China Sun Group High-Tech Co - Quarterly Report of Financial Condition (10QSB)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB

(Mark One)

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

For the quarterly period ended February 29, 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: 333-118259

CHINA SUN GROUP HIGH-TECH CO.

______________________________________________________

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

Delaware	54-2142880
(State or other jurisdiction of incorporation or organization)	(IRS Employer identification No.)

1 HUTAN STREET, ZHONGSHAN DISTRICT

DALIAN, PEOPLE’S REPUBLIC OF CHINA

(Address of principal executive offices)

(86411) 8289-7752

(Issuer's telephone number, including area code)

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 T No □

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

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant filed all documents and reports required to be filed by Section l2, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes □

No □

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 43,422,971 shares of Common Stock, $.001 par value, were outstanding as of April 14 , 2008

Transitional Small Business Disclosure Format: Yes □ No T

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

CHINA SUN GROUP HIGH-TECH CO.

(Formerly Capital Resource Funding, Inc.)

INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

	Page
Condensed Consolidated Balance Sheets as of February 29, 2008 and May 31, 2007	F-1
Condensed Consolidated Statements of Operations and Comprehensive Income for the nine months ended February 29, 2008 and February 28, 2007	F-2
Condensed Consolidated Statements of Cash Flows for the nine months ended February 29, 2008 and February 28, 2007	F-3
Condensed Consolidated Statements of Stockholders’ Equity for the nine months ended February 29, 2008	F-4
Notes to Condensed Consolidated Financial Statements	F-5

CHINA SUN GROUP HIGH-TECH CO.

(Formerly Capital Resource Funding, Inc.)

CONDENSED CONSOLIDATED BALANCE SHEET

AS OF FEBRUARY 29, 2008 AND MAY 31, 2007

(Currency expressed in United States Dollars (“US$”), except for number of shares)

(unaudited)


	February 29, 2008		May 31, 2007
	(unaudited)		(audited)
ASSETS
Current assets:
Cash and cash equivalents	$	10,045,630	$	813,163
Accounts receivable, net		436,610		4,754,929
Inventories		585,544		1,932
Deposits and prepayments		1,415		-

Total current assets		11,069,199		5,570,024


Property, plant and equipment, net		11,917,521		10,774,216

TOTAL ASSETS	$	22,986,720	$	16,344,240

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable, trade	$	777,865	$	595,941
Customers deposits		5,633		688,448
Value added tax payable		1,011,835		229,897
Income tax payable		577,089		810,413
Other payables and accrued liabilities		911,256		278,714

Total liabilities		3,283,678		2,603,413


MINORITY INTEREST		5,281,847		3,994,658

Stockholders’ equity:
Convertible preferred stock, $0.001 par value; 2,000,000 shares authorized; no shares issued and outstanding as of February 29, 2008 and May 31, 2007		-		-
Common stock, $0.001 par value; 100,000,000 shares authorized; 43,422,971 shares issued and outstanding as of February 29, 2008 and May 31, 2007		43,423		43,423
Additional paid-in capital		9,595,204		9,595,204
Accumulated other comprehensive income		2,015,826		225,808
Retained earnings (accumulated deficits)		2,766,742		(118,266	)

Total stockholders’ equity		14,421,195		9,746,169


TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	22,986,720	$	16,344,240

See accompanying notes to condensed consolidated financial statements.

F-1

CHINA SUN GROUP HIGH-TECH CO.

(Formerly Capital Resource Funding, Inc.)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME

FOR THE THREE AND NINE MONTHS ENDED FEBRUARY 29, 2008

AND FEBRUARY 28, 2007

(Currency expressed in United States Dollars (“US$”), except for number of shares)

(unaudited)

	Three months ended February						Nine months ended February
		29, 2008			28, 2007			29, 2008			28, 2007

REVENUE, NET	$	7,106,959		$	2,661,696		$	16,199,986		$	5,685,076

COST OF REVENUES		4,528,705			1,888,930			10,529,991			4,156,086

GROSS PROFIT		2,578,254			772,766			5,669,995			1,528,990


OPERATING EXPENSES (INCOME):
General and administrative		9,706			594,981			777,691			781,066
Reversal of allowance for doubtful accounts		(574,190	)		-			(574,190	)		-
Research and development		1,701			17,559			88,101			72,424
Depreciation		61,871			65,057			178,525			190,107
Total operating expenses (income)		(500,912	)		677,597			470,127			1,043,597


INCOME FROM OPERATIONS		3,076,166			95,169			5,199,868			485,393

OTHER INCOME:
Interest income		7,035			-			8,311			-
INCOME BEFORE INCOME TAXES		3,086,201			95,169			5,208,179			485,393

Income tax expense		(295,679	)		(200,309	)		(1,035,982	)		(267,977	)

INCOME (LOSS) BEFORE MINORITY INTEREST		2,790,522			(105,140	)		4,172,197			217,416

Minority interest		(837,157	)		(108,004	)		(1,287,189	)		(156,441	)

NET INCOME (LOSS)	$	1,953,365		$	(213,144	)	$	2,885,008		$	60,975

Other comprehensive income (loss):
- Foreign currency translation gain		744,185			4,685			1,790,018			7,030

COMPREHENSIVE (LOSS) INCOME	$	2,697,550		$	(208,459	)	$	4,675,026		$	68,005

Net income (loss) per share – basic and diluted	$	0.05		$	(0.01	)	$	0.07		$	0.00

Weighted average number of shares outstanding during the period – basic and diluted		43,422,971			33,358,948			43,422,971			20,777,778

See accompanying notes to condensed consolidated financial statements.

F-2

CHINA SUN GROUP HIGH-TECH CO.

(Formerly Capital Resource Funding, Inc.)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED FEBRUARY 29, 2008 AND FEBRUARY 28, 2007

(Currency expressed in United States Dollars (“US$”))

(unaudited)

	Nine months ended February
		29, 2008			28, 2007
Cash flows from operating activities:
Net income	$	2,885,008		$	60,975
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		287,878			278,816
Minority interest		1,287,189			156,441
Reversal of allowance for doubtful accounts		(574,190	)		-
Stock based compensation		-			450,000
Change in operating assets and liabilities:
Accounts receivable, trade		5,075,443			(4,405,500	)
Inventories		(562,911	)		147,382
Deposits and prepayments		(1,365	)		433,912
Accounts payable, trade		133,515			2,074,366
Customers deposits		(707,271	)		-
Value added tax payable		738,183			327,168
Income tax payable		(282,215	)		255,106
Other payables and accrued liabilities		608,120			283,318
Net cash provided by operating activities		8,887,384			61,984

Cash flows from investing activities:
Purchase of property, plant and equipment		(42,264	)		(17,934	)
Net cash used in investing activities		(42,264	)		(17,934	)

Cash flows from financing activities:
Repayment of advances to a related party		4,740			101,084
Net cash provided by financing activities		4,740			101,084

Foreign currency translation adjustment		382,607			7,030

NET CHANGE IN CASH AND CASH EQUIVALENTS		9,232,467			152,164

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		813,163			207,264

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	10,045,630		$	359,428

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes	$	1,318,198		$	16,842
Cash paid for interest expenses	$	-		$	-

SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS:
Stocks issued for service rendered	$	-		$	450,000

See accompanying notes to condensed consolidated financial statements.

