**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
                November 30, 2007**





 ̈
            
            **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 ofincorporation
                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**




State
      the
      number of shares outstanding of each of the issuer's classes of common equity,
      as of the latest practicable date: 43,422,971 shares of Common Stock, $.001
      par value, were outstanding as of January 7, 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)**





**Page**Condensed
                Consolidated Balance Sheets as of November 30, 2007 and May 31, 2007
            
            F-2Condensed
                Consolidated Statements of Operations and Comprehensive Income for
                the six
                months ended November 30, 2007 and 2006
            
            F-3Condensed
                Consolidated Statements of Cash Flows for the six months ended November
                30, 2007 and 2006
            
            F-4Condensed
                Consolidated Statements of Stockholders’ Equity for the six months ended
                November 30, 2007
            
            F-5Notes
                to Condensed Consolidated Financial
                Statements
            
            F-6
                to F-18








F-1













**CHINA
      SUN GROUP HIGH-TECH CO.**


**(Formerly
      Capital Resource Funding, Inc.)**


**CONDENSED
      CONSOLIDATED BALANCE SHEETS**


**AS
      OF NOVEMBER 30, 2007 AND MAY 31, 2007**


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






November
                30, 2007
            
            
            May
                31, 2007(unaudited)
            
            
            (audited)**ASSETS**Current
                assets:Cash
                and cash equivalents
            
            $
            2,444,688
            
            
            $
            813,163Accounts
                receivable, net
            
            
            3,203,211
            
            
            
            4,754,929Inventories
            
            
            1,214,894
            
            
            
            1,932Total
                current assets
            
            
            6,862,793
            
            
            
            5,570,024Property,
                plant and equipment, net
            
            
            11,504,993
            
            
            
            10,774,216**TOTAL
                ASSETS**
            
            $
            18,367,786
            
            
            $
            16,344,240**LIABILITIES
                AND STOCKHOLDERS’ EQUITY**Current
                liabilities:Accounts
                payable, trade
            
            $
            165,757
            
            
            $
            595,941Customers
                deposits
            
            
            5,095
            
            
            
            688,448Value
                added tax payable
            
            
            646,757
            
            
            
            229,897Income
                tax payable
            
            
            765,096
            
            
            
            810,413Other
                payables and accrued liabilities
            
            
            616,746
            
            
            
            278,714Total
                liabilities
            
            
            2,199,451
            
            
            
            2,603,413**MINORITY
                INTEREST**
            
            
            4,444,690
            
            
            
            3,994,658Stockholders’
                equity:Convertible
                preferred stock, $0.001 par value; 20,000,000 shares authorized;
                no shares
                issued and outstanding as of November 30, 2007 and May 31,
                2007
            
            
            -
            
            
            
            -Common
                stock, $0.001 par value; 100,000,000 shares authorized; 43,422,971
                shares
                issued and outstanding as of November 30, 2007 and May 31,
                2007
            
            
            43,423
            
            
            
            43,423Additional
                paid-in capital
            
            
            9,595,204
            
            
            
            9,595,204Accumulated
                other comprehensive income
            
            
            1,271,641
            
            
            
            225,808Retained
                earnings (accumulated deficits)
            
            
            813,377
            
            
            
            (118,266
            )Total
                stockholders’ equity
            
            
            11,723,645
            
            
            
            9,746,169**TOTAL
                LIABILITIES AND STOCKHOLDERS’ EQUITY**
            
            $
            18,367,786
            
            
            $
            16,344,240





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 OPERATIONS AND**


**COMPREHENSIVE
      INCOME**


**FOR
      THE SIX MONTHS ENDED NOVEMBER 30, 2007 AND 2006**


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


**(unaudited)**





Three
                months ended November 30,
            
            
            Six
                months ended November 30,2007
            
            
            2006
            
            
            2007
            
            
            
            2006**REVENUE,
                NET**
            
            $
            5,357,190
            
            
            $
            1,739,287
            
            
            $
            9,093,027
            
            
            $
            3,023,380**Cost
                of revenue**
            
            
            3,548,070
            
            
            
            1,196,081
            
            
            
            6,001,286
            
            
            
            1,995,431**Gross
                profit**
            
            
            1,809,120
            
            
            
            543,206
            
            
            
            3,091,741
            
            
            
            1,027,949**OPERATING
                EXPENSES:**General
                and administrative
            
            
            518,765
            
            
            
            337,023
            
            
            
            696,999
            
            
            
            430,488Research
                and development
            
            
            61,527
            
            
            
            60,712
            
            
            
            86,400
            
            
            
            72,187Depreciation
            
            
            94,943
            
            
            
            48,533
            
            
            
            187,640
            
            
            
