UNITED
STATES




SECURITIES
AND EXCHANGE COMMISSION




Washington,
D.C. 20549





FORM
10-QSB





(Mark
One)


T
            
            QUARTERLY
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
              For
      the quarterly period ended February 29,
2008





 ̈
            
            TRANSITION
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
              For
      the transition period from _______ to
_______





Commission
file number: 333-118259





CHINA
SUN GROUP HIGH-TECH CO.


______________________________________________________(Exact
      name of small business issuer as specified in its
  charter)




Delaware
            54-2142880(State
      or other jurisdiction of incorporation or organization)
            (IRS
      Employer identification No.)







1
HUTAN STREET, ZHONGSHAN DISTRICT


DALIAN, PEOPLE’S REPUBLIC OF
CHINA


(Address
of principal executive offices)






(86411)
8289-7752


(Issuer's
telephone number, including area code)






Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 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  T  No
 □




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





APPLICABLE
ONLY TO ISSUERS INVOLVED IN BANKRUPTCY


PROCEEDINGS
DURING THE PRECEDING FIVE YEARS





Check
whether the registrant filed all documents and reports required to be filed by
Section l2, 13 or 15(d) of the Exchange Act after the distribution of securities
under a plan confirmed by a court. Yes □


No
□











APPLICABLE
ONLY TO CORPORATE ISSUERS





April
14,2008




Transitional
Small Business Disclosure Format:  Yes  □ No   T












PART
I – FINANCIAL INFORMATION




Item
1.                       Financial
Statements











CHINA
SUN GROUP HIGH-TECH CO.


(Formerly
Capital Resource Funding, Inc.)





INDEX
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(UNAUDITED)





PageCondensed
      Consolidated Balance Sheets as of February 29, 2008 and May 31,
      2007
            F-1Condensed
      Consolidated Statements of Operations and Comprehensive Income for the
      nine  months ended February 29, 2008 and February
      28, 2007
            F-2Condensed
      Consolidated Statements of Cash Flows for the nine months ended February
      29, 2008 and February 28, 2007
            F-3Condensed
      Consolidated Statements of Stockholders’ Equity for the nine months ended
      February 29, 2008
            F-4Notes
      to Condensed Consolidated Financial
      Statements
            F-5























CHINA SUN GROUP HIGH-TECH CO.


(Formerly
Capital Resource Funding, Inc.)


CONDENSED
CONSOLIDATED BALANCE SHEET


AS
OF FEBRUARY 29, 2008 AND MAY 31, 2007


(Currency
expressed in United States Dollars (“US$”), except for number of
shares)


(unaudited)


February
      29, 2008
            
            
            May
      31, 2007(unaudited)
            
            
            (audited)ASSETSCurrent
      assets:Cash
      and cash equivalents
            
            $
            10,045,630
            
            
            $
            813,163Accounts
      receivable, net
            
            
            436,610
            
            
            
            4,754,929Inventories
            
            
            585,544
            
            
            
            1,932Deposits
      and prepayments
            
            
            1,415
            
            
            
            -Total
      current assets
            
            
            11,069,199
            
            
            
            5,570,024Property,
      plant and equipment, net
            
            
            11,917,521
            
            
            
            10,774,216TOTAL
      ASSETS
            
            $
            22,986,720
            
            
            $
            16,344,240LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilities:Accounts
      payable, trade
            
            $
            777,865
            
            
            $
            595,941Customers
      deposits
            
            
            5,633
            
            
            
            688,448Value
      added tax payable
            
            
            1,011,835
            
            
            
            229,897Income
      tax payable
            
            
            577,089
            
            
            
            810,413Other
      payables and accrued liabilities
            
            
            911,256
            
            
            
            278,714Total
      liabilities
            
            
            3,283,678
            
            
            
            2,603,413MINORITY
      INTEREST
            
            
            5,281,847
            
            
            
            3,994,658Stockholders’
      equity:Convertible
      preferred stock, $0.001 par value; 2,000,000 shares authorized; no shares
      issued and outstanding as of February 29, 2008 and May 31,
      2007
            
            
            -
            
            
            
            -Common
      stock, $0.001 par value; 100,000,000 shares authorized; 43,422,971 shares
      issued and outstanding as of February 29, 2008 and May 31,
      2007
            
            
            43,423
            
            
            
            43,423Additional
      paid-in capital
            
            
            9,595,204
            
            
            
            9,595,204Accumulated
      other comprehensive income
            
            
            2,015,826
            
            
            
            225,808Retained
      earnings (accumulated deficits)
            
            
            2,766,742
            
            
            
            (118,266
            )Total
      stockholders’ equity
            
            
            14,421,195
            
            
            
            9,746,169TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
            
            $
            22,986,720
            
            
            $
            16,344,240




See
accompanying notes to condensed consolidated financial statements.




F-1


CHINA
SUN GROUP HIGH-TECH CO.


(Formerly
Capital Resource Funding, Inc.)


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


AND
COMPREHENSIVE INCOME


FOR
THE THREE AND NINE MONTHS ENDED FEBRUARY 29, 2008


AND
FEBRUARY 28, 2007


(Currency
expressed in United States Dollars (“US$”), except for number of
shares)


(unaudited)






Three
      months ended February
            
            
            Nine
      months ended February29,
      2008
            
            
            
            28,
      2007
            
            
            
            29,
      2008
            
            
            
            28,
      2007REVENUE,
      NET
            
            $
            7,106,959
            
            
            $
            2,661,696
            
            
            $
            16,199,986
            
            
            $
            5,685,076COST
      OF REVENUES
            
            
            4,528,705
            
            
            
            1,888,930
            
            
            
            10,529,991
            
            
            
            4,156,086GROSS
      PROFIT
            
            
            2,578,254
            
            
            
            772,766
            
            
            
            5,669,995
            
            
            
            1,528,990OPERATING
      EXPENSES (INCOME):General
      and administrative
            
            
            9,706
            
            
            
            594,981
            
            
            
            777,691
            
            
            
            781,066Reversal
      of allowance for doubtful accounts
            
            
            (574,190
            )
            
            
            -
            
            
            
            (574,190
            )
            
            
            -Research
      and development
            
            
            1,701
            
            
            
            17,559
            
            
            
            88,101
            
            
            
            72,424Depreciation
            
            
            61,871
            
            
            
            65,057
            
            
            
            178,525
            
            
            
            190,107Total
      operating expenses (income)
            
            
            (500,912
            )
            
            
            677,597
            
            
            
            470,127
            
            
            
            1,043,597INCOME
      FROM OPERATIONS
            
            
            3,076,166
            
            
            
            95,169
            
            
            
            5,199,868
            
            
            
            485,393OTHER
      INCOME:Interest
      income
            
            
            7,035
            
            
            
            -
            
            
            
            8,311
            
            
            
            -INCOME
      BEFORE INCOME TAXES
            
            
            3,086,201
            
            
            
            95,169
            
            
            
            5,208,179
            
            
            
            485,393Income
      tax expense
            
            
            (295,679
            )
            
            
            (200,309
            )
            
            
            (1,035,982
            )
            
            
            (267,977
            )INCOME
      (LOSS) BEFORE MINORITY INTEREST
            
            
            2,790,522
            
            
            
            (105,140
            )
            
            
            4,172,197
            
            
            
            217,416Minority
      interest
            
            
            (837,157
            )
            
            
            (108,004
            )
            
            
            (1,287,189
            )
            
            
            (156,441
            )NET
      INCOME (LOSS)
            
            $
            1,953,365
            
            
            $
            (213,144
            )
            
            $
            2,885,008
            
            
            $
            60,975Other
      comprehensive income (loss):-
      Foreign currency translation gain
            
            
            744,185
            
            
            
            4,685
            
            
            
            1,790,018
            
            
            
            7,030COMPREHENSIVE
      (LOSS) INCOME
            
            $
            2,697,550
            
            
            $
            (208,459
            )
            
            $
            4,675,026
            
            
            $
            68,005Net
      income (loss) per share – basic and diluted
            
            $
            0.05
            
            
            $
            (0.01
            )
            
            $
            0.07
            
            
            $
            0.00Weighted
      average number of shares outstanding during the period – basic and
      diluted
            
            
            43,422,971
            
            
            
            33,358,948
            
            
            
            43,422,971
            
            
            
            20,777,778




See
accompanying notes to condensed consolidated financial statements.




