UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549






FORM
10-Q







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


For the
six months period ended June 30,
2008






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


Commission
file number 000-52080






INTERNET
ACQUISITION GROUP, INC.


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








California                                                      20-0624181




(State or
other jurisdiction of incorporation or organization)              (IRS Employer
Identification No.)









c/o
American Union Securities


100 Wall Street 15th Floor
New York, NY 10005


(Address
of principal executive offices)




(212)
232-0120


(Issuer’s
telephone number)







Check whether the issuer
(1) has filed all reports required to be filed by Section 13 or 15(d) of the
Exchange Act during the preceding 12 months (or for such shorter period that the
issuer was required to file such reports), and (2) has been  subject
to such filing requirements for the past 90 days.  Yes  [ x
]   No[]
  Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company 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 [ x ]
  Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
  Yes
              [  ]
              No
      [ x ]
  The
number of shares of Common Stock, $0.001 par value, outstanding on August 14,
2008, was 30,027,305 shares.











PART
1 – FINANCIAL INFORMATION





Item
1. Financial Statements





INTERNET
      ACQUISITION GROUP INC.BALANCE
      SHEETJune 30, 2008
            
            
            September 30, 2007UnauditedASSETSCash
            
            $
            17,907
            
            
            $
            1,838Accounts
      receivable
            
            
            34,870
            
            
            
            -Inventories
            
            
            138,599
            
            
            
            9,028Sundry
      current assets
            
            
            44,563
            
            
            
            33,350TOTAL
      CURRENT ASSETS
            
            
            235,939
            
            
            
            44,216Property
      and equipment, net of accumulated depreciation
            
            
            3,594,796
            
            
            
            3,614,607TOTAL
      ASSETS
            
            $
            3,830,735
            
            
            $
            3,658,823LIABILITIES
      AND STOCKHOLDERS’ EQUITYCURRENT
      LIABILITIES:Accounts
      payable
            
            $
            562,811
            
            
            $
            459,179Notes
      payable – bank
            
            
            2,013,420
            
            
            
            1,840,920Due
      to affiliated company
            
            
            32,702
            
            
            
            23,780Due
      to stockholders
            
            
            94,575
            
            
            
            296,850Accrued
      expenses
            
            
            407,073
            
            
            
            283,587TOTAL
      CURRENT LIABILITIES
            
            
            3,110,581
            
            
            
            2,904,316STOCKHOLDERS’
      EQUITY:Common
      stock, $0.001 par value,100,000,000
      shares authorized100,000,000
      shares issued and outstanding6,896,363,000
      shares to be issued upon authorization
            
            
            6,996,363
            
            
            
            6,996,363Accumulated
      deficit
            
            
            (6,504,420)
            
            
            
            (6,404,012
            )Accumulated
      other comprehensive income
            
            
            228,211
            
            
            
            162,156TOTAL
      STOCKHOLDERS’ EQUITY
            
            
            720,154
            
            
            
            754,507TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
            
            $
            3,830,735
            
            
            $
            3,658,823




See notes to
      financial statements









- 1 -





INTERNET
      ACQUISITION GROUP, INC.STATEMENTS
      OF OPERATIONS(Unaudited)Three
      Months Ended
              
              
              Nine
      Months EndedJune
      30,
              
              
              June
      30,2008
              
              
              2007
              
              
              2008
              
              
              2007SALES
              
              $
              190,820
              
              
              $
              -
              
              
              $
              190,820
              
              
              $
              -COST
      OF SALES
              
              
              110,434
              
              
              
              -
              
              
              
              110,434
              
              
              
              -GROSS
      PROFIT
              
              
              80,386
              
              
              
              -
              
              
              
              80,386
              
              
              
              -COSTS
      AND EXPENSES:General
      and administrative
              
              
              93,947
              
              
              
              115,727
              
              
              
              370,230
              
              
              
              399,550Research
      and development
              
              
              111,560
              
              
              
              -
              
              
              
              111,560
              
              
              
              -TOTAL
      COSTS AND EXPENSES
              
              
              205,507
              
              
              
              115,727
              
              
              
