UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





**FORM
      10-Q**





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





For
      the
      quarter ended March 31, 2008





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





For
      the
      transition period from _____ to _____





Commission
      File Number: 0-52150





**FRANKLIN
      TOWERS ENTERPRISES, INC.**


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





**Nevada**
              (State
                of incorporation)
            **20-4069588**
              (IRS
                Employer ID Number)




88
      Julong
      Road


Lidu
      Economic Development Zone


Fulin,
      Chongqing, China


(Address
      of principal executive offices)





011-86-2372183330


(Issuer's
      telephone number)





________________________________________________________________


(Former
      name, former address and former fiscal year, if changed since last
      report)





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









**TABLE
      OF CONTENTS**





PagePART
                IItem
                1. Financial StatementsItem
                2. Management’s Discussion and Analysis of Financial Condition and Results
                of OperationItem
                3 Quantitative and Qualitative Disclosures About Market
                RiskItem
                4 Controls and ProceduresPART
                IIItem
                1. Legal ProceedingsItem
                IA. Risk FactorsItem
                2. Unregistered Sales of Equity Securities and Use of ProceedsItem
                3. Defaults Upon Senior SecuritiesItem
                4. Submission of Matters to a Vote of Security HoldersItem
                5. Other InformationItem
                6. Exhibits









**PART
      I**


**FINANCIAL
      INFORMATION**





**Item
      1.**  **Financial
      Statements.**







FRANKLIN
        TOWERS ENTERPRISES, INC. AND SUBSIDIARY
 
 INDEX
        TO
        FINANCIAL STATEMENTS
 
 PageCondensed
                  Consolidated Balance Sheets
                as of March 31, 2008 (Unaudited) and December 31, 2007
              
              F-2Condensed
                  Consolidated Statements of Operations
                for the three months ended March 31, 2008 and 2007
                  (Unaudited)
              
              F-3Condensed
                  Consolidated Statements of Stockholders’ Equity
                Year ended December 31, 2007 and the three months ended March 31,
                  2008
                  (Unaudited)
              
              F-4Condensed
                  Consolidated Statements of Cash Flows
                for the three months ended March 31, 2008 and 2007
                  (Unaudited)
              
              F-5Notes
                  to Condensed Consolidated Financial Statements (Unaudited)
              
              F-6
                  - F-17
  
  FRANKLIN
        TOWERS ENTERPRISES, INC. AND SUBSIDIARY
 NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 
 NOTE
        1 – Description
        of Business and Basis of Presentation
 
 Organization
 
 Franklin
        Towers Enterprises, Inc *.* (“Franklin”) was incorporated on March 23, 2006 under the laws of the State of
        Nevada. Franklin originally intended to engage in the manufacture, processing
        and distribution of frozen Pan Asian food.
 
 On
        June
        19, 2007, Franklin entered into a Share Purchase Agreement with the shareholders
        of Chongqing Qiluo Textile Co. Ltd.(“Qiluo”), a limited liability company
        organized under the laws of the People’s Republic of China, whereby Franklin
        agreed to acquire 100% of the issued and outstanding registered capital of
        Qiluo
        for consideration of 5,000,000 shares of Franklin’s Series A Convertible
        Preferred Stock (convertible into 52,880,000 shares of common stock) (see
        Note
        10). Upon consummation of such purchase, Qiluo became a wholly-owned subsidiary
        of Franklin.
 
 The
        acquisition is accounted for as a “reverse acquisition”, since the stockholders
        of Qiluo owned a majority of Franklin’s common stock immediately following the
        transaction. The combination of the two companies is recorded as a
        recapitalization of Qiluo pursuant to which Qiluo is treated as the continuing
        entity although Franklin is the legal acquirer. Accordingly, the Company’s
        historical financial statements are those of Qiluo.
 
 Qiluo
        was
        incorporated on December 15, 2006, under the name “Chongqing Qiluo Industry
        Ltd.” under the laws of the People’s Republic of China with the purpose of
        engaging in the manufacture and sale of silk and silk products. Qiluo renamed
        to
“Chongqing Qiluo Textile Co., Ltd.” After the acquisition, Franklin will focus
        on the production and sale of silk and silk products. The Company started
        its
        test production at the end of June 2007 and commenced operations from the
        third
        quarter of 2007.
 
 All
        references to common stock, share and per share amounts have been retroactively
        restated to reflect the reverse acquisition as if the transaction had taken
        place as of the beginning of the earliest period presented.
 
 Principles
        of Consolidation
 
 The
        accompanying unaudited condensed consolidated financial statements included
        the
        accounts of Franklin (Parent) and its wholly owned subsidiary Qiluo. All
        significant intercompany accounts and transactions have been eliminated in
        consolidation.
 
 Going
        Concern
 
 The
        Company started its test production at the end of June 2007 and commenced
        its
        manufacturing operations during the third quarter of 2007. The Company has
        incurred a net loss of $1,541,660, which included the amortization of deferred
        finance cost and debt discount of $1,054,035 for the quarter ended March
        31,
        2008. In addition, the Company had negative cash flow from operations since
        December 15, 2006 (date of inception) and has an accumulated deficit of
        $13,049,756 at March 31, 2008. Substantial portions of the losses are
        attributable to consulting and professional fees. Furthermore, the Company’s
        gross margin rate from its current operations was very low. It was less than
        1%
        for the three months ended March 31, 2008. The Company had a working capital
        deficiency of $934,701 at March 31, 2008. These factors raised substantial
        doubt
        about the Company’s ability to continue as going concern.
  F-6
 Going
        Concern (Continued)
 
 There
        can
        be no assurance that sufficient funds will be generated during the next twelve
        months or thereafter from the Company’s current operations, or that funds will
        be available from external sources such as debt or equity financings or other
        potential sources. The lack of additional capital could force the Company
        to
        curtail or cease operations and would, therefore, have a material adverse
        effect
        on its business. Furthermore, there can be no assurance that any such required
        funds, if available, will be available on attractive terms or that they will
        not
        have a significant dilutive effect on the Company's existing
        stockholders.
 
 During
        first quarter of 2008, the Company received proceeds from a significant
        shareholder in the amount of $219,693 as a repayment of nonreciprocal funds
        transferred to this shareholder during 2007.
  The
        Company has undertaken further steps as part of a plan to improve operations
        with the goal of sustaining our operations for the next twelve months and
        beyond
        to address our lack of liquidity by raising additional funds, either in the
        form
        of debt or equity or some combination thereof. The Company is planning to
        reduce
        its cost of goods sold by purchase its main raw material directly from farmers
        in the local neighbored area and to reduce its overhead cost by fully utilizing
        its current manufacture facilities. However, there can be no assurance that
        the
        Company can successfully accomplish these steps and or business plans, and
        it is
        uncertain that the Company will achieve a profitable level of operations
        and be
        able to obtain additional financing.
 
 There
        can
        be no assurance that any additional financings will be available to the Company
        on satisfactory terms and conditions, if at all. In the event we are unable
        to
        continue as a going concern, we may elect or be required to seek protection
        from
        our creditors by filing a voluntary petition in bankruptcy or may be subject
        to
        an involuntary petition in bankruptcy. To date, management has not considered
        this alternative, nor does management view it as a likely occurrence.
 
 The
        accompanying unaudited condensed consolidated financial statements do not
        include any adjustments related to the recoverability or classification of
        asset-carrying amounts or the amounts and classifications of liabilities
        that
        may result should the Company be unable to continue as a going
        concern.
 
 Reclassifications
 
 Certain
        items in these unaudited condensed consolidated financial statements have
        been
        reclassified to confirm to the current period’s presentation.
 
