**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      DC 20549**




**FORM
      10-Q**




(Mark
      One)


x
            **QUARTERLY
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE OF
                1934**




**For
      the quarterly period ended March 31, 2008**




o
            **TRANSITION
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE OF
                1934**




**For
      the transition period from _______ to _________**




**Commission
      file number:** 000-21419




**CHINA
                DISPLAY TECHNOLOGIES, INC.**(Name
                of Small Business Issuer in Its Charter)




**Delaware**
            
            **23-2753988**(State
                or Other Jurisdiction of Incorporation or Organization)
            
            (I.R.S.
                Employer Identification No.)




**12A
                Block, Xinhe Road, Xinqiao No. 3**
              **Industrial
                Zone, Shajing District, Baoan Town, Shenzen, China
                150090**(Address
                of Principal Executive Offices and Zip Code)**86-0755-29758811**(Issuer's
                telephone number)**N/A**(Former
                name, former address and former fiscal year, if changed since last
                report)




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


Yes  x No
      o




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





Large
                accelerated filer o
            
            Accelerated
                filer oNon-accelerated
                filer o
            
            Smaller
                reporting company x





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act)


Yes o No x




Indicate
      the number of shares outstanding of each of the issuer's classes of common
      stock, as of the latest practicable date: 11,942,906 shares at March 31,
      2008.










**CHINA
      DISPLAY TECHNOLOGIES, INC. AND SUBSIDIARIES**


**FORM
      10-Q**


**QUARTERLY
      PERIOD ENDED MARCH 31, 2008**





**INDEX**




PagePART
                I - FINANCIAL INFORMATIONItem
                1.
            Consolidated
                Financial StatementsConsolidated
                Balance Sheet (Unaudited) at March 31, 2008 and December 31,
                2007
            3Consolidated
                Statements of Operations (Unaudited)For
                the Three Months Ended March 31, 2008 and 2007
            4Consolidated
                Statements of Cash Flows (Unaudited)For
                the Three Months Ended March 31, 2008 and 2007
            5Notes
                to Unaudited Consolidated Financial Statements
            6Item
                2.
            Management's
                Discussion and Analysis or Plan of Operation
            20Item
                3.
            Quantitative
                and Qualitative Disclosure About Market RisksItem
                4.
            Controls
                and Procedures
            24PART
                II - OTHER INFORMATIONItem
                6.
            Exhibits
            25









**CHINA
                DISPLAY TECHNOLOGIES, INC. AND SUBSIDIARIES****CONSOLIDATED
                BALANCE SHEETS**




ASSETS
            
            **March
                31,**
              **2008**
            ****
            **December
                31, 2007**(Unaudited)Current
                AssetsCash
                and cash equivalents
            
            $
            4,570,098
            
            $
            2,949,356Restricted
                cash (Note 8 )
            
            
            1,971,561
            
            
            2,039,314Trade
                receivables, net of allowance for doubtful accounts (Note 4)
            
            
            6,085,985
            
            
            5,279,282Inventories,
                net (Note 5)
            
            
            2,361,508
            
            
            1,692,934Advances
                to suppliers (Note 9 )
            
            
            3,719,590
            
            
            5,498,257Prepaid
                expenses and other receivables (Note 10 )
            
            
            98,708
            
            
            259,170Total
                Current Assets
            
            
            18,807,450
            
            
            17,718,313Property
                and Equipment, net (Note 6)
            
            
            2,890,731
            
            
            2,441,264Other
                assets (Note 11)
            
            
            632,869
            
            
            1,059,222Total
                Assets
            
            $
            22,331,050
            
            $
            21,218,799LIABILITIESCurrent
                LiabilitiesAccounts
                Payables and accrued liabilities
            
            $
            2,119,392
            
            $
            2,132,499Short
                term bank loans (Notes 7)
            
            
            5,231,616
            
            
            5,600,896Various
                taxes payable
            
            
            252,453
            
            
            383,397Wages
                payable
            
            
            106,162
            
            
            103,944Corporate
                taxes payable
            
            
            334,313
            
            
            432,532Amount
                due to director
            
            
            31,081Total
                Current Liabilities
            
            
            8,075,017
            
            
            8,653,268Commitments
                and Contingencies (Note 14)
            
            
            -
            
            
            -Stockholders'
                Equity (Note 12)Series
                A convertible preferred stock, $.001 par value; 20,000,000
                sharesauthorized;
                issued and outstanding - 6,960,296 shares at March 31,
              2008;
                3,703,704 shares at December 31, 2007;liquidation
                preference -- $7,517,120 at March 31, 2008; $4,000,000 at
              December
                31, 2007
            
            
            6,961
            
            
            3,704Common
                stock. $.001 par value; 100,000,000 shares authorized;issued
                and outstanding - 11,942,906 shares at March 31, 2008;
              11,600,000
                shares at December 31, 2007
            
            
            11,943
            
            
            11,600Additional
                paid-in capital
            
            
            6,405,309
            
            
            6,083,501Accumulated
                other comprehensive income
            
            
            1,230,120
            
            
            692,625Statutory
                reserves
            
            
            198,550
            
            
            198,550Retained
                earnings
            
            
            6,403,150
            
            
            5,575,551Total
                Stockholders' Equity
            
            
            14,256,033
            
            
            12,565,531Total
                Liabilities and Stockholders' Equity
            
            $
            22,331,050
            
            $
            21,218,799





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





3




**CHINA
                DISPLAY TECHNOLOGIES, INC. AND SUBSIDIARIES****CONSOLIDATED
                STATEMENTS OF OPERATIONS****(Unaudited)**




**For
                the Three Months Ended**
            ********
            ****
            ****
            ****
            **March
                31,**
            ********
            ****
            ****
            ****
            **2008**
            ****
            **2007**Revenues
            
            
            
            
            $
            6,723,693
            
            $
            4,592,390Cost
                of Sales
            
            
            
            
            
            5,222,193
            
            
            3,589,555Gross
                Profit
            
            
            
            
            
            1,501,500
            
            
            1,002,835Operating
                Expenses:Selling
                Expenses
            
            
            
            
            
            158,831
            
            
            63,469Research
                and development
            
            
            
            
            
            125,793
            
            
            106,288General
                and administrative
            
            
            
            
            
            155,978
            
            
            147,886Total
                Expenses
            
            
            
            
            
            440,602
            
            
            317,643Income
                from Operations
            
            
            
            
            
            1,060,898
            
            
            685,192Other
                Income (Expenses):Other
            
            
            
            
            
            (602
            )
            
            538Interest
                Income
            
            
            
            
            
            2,303
            
            
            56Interest
                Expense
            
            
            
            
            
            (167,072
            )
            
            (9,568
            )Total
                Other Income (Expenses)
            
            
            
            
            
            (165,371
            )
            
            (8,974
            )Income
                Before Income Taxes
            
            
            
            
            
            895,527
            
            
            676,218Provision
                for Income Taxes
            
            
            
            
            
            67,928
            
            
            50,716Net
                Income
            
            
            
            
            $
            827,599
            
            $
            625,502Net
                earnings per share of common stock, basic
            
            
            
            
            $
            0.07
            
            $
            0.05Weighted
                average number of shares outstanding, basic
            
            
            
            
            
            11,751,228
            
            
            11,376,000Net
                earnings per share of common stock, diluted
            
            
            
            
            $
            0.04
            
            $
            0.05Weighted
                average number of shares outstanding, diluted
            
            
            
            
            
            22,781,724
            
            
            11,376,000




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




4


**CHINA
                DISPLAY TECHNOLOGIES, INC. AND SUBSIDIARIES****CONSOLIDATED
                STATEMENTS OF CASH FLOWS****(Unaudited)**




**For
                the Three Months Ended****March
                31,******
            
            ****
            
            **2008**
            
            **2007**Cash
                flows from operating activitiesNet
                income
            
            
            
            
            $
            827,599
            
            $
            625,502Adjustments
                to reconcile net income to cashprovided
                by (used in) operating activities:Depreciation
            
            
            
            
            
            141,356
            
            
            99,366Changes
                in operating assets and liabilities:Decrease
                (Increase) in assets:Accounts
                receivable, net
            
            
            
            
            
            (806,703
            )
            
            (905,305
            )Advances
                to suppliers
            
            
            
            
            
            1,778,667Inventories,
                net
            
            
            
            
            
            (668,573
            )
            
            (207,979
            )Prepaid
                expenses and other receivables
            
            
            
            
            
            160,462
            
            
            (40,548
            )Other
                assets
            
            
            
            
            
            426,353
            
            
            -Increase
                (Decrease) in liabilities:Accounts
                payables and accrued liabilities
            
            
            
            
            
            (13,107
            )
            
            (208,413
            )Various
                tax payable
            
            
            
            
            
            (130,944
            )
            
            (124,401
            )Wage
                payable
            
            
            
            
            
            2,218
            
            
            (109
            )Corporate
                tax payable
            
            
            
            
            
            (98,219
            )
            
            50,916Net
                cash provided by (used in) operating activities
            
            
            
            
            
            1,619,109
            
            
            (710,971
            )Cash
                flows from investing activitiesPurchase
                of property and equipment
            
            
            
            
            
            (590,823
            )
            
            (22,170
            )Net
                cash used in investing activities
            
            
            
            
            
            (590,823
            )
            
            (22,170
            )Cash
                flows from financing activitiesIncrease
                in restricted cash
            
            
            