F-2


CHINA
SUN GROUP HIGH-TECH CO.


(Formerly
Capital Resource Funding, Inc.)


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


FOR
THE NINE MONTHS ENDED FEBRUARY 29, 2008 AND FEBRUARY 28, 2007


(Currency
expressed in United States Dollars (“US$”))


(unaudited)






Nine
      months ended February29,
      2008
            
            
            
            28,
      2007Cash
      flows from operating activities:Net
      income
            
            $
            2,885,008
            
            
            $
            60,975Adjustments
      to reconcile net income to net cash provided by operating
      activities:Depreciation
            
            
            287,878
            
            
            
            278,816Minority
      interest
            
            
            1,287,189
            
            
            
            156,441Reversal
      of allowance for doubtful accounts
            
            
            (574,190
            )
            
            
            -Stock
      based compensation
            
            
            -
            
            
            
            450,000Change
      in operating assets and liabilities:Accounts
      receivable, trade
            
            
            5,075,443
            
            
            
            (4,405,500
            )Inventories
            
            
            (562,911
            )
            
            
            147,382Deposits
      and prepayments
            
            
            (1,365
            )
            
            
            433,912Accounts
      payable, trade
            
            
            133,515
            
            
            
            2,074,366Customers
      deposits
            
            
            (707,271
            )
            
            
            -Value
      added tax payable
            
            
            738,183
            
            
            
            327,168Income
      tax payable
            
            
            (282,215
            )
            
            
            255,106Other
      payables and accrued liabilities
            
            
            608,120
            
            
            
            283,318Net
      cash provided by operating activities
            
            
            8,887,384
            
            
            
            61,984Cash
      flows from investing activities:Purchase
      of property, plant and equipment
            
            
            (42,264
            )
            
            
            (17,934
            )Net
      cash used in investing activities
            
            
            (42,264
            )
            
            
            (17,934
            )Cash
      flows from financing activities:Repayment
      of advances to a related party
            
            
            4,740
            
            
            
            101,084Net
      cash provided by financing activities
            
            
            4,740
            
            
            
            101,084Foreign
      currency translation adjustment
            
            
            382,607
            
            
            
            7,030NET
      CHANGE IN CASH AND CASH EQUIVALENTS
            
            
            9,232,467
            
            
            
            152,164CASH
      AND CASH EQUIVALENTS, BEGINNING OF PERIOD
            
            
            813,163
            
            
            
            207,264CASH
      AND CASH EQUIVALENTS, END OF PERIOD
            
            $
            10,045,630
            
            
            $
            359,428SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATION:Cash
      paid for income taxes
            
            $
            1,318,198
            
            
            $
            16,842Cash
      paid for interest expenses
            
            $
            -
            
            
            $
            -SUPPLEMENTAL
      DISCLOSURE OF NON-CASH TRANSACTIONS:Stocks
      issued for service rendered
            
            $
            -
            
            
            $
            450,000




See
accompanying notes to condensed consolidated financial statements.




F-3


CHINA
SUN GROUP HIGH-TECH CO.


(Formerly
Capital Resource Funding, Inc.)


CONSOLDIATED
STATEMENTS OF STOCKHOLDERS’ EQUITY


FOR
THE NINE MONTHS ENDED FEBRUARY 29, 2008


(Currency
expressed in United States Dollars (“US$”), except for number of
shares)


(unaudited)











Convertiblepreferred
      stock
            
            
            Common
      stockNo.
      of shares
            
            
            Amount
            
            
            No.
      of shares
            
            
            Amount
            
            
            Additional
              paid-in
      capital
            
            
            Accumulated
              other
              comprehensive
              income
            
            
            (Accumulated
              deficit)
              retained
      earnings
            
            
            Total
      stockholders’
              equityBalance
      as of May 31, 2007
            
            
            -
            
            
            $
            -
            
            
            
            43,422,971
            
            
            $
            43,423
            
            
            $
            9,595,204
            
            
            $
            225,808
            
            
            $
            (118,266
            )
            
            $
            9,746,169Net
      income for the period
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            2,885,008
            
            
            
            2,885,008Foreign
      currency translation adjustment
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            1,790,018
            
            
            
            -
            
            
            
            1,790,018Balance
      as of February 29, 2008
            
            
            -
            
            
            $
            -
            
            
            
            43,422,971
            
            
            $
            43,423
            
            
            $
            9,595,204
            
            
            $
            2,015,826
            
            
            $
            2,766,742
            
            
            $
            14,421,195




See
accompanying notes to condensed consolidated financial statements.






F-4






CHINA
SUN GROUP HIGH-TECH CO.


(Formerly
Capital Resource Funding, Inc.)


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED FEBRUARY 29, 2008 AND FEBRUARY 28, 2007


(Currency
expressed in United States Dollars (“US$”)


(unaudited)






NOTE
- 1BASIS OF PRESENTATION





The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with both generally accepted accounting principles for
interim financial information, and the instructions to Form 10-QSB and Item
310(b) of Regulation S-B. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. The accompanying unaudited condensed
consolidated financial statements reflect all adjustments (consisting of normal
recurring accruals) that are, in the opinion of management, considered necessary
for a fair presentation of the results for the interim periods presented.
Interim results are not necessarily indicative of results for a full
year.





The
condensed consolidated financial statements and related disclosures have
been prepared with the presumption that users of the interim financial
information have read or have access to our annual audited consolidated
financial statements for the preceding fiscal year. Accordingly, these condensed
consolidated financial statements should be read in conjunction with the
unaudited consolidated financial statements and the related notes thereto
contained in the Annual Report on Form 10-KSB for the year ended May 31,
2007.








NOTE
- 2     ORGANIZATION AND BUSINESS BACKGROUND





China Sun
Group High-Tech Co. (the “Company” or “CSGH”) was organized under the laws of
the State of North Carolina on February 2, 2004 as a subchapter S-Corporation.
On August 24, 2007, the Company was reincorporated to the State of Delaware and
changed its name from “Capital Resource Funding, Inc.” to “China Sun Group
High-Tech Co.” Also, the Company was authorized to change its par value from
$0.00000005 to $0.001 per share.





On
February 28, 2007, the Company completed a stock exchange transaction with Da
Lian Xin Yang High-Tech Development Co., Ltd. (“DXL”). DXL was incorporated as a
limited liability company in the People’s Republic of China (“PRC”) on August 8,
2000 with its principal place of business in Da Lian City, Liaoning Province,
the PRC. Upon completion of the exchange, DXL became a majority-owned subsidiary
of CSGH and the former owners of DXL then owned 93% of the issued and
outstanding shares of the Company.





The stock
exchange transaction has been accounted for as a reverse acquisition and
recapitalization of the CSGH whereby DXL is deemed to be the accounting acquirer
(legal acquiree) and CSGH to be the accounting acquiree (legal acquirer). The
accompanying condensed consolidated financial statements are in substance those
of DXL, with the assets and liabilities, and revenues and expenses, of CSGH
being included effective from the date of the stock exchange
transaction. CSGH is deemed to be a continuation of the business of DXL.
Accordingly, the accompanying condensed consolidated financial statements
include the following:





(1)
            the
      balance sheet consists of the net assets of the accounting acquirer at
      historical cost and the net assets of the accounting acquiree at
      historical cost; and





(2)
            the
      financial position, results of operations, and cash flows of the
      accounting acquirer for all periods presented as if the recapitalization
      had occurred at the beginning of the earliest period presented and the
      operations of the accounting acquiree from the date of stock exchange
      transaction.





CSGH and
DXL are hereinafter referred to as (the “Company”).




F-5


CHINA
SUN GROUP HIGH-TECH CO.
 (Formerly
Capital Resource Funding, Inc.)
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED FEBRUARY 29, 2008 AND FEBRUARY 28, 2007
 (Currency
expressed in United States Dollars (“US$”)
 (unaudited)




The
Company, through its subsidiary, DXL, principally engages in the production and
sales of cobaltosic oxide, which is the primary raw material used in lithium ion
rechargeable batteries.








