---

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 March 31, 2010or

[   ] 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.[X] Yes    No
[   ]

Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files).
[   ] Yes    [   ] 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]                       

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- 2 -

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

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 May 1, 2010.

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- 3 -

|PART
      I - FINANCIAL INFORMATION                                                                                                                                 
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                     
|Item
      1. Unaudited Consolidated Financial Statements.                                                                                                           
|                                                                                                                                                                     
|Consolidated
      Balance Sheets as at March 31, 2010 and December 31, 2009                                                                                         
|                                                                                                                                                                     
|Consolidated Statements of Operations and Comprehensive Profit
      (Loss) for the three months ended
                    March
    31, 2010 and 2009               
|                                                                                                                                                                     
|Consolidated Statements of Changes in Shareholders
      Equity and Comprehensive Profit (Loss) for the
                    
      three months ended March 31, 2010
|                                                                                                                                                                     
|Consolidated
      Statements of Cash Flows for the three months ended March 31, 2010 and
      2009                                                                 
|                                                                                                                                                                     
|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
      4. 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. (Removed and Reserved).                                                                                                                                
|                                                                                                                                                                     
|Item
      5. Other Information.                                                                                                                                     
|                                                                                                                                                                     
|Item
      6. Exhibits.                                                                                                                                              

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- 4 -

Item 1. Financial Statements.





LIGHTSCAPE TECHNOLOGIES INC. AND SUBISIDIARIESINTERIM CONSOLIDATED FINANCIAL STATEMENTSFOR THE THREE
MONTHS ENDED MARCH 31, 2010UNAUDITED

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- 5 -

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

|                                                                                  |  | March 31,   |  |  | December 31, | 
|--------------------------------------------------------------------------------- |  | ----------- |  |  | ------------ | 
|                                                                                  |  | 2010        |  |  | 2009         | 
|                                                                                  |  | (Unaudited) |  |  |              | 
|                                                                                  |  | $           |  |  | $            | 
|ASSETS                                                                            |  |             |  |  |              | 
|Current assets:                                                                   |  |             |  |  |              | 
|Cash and cash equivalents                                                         |  | 596,832     |  |  | 209,508      | 
|Accounts
      receivable, net of allowance for doubtful accounts of              |  |             |  |  |              | 
|$876,848 on March 31, 2010 and
      $876,848 on December 31, 2009                |  | 988,262     |  |  | 905,816      | 
|Costs and
      estimated earnings in excess of billings on uncompleted contracts |  | 1,307,293   |  |  | 652,770      | 
|Prepaid expenses                                                                  |  | 308,934     |  |  | 473,028      | 
|Rental, utility
      and other deposits                                          |  | 121,415     |  |  | 125,129      | 
|Other current assets                                                              |  | 55,460      |  |  | 54,779       | 
|Other
      receivables  disposal consideration of subsidiaries                  |  | 1,120,000   |  |  | 2,036,550    | 
|Inventories  LED                                                                 |  | 1,072,150   |  |  | 1,072,150    | 
|Current assets
      of discontinued operations (see Note 12(d))                  |  | 127,531     |  |  | 125,648      | 
|                                                                                  |  |             |  |  |              | 
|Total current assets                                                              |  | 5,697,877   |  |  | 5,655,378    | 
|                                                                                  |  |             |  |  |              | 
|Intangible assets, net                                                            |  | 413,067     |  |  | 453,528      | 
|Goodwill                                                                          |  | 776,378     |  |  | 776,378      | 
|Plant and equipment, net                                                          |  | 238,970     |  |  | 270,478      | 
|Out-of-home advertising equipment, net                                            |  | 2,338,792   |  |  | 2,130,002    | 
|Construction in progress  Out-of-home
      advertising equipment                |  | 188,230     |  |  | 351,482      | 
|Deferred cost                                                                     |  | 153,787     |  |  | 86,317       | 
|                                                                                  |  |             |  |  |              | 
|                                                                                  |  | 4,109,224   |  |  | 4,068,185    | 
|                                                                                  |  |             |  |  |              | 
|TOTAL ASSETS                                                                      |  | 9,807,101   |  |  | 9,723,563    | 
|                                                                                  |  |             |  |  |              | 
|LIABILITIES AND SHAREHOLDERS EQUITY                                              |  |             |  |  |              | 
|Current liabilities:                                                              |  |             |  |  |              | 
|Short-term bank borrowings                                                        |  | 66,416      |  |  | 263,313      | 
|Secured loan                                                                      |  | 128,535     |  |  | 192,802      | 
|Bills payable                                                                     |  | 22,251      |  |  | -            | 
|Trade payables                                                                    |  | 2,429,847   |  |  | 888,394      | 
|Billings in excess of cost and
      estimated earnings                           |  | 18,914      |  |  | 996,472      | 
|Amount due to a
      director                                                    |  | 425,270     |  |  | 497,569      | 
|Accrued expenses                                                                  |  | 836,597     |  |  | 1,272,747    | 
|Other current
      liabilities                                                   |  | 65,257      |  |  | 45,297       | 
|Obligations under capital leases
       current portion                          |  | 11,800      |  |  | 11,800       | 
|Current
      liabilities of discontinued operations (see Note 12(d))             |  | 201,199     |  |  | 200,957      | 
|                                                                                  |  |             |  |  |              | 
|Total current liabilities                                                         |  | 4,206,086   |  |  | 4,369,351    | 

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- 6 -

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

|                                                                       |  | March 31,   |   |  | December 31,     |  
|---------------------------------------------------------------------- |  | ----------- | - |  | ---------------- | -
|                                                                       |  | 2010        |   |  | 2009             |  
|                                                                       |  | (Unaudited) |   |  |                  |  
|                                                                       |  | $           |   |  | $                |  
|                                                                       |  |             |   |  |                  |  
|Non-current liabilities:                                               |  |             |   |  |                  |  
|Obligations under capital leases 
      non-current portion           |  | 41,297      |   |  | 44,249           |  
|                                                                       |  |             |   |  |                  |  
|Total non-current liabilities                                          |  | 41,297      |   |  | 44,249           |  
|                                                                       |  |             |   |  |                  |  
|Total liabilities                                                      |  | 4,247,383   |   |  | 4,
      413,600 |  
|                                                                       |  |             |   |  |                  |  
|COMMITMENTS (see Note 14)                                              |  |             |   |  |                  |  
|                                                                       |  |             |   |  |                  |  
|Shareholders equity:                                                  |  |             |   |  |                  |  
|Common stock                                                           |  |             |   |  |                  |  
|Authorized:                                                            |  |             |   |  |                  |  
|800,000,000 common shares, par value $0.001 per share                  |  |             |   |  |                  |  
|100,000,000 preferred shares, par value $0.001 per share               |  |             |   |  |                  |  
|Issued and outstanding:                                                |  |             |   |  |                  |  
|55,876,410
      common shares at March 31, 2010 and December 31, 2009 |  | 55,876      |   |  | 55,876           |  
|Additional paid-in capital                                             |  | 34,140,708  |   |  | 34,140,708       |  
|Common stock warrants                                                  |  | 344,673     |   |  | 344,673          |  
|Accumulated other
      comprehensive income                           |  | 280,805     |   |  | 281,222          |  
|Accumulated deficit                                                    |  | (29,262,344 | ) |  | (29,512,516      | )
|Total shareholders equity and Total Equity                            |  | 5,559,718   |   |  | 5,309,963        |  
|                                                                       |  |             |   |  |                  |  
|TOTAL LIABILITIES AND SHAREHOLDERS EQUITY                             |  | 9,807,101   |   |  | 9,723,563        |  

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

---

- 7 -

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

|                                                                        |  | Three Months |   |  | Three Months |  
|----------------------------------------------------------------------- |  | ------------ | - |  | ------------ | -
|                                                                        |  | Ended        |   |  | Ended        |  
|                                                                        |  | March 31,    |   |  | March 31,    |  
|                                                                        |  | 2010         |   |  | 2009         |  
|                                                                        |  | $            |   |  | $            |  
|Revenues:                                                               |  |              |   |  |              |  
|Advertising revenue                                                     |  | 297,479      |   |  | -            |  
|LED solutions revenue                                                   |  | 3,307,189    |   |  | 737,165      |  
|Other revenue                                                           |  | -            |   |  | 2,591        |  
|                                                                        |  |              |   |  |              |  
|Total net revenues                                                      |  | 3,604,668    |   |  | 739,756      |  
|                                                                        |  |              |   |  |              |  
|Cost of revenues:                                                       |  |              |   |  |              |  
|Cost of sales of Advertising
      revenue (i)                          |  | 149,099      |   |  | 13,577       |  
|Cost of sales of LED solutions revenue                                  |  | 2,471,386    |   |  | 183,332      |  
|Costs of Other revenue                                                  |  | -            |   |  | (567         | )
|                                                                        |  |              |   |  |              |  
|Total cost of revenues                                                  |  | 2,620,485    |   |  | 196,342      |  
|                                                                        |  |              |   |  |              |  
|Gross profit                                                            |  | 984,183      |   |  | 543,414      |  
|                                                                        |  |              |   |  |              |  
|Bad debts                                                               |  | -            |   |  | 798,458      |  
|Amortization                                                            |  | 960          |   |  | 61,805       |  
|Depreciation                                                            |  | 39,907       |   |  | 26,410       |  
|Loss on disposal of property, plant and equipment                       |  | 5,269        |   |  | (2,513       | )
|Selling and marketing expenses                                          |  | 85,230       |   |  | 123,234      |  
|General and administrative expenses                                     |  | 584,870      |   |  | 870,910      |  
|                                                                        |  |              |   |  |              |  
|Profit (loss) from operations                                           |  | 267,947      |   |  | (1,334,890   | )
|Interest expense, net of interest income                                |  | (14,329      | ) |  | 109          |  
|Other income                                                            |  | 1,137        |   |  | 42,679       |  
|                                                                        |  |              |   |  |              |  
|Profit (loss) from continuing operations before income tax              |  | 254,755      |   |  | (1,292,102   | )
|Income tax refund                                                       |  | -            |   |  | 27,943       |  
|                                                                        |  |              |   |  |              |  
|Profit (loss) from continuing operations,
      net of tax              |  | 254,755      |   |  | (1,264,159   | )
|                                                                        |  |              |   |  |              |  
|Discontinued operations, net of tax                                     |  |              |   |  |              |  
|Net (loss) from discontinued operations, net of
      income taxes      |  | (4,583       | ) |  | (1,004,523   | )
|                                                                        |  |              |   |  |              |  
|Net profit (loss)                                                       |  | 250,172      |   |  | (2,268,682   | )
|Less: net loss attributable to the
      noncontrolling interest        |  | -            |   |  | 206,653      |  
|                                                                        |  |              |   |  |              |  
|Net profit (loss) attributable to
      Lightscape Technologies Inc.    |  | 250,172      |   |  | (2,062,029   | )
|Other comprehensive income:                                             |  |              |   |  |              |  
|Foreign currency translation
      adjustment arising during the period |  | (417         | ) |  | 7,476        |  
|Comprehensive profit (loss)                                             |  | 249,755      |   |  | (2,054,553   | )