            
            
            67,753
            
            
            -Proceeds
                from loans payable
            
            
            
            
            
            
            
            
            638,083Repayment
                of short term loan
            
            
            
            
            
            (369,280
            )
            
            -Net
                proceeds from warrant exercise
            
            
            
            
            
            325,407
            
            
            -Amount
                due to director
            
            
            
            
            
            31,081
            
            
            -Repayment
                of related party loans
            
            
            
            
            
            -
            
            
            110,504Net
                cash provided by (used in) financing activities
            
            
            
            
            
            54,961
            
            
            748,587Effect
                of exchange rate changes on cash
            
            
            
            
            
            537,495
            
            
            18,541Net
                increase (decrease) in cash
            
            
            
            
            
            1,620,742
            
            
            33,987Cash,
                beginning of period
            
            
            
            
            
            2,949,356
            
            
            134,991Cash,
                end of period
            
            
            
            
            $
            4,570,098
            
            $
            168,978Supplemental
                disclosure information:Interest
                expense paid
            
            
            
            
            $
            167,072
            
            $
            9,568Income
                taxes paid
            
            
            
            
            $
            185,656
            
            $
            -


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


5




**1.**
              **Organization**


China
      Display Technologies, Inc. (the “Company”) was incorporated in Delaware on
      September 29, 2004 under the name Lincoln International Corporation (“Lincoln”).
      On September 21, 2007, its corporate name was changed to SUNY Display
      Technologies, Inc., and on October 11, 2007, its corporate name was changed
      to
      China Display Technologies, Inc. References to Lincoln relate to the Company
      prior to the reverse acquisition. At the time of the acquisition, Lincoln was
      not engaged in any active business.




On
      September 12, 2007, the Company executed a share exchange agreement (“Share
      Exchange Agreement”) with Lawrence Kwok-Yan
      Chan, the sole stockholder of Keep On Holdings, Limited, a British Virgin Island
      corporation incorporated on April 18, 2007 (“Keep On”) , whereby
      the Company acquired all of the outstanding common stock of Keep On in exchange
      for newly-issued stock of the Company to Keep On’s sole shareholder.





Under
      the
      Share Exchange Agreement, on September 12, 2007, the Company issued
      11,376,000 shares of common stock to the Keep On Stockholder and his assignees
      in exchange for 100% of the stock of Keep On. Pursuant to a separate agreement,
      the Company acquired from the principal stockholder 290,000 shares of the
      Company’s common stock he owned immediately prior to the closing for $340,133
      and the Company repaid obligations to the principal stockholders due to him
      in
      the aggregate amount of $284,867. The shares acquired from the principal
      stockholder were cancelled. After
      giving effect to the cancellation of shares, the Company had 58,000 shares
      of
      common stock outstanding immediately prior to Closing. After the Closing, the
      Company had a total of 11,600,000 shares of common stock outstanding, with
      the
      Keep On stockholder and his assignees owning 98.1% of the total issued and
      outstanding shares of the Company's common stock.





The
      Company is the sole stockholder of Keep On and Keep On is the sole stockholder
      of Suny Electronics (Shenzhen) Company Limited (“Suny”), a corporation organized
      under the laws of the Peoples’ Republic of China. Suny was organized on November
      2, 2004 and commenced operations in 2005. On July 19, 2007, Keep On acquired
      all
      of the equity interest in Suny.




The
      Company’s business is the business of Suny. Suny designs, manufactures and
      markets small to medium-sized light emitting diode, known as “LEDs,” and cold
      cathode fluorescent lamp, known as “CCFL,” for various types of displays, such
      as amorphous
      silicon thin film liquid
      crystal displays, low
      temperature poly-silicon thin film liquid
      crystal displays, super-twisted liquid crystal display, colored super-twisted
      liquid crystal display, twisted liquid crystal display, and mono LCDs for liquid
      crystal displays. Suny’s products are used in a variety of products, such as
      mobile phones, PDA’s, GPS system, portable DVD/VCD players, MP3 and MP4, medical
      equipment, household appliances with displays. Its emphasis is on small to
      medium-size back-light unit manufacturing.




As
      a
      result of the Share Exchange Agreement, t he
      acquisition of Keep On by the Company was accounted for as a reverse acquisition
      because on a post-acquisition basis, the former stockholder of Keep On and
      his
      assignees held a majority of the outstanding common stock of the Company on
      a
      voting and fully-diluted basis. As a result, Keep On is deemed to be the
      acquirer for accounting purposes. Accordingly, the consolidated financial
      statement data presented are those of Keep On and its wholly-owned subsidiary,
      Suny, for all periods prior to the Company’s acquisition of Keep On on September
      12, 2007, and the financial statements of the consolidated companies from the
      acquisition date forward.





On
      November 8, 2007, the Company amended its certificate of incorporation which
      (i)
      effected a one-for-7.5 reverse split and (ii) changed the authorized capital
      stock to 20,000,000 shares of preferred stock, par value $.001 per share, and
      100,000,000 shares of common stock, par value $.001 per share. All share and
      per
      share information in these financial statements give retroactive effect to
      the
      reverse split and the change in par value.




**2.**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING
                POLICIES**





**a.**  **Basis
      of Preparation**





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





6





The
      accompanying unaudited condensed consolidated financial statements have been
      prepared in accordance with accounting principles generally accepted in the
      United States of America for interim financial information and with the
      instructions to Form 10-Q and Article
      8-03 of Regulation S-X .
      In the
      opinion of management, the condensed consolidated financial statements reflect
      all adjustments (consisting of normal recurring adjustments) considered
      necessary for a fair presentation of the results China Display Technologies,
      Inc. and its subsidiaries for the periods presented. Operating results for
      interim periods are not necessarily indicative of results that may be expected
      for the fiscal year as a whole. The preparation of the financial statements
      in
      conformity with accounting principles generally accepted in the U.S. requires
      management to make estimates and assumptions that affect the reported amounts
      of
      assets, liabilities, revenues, expenses, and the related disclosures at the
      date
      of the financial statements and during the reporting period. Actual results
      could materially differ from these estimates.





**b.**  . **Basis
      of consolidation**





The
      consolidated financial statements include the accounts of the Company and its
      wholly-owned subsidiaries, Keep On and Suny. Intercompany transactions have
      been
      eliminated in consolidation.





**c.**  **Use
      of Estimates**





The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosure of contingent assets and liabilities as well as
      the
      reported amounts of revenues and expenses. Actual results could differ from
      these estimates.





**d.**  **Fair
      values of financial instruments**





The
      Company values its financial instruments as required by Statement of Financial
      Accounting Standard (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 consist of cash and cash equivalent,
      restricted cash, accounts receivable, inventories, advance to suppliers, prepaid
      expenses and other receivables, accounts payable, accrued expenses, short term
      loan, various taxes payable, wages payable and corporate taxes
      payable.





As
      of the
      balance sheet date, the estimated fair values of the financial instruments
      were
      not materially different from their carrying values as presented due to the
      short maturities of these instruments and that the interest rates on the
      borrowings approximate those that would have been available for loans of similar
      remaining maturity and risk profile at respective year ends.





**e.**  **Cash
      and Cash Equivalents**





Cash
      and
      cash equivalents include cash on hand, demand deposits with banks and liquid
      investments with an original maturity of three months or less.





**f.**  **Accounts
      Receivable**





Accounts
      receivables are recognized and carried at original invoiced amount less an
      allowance for uncollectible accounts, as needed.





The
      Company uses the aging method to estimate the valuation allowance for
      anticipated uncollectible receivable balances. Under the aging method, bad
      debts
      percentages determined by management based on historical experience as well
      as
      current economic climate are applied to customers’ balances categorized by the
      number of months the underlying invoices have remained outstanding. The
      valuation allowance balance is adjusted to the amount computed as a result
      of
      the aging method. When facts subsequently become available to indicate that
      the
      amount provided as the allowance was incorrect, the Company makes an adjustment,
      which is classified as a change in estimate.





7


**g.**  **Inventories**





Inventories
      are stated at the lower of cost, as determined on a weighted average basis,
      or
      market. Costs of inventories include purchase and related costs incurred in
      bringing the products to their present location and condition. Market value
      is
      determined by reference to selling prices after the balance sheet date or to
      management’s estimates based on prevailing market conditions. The management
      writes down the inventories to market value if market value is below cost.
      The
      management also regularly evaluates the composition of its inventories to
      identify slow-moving and obsolete inventories to determine if a valuation
      allowance is required.





**h.**  **Property
      and Equipment**





Property
      and equipment are initially recognized recorded at cost. Gains or losses on
      disposals are reflected as gain or loss in the period of disposal. The cost
      of
      improvements that extend the life of plant and equipment are capitalized. These
      capitalized costs may include structural improvements, equipment and fixtures.
      All ordinary repairs and maintenance costs are expensed as
      incurred.





Depreciation
      for financial reporting purposes is provided using the straight-line method
      over
      the estimated useful lives of the assets:





Production
                machinery and equipment
            
            8
                yearsLeasehold
                improvements
            
            10
                yearsOffice
                and other equipment
            
            5
                yearsAutomobiles
            
            5
                years





**i.**  **Impairment
      of Long-Lived Assets**





The
      Company accounts for impairment of plant and equipment and amortizable
      intangible assets in accordance with SFAS No. 144, “Accounting for Impairment of
      Long-Lived Assets and Long-Lived Assets to be Disposed Of”, which requires the
      Group to evaluate a long-lived asset for recoverability when there is event
      or
      circumstance that indicate the carrying value of the asset may not be
      recoverable. An impairment loss is recognized when the carrying amount of a
      long-lived asset or asset group is not recoverable (when carrying amount exceeds
      the gross, undiscounted cash flows from use and disposition) and is measured
      as
      the excess of the carrying amount over the asset’s (or asset group’s) fair
      value.





