| 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                                                                                                 |
|   |                                                                                               |
| o      | TRANSITION      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF      1934 |
|   |                                                                                               |
|   | For      the transition period from _________ to _________                                    |
|   |                                                                                               |
|   |                                                                                               |

| Delaware                                                            |   | 13-3637458                                |
|---------------------------------------------------------------------|--------|-------------------------------------------|
| (State      or other jurisdiction of incorporation or organization) |   | (I.R.S.      Employer Identification No.) |
|                                                                |   |                                      |
| Cheming      Industrial Park, Shouguang City, Shandong, China       |   | 262714                                    |
| (Address      of principal executive offices)                       |   | (Zip      Code)                           |

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

----

| Part      I – Financial Information                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|              Item      1. Financial      Statements                                                                       | 4      |
|              Item      2. Management’s Discussion and Analysis of Financial Condition      and      Results of Operations                                                                                                                                                                                                                                                                                                                                                         | 20     |
|              Item      3. Quantitative and Qualitative Disclosures about Market    Risk                                                                                                                                                                                                                                                                                                                                                                                                 | 27     |
|              Item      4. Controls and Procedures                                                                                                                                                                                                                                                                                                                                                                                                                                       | 27     |
| Part      II – Other Information                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |
|              Item      1. Legal Proceedings.                                                                                                                                                                                                                                                                                                                                                                                                                                            | 27     |
|              Item      2. Unregistered Sales of Equity Securities and Use of      Proceeds.                                                                                                                                                                                                                                                                                                                                                                                             | 28     |
|              Item      3. Defaults Upon Senior Securities.                                                                                                                                                                                                                                                                                                                                                                                                                              | 28     |
|              Item      4. Submission of Matters to a Vote of Security Holders.                                                                                                                                                                                                                                                                                                                                                                                                          | 28     |
|              Item      5. Other Information.                                                                                                                                                                                                                                                                                                                                                                                                                                            | 28     |
|              Item      6. Exhibits.                                                                                                                                                                                                                                                                                                                                                                                                                                                     | 29     |

----

 Note Regarding Forward Looking Information

----

|                                                       |   | March 31, |       |   | December 31, |   |
|------------------------------------------------------------|--------|----------------|------------|--------|-------------------|--------|
|                                                       |   | 2008           |       |   | 2007              |   |
|                                                       |   | (unaudited)    |       |   | (audited)         |   |
| ASSETS                                                     |   |           |       |   |              |   |
|                                                       |   |           |       |   |              |   |
| CURRENT      ASSETS                                        |   |           |       |   |              |   |
| Cash                                                       |   | $              | 10,984,541 |   |              | $      | 10,773,875 |   |
| Restricted      cash                                       |   |           | 2,199,949  |   |              |   | - |   |
| Accounts      receivable                                   |   |           | 7,335,121  |   |              |   | 3,945,000 |   |
| Inventories                                                |   |           | 449,885    |   |              |   | 413,391 |   |
| Prepaid      expenses                                      |   |           | -          |   |              |   | 145,484 |   |
| Prepayment      and deposit                                |   |           | 750,203    |   |              |   | 236,269 |   |
| Prepaid      land lease                                    |   |           | 15,421     |   |              |   | 13,521 |   |
|                                                       |   |           | 21,735,120 |   |              |   | 15,527,540 |   |
|                                                       |   |           |       |   |              |   |   |   |
| PROPERTY,      PLANT AND EQUIPMENT, Net                    |   |           | 40,440,777 |   |              |   | 30,105,185 |   |
|                                                       |   |           |       |   |              |   |   |   |
| PREPAID      LAND LEASE, Net of current portion            |   |           | 729,677    |   |              |   | 697,107 |   |
|                                                       |   |           |       |   |              |   |   |   |
| TOTAL      ASSETS                                          |   | $              | 62,905,574 |   |              | $      | 46,329,832 |   |
|                                                       |   |           |       |   |              |   |   |   |
| LIABILITIES      AND STOCKHOLDERS' EQUITY                  |   |           |       |   |              |   |   |   |
|                                                       |   |           |       |   |              |   |   |   |
| CURRENT      LIABILITIES                                   |   |           |       |   |              |   |   |   |
| Accounts      payable and accrued expenses                 |   | $              | 4,514,054  |   |              | $      | 2,928,248 |   |
| Note      payable                                          |   |           | -          |   |              |   | 9,939,750 |   |
| Due      to related party                                  |   |           | 32,230     |   |              |   | 32,230 |   |
| Taxes      payable                                         |   |           | 3,362,479  |   |              |   | 1,477,296 |   |
| TOTAL      CURRENT LIABILITIES                             |   |           | 7,908,763  |   |              |   | 14,377,524 |   |
|                                                       |   |           |       |   |              |   |   |   |
| NON      CURRENT LIABILITIES                               |   |           |       |   |              |   |   |   |
| Note      payable – related party                    |   |           | 20,850,000 |   |              |   | 5,484,000 |   |
|                                                       |   |           |       |   |              |   |   |   |
| TOTAL      LIABILITIES                                     |   |           | 28,758,763 |   |              |   | 19,861,524 |   |
|                                                       |   |           |       |   |              |   |   |   |
| STOCKHOLDERS'      EQUITY                                  |   |           |       |   |              |   |   |   |
|                                                       |   |           |       |   |              |   |   |   |
| PREFERED      STOCK ; $0.001 par value; 1,000,000 shares   |   |           |       |   |              |   |   |   |
|    authorized      none outstanding         |   |           | -          |   |              |   | - |   |
| COMMON      STOCK; $0.0005 par value; 400,000,000 shares   |   |           |       |   |              |   |   |   |
|         authorized; 99,668,842 shares issued and |   |           |       |   |              |
|         outstanding                              |   |           | 49,834     |   |              |   | 49,834 |   |
|                                                       |   |           |       |   |              |   |   |   |
| ADDITIONAL      PAID-IN CAPITAL                            |   |           | 12,195,300 |   |              |   | 11,924,616 |   |
|                                                       |   |           |       |   |              |   |   |   |
| RETAINED      EARNINGS - UNAPPROPRIATED                    |   |           | 17,471,109 |   |              |   | 11,323,518 |   |
|                                                       |   |           |       |   |              |   |   |   |
| RETAINED      EARNINGS - APPROPRIATED                      |   |           | 1,321,893  |   |              |   | 1,321,893 |   |
|                                                       |   |           |       |   |              |   |   |   |
| CUMULATIVE      TRANSLATION ADJUSTMENT                     |   |           | 3,108,675  |   |              |   | 1,848,447 |   |
|                                                       |   |           |       |   |              |   |   |   |
| TOTAL      STOCKHOLDERS' EQUITY                            |   |           | 34,146,811 |   |              |   | 26,468,308 |   |
|                                                       |   |           |       |   |              |   |   |   |
| TOTAL      LIABILITIES AND STOCKHOLDERS' EQUITY            |   | $              | 62,905,574 |   |              | $      | 46,329,832 |   |