---

- 8 -

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

|                                                                                                                       |  | Three Months |  |  | Three Months |  
|---------------------------------------------------------------------------------------------------------------------- |  | ------------ |  |  | ------------ | -
|                                                                                                                       |  | Ended        |  |  | Ended        |  
|                                                                                                                       |  | March 31,    |  |  | March 31,    |  
|                                                                                                                       |  | 2010         |  |  | 2009         |  
|                                                                                                                       |  | $            |  |  | $            |  
|Earnings (loss) per share                                                                                              |  |              |  |  |              |  
|- Basic and diluted                                                                                                    |  |              |  |  |              |  
|Profit (loss) from continuing
      operations attributable to Lightscape  Technologies Inc. common
      shareholders |  | 0.00         |  |  | (0.02        | )
|Loss from discontinued operations attributable to
      Lightscape  Technologies Inc. common shareholders              |  | 0.00         |  |  | (0.02        | )
|Total                                                                                                                  |  | 0.00         |  |  | (0.04        | )
|                                                                                                                       |  |              |  |  |              |  
|Weighted average number of common shares
      outstanding                                                             |  |              |  |  |              |  
|-Basic and diluted                                                                                                     |  | 55,876,410   |  |  | 55,876,410   |  

(i) Includes depreciation of plant and equipment and
amortization of intangible assets of $50,248 and 43,007 for the three months
ended March 31, 2010 and $13,577 and $nil for the three months ended March 31,
2009, respectively.

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

---

- 9 -

|LIGHTSCAPE TECHNOLOGIES INC. AND SUBSIDIARIES                                     
|----------------------------------------------------------------------------------
|                                                                                  
|CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
      AND COMPREHENSIVE
|PROFIT (LOSS) FOR THE THREE MONTHS ENDED MARCH 31, 2010
      (UNAUDITED)         
|Expressed in US
      dollars (except for number of common shares)                

|                                                      |  |                     |  |  |        |  |  |          |  |  |                         |  |  | Total Accumulated Other Comprehensive Income |   |  |             |  
|----------------------------------------------------- |  | ------------------- |  |  | ------ |  |  | -------- |  |  | ----------------------- |  |  | -------------------------------------------- | - |  | ----------- | -
|                                                      |  | Common
      Shares |  |  |        |  |  |          |  |  | And Accumulated Deficit |  |  |                                              |  
|                                                      |  |                     |  |  |        |  |  |          |  |  |                         |  |  |                                              |   |  |             |  
|                                                      |  |                     |  |  |        |  |  |          |  |  |                         |  |  | Accumulated                                  |   |  |             |  
|                                                      |  |                     |  |  |        |  |  |          |  |  |                         |  |  | Other                                        |   |  |             |  
|                                                      |  |                     |  |  |        |  |  |          |  |  |                         |  |  | Comprehensive                                |   |  |             |  
|                                                      |  |                     |  |  |        |  |  |          |  |  |                         |  |  | Income - Foreign                             |   |  |             |  
|                                                      |  |                     |  |  |        |  |  | Common   |  |  | Additional              |  |  | Currency                                     |   |  |             |  
|                                                      |  |                     |  |  |        |  |  | Stock    |  |  | Paid-In                 |  |  | Translation                                  |   |  | Accumulated |  
|                                                      |  | Number              |  |  | Amount |  |  | Warrants |  |  | Capital                 |  |  | Adjustment                                   |   |  | Deficit     |  
|                                                      |  |                     |  |  |        |  |  |          |  |  |                         |  |  |                                              |   |  |             |  
|Balance at 
      December 31, 
      2009            |  | 55,876,410          |  |  | 55,876 |  |  | 344,673  |  |  | 34,140,708              |  |  | 281,222                                      |   |  | (29,512,516 | )
|                                                      |  |                     |  |  |        |  |  |          |  |  |                         |  |  |                                              |   |  |             |  
|Foreign currency 
      translation 
      adjustment |  | -                   |  |  | -      |  |  | -        |  |  | -                       |  |  | (417                                         | ) |  | -           |  
|Net profit (loss)                                     |  | -                   |  |  | -      |  |  | -        |  |  | -                       |  |  | -                                            |   |  | 250,172     |  
|                                                      |  |                     |  |  |        |  |  |          |  |  |                         |  |  |                                              |   |  |             |  
|Balance at 
      March 31, 2010                      |  | 55,876,410          |  |  | 55,876 |  |  | 344,673  |  |  | 34,140,708              |  |  | 280,805                                      |   |  | (29,262,344 | )

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                    

|                                                                                                                                    |  | Three Months |   |  | Three Months |  
|----------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | - |  | ------------ | -
|                                                                                                                                    |  | Ended        |   |  | Ended        |  
|                                                                                                                                    |  | March 31,    |   |  | March 31,    |  
|                                                                                                                                    |  | 2010         |   |  | 2009         |  
|                                                                                                                                    |  | $            |   |  | $            |  
|Cash flows from operating activities:                                                                                               |  |              |   |  |              |  
|Net profit (loss)                                                                                                                   |  | 250,172      |   |  | (2,062,029   | )
|Less: Net loss from discontinued
      operations, net of income taxes                                                              |  | (4,583       | ) |  | (1,004,523   | )
|                                                                                                                                    |  |              |   |  |              |  
|Adjustment to reconcile net loss from
      continuing operations to net cash (used in) continuing operating
      activities:      |  |              |   |  |              |  
|Noncontrolling interest                                                                                                             |  | -            |   |  | (206,653     | )
|Amortization of
      intangible assets  general and administrative expense                                                        |  | 960          |   |  | 61,805       |  
|Amortization of intangible
      assets  cost of revenues                                                                          |  | 43,007       |   |  | -            |  
|Depreciation
      expense  general and administrative expense                                                                     |  | 39,907       |   |  | 26,410       |  
|Depreciation expense cost of
      revenues                                                                                        |  | 50,248       |   |  | 13,577       |  
|Bad debts
      expense                                                                                                             |  | -            |   |  | 798,458      |  
|Loss on disposal of property, plant and
      equipment                                                                             |  | 5,269        |   |  | (2,513       | )
|Changes in operating assets and
      liabilities, net of acquisitions:                                                             |  |              |   |  |              |  
|Decrease (increase) in operating assets:                                                                                            |  |              |   |  |              |  
|Accounts
      receivable, net of allowance for doubtful debts                                                                      |  | (82,446      | ) |  | 244,745      |  
|Costs and estimated earnings in
      excess of billings on uncompleted contracts                                                   |  | (654,523     | ) |  | (535,696     | )
|Prepayment and
      other current assets                                                                                           |  | -            |   |  | 1,377,599    |  
|Prepaid expenses                                                                                                                    |  | 164,094      |   |  | 85,798       |  
|Rental and other
      deposits                                                                                                     |  | 3,713        |   |  | -            |  
|Other current assets                                                                                                                |  | (682         | ) |  | 9,629        |  
|Inventories                                                                                                                         |  | -            |   |  | 2,438        |  
|Increase (decrease) in operating liabilities:                                                                                       |  |              |   |  |              |  
|Trade payables                                                                                                                      |  | 1,563,705    |   |  | (409,762     | )
|Billings in excess of costs and
      estimated earnings on uncompleted contracts                                                   |  | (977,558     | ) |  | -            |  
|Accrued expenses
      and other current liabilities                                                                                |  | -            |   |  | 549,387      |  
|Accrued expenses                                                                                                                    |  | (436,150     | ) |  | 349,262      |  
|Other current
      liabilities                                                                                                     |  | 13,320       |   |  | (149,460     | )
|Income tax payable                                                                                                                  |  | -            |   |  | 133,019      |  
|                                                                                                                                    |  |              |   |  |              |  
|Net cash provided by (used in) continuing operating
      activities                                                                |  | (12,381      | ) |  | 1,290,537    |  
|Net cash provided by (used in) discontinued
      operating activities:                                                             |  |              |   |  |              |  
|Net loss from discontinued
      operations, net of income taxes                                                                    |  | (4,583       | ) |  | (1,004,523   | )
|Adjustments to
      reconcile loss from discontinued operations to net cash used
                 in
      discontinued operations |  | 53           |   |  | 807,460      |  
|Net changes in operating assets
      and liabilities                                                                               |  | 4,530        |   |  | (847,633     | )
|Net cash (used
      in) discontinued operating activities                                                                          |  | -            |   |  | (1,044,696   | )
|Net cash provided by (used in) operating activities                                                                                 |  | (12,381      | ) |  | 245,841      |  

