##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q







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

For the Quarterly Period Ended March 31, 2008

OR



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

For the transition period from              to

Commission file number: 000-52358





MIDDLE KINGDOM ALLIANCE CORP.

(Exact name of registrant as specified in its
charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 20-4293876                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



|                                                |  |           
|----------------------------------------------- |  | ----------
|333 Sandy Springs Circle, Suite 223 Atlanta, GA |  | 30328     
|(Address of principal executive offices)        |  | (Zip Code)

(404) 843-8585

(Registrants telephone number, including area code)





Indicate by check mark whether
the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No   ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See definition of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):



|                                              |  |                             
|--------------------------------------------- |  | ----------------------------
|Large accelerated filer   ̈                    |  | Accelerated filer   ̈        
|Non-accelerated filer   ̈                      |  | Smaller reporting company  x
|(Do not check if a smaller reporting company) |  |                             

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

State the number of shares outstanding of each of the issuers classes of common equity, as of the last practicable date. There were 1,065,650 shares of the Companys Common Stock, 3,420,305 shares of the
Companys Class B Common Stock, 1,578,250 of the Companys Class A Warrants, and 3,420,305 of the Companys Class B Warrants, outstanding on May 15, 2008.









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##### Table of Contents

MIDDLE KINGDOM ALLIANCE CORP.

(a development stage company)

TABLE OF CONTENTS



|         |  |                       |  |                                                                                                                                                                                   |  |   
|-------- |  | --------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --
|         |  | Page No.             
|Part I.  |  | FINANCIAL INFORMATION |  |                                                                                                                                                                                  
|         |  |                       | 
|         |  | Item 1.               |  | Financial Statements                                                                                                                                                              |  |   
|         |  |                       | 
|         |  |                       |  | Balance Sheets, March 31, 2008 (Unaudited) and December 31, 2007                                                                                                                  |  | 3 
|         |  |                       | 
|         |  |                       |  | Statements of Operations for the three months ended March 31, 2008 (Unaudited) and 2007 (Unaudited) and for the period January 17, 2006 (inception) to March 31, 2008 (Unaudited) |  | 4 
|         |  |                       | 
|         |  |                       |  | Statements of Changes in Stockholders Equity for the three months ended March 31, 2008 (Unaudited) and for the period January 17, 2006 (inception) to December 31, 2007          |  | 5 
|         |  |                       | 
|         |  |                       |  | Statements of Cash Flows for the three months ended March 31, 2008 (Unaudited) and 2007 (Unaudited) and for the period January 17, 2006 (inception) to March 31, 2008 (Unaudited) |  | 6 
|         |  |                       | 
|         |  |                       |  | Notes to Financial Statements                                                                                                                                                     |  | 7 
|         |  |                       | 
|         |  | Item 2.               |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                                                                             |  | 12
|         |  |                       | 
|         |  | Item 3.               |  | Quantitative and Qualitative Disclosures About Market Risk                                                                                                                        |  | 15
|         |  |                       | 
|         |  | Item 4.               |  | Controls and Procedures                                                                                                                                                           |  | 15
|         |  |                      
|Part II. |  | OTHER INFORMATION     |  |                                                                                                                                                                                  
|         |  |                       | 
|         |  | Item 1A.              |  | Risk Factors                                                                                                                                                                      |  | 16
|         |  |                       | 
|         |  | Item 2.               |  | Unregistered Sales Of Equity Securities And Use Of Proceeds                                                                                                                       |  | 16
|         |  |                       | 
|         |  | Item 6.               |  | Exhibits                                                                                                                                                                          |  | 16
|         |  |                      
|         |  | SIGNATURES            |  |                                                                                                                                                                                  



2



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##### Table of Contents

PART I. FINANCIAL INFORMATION



|ITEM 1. | Financial Statements
|------- | --------------------

MIDDLE KINGDOM ALLIANCE CORP.

(a development stage company)

BALANCE SHEETS



|                                                                                     |  |               |            |                  |   |           
|------------------------------------------------------------------------------------ |  | ------------- | ---------- | ---------------- | - | ----------
|                                                                                     |  | March 31,2008 |            | December 31,2007
|                                                                                     |  | (unaudited)   |            |                 
|ASSETS                                                                               |  |               |            |                  |   |           
|Current assets:                                                                      |  |               |            |                  |   |           
|Cash and cash equivalents                                                            |  | $             | 129,108    |                  | $ | 168,915   
|Investments held in trust account                                                    |  |               | 28,704,371 |                  |   | 28,570,476
|Prepaid insurance and other assets                                                   |  |               | 39,597     |                  |   | 42,096    
|                                                                                     |  |               |            |                  |   |           
|Total current assets                                                                 |  | $             | 28,873,076 |                  | $ | 28,781,487
|                                                                                     |  |               |            |                  |   |           
|                                                                                     |  |              
|LIABILITIES AND STOCKHOLDERS EQUITY                                                 |  |               |            |                  |   |           
|Current liabilities:                                                                 |  |               |            |                  |   |           
|Accounts payable and accrued liabilities                                             |  | $             | 264,483    |                  | $ | 109,286   
|Due to underwriters                                                                  |  |               | 947,662    |                  |   | 947,662   
|                                                                                     |  |               |            |                  |   |           
|Total current liabilities                                                            |  |               | 1,212,145  |                  |   | 1,056,948 
|                                                                                     |  |               |            |                  |   |           
|Commitments:                                                                         |  |               |            |                  |   |           
|Class B common stock, $.001 par value, 684,060 shares subject to possible redemption |  |               | 5,732,809  |                  |   | 5,710,264 
|                                                                                     |  |               |            |                  |   |           
|Stockholders Equity:                                                                |  |               |            |                  |   |           
|Preferred stock$.001 par value;                                                     |  |               |            |                  |   |           
|Authorized 1,000,000 shares; none issued                                             |  | $             |           |                  | $ |          
|Common stock$.001 par value;                                                        |  |               |            |                  |   |           
|Authorized 15,000,000 shares; issued and outstanding 1,065,650                       |  |               | 1,065      |                  |   | 1,065     
|Class B common stock$.001 par value;                                                |  |               |            |                  |   |           
|Authorized 5,000,000 shares; issued and outstanding 3,420,305                        |  |               | 3,420      |                  |   | 3,420     
|(includes 684,060 shares subject to possible redemption)                             |  |               |            |                  |   |           
|Additional paid-in capital                                                           |  |               | 21,699,070 |                  |   | 21,699,070
|Retained earnings during the development stage                                       |  |               | 224,567    |                  |   | 310,720   
|                                                                                     |  |               |            |                  |   |           
|Total stockholders equity                                                           |  |               | 21,928,122 |                  |   | 22,014,275
|                                                                                     |  |               |            |                  |   |           
|Total liabilities and stockholders equity                                           |  | $             | 28,873,076 |                  | $ | 28,781,487
|                                                                                     |  |               |            |                  |   |           

The accompanying notes should be read

in conjunction with the financial statements.



3



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##### Table of Contents

MIDDLE KINGDOM ALLIANCE CORP.