 Recent
        Accounting Pronouncements
 
 Effective
        January 1, 2008, we adopted Statement of Financial Accounting Standards ("SFAS")
        No. 157, "Fair Value Measurements " ("SFAS No. 157" ) and SFAS No. 159, "The
        Fair Value Option for Financial Assets and Financial Liabilities - Including
        an
        Amendment of FASB Statement No. 115" ("SFAS No. 159"). In February 2008,
        the
        Financial Accounting Standards Board (the "FASB") issued FASB Staff Position
        ("FSP") 157-2, *"Effective
        Date of FASB Statement No. 157"* ("FSP
        157-2), which delayed the effective date of SFAS No. 157 for all non-financial
        assets and liabilities, except those that are recognized or disclosed at
        fair
        value in the financial statements on a recurring basis, until January 1,
        2009.
        We have not yet determined the impact that the implementation of FSP 157-2
        will
        have on our non-financial assets and liabilities which are not recognized
        on a
        recurring basis; however, we do not anticipate the adoption of this standard
        will have a material impact on our consolidated financial position, results
        of
        operations or cash flows. The partial adoption of SFAS No. 157 and the adoption
        of SFAS No. 159 did not have a material impact on the Company's condensed
        consolidated financial statements.
  F-7
 Recent
        Accounting Pronouncements (Continued)
 
 In
        June
        2007, the Accounting Standards Executive Committee issued Statement of Position
        07-1, "Clarification of the Scope of the Audit and Accounting Guide Investment
        Companies and Accounting by Parent Companies and Equity Method Investors
        for
        Investments in Investment Companies" ("SOP 07-1"). SOP 07-1 provides guidance
        for determining whether an entity is within the scope of the AICPA Audit
        and
        Accounting Guide Investment Companies (the "Audit Guide"). SOP 07-1 was
        originally determined to be effective for fiscal years beginning on or after
        December 15, 2007, however, on February 6, 2008, FASB issued a final Staff
        Position indefinitely deferring the effective date and prohibiting early
        adoption of SOP 07-1 while addressing implementation issues.
 
 In
        December 2007, the FASB issued SFAS No. 141(R),"Business Combinations" ("SFAS
        No. 141(R)"), which establishes principles and requirements for how an acquirer
        recognizes and measures in its financial statements the identifiable assets
        acquired, the liabilities assumed, and any noncontrolling interest in an
        acquiree, including the recognition and measurement of goodwill acquired
        in a
        business combination. SFAS No. 141(R) is effective as of the beginning of
        the
        first fiscal year beginning on or after December 15, 2008. Earlier adoption
        is
        prohibited and the Company is currently evaluating the effect, if any, that
        the
        adoption will have on its financial position, results of operations or cash
        flows.
 
 In
        December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interest in
        Consolidated Financial Statements, an amendment of ARB No. 51" ("SFAS No.
        160"),
        which will change the accounting and reporting for minority interests, which
        will be recharacterized as noncontrolling interests and classified as a
        component of equity within the consolidated balance sheets. SFAS No. 160
        is
        effective as of the beginning of the first fiscal year beginning on or after
        December 15, 2008. Earlier adoption is prohibited and the Company is currently
        evaluating the effect, if any, that the adoption will have on its financial
        position, results of operations or cash flows.
 
 In
        December 2007, the FASB ratified the consensus in EITF Issue No. 07-1,
        "Accounting for Collaborative Arrangements" (EITF 07-1). EITF 07-1 defines
        collaborative arrangements and requires collaborators to present the result
        of
        activities for which they act as the principal on a gross basis and report
        any
        payments received from (made to) the other collaborators based on other
        applicable authoritative accounting literature, and in the absence of other
        applicable authoritative literature, on a reasonable, rational and consistent
        accounting policy is to be elected. EITF 07-1 also provides for disclosures
        regarding the nature and purpose of the arrangement, the entity's rights
        and
        obligations, the accounting policy for the arrangement and the income statement
        classification and amounts arising from the agreement. EITF 07-1 will be
        effective for fiscal years beginning after December 15, 2008, and will be
        applied as a change in accounting principle retrospectively for all
        collaborative arrangements existing as of the effective date. The Company
        has
        not yet evaluated the potential impact of adopting EITF 07-1 on its financial
        position, results of operations or cash flows.
 
 In
        March
        2008, the FASB" issued SFAS No. 161, "Disclosures about Derivative Instruments
        and Hedging Activities - an amendment to FASB Statement No. 133" ("SFAS No.
        161"). SFAS No. 161 is intended to improve financial standards for derivative
        instruments and hedging activities by requiring enhanced disclosures to enable
        investors to better understand their effects on an entity's financial position,
        financial performance, and cash flows. Entities are required to provide enhanced
        disclosures about: (a) how and why an entity uses derivative instruments;
        (b)
        how derivative instruments and related hedged items are accounted for under
        SFAS
        No. 133 and its related interpretations; and (c) how derivative instruments
        and
        related hedged items affect an entity's financial position, financial
        performance, and cash flows. It is effective for financial statements issued
        for
        fiscal years beginning after November 15, 2008, with early adoption encouraged.
        The Company has not yet evaluated the potential impact of adopting SFAS No.
        161
        on its financial position, results of operations or cash flows.
 
 Other
        recent accounting pronouncements issued by the FASB (including its Emerging
        Issues Task Force), the AICPA, and the SEC did not, or are not believed by
        management to, have a material impact on the Company's present or future
        consolidated financial statements.
  F-8
  NOTE
        2 – Interim
        Financial Statements
 
 The
        unaudited condensed consolidated financial statements as of March 31, 2008
        and
        for the three months ended March 31, 2008 and 2007 have been prepared in
        accordance with accounting principles generally accepted in the United States
        of
        America for interim financial information and with the instructions for
        Securities and Exchange Commission (“SEC”) Form 10-Q. In the opinion of
        management, the unaudited condensed financial statements have been prepared
        on
        the same basis as the annual financial statements and reflect all adjustments,
        which include only normal recurring adjustments, necessary to present fairly
        the
        financial position as of March 31, 2008 and the results of operations and
        cash
        flows for the periods ended March, 2008 and 2007. The financial data and
        other
        information disclosed in these notes to the interim financial statements
        related
        to these periods are unaudited. The results for the three month period ended
        March 31, 2008 is not necessarily indicative of the results to be expected
        for
        any subsequent quarter and or the entire year ending December 31, 2008.
 
 Certain
        information and footnote disclosures normally included in financial statements
        prepared in accordance with accounting principles generally accepted in the
        United States have been condensed or omitted pursuant to the SEC’s rules and
        regulations. These unaudited condensed consolidated financial statements
        should
        be read in conjunction with our audited consolidated financial statements
        and
        notes thereto for the year ended December 31, 2007, included in the Company’s
        Annual Report on Form 10K filed on April 15, 2008 with SEC.
 
 The
        condensed consolidated financial statements as of December 31, 2007 have
        been
        derived from the audited consolidated financial statements at that date but
        do
        not include all disclosures required by the accounting principles generally
        accepted in the United States of America.
 
 NOTE
        3 - Net
        Loss Per Common Share
 
 The
        Company has adopted Financial Accounting Standards Board (“FASB”) Statement
        Number 128, “Earnings per Share,” (“EPS”) which requires presentation of basic
        and diluted EPS on the face of the income statement for all entities with
        complex capital structures and requires a reconciliation of the numerator
        and
        denominator of the basic EPS computation to the numerator and denominator
        of the
        diluted EPS
 
 Basic
        loss per share is computed by dividing net loss by the weighted average number
        of common shares outstanding during the period. The common stock issued and
        outstanding has been included from December 15, 2006 (date of inception)
        with
        respect to the effect of recapitalization.
 
 Diluted
        loss per share is computed similarly to basic loss per share except that
        it
        includes the potential dilution that could occur if dilutive securities were
        converted. Diluted loss per common share is the same as basic loss per share,
        as
        the effect of potentially dilutive securities (convertible debt - 13,200,000
        and
        warrants – 30,360,000, at March 31, 2008), are anti-dilutive.
 
 NOTE
        4 - Inventories
 
 Inventories
        consist of the following:
 March
                    31,
                  2008
                
                December
                    31,
                  2007(Unaudited)Finished
                    Goods
                
                $
                274,000
                
                $
                544,327Raw
                    Materials
                
                
                37,853
                
                
                182,335Work
                    in Process
                
                
                109,757
                
                
                12,837Total
                
                $
                421,610
                
                $
                739,499
  F-9
  NOTE
        4 – Inventories (Continued)
 
 Finished
        goods consist of those silks and by products available for sales. There was
        no
        valuation allowance for inventory loss at March 31, 2008 and December 31,
        2007.
 
 NOTE
        5 - Property
        and Equipment
 
 Property
        and equipment is summarized as follows:
 Fixed Assets
                
                Estimated
                  Usefull Life
                
                March 31,
                  2008
                
                December 31,
                  2007(Unaudited)Manufacture
                    Equipment
                
                
                10
                
                $
                679,784
                
                $
                516,381Auxiliary
                    Equipment
                
                
                10
                
                
                6,760
                
                
                7,878Office
                    Equipment
                
                
                3-5
                
                
                19,387
                
                
                15,991Automobile
                
                
                5
                
                
                121,219
                
                
                -Furnitures
                    and Fixtures
                
                
                5-7
                
                
                26,914
                
                
                25,872Construction
                    in progress
                
                
                
                
                
                13,324
                
                
                -867,388
                
                
                566,122Less:
                    Accumulated Depreciation
                
                
                
                
                
                65,557
                
                
                48,490$
                801,831
                
                $
                517,632
  Depreciation
        expense was $14,819 for the three month ended March 31, 2008, of which, $12,496
        was included in the cost of goods sold.
 
