UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON, D.C.
20549




FORM 10-Q/A





þ
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
              
              For
      the quarterly period ended March 31,
2008





OR




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




Commission file number:000-1321559


















Jpak
Group, Inc.


(Exact
name of Registrant as specified in its charter)


















Nevada
            
            20-1977020(State
      or Other Jurisdiction of
              Incorporation
      or Organization)
            
            (I.R.S.
      Employer
              Identification
      Number)




15
      Xinghua Road
              Qingdao,
      Shandong Province
              People’s
      Republic of China
            
            266401(Address
      of Principal Executive Offices)
            
            (ZIP
      Code)




(86-532)
84616387


(Registrant’s
telephone number,


including
area code)




________________________________________________________


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








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




Yesx Noo













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. (Check one)




Large
accelerated filero
Accelerated Filero
 Non-accelerated filerx




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




Yeso  Nox




Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date.




On
September 17, 2008 there were 24,805,000 shares of the issuer's common stock,
par value $.0001 per share, outstanding. The issuer also has 5,608,564 shares of
Series A Preferred Stock, par value $.0001 per share, outstanding, which shares
are convertible into on aggregate of 11,217,128 shares of common stock, and 5,000,000 shares of Series
B Convertible Preferred Stock, par value $.0001 per share outstanding, which
shares are convertible into an aggregate of 8,333,333 shares of common
stock.







2







JPAK
GROUP, INC.





INDEX





Page
              NumberPART
      I - FINANCIAL INFORMATION
            
            4Item
      1.
            
            Financial
      StatementsConsolidated
      Balance SheetsMarch
      31, 2007 (unaudited) and June 30, 2007
            
            5Consolidated
      Statements of Operations (unaudited)Three
      months ended March  31, 2008 and 2007
            
            6Consolidated
      Statements of Cash Flows (unaudited)Three
      months ended March 31, 2008 and 2007
            
            7Notes
      to Condensed Consolidated Financial Statements
            
            9Item
      2.
            
            Management’s
      Discussion and Analysis of Financial Condition and Results of Operations
            
            21Item
      3.
            
            Quantitative
      and Qualitative Disclosure About Market Risks
            
            29Item
      4.
            
            Controls
      and Procedures
            
            29PART
      II - OTHER INFORMATION
            
            30Item
      1.
            
            Legal
      Proceedings
            
            30Item
      1.A
            
            Risk
      Factors
            
            30Item
      2.
            
            Unregistered
      Sales of Equity Securities and Use of Proceeds
            
            41Item
      3.
            
            Defaults
      Upon Senior Securities
            
            41Item
      4.
            
            Submission
      of Matters to a Vote of Security Holders
            
            41Item
      5.
            
            Other
      Information
            
            41Item
      6.
            
            Exhibits
            
            41
























3







Explanatory Note:On May 3,
2008, the Board of Directors of Jpak Group, Inc. (“we”, “us”, “our” or the
"Company") concluded that the Company was required to restate its previously
issued audited financial statements for the year ended June 30, 2007, and as a
result, its financial statements for the quarters ending September 31, 2007 and
December 31, 2007. Subsequent to the issuance of the June 30, 2007 financial
statements, management identified various errors in connection with its 2007
financial statements and determined that a restatement was necessary in respect
of the following: revision of reverse acquisition accounting and revision of
capitalized costs relatedto financing
transactions.  As a result of the Board’s decision and the
aforementioned revisions to our financial statements, our previously issued
financial statements for the year ended June 30, 2007 (which were included in
our Registration Statement on Form S-1), and the periods ended September 30,
2007, and December 31, 2007, should no longer be relied
upon.  Accordingly, we filed restated financials for the quarter
ending September 30, 2008 and December 31, 2007 in a 10-Q/A on August 5, 2008
and restated financials for the year ended June 30, 2007 in an amendment to our
S-1 on August 5, 2008.  However,
pursuant to additional SEC comments, management determined that a restatement of
our December 31, 2007 and March 31, 2008 financial statements was necessary in
respect of the following: accounting for the extended term of the Series A and
Series B Warrants issued in the private placement we closed in August 2007 and
the commission paid pursuant to the exercise of the Series J
Warrants.  As a result of the Board’s decision and the aforementioned
revisions to our financial statements, our previously issued financial
statements for the periods ended December 31, 2007 and March 31, 2008, should no
longer be relied upon.  Restated financial statements for the quarter
ending March 31, 2008 are included herein.





PART
I. FINANCIAL INFORMATION




Item
1. Financial Statements





Report of Independent
Registered Public Accounting Firm








To the
Board of Directorsand
Stockholders


JPAK
Group, Inc.








We have reviewed the accompanying
consolidated balance sheets of JPAK Group, Inc. and Subsidiaries (the “Company”)
as of March 31, 2008, and the related consolidated statements of operations and
other comprehensive income for the three-month and nine-month periods ended
March 31, 2008 and 2007 and cash flows for the nine-month periods then ended.
These consolidated financial statements are the responsibility of the company’s
management.





We conducted our reviews in accordance
with the standards of the Public Company Accounting Oversight Board (United
States).  A review of interim financial information consists
principally of applying analytical procedures and making inquiries of persons
responsible for financial and accounting matters.  It is substantially
less in scope than an audit conducted in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the objective of
which is the expression of an opinion regarding the consolidated financial
statements taken as a whole.  Accordingly, we do not express such an
opinion.





Based on our reviews, we are not aware
of any material modifications that should be made to the accompanying
consolidated interim financial statements for them to be in conformity with
accounting principles generally accepted in the United States of
America.











/s/  Patrizio
& Zhao, LLC


Patrizio
& Zhao, LLC


Parsippany,
New Jersey


May 8,
2008


(Except
for Note 1 and 15, as to which


the date
is September 17, 2008)













4


JPAK
GROUP, INC.





CONSOLIDATED
BALANCE SHEETS





(UNAUDITED)





ASSETS





March 31,
            
            
            June 30,2008
            
            
            2007(Restated)
            
            
            (Restated)CURRENT
      ASSETSCash and cash
      equivalents
            
            $
            4,790,573
            
            
            $
            4,938,200Account receivables, net of
      allowance $50,209 and $38,945, respectively
            
            
            9,599,369
            
            
            
            8,583,396Inventory
            
            
            4,529,545
            
            
            
            3,393,896Other receivables
            
            
            1,000,823
            
            
            
            -Prepaid expenses and other
      current assets
            
            
            251,984
            
            
            
            772,792Advance payments
            
            
            425,776
            
            
            
            -Deferred financing costs,
      net
            
            
            -
            
            
            
            405,072Total Current
    Assets
            
            
            20,598,070
            
            
            
            18,093,356PROPERTY
      AND EQUIPMENT, NET
            
            
            11,532,961
            
            
            
            7,935,920Total Assets
            
            $
            32,131,031
            
            
            $
            26,029,276LIABILITIES
      AND STOCKHOLDERS’ EQUITYCURRENT
      LIABILITIESAccounts payable and accrued
      expenses
            
            $
            3,558,752
            
            
            $
            4,634,457Trade notes
    payable
            
            
            1,713,600
            
            
            
            526,000Convertible notes
            
            
            -
            
            
            
            5,500,000Short-term bank
    loans
            
            
            3,570,000
            
            
            
            4,812,900Advanced Payment from
      customer
            
            
            34,063
            
            
            
            -Other payables
            
            
            74,598
            
            
            
            65,378Total Current
      Liabilities
            
            
            8,951,013
            
            
            
            15,538,735LONG-TERM
      DEBT
            
            
            1,361,027
            
            
            
            2,008,893MINORITY
      INTEREST
            
            
            104,958
            
            
            
            -STOCKHOLDERS’
      EQUITYSeries A convertible preferred
      stock, $0.0001 par value, 5,608,564shares authorized,
      issued and outstanding
            
            
            561
            
            
            
            -Common stock, $0.001 par value,
      300,000,000 shares authorized24,505,000 shares
      issued and outstanding
            
            
            24,505
            
            
            
            24,505Series B convertible preferred
      stock, $0.0001 par value, 5,000,000shares authorized,
      issued and outstanding
            
            
            500
            
            
            
            -Allocation
      of Series A Preferred Shares
            
            
            2,484,226Allocation
      of Series B Preferred Shares
            
            
            1,390,853Warrants
            
            
            4,634,677Placement
      Agent Warrants
            
            
            1,172,487Additional paid-in
      capital
            
            
            11,048,604
            
            
            
            5,674,759Retained earnings
            
            
            (1,554,581
            )
            
            
            1,896,256Statutory
reserves
            
            
            348,009
            
            
            
            348,009Accumulated other comprehensive
      income
            
            
            2,164,192
            
            
            
            538,119Total Stockholders’
      Equity
            
            
            21,714,033
            
            
            
            8,481,648Total Liabilities and
      Stockholders’ Equity
            
            $
            32,131,031
            
            
            $
            26,029,276





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


5


JPAK
GROUP, INC.





CONSOLIDATED
STATEMENTS OF OPERATIONS





AND
COMPREHENSIVE INCOME





(UNAUDITED)





Three
      Months Ended
            
            
            Nine
      Months EndedMarch 31,
            
            
            March 31,2008
            
            
            2007
            
            
            2008
            
            
            2007(Restated)
            
            
            (Restated)REVENUE
            
            $
            10,813,896
            
            
            $
            8,145,551
            
            
            $
            26,232,788
            
            
            $
            21,193,911COST
      OF SALES
            
            
            7,876,883
            
            
            
            6,233,657
            
            
            
            19,183,182
            
            
            
            16,363,957GROSS
      PROFIT
            
            
            2,937,013
            
            
            
            1,911,894
            
            
            
            7,049,606
            
            
            
            4,829,954EXPENSESSelling, general and
      administrative
            
            
            1,277,004
            
            
            
            932,014
            
            
            
            4,219,602
            
            
            
            3,386,039Total Expenses
            
            
            1,277,004
            
            
            
            932,014
            
            
            
            4,219,602
            
            
            
            3,386,039INCOME
      FROM OPERATIONS
            
            
            1,660,009
            
            
            
            979,880
            
            
            
            2,830,004
            
            
            
            1,443,915OTHER
      INCOME (EXPENSES)Interest income
            
            
            5,249
            
            
            
            2,250
            
            
            
            37,544
            
            
            
            2,250Interest expense
            
            
            (65,942
            )
            
            
            (95,045
            )
            
            
            (284,318
            )
            
            
            (287,964
            )Other income (expense),
      net
            
            
            (18,393
            )
            
            
            471
            
            
            
            230,890
            
            
            
            126,725Total Other Income
      (Expenses)
            
            
            (79,086
            )
            
            
            (92,324
            )
            
            
            (15,884
            )
            
            
            (158,989
            )INCOME
      BEFORE PROVISIONFOR
      INCOME TAX
            
            
            1,580,923
            
            
            
            887,556
            
            
            
            2,814,120
            
            
            
            1,284,926PROVISION
      FOR INCOME TAX
            
            
            -
            
            
            
            2,378
            
            
            
            -
            
            
            
            262,303NET
      INCOME BEFORE MINORITY INTEREST
            
            
            1,580,923
            
            
            
            885,178
            
            
            
            2,814,120
            
            
            
            1,022,623MINORITY
      INTEREST
            
            
            1,980
            
            
            
            104,157
            
            
            
            -
            
            
            
            126,265NET
      INCOME
            
            
            1,578,943
            
            
            
            781,021
            
            
            
            2,814,120
            
            
            
            896,358Beneficial
      conversion feature related to issuance of Series A convertible preferred
      stock
            
            
            -
            
            
            
            -
            
            
            
            (2,484,226)
            
            
            
            -Beneficial
      conversion feature related to issuance of Series B convertible preferred
      stock
            
            
            -
            
            
            
            -
            
            
            
            (1,390,853)
            
            
            
            -NET
      INCOME / (LOSS) APPLICABLE TO COMMON STOCK HOLDERS
            
            
            1,578,943
            
            
            
            781,021
            
            
            
            (1,060,959
            )
            
            
            896,358OTHER
      COMPREHENSIVE INCOME (LOSS)Foreign currency translation
      adjustment
            
            
            801,923
            
            
            
            136,598
            
            
            
            1,626,073
            
            
            
            98,545COMPREHENSIVE
      INCOME / (LOSS)
            
            $
            2,380,866
            
            
            $
            917,619
            
            
            $
            565,114
            
            
            $
            994,903BASIC
      EARNINGS / (LOSS) PER SHARE
            
            $
            .06
            
            
            $
            .03
            
            
            $
            (.04
            )
            
            $
            .04DILUTED
      EARNINGS/ (LOSS) PER SHARE
            
            $
            .03
            
            
            $
            .03
            
            
            $
            (.02
            )
            
            $
            .04WEIGHTED
      AVERAGESHARES
      OUTSTANDINGBASIC
            
            
            24,505,000
            
            
            
            23,005,000
            
            
            
            24,286,022
            
            
            
            23,005,000DILUTED
            
            
            46,903,748
            
            
            
            23,005,000
            
            
            
            44,576,470
            
            
            
            23,005,000


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


6














JPAK
GROUP, INC.





CONSOLIDATED
STATEMENTS OF CASH FLOWS





FOR
THE NINE MONTHS ENDED MARCH 31,





(UNAUDITED)





2008
            
            
            2007(Restated)
            
            
            (Restated)CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      Income
            
            $
            2,814,120
            
            
            $
            896,358Adjustments
      to reconcile net income to net cashProvided
      (used) by operating activities:Bad
      debt expense
            
            
            7,521
            
            
            
            31,372Minority interest
            
            
            -
            
            
            
            126,265Depreciation and
      amortization
            
            
            722,211
            
            
            
            558,230Loss on disposal of fixed
      assets
            
            
            -
            
            
            
            171,948Changes in assets and
      liabilities:Account
      receivables
            
            
            (271,952
            )
            
            
            2,165,161Inventory
            
            
            (801,688
            )
            
            
            (961,410
            )Restricted
      cash for trade notes repayments
            
            
            -
            
            
            
            961,996Other
      receivables
            
            
            (950,642
            )
            
            
            86,883Advance
      payments
            
            
            (404,428
            )
            
            
            -Prepaid
      expenses and other current assets
            
            
            536,561
            
            
            
            (55,725
            )Due
      from shareholders
            
            
            -
            
            
            
            (97,106
            )Accounts
      payable and accrued expenses
            
            
            (1,335,844
            )
            
            
            (1,291,987
            )Advanced
      payment from customers
            
            
            32,355
            
            
            
            -Other
      payables
            
            
            3,421
            
            
            
            (2,579,021
            )Total Adjustments
            
            
            (2,462,485
            )
            
            
            (883,394
            )Net Cash Provided (Used) By
      Operating Activities
            
            $
            351,635
            
            
            
            12,964CASH
      FLOWS FROM INVESTING ACTIVITIESAcquisition of property and
      equipment
            
            
            (2,761,488
            )
            
            
            (1,739,421
            )Acquisition of construction in
      progress
            
            
            (679,820
            )
            
            
            -Cash acquired from the
      subsidiary
            
            
            99,695
            
            
            
            -Net Cash Provided (Used) By
      Investing Activities
            
            
            (3,341,613
            )
            
            
            (1,739,421
            )CASH
      FLOWS FROM FINANCING ACTIVITIESTrade notes
    payable
            
            
            1,085,120
            
            
            
            (850,564
            )Proceeds from capital
      contribution
            
            
            3,976,724
            
            
            
            234,474Proceeds from short term bank
      loans
            
            
            -
            
            
            
            1,496,350Repayment of bank
      loans
            
            
            (2,352,778
            )Net Cash Provided (Used) By
      Financing Activities
            
            
            2,709,066
            
            
            
            880,260EFFECT
      OF FOREIGN CURRENCY TRANSLATION ON CASH
            
            
            133,285
            
            
            
            28,835NET
      DECREASE IN CASH AND CASH EQUIVALENTS
            
            
            (147,627
            )
            
            
            (817,362
            )CASH
      AND CASH EQUIVALENTS – BEGINNING
            
            
            4,938,200
            
            
            
            1,289,995CASH
      AND CASH EQUIVALENTS – ENDING
            
            $
            4,790,573
            
            
            $
            472,633











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


7




JPAK
GROUP, INC.
 CONSOLIDATED
STATEMENT OF STOCKHOLDERS’ EQUITY
 FOR
THE NINE MONTHS ENDED MARCH 31, 2008
 (UNAUDITED)
 
 Common
      Stock
              Series
      A
                Convertible
                Preferred
      Stock
              Series
      B
                Convertible
                Preferred
      Stock
              Allocation
      of
                Series
      A
                Preferred
              Allocation
      of
                Series
      B
                Preferred
              
              Placement
                Agent
              Commission
                Of
      Series A
                Preferred
              Commission
                Of
      Series B
                Preferred
              Additional
      Paid-in Capital
              Statutory
                Reserve
              Retained
                Earnings
              Accumulated
                other
                Comprehensive
                Income
              Total
                Stockholders’
                EquityShares
              Par Value
              Shares
              Par Value
              Shares
              Par Value
              Shares
              Shares
              Warrants
              Warrants
              Shares
              SharesBalance
      at June 30, 2007
              23,005,000
              $23,005
              -
              $             -
              -
              $      -
              $      -
              $    -
              $     -
              $       -
              $         -
              