----

|                                     |   | Three      Months Ended March 31, |             |
|------------------------------------------|--------|----------------------------------------|------------------|
|                                     |   | 2008                                   |             |   | 2007 |   |
|                                     |   |                                   |             |   |   |   |
| NET      REVENUE                         |   |                                   |             |   |   |   |
| Net      sales                           |   | $                                      | 21,915,512       |   |   | $ | 9,934,201 |   |
| Maintenance      service income          |   |                                   | -                |   |   | 129,126  |   |
|                                     |   |                                   |  21,915,512 |   |   |   | 10,063,327 |   |
|                                     |   |                                   |             |   |   |   |   |   |
| OPERATING      EXPENSES                  |   |                                   |             |   |   |   |   |   |
| Cost      of net revenue                 |   |                                   | 12,535,473       |   |   |   | 6,024,702 |   |
| General      and administrative expenses |   |                                   | 854,542          |   |   |   | 182,180 |   |
| Research      and development cost       |   |                                   | 131,834          |   |   |   | - |   |
|                                     |   |                                   | 13,521,849       |   |   |   | 6,206,882 |   |
|                                     |   |                                   |             |   |   |   |   |   |
| INCOME      FROM OPERATIONS              |   |                                   | 8,393,663        |   |   |   | 3,856,445 |   |
|                                     |   |                                   |             |   |   |   |   |   |
| OTHER      INCOME (EXPENSES)             |   |                                   |             |   |   |   |   |   |
| Interest      expense                    |   |                                   | (60,111          | ) |   |   | - |   |
| Interest      income                     |   |                                   | 25,676           |   |   |   | 6,842 |   |
| Sundry      income                       |   |                                   | 35,060           |   |   | -  |   |
|                                     |   |                                   |             |   |   |   |   |   |
| INCOME      BEFORE INCOME TAXES          |   |                                   | 8,394,288        |   |   |   | 3,863,287 |   |
|                                     |   |                                   |             |   |   |   |   |   |
| INCOME      TAXES - current              |   |                                   | (2,246,697       | ) |   |   | (1,306,474 | ) |
|                                     |   |                                   |             |   |   |   |   |   |
| NET      INCOME                          |   | $                                      | 6,147,591        |   |   | $ | 2,556,813 |   |
|                                     |   |                                   |             |   |   |   |   |   |
| EARNINGS      PER SHARE                  |   |                                   |             |   |   |   |   |   |
| BASIC                                    |   | $                                      | 0.06             |   |   | $ | 0.03 |   |
| DILUTED                                  |   | $                                      | 0.06             |   |   | $ | 0.03 |   |
|                                     |   |                                   |             |   |   |   |   |   |
| WEIGHTED      AVERAGE NUMBER OF SHARES   |   |                                   |             |   |   |   |   |   |
|                                     |   |                                   |             |   |   |   |   |   |
| BASIC                                    |   |                                   | 99,668,842       |   |   |   | 88,182,580 |   |
| DILUTED                                  |   |                                   | 99,684,467       |   |   |   | 88,182,580 |   |