 During
        the first quarter of 2008, management reviewed the useful lives and residual
        value of the Company’s machinery and equipment and compared to standard
        industry. Management has determined the production equipments acquired in
        2007,
        which were originally estimated to have a 5-7 years useful lives should be
        increased to 10-years useful lives and with a residual value of 5% of their
        original costs. Accordingly, effective January 1, 2008, the Company has changed
        the depreciation lives for the production equipments and auxiliary equipments
        to
        the estimated useful lives of 10 years.
  NOTE
        6 - Acquisition
        Deposit
  On
        November 26, 2007, the Company entered into a binding letter agreement with
        Chongqing Fulin Municipal Government, pursuant to which the Company intends
        to
        acquire certain assets, including, fixed assets, real estate holding,
        intellectual property and long term leaseholdings from Zhengzhong Silkworm
        Industrial Development Co. Ltd., a state owned entity. On December 28, 2007,
        the
        Company entered into a letter of intend agreement with Chongqing Fulin Municipal
        Government and agreed to pay 3,000,000 Renmimbi ($427,831 translated at March
        31, 2008 foreign exchange rate) as a down payment. At March, 2008, the Company
        had a deposit with local government regulatory agent in the amount of 3,977,600
        Renminbi, ($567,246 and $545,289 translated at March 31, 2008 and December
        31,
        2007 foreign exchange rates, respectively), of which, 977,600 Renminbi was
        for
        silkworm seeds ($139,415 and $134,019 translated at March 31, 2008 and December
        31, 2007 foreign exchange rates, respectively).
 
 On
        March
        19, 2008, the Company signed a contract with Chongqing Fulin State Owned
        Assets
        Management Co. to rent and use state owned cocoon purchase station and warehouse
        at no cost from March 19, 2008 to March 18, 2009. The Company paid a deposit
        of
        50,000 Renminbi ($7,130 translated at March 31, 2008 foreign exchange rate)
        to
        Chongqing Fulin State Owned Assets Management Co. as required by the rent
        contract .
  F-10
 NOTE
        7 - Loans
        Payable – Short Term
  The
        Company borrowed 6,500,000 Renminbi, ($891,085 translated at December 31,
        2007
        exchange rate) from Shanghai Pudong Development Bank for working capital
        purpose
        on December 29, 2007. This short term loan was repaid on January 29, 2008.
 
 The
        Company borrowed $20,000 from two non-related individuals. Each of these
        loans,
        $10,000 each, with a borrowing line of up to $20,000, bears the interest
        at 8%
        per annum. The principal and interest is due on April 24, 2008. As of March
        31,
        2008, the accrued interest totaled $3,127. The Company did not repay these
        two
        loans as of May 20, 2008.
 
 NOTE
        8 - Loans
        Payable -Related Parties
 
 Loans
        payable – related parties represent advances made to the Company by its one
        significant shareholder and by a former officer. Loan payable due to its
        shareholder amounted to $253,617 (see Note 13), which is payable on demand
        and
        bears no interest. Loans payable due to its former officer totaled $20,581.
        Among the loans payable to its former officer, $8,348 are payable on demand
        and
        bear no interest; $12,233 bear interest at 8% per annum. As of March 31,
        2008,
        the accrued interest payable amounted to $1,558.
 
 NOTE
        9 - Convertible
        Debts
 
 Convertible
        debt consists of the following
 March 31,
                  2008
                
                December 31,
                  2007(Unaudited)Convertible
                    notes payable net of unamortized discount of $2,322,629 and $2,759,821,
                    respectively
                
                $
                835,846
                
                $
                540,179Less:
                    current portion
                
                
                561,777
                
                
                79,664Long
                    term portion
                
                $
                274,069
                
                $
                460,515
 
 On
        September 12 and September 20, 2007, the Company entered into Subscription
        Agreements (the "Subscription Agreements") with 11 investors ("Purchasers"),
        for
        the purchase and sale of $3,300,000 of Secured Convertible Promissory Notes
        of
        the Company (the “Notes”) for the aggregate purchase price of $3,300,000 (the
“Note Financing”). The Company received net proceeds from the issuance of the
        Notes of $2,622,425 after finance costs of $382,500 and other expenses of
        $295,075. Pursuant to the terms of the Subscription Agreement, the Company
        also
        issued to the Purchasers warrants to purchase up to 26,400,000 shares of
        common
        stock of the Company, subject to adjustments for certain issuances and
        transactions.
 
 The
        Notes
        bear interest at the rate of 10% per annum, payable in either (a) cash equal
        to
        115% of 5.55% of the initial principal amount or (b) absent any event of
        default, in shares of the Company’s common stock at the lesser of (i) $1.00 per
        share or (ii) 75% of the average of the closing bid prices of the Company’s
        common stock for the 5 trading days preceding the payment date. Said payments
        commence on March 12, 2008 and all accrued but unpaid interest and any other
        amounts due thereon is due and payable on September 12, 2009, or earlier
        upon
        acceleration following an event of default, as defined in the Notes.
 
 All
        principal and accrued interest on the Notes is convertible into shares of
        the
        Company’s common stock at the election of the Purchasers at any time at the
        conversion price of $0.25 per share, subject to adjustment for certain
        issuances, transactions or events that would result in “full ratchet” protection
        to the holders.
  F-11
  NOTE
        9 - Convertible
        Debts (Continued)
 
 The
        Notes
        contain default events which, if triggered and not timely cured (if curable),
        will result in a default interest rate of 15% per annum. The Notes also contain
        full ratchet antidilution provisions with respect to certain securities
        issuances, including the issuances of stock for less than $.25 per share.
        In
        addition, the Company has to pay the Purchasers an additional amount of
        principal plus accrued interest if the Company is no longer listed on the
        Bulletin Board or sells substantially all of its assets.
 
 As
        part
        of the financing, the Company also issued to each Purchaser an aggregate
        of
        13,200,000 Class A Common Stock Purchase Warrants and 13,200,000 Class B
        Common
        Stock Purchase Warrants. The Class A Warrants are exercisable at a price
        of
        $0.50 per share at any time until the fifth anniversary from the date the
        Registration Statement is declared effective by the Securities and Exchange
        Commission (“the Expiration Date”) and the Class B Warrants are exercisable at a
        price of $1 per share at any time until the Expiration Date. The warrants
        include a cashless exercise provision which is triggered after March 12,
        2008 as
        well as “full ratchet” antidilution provisions with respect to certain
        securities issuances.
 
 The
        option of each Purchaser, conversion of the Notes, or exercise of the Warrants,
        is subject to the restriction that such conversion or exercise, does not
        result
        in the Purchaser beneficially owning at any one time more that 4.99% of the
        Company’s outstanding shares of common stock.
 
 Payment
        of the Notes along with the Company’s other obligations to the Purchasers is
        secured by all the assets of the Company and of its wholly-owned subsidiary,
        Qiluo. Such obligations are also secured by a guaranty and pledge of the
        17,100,000 shares of the Company’s common stock held by Xinshengxiang Industrial
        Development Co., Ltd., a significant shareholder of the Company. In connection
        with the transaction, the Company agreed to prepare and file with the Securities
        and Exchange Commission within 60 days following the closing of a registration
        statement on Form SB-2 for the purpose of registering for resale all of the
        shares of common stock underlying the Notes, If the Company fails to file
        such
        registration statement within such time, or if the registration statement
        is not
        declared effective within 150 days from September 12, 2007, the Company must
        pay
        monthly liquidated damages in cash equal to 2% of the principal amount of
        the
        Notes and purchase price of the Warrants. The Purchasers were also granted
        standard piggyback registration rights along with certain demand registration
        rights. The Company filed SB-2 registration statement on December 26, 2007.
        The
        registration statement has not been declared effective as of May 20, 2008
        (see
        Note 16).
 
