse effect on the market for our shares.

Potential sales of a substantial number of shares of our
common stock into the public market by selling stockholders may result in
significant downward pressure on the price of our common stock and could affect
the ability of our stockholders to realize any current trading price of our
common stock.

We
granted registration rights to the holders of shares of our common stock (and
holders of warrants to purchase shares of our common stock) issued pursuant to a
capital-raising transaction which we closed on March 17, 2008. Pursuant to our
registration rights agreement, our company filed a Form S-1

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registration statement with the Securities and Exchange
Commission on July 21, 2008 for the registration of 8,750,000 shares of our
common stock. On July 28, 2008, the registration statement covering these shares
of our common stock was declared effective by the Securities and Exchange
Commission, enabling the selling stockholders to resell up to approximately
15.7% of the issued and outstanding shares of our common stock. As a result of
such registration statement, a substantial number of our shares of common stock
which have been issued may be available for immediate resale, which could have
an adverse effect on the price of our common stock. As a result of any such
decrease in price of our common stock, our current stockholders and purchasers
who acquire shares from the selling stockholders may lose some or all of their
investment.

If we are late in filing both our quarterly report for the
period ending December 31, 2008 and our annual report for the period ending
March 31, 2009, or if we are late multiple times in filing any of our annual or
quarterly reports during the next two years, our common stock may become
ineligible for quotation on the OTC Bulletin Board, which would negatively
affect the market for our shares and our ability to obtain additional financing.

Companies
trading on the OTC Bulletin Board, such as us, must have a class of securities
registered under Section 12 of the Exchange Act, as amended, and must be current
in their reports under Section 13 in order to maintain price quotation
privileges on the OTC Bulletin Board. More specifically, FINRA Rule 6530, which
determines eligibility of issuers quoted on the OTC Bulletin Board, requires an
issuer to be current in its filings with the Securities and Exchange Commission.
Pursuant to Rule 6530(e), as it is currently in effect, if we file our reports
late with the Securities and Exchange Commission three times in a two-year
period or our securities are removed from the OTC Bulletin Board twice in a
two-year period for failure to file reports, then we will be ineligible for
quotation on the OTC Bulletin Board.

We
have been late in filing a report on one occasion in the past two years: our
annual report for the period ending March 31, 2007. As a result, if we are late
in filing both our quarterly report for the period ending December 31, 2008 and
our annual report for the period ending March 31, 2009, we would have been late
in filing our reports three times in a two-year period and we may become
ineligible for quotation on the OTC Bulletin Board. In addition, if we are late
multiple times in filing any of our annual or quarterly reports during the next
two years, we may become ineligible for quotation on the OTC Bulletin Board. If
our common stock becomes ineligible for quotation on the OTC Bulletin Board, it
would negatively affect the market for our common stock and it may become more
difficult for us to obtain additional equity financing as shares of our common
stock would be less attractive to potential investors.

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

None.

Item 3. Defaults Upon Senior Securities.

None.

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

None.

Item 5. Other Information.

Corporate Governance Updates

Director Independence

We
currently act with five directors, consisting of Bondy Tan, Charles Cheung,
Francis Man Chung Wong, Kwok Tin Tang and Edmand Yuk Man Wong. On December 31,
2008, our board of directors judged and affirmatively determined that Francis
Man Chung Wong, Kwok Tin Tang and Edmand

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Yuk Man Wong each meets the definition of independent director:
(1) as that term is defined in Item 407(a) of Regulation S-K and the rules and
regulations promulgated by the Securities and Exchange Commission thereunder;
(2) as that term is defined in Rule 4200(a)(15) of the NASDAQ Stock Market
Rules; and (3) that the current board of directors of our company therefore
consists of a majority of independent directors.

Audit Committee

We
currently act with a standing audit committee. The audit committee of our board
of directors was established in accordance with Section 3(a)(58)(A) of the
Securities Exchange Act of 1934 on June 6, 2006 and adopted its charter on June
6, 2006. On December 31, 2008, our board of directors adopted an amended and
restated audit committee charter. The audit committee is directed by its charter
to review the scope, cost and results of the independent audit of our books and
records, the results of the annual audit with management and the adequacy of our
accounting, financial and operating controls; to recommend annually to the board
of directors the selection of the independent registered accountants; to
consider proposals made by the independent registered accountants for consulting
work; and to report to the board of directors, when so requested, on any
accounting or financial matters.

Our
audit committee consists of Francis Man Chung Wong (appointed chairperson on
August 1, 2007), Kwok Tin Tang and Edmand Yuk Man Wong, all of whom are
non-employee directors of our company. On December 31, 2008, our board of
directors judged and affirmatively determined that each current member of the
audit committee: (1) meets the definition of independence contained in Rule
4200(a)(15) of the NASDAQ Stock Market Rules; (2) meets the criteria for
independence set forth in Rule 10A-3(b)(1) of the Securities Exchange Act of
1934; (3) has not participated in the preparation of the financial statements of
our company or any current subsidiary of our company at any time during the past
three years; and (4) is able to read and understand fundamental financial
statements, including a companys balance sheet, income statement, and cash flow
statement.