---

- 11 -

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

|                                                                                   |  | Three Months |   |  | Three Months |  
|---------------------------------------------------------------------------------- |  | ------------ | - |  | ------------ | -
|                                                                                   |  | Ended        |   |  | Ended        |  
|                                                                                   |  | March 31,    |   |  | March 31,    |  
|                                                                                   |  | 2010         |   |  | 2009         |  
|                                                                                   |  | $            |   |  | $            |  
|                                                                                   |  |              |   |  |              |  
|Cash flows from investing activities:                                              |  |              |   |  |              |  
|Purchase of plant and equipment                                                    |  | (13,707      | ) |  | (500,780     | )
|Disposal of
      plant and equipment                                              |  | 38           |   |  | -            |  
|Purchase of out-of-home
      advertising equipment                                |  | (95,786      | ) |  | (989,884     | )
|Purchase of
      intangible asset                                                 |  | (3,507       | ) |  | -            |  
|Proceeds from disposal of a
      subsidiary                                       |  | 916,550      |   |  | -            |  
|Addition to
      construction in progress                                         |  | -            |   |  | (178,407     | )
|Addition to deferred cost                                                          |  | (67,470      | ) |  | -            |  
|                                                                                   |  |              |   |  |              |  
|Net cash provided by (used in) investing activities of
      continuing operations |  | 736,118      |   |  | (1,669,071   | )
|Net cash provided by investing activities
      of discontinued operations         |  | -            |   |  | 409,085      |  
|Net cash provided by (used in) investing activities                                |  | 736,118      |   |  | (1,259,986   | )
|                                                                                   |  |              |   |  |              |  
|Cash flows from financing activities:                                              |  |              |   |  |              |  
|Repayment of
      secured loan                                                    |  | (64,267      | ) |  | -            |  
|Repayment of short-term bank
      borrowings                                      |  | (196,897     | ) |  | -            |  
|Repayment of
      capital lease obligations                                       |  | (2,950       | ) |  | -            |  
|Repayment to a director                                                            |  | (72,299      | ) |  | (25,705      | )
|Advance from a
      director of a subsidiary                                      |  | -            |   |  | (9,647       | )
|                                                                                   |  |              |   |  |              |  
|Net cash (used in) financing activities of
      continuing operations             |  | (336,413     | ) |  | (35,352      | )
|Net cash provided by financing activities of discontinued
      operations         |  | -            |   |  | 37,678       |  
|Net cash provided by (used in) financing
      activities                          |  | (336,413     | ) |  | 2,326        |  
|                                                                                   |  |              |   |  |              |  
|Effect of foreign exchange rate changes                                            |  | -            |   |  | (155,667     | )
|                                                                                   |  |              |   |  |              |  
|Net increase (decrease) in cash and cash
      equivalents                         |  | 387,324      |   |  | (1,167,486   | )
|Cash and cash equivalents at beginning of the period                               |  | 209,508      |   |  | 1,557,685    |  
|                                                                                   |  |              |   |  |              |  
|Cash and cash equivalents at end of the period (a)                                 |  | 596,832      |   |  | 390,199      |  
|                                                                                   |  |              |   |  |              |  
|Supplemental disclosure of cash flows information                                  |  |              |   |  |              |  
|Interest expense paid                                                              |  | 14,329       |   |  | -            |  
|Income tax paid                                                                    |  | -            |   |  | -            |  

(a) Includes $nil of cash that is included on the balance sheet
with Current assets from discontinued operations as of March 31, 2010 and $nil
as of March 31, 2009.

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

---

- 12 -

LIGHTSCAPE TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS MARCH
31, 2010

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 two business activities:
(i) digital out-of-home (OOH) advertising and (ii) light-emitting diode
(LED) solutions.

NOTE 2. 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 March 31, 2010 and for the three months ended March 31, 2010 and 2009 have
been prepared in accordance with generally accepted accounting principles 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
financial statements include all adjustments considered necessary to make the
financial statements not misleading. The results of operations for the three
months ended March 31, 2010 are not necessarily indicative of the results for
the full fiscal year ending December 31, 2010. The unaudited consolidated
interim financial statements should be read in conjunction with the Groups
audited consolidated financial statements and notes thereto for the transition
period ended December 31, 2009 as reported in Form 10-K.

Certain of the March 31, 2009 and December 31, 2009 comparative
figures have been reclassified to conform to the current period presentation.
These reclassifications had no impact on previously reported financial position,
results of operations or cash flows. (See Note 12.)

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.

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 March 31, 2010 and December 31, 2009, the allowance for
doubtful accounts was approximately $876,848 and $876,848, respectively.

---

- 13 -

LIGHTSCAPE TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS MARCH
31, 2010

NOTE 2. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES
(continued)

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. All of the inventory at March 31, 2010 and December 31, 2009
consists of finished goods.

Goodwill

The Company accounts for acquisitions of business in accordance
with Financial Accounting Standards Board (FASB) Accounting Standards
Codification (ASC) 805 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
at least an annual 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. Virtually all of these
intangible assets were disposed of as part of the sale of Beijing Aihua New
Enterprise Lighting Appliance Co. Limited (Beijing Aihua). (See Note 12).

The estimation of the useful lives of the trademarks, completed
technologies for the production of AHP and HID, distributor base, customer lists
and relationships are 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 to five years.

Impairment of Long-Lived Assets Other than Goodwill

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.

---

- 14 -

LIGHTSCAPE TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS MARCH
31, 2010

NOTE 2. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES
(continued)

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                                                
|Out-of-home advertising equipment | 10 - 12 years                                                

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.

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  digital Out-of-Home advertising revenue
from advertising services, net of agency rebates and commissions, is recognized
ratably over the period 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.

Contract costs include all direct material, direct labor,
subcontracting costs 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.

---

- 15 -

LIGHTSCAPE TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS MARCH
31, 2010

NOTE 2. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)

Revenue Recognition (continued)

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.

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.

Accounting for Uncertainty in Income Taxes

In June 2006, the FASB issued ASC 740 Income Taxes (ASC
740). ASC 740 is intended to clarify the accounting for uncertainty in income
taxes recognized in a companys financial statements and prescribes the
recognition and measurement of a tax position taken or expected to be taken in a
tax return. ASC 740 also provides guidance on de-recognition, classification,
interest and penalties, accounting in interim periods, disclosure and
transition.

ASC 740 prescribes a two-step process for valuation of a tax
position. Step one is to determine whether it is more-likely-than-not that a tax
position will be sustained upon examination, including the resolution of any
related appeals or litigation based on the technical merits of that position.
Step two is to measure a tax position that meets the more-likely-than-not
threshold to determine the amount of benefit to be recognized in the financial
statements. A tax position is measured at the largest amount of benefit that is
greater than 50% likely of being realized upon ultimate settlement.

Tax positions that previously failed to meet the
more-likely-than-not recognition threshold should be recognized in the first
subsequent period in which the threshold is met. Previously recognized tax
positions that no longer meet the more-likely-than-not criteria should be
de-recognized in the first subsequent financial reporting period in which the
threshold is no longer met.

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.

---

- 16 -

LIGHTSCAPE TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS MARCH
31, 2010

NOTE 2. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)

Foreign Currency Translation (continued)

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, 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 currency translation
adjustment in accumulated other comprehensive income, a component of
stockholders equity.

Segment Information

The Companys segment reporting is prepared in accordance with
ASC 280 Segment Reporting (ASC 280). The management approach required by ASC
280 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, short-term debt 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 ASC 718 Compensation - Stock Compensation
(ASC 718) using the modified prospective method. Under ASC 718, 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
ASC 718, 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.

Basic and Diluted Earnings (Loss) per Share

The Company reports basic earnings per share in accordance with
ASC 260 Earnings Per Share (ASC 260). 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 instruments, options, warrants and other
common stock equivalents were converted or exercised. Dilution is computed by
applying the treasury stock method. Under this method, common stock equivalents
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.

---

- 17 -

LIGHTSCAPE TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS MARCH
31, 2010

NOTE 2. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)

Fair Value Disclosure

Effective April 1, 2008, the Company adopted ASC 820 Fair
Value Measurements and Disclosures (ASC 820). ASC 820 clarifies the
definition of fair value, prescribes methods for measuring fair value and
establishes a fair value hierarchy to classify the inputs used in measuring fair
value as follows:

Level 1-Inputs are unadjusted quoted prices in active markets
for identical assets or liabilities available at the measurement date.

Level 2-Inputs are unadjusted quoted prices for similar assets
and liabilities in active markets, quoted prices for identical or similar assets
and liabilities in markets that are not active, inputs other then quoted prices
that are observable, and inputs derived from or corroborated by observable
market data.

Level 3-Inputs are unobservable inputs which reflect the
reporting entity's own assumptions on what assumptions the market participants
would use in pricing the asset or liability based on the best available
information.

Recent Accounting Pronouncements

In April 2010, the FASB issued Accounting Standard Update
(ASU) 2010-17, Revenue Recognition  Milestone Method, which amended
guidance on the criteria that should be met for determining whether the
milestone method of revenue recognition is appropriate. A vendor can recognize
consideration that is contingent upon achievement of a milestone in its entirety
as revenue in the period in which the milestone is achieved only if the
milestone meets all criteria to be considered substantive. The consideration
earned by achieving the milestone should:

|1. | Be commensurate with either of the following:                                         
|-- | --------------------------------------------------------------------------------------
|   | a.                                                                                    
|   | b.                                                                                    
|2. | Relate solely to past performance                                                     
|3. | Be reasonable relative to all deliverables and payment
      terms in the arrangement.

A milestone should be considered substantive in its entirety.
An individual milestone may not be bifurcated. An arrangement may include more
than one milestone, and each milestone should be evaluated separately to
determine whether the milestone is substantive. Accordingly, an arrangement may
contain both substantive and non-substantive milestones. The amendments in this
ASU are effective on a prospective basis for milestones achieved in fiscal
years, and interim periods within those years, beginning on or after June 15,
2010. Early adoption is permitted. The management does not expect adoption of
this new guidance will have any impact on the Companys consolidated financial
statements.

