UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarter ended June 30, 2009

-OR-

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

For the transition period from to

Commission File Number 033-377099-S

T-BAY HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

NEVADA		91-1465664
(State or other jurisdiction of		(I.R.S. Employer Identification No.)
incorporation or organization)

Room 917, YongSheng Building

ZhongShan Xi Road

Xuhui District, Shanghai, China

(Address of principal executive offices)

(Zip code)

Issuer’s telephone number, including area code: 86-021 51539900

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

Indicate by check mark whether the registrant: (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes√ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨

Accelerated filer ¨

Non-accelerated filer √

Indicate by check mark whether the registrant is a shell company (as defined in Rue 12b-2of the Exchange Act).

Yes ¨ No √

The number of shares outstanding of each of the Registrant’s classes of common stock, as of August 14, 2009 was 30,088,174 shares, all of one class of $0.001 par value Common Stock.

T-BAY HOLDINGS, INC.

FORM 10-Q

Quarter Ended June 30, 2009

TABLE OF CONTENTS

		Page

	PART I— FINANCIAL INFORMATION

Item 1	Financial Statements

	Consolidated Balance Sheets as of June 30, 2009 (Unaudited) and March 31, 2009	F-2

	Unaudited Consolidated Statements of Operations for the Three Months Ended June 30, 2009 and 2008	F-3

	Unaudited Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended June 30, 2009	F-4

	Unaudited Consolidated Statements of Cash Flows for the Three Months Ended June 30, 2009 and 2008	F-5

	Notes to Unaudited Consolidated Financial Statements June 30, 2009	F-6 – F-14

Item 2	Managements Discussion and Analysis of Financial Condition and Results of Operation	18

Item 3	Quantitative and Qualitative Disclosures About Market Risk	25

Item 4T	Controls and Procedures	26

	PART II—OTHER INFORMATION

Item 1	Legal Proceedings	26

Item 1A	Risk Factors	27

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	33

Item 3	Defaults Upon Senior Securities	33

Item 4	Submission of Matters to a Vote of Security Holders	33

Item 5	Other Information	33

Item 6	Exhibits	34

	SIGNATURES	34

Page 2 of 34

SPECIAL NOTE ON FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, including "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 2 of Part I of this report include forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by forward-looking statements.

In some cases, you can identify forward-looking statements by terminology such as "may," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "proposed," "intended," or "continue" or the negative of these terms or other comparable terminology. You should read statements that contain these words carefully, because they discuss our expectations about our future operating results or our future financial condition or state other "forward-looking" information. There may be events in the future that we are not able to accurately predict or control. Before you invest in our securities, you should be aware that the occurrence of any of the events described in this Annual Report could substantially harm our business, results of operations and financial condition, and that upon the occurrence of any of these events, the trading price of our securities could decline and you could lose all or part of your investment. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, growth rates, levels of activity, performance or achievements. We are under no duty to update any of the forward-looking statements after the date of this Quarterly Report to conform these statements to actual results.

Page 3 of 34

PART 1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

T-BAY HOLDINGS, INC. AND SUBSIDIARIES

INDEX TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Unaudited Consolidated Balance Sheets	F-2

Unaudited Consolidated Statements of Operations	F-3

Unaudited Consolidated Statements of Changes in Stockholders’ Equity	F-4

Unaudited Consolidated Statements of Cash Flows	F-5

Notes to Unaudited Consolidated Financial Statements	F-6 – F-14

F-1

Page 4 of 34

T-BAY HOLDINGS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEETS

JUNE 30, 2009

(In thousands of United States dollars)

	Note(s)		JUNE 30, 2009		MARCH 31, 2009
			(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents			$	15,377	$	20,493
Notes receivable				-		37
Accounts receivable, net				15,105		14,361
Prepayments, deposits and other receivables, net				12,940		13,694

Total current assets				43,422		48,585

PROPERTY, PLANT AND EQUIPMENT, NET		3		2,253		2,493
INTANGIBLE ASSETS, NET		4		59		65
ASSETS OF DISCONTINUED OPERATIONS		10		-		724

TOTAL ASSETS			$	45,734	$	51,867

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable			$	368	$	466
Accruals and other payables
Related parties		8		285		285
Third parties				1,445		1,412
Receipts in advance				158		990
Income tax payable				-		262

Total current liabilities				2,256		3,415

LONG-TERM LIABILITIES
Due to shareholders		8		4,255		4,255

Total liabilities				6,511		7,670

COMMITMENTS AND CONTINGENCIES		9

STOCKHOLDERS’ EQUITY
Preferred stock, authorized 10,000,000 shares, par value $0.001, issued and outstanding Nil				-		-
Common stock, authorized 100,000,000 shares, par value $0.001, issued and outstanding 30,088,174				30		30
Additional paid-in capital				1,462		1,462
Public welfare fund				2,109		2,109
Statutory surplus fund				4,219		4,219
Retained earnings				23,430		28,303
Accumulated other comprehensive income				5,820		5,806

Total stockholders’ equity				37,070		41,929

NON-CONTROLLING INTEREST				2,153		2,268

TOTAL EQUITY				39,223		44,197

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY			$	45,734	$	51,867

The accompanying notes are an integral part of these unaudited consolidated financial statements.

F-2

Page 5 of 34

T-BAY HOLDINGS, INC. AND SUBSIDIARY

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED JUNE 30, 2009 AND 2008

(In thousands of United States dollars, except per share data)

	Note(s)		THREE MONTHS ENDED JUNE 30,
			2009			2008

NET REVENUE			$	9,426		$	11,133

COST OF REVENUE				8,815			6,166

GROSS PROFIT				611			4,967

OPERATING EXPENSES
Selling expenses				33			65
General and administrative expenses				5,587			729

TOTAL OPERATING EXPENSES				5,620			794

(LOSS)/INCOME FROM OPERATIONS				(5,009	)		4,173

OTHER INCOME				21			274
GAIN ON DISPOSAL OF A SUBSIDIARY				7			-

(LOSS)/INCOME BEFORE INCOME TAX				(4,981	)		4,447

INCOME TAX: CURRENT		5		(7	)		(856	)

NET (LOSS)/INCOME				(4,988	)		3,591

Less: Net loss/(income) attributable to non-controlling interest				115			(138	)

NET (LOSS)/INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS				(4,873	)		3,453

OTHER COMPREHENSIVE INCOME
Foreign currency translation adjustment				14			1,020

COMPREHENSIVE (LOSS)/INCOME			$	(4,859	)	$	4,473

WEIGHTED AVERAGE NUMBER OF SHARES (in thousands)				30,088			30,088

(LOSS)/EARNINGS PER SHARE ATTRIBUTABLE TO COMMON STOCK HOLDERS (in dollars)			$	(0.16	)	$	0.11

The accompanying notes are an integral part of these unaudited consolidated financial statements.

F-3

Page 6 of 34

T-BAY HOLDINGS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

For the three months ended June 30, 2009

(In thousands of United States dollars)

	COMMON STOCK				ADDITIONAL PAID-IN CAPITAL		PUBLIC WELFARE FUND		STATUTORY SURPLUS FUND		RETAINED EARNINGS			ACCUMULATED OTHER COMPREHENSIVE INCOME		TOTAL STOCKHOLDERS’ EQUITY
			No. of shares

Balance, April 1, 2009		30,088,174		30	$	1,462	$	2,109	$	4,219	$	28,303		$	5,806	$	41,929
Net loss		-		-		-		-		-		(4,873	)		-		(4,873	)
Foreign currency translation adjustment		-		-		-						-			14		14

Balance, June 30, 2009		30,088,174		30	$	1,462	$	2,109	$	4,219	$	23,430		$	5,820	$	37,070

The accompanying notes are an integral part of these unaudited consolidated financial statements.

F-4

Page 7 of 34

T-BAY HOLDINGS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the three months ended June 30, 2009 and 2008

(In thousands of United States dollars)

	FOR THE THREE MONTHS ENDED JUNE 30,
	2009			2008

CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income attributable to common stockholders	$	(4,873	)	$	3,453
Adjustments to reconcile net income to net cash generated from operating activities:
Depreciation		225			242
Amortization		6			9
Non-controlling interest		(115	)		138
Gain on disposal of a subsidiary		(7	)		-
Loss on disposal of property, plant and equipment		3			-
Allowances for doubtful trade and other receivables		4,003			138

Changes in operating assets and liabilities:
(Increase)/decrease in accounts receivable		(4,663	)		1,067
Decrease in prepayments, deposits and other receivables		1,438			282
Increase in inventories		-			(28	)
(Decrease)/increase in accounts payable		(98	)		143
Increase in accruals and other payables		33			57
Decrease in receipts in advance		(832	)		(818	)
Decrease in income tax payable		(262	)		(645	)

Net cash (used in)/provided by operating activities		(5,142	)		4,038

CASH FLOWS FROM INVESTING ACTIVITES

Proceeds received from disposal of property, plant and equipment		12			-

Net cash provided by investing activities		12			-

The accompanying notes are an integral part of these unaudited consolidated financial statements.