NOTE
- 3     SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES





The
accompanying condensed consolidated financial statements reflect the application
of certain significant accounting policies as described in this note and
elsewhere in the accompanying condensed consolidated financial statements and
notes.





l
            Use
      of estimates





In
preparing these consolidated financial statements, management makes estimates
and assumptions that affect the reported amounts of assets and liabilities in
the balance sheets and revenues and expenses during the period reported.
 Actual results may differ from these estimates.





l
            Basis
      of consolidation





The
unaudited condensed consolidated financial statements include the financial
statements of CSGH and its subsidiaries.





All
significant inter-company balances and transactions among CSGH and its
subsidiaries have been eliminated upon consolidation.





l
            Revenue
      recognition





Revenue
is recognized when products are delivered to customers. Provisions for discounts
and rebates to customers, estimated returns and allowances, and other
adjustments are provided for in the same period the related sales are recorded.
In instances where products are configured to customer requirements, revenue is
recorded upon the successful completion of the Company’s final test procedures
and the customer’s acceptance.





The
Company is subject to Valued Added Tax (“VAT”) which is levied on the majority
of the products of DXL at the rate of 17% on the invoiced value of sales. Output
VAT is borne by customers in addition to the invoiced value of sales and input
VAT is borne by the Company in addition to the invoiced value of purchases to
the extent not refunded for export sales.





Starting
April 1, 2006, the Company commenced the production and sales of cobaltosic
oxide in the PRC.





l
            Cost
      of revenue





Cost of
revenue primarily includes the purchase of raw materials, direct labor and
manufacturing overhead.


l
              Shipping
      and handling costs


Shipping
and handling costs, associated with the distribution of products to customers,
are recorded in costs of revenue and are recognized when the related product is
shipped to the customer. No such costs are incurred for the nine months ended
February 29, 2008 and February 28, 2007.




F-6




CHINA
SUN GROUP HIGH-TECH CO.
 (Formerly
Capital Resource Funding, Inc.)
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED FEBRUARY 29, 2008 AND FEBRUARY 28, 2007
 (Currency
expressed in United States Dollars (“US$”)
 (unaudited)


l
            Cash
      and cash equivalents





Cash and
cash equivalents are carried at cost and represent cash on hand, demand deposits
placed with banks or other financial institutions and all highly liquid
investments with an original maturity of three months or less as of the purchase
date of such investments.





l
            Accounts
      receivable





Accounts
receivable are recorded at the invoiced amount and do not bear interest. The
Company extends unsecured credit to its customers in the ordinary course of
business but mitigates the associated risks by performing credit checks and
actively pursuing past due accounts. An allowance for doubtful accounts is
established and determined based on managements’ assessment of known
requirements, aging of receivables, payment history, the customers’ current
credit worthiness and the economic environment. As of February 29, 2008, an
allowance for doubtful accounts of $239,488 was provided.





l
            Inventories





Inventories
include material, labor and manufacturing overhead and are stated at lower of
cost or market value, cost being determined on a weighted average method. The
Company periodically reviews historical sales activity to determine excess, slow
moving items and potentially obsolete items and also evaluates the impact of any
anticipated changes in future demand. The Company provides inventory allowances
based on excess and obsolete inventories determined principally by customer
demand. As of February 29, 2008, the Company did not record an allowance for
obsolete inventories, nor have there been any write-offs.





l
            Property,
      plant and equipment





Property,
plant and equipment are stated at cost less accumulated depreciation and
accumulated impairment losses, if any. Depreciation is calculated on the
straight-line basis over the following expected useful lives from the date on
which they become fully operational and after taking into account their
estimated residual values:





Depreciable life
            
            Residual valueBuilding
            40
      years
            
            
            5
            %Plant
      and machinery
            5-40
      years
            
            
            5
            %Office
      equipment
            5
      years
            
            
            5
            %Motor
      vehicle
            5
      years
            
            
            5
            %





Expenditure
for repairs and maintenance is expensed as incurred. When assets have retired or
sold, the cost and related accumulated depreciation are removed from the
accounts and any resulting gain or loss is recognized in the results of
operations.





l
            Valuation
      of long-lived assets





Long-lived
assets primarily include property, plant and equipment. In accordance with
SFAS No. 144, “Accounting for the Impairment or
Disposal of Long-Lived Assets,” the Company periodically reviews
long-lived assets for impairment whenever events or changes in business
circumstances indicate that the carrying amount of the assets may not be fully
recoverable or that the useful lives are no longer appropriate. Each impairment
test is based on a comparison of the undiscounted cash flows to the recorded
value of the asset. If an impairment is indicated, the asset is written down to
its estimated fair value based on a discounted cash flow analysis. Determining
the fair value of long-lived assets includes significant judgment by management,
and different judgments could yield different results. There has been no
impairment as of February 29, 2008.




F-7




CHINA
SUN GROUP HIGH-TECH CO.
 (Formerly
Capital Resource Funding, Inc.)
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED FEBRUARY 29, 2008 AND FEBRUARY 28, 2007
 (Currency
expressed in United States Dollars (“US$”)
 (unaudited)






l
            Comprehensive
      income





SFAS
No. 130, “Reporting Comprehensive
Income” establishes standards for reporting and display of comprehensive
income, its components and accumulated balances. Comprehensive income as
defined includes all changes in equity during the period from non-owner sources.
Accumulated comprehensive income consists of changes in unrealized gains and
losses on foreign currency translation. This comprehensive income is not
included in the computation of income tax expense or benefit.





l
            Income
      taxes





The
Company accounts for income taxes in interim periods as required by Accounting
Principles Board Opinion No. 28, “Interim Financial Reporting”
and as interpreted by FASB Interpretation No. 18, “Accounting for Income Taxes in
Interim Periods.” The Company has determined
an estimated annual effective tax rate. The rate will be revised, if necessary,
as of the end of each successive interim period during the Company’s fiscal year
to the Company’s best current estimate. The estimated annual effective tax
rate is applied to the year-to-date ordinary income (or loss) at the end of the
interim period.





The
Company also accounts for income tax using SFAS No. 109“Accounting for Income
Taxes,” which requires the asset and liability approach for financial
accounting and reporting for income taxes. Under this approach, deferred income
taxes are provided for the estimated future tax effects attributable to
temporary differences between financial statement carrying amounts of assets and
liabilities and their respective tax bases, and for the expected future tax
benefits from loss carry-forwards and provisions, if any. Deferred tax assets
and liabilities are measured using the enacted tax rates expected in the periods
of recovery or reversal and the effect from a change in tax rates is recognized
in the consolidated statement of operations and comprehensive income in the
period of enactment. A valuation allowance is provided to reduce the amount of
deferred tax assets if it is considered more likely than not that some portion
of, or all of the deferred tax assets will not be realized.


The
Company also adopts the provisions of the Financial Accounting Standards
Interpretation No. 48, “Accounting for Uncertainty in Income
Taxes”(“FIN
48”). FIN 48 prescribes a
recognition threshold and measurement process for recording in the financial
statements uncertain tax positions taken or expected to be taken in a tax
return. FIN 48 also provides guidance on de-recognition, classification,
interest and penalties, accounting in interim periods, disclosures and
transitions. The adoption of FIN 48 did not have a significant impact on the
Company’s consolidated financial statements.





The
Company conducts its major business in the PRC and is subject to tax in this
jurisdiction. As a result of its business activities, the Company files tax
returns that are subject to examination by the foreign tax
authorities.





l
            Net
      income per share





The
Company calculates net income per share in accordance with SFAS No. 128,“Earnings per
Share.”  Basic income per share is computed by dividing the net
income by the weighted-average number of common shares outstanding during the
period. Diluted income per share is computed similar to basic income per share
except that the denominator is increased to include the number of additional
common shares that would have been outstanding if the potential common stock
equivalents had been issued and if the additional common shares were
dilutive.




