U.S.
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON,
D.C.  20549



FORM
10-Q/A1



(Mark
One)



|S | QUARTERLY
    REPORT PURSUANT TO SECTION 13 OR 15(d)  OF THE SECURITIES EXCHANGE ACT OF 1934
|- | --------------------------------------------------------------------------------------------



For
the quarterly period ended December 31, 2011



|£ | 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



Jpak
Group, Inc.

(Exact
name of registrant as specified in its charter)



|Nevada                                                                                 |  | 20-1977020                           
|-------------------------------------------------------------------------------------- |  | -------------------------------------
|(State
        or other jurisdiction
        of
        incorporation or organization) |  | (IRS
    Employer Identification No.)



15
Xinghua Road, Qingdao, Shandong Province

People’s
Republic of China 266401

(Address
of principal executive offices (zip code))



(86-532)
84616387

(Issuer's
telephone number)



(Former
address)



Check
whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during
the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes  S   No £



Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Sec. 232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes 
o No o



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 Filer | £ | Accelerated
    Filer         | £
|--------------------------- | - | ----------------------------- | -
|Non-accelerated
    filer   | £ | Smaller
    reporting company | S



Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934) Yes 
SNo £



As
of February 10, 2012, there were 36,368,344 shares of the issuer's common stock, par value $.001 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,
12,000,000 shares of Series C Convertible Preferred Stock, par value $0.0001 per share outstanding, which shares are convertible
into an aggregate of 12,000,000  shares of common stock.

















Explanatory
Note



We
are filing this Form 10-Q/A1 for the period ended December 31, 2011 (“Amended Report”) to correct minor typographical
errors contained in the Results of Operation Section of Item 2. Management’s Discussion and Analysis or Plan of Operation
(“MD&A”) in Form 10-Q for the period ended December 31, 2011 filed on February 14, 2012 (“Original Report”).
The only changes are reflected on page 21, 22 of the Comparison of The Three Months Ended December 31, 2011 and 2010 and
page 24 of Liquidity and Capital Resources in MD&A. During the preparation of the Post Effective Amendment No. 10 to
our registration statement to conform the disclosure in the Original Report, we noticed an earlier version of MD&A was incorporated
in the Original Report by error, therefore, we are filing this Amended Report to correct certain numbers mentioned in MD&A
to ensure consistent financial information in the Amended Report.

This
Amended Report does not reflect events occurring after the filing of the Original Report on February 14, 2012, nor does it modify
or update those disclosures presented therein, except with regard to the modifications described in this Explanatory Note. As
such, this Amended Report continues to speak as of September 28, 2011. Accordingly, this Amended Report should be read in conjunction
with the Original Report and our other reports filed with the SEC subsequent to the filing of our Original Report, including any
amendments to those filings.



In
addition, pursuant to Rule 12b-15 under the Securities Exchange Act of 1934, as a result of this Amended Report, the certifications
pursuant to Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002, filed and furnished, respectively, as exhibits
to the Original Report have been re-executed and re-filed as of the date of this Amended Report and are included as exhibits hereto.



















JPAK GROUP, INC.

Consolidated Financial Statements

December 31, 2011 and 2010

(Unaudited)







PART
I – FINANCIAL INFORMATION





Table
of Contents



|                                                           | Page
|---------------------------------------------------------- | ----
|Consolidated
    Balance Sheets                            | F-2 
|                                                           |     
|Consolidated
    Statements of Operations                  | F-3 
|                                                           |     
|Consolidated
    Statements of Comprehensive Income (loss) | F-4 
|                                                           |     
|Consolidated
    Statements of Cash Flows                  | F-5 
|                                                           |     
|Notes
    to Consolidated Financial Statements             | F-6 



F-1







JPAK GROUP, INC.

Consolidated Balance Sheets

|                                                                                            |  | December 31, |            | June 30,
|------------------------------------------------------------------------------------------- |  | ------------ | ---------- | --------
|                                                                                            |  | 2011         |            | 2011    
|Assets                                                                                      |  | (Unaudited)  |            |         
|Current assets:                                                                             |  |              |            |         
|Cash and cash equivalents                                                                   |  | $            | 2,624,657  |         
|Restricted cash                                                                             |  |              | 20,939,764 |         
|Accounts receivable, net of allowance for doubtful accounts of $1,362,864                   |  |              | 14,234,576 |         
|and $1,339,485 at December 31, 2011 and June 30, 2011, respectively                         |  |              |            |         
|Due from factor                                                                             |  |              | 716,643    |         
|Inventory                                                                                   |  |              | 13,368,101 |         
|Trade notes receivable                                                                      |  |              | 129,068    |         
|Other receivables                                                                           |  |              | 104,129    |         
|Advance payments                                                                            |  |              | 789,224    |         
|Prepaid expenses and other current assets                                                   |  |              | 462,401    |         
|Total current assets                                                                        |  |              | 53,368,563 |         
|                                                                                            |  |              |            |         
|Property and equipment, net                                                                 |  |              | 25,672,423 |         
|                                                                                            |  |              |            |         
|Other noncurrent assets:                                                                    |  |              |            |         
|Advance payments – non current                                                              |  |              | 145,433    |         
|Intangible assets, net                                                                      |  |              | 3,156,953  |         
|Deferred loss on sales of assets                                                            |  |              | 2,226,289  |         
|Prepaid expenses                                                                            |  |              | 1,140,980  |         
|                                                                                            |  |              |            |         
|Total assets                                                                                |  | $            | 85,710,641 |         
|                                                                                            |  |              |            |         
|Liabilities                                                                                 |  |              |            |         
|Current liabilities:                                                                        |  |              |            |         
|Accounts payable and accrued expenses                                                       |  | $            | 9,658,734  |         
|Trade notes payable                                                                         |  |              | 20,534,946 |         
|Short-term bank loans                                                                       |  |              | 3,148,000  |         
|Current portion of long-term debt                                                           |  |              | 3,998,686  |         
|Income tax payable                                                                          |  |              | 92,553     |         
|Other current liabilities                                                                   |  |              | 346,553    |         
|Total current liabilities                                                                   |  |              | 37,779,472 |         
|Long-term debt                                                                              |  |              | 10,116,620 |         
|Total liabilities                                                                           |  |              | 47,896,092 |         
|                                                                                            |  |              |            |         
|Equity                                                                                      |  |              |            |         
|Stockholders’ equity:                                                                       |  |              |            |         
|Series A convertible preferred stock, $0.0001 par value, 5,608,564                          |  |              |            |         
|shares authorized, issued and outstanding                                                   |  |              | 561        |         
|Series B convertible preferred stock, $0.0001 par value, 5,000,000                          |  |              |            |         
|shares authorized, issued and outstanding                                                   |  |              | 500        |         
|Series C convertible preferred stock, $0.0001 par value, 12,000,000                         |  |              |            |         
|shares authorized, issued and outstanding                                                   |  |              | 1,200      |         
|Common stock, $0.001 par value, 300,000,000 shares authorized,                              |  |              |            |         
|36,368,334 shares issued and outstanding at December 31, 2011                               |  |              |            |         
|and June 30, 2011, respectively                                                             |  |              | 36,368     |         
|Series A preferred stock                                                                    |  |              | 2,484,226  |         
|Series B preferred stock                                                                    |  |              | 1,390,853  |         
|Additional paid-in capital                                                                  |  |              | 23,903,645 |         
|Retained earnings                                                                           |  |              | 3,071,172  |         
|Statutory reserves                                                                          |  |              | 1,826,236  |         
|Accumulated other comprehensive income                                                      |  |              | 4,988,412  |         
|Total stockholders’ equity                                                                  |  |              | 37,703,173 |         
|Noncontrolling interest                                                                     |  |              | 111,376    |         
|Total equity                                                                                |  |              | 37,814,549 |         
|                                                                                            |  |              |            |         
|Total liabilities and equity                                                                |  | $            | 85,710,641 |         
|The accompanying notes are an integral part of these consolidated financial
    statements. |  |             



F-2





JPAK GROUP, INC.