              481,790
              
              
              
              399,550LOSS
      FROM OPERATIONS
              
              
              (125,121)
              
              
              
              (115,727)
              
              
              
              (401,404)
              
              
              
              (399,550)OTHER
      INCOME (EXPENSES)Interest
      expense
              
              
              (34,644)
              
              
              
              (52,521)
              
              
              
              (97,552)
              
              
              
              (131,952)Recovery
      of bad debt from prior period
              
              
              184,740
              
              
              
              -
              
              
              
              398,548
              
              
              
              -NET
      INCOME (LOSS)
              
              
              24,975
              
              
              
              (168,248)
              
              
              
              (100,408
              )
              
              
              (531,502
              )OTHER
      COMPREHENSIVEINCOME
      (LOSS):Foreign
      currency translation adjustment
              
              
              16,349
              
              
              
              (17,532
              )
              
              
              64,426
              
              
              
              52,862COMPREHENSIVE
      INCOME (LOSS)
              
              $
              41,324
              
              
              $
              (185,780
              )
              
              $
              (35,982)
              
              
              $
              (478,640)Basic
      and diluted earnings percommon
      share
              
              
              *
              
              
              
              -
              
              
              
              *
              
              
              
              -Weighted
      average number of
              
              
              100,000,000
              
              
              
              N/A
              
              
              
              100,000,000
              
              
              
              N/Ashares
      outstanding*
      Less than  $0.001See
      notes to financial statements





-
2 -





INTERNET
      ACQUISITION GROUP, INC.STATEMENTS
      OF CASH FLOWS(Unaudited)NINE MONTHS ENDEDJUNE 30,2008
              
              
              2007OPERATING
      ACTIVITIES:Net
      loss
              
              $
              (100,408
              )
              
              $
              (531,502
              )Adjustments
      to reconcile net loss to netcash
      provided by (used in) operating activities:Depreciation
      and amortization
              
              
              394,986
              
              
              
              349,707Changes
      in operating assets and liabilities:Accounts
      receivable
              
              
              (34,870
              )Inventories
              
              
              (128,726
              )
              
              
              -Other
      current assets
              
              
              (8,088)
              
              
              
              4,812Accounts
      payable
              
              
              60,606
              
              
              
              14,824Accrued
      expenses
              
              
              96,912
              
              
              
              66,222NET
      CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
              
              
              280,412
              
              
              
              (95,937
              )INVESTING
      ACTIVITIES:Acquisition
      of property and equipment
              
              
              (36,475
              )
              
              
              -NET
      CASH USED IN INVESTING ACTIVITIES
              
              
              (36,475
              )
              
              
              -FINANCING
      ACTIVITIES:Repayment
      of Loan from stockholder
              
              
              (230,091
              )
              
              
              (12,066
              )Loan
      from affiliated company
              
              
              6,694
              
              
              
              104,358NET
      CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
              
              
              (223,397
              )
              
              
              92,292EFFECT
      OF EXCHANGE RATE ON CASH
              
              
              (4,471
              )
              
              
              5,683INCREASE
      IN CASH
              
              
              16,069
              
              
              
              2,038CASH
      – BEGINNING OF PERIOD
              
              
              1,838
              
              
              
              933CASH
      – END OF PERIOD
              
              $
              17,907
              
              
              $
              2,971Supplemental
      disclosures of cash flow information:Cash
      paid during the year for:Interest
              