F-8




CHINA
SUN GROUP HIGH-TECH CO.
 (Formerly
Capital Resource Funding, Inc.)
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED FEBRUARY 29, 2008 AND FEBRUARY 28, 2007
 (Currency
expressed in United States Dollars (“US$”)
 (unaudited)





l
            Foreign
      currencies translation





Transactions
denominated in currencies other than the functional currency are translated into
the functional currency at the exchange rates prevailing at the dates of the
transaction. Monetary assets and liabilities denominated in currencies other
than the functional currency are translated into the functional currency using
the applicable exchange rates at the balance sheet dates. The resulting exchange
differences are recorded in the condensed consolidated statement of
operations.





The
reporting currency of the Company is the United States dollar (“US$”). The
Company's subsidiaries in the PRC, maintain their books and records in its local
currency, the Renminbi (“RMB”), which is functional currency as being the
primary currency of the economic environment in which these entities
operate.





In
general, for consolidation purposes, assets and liabilities of its
subsidiaries whose functional currency is not the US$ are translated
into US$, in accordance with SFAS No 52. “Foreign Currency
Translation”, using the exchange rate on the balance sheet date. Revenues
and expenses are translated at average rates prevailing during the period. The
gains and losses resulting from translation of financial statements of foreign
subsidiaries are recorded as a separate component of accumulated other
comprehensive income within the statement of stockholders’ equity.





Translation
of amounts from RMB into US$ has been made at the following exchange rates for
the respective period:


2008
            
            
            2007Months
      end RMB: US$ exchange rate
            
            
            7.1022
            
            
            
            7.3919Average
      monthly RMB: US$ exchange rate
            
            
            7.3616
            
            
            
            7.5065


l
            Related
      parties





Parties,
which can be a corporation or individual, are considered to be related if the
Company has the ability, directly or indirectly, to control the other party or
exercise significant influence over the other party in making financial and
operating decisions. Companies are also considered to be related if they are
subject to common control or common significant influence.





l
            Segment
      reporting





SFAS No.
131 “Disclosures about Segments of an
Enterprise and Related Information” establishes standards for reporting
information about operating segments on a basis consistent with the Company’s
internal organization structure as well as information about geographical areas,
business segments and major customers in the financial statements. The Company
operates one reportable business segment.





l
            Fair
      value of financial instruments





The
Company values its financial instruments as required by SFAS No. 107, “Disclosures about Fair Value of
Financial Instruments.” The estimated fair value
amounts have been determined by the Company, using available market information
and appropriate valuation methodologies. The estimates presented herein are not
necessarily indicative of amounts that the Company could realize in a current
market exchange.




F-9




CHINA
SUN GROUP HIGH-TECH CO.
 (Formerly
Capital Resource Funding, Inc.)
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED FEBRUARY 29, 2008 AND FEBRUARY 28, 2007
 (Currency
expressed in United States Dollars (“US$”)
 (unaudited)







The
Company’s financial instruments primarily include cash and cash equivalents,
accounts receivable, deposits and prepayments, accounts payable, customers
deposit, other payables and accrued liabilities, VAT payable and income tax
payable.





As of the
balance sheet date, the estimated fair values of financial instruments were not
materially different from their carrying values as presented due to short
maturities of these instruments.





l
            Recent
      accounting pronouncements





The
Company has reviewed all recently issued, but not yet effective, accounting
pronouncements and do not believe the future adoption of any such pronouncements
may be expected to cause a material impact on its financial condition or the
results of its operations.





In
September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements"("SFAS No. 157"). SFAS No. 157 defines fair value, establishes a
framework for measuring fair value in generally accepted accounting principles
("GAAP"), and expands disclosures about fair value measurements. This statement
applies under other accounting pronouncements that require or permit fair
value measurement where the FASB has previously determined that under those
pronouncements fair value is the appropriate measurement. This statement does
not require any new fair value measurements but may require companies to change
current practice. This statement is effective for those fiscal years beginning
after November 15, 2007 and to the interim periods within those fiscal years.
The Company believes that SFAS No. 157 should not have a material impact on the
consolidated financial position or results of operations





In
February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial
Assets and Financial Liabilities"("SFAS No. 159"). SFAS No. 159 permits
entities to choose to measure, on an item-by-item basis, specified financial instruments and certain other items at fair value. Unrealized
gains and losses on items for which the fair value option has been elected are
required to be reported in earnings at each reporting date. SFAS No. 159 is
effective for fiscal years beginning after November 15, 2007, the
provisions of which are required to be applied prospectively. The Company
believes that SFAS 159 should not have a material impact on the consolidated
financial position or results of operations.





In
December 2007, the FASB issued SFAS No. 141 (Revised 2007), "Business Combinations",or
SFAS No. 141(R). SFAS No. 141(R) will change the accounting for business
combinations. Under SFAS No. 141(R), an acquiring entity will be required to
recognize all the assets acquired and liabilities assumed in a transaction at
the acquisition-date fair value with limited exceptions. SFAS No. 141(R) will
change the accounting treatment and disclosure for certain specific items in a
business combination. SFAS No. 141(R) applies prospectively to business
combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15, 2008.
Accordingly, any business combinations the Company engages in will be recorded
and disclosed following existing GAAP until January 1, 2009. The Company expects
SFAS No. 141(R) will have an impact on accounting for business combinations once
adopted but the effect is dependent upon acquisitions at that time. The Company
is still assessing the impact of this pronouncement.





In
December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in
Consolidated Financial Statements--An Amendment of ARB No. 51, or SFAS No.
160". SFAS No. 160 establishes new accounting and reporting standards for
the noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. SFAS No. 160 is effective for fiscal years beginning on or after
December 15, 2008. The Company believes that SFAS 160 should not have a material
impact on the consolidated financial position or results of
operations.




F-10


CHINA
SUN GROUP HIGH-TECH CO.
 (Formerly
Capital Resource Funding, Inc.)
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED FEBRUARY 29, 2008 AND FEBRUARY 28, 2007
 (Currency
expressed in United States Dollars (“US$”)
 (unaudited)








NOTE-
 4     ACCOUNTS RECEIVABLE, NET





The
majority of the Company’s sales are on open credit terms and in accordance with
terms specified in the contracts governing the relevant transactions. The
Company evaluates the need of an allowance for doubtful accounts based on
specifically identified amounts that management believes to be uncollectible. If
actual collections experience changes, revisions to the allowance may be
required. Based upon the aforementioned criteria, the Company has made a
reversal of the allowance for doubtful accounts of $574,190 for the nine months
ended February 29, 2008.





As
      ofFebruary
      29, 2008
            
            May
      31, 2007(audited)Accounts
      receivable, gross
            
            $
            676,098
            
            
            $
            5,532,760Less:
      allowance for doubtful accounts
            
            
            (239,488
            )
            
            
            (777,831
            )Accounts
      receivable, net
            
            $
            436,610
            
            
            $
            4,754,929




NOTE
- 5     PROPERTY, PLANT AND EQUIPMENT, NET




Property,
plant and equipment, net consisted of:


As
      ofFebruary
      29, 2008
            
            
            May
      31, 2007(audited)Building
            
            $
            6,632,855
            
            
            $
            6,308,373Plant
      and machinery
            
            
            5,177,988
            
            
            
            4,889,431Office
      equipment
            
            
            166,701
            
            
            
            155,042Motor
      vehicle
            
            
            35,979
            
            
            
            34,509Foreign
      translation difference
            
            
            876,018
            
            
            
            1,79312,889,541
            
            
            
            11,389,148Less:
      accumulated depreciation
            
            
            (915,648
            )
            
            
            (605,771
            )Less:
      foreign translation difference
            
            
            (56,372
            )
            
            
            (9,161
            )Property,
      plant and equipment, net
            
            $
            11,917,521
            
            
            $
            10,774,216





Depreciation
expenses for the three months ended February 29, 2008 and February 28, 2007 were
$100,147 and $143,766, respectively.





Depreciation
expenses for the nine months ended February 29, 2008 and February 28, 2007 were
$287,878 and $278,816 respectively.