F-3

CHINA SUN GROUP HIGH-TECH CO.

(Formerly Capital Resource Funding, Inc.)

CONSOLDIATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED FEBRUARY 29, 2008

(Currency expressed in United States Dollars (“US$”), except for number of shares)

(unaudited)

	Convertible preferred stock				Common stock
	No. of shares		Amount		No. of shares		Amount		Additional paid-in capital		Accumulated other comprehensive income		(Accumulated deficit) retained earnings			Total stockholders’ equity
Balance as of May 31, 2007		-	$	-		43,422,971	$	43,423	$	9,595,204	$	225,808	$	(118,266	)	$	9,746,169

Net income for the period		-		-		-		-		-		-		2,885,008			2,885,008

Foreign currency translation adjustment		-		-		-		-		-		1,790,018		-			1,790,018
Balance as of February 29, 2008		-	$	-		43,422,971	$	43,423	$	9,595,204	$	2,015,826	$	2,766,742		$	14,421,195

See accompanying notes to condensed consolidated financial statements.

F-4

CHINA SUN GROUP HIGH-TECH CO.

(Formerly Capital Resource Funding, Inc.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED FEBRUARY 29, 2008 AND FEBRUARY 28, 2007

(Currency expressed in United States Dollars (“US$”)

(unaudited)

NOTE - 1 BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with both generally accepted accounting principles for interim financial information, and the instructions to Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting of normal recurring accruals) that are, in the opinion of management, considered necessary for a fair presentation of the results for the interim periods presented. Interim results are not necessarily indicative of results for a full year.

The condensed consolidated financial statements and related disclosures have been prepared with the presumption that users of the interim financial information have read or have access to our annual audited consolidated financial statements for the preceding fiscal year. Accordingly, these condensed consolidated financial statements should be read in conjunction with the unaudited consolidated financial statements and the related notes thereto contained in the Annual Report on Form 10-KSB for the year ended May 31, 2007.

NOTE - 2 ORGANIZATION AND BUSINESS BACKGROUND

China Sun Group High-Tech Co. (the “Company” or “CSGH”) was organized under the laws of the State of North Carolina on February 2, 2004 as a subchapter S-Corporation. On August 24, 2007, the Company was reincorporated to the State of Delaware and changed its name from “Capital Resource Funding, Inc.” to “China Sun Group High-Tech Co.” Also, the Company was authorized to change its par value from $0.00000005 to $0.001 per share.

On February 28, 2007, the Company completed a stock exchange transaction with Da Lian Xin Yang High-Tech Development Co., Ltd. (“DXL”). DXL was incorporated as a limited liability company in the People’s Republic of China (“PRC”) on August 8, 2000 with its principal place of business in Da Lian City, Liaoning Province, the PRC. Upon completion of the exchange, DXL became a majority-owned subsidiary of CSGH and the former owners of DXL then owned 93% of the issued and outstanding shares of the Company.

The stock exchange transaction has been accounted for as a reverse acquisition and recapitalization of the CSGH whereby DXL is deemed to be the accounting acquirer (legal acquiree) and CSGH to be the accounting acquiree (legal acquirer). The accompanying condensed consolidated financial statements are in substance those of DXL, with the assets and liabilities, and revenues and expenses, of CSGH being included effective from the date of the stock exchange transaction. CSGH is deemed to be a continuation of the business of DXL. Accordingly, the accompanying condensed consolidated financial statements include the following:

(1)	the balance sheet consists of the net assets of the accounting acquirer at historical cost and the net assets of the accounting acquiree at historical cost; and

(2)	the financial position, results of operations, and cash flows of the accounting acquirer for all periods presented as if the recapitalization had occurred at the beginning of the earliest period presented and the operations of the accounting acquiree from the date of stock exchange transaction.

CSGH and DXL are hereinafter referred to as (the “Company”).

F-5

CHINA SUN GROUP HIGH-TECH CO.

(Formerly Capital Resource Funding, Inc.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED FEBRUARY 29, 2008 AND FEBRUARY 28, 2007

(Currency expressed in United States Dollars (“US$”)

(unaudited)

The Company, through its subsidiary, DXL, principally engages in the production and sales of cobaltosic oxide, which is the primary raw material used in lithium ion rechargeable batteries.

NOTE - 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying condensed consolidated financial statements reflect the application of certain significant accounting policies as described in this note and elsewhere in the accompanying condensed consolidated financial statements and notes.

l	Use of estimates

In preparing these consolidated financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheets and revenues and expenses during the period reported. Actual results may differ from these estimates.

l	Basis of consolidation

The unaudited condensed consolidated financial statements include the financial statements of CSGH and its subsidiaries.

All significant inter-company balances and transactions among CSGH and its subsidiaries have been eliminated upon consolidation.

l	Revenue recognition

Revenue is recognized when products are delivered to customers. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. In instances where products are configured to customer requirements, revenue is recorded upon the successful completion of the Company’s final test procedures and the customer’s acceptance.

The Company is subject to Valued Added Tax (“VAT”) which is levied on the majority of the products of DXL at the rate of 17% on the invoiced value of sales. Output VAT is borne by customers in addition to the invoiced value of sales and input VAT is borne by the Company in addition to the invoiced value of purchases to the extent not refunded for export sales.

Starting April 1, 2006, the Company commenced the production and sales of cobaltosic oxide in the PRC.

l	Cost of revenue

Cost of revenue primarily includes the purchase of raw materials, direct labor and manufacturing overhead.

l	Shipping and handling costs

Shipping and handling costs, associated with the distribution of products to customers, are recorded in costs of revenue and are recognized when the related product is shipped to the customer. No such costs are incurred for the nine months ended February 29, 2008 and February 28, 2007.

F-6

CHINA SUN GROUP HIGH-TECH CO.