Consolidated Statements of Operations
and Comprehensive Income (Loss)

(Unaudited)





|                                                       |  | For the Three Months Ended |            |   | For the Six Months Ended |  
|------------------------------------------------------ |  | -------------------------- | ---------- | - | ------------------------ | -
|                                                       |  | December 31,               |            |   | December 31,             |  
|                                                       |  |                            | 2011       |   |                          |  
|                                                       |  |                            |            |   |                          |  
|Sales                                                  |  | $                          | 19,686,287 |   |                          | $
|                                                       |  |                            |            |   |                          |  
|Cost of sales                                          |  |                            | 17,077,534 |   |                          |  
|                                                       |  |                            |            |   |                          |  
|Gross profit                                           |  |                            | 2,608,753  |   |                          |  
|                                                       |  |                            |            |   |                          |  
|Operating expenses                                     |  |                            |            |   |                          |  
|Selling, general and administrative                    |  |                            | 2,285,353  |   |                          |  
|                                                       |  |                            |            |   |                          |  
|Income (loss) from operations                          |  |                            | 323,400    |   |                          |  
|                                                       |  |                            |            |   |                          |  
|Other income (expenses):                               |  |                            |            |   |                          |  
|Interest Income                                        |  |                            | 170,925    |   |                          |  
|Interest expense                                       |  |                            | (248,203   | ) |                          |  
|Non-operating income, net                              |  |                            | (57,286    | ) |                          |  
|                                                       |  |                            |            |   |                          |  
|Total other income (expenses)                          |  |                            | (134,564   | ) |                          |  
|                                                       |  |                            |            |   |                          |  
|Income (loss) before provision for income taxes        |  |                            | 188,836    |   |                          |  
|                                                       |  |                            |            |   |                          |  
|Provision for income taxes                             |  |                            | 49,912     |   |                          |  
|                                                       |  |                            |            |   |                          |  
|Net income (loss)                                      |  |                            | 138,924    |   |                          |  
|                                                       |  |                            |            |   |                          |  
|Less: net loss attributable to noncontrolling interest |  |                            | (87        | ) |                          |  
|                                                       |  |                            |            |   |                          |  
|Net income (loss) attributable to Jpak Group, Inc.     |  |                            | 139,011    |   |                          |  
|                                                       |  |                            |            |   |                          |  
|Undistributed income attributable to preferred         |  |                            |            |   |                          |  
|stockholders                                           |  |                            | 64,575     |   |                          |  
|                                                       |  |                            |            |   |                          |  
|Net income (loss) attributable to common               |  |                            |            |   |                          |  
|stockholders                                           |  | $                          | 74,436     |   |                          | $
|                                                       |  |                            |            |   |                          |  
|Basic earnings per common share                        |  | $                          | 0.00       |   |                          | $
|Diluted earnings per common share                      |  | $                          | 0.00       |   |                          | $
|                                                       |  |                            |            |   |                          |  
|Weighted average number of common shares outstanding   |  |                            |            |   |                          |  
|Basic                                                  |  |                            | 36,368,334 |   |                          |  
|Diluted                                                |  |                            | 67,918,795 |   |                          |  
|                                                       |  |                            |            |   |                          |  

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



F-3





JPAK GROUP, INC.

Consolidated Statements of
Comprehensive Income (loss)

(Unaudited)



|                                            |  | For the Three Months Ended |         | For the Six Months Ended
|------------------------------------------- |  | -------------------------- | ------- | ------------------------
|                                            |  | December 31,               |         | December 31,            
|                                            |  | 2011                       |         | 2010                    
|                                            |  |                            |         |                         
|Net income (loss)                           |  | $                          | 138,924 |                         
|                                            |  |                            |         |                         
|Other comprehensive income                  |  |                            |         |                         
|Foreign currency translation adjustment     |  |                            | 196,100 |                         
|                                            |  |                            |         |                         
|Total other comprehensive income            |  |                            | 196,100 |                         
|                                            |  |                            |         |                         
|Comprehensive income (loss)                 |  |                            | 335,024 |                         
|                                            |  |                            |         |                         
|Less: comprehensive income attributable to  |  |                            |         |                         
|the noncontrolling interest                 |  |                            | 550     |                         
|                                            |  |                            |         |                         
|Comprehensive income (loss) attributable to |  |                            |         |                         
|Jpak Group, Inc.                            |  | $                          | 334,474 |                         
|                                            |  |                            |         |                         



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



F-4





JPAK GROUP, INC.

Consolidated Statements of Cash Flows

(Unaudited)

|                                                    |  | For the Six Months Ended
|--------------------------------------------------- |  | ------------------------
|                                                    |  | December 31,            
|                                                    |  | 2011                    
|                                                    |  |                         
|Cash flows from operating activities:               |  |                         
|Net income                                          |  | $                       
|Adjustments to reconcile net income to net cash     |  |                         
|provided by (used in) operating activities:         |  |                         
|Depreciation and amortization                       |  |                         
|Share-based payment                                 |  |                         
|Loss on disposal of fixed assets                    |  |                         
|Deferred tax assets                                 |  |                         
|Gain on acquisition of a subsidiary - Jiexin        |  |                         
|Changes in assets and liabilities:                  |  |                         
|Accounts receivable                                 |  |                         
|Inventory                                           |  |                         
|Trade notes receivable                              |  |                         
|Other receivables                                   |  |                         
|Advance payments                                    |  |                         
|Prepaid expenses and other current assets           |  |                         
|Accounts payable and accrued expenses               |  |                         
|Income tax payable                                  |  |                         
|Other current liabilities                           |  |                         
|Total adjustments                                   |  |                         
|                                                    |  |                         
|Net cash Provided by operating activities           |  |                         
|                                                    |  |                         
|Cash flows from investing activities:               |  |                         
|Advance payments for fixed assets                   |  |                         
|Additions to property and equipment                 |  |                         
|Proceeds from disposal of fixed assets              |  |                         
|Acquisition of intangible assets – land use rights  |  |                         
|Acquisition of a subsidiary - Jiexin, net of cash   |  |                         
|                                                    |  |                         
|Net cash used in investing activities               |  |                         
|                                                    |  |                         
|Cash flows from financing activities:               |  |                         
|Restricted cash                                     |  |                         
|Due from factor                                     |  |                         
|Issuance of trade notes payable                     |  |                         
|Proceeds from long-term debt                        |  |                         
|                                                    |  |                         
|Net cash provided by (used in) financing activities |  |                         
|                                                    |  |                         
|Effect of foreign currency translation on cash      |  |                         
|                                                    |  |                         
|Net decrease in cash and cash equivalents           |  |                         
|                                                    |  |                         
|Cash and cash equivalents – beginning               |  |                         
|                                                    |  |                         
|Cash and cash equivalents – ending                  |  | $                       
|                                                    |  |                         

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





F-5









JPAK GROUP, INC.

Notes to Consolidated Financial Statements

(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, was established under the laws of Nevada on
December 6, 2004. The accompanying consolidated financial statements include the financial statements of 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 Co.”) 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 Co., 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. (“JPAK”). The transaction was regarded as a reverse
merger whereby JPAK Co. 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 Co..
Thus, JPAK Co. is the continuing entity for financial reporting purposes. The financial statements have been prepared as if JPAK
Co. 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 Co. 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 flows 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.



On January 11, 2010, Qingdao Likang
Packaging Co. Ltd (“Qingdao Likang”), a wholly-owned subsidiary of Grand International, was registered in Qingdao with
a capital commitment of $13.5 million. As of December 31, 2011, approximately $7.1 million or 52.6% of total registered capital
has been invested and the remaining $6.4 million of the registered capital will be invested within two years since the registration.
Grand International is allowed to use the capital raised or the profit generated by Qingdao Renmin for this capital investment.



Qingdao Jiexin Recycling Resources
Technological Development Co., Ltd. (“Qingdao Jiexin”) was established on August 29, 2008, in the city of Qingdao,
PRC. On July 20, 2011, Qingdao Renmin contributed RMB 5,000,000 (approximately $773,500) and acquired 100% interest in Qingdao
Jiexin. As a result, Qingdao Jiexin became a wholly-owned subsidiary of Qingdao Renmin. The fair value of the identifiable assets
acquired and liabilities assumed of $979,791 exceeded the fair value of the purchase price of the business of $773,500. As a result,
the Company reassessed the recognition and measurement of identifiable assets acquired and liabilities assumed and concluded that
the valuation procedures and resulting measures were appropriate. Accordingly, the Company recognized a gain of $207,083 associated
with the acquisition. The gain is included in the line item “Non-operating income” in the Consolidated Statements of
Operations for the six months ended December 31, 2011. For the six months ended December 31, 2011, the Company consolidated the
financial statements of Qingdao Jiexin and eliminated the intercompany transactions, including the RMB 5,000,000 (approximately
$773,500) investment in Qingdao Jiexin.



Substantially all of the Company’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.





F-6









JPAK GROUP, INC.

Notes to Consolidated Financial Statements

(Unaudited)





Note
2 – Summary of Significant Accounting Policies



Basis
Of Presentation



The Company’s consolidated
financial statements include the accounts of its controlled subsidiaries. All intercompany balances and transactions are eliminated
in consolidation. The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting
principles (“GAAP”) applicable to interim financial information and the requirements of Form 10-Q and Article 8 of
Regulation S-X of the Securities and Exchange Commission. Accordingly, they do not include all of the information and disclosures
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.



In preparing the accompanying unaudited
consolidated financial statements, we evaluated the period from December 31, 2011 through the date the financial statements were
issued, for material subsequent events requiring recognition or disclosure. No such events were identified for this period.



Interim
Financial Statements



These consolidated interim financial
statements should be read in conjunction with the audited consolidated financial statements for the years ended June 30, 2011 and
2010, 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, 2011 and 2010.



Note
3– Restricted Cash



As of December 31, 2011 and June
30, 2011, the Company had restricted cash of $20,939,764 and $12,904,460, respectively. These restricted cash balances are reserved
for settlement of trade notes payable and open letter of credit in connection with inventory purchases. The cash held in custody
by bank issuing the trade notes payable and letter of credit is restricted as to withdrawal or use, and is currently earning interest.