In
the judgment of our board of directors, Francis Man Chung Wong: (1) meets the
definition of an audit committee financial expert, as such term is defined in
Item 407(d)(5)(ii) of Regulation S-K and the rules and regulations promulgated
by the Securities and Exchange Commission thereunder; (2) has past employment
experience in finance or accounting, requisite professional certification in
accounting, or any other comparable experience or background which results in
his financial sophistication, including being or having been a chief executive
officer, chief financial officer or other senior officer with financial
oversight responsibilities; and (3) is able to read and understand fundamental
financial statements, including a companys balance sheet, income statement, and
cash flow statement.

Nominating and Corporate Governance Committee

We
currently act with a standing nominating and corporate governance committee of
our board of directors. This committee was established and adopted its charter
on December 31, 2008. The nominating and corporate governance committee is
directed by its charter to identify individuals qualified to become directors of
our company, and to select such director nominees at the next annual meeting of
the shareholders or otherwise; to periodically evaluate the qualifications and
independence of each director on our board and its various committees and
recommend to our board any changes in its or its committees composition; and to
develop and recommend to our board of directors corporate governance principles
applicable to our company, and oversee the application of such corporate
governance principles.

Our
nominating and corporate governance committee consists of Edmand Yuk Man Wong
(appointed chairperson on December 31, 2008), Francis Man Chung Wong and Kwok
Tin Tang, all of whom are non-employee directors of our company. On December 31,
2008, our board of directors judged and affirmatively determined that each
current member of the nominating and corporate governance committee meets the
definition of independent director: (1) as that term is defined in Item 407(a)
of Regulation S-K and the rules and regulations promulgated by the Securities
and Exchange Commission thereunder; and (2) as that term is defined in Rule
4200(a)(15) of the NASDAQ Stock Market Rules.

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As
of December 31, 2008, we did not effect any material changes to the procedures
by which our stockholders may recommend nominees to our board of directors. Our
board of directors has determined that the nominating and corporate governance
committee is in the best position to evaluate our companys requirements as well
as the qualifications of each candidate when the committee considers a nominee
for a position on our board of directors. If stockholders wish to recommend
candidates directly to our nominating and corporate governance committee, they
may do so by sending communications to the chairperson of the committee at the
address on the cover of this quarterly report.

Corporate Governance Guidelines

On
December 31, 2008, our board of directors adopted a formal set of corporate
governance guidelines recommended to the board by our nominating and corporate
governance committee. The corporate governance guidelines are intended to serve
as the foundation for the governance of our company, in conjunction with the
articles of incorporation and by-laws of our company, and the charters of the
various committees of the board of directors. Among other requirements, the
corporate governance guidelines require that executive sessions or meetings of
those members of the board who meet the then current standards of independence
shall be held at least annually, and more frequently if the independent
directors so desire.

Compensation Committee

We
currently act with a standing compensation committee of our board of directors.
This committee was established and adopted its charter on December 31, 2008. The
compensation committee is directed by its charter to oversee our companys
compensation and benefit plans, policies and practices, including any executive
compensation plans, incentive compensation and equity-based plans; to determine,
or recommend to the board of directors of our company for determination, the
compensation levels of our companys executive officers, specifically the chief
executive officer and the other named executive officers as defined in Rule 3b-7
of the Securities Exchange Act of 1934; to produce an annual report on executive
compensation for inclusion in our companys annual report or proxy statement if
required by applicable securities laws; and to monitor and evaluate matters
relating to the compensation and benefits structure of our company.

Our
compensation committee consists of Kwok Tin Tang (appointed chairperson on
December 31, 2008), Francis Man Chung Wong and Edmand Yuk Man Wong, all of whom
are non-employee directors of our company. On December 31, 2008, our board of
directors judged and affirmatively determined that each current member of the
compensation committee meets the definition of independent director: (1) as that
term is defined in Item 407(a) of Regulation S-K and the rules and regulations
promulgated by the Securities and Exchange Commission thereunder; and (2) as
that term is defined in Rule 4200(a)(15) of the NASDAQ Stock Market Rules.

Copies of the board
committee charters and corporate governance guidelines, along with a table
summarizing the composition of our board of directors and committees, can be
found under the Corporate Governance tab in the Investor Relations section on
our companys website at www.lightscapetech.com.hk. The information on our
companys website does not form part of this quarterly report.