(a development stage company)

STATEMENTS OF OPERATIONS



|                                                |  |                                         |           |   |                                         |   |           |                                                                |  |   |            |  
|----------------------------------------------- |  | --------------------------------------- | --------- | - | --------------------------------------- | - | --------- | -------------------------------------------------------------- |  | - | ---------- | -
|                                                |  | For the ThreeMonths EndedMarch 31, 2008 |           |   | For the ThreeMonths EndedMarch 31, 2007 |   |           | For the Periodfrom January 17,2006
(inception)to March 31,2008 | 
|                                                |  | (unaudited)                             |           |   | (unaudited)                             |   |           | (unaudited)                                                    | 
|Operating expenses:                             |  |                                         |           |   |                                         |   |           |                                                                |  |   |            |  
|General, administrative and legal               |  | $                                       | (313,211  | ) |                                         | $ | (175,678  | )                                                              |  | $ | (1,100,821 | )
|                                                |  |                                         |           |   |                                         |   |           |                                                                |  |   |            |  
|Loss from operations                            |  |                                         | (313,211  | ) |                                         |   | (175,678  | )                                                              |  |   | (1,100,821 | )
|Interest income                                 |  |                                         | 227,058   |   |                                         |   | 340,446   |                                                                |  |   | 1,588,284  |  
|                                                |  |                                         |           |   |                                         |   |           |                                                                |  |   |            |  
|(Loss) income before provision for income taxes |  |                                         | (86,153   | ) |                                         |   | 164,768   |                                                                |  |   | 487,463    |  
|Provision for income taxescurrent              |  |                                         |          |   |                                         |   | (62,244   | )                                                              |  |   | (262,896   | )
|                                                |  |                                         |           |   |                                         |   |           |                                                                |  |   |            |  
|Net (loss) income                               |  | $                                       | (86,153   | ) |                                         | $ | 102,524   |                                                                |  | $ | 224,567    |  
|                                                |  |                                         |           |   |                                         |   |           |                                                                |  |   |            |  
|Weighted average number of shares outstanding   |  |                                         | 4,485,955 |   |                                         |   | 4,450,087 |                                                                |  |   |            |  
|                                                |  |                                         |           |   |                                         |   |           |                                                                |  |   |            |  
|Net (loss) income per sharebasic               |  | $                                       | (0.02     | ) |                                         | $ | 0.02      |                                                                |  |   |            |  
|                                                |  |                                         |           |   |                                         |   |           |                                                                |  |   |            |  
|Net (loss) income per sharediluted             |  | $                                       | (0.02     | ) |                                         | $ | 0.02      |                                                                |  |   |            |  
|                                                |  |                                         |           |   |                                         |   |           |                                                                |  |   |            |  

The accompanying notes should be read

in conjunction with the financial statements.



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MIDDLE KINGDOM ALLIANCE CORP.

(a development stage company)

STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY

(Unaudited)



|                                                                                                                                                     |  |              |  |                     |       |                          |           |        |                                                                  |       |  |                          |            |   |  |   |         |   |  |   |            |  
|---------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ |  | ------------------- | ----- | ------------------------ | --------- | ------ | ---------------------------------------------------------------- | ----- |  | ------------------------ | ---------- | - |  | - | ------- | - |  | - | ---------- | -
|                                                                                                                                                     |  | Common Stock |  | Class BCommon Stock |       | AdditionalPaid-InCapital |           |        | Retained Earnings(AccumulatedDeficit) Duringthe DevelopmentStage |       |  | TotalStockholdersEquity |           
|                                                                                                                                                     |  | Shares       |  | Amount              |       | Shares                   |           | Amount |                                                                  |       | 
|January 17, 2006 (inception)                                                                                                                         |  |              |  | $                   |      |                          |           |        | $                                                                |      |  | $                        |           |   |  | $ |        |   |  | $ |           |  
|Issuances of common stock for cash to founders at $.03 per share (from February 15, 2006 to September 30, 2006)                                      |  | 750,000      |  |                     | 750   |                          |           |        |                                                                  |      |  |                          | 21,750     |   |  |   |        |   |  |   | 22,500     |  
|Issuances of Series A units for cash to founders at $8.00 per unit (from February 15, 2006 to September 30, 2006)                                    |  | 90,450       |  |                     | 90    |                          |           |        |                                                                  |       |  |                          | 723,510    |   |  |   |         |   |  |   | 723,600    |  
|Sale of Series A units, net of underwriters discount and offering expenses on December 19, 2006                                                      |  | 198,000      |  |                     | 198   |                          |           |        |                                                                  |       |  |                          | 1,532,397  |   |  |   |         |   |  |   | 1,532,595  |  
|Sale of Series B units, net of underwriters discount and offering expenses on December 19, 2006 (includes shares subject to possible
redemption)     |  |              |  |                     |       |                          | 3,300,000 |        |                                                                  | 3,300 |  |                          | 23,950,909 |   |  |   |         |   |  |   | 23,954,209 |  
|Proceeds from the issuance of an underwriters option                                                                                                 |  |              |  |                     |       |                          |           |        |                                                                  |       |  |                          | 100        |   |  |   |         |   |  |   | 100        |  
|Reclassification of amounts subject to possible redemption of 659,999 Class B common shares                                                          |  |              |  |                     |       |                          |           |        |                                                                  |       |  |                          | (5,438,392 | ) |  |   |         |   |  |   | (5,438,392 | )
|Net loss                                                                                                                                             |  |              |  |                     |       |                          |           |        |                                                                  |       |  |                          |            |   |  |   | (92,546 | ) |  |   | (92,546    | )
|                                                                                                                                                     |  |              |  |                     |       |                          |           |        |                                                                  |       |  |                          |            |   |  |   |         |   |  |   |            |  
|Balance December 31, 2006                                                                                                                           |  | 1,038,450    |  |                     | 1,038 |                          | 3,300,000 |        |                                                                  | 3,300 |  |                          | 20,790,274 |   |  |   | (92,546 | ) |  |   | 20,702,066 |  
|Sale of Series A units, net of underwriters discount and offering expenses on January 5, 2007                                                        |  | 27,200       |  |                     | 27    |                          |           |        |                                                                  |       |  |                          | 210,435    |   |  |   |         |   |  |   | 210,462    |  
|Sale of Series B units, net of underwriters discount and offering expenses on January 26, 2007 (includes shares subject to possible
redemption)      |  |              |  |                     |       |                          | 120,305   |        |                                                                  | 120   |  |                          | 894,554    |   |  |   |         |   |  |   | 894,674    |  
|Reclassification of amounts subject to possible redemption of an additional 24,061 Class B common stock for a total of 684,060 Class B common
shares |  |              |  |                     |       |                          |           |        |                                                                  |       |  |                          | (198,263   | ) |  |   |         |   |  |   | (198,263   | )
|Overpayment of NASD filing fees refunded                                                                                                             |  |              |  |                     |       |                          |           |        |                                                                  |       |  |                          | 2,070      |   |  |   |         |   |  |   | 2,070      |  
|Net Income                                                                                                                                           |  |              |  |                     |       |                          |           |        |                                                                  |       |  |                          |            |   |  |   | 403,266 |   |  |   | 403,266    |  
|                                                                                                                                                     |  |              |  |                     |       |                          |           |        |                                                                  |       |  |                          |            |   |  |   |         |   |  |   |            |  
|Balance December 31, 2007                                                                                                                           |  | 1,065,650    |  |                     | 1,065 |                          | 3,420,305 |        |                                                                  | 3,420 |  |                          | 21,699,070 |   |  |   | 310,720 |   |  |   | 22,014,275 |  
|                                                                                                                                                     |  |              |  |                     |       |                          |           |        |                                                                  |       |  |                          |            |   |  |   |         |   |  |   |            |  
|Net loss                                                                                                                                             |  |              |  |                     |       |                          |           |        |                                                                  |       |  |                          |            |   |  |   | (86,153 | ) |  |   | (86,153    | )
|Balance March 31, 2008                                                                                                                              |  | 1,065,650    |  | $                   | 1,065 |                          | 3,420,305 |        | $                                                                | 3,420 |  | $                        | 21,699,070 |   |  | $ | 224,567 |   |  | $ | 21,928,122 |  
|                                                                                                                                                     |  |              |  |                     |       |                          |           |        |                                                                  |       |  |                          |            |   |  |   |         |   |  |   |            |  