**j.**  **Comprehensive
      income**





SFAS
      No.130, “Reporting Comprehensive Income”, requires disclosure of all components
      of comprehensive income and loss on an annual and interim basis. Comprehensive
      income and loss is defined as the change in equity of a business enterprise
      during a period from transactions and other events and circumstances from
      non-owner sources. The comprehensive income arose from the effect of foreign
      currency translation adjustments.





**k.**  **Segment
      information**





SFAS
      No.131, “Disclosures about Segments of an Enterprise and Related Information”,
      requires certain financial and supplementary information to be disclosed on
      an
      annual and interim basis for each reportable segment of an enterprise. The
      Group
      believes that it operates in one business segment (research, development,
      production, marketing and sales of opto electronic products) and in one
      geographical region (China), as all of the Company’s current operations are
      carried out in China and most of its sales are made to companies in
      China.





**l.**  **Revenue
      recognition**





The
      Company generates revenues from the sales of LEDs and CCFLs. Sales are
      recognized when the following four revenue criteria are met: persuasive evidence
      of an arrangement exists, delivery has occurred, the selling price is fixed
      or
      determinable, and collectibility is reasonably assured. Sales are presented
      net
      of value added tax (VAT). No return allowance is made as products returns are
      insignificant based on historical experience.





**m.**  **Research
      and development costs**





Research
      and development costs are expensed to operations as incurred.





8


**n.**  **Income
      taxes**





The
      Company accounts for income taxes in accordance with SFAS No. 109, "Accounting
      for Income Taxes." SFAS No. 109 requires an asset and liability approach for
      financial accounting and reporting for income taxes and allows recognition
      and
      measurement of deferred tax assets based upon the likelihood of realization
      of
      tax benefits in future years. Under the asset and liability approach, deferred
      taxes are provided for the net tax effects of temporary differences between
      the
      carrying amounts of assets and liabilities for financial reporting purposes
      and
      the amounts used for income tax purposes. A valuation allowance is provided
      for
      deferred tax assets if it is more likely than not these items will either expire
      before the Group is able to realize their benefits, or that future deductibility
      is uncertain.





**o.**  **Foreign
      currency translation**





The
      reporting currency is the U.S. dollar. The functional currency of the Company
      is
      the local currency, the Chinese Renminbi (“RMB”). The financial statements of
      the Company are translated into United States dollars in accordance with
      Statement of Financial Accounts Standards (“SFAS”) No. 52, “Foreign Currency
      Translation”, using year-end rates of exchange for assets and liabilities, and
      average rates of exchange for the period for revenues, costs, and expenses
      and
      historical rates for the equity. Translation adjustments resulting from the
      process of translating the local currency financial statements into U.S. dollars
      are included in determining comprehensive income. At March 31, 2008, the
      cumulative translation adjustment of $1,230,120 was classified as an item of
      other comprehensive income in the stockholders’ equity section of the
      consolidated balance sheet. For
      the
      three months ended March 31, 2008 and 2007, accumulated other comprehensive
      income was $1,230,120 and
      $155,333 respectively.





The
      exchange rates used to translate amounts in RMB into U.S. Dollars for the
      purposes of preparing the consolidated financial statements were as follows:
      As
      of March 31, 2008, the Company used the period-end rates of exchange for assets
      and liabilities of $0.14281 to RMB1.00. For the three months ended March 31,
      2008 and 2007, the Company used the period’s average rate of exchange to convert
      revenues, costs, and expenses of $0.13977 to RMB1.00 and $0.12868 to RMB1.00,
      respectively, and the Company used historical rates for equity.




**p.**  **Related
      parties**





A
      party
      is considered to be related to the Company if the party directly or indirectly
      or through one or more intermediaries, controls, is controlled by, or is under
      common control with the Company or one of its subsidiaries. Related parties
      also
      include principal owners of the Company, its management, members of the
      immediate families of principal owners of the Company and its management and
      other parties with which the Company or its subsidiaries may deal if one party
      controls or can significantly influence the management or operating policies
      of
      the other to an extent that one of the transacting parties might be prevented
      from fully pursuing its own separate interests. A party which can significantly
      influence the management or operating policies of the transacting parties or
      if
      it has an ownership interest in one of the transacting parties and can
      significantly influence the other to an extent that one or more of the
      transacting parties might be prevented from fully pursuing its own separate
      interests is also a related party.





**q.**  Basic
      earnings per share is computed by dividing net earnings by the weighted average
      number of shares of common stock outstanding during the period. Diluted income
      per share is computed by dividing net income by the weighted average number
      of
      shares of common stock, common stock equivalents and potentially dilutive
      securities outstanding during each period. Potentially dilutive shares of common
      stock consist of the common stock issuable upon the exercise of stock warrants
      (using the treasury stock method) and upon the conversion of convertible
      preferred stock (using the if-converted method). A reconciliation of the
      denominator used in the calculation of basic and diluted net income (loss)
      per
      share is as follows:




**For
                the Three Months Ended**
            ********
            ****
            **March
                31,**
            ********
            ****
            **2008**
            ****
            **2007**Numerator:Net
                income (loss) available to common shareholders
            
            $
            827,599
            
            $
            625,502Denominator:Weighted-average
                shares outstanding for basic earnings per share
            
            
            11,751,228
            
            
            11,376,000Effect
                of dilutive securities:Series
                A convertible preferred stock
            
            
            6,960,296
            
            
            -Common
                stock purchase warrants
            
            
            4,070,200Weighted-average
                shares outstanding for diluted earnings (loss) per share
            
            
            22,781,724
            
            
            11,376,000




9


The
      following were excluded from the computation of diluted shares outstanding
      as
      they would have had an anti-dilutive impact. In periods where the Company has
      a
      net loss, all dilutive securities are excluded. In periods where the Company
      has
      net income, the dilutive securities are excluded when, for example, their
      exercise prices are greater than the average fair values of the Company’s common
      stock as follows:




**For
                the Three Months Ended**
            ********
            ****
            ****
            ****
            **March
                31,**
            ********
            ****
            ****
            ****
            **2008**
            ****
            **2007**Common
                stock purchase warrants
            
            
            
            
            
            4,070,200
            
            
            -Series
                A convertible preferred stock
            
            
            
            
            
            6,960,296
            
            
            -




**r.**  **Recently
      issued accounting pronouncements**




In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      (“SFAS”) No. 157, “Fair Value Measurements”, which establishes a framework for
      reporting fair value and expands disclosures about fair value measurements.
      SFAS
      No. 157 is effective for financial statements issued for fiscal years beginning
      after November 15, 2007 and interim periods within those fiscal years. The
      adoption of this standard had no impact on the Company’s financial position or
      results of operations.





In
      February 2007, the FASB issued Statement of Financial Accounting Standards
      No. 159, “The Fair Value Option for Financial Assets and Financial
      Liabilities-Including an amendment of FASB Statement No. 115,
      (“SFAS No. 159”). SFAS No. 159 permits entities to choose to
      measure many financial instruments and certain other items at fair value. Most
      of the provisions of this Statement apply only to entities that elect the fair
      value option. However, the amendment to FASB Statement No. 115, “Accounting
      for Certain Investments in Debt and Equity Securities,”
(“SFAS No. 115”), applies to all entities with available-for-sale and
      trading securities. SFAS No. 159 is effective for the Company’s
      consolidated financial statements for the annual reporting period beginning
      after November 15, 2007. The
      adoption of this standard had no impact on the Company’s financial position or
      results of operations.




On
      December 4, 2007, the Financial Accounting Standards Board (FASB) issued SFAS
      No. 160, *Noncontrolling
      interest in Consolidated Financial Statements* (SFAS
      No.
      160). SFAS No. 160 requires all entities to report noncontrolling (minority)
      interests in subsidiaries as equity in the consolidated financial statements.
      The statement establishes a single method of accounting for changes in a
      parent’s ownership interest in a subsidiary that do not result in
      deconsolidation and expands disclosures in the consolidated financial
      statements. SFAS No. 160 is effective for fiscal years beginning after December
      15, 2008 and interim periods within those fiscal years. We have not yet
      determined the impact of the adoption of SFAS No. 160 on our consolidated
      financial statements and footnote disclosures.




On
      December 4, 2007, the FASB issued SFAS No.141R, *Business
      Combinations (* SFAS
      No.
      141R). SFAS No. 141R requires the acquiring entity in a business combination
      to
      recognize all the assets acquired and liabilities assumed, establishes the
      acquisition date fair value as the measurement objective for all assets acquired
      and liabilities assumed, and requires the acquirer to expand disclosures about
      the nature and financial effect of the business combination. SFAS No. 141R
      is
      effective for business combinations for which the acquisition date is on or
      after the beginning of the first annual reporting period beginning on or after
      December 15, 2008. We have not yet determined the impact of the adoption of
      SFAS
      No. 141R on our consolidated financial statements and footnote disclosures.