            135,050Total
                operating expenses
            
            
            675,235
            
            
            
            446,268
            
            
            
            971,039
            
            
            
            637,725**INCOME
                FROM OPERATIONS**
            
            
            1,133,885
            
            
            
            96,938
            
            
            
            2,120,702
            
            
            
            390,224**OTHER
                INCOME:**Interest
                income
            
            
            1,276
            
            
            
            -
            
            
            
            1,276
            
            
            
            -**INCOME
                BEFORE INCOME TAXES AND MINORITY INTEREST**
            
            
            1,135,161
            
            
            
            96,938
            
            
            
            2,121,978
            
            
            
            390,224Income
                tax expenses
            
            
            (396,679
            )
            
            
            (31,989
            )
            
            
            (740,303
            )
            
            
            (128,774
            )Minority
                interest
            
            
            (241,227
            )
            
            
            (19,485
            )
            
            
            (450,032
            )
            
            
            (78,435
            )**NET
                INCOME**
            
            $
            497,255
            
            
            $
            45,464
            
            
            $
            931,643
            
            
            $
            183,015Other
                comprehensive income:-
                Foreign currency translation gain
            
            
            381,624
            
            
            
            51,847
            
            
            
            1,045,833
            
            
            
            168,438**COMPREHENSIVE
                INCOME**
            
            $
            878,879
            
            
            $
            97,311
            
            
            $
            1,977,476
            
            
            $
            351,453Net
                income per share – Basic and diluted
            
            $
            0.01
            
            
            $
            0.00
            
            
            $
            0.02
            
            
            $
            0.01Weighted
                average number of shares outstanding during the period – Basic and
                diluted
            
            
            43,422,971
            
            
            
            41,732,806
            
            
            
            43,422,971
            
            
            
            35,728,370








See
      accompanying notes to condensed consolidated financial statements.






F-3




**CHINA
      SUN GROUP HIGH-TECH CO.**


**(Formerly
      Capital Resource Funding, Inc.)**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


**FOR
      THE SIX MONTHS ENDED NOVEMBER 30, 2007 AND 2006**


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


**(unaudited)**






Six
                months ended November 30,2007
            
            
            2006**Cash
                flows from operating activities:**Net
                income
            
            $
            931,643
            
            
            $
            183,015Adjustments
                to reconcile net income to net cash provided by (used in) operating
                activities:Depreciation
            
            
            187,640
            
            
            
            135,050Minority
                interest
            
            
            450,032
            
            
            
            78,435Changes
                in operating assets and liabilities:Accounts
                receivable, trade
            
            
            1,673,161
            
            
            
            (2,999,647
            )Inventories
            
            
            (1,194,393
            )
            
            
            146,443Deposits
                and prepayments
            
            
            -
            
            
            
            (16,148
            )Accounts
                payable, trade
            
            
            (441,807
            )
            
            
            1,426,103Customer
                deposits
            
            
            (693,937
            )
            
            
            -Value-added
                tax payable
            
            
            403,481
            
            
            
            143,027Income
                tax payable
            
            
            (69,359
            )
            
            
            123,892Other
                payables and accrued liabilities
            
            
            333,774
            
            
            
            110,986Net
                cash provided by (used in) operating activities
            
            
            1,580,235
            
            
            
            (668,844
            )**Cash
                flows from investing activities:**Purchase
                of plant and equipment
            
            
            (470
            )
            
            
            (55,404
            )Net
                cash used in investing activities
            
            
            (470
            )
            
            
            (55,404
            )**Cash
                flows from financing activities:**Advances
                from a related party
            
            
            -
            
            
            
            743,621Net
                cash provided by financing activities
            
            
            -
            
            
            
            743,621**Foreign
                currency translation adjustment**
            
            
            51,760
            
            
            
            44,291**NET
                CHANGE IN CASH AND CASH EQUIVALENTS**
            
            
            1,631,525
            
            
            
            63,664**CASH
                AND CASH EQUIVALENTS, BEGINNING OF PERIOD**
            
            
            813,163
            
            
            
            206,928**CASH
                AND CASH EQUIVALENTS, END OF PERIOD**
            
            $
            2,444,688
            
            
            $
            270,592**SUPPLEMENTAL
                DISCLOSURE OF CASH FLOW INFORMATION:**Cash
                paid for income taxes
            
            $
            809,662
            
            
            $
            4,882Cash
                paid for interest expenses
            
            $
            -
            
            
            $
            -











See
      accompanying notes to condensed consolidated financial statements.