Note
4– Accounts Receivable



Trade accounts receivable are stated
at original invoice amount less allowance for doubtful receivables based on management’s periodic review of aging of outstanding
balances and customer credit history. If the financial condition of the Company’s customers were to deteriorate, resulting
in an impairment of their ability to make payments, additional allowances may be required.



The balance of allowance for doubtful
accounts amounted to $1,362,864 and $1,339,485 as of December 31, 2011 and June 30, 2011, respectively. The allowance includes
receivable from a customer currently under bankruptcy restructuring. We estimate that the chances to recover the outstanding balance
from this customer are remote.



Note
5 – Due from Factor



Due from factor as of December 31,
2011 and June 30, 2011 consist of the following:



|                               |  | December 31, 2011 |            | June 30, 2011
|------------------------------ |  | ----------------- | ---------- | -------------
|                               |  |                   |            |              
|Receivables assigned to factor |  | $                 | 3,549,843  |              
|Advance from factor            |  |                   | (2,833,200 | )            
|Amounts due from factor        |  | $                 | 716,643    |              





F-7









JPAK GROUP, INC.

Notes to Consolidated Financial Statements

(Unaudited)





Note
5– Due From Factor (continued)



Pursuant to the factoring agreement,
with recourse against the Company in the event of a loss, Industrial and commercial bank of China acts as its factor for some of
its receivables, which are assigned on a pre-approved basis. The advances for factored receivables are made pursuant to a revolving
credit and security agreement, which expires on September 30, 2012.



Note
6 – Inventory



Inventory, consisting of material,
labor, and manufacturing overhead, as of December 31, 2011 and June 30, 2011 consists of the following:



|                   |  | December 31, 2011 |            | June 30, 2011
|------------------ |  | ----------------- | ---------- | -------------
|                   |  |                   |            |              
|Raw materials      |  | $                 | 8,033,002  |              
|Work in process    |  |                   | 1,166,243  |              
|Finished goods     |  |                   | 3,880,842  |              
|Parts and supplies |  |                   | 288,014    |              
|                   |  |                   |            |              
|Total              |  | $                 | 13,368,101 |              



Note
7 – Advance Payments



Advance payments as of December
31, 2011and June 30, 2011 consist of the following:



|                               |  | December 31, 2011 |         | June 30, 2011
|------------------------------ |  | ----------------- | ------- | -------------
|                               |  |                   |         |              
|Advance payments for inventory |  | $                 | 789,224 |              
|Advance payments for equipment |  |                   | 145,433 |              
|                               |  |                   |         |              
|Total                          |  | $                 | 934,657 |              



Note
8 – Property and Equipment



Property and equipment as of December
31, 2011 and June 30, 2011 consist of the following:

|                               |  |                   |            |              
|------------------------------ |  | ----------------- | ---------- | -------------
|                               |  | December 31, 2011 |            | June 30, 2011
|                               |  |                   |            |              
|Buildings                      |  | $                 | 5,041,398  |              
|Machinery and equipment        |  |                   | 15,632,302 |              
|Machinery—capital lease        |  |                   | 3,226,700  |              
|Subtotal                       |  |                   | 23,900,400 |              
|Less: Accumulated depreciation |  |                   | 11,963,081 |              
|                               |  |                   | 11,937,319 |              
|Add: Construction in progress  |  |                   | 13,735,104 |              
|                               |  |                   |            |              
|Total                          |  | $                 | 25,672,413 |              



Depreciation expenses for the three
months ended December 31, 2011 and 2010 were $433,302 and $332,866, respectively. For the six months ended December 31, 2011 and
2010 were $827,544 and $668,746, respectively. For the six months ended December 31, 2011 and 2010, amortization of machinery and
equipment under capital lease included in depreciation expense was $111,022 and $90,236, respectively.



F-8









Notes to Consolidated Financial Statements

(Unaudited)





Note
9 – Intangible Assets



Intangible assets at December 31,
2011 and June 30, 2011 consist of the following:

|                               |  |                   |           |              
|------------------------------ |  | ----------------- | --------- | -------------
|                               |  | December 31, 2011 |           | June 30, 2011
|                               |  |                   |           |              
|Land use rights                |  | $                 | 3,243,445 |              
|Less: accumulated amortization |  |                   | 86,492    |              
|                               |  |                   |           |              
|Total                          |  | $                 | 3,156,953 |              



The intangible assets represent
consideration payments and other expenditures of Qingdao Likang for land
use rights of a parcel of land with an area of approximately 65,064 square meters. The total cost is amortized over 50 years. Amortization
expense for the three months ended December 31, 2011 and 2010 was $16,215 and $15,350, respectively.
For the six months ended December 31, 2011 and 2010 was $32,307 and $20,491, respectively.



Note
10 – Accounts Payable and Accrued Expenses



Accounts payable and accrued expenses
at December 31, 2011 and June 30, 2011 consist of the following:



|                 |  | December 31, 2011 |           | June 30, 2011
|---------------- |  | ----------------- | --------- | -------------
|                 |  |                   |           |              
|Accounts payable |  | $                 | 8,906,303 |              
|Accrued expenses |  |                   | 752,431   |              
|                 |  |                   |           |              
|Total            |  | $                 | 9,658,734 |              



The carrying values of accounts
payable and accrued expenses approximate their fair values due to the short-term nature of these obligations.



Note
11 – Trade Notes Payable



Trade notes payable consist of
non-interest bearing promissory notes issued in connection with the acquisition of certain inventory and equipment. Balances outstanding
under the notes as of December 31, 2011 and June 30, 2011 were $20,534,946 and $12,513,972 respectively.



Note
12 – Short-Term Bank Loans



Short term bank loans as of December
31, 2011 and June 30, 2011 consist of the following:



|                                                                                                                                                                                                                                                                                               |  | December 31, |           | June 30,
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | --------- | --------
|                                                                                                                                                                                                                                                                                               |  | 2011         |           | 2011    
|On January 14, 2011, the Company obtained a loan from Qingdao City                                                                                                                                                                                                                             |  |              |           |         
|Commercial Bank, out of which, the principal is to be paid in full by January                                                                                                                                                                                                                  |  |              |           |         
|13, 2012. Interest is to be calculated using an annual fixed rate of 6.1005%                                                                                                                                                                                                                   |  |              |           |         
|and paid monthly. The loan was secured by the Company's property                                                                                                                                                                                                                               |  | $            | 629,600   |         
|                                                                                                                                                                                                                                                                                               |  |              |           |         
|On January 18, 2011, the Company obtained a loan from Qingdao City                                                                                                                                                                                                                             |  |              |           |         
|Commercial Bank, out of which, the principal is to be paid in full by January                                                                                                                                                                                                                  |  |              |           |         
|18, 20112. Interest is to be calculated using an annual fixed rate of 6.1005%                                                                                                                                                                                                                  |  |              |           |         
|and paid monthly. The loan was secured by the Company's property                                                                                                                                                                                                                               |  | $            | 1,259,200 |         
|On January 26, 2011, the company obtained a loan from Qingdao City Commercial Bank, out of which, the principal is to be paid in full by January 26, 2012. Interest is to be calculated using an annual fixed rate of 6.1005% and paid monthly. The loan was secured by the Company’s property |  | $            | 1,259,200 |         
|Total short-term bank loans                                                                                                                                                                                                                                                                    |  | $            | 3,148,000 |         







F-9













Note
13 – Long-Term Debt



Long term debt as of December 31,
2011 and June 30, 2011 consist of the following:



|                                                                                                                                                                                                                                                                                                                                                      |  | December 31, |           | June 30,
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | --------- | --------
|                                                                                                                                                                                                                                                                                                                                                      |  | 2011         |           | 2011    
|                                                                                                                                                                                                                                                                                                                                                      |  |              |           |         
|Loans from employees, interest is                                                                                                                                                                                                                                                                                                                     |  |              |           |         
|payable at an annual fixed rate of 10%. Interest payments are made                                                                                                                                                                                                                                                                                    |  |              |           |         
|semi-annually with no principal payments due until February 07, 2012,                                                                                                                                                                                                                                                                                 |  |              |           |         
|as per the terms of the loan agreement                                                                                                                                                                                                                                                                                                                |  | $            | 6,011,106 |         
|                                                                                                                                                                                                                                                                                                                                                      |  |              |           |         
|On November 27, 2009, the Company entered into a sale-leaseback                                                                                                                                                                                                                                                                                       |  |              |           |         
|transaction with International Fareastern Leasing Co., Ltd., which was                                                                                                                                                                                                                                                                                |  |              |           |         
|accounted for as a financing arrangement in the amount of approximately                                                                                                                                                                                                                                                                               |  |              |           |         
|$1.4 million. The annual principal and interest payment is $441,048                                                                                                                                                                                                                                                                                   |  |              |           |         
|and the term of the arrangement is four years. Refer to Note 19                                                                                                                                                                                                                                                                                       |  | $            | 670,148   |         
|In December 2010, two other sale-leaseback agreements established on November 27, 2009 went into effect, which represents financing arrangement in the total amount of approximately $1.65 million, received in two allotments. The annual principal and interest payment is $501,561 and the term of the arrangement is four years. Refer to Note 19 |  | $            | 1,138,052 |         