F-5

Page 8 of 34

T-BAY HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2009

1. The Company and Subsidiaries

T-Bay Holdings, Inc. (the “Company” or T-Bay) was incorporated under the laws of the State of Utah on August 8, 1984 as “Sharus Corporation” with authorized common stock of 50,000,000 shares with a par value of US$0.001. On June 13, 1989, the domicile of the Company was changed to the state of Nevada in connection with a name change to “Golden Quest, Inc.”. On January 7, 2002, the name was changed to “T-Bay Holdings, Inc.” as part of a reverse stock split of 400 shares of outstanding stock for one share and on November 23, 2004, the Company increased the authorized common stock to 100,000,000 shares with a par value of US$0.001 as part of a reverse stock split of 20 outstanding shares for one share.

On August 16, 2005, pursuant to an Agreement and Plan of Reorganization, T-Bay issued 18,550,000 shares of its common stock for all of Amber Link International Limited’s (“Amber Link”) and Wise Target International Limited’s (“Wise Target”) outstanding shares of common stock (the “Merger”). Amber Link and Wise Target were two of the owners of Shanghai Sunplus Communication Co., Ltd. (“Sunplus”). Wise Target owned a 75% interest and Amber Link owned a 20% interest in Sunplus. After the Merger, T-Bay indirectly owned a 95% interest in Sunplus. In March 2009, Wise Target transferred all its holdings (75%) in Sunplus to Amber Link for US$2,885,000 (HK$22,500,000). As a result of this transaction, Amber Link directly owned 95% of Sunplus and this transaction had no impact on the Company’s effective holdings of Sunplus. Shanghai Fanna Industrial Design Co., Ltd. owned the remaining 5% interest in Sunplus.

Wise Target was incorporated on April 24, 2002 under the International Business Companies Act in the British Virgin Islands.

Amber Link was incorporated on May 10, 2002 under the International Business Companies Act in the British Virgin Islands. During the year ended March 31, 2007, Amber Link commenced the sales of mobile phones and components.

Sunplus was established on October 17, 2002 under the laws of the People’s Republic of China (“PRC”) as a Sino-foreign joint venture specialized in the development, production and sales of electronic telecommunication devices. Sunplus commenced operations on May 1, 2003. At June 30, 2009, Sunplus has approximately 80 staff, mostly engineers and software programmers.

On February 12, 2007, Sunplus established a wholly-owned subsidiary, Zhangzhou JiaXun Communication Facility Co., Ltd. (“Zhangzhou JiaXun”) under the laws of the PRC. Zhangzhou JiaXun is an investment holding company. On April 9, 2009, Sunplus disposed of Zhangzhou JiaXun to Qiaoxing Telecommunication Industry Company Limited (“QiaoXing Telecom”), a third party, at a consideration of US$731,000 (RMB5,000,000).

On March 19, 2007, Sunplus and Zhangzhou JiaXun acquired 80% and 20%, respectively, of Fujian Qiaoxing Industry Co., Ltd. (“Fujian Qiaoxing”).

On March 20, 2009, Sunplus disposed of its 80% interest in Fujian Qiaoxing to Qiaoxing Telecom at a consideration of US$12,230,000 (RMB84,000,000).

F-6

Page 9 of 34

As of June 30, 2009, the Group structure is as follows:-

2. Summary of Significant Accounting Policies

(a) Basis of Preparation

The accompanying unaudited consolidated financial statements of T-Bay and its subsidiaries (collectively referred to as the “Group”) have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared with accounting principles generally accepted in the United States have been condensed or omitted pursuant to the Securities and Exchange Commission’s rules and regulations. In the opinion of management, these unaudited consolidated interim financial statements include all adjustments and disclosures considered necessary to a fair statement of the results for the interim period presented. All adjustments are of a normal recurring nature. These unaudited consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements of T-Bay for the year ended March 31, 2009 and notes thereto contained in the Form 10-K as filed with the Securities and Exchange Commission. The results of operations for the three months ended June 30, 2009 are not necessarily indicative of the results for the full fiscal year ending March 31, 2010.

(b) Basis of Consolidation

The unaudited consolidated balance sheet as of June 30, 2009 and the unaudited consolidated statement of operations for the three months ended June 30, 2009 include T-Bay, Wise Target, Amber Link and Sunplus. The unaudited consolidated statement of operations for the three months ended June 30, 2008 also included Zhangzhou JiaXun and Fujian Qiaoxing.

As mentioned in Note 1, Zhangzhou JiaXun was disposed of on April 9, 2009, therefore, the financial position of Zhangzhou JiaXun has been presented as assets of discontinued operations as of March 31, 2009.

F-7

Page 10 of 34

Basic (loss)/earnings per share is computed by dividing the (loss)/earnings for the period by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution of securities by including other potential common stock, including stock options and warrants, in the weighted average number of common shares outstanding for the period, if dilutive. There are no common stock equivalents outstanding for any period presented.

3. Property, Plant and Equipment, Net

	JUNE 30, 2009		March 31, 2009
	US$’000		US$’000
	(Unaudited)		(Audited)
Cost
Machinery	$	4,776	$	4,859
Office equipment		138		138
Motor vehicles		56		56
		4,970		5,053
Accumulated depreciation
Machinery		2,575		2,426
Office equipment		101		95
Motor vehicles		41		39
		2,717		2,560
Carrying value
Machinery		2,201		2,433
Office equipment		37		43
Motor vehicles		15		17
	$	2,253	$	2,493

4. Intangible Assets, Net

Changes in the carrying amount of intangible assets for the three months ended June 30, 2009 were as follows:

	Software			Patent			Total
	US$’000			US$’000			US$’000
Cost:
Balance, March 31, 2009 and June 30, 2009	$	183		$	4		$	187

Less: Accumulated amortisation
Balance, March 31, 2009		(119	)		(3	)		(122	)
Amortisation expenses		(6	)		-			(6	)

Balance, June 30, 2009		(125	)		(3	)		(128	)

Net balance, June 30, 2009	$	58		$	1		$	59

Amortization expense for each of the three months ended June 30, 2009 and 2008 was approximately $ 6,000 and $9,000, respectively. The estimated amortization expense for the nine months ending March 31, 2010 and the four years ending March 31, 2011, 2012, 2013 and 2014 amounts to approximately US$17,000, US$22,000, US$18,000, US$2,000 and US$ nil, respectively.

F-8

Page 11 of 34

5. Income Taxes

Amber Link and Wise Target are not subject to income taxes in any tax jurisdiction.

No provision for current income tax for T-Bay has been made as it incurred a loss for each of the three months ended June 30, 2009 and 2008, respectively.

Sunplus is subject to PRC Income Tax. Pursuant to the PRC Income Tax Laws, the prevailing statutory rate of enterprise income tax is 25%.

Zhangzhou JiaXun and Fujian Qiaoxing were inactive during each of the period ended June 30, 2009 and 2008, respectively.

A reconciliation between taxes computed at the United States statutory rate of 34% and the Group’s effective tax rate is as follows:-

	THREE MONTHS ENDED JUNE 30,
	2009			2008
	US$’000			US$’000

(Loss)/income before income tax	$	(4,981	)	$	4,447

Income tax (benefit)/expense on pretax income at statutory rate		(1,694	)		1,512
Effect of different tax rates of subsidiary operating in other jurisdictions		1,111			(625	)
Tax effect of non-taxable income		-			(56	)
Change in valuation allowance		583			25
Under-provision in prior period		7			-

Income tax	$	7		$	856

As of June 30, 2009, T-Bay had accumulated net operating loss carryforwards for United States federal tax purposes of approximately US$5,650,000, that are available to offset future taxable income. Realization of the net operating loss carryforwards is dependent upon future profitable operations. In addition, the carryforwards may be limited upon a change of control in accordance with Internal Revenue Code Section 382, as amended. Accordingly, management has recorded a valuation allowance to reduce deferred tax assets associated with the net operating loss carryforwards to zero at June 30, 2009. The net operating loss carryforwards expire in years 2012 through 2029.

As of June 30, 2009, deferred tax assets consist of:-

	JUNE 30, 2009
	US$’000

Net operating loss carryforwards	$	5,010
Less: valuation allowance		(5,010	)
	$	-

F-9

Page 12 of 34

6. Concentrations and Credit Risk

The Group operates principally in the PRC (including Hong Kong) and grants credit to its customers in this geographic region. Although the PRC is economically stable, it is always possible that unanticipated events in foreign countries could disrupt the Group’s operations.

Financial instruments that potentially subject the Group to a concentration of credit risk consist of cash, accounts and notes receivable.

At June 30, 2009 and March 31, 2009, the Group had credit risk exposure of uninsured cash in banks of approximately US$ 15,377,000 and US$20,493,000, respectively.

A substantial portion of revenue was generated from one group of customers for the three months ended June 30, 2009 and 2008.

The net sales to customers representing at least 10% of net total sales are as follows:-

	THREE MONTHS ENDED JUNE 30,
	2009				2008
	US$’000		%		US$’000		%

Customer A	$	1,561		17	$	837		8
Customer C		920		10		571		5
Customer D		856		9		1,997		18
Customer E		-		-		2,181		20
Customer F		-		-		2,021		18
Customer G*		1,806		19		814		7
Customer H*		1,907		20		-		-
Customer I		1,248		13		-		-
Customer group A*		3,713		39		814		7

*At June 30, 2009 and March 31, 2009, this group of customers accounted for 23% and 15%, respectively, of accounts receivable. The accounts receivable have repayment terms of not more than twelve months. The Group does not require collateral to support financial instruments that are subject to credit risk.