F-4






**CHINA
      SUN GROUP HIGH-TECH CO.**


**(Formerly
      Capital Resource Funding, Inc.)**


**CONSOLDIATED
      STATEMENTS OF STOCKHOLDERS’ EQUITY**


**FOR
      THE SIX MONTHS ENDED NOVEMBER 30, 2007**


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


**(unaudited)**





Convertible
              preferred
                stock
            
            
            Common
                stock
            
            
            Additional
              paid-in
            
            
            Accumulated
                other
                comprehensive
            
            
            (Accumulated
                deficit)/
                retained
            
            
            Total
                stockholders’No.
                of shares
            
            
            Amount
            
            
            No.
                of shares
            
            
            Amount
            
            
            capital
            
            
            income
            
            
            earnings
            
            
            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
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            931,643
            
            
            
            931,643Foreign
                currency translation adjustment
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            1,045,833
            
            
            
            -
            
            
            
            1,045,833Balance
                as of November 30, 2007
            
            
            -
            
            
            $
            -
            
            
            
            43,422,971
            
            
            $
            43,423
            
            
            $
            9,595,204
            
            
            $
            1,271,641
            
            
            $
            813,377
            
            
            $
            11,723,645










See
        accompanying notes to condensed consolidated financial
        statements.





F-5







**NOTE-1**
            **BASIS
                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 our 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 in 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. (“DLX”). DLX 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, DLX became a majority-owned
      subsidiary of CSGH and the former owners of DLX 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 DLX 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 DLX, 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 DLX.
      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
      DLX are hereinafter referred to as (the “Company”).





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






F-6








**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 DLX 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. The Company incurred $10,844 and $Nil for the periods
      ended November 30, 2007 and 2006, respectively.





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 November 30, 2007, an
      allowance for doubtful accounts of $801,938 was provided.








F-7







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 November 30, 2007, the Company did not record an
      allowance for obsolete inventories, nor have there been any
      write-offs.





l
            Property,
                plant and equipment, net





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 maintenance and repairs is expensed as incurred.





l
            Valuation
                of long-lived assets





Long-lived
      assets primarily include property 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
      November 30, 2007.





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.






F-8





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.





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.





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 dollars").
      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 dollars are
      translated into US dollars, 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 United States dollars (“US$”) has been made at the
      following exchange rates for the respective period:




2007
            
            
            2006Months
                end RMB:US$ exchange rate
            
            
            7.3919
            
            
            
            7.8400Average
                monthly RMB:US$ exchange rate
            
            
            7.5065
            
            
            
            7.9200







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.






F-9





l
            Segment
                reporting





SFAS
      No.
      131 *“**Disclosures about Segments of an Enterprise and Related
      Informa**tion”* 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.





The
      Company’s financial instruments primarily include cash and cash equivalents,
      accounts receivable, 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
            Recently
                issued accounting standards





In
      September 2006, the FASB issued SFAS No. 157, "*Fair Value Measurement*"
      ("SFAS 157") which defines fair value, establishes a framework for measuring
      fair value in generally accepted accounting principles and expands the
      disclosures about fair value measurement. This Statement was developed to
      provide guidance for consistency and comparability in fair value measurements
      and disclosures and applies under other accounting pronouncements that require
      or permit fair value measurements. This Statement is effective for financial
      statements issued for fiscal years beginning after November 15, 2007 and interim
      periods within those fiscal years. This Statement is not expected to have a
      material impact on the Company's consolidated financial statements.





In
      February 2007, the FASB issued Statement of Financial Accounting Standards
      No.
      159, *"The Fair Value Option for Financial Assets and Financial Liabilities"*("SFAS 159"). **This Statement provides companies with an
      option to report selected financial assets and liabilities at fair value. The
      Standard's objective is to reduce both the complexity in accounting for
      financial instruments and the volatility in earnings caused by measuring related
      assets and liabilities differently. SFAS 159 also establishes presentation
      and
      disclosure requirements designed to facilitate comparisons between companies
      that choose different measurement attributes for similar types of assets and
      liabilities. This Statement is effective as of the beginning of an entity's
      first fiscal year beginning after November 15, 2007. Early adoption is permitted
      if the Company makes the choice in the first 120 days of that fiscal year and
      also elects to apply the provisions of SFAS 157. The Company does not expect
      SFAS 159 to have a material impact on its consolidated financial
      statements.








**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 allowance for doubtful
      accounts of $801,938 was required as of November 30, 2007.