              $
              1,744
              
              
              $
              57,164See
      notes to financial statements


-
3 -
  INTERNET
ACQUISITION GROUP, INC.
  NOTES TO
FINANCIAL STATEMENTS
  JUNE 30,
2008
 (Unaudited)
   1           BASIS
OF PRESENTATION
 The accompanying unaudited financial statements have been prepared in accordance
with accounting principles generally accepted for interim financial information
and with the instructions to Form 10-Q and Article 8 of
 Regulation S-X relating to smaller reporting companies.  Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles (“GAAP”) for complete financial
 statements. In the
opinion of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included.  Operating
results for the three and nine-month periods
 ended June 30, 2008 are
not necessarily indicative of the results that may be expected for the year
ended September 30, 2008.
  The balance sheet at September 30, 2007 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by GAAP for complete financial statements.
  For further information, refer to the consolidated financial statements and
footnotes thereto included in our Annual Report on Form 10-KSB for the year
ended September 30, 2007 filed on February 14, 2008.
  Since the
Company operates primarily in the PRC, the Company’s functional currency is the
Chinese Yuan (RMB).  Revenue and expense accounts are translated at
the average rates during the period, and balance sheet items are translated at
year-end rates.  Translation adjustments arising from the use of
differing exchange rates from period to period are included as a component of
stockholders’ equity.  Gains and losses from foreign currency
transactions are recognized in current operations.
 
 Revenue
Recognition
 
 Revenue
is recognized at the date of shipment to customers when a formal arrangement
exists, the price is fixed or determinable, the delivery is completed, and no
other significant obligations of the Company exist and collectability is
reasonably assured. Payments received before all of the relevant criteria for
revenue recognition are satisfied are recorded as advances from
customers.
 
 2           ACQUISITION
 
 On
September 27, 2007, the Company consummated the Reverse Acquisition in which
China Renyuan International, Inc. a Delaware corporation (“CRI”) became the
Company’s wholly-owned subsidiary.  The agreement provides for former
CRI shareholders to receive 6,926,399,370 shares of common stock (the “Purchase
Price Shares”), which will constitute up to 99% of the issued and outstanding
stock.  As the Company is currently authorized by its Articles of
Incorporation to issue 100,000,000 shares of common stock, and prior to the
Reverse Acquisition, the Company had only 30,036,370 authorized by unissued
shares of common stock available for
 issuance,
the Exchange Agreement provided for the former CRI shareholders to receive
30,036,370 shares of the 6,926,399,370 shares (the “Initial Purchase Price
Shares”) immediately, with the remaining 6,896,363,000 shares (the “Remaining
Purchase Price Shares”) to be issued as soon as the Company has sufficient
authorized common stock to effect such issuance.
 
 The above
acquisition has been accounted for as a reverse merger, since the former
shareholder of CRI effectively control the Company and the only operations of
the Company are solely those of CRI.
 
 3           GOING
CONCERN
 
 The
financial statements have been prepared using accounting principles generally
accepted in the United States of America applicable for a going concern, which
assumes that the Company will realize its assets and discharge its liabilities
in the ordinary course of business.  The Company’s ability to continue
as a going concern is dependent on, among other things, its ability to achieve
profitable operations, to maintain its existing financing and to obtain
additional financing to meet its obligations and to pay its liabilities when
they come due.  The Company is currently pursuing new debt and equity
financing in conjunction with proposed future acquisitions and
operations
 
 At the
present time, the Company does not have sufficient working capital to meet its
needs.  The Company intends to raise additional funds through the
issuance of equity or convertible debt securities.  There can be no
assurance that additional financing will be available on terms favorable to the
Company, or at all.  The inability to raise the additional funds could
cause the Company to cease all operations.
 
 The
financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or amounts and
classification of liabilities that might be necessary should the Company be
unable to continue in existence.
    
 
 
 4
              PROPERTY
      AND EQUIPMENT
 
 A summary
of property and equipment and the estimated lives used in the computation of
depreciation and amortization as of June 30, 2008 is as
follows:
  Amount
              
              LifeMachinery
      and equipment
              
              $
              3,277,113
              
              7
      yearsBuilding
      and building improvements
              
              
              2,149,848
              
              39.5
      yearsAutomobile
              
              
              5,678
              
              3
      yearsRight
      to use land
              
              
              314,680
              
              50
      years5,747,319Accumulated
      depreciation
              
              
              2,152,523$
              3,594,796
    5           EARNINGS
PER SHARE
 
 Outstanding
shares prior to September 27, 2007, the date of the merger, are
undeterminable.  The total shares issued are therefore used as the
average shares outstanding.
 