F-11




CHINA
SUN GROUP HIGH-TECH CO.
 (Formerly
Capital Resource Funding, Inc.)
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED FEBRUARY 29, 2008 AND FEBRUARY 28, 2007
 (Currency
expressed in United States Dollars (“US$”)
 (unaudited)





NOTE
- 6     OTHER PAYABLES AND ACCRUED LIABILITIES





Other
payables and accrued liabilities consisted of:


As
      ofFebruary
      29, 2008
            
            
            May
      31, 2007(audited)Government
      levies payable
            
            $
            48,356
            
            
            $
            15,071Rent
      payable
            
            
            5,280
            
            
            
            45,926Salary
      and welfare payable
            
            
            614,025
            
            
            
            136,954Accrued
      expenses
            
            
            243,595
            
            
            
            80,763Other
      payables and accrued liabilities
            
            $
            911,256
            
            
            $
            278,714


NOTE
- 7     MINORITY INTEREST





In
connection with the stock exchange transaction as fully described in Note 2, the
Company granted to DXL’s 30%-controlling owners of the two (2) years option for
the subscription and purchase of the additional 10,000,000 new shares of common
stock of CRFU in exchange for RMB 38,100,000, equivalent to 30% of the
registered capital of DXL.





Pro forma financial
information





The
following summarized pro forma results of operations for the nine months ended
February 29, 2008. In preparing this pro forma information we assumed that the
exercise of the option for the subscription and purchase of an additional
10,000,000 newly issuable shares of common stock of CSGH had occurred as of June
1, 2006. These pro forma results have been prepared for comparative purposes
only and do not purport to be indications of the result of operations which
actually would have resulted had the exercise of the option occurred as of June
1, 2006.





Nine
      months ended February29,
      2008
            
            
            
            28,
      2007Net
      income attributable to holders of common stock
            
            $
            4,172,197
            
            
            $
            217,416Weighted
      average common shares outstanding – basic and diluted
            
            
            53,422,971
            
            
            
            30,777,778Net
      income per common share – basic and diluted
            
            $
            0.08
            
            
            $
            0.01








NOTE
- 8     INCOME TAXES





The
Company is registered in the United States of America and has operations in two
tax jurisdictions: the United States of America and the PRC. The operation in
the United States of America has incurred net operating losses for income tax
purposes. The Company generated substantially all of its net income from its PRC
operations through DXL, its subsidiary and has recorded income tax expense for
the nine months ended February 29, 2008 and February 28, 2007.




F-12




CHINA
SUN GROUP HIGH-TECH CO.
 (Formerly
Capital Resource Funding, Inc.)
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED FEBRUARY 29, 2008 AND FEBRUARY 28, 2007
 (Currency
expressed in United States Dollars (“US$”)
 (unaudited)


The
components of income (loss) before income taxes and minority interest separating
U.S. and PRC taxes are as follows:





Nine
      months ended February29,
      2008
            
            
            
            28,
      2007Loss
      subject to U.S. tax
            
            $
            (118,433
            )
            
            $
            -Income
      subject to the PRC tax
            
            
            4,496,941
            
            
            
            485,393Income
      before income taxes and minority interest
            
            $
            4,378,508
            
            
            $
            485,393





United
States of America





The
Company is registered in the State of Delaware and is subject to the tax laws of
the United States of America.





As of
February 29, 2008, the operation in the United States of America incurred
$118,433 of net operating losses available for federal tax purposes, which are
available to offset future taxable income. The net operating loss carry forwards
begin to expire in 2028, if unutilized. The Company has provided for a full
valuation allowance against the deferred tax assets of $40,267 on the expected
future tax benefits from the net operating loss carryforwards as the management
believes it is more likely than not that these assets will not be realized in
the future.





The
PRC





The
Company’s PRC subsidiaries are subject to the Enterprise Income Tax governed by
the Income Tax Law of the People’s Republic of China, at a statutory rate of
33%, which is comprised of a 30% national income tax and 3% local income
tax.





On March
16, 2007, the National People’s Congress approved the Corporate Income Tax Law
of the People’s Republic of China (the “New CIT Law”). The new CIT Law, among
other things, imposes a unified income tax rate of 25% for both domestic and
foreign invested enterprises with effect from January 1, 2008. DLX will be
entitled to the tax rate reduction from 33% to 25% that may impact the carrying
value of deferred tax assets as a result of new tax rate.





The
reconciliation of income tax rate to the effective income tax rate based on
income before income taxes and minority interest of PRC operations for the nine
months ended February 29, 2008 and February 28, 2007 are as
follows:





Nine
      months ended February29,
      2008
            
            
            
            28,
      2007Income
      before income taxes and minority interest
            
            $
            5,208,179
            
            
            $
            485,393Income
      tax rate (33% in 2007 and 25% in 2008)
            
            
            28
            %
            
            
            33
            %$
            1,458,290
            
            
            $
            160,180Add:
      items not deductible to taxes-
      Provision and accrued expenses
            
            
            (422,308
            )
            
            
            107,797Income
      tax expenses
            
            $
            1,035,982
            
            
            $
            267,977






F-13


CHINA
SUN GROUP HIGH-TECH CO.
 (Formerly
Capital Resource Funding, Inc.)
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED FEBRUARY 29, 2008 AND FEBRUARY 28, 2007
 (Currency
expressed in United States Dollars (“US$”)
 (unaudited)





Its
effective income tax rates for the nine months ended February 29, 2008 and
February 28, 2007 were 24% and 55%. Income taxes payable as of February 29, 2008
and February 28, 2007 consists of The PRC income tax of $577,089 and
$810,413.




NOTE
- 9     CAPITAL TRANSACTIONS





On
February 28, 2007, the Company completed a stock exchange transaction with the
equity owners of DXL. 30,000,000 shares of common stock were issued in exchange
for 70% interest of DXL and 9,500,000 shares of common stock were transferred
from the former shareholder to DXL’s owner, representing 93% of CRFU’s
outstanding common stock.





On August
24, 2006, the Company was authorized to change the par value of its
preferred and common stock from $0.00000005 per share to $0.001 per share. In
connection with the changeinparvalue of preferred and common stock
described above, all prior transactions involving common stock with a par value
of $0.00000005 have been restated to reflect the new par value of $0.001 in the
accompanying financial statements.





As of
February 29, 2008, the number of outstanding shares of the Company’s common
stock was 43,422,971.




NOTE
- 10   CONCENTRATIONS AND RISKS





100% of
the Company’s assets were located in the PRC and 100% of the Company’s revenues
were generated from customers located in the PRC.





(a) Major
customers





For the
three months ended February 29, 2008, the customers who account for 10% or more
of revenues of the Company are presented as follows:






Revenues
            
            
            Percentage
              of
      revenues
            
            
            Trade
      accounts
              ReceivableCustomer
      A
            
            $
            3,547,027
            
            
            
            50%
            
            
            $
            42,069Customer
      B
            
            
            2,424,919
            
            
            
            34%
            
            
            
            -Total:
            
            $
            5,971,946
            
            
            
            84%
            
            
            $
            42,069





For the
nine months ended February 29, 2008, the customers who account for 10% or more
of revenues of the Company are presented as follows:






Revenues
            
            
            Percentage
              of
      revenues
            
            
            Trade
      accounts
              ReceivableCustomer
      A
            
            $
            6,538,733
            
            
            
            40%
            
            
            $
            42,069Customer
      B
            
            
            3,408,014
            
            
            
            21%
            
            
            
            -Customer
      D
            
            
            2,508,647
            
            
            
            16%
            
            
            
            436,807Customer
      C
            
            
            2,151,570
            
            
            
            13%
            
            
            
            -Total:
            
            $
            14,606,964
            
            
            
            90%
            
            
            $
            478,876






F-14


CHINA
SUN GROUP HIGH-TECH CO.
 (Formerly
Capital Resource Funding, Inc.)
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED FEBRUARY 29, 2008 AND FEBRUARY 28, 2007
 (Currency
expressed in United States Dollars (“US$”)
 (unaudited)






For the
three months ended February 28, 2007, the customers who account for 10% or more
of revenues of the Company are presented as follows:




Revenues
            
            
            Percentage
              of
      revenues
            
            
            Trade
      accounts
              ReceivableCustomer
      A
            
            $
            1,396,988
            
            
            