F-10





As
                ofNovember
                30, 2007
            
            
            May
                31, 2007(audited)Accounts
                receivable, gross
            
            $
            4,005,149
            
            
            $
            5,532,760Less:
                allowance for doubtful accounts
            
            
            (801,938
            )
            
            
            (777,831
            )Accounts
                receivable, net
            
            $
            3,203,211
            
            
            $
            4,754,929








**NOTE-5      PROPERTY,
      PLANT AND EQUIPMENT, NET**





Property,
      plant and equipment, net consisted of:


As
                ofNovember
                30, 2007
            
            
            May
                31, 2007(audited)Building
            
            $
            6,308,373
            
            
            $
            6,308,373Plant
                and machinery
            
            
            4,889,431
            
            
            
            4,889,431Office
                equipment
            
            
            155,512
            
            
            
            155,042Motor
                vehicle
            
            
            34,509
            
            
            
            34,509Foreign
                translation difference
            
            
            954,942
            
            
            
            1,79312,342,767
            
            
            
            11,389,148Less:
                accumulated depreciation
            
            
            (793,411
            )
            
            
            (605,771
            )Less:
                foreign translation difference
            
            
            (44,363
            )
            
            
            (9,161
            )Property,
                plant and equipment, net
            
            $
            11,504,993
            
            
            $
            10,774,216





Depreciation
      expense for the three months ended November 30, 2007 and 2006 was $94,943 and
      $87,659, respectively.





Depreciation
      expense for the six months ended November 30, 2007 and 2006 was $187,640 and
      $135,050, respectively.








**NOTE-6**
            **OTHER
                PAYABLES AND ACCRUED
                LIABILITIES**





Other
      payables and accrued liabilities consisted of:


As
                ofNovember
                30, 2007
            
            
            May
                31, 2007(audited)Government
                levies payable
            
            $
            11,638
            
            
            $
            15,071Rental
                payable
            
            
            50,731
            
            
            
            45,926Salary
                and welfare payable
            
            
            360,767
            
            
            
            136,954Accrued
                expenses
            
            
            193,610
            
            
            
            80,763$
            616,746
            
            
            $
            278,714





**NOTE-7      MINORITY
      INTEREST**





In
      connection with the stock exchange transaction, as described in Note 2, the
      Company agreed to grant to DLX’s 30%-minority owners a two (2) year option for
      the subscription and purchase of an additional 10,000,000 newly issuable shares
      of common stock of CSGH in exchange for RMB 38,100,000, equivalent to 30% of
      the
      registered capital of DLX.






F-11




Proforma
      financial information





The
      following are summarized pro forma results of operations for the six months
      ended November 30, 2007 and 2006. In preparing this proforma 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.





Six
                months ended November 30,2007
            
            
            2006Net
                income attributable to holders of common stock
            
            $
            1,381,675
            
            
            $
            261,450Weighted
                average common shares outstanding – basic and diluted
            
            
            53,422,971
            
            
            
            45,728,370Net
                income per common share – basic and diluted
            
            $
            0.03
            
            
            $
            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 DLX, its subsidiary and has recorded an income tax provision
      for the period ended November 30, 2007.





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





Six
                months ended November 30,2007
            
            
            2006Loss
                subject to U.S. operation
            
            $
            (118,433
            )
            
            $
            -Income
                subject to PRC operation
            
            
            2,240,411
            
            
            
            390,224Income
                before income taxes and minority interest
            
            $
            2,121,978
            
            
            $
            390,224





*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
      November 30, 2007, the Company’s U.S. operations 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 2027. The Company has provided for a full valuation allowance for
      any
      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.






F-12





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
      period ended November 30, 2007 and 2006 are as follows:





Six
                months ended November 30,2007
            
            
            2006Income
                before income taxes and minority interest
            
            $
            2,240,411
            
            
            $
            390,224Income
                tax rate
            
            
            33%
            
            
            
            33%739,336
            
            
            
            128,774Add:
                items not deductible to taxes-
                Provision and accrued expenses
            
            
            967
            
            
            
            (4,000
            )Income
                tax expenses
            
            $
            740,303
            
            
            $
            124,774





The
      following table sets forth the significant components of the aggregate net
      deferred tax assets of the Company as of November 30, 2007:





November
                30, 2007Deferred
                tax assets:-
                Net operating loss carryforwards
            
            $
            41,451Less:
                valuation allowance
            
            
            (41,451
            )Deferred
                tax assets
            
            $
            -





As
      of
      November 30, 2007, a valuation allowance of $41,451 was provided to the deferred
      tax assets due to the uncertainty surrounding their realization.