(Formerly Capital Resource Funding, Inc.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED FEBRUARY 29, 2008 AND FEBRUARY 28, 2007

(Currency expressed in United States Dollars (“US$”)

(unaudited)

l	Cash and cash equivalents

Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments.

l	Accounts receivable

Accounts receivable are recorded at the invoiced amount and do not bear interest. The Company extends unsecured credit to its customers in the ordinary course of business but mitigates the associated risks by performing credit checks and actively pursuing past due accounts. An allowance for doubtful accounts is established and determined based on managements’ assessment of known requirements, aging of receivables, payment history, the customers’ current credit worthiness and the economic environment. As of February 29, 2008, an allowance for doubtful accounts of $239,488 was provided.

l	Inventories

Inventories include material, labor and manufacturing overhead and are stated at lower of cost or market value, cost being determined on a weighted average method. The Company periodically reviews historical sales activity to determine excess, slow moving items and potentially obsolete items and also evaluates the impact of any anticipated changes in future demand. The Company provides inventory allowances based on excess and obsolete inventories determined principally by customer demand. As of February 29, 2008, the Company did not record an allowance for obsolete inventories, nor have there been any write-offs.

l	Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated on the straight-line basis over the following expected useful lives from the date on which they become fully operational and after taking into account their estimated residual values:

	Depreciable life	Residual value
Building	40 years		5	%
Plant and machinery	5-40 years		5	%
Office equipment	5 years		5	%
Motor vehicle	5 years		5	%

Expenditure for repairs and maintenance is expensed as incurred. When assets have retired or sold, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the results of operations.

l	Valuation of long-lived assets

Long-lived assets primarily include property, plant and equipment. In accordance with SFAS No. 144, “ Accounting for the Impairment or Disposal of Long-Lived Assets ,” the Company periodically reviews long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives are no longer appropriate. Each impairment test is based on a comparison of the undiscounted cash flows to the recorded value of the asset. If an impairment is indicated, the asset is written down to its estimated fair value based on a discounted cash flow analysis. Determining the fair value of long-lived assets includes significant judgment by management, and different judgments could yield different results. There has been no impairment as of February 29, 2008.

F-7

CHINA SUN GROUP HIGH-TECH CO.

(Formerly Capital Resource Funding, Inc.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED FEBRUARY 29, 2008 AND FEBRUARY 28, 2007

(Currency expressed in United States Dollars (“US$”)

(unaudited)

l	Comprehensive income

SFAS No. 130, “ Reporting Comprehensive Income” establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income as defined includes all changes in equity during the period from non-owner sources. Accumulated comprehensive income consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense or benefit.

l	Income taxes

The Company accounts for income taxes in interim periods as required by Accounting Principles Board Opinion No. 28, “ Interim Financial Reporting” and as interpreted by FASB Interpretation No. 18, “ Accounting for Income Taxes in Interim Periods . ” The Company has determined an estimated annual effective tax rate. The rate will be revised, if necessary, as of the end of each successive interim period during the Company’s fiscal year to the Company’s best current estimate. The estimated annual effective tax rate is applied to the year-to-date ordinary income (or loss) at the end of the interim period.

The Company also accounts for income tax using SFAS No. 109 “Accounting for Income Taxes,” which requires the asset and liability approach for financial accounting and reporting for income taxes. Under this approach, deferred income taxes are provided for the estimated future tax effects attributable to temporary differences between financial statement carrying amounts of assets and liabilities and their respective tax bases, and for the expected future tax benefits from loss carry-forwards and provisions, if any. Deferred tax assets and liabilities are measured using the enacted tax rates expected in the periods of recovery or reversal and the effect from a change in tax rates is recognized in the consolidated statement of operations and comprehensive income in the period of enactment. A valuation allowance is provided to reduce the amount of deferred tax assets if it is considered more likely than not that some portion of, or all of the deferred tax assets will not be realized.

The Company also adopts the provisions of the Financial Accounting Standards Interpretation No. 48, “ Accounting for Uncertainty in Income Taxes” (“ FIN 48 ” ) . FIN 48 prescribes a recognition threshold and measurement process for recording in the financial statements uncertain tax positions taken or expected to be taken in a tax return. FIN 48 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosures and transitions. The adoption of FIN 48 did not have a significant impact on the Company’s consolidated financial statements.

The Company conducts its major business in the PRC and is subject to tax in this jurisdiction. As a result of its business activities, the Company files tax returns that are subject to examination by the foreign tax authorities.

l	Net income per share

The Company calculates net income per share in accordance with SFAS No. 128, “Earnings per Share.” Basic income per share is computed by dividing the net income by the weighted-average number of common shares outstanding during the period. Diluted income per share is computed similar to basic income per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common stock equivalents had been issued and if the additional common shares were dilutive.

F-8

CHINA SUN GROUP HIGH-TECH CO.

(Formerly Capital Resource Funding, Inc.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED FEBRUARY 29, 2008 AND FEBRUARY 28, 2007

(Currency expressed in United States Dollars (“US$”)

(unaudited)

l	Foreign currencies translation

Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the condensed consolidated statement of operations.

The reporting currency of the Company is the United States dollar (“US$”). The Company's subsidiaries in the PRC, maintain their books and records in its local currency, the Renminbi (“RMB”), which is functional currency as being the primary currency of the economic environment in which these entities operate.

In general, for consolidation purposes, assets and liabilities of its subsidiaries whose functional currency is not the US$ are translated into US$, in accordance with SFAS No 52. “ Foreign Currency Translation” , using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial statements of foreign subsidiaries are recorded as a separate component of accumulated other comprehensive income within the statement of stockholders’ equity.

Translation of amounts from RMB into US$ has been made at the following exchange rates for the respective period:

	2008		2007

Months end RMB: US$ exchange rate		7.1022		7.3919
Average monthly RMB: US$ exchange rate		7.3616		7.5065

l	Related parties

Parties, which can be a corporation or individual, are considered to be related if the Company has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Companies are also considered to be related if they are subject to common control or common significant influence.

l	Segment reporting

SFAS No. 131 “ Disclosures about Segments of an Enterprise and Related Information” establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organization structure as well as information about geographical areas, business segments and major customers in the financial statements. The Company operates one reportable business segment.

l	Fair value of financial instruments

The Company values its financial instruments as required by SFAS No. 107, “ Disclosures about Fair Value of Financial Instruments. ” The estimated fair value amounts have been determined by the Company, using available market information and appropriate valuation methodologies. The estimates presented herein are not necessarily indicative of amounts that the Company could realize in a current market exchange.

F-9

CHINA SUN GROUP HIGH-TECH CO.

