UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D.C. 20549


**FORM
      10-Q**


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


For
      the
      Quarterly Period Ended March 31, 2008


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


For
      the
      Transition Period from ______ to ______


Commission
      File Number: 0-9879


**FUDA
      FAUCET WORKS, INC.**


(Exact
      name of registrant as specified in its charter)


**Delaware**
            
            **13-2648442**(State
                or other jurisdiction of
              incorporation
                or organization)
            
            (I.R.S.
                Employer Identification
              No.)**Ge
                Jia Ba, Hua Ting, Yiyang**
              **Jiangxi,
                PRC**
            
            **334400**(Address
                of principal executive
              offices)
            
            (Zip
                Code)


**86
      793-5887178**


(Registrant’s
      telephone number, including area code)


**None**


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





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days. Yes R 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□
            
            Smaller
                reporting companyR




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




Indicate
      the number of shares outstanding of each of the issuer’s classes of common
      stock, as of the latest practicable date.




**Class**
            
            **Outstanding
                at May 14, 2008**Common
                Stock, $0.001 par
              value
                per share
            
            10,725,440
                shares





**TABLE
      OF CONTENTS**




**PART
                I.      FINANCIAL
                INFORMATION**
            **1****ITEM
                1. FINANCIAL STATEMENTS**
            **1****ITEM
                2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
                OF OPERATIONS.**
            **20****ITEM
                3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
                RISK.**
            **25****ITEM
                4. CONTROLS AND PROCEDURES.**
            **25****PART
                II      OTHER
                INFORMATION.**
            **26****ITEM
                4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
                HOLDERS.**
            **26****ITEM
                6. EXHIBITS.**
            **26****SIGNATURES**
            **27**





**PART
      I.**  **FINANCIAL
      INFORMATION**


**ITEM
      1.**  **FINANCIAL
      STATEMENTS**


**FUDA
      FAUCET WORKS, INC.**


CONDENSED
      CONSOLIDATED BALANCE SHEETS


(US
                  dollars)Item
              
              March 31, 2008
              
              December 31, 2007(UNAUDITED)
              
              (AUDITED)**ASSETS**Current
                  assetsCash
                  and cash equivalents
              
              
              2,764,643
              
              
              169,319Accounts
                  receivable
              
              
              4,535,417
              
              
              487,471Due
                  from related parties - trade
              
              
              -
              
              
              6,996,322Prepayments
                  to suppliers
              
              
              -
              
              
              14,326Inventories
              
              
              9,288,386
              
              
              8,260,479Other
                  current assets
              
              
              234,981
              
              
              251,619Total
                  current assets
              
              
              16,823,427
              
              
              16,179,536Property,
                  plant and equipmentLand
                  use right
              
              
              904,621
              
              
              869,251Buildings
              
              
              1,228,457
              
              
              1,180,427Machinery
                  and equipment
              
              
              2,266,612
              
              
              817,417Automobiles
              
              
              172,070
              
              
              128,495Office
                  equipment
              
              
              22,388
              
              
              14,003Property
                  plant and equipment - total
              
              
              4,594,148
              
              
              3,009,593Less:
                  accumulated depreciation
              
              
              (876,527
              )
              
              (777,600
              )Property
                  plant and equipment - net
              
              
              3,717,621
              
              
              2,231,993Construction
                  in progress
              
              
              2,033,518
              
              
              1,867,513Other
                  long-term assets - idle assetsMachinery
                  and equipment - net
              
              
              344,804
              
              
              331,324Land
                  use right - net
              
              
              191,701
              
              
              184,205**Total
                  assets**
              
              
              23,111,071
              
              
              20,794,571**LIABILITIES
                  AND STOCKHOLDERS’ EQUITY**Current
                  liabilitiesShort-term
                  bank loans
              
              
              5,914,599
              
              
              5,252,594Accounts
                  payable
              
              
              628,102
              
              
              686,114Due
                  to related parties - trade
              
              
              1,289,647
              
              
              1,189,152Due
                  to related parties - non-trade
              
              
              321,592
              
              
              869,802Accrued
                  expenses
              
              
              237,939
              
              
              112,280Other
                  payables
              
              
              40,839
              
              
              81,143Total
                  current liabilities
              
              
              8,432,718
              
              
              8,191,085**Total
                  Liabilities**
              
              
              8,432,718
              
              
              8,191,085Commitments
                  and ContingenciesStockholders’equityPreferred
                  stock, 0.0000001 par value; 20,000,000 shares authorized; 3,090,909
                  share
                  issued and outstanding on March 31, 2008 and December 31,
                  2007
              
              
              -
              
              
              -Common
                  stock - $0.0000001 par value; 900,000,000 shares authorized; 10,725,440
                  issued and outstanding shares on March 31, 2008 and December 31,
                  2007
              
              
              1
              
              
              1Additional
                  paid-in capital
              
              
              3,748,785
              
              
              3,748,785Surplus
                  reserve
              
              
              260,430
              
              
              260,430Retained
                  earnings
              
              
              9,119,729
              
              
              7,753,585Accumulated
                  other comprehensive income
              
              
              1,549,408
              
              
              840,685**Total
                  stockholders’equity**
              
              
              14,678,353
              
              
              12,603,486**Total
                  liabilities and stockholders’equity**
              
              
              23,111,071
              
              
              20,794,571


See
      notes
      to financial statements.


1


**FUDA
      FAUCET WORKS, INC.**


CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME


(UNAUDITED)


(US
                  dollars)Item
              
              Three Months Eneded March 31,2008
              
              2007Net
                  sales
              
              
              9,760,370
              
              
              4,037,934Cost
                  of sales (exclusive of items shown separately below)
              
              
              7,700,215
              
              
              3,263,348**Gross
                  profit**
              
              
              2,060,155
              
              
              774,586**Operating
                  expenses:**Selling
                  expenses
              
              
              63,718
              
              
              57,113General
                  and administrative
              
              
              222,726
              
              
              70,609Officers’
                  compensation
              
              
              6,411
              
              
              5,806Depreciation
                  and amortization
              
              
              20,850
              
              
              3,247Consulting
                  and professional fees
              
              
              56,755
              
              
              -**Total
                  operating expenses**
              
              
              370,460
              
              
              136,775**Operating
                  income**
              
              
              1,689,695
              
              
              637,811**Interest
                  expense**
              
              
              (110,912
              )
              
              (88,079
              )**Foreign
                  exchange loss**
              
              
              (212,639
              )
              
              -**Net
                  income**
              
              
              1,366,144
              
              
              549,732**Other
                  comprehensive income******Foreign currency translation adjustment
              
              
              708,723
              
              
              47,228**Comprehensive
                  income**
              
              
              2,074,867
              
              
              596,960**Earnings
                  per common share**Basic
              
              
              0.13
              
              
              0.05Diluted
              
              
              0.07
              
              
              0.05**Weighted
                  average number of common shares outstanding**Basic
              
              
              10,725,440
              
              
              10,564,647Diluted
              
              
              20,098,167
              
              
              10,564,647





See
      notes
      to financial statements.


2


**FUDA
      FAUCET WORKS, INC.**


CONDENSED
      CONSOLIDATED CASH FLOWS STATEMENTS


(UNAUDITED)


(US
                  dollars)Item
              
              Three Months Eneded March 31,2008
              
              2007**Cash
                  flows from operating activities:**Net
                  income
              
              
              1,366,144
              
              
              549,731Adjustments
                  to reconcile net income to net cash used in operating
                  activities:Depreciation
                  and amortization
              
              
              98,927
              
              
              38,443(Increase)
                  decrease in:Accounts
                  receivable
              
              
              (4,047,946
              )
              
              (282,650
              )Due
                  from related parties - trade
              
              
              6,996,322
              
              
              -Prepayments
                  to suppliers
              
              
              14,326
              
              
              (68,416
              )Inventories
              
              
              (1,027,907
              )
              
              (858,170
              )Other
                  current assets
              
              
              16,638
              
              
              (31,114
              )Increase
                  (decrease) in:Accounts
                  payable
              
              
              (58,012
              )
              
              83,656Due
                  to related parties-trade
              
              
              100,495
              
              
              (165,610
              )Advances
                  from customers
              
              
              -
              
              
              586,633Accrued
                  expenses
              
              
              125,659
              
              
              41,176Other
                  payables
              
              
              (40,304
              )
              
              (39,327
              )**Net
                  cash provided by (used in) operating activities:**
              
              
              3,544,342
              
              
              (145,648
              )**Cash
                  flows from investing activities:**Purchase
                  of fixed assets
              
              
              (1,379,708
              )
              
              (27,032
              )**Net
                  cash used in investing activities**
              
              
              (1,379,708
              )
              
              (27,032
              )**Cash
                  flows from financing activities:**Proceeds
                  from short-term bank loans
              
              
              5,381,802
              
              
              1,819,019Repayment
                  of short-term bank loans
              
              
              (4,884,271
              )
              
              (1,708,386
              )Loans
                  from related parties
              
              
              2,800,128
              
              
              -Repayment
                  to related parties
              
              
              (3,348,338
              )
              
              -**Net
                  cash from financing activities**
              
              
              (50,679
              )
              
              110,633**Effect
                  of exchange rate changes on cash and cash
                  equivalents:**
              
              
              481,369
              
              
              (55,154
              )**Cash
                  and equivalents**Net
                  increase (decrease) in cash and equivalents
              
              
              2,595,324
              
              
              (117,201
              )Cash
                  and equivalents, beginning of period
              
              
              169,319
              
              
              380,714**Cash
                  and equivalents, end of period**
              
              
              2,764,643
              
              
              263,513**Supplemental
                  Disclosures of Cash flow Information:**Cash
                  paid for interest
              
              
              110,912
              
              
              52,825Cash
                  paid for income taxes
              
              
              -
              
              
              -





See
      notes
      to financial statements.