10


In
      March 2008, the FASB issued SFAS 161, “ *Disclosures
      about Derivative Instruments and Hedging Activities* ” *.* The new
      standard is intended to improve financial reporting about derivative instruments
      and hedging activities by requiring enhanced disclosures to enable investors
      to
      better understand their effects on an entity’s financial position, financial
      performance, and cash flows. It is effective for financial statements issued
      for
      fiscal years and interim periods beginning after November 15, 2008, with
      early application encouraged. The Company is currently evaluating the impact
      of
      adopting SFAS 161 on its consolidated financial statements.




**3.**
            **CONCENTRATION
                OF CREDIT RISK**





Financial
      instruments which potentially expose the Company to concentrations of credit
      risk, consist of cash, accounts and other receivables as of March 31, 2008
      and
      2007. The Company performs ongoing evaluations of its cash position and credit
      evaluations to ensure collections and minimize losses.





As
      of
      March 31, 2008, all of the Company’s bank deposits were placed with banks in the
      PRC where there is no insurance to cover bank deposits in the event of bank
      failure.





For
      the
      three months ended March 31, 2008, approximately 75% of the Company’s sales were
      made to customers located in the PRC. ** In
      addition, approximately 90% ** of
      accounts receivables as of March 31, 2008 also arose from customers located
      in
      the PRC.





The
      largest two customer accounted for approximately 12% and 10% of the Company’s
      total revenue for the three months ended March 31, 2008. No other customer
      accounted for 10% of the Company’s revenue in the three months ended March 31,
      2008 or 2007.





**4.**
            **ACCOUNTS
                RECEIVABLE**





Accounts
      receivable consists of the following:





**March
                31,**
              **2008**
            
            **December
                31, 2007**Accounts
                receivable
            
            $
            6,258,812
            
            $
            5,445,193Less:
                Allowance for doubtful accounts
            
            
            (172,827
            )
            
            (165,911
            )Accounts
                receivable, net
            
            $
            6,085,985
            
            $
            5,279,282





The
      provision for bad debts increased by $6,916 and $31,740 in the three months
      ended March 31, 2008 and the year ended December 31, 2007 as
      follows:





**March
                31,**
              **2008**
            
            **December
                31. 2007**Beginning
                of year
            
            $
            165,911
            
            $
            134,171Additions
            
            
            6,916
            
            
            31,740End
                of year
            
            $
            172,827
            
            $
            165,911




11


**5.**
            **INVENTORIES**





Inventories
      consist of the following:





**March
                31,**
              **2008**
            
            **December
                31, 2007**Raw
                materials
            
            $
            2,648,114
            
            $
            1,821,884Work-in-progress
            
            
            -
            
            
            155,880Consumables
            
            
            35,089
            
            
            32,5592,683,203
            
            
            2,010,323Less:
                Allowance for obsolescence
            
            
            (321,695
            )
            
            (317,389
            )Total
            
            $
            2,361,508
            
            $
            1,692,934





The
      allowance for obsolescence increased by $4,306 and $169,743 in the three months
      ended March 31, 2008 and the year ended December 31, 2007 as
      follows:





**March
                31**
            
            **December
                31**Beginning
                of year
            
            $
            317,389
            
            $
            147,646Additions
            
            
            4,306
            
            
            169,743End
                of year
            
            $
            321,695
            
            $
            317,389





**6.**
            **PROPERTY
                AND EQUIPMENT**





Property
      and equipment consist of the following:





**March
                31, 2008**
            
            **December
                31**
              **2007**Production
                machinery and equipment
            
            $
            3,283,426
            
            $
            2,680,413Leasehold
                improvements
            
            
            343,561
            
            
            329,812Office
                and other equipment
            
            
            71,040
            
            
            67,375Automobiles
            
            
            309,047
            
            
            296,6804,007,074
            
            
            3,374,280Less:
                Accumulated depreciation
            
            
            (1,116,343
            )
            
            (933,016
            )Total
            
            $
            2,890,731
            
            $
            2,441,264








Depreciation
      expense was $141,356 and $99,366 for the three months ended March 31, 2008
      and
      2007, and is broken down as follows:





**For
                the Three Months Ended**
            ********
            ****
            ****
            ****
            **March
                31,**
            ********
            ****
            ****
            ****
            **2008**
            ****
            **2007**Cost
                of sales
            
            
            
            
            $
            121,701
            
            $
            82,938Operating
                expense
            
            
            
            
            
            19,655
            
            
            16,428Total
            
            
            
            
            $
            141,356
            
            $
            99,366




12


**7.**
            **SHORT-TERM
                BANK LOANS**





Short-term
      bank loans consist of the following:


**March
                    31,**
                ****
                **December
                    31,**
                ********
                ****
                **2008**
                ****
                **2007**Revolving
                    loans with ABN Amro, renewable on 90-days terms, interest at
                    6.58% -
                    8.2125% per annum due May to July 2008 and secured by restricted
                    cash of
                    approximately $856,874. These loans were each renewed for 90
                    days.
                
                $
                3,995,897
                
                $
                4,005,240Revolving
                    loans with Public Bank (Hong Kong) Limited, renewable on 90-day
                    terms,
                    interest rates ranging from 8.75% - 9.5%, due in February 2008
                    and secured
                    by restricted cash of approximately $137,097.
                
                
                
                
                
                273,968Revolving
                    loans with DBS Bank, renewable on 90-days terms, interest at
                    7.5% -9% per
                    annum, due May to June 2008 and secured by restricted cash of
                    approximately $257,814. These loans were each renewed for 90
                    days.
                
                
                640,668
                
                
                636,202China
                    Construction Bank, interest at 7.5% - 8.424% per annum, due May
                    to June,
                    2008 and secured by a personal guarantee of the Company’s chief executive
                    officer and restricted cash of approximately $142,812.
                
                
                595,051
                
                
                685,486Total
                    short-term loans
                
                $
                5,231,616
                
                $
                5,600,896




Interest
      expense arising from these loans for the three months ended March 31, 2008
      and
      2007 amounted to $167,072 and $9,568 respectively.





**8.**
            **RESTRICTED
                CASH**





The
      Company is required to hold a portion of borrowed money as security for payment
      of the loans (See Note 7). Restricted cash consist of following:





**March
                31,**
            ****
            **December
                31,**
            ********
            ****
            **2008**
            ****
            **2007**ABN
                Amro
            
            $
            856,874
            
            $
            822,582Public
                Bank (Hong Kong) Limited
            
            
            
            
            
            137,097DBS
                Bank
            
            
            257,814
            
            
            257,052China
                Construction Bank
            
            
            142,812
            
            
            137,097East
                Asia Bank
            
            
            714,061
            
            
            685,486Total
            
            $
            1,971,561
            
            $
            2,039,314




**9.**
              **ADVANCE
                  TO
                  SUPPLIERS**


Advance
      to suppliers represents primarily deposit for purchase of raw materials, and
      amounted to $3,719,590 at March 31 2008 and $5,498,257 at December 31, 2007.





**10.**
            **PREPAID
                EXPENSES AND OTHER
                RECEIVABLES**





Prepaid
      expenses and other receivables at March 31, 2008 and December 31, 2007 consisted
      of the following:




**March
                31,**
            ****
            **December
                31,**
            ********
            ****
            **2008**
            ****
            **2007**Prepaid
                expense
            
            $
            39,415
            
            $
            129,498Customs
                duty deposit
            
            
            54,769
            
            
            125,403Other
            
            
            4,524
            
            
            4,269$
            98,708
            
            $
            259,170




13


**11.**
            **OTHER
                ASSETS**





Other
      assets at March 31, 2008 and December 31, 2007 consisted of the
      following;





**March
                31,**
            ****
            **December
                31,**
            ********
            ****
            **2008**
            ****
            **2007**Deposits
            
            $
            537,965
            
            $
            959,680Other
            
            
            94,904
            
            
            99,542$
            632,869
            
            $
            1,059,222





The
      deposit for $537,965 was paid to two agents for arranging an order and delivery
      of raw materials before the end of March 2008. The deposit was fully recoverable
      if the raw material were not delivered before the end of April 2008. Since
      there
      is no definitive written agreement in place the deposit is included in other
      assets. The Company received delivery of the raw materials subsequent to March
      31, 2008.





**12.**
            **STOCKHOLDERS****’
                EQUITY**





**Reverse
      Split**




See
      Note
      1 for information concerning a one-for-7.5 shares reverse split of the common
      stock. All stock and per share information has been retroactively restated
      to
      reflect the reverse split.





**Series
      A Convertible Preferred Stock**





On
      September 12, 2007, the Company entered into a securities purchase agreement
      with Barron Partners LP and EOS Holdings LLC pursuant to which the investors
      purchased, for $4,000,000, an aggregate of (i) 3,703,704 shares of series A
      convertible preferred stock, with each share of series A preferred stock being
      initially convertible into one of a share of common stock, (ii) warrants to
      purchase 5,500,000 shares of common stock at $1.30 per share, and (iii) warrants
      to purchase 6,000,000 shares of common stock at $1.50 per share.