              $
      5,676,259
              $348,009
              $1,896,256
              $  538,119
              $ 8,481,648Common stock issued in conjunction with RX staffing
      recapitalization
              1,500,000
              $1,500
              -
              $               -
              -
              $  
         -
              $ 
          -
              $    -
              $    -
              $    
         -
              $    
          -
              
              $
      (1,500)
              $    -
              $     -
              $     -
              $     -Proceeds
      of Preferred Shares allocated on 9 Aug 2007
              -
              -
              -
              -
              -
              -
              $2,484,226
              -
              $2,327,600
              $
      332,937
              $  355,237
              
              ($5,500,000)
              -
              -
              -
              -Proceeds of Preferred Shares allocated on 28 Dec 2007
              -
              -
              -
              -
              -
              -
              -
              $
      1,390,853
              $2,307,078
              $  839,550
              
              $
      462,519
              ($5,000,000)
              -
              -
              -
              -Series
      A Convertible Preferred Stock
              -
              -
              5,608,564
              $   561
              -
              -
              -
              -
              -
              -
              -
              
              
              
              -
              -
              $   561Series
      B Convertible Preferred Stock
              -
              -
              -
              -
              5,000,000
              $
      500
              -
              -
              -
              -
              -
              
              
              
              -
              -
              $   500Capital
      contribution
              -
              -
              -
              -
              -
              -
              -
              -
              -
              -
              -
              
              $11,181,010
              -
              ($
      2,389,878)
              -
              $8,791,132Net income
              -
              -
              -
              -
              -
              -
              -
              -
              
              -
              -
              
              -
              -
              2,814,120
              -
              2,814,120Other comprehensive
                Income
              -
              -
              -
              -
              -
              -
              -
              -
              -
              -
              -
              
              -
              -
              -
              $1,626,073
              $
      1,626,073Beneficial conversion feature related to issuance of Series A convertible
      Preferred Stock
              -
              -
              -
              -
              -
              -
              -
              -
              -
              -
              -
              
              $2,484,226
              -
              ($2,484,226)
              -
              -Beneficial conversion feature related to issuance of Series B convertible
      Preferred Stock
              -
              -
              -
              -
              -
              -
              -
              -
              -
              -
              -
              
              $1,390,853
              -
              ($1,390,853)
              -
              -Balance
      at March 31, 2008 (unaudited)
              24,505,000
              $24,505
              5,608,564
              $   561
              5,000,000
              $   500
              $
      2,484,226
              $
      1,390,853
              $4,634,677
              $1,172,487
              $    355,237
              $  462,519
              $10,230,848
              $348,009
              ($1,554,581)
              $2,164,192
              $21,714,033


8


JPAK
GROUP, INC.





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





MARCH
31, 2008 AND 2007





(UNAUDITED)





NOTE
1 – ORGANIZATION AND NATURE OF BUSINESS





JPAK
Group, Inc. (Formerly Rx Staffing Inc.), a public shell company as defined in
Rule 12b-2 of the Exchange Act of 1934, established under the laws of Nevada on
December 6, 2004. The accompanying consolidated financial statements include the
financial statements of JPAK Group, Inc. JPAK Group, Inc. and its subsidiaries
(the “Company”). The Company’s primary business is to print and produce
packaging products for sale to the beverage and other industries.





On August
9, 2007, Rx Staffing Inc. (“Rx Staffing) completed a reverse acquisition of JPAK
Group Co., Ltd., (“JPAK”), which was incorporated in the Cayman Islands on June
22, 2006. To accomplish the exchange of shares Rx Staffing issued 23,005,000
shares of common stock on a one to one ratio for a 100% equity interest in JPAK,
per the terms of the Share Exchange and Bill of Sale of assets of Rx Staffing
and Shaun Jones. Rx Staffing was delivered with zero assets and zero liabilities
at time of closing. Following the reverse acquisition, Rx Staffing changed the
name to JPAK Group, Inc. The transaction was regarded as a reverse merger
whereby JPAK was considered to be the accounting acquirer as its shareholders
retained control of RX Staffing after the exchange. Although the Company is the
legal parent company, the share exchange was treated as a recapitalization of
JPAK. Thus, JPAK is the continuing entity for financial reporting purposes. The
Financial Statements have been prepared as if JPAK had always been the reporting
company and then on the share exchange date, had changed its name and
reorganized its capital stock.





In
September 2006, JPAK acquired 100% interest in Grand International Industrial
Ltd. which was incorporated on August 4, 2006, in the city of Hong Kong, the
People’s Republic of China (“PRC”). In August 2006, Grand International acquired
88.23% interest in Qingdao Renmin, which was incorporated in May 2001 in the
city of Qingdao, the People’s Republic of China. On July 3, 2007, Grand
International acquired the remaining 11.77% interest in Qingdao Renmin. The
consolidated financial statements reflect all predecessor statements of income
and cash flow from the inception of Qingdao Renmin in August 2006. In October
2007, Qingdao Renmin invested in Qingdao Delikang Packing Machinery Co., Ltd.,
(“Qingdao Delikang”), a joint venture with Xi’an Heiniu Machinery, Co. Qingdao
Renmin acquired 51% interest of Qingdao Delikang.





Substantially
all of the Group’s business is conducted through Qingdao Renmin, an operating
subsidiary established in the Peoples Republic of China, in which the Company
indirectly holds a 100% interest.








NOTE
2 – INTERIM FINANCIAL STATEMENTS





These
interim financial statements should be read in conjunction with the audited
financial statements for the years ended June 30, 2007 and 2006, as not all
disclosures required by generally accepted accounting principles for annual
financial statements are presented. The interim financial statements follow the
same accounting policies and methods of computations as the audited financial
statements for the years ended June 30, 2007 and 2006.





NOTE
3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





The
accompanying un-audited financial statements have been prepared in accordance
with generally accepted accounting principles (GAAP) applicable to interim
financial information and with the requirements of Form 10-Q and Rule 10-01 of
Regulation S-X of the Securities and Exchange Commission. Accordingly, they do
not include all of the information and footnotes required by accounting
principles generally accepted in the United States of America for complete
financial statements. Interim results are not necessarily indicative of results
for a full year. In the opinion of management, all adjustments considered
necessary for a fair presentation of the financial position and the results of
operations and cash flows for the interim periods have been
included.





EARNINGS
PER SHARE





The
Company presents earnings per share on a basic and diluted basis. Basic earnings
per share has been computed by dividing net earnings by the weighted average
number of common shares outstanding. Diluted earnings per share has been
computed by dividing net earnings plus convertible preferred dividends and
interest (after-tax) on convertible debt by the weighted average number of
common shares outstanding including the dilutive effect of equity securities.
The weighted average number of shares calculated for Diluted EPS excludes the
potential common stock that would be exercised under the options and warrants
granted to officers because the inclusion of the potential shares from these
options and warrants would cause an antidilutive effect by increasing the net
earnings
per share.


9





All share
and per share data have been adjusted to reflect the recapitalization of the
Company after the share exchange agreement with Rx Staffing.












Three Months Ended March
31,2008
            
            
            2007Net
      income
            
            $
            1,578,943
            
            
            $
            781,021Weighted
      average common shares(denominator
      for basic income per share)
            
            
            24,505,000
            
            
            
            23,005,000Effect
      of diluted securities:Convertible
      preferred stock
            
            
            10,608,564
            
            
            
            -Warrants
            
            
            11,790,184
            
            
            
            -Weighted
      average common shares(denominator
      for diluted income per share)
            
            
            46,903,748
            
            
            
            23,005,000Basic
      net income per share
            
            $
            0.06
            
            
            $
            0.03Diluted
      net income per share
            
            $
            0.03
            
            
            $
            0.03





Nine Months Ended March 31,2008
            
            
            2007Net
      income
            
            $
            2,814,120
            
            
            $
            896,358Beneficial
      conversion feature related to issuanceof
      Series A convertible preferred stock
            
            
            (2,484,226
            )
            
            
            -Beneficial
      conversion feature related to issuanceof
      Series B convertible preferred stock
            
            
            (1,390,853
            )
            
            
            -Net
      income (loss) applicable to common stockholders
            
            
            (1,060,959
            )
            
            
            896,358Weighted
      average common shares(denominator
      for basic income per share)
            
            
            24,286,022
            
            
            
            23,005,000Effect
      of diluted securities:Convertible
      preferred stock
            
            
            6,525,593
            
            
            
            -Warrants
            
            
            13,764,855
            
            
            
            -Weighted
      average common shares(denominator
      for diluted income per share)
            
            
            44,576,470
            
            
            
            23,005,000Basic
      net income (loss) per share
            
            $
            ( 0.04
            )
            
            $
            0.04Diluted
      net income (loss) per share
            
            $
            ( 0.02
            )
            
            $
            0.04





NOTE
4 – INVENTORY





Inventory
at March 31, 2008 and June 30, 2007 consisted of the following:





March 31,
            
            
            June 30,2008
            
            
            2007Finished
      products
            
            $
            935,574
            
            
            $
            571,357Raw
      materials
            
            
            2,954,803
            
            
            
            2,206,420Parts
      and supplies
            
            
            74,562
            
            
            
            41,280Work
      in process
            
            
            564,606
            
            
            
            574,839Total
            
            $
            4,529,545
            
            
            $
            3,393,896






10






NOTE
5 – RELATED PARTY TRANSACTIONS





Viewed
from the perspective of the financial statements of the reporting entity, a
related party may be any of the following:


·
              Affiliates


·
              Principal owners and close
      kin


·
              Management
      and close kin


·
              Parents
      and subsidiaries


·
              Equity
      method investors and investees


·
              Trusts
      for the benefit of employees


·
              Any
      other party that has the ability to influence the management or operating
      policies of the reporting enterprise significantly, to the extent that it
      may be prevented from fully pursuing its own separate
      interests.


·
              De
      facto agents of the entity


The
Company did not have any related party transactions accordingly.








NOTE
6 – DEFERRED FINANCING COSTS





Costs
related to obtaining the convertible note are capitalized and amortized over the
term of the related debt using the straight-line method, which is 12 months. The
remaining balance was allocated to issuance costs and netted with additional
paid-in capital as the note was converted in August 2007 per Note
8.  Deferred financing costs at March 31, 2008 and June 30, 2007 were
as follows:





March 31,
            
            
            June 30,2008
            
            
            2007Deferred
      financing costs
            
            $
            460,017
            
            
            $
            460,017Less:
      Accumulated amortization
            
            
            460,017
            
            
            
            54,945Net
      deferred financing costs
            
            $
            -
            
            
            $
            405,072





Amortization
of deferred financing costs charged to operations for the nine months ending
March 31, 2008 and June 30, 2007 was $0 and $54,945, respectively.





NOTE
– 7 PROPERTY AND EQUIPMENT





Property
and equipment at March 31, 2008 and June 30, 2007 consisted of the
following:





March 31,
            
            
            June 30,2008
            
            
            2007Buildings
            
            $
            3,837,331
            
            
            $
            3,533,677Machinery
      and equipment
            
            
            13,602,201
            
            
            
            9,848,634Subtotal
            
            $
            17,439,532
            
            
            
            13,382,311Less:
      Accumulated depreciation
            
            
            (6,622,276
            )
            
            
            5,446,39110,817,256
            
            
            
            7,935,920Construction
      in progress
            
            
            715,705
            
            
            
            -Total
            
            $
            11,532,961
            
            
            $
            7,935,920


Depreciation
expense for nine months ending March 31, 2008 and 2007 was $722,211, and
$558,230, respectively. Depreciation expense for three months ending March 31,
2008 and 2007 was 287,583 and $212,085, respectively.





NOTE
8 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES





The
carrying value of accounts payable and accrued expenses approximate fair value
due to the short-term nature of the obligations. As of March 31, 2008, accounts
payable and accrued expenses were $2,506,486 and $1,052,266, respectively.
As of June 30 2007, accounts payable and accrued expenses were $4,066,655 and
$567,802, respectively.





NOTE
9 – CONVERSION OF CONVERTIBLE NOTES




In August
9, 2007, the convertible notes converted to following items: (i) 5,608,564
shares of our Series A Convertible Preferred Stock, par value $.0001 per share
(the “Preferred Stock”), which shares are convertible into an aggregate of
11,217,128 shares of Common Stock, (ii) Class A Warrants to purchase an
aggregate of 5,500,000 shares of Common Stock (subject to adjustment) at an
exercise price of $.60 per share until August 2011 (the “Class A Warrants”),
(iii)


Class B
Warrants to purchase an aggregate of 5,500,000 shares of Common Stock (subject
to adjustment) at an exercise price of $.70 per share until August 2011 (the
“Class B Warrants”) and (iv) Class J Warrants to purchase (a) an aggregate of
5,000,000 shares of Series B Preferred Stock, which preferred stock shall
contain the same terms as the Series A Preferred Stock (other than conversion
price), which shares will be convertible into 8,333,333 shares of our Common
Stock, (b) Class C Warrants to purchase an aggregate of 4,166,667 shares of
Common Stock (subject to adjustment) at an exercise price of $.72 per share (the
“Class C Warrants”) and (c) Class D Warrants to purchase an aggregate of
4,166,667 shares of Common Stock (subject to adjustment) at an exercise price of
$.84 per share (the “Class D Warrants” and together with the Class A Warrants,
Class B Warrants and Class C Warrants, the “Warrants”). The Class J Warrants
shall only be exercisable until 90 days following the effective date of a
registration statement registering for sale the shares of common stock
underlying the securities issued in the financing.








11




NOTE 10 – SHORT-TERM BANK
LOANS





Short-term
bank loans as of March 31, 2008 consist of the following:





On
      April 10th,
      2007 We obtained a loan from China Industrialand
      Commercial Bank, of which the principal is to be paid in full by April
      9th2008.
      The interest is to be calculated using an annual fixed interest rate
      of7.029%
      and paid monthly. The loan is secured by our equipment.
            
            $
            856,800On
      February 12th
      2007, We obtained a loan from Qingdao CityCommercial
      Bank, of which the principal is to be paid in full by February 11th2008.
      The interest is to be calculated using an annual fixed interest rate
      of6.732%
      and paid monthly. The loan is secured by our equipment.
            
            
            2,284,800On
      May 25th
      2007, We obtained a loan from China
    Merchant  Bank,of
      which the principal is to be paid in full by May 25th
      2008.  The interest isto
      be calculated using an annual fixed interest rate of 6.57% and paid
      monthly.The
      loan is secured by our equipment.
            
            
            428,400Total
      short-term bank loans
            
            $
            3,570,000





NOTE
11 – LONG-TERM DEBT





As of
March 31, 2008 and June 30, 2007, the Company had long-term debt of $1,361,027
and $2,008,893 outstanding, respectively. These loans represent borrowings from
employees at an annual interest rate of 10%. Interest payments are made
semi-annually with no principal payments due until the end of the two-year
period.





NOTE
12 – RISK FACTORS





In the
three months and nine months ended March 31, 2008, three customers accounted for
approximately 44.4% of our sales, five vendors accounted for approximately
80.48% of our purchases.





Our
operations are carried out in the PRC. Accordingly, our business, financial
condition and results of operations may be influenced by the political, economic
and legal environments in the PRC as well as by the general state of the PRC’s
economy. Our business may be influenced by changes in governmental policies with
respect to laws and regulations, anti-inflationary measures, currency conversion
and remittance abroad, and rates and methods of taxation, among other
things.





NOTE
13 – CONCENTRATIONS OF CREDIT RISK





Financial
instruments which potentially subject us to credit risk consist principally of
cash on deposit with financial institutions of $ 4,790,573.





NOTE
14 – SUPPLEMENTAL CASH FLOW DISCLOSURES





Nine
      Months EndedMarch 312008
            
            
            2007Cash
      paid for interest
            
            $
            248,318
            
            
            $
            287,964Cash
      paid for income taxes
            
            $
            -
            
            
            $
            262,303


12







NOTE
      15 – RESTATEMENT TO REFLECT CORRECTION OF ACCOUNTING
  ERRORS





On August
7, 2007, the conversion feature of the Series A Convertible Preferred Stock is
“in the money” and is therefore deemed to contain a beneficial conversion
feature.





According
to EITF 00-27, the effective conversion price based on the proceeds received for
or allocated to the convertible instrument should be used to compute the
intrinsic value, if any, of the embedded conversion option. An issuer should
first allocate the proceeds received in a financing transaction that includes a
convertible instrument to the convertible instrument and any other detachable
instruments included in the exchange (such as detachable warrants) on a relative
fair value basis. Then, the Issue 98-5 model should be applied to the amount
allocated to the convertible instrument, and an effective conversion price
should be calculated and used to measure the intrinsic value, if any, of the
embedded conversion option.





On a
relative fair value basis, we have allocated $2,484,226 and $2,327,600 to the
Series A Convertible Preferred Shares and the warrants
respectively.  The effective conversion price is $0.221, the allocated
proceeds of $2,484,226 divided by 11,217,128 (the number of shares to be
received on conversion).  The intrinsic value of the conversion option
therefore is $5,592,106 [(11,217,128 shares) × ($0.72 –
$0.221)].  Because $5,592,106 is more than $2,484,226, the proceeds
allocated to the A Convertible Preferred Shares, the intrinsic value of the
conversion option is limited to $2,484,226.