The following customers had balances greater than 10% of the total accounts receivable as of June 30, 2009 and March 31, 2009:

	JUNE 30, 2009				MARCH 31, 2009
	US$’000		%		US$’000		%

Customer A	$	4,628		16	$	3,505		16
Customer B		2,485		9		2,762		12
Customer C		3,781		13		3,219		14
Customer D		2,722		10		2,241		10
Customer E		2,625		9		2,808		13
Customer G*		4,005		14		2,551		11
Customer group A*		6,411		23		3,261		15

* Customer Group A includes customers G and H.

F-10

Page 13 of 34

7. Retirement and Welfare Benefits

The full-time employees of the PRC subsidiaries are entitled to staff welfare benefits including medical care, casualty, housing benefits, education benefits, unemployment insurance and pension benefits through a PRC government-mandated multi-employer defined contribution plan. The PRC subsidiaries are required to accrue the employer-portion for these benefits based on certain percentages of the employees’ salaries. The total provision for such employee benefits was US$41,000 and US$83,000 for the three months ended June 30, 2009 and 2008, respectively. The PRC subsidiaries are required to make contributions to the plans out of the amounts accrued for all staff welfare benefits except for education benefits. The PRC government is responsible for the staff welfare benefits including medical care, casualty, housing benefits, unemployment insurance and pension benefits to be paid to these employees.

8. Related Party Transactions

The Group engages in business transactions with the following related parties:

a. Li Xiaofeng, a director and stockholder of T-Bay.

b. Li Meilian, a stockholder of T-Bay.

The Group has the following transactions and balances with related parties:-

	JUNE 30, 2009		MARCH 31, 2009
	US$’000		US$’000
	(Unaudited)		(Audited)

Other payable – Li Meilian	$	285	$	285

Long-term liabilities
Other payable – Li Meilian	$	3,482	$	3,482
Other payable – Li Xiaofeng		773		773
	$	4,255	$	4,255

The balances have no stated terms for repayment and are not interest bearing. The payables to Li Meilian and Li Xiaofeng are not repayable within the next twelve months.

9. Commitments and Contingencies

a. As of June 30, 2009, Sunplus leased office premises and staff quarters under several agreements expiring from 2010 to 2012.

Rental expenses for the three months ended June 30, 2009 and 2008 amounted to US$22,000 and US$95,000, respectively, and are included in general and administrative expenses in the consolidated statements of operations and comprehensive income.

The future minimum lease payments under the above-mentioned leases as of June 30, 2009 are as follows:-

Year Ending March 31,	US$’000

2010	$	43
2011		38
2012		38
Total	$	119

F-11

Page 14 of 34

b.	As of June 30, 2009, the Group had capital commitments in relation to acquisition of intangible assets of US$27,000.

10. Disposal of a subsidiary

On April 9, 2009, Sunplus disposed of its 100% interest in Zhangzhou JiaXun to Qiaoxing Telecom at a consideration of US$731,000 (RMB5,000,000).

Disposal of subsidiary	April 9, 2009
	US$’000

Net assets disposed:-
Investment at cost	$	585
Other receivables		83
Due from minority shareholder		59
Cash and bank balances		1

Net assets disposed		728

Impairment		(4	)

Assets of discontinued operations		724
Consideration satisfied by cash		731

Gain on disposal of a subsidiary	$	7

An analysis of the net inflow of cash and cash equivalents in respect of the disposal of Zhangzhou Jiaxun is as follows:-

	US$’000
Cash and bank balances disposed	$	(1	)
Cash consideration received		731

Net cash inflow	$	730

The carrying values of the assets of the disposal group classified as held for sale as at March 31, 2009 were as follows:

	MARCH 31, 2009
	US$’000
	(Audited)

Investment at cost	$	585
Deposits and other receivables		83
Due from minority shareholder		59
Cash and bank balances		1

		728
Impairment		(4	)

Assets of discontinued operations	$	724

F-12

Page 15 of 34

11. New Accounting Pronouncements

In May 2009, the FASB issued SFAS No. 165 “Subsequent Events”, or SFAS No. 165, which sets forth general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. SFAS No.165 is effective after June 15, 2009. The adoption of SFAS No. 165 had no material effect on the Company’s financial statements. We have evaluated subsequent events through August 14, 2009, the date the consolidated financial statements were issued. We have not identified any items requiring disclosure.

In April 2008, the FASB issued FSP FAS No. 142-3, “Determination of the Useful Life of Intangible Assets” (“FSP FAS No. 142-3”). FSP FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, Goodwill and Other Intangible Assets (“SFAS No. 142”). FSP FAS No. 142-3 is intended to improve the consistency between the useful life of an intangible asset determined under SFAS No. 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS No. 141(R) and other U.S. GAAP. FSP FAS No. 142-3 is effective for fiscal years beginning after December 15, 2008. Early adoption is prohibited. The adoption of SFAS No. 142-3 had no material effect on the Company’s consolidated financial statements.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles”. The statement identifies the sources of accounting principles and the framework to be used in preparation of financial statements of nongovernmental entities. The adoption is not expected to have a material impact on the Company’s consolidated financial statements.

In April 2009, the FASB issued FSP FAS No. 115-2 and FAS No. 124-2, “Recognition of Other-Than- Temporary Impairments (“FSP FAS No. 115-2 and FAS No. 124-2”). FSP FAS No. 115-2 and FAS No. 124-2 amends the other-than-temporary impairment guidance in SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities”, for debt securities and the presentation and disclosure requirements of other-than-temporary impairments on debt and equity securities in the financial statements. FSP FAS No. 115-2 and FAS No. 124-2 are effective for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. The adoption of SFAS No. 115-2 and FAS No. 124-2 had no material effect on the Company’s consolidated financial statements.

In April 2009, the FASB issued FSP No. 157-4 “Determining Whether a Market is Not Active and a Transaction Is Not Distressed”, or FSP No. 157-4. FSP No. 157-4 clarifies when markets are illiquid or that market pricing may not actually reflect the “real” value of an asset. If a market is determined to be inactive and market price is reflective of a distressed price then an alternative method of pricing can be used, such as a present value technique to estimate fair value. FSP No. 157-4 identifies factors to be considered when determining whether or not a market is inactive. FSP No. 157-4 would be effective for interim and annual periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009 and shall be applied prospectively. The adoption of FSP No. 157-4 had no material effect on the Company’s consolidated financial statements.

In April 2009, the FASB issued FSP No. 141R-1 “Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies”, or FSP No. 141R-1. FSP No. 141R-1 amends the provisions in SFAS No. 141 (Revised) for the initial recognition and measurement, subsequent measurement and accounting, and disclosures for assets and liabilities arising from contingencies in business combinations. FSP No. 141R-1 eliminates the distinction between contractual and non-contractual contingencies, including the initial recognition and measurement criteria in SFAS No. 141 (Revised) and instead carries forward most of the provisions in SFAS No. 141 for acquired contingencies. FSP No. 141R-1 is effective for contingent assets and contingent liabilities acquired in evaluating the impact of SFAS No. 141 (Revised). The adoption of SFAS No. 141R-1 had no material effect on the Company’s consolidated financial statements.

F-13

Page 16 of 34

In June 2009, the FASB issued SFAS No. 166 “Accounting for Transfers of Financial Assets – an amendment of FASB Statement No. 140”, or SFAS No. 166. SFAS No. 166 improves the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial statements about a transfer of financial assets; the effects of a transfer on its financial position, financial performance, and cash flows; and a transferor’s continuing involvement, if any, in transferred financial assets. SFAS No. 166 is effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. The Company is currently evaluating the impact of the adoption of SFAS No. 166 on its consolidated financial statements.

In June 2009, the FASB issued SFAS No. 167 “Amendments to FASB Interpretation No. 46(R)”, or SFAS No. 167, which amends FASB Interpretation No. 46 (revised December 2003) to address the elimination of the concept of a qualifying special purpose entity. SFAS No. 167 also replaces the quantitative-based risks and rewards calculation for determining which enterprise has a controlling financial interest in a variable interest entity with an approach focused on identifying which enterprise has the power to direct the activities of a variable interest entity and the obligation to absorb losses of the entity or the right to receive benefits from the entity. Additionally, SFAS No. 167 provides more timely and useful information about an enterprise’s involvement with a variable interest entity. SFAS No. 167 shall be effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. Earlier application is prohibited. The Company is currently evaluating the impact of the adoption of SFAS No. 167 on its consolidated financial statements.

In June 2009, the FASB issued SFAS No. 168 “The FASB Accounting Standards Codification TM and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162”, or SFAS No. 168, which establishes the FASB Accounting Standards Codification as the source of authoritative accounting principles recognized by the FASB to be applied in the preparation of financial statements in conformity with generally accepted accounting principles. SFAS No. 168 explicitly recognizes rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under federal securities laws as authoritative GAAP for SEC registrants. SFAS No. 168 will become effective for financial statements issued for interim and annual periods ending after September 15, 2009. Adoption of SFAS No. 168 is not expected to have a material impact on the Company’s consolidated financial statements.

F-14

Page 17 of 34

ITEM 2.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

The following review concerns the three months ended June 30, 2009, which should be read in conjunction with the financial statements and notes thereto presented in the Form 10-K for the year ended March 31, 2009.

Forward Looking Statements

Certain statements in Management’s Discussion and Analysis (“MD&A”), other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.

