UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C.  20549





FORM
10-K/A





xANNUAL REPORT UNDER
SECTION 13 OR 15 (D) OF THE


SECURITIES
EXCHANGE ACT OF 1934





FOR THE
FISCAL YEAR ENDED JUNE 30, 2008





oTRANSITION REPORT
PURSUANT TO SECTION 13 OF 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)
            
            (I.R.S.
      Employer Identification orOrganization
      No.)





15
Xinghua Road


Qingdao,
Shandong Province


Postal
Code 266401


People’s
Republic of China


(86-532)
84616387


(Address
and telephone number of principal executive offices and
principal place of business)





Securities
registered under Section 12 (b) of the Exchange Act: NONE





Securities
registered under Section 12 (g) of the Exchange Act:


COMMON
STOCK WITH $.001 PAR VALUE


(Title of
Class)





Indicate
by check mark if the Registrant is a well known seasoned issuer as defined in
Rule 405 of the securities Act.  Yes o No x





Indicate
by check mark if Registrant is not required to file reports pursuant to Section
13 or Section 15 (d) of the Act.  Yes x No x





Indicate
by check mark whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.  Yes x No o





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of





Registrant’s
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form
10-K.  x





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





Large
accelerated filer  o                                                              Accelerated
Filer o


Non-accelerated
filer    o                                                              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 oNo x





The
aggregate market value of the voting and non-voting common stock held by
non-affiliates of the Registrant as of December 31, 2007 (the last business day
of the Registrant’s most recently completed second fiscal quarter) was
approximately $36,757,500.  The number of outstanding shares of the
Registrant’s Common Stock as of the close of business on October 30,
2008 was 24,805,000 and 5,608,564 shares of the Registrant’s Series A
Preferred and 5,000,000 shares of Series B Preferred.


2





JPAK
GROUP, INC.


FORM 10-K
INDEX








PART
      IPageItem
      1
            Description
      of Business
            
            4Item
      1A
            Risk
      Factors
            
            16Item
      1B
            Unresolved
      Staff Comments
            
            30Item
      2
            Description
      of Property
            
            31Item
      3
            Legal
      Proceedings
            
            31Item
      4
            Submission
      of Matters to a Vote of Security Holders
            
            31PART
      IIItem
      5
            Market
      for Common Equity and Related Stockholder Matters
            
            31Item
      6
            Selected
      Financial Data
            
            34Item
      7
            Management’s
      Discussion and Analysis of Financial Conditions and Results of
      Operations
            
            34Item
      7A
            Quantitative
      and Qualitative Disclosures About Market Risk
            
            44Item
      8
            Financial
      Statements
            
            45Item
      9
            Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure
            
            71Item
      9A
            Controls
      and Procedures
            
            71Item
      9B
            Other
      Information
            
            75PART
      IIIItem
      10
            Directors
      and Executive Officers of the Registrant
            
            75Item
      11
            Executive
      Compensation
            
            77Item
      12
            Security
      Ownership of Certain Beneficial Owners and Management And Related
      Stockholder Matters
            
            80Item
      13
            Certain
      Relationships and Related Transactions
            
            83Item
      14
            Principal
      Accountant Fees and Services
            
            85PART
      IVItem
      15
            Exhibits
      and Financial Statements Schedules
            
            86Signatures
            
            88





3








EXPLANATORY NOTE
:On May 3, 2008, the Board of Directors of Jpak Group, Inc.
(“we”, “us”, “our” or the "Company") concluded that the Company was required to
restate its previously issued audited financial statements for the year ended
June 30, 2007, and as a result, its financial statements for the quarters ending
September 31, 2007 and December 31, 2007. Subsequent to the issuance of the June
30, 2007 financial statements, management identified various errors in
connection with its 2007 financial statements and determined that a restatement
was necessary in respect of the following: revision of reverse acquisition
accounting and revision of capitalized costs relatedto financing
transactions.  As a result of the Board’s decision and the
aforementioned revisions to our financial statements, our previously issued
financial statements for the year ended June 30, 2007 (which were included in
our Registration Statement on Form S-1), and the periods ended September 30,
2007, and December 31, 2007, should no longer be relied
upon.  Accordingly, we filed restated financials for those periods on
August 5, 2008.  Pursuant to additional SEC comments, management
determined that another restatement of our December 31, 2007 financial
statements, and a restatement of our March 31, 2008 financial statements was
necessary in respect of the following: accounting for the extended term of the
Series A and Series B Warrants issued in the private placement we closed in
August 2007 and the commission paid pursuant to the exercise of the Series J
Warrants.    As a result of the Board’s decision and the
aforementioned revisions to our financial statements, on September 29, 2008, we
filed restated financials for the quarter ending December 31, 2007 in an
amendment to our 10-Q for that same quarter and disclosed that our previously
issued financial statements for the periods ended December 31, 2007 and March
31, 2008, should no longer be relied upon.    The revisions
made in the September 29, 2008 filings impacted the financial statements for the
year ending June 30, 2008 and we therefore we also filed an amendment to our
10-K for such year.  We are filing this amendment to respond to
additional SEC comments that we received on November 14, 2008.








PART
I








ITEM
1.                      DESCRIPTION
OF BUSINESS





GENERAL
OVERVIEW





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





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





●
            Increasing
      output to further penetrate the China market;





4





●
            Offering
      bundled packaging materials and filling machines;





●
            Increasing
      sales to selective Asian and other markets  (including Russia
      and Easter Europe); and





●
            Establishing
      brand names and brand awareness.





Company
History




RX
Staffing, Inc.





Rx
Staffing, Inc. was a development stage company incorporated in the State of
Nevada on December 6, 2004. It was formed as a full-service temporary personnel
agency to better meet the supplemental staffing needs of healthcare providers.
Its corporate purpose was (i) to provide personnel staffing services to
institutions, occupational site healthcare organizations and alternative site
healthcare organizations and (ii) to provide health care professionals such as
nurses, specialty technicians and physicians with the flexibility to balance
their professional and personal schedules.





For the
period beginning on the date of inception through the date of the Share
Exchange, Rx Staffing generated minimal revenue from the sale of its medical
staffing services.




On August
9, 2007, we completed a reverse acquisition of Jpak Group, Inc.
(“Jpak”).  Prior to the acquisition, Rx Staffing Inc. (“Rx Staffing”),
was a public shell company, as that term is defined in Rule 12b-2 of the
Exchange Act, established under the laws of Nevada on December 6,
2004.  To accomplish the share exchange we issued 23,005,000 shares of
common stock on a one to one ratio for a 100% equity interest in JPAK. Per the
terms of the Share Exchange and Bill of Sale of assets of Rx Staffing and Shaun
Jones, Rx Staffing was delivered with zero assets and zero liabilities at time
of closing. The transaction was regarded as a reverse merger whereby JPAK was
considered to be the accounting acquirer as its shareholders retained control of
RX Staffing after the exchange.  Although the Company is the legal
parent company, the share exchange was treated as a recapitalization of
JPAK.  Thus, JPAK is the continuing entity for financial reporting
purposes.  The Financial Statements have been prepared as if JPAK had
always been the reporting company and then on the share exchange date, had
changed its name and reorganized its capital stock.





Jpak
Group, Inc.





We
commenced operations in China in 1958 as a state-owned, traditional printing and
packaging company. In 2004, management completed the buyout of 88.23% of a
state-owned equity interest in Qindao Renmin, a company located in Qingdao,
Shandong Province of the People’s Republic of China; in the same year, we
started developing aseptic liquid food and beverage cartons which was launched
in the China market in 2005.  Jpak Group Co., Ltd. (“Jpak Ltd”) was
incorporated in the Cayman Islands on June 22, 2006 under the name Winner Dragon
Limited; they changed their name to Jpak Ltd. on September 18,
2006.  Also in September 2006, Jpak Ltd. acquired the
88.23% equity interest in Qingdao Renmin through Grand International, the 100%
owned subsidiary of Jpak Ltd. Substantially, all of our operations are conducted
in China through Qingdao Renmin. In July 2007, Grand International purchased the
remaining 11.77% state-owned equity interest in Qingdao Renmin and now owns 100%
equity interest in Qingdao Renmin.








5





In
September 2006, Jpak Group Co., Ltd. (“JPAK”) – a private holding company
established under the laws Cayman Islands June 22, 2006, acquired 88.23% equity
interest in Qingdao Renmin through Grand International, the 100% owned
subsidiary of JPAK.  As a result of the acquisition, Qingdao Renmin
became the majority owned subsidiary of Grand International and an indirect
majority owned subsidiary of JPAK. The transaction was regarded as a reverse
merger whereby Qingdao Renmin was considered to be the accounting acquirer as
both Grand International and JPAK were holding companies with no significant
operations and Qingdao Renmin continues as the primary operating entity even
after the exchange, although JPAK is the legal parent company.  As
such, Qingdao Renmin (and its historical financial statements) is the continuing
entity for financial reporting purposes and the share exchange was treated as a
recapitalization of JPAK.  Thus, JPAK is the continuing entity for
financial reporting purposes.  The Financial Statements have been
prepared as if JPAK had always been the reporting company and then on the share
exchange date, had changed its name and reorganized its capital
stock.  Accordingly, we have revised our financial statements to
reflect reverse merger accounting).





On August
9, 2007, we entered into that certain Share Exchange, pursuant to which Jpak
Ltd. became our wholly owned subsidiary and in connection with the Share
Exchange, we changed our corporate name to Jpak Group, Inc.”





The
Share Exchange and the Financing





On August
9, 2007, we entered into and consummated the transactions contemplated (the
“Share Exchange”) under a Securities Exchange Agreement (the “SEA”) by and among
us, Jpak and the shareholders of Jpak (namely Joyrich Group Limited, a British
Virgin Islands (“BVI”) company, Fabregas Group Limited, a BVI company, Statepro
Investments Ltd., a BVI company, Raytech Investments Limited, a BVI company, and
Capital American Markets Limited, a BVI company), pursuant to which all the
shares of Jpak were transferred to us and Jpak became a wholly-owned subsidiary
of ours, and at the same time the shareholders of Jpak were issued 23,005,000
shares of our common stock, which represented 64.4% of all the issued and
outstanding shares of our common stock (assuming conversion of the preferred
stock described below) following the Share Exchange and the financing described
below. The Share Exchange has been accounted for as a reverse acquisition under
the purchase method of accounting for business combinations in accordance with
generally accepted accounting principles in the United States of America, or
“U.S. GAAP.” Reported results of operations of the combined group issued after
completion of the transaction will reflect Jpak’s operations.





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


6




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





The Investor RRA also made provisions
if we cannot register all of the shares underlying all of the Series A and
Series B Preferred Stock and Warrants due to the SEC’s application of Rule
415.  Pursuant to those provisions, if the SEC issues us a 415
comment, then we must first try to register the common stock underlying the
preferred stock (on a pro rata basis among the holders of the Preferred Stock)
and then register all of the common underlying the Warrants (on a pro rata basis
among the holders of the Warrants).   The SEC did issue a 415
comment to us on March 27, 2008 and accordingly, we filed an amendment to our
Registration Statement to register for resale 687,106 shares of common stock
underlying the Series APreferred Stock, as required by the terms of the Investor
RRA.  Subsequent registration statements required to be filed to
register the rest of the common stock underlying the preferred stock and
warrants issued in the financing will be filed on the later of (i) 60 days
following the sale of substantially all of the shares of common stock included
in the Registration Statement or any subsequent Registration Statement and (ii)
6 months following the effective date of the Registration Statement or any
subsequent Registration Statement, as applicable, or such earlier or later date
as permitted
or required by the Commission.  Each such subsequent registration
statement must be declared effective by the earlier of (A) the 90th day
following the filing date of such Registration Statement (or in the event such
Registration Statement is reviewed by the Commission, the one hundred twentieth
(120th) day
following such filing date) or (B) 5 business days after SEC has no more
comments. However, we do not have any monetary obligations for any securities
that were not permitted to be included in a registration statement because of
the SEC’s application of Rule 415 until such time as such securities are
required to be filed pursuant to the Investor RRA.  In such case, the
liquidated damages shall be calculated to only apply to the percentage of
securities which are permitted by the Commission to be included in the
Registration Statement.





In addition to the Share Exchange, and the Investor RRA, on August
9, 2007, we also entered into a Securities Escrow Agreement (the “Escrow
Agreement”) with the Investors, the principal stockholders named therein (the
“Principal Stockholders”) and the escrow agent named therein (the “Escrow
Agent”). Under the Escrow Agreement, the Principal Stockholders agreed to place
an aggregate of 7,200,000 shares of Common Stock into escrow (the “Escrow
Shares”) for the benefit of the Investors in the event the Company fails to
achieve net income for the fiscal year ended June 30, 2008 (“Fiscal 2008”) of at
least US$3.955 million (the “Fiscal 2008 Performance Threshold”). Since we
met the Fiscal 2008 Performance Threshold, the Escrow Shares were returned to
the Principal Stockholders.





In
connection with the Financing, we issued H.C. Wainwright & Co., Inc., a
broker-dealer member of FINRA who acted as our exclusive placement agent in
connection with the financing received the following compensation for its
services as placement agent: (i) a cash fee of 9% of the gross proceeds, plus
expenses (an aggregate of $972,500) and (ii) warrants to purchase 990,000 shares
of common stock at an exercise price equal to $0.50 per share, and warrants to
purchase 750,000 shares of common stock at an exercise price equal to $0.60 per
share, certain of which warrants were issued to officers and employees of the
placement agent.






7







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





In
connection with such exercise, the holders of the Series J Warrants agreed not
to exercise their demand registration rights with respect to the shares of our
common stock underlying the Series B Convertible Preferred Stock, the Series C
Warrants and the Series D Warrants during the period beginning on the date of
exercise of the Series J Warrants and ending on the ninetieth (90th) day
following the effective date of this prospectus.





In
connection with the exercise of the Series J Warrants, we extended the term of
our Series A Warrants and Series B Warrants from four years to six years, so
that such warrants
shall now expire on August 9, 2013, and the deadline for effectiveness of the
registration statement was extended to March 31, 2008.




We are
engaged primarily in the development, manufacture, and distribution of aseptic
liquid food and beverage cartons for milk, fruit juices, soy milk, yogurt
drinks, iced tea, coffee, sauces and other liquid foods and beverages in
China.





We
believe we are the largest and leading domestic supplier of aseptic liquid food
and beverage cartons in China. Our business is primarily in China, but we have
recently begun contract manufacturing products for the export
market.





Established
in 1958, Qingdao Renmin was a state-owned, traditional printing and packaging
company. On August 21, 2006, Grand International entered into a sales and
purchase agreement with three of the then-existing five shareholders (the
“Original Shareholders”) of Qingdao Renmin, pursuant to which Grand
International purchased 88.23% of the equity interest in Qingdao Renmin. The
total purchase consideration was RMB 40,999,000 which was determined based upon
the net asset value of Qingdao Renmin as of August 21, 2006. On September 5,
2006, this transfer was approved by the Qingdao Municipal Bureau of Foreign
Trade and Economic Cooperation, and the registration with the Qingdao State
Administration for Industry and Commerce was completed on December 7, 2006. As a
result of this transfer, Grand International acquired an 88.23% equity interest
in Qingdao Renmin. In July 2007, Grand International purchased the remaining
11.77% state-owned equity interest in Qingdao Renmin and now owns 100% equity
interest in Qingdao Renmin.




The
acquisition of Qingdao has been accounted for in the financial statements using
the reverse merger accounting method.





We have
experienced significant growth in our business in recent years. Our total net
sales reached US$37.3 million for the fiscal year ended June 30, 2008, up $6.9
million from US$30.4 million for the fiscal year ended June 30, 2007 and US$30.4
million for the fiscal year ended June 30, 2007, up from US$22.6 million for the
fiscal year ended June 30, 2006. Additionally, our total net sales for
reached US$37.3 million for the year ended June 30, 2008 as compared to
approximately US$30.4 million for the year ended June 30, 2007, an increase
of approximately US$6.9 million or 23%.





Our
Corporate Structure





We were
incorporated in the state of Nevada on December 6, 2004 under the name RX
Staffing, Inc. On August 9, 2007 we entered into that certain Share Exchange,
pursuant to which Jpak became our wholly owned subsidiary. In connection with
the Share Exchange, we changed our corporate name to Jpak Group, Inc. We
function as a holding company and, through our subsidiaries, own 100% equity
interest in Qingdao Renmin, our operating subsidiary.






8







Jpak was
incorporated in the Cayman Islands on June 22, 2006 under the name Winner Dragon
Limited. On September 18, 2006, Winner Dragon Limited was renamed Jpak Group
Co., Ltd. In September 2006, Jpak completed the acquisition of 88.23% of the
equity interest in Qingdao Renmin through Grand International, the 100% owned
subsidiary of Jpak. Substantially, all of our operations are conducted in China
through Qingdao Renmin. In July 2007, Grand International purchased the
remaining 11.77% state-owned
equity interest in Qingdao Renmin and now owns 100% equity interest in Qingdao
Renmin.





Our
Industry





We
believe that the liquid food and beverage carton market in China is
approximately 26 billion packages annually with sales of US$1.68 billion. We
believe the key factor that will continue to drive the growth of the liquid food
and beverage carton market in China is the rapidly increasing per capita
consumptions of milk and non-carbonated beverages in the major coastal cities as
well as the rural regions.





Based on
studies we have completed, we believe the annual consumption in the Asian
(excluding China and Japan) and Middle Eastern markets is estimated at 21
billion and 4 billion packages, respectively, with double digit annual growth
rates expected in most countries. We attribute such growth to a steady increase
in consumption of aseptic packaged milk and other beverage products. We also
believe that multinational suppliers currently supply nearly 90% of aseptic
packaged milk and other beverage products, whilst domestic suppliers supply the
remaining 10% of the liquid food and beverage packaging market in
China.




Our
Growth Strategy





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




Increasing output to further
penetrate the China market.





We are
continuing our efforts to increase our production output as well as widen the
range of aseptic carton products to further penetrate the packaged milk and
other liquid food and beverage markets in China.





Offering bundled
packaging materials and filling machines.





We are
developing aseptic liquid filling machines to augment the sales of our aseptic
carton packaging products, enabling us to offer a complete packaging solution as
well as increase per customer sales.





Increasing
sales to selective Asian and other markets.





We are
aggressively pursuing Asian, Middle Eastern, , Russia, Eastern European and
other markets to increase market penetration via direct sales and channel
partnerships in selective countries.





Establishing brand names and brand
awareness.





We are
continuing to establish a strong corporate identity as well as enhance our
product brand names and brand awareness to enhance an accelerated adoption of
our existing and new products.






9








Our
Products





We
provide a wide variety of aseptic liquid food and beverage carton products
intended to address the needs of our customers.





Aseptic
Packaging Technology





We use
aseptic packaging technology in our products. An aseptic liquid food and
beverage processing and packaging ensure that the packaged contents and
packaging materials are free of harmful bacteria and microorganisms in a closed,
sterile production environment under ultra high temperature
treatment.





Our
cartons are designed and constructed for processing under aseptic conditions,
keeping the liquid foods and beverages safe, fresh and flavorful without
refrigeration or preservatives during storage, and allowing the liquid food and
beverages to retain their nutrition, taste, texture and color.





Liquid
Food and Beverage Cartons





Our
aseptic liquid food and beverage cartons are made of multiple layers of
polyethylene, paper board, and aluminum materials which are intended for the
packaging of milk, fruit juices, soy milk, yogurt drinks, iced tea, coffee,
sauces and others. Aseptic cartons are available in brick or pillow shapes in
standard and slim formats, with various filling volume
specifications.





Aseptic
Carton Features and Advantages





Our
aseptic liquid food and beverage cartons are produced with several proprietary,
core product and process technologies which enable the packaging materials to
have many distinctive features and advantages, including:





●
            Aseptic
      packaging materials keep the liquid foods and beverages safe, fresh, and
      flavorful.




●
            Cartons
      ensure the packaged contents are free of harmful bacteria and
      microorganisms.




●
            Multi-layered
      materials are moisture-, air- and light-proof, allowing the packaged
      contents to retain their original nutrition, taste, texture and
      color.




●
            Aseptic
      packaged materials allow liquid foods and beverages to be stored for a
      long period of time without refrigeration and
    preservatives.




●
            Special
      printing process makes the carton package printing attractive and
      eye-catching.




●
            Durable
      packaging materials are suitable for long distance shipping and
      handling.





●
            A
      variety of shapes, forms and volume specifications to suit the various
      packaging needs.




●
            Packaging
      materials of used and discarded cartons are renewable and
      recyclable.








10







Manufacturing





Our
manufacturing and operations facility is 18,000 square meters with a current
annual production output of up to two billion aseptic liquid food and beverage
cartons. Our production facility is equipped with both imported and
self-developed equipment and machines, including printing production lines,
coating/forming processing lines, and other cutting and processing
equipment.





We have
established a stringent quality assurance system that is in conformance with
ISO9001:2000, Aseptic Liquid Food Packaging Standards, and Food Safety and
Management Requirements. We have obtained the certificates of ISO9001-2000,
HACCP Food Safety and Management System as well as Advanced Technology and
Product Enterprise.





