*Table        of Contents*

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**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**FORM      10-Q**

| x | Quarterly                report under Section 13 or 15(d) of the Securities Exchange Act of                1934 |
|---|-----------------------------------------------------------------------------------------------------------------|

|  ̈ | Transition                report under Section 13 or 15(d) of the Exchange                Act |
|--------|-----------------------------------------------------------------------------------------------|

**China      Discovery Acquisition Corp.**

| Cayman                Islands                                                                |   | N/A                                                                |
|----------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------|
| (State                or other Jurisdiction of Incorporation                or Organization) |   | (I.R.S.                Employer Identification                No.) |

| 70                Cao Bao Rd., Building C, Suite 1302, Shanghai, China |
|------------------------------------------------------------------------|
| (Address                of Principal Executive Office)                 |

| Large                  accelerated filer  ̈ | Accelerated                  filer  ̈    |
|-------------------------------------------------|----------------------------------------------|
| Non-accelerated                  filer  ̈   | Smaller                  reporting company x |

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*Table        of Contents*

**TABLE      OF CONTENTS**

|                                                                                                  | Page   |
|-------------------------------------------------------------------------------------------------------|--------|
| Part                I. Financial Information:                                                         |   |
|                                                                                                  |   |
| Item                1. Financial Statements:                                                          |   |
|                                                                                                  |   |
| Balance                Sheets                                                                         | 3      |
|                                                                                                  |   |
| Statements                of Operations                                                               | 4      |
|                                                                                                  |   |
| Statement                of Stockholders’ Equity                                                | 5      |
|                                                                                                  |   |
| Statements                of Cash Flows                                                               | 6      |
|                                                                                                  |   |
| Notes                to Financial Statements                                                          | 7      |
|                                                                                                  |   |
| Item                2. Management’s Discussion and Analysis or Plan of                Operation | 13     |
|                                                                                                  |   |
| Item                4. Controls and Procedures                                                        | 14     |
|                                                                                                  |   |
| Part                II. Other Information:                                                            |   |
|                                                                                                  |   |
| Item                2. Unregistered Sales of Equity Securities and Use of                Proceeds     | 15     |
|                                                                                                  |   |
| Item                6. Exhibits                                                                       | 15     |
|                                                                                                  |   |
| Signatures                                                                                            | 16     |

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*Table          of Contents*

**China      Discovery Acquisition Corp.**

**(a      corporation in the development stage)**

**Balance      Sheets **

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|                                                                             |   | March                31, 2008 |       | December                31, 2007 |   |
|----------------------------------------------------------------------------------|--------|-------------------------------|------------|----------------------------------|--------|
|                                                                             |   | (unaudited)                   |       |                             |   |
| **ASSETS**                                                                       |   |                          |       |                             |   |
|                                                                             |   |                          |       |                             |   |
| CURRENT                ASSETS                                                    |   |                          |       |                             |   |
| Cash                                                                             |   | $                             | 198,129    |                             | $      | 100,832 |   |
| Cash                and cash equivalents held in Trust Account                   |   |                          | 33,994,060 |                             |   | 33,876,887 |   |
| Interest                receivable                                               |   |                          | 48,427     |                             |   | 107,490 |   |
| Total                Assets                                                      |   |                          | 34,240,615 |                             |   | 34,085,209 |   |
|                                                                             |   |                          |       |                             |   |   |   |
| **LIABILITIES                AND STOCKHOLDERS’ EQUITY**                    |   |                          |       |                             |   |   |   |
|                                                                             |   |                          |       |                             |   |   |   |
| **CURRENT                LIABILITIES**                                           |   |                          |       |                             |   |   |   |
| Deferred                Underwriter’s fees                                 |   |                          | 345,000    |                             |   | 345,000 |   |
| Total                current liabilities                                         |   |                          | 345,000    |                             |   | 345,000 |   |
|                                                                             |   |                          |       |                             |   |   |   |
| Common                stock, subject to possible conversion, 1,724,425 shares    |   |                          |       |                             |   |   |   |
| at                conversion value                                               |   |                          | 10,008,413 |                             |   | 10,008,413 |   |
|                                                                             |   |                          |       |                             |   |   |   |
| **COMMITMENTS**                                                                  |   |                          |       |                             |   |   |   |
|                                                                             |   |                          |       |                             |   |   |   |
| **STOCKHOLDERS’                EQUITY**                                    |   |                          |       |                             |   |   |   |
| Preferred                shares, $.0001 par value                                |   |                          |       |                             |   |   |   |
| Authorized                1,000,000 shares; none issued                          |   |                          |       |                             |   |   |   |
| Ordinary                shares, $.0001 par value                                 |   |                          |       |                             |   |   |   |
| Authorized                25,000,000 shares                                      |   |                          |       |                             |   |   |   |
| Issued                and outstanding 7,105,000 shares (which includes 1,724,425 |   |                          |       |                             |   |   |   |
| subject                to possible conversion)                                   |   |                          | 711        |                             |   | 711 |   |
| Additional                paid-in capital                                        |   |                          | 23,187,020 |                             |   | 23,187,020 |   |
| Retained                earnings accumulated during the development              |   |                          |       |                             |   |   |   |
| Stage                                                                            |   |                          | 699,471    |                             |   | 544,065 |   |
| Total                stockholders’                equity                   |   |                          | 23,887,202 |                             |   | 23,731,796 |   |
| **Total                liabilities and stockholders’ equity**              |   | $                             | 34,240,615 |                             | $      | 34,085,209 |   |
|                                                                                  |   |                          |       |                             |   |   |   |
|                                                                                  |   |                          |       |                             |   |   |   |