Additionally,
      the Company entered into a registration rights agreement pursuant to which
      the
      Company agreed to register the shares of Common Stock issuable upon conversion
      of the series A preferred stock and exercise of the warrants and an escrow
      agreement pursuant to which the Company placed 3,700,000 shares of series A
      preferred stock in escrow. These shares are in addition to the 3,703,704 shares
      of series A preferred stock that were issued in the private placement. If the
      Company’s consolidated net income, as defined, for 2007 and 2008 do not reach
      the target numbers, on a per share, fully diluted basis, some or all of these
      shares are to be delivered to the investors and if the targets are met, the
      shares are to be returned to the Company and cancelled. The
      target number are stated in RMB. The target number for 2007 is approximately
      $0.1303 per share, and the target number for 2008 is approximately $0.2085
      per
      share, except that, if all of the warrants shall not have been exercised by
      March 31, 2008, the target number for 2008 shall by approximately $0.1818 per
      share. All of the shares held in escrow are delivered to the Investors if the
      net income for either year is 50% or less than the target number for that year.
      If the shortfall is less than 50%, a ratable portion of the shares are delivered
      to the Investors. The conversion rates are based on the rates on September
      11,
      2007, and are subject to change.




Net
      income, for the purposes of determining whether any shares are to be delivered
      to the investors, is defined to mean net income
      determined in accordance with GAAP plus (a) any charges relating to the
      transaction contemplated by the Purchase Agreement and the registration rights
      agreement, minus (b) the amount, if any, by which all non-recurring losses
      or
      expenses exceed all non-recurring items or income or gain .
      Net
      Income shall not be adjusted if all non-recurring items of income or gain exceed
      all non-recurring losses or expenses. Items shall be deemed to be non-recurring
      only if they qualify as non-recurring pursuant to GAAP. For determining net
      income per share, all shares which are outstanding or which may be issuable
      upon
      exercise or conversion of options, warrants and other convertible securities
      are
      deemed to be outstanding, regardless of whether the shares would be counted
      for
      purposes of computing diluted earnings per shares under GAAP.




The
      warrants have a term of five years, and expire on September 12, 2012. The
      warrants provide a cashless exercise feature which permits the conversion of
      the
      warrants into shares of Common Stock or Series A Preferred Stock; however,
      the
      holders of the warrants may not make a cashless exercise during the twelve
      months commencing on September 12, 2007 and thereafter only if the underlying
      shares are not covered by an effective registration statement.





14


The
      warrants provide that the exercise price of the warrants may be reduced by
      up to
      50% in each of 2007 and 2008 if the Company’s net income, as defined, per share
      of common stock, on a fully-diluted basis, is less than the Target Numbers
      described above for 2007 and 2008. An adjustment in the warrant exercise price
      does not affect the number of shares issuable upon exercise of the
      warrants.




In
      accordance with Emerging Issues Task Force (‘‘EITF’’) 98-5 and EITF 00-27, the
      Series A convertible preferred stock (“Series A Preferred”) were considered to
      have an embedded beneficial conversion feature (BCF) because the effective
      conversion price was less than the fair value of the Company’s common stock.
      This convertible preferred stock was fully convertible at the issuance date,
      therefore the portion of proceeds allocated to the Series A preferred of
      $1,088,927 was determined to be the value of the beneficial conversion feature
      and was recorded as a deemed preferred stock dividend.





The
      investors also received Common Stock Purchase Warrants (the “Warrants”) to
      purchase up to 5,500,000 shares of common stock of the Company at an exercise
      price of $1.30 per share and up to 6,000,000 shares of common stock of the
      Company at an exercise price of $1.50 per share. The fair market value of each
      stock warrant was estimated on the date of grant using the Black-Scholes
      option-pricing model in accordance with SFAS No. 123R using the following
      weighted-average assumptions: expected dividend yield 0%; risk-free interest
      rate of 4.50%; volatility of 15% and an expected term of five years. The portion
      of proceeds allocated to the warrants of $1,088,926 was determined to be the
      value of the warrants and was recorded as a deemed preferred stock dividend.





The
      Purchase Agreement, the certificate of designation and the warrants provide
      that
      those securities may not be exercised or converted if such conversion or
      exercise would result in the holder and its affiliates having beneficial
      ownership of more than 4.9% of the Company’s outstanding common stock.
      Beneficial ownership is determined in accordance with Section 13(d) of the
      Securities Exchange Act of 1934, as amended, and Rule 13d-3 thereunder. This
      limitation may not be waived.




The
      Purchase Agreement, the certificate of designation for the series A preferred
      stock and the warrants also provide that, with certain exceptions, if the
      Company issues common stock at a price, or other warrants or other convertible
      securities with an exercise or conversion price which is less than the
      conversion price of the series A preferred stock or the exercise price of the
      warrants, as the case may be, the conversion price of the warrants or the
      exercise price of the warrants will be reduced to the sales price, exercise
      price or conversion price, as the case may be, of such other securities, except
      that, the exercise price of the $1.30 warrants has a formula
      adjustment.





Pursuant
      to the purchase agreement, in addition to the foregoing:





·
            The
                Company agreed to have appointed such number of independent directors
                that
                would result in a majority of its directors being independent directors,
                that the audit committee would be composed solely of independent
                directors
                and the compensation committee would have a majority of independent
                directors within 90 days after the closing. Failure to meet this
                date will
                result in liquidated damages commencing 90 days after the closing
                from the
                period from the end of the 90 day period until the date on which
                the
                requirement is satisfied. Thereafter, if the Company does not meet
                these
                requirements for a period of 60 days for an excused reason, as defined
                in
                the Purchase Agreement, or 75 days for a reason which is not an excused
                reason, this would result in the imposition of liquidated
                damages.




·
              The
                  Company agreed to hire a full-time qualified chief financial officer
                  within 60 days after the closing date. Failure to meet this covenant
                  would
                  result in the imposition of liquidated
                  damage.




·
            Liquidated
                damages for failure to comply with the preceding two covenants are
                computed in an amount equal to 12% per annum of the Purchase Price,
                up to
                a maximum of 15% of the Purchase Price, which is $600,000, which
                is
                payable in cash or series A preferred stock, at the election of the
                investors.




·
            The
                Company and the investors entered into a registration rights agreement
                pursuant to which the Company agreed to file, within 60 days after
                the
                closing, a registration statement covering the common stock issuable
                upon
                conversion of the series A preferred stock and exercise of the warrants.
                The failure of the Company to meet this schedule and other timetables
                provided in the registration rights agreement would result in the
                imposition of liquidated damages, which are payable through the issuance
                of additional shares of series A preferred stock at the rate of 1,217
                shares of series A preferred stock for each day, based on the proposed
                registration of all of the underlying shares of common stock, with
                a
                maximum of 550,000 shares. The registration rights agreement also
                provides
                for additional demand registration rights in the event that the investors
                are not able to register all of the shares in the initial registration
                statement.




15




·
            The
                investors have a right of first refusal on future
                financings.




·
            The
                Company is restricted from issuing convertible debt or preferred
                stock or
                from having debt in an amount greater than twice the Company’s earnings
                before interest, taxes, depreciation and
                amortization.




·
            The
                Company’s debt cannot exceed twice the preceding four quarters earnings
                before interest, taxes, depreciation and
                amortization.




·
            The
                Company’s officers and directors agreed, with certain limited exceptions,
                not to publicly sell shares of common stock for 27 months or such
                earlier
                date as all of the convertible securities and warrants have been
                converted
                or exercised and the underlying shares of common stock have been
                sold.




·
            The
                Company paid Barron Partners $50,000 for its due diligence
                expenses.




On
      March
      28, 2008, the Company entered into an agreement
      with the investors in the September 2007 private placement pursuant to
      which:


·
              The
                  Company issued a total of 3,349,185 shares of series A preferred
                  stock in
                  exchange for warrants to purchase a total of 7,179,487 shares of
                  common
                  stock that had been issued in the September 2007 private placement.
                  The
                  warrants were cancelled.
  ·
              The
                  3,700,000 shares of series A preferred stock held in escrow pursuant
                  to
                  the securities purchase agreement werereturnedto
                  the Company and cancelled. These shares had been held in escrow,
                  with all
                  or a portion of the shares to be delivered to the Investors if
                  certain
                  earnings targets were not met for 2007 and 2008 and all of the
                  shares to
                  be delivered to the Company for cancellation if the earnings targets
                  are
                  met.
  ·
              Theremainingwarrants, pursuant to which a total of 4,070,200 shares of common
                  stock
                  are issuable as of March 31, 2008, were amended to eliminate the
                  provisions which provided for a reduction in the warrant exercise
                  price if
                  the earnings targets were not met for 2007 and 2008.


**Common
      Stock**




On
      September 12, 2007, in connection with securities purchase agreement, the
      Company issued 166,000 shares of its common stock as professional
      fees.




During
      the three months ended March 31, 2008, the Company issued 250,313 shares of
      common stock upon exercise of warrants, and 92,593 shares of common stock upon
      conversion of series A preferred stock.




**Warrants
      and Options**




As
      part
      of the September 2007 private placement, the Company issued an aggregate of
      11,500,000 five-year warrants consisting of 5,500,000 Series A Warrants
      exercisable at $1.30 per share and 6,000,000 Series B Warrants exercisable
      at
      $1.50 per share. On March 28, 2008, issued a total of 3,349,185 shares of series
      A preferred stock in exchange for warrants to purchase a total of 7,179,487
      shares of common stock. The warrants were cancelled.