We
believe that our current production wastage ratio is one of the lowest in the
industry. We are striving to minimize the wastage by enhancing online testing
procedures, employee training as well as improving equipment and fixture
efficiency.




Suppliers





Raw
materials and supplies are generally procured from domestic suppliers, including
paper materials, polyethylene materials, aluminum materials, and other
materials. We rely on a single or limited number of suppliers for such raw
materials, parts, components and other items. Although there are many suppliers
for each of these raw materials, parts, components and other items, we are
dependent on a limited number of suppliers for many of the significant raw
materials and components. We do not have any long-term or exclusive purchase
commitments with any of our suppliers.





Sales,
Customers and Marketing





We sell
and distribute our aseptic liquid food and beverage cartons directly to our
customers who are manufacturers and suppliers of packaged milk, fruit juices,
soy milk, yogurt drinks, iced tea, coffee, sauces and other liquid foods and
beverages throughout China.





We are
developing and expanding our customer base via distributors in selective Asian
and the Middle Eastern countries to target manufacturers and suppliers of
packaged milk, fruit juices, iced tea and other non-carbonated
drinks.





We
conduct our marketing activities to further penetrate the China market and to
enter selective Asian and Middle Eastern markets, including: attending industry
trade shows, advertising in industry publications, using internet marketing,
collaborating with the government as well as increasing brand and brand
awareness.





Competition





China
Market





The
aseptic liquid food and beverage carton market in China is dominated by Tetra
Pack, followed by SIG, both multi-national suppliers with a combined 90% of the
market share. Tetra Pack provides packaging materials, packaging machines and
processing solutions for the food and beverage industries. Worldwide, it is the
dominant market leader in
these industries. SIG is a Swiss public company that provides food and beverage
carton and plastic bottle packaging materials and filling machines. In 2006 it
had an estimated worldwide sales of 1.3 billion Euros. Domestic suppliers
currently have an estimated 10% of the China aseptic carton market and have been
gaining market shares from Tetra Pack and SIG. These gains have been primarily
due to their lower offering price with comparable products. While domestic
suppliers have penetrated the non-carbonated soft drink carton market, the
higher growth milk carton market continues to be dominated by Tetra Pack and
SIG.






11





We
believe we currently lead the domestic suppliers with an annual production
output of two billion packages. We plan to expand our production capacity and
increase our market penetration with a bundle of sales of aseptic cartons and
liquid filling machines to our existing and new customers.




Asian
and Middle Eastern Markets





Tetra
Pack dominates the aseptic carton packaging materials and filling machines as
well as the liquid food and beverage processing markets in most of the Asian and
Middle Eastern countries. Since 2004, SIG has established manufacturing plants
in Thailand, Vietnam and Saudi Arabia and has taken market shares from Tetra
Pack in these regional markets.





With the
exception of China, where alternative domestic suppliers exist, Tetra Pack and
SIG are not challenged by other suppliers in most Asian and Middle Eastern
markets. China based suppliers however, like us, are beginning to enter these
markets. Collectively, we are expected to capture a portion of the market share
over the course of the next few years.





Our
Competitive Strengths





Leveraging
our competitive strengths, we believe that we have established ourselves as a
leader among domestic suppliers in China and are in a strong position to
challenge the dominant market positions held by other suppliers. We are
aggressively penetrating the aseptic carton market and expect to take
significant market shares within next few years. Our competitive strengths
include:





Expedited development and
time-to-market capability.





We have
demonstrated our ability to timely develop and bring to market a line of aseptic
carton products within an eighteen 18 month time frame. We will continue
capitalizing on this capability for our newly developed products.





Substantially lower manufacturing
system cost.





We have
developed a complete manufacturing system for the production of aseptic cartons
at a cost that we believe to be significantly lower than the industry’s average.
We believe that this significant cost saving makes our products the most
price-competitive in the market.





Significantly reduced direct cost
and lower price.




We have
developed proprietary product and process technologies that allow for minimal
production wastage and we believe one of the lowest direct costs in the
industry, collectively giving us a critical competitive edge and thus allowing
us to offer attractive prices to customers.





12


High product quality and proven
market acceptance.





Our
aseptic carton products are proven to be comparable to those of Tetra Pak and
SIG and are well-received by our customers.





Experienced and cohesive management
team for rapid growth.




Most key
executives have been with us and working together for over 20 years. This
experienced and cohesive management team is committed and ready to rapidly grow
our business.





Intellectual
Property





We
develop our own proprietary product and process technologies for the aseptic
carton packaging materials. We have filed a total of 22 patents on material
structure, production equipment fixtures, testing equipment and have been
granted seven patents with another 15 pending. Our seven issued
patents expire between April and November 2015.





We have
submitted two registered trademark applications, one of which has been accepted
by the State Administration for Industry and Commerce of China. We are in the
process of submitting another registered trademark application.





Government
Regulation





The PRC
government regulates the printing and packaging industry. This section
summarizes the principal PRC regulations relating to our
businesses:





We
operate our business in China under a legal regime consisting of the State
Council, which is the highest authority of the executive branch of the PRC
central government, and several ministries and agencies under our authority,
including the General Administration of Press and Publication, or GAPP, the
State General Administration of the Quality Supervision, Inspection and
Quarantine (“AQSIQ”), the State Administration for Industry and Commerce
(“SAIC”), and their respective authorized local counterparts.




Regulations
on Printing and Manufacturing of Food and Beverage Packaging
Products





The
principal regulations governing printing and manufacturing of food and beverage
packaging products in China consist of the Regulations on the Administration of
Printing Industry, the Interim Rules on Establishment of the Foreign Invested
Printing Companies, the General Specification on the Manufacturing License of
Food Packaging Products, Vessel, Tools and Other Products. Below is a summary of
relevant provisions of these regulations.





Regulations
on the Administration of Printing Industry





On August
2, 2001, the State Council enacted the Regulations on the Administration of
Printing Industry, or Printing Regulations. Such Printing Regulations set forth
detailed requirements on the qualification and operations of the operators of
printing industry. Under the Printing Regulations, the operators of printing
industry shall obtain
the operating license, such as the “License for Printing Operations”. Our
subsidiary, Qingdao Renmin, has been granted a License for Printing Operations
issued by the Shandong Provincial Bureau of Press and Publication that allows
Qingdao Renmin to operate the printing business. Qingdao Renmin has also
obtained a License for Special Industry issued by the Qingdao Municipal Bureau
of Public Security on August 9, 2001. However, such License for Special Industry
has not been required for the printing industry since the promulgation of the
Decision of the State Council on the Enactment of Administrative Licensing for
the Expressly Reserved Items Subject to Administrative Examination and Approval
Rules on June 29, 2004.






13






General
Specification on the Manufacturing License of Food Packaging, Vessel, Tools and
Other Products





Pursuant
to the General Specification on the Manufacturing License of Food Packaging,
Vessel, Tools and Other Products, or General Specification, promulgated by AQSIQ
on July 18, 2006 and came into enforcement on the same day, the food and
beverage packaging products must meet certain quality standards and the
operators of the food packaging shall obtain a Manufacturing License from the
AQSIQ. Such General Specification sets forth the detailed examination and
approval procedures for applying the Manufacturing License, which include five
steps to obtain the license: (i) preliminary examination at the local
counterpart of AQSIQ, (ii) testing manufacturing, (iii) on-the-spot
verification, (iv) examination of sample product and (v) the final approval and
issuance of the license. We have obtained the Manufacturing License issued by
AQSIQ in April 2007.





Regulations
on Foreign Invested Printing Companies





Foreign
invested printing companies are specifically governed by the Interim Rules on
Establishment of the Foreign Invested Printing Companies, jointly promulgated by
the GAPP and the Ministry of Commerce of China, or MOFCOM, in 2002 in accordance
with the Law on Sino-Foreign Equity Joint Venture (2001), the Law on
Sino-Foreign Contractual Joint Venture (2000), the Law on Wholly Foreign-Funded
Enterprises (2000) and the Regulations on the Administration of Printing
Industry.





The
Interim Rules on Establishment of the Foreign Invested Printing Companies allow
and encourage the establishment of the sino-foreign equity joint ventures and
wholly foreign-funded enterprises engaged in the printing business of packaging
products. Furthermore, such sino-foreign equity joint ventures and wholly
foreign-funded enterprises shall also obtain the License for Printing Operations
to operating the printing business in China, in accordance with the Regulations
on the Administration of Printing Industry and other applicable laws and
regulations.





We have
applied and updated the License for Printing Operations for Qingdao Renmin since
its 88.23% equity interests have been acquired by Grand International and
subsequently transformed into the sino-foreign equity joint
ventures.





Research
and Development





Development
focus.





Our
research and development effort focuses on developing proprietary technology in
aseptic packaging materials and liquid filling machines to meet the growing
market demand. Our research and development expenditures were approximately
US$1.30 million and US$1.28 million for the fiscal years ended June 30, 2008 and
2007, respectively.




Research
team.





We have
an experienced and multi-disciplined research and development team of engineers
and technicians with a proven track record working with aseptic packaging
materials and machinery.





14




Laboratory
equipment.





Our
research and development center has 6 laboratories and is built with
state-of-the-art laboratory equipment for experiments on, but not limited to,
packaging printing, plastic materials, aluminum materials, compound material
strength, microorganism assessments and trial filling processing.





Projects and
partnerships.





We
currently have 22 research and development projects ongoing, 4 of which are
classified as “Focused Innovative Technology Development Projects” by Qingdao
City. We have formed numerous strategic research and development partnerships
with educational institutions, research institutions, material suppliers,
machinery builders and liquid food and beverage manufacturers.




Product
Pipeline.





We have a
continuous pipeline for (i) new products for aseptic liquid food and beverage
carton packaging materials, (ii) current product extension and (iii) new
product. In our efforts to develop our own line of liquid food and beverage
filling machines, we launched a prototype of our liquid filling machine in the
fourth quarter of 2008 and are hoping that after consumer testing, we can have a
market launch date by the second quarter of 2009.





Employees





As of
June 30, 2008, we had 316 employees, consisting of 186 in manufacturing and
operation, 37 in research and development, 20 in sales and marketing
and 73 in general and administrative. All of our employees are full-time
employees.





None of
our personnel are represented under collective bargaining agreements. We
consider our relations with our employees to be good.





Description
of Property




All land
in China is owned by the State. Individuals and companies are permitted to
acquire rights to use land or land use rights for specific purposes. In the case
of land used for industrial purposes, the land use rights are granted for a
period of 50 years. This period may be renewed at the expiration of the initial
and any subsequent terms. Granted land use rights are transferable and may be
used as security for borrowings and other obligations. Qingdao Renmin currently
owns land use rights to approximately 277,480 square meters of land consisting
of manufacturing facilities, employee
quarters and office buildings in Qingdao, China. Qingdao Renmin holds four
State-owned Land Use Rights and the Building Ownership Certificates for the land
use rights and buildings owned by it. On the State-owned Land Use Rights and the
Building Ownership Certificate (No.: Qing Fang Di Quan 3738), State-owned Land
Use Rights and Building Ownership Certificate (No.: Qing Fang Di Quan 14621) and
State-owned Land Use Rights and Building Ownership Certificate (No.: Qing Fang
Di Quan 45171), there is a note stating that because the information of the land
is incomplete, the land use right registration is pending. On the State-owned
Land Use Rights and Building Ownership Certificate (No.: Qing Fang Di Quan
19508), the type of the land use right is shown as allocated, meaning that no
consideration needed to be paid for the land use right.




We intend
to expand our manufacturing facility over the next few years but believe that we
currently have enough land to satisfy such expansion.





15


HOW
YOU CAN FIND ADDITIONAL INFORMATION





We are a
reporting company and file annual, quarterly and current reports, proxy
statements and other information with the SEC.  For further
information with respect to the Company, you may read and copy its reports,
proxy statements and other information, at the SEC public reference rooms at 100
F.  Street, N.E., Washington, D.C. 20549.  You can request
copies of these documents by writing to the SEC and paying a fee for the copying
cost.  Please call the SEC at 1-800-SEC-0330 for more information
about the operation of the public reference rooms.  The Company’s SEC
filings are also available at the SEC’s web site at
http://www.sec.gov.





You may
also send a request for a paper copy to our outside securities counsel: Leser,
Hunter, Taubman & Taubman, c/o Jpak Group, Inc. 17 State Street, Suite 2000,
New York, NY 10004.





ITEM
1A.                      RISK
FACTORS





An
investment in our common stock is speculative and involves a high degree of
risk. You should carefully consider the risks described below and the other
information in this prospectus before purchasing any shares of our common stock.
The risks and uncertainties described below are not the only ones facing us.
Additional risks and uncertainties may also adversely impair our business
operations. If any of the events described in the risk factors below actually
occur, our business, financial condition or results of operations could suffer
significantly. In such case, the value of your investment could decline and you
may lose all or part of the money you paid to buy our common stock.





Risks
Related To Our Business.





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





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





16


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




●
            the
      continued acceptance of our products and services by the packaging
      industries;




●
            our
      ability to successfully and rapidly expand sales to potential customers in
      response to potentially increasing
demand;




●
            the
      costs associated with such growth, which are difficult to quantify, but
      could be significant;




●
            rapid
      technological change; and




●
            the
      highly competitive nature of the packaging
  industries.





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





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










17





Our existing
indebtedness may adversely affect our ability to obtain additional funds and may
increase our vulnerability to economic or
business downturns.Our indebtedness
aggregated approximately US$12.6 million as of June 30, 2008. As a result, we
are subject to the risks associated with significant indebtedness,
including:




●
            we
      must dedicate a portion of our cash flows from operations to pay debt
      service costs and, as a result, we have less funds available for
      operations and other purposes;




●
            it
      may be more difficult and expensive to obtain additional funds through
      financings, if available at all;




●
            we
      are more vulnerable to economic downturns and fluctuations in interest
      rates, less able to withstand competitive pressures and less flexible in
      reacting to changes in our industry and general economic conditions;
      and





●
            if
      we default under any of our existing credit facilities or if our creditors
      demand payment of a portion or all of our indebtedness, we may not have
      sufficient funds to make such
payments.




We may be exposed
to risks relating to our disclosure controls and our internal controls and may
need to incur significant costs
to comply with applicable requirements. Based on the
evaluation done by our management at June 30, 2008, our disclosure controls were
deemed deficient, in that we could not assure that information required to be
disclosed in our SEC reports is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission’s rules and forms, and communicated to our management, so as to allow
timely decisions regarding required disclosures.  Initially, due to
staffing and resource constraints, a material weakness became evident to
management in its December 2007 evaluation regarding our inability to
simultaneously close the books on a timely basis each month and quarter and to
generate all the necessary disclosure for inclusion in our SEC filings. This
material weakness caused us to be late in the filing of our Quarterly
Report on Form 10-Q for the quarter ended December 31, 2007. In our
quarterly report for the quarter ending September 30, 2007, we did not have
sufficient resources to discover and correctly account for the impact of the
issuance of certain warrants on our financial statements.  In
addition, this lack of staffing and resources led to a misstatement in our
financial statements.





Based on
the evaluation done by our management as of June 30, 2008, our internal controls
were deemed deficient, in that we did not accurately account for the Share
Exchange and related transactions so as to avoid a material misstatement in our
financial statements that would not be prevented or detected in a timely
manner.  Due to SEC comments we received concerning our registration
statement on Form S-1, we conducted further research about how to account for
the share exchange and related activities and only then did management recognize
the material weakness. This material weakness caused an error in our financial
statements regarding how we accounted for the share exchange and the placement
agent warrants issued in the financing that closed simultaneously with the
share exchange.  These mistakes flowed through to our financial
statements for the quarters ending September 30, 2007 and December 31,
2007.  On May 4, 2008,
the Board of Directors concluded that we were required to restate our previously
issued audited financial statements for the year ended June 30, 2007 and the
periods ended September 30, 2007 and December 31, 2007.  Restated
financial statements for the year ending June 30, 2007 were included in an
amendment to our Registration Statement on Form S-1; restated financials for the
quarter ending September 30, 2007 and December 31, 2007 were included in
amendments to such reports that we filed on August 5, 2008.  After
such filing, we received additional SEC comments and determined that the
financial statements for the quarter ending December 31, 2007 must be restated
again and that the financial statements for the quarter ending March 31, 2008
must be restated; we filed restated financials for the quarter ending December
31, 2007 and March 31, 2008 in an amendment to our quarterly report on Form 10-Q
for each such quarter on September 29, 2008.Those
revisions however, impacted the financial statements for the quarter ended
September 31, 2007 and as a result, we filed, on September 29, 2008, an
amendment to that quarterly report to conform, and make consistent the
disclosure contained therein with our other filings.  This latest
restatement was needed to properly account for the extension of the term of the
Series A and Series B Warrants, as well as the compensation issued pursuant to
the exercise of the Series J Warrants.






18






We are
seeking to recruit experienced professionals to augment and upgrade our
financial staff to address issues of timeliness and completeness in financial
reporting when we are preparing SEC filings.  No assurances can be
given that we will be able to adequately remediate existing deficiencies in
disclosure controls and not have deficiencies when we report on internal
controls.  Although we believe that these corrective steps – restating
our financial statements and hiring a new Acting CFO (see Managementsection below) –
will enable management to conclude that our disclosure controls are effective
and these measures will remediate the material weaknesses discussed above when
all of the additional financial staff positions are filled, we cannot assure you
that this will be sufficient. We may be required to expend additional resources
to identify, assess and correct any additional weaknesses in disclosure or
internal control and to otherwise comply with the internal controls rules under
Section 404 of the Sarbanes-Oxley Act which will be newly applicable to us for
the fist time at the end of this fiscal year.




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




●
            acceleration
      of the payment of our outstanding
indebtedness;




●
            cross
      defaults to and acceleration of the payment under other financing
      arrangements;




●
            our
      inability to borrow additional amounts under our existing financing
      arrangements; and




●
            our
      inability to secure financing on favorable terms or at all from
      alternative sources.





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





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





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







19




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





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





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





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












20






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




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





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





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




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




21


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




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





Risks
Related To Doing Business in China




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





●
            level
      of government involvement in the
economy;




●
            control
      of foreign exchange;




●
            methods
      of allocating resources;




●
            balance
      of payments position;




●
            international
      trade restrictions; and




●
            international
      conflict.









22





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







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





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





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





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





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






23






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





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




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


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





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






24





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




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




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




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





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




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




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






25






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




According
to Notice 75:




●
            prior
      to establishing or assuming control of an offshore company for the purpose
      of obtaining overseas equity financing with assets or equity interests in
      an onshore enterprise in the PRC, each PRC resident, whether a natural or
      legal person, must complete the overseas investment foreign exchange
      registration procedures with the relevant local SAFE
    branch;




●
            an
      amendment to the registration with the local SAFE branch is required to be
      filed by any PRC resident that directly or indirectly holds interests in
      that offshore company upon either (1) the injection of equity interests or
      assets of an onshore enterprise to the offshore company, or (2) the
      completion of any overseas fund raising by such offshore company;
      and




●
            an
      amendment to the registration with the local SAFE branch is also required
      to be filed by such PRC resident when there is any material change in the
      capital of the offshore company that does not involve any return
      investment, such as (1) an increase or decrease in its capital, (2) a
      transfer or swap of shares, (3) a merger or division, (4) a long term
      equity or debt investment, or (5) the creation of any security
      interests.





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




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




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






26






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





Risks
Relating to Our Securities





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




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





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





27





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




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





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





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





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





Because
of these regulations, broker-dealers may not wish to engage in the
above-referenced necessary paperwork and disclosures and/or may encounter
difficulties in their attempt to sell shares of our common stock, which may
affect the ability of selling stockholders or other holders to sell their shares
in any secondary market and have the effect of reducing the level of trading
activity in any secondary market. These additional sales practice and disclosure
requirements could impede the sale of our securities, if and when our securities
become publicly traded. In addition, the liquidity for our securities may
decrease, with a corresponding decrease in the price of our securities. Our
shares, in all probability, will be subject to such penny stock rules for the
foreseeable future and our shareholders will, in all likelihood, find it
difficult to sell their securities.




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












28





Patterns
of fraud and abuse include:





●
            Control
      of the market for the security by one or a few broker-dealers that are
      often related to the promoter or
issuer;




●
            Manipulation
      of prices through prearranged matching of purchases and sales and false
      and misleading press releases;




●
            “Boiler
      room" practices involving high pressure sales tactics and unrealistic
      price projections by inexperienced sales
  persons;




●
            Excessive
      and undisclosed bid-ask differentials and markups by selling
      broker-dealers; and




●
            Wholesale
      dumping of the same securities by promoters and broker-dealers after
      prices have been manipulated to a desired level, along with the inevitable
      collapse of those prices with consequent investor
  losses.