The accompanying notes should be read

in conjunction with the financial statements.



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MIDDLE KINGDOM ALLIANCE CORP.

(a development stage company)

STATEMENTS OF CASH FLOWS



|                                                                                         |  |                                         |         |   |                                         |   |            |                                                                 |  |   |             |  
|---------------------------------------------------------------------------------------- |  | --------------------------------------- | ------- | - | --------------------------------------- | - | ---------- | --------------------------------------------------------------- |  | - | ----------- | -
|                                                                                         |  | For the ThreeMonths EndedMarch 31, 2008 |         |   | For the ThreeMonths EndedMarch 31, 2007 |   |            | For the Periodfrom January 17,2006 (inception)to March 31, 2008 | 
|                                                                                         |  | (unaudited)                             |         |   | (unaudited)                             |   |            | (unaudited)                                                     | 
|Cash flows from operating activities:                                                    |  |                                         |         |   |                                         |   |            |                                                                 |  |   |             |  
|Net (loss) income                                                                        |  | $                                       | (86,153 | ) |                                         | $ | 102,524    |                                                                 |  | $ | 224,567     |  
|Adjustments to reconcile net (loss) income to net cash provided by operating activities: |  |                                         |         |   |                                         |   |            |                                                                 |  |   |             |  
|Increase value of trust account                                                          |  |                                         | (41,911 | ) |                                         |   | (9,278     | )                                                               |  |   | (81,330     | )
|Deferred interest income included in shares subject to redemption                        |  |                                         | 22,545  |   |                                         |   | 9,897      |                                                                 |  |   | 96,154      |  
|Changes in operating assets and liabilities:                                             |  |                                         |         |   |                                         |   |            |                                                                 |  |   |             |  
|Prepaid insurance and other assets                                                       |  |                                         | 2,499   |   |                                         |   | 22,600     |                                                                 |  |   | (39,597     | )
|Accounts payable and accrued liabilities                                                 |  |                                         | 155,197 |   |                                         |   | (37,677    | )                                                               |  |   | 264,483     |  
|                                                                                         |  |                                         |         |   |                                         |   |            |                                                                 |  |   |             |  
|Net cash provided by operating activities                                                |  |                                         | 52,177  |   |                                         |   | 88,066     |                                                                 |  |   | 464,277     |  
|                                                                                         |  |                                         |         |   |                                         |   |            |                                                                 |  |   |             |  
|Cash flows from investing activities:                                                    |  |                                         |         |   |                                         |   |            |                                                                 |  |   |             |  
|Purchase of investment in trust account, net                                             |  |                                         | (91,984 | ) |                                         |   | (1,153,105 | )                                                               |  |   | (28,623,041 | )
|                                                                                         |  |                                         |         |   |                                         |   |            |                                                                 |  |   |             |  
|Net cash used in investing activities                                                    |  |                                         | (91,984 | ) |                                         |   | (1,153,105 | )                                                               |  |   | (28,623,041 | )
|                                                                                         |  |                                         |         |   |                                         |   |            |                                                                 |  |   |             |  
|Cash flows from financing activities:                                                    |  |                                         |         |   |                                         |   |            |                                                                 |  |   |             |  
|Proceeds from common stock to founders                                                   |  |                                         |        |   |                                         |   |           |                                                                 |  |   | 22,500      |  
|Proceeds from Series A units to founders                                                 |  |                                         |        |   |                                         |   |           |                                                                 |  |   | 723,600     |  
|Proceeds from Series A and Series B units sold                                           |  |                                         |        |   |                                         |   | 1,144,639  |                                                                 |  |   | 27,541,672  |  
|Proceeds from issuance of an underwriters option                                         |  |                                         |        |   |                                         |   |           |                                                                 |  |   | 100         |  
|Proceeds from bank line of credit                                                        |  |                                         |        |   |                                         |   | (10,000    | )                                                               |  |   | 150,000     |  
|Repayment of bank line of credit                                                         |  |                                         |        |   |                                         |   |           |                                                                 |  |   | (150,000    | )
|                                                                                         |  |                                         |         |   |                                         |   |            |                                                                 |  |   |             |  
|Net cash provided by financing activities                                                |  |                                         |        |   |                                         |   | 1,134,639  |                                                                 |  |   | 28,287,872  |  
|                                                                                         |  |                                         |         |   |                                         |   |            |                                                                 |  |   |             |  
|Net (decrease) increase in cash                                                          |  |                                         | (39,807 | ) |                                         |   | 69,600     |                                                                 |  |   | 129,108     |  
|Cash and cash equivalents at beginning of period                                         |  |                                         | 168,915 |   |                                         |   | 2,828      |                                                                 |  |   |            |  
|Cash and cash equivalents at end of period                                               |  | $                                       | 129,108 |   |                                         | $ | 72,428     |                                                                 |  | $ | 129,108     |  
|                                                                                         |  |                                         |         |   |                                         |   |            |                                                                 |  |   |             |  
|Supplemental disclosure of non-cash financing activities:                                |  |                                         |         |   |                                         |   |            |                                                                 |  |   |             |  
|Accrual of deferred underwriting fees                                                    |  | $                                       |        |   |                                         | $ | 39,502     |                                                                 |  | $ | 947,662     |  
|                                                                                         |  |                                         |         |   |                                         |   |            |                                                                 |  |   |             |  
|Supplemental disclosure of cash flow information:                                        |  |                                         |         |   |                                         |   |            |                                                                 |  |   |             |  
|Cash paid during the year for:                                                           |  |                                         |         |   |                                         |   |            |                                                                 |  |   |             |  
|Interest                                                                                 |  | $                                       |        |   |                                         | $ | 72         |                                                                 |  | $ | 377         |  
|                                                                                         |  |                                         |         |   |                                         |   |            |                                                                 |  |   |             |  
|Income Taxes                                                                             |  | $                                       |        |   |                                         | $ |           |                                                                 |  | $ | 281,890     |  
|                                                                                         |  |                                         |         |   |                                         |   |            |                                                                 |  |   |             |  

The accompanying notes should be read

in conjunction with the financial statements.



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##### Table of Contents

MIDDLE KINGDOM ALLIANCE CORP.