----

|                                         |   | Three      Months Ended March 31, |      |
|----------------------------------------------|--------|----------------------------------------|-----------|
|                                         |   | 2008                                   |      |   | 2007 |   |
| NET      INCOME                              |   | $                                      | 6,147,591 |   |   | $ | 2,556,813 |   |
|                                         |   |                                   |      |   |   |   |   |   |
| OTHER      COMPREHENSIVE INCOME              |   |                                   |      |   |   |   |   |   |
| Foreign      currency translation adjustment |   |                                   | 1,260,228 |   |   |   | 67,246 |   |
|                                         |   |                                   |      |   |   |   |   |   |
| COMPREHENSIVE      INCOME                    |   | $                                      | 7,407,819 |   |   | $ | 2,624,059 |   |

----

|                                                  |   |                                                                                                                      |   |                                                                                                                |   | Additional                                                                                                                      |   | Statutory                                                                                                                             |   |                    |   | Cumulative             |   |        |
|-------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------|--------|------------------------|--------|-------------|
|                                                  |   | Number                                                                                                                    |   | Common                                                                                                              |   | Paid-in                                                                                                                         |   | Common                                                                                                                                |   | Retained                |   | Translation            |   |        |
|                                                  |   | of      Shares                                                                                                            |   | Stock                                                                                                               |   | Capital                                                                                                                         |   | Reserve      Fund                                                                                                                     |   | Earnings                |   | Adjustment             |   | Total       |
|                                                  |   |                                                                                                                      |   |                                                                                                                |   |                                                                                                                            |   |                                                                                                                                  |   |                    |   |                   |   |        |
| BALANCE      AT DECEMBER 31, 2007 (audited)           |   |     99,668,842                                                                                        |   |  $      49,834                                                                   |   |  $  11,924,616                                                                                                   |   |  $    1,321,893                                                                                              |   |  $      11,323,518 |   |  $      1,848,447 |   | 26,468,308  |
|                                                  |   |                                                                                                                      |   |                                                                                                                |   |                                                                                                                            |   |                                                                                                                                  |   |                    |   |                   |   |        |
| Cumulative      translation adjustment                |   |                     - |   |                    - |   |                      - |   |                       - |   | -                       |   | 1,260,228              |   | 1,260,228   |
|                                                  |   |                                                                                                                      |   |                                                                                                                |   |                                                                                                                            |   |                                                                                                                                  |   |                    |   |                   |   |        |
| Waiver      of interest expenses by stockholder       |   | -                                                                                                                         |   | -                                                                                                                   |   | 131,533                                                                                                                         |   | -                                                                                                                                     |   | -                       |   | -                      |   | 131,533     |
|                                                  |   |                                                                                                                      |   |                                                                                                                |   |                                                                                                                            |   |                                                                                                                                  |   |                    |   |                   |   |        |
| Issuance      of warrants for consulting expenses     |   |                                                                                                                      |   |                                                                                                                |   | 139,151                                                                                                                         |   |                                                                                                                                  |   |                    |   |                   |   | 139,151     |
|                                                  |   |                                                                                                                      |   |                                                                                                                |   |                                                                                                                            |   |                                                                                                                                  |   |                    |   |                   |   |        |
| Net      income for three months ended March 31, 2008 |   |                     - |   |                    - |   |                      - |   |                       - |   | 6,147,591               |   | -                      |   | 6,147,591   |
|                                                  |   |                                                                                                                      |   |                                                                                                                |   |                                                                                                                            |   |                                                                                                                                  |   |                    |   |                   |   |        |
| BALANCE      AT MARCH 31, 2008 (unaudited)            |   |     99,668,842                                                                                        |   |  $      49,834                                                                   |   |  $  12,195,300                                                                                                   |   |  $    1,321,893                                                                                              |   | $17,471,109             |   | $3,108,675             |   | $34,146,811 |
|                                                  |   |                                                                                                                      |   |                                                                                                                |   |                                                                                                                            |   |                                                                                                                                  |   |                    |   |                   |   |        |