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





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





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





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




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








29






Future sales of
our common stock may depress our stock price. Sales of a substantial
number of shares of our common stock in the public market could cause a decrease
in the market price of our common stock. As of October 30, 2008, we had
approximately 44,355,461 shares of common stock outstanding (assuming conversion
of our outstanding Series A and Series B preferred stock). We also
have warrants to purchase approximately 21,073,334 shares of our common stock
outstanding. We may also issue additional shares of stock and securities
convertible into or exercisable for stock in connection with our business. In
addition, we have agreed to file a registration statement covering the sale of
the shares of our common stock underlying the securities issued in the recent
financing transaction, which shares will be freely tradable following the
effective date of such registration statement. Certain of our shareholders
holding an aggregate of 23,005,000 shares of our common stock (including shares
held in escrow as described herein) have agreed that, for a period of six months
following the effectiveness of the registration statement for which this
prospectus forms a part, they will not, subject to certain limited exceptions
set forth in the Lock-Up Agreement (defined herein), including consent by the
investors, offer, sell, contract to sell, assign, transfer, hypothecate, pledge
or grant a security interest in or other dispose of any shares of common Stock.
In addition, for a period of 12 months following such six month period, no such
shareholder shall sell more than one-twelfth of their total shares of common
stock during any one month period. If a significant portion of our shares of
common stock were sold in the public market, the market value of our common
stock could be adversely affected.





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








ITEM
1B.                      UNRESOLVED
STAFF COMMENTS





Although
we are not an accelerated or large accelerated filer, we are voluntarily
disclosing that we received comments from the SEC regarding our Registration
Statement on Form S-1.  We filed our response to such comments, along
with an amendment to our S-1 on August 5, 2008, but received additional comments
thereafter.  We are now filing a response and related amended filings
pursuant to the SEC’s latest comments.   The SEC’s most important
comment relate to how we value and account for the warrants issued pursuant to
our 2007 private financing.


30


ITEM
2.                      DESCRIPTION
OF PROPERTY





Our
corporate executive offices are located at 15 Xinghua Road, Qingdao, Shandong
Province, 266401, People’s Republic of China.





All land
in China is owned by the State. Individuals and companies are permitted to
acquire rights to use land or land use rights for specific purposes. In the case
of land used for industrial purposes, the land use rights are granted for a
period of 50 years. This period may be renewed at the expiration of the initial
and any subsequent terms. Granted land use rights are transferable and may be
used as security for borrowings and other obligations. Qingdao Renmin
currently owns land use rights to approximately 277,480 square meters of land
consisting of manufacturing facilities, employee quarters and office buildings
in Qingdao, China. Qingdao Renmin holds four State-owned Land Use Rights and the
Building Ownership Certificates for the land use rights and buildings owned by
it. On the State-owned Land Use Rights and the Building Ownership Certificate
(No.: Qing Fang Di Quan 3738), State-owned Land Use Rights and Building
Ownership Certificate (No.: Qing Fang Di Quan 14621) and State-owned Land Use
Rights and Building Ownership Certificate (No.: Qing Fang Di Quan 45171), there
is a note stating that because the information of the land is incomplete, the
land use right registration is pending. On the State-owned Land Use Rights and
Building Ownership Certificate (No.: Qing Fang Di Quan 19508), the type of the
land use right is shown as allocated, meaning that no consideration needed to be
paid for the land use right.




We intend
to expand our manufacturing facility over the next few years but believe that we
currently have enough land to satisfy such expansion.







ITEM
3.                      LEGAL
PROCEEDINGS





From time
to time, we may be involved in litigation relating to claims arising out of our
operations in the normal course of business. We are not aware of any pending or
threatened legal proceeding that, if determined in a manner adverse to us, could
have a material adverse effect on our business and operations.








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





There
were no matters submitted to a vote of securities holders during the fourth
quarter of our fiscal year ended June 30, 2008.







PART
II





ITEM
      5.
            MARKET
      FOR COMMON EQUITY AND RELATED STOCKHOLDER
  MATTERS





Our
common stock commenced trading on the Over-The-Counter Bulletin Board on August
15, 2007 and trades under the symbol “JPAK.OB.”





The OTC
Bulletin Board is an unorganized, inter-dealer, over-the-counter market that
provides significantly less liquidity than NASDAQ, and quotes for stocks
included on the OTC Bulletin Board are not listed in the financial sections of
newspapers, as are those for the NASDAQ Stock Market.








31




Transactions
in our common stock have been sporadic and do not constitute an active market.
Prior to the Share Exchange our shares of common stock did not trade
publicly.




The
following table sets forth the quarterly high and low bid prices for the common
stock since the quarter ended September 30, 2007, the first quarter during which
our common stock was listed on an exchange.  The prices set forth
below represent inter-dealer quotations, without retail markup, markdown or
commission and may not be reflective of actual transactions.





High
            
            
            LowQuarter
      ended September 30, 2007
            
            $
            1.40
            
            
            $
            0.65Quarter
      ended December 31, 2007
            
            $
            1.65
            
            
            $
            1.11Quarter
      ended March 31, 2008
            
            $
            1.80
            
            
            $
            1.30Quarter
      ended June 30, 2008
            
            $
            1.56
            
            
            $
            0.95


At
October 30, 2008, the closing bid price of the common stock was $0.13 and we had
approximately 29 record holders of our common stock, 3 record holders of our
Series A Preferred Stock and 3 record holders of our Series B Preferred Stock.
This number excludes
any estimate by us of the number of beneficial owners of shares held in street
name, the accuracy of which cannot be guaranteed.





There are
Series A warrants to purchase 5,500,000 shares common stock at $0.60 per
share and Series B warrants to purchase 5,500,000 shares at $0.70 per
share; these warrants were issued to investors on August 9, 2007 and expire in
2013. There are also warrants to purchase 990,000 shares of common stock at
$0.50 per share, which were issued to the placement agent in the Financing. The
placement agent warrants will expire in 2013.




There are
Series C Warrants to purchase an aggregate of 4,166,667 shares of our common
stock at an exercise price of US$0.72 per share and Series D Warrants to
purchase an aggregate of 4,166,667 shares of our common stock (subject to
adjustment) at an exercise price of US$0.84 per share. The Series C Warrants and
Series D Warrants were issued to investors on December 28, 2007 and expire in
2013. There are also warrants to purchase 750,000 shares of common stock at
$0.60 per share, which were issued to the placement agent in the exercise of the
Series J Warrants. The placement agent warrants will expire in
2013.




Effective
August 11, 1993, the SEC adopted Rule 15g-9, which established the definition of
a "penny stock," for purposes relevant to the Company, as any equity security
that has a market price of less than $5.00 per share or with an exercise price
of less than $5.00 per share, subject to certain exceptions. For any transaction
involving a penny stock, unless exempt, the rules require: (i) that a broker or
dealer approve a person's account for transactions in penny stocks; and (ii)
that the broker or dealer receive from the investor a written agreement to the
transaction, setting forth the identity and quantity of the penny stock to be
purchased. In order to approve a person's account for transactions in penny
stocks, the broker or dealer must (i) obtain financial information and
investment experience and objectives of the person; and (ii) make a reasonable
determination that the transactions in penny stocks are suitable for that person
and that person has sufficient knowledge and experience in financial matters to
be capable of evaluating the risks of transactions in penny stocks. The broker
or dealer must also deliver, prior to any transaction in a penny stock, a
disclosure schedule prepared by the Commission relating to the penny stock
market, which, in highlight form, (i) sets forth the basis on which the broker
or dealer made the suitability determination; and (ii) states that the broker or
dealer received a signed, written agreement from the investor prior to the
transaction. Disclosure also has to be made about the risks of investing in
penny stock in both public offerings and in secondary trading, and about
commissions payable to both the broker-dealer and the registered representative,
current quotations for the securities and the rights and remedies available
to an investor in cases of fraud in penny stock transactions. Finally, monthly
statements have to be sent disclosing recent price information for the penny
stock held in the account and information on the limited market in penny
stocks.









32





Dividend
Policy





We have
never declared or paid dividends on our common stock. We intend to retain
earnings, if any, to support the development of our business and therefore do
not anticipate paying cash dividends for the foreseeable future. Payment of
future dividends, if any, will be at the discretion of our board of directors
after taking into account various factors, including current financial
condition, operating results and current and anticipated cash
needs.




Description
of Equity Compensation Plans





We do not
have any equity compensation plans. Our Board of Directors may adopt one or more
equity compensation plans in the future.




Recent
Sales of Unregistered Securities




During
the past three years, we effected the following transactions in reliance upon
exemptions from registration under the Securities Act as amended. Unless stated
otherwise; (i) that each of the persons who received these unregistered
securities had knowledge and experience in financial and business matters which
allowed them to evaluate the merits and risk of the receipt of these securities,
and that they were knowledgeable about our operations and financial condition;
(ii) no underwriter participated in, nor did we pay any commissions or fees to
any underwriter in connection with the transactions; (iii) the transactions did
not involve a public offerings; and (iv) each certificate issued for these
unregistered securities contained a legend stating that the securities have not
been registered under the Act and setting forth the restrictions on the
transferability and the sale of the securities.





On August
9, 2007, we issued 23,005,000 shares of common stock in exchange for all of the
issued and outstanding shares of Jpak Group Co., Ltd, (“Jpak”).





On August
9, 2007, we became a party to that certain Note Purchase Agreement (the “NPA”)
by and among Jpak, Grand International Industrial Limited and the investors
named therein (collectively, the “Investors”). The NPA was originally entered
into in May 2007 pursuant to which Jpak issued Convertible Promissory Notes (the
“Financing”) in the aggregate principal amount of US$5.5 million to the
Investors (the “Notes”). As a result of the Share Exchange, under the terms of
the NPA and the Notes, the Notes automatically converted into (i) 5,608,564
shares of our Series A Convertible Preferred Stock, par value $.001 per share
(the “Preferred Stock”), which shares are convertible into an aggregate of
11,217,128 shares of common stock, (ii) Series A Warrants to purchase an
aggregate of 5,500,000 shares of common stock (subject to adjustment) at an
exercise price of US$.60 per share until August 2011 which were amended on
December 28, 2007 to extend the term to August 2013 (the “Series A Warrants”),
(iii) Series B Warrants to purchase an aggregate of 5,500,000 shares of
common stock (subject to adjustment) at an exercise price of US$.70 per share
until August 2011 which were amended on December 28, 2007 to extend the term to
August 2013 (the “Series B Warrants”) and (iv) Series J Warrants to purchase (a)
an aggregate of 5,000,000 shares of Series B Preferred Stock, which preferred
stock shall contain the same terms as the Series A Preferred Stock (other than
conversion price), which shares will be convertible into 8,333,333 shares
of our common stock, (b) Series C Warrants to purchase an aggregate of 4,166,667
shares of common stock (subject to adjustment) at an exercise price of US$.72
per share (the “Series C Warrants”) and (c) Series D Warrants to purchase an
aggregate of 4,166,667 shares of common stock (subject to adjustment) at an
exercise price of US$.84 per share (the “Series D Warrants”. The Series J
Warrants shall be exercisable at an exercise price of US$1.00 per warrant and
shall only be exercisable until 90 days following the effective date of the
registration statement.






33





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





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





None of
the above transactions involved a public offering, and we believe that each
transaction was exempt from the registration requirements of the Securities Act
by virtue of Section 4(2) of the Securities Act and Rule 506 of Regulation D as
promulgated by the SEC.





In April
2008, we engaged TriPoint Capital Advisors, LLC to provide us with business
development and U.S. corporate compliance services. The initial term of the
agreement is one year.  Pursuant to the agreement, TriPoint shall receive
300,000 shares of our restricted common stock – all of which was issued on July
14, 2008, with 175,000 vesting immediately and the remainder to vest in equal
installments of 75,000 every 90 days thereafter - in consideration for their
services. The shares were valued at $0.30 per share, the closing bid price for
shares of our common stock on the date of issuance. The shares were issued in
accordance with the exemption from the registration provisions of the Securities
Act of 1933, as amended, provided by Section 4(2) of such Act for issuances not
involving any public offering.





ITEM
6.                  
SELECTED FINANCIAL DATA





Not
applicable.





ITEM
      7.
            MANAGEMENT’S
      DISCUSSION AND ANALYSIS OR PLAN OF
OPERATIONS





FORWARD-LOOKING
INFORMATION





This
report contains forward-looking statements regarding our plans, expectations,
estimates and beliefs.  Actual results could differ materially from
those discussed in, or implied by, these forward-looking
statements.  Forward-looking statements are identified by words such
as “believe,” “anticipate,” “expect,” “intend,” “plan,” “will,” “may,” and other
similar expressions.  In addition, any statements that refer to
expectations, projections or other characterizations of future events or
circumstances are forward-looking statements.  We have based these
forward-looking statements largely on our
expectations.  Forward-looking statements are subject to risks and
uncertainties, certain of which are beyond our control.  Actual
results could differ materially from those anticipated as a result of the
factors described in the “Risk Factors” and detailed in our other Securities and
Exchange Commission filings.





Because
of these risks and uncertainties, the forward-looking events and circumstances
discussed in this report or incorporated by reference might not
transpire.  Factors that cause actual results or conditions to differ
from those anticipated by these and other forward-looking statements include
those more fully described in the “Risk Factors” section and elsewhere in this
report.


34





We did
not conduct any operations during periods up through the date of the Share
Exchange. However, we have included elsewhere in this filing the historical
consolidated financial statements of Jpak and its subsidiaries, which we own as
a result of the Share Exchange. The following discussion contains
forward-looking statements and involves numerous risks and uncertainties,
including, but not limited to, those described in the "Risk Factors" section of
this filing. 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 year ended June 30,
2008.




The
following discussion should be read in conjunction with our financial statements
and the notes thereto which appear elsewhere in this report.  The
results shown herein are not necessarily indicative of the results to be
expected in any future periods.  This discussion contains
forward-looking statements based on current expectations, which involve
uncertainties.  Actual results and the timing of events could differ
materially from the forward-looking statements as a result of a number of
factors.  Readers should also carefully review factors set forth in
other reports or documents that we file from time to time with the Securities
and Exchange Commission.










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
the largest and leading domestic supplier of aseptic liquid food and beverage
cartons in China. Our business is primarily in China, but we have recently begun
contract manufacturing products for export to several other
countries.





Company
History





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 was incorporated in the Cayman Islands as Winner Dragon Limited.
Winner Dragon Limited and was renamed Jpak Group Co., Ltd. on September 18,
2006. Additionally, during September 2006, Jpak completed the acquisition of
88.23% of the equity interest in Qingdao Renmin through Grand International, the
100% owned subsidiary of Jpak. Currently, substantially, all of our operations
are conducted in China through Qingdao Renmin.




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.









35





The
Share Exchange and the Financing





On August
9, 2007, we completed the Share Exchange, pursuant to which all the shares of
Jpak were transferred to us and Jpak became a wholly-owned subsidiary of ours,
and at the same time the shareholders of Jpak were issued 23,005,000 shares of
our common stock. The Share Exchange has been accounted for as a reverse
acquisition under the purchase method of accounting for business combinations in
accordance with generally accepted accounting principles in the United States of
America, or “U.S. GAAP.” Reported results of operations of the combined group
issued after completion of the transaction will reflect Jpak’s
operations.





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





On August
9, 2007, we also entered into a Registration Rights Agreement (“RRA”) with the
Investors. Under the Investor RRA, we were required to prepare and file a
registration statement for the sale of the Registrable Securities: Common Stock
issuable to the Investors under the Series A and Series B Preferred Stock
and the Warrants and to use our best efforts to cause, and to maintain, the
effectiveness of the registration statement. We filed an initial registration
statement to fulfill our obligations under the RRA on November 9, 2007. We are
subject to certain monetary obligations if the registration statement is not
declared effective by the SEC by March 31, 2008; the last pre-effective
amendment was filed on September 29, 2008. The obligations are payments in an
amount equal to
2% of the aggregate amount invested by such Investor (based upon the number of
Registrable Securities then owned by such Investor) for each 30 day period or
any portion thereof following the date by which such Registration Statement
should have been effective, up to a maximum amount of 10%. As per the terms of
the RRA, since we received a comment from the SEC regarding Rule 415 of the
Securities Act of 1933, as amended, the effectiveness deadline was further
extended. We do not have any monetary obligations for any securities that were
not permitted to be included in a registration statement because of the SEC’s
application of Rule 415 until such time as such securities are required to be
filed pursuant to the Investor RRA.  In such case, the liquidated
damages shall be calculated to only apply to the percentage of securities which
are permitted by the Commission to be included in the Registration
Statement.   Under the Investor RRA, the shareholders of Jpak
were granted piggyback registration rights for 15,805,000 shares of our common
stock.








36






In
addition to the Share Exchange, and the RRA, on August 9, 2007, we also entered
into a Securities Escrow Agreement with the Investors, the principal
stockholders named therein and the escrow agent named therein. Under the Escrow
Agreement, the Principal Stockholders agreed to place an aggregate of 7,200,000
shares of Common Stock into escrow for the benefit of the Investors in the event
the Company fails to achieve net income for the fiscal year ended June 30, 2008
of at least US$3.955 million.   Since we met
this performance threshold, all of the shares held in escrow were released back
to the Principal Stockholders.





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




In
connection with such exercise, the holders of the Series J Warrants agreed not
to exercise their demand registration rights with respect to the shares of our
common stock underlying the Series B Convertible Preferred Stock, the Series C
Warrants and the Series D Warrants during the period beginning on the date of
exercise of the Series J Warrants and ending on the ninetieth (90th) day
following the effective date of this prospectus.





In
connection with the exercise of the Series J Warrants, we extended the term of
our Series A Warrants and Series B Warrants from four years to six years, so
that such warrants shall now expire on August 9, 2013, and the deadline for
effectiveness of the related registration statement was extended to March 31,
2008.







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.  In addition, the recent milk scandal has brought significant
downward pressure on the industry.




Due to China’s new anti-monopoly laws,
some of our larger competitors decreased the amount of bundled products they
offer.  Although this may cause such competitors to lower their price
points, we believe it will allow us to be more competitive with
them.  Since the sale of bundled products still maintains a large
market share, we will continue to try and compete in the offering of bundled
materials and equipment.









37






Milk
scandal and its effects on Jpak






The Milk
      scandal




In
September 2008, the Chinese health ministry announced that several babies died
in recent months and thousands were sickened by contaminated milk formula
powder. The authorities confirmed that the tainted powder was laced with
melamine, an industrial chemical sometimes used to make plastics and fertilizer.
Adding the chemical to milk makes the formula test at higher concentrations of
protein.






The
tainted milk powder was traced to the Sanlu Group, one of China's biggest dairy
producers, which operates as a joint venture with a New Zealand-based dairy
conglomerate, Fonterra. Further investigation revealed that milk formula powder
produced by dozens of other dairy producers were also contaminated.






Management’s evaluation
      process




Management
is currently evaluating the probable or reasonably possible effects that the
milk scandal will have on our business and operations.  We closely
monitor the impacts of the scandal on the industry with particular attention to
the impact it has on our existing customers.  We conduct our analysis
both quantitatively and qualitatively.  The key indicators we use to
evaluate the industry include sales volume of milk products and production
facility utilization of the milk product producers.  Nevertheless,
China lacks authoritative quantitative data for the industry’s sales volume and
production facility, so we also conduct qualitative analysis.  The key
indicators we use for internal evaluation of our existing customers include
sales, inventory turnover, account receivable turnover and bad debt
expenses.  Furthermore, we also communicate directly with our
customers and collect their feedbacks.






Current status of
      evaluation




The
impact of the scandal is still evolving.  Recently we have seen many
small to medium size companies, including many of our customers, suspend their
production while large companies have low production facility
utilization.




As we are
a supplier to the milk product producers, the impact on us has a certain time
lag.  Our customers may delay or cancel their planned
orders.  We are closely monitoring the indicators of our sales,
inventory turnover, accounts receivable turnover and bad debt
expenses.  Nevertheless, the detailed financial impacts are yet to be
observed.








Possible
      effects of the scandal and results of our
  evaluation




The milk
scandal has brought the industry into a crisis as consumers’ confidence on the
milk products is significantly damaged.  In recent years, we have been
focusing strongly in the dairy packaged segment because it brings higher margins
than the fruit juice market. Between January and August 2008, the total volume
for beverage cartons was 900,000,000 packs, 360,000,000 of which were diary
related. 70% of our clients are dairy or related and account for approximately
45% of our sales.








38






Based on
the above evaluation, we anticipate that the milk scandal will have a
significant impact on our operations.  Financially it will reduce our
revenue and therefore impact our net income.  It may also increase the
amount of bad debt if we cannot collect our account receivables from our
existing clients.  We currently anticipate that the milk scandal may
affect our revenues by as much as 30% in the current year.






In
addition, the milk scandal has some direct impact on our customers. Thus far we
have only had a small test order from Sanlu and due to the scandal, have decided
to abort our initial efforts to develop our relationship with
them.  Two of our other customers, Taizinai has suspended its
production while Yinying has reduced its orders.






Actions being
      taken




Management
is taking every action necessary to minimize the impact.  In order to
address the issue of falling revenue, our sales department is dedicating itself
to developing the domestic and overseas market. In the three months ended
September 30, 2008 we have developed fourteen new domestic clients and begun
exploring the Bulgaria market, which amounted to 5% of the sales. In addition,
we are closely monitoring the account receivable balance client by
client.  We have also tightened our credit control by having hard caps
on our customers' credit limits.






Furthermore,
we have reduced our inventory level according to our estimated future orders and
tried to keep a lean production.  Internally we have paid more
attention to cost cutting by measures such as reducing the defective production
percentage.