(a development stage company)

NOTES TO FINANCIAL STATEMENTS

Note 1 Basis of
presentation, organization and proposed business operations and summary of significant accounting policies

Basis of Presentation

The financial statements at March 31, 2008 and for the period January 17, 2006 (inception) to March 31, 2008 and for the three months ended
March 31, 2008 are unaudited. In the opinion of management, all adjustments (consisting of normal accruals) have been made that are necessary to present fairly the financial position of Middle Kingdom Alliance Corp. (the Company) as
of March 31, 2008 and the results of its operations for the three months ended March 31, 2008 and its cash flows for the three months ended March 31, 2008 and for the period from January 17, 2006 (inception) to March 31,
2008. Operating results for the interim period are not necessarily indicative of the results to be expected for the full year. These financial statements should be read in conjunction with the financial statements that were included in the
Companys Annual Report on Form 10-K for the period ended December 31, 2007. The December 31, 2007 balance sheet has been derived from the audited financial statements included therein.

Organization and Operations

Middle Kingdom Alliance
Corp. (a development stage company) (the Company) was incorporated in Delaware on January 17, 2006. The Company was formed to complete a merger, capital stock exchange, asset purchase or other similar business combination
(Business Combination) with a company in an unspecified industry with principal or substantial operations in the Peoples Republic of China (China). Such company would be small enough to allow the Company to acquire a
material minority investment and large enough to have the organizational and financial infrastructure to operate as a public company. The Company has neither engaged in any operations nor generated any operating revenue to date. At March 31,
2008, the Company had not yet commenced any operations. All activity through March 31, 2008 relates to the Companys formation, public offering and the search for a company with which to affect a business combination. The Company is
considered to be in the development stage and is subject to the risks associated with activities of development stage companies.

The
registration statement for the Companys initial public offering (the Public Offering) was declared effective on December 13, 2006. The Company completed a private placement (the Private Placement) in February 2006
and received net proceeds of $723,600. The Company consummated the Public Offering on December 19, 2006 and received proceeds of $26,394,963, net of underwriters discount of $1,119,360 and offering expenses of $469,677. On January 4, 2007,
and January 26, 2007, the underwriters exercised a portion of their over-allotment option from which the Company received proceeds of $1,144,639, net of underwriters discount of $35,401. The Companys management has broad discretion with
respect to the specific application of the net proceeds of the Private Placement and the Public Offering (collectively the Offerings) (as described in Note 2), although substantially all of the net proceeds of the Offerings are intended
to be generally applied toward consummating a Business Combination with a company with principal or substantial operations in China.

At
March 31, 2008, the amount of $28,623,421 is being held in a trust account (Trust Account) and invested until the earlier of (i) the consummation of a Business Combination or (ii) the liquidation of the Company. The amount
in the Trust Account includes $1,166,561 of contingent underwriting compensation (the Compensation) which will be paid to the underwriters only if a Business Combination is consummated, but which will be forfeited if a Business
Combination is not consummated. The Company, after signing a definitive agreement for the consummation of a Business Combination with a company will submit such transactions for Class B stockholder approval. The Company will proceed with a Business
Combination only if the holders of a majority of the Class B stock cast at the meeting to approve the Business Combination vote in favor of the Business Combination and Class B stockholders owning less than 20% of the outstanding Class B stock vote
against the Business Combination and exercise their conversion rights to have their shares redeemed for cash. In connection with the vote required for any Business Combination, all our officers, directors and sponsor have agreed to vote any Class B
stock owned by them in accordance with the majority of the Class B stock voted by the public Class B stockholders.



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MIDDLE KINGDOM ALLIANCE CORP.

(a development stage company)

NOTES TO FINANCIAL STATEMENTS



With respect to a Business Combination which is approved and consummated, any Class B common
stockholders who voted against the Business Combination may demand that the Company redeem their shares for cash. The conversion price will equal $8.24 per share of Class B common stock, plus a pro-rata share of the interest earned in the Trust
Account in excess of the lesser of $1,200,000 or 50% of such interest (prior to the payment of any federal, state and local taxes due by the Company). Accordingly, 19.99 % of the Class B common stockholders may seek conversion of their shares
in the event of a Business Combination, which amount has been classified as Class B common stock subject to possible redemption in the accompanying March 31, 2008 and December 31, 2007 Balance Sheets. For each Class B common stock included
in the 19.99% of the Class B common stockholders who may seek conversion of their shares into cash should a Business Combination be approved, is an amount of $0.32 per Class B common stock of the Compensation that will be forfeited by the
underwriters. After consummation of the Business Combination, all of these voting safeguards will no longer be applicable.

The $28,623,421
held in the Trust Account at March 31, 2008 has been invested in a United States government security. One half of the interest earned in the Trust Account (prior to the payment of any federal, state and local taxes due by the company) up to a
maximum of $1,200,000 will be available to the Company to fund legal, accounting and due diligence on prospective acquisitions and continuing general and administrative expenses. At March 31, 2008, the Company had withdrawn a total of $795,003
of its 50% share of the interest earned on the Trust Account to fund legal, accounting, due diligence on prospective acquisitions and continuing general and administrative expenses. At March 31, 2008, a balance of $404,997 is still available to
be withdrawn by the Company for it to reach the maximum allowable amount of $1,200,000 for these purposes. Due to declining interest rates, the Company is uncertain that the available balance of $404,997 could be realized during 2008, to meet these
expenditures.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The
Companys Certificate of Incorporation provides for mandatory liquidation of the Company, in the event that the Company does not complete a Business Combination within 18 months after the effective date of the Public Offering on
December 13, 2006, being June 13, 2008 (or within 24 months after the effective date of the Public Offering if a letter of intent, agreement in principle or definitive agreement has been executed within 18 months after the effective date
of the Public Offering and the Business Combination has not been completed within such 24 month period, being December 13, 2008). Our officers, directors and sponsor will not participate in any liquidation distribution from the Trust Account
occurring upon our failure to consummate a Business Combination with respect to the common stock acquired by them prior to the Public Offering and with respect to the Class A Units included in the Private Placement. Accordingly, in
the event we liquidate, our Class B common stockholders could receive $8.24 per unit plus interest (net of taxes payable and that portion of the earned interest previously released to the Company) or less. The amount available to distribute at any
such liquidation could be negatively impacted by issues including, but not limited to, the following: (a) the potential claims or lawsuits that may be brought against us; (b) the amount of additional expenses that we may incur that exceeds the
amount of funds held outside of the Trust Account; (c) our ability to ensure that the proceeds held in Trust Account are not reduced by claims of target companies or vendors; and (d) the costs of liquidation, which we estimate to be at least
$125,000.

Summary of Significant Accounting Policies

Cash and cash equivalents:

The Company has defined cash and cash equivalents as highly liquid investments with original
maturities of ninety days or less. The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. As of March 31, 2008 and December 31, 2007, there is $29,108 and $68,915 in excess of FDIC
insurance limits. The Company has not experienced any losses in such accounts.