Overview

The Company was incorporated under the laws of the State of Utah on August 8, 1984 with the name of "Sharus Corporation" with authorized common stock of 50,000,000 shares with par value of $0.001 per share. On June 13, 1989 the domicile of the Company was changed to the state of Nevada in connection with a name change to "Golden Quest, Inc." On January 7, 2002, the name was changed to "T-Bay Holdings, Inc." as part of a reverse stock split of 400 shares of outstanding stock for one share. On January 17, 2005 the Company carried out a reverse stock split of 20 shares of outstanding stock for one share. After the reverse split, the Company has authorized common stock of 100,000,000 shares common stock and 10,000,000 shares of preferred stock both with par value of $0.001.

On August 1, 2005, the Company entered into an Agreement and Plan of Reorganization (the “Agreement”) between Wise Target International Limited, (“Wise Target”), Amber Link International Limited (“Amber Link”), Ms. Meilian Li and Mr. Xiaofeng Li. Pursuant to the terms of the Agreement, following due diligence, the Company acquired all of the outstanding stock of Wise Target and Amber Link, making them wholly owned subsidiaries of the Company. Wise Target and Amber Link together owned and controlled 95% of Shanghai Sunplus Communication Technology Co., Ltd., (“Sunplus”), a Sino-foreign joint venture. The Agreement required the Company to issue 18,550,000 shares of restricted common stock in exchange for all of the issued and outstanding shares of Wise Target and Amber Link. This transaction was subsequently completed on August 16, 2005.

On March 19, 2007, Sunplus and Zhangzhou JiaXun acquired 80% and 20%, respectively, of Fujian Qiaoxing Industry Co., Ltd. (“Fujian Qiaoxing”). On March 20, 2009, Sunplus disposed of its 80% interest in Fujian Qiaoxing to Qiaoxing Telecommunication Industry Company Limited (“Qiaoxing Telecom”), a third party, at a consideration of $12,230,000 (RMB84,000,000).

In March 2009, Wise Target transferred all its holdings (75%) in Sunplus to Amber Link for $2,885,000 (HK$22,500,000).

On April 9, 2009, Sunplus disposed of Zhangzhou JiaXun to Qiaoxing Telecom, a third party, at a consideration of $731,000 (RMB5,000,000).

We conduct our business through our 95% owned subsidiary, Sunplus, a Sino-foreign joint venture established in China in 2002, which provides a wide span of mobile handset design and other services to leading mobile handset brand owners in China. Sunplus also provides total solution services to its customers, starting from new product concept identification, handset exterior design, hardware and software design, material procurement, production, and after-sale maintenance services. Historically, our customers included multinational brand names such as Motorola, NEC, Siemens, China Telecom, Panasonic and Alcatel. We also conduct our business through Amber Link. Our major customers in China in fiscal year ended March 31, 2009 were Shenzhen Henkai Co. Ltd., Shenzhen Xuanhua Electronic Technology Co. Ltd., Shenzhen Naide Technology Co., Ltd., Beijing Hocom Co., Ltd. and Huizhou QiaoXing Development Co., Ltd.

Page 18 of 34

We focus on the vast wireless telecommunication market in China. By working closely with top technology partners, we provide tailored mobile handset design solution services according to our customers’ specifications. We believe we have strong capabilities to design mobile handsets to support a broad range of wireless communications standards, baseband platforms and components. We also provide production support to facilitate our customers’ manufacturing and supply chain management processes. In addition, our special project teams work closely with our customers to monitor and coordinate the progress of each new design project. To further strengthen our presence in the market, we work with our customers in providing customized handset solutions to mobile service operators. We believe the design solutions and services provided by us can help our customers in enhancing competitive strength and gaining market share.

Services and Products

We seek to maintain and strengthen our position as a provider of high quality mobile handset design services. We tailor-make our services and products based on the requirements of our customers. Our services mainly include:

Design Service

Mobile handset design: We have special project teams to work closely with our customers to monitor and coordinate the progress of each new design project.

Industrial and mechanical design: We design the exterior outlook and mechanical structure of a mobile handset. We adopt the user-orientation design concept and focus our product design on the personality of target end-users.

Hardware design: In addition to the design of the core printed circuit board layout, we have also set up special engineering teams on the design of baseband and radio frequency parts of mobile handsets based on chip platforms.

Software design: We design the software system for the mobile handset and its functional modules. We are capable of developing our own software in man-machine-interface and the driver software for LCD display, camera, harmonic ring tones and MP3 functions.

Auto Mobile wireless device design: In June 2008, we developed a GPS device and Tire Pressure Monitor System (TPMS) sensors. We are capable of designing other devices and systems related to the automobile wireless technology.

Railway wireless system design: We developed GSM-R device and system for railway network. We are capable of developing devices and systems related to railway wireless technology.

Other Design Services: We also provide design services in relation to the design of other electronic devices based on wireless technology, such as design in GPS device and Radio Frequency design.

Production Services

Based on the request of our customers, we also manufacture the components of mobile handsets. We subcontract the production work to third party manufacturers mostly in the Shanghai area. We have a quality assurance team to monitor the production process to ensure the products can meet our quality requirements.

Components: These mainly include printed circuit boards (PCB) and printed circuit board assembly (PCBA). They are the backbones of mobile handsets.

Page 19 of 34

Business Model

We are one of the larger wireless telecommunication design houses in China. We generate our revenue mainly by charging design services fees and royalty fees and by selling mobile phone components.

Revenue from Design Services

We charge design fees directly or indirectly for design solutions or services provided by us. The design fee consists of NRE (non-recurring engineering) fees and royalty fees.

NRE fees are one-off fees for a certain design project. Typically, NRE fee is required before we formally launch the project. We will start the development of a certain solution only if we have received the pre-paid NRE fee. To minimize the operation risk, the NRE fee should be no less than the projected R&D fee for a certain design solution.

We also charge royalty fees based upon the product sales volume of our customers. When the whole handset is sold in the market, we charge royalty fees monthly on every handset manufactured by our customers using our designs. We usually ask for a minimum volume term in our contracts to encourage larger volume order in a certain period of time.

Revenue from Sales of Handsets and Components

We also provide production support to facilitate our customers’ manufacture of mobile handsets and components. By closely working with our OEMs, we manufacture and sell PCBs, PCBAs and handsets to our customers. We are fully responsible for material purchases, cost control and quality control.

Competitive Strengths

Strategic Relationships with Business Partners

As the mobile handset industry is characterized by rapid technological changes, it is essential for us to keep abreast of and have access to the latest technologies by working closely with the world’s leading technology and platform providers. We continue to work closely with VIA Technologies Inc. (VIA), MediaTek Inc., Ltd.(MTK), Anyka Inc.(Anyka), Infineon Inc.(Infineon) as our strategic partners which enables us to expand our product coverage. We believe we are one of the first independent mobile handset design houses in China to work with Skyworks, Inc (Skyworks), which has established a dedicated support team in Shanghai to support us in our design process.

We have also established good relationships with subcontractors which provide production services for mobile phone components.

Quick Market Response

We pursue a market-oriented product development strategy, grasping end-users’ preferences and tastes. Our experience and expertise enables us to complete a design solution in only two to three months, as our goal is to ensure our designs are one step ahead of our competitors and leading market trends.

Strong R&D capability

We have a professional and competent team to handle the wide spectrum of mobile phone design jobs, including industrial design, structural design, electronics design, software design and machine-man interface design. Some of our engineers used to be employed by mobile communication leaders such as Motorola, Siemens or BenQ. Our professional industrial design team won the IF Asia Design Award Winner in 2005.

We are one of few design houses in China that are able to develop new mobile phones based on chip-level modules, which can enhance the flexibility of the product design in terms of handset size and functionalities.

Page 20 of 34

Customized Products and Market Knowledge

We design many of our products based on our customers’ specifications. We work closely with mobile device manufacturers and brand name owners to understand their needs and product roadmaps. We also interface with our customers regularly to understand the mobile handset market, consumer preferences and trends in the industry. This allows us to predict future trends and to assist our customers in the development of new products and functions and the setting of a price range.

Current Business Development

During the three months ended June 30, 2009, we have developed W-CDMA, TDS-CDMA solutions special for China Market. We kept working closely with strategic partners VIA, MTK, Anyka, Infineon, Skyworks and other technology partners. As the telecommunication industry in China was affected by the global financial crisis, we postponed long-term projects.

Products Geographic Coverage

In terms of revenue, over 90% of our mobile handsets designed by us were within the China and Hong Kong markets. The Company did not sell products to consumers directly, but sell through the networks of our customers. According to sales information provided by our customers, products designed or manufactured by us were sold in major cities, secondary cities and small towns throughout China, covering all provinces of China.

Quality Assurance

We believe that a high standard quality management system is crucial for maintaining our reputation. Our quality assurance team monitors hardware, software and mechanical design teams’ performance to ensure strict adherence to the quality standards required by our customers. The team conducts product reliability tests, including accelerated life tests, climatic stress tests and mechanical endurance tests. The team is also responsible for components qualification, prototype quality assurance, and submission of prototypes for FTA (Full Type Approval) and CTA (China Testing Alliance) certifications. In addition, the team collects and organizes all relevant written documents produced and used throughout the design process.

FTA certifies that a mobile handset submitted for testing has passed tests for its reliability and conformance with global standards.

CTA certifies that the use of telecommunication terminal equipment in the national telecommunications network has been approved and complies with the requirements for network access and the national standards established by the Ministry of Information Industry.

Through our quality assurance team, we adopt stringent quality procedures at the design stage, incoming quality assurance of components and parts, assembly testing and final quality testing. Our selection criteria for suppliers include reputation, time to supply, availability of components and parts, etc.