----

|                                                                                                                                                                                                                                                  |   | Three      Months Ended March 31, |        |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------|-------------|
|                                                                                                                                                                                                                                                  |   | 2008                                   |        |   | 2007 |   |
|                                                                                                                                                                                                                                                  |   |                                   |        |   |   |   |
| CASH      FLOWS FROM OPERATING ACTIVITIES                                                                                                                                                                                                             |   |                                   |        |   |   |   |
| Net      income                                                                                                                                                                                                                                       |   | $                                      | 6,147,591   |   |   | $ | 2,556,813 |   |
| Adjustments      to reconcile net income                                                                                                                                                                                                              |   |                                   |        |   |   |   |   |   |
|     to      net cash provided by operating activities                                                                                                                                                                             |   |                                   |        |   |   |   |   |   |
|         Amortization      of warrants issued for expenses                                                                                                                                                     |   |                                   | 139,151     |   |   |   | - |   |
|         Amortization      of prepaid expenses by shares                    issued      for consulting fee |   |                                   | 145,484     |   |   |   | - |   |
|         Depreciation      of fixed assets                                                                                                                                                                     |   |                                   | 985,491     |   |   |   | 116,414 |   |
| (Increase)      decrease in assets                                                                                                                                                                                                                    |   |                                   |        |   |   |   |   |   |
|         Accounts      receivable                                                                                                                                                                              |   |                                   | (3,157,652  | ) |   |   | (195,170 | ) |
|         Inventories                                                                                                                                                                                           |   |                                   | (18,898     | ) |   |   | (50,963 | ) |
|         Prepaid      expense                                                                                                                                                                                  |   |                                   | -           |   |   |   | 29,612 |   |
|         Prepayment      and deposit                                                                                                                                                                           |   |                                   | (493,415    | ) |   |   | (1,803,141 | ) |
|         Income      tax receivable                                                                                                                                                                            |   |                                   | -           |   |   |   | 46,042 |   |
| Increase      (decrease) in liabilities                                                                                                                                                                                                               |   |                                   |        |   |   |   |   |   |
|         Accounts      payable and accrued expenses                                                                                                                                                            |   |                                   | 1,588,154   |   |   |   | 402,952 |   |
|         Taxes      payable                                                                                                                                                                                    |   |                                   | 1,785,067   |   |   |   | (6,986 | ) |
|                                                                                                                                                                                                                                                  |   |                                   |        |   |   |   |   |   |
| Net      cash provided by operating activities                                                                                                                                                                                                        |   |                                   | 7,120,973   |   |   |   | 1,095,573 |   |
|                                                                                                                                                                                                                                                  |   |                                   |        |   |   |   |   |   |
| CASH      FLOWS USED IN INVESTING ACTIVITIES                                                                                                                                                                                                          |   |                                   |        |   |   |   |   |   |
| Restricted      cash                                                                                                                                                                                                                                  |   |                                   | (2,153,269  | ) |   |   | - |   |
| Property,      plant and equipment                                                                                                                                                                                                                    |   |                                   | (9,881,517  | ) |   | -  |   |
|                                                                                                                                                                                                                                                  |   |                                   |        |   |   |   |   |   |
| Net      cash used in investing activities                                                                                                                                                                                                            |   |                                   | (12,034,786 | ) |   |   | - |   |
|                                                                                                                                                                                                                                                  |   |                                   |        |   |   |   |   |   |
| CASH      FLOWS PROVIDED BY FINANCING ACTIVITIES                                                                                                                                                                                                      |   |                                   |        |   |   |   |   |   |
| Amount      due from parent                                                                                                                                                                                                                           |   |                                   | -           |   |   |   | 318,655 |   |
| Capital      contribution                                                                                                                                                                                                                             |   |                                   | -           |   |   |   | 50,000 |   |
| Proceeds      from notes payable – related party                                                                                                                                                                                                |   |                                   | 5,590,800   |   |   |   | - |   |
| Advances      from related party                                                                                                                                                                                                                      |   |                                   | 2,998,281   |   |   |   | 902,119 |   |
| Repayment      on note payable                                                                                                                                                                                                                        |   |                                   | (3,843,675  | ) |   |   | - |   |
| Dividends      paid                                                                                                                                                                                                                                   |   |                                   | -           |   |   |   | (4,739,600 | ) |
|                                                                                                                                                                                                                                                  |   |                                   |        |   |   |   |   |   |
| Net      cash provided by (used in) financing activities                                                                                                                                                                                              |   |                                   | 4,745,406   |   |   |   | (3,468,826 | ) |
|                                                                                                                                                                                                                                                  |   |                                   |        |   |   |   |   |   |
| EFFECTS      OF EXCHANGE RATE CHANGE ON CASH                                                                                                                                                                                                          |   |                                   | 379,073     |   |   |   | (9,749 | ) |
|                                                                                                                                                                                                                                                  |   |                                   |        |   |   |   |   |   |
| NET      INCREASE IN CASH                                                                                                                                                                                                                             |   |                                   | 210,666     |   |   |   | (2,383,002 | ) |
|                                                                                                                                                                                                                                                  |   |                                   |        |   |   |   |   |   |
| CASH      - BEGINNING OF PERIOD                                                                                                                                                                                                                       |   |                                   | 10,773,875  |   |   |   | 5,692,608 |   |
|                                                                                                                                                                                                                                                  |   |                                   |        |   |   |   |   |   |
| CASH      - END OF PERIOD                                                                                                                                                                                                                             |   | $                                      | 10,984,541  |   |   | $ | 3,309,606 |   |