*See        accompanying notes to financial statements.*

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*Table          of Contents*

**China      Discovery Acquisition Corp.**

**(a        corporation in the development stage)**

**Unaudited        Statements of Operations**

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|                                                                 |   | For                the Three Months Ended March 31, 2008 |      | Period                from January 8, 2007 (inception) to March 31, 2007 |   | Period                from January 8, 2007 (inception) to March 31, 2008 |   |
|----------------------------------------------------------------------|--------|----------------------------------------------------------|-----------|--------------------------------------------------------------------------|--------|--------------------------------------------------------------------------|--------|
|                                                                 |   | (unaudited)                                              |      | (unaudited)                                                              |   | (unaudited)                                                              |   |
|                                                                 |   |                                                     |      |                                                                     |   |                                                                     |   |
| Formation                costs                                       |   |                                                     | 0         |                                                                     |   | 2,500                                                                    |   |   | 4,501 |   |
| Operating                expenses                                    |   |                                                     | 53,725    |                                                                     |   | 147                                                                      |   |   | 320,013 |   |
| Operating                loss                                        |   |                                                     | (53,725   | )                                                                        |   | (2,647                                                                   | )      |   | (324,514 | ) |
|                                                                 |   |                                                     |      |                                                                     |   |                                                                     |   |   |   |   |
| Other                income:                                         |   |                                                     |      |                                                                     |   |                                                                     |   |   |   |   |
| Investment                income                                     |   |                                                     | 209,131   |                                                                     |   | 223                                                                      |   |   | 1,023,985 |   |
| Net                income (loss) for period                          |   |                                                     | 155,406   |                                                                     |   | (2,424                                                                   | )      |   | 699,471 |   |
|                                                                 |   |                                                     |      |                                                                     |   |                                                                     |   |   |   |   |
| Net                income (loss) attributable to common shareholders |   |                                                     | 155,406   |                                                                     |   | (2,424                                                                   | )      |   | 699,471 |   |
|                                                                 |   |                                                     |      |                                                                     |   |                                                                     |   |   |   |   |
| Weighted                average shares outstanding                   |   |                                                     | 7,105,000 |                                                                     |   | 1,250,000                                                                |   |   | 3,292,000 |   |
|                                                                 |   |                                                     |      |                                                                     |   |                                                                     |   |   |   |   |
| Net                income per share, basic and diluted               |   | $                                                        | 0.02      |                                                                     |   | 0.00                                                                     |   | $ | 0.21 |   |
|                                                                      |   |                                                     |      |                                                                     |   |                                                                     |   |   |   |   |
|                                                                      |   |                                                     |      |                                                                     |   |                                                                     |   |   |   |   |