Sales and marketing

Our sales force consists of approximately 15 salespeople and support personnel. Most of them have many years of experience in the telecommunication industry. They are responsible for establishing and maintaining client relationships, trying to fulfill customers’ special needs, and introducing new technologies and applications in the telecommunications field.

Intellectual Property

We believe protection of our intellectual property rights is extremely important for our continuous success. As of June 30, 2009, we have registered 17 patents, of which 15 have been approved. All of them are patents for product appearance. Besides, we have registered six copyrights for software. All of them are games and applications for mobile phone.

Page 21 of 34

Our Competitors

There are more than a hundred mobile phone design houses in China, including market leaders such as China TechFaith Wireless Communication Technology Limited, Shanghai Longcheer Telecommunication Co.,Ltd and SIMCom Information Technology Ltd. Other major design houses include Beijing Tianyu Communication Equipment Co.Ltd, Shanghai WenTai Communication Technology Co., Ltd., Shanghai Huaqi Telecom Technology Co., Ltd., Shenzhen Jinwave Technology Co., Ltd. and Shenzhen Yulong Communication Technology Co., Ltd. We believe Shanghai Longcheer and Shanghai Simcom are our most direct competitors.

Certain of our competitors are substantially larger and have significantly greater financial, marketing, research and development, technological and operating resources and broader product lines than we do.

We think that competition in our markets is based primarily on technology innovation, product performance, reputation, delivery times, customer support and price. We believe we are among the few design houses which are capable of software design and hardware design as well as performing the whole spectrum of design activities and developing functions or applications at chipset-level modules.

THREE MONTHS ENDED JUNE 30, 2009 COMPARED TO THREE MONTHS ENDED JUNE 30, 2008

Overview

For the three months ended June 30, 2009, our net revenue decreased by $1,707,000 from $11,133,000 for the three months ended June 30, 2008 to $9,426,000, which represented a 15% decrease. Our net results changed from a profit of $3,453,000 to a loss of $4,873,000. We recorded a loss per share of $0.16 for the three months ended June 30, 2009, compared to earnings per share of $0.11 for the three months ended June 30, 2008.

Net Revenue

	Three months ended June 30,
(in thousand US dollars)				2009					2008
	Growth%			Amount		%			Amount		%
Sales of mobile phone components		37	%		9,221		98	%		6,731		60	%
Revenue from design services		-95	%		205		2	%		4,402		40	%
NET REVENUE		-15	%		9,426					11,133

Our net revenue was $9,426,000 for the three months ended June 30, 2009, a decrease of $1,707,000, or 15%, from $11,133,000 for the same period in the previous year. Revenue from sales of mobile phone components was $9,221,000 compared to $6,731,000 in the same period of the previous fiscal year, representing a 37% increase. Revenue from design services decreased to $205,000 from $4,402,000 in the same period of the previous fiscal year, representing a 95% decrease.

Our net revenue decrease mainly resulted from the decrease in design services, which was partially compensated by an increase in sales of mobile phone components. As a result, the percentage of our revenue from sales of mobile phone components increased significantly, as compared with the same period last year.

For the three months ended June 30, 2009, revenue from design services represented 2% of total revenue, while revenue from sales of mobile phone components was 98%, compared to 40% from design services and 60% from sales of mobile phone components in the three months ended June 30, 2008.

Detailed information on sale of mobile phone components

Sales of mobile phone components (PCB and PCBA, the key components in the manufacture of mobile handsets) increased from $6,731,000 to $9,221,000, representing a 37% increase. The increase was largely the result of the transfer of orders from design services to mobile phone components. For customers who would like to delay their cash outflow to relieve the strain on their finances, they would buy mobile phone components rather than design services.

Page 22 of 34

We design and manufacture PCB and provide PCBA according to our customers’ specifications. Besides revenue from selling PCB and PCBA to our customers, we charged royalty fees by the number of PCB and PCBA we provided. We manufactured more PCB and PCBA for our customers in the three months ended June 30, 2009 when compared with the three months ended June 30, 2008.

Detailed information on revenue from design services

Revenue from design services decreased from $4,402,000 for the three months ended June 30, 2008 to $205,000, representing a 95% decrease. In the three months ended June 30, 2009, there was a drastic reduction of customer orders for design services. As a result of the global financial crisis, demand in the Mainland China market, as well as the overseas market, has shrunk since the second half of the fiscal year ended March 31, 2009. Also, since customers would like to delay their cash outflow to relieve the strain on their finances, they would buy mobile phone components rather than design services.

Cost of Revenue

For the three months ended June 30, 2009, cost of revenue increased to $8,815,000 from $6,166,000 for the three months ended June 30, 2008, representing a 43% increase. Cost of revenue primarily consisted of purchase cost of raw and processed materials, costs of salaries of engineers and designers, and research and development (“R&D”) expenses. The increase was largely the result of the transfer of orders from design services, for which cost of revenue is relatively low, to mobile phone components, for which cost of revenue is relatively high.

Gross Profit

Our gross profit was $611,000 for the three months ended June 30, 2009 compared to $4,967,000 for the three months ended June 30, 2008, representing an 88% decrease. The decrease in gross profit was mainly attributable to the significant decrease in revenue from design services with high profit margin.

Operating Expenses

Operating expenses consisted of selling expenses and general and administrative (G&A) expenses. For the three months ended June 30, 2009, operating expenses were $5,620,000, as compared to $794,000 for the three months ended June 30, 2008, representing a 608% increase

Detailed information of operating expenses for the three months ended June 30, 2009 is as follows:

	Three months ended June 30,
(in thousand US dollars)				2009					2008
	Growth%			Amount		% of net revenue			Amount		% of net revenue
G&A expenses		666	%		5,587		59	%		729		6	%
Selling expenses		-49	%		33		1	%		65		1	%
Operating expenses		608	%		5,620		60	%		794		7	%

Operating expenses during the three month ended June 30, 2009 were $5,620,000, or 60% of revenue, compared to $794,000, or 7% of revenue for the three months ended June 30, 2008. The significant increase was mainly attributed to the increase in G&A expenses.

G&A expenses were $5,587,000, or 59% of revenue, compared to $729,000, or 6% revenue for the three months ended June 30, 2008. The significant increase in G&A expenses was mainly due to the increase in allowance for doubtful receivables.

We increased the allowance for doubtful receivables by $4,003,000 for the three months ended June 30, 2009 as compared to $138,000 for the three months ended June 30, 2008. An allowance for doubtful receivables is maintained for all customers based on a variety of factors, including the overall economy and industrial condition, length of time the receivables are past due, significant one-time events and historical experience. For the three months ended June 30, 2009, particular consideration was given to the increased credit risk due to the current economic downturn.

Page 23 of 34

Selling expenses decreased from $65,000 to $33,000. The decrease was mainly attributable to less marketing-related expenses in keeping with a shrinking business.

(Loss) / Income from Operations

Loss from operation was $5,009,000 for the three months ended June 30, 2009, compared to income of $4,173,000 for the same period in the previous year. The decrease was mainly attributable to the decrease of revenue in design service and increase of allowance for doubtful receivables.

Non-controlling Interests

Non-controlling interests represented the portion of (loss) / income of Sunplus that we do not own. For the three months ended June 30, 2009, non-controlling interests were attributable to the 5% of the equity interest of Sunplus owned by Shanghai Fanna.

Income Tax

Sunplus is subject to PRC Enterprise Income Tax. Pursuant to the PRC Income Tax Laws, the prevailing statutory rate of enterprise income tax in Shanghai was 25% as of January 1, 2008. It was 27% prior to January 1, 2008.

For the three months ended June 30, 2009, Sunplus made an income tax provision $7,000, compared to $856,000 in the three months ended June 30, 2008. The decrease was mainly due to the decrease in taxable profits.

Fujian QiaoXing and JiaXun were inactive and were not subject to any income tax in the three months ended June 30, 2009 and 2008.

Net( loss) /Income attributable to common stockholders

As a result of the above items, net loss attributable to common stockholders was $4,873,000 for the three months ended June 30, 2009, as compared to net income attributable to common stockholders of $3,453,000 for the three months ended June 30, 2008. This adverse change was mainly the result of the significant decrease of income from design services and the increase in operating expenses.

(Loss)/earnings per share attributable to common stockholders

We reported loss per share attributable to common stockholders of $0.16, based on 30,088,174 outstanding weighted shares for the three months ended June 30, 2009. Our outstanding common stock was 30,088,174 shares as of June 30, 2009. We do not have any preferred stock issued or outstanding warrants or options.

LIQUIDITY AND CAPITAL RESOURCES

Assets

As of June 30, 2009, the total assets of the Company were $45,734,000 which consisted of $43,422,000 in current assets, $2,253,000 in property, plant and equipment (PPE) and $59,000 in intangible assets.

Liabilities

Our total liabilities as of June 30, 2009 were $6,511,000, which consisted of $2,256,000 in current liabilities and $4,255,000 in long-term liabilities. Long-term liabilities were all liabilities due to shareholders.

Page 24 of 34

Capital Resources

For three months ended June 30, 2009, we were principally engaged in provision of design solutions of wireless communication devices and sales of mobile phone components. We did not declare or pay dividends in the three months ended June 30, 2009.