On August
7, 2007, the conversion feature of the Series A Convertible Preferred Stock is
“in the money” and is therefore deemed to contain a beneficial conversion
feature.





On a
relative fair value basis, we have allocated $2,484,226 and $2,327,600 to the
Series A Convertible Preferred Shares and the warrants
respectively.  The effective conversion price is $0.221, the allocated
proceeds of $2,484,226 divided by 11,217,128 (the number of shares to be
received on conversion).  The intrinsic value of the conversion option
therefore is $5,592,106 [(11,217,128 shares) × ($0.72 –
$0.221)].  Because $5,592,106 is more than $2,484,226, the proceeds
allocated to the A Convertible Preferred Shares, the intrinsic value of the
conversion option is limited to $2,484,226.





The
Company originally did not include the impact of the beneficial conversion
features of Series A Convertible Preferred Stock and Series B Convertible
Preferred Stock.  The inclusion of beneficial conversion features
reduces the net income applicable to common stocks holders by
US$3,875,079.





In
addition, in connection with the exercise of the Series J Warrants, we extended
the term of our Series A Warrants and Series B Warrants from four years to six
years, so that such warrants shall now expire on August 9, 2013. The extension
of the term of the Series A and Series B Warrants (from four to six years) was a
condition of the exercise of the Series J Warrants and the subsequent issuance
of the Series B Preferred stock (“the financing”).





Originally we considered the
incremental costs as part of the issuance costs for the Series B Preferred
Shares.  Nevertheless, after reviewing the comments from SEC, now we
believe these costs are indirect costs associated with the offering of our
securities and should be changed to an expense.  The incremental value
of  Series A warrants, Series B Warrants and investors warrants are
US$540,430.The key assumptions we utilized for the
calculation of warrants are:





·
            Volatility
      is based on our estimate of expected volatility by utilizing the
      historical, expected or implied volatility of similar entities whose
      instruments are publicly available.  Our estimate of the
      expected volatility of Jpak is
30.28%


·  Risk-free
Rate of Return based on the rate of treasury note with the same expiry
term.


·  Black-Scholes
Call Value is calculated using the like of
http://www.blobek.com/black-scholes.html


·  Warrant
Valuation = Black-Scholes Call Value * number of Series warrants
outstanding.





In
connection with the exercise of the Series J Warrants and the subsequent
issuance of the Series B Preferred stock we also incurred a commission of
US$462,519.  The commission was originally accounted as part of the
management expenses.  Now we believe that costs of issuing equity securities
should be charged directly to equity as deduction to additional paid-in
capital.




















13





NOTE 15 – RESTATEMENT TO REFLECT
CORRECTION OF ACCOUNTING ERRORS(continued)





The
effect of restatement is as follows:





CONSOLIDATED BALANCE
SHEETS






ASSETS






CURRENT
      ASSETS
            As reported
              originally as at
              March 31, 2008
            
            As reported
              currently as at
              March 31, 2008
            
            Effect
      of ChangeCash and cash
      equivalents
            $
            4,790,573
            
            $
            4,790,573
            
            $
            -Account receivables, net of
      allowance
            
            9,599,369
            
            
            9,599,369
            
            
            -Inventory
            
            4,529,545
            
            
            4,529,545
            
            
            -Other receivables
            
            1,000,823
            
            
            1,000,823
            
            
            -Prepaid expenses and other
      current assets
            
            251,984
            
            
            251,984
            
            
            -Advance payments
            
            425,776
            
            
            425,776
            
            
            -Deferred placement agent warrant
      costs, net
            
            -
            
            
            -
            
            
            -Total Current
    Assets
            
            20,598,070
            
            
            20,598,070
            
            
            -PROPERTY
      AND EQUIPMENT, NET
            
            11,532,961
            
            
            11,532,961
            
            
            -Total Assets
            $
            32,131,031
            
            $
            32,131,031
            
            $
            -LIABILITIES AND STOCKHOLDERS'
      EQUITYCURRENT
      LIABILITIESAccounts payable and accrued
      expenses
            $
            3,558,752
            
            $
            3,558,752
            
            $
            -Trade notes
    payable
            
            1,713,600
            
            
            1,713,600Short-term bank
    loans
            
            3,570,000
            
            
            3,570,000
            
            
            -Advance payment from
      customer
            
            34,063
            
            
            34,063
            
            
            -Other payables
            
            74,598
            
            
            74,598
            
            
            -Total Current
      Liabilities
            
            8,951,013
            
            
            8,951,013
            
            
            --LONG-TERM
      DEBT
            
            1,361,027
            
            
            1,361,027
            
            
            -MINORITY
      INTEREST
            
            104,958
            
            
            104,958
            
            
            -STOCKHOLDERS’
      EQUITYSeries A convertible preferred
      stock, $0.0001 par value,5,608,564 shares authorized,
      issued and outstanding
            
            561
            
            
            561
            
            
            -Common stock, $0.001 par value,
      300,000,000 sharesauthorized 24,505,000 shares
      issued and outstanding
            
            24,505
            
            
            24,505
            
            
            -Series B convertible preferred
      stock, $0.0001 par value,5,000,000 shares authorized,
      issued and outstanding
            
            500
            
            
            500
            
            
            -Allocation
      of Series A Preferred Shares
            
            -
            
            
            2,484,226
            
            
            2,484,226Allocation
      of Series B Preferred Shares
            
            -
            
            
            1,390,853
            
            
            1,390,853Warrants
            
            -
            
            
            4,634,677
            
            
            4,634,677Placement
      agent warrants
            
            -
            
            
            1,172,487
            
            
            1,172,487Additional paid-in
      capital
            
            14,387,979
            
            
            11,048,604
            
            
            (3,339,375
            )Retained earnings
            
            4,788,287
            
            
            (1,554,581
            
            
            (6,342,868
            )Statutory
reserves
            
            348,009
            
            
            348,009
            
            
            -Accumulated other comprehensive
      income
            
            2,164,192
            
            
            2,164,192
            
            
            -Total Stockholders’
      Equity
            
            21,714,033
            
            
            21,714,033
            
            
            -Total Liabilities and
      Stockholders’ Equity
            $
            32,131,031
            
            $
            32,131,031
            
            
            -





14





NOTE 15 – RESTATEMENT TO REFLECT
CORRECTION OF ACCOUNTING ERRORS(continued)


CONSOLIDATED
      STATEMENTS OF OPERATIONS
              AND COMPREHENSIVE
      INCOME
            
            As reported originally for the nine months
      ended
            
            
            As reported currently for the nine months
      endedMarch 31, 2008
            
            
            March 31, 2008
            
            
            Effect of ChangeREVENUE
            
            $
            26,232,788
            
            
            $
            26,232,788
            
            
            $
            -COST
      OF SALES
            
            
            19,183,182
            
            
            
            19,183,182
            
            
            
            -GROSS
      PROFIT
            
            
            7,049,606
            
            
            
            7,049,606
            
            
            
            -EXPENSESSelling, general and
      administrative
            
            
            4,141,691
            
            
            
            4,219,602
            
            
            
            77,911Total Expenses
            
            
            4,141,691
            
            
            
            4,219,602
            
            
            
            77,911INCOME
      FROM OPERATIONS
            
            
            2,907,915
            
            
            
            2,830,004
            
            
            
            77,911OTHER
      INCOME (EXPENSES)Interest income
            
            
            37,544
            
            
            
            37,544
            
            
            
            -Interest expense
            
            
            (284,318
            )
            
            
            (284,318
            )
            
            
            -Other income (expense),
      net
            
            
            230,890
            
            
            
            230,890
            
            
            
            -Total Other Income
      (Expenses)
            
            
            (15,884
            )
            
            
            (15,884
            )
            
            
            -INCOME
      BEFORE PROVISIONFOR
      INCOME TAX
            
            
            2,892,031
            
            
            
            2,814,120
            
            
            
            77,911PROVISION
      FOR INCOME TAX
            
            
            -
            
            
            
            -
            
            
            
            -NET
      INCOME BEFORE MINORITY INTEREST
            
            
            2,892,031
            
            
            
            2,814,120
            
            
            
            77,911MINORITY
      INTEREST
            
            
            -
            
            
            
            -
            
            
            
            -NET
      INCOME
            
            
            2,892,031
            
            
            
            2,814,120
            
            
            
            77,911Beneficial
      conversion feature related to issuance of
            
            
            -
            
            
            
            (2,484,226
            )
            
            
            (2,484,226
            )Series
      A convertible preferred stockBeneficial
      conversion feature related to issuance of
            
            
            -
            
            
            
            (1,390,853
            )
            
            
            (1,390,853
            )Series
      B convertible preferred stock__________
            
            
            __________NET
      INCOME / (LOSS) APPLICABLE TO
            
            
            2,892,031
            
            
            
            (1,060,959
            )
            
            
            (3,952,990
            )COMMON
      STOCK HOLDERSOTHER
      COMPREHENSIVE INCOMEForeign currency translation
      adjustment
            
            
            1,626,073
            
            
            
            1,626,073
            
            
            
            -COMPREHENSIVE
      INCOME
            
            $
            4,518,104
            
            
            $
            565,114
            
            
            $
            (3,952,990
            )








15








NOTE 15 – RESTATEMENT TO REFLECT
REVERSE MERGER ACCOUNTING(continued)





CONSOLIDATED STATEMENTS OF
CASH FLOWS


As reported
              originally for the
              nine months ended
            As reported
              currently for the
              nine months endedMarch 31, 2008
            March 31, 2008
            Effect of
Change


CASH
FLOWS FROM OPERATING ACTIVITIES


Net
      Income
            
            $
            2,892,031
            
            
            $
            2,814,120
            
            
            $
            ( 77,911
            )Adjustments
      to reconcile net income to net cashProvided
      (used) by operating activities:Bad debt expense
            
            
            7,521
            
            
            
            7,521Depreciation and
      amortization
            
            
            722,211
            
            
            
            722,211
            
            
            
            -Changes in assets and
      liabilities:Account
      receivables
            
            
            (271,952
            )
            
            
            (271,952
            )
            
            
            -Inventory
            
            
            (801,688
            )
            
            
            (801,688
            )
            
            
            -Other
      receivables
            
            
            (950,642
            )
            
            
            (950,642
            )
            
            
            -Prepaid
      expenses and other current assets
            
            
            536,561
            
            
            
            536,561
            
            
            
            -Advance
      payments
            
            
            (404,428
            )
            
            
            (404,428
            )
            
            
            -Accounts
      payable and accrued expenses
            
            
            (1,335,844
            )
            
            
            (1,335,844
            )
            
            
            -Advance
      payment from customers
            
            
            32,355
            
            
            
            32,355
            
            
            
            -Other
      payables
            
            
            3,421
            
            
            
            3,421
            
            
            
            -Total
      Adjustments
            
            
            (2,462,485
            )
            
            
            (2,462,485
            )
            
            
            -Net
      Cash Used By Operating Activities
            
            
            429,546
            
            
            
            351,635
            
            
            
            (77,911
            )CASH
      FLOWS FROM INVESTING ACTIVITIESAcquisition of property and
      equipment
            
            
            (2,761,488
            )
            
            
            (2,761,488
            )
            
            
            -Addition of construction in
      progress
            
            
            (679,820
            )
            
            
            (679,820
            )
            
            
            -Cash acquired from the
      subsidiary
            
            
            99,695
            
            
            
            99,695
            
            
            
            -Net
      Cash Used By Investing Activities
            
            
            (3,341,613
            )
            
            
            (3,341,613
            )
            
            
            -CASH
      FLOWS FROM FINANCING ACTIVITIESTrade notes
    payable
            
            
            1,085,120
            
            
            
            1,085,120
            
            
            
            -Proceeds from capital
      contribution
            
            
            3,898,813
            
            
            
            3,976,724
            
            
            
            77,911Repayment of bank
      loans
            
            
            (2,352,778
            )
            
            
            (2,352,778
            )
            
            
            -Net
      Cash Provided By Financing Activities
            
            
            2,631,155
            
            
            
            2,709,066
            
            
            
            77,911EFFECT
      OF FOREIGN CURRENCYTRANSLATION
      ON CASH
            
            
            133,285
            
            
            
            133,285
            
            
            
            -NET
      DECREASE IN CASH AND CASH QUIVALENTS
            
            
            (147,627
            )
            
            
            (147,627
            )
            
            
            -CASH
      AND CASH EQUIVALENTS – BEGINNING
            
            
            4,938,200
            
            
            
            4,938,200
            
            
            
            -CASH
      AND CASH EQUIVALENTS – ENDING
            
            $
            4,790,573
            
            
            $
            4,790,573
            
            
            $
            -





16








NOTE
16 – ALLOCATION OF PROCEEDS FROM THE EXERCISEOFSERIES J WARRANTS








On August
9, 2007, the Company became a party to the NPA (Note Purchase Agreement dated
May 17,2007 ) by and among the Company, JPAK, Grand International and the
Investors.  Pursuant to the NPA JPAK issued Convertible Promissory
Notes in the aggregate principal amount of US$5.5 million to the Investors. As a
result of the Share Exchange, the Notes automatically converted into 5,608,564
shares of Series A Convertible Preferred Stock outstanding. The shares of Series
A Convertible Preferred Stock are convertible into an aggregate of 11,217,128
shares of common stock. Under the terms of the Notes, the company also issued
(i) Series A Warrants to purchase an aggregate of 5,500,000 shares of common
stock (subject to adjustment) at an exercise price of US$.60 per share until
August 2013 (the “Series A Warrants”), (ii) Series B Warrants to purchase an
aggregate of 5,500,000 shares of common stock (subject to adjustment) at an
exercise price of US$.70 per share until August 2013 (the “Series B Warrants”)
and (iii) Series J Warrants to purchase (a) an aggregate of 5,000,000 shares of
Series B Convertible Preferred Stock, which preferred stock shall contain the
same terms as the Series A Convertible Preferred Stock (other than conversion
price), which shares will be convertible into 8,333,333 shares of the Company’s
common stock, (b) Series C Warrants to purchase an aggregate of 4,166,667 shares
of common stock (subject to adjustment) at an exercise price of US$.72 per share
(the “Series C Warrants”) and (c) Series D Warrants to purchase an aggregate of
4,166,667 shares of common stock (subject to adjustment) at an exercise price of
US$.84 per share (the “Series D Warrants”). The Series J Warrants shall be
exercisable at an exercise price of US$1.00 per warrant and shall only be
exercisable until 90 days following the effective date of the registration
statement for which this prospectus forms a part. Finally, the Company also
granted warrants to purchase 990,000 shares of common stock with an exercise
price of US$.50 per share to the placement agent in the financing transaction.
These warrants have the same terms as the Series A and Series B Warrants, except
that they contain a “cashless” exercise provision.





On
December 28, 2007, the holders of the Company’s outstanding Series J Warrants
exercised in full such warrants for aggregate gross proceeds of US$5.0 million
to The Company. Upon exercise of the Series J Warrants and pursuant to their
stated terms, the Company issued to the holders of the Series J Warrants (a) an
aggregate of 5,000,000 shares of the Company’s Series B Convertible Preferred
Stock, which are convertible into an aggregate of 8,333,333 shares of the
Company’s common stock, (b) Series C Warrants to purchase an aggregate of
4,166,667 shares of the Company’s common stock at an exercise price of US$0.72
per share and (c) Series D Warrants to purchase an aggregate of 4,166,667 shares
of the Company’s common stock (subject to adjustment) at an exercise price of
US$0.84 per share. The Series C Warrants and Series D Warrants have a term of
six years from the date of issuance.





In
connection with the exercise of the Series J Warrants, we extended the term of
our Series A Warrants and Series B Warrants from four years to six years, so
that such warrants shall now expire on August 9, 2013.




As per
SAB Topic 5.A, “specific incremental costs directly attributable to a proposed
or actual offering of securities may properly be deferred and charged against
the gross proceeds of the offering.”





As per
SEC accounting and reporting manual on reverse merger, “costs of issuing equity
securities are charged directly to equity as deduction of the fair value
assigned to share issued”.





Accordingly,
we believe the warrants issued to the placement agents are directly attributable
to raising capital.  If we had not issued the warrants to the
placement agent, we would have had to pay the same amount of cash as the fair
value.  Therefore, we have deducted the fair value of the placement
agent warrants $839,550 and the financing commissions $462,519 from the proceeds
of Preferred Shares $5,000,000.





The key
assumptions we utilized for the calculation of warrants are:





·
            Volatility
      is based on our estimate of expected volatility by utilizing the
      historical, expected or implied volatility of similar entities whose
      instruments are publicly available.  Our estimate of the
      expected volatility of Jpak is
30.28%


·
            Risk-free
      Rate of Return based on the rate of treasury note with the same expiry
      term.


·
            Black-Scholes
      Call Value is calculated using the like of
      http://www.blobek.com/black-scholes.html


·
            Warrant
      Valuation = Black-Scholes Call Value * number of Series warrants
      outstanding.





Furthermore,
we allocated the remaining proceeds of $3,697,931 between investors warrants and
Preferred Shares on a relative fair value basis.  The total value of
investors warrants including incremental value of the original investors
warrants and the value of Series B Preferred shares were $8,293,751 and
$5,000,000 respectively.  Therefore, the Company allocated $2,307,078
and $1,390,853 to the investors warrants and preferred stocks respectively from
the $3,697,931 remaining proceeds of J warrants exercise.