----

|                                       |   | Three      Months Ended March 31, |    |
|--------------------------------------------|--------|----------------------------------------|---------|
|                                       |   | 2008                                   |    |   | 2007 |   |
|                                       |   |                                   |    |   |   |   |
| SUPPLEMENTAL      DISCLOSURE OF CASH FLOW  |   |                                   |    |   |   |   |
| INFORMATION                                |   |                                   |    |   |   |   |
| Cash      paid during the period for:      |   |                                   |    |   |   |   |
|     Income      taxes  |   | $                                      | 791,565 |   |   | $ | 921,201 |   |
|                                       |   |                                   |    |   |   |   |   |   |
|     Interest      paid |   | $                                      | 59,976  |   |   | $ | - |   |

|                                                               |   |   |    |   |   |   |
|--------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
| SUPPLEMENTAL      DISCLOSURE OF NON-CASH FINANCING ACTIVITIES      |   |   |    |   |   |   |
|                                                                    |   |   |    |   |   |   |
| Forgiveness      of accrued interest to Additional Paid In Capital |   | $      | 131,533 |   |   | $      | - |   |

----

----

----

----

|                                                                                                                                                                                                                                                                                                                                                                   |   | March 31 |       |   | December 31 |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------|------------|--------|------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                   |   | 2008          |       |   | 2007             |   |
|                                                                                                                                                                                                                                                                                                                                                                   |   | (unaudited)   |       |   | (audited)        |   |
| Bank      borrowing from Citibank (China) Company Limited Shanghai Branch of      $3,770,250 was due March 30, 2008 at the prevailing interest rate      regulated by The People’s Bank of China minus 5% from October 31, 2007 to      March 30, 2008, guaranteed by a shareholder, Shenzhen Huaying Guaranty and      Investment Company Limited.              |   | $             | -          |   |             | $      | 3,770,250 |   |
|                                                                                                                                                                                                                                                                                                                                                                   |   |          |       |   |             |   |   |   |
| Note      payable to a stockholder, Shenzhen Huayin Guaranty and Investment Company      Limited, is for $11,653,500. Of this, $6,169,500 of the borrowing is with      interest at 3.33% per annum from March 20, 2007 to March 19, 2008 and is      due on March 19, 2008. The remaining borrowing of $5,484,000 is interest      free and matures on April 1, 2009. |   |          | -          |   |             |   | 11,653,500 |   |
|                                                                                                                                                                                                                                                                                                                                                                   |   |          |       |   |             |   |   |   |
| Note      payable to a stockholder, Shenzhen Huayin Guaranty and Investment Company      Limited is unsecured, and non-interest bearing $3,000,000 is due May 2009      and $17,850,000 is due  January 2011.                                                                                                                                                |   |          | 20,850,000 |   |             |   | - |   |
|                                                                                                                                                                                                                                                                                                                                                                   |   |          |       |   |             |   |   |   |
| Total      loans                                                                                                                                                                                                                                                                                                                                                       |   |          | 20,850,000 |   |             |   | 15,423,750 |   |
| Less:      current portion                                                                                                                                                                                                                                                                                                                                             |   |          | -          |   |             |   | (9,939,750 | ) |
| Long-term      loans, less current portion                                                                                                                                                                                                                                                                                                                             |   | $             | 20,850,000 |   |             | $      | 5,484,000 |   |
|                                                                                                                                                                                                                                                                                                                                                                   |   |          |       |   |             |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                   |   |          |       |   |             |   |   |   |
| Future      maturities of long-term loans are as follows as of March 31,      2008:                                                                                                                                                                                                                                                                                    |   |          |       |   |             |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                   |   |          |       |   |             |   |   |   |
| 2008                                                                                                                                                                                                                                                                                                                                                                   |   | $             | -          |   |             | $      | 9,939,750 |   |
| 2009                                                                                                                                                                                                                                                                                                                                                                   |   |          | 3,000,000  |   |             |   | 5,484,000 |   |
| 2010                                                                                                                                                                                                                                                                                                                                                                   |   |          | -          |   |             |   | - |   |
| 2011                                                                                                                                                                                                                                                                                                                                                                   |   |          | 17,850,000 |   |             |   | - |   |
|                                                                                                                                                                                                                                                                                                                                                                   |   |          |       |   |             |   |   |   |
| Total                                                                                                                                                                                                                                                                                                                                                                  |   | $             | 20,850,000 |   |             | $      | 15,423,750 |   |
|                                                                                                                                                                                                                                                                                                                                                                   |   |          |       |   |             |   |   |   |