**NOTE-9      CAPITAL
      TRANSACTIONS**





On
      August
      24, 2007, 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
      November 30, 2007, 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 November 30, 2007, the customers who account for 10% or
      more
      of revenues of the Company are presented as follows:






F-13





Revenues
            
            
            Percentage
              of
                revenues
            
            
            Trade
                accounts
              receivableCustomer
                A
            
            $
            1,867,850
            
            
            
            35%
            
            
            $
            1,890,668Customer
                B
            
            
            1,735,987
            
            
            
            33%
            
            
            
            1,757,194Customer
                C
            
            
            962,340
            
            
            
            18%
            
            
            
            -Customer
                D
            
            
            529,586
            
            
            
            10%
            
            
            
            -Total:
            
            $
            5,095,763
            
            
            
            96%
            
            
            $
            3,647,862





For
      the
      six months ended November 30, 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
                B
            
            $
            2,926,797
            
            
            
            32%
            
            
            $
            1,757,194Customer
                E
            
            
            2,110,038
            
            
            
            23%
            
            
            
            -Customer
                A
            
            
            1,861,804
            
            
            
            20%
            
            
            
            1,890,668Customer
                C
            
            
            959,224
            
            
            
            11%
            
            
            
            -Total:
            
            $
            7,857,863
            
            
            
            86%
            
            
            $
            3,647,862








For
      the
      three months ended November 30, 2006, the customers who account for 10% or
      more
      of revenues of the Company are presented as follows:





Revenues
            
            
            Percentage
              of
                revenues
            
            
            Trade
                accounts
              receivableCustomer
                E
            
            $
            1,485,657
            
            
            
            86%
            
            
            $
            2,719,795Customer
                F
            
            
            243,737
            
            
            
            14%
            
            
            
            -Total
            
            $
            1,729,394
            
            
            
            100%
            
            
            $
            2,719,795





For
      the
      six months ended November 30, 2006, the customers who account for 10% or more
      of
      revenues of the Company are presented as follows:





Revenues
            
            
            Percentage
              of
                revenues
            
            
            Trade
                accounts
              receivableCustomer
                E
            
            $
            2,684,936
            
            
            
            89%
            
            
            $
            2,719,795





(b)           Major
      vendors





For
      the
      three months ended November 30, 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
            
            $
            1,777,669
            
            
            
            37%
            
            
            $
            -Vendor
                B
            
            
            1,468,151
            
            
            
            31%
            
            
            
            165,757Vendor
                C
            
            
            1,144,383
            
            
            
            24%
            
            
            
            -Total
            
            $
            4,390,203
            
            
            
            92%
            
            
            $
            165,757








F-14





For
      the
      six months ended November 30, 2007, the vendors who account for 10% or more
      of
      purchases of the Company are presented as follows:





Purchases
            
            
            Percentage
              of
                purchases
            
            
            Accounts
              payableVendor
                B
            
            $
            3,736,397
            
            
            
            47%
            
            
            $
            165,757Vendor
                A
            
            
            1,806,514
            
            
            
            31%
            
            
            
            -Vendor
                C
            
            
            1,140,678
            
            
            
            22%
            
            
            
            -Total
            
            $
            6,683,589
            
            
            
            100%
            
            
            $
            165,757





For
      the
      three months ended November 30, 2006, the vendors who account for 10% or more
      of
      purchases of the Company are presented as follows:





Purchases
            
            
            Percentage
              of
                purchases
            
            
            Accounts
              payableVendor
                D
            
            $
            1,848,988
            
            
            
            100%
            
            
            $
            -





For
      the
      six months ended November 30, 2006, the vendors who account for 10% or more
      of
      purchases of the Company are presented as follows:





Purchases
            
            
            Percentage
              of
                purchases
            
            
            Accounts
              payableVendor
                D
            
            $
            1,056,641
            
            
            
            100%
            
            
            $
            -





(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.




**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 $6,582.





2.
            On
                June 9, 2007, the Company’s 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 November 30, 2007, 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-15


**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 revenues,
      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 factors discussed above in the section entitled "Risk Factors" and 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**






2




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 Peoples' 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..






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 November 30, 2007**




In
      calendar year 2007, we made significant strides in our sales and manufacturing
      capabilities.  Sales for calendar year 2007 increased approximately
      300% from 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 will be taking and filling
      orders for it commencing the first calendar quarter of 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.





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.





3




**Results
      of Operations**




The
      following table sets forth our statements of operations for the six months
      ended
      November 30, 2007 and the three months ended November 30, 2007:




**Six-Months
                Ended**
            
            
            **Three-Months
                Ended****November
                30,**
            
            
            **November
                30,**
            
            
            **November
                30,**
            
            
            **November
                30,****2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006****(Unaudited)**
            
            
            **(Unaudited)**
            
            
            **(Unaudited)**
            
            
            **(Unaudited)**Sales
            
            $
            9,093,027
            
            
            $
            3,023,380
            
            
            $
            5,357,190
            
            
            $
            1,739,287Cost
                of Sales
            
            
            6,001,286
            
            
            
            1,995,431
            
            
            
            3,548,070
            
            
            
            1,196,081Gross
                Profit
            
            
            3,091,741
            
            
            
            1,027,949
            
            
            
            1,809,120
            
            
            