Valuation
            
            December 28, 2007Proceeds
      of Series B Preferred Shares
            
            
            5,000,000Commission
      of Series B Preferred Shares
            
            
            462,519Proceeds
      of Series B Preferred Shares after deducting commission
            
            
            4,537,481Value
      of Placement Agent Warrants
            
            
            839,550Incremental
      value of original Placement Agent Warrants
            
            
            31,680Net
      proceeds after deduction of value and incremental value of placement agent
      warrants
            
            
            3,697,931Series
      C Warrants
            
            
            4,208,334Series
      D Warrants
            
            
            3,791,667Total
      value of investor warrants and incremental value of investors
      warrants
            
            
            8,293,751Value
      of Series B Preferred Shares
            
            
            5,000,000Allocation
      of Warrants
            
            
            2,307,078Allocation
      of Series B Preferred Shares
            
            
            1,390,853








17







Agent Warrants
            
            December 28, 2007Expiration
      Date:
            December
      28, 2013Strike
      Price:
            $0.60Share
      Price:
            
            $1.60Time
      to Expiration:
            
            2,192Volatility:
            
            30.28%Risk-free
      Rate of Return:
            
            3.18%Black-Scholes
      Call Value:
            
            $1.12Warrant
      Valuation:
            
            $839,550.00







Warrant market priceSeries A Warrants
            
            August 9, 2007
            December 28, 2007
            December 28, 2007Original
            RevisedExpiration
      Date:
            August
      9, 2011August
      9, 2013Strike
      Price:
            $0.60Share
      Price:
            
            $0.72
            $1.60
            $1.60Time
      to Expiration:
            
            1,461
            1,320
            2,051Volatility:
            
            30.28%
            30.28%
            30.28%Risk-free
      Rate of Return:
            
            4.57%
            3.18%
            3.18%Black-Scholes
      Call Value:
            
            $0.28
            $1.07
            $1.11Warrant
      Valuation:
            
            $1,543,300.00
            $5,887,750.00
            $6,111,600.00Series B Warrants
            
            August 9, 2007
            December 28, 2007
            December 28, 2007Original
            RevisedExpiration
      Date:
            August
      9, 2011August
      9, 2013Strike
      Price:
            $0.70Share
      Price:
            
            $0.72
            $1.60
            $1.60Time
      to Expiration:
            
            1,461
            1,320
            2,051Volatility:
            
            30.28%
            30.28%
            30.28%Risk-free
      Rate of Return:
            
            4.57%
            3.18%
            3.18%Black-Scholes
      Call Value:
            
            $0.23
            $0.99
            $1.04Warrant
      Valuation:
            
            $1,271,600.00
            $5,430,700.00
            $5,715,600.00Series C Warrants
            
            August 9, 2007
            December 28, 2007
            December 28, 2007Expiration
      Date:
            December
      28, 2013Strike
      Price:
            $0.72Share
      Price:
            
            $0.72
            $1.60
            $1.60Time
      to Expiration:
            
            2,333
            2,192
            2,192Volatility:
            
            30.28%
            30.28%
            30.28%Risk-free
      Rate of Return:
            
            4.57%
            3.18%
            3.18%Black-Scholes
      Call Value:
            
            $0.29
            $1.03
            $1.03Warrant
      Valuation:
            
            $1,209,166.76
            $4,308,750.34
            $4,308,750.34Series D Warrants
            
            August 9, 2007
            December 28, 2007
            December 28, 2007Expiration
      Date:
            December
      28, 2013Strike
      Price:
            $0.84Share
      Price:
            
            $0.72
            $1.60
            $1.60Time
      to Expiration:
            
            2,333
            2,192
            2,192Volatility:
            
            30.28%
            30.28%
            30.28%Risk-free
      Rate of Return:
            
            4.57%
            3.18%
            3.18%Black-Scholes
      Call Value:
            
            $0.25
            $0.96
            $0.96Warrant
      Valuation:
            
            $1,037,083.42
            $3,985,000.32
            $3,985,000.32


18








NOTE
17 – BENEFICIAL CONVERSION FEATURE OF SERIES A PREFERRED SHARES





On August
7, 2007, the conversion feature of the Series A Convertible Preferred Stock is
“in the money” and is therefore deemed to contain a beneficial conversion
feature.





According
to EITF 00-27, the effective conversion price based on the proceeds received for
or allocated to the convertible instrument should be used to compute the
intrinsic value, if any, of the embedded conversion option. An issuer should
first allocate the proceeds received in a financing transaction that includes a
convertible instrument to the convertible instrument and any other detachable
instruments included in the exchange (such as detachable warrants) on a relative
fair value basis. Then, the Issue 98-5 model should be applied to the amount
allocated to the convertible instrument, and an effective conversion price
should be calculated and used to measure the intrinsic value, if any, of the
embedded conversion option.





On a
relative fair value basis, we have allocated $2,484,226 and $2,327,600 to the
Series A Convertible Preferred Shares and the warrants
respectively.  The effective conversion price is $0.221, the allocated
proceeds of $2,484,226 divided by 11,217,128 (the number of shares to be
received on conversion).  The intrinsic value of the conversion option
therefore is $5,592,106 [(11,217,128 shares) × ($0.72 –
$0.221)].  Because $5,592,106 is more than $2,484,226, the proceeds
allocated to the A Convertible Preferred Shares, the intrinsic value of the
conversion option is limited to $2,484,226.





At the
date of issuance, we make the following entry for recording:





Preferred
Stock
Discount:                                                                2,484,226


APIC – beneficial conversion
option                           
 2,484,226





We also
make the following entry to amortize the preferred stock discount on the date of
issuance because the preferred stock is not mandatorily redeemable and is
immediately convertible into common stock:





Retained
Earnings:                                                                            
2,484,226


Preferred Stock
Discount                                                  2,484,226





The net
result of the two entries is a reclassification of $2,484,226 from retained
earnings to additional paid-in capital.  This amount is also a
reduction to the net income available to the common shareholders in the
numerator of the earning-per-share calculation in the first quarter of
FY2008.








NOTE
18 – BENIFICIAL CONVERSION FEATURE OF SERIES B PREFERRED SHARES








On
December 28, 2007, the conversion feature of the Series B Convertible Preferred
Stock is “in the money” and is therefore deemed to contain a beneficial
conversion feature.





According
to EITF 00-27, the effective conversion price based on the proceeds received for
or allocated to the convertible instrument should be used to compute the
intrinsic value, if any, of the embedded conversion option. An issuer should
first allocate the proceeds received in a financing transaction that includes a
convertible instrument to the convertible instrument and any other detachable
instruments included in the exchange (such as detachable warrants) on a relative
fair value basis. Then, the Issue 98-5 model should be applied to the amount
allocated to the convertible instrument, and an effective conversion price
should be calculated and used to measure the intrinsic value, if any, of the
embedded conversion option.





On a
relative fair value basis, we have allocated $1,390,853 and $2,307,078 to the
Series B Convertible Preferred Shares and the warrants
respectively.  The effective conversion price is $0.167, the allocated
proceeds of $1,390,853 divided by 8,333,333 (the number of shares to be received
on conversion).





The
intrinsic value of the conversion option therefore is $11,942,480 [(8,333,333
shares) × ($1.60 – $0.167)].  Because $11, 942,480 is more than
$1,390,853, the proceeds allocated to the A Convertible Preferred Shares, the
intrinsic value of the conversion option is limited to $1,390,853.





At the
date of issuance, we make the following entry for recording:





Preferred
Stock
Discount:                                                                                 1,390,853


APIC – beneficial conversion
option                                                   
1,390,853





We also
make the following entry to amortize the preferred stock discount on the date of
issuance because the preferred stock is not mandatorily redeemable and is
immediately convertible into common stock:





Retained
Earnings:                                                                                      
      1,390,853


Preferred Stock
Discount                                                                        1,390,853





The net
result of the two entries is a reclassification of $1,390,853 from retained
earnings to additional paid-in capital.  This amount is also a
reduction to the net income available to the common shareholders in the
numerator of the earning-per-share calculation in the second quarter of
FY2008.









19





NOTE
19 – LIQUIDATED DAMAGES FOR INEFFECTIVE REGISTRATION STATEMENT





On August
9, 2007, the Company also entered into a Registration Rights Agreement with the
Investors (the “Investor RRA”). Under the Investor RRA, we were required to
prepare and file a registration statement for the sale of the Common Stock
issuable to the Investors under the Series A and Series B Preferred Stock and
the Warrants and to use our best efforts to cause, and to maintain, the
effectiveness of the registration statement. We filed a registration statement
to fulfill our obligations under the RRA. We are subject to certain monetary
obligations if, this registration statement is not declared effective by the SEC
by March 31, 2008. The obligations are payments in an amount equal to 2% of the
aggregate amount invested by such Investor (based upon the number of Registrable
Securities then owned by such Investor) for each 30 day period or any portion
thereof following the date by which such Registration Statement should have been
effective, up to a maximum amount of 10%. Under the Investor RRA, the
shareholders of Jpak were granted piggyback registration rights for 15,805,000
shares of our common stock.





The
Investor Registration Rights Agreement (“RAA”) also contains provisions for the
inability to register all of the shares underlying all of the Series A and
Series B Preferred Stock and Warrants due to the SEC’s application of Rule
415.  Pursuant to those provisions, if the SEC issues us a 415
comment, then we must first try to register the common stock underlying the
preferred stock (on a pro rata basis among the holders of the Preferred Stock)
and then register all of the common stock underlying the Warrants (on a pro rata
basis among the holders of the Warrants). The Company filed the initial
registration statement on Form SB-2 on October 9, 2007, the initial S-1 on
November 9, 2007 and Pre-Effective Amendment No. 1 on February 29,
2008.  The Company received a 415 comment from the SEC and shall
respond accordingly, registering that number of shares as is allowed pursuant to
Rule 415 and in accordance with the terms of the RAA.  Subsequent
registration statements required to be filed to register the rest of the common
stock underlying the preferred stock and warrants issued in the financing will
be filed on the later of (i) 60 days following the sale of substantially all of
the shares of common stock included in this Registration Statement or any
subsequent Registration Statement and (ii) 6 months following the effective date
of this Registration Statement or any subsequent Registration Statement, as
applicable, or such earlier or later date as permitted or required by the
Commission.  Each such subsequent registration statement must be
declared effective by the earlier of (A) the 90th day following the filing date
of such Registration Statement (or in the event such Registration Statement is
reviewed by the Commission, the one hundred twentieth (120th) day following such
filing date) or (B) 5 business days after SEC has no more comments. However, the
Company does not have any monetary obligations for any securities that were not
permitted to be included in a registration statement because of the SEC’s
application of Rule 415 until such time as such securities are required to be
filed pursuant to the Investor RRA.  In such case, the liquidated
damages shall be calculated to only apply to the percentage of securities which
are permitted by the Commission to be included in the Registration
Statement.





Since the
Company is only able to register 687,106 common shares and the total common
shares underlying the Series A convertible preferred stock is 11,217,128, we are
only required to pay 6.13% (680,106/11.217,128) of the 2 percent ($110,000) due
per month under the terms of the RAA.  Therefore, our monthly
liquidated damages will be roughly $6,738.07. Per our conversions with the SEC
staff and our understanding of telephone interpretations of Rule 415, we based
the number of shares eligible for registration on number of share currently
outstanding (24,505,000) and the number of common shares currently held by
non-affiliates.





NOTE
20 – SUBSEQUENT EVENTS





None.





20






Item 2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations






We did not conduct
any operations during periods up through the date of the share exchange (the
"Share Exchange") which was completed in August 2007 pursuant to which we
acquired all of the outstanding shares of capital stock of Jpak Group Co., Ltd.,
an exempted company organized under the laws of the Cayman Islands
("Jpak").  The Share Exchange has been accounted for as a reverse merge
accounting for business combinations in accordance with generally accepted
accounting principles in the United States of America, or 'U.S.
GAAP."  Reported results of operations of the combined group reflect
Jpak's operations.  As a result, we
have included elsewhere in this Quarterly Report on Form 10-Q the consolidated
financial statements of Jpak, our subsidiary which indirectly owns Qingdao
Renmin Printing Co., Ltd. our operating subsidiary ("Qingdao Renmin"). 
Jpak owns 100% equity interest in Qingdao Renmin through its wholly owned
subsidiary Grand International Industrial Limited, a company organized under the
laws of Hong Kong ("Grand International").




The
following discussion and analysis of our financial condition and result of
operations contains forward-looking statements and involves numerous risks and
uncertainties, including, but not limited to, those described in the "Risk
Factors" section of this Quarterly Report on Form 10-Q and in the other reports
we file with the Securities and Exchange Commission. Actual results may differ
materially from those contained in any forward-looking statements.
  
 The
following discussion and analysis of our financial condition and result of
operations should be read in conjunction with our condensed consolidated
financial statements and related notes appearing elsewhere in this Quarterly
Report on Form 10-Q.


Overview







We are
engaged primarily in the development, manufacture, and distribution of aseptic
liquid food and beverage cartons for milk, fruit juices, soy milk, yogurt
drinks, iced tea, coffee, sauces and other liquid foods and beverages in China.
Since 2004, we have started and focused on the research and development, and we
believe we are the largest and leading domestic supplier of aseptic liquid food
and beverage cartons in China. Our business is primarily in China, but we have
recently begun contract manufacturing products for export primarily to Southeast
Asia.







Our
growth strategy consists of consolidating our market leader position among
domestic liquid food and beverage aseptic carton suppliers and to pursue
expansion in the China market as well as selective Asian and Middle Eastern
markets. We intend to achieve our goal by pursuing the following
strategies:







·  Increasing output to further penetrate
the China market;







·  Offering bundled packaging materials
and filling machines;







·  Increasing sales to
selective Asian and other markets; and







·  Establishing brand names and
awareness.









Company
History







Jpak
commenced operations in China in 1958 as a state-owned, traditional printing and
packaging company. Management completed the buyout of 88.23% of the state-owned
equity interest in 2004, and in the same year started the development of aseptic
liquid food and beverage cartons which was launched in the China market in
2005.




On June,
22, 2006, Jpak was incorporated in the Cayman Islands as Winner Dragon Limited.
Winner Dragon Limited was renamed Jpak Group Co., Ltd. on September 18, 2006.
Additionally, during September 2006, Jpak completed the acquisition of 88.23% of
the equity interest in Qingdao Renmin, a company located in Qingdao, Shandong
Province of the People’s Republic of China, through Grand International, the
100% owned subsidiary of Jpak. Currently, substantially, all of our operations
are conducted in China through Qingdao Renmin.










21










In July
2007, Grand International completed the acquisition of the remaining 11.77% of
the state-owned equity interest and now owns 100% of the equity interest of
Qingdao Renmin.




In August
2007, we acquired all of the outstanding capital stock of Jpak.







Results
of Operations







The
following table shows the results of operations of our business.




Comparison of the Three Months Ended March 31, 2008 and 2007










Three Months Ended March
    31
            
            
            2008
            
            
            
            2007Sales
            
            $
            10,813,896
            
            
            $
            8,145,551Cost
      of sales
            
            $
            7,876,883
            
            
            $
            6,233,657Selling,
      general and administrative expenses
            
            $
            1,277,004
            
            
            $
            932,014Other
      income (expense)
            
            $
            (79,086
            )
            
            $
            (92,324
            )Income
      taxes
            
            $
            -
            
            
            $
            2,378Minority
      Interest
            
            $
            1,980
            
            
            $
            104,157Net
      income
            
            $
            1,578,943
            
            
            $
            781,021Foreign
      currency translation adjustment
            
            $
            801,923
            
            
            $
            136,598Comprehensive
      income
            
            $
            2,380,866
            
            
            $
            917,619





Sales. Total sales were
approximately US$10.8 million for the three months ended March 31, 2008 as
compared to approximately US$8.1 million for the three months ended March 31,
2007, an increase of approximately US$2.7 million, or 33.3%. The increase
resulted from increased sale of our products and services to numerous new
customers in 2008. The increase of new customers was mainly due to shifting of
the product lines from traditional printing and packaging to aseptic liquid food
and beverage cartons. Monetary sales amount for the products have been treated
as the key performance indicators that management utilizes to assess
operations.




CostofSales. Cost of sales for the three
months ended March 31, 2008 was approximately US$7.9 million, or 73.1% of sales,
as compared to US$6.2 million, or 76.5% of sales, for the three months ended
March 31, 2007. Our cost of sales are primarily composed of the costs of direct
raw materials (mainly paper materials, polyethylene materials, aluminum
materials, printing materials), labor, depreciation and amortization of
manufacturing equipment and facilities, and other overhead. The decrease in cost
of sales to sales percentage was primarily due to gradual shifting of the
product lines from traditional printing and packaging to aseptic liquid food and
beverage cartons which have higher profit margins.




Selling,generalandadministrativeexpenses. Selling, general and
administrative expenses were approximately US$1.3 million for the three months
ended March 31, 2008 as compared to approximately US$0.9 million for the three
months ended March 31, 2007, an increase of approximately US$0.4 million, or
37%.  The increase was mainly due to the increase in revenue and
operating activities.