  6
              RISK
      FACTORS
 
 Vulnerability
due to Operations in PRC
 
 The
Company=s
operations may be adversely affected by significant political, economic and
social uncertainties in the PRC.  Although the PRC government has been
pursuing economic reform policies for more than twenty years, no assurance can
be given that the PRC government will continue to pursue such policies or that
such policies may not be significantly altered, especially in the event of a
change in leadership, social or political disruption or unforeseen circumstances
affecting the PRC’s political, economic and social conditions.  There
is also no guarantee that the PRC government=s
pursuit of economic reforms will be consistent or effective.
 
 Substantially
all of the Company=s
businesses are transacted in RMB, which is not freely
convertible.  The People’s Bank of China or other banks are authorized
to buy and sell foreign currencies at the exchange rates quoted by the
People=s
Bank of China.  Approval of foreign currency payments by the People’s
Bank of China or other institutions requires submitting a payment application
form together with suppliers’ invoices, shipping documents and signed
contracts.
 
 Since the
Company has its primary operations in the PRC, the majority of its revenues will
be settled in RMB, not U.S. Dollars. Due to certain restrictions on currency
exchanges that exist in the PRC, the Company’s ability to use revenue generated
in RMB to pay any dividend payments to its shareholders may be
limited.
 
 Environmental
issues
 
 The
Company conducts business in an industry that is subject to a broad array of
environmental laws and regulations.  The production of the products
the Company intends to produce will create pollutants.  The Company
will incur significant costs if additional government regulations are introduced
to protect the environment.
 
  7
              SUBSEQUENT
      EVENTS
  On July
15, 2008 the holders of a majority of the voting power of the Company gave their
written consent to a resolution adopted by the Board of Directors to amend the
Company's Articles of Incorporation to (1) change the name of the Company
to "China Renyuan International, Inc." and (2) effect a 233 to 1 reverse
split of the Company's common stock.  The ammendment was filed with
the California Secretary of State on or about August 11, 2008 at which time
it became effective.
    
   Item
2. Management’s Discussion and Analysis
  The
following presentation of Management's Discussion and Analysis has been prepared
by internal management and should be read in conjunction with the financial
statements and notes thereto included in this Form 10-QSB. Except for the
historical information contained herein, the discussion in this report contains
certain forward-looking statements that involve risks and uncertainties, such as
statements of our business plans, objectives, expectations and intentions as of
the date of this filing. The cautionary statements about reliance on
forward-looking statements made earlier in this document should be given serious
consideration with respect to all forward-looking statements wherever they
appear in this report, notwithstanding that the "safe harbor" protections
available to some publicly reporting companies under applicable federal
securities law do not apply to us as an issuer of penny stocks. Our actual
results could differ materially from those discussed here.
 The
following discussion relates solely to the operations of our operating
subsidiary, Renyuan Bio-Chemicy, and not to CRI or our former discontinued
businesses of developing Internet based businesses and providing professional
purchasing management.
 
 Business
Overview
 
 Our
business is principally that of our wholly-owned subsidiary, Renyuan
Bio-Chemicy. Renyuan Bio-Chemicy is a high-technology biochemical enterprise
located in the Jizhou City High & New Tech Industrial Zone of Hebei Province
near Beijing.  Renyuan’s business is the research, production and
management of chemicals, bio-pharma and pharmaceutical intermediates, however,
notwithstanding our recent resumption of operations,  Renyuan’s
ability to produce products on a viable commercial basis and
conduct  research unless continues to be dependant upon
our  raising additional funds.
  Principal
products and their markets
 
 Renyuan
Bio-Chemicy’s principal products are D-Hydroxyphenlyglycine, an intermediate
products used by pharmaceutical companies, and DL-Serine, another pharmaceutical
intermediate.  Both products can be produced using current production
lines and equipment.  The Company has also developed the capability to
produce D-phenylalanine, an amino acid used in pharmaceuticals and
foods.
 