            52%
            
            
            $
            2,529,239Customer
      B
            
            
            601,310
            
            
            
            23%
            
            
            
            882,087Customer
      C
            
            
            290,760
            
            
            
            11%
            
            
            
            872,279Total:
            
            $
            2,289,058
            
            
            
            86%
            
            
            $
            4,283,605





For the
nine months ended February 28, 2007, the customers who account for 10% or more
of revenues of the Company are presented as follows:




Revenues
            
            
            Percentage
                of
      revenues
            
            
            Trade
      accounts
              ReceivableCustomer
      A
            
            $
            2,782,638
            
            
            
            49%
            
            
            $
            2,529,239Customer
      B
            
            
            1,803,929
            
            
            
            32%
            
            
            
            882,087Customer
      C
            
            
            872,279
            
            
            
            15%
            
            
            
            872,279Total:
            
            $
            5,458,846
            
            
            
            96%
            
            
            $
            4,283,605





(b)
            Major
      vendors





For the
three months ended February 29, 2008, the vendors who account for 10% or more of
purchases of the Company are presented as follows:




Purchases
            
            
            Percentage
              of
      purchases
            
            
            Accounts
              PayableVendor
      A
            
            $
            1,929,411
            
            
            
            48%
            
            
            $
            427,489Vendor
      B
            
            
            1,587,578
            
            
            
            40%
            
            
            
            332,938Total
            
            $
            3,516,989
            
            
            
            88%
            
            
            $
            760,427






F-15




CHINA
SUN GROUP HIGH-TECH CO.
 (Formerly
Capital Resource Funding, Inc.)
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED FEBRUARY 29, 2008 AND FEBRUARY 28, 2007
 (Currency
expressed in United States Dollars (“US$”)
 (unaudited)






For the
nine months ended February 29, 2008, the vendors who account for 10% or more of
purchases of the Company are presented as follows:




Purchases
            
            
            Percentage
              of
      purchases
            
            
            Accounts
              payableVendor
      A
            
            $
            5,743,323
            
            
            
            45%
            
            
            $
            444,927Vendor
      B
            
            
            3,432,917
            
            
            
            27%
            
            
            
            321,207Vendor
      C
            
            
            3,096,513
            
            
            
            24%
            
            
            
            -Total
            
            $
            12,272,753
            
            
            
            96%
            
            
            $
            766,134





For the
three months ended February 28, 2007, the vendors who account for 10% or more of
purchases of the Company are presented as follows:




Purchases
            
            
            Percentage
              of
      purchases
            
            
            Accounts
              payableVendor
      A
            
            $
            248,732
            
            
            
            18%
            
            
            $
            1,719,126





For the
nine months ended February 28, 2007, the vendors who account for 10% or more
of purchases of the Company are presented as follows:






Purchases
            
            
            Percentage
              of
      purchases
            
            
            Accounts
              payableVendor
      A
            
            $
            746,196
            
            
            
            18%
            
            
            $
            1,719,126





(c)           Credit
risk





Financial
instruments that potentially subject the Company to significant concentrations
of credit risk consist principally of cash and trade accounts receivable. The
Company performs ongoing credit evaluations of its customers' financial
condition, but does not require collateral to support such
receivables.





(d)         Exchange
rate risk





The
reporting currency of the Company is the US$, to date the majority of the
revenues and costs are denominated in RMB and a significant portion of the
assets and liabilities are denominated in RMB. As a result, the Company is
exposed to foreign exchange risk as its revenues and results of operations may
be affected by fluctuations in the exchange rate between US$ and RMB. If the RMB
depreciates against the US$, the value of the RMB revenues and assets as
expressed in US$ financial statements will decline. The Company does not hold
any derivative or other financial instruments that expose to substantial market
risk.




NOTE
- 11   COMMITMENT





1.
            The
      Company leased an office premise under a non-cancelable operating lease
      agreement for a period of eight years, due July 25, 2010. The annual lease
      payment is $6,792.





2.
            On
      June 9, 2007, the Company’s subsidiary, DXL entered into an African Mining
      Project Contract of Cooperation (the “Purchase Agreement”) with Shengbao
      Group and South African Shengbao Mining Enterprises (“Shengbao”). Pursuant
      to the Purchase Agreement, DXL is obliged to purchase the prospecting and
      mining rights of a cobalt ore mine for a purchase price of $2 million over
      a term of 15 years. As of February 29, 2008, the Company had the capital
      commitment of $2 million in the purchase of the prospecting and mining
      rights which was contracted for but not provided in the financial
      statements.




F-16










Item
2.             Management’s Discussion and Analysis
or Plan of Operation




Cautionary
Notice Regarding Forward-Looking Statements




In this
quarterly report, references to “China Sun Group,” “CSGH,” “the Company,” “we,”
“us,” and “our” refer to China Sun Group High-Tech Co.





We make
certain forward-looking statements in this report. Statements concerning our
future operations, prospects, strategies, financial condition, future economic
performance (including growth and earnings), demand for our services, and other
statements of our plans, beliefs, or expectations, including the statements
contained under the captions "Risk Factors," "Management's Discussion and
Analysis or Plan of Operation," "Description of Business," as well as captions
elsewhere in this document, are forward-looking statements. In some cases these
statements are identifiable through the use of words such as "anticipate",
"believe", "estimate", "expect", "intend", "plan", "project", "target", "can",
"could", "may", "should", "will", "would" and similar expressions.. The
forward-looking statements we make are not guarantees of future performance and
are subject to various assumptions, risks, and other factors that could cause
actual results to differ materially from those suggested by these
forward-looking statements. Because such statements are subject to risks and
uncertainties, actual results may differ materially from those expressed or
implied by the forward-looking statements. Indeed, it is likely that some of our
assumptions will prove to be incorrect. Our actual results and financial
position will vary from those projected or implied in the forward-looking
statements and the variances may be material. You are cautioned not to place
undue reliance on such forward-looking statements. These risks and
uncertainties, together with the other risks described from time to time in
reports and documents that we file with the Securities and Exchange Commission
(“SEC”) should be considered in evaluating forward-looking
statements.




The
nature of our business makes predicting the future trends of our revenue,
expenses, and net income difficult. Thus, our ability to predict results or the
actual effect of our future plans or strategies is inherently uncertain. The
risks and uncertainties involved in our business could affect the matters
referred to in any forward-looking statements and it is possible that our actual
results may differ materially from the anticipated results indicated in these
forward-looking statements. Important factors that could cause actual results to
differ from those in the forward-looking statements include, without limitation,
the following:





·
            the
      effect of political, economic, and market conditions and geopolitical
      events;


·
            legislative
      and regulatory changes that affect our
business;


·
            the
      availability of funds and working
capital;


·
            the
      actions and initiatives of current and potential
    competitors;


·
            investor
      sentiment; and


·
            our
      reputation.





We do not
undertake any responsibility to publicly release any revisions to these
forward-looking statements to take into account events or circumstances that
occur after the date of this report. Additionally, we do not undertake any
responsibility to update you on the occurrence of any unanticipated events which
may cause actual results to differ from those expressed or implied by any
forward-looking statements.




The
following discussion and analysis should be read in conjunction with our
consolidated financial statements and the related notes thereto as filed with
the SEC and other financial information contained elsewhere in this
Report.




Overview




We were
incorporated in North Carolina on February 2, 2004 and have since undergone a
change in business. In February 2007, we acquired a 70% ownership interest in Da
Lian Xin Yang High-Tech Development Co. Ltd. ("DLX"), a corporation organized
and existing under the laws of the People’s Republic of China, through a share
exchange which was consummated on February 28, 2007. In August 2007, our
shareholders approved our reincorporation in the State of Delaware and our name
change from “Capital Resource Funding, Inc.” to “China Sun Group High-Tech Co.”
Currently, our only operations are conducted through DLX, which engages in the
business of manufacturing and selling cobaltosic oxide products. These products
are primarily manufactured, marketed, and sold in the People’s Republic of
China, South Korea and Japan.