For the three months ended June 30, 2009, $5,142,000 was used in operating activities and $12,000 was provided by investing activities. Cash and cash equivalents decreased by $5,116,000 to $15,377,000 as of June 30, 2009 from $20,493,000 as of March 31, 2009.

We used $5,142,000 in operating activities for the three months ended June 30, 2009, as compared to $4,038,000 generated from operating activities for the same period in 2008. Net cash flow used in operating activities for the three months ended June 30, 2009 related to net loss adjusted for items not involving movement of cash for the period, augmented mainly by the increase in accounts receivable and the decrease in receipts in advance.

In arriving at the net loss, we made an allowance of $4,003,000 for doubtful debts for the three months ended June 30, 2009, which did not involve any outflow of cash.

Net cash provided by investing activities amounted to $12,000 for the three months ended June 30, 2009. There was no movement of cash relating to investment activities for the three months ended June 30, 2008. Cash provided by investing activities for the three months ended June 30, 2009 was mainly proceeds from the sale of property, plant and equipment.

There was no movement of cash relating to financing activities for the three months ended June 30, 2009.

As of June 30, 2009, we had capital commitments of $27,000 in relation to acquisition of intangible assets.

We believe that our cash holdings are sufficient to support our operations and capital commitments, as well as to meet our working capital needs for the next twelve months.

Off-Balance Sheet arrangements

The Company has not engaged in any off-balance sheet transactions since its inception.

Employees

As of June 30, 2009, we had approximately 80 full-time employees employed in Greater China. From time to time we employ independent contractors to support our production, engineering, marketing, and sales departments

Web Site Access to Our Periodic SEC Reports

You may read and copy any public reports we filed with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site http://www.sec.gov that contains reports and information statements, and other information that we filed electronically.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The majority of our revenues derived and expenses and liabilities incurred are denominated in Chinese Renminbi (“RMB”) with a relatively small amount in Hong Kong dollars (“HK$”) and United States dollars (“US$” or “$”). Thus, our revenues and operating results may be impacted by exchange rate fluctuations in the currencies of China and Hong Kong. We have not tried to reduce our exposure to exchange rate fluctuations by using hedging transactions. However, we may choose to do so in the future. The availability and effectiveness of any hedging transactions may be limited and we may not be able to successfully hedge our exchange rate risks. Accordingly, we may experience economic losses and negative impacts on earnings and equity as a result of foreign exchange rate fluctuations.

Page 25 of 34

ITEM 4T.

CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures.

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are controls and other procedures that are designed to provide reasonable assurance that the information that we are required to disclose in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) as appropriate to allow timely decisions regarding required disclosure.

In connection with the preparation of this Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2009, an evaluation was performed by our management, with the participation of the CEO and CFO, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report.

As previously disclosed under Item 9A (T) “Controls and Procedures” in our Annual Report on Form 10-K for fiscal year ended March 31, 2009, our management concluded that our disclosure controls and procedures were not effective at a reasonable assurance level because of certain material weaknesses in our internal control over financial reporting, including the lack of (i) effective communication of the importance of internal controls over financial reporting throughout the structure of the Company, (ii) an adequate tone set by management around control consciousness, (iii) sufficient in-house capacity to review and supervise the accounting operations, (iv) knowledge of U.S. GAAP and SEC reporting requirements, (v) anti-fraud program designed to detect and prevent fraud (vi) effective risk assessment and management mechanism, and (vii) personnel with an appropriate level of experience, training in our internal audit department.

As a result of the foregoing material weaknesses in our internal control over financial reporting, our management has concluded that our disclosure controls and procedures were not effective as of June 30, 2009.

Each of the control deficiencies described here could result in a misstatement of the aforementioned accounts or disclosures that might result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected. However, giving full consideration to these material weaknesses, we performed adequate analyses and procedures, including among other things, transaction reviews and account reconciliations in order to provide assurance that our unaudited consolidated financial statements included in this Quarterly Report were prepared in accordance with generally accepted accounting principles (“GAAP”) and present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with GAAP. As a result of these procedures, we concluded that the unaudited consolidated financial statements included in this Quarterly Report present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with GAAP.

Change in Internal Controls.

There were no significant changes in our internal controls or other factors that could significantly affect these controls.

PART II - OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

We are not involved in any material pending legal proceedings at this time, and management is not aware of any contemplated proceeding by any governmental authority.

Page 26 of 34

ITEM 1A.

Risk Factors.

Set forth below is a description of factors that may affect our business, results of operations and share price from time to time.

Our sales and profitability depend on the continued growth of the mobile communications industry as well as the growth of the new market segments within that industry in which we have recently invested. If the mobile communications industry does not grow as we expect, or if the new market segments on which we have chosen to focus and in which we have recently invested grow less than expected, or if new faster-growing market segments emerge in which we have not invested, our sales and profitability may be adversely affected.

Our business depends on continued growth in mobile communications in terms of the number of existing mobile subscribers who upgrade or simply replace their existing mobile devices, the number of new subscribers and increased usage. As well, our sales and profitability are affected by the extent to which there is increasing demand for, and development of, value-added services, leading to opportunities for us to successfully market mobile devices that feature these services. These developments in our industry are to a certain extent outside of our control. For example, we are dependent on operators in highly penetrated markets to successfully introduce services that cause a substantial increase in usage of voice and data. Further, in order to support a continued increase in mobile subscribers in certain low-penetration markets, we are dependent on operators to increase their sales volumes of lower-cost mobile devices and to offer affordable rate. If operators are not successful in their attempts to increase subscriber numbers, stimulate increased usage or drive replacement sales, our business and results of operations could be materially adversely affected.

Our industry continues to undergo significant changes. First, the mobile communications, information technology, media and consumer electronics industries are converging in some areas into one broader industry leading to the creation of new type of mobile devices, services and ways to use mobile devices. Second, while participants in the mobile communications industry once provided complete products and solutions, industry players are increasingly providing specific hardware and software layers for products and solutions. As a result of these changes, new market segments within our industry have begun to emerge and we have made significant investments in new business opportunities in certain of these market segments, such as smartphones, imaging, games, music and enterprise mobility infrastructure. However, a number of the new market segments in the mobile communications industry are still in the early states of their development, and it may be difficult for us to accurately predict which new market segments are the most advantageous for us to focus on. As a result, if the segments on which we have chosen to focus grow less than expected, we may not receive a return on our investment as soon as we expect, or at all. We may also forego growth opportunities in new market segments of the mobile communications industry on which we do not focus.

Our results of operations, particularly our profitability, may be adversely affected if we do not successfully manage price erosion related to our products.

In the future, if, for competitive reasons, if we need to lower the selling prices of certain of our products and if we cannot lower our costs at the same rate or faster, this may have a material adverse effect on our business and results of operations, particularly our profitability. To mitigate the impact of product and service mix shifts on our profitability, we implement product segmentation with the aim of designing appropriate features with an appropriate cost basis for each customer segment. Likewise, we endeavor to mitigate the impact on our profitability of price erosion of certain features and functionalities by seeking to correctly time the introduction of new products, in order to align such introductions with declines in the prices of relevant components. We cannot predict with any certainty whether or to what extent we may need to lower prices for competitive reasons again and how successful we will be in aligning our cost basis to the pricing at any given point in time. Price erosion is a normal characteristic of the mobile devices industry, and the products and solutions offered by us are also subject to natural price erosion over time. If we cannot reduce our costs at the same rate, our business may be materially adversely affected.

Page 27 of 34

We must develop or otherwise acquire complex, evolving technologies to use in our business. If we fail to develop these technologies or to successfully commercialize them as new advanced products and solutions that meet customer demand, or fail to do so on a timely basis, it may have a material adverse effect on our business, our ability to meet our targets and our results of operations.

In order to succeed in our markets, we believe that we must develop or otherwise acquire complex, evolving technologies to use in our business. However, the development and use of new technologies, applications and technology platforms for our mobile devices involves time, substantial costs and risks both within and outside of our control. This is true whether we develop these technologies internally, by acquiring or investing in other companies or through collaboration with third parties.

The technologies, functionalities and features on which we choose to focus may not achieve as broad or timely customer acceptance as we expect. This may result from numerous factors including the availability of more attractive alternatives or a lack of sufficient compatibility with other existing technologies, products and solutions. Additionally, even if we do select the technologies, functionalities and features that customers ultimately want, we or the companies that work with us may not be able to bring them to the market at the right time.

Furthermore, as a result of ongoing technological developments, our products and solutions are increasingly used together with components or layers that have been developed by third parties, whether or not we have authorized their use with our products and solutions. However, such components, such as batteries, or layers, such as software applications, may not be compatible with our products and solutions and may not meet our and our customers' quality, safety or other standards. As well, certain components or layers that may be used with our products may enable our products and solutions to be used for objectionable purposes, such as to transfer content that might be hateful or derogatory. The use of our products and solutions with incompatible or otherwise substandard components or layers, or for purposes that are inappropriate, is largely outside of our control and could harm our reputation in the industry.

We need to understand the different markets in which we operate and meet the needs of our customers, which include mobile network operators, distributors, independent retailers and enterprise customers. We need to have a competitive product portfolio, and to work together with our operator customers to address their needs. Our failure to identify key market trends and to respond timely and successfully to the needs of our customers may have a material adverse impact on our market share, business and results of operations.