A
      summary
      of the status of the Company's outstanding stock warrants as of March 31, 2008
      and changes during the periods then ended is as follows:




****
            ****
            **Number
                  of**Warrants
            ****
            **Weighted**AverageExercise PriceBalance
                at December 31, 2007
            
            
            11,500,000
            
            $
            1.40Exercised
                1.30 Warrants
            
            
            (250,313
            )
            
            1.30Cancelled
                $1.30 Warrants
            
            
            (1,179,487
            )
            
            1.30Cancelled
                $1.50 Warrants
            
            
            (6,000,000
            )
            
            1.50Balance
                at December 31, 2007
            
            
            4,070,200
            
            $
            1.30




16


**Warrants
                Outstanding**
            ****
            **Warrants
                Exercisable******
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ********
            ****
            ****
            ****
            **Weighted**
            ****
            ****
            ****
            ****
            ****
            ********
            ****
            ****
            ****
            **Average**
            ****
            **Weighted**
            ****
            ****
            ****
            **Weighted******
            ****
            ****
            ****
            **Remaining**
            ****
            **Average**
            ****
            ****
            ****
            **Average******
            ****
            ****
            ****
            **Contractual**
            ****
            **Exercise**
            ****
            ****
            ****
            **Exercise****Range
                of Exercise Prices**
            ****
            **Shares**
            ****
            **Life
                (Years)**
            ****
            **Price**
            ****
            **Shares**
            ****
            **Price**$1.30
            
            4,070,200
            
            4.50
            
            $1.30
            
            4,070,200
            
            $1.304,070,200
            
            
            
            $1.30
            
            4,070,200
            
            $1.30





Following
      the Model of EITF 00-19, “Accounting for Derivative Financial Instruments
      Indexed to, and Potentially Settled in, a Company’s Own Stock,” the Warrants,
      are considered freestanding instruments and are classified as equity instruments
      and included in additional paid-in capital.





As
      of
      March 31, 2008, the Company did not have an equity-based incentive plan and
      no
      options were outstanding.





**13.**
            **CURRENT
                VULNERABILITY DUE TO CERTAIN
                CONCENTRATIONS**





The
      Company’s operations are all carried out in the PRC. Accordingly, the Company’s
      business, financial condition and results of operations may be influenced by
      the
      political, economic and legal environments in the PRC, and by the general state
      of the PRC’s economy.





The
      Company’s operations in the PRC are subject to specific considerations and
      significant risks not typically associated with companies in the North America
      and Western Europe. These include risks associated with, among others, the
      political, economic and legal environments and foreign currency exchange. The
      Company’s consolidated results of operations may be adversely affected by
      changes in governmental policies with respect to laws and regulations,
      anti-inflationary measures, currency conversion and remittance abroad, and
      rates
      and methods of taxation, among other things.





**14.**
            **COMMITMENTS
                AND CONTINGENCIES**





(a)
            Operating
                lease commitments





The
      Company has entered into five-year leases for factory premises and staff dorms.
      These leases can be renewed for an additional five-year term. The Company’s
      commitments for minimum lease payments under these non-cancelable operating
      leases for the next five years and thereafter are as follows: Rent expense
      for
      the three months ended March 31 ,2008 and 2007 was $67,801 and $40,107,
      respectively.





Three
                months Ended March 31,2008
            
            $
            198,1202009
            
            
            267,3982010
                and thereafter
            
            
            66,849$
            532,367





(b)
            Social
                insurances of Suny’s employees





According
      to the laws and regulations of the PRC, Suny is required to cover its employees
      with medical, retirement and unemployment insurance programs. Management
      believes that due to the transient nature of its employees, Suny does not need
      to provide all employees with such social insurances, and has paid the social
      insurances for those of its employees who have completed three months’
continuous employment.





In
      the
      event that any current or former employee files a complaint with the PRC
      government and the complaint is upheld, Suny may be subject to making up the
      social insurances as well as administrative fines. The Company does not believe
      that any liability it may incur if it is held to be in violation of these laws
      would be material, and, accordingly, no provision has been made for any possible
      liability.





17


(c)  Statutory
      Reserves





Based
      on
      the legal formation of the entities, Suny is required to set aside 10% of its
      net income as reported in its statutory accounts on an annual basis to the
      Statutory Surplus Reserve Fund. Once the total Statutory Surplus Reserve reaches
      50% of the registered capital of Suny, further appropriations are discretionary.
      The Statutory Surplus Reserve can be used to increase the registered capital
      and
      eliminate future losses of the respective companies under PRC GAAP. The
      Statutory Surplus Reserve is not distributable to shareholders except in the
      event of liquidation.





Before
      January 1, 2006, Suny was also required on an annual basis to set aside at
      least
      5% of after-tax profit, calculated in accordance with PRC accounting standards
      and regulations, to the Statutory Surplus Welfare Fund, which can be used for
      staff welfare.





Effective
      from January 1, 2006, the appropriation to the Statutory Surplus Welfare Fund
      is
      no longer required. If Suny provide the Statutory Surplus Welfare Fund, such
      amount shall be determined at the discretion of its board of
      directors.





The
      Reserve Fund can be used to increase the registered capital upon approval by
      relevant government authorities and eliminate future losses of the respective
      companies upon a resolution by the board of directors.





Appropriations
      to the above statutory reserves are accounted for as a transfer from retained
      earnings to statutory reserves and are performed once a year at the fiscal
      year-end.





There
      are
      no legal requirements in the PRC to fund these statutory reserves by transfer
      of
      cash to any restricted accounts, and the Group does not do so. These reserves
      are not distributable as cash dividends.





**15.**
            **INCOME
                TAXES**





The
      Company is registered in the PRC as a wholly-foreign owned enterprise. Under
      the
      tax laws of the PRC, the Company is entitled to a preferential Enterprise Income
      Tax (“EIT”) rate of 15%, which a full exemption for the first two profitable
      years, followed by a 50% reduction on EIT for the following three consecutive
      years.





The
      provision for taxes on earnings consisted of:




**March
                31,**
            ********
            ****
            **2008**
            ****
            **2007**Current
                income tax expenses:PRC
                Enterprise Income Tax
            
            $
            67,928
            
            $
            50,716United
                States Federal Income Tax
            
            
            -
            
            
            -Total
            
            $
            67,928
            
            $
            50,716





A
      reconciliation between the income tax computed at the U.S. statutory rate and
      The Group’s provision for income tax is as follows:




**March
                31,******
            ****
            **2008**
            ****
            **2007**U.S.
                statutory rate
            
            34%
            
            34%Foreign
                income not recognized in the U.S.
            
            (34%)
            
            (34%)PRC
                preferential Enterprise Income Tax rate
            
            15%
            
            0%Tax
                holiday and relief granted to the Subsidiary
            
            (7.5%)
            
            (0%)Provision
                for income tax
            
            7.5%
            
            0%




No
      material deferred tax liabilities or assets existed as of either March 31,
      2008
      or 2007.




18


The
      tax
      authority of the PRC Government conducts periodic and ad hoc tax filing reviews
      on business enterprises operating in the PRC after those enterprises had
      completed their relevant tax filings, hence the Company’s tax filings may not be
      finalized. It is therefore uncertain as to whether the PRC tax authority may
      take different views about the Company’s tax filings which may lead to
      additional tax liabilities.





The
      Company has no United States corporate income tax liability for 2008 or
      2007.





**16.**
            **SUBSEQUENT
                EVENTS**





On
      April
      23, 2008, the Company issued warrants to purchase 110,000 shares of common
      stock
      at $1.30 per share to an investor relations firm. The warrants expire on
      November 1, 2010. The Company valued these warrants at $ 94,177, which was
      charged to operations during the second quarter of 2008.




19





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





**Forward
      Looking Statements**





Statements
      contained in this Form 10-Q include forward-looking statements that are subject
      to risks and uncertainties. In particular, statements in this Form 10-Q that
      state our intentions, beliefs, expectations, strategies, predictions or any
      other statements relating to our future activities or other future events or
      conditions are “forward-looking statements.” Forward-looking statements are
      subject to risks, uncertainties and other factors, including, but not limited
      to, those identified under “Risk Factors,” in our Form 10-KSB for the year ended
      December 31, 2007 and those described in “Management's Discussion and Analysis
      of Financial Conditions and Results of Operations” in the Form 10-KSB and this
      Form 10-Q, and those described in any other filings by us with the Securities
      and Exchange Commission, as well as general economic conditions and economic
      conditions affecting the electronics and consumer electronics industry, any
      one
      or more of which could cause actual results to differ materially from those
      stated in such statements. In addition, such statements could be affected by
      risks and uncertainties related to the ability to conduct business in China,
      product demand, our ability to develop products using the most current
      technology, our ability to raise any financing which we may require for our
      operations, competition, government regulations and requirements, pricing and
      development difficulties, our ability to make acquisitions and successfully
      integrate those acquisitions with our business, as well as general industry
      and
      market conditions and growth rates, and general economic conditions. Any
      forward-looking statements speak only as of the date on which they are made,
      and
      we do not undertake any obligation to update any forward-looking statement
      to
      reflect events or circumstances after the date of this Form 10-Q.




**Overview**




When
      used
      in this quarterly report, the terms "we," and "us" refers to China Display
      Technologies, Inc. and our wholly-owned subsidiaries.




The
      financial statements reflect the operations of Suny prior to September 12,
      1007,
      the date of the reverse acquisition, and the consolidated operations of the
      Company subsequent to September 12, 2007.




We
      design, manufacture and market small to medium-sized LEDs and cold cathode
      fluorescent lamp for various types of displays. Our emphasis is on small to
      medium-size back lighting unit manufacturing, and we are now developing the
      large size back lighting unit.