4




Through
DLX, we produce anode materials used in lithium ion batteries. Lithium ion
batteries continue to gain in popularity due to their versatility, high energy
density and capacity, high voltage, compact size, light weight, and excellent
energy retention characteristics. They are used in mobile phones, PDAs, laptops,
and digital cameras, as well as electric automobiles and solar and wind energy
storage units. DLX primarily produces cobaltosic oxide and lithium cobalt oxide
and also engages in the research and development of new technologies to be used
in the lithium ion battery market.




According
to the China Battery Industry Association, which conducts research of and puts
forth reports on the battery industry, DLX has the second largest cobalt series
production capacity in the People’s Republic of China. Through its research and
development group, DLX owns a proprietary series of nanometer technology that
supply state-of-the-art components for advanced lithium ion batteries.
Leveraging its technological leadership in the People’s Republic of China, its
high-quality product line and its scalable production capacity, we plan to
create a fully integrated supply chain from the primary manufacturing of cobalt
ore to finished products, which include lithium ion batteries.




We
recently received preliminary accreditation from the State Intellectual Property
Office of the People's Republic of China of certain of our equipment that we use
in our cobaltosic oxide and lithium cobalt oxide production process. Meeting the
State’s production standards is important to securing our technological
leadership position in the People’s Republic of China. The accreditation of the
equipment and the associated production process enables us to provide our
customers with exact specifications, along with superior quality control,
throughout the production process.





Highlights
from the Quarter Ended February 29, 2008




In the
fiscal year 2008, we made significant strides in our sales and
manufacturing capabilities.  Sales for the first nine months of fiscal
year 2008 increased approximately 185% from same period of the previous year (we
began production and sales of cobaltosic oxide in the PRC only on April 1,
2006). We operate largely on a “just-in-time” basis where demand exceeds
supply.  Accordingly, we often do not carry excess
inventory.





Concurrent
with strides in production and sales, we have also made substantial developments
in our research and development endeavors. We have completed our testing and
evaluation of our lithium cobalt oxide product and in February 2008 started
batch production. We sent lithium cobalt oxide to Shenzhen Ping Bu Technology
Electronic Co. Ltd. on February 25, 2008 and conducted trial production
with 10kg of lithium colbalt oxide. We will begin filling orders in May
2008.




We have
also completed the preliminary trial phase of our tri-component anode product,
which when completed, will be safer and able to discharge a stronger electrical
current for use with heavier capacity equipment and vehicles and receive
approval and completed research on developing techniques for a wet melting
process for the nickel, colbalt and manganese in the ternary
material.





We have
made technological improvements to our production line by adding amalgamation
capabilities to it.  We have also hired two new research and
development engineers, a graduate researcher and six chemistry graduates to our
research and development team. In February 2008, we organized an R&D project
team with a postgraduate technician as a team leader and three
chemistry graduates as members to research the battery anode material,
lithium manganese. This team has already commenced such research.




Results
of Operations




The
following table sets forth our statements of operations for the nine months
ended February 29, 2008 and the three months ended February 29,
2008:




5




THE
NINE MONTHS ENDED FEBRUARY 29, 2008 COMPARED TO THE NINE MONTHS ENDED FEBRUARY
28, 2007




Net
Revenue


Net revenue for the nine months ended February 29, 2008 was
$16,199,986, an increase of $10,514,910 or 185% from net revenue of $ 5,685,076
for the comparable period in 2007. The increase in revenue was primarily
attributable to increased customer demand for our products and consequently,
increased sales.




Cost
of Revenue




Cost of
revenue for the nine months ended February 29, 2008 was $10,529,991, an increase
of $6,373,905 or 153% from $4,156,086 for the comparable period in 2007. The
increase in cost of revenue was primarily attributable to increased production
of our products which is in
tandem with increased demand for them.




Gross
Profit




Gross
profit for the nine months ended February 29, 2008 was $5,669,995, an increase
of $4,141,005 or 271% from $1,528,990 for the comparable period in
2007.  The increase in gross profit was primarily attributable to
revenue generated by increased production and sales.




General
and Administrative Expenses




General
and administrative expenses for the nine months ended February 29,
2008 were $777,691, a decrease of $3,375 or 0.43% from $781,066 for the
comparable period in 2007. The decrease was primarily attributable to the
stricter expense control.




Research
and Development Expenses




Research
and development expenses for the nine months ended February 29, 2008 were
$88,101, an increase of $15,677 or 22% from $72,424 for the comparable period in
2007. The increase was primarily attributable to the hiring of additional
research and development personnel.




Depreciation
Expenses




Depreciation
expenses for the nine months ended February 29, 2008 were $178,525, a
decrease of $11,582 or 6% from $190,107 for the comparable period in 2007. The
decrease in our depreciation expenses is primarily attributable to the full
depreciation provision already made for some office equipment.




Income
(Loss) From Operations




Income
from operations for the nine months ended February 29, 2008 was $5,199,868, an
increase of $4,714,475 or 971% from $485,393 for the comparable period in 2007.
The increase resulted primarily from the increased customer demand for our
products and consequently, increased sales.




Other
Income




Interest
income for the nine months ended February 29, 2008 was $8,311. The Company
had no interest income for the comparable period in 2007. The increase resulted
primarily from interest income derived from cash in our bank
accounts.




Income Taxes




Provision
for income tax expenses was $1,035,982 for the nine months ended February 29,
2008, an increase of $768,005 or 287% from $267,977 for the comparable period in
2007.  The increase resulted primarily from the increase in our
revenue due to increased sales.




6


Minority
Interest




The
minority interest for the nine months ended February 29, 2008 was $1,287,189, an
increase of $1,130,748 or 723% from $156,441 for the comparable period in
2007.




Foreign
Currency Translation Gain




The
foreign currency translation gain for the nine months ended February 29, 2008
was $1,790,018, an increase of $1,782,988 or 25363% from $7,030 for the
comparable period in 2007.  The increase resulted from the increase in
value of the Renminbi against the U.S. dollar.  This updated Renminbi
valuation of DLX’s assets and liabilities resulted in this gain.




Net
Income




Net
income for the nine months ended February 29, 2008 was $2,885,008, an increase
of $2,824,033 or 4631% from $60,975 for the comparable period in
2007.






THE
THREE MONTHS ENDED FEBRUARY 29, 2008 COMPARED TO THE THREE MONTHS ENDED FEBRUARY
28, 2007




Net
Revenue




Net
revenue for the three months ended February 29, 2008 was $7,106,959, an increase
of $4,445,263 or 167% from $2,661,696 for the comparable period in
2007.  The increase resulted from increased customer demand and
sales.




Cost
of Revenue




Cost of
revenue for the three months ended February 29, 2008 was $4,528,705, an increase
of $2,639,775 or 140% from $1,888,930 for the comparable period in
2007.  The increase resulted directly from increased production of our
products which is in
tandem with increased demand for them.




Gross
Profit




Gross
profit for the three months ended February 29, 2008 was $2,578,254, an
increase of $1,805,488 or 234 % from $772,766 for the comparable period in 2007.
The increase in gross profit was primarily due to revenue generated by increased
customer demand and production, and consequently increased sales of our
products.




General
and Administrative Expenses




General
and administrative expenses for the three months ended February 29, 2008 were
$9,706, a decrease of $585,275 or 98% from $594,981 for the comparable period in
2007.  The decrease was primarily attributable to the stricter expense
control.


.


Research
and Development Expenses




Research
and development expenses for the three months ended February 29, 2008 were
$1,701, a decrease of $15,858 or 90% from $17,559 for the comparable period in
2007. The decrease was primarily attributable to the stricter cost
control.




7




Depreciation
Expenses




Depreciation
expenses for the three months ended February 29, 2008 were $61,871, a decrease
of $3,186 or 4.9 % from $65,057 for the comparable period in
2007.  This decrease is primarily attributable to the full
depreciation provision already made for some office equipment.


.


Income
(Loss) From Operations




Income
from operations for the three months ended February 29, 2008 was $3,076,166, an
increase of $2,980,997 or 3132% from $95,169 for the comparable period in
2007.  The increase resulted primarily from the increased customer
demand for our products and consequently, increased sales.


.


Other
Income




Interest
income for the three months ended February 29, 2008 was $7,035. We had no
interest income for the comparable period in 2007. The increase resulted
primarily from interest income derived from cash in our bank
accounts.