Net income (loss) per common share:

Net income (loss) per share has been computed by dividing net income (loss) for the period by the weighted average number of common shares outstanding for
the period. Diluted earnings per share give effect to dilutive options and warrants outstanding during the period. No effect has been given to potential issuances of common shares, aggregating 5,777,355 from warrants or the underwriters purchase
option in the computation of the diluted loss per share, as the outstanding warrants and underwriters purchase option are contingently exercisable, commencing on the later of the consummation by the Company of a Business Combination or
December 13, 2007.



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MIDDLE KINGDOM ALLIANCE CORP.

(a development stage company)

NOTES TO FINANCIAL STATEMENTS



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 at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those
estimates.

Investments held in trust account:

Investments held in trust are invested in United States government securities (US Securities) with a maturity of 180 days or less. The US Securities have been classified as held-to-maturity and measured at their amortized cost,
which approximates fair value. The excess of fair value (amortized cost) over cost, exclusive of the deferred interest described below, is considered accrued interest which is included in interest income in the accompanying Statements of Operations.

Deferred interest:

Deferred interest
consists of 19.99% of the net interest attributable to the Class B common stockholders, after the deduction of a pro-rata share of the gross interest earned in the Trust Account in excess of the lesser of $1,200,000 or 50% of such interest prior to
the payment of any federal, state and local taxes due by the Company. Deferred interest of $96,154 and $73,609 is included in the value of the Class B common stock subject to possible redemption at March 31, 2008 and December 31, 2007,
respectively, in the accompanying balance sheets.

Income taxes:

The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Companys financial statements or tax returns. Under this method,
deferred tax assets and liabilities are determined based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are
expected to reverse.

As of January 1, 2007, the Company has adopted FIN 48, Accounting for Uncertainty in Income Taxes, as amended.

Overnight Reverse Repurchase Agreements:

The Company invests its excess cash held in its checking account in overnight reverse repurchase agreements, with its Bank. In connection with these transactions, it is the policy of the Bank to deposit the underlying collateral in US
Government Agency obligations, with the Federal Reserve for the benefit of the Company. The fair value of the underlying collateral exceeds the principal amount of the overnight reverse repurchase agreement, including accrued interest.

New accounting pronouncements:

The Company does
not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on its financial position or results of operations.

Note 2 Offerings

Public Offering

On December 19, 2006, the Company sold 198,000 Series A Units at $8.00 per unit and 3,300,000 Series B Units at $8.00 per unit to the public. On
January 4, 2007, and January 26, 2007, the underwriters exercised a portion of their over-allotment option for 27,200 Series A Units at $8.00 per unit and 120,305 Series B Units at $8.00 per unit, respectively. Each Series A Unit consists
of one share of the Companys common stock, $.001 par value, and five non-redeemable common stock purchase Class A warrants. Each Series B Unit consists of one share of the Companys Class B common stock, $.001 par value, and one
redeemable common stock purchase Class B warrant.



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MIDDLE KINGDOM ALLIANCE CORP.

(a development stage company)

NOTES TO FINANCIAL STATEMENTS



Each Class A warrant will entitle the holder to purchase from the Company one share of common
stock at an exercise price of $5.00 commencing on the later of (a) one year from the Effective Date of the Public Offering, being December 13, 2007 or (b) the completion of a Business Combination with a company, and expiring seven
years from the Effective Date of the Public Offering, being December 13, 2013. Each Class B warrant will entitle the holder to purchase from the Company one share of common stock at an exercise price of $5.00 commencing on the later of
(a) one year from the Effective Date of the Public Offering, being December 13, 2007 or (b) the completion of a Business Combination with a company, and expiring seven years from the Effective Date of the Public Offering, being
December 13, 2013 or earlier upon redemption.

The Company sold to the Representatives of the underwriters, for $100, an option to
purchase up to a total of 19,800 Series A Units at a per-unit price of $10.00 and/or up to a total of 330,000 Series B Units at a per-unit price of $10.00. The Series A Unit and Series B Unit that would be issued upon the exercise of this option are
identical to those sold in the Offerings, provided that the exercise price of the Class A Warrants and Class B Warrants underlying the Series A Units and Series B Units, respectively, will have an exercise price of $10.00 per share (200% of the
exercise price of the Class A Warrants and Class B Warrants included in the units sold in the Offerings). This option is exercisable at $10.00 per Series A Unit and Series B Unit on the later of the completion of a Business Combination or one
year from the effective date of the Public Offering, being December 13, 2007 and expiring five years from the effective date of the Public Offering, being December 13, 2011. The option may not be sold, transferred, assigned, pledged or
hypothecated for a period of one hundred eighty days from the effective date of the Public Offering, being June 11, 2007, except to officers and partners of the underwriters and members of the selling group and/or their officers and partners.
The option has a life of five years from the effective date, being December 13, 2011. The sale of the option is accounted for as an equity transaction. Accordingly, there has not been any net impact on the Companys financial position or
results of operations, except for the recording of the $100 proceeds from the sale.

Private Placement

In February 2006, the Company sold to its principal stockholder, officers and directors an aggregate of 90,450 Series A Units at $8.00 per unit. The
Series A Units consist of one share of the Companys common stock, $.001 par value, and five non-redeemable common stock purchase Class A warrants. The Series A Units sold in the Private Placement are identical to the Series A Units sold
in the Public Offering.

Note 3 Accounts payables and accrued liabilities

Accounts payable and accrued liabilities at March 31, 2008 and December 31, 2007, consist of the following:



|                       |               |                      |                  |  |   |        
|---------------------- | ------------- | -------------------- | ---------------- |  | - | -------
|                       |               | For the period ended
|                       | March 31,2008 |                      | December 31,2007
|Audit fees             |               | $                    | 46,941           |  | $ | 78,000 
|Legal fees             |               |                      | 168,817          |  |   |       
|Administrative fees    |               |                      | 22,500           |  |   |       
|Other accrued expenses |               |                      | 26,225           |  |   | 31,286 
|                       |               |                      |                  |  |   |        
|                       |               | $                    | 264,483          |  | $ | 109,286
|                       |               |                      |                  |  |   |        

Note 4 Bank Line of Credit

On December 19, 2006, Wachovia Bank provided the Company with a line of credit for $250,000 to finance the Companys general working capital needs. The line of credit will mature in 24 months from the date
of the Public Offering, on December 19, 2008. Interest is charged at LIBOR plus 2% per annum, which at March 31, 2008 and December 31, 2007 was 4.61% and 7.24%, respectively, with interest payable monthly and the outstanding
principal and interest due and payable at maturity. In accordance with the terms of the line of credit, the bank must authorize all distributions to the Company to the extent that the aggregate sum of interest distributed to the Company from the
Trust Account exceeds $900,000. At March 31, 2008 and December 31, 2007, the Company had no amounts outstanding under the line of credit.



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MIDDLE KINGDOM ALLIANCE CORP.

(a development stage company)

NOTES TO FINANCIAL STATEMENTS



Note 5 Related Party Transactions

The Company has agreed to pay several of the officers and directors and/or their affiliated companies an aggregate monthly administrative fee of $7,500
for general and administrative services including office space, utilities, and secretarial support in Shanghai, China and Atlanta, Georgia from the Effective Date of the Public Offering through the completion of a Business Combination. The
administrative fee of $7,500 per month is allocated among Primus Capital LLC, an affiliate of Mr. Tanenbaum, CEO; Mr. Marks, President; MTP Holdings Ltd. an affiliate of Messrs. Yao (officer and director), Chai (officer), and Ding
(officer); and Mr. Lam, an officer and director. At March 31, 2008 and December 31, 2007, the Company accrued a balance of $22,500 and $0, respectively, to the above mentioned officers and directors and/or their affiliated companies.