            543,206Operating
                ExpensesGeneral
                and administrative
            
            
            696,999
            
            
            
            430,488
            
            
            
            518,765
            
            
            
            337,023Research
                and development
            
            
            86,400
            
            
            
            72,187
            
            
            
            61,527
            
            
            
            60,712Depreciation
            
            
            187,640
            
            
            
            135,050
            
            
            
            94,943
            
            
            
            48,533Total
                operating expenses
            
            
            971,039
            
            
            
            637,725
            
            
            
            675,235
            
            
            
            446,268Operating
                income
            
            
            2,120,702
            
            
            
            390,224
            
            
            
            1,133,885
            
            
            
            96,938Other
                Income (Expenses)
            
            
            1,276
            
            
            
            -
            
            
            
            1,276
            
            
            
            -Income
                Before Income Taxes and Minority Interest
            
            
            2,121,978
            
            
            
            390,224
            
            
            
            1,135,161
            
            
            
            96,938Provision
                for Income Taxes
            
            
            (740,303
            )
            
            
            (128,774
            )
            
            
            (396,679
            )
            
            
            (31,989
            )Minority
                Interest
            
            
            (450,032
            )
            
            
            (78,435
            )
            
            
            (241,227
            )
            
            
            (19,485
            )Net
                Income
            
            
            931,643
            
            
            
            183,015
            
            
            
            497,255
            
            
            
            45,464Other
                Comprehensive Income: Foreign Currency Translation Gain
            
            
            1,045,833
            
            
            
            168,438
            
            
            
            381,624
            
            
            
            51,847




**THE
      SIX MONTHS ENDED NOVEMBER 30, 2007 COMPARED TO THE SIX MONTHS ENDED NOVEMBER
      30,
      2006**




*Net
      Revenue*




4




Net
      revenue for the six months ended November 30, 2007 was $9,093,027, an increase
      of $6,069,647 or 200.76% from net revenue of $3,023,380 for the comparable
      period in 2006. 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 six months ended November 30, 2007 was $6,001,286, an increase
      of $4,005,855 or 200.76% from $1,995,431 for the comparable period in 2006.
      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 six months ended November 30, 2007 was $3,091,741, an increase
      of
      $2,063,792 or 200.77% from $1,027,949 for the comparable period in
      2006.  The increase in gross profit was primarily due to revenue
      generated by increased production and sales.




*General
      and Administrative Expenses*




General
      and administrative expenses for the six months ended November 30, 2007 were
      $696,999, an increase of $266,511 or 61.91% from $430,488 for the comparable
      period in 2006. The increase was primarily attributable to the hiring of
      additional personnel and the setup of an administrative office in the United
      States.




*Research
      and Development Expenses*




Research
      and development expenses for the six months ended November 30, 2007 were
      $86,400, an increase of $14,213 or 19.69% compared to $72,187 for the comparable
      period in 2006. The increase was primarily attributable to the hiring of
      additional research and development personnel.




*Depreciation
      Expenses*




Depreciation
      expenses for the six months ended November 30, 2007 were  $187,640, an
      increase of $52,590 or 38.94% compared to $135,050 for the comparable period
      in
      2006. The increase in our depreciation expenses is primarily attributable to
      the
      acquisition of additional of equipment for our operations.




*Income
      (Loss) From Operations*




Income
      from operations for the six months ended November 30, 2007 was $2,120,702,
      an
      increase of $1,730,478 or 443.46% compared to $390,224 for the comparable period
      in 2006. The increase resulted primarily from the increase in sale of our
      productions and consequently, our revenue. Also, we had only begun production
      and sales of cobaltosic oxide in the People’s Republic of China on April 1, 2006
      and needed lead time to ramp up our production and sales.




*Other
      Income*




Interest
      income for the six months ended November 30, 2007 was  $1,276. The Company
      had no interest income for the comparable period in 2006. The increase resulted
      primarily from interest income derived from cash in our bank
      accounts.




5




*Income
      Taxes*




Provision
      for income tax expenses was $740,303 for the six months ended November 30,
      2007,
      an increase of $611,529 or 490.11% as compared to $128,774 for the comparable
      period in 2006.  The increase resulted primarily from the increase in
      our revenue due to increased sales.




*Minority
      Interest*




The
      minority interest for the six months ended November 30, 2007 was $450,032,
      an
      increase of $371,597 or 473.76% as compared to $78,435 for the comparable period
      in 2006.




*Foreign
      Currency Translation Gain*




The
      foreign currency translation gain for the six months ended November 30, 2007
      was
      $1,045,833, an increase of $877,395 or 520.90% as compared to $168,438 for
      the
      comparable period in 2006.  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 six months ended November 30, 2007 was $931,643, an increase
      of
      $748,628 or 409.05% as compared to $183,015 for the comparable period in
      2006.