Income
Taxes




Provision
for income tax expenses was $295,679 for the three months ended February 29,
2008, an increase of $95,370 or 47.6% from $200,309 for the comparable period in
2007.




Minority
Interest




The
minority interest for the three months ended February 29, 2008 was $837,157, an
increase of $ 729,153 or 675% from $108,004 for the comparable period in
2007.




Foreign
Currency Translation Gain




The
foreign currency translation gain for the three months ended February 29, 2008
was $744,185, an increase of $739,500 or 15784% from $4,685 for the comparable
period in 2007.  The increases resulted from the increase in the value
of the Renminbi against the U.S. dollar. This updated Renminbi valuation of
DLX’s assets and liabilities resulted in this gain.





Net
Income




Net
income for the three months ended February 29, 2008 was $1,953,365, an increase
of $2,166,509 or 1016% as compared to the net loss of $213,144 for the
comparable period in 2007.




Liquidity
and Capital Resources




Cash
and Cash Equivalent




Our cash
and cash equivalent were $813,163 at the beginning of the nine months ended
February 29, 2008 and increased to $10,045,630 by the end of such period, an
increase of $9,232,467 or 1135.38%.  This net change in cash and cash
equivalents represented an increase of 5967% or $9,080,303 from $152,164 for the
comparable period in 2007.




Net
cash provided by operating activities




Net cash
provided by our operating activities was $8,887,384 for the nine months ended
February 29, 2008, an increase of $8,825,400 or 14238% as compared to net cash
of $61,984 for the same period in 2007.  This increase was due
primarily to the growth in sales revenue with the settlement in accounts
receivable by $5,075,443, the increase in value-added tax payable by $738,183,
and the increase in other payable and accrued liabilities by $608,120, and the
increase in accounts payable by $133,515, partially offset by decrease in
customer deposits by $707,271, and decrease in income tax payable by $282,215 in
this period.




8




Net
cash used in investing activities




Net cash
used in investing activities was $42,264 for the nine months ended February 29,
2008, an increase of $24,330 or 136% from $17,934 for the same period in 2007.
The increase was primarily attributable to the purchase of
equipment.




Net
cash used in financing activities




Net cash
generated from financing activities was $4,740 for the nine months ended
February 29, 2008, a decrease of $96,344 or 95% from $101,084 for the same
period in 2007. The decrease was primarily attributable to the reduced advances
from related parties.




Income
Taxes




Income
tax expense was $1,035,982 for the nine months ended February 29, 2008, an
increase of $768,005 or 287% from $267,977 for the same period in 2007. The
increase resulted primarily from the increase in income from
operations.




Foreign
currency translation adjustment




Foreign
currency translation adjustment resulted in $382,607 for the nine months ended
February 29, 2008, an increase of $375,577 or 5342% compared to $7,030 for the
same period in 2007.




Trends




Currently,
many companies in the cobalt product industry are looking to directly own cobalt
producing mines which will provide direct access and supply to cobalt ore, the
primary raw material in the cobalt product industry. In June 2007, we acquired
certain rights to a cobalt mine in Africa. This acquisition will help us avoid
export limitations imposed by the Congo, reduce freight expenses, and help
ensure a stable supply of cobalt ore.




We are
not aware of any trends, events or uncertainties that have or are reasonably
likely to have a material impact on our short-term or long-term
liquidity.




Inflation




We
believe that inflation has not had a material or significant impact on our
revenue or our results of operations.




Material
Commitments for Capital Expenditures




Currently,
we own the prospecting and mining rights of a cobalt mine in Congo. We plan to
start the construction of a processing plant in Congo in the second quarter of
the 2009 fiscal year. We anticipate that the construction of the plant will cost
approximately $2,000,000 to $3,000,000.




General




We
believe that we currently have sufficient income generated from our operations
to meet our operating and/or capital needs.




However,
we will continue to evaluate various sources of capital to meet our growth
requirements. Such sources will include debt financings, the issuance of equity
securities, and entrance into other financing arrangements. There can be no
assurance, however, that any of the contemplated financing arrangements
described herein will be available and, if available, can be obtained on terms
favorable to us.




Contractual
Obligations and Commitments




9








We leased
an office premise under a non-cancelable operating lease agreement for a period
of eight years, due July 25, 2010. The annual lease payment is
$6,792.




On June
9, 2007, our subsidiary, DLX entered into an African Mining Project Contract of
Cooperation (the “Purchase Agreement”) with Shengbao Group and South African
Shengbao Mining Enterprises (“Shengbao”). Pursuant to the Purchase Agreement,
DLX is obliged to purchase the prospecting and mining rights of a cobalt ore
mine for a purchase price of $2 million over a term of 15 years.  As
of February 29, 2008, DLX had the capital commitment of $2 million in the
purchase of the prospecting and mining rights which was contracted for but not
provided in the financial statements.





Off
Balance Sheet Arrangements




None.




Critical
Accounting Policies and Estimates




Item 3.
            Controls and
Procedures.




As of the
end of the period covered by this report, our management, with the participation
of our Principal Executive Officer, Wang Bin, and our Principal Financial and
Accounting Officer, Ming Fen Liu, evaluated the effectiveness of the design and
operation of our disclosure controls and procedures, which are those controls
and other procedures of an issuer that are designed to ensure that information
required to be disclosed by the us, in the reports we file under the Exchange
Act of 1934, as amended (the "Exchange Act"), are recorded, processed,
summarized and reported, within the time periods specified in the Securities and
Exchange Commission's rules and forms. These disclosure controls and procedures
may include, controls and procedures designed to ensure that information
required to be disclosed by us in the reports that we file or submit under the
Exchange Act are accumulated and communicated to the our management, including
our Principal Executive Officer and Principal Financial and Accounting Officer,
as appropriate to allow timely decisions regarding required disclosure. Based on
this evaluation, our management concluded that as of February 29, 2008, our
disclosure controls and procedures were effective.




During
the quarter ended February 29, 2008, there were no changes in our internal
control over financial reporting that has materially affected, or is reasonably
likely to materially affect our internal control over financial
reporting.




10





PART
II – OTHER INFORMATION




Item
1.                      Legal
Proceedings





None.





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





None.





Item
3.                      Defaults
Upon Senior Securities





None.





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





On January 31, 2008, Bin Wang, Zhi Li
and Jiao Wang, holders of an aggregate of 25,500,000 shares of our common stock,
par value $.001 per share (the “Common Stock) and accordingly, a majority of our
then issued and outstanding shares of Common Stock (comprising 43,422,971 shares
of Common Stock), executed a unanimous written consent to action in accordance
with the Delaware General Corporation Law to:





(i)
            amend
      our Certificate of Incorporation to increase the number of authorized
      shares of Common Stock from 100,000,000 shares to 500,000,000 shares;
      and


(ii)
            amend
      our Certificate of Incorporation to increase the number of authorized
      shares of our  preferred stock, par value $.001 per share from
      10,000,000 shares to 50,000,000
shares.





Pursuant to such written consent, we
filed a Preliminary Information Statement on Schedule 14C with the SEC on
February 1, 2008 followed by a Definitive Information Statement on Schedule 14C
with the SEC on March 13, 2008.





We also caused to be printed and mailed
the same Information Statement to all our stockholders as of the record date of
January 31, 2008.  The abovementioned  amendment will only
be effective 20 days after the mailing of the Information Statement on March 18,
2008, which will be on or about April 7, 2008.





Item
5.                      Other
Information.





None.





Item
      6.
            Exhibits




(a)
Exhibits




31.1
            
            Certification
      Required Under Section 302 of Sarbanes-Oxley Act of 2002
  *





31.2
            
            Certification
      Required Under Section 302 of Sarbanes-Oxley Act of 2002
  *





32
            
            Certification
      Required Under Section 906 of Sarbanes-Oxley Act of 2002
  *




* Filed
herewith.




11






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.




CHINA
      SUN GROUP HIGH-TECH CO.April
      14, 2008
              By:
              /s/ Bin
      WangBin
      WangPresident,
      Chief Executive Officer and Chairman