In January 2010, the FASB issued updated accounting guidance
related to fair value measurements and disclosures which amends and clarifies
existing disclosure requirements. This updated accounting guidance requires new
disclosures related to amounts transferred into and out of Levels 1 and 2 fair
value measurements as well as separate disclosures of purchases, sales,
issuances, and settlements related to amounts reported as Level 3 fair value
measurements. This guidance also clarifies existing fair value disclosure
requirements related to the level of disaggregation and the valuation techniques
and inputs used to measure fair value for both recurring and nonrecurring fair
value measurements. This guidance is effective for interim and annual periods
beginning after December 15, 2009, except for the separate disclosures of
purchases, sales, issuances, and settlements related to amounts reported as
Level 3 fair value measurements, which is effective for fiscal years beginning
after

---

- 18 -

LIGHTSCAPE TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS MARCH
31, 2010

NOTE 2. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)

Recent Accounting Pronouncements (continued)

December 15, 2010. The Company does not believe the adoption of
this guidance will have a material impact on its consolidated financial
statements.

In February 2010, the FASB issued an additional accounting
pronouncement that amended certain requirements for subsequent events (FASB ASC
Topic 855), which requires an SEC filer or a conduit bond obligor to evaluate
subsequent events through the date the financial statements are available to be
issued and removes the previous requirement to disclose the date through which
subsequent events have been evaluated. The amended amendments were effective on
issuance of the final pronouncement. The adoption of this pronouncement had no
effect on the Companys consolidated financial statements.

In September, 2009, the FASB issued Accounting Standards Update
2009-13, Multiple-Deliverable Revenue Arrangements, and ASU 2009-14, Certain
Revenue Arrangements That Include Software Elements  a consensus of the FASB
Emerging Issues Task Force, to amend the existing revenue recognition guidance.
ASU 2009-13 amends ASC 605, Revenue Recognition, 25, Multiple-Element
Arrangements (formerly EITF Issue 00-21, Revenue Arrangements with Multiple
Deliverables), as follows: modifies criteria used to separate elements in a
multiple-element arrangement, introduces the concept of best estimate of
selling price for determining the selling price of a deliverable, establishes a
hierarchy of evidence for determining the selling price of a deliverable,
requires use of the relative selling price method and prohibits use of the
residual method to allocate arrangement consideration among units of accounting,
and expands the disclosure requirements for all multiple-element arrangements
within the scope of ASC 605-25.

ASU 2009-14 amends the scope of ASC 985, Software, 605,
Revenue Recognition (formerly AICPA Statement of Position 97-2, Software
Revenue Recognition), to exclude certain tangible products and related
deliverables that contain embedded software from the scope of this guidance.
Instead, the excluded products and related deliverables must be evaluated for
separation, measurement, and allocation under the guidance of ASC 605-25, as
amended by ASU 2009-13. The amended guidance is effective prospectively for
revenue arrangements entered into or materially modified in fiscal years
beginning on or after June 15, 2010. Early adoption is permitted. An entity may
elect retrospective application for all revenue arrangements for all periods
presented using the guidance in ASC 250, Accounting Changes and Error
Corrections. Entities must adopt the amendments resulting from both of these
ASUs in the same period using the same transition method, where applicable.
Management is reviewing ASU 2009-13 and ASU 2009-14 for applicability to the
Companys revenue recognition policies. The Company will adopt this standard for
its fiscal year beginning January 1, 2011.

NOTE 3. COSTS AND ESTIMATED EARNINGS IN EXCESS OF BILLINGS
ON UNCOMPLETED CONTRACTS

Costs and estimated earnings in excess of billings on
uncompleted contracts are summarized as follows:

March 31,
    
    
    December 31,2010
    
    
    2009(Unaudited)$
    
    
    $Cumulative costs incurred on
      uncompleted contracts
    
    5,509,241
    
    
    2,995,213Cumulative estimated earnings to date
    
    1,428,449
    
    
    617,0886,937,690
    
    
    3,612,301Less: Billings to date
    
    5,630,397
    
    
    2,959,5311,307,293
    
    
    652,770


---

- 19 -

LIGHTSCAPE TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS MARCH
31, 2010

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

Billings in excess of costs and estimated earnings on
uncompleted contracts are summarized as follows:

March 31,
    
    
    December 31,2010
    
    
    2009(Unaudited)$
    
    
    $Billings to date
    
    384,657
    
    
    1,409,716Cumulative costs incurred on
      uncompleted contracts
    
    253,539
    
    
    298,599Cumulative estimated earnings to date
    
    112,204
    
    
    114,645365,743
    
    
    413,24418,914
    
    
    996,472


NOTE 5. PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consist of the
following:

|                                              |  | March 31,   |  |  | December 31, | 
|--------------------------------------------- |  | ----------- |  |  | ------------ | 
|                                              |  | 2010        |  |  | 2009         | 
|                                              |  | (Unaudited) |  |  |              | 
|Presented in current assets:                  |  | $           |  |  | $            | 
|Prepaid expenses                              |  |             |  |  |              | 
|Prepaid expenses - others                     |  | 275,697     |  |  | 439,791      | 
|Trade deposits                                |  | 33,237      |  |  | 33,237       | 
|                                              |  | 308,934     |  |  | 473,028      | 
|Other current assets                          |  |             |  |  |              | 
|Other receivables                             |  | 10,855      |  |  | 10,174       | 
|Contract surety bond
      refundable deposit |  | 44,605      |  |  | 44,605       | 
|                                              |  | 55,460      |  |  | 54,779       | 

NOTE 6. INTANGIBLE ASSETS

Intangible assets consist of the following:

|                                 |  | March 31,   |   |  | December 31, |  
|-------------------------------- |  | ----------- | - |  | ------------ | -
|                                 |  | 2010        |   |  | 2009         |  
|                                 |  | (Unaudited) |   |  |              |  
|Presented in non-current assets: |  | $           |   |  | $            |  
|Software and license             |  |             |   |  |              |  
|Cost                             |  |             |   |  |              |  
|Balance  opening                |  | 913,992     |   |  | 458,005      |  
|Addition                         |  | 3,507       |   |  | 455,987      |  
|Written off                      |  | -           |   |  | -            |  
|Balance  closing                |  | 917,499     |   |  | 913,992      |  
|Accumulated amortization         |  | (504,431    | ) |  | (460,464     | )
|Software and license, net        |  | 413,067     |   |  | 453,528      |  

---

- 20 -

LIGHTSCAPE TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS MARCH
31, 2010

NOTE 6. INTANGIBLE ASSETS (continued)

Amortization of $43,007 and $960 for the three months ended
March 31, 2010 and $nil and $61,805 for the three months ended March 31, 2009
were accounted for under cost of revenues and general and administrative
expenses, respectively.

Estimated amortization for the next 5 years is as follows:

$For the twelve months ended March 31,2011
    
    156,4082012
    
    154,3962013
    
    102,2632014
    
    -2015
    
    -413,067


NOTE 7. OUT-OF-HOME ADVERTISING EQUIPMENT, NET

OOH advertising equipment consists of the following:

March 31,
    
    
    December 31,2010
    
    
    2009(Unaudited)$
    
    
    $OOH advertising LED display
    
    2,530,272
    
    
    2,271,234Less: Accumulated depreciation
    
    (191,480
    )
    
    (141,232
    )OOH advertising equipment,
      net
    
    2,338,792
    
    
    2,130,002


NOTE 8. CONSTRUCTION IN PROGRESS - OUT-OF-HOME ADVERTISING
EQUIPMENT

OOH construction in progress consists of the following:

March 31,
    
    
    December 31,2010
    
    
    2009(Unaudited)$
    
    
    $Cost incurred related to
      construction of OOH advertising LED displays in China
    
    188,230
    
    
    351,482


NOTE 9. OBLIGATIONS UNDER CAPITAL LEASES

March 31,
    
    
    December 31,2010
    
    
    2009(Unaudited)$
    
    
    $Total minimum lease payments,
      exclusive of related interest of $8,968
    
    53,097
    
    
    56,049Less: Current portion of obligations under
      capital leases
    
    11,800
    
    
    11,800Long-term portion of
      obligations under capital leases
    
    41,297
    
    
    44,249


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- 21 -

LIGHTSCAPE TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS MARCH
31, 2010

NOTE 9. OBLIGATIONS UNDER CAPITAL LEASES (continued)

The following is a summary of future minimum lease payments
under capital leases as of March 31, 2010:

Twelve months ending March 31,
    
    $2011
    
    11,8002012
    
    11,7992013
    
    11,7992014
    
    11,7992015
    
    5,90053,097


The Company entered into capital lease arrangements for leasing
a motor vehicle used in its operations. The lease is for a term of five years.
For the three months ended March 31, 2010, the capital lease arrangement was on
an interest bearing basis. The lease is on a fixed repayment basis and requires
no contingent rental payments. The interest expense incurred on this capital
lease was $472 and $472 for the three months ended March 31, 2010 and for the
nine month transition period ended December 31, 2009, respectively.

NOTE 10. BILLS PAYABLE

In late March 2010, the Company, through its wholly-owned
subsidiary Lightscape Technologies (Greater China) Limited (LTGC), secured an
Account Payable Financing (AP Financing) loan facility, which also applies to
Letter of Credit and Trust Receipt, with a maximum limit of $642,674 (or
HKD5,000,000) from DBS Bank (Hong Kong) Limited (DBS Bank) under the Special
Loan Guarantee Scheme of the HKSAR Government. The AP Financing loan is operated
on a revolving basis, with the AP Financing loan granted at 100% of invoiced
value against original invoice, for a maximum maturity of 90 days, less
suppliers credit period, if any. Interest charged against the related bill
payable will be at a standard bills rate quoted by DBS from time to time. The AP
Financing loan is secured by a Special Loan Guarantee issued by the HKSAR
Government for an amount equal to 80% of the loan, a Guarantee and Indemnity for
an unlimited amount duly executed by a director of the Company and a director of
LTGC, and a Guarantee and Indemnity for an unlimited amount duly executed by
Tech Team Investment Limited, the immediate holding company of LTGC.