3


**FUDA
      FAUCET WORKS, INC.**


Notes
      to
      Condensed Consolidated Financial Statements


March
      31,
      2008


(Unaudited)




**1.**  **Organization
      and Basis of Presentation**




***(1)***  ***Management’s
      Responsibility For Interim Financial Statements***




Management
      acknowledges its responsibility for the preparation of the accompanying interim
      consolidated financial statements which reflect all adjustments, consisting
      of
      normal recurring adjustments, considered necessary in its opinion for a fair
      statement of its consolidated financial position and the results of its
      operations for the interim period presented. These consolidated financial
      statements should be read in conjunction with the summary of significant
      accounting policies and notes to consolidated financial statements included
      in
      the Company’s Form 10-KSB annual report for the year ended December 31, 2007.




***(2)***  ***Organization***




Fuda
      Faucet Works, Inc. (the “Company,” “we,”
      “us,” “our” )
      was
      incorporated in Delaware on June 10, 1969 under the name Magnum Communications
      Corp. On December 9, 1980, the Company changed its name to Vacation Ownership
      Marketing, Inc. and was engaged in the development and marketing of time-shared
      condominiums. In 1983, the Company ceased operations due to continued financial
      difficulties and adverse litigation. From 1983 until August 29, 2001, the
      Company was not engaged in any business. On August 29, 2001, the Company
      acquired Encore Builders, Inc., a construction company, through what was then
      a
      subsidiary of the Company. Beginning on August 29, 2001, the Company was engaged
      in the construction of Conquistador Plaza Apartments in Miami, Florida, pursuant
      to a lump sum construction contract with Conquistador Plaza. These operations
      ceased with the separation of Encore Builders from the Company in the first
      quarter of 2002. On May 6, 2004, the Company changed its corporate name to
      Capital Solutions I, Inc. Prior to December 3, 2007, the Company was not engaged
      in any business. On January 3, 2008, the Company changed its name to Fuda Faucet
      Works, Inc.




On
      December 3, 2007, the Company entered into a buy-back agreement with Richard
      Astrom and Christopher Astrom, who were the Company’s principal stockholders and
      sole directors and Christopher Astrom was the Company’s president, Chief
      Executive Officer and chief financial officer, pursuant to which they sold
      to
      the Company all of the shares of common stock owned by them, which constituted
      75% of the Company’s outstanding common stock, for a purchase price of $625,000.
      Richard and Christopher Astrom resigned from all positions as officers and
      directors simultaneously.




Contemporaneously
      with the purchase of stock from the former principal stockholders, the Company
      executed a share exchange agreement with Jibrin Issa Jibrin Al Jibrin, trustee
      of the Wu Yiting Stock Trust, the sole stockholder of Moral Star Development
      Limited, a British Virgin Islands company (“Moral Star BVI”), pursuant to which
      the trustee transferred to the Company all of the capital stock of Moral Star
      BVI in exchange for 10,564,647 shares of the Company’s common stock,
      approximately 98.5% of the Company’s outstanding common stock, which were issued
      to the Trust and the designees of the Trust. As a result, Moral Star BVI became
      the Company’s wholly-owned subsidiary and the Company’s business became the
      business of Moral Star BVI and its affiliated companies. The sole beneficiary
      of
      the trust is Ms. Wu Yiting, who, as a result of the exchange, became the Chief
      Executive Officer, president and a director of the Company. Under generally
      accepted accounting principles, the company accounted this transaction as a
      reverse acquisition.


4


**FUDA
        FAUCET WORKS, INC.**
 Notes
        to
        Condensed Consolidated Financial Statements
 March
        31,
        2008
 (Unaudited)




On
      January 3, 2008, the Company effected a 3.2-for-one stock distribution pursuant
      to which each share of common stock was converted into 3.2 shares of common
      stock. All references in these financial statements to shares and per share
      information give effect to the stock distribution.




Moral
      Star BVI owns 100% of the stock of Jiangxi Moral Star Copper Technology Co.,
      Ltd. (“Moral Star China”), which is a wholly foreign-owned enterprise organized
      under the laws of the Peoples’ Republic of China (“PRC”). Moral Star China is a
      party to a series of contractual arrangements with Jiangxi Yiyang Fuda Copper
      Co. Ltd. (“Fuda Yiyang”), a limited liability company headquartered in, and
      organized under the laws of the PRC.




The
      contractual arrangements among Moral Star China, Fuda Yiyang, its sole owner,
      Wu
      Yiting and related parties are represented by a series of agreements, including
      Management Agreement, Related Transactions Agreement, Purchase Agreement,
      Stockholders’ Voting Proxy Agreement, Shares Pledge Agreement, Exclusive Option
      Agreement, Patent Transfer Agreement, and Trademark Transfer Agreement, pursuant
      to which the Company obtained control over the business and operations of Fuda
      Yiyang, and became the primary beneficiary of Fuda Yiyang operations.




Under
      generally accepted accounting principles, the acquisition by the Company of
      Moral Star BVI is considered to be capital transactions in substance, rather
      than a business combination. That is, the acquisition is equivalent, in the
      acquisition by Moral Star BVI of the Company, then known as Capital Solutions
      I,
      Inc., with the issuance of stock by Moral Star BVI for the net monetary assets
      of the Company. This transaction is accompanied by a recapitalization, and
      is
      accounted for as a change in capital structure. Accordingly, the accounting
      for
      the acquisition is identical to that resulting from a reverse acquisition,
      except that no goodwill is recorded. Under reverse takeover accounting, the
      comparative historical financial statements of the Company, as the legal
      acquirer, are those of the accounting acquirer, Moral Star BVI. Since Moral
      Star
      BVI and Moral Star China did not have any business activities, the Company’s
      financial statements prior to the closing on the reverse acquisition, reflect
      only business of Fuda Yiyang. The accompanying financial statements reflect
      the
      recapitalization of the stockholders’ equity as if the transactions occurred as
      of the beginning of the first period presented. Thus, the 10,564,647 shares
      of
      common stock issued to the trust and its designees are deemed to be outstanding
      from December 31, 2005.




The
      relationship among the above companies as follows:


5


**FUDA
      FAUCET WORKS, INC.**


Notes
      to
      Condensed Consolidated Financial Statements


March
      31,
      2008


(Unaudited)




Funda




***(3)***  ***Business***




The
      Company’s business is presently the business conducted by Fuda Yiyang prior to
      the share exchange, which is the development, manufacture and distribution
      of a
      wide range of brass faucets and related spouts and fittings. The Company’s
      products include kitchen and bar faucets, bathroom faucets and bathroom
      accessories. The Company produces all of its products in China and exports
      most
      of them into the international marketplace. The Company started doing business
      by focusing on copper re-processing when Fuda Yiyang was initially formed in
      1995. In 2002, the Company began to produce and sell the European style brass
      faucets, spouts and fittings to the Chinese local market, and in 2004, it began
      to sell our products internationally. We sell our products to bathroom supplies
      distributors.




***(4)***  ***Basis
      of Presentation***




The
      consolidated financial statements have been prepared pursuant to the rules
      and
      regulations of the Securities and Exchange Commission (“SEC”) and in accordance
      with generally accepted accounting principles in the United States of America
      (“US GAAP”). The Company’s functional currency is the China Renminbi (RMB);
      however the accompanying consolidated financial statements have been translated
      and presented in United States Dollars (“U.S. dollars” or “US$”).




**Principles
      of consolidation** - The
      Company’s consolidated financial statements include the financial statements of
      its wholly owned subsidiaries, Moral Star BVI and Moral Star China, as well
      as
      Fuda Yiyang, which is a variable interest entity whose financial statements
      are
      consolidated with those of the Company pursuant to FASB Interpretation No.
      46R
“Consolidation of Variable Interest Entities, an Interpretation of Accounting
      Research Bulletin No. 51” (“FIN 46R”). All significant intercompany accounts and
      transactions have been eliminated in the combination.




FIN
      46R
      requires a variable interest entity to be consolidated by a company if that
      company is subject to a majority of the risk of loss for the variable interest
      entity or is entitled to receive a majority of the variable interest entity’s
      residual returns. Variable interest entities are those entities in which the
      Company, through contractual arrangements, bears the risks of, and enjoys the
      rewards normally associated with ownership of the entities, and therefore the
      Company is the primary beneficiary of these entities.