|On April 28, 2011, the Company obtained a loan from Bank of Qingdao. The Principle is to be paid in full by April 28, 2016. The interest rate is a variable rate equal to 15% per annum above the floating base interest for loans of the same term promulgated by the PRC’s central bank, China People’s bank. The average interest rate for the six month ended December 31, 2011 was approximately 7.6475%. Interest is paid monthly. The loan was designated to finance the construction of Qingdao Likang. The loan was secured by the Company’s construction in progress and guaranteed by the Company’s subsidiary-Qingdao Renmin |  | $ | 6,296,000  |  |  | $ | 6,188,000  | 
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | - | ---------- |  |  | - | ---------- | 
|Total                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  | $ | 14,115,306 |  |  | $ | 13,782,823 | 
|Less: Current portion of loans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |   | 2,787,554  |  |  |   | 2,688,686  | 
|Current portion of obligation under capital lease                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   | 1,211,132  |  |  |   | 1,211,132  | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |   |            |  |  |   |            | 
|Total Current portion                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |   | 3,998,686  |  |  |   | 3,899,818  | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |   |            |  |  |   |            | 
|Total long-term portion                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  | $ | 10,116,620 |  |  | $ | 9,883,005  | 



Note
14 – Stockholders’ Equity and Related Financing Agreements



On August 9, 2007, the shareholders
of JPAK were issued 23,005,000 shares of Rx Staffing’s common stock, which represented 64.4% of all the issued and outstanding
shares of JPAK’s common stock, under a Securities Exchange Agreement (the “SEA”), pursuant to which all the shares
of Rx Staffing were transferred and JPAK became a wholly-owned subsidiary of Rx Staffing. In connection with the Share Exchange,
the Company changed its name to JPAK Group, Inc.



F-10









Notes to Consolidated Financial Statements

(Unaudited)





Note
14 – Stockholders’ Equity and Related Financing Agreements (continued)



On August 9, 2007, JPAK became a
party to the Note Purchase Agreement dated May 17, 2007 (“NPA”). Pursuant to the NPA, JPAK issued Convertible Promissory
Notes in the aggregate principal amount of $5.5 million to the Investors. As a result of the Share Exchange, and under the terms
of the Notes and the NPA, the notes converted to the following: (i) 5,608,564 shares of the Company’s Series A Convertible
Preferred Stock, par value $.0001 per share, 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 $.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 $.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 shall contain the
same terms as the Series A Preferred Stock (other than conversion price), and 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 $.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 $.84 per share (the “Series D Warrants”
and together with the Series A Warrants, Series B Warrants and Series C Warrants, the “Warrants”). The Series J Warrants
were exercisable until 90 days following the effective date of a registration statement registering for sale of shares of common
stock underlying the securities issued in the financing. Finally, the Company also granted warrants to purchase 990,000 shares
of common stock at an exercise price of $.50 per share and 750,000 shares of common stock at an exercise price of $.60 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 JPAK’s outstanding Series J Warrants exercised in full such warrants for aggregate gross proceeds of $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 $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 $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, the term of Series A and Series B Warrants was extended 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 was a condition of the exercise
of the Series J Warrants and the subsequent issuance of the Series B Preferred stock (the “Series B financing”). In
this way, the conversion of Series A and Series B convertible Preferred Stock is deemed as “in the money” and therefore
contain a beneficial conversion feature which amounted to $2,484,226 and $1,390,853, respectively, after allocation.



On April 1, 2008, JPAK entered into
a consulting agreement with Tripoint Capital Advisors, LLC to provide consulting services for one year. As a result, JPAK agreed
to issue to Tripoint and/or its affiliates 300,000 shares of its capital stock on July 1, 2008. The shares were issued on July
1, 2008. 150,000 shares were vested immediately and the remaining 150,000 were to be vested in equal installments in the next two
quarters. The fair value on April 1, 2008 was $404,700 based on the quoted price of the Company’s common stock.



On April 1, 2009, the Board of Directors
approved to issue 200,000 shares of the Company’s common stock to Mr. Dongliang (Frank) Su, the acting CFO of the Company
and the shares were vested on July 1, 2009. The fair value on April 1, 2009 was $20,000 based on the quoted price of the Company’s
common stock on that day.



F-11









Notes to Consolidated Financial Statements

(Unaudited)





Note
14 – Stockholders’ Equity and Related Financing Agreements (continued)



On November 3, 2009, JPAK completed
a financing with one accredited investor. The financing raised gross proceeds of $6.0 million with net proceeds to JPAK of
$5,916,500. As a result of the financing, JPAK issued 12,000,000 units of securities at a price of $0.50 per unit. Each unit consists
of (i) one (1) share of the Company’s Series C Convertible Preferred Stock, par value $0.0001 per share (the “Preferred
Shares”), convertible into one share of the Company’s common stock, par value $0.001 per share (the “Common Stock”),
and (ii) a one-half Series E Warrant (the “Series E Warrant”) and one-half Series F Warrant (the “Series F Warrant”,
collectively the “Warrants”).  Each whole Series E Warrant may be exercised to purchase one share of Common
Stock at an exercise price of $0.60 per share and each whole Series F Warrant may be exercised to purchase one share of Common
Stock at an exercise price of $0.70 per share.  The Warrants are exercisable for a period of five years from the date of issuance.
In connection with the financing, the Company paid the fee of $30,000 to Tripoint Global Equities, LLC, who acted as placement
agent.



On December 16, 2009, JPAK entered
into an Exchange Agreement with each of the holders of the warrants that were issued pursuant to the private financings which closed
in August 2007, December 2007 and November 2009.  Pursuant to the Exchange Agreement the Company issued an aggregate
of 11,363,334 shares of our common stock in exchange for 5,500,000 Series A Warrants; 5,500,000 Series B Warrants; 4,166,667 Series
C Warrants; 4,166,667 Series D Warrants; 6,000,000 Series E Warrants; and 6,000,000 Series F Warrants.  The warrant exchange
took the form of a cashless transaction.  As a result, JPAK does not have any warrants outstanding other than those issued
to the placement agent of the above mentioned private financings.



On December
15, 2010, JPAK grantedfive years options to purchase up to 3,600,000 shares of the common stock of the Company at the exercise
price of $0.20 per share to four of its key employees in accordance with the 2010 Equity Incentive Plan. All the options vested
immediately upon issuance. The fair value of each option grant is estimated on the granted date using the Black-Scholes option-pricing
model with the following weighted-average assumptions used for grants in the period ended December 31, 2010: expected volatility
of 299.23 percent and risk-free interest rate of 2.11 percent.



Note
15 – Income Taxes



JPAK Group Co., Ltd. was incorporated
in the Cayman Islands. Under the laws of Cayman Islands, the Company is not subject to tax on income or capital gain.



The operating subsidiary Qingdao
Renmin is a wholly foreign-owned enterprise incorporated in the PRC and subject to PRC Foreign Enterprise Income Tax (“FEIT”)
Law. Pursuant to FEIT Law, foreign invested enterprises (“FIEs”) are subject to FEIT at a state tax rate of 30% plus
a local tax rate of 3% on PRC taxable income. FIEs are also entitled to be exempted from FEIT for a 2-year period starting from
their first profit-making year followed by a 50% reduction of FEIT payable for the subsequent three years, if they fall into the
category of production-oriented enterprises with an operational period of more than 10 years in China. Qingdao Renmin started its
tax holiday period on January 1, 2007, which will end on December 31, 2011.



On March
16, 2007, the National People’s Congress of China enacted a new Corporate Income Tax (“CIT”) law, under which
FIEs and domestic companies would be subject to CIT at a uniform rate of 25%. The new CIT law became effective on January 1, 2008.
The grandfathering treatments for unutilized tax holiday are provided for certain qualified FIEs. For those FIEs which have already
commenced their qualified tax holidays before 2008, they can continue to enjoy the remaining unutilized tax holidays until expiry.
For those qualified old FIEs which have not commenced their tax holidays before 2008 due to cumulative losses, their tax holidays
will be deemed to commence in 2008 and can be utilized until expiry. Currently, the Company does not believe that the new CIT law
will affect the preferential tax treatments (i.e. the unutilized tax holiday) that it is entitled to. Accordingly, since January
1, 2009, the Company has commenced the 3-year period of tax holidays by a 50% reduction of FEIT with an effective tax rate of 12.5%,
and for the six months ended December 31, 2011 and 2010, the income tax expense was$141,748 and $303,937, respectively.



F-12







JPAK GROUP, INC.