 Renyuan’s
D-Hydroxyphenlyglycin (or D-PHG) is produced with a non-proprietary advanced
one-step enzymatic technology as opposed to the more traditional optical
resolution method.  Its plant was put into production in 2002 to
produce high purity, high quality, and low cost D-PHG with low environmental
impact.  D-PHG is an intermediate used in manufacturing amoxicillin
and cefadroxil.
  The D-PHG
plant was designed to allow the production of up to 1,500 tons of D-PHG per
year, but a significant design flaw limited actual production capacity to
only approximately only 720-750 tons per year.  With the reduced
capacity, the cost of production was considerably higher than
expected.  Despite these unforeseen difficulties, Renyuan’s management
continued producing into 2003.  At that time the SARS epidemic swept
China, and local governments closed inbound traffic to try to prevent the spread
of the disease.  Renyuan’s locality was affected for approximately
three months, during which time the Company depleted its inventory of principal
ingredient Benzene hydantoin and could not resupply.
  In July
2003, Renyuan Bio-Chemicy recommenced production of D-PHG, but a joint directive
issued by the State Reform and Development Commission and the State Drug
Administration in October 2003 eventually made it impossible to continue
manufacturing. Therefore, the Company was limited in 2005 and 2006 to selling
the products it held in inventory which were manufactured prior to October 2003.
The directive set price caps on antibiotics following reports that certain
pharmaceutical companies reaped windfall profits sales of antibiotics during the
SARS epidemic despite the fact that Amoxycillin is not effective against SARS
and that its price had not risen abnormally.  Nevertheless, the
directive provided for a 30% cut of the price of Amoxycillin and certain other
antibiotics.  As a result, the 30% price cut made it unprofitable
to produce the product.  The company discontinued production. However,
with some technical adjustment and investment, the D-PHG plant was
redeployed to produce DL-Serine or vitamin B-2 (riboflavin) during the quarter
ended June 30, 2008.  At the present time we lack sufficient funds to
make the switch, but we intend to do so if and when we can secure needed
funds.  At this time we cannot provide any meaningful estimates as to
the time and expenses needed to redeploy the D-PHG plant for the production of
DL-Serine or vitamin B-2 and we cannot provide any assurances that we will be
able to make such redeployment.
  Renyuan’s
second product, DL-Serine is a synthetic amino acid that has applications in
pharmaceutical and food fields.  Related compounds of DL-Serine can be
converted to L-ser, D-ser, and after hydrolysis, 3-Chloroalanine.  The
latter is used in treatments for tuberculosis and also to make agents for foods,
nutritional supplements, and animal fodder.  Because of special
moisture properties, it can be used in cosmetics to improve skin
elasticity.  DL-Serine is in short supply within China and throughout
the world.  Renyuan has the capacity to produce 24 tons of DL-Serine
per year.  As it did for D-PHG, the Company gradually wound down and
then ceased production of DL-Serine due to a shortage of working capital
following the disruption caused by the SARS epidemic.  But in contrast
to D-PHG, we plan to be able to produce DL-Serine going forward, and have, with
the cooperation of certain customers who have pre-paid in part for their orders,
resumed production.
 
 The
Company failed to realize that the new processing technique not only failed to
produce D-PHG pure enough to manufacture injections, but the production costs
also turned out to be much higher than expected. So at the end of fiscal year
2007, the company didn’t perform any production and sales.
 
 From July
2007 to September 2007, the professor Yi from Tsinghua University took
three production lines standards tests for the spherical lithium iron phosphate
products, in which the equipment operation, technology operations, and
accomplishment are very smooth. We were very satisfied with the actual test
results. By the end of December 2007, the company signed a formal long-term
supply agreement of lithium iron phosphate with a Beijing client. We formally
re-started revenue generating operations during the quarter ended June 30, 2008.
  The
Company did all the preparatory work before production from October 2007 to
December 2007, so sales were still zero at that time, but the pace of progress
of the company has not stopped. The Company recovered more than $145,000 account
receivables from July 2007 to September 2007.  During the first fiscal
quarter of 2008 we recovered approximately $210,000 in accounts receivables
during the second fiscal quarter of 2008 we recovered $185,000 of accounts
receivables.
 The
Company's' production of D-PHG was restored as of June 2008. The Company has
determined that based on its internal projections, the carrying costs of the
assets are recoverable.  The Company projects revenue of 80 Million
RMB or approximately $11.42 million USD for the next twelve months, but can not
give assurance that it will reach those goals.
 