(Formerly Capital Resource Funding, Inc.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED FEBRUARY 29, 2008 AND FEBRUARY 28, 2007

(Currency expressed in United States Dollars (“US$”)

(unaudited)

The Company’s financial instruments primarily include cash and cash equivalents, accounts receivable, deposits and prepayments, accounts payable, customers deposit, other payables and accrued liabilities, VAT payable and income tax payable.

As of the balance sheet date, the estimated fair values of financial instruments were not materially different from their carrying values as presented due to short maturities of these instruments.

l	Recent accounting pronouncements

The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption of any such pronouncements may be expected to cause a material impact on its financial condition or the results of its operations.

In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" ("SFAS No. 157"). SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles ("GAAP"), and expands disclosures about fair value measurements. This statement applies under other accounting pronouncements that require or permit fair value measurement where the FASB has previously determined that under those pronouncements fair value is the appropriate measurement. This statement does not require any new fair value measurements but may require companies to change current practice. This statement is effective for those fiscal years beginning after November 15, 2007 and to the interim periods within those fiscal years. The Company believes that SFAS No. 157 should not have a material impact on the consolidated financial position or results of operations

In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities" ("SFAS No. 159"). SFAS No. 159 permits entities to choose to measure, on an item-by-item basis, specified financial instruments and certain other items at fair value. Unrealized gains and losses on items for which the fair value option has been elected are required to be reported in earnings at each reporting date. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007, the provisions of which are required to be applied prospectively. The Company believes that SFAS 159 should not have a material impact on the consolidated financial position or results of operations.

In December 2007, the FASB issued SFAS No. 141 (Revised 2007), "Business Combinations", or SFAS No. 141(R). SFAS No. 141(R) will change the accounting for business combinations. Under SFAS No. 141(R), an acquiring entity will be required to recognize all the assets acquired and liabilities assumed in a transaction at the acquisition-date fair value with limited exceptions. SFAS No. 141(R) will change the accounting treatment and disclosure for certain specific items in a business combination. SFAS No. 141(R) applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Accordingly, any business combinations the Company engages in will be recorded and disclosed following existing GAAP until January 1, 2009. The Company expects SFAS No. 141(R) will have an impact on accounting for business combinations once adopted but the effect is dependent upon acquisitions at that time. The Company is still assessing the impact of this pronouncement.

In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements--An Amendment of ARB No. 51, or SFAS No. 160" . SFAS No. 160 establishes new accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS No. 160 is effective for fiscal years beginning on or after December 15, 2008. The Company believes that SFAS 160 should not have a material impact on the consolidated financial position or results of operations.

F-10

CHINA SUN GROUP HIGH-TECH CO.

(Formerly Capital Resource Funding, Inc.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED FEBRUARY 29, 2008 AND FEBRUARY 28, 2007

(Currency expressed in United States Dollars (“US$”)

(unaudited)

NOTE- 4 ACCOUNTS RECEIVABLE, NET

The majority of the Company’s sales are on open credit terms and in accordance with terms specified in the contracts governing the relevant transactions. The Company evaluates the need of an allowance for doubtful accounts based on specifically identified amounts that management believes to be uncollectible. If actual collections experience changes, revisions to the allowance may be required. Based upon the aforementioned criteria, the Company has made a reversal of the allowance for doubtful accounts of $574,190 for the nine months ended February 29, 2008.

	As of
	February 29, 2008				May 31, 2007
					(audited)

Accounts receivable, gross		$	676,098			$	5,532,760

Less: allowance for doubtful accounts			(239,488	)			(777,831	)
Accounts receivable, net		$	436,610			$	4,754,929

NOTE - 5 PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment, net consisted of:

	As of
	February 29, 2008			May 31, 2007
				(audited)

Building	$	6,632,855		$	6,308,373
Plant and machinery		5,177,988			4,889,431
Office equipment		166,701			155,042
Motor vehicle		35,979			34,509
Foreign translation difference		876,018			1,793
		12,889,541			11,389,148

Less: accumulated depreciation		(915,648	)		(605,771	)
Less: foreign translation difference		(56,372	)		(9,161	)
Property, plant and equipment, net	$	11,917,521		$	10,774,216

Depreciation expenses for the three months ended February 29, 2008 and February 28, 2007 were $100,147 and $143,766, respectively.

Depreciation expenses for the nine months ended February 29, 2008 and February 28, 2007 were $287,878 and $278,816 respectively.

F-11

CHINA SUN GROUP HIGH-TECH CO.

(Formerly Capital Resource Funding, Inc.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED FEBRUARY 29, 2008 AND FEBRUARY 28, 2007

(Currency expressed in United States Dollars (“US$”)

(unaudited)

NOTE - 6 OTHER PAYABLES AND ACCRUED LIABILITIES

Other payables and accrued liabilities consisted of:

	As of
	February 29, 2008		May 31, 2007
			(audited)

Government levies payable	$	48,356	$	15,071
Rent payable		5,280		45,926
Salary and welfare payable		614,025		136,954
Accrued expenses		243,595		80,763
Other payables and accrued liabilities	$	911,256	$	278,714

NOTE - 7 MINORITY INTEREST

In connection with the stock exchange transaction as fully described in Note 2, the Company granted to DXL’s 30%-controlling owners of the two (2) years option for the subscription and purchase of the additional 10,000,000 new shares of common stock of CRFU in exchange for RMB 38,100,000, equivalent to 30% of the registered capital of DXL.

Pro forma financial information

The following summarized pro forma results of operations for the nine months ended February 29, 2008. In preparing this pro forma information we assumed that the exercise of the option for the subscription and purchase of an additional 10,000,000 newly issuable shares of common stock of CSGH had occurred as of June 1, 2006. These pro forma results have been prepared for comparative purposes only and do not purport to be indications of the result of operations which actually would have resulted had the exercise of the option occurred as of June 1, 2006.

	Nine months ended February
		29, 2008		28, 2007

Net income attributable to holders of common stock	$	4,172,197	$	217,416
Weighted average common shares outstanding – basic and diluted		53,422,971		30,777,778
Net income per common share – basic and diluted	$	0.08	$	0.01

NOTE - 8 INCOME TAXES

The Company is registered in the United States of America and has operations in two tax jurisdictions: the United States of America and the PRC. The operation in the United States of America has incurred net operating losses for income tax purposes. The Company generated substantially all of its net income from its PRC operations through DXL, its subsidiary and has recorded income tax expense for the nine months ended February 29, 2008 and February 28, 2007.

F-12

CHINA SUN GROUP HIGH-TECH CO.