Finally,
we have strengthened our R&D.  We have successfully developed
packaging which can be used in the SIG filling machines, which we believe will
bring additional revenue to the Company.







Strategy





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





·
            Increasing
      output to further penetrate the China market;


·
            Offering
      bundled packaging materials and liquid filling machines;


·
            Increasing
      sales to selective Asian and other
markets;


·
            Continuing
      and increasing the recent orders from Russia and other Eastern European
      markets;


39


·
            Establishing
      brand names and brand awareness;
and


·
            Enhance
      the Company’s competitive advantages through
  R&D.





Research
and Development





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.  We are progressing with related technology and techniques
and the filling machines are still in the development period. Management is
formalizing its strategies for the filling machines, but hopes for a market
launch date by the second quarter of fiscal 2009.





In addition, we successfully developed
packaging which can be used in the filling machines created by
SIG.  Management believes this new packaging will be able to increase
our revenue significantly.  The packaging will also enjoy a relatively
higher gross margin.





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. We have increased the annual capacity from 2 billion packs
last year to approximate 3.5 billion packs currently.





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 decreased the scrap percentage and lowered our
costs.





We
expanded our market by increasing the number of transactions with existing key
clients and new clients; during fiscal 2008, we gained a number of additional
clients.  We recently began receiving orders from customers in Russia
and Eastern Europe, who currently only account for a small amount of our total
sales, but we intend to expand the amount of customers in these regions.
Management also believes we are well positioned to attain new strategic clients
in the coming year with our new filling machines and SIG packaging.








Results
of Operations





Comparison
of results for the fiscal year ended June 30, 2008, to the fiscal year ended
June 30, 2007





Year
      Ended June 30
            
            2008
            
            
            2007Sales
            
            $
            37,263,624
            
            
            $
            30,438,550Cost
      of sales
            
            $
            27,379,350
            
            
            $
            23,556,328Total
      expenses
            
            $
            6,054,118
            
            
            $
            4,693,147Other
      income (expense)
            
            $
            (24,945
            )
            
            $
            (224,478Income
      taxes
            
            $
            -
            
            
            $
            263,870


40





Minority
      interest
            
            $
            (1,460
            )
            
            $
            -Net
      income
            
            $
            3,806,671
            
            
            $
            1,700,727Beneficial
      conversion feature related to issuance of series A&Bconvertible
      preferred stockconvertible
      preferred stock
            
            $
            (3,875,079
            )
            
            $
            -Foreign
      currency translation adjustment
            
            $
            2,109,409
            
            
            $
            366,698Comprehensive
      income (Loss)
            
            $
            2,041,001
            
            
            $
            2,067,425





Sales.Total sales
were approximately US$37.2 million for the fiscal year ended June 30, 2008 as
compared to approximately US$30.4 million for the fiscal year ended June 30,
2007, an increase of approximately US$6.8 million, or 22.4%. Besides the factor
of the appreciation of RMB to US$, the sales increased by 13.9% for the year
ended June 30, 2007. The increase resulted from increased sale of our products
to major key clients as well as to new customers in 2008. The sales to two key
clients for the year ended June 30, 2008 increased by US$1.9 million comparing
to that for the year ended June 30, 2007. The increase of new customers was
mainly due to shifting of the product lines from traditional printing and
packaging to aseptic liquid food and beverage cartons. There were 18 new
customers solely for aseptic products in 2008 as compared to 2007 and the amount
of increased sales for the 18 new customers was US$1.8 million. Existing
customers for aseptic products accounted for the remaining US$3.1 million
increase in sales for 2008 as compared to 2007.





Cost of Sales.Cost
of sales for the fiscal year ended June 30, 2008 was approximately US$27.4
million, or 73.5% of sales, as compared to US$23.6 million, or 77.4% of sales,
for the fiscal year ended June 30, 2007. Our cost of sales are primarily
composed of the costs of direct raw materials (mainly paper materials,
polyethylene materials, aluminum materials, printing materials), labor,
depreciation and amortization of manufacturing equipment and facilities, and
other overhead. There was no significant change in cost of sales to sales for
2008 and 2007. The slight change was due to less scrap percentage than the
expected percentage, more efficient use of the materials, as well as less unit
cost of fixed cost under the enlarged production. Our management is investing in
more research and development expenses for improving the cost of sales to sales
percentage.





Operating Expenses.Selling, general and
administrative expenses were approximately US$6.0 million for the fiscal
year ended June 30, 2008 as compared to approximately US$4.7 million for the
fiscal year ended June 30, 2007, an increase of approximately US$1.3 million, or
27.7%. The increase was primarily due to an increase in general and
administrative expenses by US$0.9 million for 2008, as compared to 2007, as a
result of listing as a public company in the United States.





Although
increase in sales of approximately US$6.8 million, the sales and sales related
expenses decreased by $196,015. Selling expenses primarily consist of
advertising, promotional and other sales and marketing expenses, salaries,
commissions, and benefits for our sales and marketing personnel. The decrease of
selling expenses was mainly due to the travelling expense of the sales staff
that decreased by 69%, which was the result of the company strengthening the
control of after sales service. We expect that our selling expenses will
increase in absolute terms in the near future as we increase our sales
efforts, expansion of the markets to more markets, hire additional sales
personnel, and initiate additional marketing programs.




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






41






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





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





Net income.Net
income was approximately US$3.8 million for the fiscal year ended June 30, 2008
as compared to net income of approximately US$1.7 for the fiscal year ended June
30, 2007, an increase of US$2.1 million. The increase was primarily attributed
to the increase of sales and increase of profit margin of products.




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 amounted to US$ 2.1 million as of June 30, 2008 as compared to US$0.4
million as of June 30, 2007. The balance sheet amounts with the exception of
equity at June 30, 2008 were translated at 6.854 RMB to 1.00 US dollar as
compared to 7.6 RMB at June 30, 2007. The equity accounts were stated at their
historical rate. The average translation rates applied to income statement
accounts for the fiscal years ended June 30, 2008, and June 30, 2007 were RMB
7.263 and RMB7.81, respectively.





Comprehensive
Income.The comprehensive income, which adds the currency
adjustment to Net Income, were US$2.0 million for the year ended June 30, 2008,
as compared to the comprehensive income of US$2.1 million for the year ended
June 30, 2007, an decrease of US$0.1 million.  The decrease was
primarily due to the beneficial conversion feature related to issuance of Series
A and Series B convertible preferred stock, which amounts to a negative US$3.9
million.





Liquidity
and Capital Resources





As of
June 30, 2008, we had working capital totaling approximately US$12.3 million,
including cash and cash equivalents of US$7.2 million.




Net cash
provided by operating activities was US$0.9 million for the fiscal year ended
June 30, 2008, which was mainly due to the addition of other receivables and
advance payments and reduction of accounts payable. Net cash used by US$1.8
million for the fiscal year ended June 30, 2007 was mainly due to reduction of
accounts payable, accrued expenses and other payables.








42






Net cash
used in investing activities for the fiscal year ended June 30, 2008 totaled
US$3.6 million and related primarily to the purchase of property and equipment
at US$ 4.4 million less the disposal of machinery with the net book value of 0.7
million. Net cash used in investing activities for the fiscal year ended June
30, 2007 totaled US$6.9 million and related to the purchase of property and
equipment and acquisition of the outstanding equity of Qingdao Renmin not owned
by us..





Net cash
provided in financing activities for the fiscal year ended June 30, 2008 was
US$4.6 million. Net cash generated in financing activities for the fiscal year
ended June 30, 2007 totaled US$12.2 million. The decrease in the 2008 period was
primarily the result of a decrease in capital contributions, and no proceeds
from the sale of the convertible notes in 2008 compared to 2007.




We have
entered into several loan agreements with our primary lenders, Industrial and
Commercial Bank of China and Qingdao City Commercial Bank, under which we have
term loans. As of June 30, 2008, we had an aggregate principal amount of US$3.1
million outstanding under the loan agreements, which amounts mature from January
2009 to May 2009 and accrue interest at 7.47%. The loan agreements contain
customary affirmative and negative covenants. As of June 30, 2008, we were in
material compliance with the terms of our loan agreements.




Since the
principal amount of US$4.1 million will fall due between January 2009 and May
2009, we will either repay the term loan or renew the loan according to the
financial position and cashflow position as at the maturity date of the term
loan. Since the financial and cashflow position is strengthening as compared for
the last year, we will repay some of the term loan, provided that that there is
no additional working capital requirement.





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.





Critical
Accounting Policies and Estimates





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





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





Revenue
recognition.




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








43





Accounts
Receivable and Allowance for Doubtful Accounts.





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




Inventory.





Our
provision for inventory write-downs is based on our best estimates of (i)
product sale prices, (ii) customer demand patterns, and (iii) our plan to
transition products. However, since we operate in a highly competitive industry
that is characterized by aggressive pricing practices, downward pressures on
gross margins, and rapid technological advances it is foreseeable that the
estimates used by us to determine its provisions for inventory write-downs will
be materially different from the actual amounts or results. Such differences
could result in higher than expected inventory provisions and related costs,
which could have a materially adverse effect on our results of operations and
financial condition in the near term.




Property
and Equipment.




Property
and equipment are stated at cost and depreciated using the straight-line method,
over 5 and 40 years. The carrying value of long lived assets is evaluated
whenever changes in circumstances indicate the carrying amount of such assets
may not be recoverable. If necessary, we recognize an impairment loss for the
difference between the carrying amount of the assets and their estimated fair
value. Fair value is based upon current and anticipated future undiscounted cash
flows. Expenditures for maintenance and repairs are charged to operations as
incurred; additions, renewals and betterments are capitalized. Based upon our
most recent analysis, we believe that no impairment of property and equipment
existed for the fiscal year ended June 30, 2008.







Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure




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





ITEM
      7A.
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





Not
      applicable.


44





ITEM
8.                      FINANCIAL
STATEMENTS





JPAK
GROUP, INC.





CONSOLIDATED
FINANCIAL STATEMENTS





JUNE
30, 2008 AND 2007


CONSOLIDATED
FINANCIAL STATEMENTS




Report of
      Independent Registered Public Accounting Firm
                F-1Consolidated
      Balance Sheets
                F-3Consolidated
      Statements of Operations and Comprehensive Income
                F-4Consolidated
      Statements of Stockholders’ Equity
                F-5Consolidated
      Statements of Cash Flows
                F-6Notes to
      Consolidated Financial Statements
                F-7


F-1





























Report of Independent
Registered Public Accounting Firm








To the
Board of Directors and Stockholders


JPAK
Group, Inc.:








We have audited the accompanying
consolidated balance sheets of JPAK Group, Inc. and Subsidiaries (the “Company”)
as of June 30, 2008 and 2007, and the related consolidated statements of
operations and comprehensive income, stockholders’ equity, and cash flows for
the years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.





We conducted our audits in accordance
with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. The Company is not required to have, nor were we engaged to
perform an audit of its internal control over financial reporting. Our audit
includes consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements,
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.  We believe that our audits provide a reasonable basis
for our opinion.





In our opinion, the financial
statements referred to above present fairly, in all material respects, the
consolidated financial position of JPAK Group, Inc. and Subsidiaries as of June
30, 2008 and 2007, and the consolidated results of their operations and their
consolidated cash flows for the years then ended in conformity with accounting
principles generally accepted in the United States of America.









/s/  Patrizio & Zhao,
LLC







Parsippany,
New Jersey


September
9, 2008


(Except
for Note 18 and 19 as to which


the date
is December 1, 2008)














F-2





JPAK
GROUP, INC.





CONSOLIDATED
BALANCE SHEETS





ASSETS





June
      30,
            
            
            June
      30,2008
            
            
            2007CURRENT
      ASSETSCash and cash
      equivalents
            
            $
            7,218,904
            
            
            $
            4,938,200Accounts receivable, net of
      allowance for doubtful accounts of $45,359and $38,945 at June
      30, 2008 and June 30, 2007, respectively
            
            
            9,026,455
            
            
            
            8,583,396Inventory
            
            
            5,420,631
            
            
            
            3,393,896Other receivables
            
            
            1,131,511
            
            
            
            -Prepaid expenses and other
      current assets
            
            
            96,751
            
            
            
            772,792Advance payments
            
            
            1,367,622
            
            
            
            -Deferred financing costs,
      net
            
            
            -
            
            
            
            405,072Total Current
    Assets
            
            
            24,261,874
            
            
            
            18,093,356PROPERTY
      AND EQUIPMENT, NET
            
            
            11,660,063
            
            
            
            7,935,920Total Assets
            
            $
            35,921,937
            
            
            $
            26,029,276LIABILITIES
      AND STOCKHOLDERS’ EQUITYCURRENT
      LIABILITIESAccounts payable and accrued
      expenses
            
            $
            3,598,732
            
            
            $
            4,634,457Trade notes
    payable
            
            
            3,784,956
            
            
            
            526,000Convertible notes
            
            
            -
            
            
            
            5,500,000Short term bank
    loans
            
            
            3,063,900
            
            
            
            4,812,900Current portion of long-term
      debt
            
            
            1,263,786
            
            
            
            -Other payables
            
            
            259,861
            
            
            
            65,378Total Current
      Liabilities
            
            
            11,971,235
            
            
            
            15,538,735LONG-TERM
      DEBT
            
            
            655,091
            
            
            
            2,008,893MINORITY
      INTEREST
            
            
            105,690
            
            
            
            -Total Liabilities
            
            
            12,732,016
            
            
            
            17,547,628STOCKHOLDERS’
      EQUITYSeries A convertible preferred
      stock, $0.0001 par value, 5,608,564shares authorized,
      issued and outstanding at June 30, 2008
            
            
            561
            
            
            
            -Common stock, $0.001 par value,
      300,000,000 shares authorized 24,505,000and 23,005,000 shares
      issued and outstanding at June 30 2008 and 2007
            
            
            24,505
            
            
            
            23,005Series B convertible preferred
      stock, $0.0001 par value, 5,000,000shares authorized,
      issued and outstanding at June 30, 2008
            
            
            500
            
            
            
            -Series A Preferred
      Shares
            
            
            2,484,226
            
            
            
            -Series B Preferred
      Shares
            
            
            1,390,853
            
            
            
            -Warrants
            
            
            4,634,678
            
            
            
            -Placement Agent
      Warrants
            
            
            1,172,487
            
            
            
            -Additional paid-in
      capital
            
            
            11,048,604
            
            
            
            5,676,259Retained earnings
            
            
            (562,030
            )
            
            
            1,896,256Statutory
reserves
            
            
            348,009
            
            
            
            348,009Accumulated other comprehensive
      income
            
            
            2,647,528
            
            
            
            538,119Total Stockholders’
      Equity
            
            
            23,189,921
            
            
            
            8,481,648Total Liabilities and
      Stockholders’ Equity
            
            $
            35,921,937
            
            
            $
            26,029,276


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













F-3







JPAK
GROUP, INC.
 
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 
 AND
COMPREHENSIVE INCOME
 
 
 For
      the Years Ended June 30,2008
              
              
              2007SALES
              
              $
              37,263,624
              
              
              $
              30,438,550COST
      OF SALES
              
              
              27,379,350
              
              
              
              23,556,328GROSS
      PROFIT
              
              
              9,884,274
              
              
              
              6,882,222OPERATING
      EXPENSESSelling, general and
      administrative
              
              
              6,054,118
              
              
              
              4,693,147INCOME
      FROM OPERATIONS
              
              
              3,830,156
              
              
              
              2,189,075OTHER
      INCOME (EXPENSES)Non-operating
    income
              
              
              43,154
              
              
              
              46,734Interest Income
              
              
              90,801
              
              
              
              79,908Interest expense
              
              
              (356,589
              )
              
              
              (449,014
              )Non-operating
    expense
              
              
              (21,644
              )
              
              
              (48,641
              )Government subsidy
      income
              
              
              219,333
              
              
              
              146,535Total Other Income
      (Expenses)
              
              
              (24,945
              )
              
              
              (224,478
              )INCOME
      BEFORE PROVISION FOR INCOME TAXES
              
              
              3,805,211
              
              
              
              1,964,597PROVISION
      FOR INCOME TAXES
              
              
              -
              
              
              
              263,870NET
      INCOME BEFORE MINORITY INTEREST
              
              
              3,805,211
              
              
              
              1,700,727MINORITY
      INTEREST
              
              
              (1,460
              )
              
              
              -NET
      INCOME
              
              
              3,806,671
              
              
              
              1,700,727BENEFICIAL
      CONVERSION FEATURE RELATED TO ISSUANCE OFSERIES
      A CONVERTIBLE PREFERRED STOCK
              
              
              (2,484,226
              )
              
              
              -BENEFICIAL
      CONVERSION FEATUREE RELATED TO ISSUANCE OFSERIES
      B CONVERTIBLE PREFERRED STOCK
              
              
              (1,390,853
              )
              
              
              -NET
      INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS
              
              
              (68,408
              )
              
              
              1,700,727OTHER
      COMPREHENSIVE INCOMEForeign currency translation
      adjustment
              
              
              2,109,409
              
              
              
              366,698COMPREHENSIVE
      INCOME
              
              $
              2,041,001
              
              
              $
              2,067,425BASIC
      EARNINGS PER SHARE
              
              $
              ( .00
              )
              
              $
              .07DILUTED
      EARNINGS PER SHARE
              
              $
              ( .00
              )
              
              $
              .06WEIGHTED
      AVERAGE NUMBER OF COMMON SHARES OUTSTANDINGBASIC
              
              
              24,341,066
              
              
              
              23,005,000DILUTED
              
              
              24,341,066
              
              
              
              29,085,831
 
 
 The
accompanying notes are an integral part of these consolidated financial
statements.


F-4


JPAK
GROUP, INC.
 
 CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY
 
 Series
      A
              Series
      BConvertible
      preferred
              Convertible
      preferred
              Allocation
                of
              Allocation
                of
              
              
              Commission
                Series
      A
              Commission
                Series
      B
              
              
              
              Accumulated

                  Other
              TotalCommon
      Stock
              Stock
              Stock
              Series
      A
              Series
      B
              
              Placement
              of
              of
              Additional
              Retained
              
              Compre-
              Stock-Par
              
              Par
              
              Par
              Preferred
              Preferred
              
              Agent
              Preferred
              Preferred
              Paid-in
              Earnings
              Statutory
              hensiv
              holders’Shares
              Value
              Shares
              Value
              Shares
              Value
              Shares
              Shares
              Warrants
              Warrants
              Shares
              Shares
              Capital
              (Deficit)
              Reserves
              Income
              EquityBalance
      June 30, 2006
              23,005,000
              $23,005
              -
              $         -
              -
              $         -
              $         -
              $         -
              $         -
              $         -
              $         -
              $         -
              $
      5,343,390
              $   535,675
              $177,936
              $
      171,421
              $  6,251,427Capital
      contribution
              -
              -
              -
              -
              -
              -
              -
              -
              -
              -
              -
              -
              332,869
              -
              -
              -
              332,869.Net
      income
              -
              -
              -
              -
              -
              -
              -
              -
              -
              -
              -
              -
              -
              1,530,654
              -
              -
              1,530,654Other
      comprehensive income
              -
              -
              -
              -
              -
              -
              -
              -
              -
              -
              -
              -
              -
              -
              -
              366,698
              366,698Statutory
      reserves
              -
              -
              -
              -
              -
              -
              -
              -
              -
              -
              -
              -
              -
              (170,073)
              170,073
              -
              -Balance
      June 30, 2007
              23,005,000
              $23,005
              -
              $         -
              -
              $         -
              $         -
              $         -
              $         -
              $         -
              $         -
              $         -
              $ 5,676,259
              $1,896,256
              $348,009
              $    538,119
              $  8,481,648Common
      stock issued in conjunctionwith
      RX Staffing recapitalization
              1,500,000
              1,500
              -
              -
              -
              -
              -
              -
              -
              -
              -
              -
              (1,500)
              -
              -
              -
              -Proceeds
      of preferred  sharesallocate
      on Aug 9, 2007
              -
              -
              -
              -
              -
              -
              2,484,226
              -
              2,327,600
              332,937
              355,237
              -
              (5,500,000)
              -
              -
              -
              -Proceeds
      of preferred  sharesallocate
      on Dec 8, 2007
              -
              -
              -
              -
              -
              -
              -
              1,390,853
              2,307,078
              839,550
              -
              462,519
              (5,000,000)
              -
              -
              -
              -Series
      A & B convertiblepreferred
      stock
              -
              -
              5,608,564
              561
              5,000,000
              500
              -
              -
              -
              -
              -
              -
              -
              -
              -
              -
              1,061Capital
      contribution
              -
              -
              -
              -
              -
              -
              -
              -
              -
              -
              -
              -
              11,181,010
              (2,389,878)
              -
              -
              8,791,132Net
      income
              -
              -
              -
              -
              -
              -
              -
              -
              -
              -
              -
              -
              -
              3,806,671
              -
              -
              3,806,671Beneficial
      conversion feature relatedto
      issuance of Series A convertiblepreferred
      stock
              -
              -
              -
              -
              -
              -
              -
              -
              -
              -
              -
              -
              2,484,226
              (2,484,226)
              -
              -
              -Beneficial
      conversion feature relatedto
      issuance of Series B convertiblepreferred
      stock
              -
              -
              -
              -
              -
              -
              -
              -
              -
              -
              -
              -
              1,390,853
              (1,390,853)
              -
              -
              -Other
      comprehensive income
              -
              -
              -
              -
              -
              -
              -
              -
              -
              -
              -
              -
              -
              -
              -
              2,109,409
              2,109,409Balance
      June 30, 2008
              24,505,000
              $24,505
              5,606,564
              $    561
              5,000,000
              $     500
              $2,484,226
              $1,390,853
              $4,634,678
              $1,172,487
              $355,237
              $462,519
              $10,230,848
              ($ 562,030)
              $348,009
              $2,647,528
              $23,189,921
 
 The
accompanying notes are an integral part of these consolidated financial
statements
 F-5


JPAK
GROUP, INC.
 