MinorityInterest.In July 2007, Grand
International completed the acquisition of the remaining 11.77% of the
state-owned equity interest and now owns 100%.  The minority interest
in 2007 was related to the 11.77% of the state-owned interest prior to
acquisition.




Netincome. Net income was
approximately US1.58 million for three months ended March 31, 2008 as compared
to net income approximately US$0.78 million for the three months ended March 31,
2007, an increase of US$0.80 million. The increase in net income was primarily
due to increase of sales and increase of profit margin of products.




Our
reporting currency is the US dollar. Our local currency, Renminbi (RMB), is our
functional currency. Results of operations and cash flow are translated at
average exchange rates during the period, and assets and liabilities are
translated at the unified exchange rate as quoted by the People’s Bank of China
at the end of the period. Translation adjustments resulting from this process
are included in accumulated other comprehensive income in the statement of
shareholders’ equity.
Transaction gains and losses that arise from exchange rate fluctuations on
transactions denominated in a currency other than the functional currency are
included in the results of operations as incurred.


22









Currency
translation adjustments resulting from this process are included in accumulated
other comprehensive income in the consolidated statement of shareholders' equity
and amounted to gain of US$ 1.2 million for the three months to March 31, 2008
as compared to gain of US$0.1 million as of March 31, 2007. The balance sheet
amounts with the exception of equity at March 31, 2008 were translated at 7.0028
RMB to 1.00 US dollar as compared to RMB7.7220 at March 31, 2007. The equity
accounts were stated at their historical rate.  The average
translation rates applied to income statement accounts for the three months
ended March 31, 2008 and March 31, 2007, were the average rate of exchange
during the period.







The
comprehensive income, which adds the currency adjustment to net income, was
US$2.4 million for the three months ended March 31, 2008 as compared to US$0.9
million income for the three months ended March 31, 2007, an increase of $1.5
million. The increase was primarily due to the appreciation of RMB to US$ during
the three months ended March 31, 2008 as compared to that of
2007.


23




Comparison
of the Nine Months ended March 31, 2008








Nine
      Months Ended March 31
            
            2008
            
            
            2007Sales
            
            $
            26,232,788
            
            
            $
            21,193,911Cost
      of sales
            
            $
            19,183,182
            
            
            $
            16,363,957Selling,
      general and administrative expenses
            
            $
            4,219,602
            
            
            $
            3,386,039Minority
      Interest
            
            
            -
            
            
            
            126,265Net
      Income
            
            $
            2,814,120
            
            
            
            896,358Foreign
      currency translation adjustment
            
            $
            1,626,073Comprehensive
      income
            
            $
            565,114
            
            
            
            994,903










Sales. Total sales were
approximately US$26.2 million for the nine months ended March 31, 2008 as
compared to approximately US$21.2 million for the nine months ended March 31,
2007, an increase of approximately US$5.0 million, or 23.6%. The increase
resulted from increased sale of our products and services to numerous new
customers in 2008. The increase of new customers was mainly due to shifting of
the product lines from traditional printing and packaging to aseptic liquid food
and beverage cartons. Monetary sales amount for the products have been treated
as the key performance indicators that management utilizes to assess
operations.





CostofSales. Cost of sales for the nine
months ended March 31, 2008 was approximately US$19.2 million, or 73.3% of
sales, as compared to US$16.4 million, or 77.4% of sales, for the nine months
ended March 31, 2007. Our cost of sales are primarily composed of the costs of
direct raw materials (mainly paper materials, polyethylene materials, aluminum
materials, printing materials), labor, depreciation and amortization of
manufacturing equipment and facilities, and other overhead. The decrease in cost
of sales to sales % was primarily due to gradual shifting of the product lines
from traditional printing and packaging to aseptic liquid food and beverage
cartons which have higher profit margins.




Selling,generalandadministrativeexpenses.


Selling,
general and administrative expenses were approximately US$4.2 million for the
nine months ended March 31, 2008 as compared to approximately US$3.4 million for
the nine months ended March 31, 2007, the increase of approximately US$0.8
million, or 23%.  The increase was mainly due to the increase in
revenue and related operating activities.




MinorityInterestIn July 2007, Grand
International completed the acquisition of the remaining 11.77% of the
state-owned equity interest and now owns 100%.  The minority interest
was related to the 11.77% of the state-owned interest prior to
acquisition.




Netincome. Net income was
approximately US$2.8 million for nine months ended March 31, 2008 as compared to
net income of approximately US$0.9 million for the nine months ended March 31,
2007, an increase of US$1.9 million. The increase in net income was primarily
due to increase of sales and increase of profit margin of products.




Our
reporting currency is the US dollar. Our local currency, Renminbi (RMB), is our
functional currency. Results of operations and cash flow are translated at
average exchange rates during the period, and assets and liabilities are
translated at the unified exchange rate as quoted by the People’s Bank of China
at the end of the period. Translation adjustments resulting from this process
are included in accumulated other comprehensive income in the statement of
shareholders’ equity. Transaction gains and losses that arise from exchange rate
fluctuations on transactions denominated in a currency other than the functional
currency are included in the results of operations as incurred.


24







Currency
translation adjustments resulting from this process are included in accumulated
other comprehensive income in the consolidated statement of shareholders' equity
and amounted to gain of US$2.1 million for the nine months to March 31, 2008 as
compared to gain of US$98,000 for the nine months to March 31,
2007.  The balance sheet amounts with the exception of equity at March
31, 2008 were translated at 7.0028 RMB to 1.00 US dollar as compared to
RMB7.7220 at March 31, 2007.  The average translation rates applied to
income statement accounts for the three months ended March 31, 2008 and March
31, 2007, were the average rate of exchange during the period.







The
comprehensive income /(loss), which adds the currency adjustment to net income,
was a net income of US$0.56 million for the nine months ended March 31, 2008 as
compared to US$1.0 million for the nine months ended March 31, 2007, an decrease
of $0.44 million. The decrease was primarily due to beneficial conversion
feature related to issuance of Series A and Series B convertible preferred stock
which was amounted to US$3.9 million.





Income
Taxes







We are
not subject to any income taxes in the United States or the Cayman Islands.
Under the Interim Regulations of the People's Republic of China on Enterprises
Income Tax effective from January 1, 1994 to December 31, 2007 and the Income
Tax Law of the People's Republic of China for Foreign Investment Enterprises and
Foreign Enterprises effective from July 1, 1991 to December 31, 2007, a company
is generally subject to an income tax at an effective rate of 33% (30% state
income taxes plus 3% local income taxes) on income reported in the statutory
financial statements after appropriate tax adjustments with the following “tax
holidays”: If the enterprise is a manufacturing related joint venture with a
foreign enterprise or a wholly owned subsidiary of a foreign enterprise, with an
operation of 10 years or more, it enjoys a two-year income tax exemption from
the year that it is profitable and a 50% income tax reduction for the following
three years ( the “2-3 tax holiday”).







Our
subsidiary, Qingdao Renmin has been a domestic limited liability company since
May 24, 2001 and has been subject to an income tax at an effective rate of 33%.
However, since September 7, 2006, as a result of our acquisition, Qingdao Renmin
is now a foreign investment enterprise and started to enjoy the 2-3 tax
holidays.







On March
16, 2007, the PRC promulgated a new income tax law for enterprises that became
effective on January 1, 2008. Under the new income tax law, a company
incorporated in the PRC will be generally subject to an income tax at an
effective rate of 25%. In accordance with the new tax law, Qingdao Renmin may
continue to enjoy the 2-3 tax holidays that it currently enjoys as a foreign
investment enterprise subject to the regulations to be promulgated by the State
Council of the PRC.







Liquidity
and Capital Resources




As of
March 31, 2008, we had working capital totaling approximately US$11.6 million,
including cash and cash equivalents of US$4.8.





Net cash
provided in operating activities was US$429,000 for the nine months ended March
31, 2008.  Net cash provided in operating activities US$13,000 for the
nine months ended March 31, 2007.  The increase in cash generated from
operating activities during the nine months ended March 31, 2008 period was
primarily the result of revenue growth that produced improvement in net
income.





Net cash
used in investing activities for the nine months ended March 31, 2008 amounted
to US$3.3 million and related primarily to the purchase of property and
equipment and construction in progress. Net cash used in investing activities
for the nine months ended March 31, 2007 amounted to US$1.7 million was related
to acquisition of property and equipment.





Net cash
provided in financing activities for the nine months ended March 31, 2008 was
US$2.6 million and related primarily to capital contribution. Net cash provided
in financing activities for the nine months ended March 31, 2007 totaled US$0.9
million related to raising of short term bank loans.


25


We have
entered into several loan agreements with our primary lenders, Industrial and
Commercial Bank of China, Qingdao City Commercial Bank and China Merchant Bank,
under which we have term loans. As of March 31, 2008, we had an aggregate
principal amount of US$3.6 million outstanding under the loan agreements, which
amounts mature from April 2008 to January 2009 and accrue interest at a rate
from 7.029% per annum to 6.57% per annum. The loan agreements contain customary
affirmative and negative covenants. As of March 31, 2008, we were in material
compliance with the terms of our loan agreements.




Since the
principal amount of US$3.6 million will fall due between April 2008 to January
2009, we will either repay the term loan or renew the loan according to the
financial position and cashflow position as at the maturity date of the term
loan. Since the financial and cashflow position is strengthening as compared for
the nine months ended March 31, 2008 vs. 2007, we will repay some of the term
loan provided that that there is no additional working capital
requirement.




On August
9, 2007, we became a party to that certain Note Purchase Agreement (the “NPA”)
by and among Jpak, Grand International Industrial Limited, a company organized
under the laws of Hong Kong (“Grand International”) and the investors named
therein (collectively, the “Investors”). The NPA was originally entered into in
May 2007 pursuant to which Jpak issued Convertible Promissory Notes in the
aggregate principal amount of US$5.5 million (the “Financing”) to the Investors
(the “Notes”). As a result of the Share Exchange, under the terms of the NPA and
the Notes, the Notes have been converted into (i) 5,608,564 shares of our Series
A Convertible Preferred Stocks, par value $.0001 per share (the “Preferred
Stock”), which shares are convertible into an aggregate of 11,217,128 shares of
common stock, (ii) Series A Warrants to purchase an aggregate of 5,500,000
shares of common stock (subject to adjustment) at an exercise price of US$.60
per share until August 2011 (the “Series A Warrants”), (iii) Series B Warrants
to purchase an aggregate of 5,500,000 shares of common stock (subject to
adjustment) at an exercise price of US$.70 per share until August 2011 (the
“Series B Warrants”) and (iv) Series J Warrants to purchase (a) an aggregate of
5,000,000 shares of Series B Preferred Stock, which preferred stock shall
contain the same terms as the Series A Preferred Stock (other than conversion
price), which shares will be convertible into 8,333,333 shares of our common
stock, (b) Series C Warrants to purchase an aggregate of 4,166,667 shares of
common stock (subject to adjustment) at an exercise price of US$.72 per share
(the “Series C Warrants”) and (c) Series D Warrants to purchase an aggregate of
4,166,667 shares of common stock (subject to adjustment) at an exercise price of
US$.84 per share (the “Series D Warrants”).




On
December 28, 2007, the holders of the Company's outstanding Series J Warrants
exercised in full such warrants for aggregate gross proceeds of US$5.0 million
to the Company. Pursuant to the terms of the Series J Warrants, the Company
issued to the holders of the Series J Warrants (a) an aggregate of 5,000,000
shares of the Company's Series B Convertible Preferred Stock, which will be
convertible into an aggregate of 8,333,333 shares of the Company's Common Stock,
(b) Series C Warrants to purchase an aggregate of 4,166,667 shares of the
Company's Common Stock at an exercise price of US$0.72 per share and (c) Series
D Warrants to purchase an aggregate of 4,166,667 shares of the Company's Common
Stock (subject to adjustment) at an exercise price of US$0.84 per share. The
Series C Warrants and Series D Warrants have a term of six years from the date
of issuance.




In
connection with the Financing, we also granted warrants to purchase 990,000
shares of common stock with an exercise price of US$.50 per share to the
placement agent in the Financing. These warrants have the same terms as the
Series A and Series B Warrants, except that they contain a “cashless” exercise
provision.




Although
we expect that the net proceeds of the private placement described above,
together with our available funds and funds generated from our operations, will
be sufficient to meet our anticipated needs for 12 months, we may need to obtain
additional capital to continue to operate and grow our business. Our cash
requirements may vary materially from those currently anticipated due to changes
in our operations, including our marketing and distribution activities, product
development, expansion of our personnel and the timing of our receipt of
revenues. Our ability to obtain additional financing in the future will depend
in part upon the prevailing capital market conditions, as well as our business
performance. There can be no assurance that we will be successful in our efforts
to arrange additional financing on terms satisfactory to us, if at
all.







Off-Balance
Sheet Arrangements




We do not
have any off-balance sheet arrangements that have or are reasonably likely to
have a current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital expenditures
or capital resources that is material to investors.


26





Critical
Accounting Policies and Estimates







Our
consolidated financial information has been prepared in accordance with
generally accepted accounting principles in the United States, which requires us
to make judgments, estimates and assumptions that affect (1) the reported
amounts of our assets and liabilities, (2) the disclosure of our contingent
assets and liabilities at the end of each fiscal period and (3) the reported
amounts of revenues and expenses during each fiscal period. We continually
evaluate these estimates based on our own historical experience, knowledge and
assessment of current business and other conditions, our expectations regarding
the future based on available information and reasonable assumptions, which
together form our basis for making judgments about matters that are not readily
apparent from other sources. Since the use of estimates is an integral component
of the financial reporting process, our actual results could differ from those
estimates. Some of our accounting policies require a higher degree of judgment
than others in their application.




When
reviewing our financial statements, you should consider (1) our selection of
critical accounting policies, (2) the judgment and other uncertainties affecting
the application of those policies, and (3) the sensitivity of reported results
to changes in conditions and assumptions. We believe the following accounting
policies involve the most significant judgment and estimates used in the
preparation of our financial statements.




Revenue
recognition.




We derive
our revenues primarily from sales of printing packaging products. We generally
recognize product revenue when persuasive evidence of an arrangement exists,
delivery has occurred, the fee is fixed or determinable, and the collectibility
is probable. In instances where final acceptance of the product is specified by
the customer, revenue is deferred until all acceptance criteria have been met.
We are generally not contractually obligated to accept returns.




Accounts
Receivable and allowance for Doubtful Accounts.




Trade
accounts receivable are stated at the amount management expects to collect from
balances outstanding at the end of the period. An allowance is estimated based
upon (i) management’s assessment of the credit history with customers having
outstanding balances and (ii) the current status of the relationship with the
customer. It is possible the allowance for doubtful accounts could materially
differ than management’s estimate.




Inventory.




downs  will  be  materially  different  from  the  actual  amounts  or  results.  Such  differences  could  result  in  higher  than
expected inventory provisions and related costs, which could have a materially
adverse effect on our results of operations and financial condition in the near
term.







Property
and Equipment.




Property
and equipment are stated at cost and depreciated using the straight-line method,
over 5 and 40 years. The carrying value of long lived assets is evaluated
whenever changes in circumstances indicate the carrying amount of such assets
may not be recoverable. If necessary, we recognize an impairment loss for the
difference between the carrying amount of the assets and their estimated fair
value. Fair value is based upon current and anticipated future undiscounted cash
flows. Expenditures for maintenance and repairs are charged to operations as
incurred; additions, renewals and betterments are capitalized.
Based upon our most recent analysis, we believe that no impairment of property
and equipment existed for the 3 months ended March 31, 2008.


27





Foreign
Currency Translation and Transactions.




The
financial position and results of operations of our foreign subsidiaries are
determined using local currency (Chinese
Yuan) as the functional currency. Assets and liabilities of the subsidiaries are
translated at the exchange rate in effect at each year end. Contributed capital
accounts are translated using the historical rate of exchange when capital is
injected. Income statement accounts are translated at the average rate of
exchange during the year. Translation adjustments arising from the use of
different exchange rates from period to period are included in the cumulative translation
adjustment account in shareholders’ equity. Gains and losses resulting from
foreign currency transactions are included in operations. Due to the volatile
nature of the Chinese Yuan, the results of operations and financial condition
could be materially impacted.




Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure




On
October 2, 2007, we appointed Patrizio & Zhao, LLC, as our independent
registered public accounting firm to replace Bagell, Josephs, Levine &
Company, LLC following their dismissal on October 2, 2007. This action was
ratified by our board of directors on October 2, 2007. During our fiscal years
ended December 31, 2006 and 2005 and the subsequent interim period through
October 2, 2007, we had no disagreements with Bagell, Josephs, Levine &
Company, LLC on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedures, which disagreements, if
not resolved to the satisfaction of Bagell, Josephs, Levine & Company, LLC
would have caused it to make reference to the subject matter of the
disagreements in its report. Bagell, Josephs, Levine & Company, LLC’s report
on our financial statements for the fiscal years ended December 31, 2006 and
2005 did not contain an adverse opinion or disclaimer of opinion, and was not
qualified or modified as to uncertainty, audit scope or accounting principles. A
letter addressed to the SEC from Bagell, Josephs, Levine & Company, LLC
stating that it agrees with the above statement was attached as an exhibit to
our Current Report on 8-K filed with the SEC on October 8, 2007.