 In
        connection with the convertible debt, the Company recorded deferred finance
        costs of $4,466,334 of which, $382,500 recorded as an assets – deferred
        finance cost and $4,083,834 recorded as a component of stockholders’ equity,
        additional paid-in capital. Such deferred finance costs are being amortized
        over
        the life of the related debt. The Company also recorded a deferred debt discount
        in the amount of $3,300,000 to reflect the beneficial conversion feature
        of the
        convertible debt and the fair value of the warrants. The beneficial conversion
        feature was recorded pursuant to Emerging Issues Task Force (“EITF”) 00-27:
“Application of EITF No. 98-5, Accounting for Convertible Securities with
        Beneficial Conversion Features or Contingently Adjustable Conversion Ratios,
        to
        Certain Convertible Instruments”. In accordance with EITF 00-27, the Company
        evaluated the value of the beneficial conversion feature and recorded the
        amount
        of $396,753 as a reduction to the carrying amount of the convertible debt
        and as
        an addition to paid-in capital. Additionally, the relative fair value of
        the
        warrants of $2,903,247 was calculated and recorded as a further reduction
        to the
        carrying amount of the convertible debt and as addition to paid-in capital.
        The
        amortization of these deferred finance costs and debt discount are reported
        as a
        component of the interest expense. The amortization of deferred finance costs
        and debt discount for the three months ended March 31, 2008 were $541,036
        and
        $437,192, respectively. Such amortizations have been included as interest
        expense.
  The
        Company commenced the repayment of the convertible notes and interest on
        March
        12, 2008 and paid $26,375 to three private investors, which represents accrued
        interest of $12,500 to three private investors and repayment of principal
        in the
        amount of $13,875 due on the convertible promissory notes.
  F-12
  NOTE
        10 - Stockholders’
        Equity and Share Purchase Agreement
 
 Effective
        on April 23, 2007, the Company amended its articles of incorporation for
        the
        purpose of effecting a one for two and a half (1 for 2.5) forward stock split
        of
        its common stock. In addition, the authorized common stock of the Company
        was
        increased from 500,000,000 shares, $.001 par value to 1,250,000,000 shares,
        $.0001 par value. All share and per share data have been given retroactive
        effect to reflect this recapitalization.
 
 On
        June
        19, 2007, Franklin entered into a Share Purchase Agreement (the “Share Purchase
        Agreement”) with the following persons: Chongqing Qiluo Textile Co. Ltd., a
        limited liability company organized under the laws of the People’s Republic of
        China (“Qiluo”); Xinshengxiang Industrial Development Co., Ltd., a limited
        liability company organized under the laws of the People’s Republic of China
        (“Xinshengxiang”); Mr. Dingliang Kuang (“Dingliang”); and Ms. Yue Kuang (“Yue,”
and together with Xinshengxiang and Dingliang, the "Qiluo Shareholders").
        Pursuant to the Share Purchase Agreement, Franklin agreed to acquire Qiluo
        at a
        closing held simultaneously therewith by purchasing from the Qiluo Shareholders
        all of their respective shares of Qiluo’s registered capital, which represent
        100% of the issued and outstanding registered capital stock of Qiluo. Upon
        the
        consummation of such purchase, Qiluo became a wholly-owned subsidiary of
        Franklin. In consideration therefor, Franklin agreed to issue to the Qiluo
        Shareholders an aggregate of 5,000,000 shares of Franklin’s Series A Convertible
        Preferred Stock (convertible into 52,880,000 shares of common stock, see
        Notes
        11), which were allocated between the Qiluo Shareholders as follows: 4,750,000
        shares to Xinshengxiang; 125,000 shares to Dingliang; and 125,000 shares
        to Yue.
        Each share of Series A Convertible Preferred Stock is convertible, at the
        option
        of the holder thereof, into 10.576 of Franklin's common stock.
 
 In
        connection with the foregoing transaction, on June 19, 2007, Kelly Fan, the
        former President, Chief Executive Officer, Treasurer, and Director of Franklin,
        transferred without consideration to the Qiluo Shareholders 18,000,000 shares
        of
        the common stock of Franklin which were issued and outstanding and held by
        Ms.
        Fan. Such shares were allocated between the Qiluo Shareholders as follows:
        17,100,000 shares to Xinshengxiang Industrial Development Co., Ltd.; 450,000
        shares to Dingliang Kuang; and 450,000 shares to Yue Kuang.
 
 As
        a
        result of the foregoing transactions: (a), Xinshengxiang Industrial Development
        Co., Ltd. holds approximately 81% of the total combined voting power of all
        classes of Franklin’s capital stock entitled to vote; (b) Diangliang Kuang is
        the principal owner and manager of Xinshengxiang Industrial Development Co.,
        Ltd. and thus has voting, investment, and dispositive control over the shares
        of
        Franklin’s capital stock owned by Xinshengxiang Industrial Development Co., Ltd.
        Accordingly, Mr. Kuang is also deemed to be the indirect beneficial owner
        of the
        shares of Franklin’s capital stock owned by Xinshengxiang Industrial Development
        Co., Ltd. Mr. Kuang thus directly and indirectly (by Xinshengxiang Industrial
        Development Co., Ltd.) holds approximately 83% of the total combined voting
        power of all classes of Franklin’s capital stock entitled to vote; and (c) Yue
        Kuang, who is the sister of Diangliang Kuang, directly holds approximately
        2% of
        the total combined voting power of all classes of Franklin’s capital stock who
        is entitled to vote.
 
 In
        September 2007, the Company agreed to issue an aggregate of 8,000,000 shares
        of
        its common stock valued at $9,200,000 to Bonsai Venture Partner, Ltd., a
        British
        Virgin Islands Limited company in consideration for the consulting services
        rendered. These issuances were offered and sold in reliance upon exemptions
        from
        registration pursuant to Section 4(2) under the Securities Act and the Rule
        506
        promulgated thereunder. The shares issued in consideration for services rendered
        were valued at $9,200,000, based on the price of our stock on the date of
        issuance.
 
 In
        March
        2008, the Company issued 4,190,847 shares of its common stock to other five
        investors, which represented the payment of accrued interest of $115,000
        and
        repayment of principal in the amount of $127,650 due on March 12, 2008 pursuant
        to the terms of the Notes (see Note 9). The issuing price was calculated
        at 75%
        of average of the closing bid prices of the Company’s common stock for the 5
        days preceding the payment date.
  F-13
  NOTE
        11 - Preferred
        Stock
 
 On
        June
        18, 2007, the Company designated a series of Preferred Stock known as the
        “Series A Convertible Preferred Stock” (the “Series A Preferred Stock”) by
        filing a Certificate of Designation with the Secretary of State of Nevada.
        The
        number of shares constituting such Series A Preferred Stock was designated
        to be
        5,000,000 shares, par value $0.001 per share. Pursuant to the Certificate
        of
        Designation, the principal rights, preferences, powers, limitations and
        restrictions of the Series A Preferred Stock are as follows:
 
 Each
        share of Series A Preferred Stock is convertible, at the option of the holder
        thereof, without payment of additional consideration, 10.576 shares of the
        Company’s common stock. Holders of Series A Preferred Stock shall be entitled to
        vote, together with holders of common stock as a single class, on all matters
        upon which stockholders of the Company are entitled to vote, with each share
        of
        Series A Preferred Stock having one vote. The Series A Preferred Stock shall
        rank senior to the common stock. In the event of any liquidation, dissolution
        or
        winding up of the Company, the holders of Series A Preferred Stock shall
        be
        entitled to receive, prior and in preference to any distribution of any of
        the
        assets of the Company to the holders of the common stock of the Company and
        any
        other issue of stock, should there be any, by reason of their ownership thereof,
        an amount per share equal to $0.001 per each share of Series A Preferred
        Stock
        owned by such shareholder plus any declared and unpaid dividends on the Series
        A
        Preferred Stock.
 
 On
        December 10, 2007, the Company issued an aggregate of 52,880,000 shares of
        common stock and completed conversion of 5,000,000 shares of Series A Preferred
        Stock.
 