(Formerly Capital Resource Funding, Inc.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED FEBRUARY 29, 2008 AND FEBRUARY 28, 2007

(Currency expressed in United States Dollars (“US$”)

(unaudited)

The components of income (loss) before income taxes and minority interest separating U.S. and PRC taxes are as follows:

	Nine months ended February
		29, 2008			28, 2007

Loss subject to U.S. tax	$	(118,433	)	$	-
Income subject to the PRC tax		4,496,941			485,393
Income before income taxes and minority interest	$	4,378,508		$	485,393

United States of America

The Company is registered in the State of Delaware and is subject to the tax laws of the United States of America.

As of February 29, 2008, the operation in the United States of America incurred $118,433 of net operating losses available for federal tax purposes, which are available to offset future taxable income. The net operating loss carry forwards begin to expire in 2028, if unutilized. The Company has provided for a full valuation allowance against the deferred tax assets of $40,267 on the expected future tax benefits from the net operating loss carryforwards as the management believes it is more likely than not that these assets will not be realized in the future.

The PRC

The Company’s PRC subsidiaries are subject to the Enterprise Income Tax governed by the Income Tax Law of the People’s Republic of China, at a statutory rate of 33%, which is comprised of a 30% national income tax and 3% local income tax.

On March 16, 2007, the National People’s Congress approved the Corporate Income Tax Law of the People’s Republic of China (the “New CIT Law”). The new CIT Law, among other things, imposes a unified income tax rate of 25% for both domestic and foreign invested enterprises with effect from January 1, 2008. DLX will be entitled to the tax rate reduction from 33% to 25% that may impact the carrying value of deferred tax assets as a result of new tax rate.

The reconciliation of income tax rate to the effective income tax rate based on income before income taxes and minority interest of PRC operations for the nine months ended February 29, 2008 and February 28, 2007 are as follows:

	Nine months ended February
		29, 2008			28, 2007

Income before income taxes and minority interest	$	5,208,179		$	485,393
Income tax rate (33% in 2007 and 25% in 2008)		28	%		33	%
	$	1,458,290		$	160,180
Add: items not deductible to taxes
- Provision and accrued expenses		(422,308	)		107,797
Income tax expenses	$	1,035,982		$	267,977

F-13

CHINA SUN GROUP HIGH-TECH CO.

(Formerly Capital Resource Funding, Inc.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED FEBRUARY 29, 2008 AND FEBRUARY 28, 2007

(Currency expressed in United States Dollars (“US$”)

(unaudited)

Its effective income tax rates for the nine months ended February 29, 2008 and February 28, 2007 were 24% and 55%. Income taxes payable as of February 29, 2008 and February 28, 2007 consists of The PRC income tax of $577,089 and $810,413.

NOTE - 9 CAPITAL TRANSACTIONS

On February 28, 2007, the Company completed a stock exchange transaction with the equity owners of DXL. 30,000,000 shares of common stock were issued in exchange for 70% interest of DXL and 9,500,000 shares of common stock were transferred from the former shareholder to DXL’s owner, representing 93% of CRFU’s outstanding common stock.

On August 24, 2006, the Company was authorized to change the par value of its preferred and common stock from $0.00000005 per share to $0.001 per share. In connection with the change in par value of preferred and common stock described above, all prior transactions involving common stock with a par value of $0.00000005 have been restated to reflect the new par value of $0.001 in the accompanying financial statements.

As of February 29, 2008, the number of outstanding shares of the Company’s common stock was 43,422,971.

NOTE - 10 CONCENTRATIONS AND RISKS

100% of the Company’s assets were located in the PRC and 100% of the Company’s revenues were generated from customers located in the PRC.

(a) Major customers

For the three months ended February 29, 2008, the customers who account for 10% or more of revenues of the Company are presented as follows:

	Revenues		Percentage of revenues		Trade accounts Receivable
Customer A	$	3,547,027		50%	$	42,069
Customer B		2,424,919		34%		-
Total:	$	5,971,946		84%	$	42,069

For the nine months ended February 29, 2008, the customers who account for 10% or more of revenues of the Company are presented as follows:

	Revenues		Percentage of revenues		Trade accounts Receivable
Customer A	$	6,538,733		40%	$	42,069
Customer B		3,408,014		21%		-
Customer D		2,508,647		16%		436,807
Customer C		2,151,570		13%		-
Total:	$	14,606,964		90%	$	478,876

F-14

CHINA SUN GROUP HIGH-TECH CO.

(Formerly Capital Resource Funding, Inc.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED FEBRUARY 29, 2008 AND FEBRUARY 28, 2007

(Currency expressed in United States Dollars (“US$”)

(unaudited)

For the three months ended February 28, 2007, the customers who account for 10% or more of revenues of the Company are presented as follows:

	Revenues		Percentage of revenues		Trade accounts Receivable
Customer A	$	1,396,988		52%	$	2,529,239
Customer B		601,310		23%		882,087
Customer C		290,760		11%		872,279
Total:	$	2,289,058		86%	$	4,283,605

For the nine months ended February 28, 2007, the customers who account for 10% or more of revenues of the Company are presented as follows:

	Revenues		Percentage of revenues		Trade accounts Receivable
Customer A	$	2,782,638		49%	$	2,529,239
Customer B		1,803,929		32%		882,087
Customer C		872,279		15%		872,279
Total:	$	5,458,846		96%	$	4,283,605

(b)	Major vendors

For the three months ended February 29, 2008, the vendors who account for 10% or more of purchases of the Company are presented as follows:

	Purchases		Percentage of purchases		Accounts Payable
Vendor A	$	1,929,411		48%	$	427,489
Vendor B		1,587,578		40%		332,938
Total	$	3,516,989		88%	$	760,427

F-15

CHINA SUN GROUP HIGH-TECH CO.

(Formerly Capital Resource Funding, Inc.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED FEBRUARY 29, 2008 AND FEBRUARY 28, 2007

(Currency expressed in United States Dollars (“US$”)

(unaudited)

For the nine months ended February 29, 2008, the vendors who account for 10% or more of purchases of the Company are presented as follows:

	Purchases		Percentage of purchases		Accounts payable
Vendor A	$	5,743,323		45%	$	444,927
Vendor B		3,432,917		27%		321,207
Vendor C		3,096,513		24%		-

Total	$	12,272,753		96%	$	766,134

For the three months ended February 28, 2007, the vendors who account for 10% or more of purchases of the Company are presented as follows:

		Purchases				Percentage of purchases				Accounts payable
Vendor A		$	248,732				18%			$	1,719,126

For the nine months ended February 28, 2007, the vendors who account for 10% or more of purchases of the Company are presented as follows:

		Purchases				Percentage of purchases				Accounts payable
Vendor A		$	746,196				18%			$	1,719,126

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and trade accounts receivable. The Company performs ongoing credit evaluations of its customers' financial condition, but does not require collateral to support such receivables.