**THE
      THREE MONTHS ENDED NOVEMBER 30, 2007 COMPARED TO THE THREE MONTHS ENDED NOVEMBER
      30, 2006**




*Net
      Revenue*




Net
      revenue for the three months ended November 30, 2007 was $5,357,190, an increase
      of $3,617,903 or 208.01% from net revenue of $1,739,287 for the comparable
      period in 2006.  The increase resulted from increased customer demand
      and sales.




*Cost
      of Revenue*




Cost
      of
      revenue for the three months ended November 30, 2007 was $3,548,070, an increase
      of 2,351,989 or 196.64% from $1,196,081 for the comparable period in
      2006.  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 November 30, 2007 was $1,809,120, an
      increase of $1,265,914 or 233.04% from $543,206 for the comparable period in
      2006. The increase in gross profit was primarily due to revenue generated by
      increased customer demand and production, and consequently increased sales
      of
      our products.






6




*General
      and Administrative Expenses*




General
      and administrative expenses for the three months ended November 30, 2007 were
      $518,765, an increase of $181,742 or 53.93% from $337,023 for the comparable
      period in 2006.  The increase was primarily attributable to the hiring
      of additional personnel and the costs in setting up an administrative office
      in
      the United States.




*Research
      and Development Expenses*




Research
      and development expenses for the three months ended November 30, 2007 were
      $61,527, an increase of $815 or 1.34% compared to $60,712 for the comparable
      period in 2006. The increase is primarily the result of hiring of additional
      research and development personnel**.**




*Depreciation
      Expenses*




Depreciation
      expenses for the three months ended November 30, 2007 were $94,943, an increase
      of $46,410 or 95.63% compared to $48,533 for the comparable period in
      2006.  This increase is primarily attributable to our acquisition of
      more equipment for our operations.




*Income
      (Loss) From Operations*




Income
      from operations for the three months ended November 30, 2007 was $1,133,885,
      an
      increase of $1,036,947 or 1069.70% compared to $96,938 for the comparable period
      in 2006.  The increase resulted primarily from the increase in sales
      and revenue.  Also, we had only begun production and sales of
      cobaltosic oxide in the People’s Republic of China on April 1, 2006 and needed
      lead time to ramp up our production and sales.




*Other
      Income*




Interest
      income for the three months ended November 30, 2007 was $1,276. We had no
      interest income for the comparable period in 2006. The increase resulted
      primarily from interest income derived from cash in our bank
      accounts.




*Income
      Taxes*




Provision
      for income tax expenses was $396,679 for the three months ended November 30,
      2007, an increase of $364,690 or 1140.05% as compared to $31,989 for the
      comparable period in 2006.




*Minority
      Interest*




The
      minority interest for the three months ended November 30, 2007 was $241,227,
      an
      increase of $221,742 or 1138.01% as compared to $19,485 for the comparable
      period in 2006.




*Foreign
      Currency Translation Gain*




The
      foreign currency translation gain for the three months ended November 30, 2007
      was $381,624, an increase of $329,777 or 636.06% as compared to $51,847 for
      the
      comparable period in 2006.  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.






7




*Net
      Income*




Net
      income for the three months ended November 30, 2007 was $497,255, an increase
      of
      $451,791 or 993.73% as compared to $45,464 for the comparable period in
      2006.




**Liquidity
      and Capital Resources**




*Cash
      and Cash Equivalent*




Our
      cash
      and cash equivalent were $813,163 at the beginning of the six months ended
      November 30, 2007 and increased to $2,444,688 by the end of such period, an
      increase of $2,174,096 or 803.46% from $270,592 for the same period in
      2006.




*Net
      cash provided by operating activities*




Net
      cash
      provided by our operating activities was $1,580,235 for the six months ended
      November 30, 2007, an increase of $2,249,079 or 336.26% as compared to net
      cash
      of $(668,844) for the same period in 2006.  This increase was due
      primarily to the growth in sales revenue with the decrease in accounts
      receivable by $1,673,161, the increase in value-added tax payable by $403,481,
      and the increase in other payable and accrued liabilities by $333,774, partially
      offset by the decrease in accounts payable by $441,807, decrease in customer
      deposits by $693,937, and decrease in income tax payable by $69,359 in this
      period.




*Net
      cash used in investing activities*




Net
      cash
      used in investing activities was $(470) for the six months ended November 30,
      2007, an increase of $54,934 or 99.15% from $(55,404) for the same period in
      2006. The increase was primarily attributable to the purchase of
      equipment.




*Net
      cash used in financing activities*




There
      was
      no net cash generated from financing activities for the six months ended
      November 30, 2007, as compared to $743,621 for the same period in 2006 because
      there were no advances from related parties.