*See        accompanying notes to financial statements.*

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*Table          of Contents*

**China      Discovery Acquisition Corp.**

**(a        corporation in the development stage)**

**Unaudited        Statement of Stockholders’ Equity **

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|                                                                                                                                                                                                                                         |   | Ordinary                Shares |      | Additional |   | Earnings                accumulated during the developmental |   |   |        |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------|-----------|------------|--------|--------------------------------------------------------------|--------|--------|-------------|
|                                                                                                                                                                                                                                              |   | Shares                         |      | Amount     |   | Paid-In                Capital                               |   | stage  |        | Total |   |
| Balance,                January 8, 2007 (inception)                                                                                                                                                                                          |   |                           | —   |       |   | —                                                      |   |   | —     |   |   | — |   |   | — |   |
|                                                                                                                                                                                                                                         |   |                           |      |       |   |                                                         |   |   |        |   |   |   |   |   |   |   |
| Ordinary                shares issued January 8, 2007 at $.0200 per share                                                                                                                                                                    |   |                           | 1,250,000 |       |   | 125                                                          |   |   | 24,875      |   |   |   |   |   | 25,000 |   |
|                                                                                                                                                                                                                                         |   |                           |      |       |   |                                                         |   |   |        |   |   |   |   |   |   |   |
| Sale                of 5,750,000 units at $6.00 per unit through a public offering, net                of                underwriter’s discount and offering expenses (1,724,425 shares subject to                possible conversion) |   |                           | 5,750,000 |       |   | 575                                                          |   |   | 31,920,469  |   |   |   |   |   | 31,921,044 |   |
| Proceeds                from issuance of underwriter’s options                                                                                                                                                                         |   |                           |      |       |   |                                                         |   |   | 100         |   |   |   |   |   | 100 |   |
| Proceeds                subject to possible conversion of 1,724,425 shares                                                                                                                                                                   |   |                           |      |       |   |                                                         |   |   | (10,008,413 | ) |   |   |   |   | (10,008,413 | ) |
| Proceeds                from private placement to insider units and warrants                                                                                                                                                                 |   |                           | 105,000   |       |   | 11                                                           |   |   | 1,249,989   |   |   |   |   |   | 1,250,000 |   |
| Net                income for the period from January 8, 2007 (inception) to March                31, 2008 (unaudited)                                                                                                             |   |                           |      |       |   |                                                         |   |   |        |   |   | 699,471 |   |   | 699,471 |   |
| Balance,                March 31, 2008 (unaudited)                                                                                                                                                                                           |   |                           | 7,105,000 |       |   | 711                                                          |   |   | 23,187,020  |   |   | 699,471 |   |   | 23,887,202 |   |
|                                                                                                                                                                                                                                              |   |                           |      |       |   |                                                         |   |   |        |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                              |   |                           |      |       |   |                                                         |   |   |        |   |   |   |   |   |   |   |

*See        accompanying notes to financial statements.*

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*Table          of Contents*