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 
 
 For
      the Years Ended June 30,2008
              
              
              2007CASH
      FLOWS FROM OPERATING ACTIVITIES:ANet
      Income
              
              $
              3,806,671
              
              
              $
              1,700,727Adjustments
      to reconcile net income to net cashProvided
      by (used in) operating activities:Minority interest
              
              
              (1,460
              )
              
              
              -Depreciation and
      amortization
              
              
              1,048,719
              
              
              
              824,614Loss (Gain) on disposal of fixed
      assets
              
              
              (10,955
              )
              
              
              29,018Bad debt expense
              
              
              2,029
              
              
              
              25,235Changes in assets and
      liabilities:Accounts
    receivable
              
              
              466,883
              
              
              
              915,768Inventory
              
              
              (1,561,951
              )
              
              
              (899,953
              )Restricted cash for trade notes
      repayment
              
              
              -
              
              
              
              993,658Other receivables
              
              
              (1,067,840
              )
              
              
              -Prepaid expenses and other
      current assets
              
              
              686,148
              
              
              
              (710,974
              )Advance payments
              
              
              (1,290,664
              )
              
              
              -Accounts payable and accrued
      expenses
              
              
              (1,390,329
              )
              
              
              (2,114,928
              )Advanced payment from
      customers
              
              
              197,157
              
              
              
              -Other payables
              
              
              (20,374
              )
              
              
              (2,507,625
              )Other current
      liabilities
              
              
              -
              
              
              
              (23,107
              )Total Adjustments
              
              
              (2,942,637
              )
              
              
              (3,468,294
              )Net Cash Provided By (Used in)
      Operating Activities
              
              
              864,034
              
              
              
              (1,767,567
              )CASH
      FLOWS FROM INVESTING ACTIVITIES:Additions to property and
      equipment
              
              
              (3,702,732
              )
              
              
              (1,808,675
              )Additions to construction in
      progress
              
              
              (696,586
              )
              
              
              -Proceeds from disposal of fixed
      assets
              
              
              716,936
              
              
              
              155,331Proceeds from minority
      interest
              
              
              101,202
              
              
              
              -Acquisition of Qingdao’s
      equity
              
              
              -
              
              
              
              (5,243,900
              )Net Cash Used In Investing
      Activities
              
              
              (3,581,180
              )
              
              
              (6,897,244
              )CASH
      FLOWS FROM FINANCING ACTIVITIES:Additional paid-in
      capital
              
              
              4,043,414
              
              
              
              5,406,695Issuance of trade notes
      payable
              
              
              3,021,211
              
              
              
              -Repayment of trade notes
      payable
              
              
              -
              
              
              
              (343,281
              )Issuance of convertible
      notes
              
              
              -
              
              
              
              5,500,000Repayment of bank
      loans
              
              
              (2,440,521
              )
              
              
              -Proceeds from bank
      loans
              
              
              -
              
              
              
              2,212,979Repayment of shareholder
      loans
              
              
              -
              
              
              
              (47,387
              )Deferred financing
      cost
              
              
              -
              
              
              
              (460,019
              )Net Cash Provided By Financing
      Activities
              
              
              4,624,104
              
              
              
              12,268,987EFFECT
      OF FOREIGN CURRENCY TRANSLATION ON CASH
              
              
              373,746
              
              
              
              44,029NET
      INCREASE IN CASH AND CASH EQUIVALENTS
              
              
              2,280,704
              
              
              
              3,648,205CASH
      AND CASH EQUIVALENTS AT BEGINNING OF YEAR
              
              
              4,938,200
              
              
              
              1,289,995CASH
      AND CASH EQUIVALENTS AT END OF YEAR
              
              $
              7,218,904
              
              
              $
              4,938,200
  The
accompanying notes are an integral part of these consolidated financial
statements.







F-6


JPAK
GROUP, INC.





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS








NOTE
1 – ORGANIZATION AND NATURE OF BUSINESS





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





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





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





Substantially
all of the 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.





NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





BASIS
OF PRESENTATION AND CONSOLIDATION





The
accompanying consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United Stated of America.
The consolidated financial statements include the accounts of JPAK Group Inc.
and its wholly-owned subsidiaries. All inter-company transactions and balances
have been eliminated in consolidation.


F-7





CASH
AND CASH EQUIVALENTS





In
accordance with Statement of Financial Accounting Standards No. 95, “Statement
of Cash Flows,” the Company considers all highly liquid instruments with
original maturities of three months or less to be “cash
equivalents”.





ACCOUNTS
RECEIVABLE





Trade
accounts receivable are stated at the amount management expects to collect from
balances outstanding at the end of the period. Based on management’s assessment
of the credit history with customers having outstanding balances and current
relationships with them, it has concluded that the realization of losses on
balances outstanding at year-end will be immaterial. The allowance for bad debts
at June 30, 2008 and 2007 was $45,359 and $38,945, respectively.





INVENTORY





Inventory
is stated at the lower of cost or market. Cost is determined using the
weighted-average cost method. Provisions are made for excess, slow moving and
obsolete inventory as well as inventory whose carrying value is in excess of net
realizable value. Management continually evaluates the recoverability based on
assumptions about customer demand and market conditions. If actual market
conditions are less favorable than those projected by management, additional
inventory reserves or write-downs may be required that could negatively impact
our gross margin and operating results. The Company did not record any provision
for slow-moving and obsolete inventory as of June 30, 2007 and
2008.





PROPERTY
AND EQUIPMENT





Property
and equipment are stated at cost. Depreciation is calculated are provided on the
straight-line method over the estimated useful lives of the assets as
follows:





Vehicles                                                                              5
to 10 years


Furniture, machinery and
equipment                            
5 to 20 years


Buildings and
improvements                                                  40
years





Construction
in progress primarily represents the renovation costs of plant, machinery and
equipment Costs incurred are capitalized and transferred to property and
equipment upon completion, at which time depreciation commences.





Expenditures
for repairs and maintenance are expensed as incurred. Gain or loss on disposal
of property and equipment, if any, is recognized in the consolidated statement
of operations.





LONG-LIVED
ASSETS





In
accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of
Long-Lived Assets,” the Company reviews the recoverability of its long-lived
assets on a periodic basis in order to identify business conditions, which may
indicate a possible impairment. The assessment for potential impairment is based
primarily on the Company’s ability to recover the carrying value of its
long-lived assets from expected future undiscounted cash flows. If the total of
the expected future undiscounted cash flows is less than the total carrying
value of the assets, a loss is recognized
for the difference between the fair value (computed based upon the expected
future discounted cash flows) and the carrying value of the assets.










F-8







REVENUE
RECOGNITION





The
Company derives its revenues primarily from sale of printed packaging products.
In accordance with the provisions of Staff Accounting Bulletin No. 103, revenue
is recognized when merchandise is shipped, title and risk of loss pass to the
customer and collectibility is reasonably assured.





RESEARCH
AND DEVELOPMENT





Research
and development costs are expensed when incurred. Research and development costs
for the years ended June 30, 2008 and 2007 was $1,299,157 and $1,280,466,
respectively.





INCOME
TAXES





Income
taxes are accounted for under the asset and liability method. Deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statements carrying amounts of
existing assets and liabilities and their respective tax bases, and operating
loss and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment
date.





A
valuation allowance is provided to reduce the carrying amount of deferred tax
assets if it is considered more likely than not that some portion, or all, of
the deferred tax assets will not be realized. No differences were noted between
the book and tax bases of the Company’s assets and liabilities, respectively.
Therefore, there are no deferred tax assets or liabilities for the years ended
June 30, 2008 and 2007.The standard corporate income tax rate has decreased from
33% to 25% with effect from January 1, 2008, when new Chinese tax law became
effective.





FAIR
VALUE OF FINANCIAL INSTRUMENTS





The
carrying amounts of the Company’s financial instruments, which include cash and
cash equivalents, investment securities, accounts receivable, accounts payable,
accrued expenses and other obligations, approximate their fair value due to the
short-term maturities of the related instruments.





FOREIGN
CURRENCY TRANSLATION AND TRANSACTIONS





The
financial position and results of operations of the Company is determined using
local currency (Chinese Yuan) as the functional currency.  Assets and
liabilities are translated at the prevailing exchange rate in effect at each
year end. Contributed capital accounts are translated using the historical rate
of exchange when capital is contributed. Income statement accounts are
translated at the average rate of exchange during the year. Currency translation
adjustments arising from the use of different exchange rates are included in
accumulated other comprehensive income (loss) in shareholders' equity. Gains and
losses resulting from foreign currency transactions are included in
operations.


F-9





COMPREHENSIVE
INCOME (LOSS)





The
Company has adopted SFAS No. 130, Reporting Comprehensive Income, which
establishes rules for the reporting and display of comprehensive income, its
components and accumulated balances. SFAS No. 130 defines comprehensive income
(loss) to include all changes in equity, including adjustments to minimum
pension liabilities, accumulated foreign currency translation, and unrealized
gains or losses on available-for-sale marketable securities, except those
resulting from investments by owners and distributions to owners.





EARNINGS
(LOSS) PER SHARE





In
accordance with SFAS No. 128, “Computation of Earnings Per Share” (“SFAS No.
128”) and EITF No. 03-6, “Participating Securities and the Two-Class Method
under FASB Statement No. 128” (“EITF No. 03-6”), basic earnings per share is
computed by dividing net income attributable to ordinary shareholders by the
weighted average number of ordinary shares outstanding during the year using the
two-class method. 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 redeemable convertible preferred
shares are participating securities. Diluted earnings per share is calculated by
dividing net income attributable to ordinary shareholders as adjusted for the
effect of dilutive ordinary equivalent shares, if any, by the weighted average
number of ordinary and dilutive ordinary equivalent shares outstanding during
the year. Ordinary equivalent shares consist of the ordinary shares issuable
upon the conversion of the convertible preferred shares (using the if-converted
method) and ordinary shares issuable upon the exercise of outstanding share
options (using the treasury stock method).





USE
OF ESTIMATES





The
preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Significant estimates include valuation reserves
for accounts receivable, inventory and income taxes and valuation of goodwill.
Actual results could differ from those estimates





RECENT
ACCOUNTING PRONOUNCEMENTS





In
December 2007, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin 110 (“SAB 110”). SAB 110 states that the staff will continue
to accept, under certain circumstances, the use of the simplified method for
estimating the expected term of “plain vanilla” share options in accordance with
SFAS 123(R) beyond December 31, 2007. The Company believed there will be no
material impact on the Company’s financial statements upon adoption of this
standard.





In
December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in
Consolidated Financial Statements, an amendment of ARB Statement No. 51.” SFAS
No. 160 amends Accounting Research Bulletin (ARB) No. 51, “Consolidated
Financial Statements,” to establish accounting and reporting standards for the
non-controlling interest in a subsidiary and for the deconsolidation of a
subsidiary.  SFAS No. 160
clarifies that a non-controlling interest in a subsidiary, which is sometimes
referred to as a minority interest, is an ownership interest in the consolidated
entity that should be reported as a component of equity in the consolidated
financial statements.  Among other requirements, SFAS No. 160 requires
consolidated net income to be reported at amounts that include the amounts
attributable to both the parent and the non-controlling interest.  It
also requires disclosure, on the face of the consolidated income statement, of
the amounts of consolidated net income attributable to the parent and the
non-controlling interest. SFAS No. 160 will be effective for the Company on
January 1, 2009, and is not expected to have a significant impact on the
Company’s financial condition or results of operations.






F-10





In
December 2007, the FASB issued SFAS No. 141(R), “Business Combinations
(Revised)”, to replace SFAS No. 141, “Business Combinations. SFAS No. 141(R)
requires the use of the acquisition method of accounting, defines the acquirer,
establishes the acquisition date and broadens the scope to all transactions and
other events in which one entity obtains control over one or more other
businesses. This statement is effective for business combinations or
transactions entered into for fiscal years beginning on or after December 15,
2008. The Company is evaluating the impact of SFAS No. 141 (R).





NOTE
3 – INVENTORY





Inventory
at June 30, 2008 and 2007 consists of the following:


June 30, 2008
            
            
            June 30, 2007Finished
      goods
            
            $
            787,872
            
            
            $
            571,357Raw
      materials
            
            
            4,011,065
            
            
            
            2,206,420Parts
      and supplies
            
            
            66,599
            
            
            
            41,280Work
      in process
            
            
            555,095
            
            
            
            574,839Total
            
            $
            5,420,631
            
            
            $
            3,393,896


NOTE
4 – ADVANCE PAYMENTS





The
Company makes advances to certain vendors for inventory, equipment, and
construction-in-progress. The advances on purchase of inventory amounted to
$825,795 and $-0- as of June 30, 2008 and 2007. Additionally, the Company made
advances on equipment purchases amounting to $541,827 and $-0- as of June 30,
2008 2007, respectively.





NOTE
5 – DEFERRED FINANCING COSTS





Costs
related to obtaining the convertible notes are capitalized and amortized over
the term of the related debt using the straight-line method, which is 12 months.
Deferred financing costs at June 30, 2008 and 2007 were as follows:





June 30, 2008
            
            
            June 30, 2007Deferred
      financing costs
            
            $
            460,017
            
            
            $
            460,017Accumulated
      amortization
            
            
            (460,017
            )
            
            
            (54,945
            )Net
      deferred financing costs
            
            $
            -
            
            
            $
            405,072





Amortization
of deferred financing costs charged to operations for the years ended June 30,
2008 and 2007 was $405,072 and $54,945, respectively








F-11


NOTE
6 – PROPERTY AND EQUIPMENT





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


June 30, 2008
            
            
            June 30, 2007Buildings
            
            $
            3,972,267
            
            
            $
            3,533,677Machinery
      and equipment
            
            
            13,973,256
            
            
            
            9,848,634Subtotal
            
            
            17,945,523
            
            
            
            13,382,311Less:
      Accumulated depreciation
            
            
            7,023,582
            
            
            
            5,446,39110,921,941
            
            
            
            7,935,920Add:
      Construction in progress
            
            
            738,122
            
            
            
            -Total
            
            $
            11,660,063
            
            
            $
            7,935,920


Depreciation
expense for the years ended June 30, 2008 and 2007 was $998,884 and $769,669,
respectively.





NOTE
7 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES





Accounts
payable and accrued expenses consist of the following:





June 30, 2008
            
            
            June 30, 2007Accounts
      payable
            
            $
            3,256,552
            
            
            $
            4,066,655Accrued
      expenses
            
            
            342,180
            
            
            
            567,802Total
            
            $
            3,598,732
            
            
            $
            4,634,457





The
carrying value of accounts payable and accrued expenses approximates fair value
due to the short-term nature of these obligations.





NOTE
8 – TRADE NOTES PAYABLE





Trade
notes payable consists of noncollateralized non-interest bearing promissory
notes issued in connection with the acquisition of certain inventory and
equipment. Balances outstanding under the notes as of June 30, 2008 and 2007 was
$3,784,956 and $526,000, respectively.








NOTE
9 - CONVERTIBLE NOTES





On August
9, 2007, the convertible notes converted to the following items: (i) 5,608,564
shares of the Company’s Series A Convertible Preferred Stock, par value $.0001
per share (the “Preferred Stock”), which shares are convertible into an
aggregate of 11,217,128 shares of Common Stock, (ii) Class A Warrants to
purchase an aggregate of 5,500,000 shares of Common Stock (subject to
adjustment) at an exercise price of $.60 per share until August 2011 (the “Class
A Warrants”), (iii) Class B Warrants to purchase an aggregate of 5,500,000
shares of Common Stock (subject to adjustment) at an exercise price of $.70 per
share until August 2011 (the “Class B Warrants”) and (iv) Class J Warrants to
purchase (a) an aggregate of 5,000,000 shares of Series B Preferred Stock, which
preferred stock shall contain the same terms as the Series A Preferred Stock
(other than conversion price), which shares will be convertible into 8,333,333
shares of the Company’s Common Stock, (b) Class C Warrants to purchase an
aggregate of 4,166,667 shares of Common Stock (subject to adjustment) at an
exercise price of $.72 per share (the “Class C Warrants”) and (c) Class D
Warrants to purchase an aggregate of 4,166,667 shares of Common Stock (subject
to adjustment) at an exercise price of $.84 per share (the “Class
D


F-12


Warrants”
and together with the Class A Warrants, Class B Warrants and Class C Warrants,
the “Warrants”). The Class J Warrants shall only be exercisable until 90 days
following the effective date of a registration statement registering for sale
the shares of common stock underlying the securities issued in the
financing.  (Please see Note 20 – Allocation of Proceeds of
Convertible Promissory Notes to see a detailed description of the accounting for
the Series A preferred stock issued with the warrants.)





The conversion of convertible notes is
considered as a non-cash financing transaction.











NOTE
10 – SHORT TERM BANK LOANS





Short
term bank loans consist of the following:





June 30, 2008
            
            
            June 30, 2007On
      September 7th
      2006, the Company obtained a loan from China Industrialand
      Commercial Bank, of which the principal is to be paid in full by
      August27th,
      2008. The interest is to be calculated using an annual fixed interest rate
      of6.732%
      and paid monthly. The loan is secured by the company's
      equipment.
            
            $
            -
            
            
            $
            867,900On
      February 2nd,
      2007, the Company obtained a loan from China Industrialand
      Commercial Bank, of which the principal is to be paid in full by
      February11th
      2008, The interest is to be calculated using an annual fixed interest rate
      of6.732%
      and paid monthly. The loan is secured by the company's
      equipment.
            
            $
            -
            
            
            $
            657,500On
      April 10th, 2007 the Company obtained a loan from China
      Industrialand
      Commercial Bank, of which principal is to be paid in full by April
      9th2008.
      Interest is to be calculated using an annual fixed rate of7.029%
      and paid monthly. The loan is secured by the company's
      equipment.
            
            $
            -
            
            
            $
            789,000On
      February 12th 2007, the Company obtained a loan from Qingdao
      CityCommercial
      Bank, of which principal is to be paid in full by February
      11th2008.
      Interest is to be calculated using an annual fixed rate of6.732%
      and paid monthly. The loan is secured by the company's
      equipment.
            
            $
            -
            
            
            $
            2,104,000On
      May 25th 2007, the Company obtained a loan from China Merchant
      Bank,


F-13





of
      which principal is to be paid in full by May 25th 2008. The interest is to
      becalculated
      using an annual fixed rate of 6.57% and paid monthly.The
      loan is secured by the company's equipment.
            
            $
            -
            
            
            $
            394,500








NOTE
10 – SHORT TERM BANK LOANS (continued)


On
      January 29th
      2008, the Company obtained a loan from Qingdao CityCommercial
      Bank, of which principal is to be paid in full by January 29,
      2009Interest
      is to be calculated using an annual fixed rate of 7.47%
andpaid
      monthly. The loan is secured by the company's property and
      equipment.
            
            $
            2,334,400
            
            
            $
            -On
      May 30th,
      2008, the Company obtained a loan from China Industrial
andCommercial
      Bank, of which principal is to be paid in full by May 29th,
      2009Interest
      is to be calculated using an annual fixed rate of 7.47%
andpaid
      monthly. The loan is secured by the company's equipment.
            
            $
            729,500
            
            
            $
            -Total
      short term bank loans
            
            $
            3,063,900
            
            
            $
            4,812,900





NOTE
11 – 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, foreigninvested 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 do not believe the new CIT law will affect the preferential tax
treatments (i.e. the unutilized tax holiday) enjoyed by
them.


F-14





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 intend 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. Accordingly, as of June 30, 2008, the Company has not
recorded any withholding tax on the retained earnings of its foreign invested
enterprises in China.








NOTE
12 – LONG-TERM DEBT





As of
June 30, 2008, the Company had an outstanding long-term debt of $1,918,877,
including the current portion of $1,263,786. These loans represent borrowings
from employees at an annual interest rate of 10%. Interest payments are made
semi-annually with no principal payments due until May 31, 2010, as per the
terms of the loan agreement.





NOTE
13 – 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 certain percentage of
the employees’ salaries. The total contribution for such employee benefits was $
356,359 and $ 63,835 for the years ended June, 2008 and 2007,
respectively.