Notes to Consolidated Financial Statements

(Unaudited)



Note
15 – Income Taxes (continued)



On February 22, 2008, the Ministry
of Finance (“MOF”) and the State Administration of Taxation (“SAT”) jointly issued Cai Shui [2008] Circular
1 (“Circular 1”). According to Article 4 of Circular 1, distributions of accumulated profits earned by a FIE prior
to January 1, 2008 to foreign investor(s) in 2008 or after will be exempt from withholding tax (“WHT”) while distribution
of the profit earned by an FIE after January 1, 2008 to its foreign investor(s) shall be subject to WHT. Since the Company intends
to reinvest its earnings to further expand its businesses in mainland China, its foreign invested enterprises do not intend to
declare dividends to their immediate foreign holding companies in the foreseeable future.



Note
16 – Employee Welfare Plan



The Company has established an employee
welfare plan in accordance with Chinese laws and regulations. Full-time employees of the Company in the PRC participate in a government-mandated
multi-employer defined contribution plan pursuant to which certain pension benefits, medical care, unemployment insurance, employee
housing fund and other welfare benefits are provided to employees. PRC labor regulations require the Company to accrue for these
benefits based on a certain percentage of the employees’ salaries. The total contribution for such employee benefits was
$524,997 and $311,879 for the six months ended December 31, 2011 and 2010, respectively.



Note
17 – Risk Factors



The Company's operations are carried
out in the PRC. Accordingly, the Company's 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. The Company's 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
18 - Risk of Concentrations and Credit Risk



For the six months ended December
31, 2011 and 2010, five vendors accounted for approximately 81% and 71% of the Company’s purchases, respectively. Total purchases
from these vendors were $39,126,687 and $20,477,832 for the six months ended December 31, 2011 and 2010, respectively.



For the six months ended December
31, 2011 and 2010, five customers accounted for approximately 48% and 55% of the Company’s revenue, respectively. Total sales
to these customers were $24,299,819 and $20,477,832 for the six months ended December 31, 2011 and 2010, respectively



Financial instruments which potentially
subject the Company to credit risk consist principally of cash on deposit with financial institutions. Management believes that
the financial institutions that hold the Company’s cash and cash equivalents are financially sound and minimal credit risk
exists with respect to these investments.



Note
19 – Sale-Leaseback Transaction Accounted for as a Financing Arrangement



On November
27, 2009, the Company entered into three sale-leaseback arrangements with International Fareastern Leasing Co., Ltd and completed
one of them through the refinancing of its printing equipment. Equipment with book value of approximately $3.4 million was sold
for approximately $1.4 million.The other two arrangements went into effect in December 2010, pursuant to which the equipment
with book value of approximately $2.4 million was sold for $ 1.65 million.The
cash received was used towards the original invoice amount. The transaction has been accounted for as a financing arrangement,
wherein the equipment remains on the Company’s books and will continue to be depreciated.



F-13







Notes to Consolidated Financial Statements

(Unaudited)





Note 19 – Sale-Leaseback
Transaction Accounted for as a Financing Arrangement (continued)



The loss on the sale of the equipment
was deferred and amortized over the remaining useful life of the leased assets as an increase of depreciation expense. For the
six months ended December 31, 2011 and 2010, the Company amortized $110,721 and $90,714 of the deferred loss into depreciation
expense respectively. A financing obligation in the amount of $3.05 million representing the proceeds has been recorded under long-term
debt in the Company’s Balance Sheet, and is being reduced based on payments under the lease.



The lease has a term of four years
and requires minimum annual lease payments as follows:



|Year Ending June 30 |  | Amount
|------------------- |  | ------
|2012                |  | $     
|2013                |  |       
|2014                |  |       
|Total               |  | $     
|                    |  |       

The Company
has the option to purchase the equipment at the end of the lease term.



Note
20 – Earnings Per Share



The Company presents earnings per
share (“EPS”) on a basic and diluted basis. Basic earnings per share have been computed by dividing income available
to common shareholders by the weighted average number of common shares outstanding. Diluted earnings per share have been computed
by dividing income available to common shareholders by the weighted average number of shares outstanding including the dilutive
effect of equity securities. All share and per share data have been adjusted retroactively to reflect the recapitalization of the
Company pursuant to the Securities Exchange Agreement with Rx Staffing.



The Company uses two-class method
to calculate the basic earnings per share. Under the two class method, net income is allocated between ordinary shares and other
participating securities based on their respective participating rights. The Company’s Series A, Series B and Series C preferred
shares are participating securities. In the event that any dividends are paid on our common stock, the holders of Series A, Series
B and Series C preferred stock shall share with the holders of common stock on an as converted basis in such dividends. The 5,608,564
shares of Series A Preferred Stock are convertible into an aggregate of 11,217,128 shares of common stock. The 5,000,000 shares
of Series B Preferred Stock are convertible into an aggregate of 8,333,333 shares of common stock. The 12,000,000 shares of Series
C Preferred Stock are convertible into an aggregate of 12,000,000 shares of common stock.



Basic EPS for the three months ended
December 31, 2011 was computed as follows:



|Net income                                  |  | $ | 139,011 | 
|------------------------------------------- |  | - | ------- | 
|Less dividends paid to:                     |  |   |         | 
|Common shareholders                         |  |   | —       | 
|Series A convertible preferred shareholders |  |   | —       | 
|Series B convertible preferred shareholders |  |   | —       | 
|Series C convertible preferred shareholders |  |   | —       | 
|Undistributed earnings                      |  | $ | 139,011 | 



|Basic earnings per share amounts: |  |  
|--------------------------------- |  | -
|                                  |  |  
|                                  |  |  
|                                  |  |  
|                                  |  |  
|Distributed earnings              |  | $
|Undistributed earnings            |  |  
|Totals                            |  | $
|                                  |  |  



F-14









Notes to Consolidated Financial Statements

(Unaudited)





Note
20 – Earnings Per Share (continued)



Diluted EPS for the three months
ended December 31, 2011 was computed as follows using the If-Converted Method:



|                                    |  | Distributed & |         |        |  |          
|----------------------------------- |  | ------------- | ------- | ------ |  | ---------
|                                    |  | Undistributed |         |        |  |          
|                                    |  | earnings to   |         |        |  |          
|                                    |  | Common        |         | Common |  | Earnings 
|                                    |  | Stock         |         | Shares |  | Per Share
|                                    |  |               |         |        |  |          
|As reported - Basic                 |  | $             | 74,436  |        |  |          
|Warrants                            |  |               | —       |        |  |          
|                                    |  |               | 74,436  |        |  |          
|Series A preferred stock conversion |  |               | 22,958  |        |  |          
|Series B preferred stock conversion |  |               | 17,056  |        |  |          
|Series C preferred stock conversion |  |               | 24,561  |        |  |          
|Diluted earnings for common stock   |  | $             | 139,011 |        |  |          



Basic EPS for the three months ended
December 31, 2010 was computed as follows:



|Net loss                                    |  | $ | (680,230 | )
|------------------------------------------- |  | - | -------- | -
|Less dividends paid to:                     |  |   |          |  
|Common shareholders                         |  |   | —        |  
|Series A convertible preferred shareholders |  |   | —        |  
|Series B convertible preferred shareholders |  |   | —        |  
|Series C convertible preferred shareholders |  |   | —        |  
|Undistributed loss                          |  | $ | (680,230 | )



|Basic earnings per share amounts: |  |  
|--------------------------------- |  | -
|                                  |  |  
|                                  |  |  
|                                  |  |  
|                                  |  |  
|Distributed earnings              |  | $
|Undistributed earnings            |  |  
|Totals                            |  | $
|                                  |  |  



Diluted EPS for the three months
ended December 31, 2010 was computed as follows using the If-Converted Method:



|                                    |  | Distributed & |          |        |  |          
|----------------------------------- |  | ------------- | -------- | ------ |  | ---------
|                                    |  | Undistributed |          |        |  |          
|                                    |  | earnings to   |          |        |  |          
|                                    |  | Common        |          | Common |  | Earnings 
|                                    |  | Stock         |          | Shares |  | Per Share
|                                    |  |               |          |        |  |          
|As reported - Basic                 |  | $             | (680,230 | )      |  |          
|Warrants                            |  |               | —        |        |  |          
|                                    |  |               | (680,230 | )      |  |          
|Series A preferred stock conversion |  |               | —        |        |  |          
|Series B preferred stock conversion |  |               | —        |        |  |          
|Series C preferred stock conversion |  |               | —        |        |  |          
|Diluted earnings for common stock   |  | $             | (680,230 | )      |  |          





F-15











Notes to Consolidated Financial Statements

(Unaudited)





Note
20 – Earnings Per Share (continued)