 NOTE
        12 - Warrants
 
 A
        summary
        of the status of the Company’s warrants is presented below:
 Date of
                  Issuance
                
                Number of
                  Warrants
                
                Weighted Average
                  Exercise PriceOutstanding
                    -January 1, 2007
                
                
                
                
                
                -
                
                $
                -Issued,
                    Class A Warrants
                
                
                09/12/07
                
                
                13,200,000
                
                
                0.50Issued,
                    Class B Warrants
                
                
                09/12/07
                
                
                13,200,000
                
                
                1.00Issued,
                    Finder's Fees Warrants
                
                
                09/12/07
                
                
                3,960,000
                
                
                0.25Outstanding
                    - March 31, 2008 (Unaudited) and December 31, 2007
                
                
                
                
                
                30,360,000
                
                $
                0.68
  Warrants
        outstanding and exercisable by price range as of March 31, 2008:
 Warrants
                    Outstanding
                
                Warrants ExercisableRange of
                
                Number
                  Outstanding
                
                Weighted Average
                  Remaining
                  Contractual
                  Life in Years *
                
                Weighted
                  Average
                  Exercise
                  Price
                
                Number
                  Exercisable
                
                Weighted
                  Average
                  Exercise
                  Price$      
                    0.25
                
                
                3,960,000
                
                
                5.00
                
                $
                0.25
                
                
                3,960,000
                
                $
                0.25$      
                    0.50
                
                
                13,200,000
                
                
                5.00
                
                
                0.50
                
                
                13,200,000
                
                
                0.50$      
                    1.00
                
                
                13,200,000
                
                
                5.00
                
                
                1.00
                
                
                13,200,000
                
                
                1.0030,360,000
                
                
                
                
                $
                0.68
                
                
                30,360,000
                
                $
                0.68
  *
          Warrants expire 5 years after effective date of registration
          statement.
 The
          registration statement filed on December 26, 2007 is not effective as of
          May 20,
          2008.
  F-14
 NOTE
        12 - Warrants (Continued)
 
 The
        fair
        value of these warrants and significant assumptions used to determine the
        fair
        values, using a Black-Scholes option pricing model are as follows:
 Significant
                    assumptions:Risk-free
                    interest rate at grant date
                
                
                4.11
                %Expected
                    stock price volatility
                
                
                93.95
                %Expected
                    dividend payout
                
                
                -Expected
                    option life-years
                
                
                5
  NOTE
        13 - Related
        Party Transaction
 
 During
        2007, the Company received funds from and advanced funds to Xinshengxiang,
        one
        of its significant shareholders (see Note 10) for working capital purpose
        . As
        of December 31, 2007, the excess advanced payment to Xinshengxiang amounted
        to
        $2,019,685. The Company has accounted for this excess payment to its significant
        shareholder as a nonreciprocal transfer in 2007 and recorded the overpayment
        as
        a direct reduction of additional paid in capital. Xinshengxiang repaid $219,693
        during the first quarter of 2008. Accordingly, the repayment was recorded
        as an
        additional paid in capital to reverse the nonreciprocal funds transferred
        to
        Xinshengxiang for the amount returned. A historical foreign exchange rate
        (December 31, 2007 exchange rate) will be used in tracking Xinshengxinag’s
        repayment.
 
 During
        first quarter of 2008, the Company purchased approximately $253,600 (1,850,000
        Renminbi) worth of manufacturing equipment and an automobile from Xinshengxiang,
        one of its significant shareholders (see Note 10). The value of the used
        equipment was assessed based on the market price at the purchase date. Since
        the
        payment method is not decided yet, the Company recorded the amount due to
        Xinshengxiang as loan payable – related parties.
 
 In
        addition, the Company purchased approximately 4.2 tons raw material–cocoon,
        approximately $324,304 (2,365,630 Renminbi) from Xinshengxiang during the
        first
        quarter of 2008. The purchase and sale price are based on the market price
        at
        the date of transaction. The Company did not make payments to these purchases
        at
        March 31, 2008. The amount owed to Xinshengxiang was included in the balance
        of
        accounts payable.
 
 Accrued
        interest payable related to the loans due to a former officer has been included
        in accounts payable, which amounted to $1,558 and $1,313 at March 31, 2008
        and
        December 31, 2007, respectively (see Note 8).
 
 The
        Company paid two months of consulting fee totaled to $8,000 to Mr. Guo Fan,
        spouse of former officer during the first quarter of 2008.
 
 NOTE
        14 - Concentration
        of Credit Risk
 
 Financial
        instruments that potentially subject the Company to significant concentrations
        of credit risk consist principally of cash and cash equivalents. The Company
        maintains cash balances in various US financial institutions. As of March
        31,
        2008 and December 31, 2007, the Company’s cash balance on each US financial
        institution is covered by Federal Deposit Insurance Corporation.
 
 The
        Company also maintains cash balances in various banks in the People’s Republic
        of China. Currently, no deposit insurance system has been set up in the People’s
        Republic of China. Therefore, the Company will bear a risk if any of these
        banks
        become insolvent. The Company’s uninsured cash balance was approximately $78,356
        and $1,264,007 as of March 31, 2008 and December 31, 2007,
        respectively.
 
 The
        financial position and results of operations of the Company are recorded
        in
        Renminbi. Therefore, exchange rate fluctuations could affect the future business
        operations of the Company as translated to US dollars.
  F-15
  NOTE
        15 - Commitments
        and Contingencies
  Lease
        agreement
 
 On
        January 28, 2007, the Company signed a twenty (20) years lease with
        Xinshengxiang, a related party, (see Note 10), for the use of a factory building
        located in Fulin, Chongqing. The lease commenced on March 1, 2007 and calls
        for
        annual base rent of $28,522 (200,000 Renminbi translated at March 31, 2008
        exchange rate) plus other occupancy costs.
 
 Future
        annual minimum rentals are as follows:
 Period Ending
                  March 31,
                
                Future Minimum
                  Rent Payments
                  US Dollars2009
                
                $
                28,5222010
                
                
                28,5222011
                
                
                28,5222012
                
                
                28,5222013
                
                
                28,522Thereafter
                
                
                404,061Total
                
                $
                546,671
  Consulting
        Fee Payment
 
 On
          October 1, 2007, the Board determined to engage First Line Capital, LLC
          for one
          year term at $5,000 per month and Mr. Guo Fan for one year term at $4,000
          per
          month for their advisory services. The unpaid consulting service fee amounted
          to
          $36,000 and $27,000 as of March 31, 2008 and December 31, 2007, respectively,
          which has been included in the accounts payable balances.
 
 Registration
        Payment Arrangement
 
 In
        connection with the convertible debt (see Note 9), the Company agreed to
        prepare
        and file with the Securities and Exchange Commission within 60 days following
        the closing of a registration statement on Form SB-2 for the purpose of
        registering for resale all of the shares of common stock underlying the Notes,
        If the Company fails to file such registration statement within such time,
        or if
        the registration statement is not declared effective within 150 days from
        September 12, 2007, the Company must pay monthly liquidated damages in cash
        equal to 2% of the principal amount of the Notes and purchase price of the
        Warrants. The Company filed SB-2 registration statement on December 26, 2007
        and
        Form S-1/A on March 7, 2008. The registration statement has not been declared
        effective as of May 20, 2008. The Company concluded that it is probable that
        it
        will be required to remit liquidated damage payment to the investors for
        failing
        to file Form SB-2 within 60 days from September 12, 2007. In accordance with
        FSP
        00-19-2, the Company accrued liquidated damage in the amount of $196,585
        and
        $99,000 during the first quarter 2008 and fourth quarter 2007, respectively,
        which has been included in the accounts payable balances.
 
 Lack
        of Insurance
 
 The
        Company currently has no insurance in force for its office facilities and
        operations and it cannot be certain that it can cover the risks associated
        with
        such lack of insurance or that it will be able to obtain and/or maintain
        insurance to cover these risks at economically feasible premiums.
  F-16
  Country
        Risk
 
 As
        the
        Company's principal operations are conducted in the People’s Republic of China
        (the “PRC”), the Company is subject to special considerations and significant
        risks not typically associated with companies in North America and Western
        Europe. These risks include, among others, risks associated with the political,
        economic and legal environments and foreign currency exchange limitations
        encountered in the PRC. The Company's results of operations may be adversely
        affected by changes in the political and social conditions in the PRC, and
        by
        changes in governmental policies with respect to laws and regulations, among
        other things.
 
 In
        addition, all of the Company's transactions undertaken in the PRC are
        denominated in Renminbi, which must be converted into other currencies before
        remittance out of the PRC may be considered. Both the conversion of Renminbi
        into foreign currencies and the remittance of foreign currencies abroad require
        the approval of the PRC government.
  NOTE
          16 - Subsequent
          Events
  On
        April
        1, 2008, the Company issued 721,973 shares of its common stock to two (2)
        investors, which represents the payment of interest of $5,000 and principal
        of
        $13,875 due by March 12, 2008 pursuant to the terms of the Notes (see Note
        9).
 
 During
          April 2008, the Company issued additional 7,316,284 shares of its common
          stock
          to six(6) investors, which represents the payment of interest of $23,751
          and
          principal of $113,775 due by April 12, 2008 pursuant to the terms of the
          Notes
          (see Note 9).
  The
          Company was in default to one investor resulted from the Company‘s delay of
          repayment in cash. As of May 20, 2008, the Company owed to this investor
          principal amount of approximately $83,250 and accrued interest payable
          of
          $37,500. Such amount has not included the additional interest resulting
          from the
          default (see Note 9), which amounted to $12,500.
 