We serve a diverse range of customers, ranging from mobile network operators, distributors, independent retailers to enterprise customers, across a variety of markets. In many of these markets, the mobile communications industry is at different stages of development, and many of these markets have different characteristics and dynamics, for example, in terms of mobile penetration rates and technology, feature and pricing preferences. Establishing and maintaining good relationships with our customers and understanding trends and needs in their markets require us to constantly obtain and evaluate a complex array of feedback and other data. We must do this efficiently in order to be able to identify key market trends and address our customers' needs proactively and in a timely manner. If we fail to analyze correctly and respond timely and appropriately to customer feedback and other data, our business may be materially adversely affected.

Certain mobile network operators require mobile devices to be customized to their specifications, by requesting certain preferred features, functionalities or design, together with co-branding with the network operator's brand. We believe that customization is an important element in gaining increased operator customer satisfaction and we are working together with operators on product planning as well as accelerating product hardware and software customization programs. These developments may result in new challenges as we provide customized products, such as the need for us to produce mobile devices in smaller lot sizes, which can impede our economies of scale, or the potential for the erosion of the Sunplus brand, which we consider to be one of our key competitive advantages.

In order to meet our customers' needs, we need to introduce new devices on a timely basis and maintain a competitive product portfolio. For us, a competitive product portfolio means a broad and balanced offering of commercially appealing mobile devices with attractive features, functionality and design for all major user segments and price points. If we do not achieve a competitive portfolio, we believe that we will be at a competitive disadvantage, which may lead to lower revenue and lower profits.

Page 28 of 34

The competitiveness of our portfolio is also influenced by the value of the Sunplus brand. A number of factors, including actual or even alleged defects in our products and solutions, may have a negative effect on our reputation and erode the value of the Sunplus brand.

Competition in our industry is intense. Our failure to respond successfully to changes in the competitive landscape may have a material adverse impact on our business and results of operations.

The markets for our products and solutions are intensely competitive. Industry participants compete with each other mainly on the basis of the breadth and depth of their product portfolios, price, operational and manufacturing efficiency, technical performance, product features, quality, customer support and brand recognition. We are facing increased competition from both our traditional competitors in the mobile communications industry as well as a number of new competitors, particularly from countries where production costs tend to be lower. Some of these competitors have used, and we expect will continue to use, more aggressive pricing strategies, different design approaches and alternative technologies than ours. In addition, some competitors have chosen a strategy of focusing on productization based on commercially available technologies and components, which may enable them to introduce products faster and with lower levels of research and development spending than our company.

As a result of developments in our industry, we also expect to face new competition from companies in related industries, such as consumer electronics manufacturers and business device and solution providers, including but not limited to Dell, HP, Microsoft, Nintendo, Palm, Research in Motion and Sony. Additionally, because mobile network operators are increasingly offering mobile devices under their own brand, we face increasing competition from non-branded mobile device manufacturers. If we cannot respond successfully to these competitive developments, our business and results of operations may be materially adversely affected.

Reaching our sales, profitability, volume and market share targets depends on numerous factors. These include our ability to offer products and solutions that meet the demands of the market and to manage the prices and costs of our products and solutions, our operational efficiency, the pace of development and acceptance of new technologies, our success in the business areas that we have recently entered, and general economic conditions. Depending on those factors, some of which we may influence and others of which are beyond our control, we may fail to reach our targets and we may fail to provide accurate forecasts of our sales and results of operations.

A variety of factors discussed throughout these Risk Factors could affect our ability to reach our targets and give accurate forecasts. Although, we can influence some of these factors, some of them depend on external factors that are beyond our control. In our mobile device businesses, we seek to maintain healthy levels of sales and profitability through offering a competitive portfolio of mobile devices, growing faster than the market, working to improve our operational efficiency, controlling our costs, and targeting timely and successful product introductions and shipments. The quarterly and annual sales and operating results in our mobile device businesses also depend on a number of other factors that are not within our control. Such factors include the global growth in mobile device volumes, which is influenced by, among other factors, regional economic factors, competitive pressures, regulatory environment, the timing and success of product and service introductions by various market participants, including network operators, the commercial acceptance of new mobile devices, technologies and services, and operators' and distributors' financial situations. Our sales and operating results are also impacted by fluctuations in exchange rates and at the quarterly level by seasonality. In developing markets, the availability and cost, through affordable tariffs, of mobile phone service compared with the availability and cost of fixed line networks may also impact volume growth.

In our mobile networks business, we also seek to maintain healthy levels of sales and profitability and try to grow faster than the market. Our networks business's quarterly and annual net sales and operating results can be affected by a number of factors, some of which we can influence, such as our operational efficiency, the level of our research and development investments and the deployment progress and technical success we achieve under network contracts. Other relevant factors include operator investment behavior, which can vary significantly from quarter to quarter, competitive pressures and general economic conditions although these are not within our control.

The new business areas that we have entered may be less profitable than we currently foresee, or they may generate more variable operating results than we currently foresee. We expect to incur short-term operating losses in certain of these new business areas given our early stage investments in research and development and marketing in particular. Also our efforts in managing prices and costs in the long-term, especially balancing prices and sales volumes with research and development costs, may prove to be inadequate.

Page 29 of 34

Although we may announce forecasts of our results of operations, uncertainties affecting any of these factors, particularly during difficult economic conditions, render our forecasts difficult to make, and may cause us not to reach the targets that we have forecasted, or to revise our estimates.

Our sales and results of operations could be adversely affected if we fail to efficiently manage our manufacturing and logistics without interruption, or fail to ensure that our products and solutions meet our and our customers' quality, safety and other requirements and are delivered in time.

Our manufacturing and logistics are complex, require advanced and costly equipment and include outsourcing to third parties. These operations are continuously modified in an effort to improve manufacturing efficiency and flexibility. We may experience difficulties in adapting our supply to the demand for our products, ramping up or down production at our facilities, adopting new manufacturing processes, finding the timeliest way to develop the best technical solutions for new products, or achieving manufacturing efficiency and flexibility, whether we manufacture our products and solutions ourselves or outsource to third parties. Such difficulties may have a material adverse effect on our sales and results of operations and may result from, among other things: delays in adjusting or upgrading production at our facilities, delays in expanding production capacity, failure in our manufacturing and logistics processes, failures in the activities we have outsourced, and interruptions in the data communication systems that run our operations. Also, a failure or an interruption could occur at any stage of our product creation, manufacturing and delivery processes, resulting in our products and solutions not meeting our and our customers' quality, safety and other requirements, or being delivered late, which could have a material adverse effect on our sales, our results of operations and reputation and the value of the Sunplus brand.

We depend on our suppliers for the timely delivery of components and for their compliance with our supplier requirements, such as, most notably, our and our customers' product quality, safety and other standards. Their failure to do so could adversely affect our ability to deliver our products and solutions successfully and on time.

Our manufacturing operations depend to a certain extent on obtaining adequate supplies of fully functional components on a timely basis. Our principal supply requirements are for electronic components, mechanical components and software, which all have a wide range of applications in our products. Electronic components include integrated circuits, microprocessors, standard components, memory devices, cameras, displays, batteries and chargers while mechanical components include covers, connectors, key mats and antennas. In addition, a particular component may be available only from a limited number of suppliers. Suppliers may from time to time extend lead times, limit supplies or increase prices due to capacity constraints or other factors, which could adversely affect our ability to deliver our products and solutions on a timely basis. Moreover, even if we attempt to select our suppliers and manage our supplier relationships with scrutiny, a component supplier may fail to meet our supplier requirements, such as, most notably, our and our customers' product quality, safety and other standards, and consequently some of our products are unacceptable to us and our customers, or we may fail in our own quality controls. Moreover, a component supplier may experience delays or disruption to its manufacturing, or financial difficulties. Any of these events could delay our successful delivery of products and solutions, which meet our and our customers' quality, safety and other requirements, or otherwise adversely affect our sales and our results of operations. Also, our reputation and brand value may be affected due to real or merely alleged failures in our products and solutions.

We are developing a number of our new products and solutions together with other companies. If any of these companies were to fail to perform, we may not be able to bring our products and solutions to market successfully or in a timely way and this could have a material adverse impact on our sales and profitability.

We continue to invite the providers of technology, components or software to work with us to develop technologies or new products and solutions. These arrangements involve the commitment by each company of various resources, including technology, research and development efforts, and personnel. Although the target of these arrangements is a mutually beneficial outcome for each party, our ability to introduce new products and solutions that meet our and our customers' quality, safety and other standards successfully and on schedule could be hampered if, for example, any of the following risks were to materialize: the arrangements with the companies that work with us do not develop as expected, the technologies provided by the companies that work with us are not sufficiently protected or infringe third parties' intellectual property rights in a way that we cannot foresee or prevent, the technologies, products or solutions supplied by the companies that work with us do not meet the required quality, safety and other standards or customer needs, our own quality controls fail, or the financial standing of the companies that work with us deteriorates.

Page 30 of 34

Our operations rely on complex and highly centralized information technology systems and networks. If any system or network disruption occurs, this reliance could have a material adverse impact on our operations, sales and operating results.

Our operations rely to a significant degree on the efficient and uninterrupted operation of complex and highly centralized information technology systems and networks, which are integrated with those of third parties. Any failure or disruption of our current or future systems or networks could have a material adverse effect on our operations, sales and operating results. Furthermore, any data leakages resulting from information technology security breaches could also adversely affect us.