28







Item
3. Quantitative and Qualitative Disclosure About Market Risk




Not
applicable.




Item
4. Controls and Procedures





Evaluation
of Disclosure Controls and Procedures





We
maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our reports under the Securities
Exchange Act of 1934, as amended, is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission’s rules and forms, and that such information is accumulated and
communicated to our management, including our Chief Executive Officer and Acting
Chief Financial Officer, as appropriate, to allow timely decisions regarding
required disclosures. Any controls and procedures, no matter how well designed
and operated, can provide only reasonable assurance of achieving the desired
control objectives. Our management, with the participation of our Chief
Executive Officer and Acting Chief Financial Officer, has evaluated the
effectiveness of our disclosure controls and procedures as of March 31, 2008.
Based upon that evaluation and subject to the foregoing, our Chief Executive
Officer and Acting Chief Financial Officer concluded that our disclosure
controls and procedures were deficient.




A
material weakness is a significant deficiency in one or more of the internal
control components that alone or in the aggregate precludes our internal
controls from reducing to an appropriately low level the risk that material
misstatements in our financial statements will not be prevented or detected on a
timely basis. Due to staffing and resource constraints, a material weakness
became evident to management regarding our inability to simultaneously close the
books on a timely basis each month and quarter and to generate all the necessary
disclosure for inclusion in our filings with the Securities and Exchange
Commission.





In
addition, this lack of staffing and resources has led to a misstatement in our
financial statements. On May 4, 2008, the Board of Directors of Jpak Group,
Inc. (“we”, “us”, “our” or the "Company") concluded that the Company is required
to restate its previously issued audited financial statements for the year ended
June 30, 2007 and the periods ended September 30, 2007, and December 31,
2007.  Subsequent to the issuance of these financial statements,
management identified various errors in connection with its 2007 financial
statements and determined that a restatement was necessary in respect of the
following:





1.
            Revision of reverse acquisition
      accounting.On August 9, 2007, we completed a reverse
      acquisition of Jpak Group Co., Ltd. (“Jpak Ltd”), a Cayman Islands
      Company.   As a result, Jpak Ltd became our wholly owned
      subsidiary.  Previously, in September 2006, Jpak Ltd acquired an
      88.23% equity interest in Qingdao Renmin, our primary operating subsidiary
      located in the city of Qingdao in Shandong Province in the Peoples
      Republic of China, through Grand International, a Hong Kong company, which
      is the wholly owned subsidiary of Jpak Ltd.  In July 2007, Grand
      International acquired the remaining 11.77% state-owned equity interest in
      Qingdao Renmin and now owns 100% equity interest in Qingdao Renmin.
       The acquisition of Qingdao Renmin was initially accounted for using
      the purchase method. Subsequent to the issuance of the June 30, 2007,
      financial statements, management revisited the acquisition and deemed the
      transaction to be a reverse acquisition for accounting purposes. Qingdao
      Renmin was considered to be the accounting acquirer as both Grand
      International and Jpak Ltd were holding companies with no significant
      operations and Qingdao Renmin continues as the primary operating entity
      even after the exchange, although Jpak Ltd is the legal parent company.
       As such, Qingdao Renmin (and its historical financial statements) is
      the continuing entity for financial reporting purposes and the share
      exchange will be treated as a recapitalization of Jpak Ltd.  Thus,
      Jpak Ltd is the continuing entity for financial reporting purposes.
       Accordingly, we will prepare the financial statements as if Jpak Ltd
      had always been the reporting company and then on the share exchange date,
      changed its name and reorganized its capital stock.  Accordingly, we
      shall revise our financial statements to reflect reverse merger accounting
      by eliminating the goodwill and adjusting the additional paid-in
      capital.





2.
            Revision of capitalized costs
      related to financing transaction. In connection with the
      US$5,500,000 financing
      that we completed in August 2007, we granted warrants, with an exercise
      price of US$0.50 per share, to purchase up to 990,000 shares of common
      stock to the placement agent of the Financing. The expiration date of this
      warrant is May 17, 2011. Furthermore, as a result of the investors’
      exercise of their Series J warrants in December 2007, we granted the
      placement agent an additional warrant to purchase up to 750,000 shares of
      common stock with an exercise price of US$0.60 per share; the expiration
      date of this warrant is December 28, 2011. These placement agent warrants
      have the same terms as the Series A and Series B Warrants we issued to the
      investors.  The cost related to the two placement agent warrants were
      originally capitalized and amortized over the term of the
      warrants.    However, after further  discussion 
      and research, we  believe  the  warrants  issued
      to  the placement  agents  are directly attributable to
      raising capital; if we had not issued the warrants to the placement agent,
      we would have paid the same amount of cash as the fair value of the
      warrants.  Therefore, we will allocate the proceeds received in a
      financing transaction to the preferred shares and warrants on a relative
      fair value basis to the additional paid-in capital of preferred shares and
      common shares,
respectively.


On
September 23, 2008, the Board of Directors of Jpak Group, Inc. (“we”, “us”,
“our” or the "Company") concluded that the Company is required to restate its
previously issued audited financial statements for the period ended December 31,
2007 and March 31, 2008.  Subsequent to the issuance of these
financial statements, management identified various errors in connection with
them and determined that a restatement was necessary in respect of the
following:





1.
            In
      connection with the exercise of the Series J Warrants (the “Series J
      Exercise”), we extended the term of our Series A Warrants and Series B
      Warrants from four years to six years, so that such warrants shall now
      expire on August 9, 2013. The extension of the term of the Series A and
      Series B Warrants (from four to six years) was a condition of the exercise
      of the Series J Warrants and the subsequent issuance of the Series B
      Preferred stock (“the financing”).  Originally we considered the
      incremental costs as part of the issuance costs for the Series B Preferred
      Shares.  However, after reviewing the SEC’s comments, we now
      believe that these costs are indirect costs associated with the offering
      of our securities and should be changed to an expense.  The
      incremental value of Series A warrants, Series B Warrants and investors
      warrants are US$540,430.





2.
            The
      Company incurred a commission of $462,519.22 pursuant to the Series J
      Exercise.  However, this commission was not paid until January 16,
      2008.  Originally, in the financial statements as of March 31, 2008,
      the Company did not account for this commission as a deduction to
      additional paid-in capital; the Company included this commission as part
      of the expenses in the third quarter.  To correct the error, the
      Company shall account the commission as a deduction to additional paid-in
      capital in the second quarter and revise the amount of expenses in the
      third quarter.





These
control deficiencies resulted in a misstatement to substantially all of our
financial statements and disclosures covering the year ended June 30, 2007 and
onward, which resulted in a material misstatement to such annual and interim
financial statements (September 30, 2007,  December 30, 2007 and March
31, 2008) that was not prevented or detected. Accordingly, management has
concluded that this control deficiency constitutes a material
weakness.






Remediation
Plan for Material Weaknesses





The
material weaknesses described above in “Evaluation of Disclosure Controls and
Procedures” comprise control deficiencies that we discovered in the fourth
quarter of fiscal year 2008 as we were preparing responses to SEC comments
regarding the registration statement on Form S-1 that we filed on February 29,
2008.  Pursuant to this discovery, we formulated a remediation plan
and initiated remedial action to address those material weaknesses. The elements
of the remediation plan are as follows:





●
            Appoint a new Acting Chief
      Financial Officer.We appointed a new Acting CFO with extensive US
      GAAP and regulatory experience.  Our new Acting CFO, Frank Su,
      maintains a deep understanding of GAAP and financial statements and is
      highly skilled in analyzing and evaluating various financial issues and in
      preparing financial statements.





●
            Restate Financial
      Statement:  We
      restated our financial statements for the year ending June 30, 2007 and
      our interim financial statements for the quarter ending September 30, 2007
      and shall restate our interim financial statements for the quarters ending
      December 31, 2007 and March 31, 2008; furthermore, we will ensure that all
      necessary amendments are filed so that the correct accounting treatment is
      reflected in those statements and flows through them
      accordingly.●
            Seeking and Recruiting
      Additional Accounting Professionals.We are seeking to
      recruit experienced professionals to augment and upgrade our financial
      staff to address issues of timeliness and completeness in financial
      reporting when we are preparing filings for the Securities and Exchange
      Commission.





Although
we believe that these corrective steps will enable management to conclude that
our disclosure controls are effective and these measures will remediate the
material weaknesses discussed above when all of the additional financial staff
positions are filled, we cannot assure you that this will be sufficient. We may
be required to expend additional resources to identify, assess and correct any
additional weaknesses in disclosure or internal control.





Changes
in Internal Controls Over Financial Reporting





Except
as described above, there have been no changes in our internal controls over
financial reporting that occurred during our last fiscal quarter to which this
Quarterly Report on Form 10-QSB relates that have materially affected, or are
reasonably likely to materially affect our internal controls over financial
reporting.












29







PART
II - OTHER INFORMATION




Item
1. Legal Proceedings





Not
applicable.


Item
1A. Risk Factors





Except as
set forth below, there have been no changes to the risk factors set forth in our
filings with the Securities and Exchange Commission.





Risks
Related To Our Business.





The price
increase of raw materials, such as paper
materials, polyethylene materials, and aluminum materials, could increase the
cost of our products and reduce our profit margin.  Paper
materials, polyethylene materials, and aluminum materials are the major
materials for our aseptic packaging products. In the last two years, the prices
of paper materials, polyethylene materials and aluminum materials have
fluctuated substantially, as have other raw materials, due to the increasing
demand in China resulting from its rapid economic development. Although we have
managed to minimize the impact of such fluctuation in the past, there is no
assurance that we will be able to do so in the future. If the price for paper
materials, polyethylene materials, aluminum materials, and other necessary raw
materials increases significantly, our profit margin could decrease considerably
and we may not be able to maintain our profitability.





We may not be
able to secure financing needed for future operating needs on acceptable terms,
or on any terms at all. From time to time, we may seek additional
financing to provide the capital required to maintain or expand our production
facilities, implement research and development and equipment and/or working
capital initiatives, as well as to repay outstanding loans if cash flow from
operations is insufficient. We cannot predict with certainty the timing or
account of any such capital requirements. If such financing is not available on
satisfactory terms, we may be unable to expand our business or develop new
business at the desired rate. Consequently, our operating results may suffer. If
we are able to incur debt, we may be subject to certain restrictions imposed by
the terms of the debt and the repayment of such debt may limit our cash flow and
our ability to grow. If we are unable to incur debt, we may be forced to issue
additional equity, which could have a dilutive effect on our current
stockholders.





Expansion of our
business may put added pressure on our management and operational infrastructure
impeding our ability to meet any increased
demand for our products and services and possibly hurting our operating
results . Our business plan is to significantly grow our operations to
meet anticipated growth in demand for our products and services. Our planned
growth includes the increase of our line of products and expansion of sales in
our existing markets as well as new markets over the next few years. Growth in
our business may place a significant strain on our personnel, management,
financial systems and other resources. The evolution of our business also
presents numerous risks and challenges, including, but not limited
to:




●
            the
      continued acceptance of our products and services by the packaging
      industries;●
            our
      ability to successfully and rapidly expand sales to potential customers in
      response to potentially increasing demand;●
            the
      costs associated with such growth, which are difficult to quantify, but
      could be significant;●
            rapid
      technological change; and●
            the
      highly competitive nature of the packaging
  industries.






If we are
successful in obtaining rapid market growth of our products and services, we
will be required to deliver large volumes of quality products and services to
customers on a timely basis at a reasonable cost to those customers. Meeting any
such increased demands will require us to expand our manufacturing facilities,
to increase our ability to purchase raw materials, to increase the size of
our work force, to expand our quality control capabilities and to increase the
scale upon which we provide our products and services. Such demands would
require more capital and working capital than we currently have available and we
may be unable to meet the needs of our customers, this could adversely affect
our relationship with customers, leading to a reduction in our
revenues.







30







We have a history
of operating losses, and there can be no assurancethat we can
sustain or increase profitability and, as a result, may not operate as a going
concern.  While we recently achieved an operating profit, we
have had operating losses in some of the years since our inception and there can
be no assurance that we can sustain or increase profitability. Unanticipated
problems, expenses, and delays are frequently encountered in developing and
marketing products. These include, but are not limited to, competition, the need
to develop customers and market expertise, market conditions, sales, marketing,
increases in the cost of raw materials and governmental regulation. Our failure
to meet any of these conditions would have a materially adverse effect upon us
and may force us to reduce or curtail our operations. Revenues and profits, if
any, will depend upon various factors. We may not achieve our business
objectives and the failure to achieve such goals would have an adverse impact on
our business and results of operations. In addition, we expect to incur
additional general and administrative expenses as a public company in the United
States which could also have a negative impact on our
profitability.





Our existing
indebtedness may adversely affect our ability to obtain additional funds and may
increase our vulnerabilityto economic or
business downturns.  Our indebtedness aggregated approximately
US$5.8 million as of September 30, 2007. As a result, we are subject to the
risks associated with significant indebtedness, including:




●
            we
      must dedicate a portion of our cash flows from operations to pay debt
      service costs and, as a result, we have less funds available for
      operations and other purposes;●
            it
      may be more difficult and expensive to obtain additional funds through
      financings, if available at all;●
            we
      are more vulnerable to economic downturns and fluctuations in interest
      rates, less able to withstand competitive pressures and less flexible in
      reacting to changes in our industry and general economic conditions;
      and●
            if
      we default under any of our existing credit facilities or if our creditors
      demand payment of a portion or all of our indebtedness, we may not have
      sufficient funds to make such
payments.




We have pledged
substantially all of our assets to secure our borrowings and are subject to
covenants that may
restrict our ability to operate our business.  Our borrowings
under our existing loan agreements are secured by substantially all of our
assets. If we default under the indebtedness secured by our assets, those assets
would be available to the secured creditor to satisfy our obligations to the
secured creditor. In addition, our loan agreements impose certain restrictive
covenants, including financial covenants. Failure to satisfy any of these
covenants could result in all or any of the following:




●
            acceleration
      of the payment of our outstanding indebtedness;●
            cross
      defaults to and acceleration of the payment under other financing
      arrangements;●
            our
      inability to borrow additional amounts under our existing financing
      arrangements; and●
            our
      inability to secure financing on favorable terms or at all from
      alternative sources.





Any of
these consequences could adversely affect our ability to acquire consumer
receivable portfolios and operate our business.





The failure to
maintain our relationships with our
existing customers or the failure to obtain new customers could negatively
affect our revenues and decrease our earnings or have an adverse impact on our
business.  We maintain purchase orders for the sales of our
products to our customers. Although we have entered into agreements to supply
our customers, we cannot assure that such agreements will be renewed when the
terms of such agreements expire or that our relationships with our customers
will be maintained on satisfactory terms, if at all. The failure to
maintain our relationships with our customers or the failure to obtain new
customers could (i) negatively affect our revenues and decrease our earnings or
(ii) adversely impact our business.




31







We rely on a
limited number of suppliers and the loss of
any of our suppliers, or delays or problems in the supply of materials used in
our products, could materially and adversely affect our business, financial
condition, results of operations and growth prospects.  We
generally rely on one or two suppliers for each of the primary materials used in
our products, including paper, polyethylene and aluminum, and otherwise rely on
a limited number of suppliers for the other materials used in our products. Our
suppliers may not be able to supply the necessary materials without
interruption. We may not have adequate remedies for their failure to supply us
which could result in a shortage of our products. If one of our suppliers fails
or refuses to supply us for any reason, it could take time and expense to obtain
a new supplier. In addition, our failure to maintain existing relationships with
our suppliers or to establish new relationships in the future could negatively
affect our ability to obtain the materials used in our products in a timely
manner. The search for new suppliers could potentially delay the manufacture of
our products, resulting in shortages in the marketplace and may cause us to
incur additional expense. Failure to comply with applicable legal requirements
subjects our suppliers to possible legal or regulatory action, including
shutdown, which may adversely affect their ability to supply us with the
materials we need for our products. Any delay in supplying, or failure to
supply, materials for our products by any of our suppliers could result in our
inability to meet the commercial demand for our products, and could adversely
affect our business, financial condition, results of operations and growth
prospects.





We may not be
able to adequately protect our intellectual property, which could harm our
competitive advantage. We rely on a combination
of patent, copyright, trademark and trade secret laws and restrictions on
disclosure to protect our intellectual property rights. Piracy of intellectual
property is widespread in China and despite our efforts to protect our
intellectual proprietary rights, unauthorized parties may attempt to copy or
otherwise obtain and use our technology. Monitoring unauthorized use of our
technology is difficult and costly, and we cannot be certain that the steps we
have taken will prevent misappropriations of our technology, particularly in
countries where the laws may not protect our intellectual property rights as
fully as in other countries such as the United States of America. In addition,
third parties may seek to challenge, invalidate, circumvent or render
unenforceable any intellectual property rights owned by us. From time to time,
we may have to resort to litigation to enforce our intellectual property rights,
which could result in substantial costs, diversion of our management’s attention
and diversion of our other resources.





The failure to
increase our current manufacturing capacity could materially and adversely
affect our business, financial condition, results of operations and growth
prospects.  We currently manufacture our products at a single
facility with two production lines. Manufacturing products at a single site
presents risks because a disaster, such as a fire or hurricane, may interrupt
our manufacturing capability. In such an event, we will have to resort to
alternative sources of manufacturing that could increase our costs as well as
result in significant delays. Any increase in costs, slowdowns or shutdowns
could have a material adverse affect on our business, financial condition,
results of operations and growth prospects.