 As
        of May
        20, 2008, the Company was in default to other four (4) investors on payments
        scheduled on April 12, 2008. The Company owed principal of $41,625 and accrued
        interest of $5,903. Such amount has not included the additional interest
        resulting from the default (see Note 9).
 
 As
          of May
          20, 2008, the Company was in default to ten (10) investors on payments
          scheduled
          on May 12, 2008. The Company owed principal of $155,250 and accrued interest
          of
          $21,090. Such amount has not included the additional interest resulting
          from the
          default (see
          Note 9) .
  F-17
  **Item
        2.**  **Management’s
        Discussion and Analysis of Financial Condition and Results of
        Operations.**





**Forward-Looking
      Statements**





The
      following discussion should be read in conjunction with our financial
      statements, which are included elsewhere in this Form 10-Q (the “Report”). This
      Report contains forward-looking statements which relate to future events or
      our
      future financial performance. In some cases, you can identify forward-looking
      statements by terminology such as “may,” “should,” “expects,” “plans,”
“anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or
      the negative of these terms or other comparable terminology. These statements
      are only predictions and involve known and unknown risks, uncertainties, and
      other factors that may cause our or our industry’s 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
      these forward-looking statements.





For
      a
      description of such risks and uncertainties refer to our Registration Statement
      on Form S-1/A, and Annual Report on Form 10-K, filed with the Securities and
      Exchange Commission on March 7, 2008 and April 15, 2008, respectively. While
      these forward-looking statements, and any assumptions upon which they are based,
      are made in good faith and reflect our current judgment regarding the direction
      of our business, actual results will almost always vary, sometimes materially,
      from any estimates, predictions, projections, assumptions or other future
      performance suggested herein. Except as required by applicable law, including
      the securities laws of the United States, we do not intend to update any of
      the
      forward-looking statements to conform these statements to actual
      results.





***Business
      Overview***





**Our
      History**





Franklin
      was incorporated on March 23, 2006 in the State of Nevada. Prior to our
      acquisition of Chongqing Qiluo Textile Co., Ltd., a limited liability company
      organized under the laws of the People’s Republic of China (“Qiluo”), as
      disclosed in the Company’s Current Report on Form 8-K filed with the SEC on June
      20, 2007, Franklin intended to engage in the manufacturing, processing, and
      distribution of frozen Pan Asian foods.





Franklin
      has not generated any revenue to date from the frozen Pan Asian Food business
      model and its operations have been limited to organizational, start-up, and
      fund
      raising activities. We shifted our business focus in June 2007, as a result
      of
      our acquisition of Qiluo. Through Qiluo, we are currently engaged in the
      production and sale of raw silk.




On
      July
      20, 2006, the Securities and Exchange Commission declared effective Franklin’s
      Registration Statement on Form SB-2 (Commission File No. 333-135199) relating
      to
      the primary offering by Franklin of up to 4,000,000 shares of our common stock
      at a purchase price equal to $0.025 per share. Such offering commenced on July
      1, 2006 and was terminated and concluded on September 25, 2006. Franklin sold
      all 4,000,000 shares of common stock offered in such offering and raised gross
      proceeds of $100,000. Franklin incurred offering costs of $16,000, and net
      proceeds amounted to $84,000. $70,000 of the net proceeds have been utilized
      to
      engage consultants in areas including culinary cuisine, research and equipment,
      development of a marketing plan, food samples and web site
      development.




3


On
      April
      23, 2007, Franklin amended its Articles of Incorporation for the purposes of
      implementing two and a half for one (2.5:1) forward stock split and increasing
      its authorized shares of common stock on a corresponding basis. As a result
      of
      such forward stock split, shares of common stock held by each holder of record
      on April 23, 2007 were automatically split at the rate of two and a half for
      one
      (2.5:1), so that each pre-split share was equal to two and a half post-split
      shares. The number of shares of common stock issued and outstanding prior to
      the
      forward stock split was 12,100,000 shares. After the forward stock split, the
      number of shares of common stock issued and outstanding was 30,250,000 shares.
      In addition, the authorized shares of common stock of the Company were increased
      from 500,000,000 shares, par value $0.001, to 1,250,000,000 shares, par value
      $.0001 per share.





On
      June
      18, 2007, Franklin authorized and created a series of preferred stock,
      designated as the “Series A Convertible Preferred Stock” (the “Series A
      Preferred Stock”), consisting of 5,000,000 shares. Each share of Series A
      Preferred Stock was convertible, at the option of the holder thereof, into
      10.576 shares of Franklin's common stock.





On
      June
      19, 2007, Franklin entered into a Share Purchase Agreement with the shareholders
      of Qiluo, whereby Franklin agreed to acquire 100% of the issued and outstanding
      registered capital of Qiluo for consideration of 5,000,000 shares of Franklin’s
      Series A Convertible Preferred Stock (convertible into 52,880,000 shares of
      common stock). Upon consummation of such purchase, Qiluo became a wholly-owned
      subsidiary of Franklin.





Since
      its
      acquisition of Qiluo, Franklin is no longer engaged in the manufacturing,
      processing, and distribution of frozen Pan Asian foods. Instead, it is now
      engaged in the production and sale of raw silk.




**Our
      Business**





Through
      our subsidiary, Qiluo, we are engaged in the manufacture and sale of raw silk
      in
      the Fulin District of Chongqing Municipality, China. Qiluo was incorporated
      on
      December 15, 2006, under the name “Chongqing Qiluo Textile Co. Ltd.” under the
      laws of the People’s Republic of China. Qiluo was a development stage company,
      which commenced operations in August 2007. Qiluo’s executive offices and
      principal place of business is located in the Fulin District of Chongqing
      Municipality, China. The primary goal of Qiluo is to be the leader in silk
      manufacturing in the local area of Fulin, Chongqing, China.





Prior
      to
      the acquisition of Qiluo by Franklin, Qiluo had been owned by three
      shareholders: Xinshengxiang Industrial Development Co., Ltd., who owned 95%
      of
      the shares of Qiluo’s registered capital; Dingliang Kuang, who owned 2.5% of the
      shares of Qiluo’s registered capital; and Yue Kuang, who owned 2.5% of the
      shares of Qiluo’s registered capital. Xinshengxiang Industrial Development Co.,
      Ltd. contributed $363,944, Dingliang Kuang contributed $9,578, and Yue Kuang
      contributed $9,578 to Qiluo’s registered capital. In addition to the registered
      capital, the three shareholders made additional capital contributions to Qiluo
      in the amount of $768,600, as follows: Xinshengxiang Industrial Development
      Co.,
      Ltd. contributed $730,170; Dingliang Kuang contributed $19,215; and Yue
      contributed $19,215. In addition, Qiluo borrowed $864 from Xinshengxiang
      Industrial Development Co., Ltd. during the process of incorporation. The loan
      bears no interest and is payable upon demand.




4


In
      order
      to gain a competitive edge in the centralization of the silk industry in
      Chongqing, Qiluo had to seek out methods to bring together what had typically
      been a very fragmented industry and co-ordinate the entire silk manufacturing
      process. This process includes everything from sericulture, to harvesting and
      processing the cocoons, through to the manufacturing and exportation of either
      finished or raw silk products. On January 28, 2007, the Company signed a twenty
      (20) year lease effective as of March 1, 2007 with Xinshengxiang, the holder
      of
      approximately 17.8% of our common stock, for the use of a factory building
      located in Fulin, Chongqing. The lease commenced on March 1, 2007 and calls
      for
      annual base rent of $27,418 plus other occupancy costs. The leased factory
      building is equipped with brand new state-of-the-art manufacturing machinery
      and
      housing facilities. We believe that the investment in the newest high-end silk
      manufacturing machinery will elevate both the quality and the quantity of the
      silk produced.





Manufacturing
      equipment and facilities include:





 ̈
            Administrative
                building ̈
            Secondary
                process centre





 ̈
            12
                electric automatic reeling machines ̈
            Vacuum
                infiltration equipment





 ̈
            Water
                infiltration equipment ̈
            Ventilation
                & air condition





 ̈
            Hydration
                distribution facility





On
      December 18, 2006, Qiluo entered into a purchase agreement with Hangzhou Textile
      Machinery Co. Ltd., pursuant to which Qiluo agreed to purchase six new silk
      drawing machinery units. The aggregate purchase price for such units was
      approximately $314,000 which has been paid in full. The six silk drawing
      machinery units have been delivered and installed at Qiluo’s premises.