As of March 31, 2010, bills payable is comprised of the
following (See Note 19):

March 31,
    
    
    December 31,2010
    
    
    2009(Unaudited)$
    
    
    $1 set of bills payable with
      maturity date of June 28, 2010
    
    22,251
    
    
    -


NOTE 11. INCOME TAX

The Company accounts for income taxes pursuant to Accounting
Standards Codification 740, Income Taxes (ASC 740). Under this accounting
standard, deferred tax assets and liabilities are determined with reference to
temporary differences between the bases of certain assets and liabilities for
income tax and financial reporting purposes. The deferred tax assets and
liabilities are classified according to the financial statement classification
of the assets and liabilities generating the differences, and a valuation
allowance is to be maintained with respect to deferred tax assets.

---

- 22 -

LIGHTSCAPE TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS MARCH
31, 2010

NOTE 11. INCOME TAX (continued)

The Company establishes a valuation allowance based upon the
potential likelihood of realization of the deferred tax asset and taking into
consideration the Companys financial position and results of operations for the
current period. Future realization of the deferred tax benefit depends on the
existence of sufficient taxable income within the carryforward period under the
Federal and local tax laws of its overseas subsidiaries.

Changes in circumstances, such as the Company generating
taxable income, could cause a change in judgment about the realizability of the
related deferred tax asset. Any change in the valuation allowance will be
included in income in the year of the change in estimate.

ASC 740 Income Taxes defines a criterion that an individual
income tax position must meet for any part of the benefit of that position to be
recognized in an enterprises financial statements and provides guidance on
measurement, derecognition, classification, accounting for interest and
penalties, accounting in interim periods, disclosure and transition.

The Company recognizes that virtually all tax positions in the
jurisdictions in which it operates are not free of some degree of uncertainty
due to tax law and policy changes by the state. However, the Company cannot
reasonably quantify political risk factors and thus must depend on guidance
issued by current state officials.

Based on all known facts and circumstances and current tax law,
the Company believes that the total amount of unrecognized tax benefits as of
March 31, 2010 is not material to its results of operations, financial condition
or cash flows. The Company also believes that the total amount of unrecognized
tax benefits as of March 31, 2010, if recognized, would not have a material
effect on its effective tax rate. The Company further believes that there are no
tax positions for which it is reasonably possible, based on current tax law and
policy to which we are subject, that the unrecognized tax benefits will
significantly increase or decrease over the next 12 months producing,
individually or in the aggregate, a material effect on the Companys results of
operations, financial position or cash flows.

Despite the net profit arising during the three months ended
March 31, 2010, no income tax is provided for because the net operating losses
carried forward from preceding years are more than enough to offset taxable
income for the period, while a tax credit was recorded for the three months
ended March 31, 2009 upon issuance of a tax assessment confirming no income tax
for the previous year in Lightscape Technologies (Macau) Limited, our Macau
subsidiary.

NOTE 12. DISCONTINUED OPERATIONS

The Company accounts for its discontinued operations under the
provisions of ASC 205-20 Presentation of Financial Statements  Discontinued
Operations (ASC 205-20). Accordingly, the results of operations and the
related charges for discontinued operations in respect of Beijing Aihua New
Enterprise Lighting Appliance Co. Ltd. as included previously in other segment,
and discontinued component in respect of Golden Cypress Limited as previously
included in LED solutions segment, have been classified as Net profit from
discontinued operations, net of income taxes on the accompanying Consolidated
Statements of Operations and Comprehensive Loss. Assets and liabilities of the
discontinued operations have been reclassified and reflected on the accompanying
Consolidated Balance Sheets as Current assets of discontinued operations and
Current liabilities of discontinued operations.

For comparative purposes, all prior periods presented have been
reclassified to reflect the reclassifications on a consistent basis.

---

- 23 -

LIGHTSCAPE TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS MARCH
31, 2010

12. DISCONTINUED OPERATIONS (continued)

(a) Golden Cypress Limited

In order to more effectively utilize the financial and other
resources, and to focus our business on the digital out-of-home advertising
business, on August 31, 2009, the Company disposed of 100% of the outstanding
capital stock of Golden Cypress Limited (Golden Cypress) to a third party
investor (the Purchaser), at a consideration of$1,120,000. Golden
Cypress is a company incorporated in the British Virgin Islands, which operates
an LED solutions business in Asia, the segment in which we reported its
operations before the sale (See Note 16).

The purchase price is due to be paid in cash by the Purchaser
within 12 months on or before August 31, 2010.

(b) Lighting Source Products Business

In September 2009, the Companys board of directors authorized
management to begin the process to sell all the rights and assets of the
lighting source products business, namely the operational subsidiary Beijing
Aihua. Beijing Aihua researches, develops, manufactures and sells high-intensity
discharge lighting products including metal halide lamps and high-pressure
sodium lamps. The Companys decision to discontinue operations in the lighting
source products business was intended to more effectively utilize the Companys
financial and human resources by focusing on the digital out-of-home advertising
and LED solutions businesses which management considers to have more promising
potential for revenue and margin growth. Pursuant to a sales and purchase
agreement (the S&P Agreement) dated November 20, 2009, with an effective
date of November 30, 2009, between Beijing Illumination (Hong Kong) Limited
(Beijing Illumination) and Zhejiang Zhong Jun Investment Management Co. Ltd.
(Zhejiang Zhong Jun), the Company, through its subsidiary Beijing
Illumination, agreed to sell to Zhejiang Zhong Jun its 100% equity interest in
Beijing Aihua at a consideration of $1,140,751 (or RMB7,800,000). Of the total
consideration of $1,140,751, $219,375 (or RMB1,500,000) was received in cash on
November 20, 2009. The remaining RMB 6,300,000 (approximately US$921,861) was
paid by Zhejiang Zhong Jun to Beijing Illumination in full in cash in March
2010. The Sale and Purchase Agreement closed on April 12, 2010.

We previously reported Beijing Aihuas operations as part of
the Other segment (See Note 16).

(c) Results of Discontinued Operations

Revenues and net profit (loss) from discontinued operations of
the Golden Cypress and energy savings business, as included in others, and
lighting source product business of Beijing Aihua are as follows:

---

- 24 -

LIGHTSCAPE TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS MARCH
31, 2010

12. DISCONTINUED OPERATIONS (continued)

Three Months
    
    
    Three MonthsEnded
    
    
    EndedMarch 31,
    
    
    March 31,2010
    
    
    2009$
    
    
    $Operating revenue - Beijing
      Aihua
    
    -
    
    
    36,719Operating revenue  others
    
    4,843
    
    
    500,7484,843
    
    
    537,467Pre-tax profit (loss) from
      discontinuedoperations:Beijing Aihua
    
    -
    
    
    (1,012,282
    )Others
    
    (4,583
    )
    
    7,854(4,583
    )
    
    (1,004,428
    )Income tax credit (expense)
    
    -
    
    
    (95
    )Net profit (loss) from discontinued
      operations
    
    (4,583
    )
    
    (1,004,523
    )


(d) Relevant current assets and current liabilities in
respect of discontinued operations are as follows:

|                                                                          |  | March 31,   |  |  | December 31, | 
|------------------------------------------------------------------------- |  | ----------- |  |  | ------------ | 
|                                                                          |  | 2010        |  |  | 2009         | 
|                                                                          |  | (Unaudited) |  |  |              | 
|                                                                          |  | $           |  |  | $            | 
|Current assets of discontinued
      operations:                          |  |             |  |  |              | 
|Accounts receivable, net of
      allowance for doubtful accounts of $nil |  |             |  |  |              | 
|on March 31,
      2010 and $nil on December 31, 2009                     |  | 1,618       |  |  | -            | 
|Prepaid expenses and other
      current assets                           |  | 9,505       |  |  | 9,186        | 
|Net investment
      in sales-type leases of discontinued operations     |  |             |  |  |              | 
|current portion                                                           |  | 116,107     |  |  | 116,107      | 
|Plant and
      equipment, net                                            |  | 301         |  |  | 355          | 
|                                                                          |  | 127,531     |  |  | 125,648      | 
|                                                                          |  |             |  |  |              | 
|Current liabilities of discontinued operations:                           |  |             |  |  |              | 
|Trade payables                                                            |  | 7,824       |  |  | 7,824        | 
|Accrued expenses and other
      current liabilities                      |  | 118,420     |  |  | 118,178      | 
|Income tax
      payable                                                  |  | 74,955      |  |  | 74,955       | 
|                                                                          |  | 201,199     |  |  | 200,957      | 

---

- 25 -

LIGHTSCAPE TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS MARCH
31, 2010

NOTE 13. CONCENTRATION OF CREDIT RISK

As of March 31, 2010 and December 31, 2009, the Company has a
credit risk exposure of uninsured cash in banks of $72,319 and $5,018 (including
cash of discontinued operations of $nil and $473, respectively), 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, as
of March 31, 2010 cash of $524,513 (including cash of discontinued operations of
$nil) out of a total of $596,832 (including cash of discontinued operations of
$nil) of the Companys cash held with banks in Hong Kong 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 three months ended March 31, 2010, 2 customers
accounted for approximately 56.1% and 22.0%, respectively, of the Companys
total revenues. As of March 31, 2010, there are four customers whose account
receivables to the Company accounted for 45.8%, 24.0%, 10.5% and 10.2%,
respectively, of total accounts receivable, of which the first customer of 45.8%
and the fourth customer of 10.2% are subsidiaries of the same group of
companies.

The Company relies on supplies from numerous vendors. For the
three months ended March 31, 2010, three vendors accounted for approximately
58.1%, 21.7% and 11.7%, respectively, of total supply purchases.

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

NOTE 14. COMMITMENTS

Leases

The Company has operating lease agreements principally for its
office facilities and factory buildings. Such leases have remaining terms of
approximately 0.75 to 1.50 years. The following is a summary of future minimum
lease payments under operating leases as of March 31, 2010. Rental expense was
$62,703 and $75,465 for the three months ended March 31, 2010 and 2009,
respectively.