We
      sell
      our products to manufacturers of electronic products and not to end users.
      Our
      customers generally do not provide us with any long-term commitments. As a
      result it is necessary for us to estimate, based in part on non-binding
      estimates by our customers and potential customers, the requirements for our
      products. In addition, in some instances, we develop products based on
      anticipated customer demand with no assurance that we will get the anticipated
      orders. To the extent that we do not receive the anticipated orders or that
      our
      customers require products in greater quantities than we anticipated, our
      revenue and margins will be affected.




A
      small
      number of customers account for a very significant percentage of our revenue.
      During the three months ended March 31, 2008, we had two customers that
      generated revenue of more than 10%. These customers accounted for 12% and 10%
      of
      our revenue during the three months ended March 31, 2008. For the year ended
      December 31, 2007, four customers accounted for revenue of approximately 50%
      of
      revenue, Unless we replace a customer, the loss of any of these customers could
      have a material adverse effect upon our revenue and net income. Although we
      market to customers both within China and outside of China, our largest
      customers are Chinese manufacturers, many of whom manufacture products for
      sale
      in the international market. As a result, we are dependent upon the
      international market acceptance of Chinese made products.




We
      do not
      have long term supply contracts. While this practice reduces our risk, it also
      subjects us to price changes and, if our suppliers have a larger than
      anticipated demand for its products, our allocation may be reduced. We may
      not
      be able to obtain the components from alternate suppliers in a timely manner
      if
      at all, which would affect our relationship with our customers.




Prior
      to
      September 2007, we were a privately-owned company and we did not have the legal,
      accounting and other expenses that are associated with our being a public
      company. Commencing in the third quarter of 2007, our general and administrative
      expenses will increase as a result of these factors.




As
      a
      result of the issuance of series A preferred stock and warrants, we incurred
      a
      deemed dividend to the holders of the series A preferred stock in the amount
      of
      approximately $2.2 million, resulting from the discount of the conversion price
      of the series A preferred stock from the value of the underlying common stock
      and the allocated value of the warrants granted.




20


**Critical
      Accounting Policies and Estimates**




The
      discussion and analysis of our financial condition and results of operations
      is
      based upon our financial statements which have been prepared in accordance
      with
      accounting principles generally accepted in the United States. The preparation
      of these financial statements requires us to make estimates and judgments that
      affect the reported amounts of assets and liabilities. On an on-going basis,
      we
      evaluate our estimates including the allowance for doubtful accounts, the
      salability and recoverability of inventory, income taxes and contingencies.
      We
      base our estimates on historical experience and on other assumptions that we
      believes to be reasonable under the circumstances, the results of which form
      our
      basis for making judgments about the carrying values of assets and liabilities
      that are not readily apparent from other sources. Actual results may differ
      from
      these estimates under different assumptions or conditions.




In
      estimating the collectability of accounts receivable we analyze historical
      write-offs, changes in our internal credit policies and customer concentrations
      when evaluating the adequacy of our allowance for doubtful accounts. Differences
      may result in the amount and timing of expenses for any period if we make
      different judgments or uses difference estimates. Our accounts receivable
      represent a significant portion of our current assets and total assets. Our
      realization on accounts receivable, expressed in terms of United States dollars
      may be affected by fluctuations in currency rates since the customer’s currency
      is frequently a currency other than United States dollars.




Inventories
      comprise raw materials work on process, finished goods and low value consumable
      articles are stated at the lower of cost or market. Substantially all inventory
      costs are determined using the weighted average basis. Costs of finished goods
      include direct labor, direct materials, and production overhead before the
      goods
      are ready for sale. Inventory costs do not exceed net realizable
      value.




Property,
      equipment are stated at cost. Depreciation is provided principally by use of
      the
      straight-line method over the useful lives of the related assets. Expenditures
      for maintenance and repairs, which do not improve or extend the expected useful
      life of the assets, are expensed to operations while major repairs are
      capitalized. The gain or loss on disposal of property, plant and equipment
      is
      the difference between the net sales proceeds and the carrying amount of the
      relevant assets, and, if any, is recognized in the statements of
      operations.




Under
      the
      tax laws of the PRC, we received a 100% tax holiday for 2005 and 2006 for the
      enterprise income tax. For 2007, 2008 and 2009, under present law, we will
      be
      entitled to a 50% tax holiday from this tax. As a result, we not not pay income
      tax for 2005 and 2006. The tax provision for 2007 and 2008 is 7.5% of taxable
      income.




We
      cannot
      predict what future laws and regulations might be passed that could have a
      material effect on our results of operations. We assess the impact of
      significant changes in laws and regulations on a regular basis and update the
      assumptions and estimates used to prepare our financial statements when we
      deem
      it necessary.




We
      recognize product sales generally at the time the product is shipped. Shipping
      and handling costs are included in cost of goods sold. Revenue is presented
      net
      of any sales tax and value added tax.




Our
      functional currency is the RMB, which is the currency of the PRC, and our
      reporting currency is United States dollars. Our balance sheet accounts are
      translated into United States dollars at the year-end exchange rates prevailing
      during the periods in which these items arise. Translation gains and losses
      are
      deferred and accumulated as a component of other comprehensive income in owners’
equity. Transaction gains and losses that arise from exchange rate fluctuations
      from transactions denominated in a currency other than the functional currency
      are included in the statement of operations as incurred. The translation and
      transaction gains and losses were immaterial in the statement of operations
      as
      incurred. The translation and transaction gains and losses were immaterial
      for
      the three months ended March 31, 2008 and 2007.




The
      PRC
      government imposes significant exchange restrictions on fund transfers out
      of
      the PRC that are not related to business operations. These restrictions have
      not
      had a material impact on our operations because we have not previously engaged
      in any significant transactions that are subject to the
      restrictions.




21


**Reverse
      Acquisition**




On
      September 12, 2007, we acquired Keep On Holdings and its wholly-owned
      subsidiary, Suny, in a transaction which is accounted for as a reverse
      acquisition. Although we are the company that made the acquisition, for
      accounting purposes, Suny is treated as the acquiring company. As a result
      our
      financial statements reflect the financial position, results of operations
      and cash flows of Suny prior to September 12, 2007 and the consolidated
      operations of the Company its subsidiaries, including Suny, from and after
      September 12, 2007. From Suny’s organization until the completion of the reverse
      acquisition, Lawrence Kwok-Yan Chan, was Suny’s sole stockholder. The 11,376,000
      shares issued to Mr. Chan and his designees are deemed to have been outstanding
      for all periods prior to September 12, 2007.




**Convertible
      Preferred Stock and Warrants**




In
      accordance with EITF 00-19, we determined that the convertible preferred stock
      and the accompanying warrants were equity instruments under SFAS 150 and 133.
      Although we had unconditional obligation to issue additional shares of common
      stock upon conversion of the series A preferred stock if our fully-diluted
      EBITDA per share were below the targeted levels, the certificate of designation
      relating to the series A preferred stock did not provide that we must issue
      shares that are registered pursuant to the Securities Act of 1933, with the
      result, pursuant to the certificate of designation, the additional shares need
      not be registered shares. Our series A preferred stock also met all other
      conditions for the classification as equity instruments. We had a sufficient
      number of authorized shares, the agreement contained an explicit limit on the
      number of shares to be delivered on conversion of the series A preferred stock,
      there is no required cash payment or net cash settlement requirement, and the
      holders of the series A preferred stock had no right higher than the holders
      of
      the common stock.




Our
      warrants were excluded from derivative accounting because they were indexed
      to
      our common stock and were classified in stockholders’ equity section according
      to SFAS 133 paragraph 11(a).





**Results
      of Operations**




***Three
      Months ended March 31, 2008 and 2007***




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




**Three
                Months Ended March 31,**
            ********
            **2008**
            ****
            **2007**Sales
            
            $
            6,724
            
            
            100.0
            %
            $
            4,592
            
            
            100.0
            %Cost
                of sales
            
            
            5,222
            
            
            77.6
            %
            
            3,590
            
            
            78.2
            %Gross
                profit
            
            
            1,502
            
            
            22.4
            %
            
            1,002
            
            
            21.8
            %Selling
            
            
            159
            
            
            2.4
            %
            
            63
            
            
            1.4
            %Research
                and developments
            
            
            126
            
            
            1.9
            %
            
            106
            
            
            2.3
            %General
                and administrative
            
            
            156
            
            
            2.3
            %
            
            148
            
            
            3.2
            %Income
                from operations
            
            
            1,061
            
            
            15.8
            %
            
            685
            
            
            14.9
            %Interest
                expense, net
            
            
            166
            
            
            2.5
            %
            
            10
            
            
            0.2
            %Other
                income (expenses)
            
            
            (1
            )
            
            0.0
            %
            
            1
            
            
            0.0
            %Income
                before income taxes
            
            
            896
            
            
            13.3
            %
            
            676
            
            
            14.7
            %Provision
                for (benefit from) income taxes
            
            
            68
            
            
            1.0
            %
            
            51
            
            
            1.1
            %Net
                income
            
            
            828
            
            
            12.3
            %
            
            625
            
            
            13.6
            %




Sales
      were $6.7 million for the three months ended March 31, 2008 (the “March 2008
      Quarter”), an increase of $2.1 million, or 46%, from $4.6 million for three
      months ended March 31, 2007 (the “March 2007 Quarter”). The increase in revenue
      reflects an increased demand for our BLU products from small screen LCD and
      our
      successful expansion of our market.