Basic EPS for the six months ended
December 31, 2011 was computed as follows:



|Net income                                  |  |   |        |  |  |   |                 | $ |  | 818,853
|------------------------------------------- |  | - | ------ |  |  | - | --------------- | - |  | -------
|Less dividends paid to:                     |  |   |        |  |  |   |                 |  
|Common shareholders                         |  |   |        |  |  |   |                 |   |  | -      
|Series A convertible preferred shareholders |  |   |        |  |  |   |                 |   |  | -      
|Series B convertible preferred shareholders |  |   |        |  |  |   |                 |   |  | -      
|Series C convertible preferred shareholders |  |   |        |  |  |   |                 |   |  | -      
|Undistributed earnings                      |  |   |        |  |  |   |                 |  
|                                            |  |   |        |  |  |   |                 |  
|Basic earnings per share amounts:           |  |   |        |  |  |   |                 |  
|                                            |  |   |        |  |  |   | Series A        |   |  |        
|                                            |  |   | Common |  |  |   | convertible     |   |  |        
|                                            |  |   | Stock  |  |  |   | preferred stock |   |  |        
|                                            |  |   |        |  |  |   |                 |   |  |        
|Distributed earnings                        |  | $ | 0.00   |  |  | $ | 0.00            |   |  | $      
|Undistributed earnings                      |  |   | 0.01   |  |  |   | 0.02            |   |  |        
|Totals                                      |  | $ | 0.01   |  |  | $ | 0.02            |   |  | $      
|                                            |  |   |        |  |  |   |                 |   |  |        



Diluted EPS for the six months ended
December 31, 2011 was computed as follows using the If-Converted Method:



|                                    |  | Distributed & |         |        |  |          
|----------------------------------- |  | ------------- | ------- | ------ |  | ---------
|                                    |  | Undistributed |         |        |  |          
|                                    |  | earnings to   |         |        |  |          
|                                    |  | Common        |         | Common |  | Earnings 
|                                    |  | Stock         |         | Shares |  | Per Share
|                                    |  |               |         |        |  |          
|As reported - Basic                 |  | $             | 438,469 |        |  |          
|Warrants                            |  |               | —       |        |  |          
|                                    |  |               | 438,469 |        |  |          
|Series A preferred stock conversion |  |               | 135,238 |        |  |          
|Series B preferred stock conversion |  |               | 100,469 |        |  |          
|Series C preferred stock conversion |  |               | 144,677 |        |  |          
|Diluted earnings for common stock   |  | $             | 818,853 |        |  |          



Basic EPS for the six months ended
December 31, 2010 was computed as follows:



|Net income attributable to Jpak Group, Inc. |  |   |        |  |  | $297,070
|------------------------------------------- |  | - | ------ |  |  | --------
|Less dividends paid to:                     |  |   |        |  |  |         
|Common shareholders                         |  |   |        |  |  | —       
|Series A convertible preferred shareholders |  |   |        |  |  | —       
|Series B convertible preferred shareholders |  |   |        |  |  | —       
|Undistributed earnings                      |  |   |        |  |  | $297,070
|                                            |  |   |        |  |  |         
|Basic earnings per share amounts:           |  |   |        |  |  |         
|                                            |  |   |        |  |  |         
|                                            |  |   | Common |  |  |         
|                                            |  |   | Stock  |  |  |         
|                                            |  |   |        |  |  |         
|Distributed earnings                        |  | $ | 0.00   |  |  | $       
|Undistributed earnings                      |  |   | 0.00   |  |  |         
|Totals                                      |  | $ | 0.00   |  |  | $       
|                                            |  |   |        |  |  |         







F-16











Notes to Consolidated Financial Statements

(Unaudited)





Note
20 – Earnings Per Share (continued)



Diluted EPS for the six months ended
December 31, 2010 was computed as follows using the If-Converted Method:



|                                    |  | Distributed & |         |        |  |          
|----------------------------------- |  | ------------- | ------- | ------ |  | ---------
|                                    |  | Undistributed |         |        |  |          
|                                    |  | earnings to   |         |        |  |          
|                                    |  | Common        |         | Common |  | Earnings 
|                                    |  | Stock         |         | Shares |  | Per Share
|                                    |  |               |         |        |  |          
|As reported - Basic                 |  | $             | 159,071 |        |  |          
|Warrants                            |  |               | —       |        |  |          
|                                    |  |               | 159,071 |        |  |          
|Series A preferred stock conversion |  |               | 49,063  |        |  |          
|Series B preferred stock conversion |  |               | 36,449  |        |  |          
|Series C preferred stock conversion |  |               | 52,487  |        |  |          
|Diluted earnings for common stock   |  | $             | 297,070 |        |  |          



Note
21 – Supplemental Cash Flow Information



|                           |  | Six Months Ended December 31,
|-------------------------- |  | -----------------------------
|                           |  | 2011                         
|                           |  |                              
|Cash paid for interest     |  | $                            
|Cash paid for income taxes |  | $                            





F-17









ITEM
2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



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 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 financial condition and results of operations relates to the operations and financial condition
reported in the financial statements of Jpak for the three and six months ended December 31, 2011and 2010 and should be read in
conjunction with such financial statements and related notes included in this report and the Company’s Annual Report on
Form 10-K for the year ended June 30, 2011.



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, wine, sauces and other liquid foods and beverages in China. Since 2004, we have focused
on research and development and we believe we are one of the largest and leading domestic suppliers of aseptic liquid food and
beverage cartons in China. Our business is primarily focused in China, but we have begun exporting our manufacturing products
to several foreign countries.



18







Company
History



Our
operations are conducted in China through Qingdao Renmin. Qingdao Renmin 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 Group Co., Ltd (“Jpak Ltd.”) was incorporated in the Cayman Islands. In September 2006, Jpak Ltd.
completed the acquisition of 88.23% of the equity interest in Qingdao Renmin through Grand International, the 100% owned subsidiary
of Jpak Ltd.. 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.



On
August 9, 2007, Rx Staffing completed a reverse acquisition of Jpak Ltd. and issued 23,005,000 shares of common stock on a one
to one ratio for a 100% equity interest in Jpak Ltd., whereby Jpak Ltd. becomes a subsidiary of Rx Staffing. On the same day,
Rx Staffing changed its corporate name to Jpak Group, Inc. (“Jpak”).



On
January 11, 2010, Qingdao Likang Packaging Co. Ltd (“Qingdao Likang”), a wholly-owned subsidiary of Grand International,
was registered in Qingdao with a capital commitment of $13.5 million. As of December 31, 2011, approximately $7.1 million or 52.6%
of total registered capital has been invested and the rest will be invested within two years since the registration. Grand International
is allowed to use the capital raised or the profit generated by Qingdao Renmin for this capital injection.



Qingdao
Jiexin Recycling Resources Technological Development Co., Ltd. (“Qingdao Jiexin”) was established on August 29, 2008,
in the city of Qingdao, PRC. On July 20, 2011, Qingdao Renmin contributed RMB 5,000,000 (approximately $773,500) and acquired
100% interest in Qingdao Jiexin. As a result, Qingdao Jiexin became a wholly-owned subsidiary of Qingdao Renmin. The fair value
of the identifiable assets acquired and liabilities assumed of $979,791 exceeded the fair value of the purchase price of the business
of $773,500. As a result, the Company reassessed the recognition and measurement of identifiable assets acquired and liabilities
assumed and concluded that the valuation procedures and resulting measures were appropriate. Accordingly, the Company recognized
a gain of $207,083 associated with the acquisition. The gain is included in the line item “Non-operating income” in
the Consolidated Statements of Operations for the six months ended December 31, 2011. For the six months ended December 31, 2011,
the Company consolidated the financial statements of Qingdao Jiexin and eliminated the intercompany transactions, including the
RMB 5,000,000 (approximately $773,500) investment in Qingdao Jiexin.





Competitive
environment



The
market for packaging products is competitive. Our operations may be affected by technological advances of competitors, industry
consolidation, competitive combination products and new information of marketed products or post-marketing surveillance.



Due
to China’s new anti-monopoly laws, some of our larger competitors decreased the amounts of bundled products they offer,
which may cause them to lower their prices. Because of the relatively high margin offered by the products in this sector, local
suppliers continue to enter this space, thereby creating more competition.  As a result of growing competition, our
sales prices and gross margin have been affected.





19









Strategy



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



|● | Increasing
    output to further penetrate the China market;           
|- | -----------------------------------------------------------------------
|● | Developing bundled
    packaging materials and liquid filling machines;
|● | Increasing sales
    to selective Asian and other markets;             
|● | Partnering with top
    milk producers;                                
|● | Establishing brand
    names and brand awareness; and                  
|● | Enhancing the Company’s
    competitive advantages through R&D.        



Research
and Development



To
maintain and expand our market share, our top priority is to achieve technology breakthroughs on SIG packages and self-developed
filling equipment.



In
October 2006, Qingdao Renmin invested in Qingdao Delikang Packing Machinery Co., Ltd., (“Qingdao Delikang”), a joint
venture with Xi’an Heiniu Machinery, Co.. Qingdao Renmin is the 51% owner of Qingdao Delikang. The main business of this
joint venture is to research and develop filling machines. Our first filling machine can run at approximately 12,000 packages
output per hour.  As disclosed in our Annual Report on Form 10-K/A for the year ended June 30, 2011, we finished testing
this machine with one of our customers; however, the test results were unsatisfactory and we may need to send the machine back
to the Xi’an Machinery for adjusting.   As this is our first filing machine, the testing and adjustments
are necessary. Therefore, it may take longer than we originally expected for the machines to run as we planned.  The
second filing machine was installed and began production in September 2011; we expect to start trial production by March 2012.