**China      Discovery Acquisition Corp.**

**(a        corporation in the development stage)**

**Unaudited        Statement of Cash Flows **

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|                                                                                                                          |   | For                the Three                Months Ended March                31, 2008 |     | Period                from January 8, 2007 (inception) to March 31, 2007 |   | January                8, 2007(inception)                toMarch                31, 2008 |   |
|--------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------|----------|--------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------|--------|
| **CASH                FLOWS FROM OPERATING ACTIVITIES**                                                                  |   |                                                                                   |     |                                                                     |   |                                                                                     |   |
| Net                income                                                                                                |   | $                                                                                      | 155,406  |                                                                     | $      | (2,424                                                                                   | )      | $ | 699,471 |   |
| Adjustments                to reconcile net loss for the period to net cash used in operating                activities: |   |                                                                                   |     |                                                                     |   |                                                                                     |   |   |   |   |
| Changes                in operating assets and liabilities                                                               |   |                                                                                   |     |                                                                     |   |                                                                                     |   |   |   |   |
| Increase                in accrued expenses                                                                              |   |                                                                                   |     |                                                                     |   | 2,500                                                                                    |   |   |   |   |
| Interest                earned on trust fund                                                                             |   |                                                                                   | (159,682 | )                                                                        |   |                                                                                     |   |   | (971,559 | ) |
| Interest                receivable                                                                                       |   |                                                                                   | (48,427  | )                                                                        |   |                                                                                     |   |   | (48,427 | ) |
| Net                cash used in operating activities                                                                     |   |                                                                                   | (52,703  | )                                                                        |   | 76                                                                                       |   |   | (320,515 | ) |
|                                                                                                                     |   |                                                                                   |     |                                                                     |   |                                                                                     |   |   |   |   |
| **CASH                FLOWS FROM INVESTING ACTIVITIES**                                                                  |   |                                                                                   |     |                                                                     |   |                                                                                     |   |   |   |   |
| Deposits                from Trust Account                                                                               |   |                                                                                   | —  |                                                                     |   |                                                                                     |   |   | (33,372,500 | ) |
| Withdrawals                from Trust Account                                                                            |   |                                                                                   | 150,000  |                                                                     |   |                                                                                     |   |   | (350,000 | ) |
| Net                cash used in investing activities                                                                     |   |                                                                                   | 150,000  |                                                                     |   |                                                                                     |   |   | (33,022,500 | ) |
|                                                                                                                     |   |                                                                                   |     |                                                                     |   |                                                                                     |   |   |   |   |
| **CASH                FLOWS FROM FINANCING ACTIVITIES**                                                                  |   |                                                                                   |     |                                                                     |   |                                                                                     |   |   |   |   |
| Deferred                costs associated with initial pubic offering                                                     |   |                                                                                   |     |                                                                     |   | (88,843                                                                                  | )      |   |   |   |
| Gross                proceeds from initial public offering                                                               |   |                                                                                   |     |                                                                     |   |                                                                                     |   |   | 34,500,000 |   |
| Proceeds                from underwriters’ purchase option                                                         |   |                                                                                   | 0        |                                                                     |   |                                                                                     |   |   | 100 |   |
| Proceeds                from sale of ordinary shares to founding stockholders                                            |   |                                                                                   | 0        |                                                                     |   | 25,000                                                                                   |   |   | 25,000 |   |
| Proceeds                from private placement to founding stockholders                                                  |   |                                                                                   | 0        |                                                                     |   |                                                                                     |   |   | 1,250,000 |   |
| Accrued                offering costs                                                                                    |   |                                                                                   | 0        |                                                                     |   |                                                                                     |   |   | 0 |   |
| Payment                of costs of initial public offering                                                               |   |                                                                                   | 0        |                                                                     |   |                                                                                     |   |   | (2,233,956 | ) |
| Proceeds                from stockholder notes payable                                                                   |   |                                                                                   | 0        |                                                                     |   | 100,000                                                                                  |   |   | 100,000 |   |
| Repayment                of stockholder notes payable                                                                    |   |                                                                                   | 0        |                                                                     |   |                                                                                     |   |   | (100,000 | ) |
| Net                cash provided by financing activities                                                                 |   |                                                                                   | 0        |                                                                     |   | 36,157                                                                                   |   |   | 33,541,144 |   |
|                                                                                                                     |   |                                                                                   |     |                                                                     |   |                                                                                     |   |   |   |   |
| NET                INCREASE IN CASH                                                                                      |   |                                                                                   | 97,297   |                                                                     |   | 36,233                                                                                   |   |   | 198,129 |   |
| CASH                AT BEGINNING OF PERIOD                                                                               |   |                                                                                   | 100,832  |                                                                     |   | —                                                                                  |   |   | 0 |   |
| CASH                AT END OF PERIOD                                                                                     |   |                                                                                   | 198,129  |                                                                     |   | 36,233                                                                                   |   |   | 198,129 |   |
| SUPPLEMENTAL                SCHEDULE OF NON-CASH FINANCING ACTIVITIES                                                    |   |                                                                                   |     |                                                                     |   |                                                                                     |   |   |   |   |
| Accrual                of deferred underwriting discount & commission                                                |   |                                                                                   | 345,000  |                                                                     |   |                                                                                     |   |   | 345,000 |   |
| Fair                value of underwriter purchase option included in offering                costs                       |   |                                                                                   |     |                                                                     |   |                                                                                     |   |   | 1,054,114 |   |
|                                                                                                                          |   |                                                                                   |     |                                                                     |   |                                                                                     |   |   |   |   |
|                                                                                                                          |   |                                                                                   |     |                                                                     |   |                                                                                     |   |   |   |   |