NOTE
14 – STATUTORY COMMON WELFARE FUND





As
stipulated by the People’s Republic of China (PRC), net income after taxation
can only be distributed as dividends after appropriation has been made for the
following:





(i)
            Making
      up cumulative prior years’ losses, if
any;





(ii)
            Allocations
      to the “Statutory surplus reserve” of at least 10% of income after tax, as
      determined under PRC accounting rules and regulations, until the fund
      amounts to 50% of the Company's registered
  capital;





(iii)
            Allocations
      of 5-10% of income after tax, as determined under PRC accounting rules and
      regulations, to the Company's “Statutory common welfare fund”, which is
      established for the purpose of providing employee facilities and other
      collective benefits to the Company's
employees;


F-15




Allocations
to the discretionary surplus reserve, is approved in the shareholders’ general
meeting. The Company did not provide a reserve for the welfare fund for the
years ended June 30, 2008 and 2007, respectively.





NOTE
15 – RISK FACTORS





In the
fiscal year 2008 and 2007, five vendors accounted for approximately 62% and 50%
of the Company’s purchases.





In fiscal
year 2008, five customers accounted for approximately 57% of the Company’s
sales, while in fiscal year 2007, five customers accounted for approximately 50%
of the Company’s sales.





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
16 - CONCENTRATIONS OF CREDIT RISK





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
17 – SUPPLEMENTAL CASH FLOW INFORMATION





The
following is supplemental information relating to the consolidated statements of
cash flows:





June 30, 2008
            
            
            June 30, 2007Cash
      paid for interest
            
            $
            356,589
            
            
            $
            449,014Cash
      paid for income taxes
            
            $
            -
            
            
            $
            263,870


NOTE
18 – EARNINGS PER SHARE





The
Company presents earnings per share 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.














F-16





June 30, 2008
              
              
              June 30, 2007Net
      income
              
              $
              3,806,671
              
              
              $
              1,700,727Beneficial
      conversion feature related to issuanceof
      Series A convertible preferred stock
              
              
              (2,484,226
              )
              
              
              -Beneficial
      conversion feature related to issuanceof
      Series B convertible preferred stock
              
              
              (1,390,853
              )
              
              
              -Net
      income (loss) applicable to common stockholders
              
              
              (68,408
              )
              
              
              1,700,727Weighted
      average common shares(denominator
      for basic income per share)
              
              
              24,341,066
              
              
              
              23,005,000Effect
      of diluted securities:Convertible
      preferred stock
              
              
              -
              
              
              
              1,500,000Convertible
      notes
              
              
              -
              
              
              
              4,580,831Weighted
      average common shares(denominator
      for diluted income per share)
              
              
              24,341,066
              
              
              
              29,085,831Basic
      net income (loss) per share
              
              $
              ( 0.00
              )
              
              $
              0.07Diluted
      net income (loss) per share
              
              $
              ( 0.00
              )
              
              $
              0.06
 NOTE
19 – ALLOCATION OF PROCEEDS FROM THE EXERCISE OF SERIES J
WARRANTS





On August
9, 2007, the Company became a party to the NPA (Note Purchase Agreement dated
May 17, 2007) by and among the Company, JPAK, Grand International and the
Investors. Pursuant to the NPA JPAK issued Convertible Promissory Notes in the
aggregate principal amount of US$5.5 million to the Investors. As a result of
the Share Exchange, and under the terms of the Notes and the NPA,  the
convertible notes converted to the following items: (i) 5,608,564 shares of the
Company’s Series A Convertible Preferred Stock, par value $.0001 per share (the
“Preferred Stock”), which shares are convertible into an aggregate of 11,217,128
shares of Common Stock, (ii) Class A Warrants to purchase an aggregate of
5,500,000 shares of Common Stock (subject to adjustment) at an exercise price of
$.60 per share until August 2011 (the “Class A Warrants”), (iii) Class B
Warrants to purchase an aggregate of 5,500,000 shares of Common Stock (subject
to adjustment) at an exercise price of $.70 per share until August 2011 (the
“Class B Warrants”) and (iv) Class J Warrants to purchase (a) an aggregate of
5,000,000 shares of Series B Preferred Stock, which preferred stock shall
contain the same terms as the Series A Preferred Stock (other than conversion
price), which shares will be convertible into 8,333,333 shares of the Company’s
Common Stock, (b) Class C Warrants to purchase an aggregate of 4,166,667 shares
of Common Stock (subject to adjustment) at an exercise price of $.72 per share
(the “Class C Warrants”) and (c) Class D Warrants to purchase an aggregate of
4,166,667 shares of Common Stock (subject to adjustment) at an exercise price of
$.84 per share (the “Class D Warrants” and together with the Class A Warrants,
Class B Warrants and Class C Warrants, the “Warrants”). The Class J Warrants
were be exercisable until 90 days following the effective date of a registration
statement registering for sale the shares of common stock underlying the
securities issued in the financing. Finally, the Company also granted warrants
to purchase 990,000 shares of common stock with an exercise price of US$.50 per
share to the placement agent in the financing transaction. These warrants have
the same terms as
the Series A and Series B Warrants, except that they contain a “cashless”
exercise provision.








F-17




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





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





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







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





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





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





Allocation of proceed from the exercise of J
      warrants
            
            
            2007-12-28Proceeds
      of Series B Preferred Shares
            
            
            5,000,000Commission
      of Series B Preferred Shares
            
            
            462,519Proceeds
      of Series B Preferred Shares after deducting commission
            
            
            4,537,481Value
      of Placement Agent Warrants
            
            
            839,550Incremental
      value of original Placement Agent Warrants
            
            
            31,680


F-18





Net
      proceeds after deduction of value and incremental value of placement agent
      warrants
            
            
            3,697,931Series
      C Warrants
            
            
            4,308,750Series
      D Warrants
            
            
            3,985,000Incremental
      value of Series A Warrants(Note
      1)
            
            
            223,850Incremental
      value of Series B Warrants(Note
      1)
            
            
            284,900Total
      value of investor warrants, incremental value of investors warrants and
      preferred shares
            
            
            8,293,751Value
      of Series B Preferred Shares
            
            
            5,000,000Allocation
      of Warrants
            
            
            2,307,078Allocation
      of Series B Preferred Shares
            
            
            1,390,853





Note
1:  Incremental value of Series A and Series B warrants was expensed
in the period as indirect financing costs.





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





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


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


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


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





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





Valuation
            
            December 28, 2007Proceeds
      of Series B Preferred Shares
            
            
            5,000,000Commission
      of Series B Preferred Shares
            
            
            462,519Proceeds
      of Series B Preferred Shares after deductingcommission
            
            
            4,537,481Value
      of Placement Agent Warrants
            
            
            839,550Incremental
      value of original Placement Agent Warrants
            
            
            31,680Net
      proceeds after deduction of value and incrementalvalue
      of placement agent warrants
            
            
            3,697,931Series
      C Warrants
            
            
            4,308,750Series
      D Warrants
            
            
            3,985,000Total
      value of investor warrants and incremental value ofinvestors
      warrants
            
            
            8,293,751Value
      of Series B Preferred Shares
            
            
            5,000,000Allocation
      of Warrants
            
            
            2,307,078Allocation
      of Series B Preferred Shares
            
            
            1,390,853





F-19





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





Warrant market priceSeries A Warrants
            
            
            
            
            August 9, 2007
            
            
            December 28, 2007
            
            
            December 28, 2007Original
            
            
            RevisedExpiration
      Date:
            
            August
      09, 2011August
      09, 2013Strike
      Price:
            
            $
            0.60Share
      Price:
            
            
            
            
            
            $
            0.72
            
            
            $
            1.60
            
            
            $
            1.60Time
      to Expiration:
            
            
            
            
            
            
            1,461
            
            
            
            1,320
            
            
            
            2,051Volatility:
            
            
            
            
            
            
            30.28
            %
            
            
            30.28
            %
            
            
            30.28
            %Risk-free
      Rate of Return:
            
            
            
            
            
            
            4.57
            %
            
            
            3.18
            %
            
            
            3.18
            %Black-Scholes
      Call Value:
            
            
            
            
            
            $
            0.28
            
            
            $
            1.07
            
            
            $
            1.11Warrant
      Valuation:
            
            
            
            
            
            $
            1,543,300.00
            
            
            $
            5,887,750.00
            
            
            $
            6,111,600.00




Series B Warrants
            
            
            
            
            August 9, 2007
            
            
            December 28, 2007
            
            
            December 28, 2007Original
            
            
            RevisedExpiration
      Date:
            
            August
      9, 2011August
      9, 2013Strike
      Price:
            
            $
            0.70Share
      Price:
            
            
            
            
            
            $
            0.72
            
            
            $
            1.60
            
            
            $
            1.60Time
      to Expiration:
            
            
            
            
            
            
            1,461
            
            
            
            1,320
            
            
            
            2,051Volatility:
            
            
            
            
            
            
            30.28
            %
            
            
            30.28
            %
            
            
            30.28
            %Risk-free
      Rate of Return:
            
            
            
            
            
            
            4.57
            %
            
            
            3.18
            %
            
            
            3.18
            %Black-Scholes
      Call Value:
            
            
            
            
            
            $
            0.23
            
            
            $
            0.99
            
            
            $
            1.04Warrant
      Valuation:
            
            
            
            
            
            $
            1,271,600.00
            
            
            $
            5,430,700.00
            
            
            $
            5,715,600.00







F-20


Series C Warrants
              
              
              
              
              August 9, 2007
              
              
              December 28, 2007
              
              
              December 28, 2007Expiration
      Date:
              
              December
      28, 2013Strike
      Price:
              
              $
              0.72Share
      Price:
              
              
              
              
              
              $
              0.72
              
              
              $
              1.60
              
              
              $
              1.60Time
      to Expiration:
              
              
              
              
              
              
              2,333
              
              
              
              2,192
              
              
              
              2,192Volatility:
              
              
              
              
              
              
              30.28
              %
              
              
              30.28
              %
              
              
              30.28
              %Risk-free
      Rate of Return:
              
              
              
              
              
              
              4.57
              %
              
              
              3.18
              %
              
              
              3.18
              %Black-Scholes
      Call Value:
              
              
              
              
              
              $
              0.29
              
              
              $
              1.03
              
              
              $
              1.03Warrant
      Valuation:
              
              
              
              
              
              $
              1,209,166.76
              
              
              $
              4,308,750.34
              
              
              $
              4,308,750.34






Series D Warrants
            
            August 9, 2007
            December 28, 2007
            December 28, 2007Expiration
      Date:
            December
      28, 2013Strike
      Price:
            $0.84Share
      Price:
            
            $0.72
            $1.60
            $1.60Time
      to Expiration:
            
            2,333
            2,192
            2,192Volatility:
            
            30.28%
            30.28%
            30.28%Risk-free
      Rate of Return:
            
            4.57%
            3.18%
            3.18%Black-Scholes
      Call Value:
            
            $0.25
            $0.96
            $0.96Warrant
      Valuation:
            
            $1,037,083.42
            $3,985,000.32
            $3,985,000.32


NOTE
20 – ALLOCATION OF PROCEEDS OF CONVERTIBLE PROMISSORY NOTES





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








F-21








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





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





Accordingly,
we believe the warrants issued to the placement agents are directly attributable
to raising capital.  If we had not issued the warrants to the
placement agent, we would have had to pay the same amount of cash as the fair
value.  Therefore, we have deducted the fair value of the placement
agent warrants $332,937 and the remaining deferred financing costs of $355,237
from the proceeds of Preferred Shares $5,500,000.  Furthermore, we
allocated the remaining proceeds of $4,811,826 between investors warrants and
Preferred Shares on a relative fair value basis.





Originally,
we used an expected volatility approximate 7% and assumed
that expected volatility would be the same as historical volatility for
calculations of value assigned the preferred stock and
warrants.  After reviewing comments from the SEC, we changed certain
assumptions utilized, particularly volatility, and therefore changed values
assigned to the preferred stock and warrants resulting from the automatic
conversion of convertible promissory notes into Series A preferred stock.




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





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


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


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


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


The total
value of warrants and the value of Series A Preferred shares on the date of
conversion were $5,153,233 and $5,500,000 respectively.  Therefore,
the Company allocated $2,327,600 and $2,484,226 to warrants and preferred stocks
respectively from the $4,811,826 remaining proceeds of Convertible Promissory
Notes.








F-22







Proceeds
      of Series A Preferred Shares
            5,500,000Financing
      commission of Series A Preferred Shares
            355,237Proceeds
      of Series A Preferred Shares after deducting commission
            5,144,763Value
      of Placement Agent Warrants
            332,937Net
      proceeds after deduction of value of placement agent warrants and
      financing commission of Series A Preferred Shares
            4,811,826Series
      A Warrants
            1,543,300Series
      B Warrants
            1,271,600Series
      J Warrants
            2,338,333Total
      value of investor warrants, incremental value of investors warrants and
      preferred shares
            5,153,233Value
      of Series A Preferred Shares
            5,500,000Allocation
      of Warrants
            2,327,600Allocation
      of Series A Preferred Shares
            2,484,226










Warrant valuationAgent Warrants
            
            August 9, 2007Expiration
      Date:
            August
      9, 2011August
      9, 2013Strike
      Price:
            $0.50Share
      Price:
            
            $0.72Time
      to Expiration:
            
            1,461Volatility:
            
            30.28%Risk-free
      Rate of Return:
            
            4.57%Black-Scholes
      Call Value:
            
            $0.34Warrant
      Valuation:
            
            $332,937.00








F-23




Series A Warrants
              
              August 9, 2007Expiration
      Date:
              August
      9, 2011August
      9, 2013Strike
      Price:
              $0.60Share
      Price:
              
              $0.72Time
      to Expiration:
              
              1,461Volatility:
              
              30.28%Risk-free
      Rate of Return:
              
              4.57%Black-Scholes
      Call Value:
              
              $0.28Warrant
      Valuation:
              
              $1,543,300.00Series B Warrants
              
              August 9, 2007Expiration
      Date:
              August
      9, 2011August
      9, 2013Strike
      Price:
              $0.70Share
      Price:
              
              $0.72Time
      to Expiration:
              
              1,461Volatility:
              
              30.28%Risk-free
      Rate of Return:
              
              4.57%Black-Scholes
      Call Value:
              
              $0.23Warrant
      Valuation:
              
              $1,271,600.00Series J Warrants
              
              August 9, 2007Expiration
      Date:
              August
      9, 2011Strike
      Price:
              $0.60Share
      Price:
              
              $0.72Time
      to Expiration:
              
              1,461Volatility:
              
              30.28%Risk-free
      Rate of Return:
              
              4.57%Black-Scholes
      Call Value:
              
              $0.28Warrant
      Valuation:
              
              $2,338,333.24
 
   
 F-24






NOTE
21 – BENIFICIAL CONVERSION FEATURE OF SERIES B PREFERRED SHARES





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


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





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





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





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





Preferred
Stock
Discount:                                                                                 1,390,853


APIC – beneficial conversion
option                                                                                     1,390,853





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





Retained
Earnings:                                                                                 1,390,853


Preferred Stock
Discount                                                                                     1,390,853





The net
result of the two entries is a reclassification of $1,390,853 from retained
earnings to additional paid-in capital.  This amount is also a
reduction to the net income available to the common shareholders in the
numerator of the earning-per-share calculation in the second quarter ended
December 31, 2007.





NOTE
22 – LIQUIDATED DAMAGE FOR INEFFECTIVE REGISTRATION STATEMENT





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


F-25





The
Investor “RAA” also contains provisions for the inability to register all of the
shares underlying all of the Series A and Series B Preferred Stock and Warrants
due to the SEC’s application of Rule 415.  Pursuant to those
provisions, if the SEC issues us a 415 comment, then the Company must first try
to register the common stock underlying the preferred stock (on a pro rata basis
among the holders of the Preferred Stock) and then register all of the common
underlying the Warrants (on a pro rata basis among the holders of the Warrants).
The Company is filing the Registration Statement to register for resale 687,106
shares of common stock underlying the Series A Preferred Stock, as required by
the terms of the Investor RRA.  Subsequent registration statements
required to be filed to register the rest of the common stock underlying the
preferred stock and warrants issued in the financing will be filed on the later
of (i) 60 days following the sale of substantially all of the shares of common
stock included in this Registration Statement or any subsequent Registration
Statement and (ii) 6 months following the effective date of this Registration
Statement or any subsequent Registration Statement, as applicable, or such
earlier or later date as permitted or required by the
Commission.  Each such subsequent registration statement must be
declared effective by the earlier of (A) the 90th day following the filing date
of such Registration Statement (or in the event such Registration Statement is
reviewed by the Commission, the one hundred twentieth (120th) day following such
filing date) or (B) 5 business days after SEC has no more comments. However, the
Company does not have any monetary obligations for any securities that were not
permitted to be included in a registration statement because of the SEC’s
application of Rule 415 until such time as such securities are required to be
filed pursuant to the Investor RRA.  In such case, the liquidated
damages shall be calculated to only apply to the percentage of securities which
are permitted by the Commission to be included in the Registration
Statement.





Since the
Company is only able to register 687,106 common shares and the total common
shares underlying the Series A convertible preferred stock is 11,217,128, the
Company is only required to pay 6.13% (680,106/11,217,128) of the 2 percent
($110,000) due per month under the terms of the Company’s RAA. Therefore, the
Company’s monthly liquated damages will be roughly $6,738.07. Pursuant to
discussions with SEC staff covering interpretations of Rule 415, the Company
based the number of shares eligible for registration on the number of shares
currently outstanding (24,505,000) and the number of common shares currently
held by non-affilates (1,500,000 issued by RX Staffing prior to the reverse
merger and the 561,322 shares issued the American Capital Markets, Ltd. as part
of the merger).





NOTE
23 – SUBSEQUENT EVENTS





On July
3, 2008, the Company issued 300,000 common shares, which increases the number of
shares outstanding accordingly.















F-26








ITEM
9.                      CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURES





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








ITEM
9A.                      CONTROLS
AND PROCEDURES


Evaluation
of Disclosures Controls and Procedures





Our
management evaluated, with participation of our Chief Executive Officer and our
Acting Chief Financial Officer, the effectiveness of our disclosure controls and
procedures as of the end of the period covered by this Annual Report on Form
10-K. 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 such information 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.


71





Management’s
Report on Internal Controls Over Financial Reporting





Board of
Directors and Shareholders of Jpak Group, Inc.:





The
Management of Jpak Group, Inc. is responsible for establishing and maintaining
adequate internal control over financial reporting for Jpak.  Jpak’s
internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with U.
S. generally accepted accounting principles.  Jpak’s internal control
over financial reporting includes those policies and procedures that: (i)
pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of Jpak’s assets, (ii) provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with U. S. generally accepted
accounting principles, and that  receipts and expenditures of Jpak are
being made only in accordance with authorizations of management and directors of
Jpak; (iii) provide reasonable assurance regarding prevention of timely
detection of unauthorized acquisition, use or disposition of Jpak’s assets that
could have a material effect on the financial statements, and (iv) provide
reasonable assurance that receipts and expenditures of Jpak are being made only
in accordance with authorization of management and directors of
Jpak.





The Company’s management assessed the effectiveness of the
Company’s internal control over financial reporting as of June 30, 2008,
utilizing the criteria set forth by the Committee of Sponsoring Organizations of
the Treadway Commission (“COSO”) in Internal Control-Integrated
Framework.  Management’s assessment included evaluating the design of
the Company’s internal control over financial reporting and testing the
operational effectiveness of the Company’s internal control over financial
reporting.





A
material weakness is a control deficiency, or combination of control
deficiencies, that results in a more than remote likelihood that a material
misstatement of the annual or interim financial statements will not be prevented
or detected.  The Company identified the following control
deficiencies which, together, constitute a material weakness in the Company’s
assessment of the effectiveness of internal control over financial reporting as
of June 30, 2008:





1.
            Inability to close our books
      and generate required disclosure.Management evaluated
      our controls as of December 31, 2007 and due to staffing and resource
      constraints, a material weakness became evident regarding our inability to
      simultaneously close the books on a timely basis each month and quarter
      and to generate all the necessary disclosure for inclusion in our filings
      with the Securities and Exchange Commission. This material weakness caused
      us to be late in our filing for that quarter. In addition, this lack of
      staffing and resources led to a misstatement in our financial statements.
      Then, in our quarterly report for the September 30, 2007 quarter, we did
      not have sufficient resources to discover and correctly account for the
      impact of the issuance of certain warrants on our financial statements.
      Accordingly, we filed amendments to our quarterly report on Form 10-Q for
      the quarter ended September 30, 2007 and December 31, 2007 to correct the
      accounting treatment for such
warrants.





2.
            Revision of reverse acquisition
      accounting.The acquisition of Qingdao Renmin was initially
      accounted for using the purchase method. Subsequent to the issuance of the
      June 30, 2007, financial statements, management revisited the acquisition
      and deemed the transaction to be a reverse acquisition for accounting
      purposes. Qingdao Renmin was considered to be the accounting acquirer as
      both Grand International and Jpak Ltd were holding companies with no
      significantoperations
      and Qingdao Renmin continues as the primary operating entity even after
      the exchange, although Jpak Ltd is the legal parent company.  As
      such, Qingdao Renmin (and its historical financial statements) is the
      continuing entity for financial reporting purposes and the share exchange
      will be treated as a recapitalization of Jpak Ltd.  Thus, Jpak Ltd is
      the continuing entity for financial reporting purposes.  Accordingly,
      we needed to prepare the financial statements as if Jpak Ltd. had always
      been the reporting company and then on the share exchange date, changed
      its name and reorganized its capital stock.  As a result,
      we restated our financial statements for the year ending June 30,
      2007 and revised our financial statements to reflect reverse merger
      accounting by eliminating the goodwill and adjusting the additional
      paid-in capital.