 The
Company performed an impairment test for its fixed assets and found no
impairment due to the fact that the equipment was now online for
production.  Based upon our surveys and general knowledge of our equipment,
we believe that there would be a market for the equipment in the event that we
seek to sell the equipment. This is because the equipment is brand new
and widely used in the market.
 
 We are
attempting to deal with our need for working capital resulting from our
production halts through an approach of aggressively collecting our receivables,
partnerships with our suppliers which provide for favorable payment terms and
giving our customers discounts for prepayments on orders.  To date,
the Company believes that these measures have been beneficial in lessening our
working capital shortages and enabling production although we continue to seek
working capital investment.
 
 The
Company has received orders from Xiamen Pujing Medicine Production Company and
Nantong Kaixin Chemistry Production, Ltd. We anticipate significant orders with
pre-payments from other customers in the next few months. Xiamen Pujing Medicine
Production Company has ordered 1.2 tons and we have sent our products to them.
According to the contract, the advance payment is 60% and the rest of the
payment will be received within 3 days when the products arrived. We have been
paid in full for this shipment. With regard to Nantong Kaixin Chemistry
Production, Ltd, they have paid the whole payment for 800 kg
products.
    
 
 RESULTS
OF OPERATIONS
  Quarter
Ended June 30, 2008 compared to Quarter Ended June 30,
2007
  Our sales
were $190,820 during our quarter ended June 30, 2008 and $0 during the
quarter ended June 30, 2007.   The primary reason for this
increase was the restoration of the Company's D-PHG production
line.
  Our total
costs and expenses have increased from $115,727 for the three month period
ended June 30, 2007 to $205,507 for the three months ended June
30, 2008.  This primary reason for this increase of 77.6% was due to
the increase in research and development expenses. These costs of $111,560
represent 54.2% of total expenses during the three month period ended June 30,
2008. These costs are associated with the technical adjustments to the D-PHG
production line incurred to restore it to operational capacity.
 
 In
comparison, general and administrative expenses of $93,947 remained relatively
unchanged during the three month period ended June 30, 2008 compared to $115,727
during the three month period ended June 30, 2007.
 The
biggest contributor to general and administrative expenses during the three
month period ended June 30, 2008 was $85,446 in depreciation
expenses.
  Net
income for the three month period ended June 30, 2008 totaled $24,975 compared
to a net loss of $168,248 the three month period ended June 30, 2007. This was a
direct result of our ability to resume production of our products.
 
 Nine
Months Ended June 30, 2008 compared to Nine Months Ended June 30,
2007
  Our sales
were $190,820 during nine months ended June 30, 2008 compared to nil for the
nine months ended June 30, 2007.  The primary reason for the increase
of revenue was that the Company's resumed production of D-PHG.
  Our total
costs and expenses have increased from $339,550 during the nine months
ended June 30, 2007 to $481,790 during the nine months ended June
30, 2008.  The primary reason for this 20.6% increase was due to the
increase in research and development expenses. All research and development
expenses were incurred during the three month period ended June 30, 2008 as
discussed above.
 
 General
and administrative expenses of $370,230 remained relatively unchanged during the
nine month period ended June 30, 2008 compared to $399,550 during the nine month
period ended June 30, 2007.
 
 The
biggest contributor to general and administrative expenses during the nine month
period ended June 30, 2008 was $331,431 in depreciation expenses.
 
 We expect
that in the near future our selling, general and administrative expense will
increase steadily, as we will incur the expenses attributable to being a U.S.
public company and as we continue to expand the focus of our business
operations, necessitating a staff of skilled administrators.
 
 Net loss
for the nine month period ended June 30, 2008 totaled $100,408 compared to a net
loss of $531,502 during the nine month period ended June 30, 2007. This
reduction in net loss was a direct result of our ability to resume production of
our products during the three months period ended June 30, 2008.
 