*See        accompanying notes to financial statements.*

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*Table          of Contents*

**China      Discovery Acquisition Corp.**

**(a        corporation in the development stage)**

**Notes        to Unaudited Financial Statements **

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| **1.** | **Organization****and****Business****Operations** | China                Discovery Acquisition Corp. (the “Company”) was incorporated in the Cayman                Islands on January 8, 2007 as a blank check company whose objective                is to                acquire, through a stock exchange, asset acquisition or other similar                business combination, an operating business, or control of such operating                business through contractual arrangements, that has its principal                operations located in the People’s Republic of China.  The                financial statements at and for the periods ended March 31, 2008                are                unaudited. In the opinion of management, all adjustments (consisting                of                normal adjustments) have been made that are necessary to present                fairly                the financial position of the Company as of March 31, 2008, the results                of                its operations and cash flows for the three month period ended March                31,                2008 and for the period from January 8, 2007 (inception) through                March 31,                2008. Operating results for the interim period presented are not                necessarily indicative of the results to be expected for a full                year. The                statements and related notes have been prepared pursuant to the rules                and                regulations of the U.S. Securities and Exchange Commission. Accordingly,                certain information and footnote disclosures normally included in                financial statements prepared in accordance with generally accepted                accounting principles have been omitted pursuant to such rules and                regulations. The                preparation of financial statements in conformity with generally                accepted                accounting principles requires management to make estimates and                assumptions that affect the reported amounts of assets and liabilities                and                any disclosure of contingent assets and liabilities at the date of                the                financial statements, and the reported amounts of revenues and expenses                during the reported period. Actual results could differ from those                estimates. The interim condensed financial statements should be read                in                conjunction with the financial statements and notes thereto included                in                the Company’s final prospectus, dated June 18, 2007, which was filed with                the Securities and Exchange Commission on June 21, 2007. All                activity from January 8, 2007 (inception) through June 21, 2007 relates                to                the Company’s formation and initial public offering described below. The                Company has selected December 31 as its fiscal                year-end. |
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*Table          of Contents*