Twelve months ending March 31,

$2011
    
    256,3032012
    
    120,096Thereafter
    
    -376,399


---

- 26 -

LIGHTSCAPE TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS MARCH
31, 2010

NOTE 14. COMMITMENTS (continued)

Capital Expenditures

On October 1, 2009, the Company signed an outdoor digital
billboard cooperation agreement with Beijing Chongwen New World Properties
Development Co. Ltd., a New World subsidiary. Under the 10-year agreement, the
Company agreed to build two large-scale outdoor LED displays at the Beijing New
World Centre mixed-use complex, with screen areas of 150 square meters and 50
square meters, respectively. The Company will source, design, install and
service the two LED displays, and secure advertising contracts for advertising
and media content to be displayed on the screens. The first LED display began
operating and generating advertising revenue on February 10, 2010, while the
second LED display is expected to be completed and become operational by June
2010. The Company plans to install additional large-sized LED displays in the
second half of 2010, including but not limited to New World Department Store
China Ltd. department stores in Wuhan and Changsha, China. The Company estimates
the total capital expenditure involved for these LED screens to be approximately
$1,092,545, either in cash or through utilization of LED inventory of the
Company.

NOTE 15. RELATED PARTY BALANCES AND TRANSACTIONS

Related Party Transactions

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.

Related Party Balances

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

March 31,
    
    
    December 31,2010
    
    
    2009(Unaudited)$
    
    
    $Amount due to a director:Mr. Bondy Tan
    
    425,270
    
    
    497,569


NOTE 16. SEGMENT INFORMATION

The Company is engaged in continuing operations within two main
business segments: (i) digital out-of-home advertising and (ii) LED solutions.
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 2).
The Company evaluates performance based on profit or loss from operations,
excluding corporate, general and administrative expenses.

---

- 27 -

LIGHTSCAPE TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS MARCH
31, 2010

NOTE 16. SEGMENT INFORMATION (continued)

Three Months
    
    
      Three MonthsEnded
    
    
      EndedMarch 31,
    
    
      March 31,2010
    
    
      2009$
    
    
      $Segment revenues from external customers:Advertising
    
      297,479
    
    
      -LED solutions
    
      3,307,189
    
    
      737,165Other
    
      -
    
    
      2,5913,604,668
    
    
      739,756


Three Months
    
    
      Three MonthsEnded
    
    
      EndedMarch 31,
    
    
      March 31,2010
    
    
      2009$
    
    
      $Operating profit (losses):Advertising
    
      147,872
    
    
      (13,577
    )LED solutions
    
      120,075
    
    
      (1,375,393
    )Other
    
      -
    
    
      54,080Profit (Loss) from continuing operations
      before income tax and noncontrolling interest
    
      267,947
    
    
      (1,334,890
    )


March 31,
    
    
    December 31,2010
    
    
    2009(Unaudited)$
    
    
    $Segment assets:Advertising
    
    3,144,671
    
    
    3,274,945LED solutions (i)
    
    6,534,899
    
    
    6,322,9709,679,570
    
    
    9,597,915Assets of discontinued operations
    
    127,531
    
    
    125,6489,807,101
    
    
    9,723,563


(i) including goodwill of $776,378 as of March 31, 2010 and
$776,378 as of December 31, 2009 included in the LED solutions segment.

Three Months
    
    
    Three MonthsEnded
    
    
    EndedMarch 31,
    
    
    March 31,2010
    
    
    2009$
    
    
    $Capital expenditures:Advertising
    
    163,256
    
    
    1,168,291LED solutions
    
    17,214
    
    
    500,780Other
    
    -
    
    
    -180,470
    
    
    1,669,071


---

- 28 -

LIGHTSCAPE TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS MARCH
31, 2010

NOTE 16. SEGMENT INFORMATION (continued)

Geographical Information:

Three Months
    
    
    Three MonthsEnded
    
    
    EndedMarch 31,
    
    
    March 31,2010
    
    
    2009$
    
    
    $Total sales:Mainland, the PRC
    
    199,529
    
    
    100,375Hong Kong
    
    3,405,138
    
    
    639,3813,604,667
    
    
    739,756


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

March 31,
    
    
    December 31,2010
    
    
    2009(Unaudited)$
    
    
    $Hong Kong
    
    1,681,489
    
    
    1,760,210Mainland, the PRC
    
    2,273,948
    
    
    2,221,6573,955,437
    
    
    3,981,867


Two customers accounted for 61.1% and 24.0% of operating
revenue of the LED solutions segment for the three months ended March 31, 2010,
respectively, and two customers accounted for 79.8% and 19.4% of operating
revenue of the LED solutions segment for the three months ended March 31,
2009.

NOTE 17. SECURED LOANS

On July 13, 2009, the Company obtained a secured loan of
$257,069 from a third party financial institution. The loan has a maturity of
four months and was to be repaid on November 12, 2009, which was subsequently
extended to May 12, 2010, at an interest rate of 3% per month. It is secured by
a joint and several guarantee from two directors of subsidiaries of the Company.
Upon agreement of both parties, principal will be repaid in four equal monthly
installments.

The following is a summary of future repayments related to the
secured loan:

$Twelve months ending March 31, 2011
    
    128,535


NOTE 18. SHORT-TERM BANK BORROWINGS

Short-term bank borrowings relate to an installment loan of
$771,208 (or HKD6,000,000) from DBS Bank (Hong Kong) Limited (DBS Bank) under
the Special Loan Guarantee Scheme of The Government of the Hong Kong Special
Administrative Region (HKSAR Government). The loan is repayable over 12 equal
monthly installments, at an interest rate of 2% per annum over the prime lending
rate, which is currently 5%, from May 12, 2009 to April 12, 2010.

---

- 29 -

LIGHTSCAPE TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS MARCH
31, 2010

NOTE 18. SHORT-TERM BANK BORROWINGS (continued)

The
installment loan is secured by a Special Loan Guarantee issued by the HKSAR
Government for an amount equal to 70% of the loan, a Guarantee and Indemnity for
an unlimited amount duly executed by a director of the Company and a director of
a subsidiary, and a Guarantee and Indemnity for an unlimited amount duly
executed by a subsidiary. The installment loan has been fully repaid to DBS Bank
on April 8, 2010 when the final installment of $66,416 was made.

NOTE 19. POST BALANCE SHEET EVENT

Subsequent to March 31, 2010, the Company increased its
drawdown of the Account Payable Financing (AP Financing) loan facility, with a
maximum limit of $642,674 (or HKD5,000,000) from DBS Bank (Hong Kong) Limited
(DBS Bank). As of May 21, 2010, the amount utilized with AP Financing loan
established is as follows:

|                                                                    |  |               |  |  |                |  |  | Bills payable arising |  |  | Bills payable arising  | 
|------------------------------------------------------------------- |  | ------------- |  |  | -------------- |  |  | --------------------- |  |  | ---------------------- | 
|                                                                    |  |               |  |  |                |  |  | after March 31, 2010  |  |  | after March 31, 2010   | 
|                                                                    |  |               |  |  |                |  |  | in relation to        |  |  | in relation to         | 
|                                                                    |  |               |  |  | Bills payable  |  |  | settlement of trade   |  |  | settlement of trade    | 
|                                                                    |  |               |  |  | as of          |  |  | payables as of        |  |  | payables arising after | 
|                                                                    |  | Bills payable |  |  | March 31, 2010 |  |  | March 31, 2010(i)     |  |  | March 31, 2010(i)      | 
|                                                                    |  | $             |  |  | $              |  |  | $                     |  |  | $                      | 
|Bills payable with maturity date on or
      before June 30, 2010   |  | 22,251        |  |  | 22,251         |  |  | -                     |  |  | -                      | 
|Bills payable with maturity date on or before July 31, 2010         |  | 491,605       |  |  | -              |  |  | 477,861               |  |  | 13,744                 | 
|Bills payable with maturity date on or
      before August 31, 2010 |  | 128,535       |  |  | -              |  |  | 128,535               |  |  | -                      | 
|                                                                    |  | 642,391       |  |  | 22,251         |  |  | 606,396               |  |  | 13,744                 | 

|(i) | The AP Financing loan is operated by DBS Banks payment
      directly to the Companys suppliers at 100% of invoiced value against
      original invoice. Of AP Financing loan of $642,391 due to DBS as of May
      21, 2010, $606,396 was utilized in payment of trade payable arising after
      March 31, 2010, $22,251 relates to bills payable as of March 31, 2010,
      while the rest of $13,744 relates to payment of trade payable arising
      after March 31, 2010.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

- 30 -

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.

Use of Certain Defined Terms

In
this quarterly report and unless otherwise specified, all dollar amounts are
expressed in United States dollars, all references to common shares refer to
the common shares in our capital stock and 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 23, 2007, we changed our name to
Lightscape Technologies Inc. The name change became effective with the OTC
Bulletin Board at the opening for trading on April 23, 2007 under the new stock
symbol LTSC.

We
are a holding company for subsidiaries engaged in two main business activities:
(i) digital out-of-home advertising and (ii) light-emitting diode (LED)
solutions. During the three months ended March 31, 2010, approximately 8% of our
revenue was derived from our digital out-of-home advertising business and 92%
from our LED solutions business.

Digital Out-of-Home Advertising Business

We
design, install and operate digital out-of-home advertising billboards. We are
building and expanding our digital out-of-home advertising network (i) through
digital billboard installations which we complete and operate independently, and
(ii) through digital display 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 digital
out-of-home media network to advertisers. We have established and are continuing
to establish advertising sales channels for our digital out-of-home advertising
network by forming strategic partnerships with advertising agencies and other
media industry partners.