Our use
of a single manufacturing facility with two production lines may restrict our
ability to attract large customers who require certainty in the production
process. We intend to expand our manufacturing operations by adding additional
production lines, but there is no assurance that we will have the financial
resources required for this planned expansion or that any such expansion will be
successful or completed in a timely fashion or within budget. We may encounter
difficulties and significant unexpected costs and delays in scaling up our
manufacturing operations. The failure to scale-up manufacturing operations in a
timely and cost-effective way may adversely affect our income. In the event the
demand for our products rapidly increases or spikes in a certain period, we may
not have the manufacturing ability to fulfill demand, either in our own
facilities or through agreements with third parties. This lack of manufacturing
capacity could have a material adverse affect on our business, financial
condition, results of operations and growth prospects.





Our failure to
successfully develop new business segments could have a material adverse affect
on our business, financial condition, results of operations and growth
prospects.  We
are currently pursuing and in the future may pursue new technologies and
businesses segments internally or through acquisitions or combinations which
involve significant risks. Any such acquisition or combination may involve,
among other things, the payment of cash, the incurrence of contingent
liabilities and the amortization of expenses related to goodwill and other
intangible assets, and transaction costs, which may adversely affect our
business, financial condition, results of operations and growth prospects.
Our ability to integrate and organize any new businesses and/or products,
whether internally developed or obtained by acquisition or combination, will
likely require significant expansion of our operations. There is no assurance
that we will have or be able to obtain the necessary resources to satisfactorily
effect such expansion, and the failure to do so could have a material adverse
effect on our business, financial condition, results of operations and growth
prospects. In addition, future acquisitions or combinations
by us involve risks of, among other things, entering markets or segments in
which we have no or limited prior experience, the potential loss of key
employees or difficulty, delay or failure in the integration of the operations
of any such new business with our current business and operating and financial
difficulties of any new or newly combined operations, any of which could have a
materially adverse effect on our business, financial condition, results of
operations and growth prospects. Moreover, there can be no assurance that the
anticipated benefits of any internally developed new business segment or
business combination will be realized.


32





The loss of one
or more members of our management team or other key employees couldaffect our
ability to successfully grow our business . Our success and future growth
depends to a significant degree on the skills and continued services of our
management team and other key employees, including but not limited to, Yijun
Wang, our Chairman, Chief Executive Officer and President (and Chairman and
Chief Executive Officer of Qingdao Renmin) and Qingjun Yang, the President of
Qingdao Renmin. Qingdao Renmin currently has employment agreements with its
named executive officers but does not currently maintain key person life
insurance. If one or more members of our management or other key employees were
to resign or no longer be able to serve as our employees, it could impair our
revenue growth, business and future prospects. Further, our ability to
execute our business plan is dependent on our ability to attract and retain
additional highly skilled personnel.




We do not have a
majority of independent directors serving on our board of directors, which could
present the potential for conflicts of interest.  We
do not have a majority of independent directors serving on our board of
directors and we cannot guarantee that our board of directors will have a
majority of independent directors in the future. In the absence of a majority of
independent directors, our executive officers could establish policies and enter
into transactions without independent review and approval thereof. This could
present the potential for a conflict of interest between us and our
stockholders, generally, and the controlling officers, stockholders or
directors.





We may be exposed
to risks relating to our disclosure controls and our internal controls and may
need to incur significant costs to comply with applicable
requirements. Based on the evaluation done by our management as of June 30,
2007, our internal controls were deemed deficient, in that we did not accurately
account for the share exchange and related transactions so as to avoid a
material misstatement in our financial statements that would not be prevented or
detected in a timely manner.  Due to SEC comments we received concerning
our registration statement on Form S-1, we conducted further research about how
to account for the share exchange and related activities and only then did
management recognize the material weakness. This material weakness caused an
error in our financial statements regarding how we accounted for the share
exchange, the placement agent warrants issued in the financing that closed
simultaneously with the share exchange, and the cash flow translation in our
June 30, 2007 financial statements.  These mistakes flowed through to
our financial statements for the quarters ending September 30, 2007 and December
31, 2007.  On May 4,
2008, the Board of Directors concluded that we were required to restate our
previously issued audited financial statements for the year ended June 30, 2007
and the periods ended September 30, 2007 and December 31,
2007.  Subsequent to the issuance of these financial statements,
management identified various errors in connection with its 2007 financial
statements and determined that a restatement was necessary.  Restated
financial statements for the year ending June 30, 2007 were included in an
amendment to our Registration Statement on Form S-1; restated financials for the
quarter ending September 30, 2007 and December 31, 2007 were included in
amendments to such reports that we filed on August 5, 2008.  After
such filing, we received additional SEC comments and determined that the
financial statements for the quarter ending December 31, 2007 must be restated
again – and shall be included in an amendment to that quarterly report that we
will file on this same date, and that the financial statements for the quarter
ending March 31, 2008 must be restated and are included in this amendment; these
revisions impacted the financial statements for the quarter ended September 31,
2007 and as a result, we shall file an amendment to that quarterly report to
conform, and make consistent the disclosure contained therein with our other
filings.  This latest restatement was needed to properly account for
the extension of the term of the Series A and Series B Warrants, as well as the
compensation issued pursuant to the exercise of the Series J
Warrants.




We are
seeking to recruit experienced professionals to augment and upgrade our
financial staff to better address complex accounting issues.  We may
be required to expend additional resources to identify, assess and correct any
additional weaknesses in disclosure or internal control, and to otherwise comply
with the internal controls rules under Section 404 of the Sarbanes-Oxley Act
which will be newly applicable to us for the fist time at the end of this fiscal
year.





If we are unable
to establish appropriate internal financial reporting controls and procedures,
it could cause usto fail to meet
our reporting obligations, result in the restatement of our financial
statements, harm our operating results, subject us to regulatory scrutiny and
sanction, cause investors to lose confidence in our reported financial
information and havea negative effect
on the market price for shares of our common stock.  Effective
internal controls are necessary for us to provide reliable financial reports and
effectively prevent fraud. We maintain a system of internal control over
financial reporting, which is defined as a process designed by, or under the
supervision of, our principal executive officer and principal financial officer,
or persons performing similar functions, and effected by our board of directors,
management and other personnel, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting
principles.





As a
public company, we will have significant additional requirements for enhanced
financial reporting and internal controls. We will be required to document and
test our internal control procedures in order to satisfy the requirements of
Section 404 of the Sarbanes-Oxley Act of 2002, which requires annual management
assessments of the effectiveness of our internal controls over financial
reporting and a report by our independent registered public accounting firm
addressing these assessments. The process of designing and implementing
effective internal controls is a continuous effort that requires us to
anticipate and react to changes in our business and the economic and regulatory
environments and to expend
significant resources to maintain a system of internal controls that is adequate
to satisfy our reporting obligations as a public
company.


33




We cannot
assure you that we will not, in the future, identify additional areas requiring
improvement in our internal control over financial reporting. We cannot assure
you that the measures we will take to remediate any areas in need of improvement
will be successful or that we will implement and maintain adequate controls over
our financial processes and reporting in the future as we continue our growth.
If we are unable to establish appropriate internal financial reporting controls
and procedures, it could cause us to fail to meet our reporting obligations,
result in the restatement of our financial statements, harm our operating
results, subject us to regulatory scrutiny and sanction, cause investors to lose
confidence in our reported financial information and have a negative effect on
the market price for shares of our common stock.




We face
significant competition in each product we offer and each geographic market in
which we operate, and if we fail to compete effectively, we may
lose our market share and our profitability may be adversely
affected.  The aseptic liquid food and beverage carton market
in China is rapidly evolving and highly competitive. We expect competition in
this market to persist and intensify. We face competition in each major product
line we offer and each geographic market in which we operate. We face nationwide
competition primarily from Tetra Pack and SIG Cambibloc (“SIG”), both
multi-national companies which currently have an estimated combined 90% of the
aseptic carton market. We also face competition from domestic aseptic carton
suppliers in China. Existing or future competing products may provide (i) better
quality and technology, (ii) greater utility, lower cost or other benefits from
their intended uses than our products, or (iii) may offer comparable performance
at lower cost. Many of these companies are well-established, have substantially
greater financial and other resources, and have more experience in manufacturing
and marketing than we do. There can be no assurance that we will be able to
compete successfully with such competitors. If our products fail to capture and
maintain market share, we may not achieve sufficient product revenues, and our
business could suffer.




High
margins for the aseptic
liquid food and beverage cartons business will attract more businesses to enter
this field. Our business could suffer as a result of more
competition.  Our business has enjoyed relatively high profit
margins so far due to the fact that we have concentrated in the aseptic liquid
food and beverage carton business. Such high margins will attract more
businesses to enter into this field. As a result, competition may intensify and
our profits may drop significantly.





Risks
Related To Doing Business in China




Changes in
China’s political or
economic situation could harm us and our operational results. Economic
reforms adopted by the Chinese government have had a positive effect on the
economic development of the country, but the government could change these
economic reforms or any of the legal systems at any time. This could either
benefit or damage our operations and profitability. Some of the things that
could have this effect are:





●
            level
      of government involvement in the economy;●
            control
      of foreign exchange;●
            methods
      of allocating resources;●
            balance
      of payments position;●
            international
      trade restrictions; and●
            international
      conflict.





The
Chinese economy differs from the economies of most countries belonging to the
Organization for Economic Cooperation and Development, or OECD, in many ways.
The economic reforms in China have been conducted under a tight grip of the
Chinese government. As a result of these differences, we may not develop in the
same way or at the same rate as might be expected if the Chinese economy were
similar to those of the OECD member countries.




Our business is
largely subject to the uncertain legal environment in China and your legal
protection could be limited. The Chinese legal system is a civil law
system based on written statutes. Unlike common law systems, it is a system in
which precedents set in earlier legal cases are not generally used. The overall
effect of legislation enacted over the past 20 years has been to enhance the
protections afforded to foreign invested enterprises in China. However, these
laws, regulations and legal requirements are relatively recent and are evolving
rapidly, and their interpretation and enforcement involve uncertainties. These
uncertainties could limit the legal protections available to foreign
shareholders, such as the right of foreign
invested enterprises to hold licenses and permits such as requisite business
licenses. Because most of our officers and directors reside outside of the
United States, it may be difficult, if not impossible, to acquire jurisdiction
over those persons if a lawsuit is initiated against us and/or its officers and
directors by a shareholder or group of shareholders in the United States. Also,
because our officers will likely be residing in the PRC at the time such a suit
is initiated, achieving service of process against such persons would be
extremely difficult. Furthermore, because the majority of our assets are located
in the People’s Republic of China (“PRC”) it would also be extremely difficult
to access those assets to satisfy an award entered against us in United States
court. Moreover, we have been advised that the PRC does not have treaties with
the United States providing for the reciprocal recognition and enforcement of
judgments of courts.


34




Recent PRC
regulations relating to mergers and acquisitions of domestic enterprises by
foreign investors may increase the
administrative burden we face and create regulatory uncertainties . On
August 8, 2006, six PRC regulatory agencies, namely, the PRC Ministry of
Commerce (“MOFCOM”), the State Assets Supervision and Administration Commission
(“SASAC”), the State Administration for Taxation, the State Administration for
Industry and Commerce, the China Securities Regulatory Commission (“CSRC”), and
the State Administration of Foreign Exchange, (“SAFE”), jointly adopted the
Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign
Investors (“New M&A Rule”), which became effective on September 8, 2006. The
New M&A Rule purports, among other things, to require offshore special
purpose vehicles (“SPVs”), formed for overseas listing purposes through
acquisitions of PRC domestic companies and controlled by PRC companies or
individuals, to obtain the approval of the CSRC prior to publicly listing their
securities on an overseas stock exchange.





On
September 21, 2006, pursuant to the New M&A Rule and other PRC laws and
regulations, the CSRC, in its official website, promulgated relevant guidance
with respect to the issues of listing and trading of domestic enterprises’
securities on overseas stock exchanges (the “Administrative Permits”), including
a list of application materials with respect to the listing on overseas stock
exchanges by SPVs.





Based on
our understanding of current PRC Laws, we believe that the New M&A Rule does
not require us or our Chinese shareholders or our entities in China to obtain
the CSRC approval in connection with the transaction contemplated by the share
exchange agreement, by and among the Company, Jpak and the shareholders of Jpak
named therein, dated as of August 9, 2007 (the “Securities Exchange Agreement”
or “SEA”), in connection with the Share Exchange because Grand International
completed the approval procedures of the acquisition of the 88.23% equity
interest in Qingdao Renmin at MOFCOM before September 8, 2006 when the New
M&A Rule became effective.





There
are, however, substantial uncertainties regarding the interpretation and
application of current or future PRC laws and regulations, including the New
M&A Rule. Accordingly, we cannot assure you that PRC government authorities
will not ultimately take a view contrary to our understanding that we do not
need the CSRC approval, and PRC government authorities may impose some
additional approvals and requirements.





Further,
if the PRC government finds that we or our Chinese shareholders did not obtain
the CSRC approval, which CSRC may think we should have obtained before our
executing the Securities Exchange Agreement, we could be subject to severe
penalties. The New M&A Rule does not stipulate the specific penalty terms,
so we are not able to predict what penalties we may face, and how such penalties
will affect our business operations or future strategy.





The Chinese
government exerts substantial influence over the
manner in which we must conduct our business activities. China only
recently has permitted provincial and local economic autonomy and private
economic activities and, as a result, we are dependent on our relationship with
the local government in the province in which we operate our business. Chinese
government has exercised and continues to exercise substantial control over
virtually every sector of the Chinese economy through regulation and state
ownership. Our ability to operate in China may be harmed by changes in its laws
and regulations, including those relating to taxation, import and export
tariffs, environmental regulations, land use rights, property and other matters.
We believe that our operations in China are in material compliance with all
applicable legal and regulatory requirements. However, the central or local
governments of these jurisdictions may impose new, stricter regulations or
interpretations of existing regulations that would require additional
expenditures and efforts on our part to ensure our compliance with such
regulations or interpretations. Accordingly, government actions in the future,
including any decision not to continue to support recent economic reforms and to
return to a more centrally planned economy or regional or local variations in
the implementation of economic policies, could have a significant effect on
economic conditions in China or particular regions thereof, and could require us
to divest ourselves of any interest we then hold in Chinese
properties.







35




Future inflation
in China may inhibit our activity to conduct business in China. In recent
years, the Chinese economy has experienced periods of rapid expansion and high
rates of inflation. During the past ten years, the rate of inflation in China
has been as high as 20.7% and as low as -2.2%. These factors have led to the
adoption by Chinese government, from time to time, of various corrective
measures designed to restrict the availability of credit or regulate growth and
contain inflation. While inflation has been more moderate since 1995, high
inflation may in the future cause Chinese government to impose controls on
credit and/or prices, or to take other action, which could inhibit economic
activity in China, and thereby harm the market for our products.




Restrictions on
currency exchange may limit our ability to receive and use our revenues
effectively. The majority of our revenues will be settled in RMB (“RMB”)
and, any future restrictions on currency exchanges may limit our ability to use
revenue generated in RMB to fund any future business activities outside China or
to make dividend or other payments in U.S. dollars. Although the Chinese
government introduced regulations in 1996 to allow greater convertibility of the
RMB for current account transactions, significant restrictions still remain,
including primarily the restriction that foreign-invested enterprises may only
buy, sell or remit foreign currencies after providing valid commercial
documents, at those banks in China authorized to conduct foreign exchange
business. In addition, conversion of RMB for capital account items, including
direct investment and loans, is subject to governmental approval in China, and
companies are required to open and maintain separate foreign exchange accounts
for capital account items. We cannot be certain that the Chinese regulatory
authorities will not impose more stringent restrictions on the convertibility of
the RMB.




The value of our
securities will be affected by the foreign exchange rate between U.S.
dollars and
RMB. The value of our common stock will be affected by the foreign
exchange rate between U.S. dollars and RMB, and between those currencies and
other currencies in which our sales may be denominated. For example, to the
extent that we need to convert U.S. dollars into RMB for our operational needs
and should the RMB appreciate against the U.S. dollar at that time, our
financial position, the business of the company, and the price of our common
stock may be harmed. Conversely, if we decide to convert our RMB into U.S.
dollars for the purpose of declaring dividends on our common stock or for other
business purposes and the U.S. dollar appreciates against the RMB, the U.S.
dollar equivalent of our earnings from our subsidiaries in China would be
reduced.





Government
regulations and environmental matter in China may adversely impact on our
business. Our manufacturing operations are subject to numerous laws,
regulations,  rules
and specifications relating to human health and safety and  the
environment. These laws and regulations address and regulate, among other  matters,
wastewater discharge, air quality and the generation, handling,  storage,
treatment, disposal and transportation of solid and hazardous wastes  and
releases of hazardous substances into the environment. In addition, third  parties
and governmental agencies in some cases have the power under such laws  and
regulations to require remediation of environmental conditions and, in the  case
of governmental agencies, to impose fines and penalties. We make capital
expenditures from time to time to stay in compliance with  applicable
laws and regulations.