6


**FUDA
      FAUCET WORKS, INC.**


Notes
      to
      Condensed Consolidated Financial Statements


March
      31,
      2008


(Unaudited)




Moral
      Star China is a party to a series of contractual arrangements with Fuda Yiyang.
      These agreements include a management agreement pursuant to which all net income
      after deduction of necessary expenses, if any, generated by Fuda Yiyang is
      paid
      to Moral Star China and Moral Star China is responsible for paying Fuda Yiyang’s
      obligations incurred in connection with its business. In addition, Moral Star
      China manages and controls all of the funds of Fuda Yiyang. Moral Star China
      also has the right to purchase Fuda Yiyang’s equipment and patents and lease its
      manufacturing plants, land and remaining equipment. This agreement is designed
      so that Moral Star China can conduct its business in China. Pursuant to two
      other agreements, the sole stockholder of Fuda Yiyang, who is also the Company’s
      Chief Executive Officer, has pledged all of her equity in Fuda Yiyang as
      security for performance of Fuda Yiyang’s obligations to Moral Star China, and
      she granted Moral Star China an irrevocable grant of a proxy over her stock
      in
      Fuda Yiyang. As a result, Fuda Yiyang is considered a variable interest
      entity.




**Use
      of Estimates** - The
      preparation of financial statements in conformity with US GAAP requires
      management to make estimates and assumptions that affect the reported amounts
      of
      assets and liabilities, disclosure of contingent assets and liabilities at
      the
      date of the financial statements, and the reported amounts of revenues and
      expenses during the reporting period. Actual results could differ from those
      estimates. Significant accounting estimates include bad debt provision,
      impairment of long-lived assets, depreciation and amortization,
      etc.




**Country
      Risk** - As the
      Company’s manufacturing base is located in China and its market is mainly
      located in Middle East, Africa and Russia, the Company is subject to special
      considerations and significant risks not typically associated with companies
      in
      North America and/or Western Europe. These risks include, among others, risks
      associated with the political, economic and legal environments and foreign
      currency exchange limitations encountered in these areas. The Company’s results
      of operations may be adversely affected by changes in the political and social
      conditions in these areas, and by changes in governmental policies with respect
      to laws and regulations, among other things.




In
      accordance with the relevant Chinese rules and regulations on management of
      foreign exchanges, the foreign exchanges generated by Fuda Yiyang and Moral
      Star
      China from sales of our products out of China shall be brought back into China
      and exchanged to RMB in designated banks instead of being deposited out of
      China
      without authorization. On the other hand, the Company has to buy foreign
      exchanges from designated banks when paying current expenditures with foreign
      exchanges. Both the conversion of RMB into foreign currencies and the remittance
      of foreign currencies abroad require the approval of the Chinese government.
      In
      recent years, the Chinese government has gradually losen its control over
      foreign exchange, especially on current foreign exchange accounts, for instance,
      canceling of advance examination and approval for the opening of current foreign
      exchange accounts and enhancing of quota of current foreign exchange
      accounts.




**Credit
      Risk** - The
      Company performs ongoing credit evaluations of its customers and intends to
      establish an allowance for doubtful accounts when outstanding balances are
      not
      considered fully collectable. According to the Company’s credit policy, the
      Company generally provides 100% bad debt provision for the amounts outstanding
      over 180 days after the deduction of the amount subsequently settled after
      the
      balance sheet date, which management believes is consistent with industry
      practice.


7


**FUDA
      FAUCET WORKS, INC.**


Notes
      to
      Condensed Consolidated Financial Statements


March
      31,
      2008


(Unaudited)




The
      Company may require its customers to make a partial payment, based on the
      Company’s credit evaluation. The Company generally requires payment within three
      months. We maintain a policy that all sales are final and we do not allow
      returns. No return occurred in the three months ended March 31, 2008. Based
      on
      industry practice and the credit history of customers, the Company believes
      the
      accounts receivable shown on its balance sheets are fully
      collectable.




**Foreign
      Currency Translation** - The
      functional currency of the Company is China RMB, which is the primary medium
      of
      exchange where the Company operates. The Company reports its financial results
      in U.S. dollars.




The
      Company translates its assets and liabilities into U.S. dollars using the rate
      of exchange prevailing at the balance sheet date, and the statement of
      operations is translated at the average rates over each month during the
      reporting period. Equity items are translated at historical exchange rates.
      Adjustments resulting from the translation from RMB into U.S. dollars are
      recorded in stockholders’ equity as part of accumulated comprehensive income
      (loss). Gains or losses resulting from transactions in currencies other than
      RMB
      are reflected in the statement of operations and comprehensive income. The
      translation rates from RMB to US dollars for the first quarter of 2008 and
      2007
      are as follows:




Translation
                rate for assets and liabilities as of March 31, 2008
            
            
            7.0190:1Translation
                rate for assets and liabilities as of December 31, 2007
            
            
            7.3046:1Translation
                rate for profit and loss items for the three months ended March 31,
                2008
            
            
            7.1034:1Translation
                rate for profit and loss items for the three months ended March 31,
                2007
            
            
            7.7509:1Translation
                rate for equity items of Fuda Yiyang as of March 31, 2008 and December
                31,
                2007
            
            
            8.2875:1Translation
                rate for equity items of Moral Star China as of March 31, 2008 and
                December 31, 2007
            
            
            7.3938:1




**Revenue
      Recognition** - The
      Company recognizes sales of its products in accordance with Securities and
      Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) No. 101,
“ *Revenue
      Recognition in Financial Statements,” as amended by SAB No. 104, “Revenue
      Recognition.* ”
      Revenues represent the invoiced value of goods, net of value added tax (“VAT”),
      if any, and are recognized upon delivery of goods and passage of title.




Pursuant
      to China’s VAT rules and regulations, Fuda Yiyang’s sales in China mainland are
      subject to a tax rate of 17% (“output VAT”) as an ordinary VAT taxpayer, and the
      relating revenues were recognized by the invoiced value offsetting 17% output
      VAT. However, its sales outside of China mainland are applicable for VAT
      exemption, credit and refund policy, and the relating revenues were equal to
      the
      invoiced value. The applicable refund rate from January 1, 2007 to June 30,
      2007
      was 13% and it has been adjusted down to 9% since July 1, 2007. The actual VAT
      payable is the balance after offsetting both VAT paid on purchases (“input VAT”)
      and the amount exempted or credited. The actual VAT refunded is recognized
      as
      other income.




**Shipping
      and handling cost** - We
      bear shipping and handling costs from our factory to our customers’ designated
      location, and not billed them to our customers. From accounting perspective,
      we
      record such costs as delivery expenses, which are accounted for as part of
      selling expenses. Delivery expenses for the three months ended March 31, 2008
      and 2007 were $60,493 and $33,638, respectively.


8


**FUDA
      FAUCET WORKS, INC.**


Notes
      to
      Condensed Consolidated Financial Statements


March
      31,
      2008


(Unaudited)




**Advertising** - The
      Company expenses all advertising costs as incurred. The advertising cost for
      the
      three months ended March 31, 2008 and 2007 was $409 and $23,321,
      respectively.




**Comprehensive
      Income (Loss)** -
      The
      Company has adopted SFAS No. 130, “ *Reporting
      Comprehensive Income* ”
which
      establishes standards for reporting and presentation of comprehensive income
      (loss) and its components in a full set of general-purpose financial statements.
      The Company has chosen to report comprehensive income (loss) in the statements
      of operations and comprehensive income.




**Income
      Taxes** -The
      Company accounts for income taxes under the provisions of SFAS No. 109,
“ *Accounting
      for Income Taxes* ”
which
      requires recognition of deferred tax assets and liabilities for the expected
      future tax consequences of events that have been included in the consolidated
      financial statements or tax returns. Deferred tax assets and liabilities are
      recognized for the future tax consequence attributable to the difference between
      the tax bases of assets and liabilities and their reported amounts in the
      financial statements. Deferred tax assets and liabilities are measured using
      the
      enacted tax rate 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. The Company establishes
      a
      valuation allowance when it is more likely than not that the assets will not
      be
      recovered.




With
      the
      approvals of the County Government of Yiyang on July 17, 2007, Fuda Yiyang
      was
      exempt from corporate income taxes for 2008 and 2007. The Local Tax Bureau
      of
      Yiyang County (“Yiyang Tax Authority”) also retroactively confirmed the
      above-said preferential tax treatment on September 30, 2007.




On
      March
      16, 2007, China’s parliament, the National People’s Congress, adopted the
      Enterprise Income Tax Law, which took effect
      on January 1, 2008. The new income tax law sets unified income tax rate for
      domestic and foreign companies at 25% except a 15% corporate income tax rate
      for
      qualified high and new technology enterprises. In accordance with this new
      income tax law, low preferential tax rate in accordance with both the tax laws
      and administrative regulations prior to the promulgation of this Law shall
      gradually transit to the new tax rate within five years after the implementation
      of this law.




Fuda
      Yiyang has filed its income tax return for the first quarter of 2008 with Yiyang
      Tax Authortiy, in which the income tax for the first quarter of 2008 was nil
      subject to the exemption policy. Yiyang Tax Authority accepted it and didn’t put
      forward any objection to the return. Management believes Fuda Yiyang can
      continue to enjoy the income tax exemption policy in 2008 in accordance with
      above-mentioned governmental documents.




**Cash
      and Cash Equivalents** - Highly
      liquid investments with a maturity of three months or less at the time of
      acquisition are considered to be cash equivalents.




**Inventories** -
      Inventories are stated at the lower of cost, determined on a weighted average
      basis, and net realizable value. Work in progress and finished goods are
      composed of direct material, direct labour and a portion of manufacturing
      overhead. Net realizable value is the estimated selling price, in the ordinary
      course of business, less estimated costs to complete and dispose. Management
      believes that there was no obsolete inventory as of March 31, 2008.