Qiluo’s
      manufacturing facilites are capable of producing 600 tons of raw silk per year.
      Qiluo also intends to further expand its production ability by acquiring
      silkworm production bases and silk textile production capacity in the local
      area. On November 26, 2007, we entered into a binding letter of intent with
      Zhengzhong Silkworm Industrial Development Co., a limited liability company
      organized under the laws of the People’s Republic of China (“Zhengzhong”),
      pursuant to which we intend to acquire from Zhengzhong certain assets,
      including, fixed assets, real estate holdings, intellectual property and a
      long
      term lease of approximately 15,000 acres of mulberry farms, in consideration
      for
      a purchase price to be mutually agreed upon after the we have has completed
      our
      due diligence investigation of Zhengzhong and its assets. On December 28, 2007,
      the Company made a deposit with local government regulatory agent in the amount
      of 3,977,600 Renminbi ($567,246 and $545,289 translated at March 31, 2008 and
      December 31, 2007 foreign exchange rates, respectively).





On
      November 28, 2007, we entered into a binding letter agreement with Chongqing
      Wintus New Star Enterprises Group, Ltd., a limited liability company organized
      under the laws of the People’s Republic of China (“Wintus”), pursuant to which
      we intend to acquire certain assets of Wintus, including the stock of their
      seven wholly owned Chinese subsidiaries. The business of Wintus is focused
      on
      the production of raw silk and the subsequent processing and sales of various
      silk products. As consideration for the assets, we agreed to pay a combination
      of cash and capital stock, in amounts to be mutually agreed upon after we have
      completed our due diligence investigation of Wintus’ and its
      assets.




5





During
      the first quarter of 2008, the Company purchased approximately $253,600
      (1,850,000 Renminbi) worth of manufacturing equipment and an automobile from
      Xinshengxiang, one of its significant shareholders. The value of the used
      equipment was assessed based on the market price oat the date of purchase.
      In
      addition, the Company purchased approximately 4.2 tons raw material-cocoon
      for
      approximately $324,304 (2,365,630 Renminbi) from Xinshengxiang during the first
      quarter of 2008. The purchase and sale price are based on the market price
      at
      the date of the transaction. The Company did not make payments to these
      purchases at March 31, 2008. The balance owed to Xinshengxiang was recorded
      as
      loans payable to a related third party.





The
      creation of Qiluo’s facility with modern processing equipment, the acquisition
      from Xinshengxiang, together with our intended acquisitions of Zhengzhong and
      Wintus, will allow Qiluo to maximize both output and quality of silk production.
      Qiluo is aligned with the governments’ vision for the future economic
      development of the Chinese textile industry. The carefully mapped out plan
      pushes forward scientific and technological progress, focusing on indigenous
      innovation for a shift to a new growth model, upgrading and optimizing
      industrial structure and striving for a complete, coordinated and sustainable
      development for the Chinese textile industry.





**Plan
      of Operation**





Qiluo
      was
      formed in December 2006, started its test production at the end of June 2007
      and
      commenced it operations during the third quarter of 2007. Qiluo currently
      has 8 silk reeling machines, of which 6 are in operation. We
      anticipate that the remaining 4 reeling machines, which are currently being
      assembled, are likely to start production in June 2008.





Qiluo
      currently has 306 employees, all of whom are employed on a full time basis.
      Our
      employees have no long term commitments to the Company. All employees are
      employed pursuant to standard employment agreement, which sets forth the terms
      of the employment, duties, compensation, and other such matters, In addition,
      all of our employees are required to sign our standard confidentiality
      agreement, pursuant to which they agree to maintain the confidentiality of
      all
      proprietary information of our company. We do not believe that any of these
      are
      material to our business operation.





In
      an
      effort to maximize both output and quality of our silk production, through
      Qiluo, we are contemplating the acquisition of various other silk worm farms
      and/or existing manufacturing facilities. On November 26, 2007, we entered
      into
      a letter of intent with Zhengzhong, pursuant to which we intends to acquire
      from
      Zhengzhong certain assets, including, fixed assets, real estate holdings,
      intellectual property and a long term lease of approximately 15,000 acres of
      mulberry farms, in consideration for a purchase price to be mutually agreed
      upon
      after the we have has completed our due diligence investigation of the
      Zhengzhong and its assets.




Furthermore,
      on November 28, 2007, we entered into a binding letter agreement with Chongqing
      Wintus, pursuant to which we intend to acquire certain assets of Wintus,
      including the stock of their seven wholly owned Chinese subsidiaries. The
      business of Wintus is focused on the production of raw silk and the subsequent
      processing and sales of various silk products. As consideration for the assets,
      we agreed to pay a combination of cash and stock, in amounts to be mutually
      agreed upon after we have completed our due diligence investigation of Wintus’
and its assets.





Also,
      during the first quarter of 2008, the Company purchased manufacturing equipment,
      an automobile for approximately $253,600 (1,850,000 Renminbi) from Xinshegxiang,
      one of our significant shareholders. The Company also purchased approximately
      4.2 tons of raw material-cocoons valued at $324,304 (2,365,630 Renminbi) from
      Xinshengxiang during the first quarter of 2008. The Company did not make
      payments to these purchases at March 31, 2008. The amount owed to Xinshengxiang
      was included in the balance of accounts payable.




6


Should
      our initiatives to maximize both output and quality of silk production move
      forward, additional funds may be required. There can be no assurance that
      additional capital will be available to us. Although we may seek to raise
      additional funds, we have no specific plans, understandings or agreements with
      respect to such an offering, and we have given no contemplation with respect
      to
      the securities to be offered or any other issue with respect to any offering.
      We
      may have to issue debt or equity or enter into a strategic arrangement with
      a
      third party. We currently have no agreements, arrangements or understandings
      with any person to obtain funds through bank loans, lines of credit or any
      other
      sources.





The
      creation of Qiluo’s new facility with modern processing equipment, together with
      the purchases from Xinshengxiang and the acquisition of Zhengzhong and Wintus,
      will allow Qiluo to maximize both output and quality of silk production. Qiluo
      is aligned with the governments’ vision for the future economic development of
      the Chinese textile industry. The carefully mapped out plan pushes forward
      scientific and technological progress, focusing on indigenous innovation for
      a
      shift to a new growth model, upgrading and optimizing industrial structure
      and
      striving for a complete, coordinated and sustainable development for the Chinese
      textile industry.





**Results
      of Operations**





Through,
      Qiluo, we are currently engaged in the production and sale of raw silk. The
      Company commenced operations during the third quarter of 2007 after the
      acquisition of Qiluo, its Chinese subsidiary in June 2007. The acquisition
      is
      accounted for as a “reverse acquisition”, since the stockholders of Qiluo owned
      a majority of Franklin’s common stock immediately following the transaction.
      Qiluo is treated as the continuing entity although Franklin is the legal
      acquirer. Consequently, the Company has no comparative first fiscal quarter
      for
      2007, other than the operating expenses incurred while operating under a
      development stage enterprise.





For
      first
      quarter ended March 31, 2008, we produced approximately 33 tons of raw silk
      and
      generated $1,325,660 in net sales and gross profits of $10,799. Our
      net sales were the result of purchases made by three of our major customers.
      Tong Liang Wei Xin Zhen Honh Da Si Main Chang, accounted for approximately
      42.6%
      of our net sales; Chongqing Si Lan Si Juang Co., accounted for approximately
      18%
      of our net sales; and Yu Bei Ming Hua Trading Co., accounted for
      approximately13.5% of our net sales.





Our
      total
      operating expenses for the first quarter ended March 31, 2008 were $215, 699,
      as
      compared to $76,712 for the three months ended March 31, 2007. The increase
      was
      primarily due to the Company’s commencement of its operations, which started
      during the third quarter of 2007.





We
      had a
      loss from operations in the amount of $1,541,660 for the three months ended
      March 31, 2008, as compared to $76,317 for the three months ended March 31,
      2007
      for the same reason as discussed above.





**Liquidity
      and Capital Resources**





As
      of
      March 31, 2008, we had $79,789 in cash and cash equivalents. During the fiscal
      quarter ended March 31, 2008, the Company owed an aggregate of $340,650
      representing the principal repayment and accrued interest owed to note holders
      as of March 12, 2008. Some note holders elected to convert the March 12, 2008
      payments into shares of common stock.





On
      March
      12, 2008, the Company paid $26,375 to three investors, which represents accrued
      interest of $12,500 and repayment of principal in the amount of $13,875 due
      on
      the convertible promissory notes.