We have
obtained all permits and approvals and filed all registrations required for the
conduct of its business, except where the failure to obtain any permit or
approval or file any registration would not have a material adverse effect on
our business, financial condition and results of operations. We are in
compliance in all material respects with the numerous
laws, regulations,  rules,
specifications and permits, approvals and registrations relating to human health
and safety and the environment except where noncompliance would not have a
material adverse effect on our business, financial condition and results of
operations.




The PRC
governmental authorities have not revealed any material environmental liability
that would have a material adverse effect on us. We have not been notified by
any governmental authority of any continuing noncompliance, liability or other
claim in connection with any of our properties or business operations, nor are
we aware of any other material environmental condition with respect to any of
our properties or arising out of our business operations at any other location.
However, in connection with the ownership and operation of our properties
(including locations to which we may have sent waste in the past) and the
conduct of our business, we potentially may be liable for damages or cleanup,
investigation or remediation costs.




No
assurance can be given that all potential environmental liabilities have been
identified or properly quantified or that any prior owner, operator, or tenant
has not created an environmental condition unknown to us. Moreover, no assurance
can be given that (i) future laws, ordinances or regulations will not impose any
material environmental liability or (ii) the current
environmental condition of the properties will not be affected by the condition
of land or operations in the vicinity of the properties (such as the presence of
underground storage tanks), or by third parties unrelated to us. State and local
environmental regulatory requirements change often.


36




It is
possible that compliance with a new regulatory requirement could impose
significant compliance costs on us. Such costs could have a material adverse
effect on our business, financial condition and results of
operations.




We may have
difficulty establishing adequate management, legal and financial controls in the
PRC. The PRC historically has been deficient in Western style management
and financial reporting concepts and practices, as well as in modern banking,
computer and other control systems. We may have difficulty in hiring and
retaining a sufficient number of qualified employees to work in the PRC. As a
result of these factors, we may experience difficulty in establishing
management, legal and financial controls, collecting financial data and
preparing financial statements, books of account and corporate records and
instituting business practices that meet Western standards.




Changes in
foreign exchange regulations in the PRC may affect our ability to pay dividends
in foreign currency or conduct other foreign exchange
business.  RMB is not a freely convertible currency currently,
and the restrictions on currency exchanges may limit our ability to use revenues
generated in RMB to fund our business activities outside the PRC or to make
dividends or other payments in United States dollars. The PRC government
strictly regulates conversion of RMB into foreign currencies. Over the years,
foreign exchange regulations in the PRC have significantly reduced the
government’s control over routine foreign exchange transactions under current
accounts. In the PRC, the State Administration for Foreign Exchange, or the
SAFE, regulates the conversion of the RMB into foreign currencies. Pursuant to
applicable PRC laws and regulations, foreign invested enterprises incorporated
in the PRC are required to apply for “Foreign Exchange Registration
Certificates.” Currently, conversion within the scope of the “current account”
(e.g. remittance of foreign currencies for payment of dividends, etc.) can be
effected without requiring the approval of SAFE. However, conversion of currency
in the “capital account” (e.g. for capital items such as direct investments,
loans, securities, etc.) still requires the approval of SAFE.




In
addition, on October 21, 2005, SAFE issued the Notice on Issues Relating to the
Administration of Foreign Exchange in Fundraising and Reverse Investment
Activities of Domestic Residents Conducted via Offshore Special Purpose
Companies (“Notice 75”), which became effective as of November 1, 2005. Notice
75 replaced the two rules issued by SAFE in January and April 2005.




According
to Notice 75:




●
            prior
      to establishing or assuming control of an offshore company for the purpose
      of obtaining overseas equity financing with assets or equity interests in
      an onshore enterprise in the PRC, each PRC resident, whether a natural or
      legal person, must complete the overseas investment foreign exchange
      registration procedures with the relevant local SAFE
    branch;●
            an
      amendment to the registration with the local SAFE branch is required to be
      filed by any PRC resident that directly or indirectly holds interests in
      that offshore company upon either (1) the injection of equity interests or
      assets of an onshore enterprise to the offshore company, or (2) the
      completion of any overseas fund raising by such offshore company;
      and●
            an
      amendment to the registration with the local SAFE branch is also required
      to be filed by such PRC resident when there is any material change in the
      capital of the offshore company that does not involve any return
      investment, such as (1) an increase or decrease in its capital, (2) a
      transfer or swap of shares, (3) a merger or division, (4) a long term
      equity or debt investment, or (5) the creation of any security
      interests.




Moreover,
Notice 75 applies retroactively. As a result, PRC residents who have established
or acquired control of offshore companies that have made onshore investments in
the PRC in the past are required to complete the relevant overseas investment
foreign exchange registration procedures by March 31, 2006. Under the relevant
rules, failure to comply with the registration procedures set forth in Notice 75
may result in restrictions being imposed on the foreign exchange activities of
the relevant onshore company, including the payment of dividends and other
distributions to its offshore
parent or affiliate and the capital inflow from the offshore entity, and may
also subject relevant PRC residents to penalties under PRC foreign exchange
administration regulations.


37




In
addition, SAFE issued updated internal implementing rules (“Implementing Rules”)
in relation to Notice 75. The Implementing Rules were promulgated and became
effective on May 29, 2007. Such Implementing Rules provide more detailed
provisions and requirements regarding the overseas investment foreign exchange
registration procedures. The Implementing Rules permits retroactive registration
for PRC residents who have established or acquired control of offshore companies
that have made onshore investments in the PRC in the past but did not complete
the relevant overseas investment foreign exchange registration procedures before
March 31, 2006. But there may be penalties on the relevant PRC residents and the
relevant onshore company if any foreign exchange transactions were paid out from
the relevant onshore company to the relevant offshore company between April 21,
2005 and the date of the application for the registration. However, even after
the promulgation of Implementing Rules there still exist uncertainties regarding
the SAFE registration for PRC residents’ interests in overseas companies. It
remains uncertain whether PRC residents shall go through the overseas investment
foreign exchange registration procedures under Notice 75 or Implementing Rules,
who may indirectly hold our shares through the participation and exercise of
incentive stock option granted by Joyrich Group Limited and Fabregas Group
Limited, shareholders of our company.




As a
result, we cannot predict how they will affect our business operations following
our business combination. For example, our ability to conduct foreign exchange
activities following a business combination, such as remittance of dividends and
foreign-currency-denominated borrowings, may be subject to compliance with the
SAFE registration requirements by such PRC residents, over whom we have no
control. In addition, we cannot assure you that such PRC residents will be able
to complete the necessary approval and registration procedures required by the
SAFE regulations. We will require all our shareholders, following a business
combination, who are PRC residents to comply with any SAFE registration
requirements, if required by Notice 75, Implementing Rules or other applicable
PRC laws and regulations, although we have no control over either our
shareholders or the outcome of such registration procedures. Such uncertainties
may restrict our ability to implement our business combination strategy and
adversely affect our business and prospects following a business
combination.




Our future
employee stock option plan or stock ownership plan involving any PRC domestic
individual will be subject to the administration of foreign exchange in the
PRC . In accordance with the Measures of Administration on Foreign
Exchange of Individuals promulgated on December 25, 2006 (the “Measures”) and
the Implementing Rules of the Measures of Administration on Foreign Exchange of
Individuals (the “Implementing Rules of Measures”), which became effective in
February 2007, a PRC domestic individual (i.e., a Chinese citizen as defined)
who participates in the employees stock option plan or stock plan of an overseas
listed company shall conduct foreign exchange related affairs upon the prior
approval of SAFE and/or its local branch through its employer or a PRC agency.
The dividends of the shares or proceeds received from sale of shares under the
stock option plan or stock ownership plan in foreign exchange by such PRC
domestic individual shall be remitted and deposited into the special onshore
foreign currency bank account in the PRC opened by the employer or the PRC
agency. Furthermore, following the Implementing Rules of Measures, SAFE issued
the Operating Procedures for Administration of Domestic
Individuals Participating in the Employee Stock Ownership Plan or Stock
Option Plan of An Overseas Listed Company (Hui Zong Fa [2007] No. 78, the
“Circular 78”) on April 6, 2007. Circular 78, which introduces a number of new
and highly restrictive requirements, applies to any employee stock option plan
or stock ownership plan offered by a PRC or non-PRC company whose shares are
listed on an overseas stock exchange. Given these PRC regulations, if we approve
and implement any employee stock option plan or stock ownership plan which will
involve any PRC domestic individual, the SAFE registration for such PRC domestic
individual participating in the employee stock ownership plan or stock option
plan shall apply and be required. Nevertheless, Circular 78 only applies to the
overseas listed company other than an overseas private company and as a result,
the incentive stock option granted by Joyrich Group Limited and Fabregas Group
Limited, shareholders of our company and private companies, to PRC residents do
not fall into such SAFE registration under Circular 78. Currently it is silent
in terms of PRC statutory requirements with respect to the PRC domestic
individuals participating in employee stock ownership plan or stock option plan
of an overseas private company, since there are no applicable PRC laws or
regulations. It is unclear how future regulations will impact the incentive
stock options granted by Joyrich Group Limited and Fabregas Group
Limited.




Risks
Relating to Our Securities





Insiders have
substantial control over us, and they
could delay or prevent a change in our corporate control even if our other
stockholders wanted it to occur.  Our executive officers,
directors, and principal stockholders who hold


38


5% or
more of our outstanding common stock own, in the aggregate, approximately 96% of
our outstanding common stock. These stockholders are able to control all matters
requiring stockholder approval, including the election of directors and approval
of significant corporate transactions. This could delay or prevent an outside
party from acquiring or merging with us even if our other stockholders wanted it
to occur.




There is no
active public trading market for our common stock and there can be no assurance
that one will develop in the future.  There is no active public
trading market for our common stock. Our common stock is quoted on the OTC
Bulletin Board. There can be no assurance that a regular trading market will
develop or that if developed, will be sustained. The development of an active
trading market will depend on the existence of willing buyers and sellers, the
presence of which is not within our control, or the control of any market maker
or specialist. The number of active buyers and sellers of our common stock at
any particular time may be limited. Under such circumstances, our shareholders
could have difficulty selling our shares on short notice, and, therefore, our
common stock should not be viewed as a short-term or liquid investment. In the
absence of a trading market, a shareholder will be unable to liquidate his
investment except by private sale.





If we fail to
remain current on our reporting requirements, we could be removed from the OTC
Bulletin Board which would limit the ability of broker dealers to sell our
securities and the ability of stockholders to sell
their securities in the secondary market.  Companies trading on
the OTC Bulletin Board must be reporting issuers under Section 12 of the
Securities Exchange Act of 1934, as amended, and must be current in their
reports under Section 13, in order to maintain price quotation privileges on the
OTC Bulletin Board. If we fail to remain current on our reporting requirements,
we could be removed from the OTC Bulletin Board. As a result, the market
liquidity for our securities could be severely adversely affected by limiting
the ability of broker-dealers to sell our securities and the ability of
stockholders to sell their securities in the secondary market. In addition, we
may be unable to get re-listed on the OTC Bulletin Board, which may have an
adverse material effect on our company.




Any market that
develops in shares of our common stock will be subject to the penny stock
regulations and restrictions, which could impair liquidity and make trading
difficult.  SEC Rule 15g-9, as amended, establishes the
definition of a "penny stock" as any equity security that has a market price of
less than $5.00 per share or with an exercise price of less than $5.00 per
share, subject to a limited number of exceptions. It is likely that our shares
will be considered to be penny stocks for the immediately foreseeable future.
This classification severely and adversely affects the market liquidity for our
common stock.





For any
transaction involving a penny stock, unless exempt, the penny stock rules
require that a broker or dealer approve a person’s account for transactions in
penny stocks and the broker or dealer receive from the investor a written
agreement to the transaction setting forth the identity and quantity of the
penny stock to be purchased.   To approve a person’s account for
transactions in penny stocks, the broker or dealer must obtain financial
information and investment experience and objectives of the person and make a
reasonable determination that the transactions in penny stocks are suitable for
that person and that that person has sufficient knowledge and experience in
financial matters to be capable of evaluating the risks of transactions in penny
stocks.





The
broker or dealer must also deliver, prior to any transaction in a penny stock, a
disclosure schedule prepared by the SEC relating to the penny stock market
which, in highlight form, sets forth:





●
            the
      basis on which the broker or dealer made the suitability determination,
      and●
            that
      the broker or dealer received a signed, written agreement from the
      investor prior to the transaction.





Disclosure
also has to be made about the risks of investing in penny stock in both public
offerings and in secondary trading and commissions payable to both the
broker-dealer and the registered representative, current quotations for the
securities and the rights and remedies available to an investor in cases of
fraud in penny stock transactions. Finally, monthly statements must be sent
disclosing recent price information for the penny stock held in the account and
information on the limited market in penny stocks.








39


Because
of these regulations, broker-dealers may not wish to engage in the
above-referenced necessary paperwork




The market for
penny stocks has experienced numerous frauds and abuses which could adversely
impact investors in our stock.  OTC Bulletin Board securities
are frequent targets of fraud or market manipulation, both because of their
generally low prices and because OTC Bulletin Board reporting requirements are
less stringent than those of the stock exchanges or NASDAQ.





Patterns
of fraud and abuse include:





●
            Control
      of the market for the security by one or a few broker-dealers that are
      often related to the promoter or issuer;●
            Manipulation
      of prices through prearranged matching of purchases and sales and false
      and misleading press releases;●
            “Boiler
      room" practices involving high pressure sales tactics and unrealistic
      price projections by inexperienced sales persons;●
            Excessive
      and undisclosed bid-ask differentials and markups by selling
      broker-dealers; and●
            Wholesale
      dumping of the same securities by promoters and broker-dealers after
      prices have been manipulated to a desired level, along with the inevitable
      collapse of those prices with consequent investor
  losses.





Our
management is aware of the abuses that have occurred historically in the penny
stock market.





In the
eventthat we raise
additional capital through the issuance of equity securities, or securities
exercisable for or convertible into our equity securities, our stockholders
could experience substantial dilution.  If we raise additional
capital by issuing equity securities or convertible debt securities, our
existing stockholders may incur substantial dilution. Further, any shares so
issued may have rights, preferences and privileges superior to the rights,
preferences and privileges of our outstanding securities.





The market price
of our common stock may be volatile. The market price of our common stock
will likely be highly volatile, as is the stock market in general, and the
market for OTC Bulletin Board quoted stocks in particular. Some of the factors
that may materially affect the market price of our common stock are beyond our
control, such as changes in financial estimates by industry and securities
analysts, conditions or trends in industries in which we operate, announcements
made by our competitors or sales of our common stock. These factors may
materially adversely affect the market price of our common stock, regardless of
our performance.





In
addition, the public stock markets have experienced extreme price and trading
volume volatility. This volatility has significantly affected the market prices
of securities of many companies for reasons frequently unrelated to the
operating performance of the specific companies. These broad market fluctuations
may adversely affect the market price of our common stock.








We have not paid
dividends in the past and do not expect to pay dividends in the future, and any
return on investment may be limited to the value of our
stock.  We have never paid any cash dividends on our common
stock and do not anticipate paying any cash dividends on our common stock in the
foreseeable future and any return on investment may be limited to the value of
our stock. We plan to retain any future earnings to finance growth.




40





Anti-takeover
provisions of Nevada law, our articles of incorporation and our
bylaws may prevent or delay an acquisition of us that shareholders may consider
favorable or attempts to replace or remove our management that could be
beneficial to our shareholders.  Our articles of incorporation
and bylaws contain provisions which could make it more difficult for a third
party to acquire us without the consent of our board of directors. Our bylaws
impose restrictions on the persons who may call special shareholder meetings.
Furthermore, the Nevada Revised Statutes contain an affiliated transaction
provision that prohibits a publicly-held Nevada corporation from engaging in a
broad range of business combinations or other extraordinary corporate
transactions with an “interested stockholder” unless, among others, (i) the
transaction is approved by a majority of disinterested directors before the
person becomes an interested shareholder or (ii) the transaction is approved by
the holders of a majority of the corporation’s voting shares other than those
owned by the interested shareholder. An interested shareholder is defined as a
person who together with affiliates and associates beneficially owns more than
10% of the corporation’s outstanding voting shares. This provision may have the
effect of delaying or preventing a change of control of our company even if
this change of control would benefit our shareholders.







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





Not
applicable.




Item
3. Defaults Upon Senior Securities





Not
applicable.




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





Not
applicable.




Item
5. Other Information





Not
applicable.




Item
6. Exhibits





See
Exhibit Index on page 20 for a description of the documents that are filed
as Exhibits to this report on Form 10-Q or incorporated by reference
herein.







41







SIGNATURES






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




JPAK
      GROUP, INC.By:
            /s/
      Yijun WangYijun
      Wang
              Chief
      Executive OfficerBy:
            /s/
      Dongliang SuDongliang
      Su
              Acting
      Chief Financial Officer




Date:
September 22, 2008







42







EXHIBIT
INDEX




Exhibit No.
            
            Description31.1
            
            Certification
      of the Chief Executive Officer Pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.31.2
            
            Certification
      of the Acting Chief Financial Officer Pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.32.1
            
            Certification
      of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as
      Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.32.2
            
            Certification
      of the Acting Chief Financial Officer Pursuant to 18 U.S.C. Section 1350,
      as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.













43