9


**FUDA
      FAUCET WORKS, INC.**


Notes
      to
      Condensed Consolidated Financial Statements


March
      31,
      2008


(Unaudited)




**Property,
      Plant and Equipment** -
      Property, plant and equipment are stated at cost. Major expenditures for
      betterments and renewals are capitalized while ordinary repairs and maintenance
      costs are expensed as incurred. Depreciation and amortization is provided using
      the straight-line method over the estimated useful life of the assets after
      taking into account the estimated residual value. The estimated useful life
      of
      property, plant and equipment are as follows:




Land
                use rights
            
            
            50
                yearsBuildings
            
            
            30
                yearsMachinery
                and equipment
            
            
            10
                yearsAutomobiles
            
            
            5
                yearsOffice
                equipment
            
            
            5
                years




There
      is
      no private ownership of land in the PRC. All land is owned by the government
      which grants a transferable land use right pursuant to which the holder of
      the
      land use right has the right to use the land for the term of the land use
      rights. The estimated useful life of the land use rights is based on the term
      of
      the land use rights, which is 50 years.




We
      periodically evaluate our investment in long-lived assets, including property
      and equipment, for recoverability whenever events or changes in circumstances
      indicate the net carrying amount may not be recoverable. Our judgments regarding
      potential impairment are based on legal factors, market conditions and
      operational performance indicators, among others. In assessing the impairment
      of
      property and equipment, we make assumptions regarding the estimated future
      cash
      flows and other factors to determine the fair value of the respective assets.
      If
      these estimates or the related assumptions change in the future, we may be
      required to record impairment charges for these assets. From December 2004
      to
      present, fixed assets amounting to $510,529 were left unused, including land,
      workshop building and equipment. ** Since
      value of land in similar sections of the city was increasing, no impairment
      on
      land use right has been charged. The workshop buildings were maintained in
      good
      condition, and most of the equipment will be transported and reinstalled into
      the Company’s new workshop building, which is now under construction. A
      provision for impairment of certain idle assets in the amount of $146,209 was
      made previously when they were turned into idle status.




**Derivative
      Instruments** -
      The
      Company accounts for financial instruments under the provisions of SFAS No.
      133,
“ *Accounting
      for Derivative Instruments and Hedging Activities* ”
and
      EITF 00-19 “ *Accounting
      for Derivative Financial Instruments Indexed to, and Potentially Settled in,
      a
      Company’s Own Stock* ”,
      which
      requires that all derivative financial instruments be recognized in the
      consolidated financial statements and maintained at fair value regardless of
      the
      purpose or intent
      for holding them.




We
      accounted for our convertible preferred stock and relating freestanding warrants
      as equity. At the same time, we evaluated the fair values of such preferred
      stock, warrants and embedded conversion feature and made the allocation of
      proceeds between the detachable warrants and equity based on their relative
      fair
      values.




**Financial
      Instruments and Fair Value** - SFAS
      No. 107 “ *Disclosures
      about Fair Value of Financial Instruments* ”,
      requires that the Company disclose estimated fair values of financial
      instruments. The carrying amounts for cash and cash equivalents, accounts
      receivable, prepayments, short-term loans, accounts payable, advances, accruals
      and other payables approximate their fair values because of the short maturity
      of those instruments.


10


**FUDA
      FAUCET WORKS, INC.**


Notes
      to
      Condensed Consolidated Financial Statements


March
      31,
      2008


(Unaudited)




**Reclassification
      from Prior Period Financial Statements** - Certain
      prior period comparative figures have been reclassified to conform to the
      current year presentation.




**2.**  **Recent
      Accounting Pronouncements**




In
      March
      2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments
      and Hedging Activities-an amendment of FASB Statement No. 133." SFAS No. 161
      gives financial statement users better information about the reporting entity's
      hedges by providing for qualitative disclosures about the objectives and
      strategies for using derivatives, quantitative data about the fair value of
      and
      gains and losses on derivative contracts, and details of credit-risk-related
      contingent features in their hedged positions. SFAS No. 161 is effective for
      financial statements issued for fiscal years beginning after November 15, 2008
      and interim periods within those years. The Company does not expect the adoption
      of SFAS No. 161 to have a material effect on the Company's financial
      statements.




Other
      recent accounting pronouncements issued by the FASB (including its Emerging
      Issues Task Force), the AICPA, and the SEC did not or are not believed by
      management to have a material impact on the Company’s present or future
      consolidated financial statements.




**3.**  **Variable
      Interest Entity**




As
      a
      result of the contractual arrangements among Moral Star China, Fuda Yiyang,
      its
      sole shareholder, Wu Yiting, and related parties, the Company was given control
      over the business and operations of Fuda Yiyang and became the primary
      beneficiary of Fuda Yiyang. The consolidated financial statements for the three
      months ended March 31, 2008 and 2007 included the results of operations of
      Fuda
      Yiyang for the same periods, even though the Company does not own any of Fuda
      Yiyang’s equity.


11


**FUDA
      FAUCET WORKS, INC.**


Notes
      to
      Condensed Consolidated Financial Statements


March
      31,
      2008


(Unaudited)




Fuda
      Yiyang’s assets and liabilities as of March 31, 2008 and December 31, 2007 are
      as follows:





Item
            
            (US
                dollars)March 31, 2008
            
            December 31, 2007Cash
                and cash equivalents
            
            $
            2,752,418
            
            $
            167,148Accounts
                receivable
            
            
            4,535,417
            
            
            7,483,792Prepayments
                to suppliers
            
            
            -
            
            
            14,326Inventories
            
            
            9,267,015
            
            
            8,239,944Other
                current assets
            
            
            77,239
            
            
            55,724Property
                plant and equipment - net
            
            
            3,453,691
            
            
            3,832,895Construction
                in progress
            
            
            2,033,518
            
            
            1,867,513Other
                long-term assets
            
            
            536,505
            
            
            515,529Total
                assets
            
            
            22,655,803
            
            
            22,176,871Short-term
                bank loans
            
            
            5,914,599
            
            
            5,252,594Accounts
                payable
            
            
            609,083
            
            
            602,901Due
                to related parties-trade
            
            
            1,289,647
            
            
            1,189,152Due
                to related parties- non-trade
            
            
            42,741
            
            
            676,559Accrued
                expenses
            
            
            237,939
            
            
            112,280Other
                payables
            
            
            35,389
            
            
            81,143Total
                liabilities
            
            
            8,129,398
            
            
            7,914,629




A
      $1,999,145 intercompany payable on Fuda Yiyang’s books was not included in the
      above table, since this balance had been eliminated during
      consolidation.




As
      of
      March 31, 2008 and December 31, 2007, non-controlling interest consists of
      100%
      of the equity of Fuda Yiyang owned by Wu Yiting.




**4.**  **Accounts
      Receivable**




As
      of
      March 31, 2008 and December 31, 2007, the balance of accounts receivable,
      excluding receivables from related parties, was $4,535,417 and $487,471,
      respectively.




As
      of
      December 31, 2007, the balance due from Al Jibrin Gereral Trading Co., Ltd.
      (“Jibrin Company”), a related party, was $6,996,332. During three months ended
      March 31, 2008, this outstanding balance has been fully collected, and there
      were no sales to the Jibrin Company or any other related party during the
      quarter.




**5.**  **Inventories**




Inventories
      consisted of the following as of March 31, 2008 and December 31,
      2007:





**Inventories**
            
            March 31, 2008
            
            December 31, 2007Raw
                materials
            
            $
            2,329,957
            
            $
            3,844,897Work
                in progress
            
            
            3,839,694
            
            
            2,098,383Finished
                goods
            
            
            3,118,735
            
            
            2,317,199Total
            
            $
            9,288,386
            
            $
            8,260,479




12


**FUDA
      FAUCET WORKS, INC.**


Notes
      to
      Condensed Consolidated Financial Statements


March
      31,
      2008


(Unaudited)




Management
      believes that no inventory was obsolete on each balance sheet date thus no
      impairment on inventories was provided.




**6.**  **Property,
      Plant and Equipment**




Total
      cost of property, plant and equipment was $4,594,148 and $3,009,593 as of March
      31, 2008 and December 31, 2007, respectively. The increase in gross amount
      of
      property, plant and equipment was mainly attributable to purchase of new
      equipment during the first quarter of 2008.




In
      China,
      all land is owned by the government and there is no private ownership of land.
      The government issues a certificate of use right, which is transferable, and
      permits the holder to use the land. Under three “State-owned Land Use Right
      Certificates,” the Company owns the use right for two blocks of industrial-use
      land (covering approximately 262,000 square feet) for the term of 50 years,
      beginning from issuance date of the certificates, which were 1999 and
      2001.




Depreciation
      expense was $98,927 and $38,443 for the three months ended March 31, 2008 and
      2007, respectively.




The
      land
      use rights for one parcel of land and 10 workshop buildings are used as
      collateral pursuant to a mortgage agreement with a commercial bank. The mortgage
      agreement initially has a term from September 6, 2004 to September 5, 2007,
      and,
      on September 6, 2007, was replaced by a mortgage agreement that expires on
      September 5, 2010. The net book value of this collateral as of March 31, 2008
      and December 31, 2007 was $1,544,933 and $1,517,483, respectively. Under the
      terms of the mortgage agreement, the Company may borrow from time to time up
      to
      the maximum amount provided in the mortgage agreement, which is $1.7
      million.