**China        Discovery Acquisition Corp.**

**(a          corporation in the development stage)**

**Notes          to Unaudited Financial Statements **

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|   |   | The                registration statement for the Company’s initial public offering                (“Offering”) was declared effective June 18, 2007. The Company consummated                the offering on June 26, 2007 (Note 2). The Company’s management has broad                discretion with respect to the specific application of the net proceeds                of                this Offering, although substantially all of the net proceeds of                this                Offering are intended to be generally applied toward consummating                the                acquisition, through a stock exchange, asset acquisition or other                similar                business combination, of an operating business, or the acquisition                of                control of such operating business through contractual arrangements,                that                has its principal operations located in the People’s Republic of China                (“Business Combination”). However, there is no assurance that the Company                will be able to successfully effect a Business Combination. Upon                the                closing of the Offering, including the over-allotment option, an                amount of                $29,075,000 of the net proceeds was deposited in an interest-bearing                trust                account (“Trust Account”) until the earlier of (i) the consummation of a                Business Combination or (ii) liquidation of the Company. There can                be                released to the Company, from time to time, interest earned on the                funds                held in trust up to an aggregate of $1,050,000 of which $350,000                has been                released through March 31, 2008. Under the agreement governing the                Trust                Account, funds will only be invested in United States “government                securities” within the meaning of Section 2(a)(16) of the Investment                Company Act of 1940 with a maturity of 180 days or less or in money                market                funds meeting certain conditions under Rule 2a-7 promulgated under                the                Investment Company Act of 1940. The remaining net proceeds (not held                in                the Trust Account) may be used to pay for business, legal and accounting                due diligence on prospective acquisitions and continuing general                and                administrative expenses.  The                Company, after signing a definitive agreement for the acquisition                of a                target business, will submit such transaction for stockholder approval.                In                the event that stockholders owning 30% or more of the shares sold                in the                Offering vote against the Business Combination and exercise their                conversion rights described below, the Business Combination will                not be                consummated. All                of the Company’s stockholders prior to the Offering, including all of the                officers and directors of the Company (“Initial Stockholders”), have                agreed to vote their 1,250,000 founding shares of common stock in                accordance with the vote of the majority in interest of all other                stockholders of the Company (“Public Stockholders”) with respect to any                Business Combination. After consummation of a Business Combination,                these                voting safeguards will no longer be applicable.  With                respect to a Business Combination which is approved and consummated,                any                Public Stockholder who voted against the Business Combination may                demand                that the Company convert his shares. The per share conversion price                will                equal the amount in the Trust Account, calculated as of two business                days                prior to the consummation of the proposed Business Combination, divided                by                the number of shares of common stock held by Public Stockholders                at the                consummation of the Offering. Accordingly, Public Stockholders holding                29.99% of the aggregate number of shares owned by all Public Stockholders                may seek conversion of their shares in the event of a Business                Combination. Such Public Stockholders are entitled to receive their                per                share interest in the Trust Account computed without regard to the                shares                held by Initial Stockholders. Accordingly, a portion of the net proceeds                from the offering (29.99% of the amount held in the Trust Account)                has                been classified as common stock subject to possible conversion in                the                accompanying March 31, 2008 balance                sheet. |
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*Table          of Contents*

**China        Discovery Acquisition Corp.**

**(a          corporation in the development stage)**

**Notes          to Unaudited Financial Statements **

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|   |   | The                Company’s Memorandum and Articles of Association provides that the Company                will continue in existence only until June 26, 2009. If the Company                has                not completed a Business Combination by such date, its corporate                existence                will cease and it will dissolve and liquidate for the purposes of                winding                up its affairs. In the event of liquidation, it is likely that the                per                share value of the residual assets remaining available for distribution                (including Trust Fund assets) will be less than the initial public                offering price per share in the Offering (assuming no value is attributed                to the Warrants contained in the Units to be offered in the Offering                discussed in Note 2). ***Concentration                of Credit Risk*** The                Company maintains cash in bank deposit accounts which, at times,                exceed                federally insured limits. The company has not experienced any losses                on                these accounts. ***Investment                Held in Trust*** The                Company’s restricted investment held in the Trust Fund at March 31, 2008                is comprised of Money Market Treasury Obligations Fund consisting                of tax                exempt securities with short term maturities. Such securities generate                current income which is exempt from federal income tax. ***Earnings                Per Share*** Basic                earnings (loss) per share is computed by dividing net income (loss)                by the                weighted-average number of shares of common stock outstanding during                the                period. The                effect of the 11,500,000 warrants issued in connection with the public                offering, 1,033,334 warrants and 105,000 units issued in connection                with                the private placement and the 500,000 units included in the underwriter’s                purchase options has not been considered in diluted loss per share                calculations since such warrants are not yet exercisable. ***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 at the date of the financial statements                and the reported amounts of expenses during the reporting period.                Actual                results could differ from those                estimates. |
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*Table          of Contents*