We
have partnered directly with New World Group companies New World China Land
Limited (NWCL) and New World Department Stores China Ltd. (NWDSC) to install
and operate digital out-of-home advertising screens at properties owned by NWCL
and operated by NWDSC throughout mainland China. NWDSC is a department store
operator in the PRC with a network of 28 stores in 16 major cities in China.

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On
October 1, 2009, our company signed an outdoor digital billboard cooperation
agreement with Beijing Chongwen New World Properties Development Co. Ltd., a
New World subsidiary. Under the 10-year agreement, our company agreed to build
two large-scale outdoor LED displays at the Beijing New World Centre mixed-use
complex, with screen areas of 150 square meters and 50 square meters,
respectively. Our company will source, design, install and service the two LED
displays, and secure advertising contracts for advertising and media content to
be displayed on the screens. The first LED display began operating and
generating advertising revenue on February 10, 2010, while the second LED
display is expected to be completed and become operational by June 2010. We plan
to install additional large-sized LED displays in second half of 2010, including
but not limited to NWDSC department stores in Wuhan and Changsha, China.

As
of May 1, 2010, we have set up and operate 5 out-of-home LED screens in Hong
Kong and 30 out-of-home LED screens across various major cities in China,
including 2 screens in Beijing, 1 screen in Shenzhen, 1 screen in Jinan and 26
screens in Zhejiang province. 7 new screens are expected to be in operation
before the end of 2010. Additionally, we have launched and operate approximately
300 indoor LCD displays within 28 NWDSC department stores across 16 cities in
China. Both the LED and LCD advertising networks became operational and began
generating advertising revenue in February 2010 from various well-known
international brand-name customers.

Our
company has formed strategic partnerships with Ogilvy & Mather Group, a
major advertising agency in Hong Kong, and LIME, a diversified media
conglomerate, to sell advertising space on our digital out-of-home advertising
network. Both of these partnerships are actively promoting out-of-home
advertising on our network. We are also in the process of negotiating strategic
partnership agreements and contracts with other advertising agencies and
advertisers for the sales of advertising space on the network.

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.

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

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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.

ASC 605 addresses
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.

ASC 605 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 the extent of
progress toward completion, contract revenue and contract costs; (2) the
construction contract specifies the parties rights as to the goods or services
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 all contractual obligations.

ASC 605 states, Contract costs
generally include direct costs, such as material, labor, and subcontracting
costs 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)
allow us to use the certificate as a basis that is 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, subcontracting costs 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. 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.

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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 Other than Goodwill

Our
company reviews long-lived assets other than goodwill 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.

Impairment of Goodwill

Our
company performs an annual review for impairment of goodwill, or more frequently
if impairment indicators arise. Goodwill is considered to be impaired if it is
determined that the carrying value of the goodwill exceeds its fair value.

Impairment
test of goodwill is a two-step process. The first step involves comparing the
fair values of the applicable reporting units with the respective aggregate
carrying values, including goodwill. If the carrying amount of a reporting unit
exceeds the reporting units fair value, the second step of the goodwill
impairment test will be performed to determine the amount of the impairment
loss. The second step involves comparing the implied fair value of the related
reporting units goodwill with the carrying value of that goodwill. If the
carrying amount of goodwill exceeds the implied fair value of that goodwill, an
impairment loss is recognized in an amount equal to that excess. It is
determined that our reporting units are one level below our identified operating
segments because discrete financial information is available.

Fair
value is determined under an income approach, applying a discounted cash flow
model. The discounted cash flow model determines fair value based on the present
value of projected cash flows over a specific projection period. All values are
discounted to reflect the risk factor and related uncertainty inherent in an
investment in the reporting unit and achieving the projected cash flows. A
weighted average cost of capital of a market participant is used as the discount
rate. The residual value is determined by applying a constant terminal growth
rate to the estimated net cash flows at the end of the projection period.
Alternatively, the present value of the residual value may be determined by
applying a market multiple at the end of the projection period.

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 estimated 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
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.

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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 a digital out-of-home advertising network in the PRC, Hong Kong and
other areas of Asia. We are also engaged in 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 digital 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 digital 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 and Macau. The future
performance of these specific business segments may materially affect the future
performance of our company.

In
September 2009, our board of directors authorized management to begin the
process to sell all the rights and assets of our lighting source products
business, namely Beijing Aihua. Our companys decision to discontinue operations
in the lighting source products business was intended to more effectively
utilize our financial and human resources by focusing on our digital out-of-home
advertising and LED solutions businesses which we consider to have more
promising potential for revenue and margin growth. As of September 30, 2009, we
classified these assets as assets held for sale and included the results of the
lighting source products business in discontinued operations. On November 20,
2009, Beijing Illumination entered into a Sale and Purchase Agreement with
Zhejiang Zhong Jun Investment Management Co. Limited (Zhejiang Zhong Jun).
Pursuant to the terms and conditions of the Sale and Purchase Agreement, Beijing
Illumination agreed to sell its 100% ownership of the registered share capital
of Beijing Aihua to Zhejiang Zhong Jun in consideration for payments totaling
RMB7,800,000 (approximately US$1,140,751). Of this amount, a cash deposit of
RMB1,500,000 (approximately US$219,375) was paid by Zhejiang Zhong Jun to
Beijing Illumination on November 20, 2009. The remaining RMB6,300,000
(approximately US$921,861) was paid in full by Zhejiang Zhong Jun to Beijing
Illumination in cash in March 2010. The Sale and Purchase Agreement closed on
April 12, 2010.

Challenging
economic conditions may adversely affect our business. Firstly, we may require
outside capital over the near-term to fund our capital needs. 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 or withstand adverse
operating results. Secondly, challenging economic conditions have reduced
spending by businesses. Our operating results in one or more segments may be
adversely affected by these slowing economic conditions and spending patterns.
If global economic and market conditions remain uncertain or persist, spread, or
deteriorate further, we may experience material impacts on our business,
operating results, and financial condition. Lastly, in times of economic
slowdown, the number of our customers who default on payments owed to us may
increase. We could experience longer payment cycles, increased collection costs
and higher bad debt expenses.

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Summary of Key Results

Total
net revenue from continuing operations for the three months ended March 31, 2010
was $3,604,668, which represents a 387% increase from the total net revenue from
continuing operations of $739,756 for the three months ended March 31, 2009.

Net
profit from continuing operations for the three months ended March 31, 2010 was
$254,755 compared to a net loss of $1,264,159 for the three months ended March
31, 2009.

Net
loss from discontinued operations for the three months ended March 31, 2010 was
$4,583 compared to a net loss of $1,004,523 for the three months ended March 31,
2009

Basic
and fully diluted earnings per share for the three months ended March 31, 2010
was $0.00 compared to a basic and fully diluted loss per share of $0.04 for the
three months ended March 31, 2009.

Results of Operations  Three months ended March 31,
2010

Net Profit

Our
net profit from continuing operations attributable to Lightscape Technologies
Inc. common shareholders for the three months ended March 31, 2010 was $254,755,
or $0.00 per basic and fully diluted share, compared to a net loss of
$1,264,159, or $0.02 per basic and fully diluted share, for the three months
ended March 31, 2009. The increase in net profit from continuing operations is
primarily attributable to a $297,479 increase in revenue from our digital
out-of-home advertising business, a $2,570,024 increase in revenue from our LED
solutions business and a $1,162,068 decrease in operating expenses.

Our
net loss from discontinued operations attributable to Lightscape Technologies
Inc. common shareholders for the three months ended March 31, 2010 was $4,583,
or $0.00 per basic and fully diluted share, compared to a net loss of
$1,004,523, or $0.02 per basic and fully diluted share, for the three months
ended March 31, 2009. The decrease in net loss from discontinued operations is
primarily attributable to the scaling down of our operations within the lighting
source products business and the sale of our lighting source products subsidiary
Beijing Aihua.

Revenues and Cost of Revenues

Total
net revenue from continuing operations for the three months ended March 31, 2010
was $3,604,668, which represents a 387% increase from the total net revenue from
continuing operations of $739,756 for the three months ended March 31, 2009. The
increase in net revenues is attributable to increased sales across both our
digital out-of-home advertising business and our LED solutions business.

Specifically,
revenue related to our digital out-of-home advertising business was $297,479 for
the three months ended March 31, 2010 as compared to $nil during the three
months ended March 31, 2009. The increase in revenue was due to our entry into
the digital out-of-home advertising business during calendar year 2009 and the
generation of new revenue streams from this business segment beginning during
the three months ended June 30, 2009. The gross profit margin on our digital
out-of-home advertising business was 50% for the three months ended March 31,
2010. Our digital out-of-home advertising business is expected to contribute
increased revenues in the foreseeable future as we build out our digital
out-of-home advertising network, primarily through our relationships with New
World China Land Limited and New World Department Stores China Ltd. Our company
has also formed strategic partnerships with Ogilvy & Mather Group, a major
advertising agency in Hong Kong, and LIME, a diversified media conglomerate, to
sell advertising space on our digital out-of-home network. Both of these
partnerships are actively promoting out-of-home advertising on our network. We
are also in the process of negotiating strategic partnership agreements and
contracts with other advertising agencies and advertisers for the sales of
advertising space on our digital advertising network.

Revenue
related to our LED solutions business increased to $3,307,189 for the three
months ended March 31, 2010 from $737,165 during the three months ended March
31, 2009, or an increase of 349%. The increase in revenues was due primarily to
the completion of LED solutions contracts with larger average contract sums
during the three months ended March 31, 2010 as compared to a similar number of
contracts but with relatively smaller contract sums completed during the three months ended March 31,
2009.

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- 36 -

The gross profit margin on our LED solutions business was 25% for the
three months ended March 31, 2010. Our LED solutions business is expected to
contribute increased revenues in the foreseeable future as several key projects
are expected to be completed in the near future.

Total
cost of revenues for the three months ended March 31, 2010 was $2,620,485, which
represents an increase of 1,235% as compared to total cost of revenues of
$196,342 for the three months ended March 31, 2009. The increase in the total
cost of revenues during the three months ended March 31, 2010 was due primarily
to the corresponding 387% increase in overall sales revenues. Our overall gross
profit margin was 27% for the three months ended March 31, 2010.