----

| Taxes      payable consists of the following: |
|-----------------------------------------------|
|                                          |   |   |   |   |   |   |
|                                          |   | March 31,2008 |   |   | December 31,2007 |   |
|                                          |   | (unaudited) |   |   | (audited) |   |
| Income      tax payable                       |   | $ | 1,875,019 |   |   | $ | 798,090 |   |
| Value      added tax payable and others       |   |   | 1,487,460 |   |   |   | 679,206 |   |
| Total                                         |   | $ | 3,362,479 |   |   | $ | 1,477,296 |   |

----

|                                                                    |   | Option      Shares |      |   | Vested      Shares |   |    | Exercise      Price per Common Share Range |   |
|-------------------------------------------------------------------------|--------|--------------------|-----------|--------|--------------------|--------|---------|--------------------------------------------|--------|
|  Balance,      December 31, 2007                              |   |               | 100,000   |   |               |   | 100,000 |                                       |   | $ | 2.00      - $2.05 |   |
| Granted      or vested during the three months ended March 31,2008 |   |               | 1,000,000 |   |               |   | -       |                                       |   |   | 2.51 |   |
| Expired      during the three months ended March 31, 2008          |   |               | -         |   |               |   | -       |                                       |   |   | - |   |
| Balance,      March 31, 2008                                       |   |               | 1,100,000 |   |               |   | 100,000 |                                       |   | $ | 2.00      - $2.51 |   |

----

|                                |   | Bromine      and |       |   | Chemical |   |       | Segment |   |   |       |   |   | Consolidated                          |       |
|-------------------------------------|--------|------------------|------------|--------|----------|--------|------------|---------|--------|--------|------------|--------|--------|---------------------------------------|------------|
|                                |   | Crude      Salt  |       |   | Products |   |       | Total   |   |   | Corporate  |   |   | Total                                 |       |
|                                |   |             |       |   |     |   |       |    |   |   |       |   |   |                                  |       |
| March 31,      2008(unaudited) |   |             |       |   |     |   |       |    |   |   |       |   |   |                                  |       |
|                                |   |             |       |   |     |   |       |    |   |   |       |   |   |                                  |       |
| Net      sales                      |   | $                | 16,394,060 |   |     | $      | 5,521,452  |    |   | $      | 21,915,512 |   |   | $                                     | -          |   |   | $ | 21,915,512 |   |
| Income      (loss) from operations  |   |             | 7,130,523  |   |     |   | 1,839,125  |    |   |   | 8,969,648  |   |   |                                  | (575,985   | ) |   |   | 8,393,663 |   |
| Total      assets                   |   |             | 51,902,737 |   |     |   | 10,800,169 |    |   |   | 62,702,906 |   |   |                                  | 202,668    |   |   |   | 62,905,574 |   |
| Depreciation      and amortization  |   |             | 937,203    |   |     |   | 48,288     |    |   |   | 985,491    |   |   |                                  | 145,484    |   |   |   | 1,130,975 |   |
|                                |   |             |       |   |     |   |       |    |   |   |       |   |   |                                  |       |   |   |   |   |   |
| March 31,      2007(unaudited) |   |             |       |   |     |   |       |    |   |   |       |   |   |                                  |       |   |   |   |   |   |
|                                |   |             |       |   |     |   |       |    |   |   |       |   |   |                                  |       |   |   |   |   |   |
| Net      sales                      |   | $                | 5,301,727  |   |     | $      | 4,632,474  |    |   | $      | 9,934,201  |   |   | $                                     | -          |   |   | $ | 9,934,201 |   |
| Maintenance      services income    |   |             | -          |   |     |   | 129,126    |    |   |   | 129,126    |   |   |                                  | -          |   |   |   | 129,126 |   |
| Income      (loss) from operations  |   |             | 2,241,508  |   |     |   | 1,701,276  |    |   |   | 3,942,784  |   |   |                                  | (86,339    | ) |   |   | 3,856,445 |   |
| Total      assets                   |   |             | 8,766,446  |   |     |   | 4,534,931  |    |   |   | 13,301,377 |   |   |                                  | 912,887    |   |   |   | 14,214,264 |   |
| Depreciation      and amortization  |   |             | 70,085     |   |     |   | 46,329     |    |   |   | 116,414    |   |   |                                  | -          |   |   |   | 116,414 |   |
|                                |   |             |       |   |     |   |       |    |   |   |       |   |   |                                  |       |   |   |   |   |   |
|                                |   |             |       |   |     |   |       |    |   |   |       |   |   | Three      Months EndedMarch 31, |       |
|                                |   |             |       |   |     |   |       |    |   |   |       |   |   | 2008                                  |       |   | 2007 |   |
| Reconciliations                     |   |             |       |   |     |   |       |    |   |   |       |   |   | (unaudited)                           |       |   | (unaudited) |   |
|                                |   |             |       |   |     |   |       |    |   |   |       |   |   |                                  |       |   |   |   |   |   |
| Total      segment operating income |   |             |       |   |     |   |       |    |   |   |       |   |   | $                                     | 8,969,648  |   |   | $ | 3,942,784 |   |
| Corporate      overhead expenses    |   |             |       |   |     |   |       |    |   |   |       |   |   |                                  | (575,985   | ) |   |   | (86,339 | ) |
| Other      income                   |   |             |       |   |     |   |       |    |   |   |       |   |   |                                  | 625        |   |   |   | 6,842 |   |
| Income      tax expense             |   |             |       |   |     |   |       |    |   |   |       |   |   |                                  | (2,246,697 | ) |   |   | (1,306,474 | ) |
|                                |   |             |       |   |     |   |       |    |   |   |       |   |   |                                  |       |   |   |   |   |   |
| Total      consolidated net income  |   |             |       |   |     |   |       |    |   |   |       |   |   | $                                     | 6,147,591  |   |   | $ | 2,556,813 |   |