(d) Exchange rate risk

The reporting currency of the Company is the US$, to date the majority of the revenues and costs are denominated in RMB and a significant portion of the assets and liabilities are denominated in RMB. As a result, the Company is exposed to foreign exchange risk as its revenues and results of operations may be affected by fluctuations in the exchange rate between US$ and RMB. If the RMB depreciates against the US$, the value of the RMB revenues and assets as expressed in US$ financial statements will decline. The Company does not hold any derivative or other financial instruments that expose to substantial market risk.

NOTE - 11 COMMITMENT

1.	The Company leased an office premise under a non-cancelable operating lease agreement for a period of eight years, due July 25, 2010. The annual lease payment is $6,792.

On June 9, 2007, the Company’s subsidiary, DXL entered into an African Mining Project Contract of Cooperation (the “Purchase Agreement”) with Shengbao Group and South African Shengbao Mining Enterprises (“Shengbao”). Pursuant to the Purchase Agreement, DXL is obliged to purchase the prospecting and mining rights of a cobalt ore mine for a purchase price of $2 million over a term of 15 years. As of February 29, 2008, the Company had the capital commitment of $2 million in the purchase of the prospecting and mining rights which was contracted for but not provided in the financial statements.

F-16

Item 2. Management’s Discussion and Analysis or Plan of Operation

Cautionary Notice Regarding Forward-Looking Statements

In this quarterly report, references to “China Sun Group,” “CSGH,” “the Company,” “we,” “us,” and “our” refer to China Sun Group High-Tech Co.

We make certain forward-looking statements in this report. Statements concerning our future operations, prospects, strategies, financial condition, future economic performance (including growth and earnings), demand for our services, and other statements of our plans, beliefs, or expectations, including the statements contained under the captions "Risk Factors," "Management's Discussion and Analysis or Plan of Operation," "Description of Business," as well as captions elsewhere in this document, are forward-looking statements. In some cases these statements are identifiable through the use of words such as "anticipate", "believe", "estimate", "expect", "intend", "plan", "project", "target", "can", "could", "may", "should", "will", "would" and similar expressions.. The forward-looking statements we make are not guarantees of future performance and are subject to various assumptions, risks, and other factors that could cause actual results to differ materially from those suggested by these forward-looking statements. Because such statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by the forward-looking statements. Indeed, it is likely that some of our assumptions will prove to be incorrect. Our actual results and financial position will vary from those projected or implied in the forward-looking statements and the variances may be material. You are cautioned not to place undue reliance on such forward-looking statements. These risks and uncertainties, together with the other risks described from time to time in reports and documents that we file with the Securities and Exchange Commission (“SEC”) should be considered in evaluating forward-looking statements.

The nature of our business makes predicting the future trends of our revenue, expenses, and net income difficult. Thus, our ability to predict results or the actual effect of our future plans or strategies is inherently uncertain. The risks and uncertainties involved in our business could affect the matters referred to in any forward-looking statements and it is possible that our actual results may differ materially from the anticipated results indicated in these forward-looking statements. Important factors that could cause actual results to differ from those in the forward-looking statements include, without limitation, the following:

·	the effect of political, economic, and market conditions and geopolitical events;

·	legislative and regulatory changes that affect our business;

·	the availability of funds and working capital;

·	the actions and initiatives of current and potential competitors;

·	investor sentiment; and

·	our reputation.

We do not undertake any responsibility to publicly release any revisions to these forward-looking statements to take into account events or circumstances that occur after the date of this report. Additionally, we do not undertake any responsibility to update you on the occurrence of any unanticipated events which may cause actual results to differ from those expressed or implied by any forward-looking statements.

The following discussion and analysis should be read in conjunction with our consolidated financial statements and the related notes thereto as filed with the SEC and other financial information contained elsewhere in this Report.

Overview

We were incorporated in North Carolina on February 2, 2004 and have since undergone a change in business. In February 2007, we acquired a 70% ownership interest in Da Lian Xin Yang High-Tech Development Co. Ltd. ("DLX"), a corporation organized and existing under the laws of the People’s Republic of China, through a share exchange which was consummated on February 28, 2007. In August 2007, our shareholders approved our reincorporation in the State of Delaware and our name change from “Capital Resource Funding, Inc.” to “China Sun Group High-Tech Co.” Currently, our only operations are conducted through DLX, which engages in the business of manufacturing and selling cobaltosic oxide products. These products are primarily manufactured, marketed, and sold in the People’s Republic of China, South Korea and Japan.

Through DLX, we produce anode materials used in lithium ion batteries. Lithium ion batteries continue to gain in popularity due to their versatility, high energy density and capacity, high voltage, compact size, light weight, and excellent energy retention characteristics. They are used in mobile phones, PDAs, laptops, and digital cameras, as well as electric automobiles and solar and wind energy storage units. DLX primarily produces cobaltosic oxide and lithium cobalt oxide and also engages in the research and development of new technologies to be used in the lithium ion battery market.

According to the China Battery Industry Association, which conducts research of and puts forth reports on the battery industry, DLX has the second largest cobalt series production capacity in the People’s Republic of China. Through its research and development group, DLX owns a proprietary series of nanometer technology that supply state-of-the-art components for advanced lithium ion batteries. Leveraging its technological leadership in the People’s Republic of China, its high-quality product line and its scalable production capacity, we plan to create a fully integrated supply chain from the primary manufacturing of cobalt ore to finished products, which include lithium ion batteries.

We recently received preliminary accreditation from the State Intellectual Property Office of the People's Republic of China of certain of our equipment that we use in our cobaltosic oxide and lithium cobalt oxide production process. Meeting the State’s production standards is important to securing our technological leadership position in the People’s Republic of China. The accreditation of the equipment and the associated production process enables us to provide our customers with exact specifications, along with superior quality control, throughout the production process.

Highlights from the Quarter Ended February 29, 2008

In the fiscal year 2008, we made significant strides in our sales and manufacturing capabilities. Sales for the first nine months of fiscal year 2008 increased approximately 185% from same period of the previous year (we began production and sales of cobaltosic oxide in the PRC only on April 1, 2006). We operate largely on a “just-in-time” basis where demand exceeds supply. Accordingly, we often do not carry excess inventory.

Concurrent with strides in production and sales, we have also made substantial developments in our research and development endeavors. We have completed our testing and evaluation of our lithium cobalt oxide product and in February 2008 started batch production. We sent lithium cobalt oxide to Shenzhen Ping Bu Technology Electronic Co. Ltd. on February 25, 2008 and conducted trial production with 10kg of lithium colbalt oxide. We will begin filling orders in May 2008.