In
addition, we are dedicated to developing packaging materials that can be used in the filling machines created by SIG. We have
achieved technology breakthroughs with our two SIG packaging lines, which can produce packages for small customers.  In
order to use SIG packaging lines to produce for big customers, we have been continuing on improving both quality and stability
of these two new lines. We plan to add up to eight additional lines by 2014.  Management believes that these new SIG
packaging lines will significantly increase our revenue and also provide relatively higher gross margins in the next several years.



Manufacturing,
Sales and Marketing



We
support commercialized products with manufacturing, sales and marketing efforts. We are also moving forward with additional investments
to enhance our infrastructure and business, including capital expenditures for the new production machinery. Our current annual
capacity is approximately 4.5 billion packs for normal packaging. Once SIG packaging proves its ability to produce packages in
large batches, assuming funding is available, management plans to introduce up to eight more production lines with anticipated
annual capacity of 80 million packs per SIG line.



Management
continually reviews the business, including manufacturing operations, to identify actions that will enhance long-term competitiveness.
By continuously streamlining the management of the production processes and improving production efficiency, we have decreased
the scrap percentage and lowered our costs. Our market share increased because of old and new customer development,   however,
our profit margin is much smaller than before due to the decreased sales prices. .



With
the planning and construction of our new plant Qingdao Likang, we anticipate that a new line for normal packs and four new lines
for SIG packs will be put into production in the April of 2012. As our finances permit, further expansion will be continued in
the following two or three years which may increase our annual capacity to 8.0 billion packs per annum in total.





20









Results
of Operations



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



Comparison
of the three months ended December 31, 2011 and 2010



|Three
    Months Ended December 31                 |  | 2011 |            | 2010
|-------------------------------------------------- |  | ---- | ---------- | ----
|Sales                                              |  | $    | 19,686,287 |     
|Cost of sales                                      |  | $    | 17,077,534 |     
|Gross profit                                       |  | $    | 2,608,753  |     
|Selling, general and administrative expenses       |  | $    | 2,285,353  |     
|Other income (expense)                             |  | $    | (134,564   | )   
|Income taxes                                       |  | $    | 49,912     |     
|Noncontrolling interest                            |  | $    | (87        | )   
|Net income (loss) attributable to Jpak Group, Inc. |  | $    | 139,011    |     
|Foreign currency translation adjustment            |  | $    | 195,463    |     
|Comprehensive income (loss)                        |  | $    | 334,474    |     



Sales.Total sales were approximately $19.7 million for the three months ended December 31 2011 as compared with approximately $16.7
million for the three months ended December 31, 2010, a significant increase of approximately $3 million, or 18%.  The
increase was mainly due to our continued sales and marketing efforts to locate new customers who contributed to the sales growth.
With our competitive pricing advantage, we have added 4new domestic customers in this quarter which accounted for 1.2% of total
revenue. Although the total sales volume increased largely in this period, our profit margin decreased because the sale prices
of our products decreased.



Cost
of Sales. Cost of sales for the three months ended December 31, 2011 was approximately $17.1 million, or 86.8 % of sales,
as compared with $13.8 million, or 82.7% of sales, for the three months ended December 31, 2010, an increase of approximately
$3.3 million or 5%. Our cost of sales is 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 increase of cost of sales as a percentage of sales by 4.1% was due to decreased product prices. I As the
fierce competition in the packaging industrial, we have to drop the sale prices in order to keep the market shares.



Gross
profit. The gross profit margin for the three months ended December 31, 2011was approximately 13.2 % as compared with 17.3%
for the three months ended December 31, 2010, a decrease of 4.1%. The decrease was caused by ecreased sales price of our products.
In order to maintain and expand our market shares in this competitive packing industry, we have to drop the sale prices to keep
old customers and attract new customers. With the improved production technology, we expected the gross margin would increase
slightly.



Selling,
general and administrative expenses. Selling, general and administrative expenses were approximately $2.3 million for the
three months ended December 31, 2011 as compared with approximately $3.3 million for the three months ended December 31, 2010.  Although
the sales increase sharply, the company decreases the management members’ salaries temporarily to reduce the administrative
expenses.



Income
tax.  Income tax was approximately $0.05 million for the three months ended December 31, 2011as compared with approximately
$0.13 million for the three months ended December 31, 2010 in accordance with the change of profit before tax.







21









Net
income.  Net income was approximately $0.14 million for the three months ended December 31, 2011 as compared
with net income of $(0.68) million for the three months ended December 31, 2010, an increase of approximately $0.82 million.
The increase in net income was primarily due to the increase of sales.



Foreign
currency translation adjustment.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.



Currency
translation adjustments resulting from this process are included in accumulated other comprehensive income in the consolidated
statement of shareholders' equity and was a gain of $ 195,463for the three months ended December 31, 2011compared with a gain
of $ 456,780 for the three months ended December 31, 2010. The balance sheet amounts with the exception of equity at December
31, 2011were translated at RMB 6.35324 to US $1.00 as compared with RMB 6.5920 to US$1.00 at December 31, 2010. The equity accounts
were stated at their historical rate. The average translation rates applied to income statement accounts for the three months
ended December 31, 2011and 2010 were RMB 6.35364 and RMB6.6483 to US$1.00.



Comprehensive
income. The comprehensive income, which adds the currency adjustment to net income, was $0.34 million for the three months
ended December 31,2011 as compared with $ (0.22) million for the three months ended December 31, 2010. The increase of comprehensive
income was mainly due to the large increase of our net income.



Comparison
ofthe six monthsended
December 31,2011and2010



|Six Months Ended December 31                 |  | 2011 |            | 2010
|-------------------------------------------- |  | ---- | ---------- | ----
|Sales                                        |  | $    | 44,044,023 |     
|Cost of sales                                |  | $    | 38,591,848 |     
|Gross profit                                 |  | $    | 5,452,175  |     
|Selling, general and administrative expenses |  | $    | 4,506,119  |     
|Other income (expense)                       |  | $    | 14,415     |     
|Income taxes                                 |  | $    | 141,748    |     
|Non-controlling interest                     |  | $    | -130       |     
|Net income (loss)                            |  | $    | 818,723    |     
|Foreign currency translation adjustment      |  | $    | 614,093    |     
|Comprehensive income (loss)                  |  | $    | 1,432,946  |     



Sales.Total sales were approximately $44 million for the six months ended December 31, 2011 as compared with approximately $32.8
million for the six months ended December 31, 2010, an increase of approximately $11.2 million, or 34.1%. The increase of sales
was mainly due to our continued sales and marketing efforts. With our competitive pricing advantage,
we added 10 new domestic customers in this period which accounted for 10.5% of total revenue.



Cost
of Sales. Cost of sales for the six months ended December 31, 2011 was approximately $38.6 million, or 87.7% of sales, as
compared with $26.4 million, or 80.4% of sales, for the six months ended December 31, 2010, an increase of approximately $12.2
million or 46.2%. Our cost of sales is 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 increase of cost of sales as a percentage of sales by 7.3% was mainly due to the purchase price escalation
of major raw materials such as paper and plastic particles, which led to a narrower profit margin in three and six months ended
December 31, 2011. Our cost of sales may continue to rise as the global commodity prices move higher. Another important reason
for the increase of the cost of sale is the decreased sale price of our products. We have to drop the product price to keep and
expand the market share.





22











Gross
profit. As a result of the increase in the percentage of cost of sales, the gross profit margin for the six months ended December
31, 2011 was approximately 12.3% as compared with 19.6% for the six months ended December 31, 2010, a decrease of 7.3%.



Selling,
general and administrative expenses. Selling, general and administrative expenses were approximately $4.5 million for the
six months ended December 31, 2011 as compared with approximately $5.5 million for the six months ended December 31, 2010, a decrease
of approximately $1 million, or 22.2%. Although the sales increase sharply, the company decreases the management members’
salaries temporarily to reduce the administrative expenses.



Income
tax. Income tax was approximately $0.14 million for the six months ended December 31, 2011 as compared with approximately
$0.3 million for the six months ended December 31, 2010, a decrease of approximately $0.16 million or 53.3% in accordance with
the change of profit before tax.



Net
income. Net income was approximately $0.8 million for the six months ended December 31, 2011 as compared with net income of
$0.3 million for the six months ended December 31, 2010, an increase of approximately $0.5 million, or 167%. The increase in net
income was primarily due to the increase of the sales and the decrease of general and administrative expenses.



Foreign
currency translation adjustment. 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.