**7.**  **Construction
      in Progress**




A s
      of
      March 31, 2008 and December 31, 2007, the balance of construction in progress
      was $2,033,518 and $1,867,513, respectively, which represents the construction
      of new workshop buildings to expand current production capability. The
      construction started in the early
      part of 2007. We made progress payments to the contractor in accordance with
      the
      actual construction progress, thus the balance was in line with those already
      paid.




The
      land
      use right (covering 229,703 square feet) , on which these new workshop buildings
      are being constructed, is under the name of Ms. Wu Yiting, the Company’s Chief
      Executive Officer and sole stockholder of Fuda Yiyang. Ms. Wu has agreed to
      transfer the land use right of this block of land to the Company before the
      construction is finished. At March 31, 2008, the construction had not yet been
      completed. The construction was completed in April 2008, and the Company has
      submitted an application to relevant authority for the transfer of land use
      right.


13


**FUDA
      FAUCET WORKS, INC.**


Notes
      to
      Condensed Consolidated Financial Statements


March
      31,
      2008


(Unaudited)




**8.**  **Other
      long-term assets**






As
      of
      March 31, 2008 and December 31, 2007, other long-term assets were $536,505
      and
      $515,529 **,** respectively. The increase was due to appreciation of value of the RMB against
      U.S. dollars. These other long-term assets include one block of land and a
      workshop building and equipment, which have not been used since 2004. Since
      value of land in similar sections of the city was increasing, no impairment
      on
      land use right has been charged. The workshop buildings were maintained in
      good
      condition, and most of the equipment will be transported and reinstalled into
      the Company’s new workshop building, which is now under construction. A
      provision for impairment of certain idle assets in the amount of $146,209 was
      made previously when they were turned into idle status.




**9.**  **Short-term
      bank loans**




The
      balance of short-term bank loans as of March 31, 2008 and December 31, 2007
      was
      $5,914,599 and $5,252,594, respectively as follows:


Bank
              
              Main
                  Terms
              
              March
                  31, 2008
              
              December
                  31, 2007Industrial
                  and Commercial Bank of China Ltd., YiYang Branch
              
              
              Two
                  or three-month-term loans, bearing benchmark interest rate announced
                  by
                  People's Bank of China
              
              
              Principal
              
              
              Interest
                  rate
                (per
                  annum)
              
              
              Principal
              
              
              Interest
                  rate
                (per
                  annum)$
              -
              
              
              -
              
              $
              444,925
              
              
              7.776
              %-
              
              
              -
              
              
              521,589
              
              
              8.07
              %-
              
              
              -
              
              
              2,349,205
              
              
              8.42
              %3,574,583
              
              
              8.54
              %
              
              383,320
              
              
              8.54
              %-
              
              
              -
              
              
              130,055
              
              
              9.13
              %Subtotal
              
              $
              3,574,583
              
              
              
              
              $
              3,829,094Bank
                  of China, YiYang Branch(1)
              
              
              Two
                  or three-month-term secured loans, bearing benchmark interest rate
                  announced by People's Bank of China
              
              $
              -
              
              
              -
              
              $
              57,000
              
              
              6.25
              %-
              
              
              -
              
              
              140,000
              
              
              6.44
              %751,000
              
              
              7.00
              %
              
              960,000
              
              
              7.00
              %245,500
              
              
              8.69
              %
              
              266,500
              
              
              8.69
              %Subtotal
              
              $
              996,500
              
              
              
              
              $
              1,423,500Two
                  or three-month-term unsecured loans.
              
              
              283,516
              
              
              6.57
              %
              
              -
              
              
              -China
                  Construction Bank
              
              
              
              
              
              680,000
              
              
              LIBOR(2)+2.0
              %
              
              -
              
              
              -120,000
              
              
              LIBOR(2)+2.5
              %
              
              -
              
              
              -260,000
              
              
              LIBOR(2)+3.0
              %
              
              -
              
              
              -1,343,516
              
              
              
              
              
              -Total
              
              $
              5,914,599
              
              
              
              
              $
              5,252,594




(1)  The
      loans
      from Bank of China, Yiyang Branch, were secured by the land use right for one
      block of land and 10 workshop buildings under a mortgage agreement with the
      bank
      dated September 6, 2004, and on September 6, 2007, this mortgage contract was
      replaced by a mortgage which will expire on September 5, 2010. See Note
      4.


14


**FUDA
      FAUCET WORKS, INC.**


Notes
      to
      Condensed Consolidated Financial Statements


March
      31,
      2008


(Unaudited)


(2)  LIBOR
      refers to the London Interbank Offered Rate. The interest rate of variance
      loans
      from China Construction Bank is the LIBOR on the date of maturity plus a certain
      percentage.




**10.**  **Accounts
      Payable**




The
      balance of accounts payable was $628,102 and $686,114 as of March 31, 2008
      and
      December 31, 2007, respectively, which included payables to material suppliers
      and professional service providers.




**11.**  **Related
      party transactions**




The
      transactions between the Company and related parties are classified into two
      categories: non-trade and trade.




***(1)***  ***Non-trade
      transactions with Ms. Wu Yiting***




Ms.
      Wu
      Yiting is our Chief Executive Officer and Chairman of the Board. From time
      to
      time the Company has borrowed money from Ms. Wu for its operations. As of
      December 31, 2007, the amount due to Ms. Wu Yiting was $869,802. During three
      months ended March 31, 2008, Ms. Wu Yiting advanced $2,800,128 to the Company
      and was repaid for $3,348, 338. As of March 31, 2008, the amount due to Ms.
      Wu
      Yiting was $321,592. The loans from Ms. Wu are non-interest
      bearing.




***(2)***  ***Trade
      transactions with Yiyang KunPeng Worn Metal Recycling Co.,
      Ltd.***




Ms.
      Wu
      Yiting holds 80% equity of, and is the chairman of, Yiyang KunPeng Metal
      Recycling Co., Ltd. (“KunPeng”). Mr. Yang Kun, Vice-President of Fuda Yiyang,
      holds the remaining 20% equity of KungPeng.




The
      Company purchased a significant percentage of copper from KunPeng. During three
      months ended March 31, 2008 and 2007, the Company purchased $5,453,133 and
      $840,935, representing 56.3% and 19.3% of the total raw material purchase
      amount, respectively, from KunPeng.




As
      of
      March 31, 2008 and December 31, 2007, the amount due to Kunpeng in connection
      with above-said trade transactions was $1,289,64 **7** and
      $1,189,152, respectively.




**12.**  **Accrued
      Expenses**




As
      of
      March 31, 2008 and December 31, 2007, the accrued expenses were $237,939 and
      $112,280, respectively. Accrued expenses mainly consist of accrued
      salaries.


15


**FUDA
      FAUCET WORKS, INC.**


Notes
      to
      Condensed Consolidated Financial Statements


March
      31,
      2008


(Unaudited)




**13.**  **Equity-based
      Transactions**




***(1)***  ***Authorized
      shares***




At
      March
      31, 2008, the Company’s authorized capital stock consisted of 20,000,000 shares of preferred stock, par value $.0000001 per share, and
      900,000,000 shares of common stock, par value $.0000001 per share. In December
      2007, the Company’s board of directors and the holders of a majority of its
      capital stock approved a restated certificate of incorporation which changes
      the
      authorized capital stock to 130,000,000 shares, of which 20,000,000 are shares
      of preferred stock, par value $.001 per share, and 110,000,000 are shares of
      common stock, par value $.001 per share.




The
      Company’s certificate of incorporation will be amended to reflect the change in
      authorized capital after an information statement has been mailed to
      stockholders. As of May 14, 2008, the restated certificate of incorporation
      has
      not yet been filed.




***(2)***  ***Common
      Stock***




As
      of
      March 31, 2008 and December 31, 2007, the Company had 10,725,440 shares of
      common stock issued and outstanding, respectively.




***(3)***  ***Preferred stock***




As
      of
      March 31, 2008 and December 31, 2007, the Company had 3,090,909 shares of series
      A preferred stock issued and outstanding, respectively, which were issued on
      December 3, 2007 pursuant to a securities purchase agreement and an escrow
      agreement with three investors. At the same time the Company also issued to
      the
      three investors warrants to purchase 2,060,606 shares of common stock at $1.80
      per share and 4,121,212 shares of common stock at $3.00 per share. In addition,
      3,000,000 shares of series A preferred stock are held in escrow for issuance
      in
      the event that the Company does not meet target levels of earnings before
      interest and taxes as defined (“EIBT”) are less than specified levels. The
      3,000,000 shares that are held in escrow are not treated as outstanding since
      the condition which would result in the delivery of the shares from escrow
      has
      not occurred. The target level was met for 2007. The target numbers, which
      are
      expressed in RMB, for 2008 are as follows :




RMB¥2.6152
      ($0.373) per share if all of the $1.80 warrants are exercised by June 30, 2008
      and 50% of the $3.00 warrants are exercised by September 30, 2008.




RMB¥3.0653
      ($0.437) per share if all of the $1.80 Warrants are exercised by June 30, 2008
      and all of the $3.00 Warrants are exercised by September 30, 2008.




RMB¥2.3152
      ($0.330) per share if neither of the conditions listed above is
      met.




The
      dollar equivalent is based on the exchange rate in effect on March 31, 2008,
      which was RMB¥7.0190 to $1.00.




If
      the
      targets are not met, the number of shares to be delivered to the investors
      is
      determined by a formula by which the 3,000,000 is multiplied by a percentage
      determined by the following formula: (1/(1-P)) - 1, where P is the percentage
      shortfall.