All information technology systems are potentially vulnerable to damage or interruption from a variety of sources. We pursue various measures in order to manage our risks related to system and network disruptions, including the use of multiple suppliers and available information technology security. However, despite precautions taken by us, an outage in a telecommunications network utilized by any of our information technology systems, virus or other event that leads to an unanticipated interruption of our information technology systems or networks could have a material adverse effect on our operations, sales and operating results.

Our products and solutions include increasingly complex technology involving numerous new proprietary technologies, as well as some developed or licensed to us by certain third parties. As a consequence, evaluating the protection of the technologies we intend to use is more and more challenging, and we expect increasingly to face claims that we have infringed third parties' intellectual property rights. The use of increasingly complex technology may also result in increased licensing costs for us, restrictions on our ability to use certain technologies in our products and solution offerings, and/or costly and time-consuming litigation. Third parties may also commence actions seeking to establish the invalidity of intellectual property rights on which we depend.

Our products and solutions include increasingly complex technology involving numerous new proprietary technologies, as well as some developed or licensed to us by certain third parties. As the amount of such proprietary technologies needed for our products and solutions continues to increase, the number of parties claiming rights continues to increase and become more fragmented within individual products, and as the complexity of the technology and the overlap of product functionalities increases, the possibility of more infringement and related intellectual property claims against us also continues to increase. The holders of patents potentially relevant to our product and solution offerings may be unknown to us, or may otherwise make it difficult for us to acquire a license on commercially acceptable terms. There may also be technologies licensed to and relied on by us that are subject to claims of infringement or other corresponding allegations by others which could damage our ability to rely on such technologies.

In addition, although we endeavor to ensure that companies that work with us possess appropriate intellectual property rights or licenses, we cannot fully avoid risks of intellectual property rights infringement created by suppliers of components and various layers in our products and solutions or by companies with which we work in cooperative research and development activities. Similarly, we and our customers may face claims of infringement in connection with our customers' use of our products and solutions. Finally, as all technology standards, including those used and relied on by us, include some intellectual property rights, we cannot fully avoid risks of a claim for infringement of such rights due to our reliance on such standards. We believe that the number of third parties declaring their intellectual property to be relevant to these standards is increasing, which may increase the likelihood that we will be subject to such claims in the future.

Any restrictions on our ability to sell our products and solutions due to expected or alleged infringements of third party intellectual property rights and any intellectual property rights claims, regardless of merit, could result in material losses of profits, costly litigation, the payment of damages and other compensation, the diversion of the attention of our personnel, product shipment delays or the need for us to develop non-infringing technology or to enter into royalty or licensing agreements. If we were unable to develop non-infringing technology, or if royalty or licensing agreements were not available on commercially acceptable terms, we could be precluded from making and selling the affected products and solutions. As new features are added to our products and solutions, we may need to acquire further licenses, including from new and sometimes unidentified owners of intellectual property. The cumulative costs of obtaining any necessary licenses are difficult to predict and may over time have a negative effect on our operating results.

Page 31 of 34

In addition, other companies may commence actions seeking to establish the invalidity of our intellectual property, for example, patent rights. In the event that one or more of our patents are challenged, a court may invalidate the patent or determine that the patent is not enforceable, which could harm our competitive position. If any of our key patents are invalidated, or if the scope of the claims in any of these patents is limited by a court decision, we could be prevented from licensing the invalidated or limited portion of our intellectual property rights. Even if such a patent challenge is not successful, it could be expensive and time consuming, divert management attention from our business and harm our reputation. Any diminution of the protection that our own intellectual property rights enjoy could cause us to lose some of the benefits of our investments in R&D, which may have a negative effect on our results of operations.

If we are unable to recruit, retain and develop appropriately skilled employees, we may not be able to implement our strategies and, consequently, our results of operations may suffer.

We must continue to recruit, retain and through constant competence training develop appropriately skilled employees with a comprehensive understanding of our businesses and technologies. As competition for skilled personnel remains keen, we seek to create a corporate culture that encourages creativity and continuous learning. We are also continuously developing our compensation and benefit policies and taking other measures to attract and motivate skilled personnel. Nevertheless, we have encountered in the past, and may encounter in the future, shortages of appropriately skilled personnel, which may hamper our ability to implement our strategies and harm our results of operations.

The global networks business relies on a limited number of customers and large multi-year contracts. Unfavorable developments under such a contract or in relation to a major customer may affect our sales, our results of operations and cash flow adversely.

Large multi-year contracts, which are typical in the networks industry, include a risk that the timing of sales and results of operations associated with these contracts will be different than expected. Moreover, they usually require the dedication of substantial amounts of working capital and other resources, which impacts our cash flow negatively. Any non-performance by us under these contracts may have significant adverse consequences for us because network operators have demanded and may continue to demand stringent contract undertakings such as penalties for contract violations.

Our sales derived from, and assets located in, emerging market countries may be adversely affected by economic, regulatory and political developments in those countries. As sales from these countries represent an increasing portion of our total sales, economic or political turmoil in these countries could adversely affect our sales and results of operations. Our investments in emerging market countries may also be subject to other risks and uncertainties.

We generate sales from and have invested in various emerging market countries. As sales from these countries represent an increasing portion of our total sales, economic or political turmoil in these countries could adversely affect our sales and results of operations. Our investments in emerging market countries may also be subject to risks and uncertainties, including unfavorable taxation treatment, exchange controls, challenges in protecting our intellectual property rights, nationalization, inflation, incidents of terrorist activity, currency fluctuations, or the absence of, or unexpected changes in, regulation as well as other unforeseeable operational risks.

Allegations of health risks from the electromagnetic fields generated by base stations and mobile devices, and the lawsuits and publicity relating to them, regardless of merit, could affect our operations negatively by leading consumers to reduce their use of mobile devices or by causing us to allocate monetary and personnel resources to these issues.

There has been public speculation about possible health risks to individuals from exposure to electromagnetic fields from base stations and from the use of mobile devices. While a substantial amount of scientific research conducted to date by various independent research bodies has indicated that these radio signals, at levels within the limits prescribed by public health authority safety standards and recommendations, present no discernable adverse effect on human health, we cannot be certain that future studies, irrespective of their scientific basis, will not suggest a link between electromagnetic fields and adverse health effects that would adversely affect our sales and share price. Research into these issues is ongoing by government agencies, international health organizations and other scientific bodies in order to develop a better scientific and public understanding of these issues.

Page 32 of 34

Although Sunplus products and solutions are designed to meet all relevant safety standards and recommendations globally, no more than a perceived risk of adverse health effects of mobile communications devices could adversely affect us through a reduction in sales of mobile devices or increased difficulty in obtaining sites for base stations, and could have a negative effect on our reputation and brand value as well as harm our share price.

Changes in various types of regulation in countries around the world could affect our business adversely.

Our business is subject to direct and indirect regulation in each of the countries in which we, and the companies with which we work or our customers do business. As a result, changes in various types of regulations applicable to current or new technologies, products or services could affect our business adversely. For example, it is in our interest that the Federal Communications Commission maintains a regulatory environment that ensures the continued growth of the wireless sector in the United States. In addition, changes in regulation affecting the construction of base stations and other network infrastructure could adversely affect the timing and costs of new network construction or expansion and the commercial launch and ultimate commercial success of these networks.

Moreover, the implementation of new technological or legal requirements, such as the requirement in the United States that all handsets must be able to indicate their physical location, could impact our products and solutions, manufacturing or distribution processes, and could affect the timing of product and solution introductions, the cost of our production, products or solutions as well as their commercial success. Finally, export control, tariff, environmental, safety and other regulation that adversely affects the pricing or costs of our products and solutions as well as new services related to our products could affect our net sales and results of operations. The impact of these changes in regulation could affect our business adversely even though the specific regulations do not always directly apply to us or our products and solutions.

Our stock price has been historically volatile and may continue to be volatile, which may make it more difficult for you to resell shares when you want at prices you find attractive.

The trading price of our ordinary shares has been and may continue to be subject to considerable daily fluctuations. During the three months ended June 30, 2009, the closing sale prices of our ordinary shares on the Over-the-Counter Bulletin Board ranged from $0.21 to $1.01 per share and the closing sale price on August 13, 2009 was $0.21 per share. Our stock price may fluctuate in response to a number of events and factors, such as quarterly variations in operating results, announcements of technological innovations or new products and media properties by us or our competitors, changes in financial estimates and recommendations by securities analysts, the operating and stock price performance of other companies that investors may deem comparable, new governmental restrictions or regulations and news reports relating to trends in our markets. In addition, the stock market in general, and the market prices for China-related and Internet-related companies in particular, have experienced extreme volatility that often has been.

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

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5. OTHER INFORMATION

None.

Page 33 of 34

ITEM 6. EXHIBITS

INDEX TO EXHIBITS

T-BAY HOLDINGS, INC.

31.1	Rule 13a-14 (a)/15d-14 (a) Certification of Chief Executive Officer

31.2	Rule 13a-14 (a)/15d-14 (a) Certification of Chief Financial Officer

32.1	Section 1350 Certification of Chief Executive Officer

32.2	Section 1350 Certification of Chief Financial Officer

SIGNATURES

Pursuant to the requirements of Section 13 of 15(d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	T-BAY HOLDINGS, INC.
	(Registrant)

Date: August 14, 2009	By:	/s/ Xiaofeng Li
		Xiaofeng Li, Chief Executive Officer

Date: August 14, 2009	By:	/s/ Xiangning Qin
		Xiangning Qin, Chief Financial Officer

Page 34 of 34

T BAY HOLDINGS INC 10-Q