  LIQUIDITY
AND CAPITAL RESOURCES
  During
the nine months ended June 30, 2008, our operations provided $282,412 in cash,
primarily due to $394,986 in depreciation and amortization and a reduction in
net loss to $100,408. In comparison, for the same period in 2007, $95,937 in
cash was used as a result of a net loss of $531,502.
 
 From 2008
the Company began shipping product to its customers. The Company started
its production in May 2008 and began sales in June 2008. This timetable was
reachable due to the fact that it takes about one week from the material input
to the packaging of finished goods off the assembly line. Although the current
production volume is small, we expect to gradually increase production in the
near future.
 
 The
company has financed the production in several ways including the collection
of $398,548 of previously written-off accounts receivable. The Company is
also taking advantage of favorable terms with its suppliers who have extended
credit during the initial production of the product.
 
 During
the nine months ended June 30, 2008, net cash used in investing activities
totaled $36,475 which was the acquisition of property and equipment for our
production lines. In comparison to the same period in 2007, we had no investing
activities.
 
 During
the nine months ended June 30, 2008, net cash used in financing activities
totaled $223,397 which was primarily of the repayment of loans from Mr. Ren
Chaozhang, one of our directors. In comparison to the same period in 2007, net
cashed provided by financing activities was $92,292 which resulted primarily
from a loan from an affiliated company.
 
 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 or results of
operations.
   
 
 ITEM
3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISKS
 
 We do not
own the type of market risk sensitive instruments described in Regulation S-K
Section 305.
 
 ITEMS
4.  CONTROLS AND PROCEDURES
 
 As of the
end of the period covered by this report, the Company carried out, under the
supervision and with the participation of the Company's management, including
its Chief Executive Officer and Chief Financial Officer, an evaluation of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934) in ensuring that information required to be disclosed by
the Company in its reports is recorded, processed, summarized and reported
within the required time periods.  In carrying out that evaluation,
management identified a material weakness (as defined in Public Company
Accounting Oversight Board Standard No. 2) in our internal control over
financial reporting.
 
 The
material weakness identified by Management consisted of inadequate staffing and
supervision within the bookkeeping and accounting operations of our
company.  The relatively small number of employees who have
bookkeeping and accounting functions prevents us from segregating duties within
our internal control system.  The inadequate segregation of duties is
a weakness because it could lead to the untimely identification and resolution
of accounting and disclosure matters or could lead to a failure to perform
timely and effective reviews.  However, as there has been no instance
in which the company failed to identify or resolve a disclosure matter or failed
to perform a timely and effective review, management determined that the
addition of personnel to our bookkeeping and accounting operations is not an
efficient use of our resources at this time.
 
 Accordingly,
based on their evaluation of our disclosure controls and procedures as of June
30, 2008, the Company's Chief Executive Officer and its Chief Financial Officer
have concluded that, as of that date, the Company's controls and procedures were
not effective for the purposes described above.
 
 There was
no change in the Company's internal control over financial reporting (as defined
in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934)
during the six months ended March 31, 2008 that has materially affected or is
reasonably likely to materially affect the Company's internal control over
financial reporting.
     
 
 PART
3 - OTHER INFORMATION
      Item 1
              Legal
      ProceedingsNoneItem 1A
              Risk Factors: 
      Reference is made to our Current Report on Form 10-KSBDated February 14,
      2008Item 2
              Unregistered Sale of
      Equity Securities and Use of ProceedsNoneItem 3
              Defaults upon Senior
      SecuritiesNoneItem 4
              Submission of
      Matters to a Vote of ShareholdersNoneItem 5
              Other
      InformationItem 6
              Exhibits
   Exhibit
Number   Description
  31.1   Section
302 Certification of Chief Executive Officer and Chief Financial
Officer
  32.1   Certification
Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 Of The
Sarbanes-Oxley Act Of 2002 – Chief Executive Officer And Chief Financial
Officer
  
  SIGNATURES
  In
accordance with Section 13 or 15(d) of the Securities Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
  INTERNET
ACQUISITION GROUP, INC.
  
 /s/Qingfu Ren
 Qingfu
Ren, Chief Executive Officer
  Date:
August 14, 2008
   -
9 -