16


**FUDA
      FAUCET WORKS, INC.**


Notes
      to
      Condensed Consolidated Financial Statements


March
      31,
      2008


(Unaudited)




EBIT
      is
      defined as income before income taxes and interest, determined in accordance
      with GAAP plus (a) any charges which are reflected under GAAP in the Company’s
      financial statements which relate to the transaction contemplated by the
      purchase agreement and the registration rights agreement and the other documents
      executed in connection with the financing, including the issuance of the series
      A preferred stock and warrants and any other securities issuable pursuant to
      the
      purchase agreement, the registration rights agreement and the other documents,
      minus (b) the amount, if any, by which all non-recurring losses or expenses
      exceed all non-recurring items or income or gain. EBIT shall not be adjusted
      if
      all non-recurring items of income or gain exceed all non-recurring losses or
      expenses. Items shall be deemed to be non-recurring only if they qualify as
      non-recurring pursuant to GAAP.




For
      purpose of determining EBIT per share on a fully-diluted basis, all shares
      of
      common stock issuable upon conversion of convertible securities and upon
      exercise of warrants and options (whether or not vested) shall be deemed to
      be
      outstanding, regardless of whether (i) such shares are treated as outstanding
      for determining diluted earnings per share under GAAP, (ii) such securities
      are
“in the money,” or (iii) such shares may be issued as a result of a 4.9%
      limitation; provided, however, that none of the 3,000,000 shares of series
      A
      preferred stock held in escrow nor the shares of common stock issuable upon
      conversion of such series A preferred stock shall be deemed
      outstanding




The
      Company agreed that, by March 2, 2008, which is 90 days after the closing on
      December 3, 2007, it would have appointed such number of independent directors
      that would result in a majority of our directors being independent directors
      and
      we would have an audit committee composed solely of at least three independent
      directors and a compensation committee would have a majority of independent
      directors. The agreement provides that the Company pay liquidated damages (i)
      if
      the Company fails to have a majority of independent directors 90 days after
      the
      closing or (ii) thereafter, if the Company subsequently fails to meet these
      requirements for a period of 60 days for an excused reason, as defined in the
      purchase agreement, or 75 days for a reason which is not an excused reason.
      Liquidated damages are payable in cash or additional shares of series A
      preferred stock, with the series A preferred stock being valued at its
      liquidated preference of $1.10 per share. The liquidated damages are computed
      at
      the rate of 12% per annum of the purchase price, with a limit of $408,000.
      The
      appointment of five directors, four of which are independent directors, took
      effect on April 28, 2008 and related board committees were created on the same
      day. The investors waived their right to liquidated damages resulting from
      the
      failure to have met the required schedule.




The
      Company and the investors entered into a registration rights agreement pursuant
      to which the Company is required to have a registration statement filed with
      the
      SEC by February 1, 2008 and declared effective by the SEC not later than June
      29, 2008. We are required to pay liquidated damages at the rate of 1,000 shares
      of series A preferred stock for each day after June 29, 2008 that the
      registration statement is not declared effective or for any period that we
      fail
      to keep the registration statement effective, up to a maximum of 370,000 shares.
      The number of shares of series A preferred stock issuable pursuant to the
      liquidated damages provision is subject to reduction based on the maximum number
      of shares that can be registered under the applicable SEC guidelines. No
      liquidated damages have been accrued since the Company believes that the
      registration statement will be declared effective by June 29,
      2008.


17


**FUDA
      FAUCET WORKS, INC.**


Notes
      to
      Condensed Consolidated Financial Statements


March
      31,
      2008


(Unaudited)




**14.**  **Concentration of Suppliers and Customers**




Two
      suppliers accounted for 56.3%, and 21.4% of our raw material purchases for
      the
      three months ended March 31, 2008. Two suppliers accounted for 76.4% and 19.3%
      of our raw material purchases for the three months ended March 31, 2007. No
      other supplier accounted for more than 10% of our purchases for either period.
      KunPeng was the largest supplier for the first quarter of 2008 and the second
      largest supplier for the same period of 2007. Wu Yiting, the Company’s chief
      executive officer, is the 80% stockholder and chief executive officer of
      KunPeng. (See Note 11).




During
      the three months ended March 31, 2008, two customers accounted for 49.5% and
      44.6% of our net sales. For the three months ended March 31, 2007, one customer
      accounted for 33.0% of our net sales. No other customer accounted for 10% or
      more of our net sales in either quarter. The Company’s largest customer was the
      same in the both period.




**15.**  **Segment
      Reporting**




The
      Company operates in one segment - producing and distributing brass faucets
      and
      related spouts and fittings, no business segment information is presented.
      The
      following table sets forth, by geographic region, information concerning the
      Company’s net sales classified by the major geographic areas in which it sold
      its products:


Three months ended March 31,2008
              
              2007Nation
              
              Amount
              
              Percentage
              
              Amount
              
              PercentageUnited
                  Arab Emirates
              
              $
              9,195,420
              
              
              94.2
              %
              $
              3,862,790
              
              
              95.7
              %Russia
              
              
              564,950
              
              
              5.8
              %
              
              -
              
              
              0.0
              %Turkey
              
              
              -
              
              
              0.0
              %
              
              24,272
              
              
              0.6
              %Spain
              
              
              -
              
              
              0.0
              %
              
              149,824
              
              
              3.7
              %China
              
              
              -
              
              
              0.0
              %
              
              1,048
              
              
              0.03
              %Total
              
              $
              9,760,370
              
              
              100
              %
              $
              4,037,934
              
              
              100.0
              %




The
      Company’s products fall within three categories - kitchen and bar faucets,
      bathroom faucets and bathroom accessories. The following table sets forth our
      sales in each product category for the three months ended March 31, 2008 and
      2007.


Category
              
              Three months ended March 31,2008
              
              2007Kitchen
                  and bar faucets
              
              $
              3,814,065
              
              $
              1,426,679Bathroom
                  faucets
              
              
              5,946,305
              
              
              2,382,577Bathroom
                  accessories
              
              
              -
              
              
              228,678Total
              
              $
              9,760,370
              
              $
              4,037,934




All
      of
      the Company’s long-lived assets are located in the PRC.


18


**FUDA
      FAUCET WORKS, INC.**


Notes
      to
      Condensed Consolidated Financial Statements


March
      31,
      2008


(Unaudited)




**16.**  **Commitments
      and Contingencies**




The
      Company leases an office in Dubai under an operating lease that expired in
      September 2008 with an aggregate monthly lease payment of approximately $1,313.
      Rent expense under the operating leases for the three months ended March 31,
      2008 and 2007 was $3,939, respectively.


19


**ITEM
      2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS.** ****




**Overview**




Prior
      to
      December 3, 2007, we were a public reporting blind pool company with no assets.
      On December 3, 2007, we consummated a share exchange agreement with Jibrin
      Issa
      Jibrin Al Jibrin, trustee of the Wu Yitang Trust, which was the sole stockholder
      of Moral Star BVI. Pursuant to the share exchange agreement, the Trustee
      transferred to us all of the capital stock of Moral Star BVI in exchange for
      10,564,647 shares of our common stock, which were issued to the Trust and the
      designees of the Trust, some of whom acquired their shares as nominees of Ms.
      Wu
      Yiting, our Chief Executive Officer. As a result, Moral Star BVI became our
      wholly-owned subsidiary and our sole business became the business of Moral
      Star
      BVI and its affiliated companies. The transaction is treated as a reverse
      acquisition. As a result, for accounting purposes, Moral Star BVI is treated
      as
      the acquiring company for accounting purposes and our financial statements
      for
      period prior to December 3, 2007 reflect the historical operations of Fuda
      Yiyang.




We
      have a
      series of contractual arrangements with Fuda Yiyang, which provide us with
      both
      control over the operations of Fuda Yiyang and the net income from Fuda Yiyang’s
      operations. Thus this discussion relates to the business, financial condition
      and results of operations of Fuda Yiyang.




We
      develop, manufacture, distribute and market high-quality brass faucets and
      related spouts and fittings. We produce all our products in China and export
      most of them to international markets, including Middle East, primarily United
      Arab Emirates, and
      Russia. We do not have long-term contracts with any of our customers. Our sales
      in China declined from 0.03% of revenue for the three months ended March 31,
      2007 to nil for the same period of 2008.




**Significant
      Accounting Estimates and Policies**




The
      discussion and analysis of our financial condition and results of operations
      is
      based upon our condensed consolidated financial statements, which have been
      prepared in accordance with US GAAP. The preparation of these financial
      statements requires management to make estimates and judgments that affect
      the
      reported amounts of assets and liabilities. On an on-going basis, we evaluate
      our estimates including the allowance for doubtful accounts, the salability
      and
      recoverability of our products, impairment of long-term assets, income taxes
      and
      contingencies. We base our estimates on historical experience and on other
      assumptions that we believe to be reasonable under the circumstances, the
      results of which form our 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.




**Revenue
      Recognition** - We
      recognizes sales of our products in accordance with SEC Staff Accounting
      Bulletin (“SAB”) No. 101, “Revenue Recognition in Financial Statements” as
      amended by SAB No. 104, “Revenue Recognition.” Sales represent the invoiced
      value of goods, net of value added tax (“VAT”), if any, and are recognized upon
      delivery of goods and passage of title.