----

|                                                                                         |   | March      31, 2008 |       |
|----------------------------------------------------------------------------------------------|--------|---------------------|------------|
|                                                                                         |   | (unaudited)         |       |
| Waiver      of interest expenses during first quarter 2008 by a related      party:          |   |                |       |
| Shenzhen      Huaying Guaranty and Investment Company Limited (Note 2)                       |   | $                   | 131,533    |   |
|                                                                                         |   |                |       |   |
| Note      payable - related party:                                                           |   |                |       |   |
| Shenzhen      Huayin Guaranty and Investment Company Limited (Note      2)    |   | $                   | 20,850,000 |   |
|                                                                                         |   |                |       |   |

----

----

----

|                                          |   | Three      months endedMarch 31,      2008 |       |   | Three      months endedMarch 31,      2007 |   |       | Percentage      Change |   |
|-----------------------------------------------|--------|-------------------------------------------------|------------|--------|-------------------------------------------------|--------|------------|------------------------|--------|
| Net      Revenue                              |   | $                                               | 21,915,512 |   |                                            | $      | 10,063,327 |                   |   |   | 118 | % |
|                                          |   |                                            |       |   |                                            |   |       |                   |   |   |   |   |
| Cost      of Net Revenue                      |   | $                                               | 12,535,473 |   |                                            | $      | 6,024,702  |                   |   |   | 108 | % |
|                                          |   |                                            |       |   |                                            |   |       |                   |   |   |   |   |
| Gross      Profit                             |   | $                                               | 9,380,039  |   |                                            | $      | 4,038,625  |                   |   |   | 133 | % |
|                                          |   |                                            |       |   |                                            |   |       |                   |   |   |   |   |
| Research      and Development costs           |   | $                                               | 131,834    |   |                                            |   | ---------- |                   |   |   |   |   |
|                                          |   |                                            |       |   |                                            |   |       |                   |   |   |   |   |
| General      and Administrative expenses |   | $                                               | 854,542    |   |                                            | $      | 182,180    |                   |   |   | 369 | % |
|                                          |   |                                            |       |   |                                            |   |       |                   |   |   |   |   |
| Income      from operations                   |   | $                                               | 8,393,663  |   |                                            | $      | 3,856,445  |                   |   |   | 118 | % |
|                                          |   |                                            |       |   |                                            |   |       |                   |   |   |   |   |
| Other      Income (expenses), net             |   | $                                               | 625        |   |                                            | $      | 6,842      |                   |   |   | (91 | %) |
|                                          |   |                                            |       |   |                                            |   |       |                   |   |   |   |   |
| Income      before taxes                      |   | $                                               | 8,394,288  |   |                                            | $      | 3,863,287  |                   |   |   | 117 | % |
|                                          |   |                                            |       |   |                                            |   |       |                   |   |   |   |   |
| Income      Taxes                             |   | $                                               | 2,246,697  |   |                                            | $      | 1,306,474  |                   |   |   | 72 | % |
|                                          |   |                                            |       |   |                                            |   |       |                   |   |   |   |   |
| Net      Income                               |   | $                                               | 6,147,591  |   |                                            | $      | 2,556,813  |                   |   |   | 140 | % |