Operating Expenses

Operating
expenses for the three months ended March 31, 2010 were $716,236, which
represents a 62% decrease in operating expenses from $1,878,304 for the three
months ended March 31, 2009. Selling, marketing, general and administrative
expenses constitute the main components of our operating expenses.

Selling
and marketing expenses for the three months ended March 31, 2010 decreased
approximately 31% to $85,230 from $123,234 for the three months ended March 31,
2009. The decrease is attributable to one-time advertising campaign expenses and
sales network set up costs related to the launch of our digital out-of-home
advertising network during the three months ended March 31, 2009 with no
comparable one-time expenses during the three months ended March 31, 2010. Our
company anticipates that selling and marketing expenses will remain steady or
increase slightly in the future in step with overall revenue increases. As we
further expand our core digital out-of-home advertising and LED solutions
businesses, any increases in selling and marketing expenses are expected to be
limited as a result of a company-wide cost-cutting initiative implemented
throughout 2009 and into 2010.

General
and administrative expenses decreased by 33% during the three months ended March
31, 2010 to $584,870 from $870,910 for the three months ended March 31, 2009.
The decrease is primarily attributable to a company-wide cost-cutting initiative
implemented throughout 2009 and into 2010. Our company anticipates that general
and administrative costs will remain steady or marginally increase in the
foreseeable future as our companys operations continue to expand, however, such
increases are expected to continue to be limited as a result of the cost-cutting
initiative.

Bad
debts expenses for the three months ended March 31, 2010 decreased to $nil from
$798,458 for the three months ended March 31, 2009. The bad debts expense during
the three months ended March 31, 2009 resulted from a write off of a trade
receivable within our LED solutions business which management deemed
irrecoverable and a one-time occurrence.

Liquidity and Capital Resources

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

Working Capital

As
of March 31, 2010, our company had an overall net working capital surplus of
$1,491,791 compared to a surplus of $1,286,027 as of December 31, 2009,
representing an increase in working capital of $205,764. The cash and cash
equivalents of our company increased to $596,832 as at March 31, 2010 as
compared to $209,508 as of December 31, 2009.

Cash Flow Related to Operating Activities

Continuing
operating activities used cash of $12,381 for the three months ended March 31,
2010 as compared to continuing operating activities generating cash of
$1,290,537 for the three months ended March 31, 2009.

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- 37 -

The decrease in cash generated by continuing operating
activities was mainly due to the $118,827 increase in the operating asset Costs
and estimated earnings in excess of billings on uncompleted contracts, which
represents more project revenue being recognized during the period than the
amount of sales invoices billed to our clients. The increasing total signifies
the timing difference between revenue recognition and billing to our clients,
which will be reduced significantly towards completion of individual projects,
and subsequent timely issuance of relevant invoices. A $977,558 decrease in the
operating liability Billings in excess of costs and estimated earnings on
uncompleted contracts also contributed significantly to the decrease in cash
generated by continuing operating activities. This operating liability
represents amounts billed on our LED solutions contracts in excess of revenues
recognized. The decreasing total signifies that we paid more project costs and
collected fewer deposits during the three months ended March 31, 2010. A
$785,412 decrease in accrued expenses also detracted from our operational cash
flow from continuing activities as we sped up payment of certain invoices. Our
operational cash flows were enhanced by the $250,172 net profit during the three
months ended March 31, 2010, and by a $1,973,467 increase in trade payables as
we took advantage of extended credit term limits from certain suppliers.
Discontinued operating activities generated $nil during the three months ended
March 31, 2010 as compared to discontinued operating activities using cash of
$1,044,696 during the three months ended March 31, 2009.

Cash Flow Related to Investing Activities

Net
cash generated by investing activities of continuing operations amounted to
$736,118 during the three months ended March 31, 2010 as compared to investing
activities of continuing operations using cash of $1,669,071 during the three
months ended March 31, 2009. The increase in cash generated by investing
activities of continuing operations is attributable primarily to the $916,550
our company received during the three months ended March 31, 2010 related to the
disposal of our subsidiary Beijing Aihua within the lighting source products
business. Investing activities of discontinued operations generated $nil during
the three months ended March 31, 2010 as compared to investing activities of
discontinued operations generating cash of $409,085 during the three months
ended March 31, 2009.

Our
company incurred capital expenditures of $180,470 during the three months ended
March 31, 2010 and $1,669,071 for the three months ended March 31, 2009. The
decrease in capital expenditures for the three months ended March 31, 2010 as
compared to March 31, 2009 was mainly attributable to the $894,098 decrease in
purchases of digital out-of-home advertising equipment and a $487,073 decrease
in purchase of plant and equipment. We plan to install additional large-sized
LED displays during the second half of 2010, including but not limited to New
World Department Store China Ltd. department stores in Wuhan and Changsha,
China. We estimate total capital expenditures for these LED screens to be
approximately $1,092,545, in the form of cash and/or utilization of our
companys LED screen inventory.

Cash Flow Related to Financing Activities

Financing
activities of continuing operations used cash of $336,413 for the three months
ended March 31, 2010 as compared to financing activities of continuing
operations using cash of $35,352 for the three months ended March 31, 2009. The
increase in net cash flow used in financing activities of continuing operations
was mainly due to the $261,164 repayment of bank loans during the three months
ended March 31, 2010 compared to no such repayments during the three months
ended March 31, 2009. Financing activities of discontinued operations generated
$nil during the three months ended March 31, 2010 as compared to financing
activities of discontinued operations generating cash of $37,678 for the three
months ended March 31, 2009.

During
the nine months ended December 31, 2009, our company, through our wholly-owned
subsidiary Lightscape Technologies (Greater China) Limited (LTGC), obtained an
installment loan of $771,208 (HKD6,000,000) from DBS Bank (Hong Kong) Limited
(DBS Bank) under the Special Loan Guarantee Scheme of The Government of the
Hong Kong Special Administrative Region (HKSAR Government). The loan was
repayable over 12 equal monthly installments, at an interest rate of 2% per
annum over the prime lending rate, from May 12, 2009 to April 12, 2010. The
installment loan was secured by a Special Loan Guarantee issued by the HKSAR
Government for an amount equal to 70% of the loan, a Guarantee and Indemnity for
an unlimited amount duly executed by a director of our company and a director of
LTGC, and a Guarantee and Indemnity for an unlimited amount duly executed by
Tech Team Investment Limited, the immediate holding company of LTGC. On April 8,
2010 the twelfth and final loan installment was repaid to DBS Bank.

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- 38 -

In
late March 2010, our company, through LTGC, secured an Account Payable Financing
(AP Financing) loan facility, which also applies to Letter of Credit and Trust
Receipt, with a maximum limit of $642,674 (or HKD5,000,000) from DBS Bank under
the Special Loan Guarantee Scheme of the HKSAR Government. The AP Financing loan
is operated on a revolving basis, with the AP Financing loan granted at 100% of
invoiced value against original invoice, for a maximum maturity of 90 days, less
suppliers credit period, if any. Interest charged against the related bill
payable will be at a standard bills rate quoted by DBS from time to time. The AP
Financing loan is secured by a Special Loan Guarantee issued by the HKSAR
Government for an amount equal to 80% of the loan, a Guarantee and Indemnity for
an unlimited amount duly executed by a director of the Company and a director of
LTGC, and a Guarantee and Indemnity for an unlimited amount duly executed by
Tech Team Investment Limited, the immediate holding company of LTGC.

Management
believes that additional cash may need to be raised in the next twelve months to
finance our existing operations and expansion of our digital out-of-home
advertising and LED solutions businesses since we have not yet achieved
sustainable positive cash flows. However, management also expects to generate
positive cash flow in the coming twelve months from the completion of projects
which may substantially, if not fully, meet the cash needs of our company during
the next twelve months. Management may consider outside capital over the
near-term, including the next twelve months, if required to fund our capital
needs. Such outside capital may be obtained from additional debt or equity
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.

As a
  smaller reporting company, we are not required to provide this information.

Item 4. 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 March 31, 2010, 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.

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

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Changes in Internal Control over Financial Reporting

There
have been no significant changes in our internal controls over financial
reporting that occurred during our most recent fiscal quarter ended March 31,
2010 that have materially affected, or are reasonably likely to materially
affect, our internal controls over financial reporting.

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 March 31, 2010. 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.

In
addition to the other information set forth in this report, including the
important information in Forward-Looking Statements, you should carefully
consider the Risk Factors discussed in our companys Transition Report on Form
10-K for the fiscal nine months ended December 31, 2009. If any of those factors
were to occur, they could materially adversely affect our companys financial
condition or future results, and could cause our actual results to differ
materially from those expressed in our forward-looking statements in this
report. Our company is aware of no material changes to the Risk Factors
discussed in our companys Transition Report on Form 10-K for the fiscal nine
months ended December 31, 2009.

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

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. (Removed and Reserved).

Item 5. Other Information.

None.

Item 6. Exhibits

Exhibits required by Item 601 of Regulation S-K

|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)                                                                                                                                                     

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- 40 -

|Exhibit Number | Description                                                                                                                                                                                                                                                                                                          
|-------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|               |                                                                                                                                                                                                                                                                                                                      
|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           | 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)                                                                         
|               |                                                                                                                                                                                                                                                                                                                      
|10.3           | 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)                                                                                                         
|               |                                                                                                                                                                                                                                                                                                                      
|10.4           | Sale and Purchase
        Agreement between Beijing Illumination (Hong Kong) Limited and Zhejiang
        Zhong Jun Investment Management Co. Limited, dated November 20, 2009 (Translated
        from Chinese)(incorporated by reference from our Quarterly
        Report on Form 10-Q filed on November 23, 2009)
|               |                                                                                                                                                                                                                                                                                                                      
|(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



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- 41 -

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: May 21, 2010

---