Pursuant
      to China’s VAT rules and regulations, Fuda Yiyang’s sales in China are subject
      to a VAT tax rate of 17% (“output VAT”) as an ordinary VAT taxpayer, and the
      relating revenues were recognized by the invoiced value offsetting 17% output
      VAT. However, our sales outside of China are eligible for VAT exemption, credit
      and refund policy, and the relating revenues were equal to the invoiced value.
      The applicable refund rate from January 1, 2006 to June 30, 2007 was 13% and
      it
      has been adjusted down to 9% since July 1, 2007. The actual VAT
      payable is the balance after offsetting both VAT paid on purchases (“input VAT”)
      and the amount exempted or credited.


20




**Variable
      Interest Entity -** Our
      condensed consolidated
      financial statements include the financial statements of our wholly owned
      subsidiaries, Moral Star BVI and Moral Star China, as well as Fuda Yiyang,
      which
      is a variable interest entity whose financial statements are consolidated with
      ours pursuant to FASB Interpretation No. 46R “Consolidation of Variable Interest
      Entities” (“FIN 46R”), an Interpretation of Accounting Research Bulletin No. 51.
      FIN 46R requires a variable interest entity to be consolidated by a company
      if
      that company is subject to a majority of the risk of loss for the variable
      interest entity or is entitled to receive a majority of the variable interest
      entity’s residual returns. Variable interest entities are those entities in
      which we, through contractual arrangements, bear the risks of, and enjoy the
      rewards normally associated with ownership of the entities, and therefore we
      are
      the primary beneficiary of these entities.




Moral
      Star China is a party to a series of agreements with Fuda Yiyang. These
      agreements include a management agreement pursuant to which all net income
      after
      deduction of necessary expenses, if any, generated by Fuda Yiyang is paid to
      Moral Star China and Moral Star China is responsible for paying Fuda Yiyang’s
      obligations incurred in connection with its business. In addition, Moral Star
      China manages and controls all of the funds of Fuda Yiyang. Moral Star China
      also has the right to purchase Fuda Yiyang’s equipment and patents and lease its
      manufacturing plants, land and remaining equipment. This agreement is designed
      so that Moral Star China can conduct its business in China. Pursuant to two
      other agreements, the sole stockholder of Fuda Yiyang, who is also our Chief
      Executive Officer, has pledged all of her equity in Fuda Yiyang as security
      for
      performance of Fuda Yiyang’s obligations to Moral Star China, and she granted
      Moral Star China an irrevocable grant of a proxy over her stock in Fuda Yiyang.
      As a result, Fuda Yiyang is considered a variable interest entity.




**Comprehensive
      Income (Loss)** - We
      have adopted Statements of Financial Accounting Standards (“SFAS”) No. 130,
“Reporting Comprehensive Income,” which establishes standards for reporting and
      presentation of comprehensive income (loss) and its components in a full set
      of
      general-purpose financial statements. We have has chosen to report comprehensive
      income (loss) in the statements of operations and comprehensive
      income.




**Income
      Taxes** - We
      account for income taxes under the provisions of SFAS No. 109, “Accounting for
      Income Taxes”, which requires recognition of deferred tax assets and liabilities
      for the expected future tax consequences of events that have been included
      in
      the consolidated financial statements or tax returns. Deferred tax assets and
      liabilities are recognized for the future tax consequence attributable to the
      difference between the tax bases of assets and liabilities and their reported
      amounts in the financial statements. Deferred tax assets and liabilities are
      measured using the enacted tax rate 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.
      We
      establish a valuation allowance when it is more likely than not that the assets
      will not be recovered.




With
      the
      approvals of the County Government of Yiyang on July 17, 2007, Fuda Yiyang
      was
      exempt from corporate income taxes during 2008 and 2007. The Yiyang
      Tax Authority has also
      confirmed the above said preferential tax treatment on September 30, 2007.
      On
      March 16, 2007, China’s parliament, the National People’s Congress, adopted the
      Enterprise Income Tax Law, which took effect on January 1, 2008. The new income
      tax law sets unified income tax rate for domestic and foreign companies at
      25%,
      except that qualified high and new technology enterprises are eligible for
      a 15%
      corporate income tax rate. Under the new income tax law, the low preferential
      tax rate shall gradually increase to the new tax rate within five years after
      the implementation of this law.




Fuda
      Yiyang has filed its income tax return for the first quarter of 2008 with Yiyang
      Tax Authortiy, in which Fuda Yiyang had no income tax as a result of the
      exemption.




**Accounts
      Receivable -** We
      perform ongoing credit evaluations of our customers and intend to establish
      an
      allowance for doubtful accounts when outstanding balances are not considered
      fully collectable. According to our credit policy, we generally provides 100%
      bad debt provision for the amounts outstanding over 180 days after the deduction
      of the amount subsequently settled after the balance sheet date, which
      management believes is consistent with industry practice.


21




We
      may
      require our customers to make a partial payment when placing an order, based
      on
      our credit evaluation. We generally require payment within three months. We
      maintain a policy that all sales are final and we do not allow returns. No
      return occurred in the three months ended March 31, 2008 and 2007. Based on
      industry practice and the credit history of customers, we believe the accounts
      receivable shown on its balance sheets are fully collectable.




**Inventories** -
      Inventories are stated at the lower of cost, determined on a weighted average,
      method, and net realizable value. Work in progress and finished goods are
      composed of direct material, direct labor and a portion of manufacturing
      overhead. Net realizable value is the estimated selling price, in the ordinary
      course of business, less estimated costs to complete and dispose. We believe
      that there was no obsolete inventory as of March 31, 2008 and 2007.




**Property,
      Plant and Equipment** -
      Property, plant and equipment are stated at cost. Major expenditures for
      betterments and renewals are capitalized while ordinary repairs and maintenance
      costs are expensed as incurred. Depreciation and amortization is provided using
      the straight-line method over the estimated useful life of the assets after
      taking into account the estimated residual value.




There
      is
      no private ownership of commercial land in China. All land ownership is held
      by
      the government of China, its agencies and collectives. Land use rights are
      obtained from government, and are typically renewable. Land use rights can
      be
      transferred upon approval by the land administrative authorities of China (State
      Land Administration Bureau) upon payment of the required transfer fee. Under
      three “State-owned Land Use Right Certificates”, issued in September 23, 1999,
      November 23, 1999 and July 19, 2001 **,** we own
      the use right of two blocks of industrial-use land (covering 261,669 square
      feet) for the term of 50 years, beginning from issuance date of the
      certificates, respectively. We record the property subject to land use rights
      as
      property.




Our
      Chief
      Executive Officer, Ms. Wu Yiting, holds the land use right covering 229,703
      square feet where a new facility is located. Ms. Wu Yiting has agreed to
      transfer the land use right of this block of land to Fuda Yiyang without any
      cost to Fuda Yiyang prior to the completion of construction. The construction
      was completed in April 2008, and the Company has filed the documentation with
      the applicable government authority to effect a transfer of the property to
      us.




**Impairment
      of Long-lived Assets** -
      Our
      long-lived assets consist of property and equipment. As of March 31, 2008 and
      December 31, 2007, the net value of property and equipment was $4,254,126 and
      $2,747,522, respectively, which represented approximately 18.4% and 13.2% of
      our
      total assets.




From
      December 2004 to present, fixed assets, including land, workshop buildings
      and
      equipment, amounting to $536,505 were unused. Since the value of land in similar
      sections of the city was increasing, no impairment on land use right has been
      charged. The workshop buildings were maintained in good condition, and most
      of
      the equipment will be transported and reinstalled into the Company’s new
      workshop building, which is now under construction. A provision for impairment
      of certain idle assets in the amount of $146,209 was made previously when they
      became idle.




**Recent
      Accounting Pronouncements**




See
      Note
      2 to the Condensed Consolidated Financial Statements.




**Results
      of Operations**




The
      following table sets forth information from our statements of operations for
      the
      three months ended March 31, 2008 and 2007, in thousands of dollars and as
      a
      percentage of revenue.