----

|                        |   | Net      Revenue by Segment |       |
|-----------------------------|--------|-----------------------------|------------|
|                        |   | Three      Months Ended     |       |   | Three      Months Ended |   |
|                        |   | March      31, 2008         |       |   | March      31, 2007 |   |
| Segments                    |   |                        |       |   | Percent      of total |   |   |   |   |   | Percent      of total |   |
| Bromine      and Crude salt |   | $                           | 16,394,060 |   |   |   | 74.8 | % |   | $ | 5,301,727 |   |   |   | 52.7 | % |
| Chemical      Products      |   | $                           | 5,521,452  |   |   |   | 25.2 | % |   | $ | 4,761,600 |   |   |   | 47.3 | % |
| Total      Revenues         |   | $                           | 21,915,512 |   |   |   | 100 | % |   | $ | 10,063,327 |   |   |   | 100 | % |

|                        | Three      Months Ended March 31 |
|-----------------------------|---------------------------------------|
|                        | 2008      vs. 2007                    |
| Segments                    | Percent      Increase of Net S        |
| Bromine      and Crude salt | 209%                                  |
| Chemical      Products      | 16%                                   |

| Bromine      and Crude salt segment product sold in metric tons |   | Three      Months EndedMarch 31, 2008 |   |   | Three      Months EndedMarch 31,      2007 |   |   | Percentage      Change |   |
|-----------------------------------------------------------------|--------|--------------------------------------------|--------|--------|-------------------------------------------------|--------|--------|------------------------|--------|
| Bromine                                                         |   |                                       | 8,062  |   |                                            |   | 2,868  |                   |   |   | 181 | % |
|                                                            |   |                                       |   |   |                                            |   |   |                   |   |   |   |   |
| Crude      Salt                                                 |   |                                       | 8,000  |   |                                            |   | 8,000  |                   |   |   | - |   |

----

|                                               | Income      from Operations by Segment |   |
|----------------------------------------------------|----------------------------------------|--------|
|                                               | Three      Months Ended                |   | Three      Months Ended |   |
|                                               | March 31,      2008               |   | March 31,      2007 |   |
| Segments                                           |                                   |   |   | Percent      of total |   |   |   |   | Percent      of total |   |
| Bromine      and Crude salt                        |                                   | $      | 7,130,523 |   |   |   | 79.5 | % |   | $ | 2,241,508 |   |   |   | 56.9 | % |
| Chemical      Products                             |                                   |   | 1,839,125 |   |   |   | 20.5 | % |   |   | 1,701,276 |   |   |   | 43.1 | % |
| Income      from operations before corporate costs |                                   |   | 8,969,648 |   |   |   | 100.0 | % |   |   | 3,942,784 |   |   |   | 100.0 | % |
| Corporate      costs                               |                                   |   | 575,985 |   |   |   |   |   |   |   | 86,339 |   |   |   |   |   |
| Income      from operations                        |                                   | $      | 8,393,663 |   |   |   |   |   |   | $ | 3,856,445 |   |   |   |   |   |

----

|                                                     |   | Three      Months Ended March 31 |      |
|----------------------------------------------------------|--------|---------------------------------------|-----------|
|                                                     |   | 2008                                  |      |   | 2007 |   |
| Net      cash provided by operating activities           |   | $                                     | 7,120,973 |   |   | $ | 1,095,573 |   |
| Net      cash used in investing activities               |   | $                                     | 9,881,517 |   |   | $ | 0 |   |
| Net      cash provided by (used in) financing activities |   | $                                     | 4,745,406 |   |   | $ | (3,468,826 | ) |
| Net      cash inflow                                     |   | $                                     | 210,666   |   |   | $ | (2,383,002 | ) |

----

----

----

|                | Useful      life(in      years)               |
|---------------------|-----------------------------------------------|
| Mineral      rights | Lower      of the period of lease or 50 years |
| Buildings           | 20                                            |
| Machinery           | 8                                             |
| Motor      vehicles | 5                                             |
| Equipment           | 8                                             |

----

PART II—OTHER INFORMATION

----

----

| Exhibit      No. | Description                                                                                                        |
|------------------|--------------------------------------------------------------------------------------------------------------------|
| 10.1             | Option      agreement dated October 24, 2007 between the Registrant      and Richard Khaleel             |
| 10.2             | Option      agreement dated November 6, 2007 between the Registrant and Biagio      Vignolo                   |
| 10.3             | Agreement      dated June 15, 2007 between the Registrant and East China University of      Science andTechnology. |
| 10.4             | Lease      dated      November 11, 2004 between Shouguang City WopuCounty      Bamianhe Villiage and SCHC.         |
| 10.5             | Lease      dated April 1, 1998  between Shouguang City Wopu County Houxin      Village and SYCI.         |

| 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 ExecutiveOfficer. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------|

| 32.2                          | Section      1350 Certification of Chief FinancialOfficer. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------|

----

|                     | GULF      RESOURCES, INC. |
|--------------------------|---------------------------|
|                     |                      |   |
| Dated:      May 14, 2008 | By:                       | /s/      Ming Yang |
|                     |                      | Ming      Yang |
|                     |                      | Chairman      and Chief Executive Officer |
|                     |                      | (principal      executive officer) |
|                     |                      |   |
|                     | By:                       | /s/      Min Li |
|                     |                      | Min      Li |
|                     |                      | Chief      Financial Officer |
|                     |                      | (principal      financial and accounting officer) |