Note 6 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. At March 31, 2008 and December 31, 2007, no preferred
shares were issued and outstanding.

Note 7 Income Taxes

The (benefit) provision for income taxes consists of the following:



|                         |  |                            |   |               |   |       
|------------------------ |  | -------------------------- | - | ------------- | - | ------
|                         |  | For the Three Months Ended
|                         |  | March 31,2008              |   | March 31,2007
|CurrentFederal          |  | $                          |  |               | $ | 52,907
|CurrentState and Local  |  |                            |  |               |   | 9,337 
|DeferredFederal         |  |                            |  |               |   |      
|DeferredState and Local |  |                            |  |               |   |      
|                         |  |                            |   |               |   |       
|Total                    |  | $                          |  |               | $ | 62,244
|                         |  |                            |   |               |   |       

No (benefit) provision for income taxes has been made at March 31, 2008 as the Company had
operating losses for the three months ending on that date. The financial statements do not reflect a benefit for any possible carry-back claim.



|                                  |  |                            |   |  |               |  
|--------------------------------- |  | -------------------------- | - |  | ------------- | -
|                                  |  | For the Three Months Ended |  
|                                  |  | March 31,2008              |   |  | March 31,2007 |  
|Statutory federal income tax rate |  | -34                        | % |  | 34            | %
|State and local income taxes      |  | -4                         | % |  | 4             | %
|Valuation allowance               |  | 38                         | % |  | 0             | %
|                                  |  |                            |   |  |               |  
|Effective tax rate                |  | 0                          | % |  | 38            | %
|                                  |  |                            |   |  |               |  



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|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

Forward Looking Statements

This Quarterly Report on Form 10-Q includes forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We have based these forward-looking statements on our current expectations and
projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as may,
should, could, would, expect, plan, anticipate, believe, estimate, continue, or the negative of such terms or other similar expressions.
Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described under Item 1A Risk Factors in our Annual Report on Form 10-K and in our other Securities and Exchange Commission filings.
The following discussion should be read in conjunction with our Financial Statements and related Notes thereto included elsewhere in this report.

Overview

We were formed on January 17, 2006, to serve as a vehicle to effect a merger, capital stock exchange,
asset purchase or other similar business combination (Business Combination) with a company having its primary or substantial operations in China. We intend to utilize cash derived from the proceeds of our Initial Public Offering
(Public Offering), Private Placement, our capital stock, debt or a combination of cash, capital stock and debt, in completing a Business Combination. We are currently a shell company, and we will remain a shell company until we engage in
a business combination.

All activities for the period from January 17, 2006 (inception) through March 31, 2008 relate to the
Companys formation, the completion of the Public Offering and the search for a company with whom to effect a Business Combination. At March 31, 2008, the Company had not entered into a definitive agreement to complete a Business
Combination.

In pursuit of our plan of completing an appropriate business combination we actively seek introductions to qualified target
companies by contacting and then often meeting with bankers, government officials, consultants, advisors, and other potential intermediaries. This process has thus far resulted in our review of information and/or meetings with management or
representatives of more than 50 companies, each with substantial operations in China. Subsequent to these introductory reviews, if we view the company positively and if the company expresses an interest in exploring a business combination with
us, we may conduct a preliminary level of due diligence. We have occasionally explored business combinations through the issuance of nonbinding letters which outline the basic terms that we propose for a potential business
combination. These non-binding letters may also provide for collaborative efforts which may lead to a business combination. We are presently actively involved in negotiations with more than one potential target company, any of which might
lead to a single business combination. However, we cannot offer any assurances that any of these negotiations will result in an agreement to complete a business combination. If any of these negotiations were to result in such an agreement,
the completion of a business combination would still be subject to the approval of a majority of our Class B shareholders casting votes at a meeting held for such purpose, and less than 20% of the holders of our Class B Common Stock voting against
such transaction and exercising their conversion rights.

If the Company does not enter into a letter of intent, an agreement in principle
or a definitive agreement (collectively Agreement) to complete a Business Combination prior to the expiration of 18 months after the effective date of our Public Offering, being June 13, 2008, we will then liquidate. If the Company
does enter into an Agreement to complete a business combination prior to June 13, 2008, but are unable to complete the business combination prior to such date, then we will have an additional 6 months in which to complete the Business
Combination contemplated by the Agreement. If we are unable to do so by the expiration of the 24month period from the effective date of our Public Offering, being December 13, 2008, we will then liquidate.

Critical Accounting Policies

Investments held
in a trust account (Trust Account) are invested in United States government securities (US Securities) with a maturity of 180 days or less. The US Securities have been classified as held-to-maturity and measured at their
amortized cost, which approximates fair value. The excess of fair value (amortized cost) over cost, exclusive of the deferred interest, is considered accrued interest which is included in interest income in the accompanying Statements of Operations.

Deferred interest consists of 19.99% of the net interest attributable to the Class B Common Stockholders, after the deduction of a
pro-rata share of the gross interest earned in the Trust Account in excess of the lesser of $1,200,000 or 50% of such interest and after the payment of any federal, state and local taxes due by the Company. Deferred interest is included in the value
of the Class B Common Stock subject to possible redemption, in the accompanying balance sheets.



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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.

Results of Operations

For the three months ending March 31, 2008 we had a net operating loss of $86,153. Since we did not have any operations, all of our income was
derived from interest income, most of which was earned on funds held in the Trust Account. Our operating expenses during the period were $313,211 and consisted primarily of expenses related to pursuing a Business Combination, professional fees and
the monthly administrative fee for services including office space, utilities, and secretarial support in China and Atlanta, Georgia of $7,500, owed to several of the officers and directors and/or their affiliated companies. No (benefit) provision
for income taxes has been made at March 31, 2008 as the Company had operating losses for the three months ending on that date. The financial statements do not reflect a benefit for any possible carry-back claim.

For the three months ending March 31, 2007 we earned net income after taxes of $102,524. Since we did not have any operations, all of our income was
derived from interest income, most of which was earned on funds held in the Trust Account. Our operating expenses during the period were $175,678 and consisted primarily of expenses related to pursuing a Business Combination, professional fees and
the monthly administrative fee for services including office space, utilities, and secretarial support in, China and Atlanta, Georgia of $7,500, paid to several of the officers and directors and/or their affiliated companies. We also provided for
$62,244 in income taxes.

For the period from January 17, 2006 (inception) to March 31, 2008 we earned net income after taxes of
$224,567. Since we did not have any operations, all of our income was derived from interest income, most of which was earned on funds held in the Trust Account. Our operating expenses during the period were $1,100,821 and consisted primarily of
expenses related to pursuing a Business Combination, professional fees and the monthly administrative fee for services including office space, utilities, and secretarial support in China and Atlanta, Georgia of $7,500, owed or paid to several of the
officers and directors and/or their affiliated companies. We also provided for $262,896 in income taxes.