Item 6. Exhibits

Exhibits required by Item 601 of Regulation S-K

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|Exhibit Number | Description                                                                                                                                                                                                                                                                                                  
|-------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|               |                                                                                                                                                                                                                                                                                                              
|(2)            | Plan of Purchase, Sale, Reorganization, Arrangement,
      Liquidation or Succession                                                                                                                                                                                                                         
|               |                                                                                                                                                                                                                                                                                                              
|2.1            | Share Exchange Agreement dated January 7, 2005, among
      Global Innovative Systems Inc., Tech Team Holdings Limited, Bondy Tan and
      the Selling Shareholders (incorporated by reference from our Current
      Report on Form 8-K filed on January 18, 2005)                                         
|               |                                                                                                                                                                                                                                                                                                              
|(3)            | (i) Articles of Incorporation; and (ii) Bylaws                                                                                                                                                                                                                                                               
|               |                                                                                                                                                                                                                                                                                                              
|3.1            | Charter (incorporated by reference from our Registration
      Statement on Form 10-SB filed on April 11, 2000)                                                                                                                                                                                              
|               |                                                                                                                                                                                                                                                                                                              
|3.2            | Articles of Incorporation (incorporated by reference from
      our Registration Statement on Form 10-SB filed on April 11, 2000)                                                                                                                                                                            
|               |                                                                                                                                                                                                                                                                                                              
|3.3            | Certificate of Reverse Stock Split filed with the Nevada
      Secretary of State on November 12, 2003 (incorporated by reference from
      our Current Report on Form 8-K filed on December 17, 2003)                                                                                                      
|               |                                                                                                                                                                                                                                                                                                              
|3.4            | Certificate of Amendment to Articles of Incorporation
      filed with the Secretary of State of Nevada on March 3, 2004 (incorporated
      by reference from our Quarterly Report on Form 10- QSB filed on May 15,
      2004)                                                                             
|               |                                                                                                                                                                                                                                                                                                              
|3.5            | Certificate of Change filed with the Secretary of State
      of Nevada on December 23, 2004 (incorporated by reference from our Current
      Report on Form 8-K filed on January 6, 2005)                                                                                                                  
|               |                                                                                                                                                                                                                                                                                                              
|3.6            | Articles of Merger filed with the Secretary of State of
      Nevada on April 17, 2007 effective April 20, 2007 (incorporated by
      reference from our Current Report on Form 8-K filed on April 23, 2007)                                                                                                
|               |                                                                                                                                                                                                                                                                                                              
|3.7            | Bylaws (incorporated by reference from our Current Report
      on Form 8-K filed on October 14, 2008)                                                                                                                                                                                                       
|               |                                                                                                                                                                                                                                                                                                              
|(10)           | Material Contracts                                                                                                                                                                                                                                                                                           
|               |                                                                                                                                                                                                                                                                                                              
|10.1           | Management Contract between Tech Team Holdings Limited /
      Tech Team Development Limited and Bondy Tan (incorporated by reference
      from our Current Report on Form 8-K filed on January 18, 2005)                                                                                                   
|               |                                                                                                                                                                                                                                                                                                              
|10.2           | Subscription Agreement between Global Innovative Systems
      Inc. and Bondy Tan, dated January 18, 2007 (incorporated by reference from
      our Quarterly Report on Form 10-QSB filed on February 20, 2007)                                                                                              
|               |                                                                                                                                                                                                                                                                                                              
|10.3           | Subscription Agreement between Global Innovative Systems
      Inc., Investec Bank (UK) Limited and the persons set out in Schedule 1 to
      the Subscription Agreement, dated January 18, 2007 (incorporated by
      reference from our Quarterly Report on Form 10-QSB filed on February 20,
      2007)
|               |                                                                                                                                                                                                                                                                                                              
|10.4           | Note issued by Global Innovative Systems Inc. to Investec
      Bank (UK) Limited dated January 23, 2007 (incorporated by reference from
      our Quarterly Report on Form 10-QSB filed on February 20, 2007)                                                                                               