We have also completed the preliminary trial phase of our tri-component anode product, which when completed, will be safer and able to discharge a stronger electrical current for use with heavier capacity equipment and vehicles and receive approval and completed research on developing techniques for a wet melting process for the nickel, colbalt and manganese in the ternary material.

We have made technological improvements to our production line by adding amalgamation capabilities to it. We have also hired two new research and development engineers, a graduate researcher and six chemistry graduates to our research and development team. In February 2008, we organized an R&D project team with a postgraduate technician as a team leader and three chemistry graduates as members to research the battery anode material, lithium manganese. This team has already commenced such research.

Results of Operations

The following table sets forth our statements of operations for the nine months ended February 29, 2008 and the three months ended February 29, 2008:

THE NINE MONTHS ENDED FEBRUARY 29, 2008 COMPARED TO THE NINE MONTHS ENDED FEBRUARY 28, 2007

Net Revenue

Net revenue for the nine months ended February 29, 2008 was $16,199,986, an increase of $10,514,910 or 185% from net revenue of $ 5,685,076 for the comparable period in 2007. The increase in revenue was primarily attributable to increased customer demand for our products and consequently, increased sales.

Cost of Revenue

Cost of revenue for the nine months ended February 29, 2008 was $10,529,991, an increase of $6,373,905 or 153% from $4,156,086 for the comparable period in 2007. The increase in cost of revenue was primarily attributable to increased production of our products which is in tandem with increased demand for them.

Gross Profit

Gross profit for the nine months ended February 29, 2008 was $5,669,995, an increase of $4,141,005 or 271% from $1,528,990 for the comparable period in 2007. The increase in gross profit was primarily attributable to revenue generated by increased production and sales.

General and Administrative Expenses

General and administrative expenses for the nine months ended February 29, 2008 were $777,691, a decrease of $3,375 or 0.43% from $781,066 for the comparable period in 2007. The decrease was primarily attributable to the stricter expense control.

Research and Development Expenses

Research and development expenses for the nine months ended February 29, 2008 were $88,101, an increase of $15,677 or 22% from $72,424 for the comparable period in 2007. The increase was primarily attributable to the hiring of additional research and development personnel.

Depreciation Expenses

Depreciation expenses for the nine months ended February 29, 2008 were $178,525, a decrease of $11,582 or 6% from $190,107 for the comparable period in 2007. The decrease in our depreciation expenses is primarily attributable to the full depreciation provision already made for some office equipment.

Income (Loss) From Operations

Income from operations for the nine months ended February 29, 2008 was $5,199,868, an increase of $4,714,475 or 971% from $485,393 for the comparable period in 2007. The increase resulted primarily from the increased customer demand for our products and consequently, increased sales.

Other Income

Interest income for the nine months ended February 29, 2008 was $8,311. The Company had no interest income for the comparable period in 2007. The increase resulted primarily from interest income derived from cash in our bank accounts.

Income Taxes

Provision for income tax expenses was $1,035,982 for the nine months ended February 29, 2008, an increase of $768,005 or 287% from $267,977 for the comparable period in 2007. The increase resulted primarily from the increase in our revenue due to increased sales.

Minority Interest

The minority interest for the nine months ended February 29, 2008 was $1,287,189, an increase of $1,130,748 or 723% from $156,441 for the comparable period in 2007.

Foreign Currency Translation Gain

The foreign currency translation gain for the nine months ended February 29, 2008 was $1,790,018, an increase of $1,782,988 or 25363% from $7,030 for the comparable period in 2007. The increase resulted from the increase in value of the Renminbi against the U.S. dollar. This updated Renminbi valuation of DLX’s assets and liabilities resulted in this gain.

Net Income

Net income for the nine months ended February 29, 2008 was $2,885,008, an increase of $2,824,033 or 4631% from $60,975 for the comparable period in 2007.

THE THREE MONTHS ENDED FEBRUARY 29, 2008 COMPARED TO THE THREE MONTHS ENDED FEBRUARY 28, 2007

Net Revenue

Net revenue for the three months ended February 29, 2008 was $7,106,959, an increase of $4,445,263 or 167% from $2,661,696 for the comparable period in 2007. The increase resulted from increased customer demand and sales.

Cost of Revenue

Cost of revenue for the three months ended February 29, 2008 was $4,528,705, an increase of $2,639,775 or 140% from $1,888,930 for the comparable period in 2007. The increase resulted directly from increased production of our products which is in tandem with increased demand for them.

Gross Profit

Gross profit for the three months ended February 29, 2008 was $2,578,254, an increase of $1,805,488 or 234 % from $772,766 for the comparable period in 2007. The increase in gross profit was primarily due to revenue generated by increased customer demand and production, and consequently increased sales of our products.

General and Administrative Expenses

General and administrative expenses for the three months ended February 29, 2008 were $9,706, a decrease of $585,275 or 98% from $594,981 for the comparable period in 2007. The decrease was primarily attributable to the stricter expense control.

Research and Development Expenses

Research and development expenses for the three months ended February 29, 2008 were $1,701, a decrease of $15,858 or 90% from $17,559 for the comparable period in 2007. The decrease was primarily attributable to the stricter cost control.

Depreciation Expenses

Depreciation expenses for the three months ended February 29, 2008 were $61,871, a decrease of $3,186 or 4.9 % from $65,057 for the comparable period in 2007. This decrease is primarily attributable to the full depreciation provision already made for some office equipment.

Income (Loss) From Operations

Income from operations for the three months ended February 29, 2008 was $3,076,166, an increase of $2,980,997 or 3132% from $95,169 for the comparable period in 2007. The increase resulted primarily from the increased customer demand for our products and consequently, increased sales.

Other Income

Interest income for the three months ended February 29, 2008 was $7,035. We had no interest income for the comparable period in 2007. The increase resulted primarily from interest income derived from cash in our bank accounts.

Income Taxes

Provision for income tax expenses was $295,679 for the three months ended February 29, 2008, an increase of $95,370 or 47.6% from $200,309 for the comparable period in 2007.

Minority Interest

The minority interest for the three months ended February 29, 2008 was $837,157, an increase of $ 729,153 or 675% from $108,004 for the comparable period in 2007.

Foreign Currency Translation Gain

The foreign currency translation gain for the three months ended February 29, 2008 was $744,185, an increase of $739,500 or 15784% from $4,685 for the comparable period in 2007. The increases resulted from the increase in the value of the Renminbi against the U.S. dollar. This updated Renminbi valuation of DLX’s assets and liabilities resulted in this gain.