22


Item
              
              (In
                  thousands, except per share amounts)Three
                  Months Eneded March 31,2008
              
              2007**Net
                  sales**
              
              $
              9,760
              
              
              100.0
              %
              $
              4,038
              
              
              100.0
              %**Cost
                  of sales**
              
              
              7,700
              
              
              78.9
              %
              
              3,263
              
              
              80.8
              %**Gross
                  profit**
              
              
              2,060
              
              
              21.1
              %
              
              775
              
              
              19.2
              %**Operating
                  expenses:**Selling
                  expenses
              
              
              64
              
              
              0.7
              %
              
              57
              
              
              1.4
              %General
                  and administrative
              
              
              223
              
              
              2.3
              %
              
              71
              
              
              1.7
              %Officers’
                  compensation
              
              
              6
              
              
              0.1
              %
              
              6
              
              
              0.1
              %Depreciation
                  and amortization
              
              
              21
              
              
              0.2
              %
              
              3
              
              
              0.1
              %Consulting
                  and professional fees
              
              
              57
              
              
              0.6
              %
              
              -
              
              
              0.0
              %**Total
                  operating expenses**
              
              
              370
              
              
              3.8
              %
              
              137
              
              
              3.4
              %**Operating
                  income**
              
              
              1,690
              
              
              17.3
              %
              
              638
              
              
              15.8
              %**Interest
                  expense**
              
              
              (111
              )
              
              -1.1
              %
              
              (88
              )
              
              -2.2
              %**Foreign
                  exchange loss**
              
              
              (213
              )
              
              -2.2
              %
              
              -**Net
                  income**
              
              $
              1,366
              
              
              14.0
              %
              $
              550
              
              
              13.6
              %**Other
                  comprehensive income******Foreign currency translation adjustment
              
              
              709
              
              
              7.3
              %
              
              47
              
              
              1.2
              %**Comprehensive
                  income**
              
              $
              2,075
              
              
              21.3
              %
              $
              597
              
              
              14.8
              %**Earnings
                  per common share**Basic
              
              $
              0.13
              
              
              
              
              $
              0.05Diluted
              
              $
              0.07
              
              
              
              
              $
              0.05**Weighted
                  average number of common shares outstanding**Basic
              
              
              10,725
              
              
              
              
              
              10,564Diluted
              
              
              20,098
              
              
              
              
              
              10,564




**Net
      Sales**




Net
      sales
      were $9,760,370 and $4,037,934 for the three months ended March 31,2008 and
      2007, respectively, representing an increase $5,722,436, or 141.7%. The
      significant increase is mainly due to our marketing efforts in United Arab
      Emirates and Russia. During the first quarter of 2008, net sales in Dubai,
      United Arab Emirates, a retail and wholesale center of bathroom supply
      distributors in the Middle East, increased $5,332,630 or 138.1% from $3,862,790
      to $9,195,420, as compared with the same period of 2007. All sales were to
      non-related parties.




**Cost
      of Sales; Gross Profit**




Cost
      of
      sales was $7,700,215 and $3,263,348 for the three months ended March 31, 2008
      and 2007, respectively. The increase of $4,436,867, or 136.0%, was primarily
      due
      to the rapid increase of sales. Cost of sales is the costs of finished goods
      sold, including raw materials, labor costs and manufacturing overhead.
      Manufacturing overhead covers the depreciation of production facilities. We
      treat delivery expenses as a selling expense rather than as an element of cost
      of sales. As a result, our gross profit was $2,060,155 for first quarter of
      2008, representing gross profit margin of 21.1%, compared with $774,586 for
      the
      same period of 2007, representing a gross margin of 19.2%.




**Selling
      Expenses**




During
      the first quarter of 2008, selling expenses were $63,718, an increase of $6,605,
      or11.6%, from $57,113 for the same period of 2007. Selling expenses include
      delivery expense, advertising and salaries. This increase is mainly attributable
      to significantly increase (from $33,638 to $60,493) of delivery expenses
      resulting from both the growth in sales volume and the increased sales in the
      international market. Our advertising expenses decreased from $23,321to
      $409.


23




**General
      and administrative**




General
      and administrative expenses were $222,726 and $70,609 for the three months
      ended
      March 31, 2008 and 2007, an increase of $152,117 or 215.4%. General and
      administrative expenses include salaries, business entertainment, travel and
      entertainment, rent, office expense, car expenses and insurance costs. The
      increase is mainly resulted from the expansion of our operating activities
      in
      Fuda Yiyang, which led to the increased amount of salaries, insurance, car
      expenses, business entertainment, travel, office expenses.




**Officers’
      compensation**




Officers’
      compensation was $6,411 and $5,806 for three months ended March 31, 2008 and
      2007, respectively. The nominal difference was due to a change in the exchange
      rates prevailing at the two periods.




**Depreciation
      and amortization**




Depreciation
      and amortization, excluding depreciation included in cost of production,
      increased $17,603 or 542.1% from $3,247 of first quarter of 2007 to $20,850
      of
      comparable period of 2008. The increase in depreciation and amortization is
      mainly due to additional office equipments and automobiles purchased in
      2008.




**Consulting
      and professional fees**




We
      did
      not incur any consulting or professional fee in the first quarter of 2007,
      when
      Fuda Yiyang was still a private company only engaging in product development,
      manufacturing and market exploration. After the reverse acquisition, our
      consulting and professional fees increased to $56,755 as a result of our public
      company expenses.




**Net
      Interest Expense**




Net
      interest expense, offsetting minor interest income, was $110,912 and $88,079
      for
      the first quarter of 2008 and 2007, respectively, representing a $22,833, or
      25.9%, increase as a result of the increase of short-term bank
      loans.




**Foreign
      Exchange Loss**




Net
      foreign exchange loss during first quarter of 2008 was $212,639. We did not
      incur any foreign exchange loss during the first quarter of 2007. The foreign
      exchange loss in 2008 reflected a foreign exchange loss on accounts receivable
      from the customers out of China, offsetting minor foreign exchange gain, which
      generated from loans of United States dollars.




**Net
      Income**




As
      a
      result of the factors described above, our net income for the first quarter
      of
      2008 was $1,366,144, or $0.13 per share (basic) and $0.07 per share (diluted),
      an increase of $816,412, or 148.5%, compared to $549,732, or $0.05 per share
      (basic and diluted) for first quarter of 2007.


24




**Liquidity
      and Capital Resources**




At
      March
      31, 2008, we had working capital of $8,440,709, reflecting a current ratio
      of
      2.0:1 and quick ratio of 0.9:1, compared to working capital of $8,038,451,
      reflecting a current ratio 2.0:1 and quick ratio of 1.0:1 as of December 31,
      2007.




As
      of
      March 31, 2008 and December 31, 2007, we had cash of 2,764,643 and $169,319,
      respectively.




During
      first quarter of 2008, our operations provided cash of $3,544,342 as compared
      with cash used by operating activities of $145,648 used for the same period
      of
      2007. The significant improvement of our cash position in operating activities
      is largely attributable to the collection of accounts receivable from one of
      our
      related parties. Comparably, during the first quarter of 2007, the increase
      of
      inventories and accounts receivable has significantly affected our short-term
      liquidity.




During
      the first quarter of 2008, we utilized $1,379,708 in purchasing fixed assets,
      principally equipment, as compared to $27,032 for the same period during
      2007.




During
      three months ended March 31, 2008, our financing activities used $50,679 as
      compared with net cash inflow of $110,633 for the same period of 2007. We raised
      $5,381,802 from short-term loans from several banks, which was partly offset
      by
      repayment of $4,884,271 to the banks. Loan proceeds from related parties were
      $2,800,128, which was offset by repayment to related parties of $3,348,338
      in
      first quarter of 2008. We raised $1,819,019 from short-term bank loans in first
      quarter of 2007 and repaid $1,708,386.




**Off-Balance
      Sheet Arrangements**




At
      March
      31, 2008, we did not have any relationships with unconsolidated entities or
      financial partnerships, such as entities often referred to as structured finance
      or special purpose entities, which would have been established for the purpose
      of facilitating off-balance sheet arrangements or other contractually narrow
      or
      limited purposes.




**ITEM
      3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK.** ****




**Foreign
      Currency Exchange Rate Risk**




We
      produce all our products in China and export most of them to international
      markets, the export prices on the selling contracts were all dominated in United
      States dollars. Thus, most of our revenues and operating results may be impacted
      by exchange rate fluctuations between RMB and US dollars. We have not reduced
      our exposure to exchange rate fluctuations by using hedging transactions. While
      we may choose to do so in the future, the availability and effectiveness of
      any
      hedging transactions may be limited and we may not be able to successfully
      hedge
      our exchange rate risks. Accordingly, we may experience economic losses and
      negative impacts on earnings and equity as a result of foreign exchange rate
      fluctuations. For the first quarter ended March 31, 2008, the foreign exchange
      losses were approximately $212,639 on and the foreign currency translation
      adjustments to our comprehensive income were $708,723 primarily as a result
      of
      the appreciation of the Chinese RMB against the U.S. dollar.




**ITEM
      4. CONTROLS AND PROCEDURES.** ****




*Evaluation
      of Disclosure Controls and procedures* .
      The
      Chief Executive Officer and Chief Financial Officer of the Company have
      evaluated the disclosure controls and procedures relating to the Company's
      Quarterly Report on Form 10-Q for the period ended March 31, 2008 as filed
      with
      the Securities and Exchange Commission and have judged such controls and
      procedures to be effective.





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


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**PART
      II**   **OTHER
      INFORMATION.** ****




**ITEM
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.** ****




On
      December 4, 2007, the holders of more than a majority of our outstanding common
      stock approved our restated certificate of incorporation and we filed a Schedule
      14C regarding this issue with SEC on February 19, 2008. The restated certificate
      of incorporation will be filed with the Secretary of State of the State of
      Delaware approximately 20 days after we mail an information statement to our
      stockholders. The information statement will be mailed following after we have
      responded to comments raised by the SEC with respect to our annual financial
      statements.





**ITEM
      6. EXHIBITS.** ****




31.1
            Certification
                by Chief Executive Officer pursuant to Sarbanes Oxley Act of 2002
                Section
                302.31.2
            Certification
                by Chief Financial Officer pursuant to Sarbanes Oxley Act of 2002
                Section
                302.32.1
            Certification
                by chief executive officer and chief financial officer pursuant to
                Sarbanes-Oxley Act of 2002 Section
                906.


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**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.





**Fuda
                Faucet Works, Inc.******
            (Registrant)May
                14, 2008
            /s/
                Wu
                YitingWu
                Yiting, Chief Executive OfficerMay
                14, 2008
            /s/
                Wu
                YaxuWu
                Yaxu, Chief Financial Officer




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