7


On
      March
      14, 2008, the Company issued 4,190,847 shares of its common stock to five (5)
      other investors, which represents the payment of interest of $115,000 and
      principal of $127,650 due on March 12, 2008 pursuant to the terms of the Notes.





In
        April
        2008, the Company issued 721,973 shares of its common stock to two (2) other
        investors, which represents the payment of interest of $5,000 and principal
        of
        $13,875 due on March 12, 2008 pursuant to the terms of the Notes.





During
      April 2008, the Company issued an additional 7,316,284 shares of its common
      stock to six (6) investors, which represents the payment of interest of $23,751
      and principal of $113,775 due by April 12, 2008 pursuant to the terms of the
      Notes.





As
        of
        April 12, 2008, the Company was in default to four (4) investors for the
        principal amount of $41,625 and accrued interest of
        $5,903.




The
        Company was in default to one investor resulted from the Company‘s delay of
        repayment in cash. As of May 20, 2008, the Company owed to this investor
        principal amount of approximately $83,250 and accrued interest payable of
        $37,500. Such amount has not included the additional interest resulting from
        the
        default, which amounted to $12,500.





As
      of May
      20, 2008, the Company was in default to other four (4) investors on payments
      scheduled on April 12, 2008. The Company owed principal of $41,625 and accrued
      interest of $5,903. Such amount has not included the additional interest
      resulting from the default.





As
        of May
        20, 2008, the Company was in default to ten (10) investors on payments scheduled
        on May 12, 2008. The Company owed principal of $155,250 and accrued interest
        of
        $21,090. Such amount has not included the additional interest resulting from
        the
        default.





**Lack
      of Insurance**





The
      Company currently has no insurance in force for its office facilities and
      operations and it cannot be certain that it can cover the risks associated
      with
      such lack of insurance or that it will be able to obtain and/or maintain
      insurance to cover these risks at economically feasible premiums.




**Going
      Concern Consideration**





The
        Company started its test production at the end of June 2007 and commenced
        its
        manufacturing operations during the third quarter of 2007. The Company has
        incurred a net loss of $1,541,660, which included the amortization of deferred
        finance cost and debt discount of $1,054,035 for the quarter ended March
        31,
        2008. In addition, the Company had negative cash flow from operations since
        December 15, 2006 (date of inception) and has an accumulated deficit of
        $13,049,756 at March 31, 2008. Substantial portions of the losses are
        attributable to consulting and professional fees. Furthermore, the Company’s
        gross margin rate from its current operations was very low. It was less than
        1%
        for the three months ended March 31, 2008. The Company had a working capital
        deficiency of $934,701 at March 31, 2008. These factors raised substantial
        doubt
        about the Company’s ability to continue as going concern.





There
      can
      be no assurance that sufficient funds will be generated during the next twelve
      months or thereafter from the Company’s current operations, or that funds will
      be available from external sources such as debt or equity financings or other
      potential sources. The lack of additional capital could force the Company to
      curtail or cease operations and would, therefore, have a material adverse effect
      on its business. Furthermore, there can be no assurance that any such required
      funds, if available, will be available on attractive terms or that they will
      not
      have a significant dilutive effect on the Company's existing
      stockholders.




8


During
        first quarter of 2008, the Company received proceeds from a significant
        shareholder in the amount of $219,693 as a repayment of nonreciprocal funds
        transferred to this shareholder during 2007.




The
      Company has undertaken further steps as part of a plan to improve operations
      with the goal of sustaining our operations for the next twelve months and beyond
      to address our lack of liquidity by raising additional funds, either in the
      form
      of debt or equity or some combination thereof. The Company is planning to reduce
      its cost of goods sold by purchase its main raw material directly from farmers
      in the local neighbored area and to reduce its overhead cost by fully utilizing
      its current manufacture facilities. However, there can be no assurance that
      the
      Company can successfully accomplish these steps and or business plans, and
      it is
      uncertain that the Company will achieve a profitable level of operations and
      be
      able to obtain additional financing.





There
      can
      be no assurance that any additional financings will be available to the Company
      on satisfactory terms and conditions, if at all. In the event we are unable
      to
      continue as a going concern, we may elect or be required to seek protection
      from
      our creditors by filing a voluntary petition in bankruptcy or may be subject
      to
      an involuntary petition in bankruptcy. To date, management has not considered
      this alternative, nor does management view it as a likely occurrence.





The
      accompanying unaudited condensed consolidated financial statements do not
      include any adjustments related to the recoverability or classification of
      asset-carrying amounts or the amounts and classifications of liabilities that
      may result should the Company be unable to continue as a going
      concern.





**Critical
      Accounting Policies and Estimates**





*Recent
      Accounting Pronouncements*





For
      a
      summary of our critical accounting policies, please refer to our Annual Report
      on Form 10-K for the year ended December 31, 2007 filed with SEC on April 15,
      2008 and Note 1 of Notes to Condensed Consolidated Financial Statements under
      the caption “Recent Accounting Pronouncements” included in Part I, Item 1,
      Financial Statements of this Form 10-Q.





**Off-Balance
      Sheet Arrangements**





We
      have
      no off-balance sheet arrangements.





**Item
      3.**  **Quantitative
      and Qualitative Disclosures About Market Risk.**





Smaller
        reporting companies are not required to provide the information required
        by Item
        305.





**Item
      4.**  **Controls
      and Procedures.**





**Evaluation
      of Disclosure Controls and Procedures**





Our
      disclosure controls and procedures are designed to ensure that information
      required to be disclosed in reports that we file or submit under the Securities
      Exchange Act of 1934 is recorded, processed, summarized and reported within
      the
      time periods specified in the rules and forms of the United States Securities
      and Exchange Commission. Our principal executive officer and principal financial
      officer has reviewed the effectiveness of our “disclosure controls and
      procedures” (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e)
      and 15d-15(e)) within the end of the period covered by this Quarterly Report
      on
      Form 10-Q and has concluded that the disclosure controls and procedures are
      effective to ensure that material information relating to the Company is
      recorded, processed, summarized, and reported in a timely manner. There were
      no
      significant changes in our internal controls or in other factors that could
      significantly affect these controls subsequent to the last day they were
      evaluated by our principal executive officer and principal financial officer.




9




**Changes
      in Internal Controls over Financial Reporting**





There
      have been no changes in the Company's internal control over financial reporting
      during the last quarterly period covered by this report that have materially
      affected, or are reasonably likely to materially affect, the Company's internal
      control over financial reporting.





**PART
      II**


**OTHER
      INFORMATION**





**Item
      1.**  **Legal
      Proceedings.**





There
      are
      no pending legal proceedings to which the Company is a party or in which any
      director, officer or affiliate of the Company, any owner of record or
      beneficially of more than 5% of any class of voting securities of the Company,
      or security holder is a party adverse to the Company or has a material interest
      adverse to the Company. The Company’s property is not the subject of any pending
      legal proceedings.





**Item
      1A.**  **Risk
      Factors**





There
        have been no material changes to the risks to our business described in our
        Annual Report on Form 10-K for the year ended December 31, 2007 filed with
        SEC
        on April 15, 2008.





**Item
      2.**  **Unregistered
      Sales of Equity Securities and Use of Proceeds.**





***Unregistered
      Sales of Equity Securities***





none





***Purchases
      of equity securities by the issuer and affiliated
      purchasers***





None.





***Use
      of Proceeds***





none





**Item
      3.**  **Defaults
      Upon Senior Securities.**





-----------





**Item
      4.**  **Submission
      of Matters to a Vote of Security Holders.**





There
      was
      no matter submitted to a vote of security holders during the fiscal quarter
      ended March 31, 2008.





**Item
      5.**  **Other
      Information.**





None




10




**Item
      6.**  **Exhibits**





Exhibit
                No.
              
              Description31.1
              
              Rule
                  13a-14(a)/15d14(a) Certifications of Dingliang Kuang, the President,
                  Chief
                  Executive Officer, Treasurer and Director (Attached
                  Hereto)32.1
              
              Section
                  1350 Certifications of Dingliang Kuang, the President, Chief Executive
                  Officer, Treasurer and Director (Attached
                  Hereto)




11




**SIGNATURES**





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





FRANKLIN
                  TOWERS ENTERPRISES, INC.Dated:
                  May 20, 2008
              By:
              /s/Dingliang
                  KuangName:
              Dingliang
                  KuangTitle:
              President,
                  Chief Executive Officer,Treasurer and Director(Principal
                  Executive, Financial andAccounting
                  Officer)




12