**China      Discovery Acquisition Corp.**

**(a          corporation in the development stage)**

**Notes          to Unaudited Financial Statements **

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|   |                                       | ***Effect              of Recent Accounting Pronouncements*** Management                does not believe that any recently issued, but not yet effective,                accounting standards if currently adopted would have a material effect                on                the accompanying financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
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| **2.** | **Initial                Public Offering** | On                June 26, 2007, the Company sold 5,000,000 units (“Units”) in the Offering.                On July                2, 2007, the Company consummated the closing of an additional 750,000                Units which were subject to the over-allotment option.** **Each                Unit consists of one ordinary share, $.0001 par value, and two warrants                (“Warrants”). Each Warrant entitles the holder to purchase from the                Company one ordinary share at an exercise price of $5.00 commencing                the                later of the completion of a Business Combination or June 18, 2008                and                expiring June 17, 2011. The Warrants will be redeemable, at the Company’s                option, with the prior consent of EarlyBirdCapital, Inc., the                representative of the underwriters in the Offering (“Representative”), at                a price of $.01 per Warrant upon 30 days’ notice after the Warrants become                exercisable, only in the event that the last sale price of the common                stock is at least $8.50 per share for any 20 trading days within                a 30                trading day period ending on the third day prior to the date on which                notice of redemption is given. If the Company redeems the Warrants                as                described above, management will have the option to require any holder                that wishes to exercise his Warrant to do so on a “cashless basis.” In                such event, the holder would pay the exercise price by surrendering                his                Warrants for that number of ordinary shares equal to the quotient                obtained                by dividing (x) the product of the number of ordinary shares underlying                the Warrants, multiplied by the difference between the exercise price                of                the Warrants and the “fair market value” (defined below) by (y) the fair                market value. The “fair market value” shall mean the average reported last                sale price of the ordinary shares for the 10 trading days ending                on the                third trading day prior to the date on which the notice of redemption                is                sent to holders of Warrants. In accordance with the warrant agreement                relating to the Warrants to be sold and issued in the Offering, the                Company is only required to use its best efforts to maintain the                effectiveness of the registration statement covering the Warrants.                The                Company will not be obligated to deliver securities, and there are                no                contractual penalties for failure to deliver securities, if a registration                statement is not effective at the time of exercise. Additionally,                in the                event that a registration is not effective at the time of exercise,                the                holder of such Warrant shall not be entitled to exercise such Warrant                and                in no event (whether in the case of a registration statement not                being                effective or otherwise) will the Company be required to net cash                settle                the warrant exercise. Consequently, the Warrants may expire unexercised                and unredeemed. |

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*Table          of Contents*

**China        Discovery Acquisition Corp.**

**(a            corporation in the development stage)**

**Notes            to Unaudited Financial Statements **

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|   |                                         | The                Company paid the underwriters in the Offering an underwriting discount                of                5.5% of the gross proceeds of the Offering and a non-accountable                expense                allowance of 0.5% of the gross proceeds of the Offering. However,                the                underwriters agreed that 1% of the underwriting discount would be                deferred                and would not be paid unless and until the Company consummated a                Business                Combination. In connection with this Offering, the Company also issued                an                option (“Option”), for $100, to the Representative to purchase 500,000                Units at an exercise price of $6.60 per Unit. The Company accounted                for                the fair value of the Option, inclusive of the receipt of the $100                cash                payment, as an expense of the Offering resulting in a charge directly                to                stockholders’ equity. The Company estimated that the fair value of the                Option was approximately $1,054,114 ($2.11 per Unit) using a Black-Scholes                option-pricing model. The fair value of the Option granted to the                Representative was estimated as of the date of grant using the following                assumptions: (1) expected volatility of 35.03%, (2) risk-free interest                rate of 4.54% and (3) expected life of 5 years. The Option may be                exercised for cash or on a "cashless" basis, at the holder's option                (except in the case of a forced cashless exercise upon the Company’s                redemption of the Warrants, as described above), such that the holder                may                use the appreciated value of the Option (the difference between the                exercise prices of the Option and the underlying Warrants and the                market                price of the Units and underlying securities) to exercise the option                without the payment of any cash. The Company will have no obligation                to                net cash settle the exercise of the unit purchase option or the Warrants                underlying the unit purchase option. The holder of the unit purchase                option will not be entitled to exercise the unit purchase option                or the                Warrants underlying the unit purchase option unless a registration                statement covering the securities underlying the unit purchase option                is                effective or an exemption from registration is available. If the                holder is                unable to exercise the unit purchase option or underlying Warrants,                the                unit purchase option or Warrants, as applicable, will expire                worthless. |
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| **3.** | **Note                Payable, Stockholder** | The                Company issued unsecured promissory notes in aggregate amount of                $100,000                to certain officers. The notes were non interest bearing and were                paid                from the net proceeds of the Offering.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
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| **4.** | **Commitments**                              | The                Company occupies office space provided by an affiliate of the Company’s                chief operating officer. Such affiliate has agreed that, until the                Company                consummates a Business Combination, it will make such office space,                as                well as certain office and secretarial services, available to the                Company,                as may be required by the Company from time to time. The Company                has                agreed to pay such affiliate $7,500 per month for such services commencing                on the effective date of the Offering.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |

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*Table          of Contents*

**China        Discovery Acquisition Corp.**

**(a            corporation in the development stage)**

**Notes            to Unaudited Financial Statements **

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|   |                               | Pursuant                to letter agreements dated as of October 12, 2006 with the Company                and the                underwriter, the Initial Stockholders have waived their right to                receive                distributions with respect to their founding shares upon the Company’s                liquidation. The                Company’s directors and certain special advisors and their members                purchased 105,000 Units (“Insider Units”) at $6.00 per Unit and 1,033,334                Warrants (“Insider Warrants”) at $0.60 per Unit (for an aggregate purchase                price of $1,250,000) privately from the Company. These purchases                took                place simultaneously with the consummation of the Offering. All of                the                proceeds received from these purchases were placed in the Trust Account.                The Insider Units and Insider Warrants are identical to the Units                sold in                the Offering (and the Warrants underlying such Units) except that                if the                Company calls the Warrants for redemption, the Insider Warrants may                be                exercisable on a “cashless basis,” at the holder’s option (except in the                case of a forced cashless exercise upon the Company’s redemption of the                Warrants, as described above), so long as such securities are held                by such                purchasers or their affiliates. Furthermore, the purchasers have                agreed                that the Insider Warrants will not be sold or transferred by them                until                after the Company has completed a Business Combination. The                Initial Stockholders and the holders of the Insider Units and Insider                Warrants (or underlying securities) will be entitled to registration                rights with respect to their founding shares, Insider Units or Insider                Warrants (or underlying securities) pursuant to an agreement signed                prior                the Offering. The holders of the majority of the founding shares                are                entitled to demand that the Company register these shares at any                time                commencing three months prior to the first anniversary of the consummation                of a Business Combination. The holders of the Insider Units and Insider                Warrants (or underlying securities) are entitled to demand that the                Company register these securities at any time after the Company                consummates a Business Combination. In addition, the Initial Stockholders                and holders of the Insider Units and Insider Warrants (or underlying                securities) have certain “piggy-back” registration rights on registration                statements filed after the Company’s consummation of a Business                Combination. The                Representative has been engaged by the Company to act as the Company’s                non-exclusive investment banker in connection with a proposed Business                Combination. For assisting the Company in structuring and negotiating                the                terms of a Business Combination, the Company will pay the Representative                a                cash transaction fee equal to 1% of the total consideration paid                in                connection with the Business Combination, with a maximum fee to be                paid of                $300,000. Additionally, the Company has agreed to pay the fees and                issue                the securities to the underwriters in the Offering as described in                Note 2                above. |
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| **5.** | **Preferred                Stock** | The                Company is authorized to issue 1,000,000 shares of preferred stock                with                such designations, voting and other rights and preferences as may                be                determined from time to time by the Board of Directors. The                agreement with the underwriters prohibits the Company, prior to a                Business                Combination, from issuing preferred stock which participates in the                proceeds of the Trust Account or which votes as a class with the                Common                Stock on a Business Combination.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |

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*Table          of Contents*

**ITEM      2.** **MANAGEMENT'S      DISCUSSION AND ANALYSIS OR PLAN OF OPERATION**

**Forward      Looking Statements**

**Overview**

**Results      of Operations**

**Financial      Condition and Liquidity**

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*Table          of Contents*

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

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*Table          of Contents*

**PART      II. **

**OTHER      INFORMATION**

**ITEM      2.** **UNREGISTERED      SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**

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

|  | (a) | Exhibits: |
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|  | 31.1 | Section                302 Certification by CEO |
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|  | 31.2 | Section                906 Certification by CFO |
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|  | 32.1 | Section                302 Certification by CEO |
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|  | 32.2 | Section                906 Certification by CFO |
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*Table          of Contents*

**SIGNATURES**

**CHINA      DISCOVERY ACQUISITION CORP. **

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