*Income
      Taxes*




Income
      tax expense was $809,662 for the six months ended November 30, 2007, an increase
      of $804,780 or 164.85% compared to $4,882 for the same period in 2006. The
      increase resulted primarily from the increase in income from
      operations.




*Foreign
      currency translation adjustment*




Foreign
      currency translation adjustment resulted in $51,760 for the six months ended
      November 30, 2007, an increase of $7,469 or 16.86% compared to $44,291 for
      the
      same period in 2006.




*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.




8




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 third quarter
      of
      the 2008 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*




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
      $6,582.




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 November 30, 2007, 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**




We
      have
      disclosed in Note 3 to our financial statements those accounting policies that
      we consider to be significant in determining our results of operations and
      our
      financial position which are incorporated by reference herein.




9




Management’s
      discussion and analysis of its financial condition and results of operations
      are
      based upon our consolidated financial statements, which have been prepared
      in
      accordance with accounting principles generally accepted in the United States.
      Our financial statements reflect the selection and application of accounting
      policies which require management to make significant estimates and judgments.
      Management bases its estimates on historical experience and on various other
      assumptions that are believed to be reasonable under the circumstances. We
      believe that the following reflect the more critical accounting policies that
      currently affect our financial condition and results of operations.





The
      significant accounting policies which we believe are the most critical to aid
      in
      fully understanding and evaluating our reported financial results include the
      following:




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 our final test procedures and the
      customer’s acceptance.




We
      are
      subject to Valued Added Tax (“VAT”) which is levied on the majority of the
      products of DLX 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 us in addition to the invoiced value of purchases to the extent not
      refunded for export sales.




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




Income
      Taxes




We
      account 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 . ”* We have determined an estimated annual effective tax rate. The
      rate will be revised, if necessary, as of the end of each successive interim
      period during our fiscal year to our 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.




We
      also
      account 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.




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.






10





The
      reporting currency of the Company is the United States dollar ("US
      dollars"). Our subsidiary in the PRC, maintains its books and records
      in its local currency, the Renminbi (“RMB”), which is the primary currency
      of the economic environment in which it operates.





In
      general, for consolidation purposes, assets and liabilities of our
      subsidiaries whose functional currency is not the US dollar are
      translated into US dollars, in accordance with SFAS No 52. “*Foreign Currency
      Translation”*, using the exchange rate on the balance sheet date. Revenue
      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 United States dollars (“US$”) has been made at the
      following exchange rates for the respective period:




2007
            
            
            2006Months
                end RMB:US$ exchange rate
            
            
            7.3919
            
            
            
            7.8400Average
                monthly RMB:US$ exchange rate
            
            
            7.5065
            
            
            
            7.9200


Recently
      issued accounting standards




In
      September 2006, the FASB issued SFAS No. 157, "*Fair Value Measurement*"
      ("SFAS 157") which defines fair value, establishes a framework for measuring
      fair value in generally accepted accounting principles and expands the
      disclosures about fair value measurement. This Statement was developed to
      provide guidance for consistency and comparability in fair value measurements
      and disclosures and applies under other accounting pronouncements that require
      or permit fair value measurements. This Statement is effective for financial
      statements issued for fiscal years beginning after November 15, 2007 and interim
      periods within those fiscal years. This Statement is not expected to have a
      material impact on the Company's consolidated financial statements.




In
      February 2007, the FASB issued Statement of Financial Accounting Standards
      No.
      159, *"The Fair Value Option for Financial Assets and Financial
      Liabilities"* ("SFAS 159"). ** This Statement provides
      companies with an option to report selected financial assets and liabilities
      at
      fair value. The Standard's objective is to reduce both the complexity in
      accounting for financial instruments and the volatility in earnings caused
      by
      measuring related assets and liabilities differently. SFAS 159 also establishes
      presentation and disclosure requirements designed to facilitate comparisons
      between companies that choose different measurement attributes for similar
      types
      of assets and liabilities. This Statement is effective as of the beginning
      of an
      entity's first fiscal year beginning after November 15, 2007. Early adoption
      is
      permitted if we make the choice in the first 120 days of that fiscal year and
      also elects to apply the provisions of SFAS 157. We do not expect SFAS 159
      to
      have a material impact on its consolidated financial statements.




**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 November 30, 2007 our
      disclosure controls and procedures were effective.




11




During
      the quarter ended November 30, 2007, 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.






**PART
      II – OTHER INFORMATION**







**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.




12











**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.Date:
                  January 14, 2008
            By:
            /s/ Bin
              WangName:  Bin
              WangTitle:   President,
              Chief Executive Officer and Chairman








13