Liquidity and Capital Resources

In February 2006, the Company completed a Private Placement and received net proceeds of $723,600 from the sale of 90,450 Series A Units at
$8.00 per unit to its then principal stockholder, officers and directors. The Series A Units consist of one share of the Companys Common Stock, $.001 par value, and five non-redeemable common stock purchase Class A Warrants. The Series A
Units sold in the Private Placement are identical to the Series A Units sold in the Public Offering.

On December 19, 2006, the Public
Offering closing date, the Company sold 198,000 Series A Units at $8.00 per unit and 3,300,000 Series B Units at $8.00 per unit and received proceeds of $26,394,963, net of underwriters discount of $1,119,360 and offering expenses of $469,677. On
January 4, 2007, and January 26, 2007, the underwriters exercised a portion of their over-allotment option for 27,200 Series A Units at $8.00 per unit and 120,305 Series B Units at $8.00 per unit, respectively, resulting in the Company
receiving additional proceeds of $1,144,639, net of underwriters discount of $35,401. Each Series A Unit consists of one share of the Companys Common Stock, $.001 par value, and five non-redeemable common stock purchase Class A Warrants.
Each Series B Unit consists of one share of the Companys Class B Common Stock, $.001 par value, and one redeemable common stock purchase Class B Warrant. Each Class A Warrant will entitle the holder to purchase from the Company one share
of Common Stock at an exercise price of $5.00 commencing on the later of (a) one year from the Effective Date of the Public Offering, being December 13, 2006 (the Effective Date) or (b) the completion of a Business
Combination with a company, and expiring seven years from the Effective Date. Each Class B Warrant will entitle the holder to purchase from the Company one share of Common Stock at an exercise price of $5.00 commencing on the later of (a) one
year from the Effective Date or (b) the completion of a Business Combination with a company, and expiring seven years from the Effective Date or earlier upon redemption. Our Common Stock, Class B Common Stock, Class A and Class B Warrants
started trading separately as of March 13, 2007.

The net proceeds from the sale of our Series A and Series B Units, after deducting
certain offering expenses of $1,624,438 including underwriting discounts and commissions and placement fees and the proceeds from the Private Placement were $28,263,302. Of this amount, $28,183,313 or $8.24 per each Series B Unit sold to the public,
was placed in the Trust Account, and the remaining proceeds of $79,989 were available to be used by us to provide for business, legal and accounting due diligence on prospective acquisitions and continuing general and administrative expenses. The
net proceeds deposited into the Trust Account remain on deposit in the Trust Account earning interest at March 31, 2008. During the quarter ending March 31, 2008, we transferred a total of $115,169 from the Trust Account to the operating
account, consisting of $103,471 being the Companys 50% share of the interest earned on the Trust Account for various general and administrative expenses incurred during the quarter and $11,698 for Federal, State and local tax obligations. As
of March 31, 2008, there was $28,704,371 or $8.39 per Class B common stock held in the Trust Account, of which up to $1,166,561 will be paid to the underwriters if a Business Combination is consummated, but which will be forfeited if a Business
Combination is not consummated or a portion of which will be forfeited if a Business Combination is consummated and less than 20% of the public stockholders elect to have their Class B common stock redeemed for cash. We will use substantially all of
the net proceeds of the Public Offering and Private Placement to acquire a company, including identifying and evaluating prospective acquisition candidates, selecting the companys business, and structuring, negotiating and



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consummating the Business Combination. To the extent that our capital stock is used in whole or in part as consideration to effect a Business Combination,
the proceeds held in the Trust Account as well as any other net proceeds not expended will be used to finance the operations of the company with which we have consummated a Business Combination.

With respect to a Business Combination which is approved and consummated, any Class B common stockholders who votes against the Business Combination may
demand that the Company redeem their shares for cash. The conversion price will equal $8.24 per share of Class B common stock, plus a pro-rata share of the net interest earned in the Trust Account after deducting the lesser of $1,200,000 or 50% of
the gross interest and after the payment of any federal, state and local taxes due by the Company. Accordingly, 19.99 % of the Class B common stockholders may seek conversion of their shares in the event of a Business Combination, which amount
has been classified as Class B common stock subject to possible redemption in the accompanying March 31, 2008 balance sheet. For each Class B common share included in the 19.99% of the Class B common stockholders who may seek conversion of
their shares into cash should a Business Combination be approved, is an amount of $0.32 per Class B common share of deferred underwriters compensation that will be forfeited by the underwriters. Accordingly, at March 31, 2008 $5,732,809 of the
net proceeds from the Public Offering and Private Placement has been classified as common stock subject to possible redemption in the Companys balance sheet.

If the Company does not enter into an Agreement prior to the expiration of the 18 month period after the effective date of our Public Offering, being June 13, 2008 and we are required to liquidate, it is
uncertain that the funds available to us outside of the Trust Account and 50% of the interest earned on the Trust Account up to a maximum of $1,200,000, which we may access, will be sufficient to allow us to operate and liquidate the Company. If the
Company does enter into an Agreement prior to June 13, 2008 but does not consummate a Business Combination prior to December 13, 2008 and we are required to liquidate, it is uncertain that the funds available to us outside of the Trust
Account and 50% of the interest earned on the Trust Account up to a maximum of $1,200,000, which we may access, will be sufficient to allow us to manage and liquidate the Company.

In the event we are required to liquidate it is possible that the amounts payable to our Class B stockholders could be less than $8.24 per share. The
amount available to distribute at any such liquidation could be negatively impacted by issues including, but not limited to, the following: (a) the potential claims or lawsuits that may be brought against us; (b) the amount of additional
expenses that we may incur that exceeds the amount of funds held outside of the Trust Account; (c) our ability to ensure that the proceeds held in Trust Account are not reduced by claims of target companies or vendors; and (d) the costs of
liquidation, which we estimate to be at least $125,000.

It is uncertain if we may be required to raise additional funds following the
Public Offering and Private Placement in order to meet the expenditures required for operating our business should an Agreement be entered into prior to June 13, 2008 but prior to the consummation of a Business Combination by December 13,
2008. Additionally, we may also be required to raise additional funds through a private offering of debt or equity securities if such funds are required to consummate a Business Combination that is presented to us. With regard to the latter, we
would only consummate such a fund raising, simultaneously with the completion of a Business Combination.

Competition

In identifying, evaluating and selecting target businesses, we may encounter intense competition from other entities having a business objective similar
to ours. Some of these entities are well established and have extensive experience identifying and effecting business combinations directly or through affiliates. Some of these competitors possess greater technical, human and other resources than us
and our financial resources will be relatively limited as compared to many of these competitors. While we believe there are numerous potential target businesses that we could acquire with the net proceeds of the Public Offering and Private
Placement, our ability to compete in acquiring certain sizable target businesses will be limited by our available financial resources. Further:



| |  |  | our obligation to seek stockholder approval of a Business Combination or obtain the necessary financial statements to be included in the proxy materials to be sent
to stockholders in connection with a proposed Business Combination may delay the completion of a transaction;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our obligation to convert into cash shares of Class B Common Stock held by our Class B stockholders in certain instances may reduce the resources available to us
for a Business Combination; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our outstanding warrants and the purchase option granted to the Representatives of the underwriters, and the future dilution they potentially represent, may not be
viewed favorably by certain target businesses.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Any of these factors may place us at a competitive disadvantage in
successfully negotiating a Business Combination. Our management believes, however, that our status as a public entity and potential access to the United States public equity markets may give us a competitive advantage over privately-held entities
having a similar business objective as ours in acquiring a target business on favorable terms.