72





3.
            Revision of capitalized costs
      related to
      financing transaction. In connection with the US$5,500,000 financing that
      we completed in August 2007, we granted warrants, with an exercise price
      of US$0.50 per share, to purchase up to 990,000 shares of common stock to
      the placement agent of the Financing. The expiration date of this warrant
      is May 17, 2011. Furthermore, as a result of the investors’ exercise of
      their Series J warrants in December 2007, we granted the placement agent
      an additional warrant to purchase up to 750,000 shares of common stock
      with an exercise price of US$0.60 per share; the expiration date of this
      warrant is December 28, 2011. These placement agent warrants have the same
      terms as the Series A and Series B Warrants we issued to the investors.
       The cost related to the two placement agent warrants were originally
      capitalized and amortized over the term of the warrants.   
      However, after further  discussion  and research, we
       believe  the  warrants  issued to  the
      placement  agents  are directly attributable to raising capital;
      if we had not issued the warrants to the placement agent, we would have
      paid the same amount of cash as the fair value of the warrants.
       Therefore, we allocated the proceeds received in the financing
      transaction to the preferred shares and warrants on a relative fair value
      basis to the additional paid-in capital of preferred shares and common
      shares, respectively.





4.
            Series J Warrant
      Exercise.In connection with the exercise of the Series
      J Warrants (the “Series J Exercise”), we extended the term of our Series A
      Warrants and Series B Warrants from four years to six years, so that such
      warrants shall now expire on August 9, 2013. The extension of the term of
      the Series A and Series B Warrants (from four to six years) was a
      condition of the exercise of the Series J Warrants and the subsequent
      issuance of the Series B Preferred stock (“the
      financing”).  Originally we considered the incremental costs as
      part of the issuance costs for the Series B Preferred
      Shares.  However, after reviewing the SEC’s comments, we now
      believe that these costs are indirect costs associated with the offering
      of our securities and should be changed to an expense.  The
      incremental value of Series A warrants, Series B Warrants and investors
      warrants are US$540,430. Additionally, we incurred a commission of
      $462,519.22 pursuant to the Series J Exercise.  However, this
      commission was not paid until January 16, 2008.  Originally, in the
      financial statements as of March 31, 2008, we did not account for this
      commission as a deduction to additional paid-in capital; we included this
      commission as part of the expenses in the third quarter.  To
      correct the error, we shall account the commission as a deduction to
      additional paid-in capital in the second quarter and revise the amount of
      expenses in the third quarter.





73


This
control deficiency resulted in a misstatement to substantially all of our
financial statements and disclosures covering the year ended June 30, 2007 and
onward, which resulted in a material misstatement to such annual and interim
financial statements (September 30, 2007,  December 30, 2007 and March
31, 2008) that was not prevented or detected.  Because of the
aforementioned control deficiencies, which together constitute a material
weakness, the Company’s management has concluded that the Company’s internal
control over financial reporting was ineffective as of June 30,
2008.





The
Company is in the process of remediating its control
deficiencies.  However, the material weakness in internal control over
financial reporting that has been identified will not be remediated until
numerous internal controls are implemented and operate for a period of time, are
tested, and the Company is able to conclude that such internal controls are
operating effectively. The most significant elements of our remediation plan
are:





●
            Appoint a new Acting Chief
      Financial Officer.On May 8, 2008, we appointed Dongliang (Frank)
      Su as our Acting Chief Financial Officer; Ming Qi resigned as our Chief
      Financial Officer, although he will maintain his position as a director on
      our Board on that same day.  Mr. Su has extensive US GAAP and
      regulatory experience and maintains a deep understanding of GAAP and
      financial statements.  Mr. Su is highly skilled in analyzing and
      evaluating various financial issues and in preparing financial
      statements.





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





Although
we believe that these corrective steps will enable management to conclude that
our internal controls are effective and these measures will remediate the
material weaknesses discussed above when all of the additional financial staff
positions are filled and our filings do not receive any additional comments from
the SEC, we cannot assure you that this will be sufficient. We may be required
to expend additional resources to identify, assess and correct any additional
weaknesses in disclosure or internal control. The Company cannot make assurances
that it will not identify additional material weaknesses in its internal control
over financial reporting in the future.





This
annual report does not include an attestation report of our registered public
accounting firm regarding internal control over financial
reporting.  Management’s report was not subject to attestation by our
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit us to provide only management’s report in
this annual report.





Jpak
Group, Inc.





/s/ 
Yijun Wang


Yijun
Wang


PRESIDENT
& CEO





/s/  Dongliang (Frank)
Su


Dongliang
(Frank) Su


ACTING
CHIEF FINANCIAL OFFICER


74




ITEM
9B.                      OTHER
INFORMATION





None





PART
III








ITEM
10.                      DIRECTORS
AND EXECUTIVE OFFICERS OF THE REGISTRANT





EXECUTIVE
OFFICERS AND OTHER KEY EMPLOYEES





The
following individuals were appointed as our officers and directors upon the
completion of the Share Exchange between us and Jpak. The officers and directors
below were not affiliated with us prior to the Share Exchange. The officers and
directors of the company prior to the Share Exchange resigned from their
positions in connection with the Share Exchange.  Additionally, on May
8, 2008, we appointed Dongliang (Frank) Su as our Acting Chief Financial
Officer; Ming Qi resigned as our Chief Financial Officer on that same date,
although he will maintain his position as a director on our
Board.  Mr. Su is not related to any of our directors or executive
officers and is not involved in any transaction that is required to be disclosed
under Item 404(a) of Regulation S-K.    We appointed Mr. Su
as part of our efforts to ensure the proper interpretation of accounting issues
in the future and avoid future restatements of our financial
statements.  We believe that Mr. Su’s experience will benefit us
greatly and assist us to maintain adequate controls and procedures, as well as
accurately prepare our financial statements.





Name
            
            Age
            
            PositionYijun
      Wang
            
            57
            
            Chairman
      of the Board of Directors, Chief Executive Officer and
      PresidentDongliang
      (Frank) Su
            
            40
            
            Acting
      Chief Financial OfficerQingjun
      Yang
            
            53
            
            Director
      and President (Qingdao Renmin)Huatian
      Sha
            
            53
            
            Director
      and SecretaryMing
      Qi
            
            44
            
            DirectorStewart
      Shiang Lor
            
            45
            
            DirectorYuanbo
      Wang
            
            52
            
            Vice
      President, Technology (Qingdao Renmin)Ligui
      Jiao
            
            50
            
            Vice
      President, Manufacturing (Qingdao
Renmin)




Mr. Yijun Wang, the Chairman of the
Board and Chief Executive Officer and President. Mr. Wang is our
current President and Chairman of the Board of Directors. He has over 30 years
of working experience in corporate management, product development, manufacturing
and operations, technology management as well as government relations. He has
been with Qingdao Renmin and served as CEO since 1984. Prior to joining Qingdao
Renmin, Mr. Wang served in several technical management positions at Qingdao
Light Industrial Co., Ltd. He has received numerous government and industry
awards and distinctions, among them the “Outstanding Corporate Executive -
Qingdao”; and “National Top Executive in Packaging Industry”. Mr. Wang is a
certified Senior Economist and a certified Senior Mechanical and Electrical
Engineer. He graduated from Nanjing Machinery and Electrical Institute, Qingdao
Light Industrial Management School, and National Economic Council
University.






75




Mr. Dongliang (Frank) Su, Acting
Chief Financial Officer.  Prior to becoming our Acting CFO, he
founded Kvalue Financial Services Co., Ltd. (Kvalue), an advisory firm
specialized in providing CFO advisory services and IPO related financial
services.  Prior to Kvalue, Mr. Su worked as a Senior Manager for KPMG
China, where he was one of the founders of the departments of Internal Audit
Services and Business Performance Services at KPMG Shanghai.  Mr. Su
is also the CFO of Magiland Property, a company in Qingdao,
China.  Mr. Su has over sixteen years of experience in business,
financial management, internal auditing and consulting and led many projects
dealing with Sarbanes-Oxley Act Section 404, finance function transformation,
assurance and internal auditing for Fortune 500 companies and local
conglomerates in China.  Mr. Su is a US Certified Public Accountant
(CPA), Chartered Financial Analyst (CFA), and Certified Internal Auditor
(CIA).  Mr. Su earned his Master of Business and Administration (MBA)
with distinction from York University, Canada.





Mr. Qingjun Yang, Director.
Mr. Yang is a Director and he serves as President of Qingdao Renmin and also
leads the Marketing and Sales Division. He has been with Qingdao Renmin for over
30 years, starting as a technical manager on the production line and ultimately
becoming the President in 2001. Mr. Yang is experienced in technical management,
marketing and sales, distribution management, product development as well as
manufacturing and operations. Mr. Yang has received several government and
industry awards and distinctions, including the “Top Packaging Executive in
Shandong Province - 2005”. He has completed several technical and management
courses at Beijing Printing Institute, Ministry of Light Industry Management
School, and Qinghua University. Mr. Yang received his bachelor degree in
Mechanical Engineering from Qingdao Zhigong University.






Mr. Huatian Sha, Director and
Secretary. Mr.
Sha is a Direcotr and our Secretary. As Vice President, Accounting (Qindgao
Renmin), he is responsible for Qingdao Renmin’s finance and accounting
operations. He has more than 30 years of extensive experience in finance and
accounting, operations management and technical management. Prior to joining
Qingdao Renmin, Mr. Sha served various operations and accounting management
positions at Xinhe Cultural and Sporting Co., Ltd., Qingdao State Holding Co.,
Ltd, and Qingdao Sewing Machinery Co., Ltd. Mr. Sha graduated from Shandong
Mechanical and Industry College and Qingdao State Management
School.




Mr. Ming Qi, Director. Mr. Qi
is a Director and Chief Financial Officer of Qindgao Renmin. He has over 20
years of extensive experience in corporate and financial management,
international trade and export management, manufacturing and operations, sales
and marketing. Prior to joining Qingdao Renmin, he was General Manager at a
Qingdao food process plant of Zhengda Group and served senior
management positions at several Qingdao based companies. Mr. Qi received
bachelor degree in Mechanical Engineering from Shandong University.





Mr. Stewart Shiang Lor,
Director. Mr. Lor serves as Director. He has over 20 years of working
experience in diverse disciplines including corporate management, manufacturing
and operations, international trade, corporate finance and investment,
information technology as well as sales and marketing. Mr. Lor cofounded Lorons
International Corporation, PowerBridge Technology Co., Ltd. and Cmark Capital
Co., Ltd. and served senior management positions at several U.S. and China based
companies. Mr. Lor graduated from State University of New York at Stony Brook
and studied Management at Baruch College.





Significant
Employees





The
following are employees who are not executive officers, but who are expected to
make significant contributions to our business:





Mr. Yuanbo Wang, Vice President,
Technology (Qindgao Renmin). Mr. Wang is the Vice President, Technology
(Qindgao Renmin) and is responsible for our research and development, quality
assurance and equipment management. He has 35 years of extensive experience in
product design and formulation, production process and equipment research,
development and optimization as well as quality assurance and control. Prior to
joining Qingdao Renmin, Mr. Wang served as Vice President at Qingdao
Sensitization Material Co., Ltd. and Operations Manager at Qingdao Carpet Co.,
Ltd. He received bachelor degree in Mechanical Engineering from Shandong
Chemical Engineering University.





Mr. Ligui Jiao, Vice President,
Manufacturing (Qindgao Renmin). Mr. Jiao is the Vice President,
Manufacturing (Qindgao Renmin) and is responsible for our manufacturing,
inventory and material management operations. He has over 30 years of working
experience in production planning, production management, inventory control, and
material management as well as manufacturing resource planning applications.
Prior to joining Qingdao Renmin, Mr. Jiao served in various equipment and
manufacturing management positions at Qingdao Textile Electronics Equipment Co.,
Ltd. Mr. Jiao graduated from Qingdao Zhigong University in Mechanical and
Process Engineering and Shandong Electrical and Industry College in Economics
and Management.






76







Compliance
with Section 16(a) of the Exchange Act





Section
16(a) of the Exchange Act requires our officers, directors and persons who own
more than 10% of any class of our securities registered under Section 12(g) of
the Exchange Act to file reports of ownership and changes in ownership with the
SEC. Officers, directors and greater than 10% stockholders are required by SEC
regulation to furnish us with copies of all Section 16(a) forms they
file.





Based on
our review of copies of such reports, we believe that there was compliance with
all filing requirements of Section 16(a) applicable to our officers, directors
and 10% stockholders during fiscal 2008.


Code
of ethics





The
Company has always encouraged its employees, including officers and directors to
conduct business in an honest and ethical manner.  Additionally, it
has always been our policy to comply with all applicable laws and provide
accurate and timely disclosure. As a recent public company, we did not have a
formal written code of ethics for the 2008 fiscal year; we will adopt a formal
written code of ethics this fiscal year, 2009.





Our code
of ethics will apply to all employees, including all directors and officers and
will be designed to deter wrongdoing and promote honest and ethical conduct and
compliance with applicable laws and regulations.  The code will also
incorporate our expectations of our employees that enable us to provide accurate
and timely disclosure in our filings with the Securities and Exchange Commission
and other public communications.  Our code of ethics will be posed on
our website as soon as is practicable.  Any future changes or
amendments to our code of ethics, and any waiver of our code of ethics that
applies to our Chief Executive Officer, Chief Financial Officer, or Principal
Accounting Officer, will also be posted on our website when
applicable.





Board
Independence and Committees





Presently,
we are not required to comply with the director independence requirements of any
securities exchange.  In determining whether our directors are
independent, however, we intend to comply with the rules of the American Stock
Exchange LLC, or the AMEX.  The board of directors will also consult
with counsel to ensure that the boards of director’s determinations are
consistent with those rules and all relevant securities and other laws and
regulations regarding the independence of directors, including those adopted
under the Sarbanes-Oxley Act of 2002 with respect to the independence of audit
committee members.  The AMEX listing standards define an “independent
director” generally as a person, other than an officer of a company, who does
not have a relationship with the company that would interfere with the
director’s exercise of independent judgment.




Due to
our lack of operations and size prior to the Share Exchange, we did not have an
Audit Committee. Furthermore, we are currently quoted on the OTC Bulletin Board,
which is sponsored by the NASD, under the symbol “JPAK” and the OTCBB does not
have any listing requirements mandating the establishment of any particular
committees.  For these same reasons, we did not have any other
separate committees during fiscal 2008; all functions of a nominating committee,
audit committee and compensation committee were performed by our sole
director.  Our board of directors intends to appoint such persons and
form such committees as are required to meet the corporate governance
requirements imposed by the national securities exchanges as necessary.
Therefore, we intend that a majority of our directors will eventually be
independent directors and at least one director will qualify as an “audit
committee financial expert.”







ITEM
11.                      EXECUTIVE
COMPENSATION





The
Company





We have
not paid any compensation to our chief executive officer or any other executive
officer during the last three fiscal years.





Jpak


77


The
following table sets forth the compensation paid by Jpak to its chief executive
officer and chief financial officer and to all other executive officers for
services rendered during the last three completed fiscal years. In reviewing the
table, please note that:





●
            The
      compensation amounts paid to Yijun Wang reflects compensation paid to him
      by the operating subsidiaries of Jpak during the reported periods;
      and●
            No
      officer earned more than US$100,000 per
annum




Summary
Compensation Table





Name
      and Principal Position
            Year
            Salary
              ($)
            Bonus
              ($)
            Stock
      Awards
              ($)
            Option
      Awards
              ($)(a)
            (b)
            (c)
            (d)
            (e)
            (f)Yijun
      Wang
              Chief
      Executive Officer
            2008
            50,000
            0
            0
            0Yijun
      Wang
              Chief
      Executive Officer
            2007
            50,000
      (1)
            0
            0
            0Yijun
      Wang
              Chief
      Executive Officer
            2006
            0
            0
            0
            0Ming
      Qi
              Chief
      Accounting Officer
            2008
            30,000
      (2)
            0
            0
            0Ming
      Qi
              Chief
      Accounting Officer
            2007
            30,000
      (3)
            0
            0
            0Ming
      Qi
              Chief
      Accounting Officer
            2006
            0
            0
            0
            0Dongliang
      (Frank) Su
              Acting
      Chief Financial Officer (3)
            2008
            18,000
      (4)
            0
            0
            0Dongliang
      (Frank) Su
              Acting
      Chief Financial Officer
            2007
            0
            0
            0
            0Dongliang
      (Frank) Su
              Acting
      Chief Financial Officer
            2006
            0
            0
            0
            0


78





Name
      and Principal Position
            Year
            Non-Equity
      Incentive Plan Compensation
              ($)
            Nonqualified  Deferred
      Compensation Earnings
              ($)
            All
      other Compensation
              ($)
            Total
              ($)(a)
            (b)
            (g)
            (h)
            (i)
            (j)Yijun
      Wang
              Chief
      Executive Officer
            2008
            0
            0
            0
            50,000Yijun
      Wang
              Chief
      Executive Officer
            2007
            0
            0
            0
            50,000Yijun
      Wang
              Chief
      Executive Officer
            2006
            0
            0
            0
            0Ming
      Qi
              Chief
      Accounting Officer
            2008
            0
            0
            0
            30,000Ming
      Qi
              Chief
      Accounting Officer
            2007
            0
            0
            0
            30,000Ming
      Qi
              Chief
      Accounting Officer
            2006
            0
            0
            0
            0Dongliang
      (Frank) Su
              Acting
      Chief Financial Officer
            2008
            0
            0
            0
            18,000Dongliang
      (Frank) Su
              Acting
      Chief Financial Officer
            2007
            0
            0
            0
            0Dongliang
      (Frank) Su
              Acting
      Chief Financial Officer
            2006
            0
            0
            0
            0





(1) The
compensation for Yijun Wang reflects his salary at Qingdao Renmin prior to the
Share Exchange.




(2) Ming
Qi served as our Chief Financial Officer from January 2007 until May
2008.





(3) The
compensation for Ming Qi in 2007 reflects his salary at Qingdao Renmin prior to
the Share Exchange.





(4) Frank
Su has served as our Acting Chief Financial Officer since May 2008; accordingly,
he did not receive any compensation from us prior to such time, however we are
required to include him in the table for the preceding three fiscal
years.






79







Potential
Payments upon Termination




Our
employment agreements with Yijun Wang, our Chief Executive Officer, and Ming Qi,
our Chief Financial Officer provide for various payments and benefits upon
termination of their employment. Ming Qi waived all potential payments and
benefits upon his resignation as our CFO.  Pursuant to a one year
agreement we signed with Mr. Frank Su, he agreed to serve as our Acting Chief
Financial Officer until we find an adequate replacement.  After we
have negotiated the termination of the contract with the applicable employee,
the employee shall be provided with a compensation subsidy as per relevant
national, provincial and municipal regulations. We do not have any other
policies, agreements or arrangements regarding potential payments upon
termination of employment.





Outstanding
Equity Awards at Fiscal Year-End





There are
no outstanding equity awards as of the end of our most recently completed fiscal
year.




Compensation of
Directors




We have
not paid our directors fees in the past for attending scheduled or special
meetings of our board of directors. In the future, we may adopt a policy of
paying independent directors a fee for their attendance at board and committee
meetings. We do however reimburse each director for reasonable travel expenses
related to such director’s attendance at board of directors and committee
meetings, but such amount shall not exceed $5,000.




Limitation
on Liability and Indemnification Matters




Article X
of our Articles of Incorporation provide that no director or officer of the
corporation past, present or future, shall be personally liable to the
corporation or any of its shareholders for damages for breach of fiduciary duty
as a director or officer; provided, however, that the liability of a director
for acts or omissions which involve intentional misconduct, fraud or knowing
violation of law and for the payment of dividends in violation of Section 78.300
of the Nevada Revised Statutes is not so eliminated. The corporation shall
advance or reimburse reasonable expenses incurred by this individual without
regard to the limitations in Nevada Revised Statute 78.7502, or any other
limitation which may hereafter be enacted to the extent such limitation may be
disregarded if authorized by the Articles of Incorporation.




Our
bylaws provide for the indemnification of our directors and officers, as to
those liabilities and on those terms and conditions as
appropriate.








ITEM
      12.
            SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS.





The
following table sets forth certain information regarding the beneficial
ownership of our common stock, Series A Preferred Stock and Series B Preferred
Stock. The information below indicates:





●
            each
      person who is known by us to be the beneficial owner of more than five
      percent (5%) of our issued and outstanding shares of common stock or our
      issued and outstanding shares of Series A Preferred Stock or Series B
      Preferred Stock;●
            each
      of our directors, executive officers and nominees to become directors;
      and●
            all
      directors and executive officers as a
group.