Cost
      of
      sales was $5.2 million for the March 2008 Quarter, an increase of $1.6 million,
      or 45%, compared to $3.6 million for the March 2007 Quarter. The gross profit
      for the March 2008 Quarter was $1.5 million, an increase of $0.5 million, or
      50%, from $1.0 million for the March 2007 Quarter. In general, the increase
      in
      cost of good sold and gross profit resulted from and reflected the increase
      in
      revenue, although the gross margin for the March 2008 Quarter was 22.4%,
      compared with 21.8% for the March 2007 Quarter.




22


Selling
      expenses were $159,000 for March 2008 Quarter, an increase of $96000, or 152%,
      compared with $63,000 during the March 2007 Quarter. The increase was
      attributable to the increase in sales commissions and marketing expenses as
      a
      result of and also in line with increase in our revenue.




Research
      and development expenses were $126,000 for the March 2008 Quarter, an increase
      of $20,000, or 19%, from $106,000 for the March 2007 Quarter, as a result of
      research and development relating to new projects including large BLU products.




General
      and administrative were $156,000 for the March 2008 Quarter, an increase of
      $8,000, or 5% from $148,000 for the March 2007 Quarter. The increase was in
      line
      with the increase in our scales of operation, and the additional costs that
      we
      incurred as a public company.




Income
      from operations was approximately $1.1 million for the March 2008 Quarter,
      compared with approximately $685,000 for the March 2007 Quarter. The increase
      was primarily the result of factors described above.




Income
      tax provision for the March 2008 Quarter was approximately $68,000, an increase
      of $17,000, or 33% from $51,000 for the March 2007 Quarter. The effective tax
      rate for the March 2008 Quarter was 7.5%, as a result of the 50% tax holiday
      that, under current law, applies to 2007, 2008 and 2009.





For
      the
      March 2008 Quarter, we had net income of $828,000, or $ 0.04 per share (basic)
      and $0.07 per share (diluted), compared to $625,000, or $0.05 per share (basic
      and diluted) for the March 2007 Quarter, an increase of 203,000 or
      32%





**Liquidity
      and Capital Resources**




At
      March
      31, 2008, we had a cash balance of $4.8 million. These funds are located in
      financial institutions located in China.





We
      are
      subject to the regulations of the PRC which restricts the transfer of cash
      from
      that country, except under certain specific circumstances. Accordingly, such
      funds may not be readily available to us to satisfy obligations which have
      been
      incurred outside the PRC.





As
      of
      March 31, 2008, we had working capital of approximately $10.7 million, compared
      to $3.0 million at March 31, 2007, of which cash and cash equivalents amounted
      to $4.6 million, compared to $169,000 at March 31, 2007. Our accounts receivable
      has been a significant portion of our current assets, representing $6.09
      million, or 32% of current assets, compared to $2.9 million, or 58% of current
      assets at March 31, 2007. Inventories amounted to $2.4 million, compared to
      $1.7
      million at March 31, 2007. During the March 2008 Quarter, our cash flow used
      by
      operations amounted $1.6 million, compared to net cash provided in operating
      activities of $0.7 million in the March 2007 Quarter.




For
      the
      March 2008 Quarter, we used cash for investing activities of $591,000 as
      compared to $22,000 for the March 2007 Quarter. For the March 2008 Quarter,
      we
      used cash for the purchase of property and equipment of $591,000. For the March
      2007 Quarter, we used cash for the purchase of property and equipment of
      $22,000.




We
      have
      entered into 90-day revolving loan facilities with several banks pursuant which
      we have borrowed $5.23 million. At the end of each 90-day period, we are
      required to renew or repay these loans. At March 31, 2008, there was $5,231,616
      outstanding, all of which were due in the second quarter of 2008. These loans
      bear interest at rates ranging from 6.58% to 9.50% and are secured by restricted
      cash of $1,971,561. These notes have been renewed for additional 90-day terms.
      Additionally, at March 31, 2008, we have a loan payable with a bank of $595,051
      which is due on July 23, 2008 and is personally guarantee by our chief executive
      officer.   During the March 2008 Quarter, we received gross proceeds of
      $325,407 from our the exercise or warrants.




23


*Off-balance
      Sheet Arrangements*





We
      have
      not entered into any other financial guarantees or other commitments to
      guarantee the payment obligations of any third parties. We have not entered
      into
      any derivative contracts that are indexed to our shares and classified as
      stockholder's equity or that are not reflected in our consolidated financial
      statements. Furthermore, we do not have any retained or contingent interest
      in
      assets transferred to an unconsolidated entity that serves as credit, liquidity
      or market risk support to such entity. We do not have any variable interest
      in
      any unconsolidated entity that provides financing, liquidity, market risk or
      credit support to us or engages in leasing or hedging services with
      us.





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




Foreign
      Currency Exchange Rate Risk





We
      produce all our products in China and export most of of our products to
      international markets. Our functional currency is RMB, and our financial
      statements are translated into United States dollars. Translation adjustments
      resulting from the translation of local currency financial statements into
      United States dollars are included in determining comprehensive income.Our
      financial statements are expressed in dollars, At March 31, 2008, the cumulative
      translation adjustment of $1,230,120 was classified as an item of other
      comprehensive income in the stockholders’ equity section of the consolidated
      balance sheet. For
      the
      three months ended March 31, 2008 and 2007, accumulated other comprehensive
      income was $1,230,120 and
      $155,333 respectively.




Most
      of
      our customers pay in a currency other than United States dollars. Our accounts
      receivable represent a significant portion of our current assets and total
      assets. As a result, our realization on accounts receivable, expressed in terms
      of United States dollars, may be affected by fluctuations in currency rates
      since the customer’s currency is frequently a currency other than United States
      dollars.




**ITEM
      4. CONTROLS AND PROCEDURES**





Under
      the
      supervision and with the participation of our management, including our
      principal executive officer and principal financial officer, we conducted an
      evaluation of our disclosure controls and procedures, as such term is defined
      under Rule 13a-14(c) promulgated under the Securities Exchange Act of 1934,
      as
      amended (the “Exchange Act”), within 90 days of the filing date of this report.
      In designing and evaluating the Company’s disclosure controls and procedures,
      management recognized that any controls and procedures, no matter how well
      designed and operated, can provide only reasonable assurance of achieving their
      objectives and management necessarily applied its judgment in evaluating the
      cost-benefit relationship of possible controls and procedures. Based on this
      evaluation, the Company’s chief executive officer and chief financial officer
      concluded that as of March 31, 2008, the Company’s disclosure controls and
      procedures were (1) designed to ensure that material information relating to
      the
      Company, including its consolidated subsidiaries, is made known to the Company’s
      chief executive officer and chief financial officer by others within those
      entities, particularly during the period in which this report was being prepared
      and (2) effective, in that they provide reasonable assurance that information
      required to be disclosed by the Company in the reports that it files or submits
      under the Exchange Act is recorded, processed summarized and reported within
      the
      time periods specified in the SEC’s rules and forms.




**Limitations
      on the Effectiveness of Internal Controls**





Management
      does not expect that our disclosure controls and procedures or our internal
      control over financial reporting will necessarily prevent all fraud and material
      errors. An internal control system, no matter how well conceived and operated,
      can provide only reasonable, not absolute, assurance that the objectives of
      the
      control system are met. Further, the design of a control system must reflect
      the
      fact that there are resource constraints, and the benefits of controls must
      be
      considered relative to their costs. Because of the inherent limitations on
      all
      internal control systems, no evaluation of controls can provide absolute
      assurance that all control issues and instances of fraud, if any, within the
      Company have been detected. These inherent limitations include the realities
      that judgments in decision-making can be faulty, and that breakdowns can occur
      because of simple error or mistake. The design of any system of internal control
      is also based in part upon certain assumptions about the likelihood of future
      events, and there can be no assurance that any design will succeed in achieving
      its stated goals under all potential future conditions. Over time, controls
      may
      become inadequate because of changes in circumstances, and/or the degree of
      compliance with the policies and procedures may deteriorate. Because of the
      inherent limitations in a cost effective internal control system, financial
      reporting misstatements due to error or fraud may occur and not be detected
      on a
      timely basis.





There
      have been no significant changes (including corrective actions with regard
      to
      significant deficiencies or material weaknesses) in our internal controls or
      in
      other factors that could significantly affect these controls subsequent to
      the
      date of the evaluation referenced in the above paragraph.




24


**PART
      II - OTHER INFORMATION**




Item
                  6.
              
              Exhibits31.1
              
              Rule
                  13a-14(a)/15d-14(a) certification of Chief Executive
                  Officer31.2
              
              Rule
                  13a-14(a)/15d-14(a) certificate of Chief Financial
                  Officer32.1
              
              Section
                  1350 certification of Chief Executive and Chief Financial
                  Officers






**SIGNATURES**




In
      accordance with the requirements of the Exchange Act, the registrant has caused
      this report to be signed on its behalf by the undersigned thereunto duly
      authorized.




China
                Display Technologies, Inc.Date: May
              15,
              2008
            By:
            /s/ Lawrence
              Kwok-Yan ChanLawrence
                Kwok-Yan Chan
                Chief
                  Executive Officer, Principal Executive
                  Officer




Date: May
              15,
              2008
            By:
            /s/ Jason
              YeJason
                Ye
                Chief
                  Financial Officer, Principal Financial
                  Officer




25