Net Income

Net income for the three months ended February 29, 2008 was $1,953,365, an increase of $2,166,509 or 1016% as compared to the net loss of $213,144 for the comparable period in 2007.

Liquidity and Capital Resources

Cash and Cash Equivalent

Our cash and cash equivalent were $813,163 at the beginning of the nine months ended February 29, 2008 and increased to $10,045,630 by the end of such period, an increase of $9,232,467 or 1135.38%. This net change in cash and cash equivalents represented an increase of 5967% or $9,080,303 from $152,164 for the comparable period in 2007.

Net cash provided by operating activities

Net cash provided by our operating activities was $8,887,384 for the nine months ended February 29, 2008, an increase of $8,825,400 or 14238% as compared to net cash of $61,984 for the same period in 2007. This increase was due primarily to the growth in sales revenue with the settlement in accounts receivable by $5,075,443, the increase in value-added tax payable by $738,183, and the increase in other payable and accrued liabilities by $608,120, and the increase in accounts payable by $133,515, partially offset by decrease in customer deposits by $707,271, and decrease in income tax payable by $282,215 in this period.

Net cash used in investing activities

Net cash used in investing activities was $42,264 for the nine months ended February 29, 2008, an increase of $24,330 or 136% from $17,934 for the same period in 2007. The increase was primarily attributable to the purchase of equipment.

Net cash used in financing activities

Net cash generated from financing activities was $4,740 for the nine months ended February 29, 2008, a decrease of $96,344 or 95% from $101,084 for the same period in 2007. The decrease was primarily attributable to the reduced advances from related parties.

Income Taxes

Income tax expense was $1,035,982 for the nine months ended February 29, 2008, an increase of $768,005 or 287% from $267,977 for the same period in 2007. The increase resulted primarily from the increase in income from operations.

Foreign currency translation adjustment

Foreign currency translation adjustment resulted in $382,607 for the nine months ended February 29, 2008, an increase of $375,577 or 5342% compared to $7,030 for the same period in 2007.

Trends

Currently, many companies in the cobalt product industry are looking to directly own cobalt producing mines which will provide direct access and supply to cobalt ore, the primary raw material in the cobalt product industry. In June 2007, we acquired certain rights to a cobalt mine in Africa. This acquisition will help us avoid export limitations imposed by the Congo, reduce freight expenses, and help ensure a stable supply of cobalt ore.

We are not aware of any trends, events or uncertainties that have or are reasonably likely to have a material impact on our short-term or long-term liquidity.

Inflation

We believe that inflation has not had a material or significant impact on our revenue or our results of operations.

Material Commitments for Capital Expenditures

Currently, we own the prospecting and mining rights of a cobalt mine in Congo. We plan to start the construction of a processing plant in Congo in the second quarter of the 2009 fiscal year. We anticipate that the construction of the plant will cost approximately $2,000,000 to $3,000,000.

General

We believe that we currently have sufficient income generated from our operations to meet our operating and/or capital needs.

However, we will continue to evaluate various sources of capital to meet our growth requirements. Such sources will include debt financings, the issuance of equity securities, and entrance into other financing arrangements. There can be no assurance, however, that any of the contemplated financing arrangements described herein will be available and, if available, can be obtained on terms favorable to us.

Contractual Obligations and Commitments

We leased an office premise under a non-cancelable operating lease agreement for a period of eight years, due July 25, 2010. The annual lease payment is $6,792.

On June 9, 2007, our subsidiary, DLX entered into an African Mining Project Contract of Cooperation (the “Purchase Agreement”) with Shengbao Group and South African Shengbao Mining Enterprises (“Shengbao”). Pursuant to the Purchase Agreement, DLX is obliged to purchase the prospecting and mining rights of a cobalt ore mine for a purchase price of $2 million over a term of 15 years. As of February 29, 2008, DLX had the capital commitment of $2 million in the purchase of the prospecting and mining rights which was contracted for but not provided in the financial statements.

Off Balance Sheet Arrangements

None.

Critical Accounting Policies and Estimates

Item 3.

Controls and Procedures.

As of the end of the period covered by this report, our management, with the participation of our Principal Executive Officer, Wang Bin, and our Principal Financial and Accounting Officer, Ming Fen Liu, evaluated the effectiveness of the design and operation of our disclosure controls and procedures, which are those controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the us, in the reports we file under the Exchange Act of 1934, as amended (the "Exchange Act"), are recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. These disclosure controls and procedures may include, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act are accumulated and communicated to the our management, including our Principal Executive Officer and Principal Financial and Accounting Officer, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, our management concluded that as of February 29, 2008, our disclosure controls and procedures were effective.

During the quarter ended February 29, 2008, there were no changes in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 2. Unregistered Sale of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Submission of Matters to a Vote of Securities Holders

On January 31, 2008, Bin Wang, Zhi Li and Jiao Wang, holders of an aggregate of 25,500,000 shares of our common stock, par value $.001 per share (the “Common Stock) and accordingly, a majority of our then issued and outstanding shares of Common Stock (comprising 43,422,971 shares of Common Stock), executed a unanimous written consent to action in accordance with the Delaware General Corporation Law to:

(i)	amend our Certificate of Incorporation to increase the number of authorized shares of Common Stock from 100,000,000 shares to 500,000,000 shares; and

(ii)	amend our Certificate of Incorporation to increase the number of authorized shares of our preferred stock, par value $.001 per share from 10,000,000 shares to 50,000,000 shares.

Pursuant to such written consent, we filed a Preliminary Information Statement on Schedule 14C with the SEC on February 1, 2008 followed by a Definitive Information Statement on Schedule 14C with the SEC on March 13, 2008.

We also caused to be printed and mailed the same Information Statement to all our stockholders as of the record date of January 31, 2008. The abovementioned amendment will only be effective 20 days after the mailing of the Information Statement on March 18, 2008, which will be on or about April 7, 2008.

Item 5. Other Information.

None.

Item 6.

Exhibits

(a) Exhibits

31.1

Certification Required Under Section 302 of Sarbanes-Oxley Act of 2002 *

31.2

Certification Required Under Section 302 of Sarbanes-Oxley Act of 2002 *

Certification Required Under Section 906 of Sarbanes-Oxley Act of 2002 *

* Filed herewith.

SIGNATURES

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

	CHINA SUN GROUP HIGH-TECH CO.

April 14, 2008	By:	/s/ Bin Wang
		Bin Wang
		President, Chief Executive Officer and Chairman

China Sun Group High Tech (CE) (USOTC:CSGH)
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