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|Exhibit Number | Description                                                                                                                                                                                                                                                                                                                                                                 
|-------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|               |                                                                                                                                                                                                                                                                                                                                                                             
|10.5           | Subscription Agreement between Global Innovative Systems
      Inc., Full Moon Resources Limited and the persons set out in Schedule 1 to
      the Subscription Agreement, dated January 18, 2007 (incorporated by
      reference from our Quarterly Report on Form 10-QSB filed on February 20,
      2007)                                                              
|               |                                                                                                                                                                                                                                                                                                                                                                             
|10.6           | Note issued by Global Innovative Systems Inc. to Full
      Moon Resources Limited dated January 23, 2007 (incorporated by reference
      from our Quarterly Report on Form 10-QSB filed on February 20, 2007)                                                                                                                                                             
|               |                                                                                                                                                                                                                                                                                                                                                                             
|10.7           | Subscription Agreement between Global Innovative Systems
      Inc., LP Asset Management Limited and the persons set out in Schedule 1 to
      the Subscription Agreement, dated January 18, 2007 (incorporated by
      reference from our Quarterly Report on Form 10-QSB filed on February 20,
      2007)                                                              
|               |                                                                                                                                                                                                                                                                                                                                                                             
|10.8           | Note issued by Global Innovative Systems Inc. to LP Asset
      Management Limited dated January 23, 2007 (incorporated by reference from
      our Quarterly Report on Form 10-QSB filed on February 20, 2007)                                                                                                                                                             
|               |                                                                                                                                                                                                                                                                                                                                                                             
|10.9           | Redemption Agreement between Lightscape Technologies
      Inc., Investec Bank (UK) Limited, Full Moon Resources Limited, LP Asset
      Management Limited and Bondy Tan, dated July 10, 2007 (incorporated by
      reference from our Current Report on Form 8-K filed on August 22, 2007)                                                                               
|               |                                                                                                                                                                                                                                                                                                                                                                             
|10.10          | Form of Subscription Agreement dated August 21, 2007
      (incorporated by reference from our Current Report on Form 8-K filed on
      August 22, 2007)                                                                                                                                                                                                                   
|               |                                                                                                                                                                                                                                                                                                                                                                             
|10.11          | Subscription Agreement between Lightscape Technologies
      Inc. and SMC Investment Management Limited dated December 11, 2007
      (incorporated by reference from our Current Report on Form 8-K filed on
      December 14, 2007)                                                                                                                                      
|               |                                                                                                                                                                                                                                                                                                                                                                             
|10.12          | Joint Venture Agreement between Lightscape Technologies
      (Greater China) Limited, Beijing Xintong Media & Cultural Development
      Co. Ltd., Beijing New Vision Media Advertising Co. Ltd. and Miss Yao Po
      Chun dated February 12, 2008 (Translated from Chinese)(incorporated by reference from our Annual Report on Form 10-KSB filed
      on July 14, 2008)
|               |                                                                                                                                                                                                                                                                                                                                                                             
|10.13          | Form of Securities Purchase Agreement, among Lightscape
      Technologies Inc. and the investors named therein dated March 9, 2008
      (incorporated by reference from our Current Report on Form 8-K filed on
      March 10, 2008)                                                                                                                                     
|               |                                                                                                                                                                                                                                                                                                                                                                             
|10.14          | Form of Registration Rights Agreement among Lightscape
      Technologies Inc. and the investors named therein dated March 9, 2008
      (incorporated by reference from our Current Report on Form 8-K filed on
      March 10, 2008)                                                                                                                                      
|               |                                                                                                                                                                                                                                                                                                                                                                             
|10.15          | Escrow Agreement among Lightscape Technologies Inc., Roth
      Capital Partners, LLC and Tri- State Title & Escrow, LLC, as escrow
      agent, dated March 9, 2008 (incorporated by reference from our Current
      Report on Form 8-K filed on March 10, 2008)                                                                                                          

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- 61 -

|Exhibit Number | Description                                                                                                                                                                                                   
|-------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|               |                                                                                                                                                                                                               
|10.16          | Form of Placement
        Agent Warrant (incorporated by reference from our Current Report on Form
        8-K filed on March 10, 2008)                                                                       
|               |                                                                                                                                                                                                               
|10.17          | Agreement between
        Lightscape Technologies Inc. and Aaron Tibor Ratner dated April 18, 2008
        (incorporated by reference from our Current Report on Form 8-K filed on
        December 5, 2008)  
|               |                                                                                                                                                                                                               
|(14)           | Code of Ethics                                                                                                                                                                                                
|               |                                                                                                                                                                                                               
|14.1           | Code of Ethics
        (incorporated by reference from our Current Report on Form 8-K filed on
        January 6, 2009)                                                                                       
|               |                                                                                                                                                                                                               
|(31)           | Rule 13a-14(a)/15d-14(a)
        Certifications                                                                                                                                                               
|               |                                                                                                                                                                                                               
|31.1*          | Certification
        of Principal Executive Officer and Principal Financial Officer filed pursuant
        to Section 302 of the Sarbanes-Oxley Act of 2002.                                                 
|               |                                                                                                                                                                                                               
|(32)           | Section 1350
        Certifications                                                                                                                                                                           
|               |                                                                                                                                                                                                               
|32.1*          | Certification
        of Principal Executive Officer and Principal Financial Officer pursuant
        to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
        Act of 2002.

*Filed herewith





SIGNATURES

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

LIGHTSCAPE TECHNOLOGIES INC.





By: /s/ Bondy Tan Bondy Tan President,
Secretary and Treasurer and Chief Executive Officer and Director
(Principal Executive Officer, Principal Financial Officer and
Principal Accounting Officer)

Date: February 17, 2009

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