Currency
translation adjustments resulting from this process are included in accumulated other comprehensive income in the consolidated
statement of shareholders' equity and was a gain of $614,093 for the six months ended December 31, 2011 compared with a gain of
$976,226 for the six months ended December 31, 2010. The balance sheet amounts with the exception of equity at December 31, 2011
were translated at RMB6.3532 to US$1.00 as compared with RMB6.5920 to US$1.00 at December 31, 2010. The equity accounts were stated
at their historical rate. The average translation rates applied to income statement accounts for the six months ended December
31, 2011 and 2010 were RMB6.3784 and RMB6.7042 to US$1.00.



Comprehensive
income. The comprehensive income, which adds the currency adjustment to net income, was $1.4 million for the six months ended
December 31, 2011 as compared with $1.3million for the six months ended December 31, 2010. The large amount of foreign currency
translation adjustment was due to appreciation of RMB and the increase of our net income.





23











Liquidity
and Capital Resources



|                                                     |  | For the six months ended December 31
|---------------------------------------------------- |  | ------------------------------------
|                                                     |  | 2011                                
|Cash flow provided by operating activities           |  | $                                   
|Cash flow used in investing activities               |  |                                     
|Cash flow provided by (used in) financing activities |  |                                     



As
of December 31, 2011, we had working capital totaling approximately $15.6 million, including cash and cash equivalents of $2.6
million.



Net
cash   provided by operating activities was approximately $4.9 million for the six months ended December 31, 2011. This net
cash  provided was primarily due to the increase accounts payable by
approximately $4.1 million. Net cash generated in operating activities was $0.6 million for the six months ended December 31,
2010 due to the increase of accounts payable balances by approximately $0.8 million.



Net
cash used in investing activities for the six months ended December 31, 2011 totaled $7.3 million, related primarily to the purchase
property and consideration for acquisition of Jiexin, a subsidiary. Net cash used in investing activities for the six months ended
December 31, 2010 totaled $6.7 million, related primarily to the purchase property and equipment and the consideration paid for
a land use right of Qingdao Likang.



Net
cash  used in  financing activities for the six months ended December 31, 2011 was $0.6 million and was primarily related
to the  increase of due from factor. Net cash provided by financing activities for the six months ended December 31, 2010 was
$1.7 million and was related primarily to the proceeds from long-debt.



Borrowings
and Credit Facilities



We
have entered into several loan agreements with our primary lenders, Qingdao City Commercial Bank, with which we have term
loans. The short-term bank borrowings outstanding as of December 31, 2011 and 2010 were approximately $3.1 million and $3.1
million, respectively. The loan borrowed in 2011 bore an average interest rate of 6.1005% per annum, and borrowed in 2010
bore an average interest rate of 5.31% per annum. Secured by properties and equipment of Qindao Renmin, the loan agreements
have one-year terms, contain customary affirmative and negative covenants and will expire in January 2012. As of December 31,
2011, we were in material compliance with the terms of our loan agreements. The current borrowings will probably extend after
expiration in consideration of the capital demand from our company.



On
April 28, 2011, the subsidiary of the company, Likang entered into one long-term loan with the Bank of Qingdao for approximately
$6.2 million with an average interest rate 7.6475% in the first year. The loan agreement has a 5-year term, contains customary
affirmative and negative covenants and will expire in April 28, 2016.



Capital
Commitment



On
August 12, 2010, Qingdao Likang, our indirectly owned subsidiary, entered into a land use right transfer agreement with Qingdao
Territories and House Administration Bureau, pursuant to which, Qingdao Likang was granted a 50-year use right for a parcel of
land in Qingdao with an area of approximately 65,064 square meters. Qingdao Likang has paid the consideration and started building
a new plant on the land and the construction is estimated to be completed by March 2012.





24









The
agreement also included provisions that requires total investments for the project of not less than RMB242.1 million (US$35.66
million) before August 12, 2013 with a conditional one-year extension. The amount of total investment refers to the amount of
capital that will be spent in the construction and operations of the plant. It includes not only the registered capital, but also
future borrowings such as bank loans and funds from the potential investors.



Critical
Accounting Policies and Estimates



Please
refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in Jpak’s
Annual Report on Form 10-K for the year ended June 30, 2011 for disclosures regarding Jpak’s critical accounting policies
and estimates.  The interim financial statements follow the same accounting policies and methods of computations as
those for the year ended June 30, 2011.



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.



ITEM
3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



Not applicable.



ITEM
4. CONTROLS AND PROCEDURES



|(a) | Evaluation
    of disclosure controls and procedures
|--- | ----------------------------------------------------



We
maintain disclosure controls and procedures designed to provide reasonable assurance that material information required to be
disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized
and reported within the time periods specified in the SEC’s rules and forms, and that the 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 disclosure. We performed an evaluation, under the supervision and with the participation of
our management, including our Chief Executive Officer and Acting Chief Financial Officer, of the effectiveness of the design and
operation of our disclosure controls and procedures as of the end of the period covered by this report.  Based on this
evaluation, our Chief Executive Officer and our Acting Chief Financial Officer have concluded that our disclosure controls and
procedures are effective in ensuring that information required to be disclosed in reports filed under the Securities Exchange
Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified by the Securities and
Exchange Commission, and are effective in providing reasonable assurance that information required to be disclosed by the Company
in such reports is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Acting
Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.



We
do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls
and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives
of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the
fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent
limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute
assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls
and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance
that any design will succeed in achieving its stated goals under all potential future conditions.





25











|(b) | Changes
    in internal control over financial reporting
|--- | --------------------------------------------------------



Since
April 2009, we have been working diligently on the evaluation of internal controls based on COSO framework. The evaluation covers
all the major financial reporting processes, including procurement, revenue, inventory, fixed assets, tax, treasury and financial
reporting. As of June 30, 2010, we completed our documentation both at the entity level and process level. As a result, we have
identified a number of significant deficiencies and improvement opportunities with each process. We have subsequently implemented
remediation measures to correct most of these weaknesses.  We believe that these corrective steps have remediated the
material weaknesses disclosed in our annual report on Form 10-K for the year ended June 30, 2009 and our internal controls are
now effective.



Nevertheless,
we would like to draw your attention to a number of remaining significant deficiencies with our internal controls, as described
in our Form 10-K for the year ended June 30, 2011.  A significant deficiency is a deficiency, or a combination of deficiencies,
that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of the
registrant’s financial reporting. After the evaluation, we believe these deficiencies are significant, but not material
after taking into account our risk assessment and existing controls both at the entity and process levels.  The significant
deficiencies identified in the Form 10-K for the year ended June 30, 2011, which have been partially remediated, are as follows:



|1. | Currently
    we do not have sufficient in-house expertise in US GAAP reporting. Although we have not identified any material errors
    with our financial reporting or any material weaknesses with our internal controls, no assurances can be given that there
    are no such material errors or weaknesses existing.  To remediate this situation, we are seeking to recruit experienced
    professionals to augment and upgrade our financial staff to address issues of timeliness and completeness in US GAAP financial
    reporting.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|2. | Although
                           the Company does not have a Board with a majority of independent members and does not have an audit
                           committee, it hired Mr. Wenjie Li as its independent director in July 2010.  The Company
                           is also seeking additional independent members, including a qualified financial expert to fulfill the
                           role of audit committee chairman.  Nevertheless, the Company cannot assure you of when it
                           will identify a qualified candidate or when it will be able to form an independent audit committee.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3. | For
    the remediation measures that have recently been implemented, they are relatively new and their operating effectiveness still
    needs to be monitored carefully.                                                                                                                                                                                                                                                                                                                                                                                                                                                                      



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-Q relates that have materially affected, or are reasonably likely to
materially affect our internal controls over financial reporting.







26











PART
II - OTHER INFORMATION



ITEM
1.   LEGAL PROCEEDINGS



None.



ITEM
1A. RISK FACTORS



Not applicable
to smaller reporting companies.



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



(a)             Not
Applicable.



(b)             Not
Applicable.



(c)             Not
Applicable



ITEM
3. DEFAULTS UPON SENIOR SECURITIES



(a)             Not
Applicable.



(b)             Not
Applicable.



ITEM
4.  (REMOVED AND RESERVED)



ITEM
5. OTHER INFORMATION



(a)             Not
applicable.



(b)             Not
applicable.







27











ITEM
6.  EXHIBITS



(a) The
following exhibits are filed as part of this report.



|Exhibit No |  | Description                                                                                                                                                          
|---------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|           |  |                                                                                                                                                                      
|3.1        |  | Articles of Incorporation,
    as amended (Incorporated by reference to Exhibit 3.1 to our Annual Report on Form 10-K filed on September 29, 2008)                   
|           |  |                                                                                                                                                                      
|3.2        |  | Bylaws (Incorporated
    by reference to Exhibit 3.2 to our Annual Report on Form 10-K filed on September 29, 2008)                                                  
|           |  |                                                                                                                                                                      
|31.1       |  | 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.







28











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 Wang                                                  
| |                      | Yijun
        Wang
        Chief
        Executive Officer,         
| |                      | President & Director                                                
| |                      |                                                                     
| | By:                  | /s/
    Yongbo Wang                                                 
| |                      | Yongbo
        (Esther) Wang
        Chief
        Financial Officer



Date:
March 6, 2012







29