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If we succeed in effecting a Business Combination, there will be, in all likelihood, intense competition
from competitors of the target businesses. In particular, certain industries that experience rapid growth frequently attract an increasingly larger number of competitors, including competitors with increasingly greater financial, marketing,
technical and other resources than the initial competitors in the industry. The degree of competition characterizing the industry of any prospective target business cannot presently be ascertained. Subsequent to a Business Combination, however, we
may not have the resources to compete effectively, especially to the extent that the target businesses are in high-growth industries.

Off Balance
Sheet Arrangements

Warrants issued in conjunction with our Private Placement and Public Offering are equity linked derivatives and
accordingly represent off balance sheet arrangements. The warrants meet the scope exception in paragraph 11(a) of FAS 133 and are accordingly not accounted for as derivatives for purposes of FAS 133, but instead are accounted for as equity.

On the Closing Date of the Public Offering, Wachovia Bank provided the Company with a line of credit for $250,000 to finance the
Companys general working capital needs, but which does not include any expenses associated with dissolution and liquidation or any amounts that may be due to or reserved for payment to creditors. The line of credit will mature in 24 months
from the Closing Date of the Public Offering, being December 19, 2008. Interest is charged at an annual rate of LIBOR plus 2%, which at March 31, 2008 and 2007 was 4.61% and 7.24%. Interest is payable monthly and the outstanding principal
and interest due and payable at maturity. In accordance with the terms of the line of credit, the bank must authorize all distributions to the Company to the extent that the aggregate sum of interest distributed to the Company from the Trust Account
exceeds $900,000. At March 31, 2008, the Company had $0 outstanding under the line of credit.

Contractual Obligations

The Company has agreed to pay several of the officers and directors and/or their affiliated companies an aggregate monthly administrative fee of $7,500
for general and administrative services including office space, utilities, and secretarial support in Shanghai, China and Atlanta, Georgia from the Effective Date of the Public Offering through the completion of a Business Combination. The
administrative fee of $7,500 per month is allocated among Primus Capital LLC, an affiliate of Mr. Tanenbaum, CEO; Mr. Marks, President; MTP Holdings Ltd. an affiliate of Messrs. Yao (officer and director), Chai (officer), and Ding
(officer); and Mr. Lam, an officer and director. At March 31, 2008 and December 31, 2007, the Company accrued a balance of $22,500 and $0, respectively, to the above mentioned officers and directors and/or their affiliated companies.



|ITEM 3. | Quantitative and Qualitative Disclosures about Market Risk
|------- | ----------------------------------------------------------

Market risk is the sensitivity of income to changes in interest rates, foreign exchanges, commodity prices, equity prices, and other market-driven rates or prices. We are not presently engaged in and, if a suitable business target is not
identified by us prior to the prescribed liquidation date of the trust account, we may not engage in, any substantive commercial business. Accordingly, we are not and, until such time that we consummate a business combination, we will not be,
exposed to risks associated with foreign exchange rates, commodity prices, equity prices or other market-driven rates or prices. The net proceeds of our initial public offering held in a trust account have been invested only in United States
government securities meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act of 1940. Given our limited risk in our exposure to United States government securities, we do not view the interest rate risk to be
significant.



|ITEM 4. | Controls and Procedures
|------- | -----------------------

Evaluation of
Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are intended to ensure that
information required to be disclosed in the Companys reports submitted under the Securities Exchange Act of 1934, as amended (the Exchange Act), is recorded, processed, summarized and reported within the time periods specified in
the rules and forms of the SEC. These controls and procedures also are intended to ensure that information required to be disclosed in such reports is accumulated and communicated to management to allow timely decisions regarding required
disclosures.

The Companys Chief Executive Officer and Chief Financial Officer, with the participation of other members of the
Companys management, have evaluated the effectiveness of the Companys disclosure controls and procedures (as such term is defined in Rules 13a  15(e) and 15d  15(e) under the Exchange Act) and have concluded that the
Companys disclosure controls and procedures were effective for their intended purposes as of the end of the period covered by this report.

Changes in Internal Control over Financial Reporting

There were no changes during the fiscal quarter
ended March 31, 2008 in the Companys internal control over financial reporting that materially affected, or are reasonably likely to materially affect, those controls.



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##### Table of Contents

PART II. OTHER INFORMATION



|ITEM 1A. | Risk Factors
|-------- | ------------

See our Annual Report on Form 10-K
for the year ended December 31, 2007 for a detailed discussion of our risk factors.



|ITEM 2. | Unregistered Sales Of Equity Securities And Use Of Proceeds
|------- | -----------------------------------------------------------

On December 19, 2006, we closed our initial public offering of 198,000 Series A Units (consisting of one share of Common Stock and five non-redeemable Class A Warrants) and 3,300,000 Series B Units (consisting of one share of
Class B Common Stock and one redeemable Class B Warrant) for $8.00 per unit before underwriting fees and expenses, for gross proceeds of $27,984,000. In January 2007 our underwriters exercised a portion of their over-allotment option by purchasing
27,200 Series A Units and 120,305 Series B Units, for gross proceeds of $1,180,040. I-Bankers Securities, Inc., Newbridge Securities Corp., and Westminster Securities Corporation acted as underwriters for the offering. The securities sold in the
offering were registered under the Securities Act of 1933 on a registration statement on Form S-1 (Nos. 333-133475 and 333-139325). The Securities and Exchange Commission declared the registration statement effective on December 13, 2006.

We paid a total of $2,321,323 in underwriting discounts and commissions (of which $1,166,561 was deposited in the Trust Account) and
$469,677 for other costs and expenses related to the offering and the over-allotment option. Of the total gross proceeds of $29,164,040 from our IPO, plus $723,600 of the proceeds of the private placement of our Series A Units prior to our IPO,
$28,183,313 was placed in a trust account with Continental Stock Transfer and Trust.

For a description of the use of the proceeds
generated in our initial public offering, see Part I, Item 2 of this Form 10-Q.



|ITEM 6. | Exhibits
|------- | --------

(a) Exhibits:



|     |  |                                                                   
|---- |  | ------------------------------------------------------------------
|31.1 |  | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.
|     | 
|31.2 |  | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.
|     | 
|32.1 |  | Section 1350 Certification of Chief Executive Officer.            
|     | 
|32.2 |  | Section 1350 Certification of Chief Financial Officer.            

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



|             |  |                              
|------------ |  | -----------------------------
|             |  | Middle Kingdom Alliance Corp.
|             | 
|May 15, 2008 |  | /s/ Bernard J. Tanenbaum III 
|             |  | Bernard J. Tanenbaum III     
|             |  | Chief Executive Officer      
|             | 
|May 15, 2008 |  | /s/ Fred A. Brasch           
|             |  | Fred A. Brasch               
|             |  | Chief Financial Officer      



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