80





As used
in this section, the term beneficial ownership with respect to a security is
defined by Rule 13d-3 under the Securities Exchange Act of 1934, as amended, as
consisting of sole or shared voting power (including the power to vote or direct
the vote) and/or sole or shared investment power (including the power to dispose
of or direct the disposition of) with respect to the security through any
contract, arrangement, understanding, relationship or otherwise, subject to
community property laws where applicable.





As of
October 30, 2008, we have 24,805,000 shares of common stock outstanding;
5,608,564 shares of Series A Preferred Stock outstanding, which converts into
11,217,128 shares of common stock; and 5,000,000 shares of Series B Preferred
Stock outstanding, which convert into 8,333,333 shares of common
stock.  Each holder of Series A and Series B Preferred Stock are
entitled to vote on all matters, together with the holders of Common Stock, on
an as converted basis up to 9.99% of (A) the Common Stock issuable upon
conversion of the Series A and Series B Preferred Stock held by such holder,
plus (B) all other shares of Common Stock beneficially owned by the holder at
such time.  However, based upon the terms of the preferred stock and
the Warrants, the holders thereof may not convert or exercise such securities if
on any date, such holder would be deemed the beneficial owner of either more
than 4.9% or 9.9%, depending upon the holder’s specific cap, of the then
outstanding shares of our common stock; although, the holder can elect to waive
the cap upon 61 days notice to us, but the cap shall be of no further force or
effect during the sixty-one (61) days immediately preceding the expiration of
the Warrant.Accordingly,
the column entitled “Percent of Class” represents the total voting power that a
shareholder possesses based on his/her current holdings, taking the ownership
cap into account.  .





Except as
otherwise indicated, each person and each group shown in the table has sole
voting and investment power with respect to the shares of common stock and
Series A and Series B Preferred Stock indicated. For purposes of the table
below, in accordance with Rule 13d-3 under the Exchange Act, a person is deemed
to be the beneficial owner, for purposes of any shares of common stock, Series A
Preferred Stock or Series B Preferred Stock, over which he or she has or shares,
directly or indirectly, voting or investment power, or of which he or she has
the right to acquire beneficial ownership at any time within 60 days after
October 30, 2008. As used herein, “voting power” is the power to vote or direct
the voting of shares and “investment power” includes the power to dispose or
direct the disposition of shares.




Name
      and Address*
              
              Amount
      and Nature of beneficial ownership
              
              Percent
      of ClassJoyrich
      Group Limited (1)
              
              17,023,700
              
              68.6%Fabregas
      Group Limited (2)
              
              3,163,188
              
              12.8%Statepro
      Investments Ltd. (3)
              
              1,170,954
              
              4.7%Vision
      Opportunity Master Fund (4)
              
              817,903
      (5)
              
              4.9%
      (5)QVT
      Fund LP (6)
              
              2,425,995
      (7)
              
              9.8%
      (7)Quintessence
      Fund LP (6)
              
              1,944,189(8)
              
              7.8%(8)Yijun
      Wang
              
              —
              
              —Qingjun
      Yang
              
              —
              
              —Huatian
      Sha
              
              —
              
              —Ming
      Qi
              
              —
              
              —Yuanbo
      Wang
              
              —
              
              —Ligui
      Jiao
              
              —
              
              —Stewart
      Shiang Lor (9)
              
              21,357,842
              
              86.1%All
      executive officers and directors as a group (seven
persons)
              
              21,357,842
              
              86.1%


* The
address for the officers and directors is 15 Xinghua Road, Qingdao, Shandong
Province, the People’s Republic of China, (86-532) 8461 6387.





81




(1)   Joyrich Group Limited is a BVI company
of which Stewart Shiang Lor is the sole shareholder and has sole voting and
dispositive power over these shares. Mr. Lor is a one of our directors. 
See “Certain Relationships and Related Transactions - Reorganization of Qingdao
Renmin.”





(2)
  Fabregas Group Limited is a BVI company of which Stewart Shiang Lor is
the sole shareholder and has sole voting and dispositive power over these
shares. Mr. Lor is a one of our directors. See “Certain Relationships and
Related Transactions - Reorganization of Qingdao Renmin.”




(3)
  Statepro Investments Ltd. is a BVI company of which Stewart Shiang Lor is
the sole shareholder and has sole voting and dispositive power over these
shares. Mr. Lor is a one of our directors.




(4)
  Adam Benowitz, the managing member of Vision Opportunity Master Fund, has
sole voting and investment control over these securities. Mr. Benowitz disclaims
beneficial ownership of these securities.





(5) This
amount represents 4.9% of the shares of common stock underlying Vision’s Series
A Preferred Stock, Series B Preferred Stock and Warrants.  Vision
currently owns 2,804,282 shares of Series A Preferred Stock (convertible into
5,608,564 shares of common stock), 2,500,000 shares of Series B Preferred Stock
(convertible into 4,166,667 shares of common stock) and warrants to purchase up
to 9,666,666 shares of common stock; however, pursuant to the ownership Cap
explained above, they are only deemed to beneficially own the number listed in
the table.





(6)
 Management of
QVT Fund and Quintessence is vested in its general partner, QVT Associates GP
LLC. QVT Financial LP is the investment manager for QVT Fund LP and shares
voting and investment control over the securities held in QVT Fund
LP.  QVT Financial GP LLC is the general partner of QVT Financial LP
and as such has complete discretion in the management and control of the
business affairs of QVT Financial LP.  AVT Associates GP LLC is the
general partner of QVT Fund LP and may be deemed to beneficially own the
securities.  The managing members of QVT Financial GP LLC are Daniel
Gold, Lars Bader, Tracy Fu and Nicholas Brumm.  Each of QVT Financial
LP, QVT Financial GP LLC< Daniel Gold, Lars Bader,
Tracy Fu and Nicholas Brumm disclaims beneficial ownership of our securities
held by QVT Fund and Quintessence, except to the extend of its pecuniary
interest therein.





(7)  This
amount represents 9.9% of the shares of common stock underlying QVT’s Series A
Preferred Stock, Series B Preferred Stock and Warrants.  QVT currently
owns 2,523,854 shares of Series A Preferred Stock (convertible into 5,047,708
shares of common stock), 2,250,000 shares of Series B Preferred Stock
(convertible into 3,750,000 shares of common stock) and warrants to purchase up
to 8,700,000 shares of common stock; however, pursuant to the ownership Cap
explained above, they are only deemed to beneficially own the number listed in
the table.





(8) This
amount represents 9.9% of the shares of common stock underlying Quintessence’s
Series A Preferred Stock, Series B Preferred Stock and
Warrants.  Quintessence currently owns 280,428 shares of Series A
Preferred Stock (convertible into 560,856 shares of common stock), 250,000
shares of Series B Preferred Stock (convertible into 416,667 shares of common
stock) and warrants to purchase up to 966,666 shares of common stock; however,
pursuant to the ownership Cap explained above, they are only deemed to
beneficially own the number listed in the table.




(8)
  Mr. Lor has sole voting and dispositive power over the shares of common
stock beneficially owned by Joyrich Group Limited, Fabregas Group Limited and
Statepro Investments Ltd. See footnotes (1) through (3).










82







Changes
in Control





Pursuant
      to the Share Exchange, all the shares of Jpak were transferred to us and
      Jpak became a wholly-owned subsidiary of ours, and at the same time the
      shareholders of Jpak were issued 23,005,000 shares of our common stock,
      which represented 64.4% of all the issued and outstanding shares of our
      common stock (assuming conversion of the preferred stock described below)
      following the Share Exchange and the financing.  Therefore, the
      closing of the Share Exchange caused a change in
  control.











ITEM
      13.
            CERTAIN
      RELATIONSHIPS AND RELATED
TRANSACTIONS.





We have
not entered into any transactions during the last two fiscal years with any
director, executive officer, director nominee, 5% or more shareholder, nor have
we entered into transactions with any member of the immediate families of the
foregoing person (include spouse, parents, children, siblings, and in-laws) nor
is any such transaction proposed, except as follows:





Reorganization
of Qingdao Renmin





On August
21, 2006, Grand International entered into a sales and purchase agreement with
three of the then-existing five shareholders (the “Original Shareholders”) of
Qingdao Renmin, pursuant to which Grand International purchased 88.23% of the
equity interest in Qingdao Renmin. The total purchase consideration was
RMB40,999,000 which was determined based upon the net asset value of Qingdao
Renmin as of August 21, 2006. On September 5, 2006, this transfer was
approved by the Qingdao Municipal Bureau of Foreign Trade and Economic
Cooperation, and the registration with the Qingdao State Administration for
Industry and Commerce was completed on December 7, 2006. As a result of this
transfer, Grand International acquired an 88.23% equity interest in Qingdao
Renmin. In July 2007, Grand International purchased the remaining 11.77%
state-owned equity interest in Qingdao Renmin and now owns 100% equity interest
in Qingdao Renmin.


In March
2007, Joyrich Group Limited and Fabregas Group Limited, two of our principal
shareholders, issued stock options to the executives and management team of
Qingdao Renmin pursuant to which such persons will be entitled to acquire shares
of Joyrich Group Limited and Fabregas Group Limited. Under the terms of the
options, such person will have the right to purchase 100% of the outstanding
capital stock of Joyrich Group Limited and 43.63% of the outstanding capital
stock of Fabregas Group Limited. These options may be exercised in
accordance with the following schedule: 75% of the shares subject to these
options vested; 25% of the shares subject to these options shall be
vested as of December 31, 2007; provided, that the revenue of Qingdao
Renmin for the period from October 1, 2007 to December 31, 2007 reaches RMB
30,000,000.





Share
Exchange





On August
9, 2007, we entered into and consummated the transactions contemplated under a
Securities Exchange Agreement, pursuant to which all the shares of Jpak were
transferred to us and Jpak became our wholly-owned subsidiary and at the same
time the shareholders of Jpak were issued 23,005,000 shares of our common stock,
which represented 64.4% of all the issued and outstanding shares of our common
stock (assuming conversion of the preferred stock described below) following the
Share Exchange and the Financing.








83





Registration
Rights Agreement




On August
9, 2007, we also entered into a Registration Rights Agreement with the Investors
(the “Investor RRA”). Under the Investor RRA, we are required to prepare and
file a registration statement for the sale of the common stock issuable to the
Investors under the Series A Preferred Stock and the Series A and Series B
Warrants and to use our best efforts to cause, and to maintain, the
effectiveness of the registration statement. We are subject to certain monetary
obligations if the registration statement is not declared effective by the
effective date specified in the Investor RRA. The obligations are payments in an
amount equal to 2% of the aggregate amount invested by such Investor (based upon
the number of Registrable Securities then owned by such Investor) for each 30
day period or any portion thereof following the date by which such Registration
Statement should have been effective, up to a maximum amount of
10%.  The Investor RRA provides for specific registration procedures
if the SEC issues a Rule 415 comment.  Since we received a Rule 415
comment, we are required to register a certain number of shares of common stock
underlying the Series A Preferred Stock in the registration statement;
subsequent registration statements will be filed to register the rest of the
common stock underlying the preferred stock and warrants.  Each such
subsequent registration statement must be declared effective by the earlier of
(A) the 90th day
following the filing date of such Registration Statement (or in the event such
Registration Statement is reviewed by the Commission, the one hundred twentieth
(120th) day
following such filing date) or (B) 5 business days after SEC has no more
comments. We do not have any monetary obligations for any securities that were
not permitted to be included in a registration statement because of the SEC’s
application of Rule 415 until such time as such securities are required to be
filed pursuant to the Investor RRA.  In such case, the liquidated
damages shall be calculated to only apply to the percentage of securities which
are permitted by the Commission to be included in the Registration
Statement.





Under the
Investor RRA, the shareholders of Jpak were granted piggyback registration
rights with respect to the registration statement to be filed under the Investor
RRA for 15,805,000 shares of common stock.





Securities
Escrow Agreement





In
addition, on August 9, 2007, we entered into the securities escrow agreement
with the Investors, the principal stockholders named therein (the “Escrow
Stockholders”) and the escrow agent named therein (the “Escrow Agent”), (the “Securities Escrow
Agreement”).Under the Securities Escrow Agreement,
the Escrow Stockholders agreed to place an aggregate of 7.2 million shares of
common stock into escrow for the benefit of the Investors in the event we fail
to achieve net income for Fiscal 2008 of at least US$3.955million (the “Fiscal 2008 Performance
Threshold”).We obtained the Fiscal 2008 Performance
Threshold and therefore all of the escrowed shares were returned to the Escrow
Stockholders.




Lock-Up
Agreement





Pursuant
to that certain lock-up agreement, dated as of August 9, 2007 entered into by
the former Jpak shareholders (the “Lock-Up Agreement”), shareholders holding an
aggregate of 23,005,000 shares of our common stock have agreed that, for a
period of six months following the effectiveness of the registration statement,
of which this prospectus is a part, they will not, subject to certain limited
exceptions set forth in the Lock-Up Agreement, including consent by the
Investors, offer, sell, contract to sell, assign, transfer, hypothecate, pledge
or grant a security interest in or other dispose of any shares of common stock.
In addition, for a period of 12 months following such six month period, no such
shareholder shall sell more than one-twelfth of their total shares of common
stock during any one month period.





Review, Approval and Ratification of Related Party Transactions





Given our
small size and limited financial resources, we had not adopted, prior to the
Share Exchange, formal policies and procedures for the review, approval or
ratification of transactions, such as those described above, with our executive
officers, directors and significant shareholders. However, we intend that such
transactions will, on a going-forward basis, be subject to the review, approval
or ratification of our board of directors, or an appropriate committee
thereof.






84




Promoters
and Certain Control Persons




On August
9, 2007, we entered into and consummated the transactions contemplated (the
“Share Exchange”) under a Securities Exchange Agreement (the “SEA”) by and among
us, Jpak and the shareholders of Jpak (namely Joyrich Group Limited, a British
Virgin Islands (“BVI”) company, Fabregas Group Limited, a BVI company, Statepro
Investments Ltd., a BVI company, Raytech Investments Limited, a BVI company, and
Capital American Markets Limited, a BVI company), pursuant to which all the
shares of Jpak were transferred to us and Jpak became a wholly-owned subsidiary
of ours, and at the same time the shareholders of Jpak were issued 23,005,000
shares of our common stock, which represented 64.4% of all the issued and
outstanding shares of our common stock (assuming conversion of the preferred
stock described below) following the Share Exchange and the
financing.





Our only “promoters” (within the
meaning of Rule 405 under the Securities Act), or person who took the initiative
in the formation of our business or in connection with the formation of our
business received 10% of our debt or equity securities or 10% of the proceeds
from the sale of such securities in exchange for the contribution of property or
services, during the last five years have been Joyrich, Fabregas and
Statepro.  As disclosed elsewhere in this Report, in connection with
the Share Exchange, Joyrich, Fabregas and Statepro, the majority shareholders of
Raygere, received 17,023,700, 3,163,188 and 1,170,954 shares of our common
stock, respectively, representing approximately 68.6%, 12.8% and 4.7%,
respectively, of our issued
and outstanding shares.  Mr. Stewart Shiang Lor is the sole
shareholder of Joyfrich, Fabregas and Statepro and Mr. Lor is one of our
directors.





ITEM
      14.
            PRINCIPAL
      ACCOUNTING FEES AND SERVICES







(1) AUDIT
FEES






The aggregate fees billed for
professional services rendered by Patrizio & Zhao for the audit of the
registrant's annual financial statements and review of financial statements
included in the registrant's Form 10-K or services that are normally provided by
the accountant in connection with statutory and regulatory filings or
engagements for fiscal years 2008 and 2007 were approximately $90,000 and
$55,000, respectively.






(2)
AUDIT-RELATED FEES






NONE






(3) TAX
FEES






NONE






(4) ALL
OTHER FEES






NONE






(5) AUDIT
COMMITTEE POLICIES AND PROCEDURES






The
policy of our Audit Committee is to pre-approve all audit and permissible
non-audit services to be performed by the Company’s independent auditors during
the fiscal year.




No services related to Audit-Related Fees, Tax Fees or All Other Fees described
above, were approved by the Audit Committee.





85





ITEM
      15.
            EXHIBITS
      & FINANCIAL STATEMENT SCHEDULES





1.
            Financial
      Statements and Financial Statement Schedules See “Index to Consolidated
      Financial Statements” on page F-1





2.
            EXHIBITS


3.1
            
            Articles
      of Incorporation, as amended3.2
            
            Bylaws,
      as amended4.1
            
            Certificate
      of Designation of the Relative Rights and Preferences of the Series A
      Convertible Preferred Stock of Jpak Group, Inc., filed with the Secretary
      of State of Nevada on August 9, 2007 (incorporated by reference to Exhibit
      4.1 of the Registrant’s Form 8-K filed on August 15,
  2007)4.2
            
            Amendment
      to the Certificate of Designation of the Relative Rights and Preferences
      of the Series A Convertible Preferred Stock of Jpak Group, Inc., filed
      with the Secretary of State of Nevada on October 1, 2007 (incorporated by
      reference to Exhibit 4.1(a) of the Registrant’s Form 8-K filed on October
      9, 2007)4.3
            
            Certificate
      of Designation of the Relative Rights and Preferences of the Series B
      Convertible Preferred Stock of Jpak Group, Inc. (incorporated by reference
      to Exhibit 4.1 of the Registrant’s Form 8-K filed on January 4,
      2008).4.4
            
            Series
      A Warrant to Purchase shares of common stock of Jpak Group, Inc., issued
      on August 9, 2007 (incorporated by reference to Exhibit 4.2 of Rx
      Staffing, Inc.’s Form 8-K filed on January 4, 2008).4.5
            
            Series
      B Warrant to Purchase shares of common stock of Jpak Group, Inc., issued
      on August 9, 2007 (incorporated by reference to Exhibit 4.3 of Rx
      Staffing, Inc.’s Form 8-K filed on January 4, 2008).4.6
            
            Series
      C Warrant to Purchase shares of common stock of Jpak Group, Inc.
      (incorporated by reference to Exhibit 4.4 of the Registrant’s Form 8-K
      filed on January 4, 2008).4.7
            
            Series
      D Warrant to Purchase shares of common stock of Jpak Group, Inc.
      (incorporated by reference to Exhibit 4.5 of the Registrant’s Form 8-K
      filed on January 4, 2008).10.1
            
            Note
      Purchase Agreement by and among Jpak Group Co., Ltd, Grand International
      Industrial Limited and the investors identified therein, dated as of May
      17, 2007 (incorporated by reference to Exhibit 10.1 of the Registrant’s
      Form 8-K filed on August 15, 2007).10.2
            
            Joinder
      Agreement executed by Jpak Group, Inc., dated as of August 9, 2007
      (incorporated by reference to Exhibit 10.2 of the Registrant’s Form 8-K
      filed on August 15, 2007).10.3
            
            Registration
      Rights Agreement by and among Jpak Group, Inc. and the purchasers named
      therein, dated as of August 9, 2007 (incorporated by reference to Exhibit
      10.3 of the Registrant’s Form 8-K filed on August 15,
    2007).10.4
            
            Securities
      Escrow Agreement by and among Jpak Group, Inc., the purchasers named
      therein, the principal stockholders of Jpak Group, Inc. named therein and
      the escrow agent named therein, dated as of August 9, 2007 (incorporated
      by reference to Exhibit 10.4 of the Registrant’s Form 8-K filed on
      August 15, 2007).10.5
            
            Lock-Up
      Agreement by and among Jpak Group, Inc. and the shareholders of Jpak
      Group, Inc. named therein, dated as of August 9, 2007 (incorporated by
      reference to Exhibit 10.5 of the Registrant’s Form 8-K filed on August 15,
      2007)


86





10.6
            
            Working
      Capital Loan Contract, effective as of August 27, 2006, by and between
      Qingdao Renmin Printing Co., Ltd., as borrower, and Industrial and
      Commercial Bank of China, Qingdao Branch, as lender (incorporated by
      reference to Exhibit 10.6 of the Registrant’s Form 8-K filed on August 15,
      200710.7
            
            Working
      Capital Loan Contract, effective as of February 12, 2007, by and between
      Qingdao Renmin Printing Co., Ltd., as borrower, and Qingdao City
      Commercial Bank, Yongping Branch, as lender (incorporated by reference to
      Exhibit 10.7 of the Registrant’s Form 8-K filed on August 15,
      2007)10.8
            
            Working
      Capital Loan Contract, effective as of April 10, 2007, by and between
      Qingdao Renmin Printing Co., Ltd., as borrower, and Industrial and
      Commercial Bank of China, Qingdao Branch, as lender (incorporated by
      reference to Exhibit 10.9 of the Registrant’s Form 8-K filed on August 15,
      2007).10.9
            
            Employment
      Agreement, effective June 1, 2001, by and between Qingdao Renmin Printing
      Co., Ltd, as employer, and Yijun Wang, as employee.10.10
            
            Employment
      Agreement, effective February 26, 2007, by and between Qingdao Renmin
      Printing Co., Ltd, as employer, and Ming Qi, as
employee10.11
            
            Letter
      of Agreement by and among Jpak Group, Inc. and the holders of Series J
      Warrants, dated as of December 28, 2007 (incorporated by reference to
      Exhibit 10.1 of the Registrant's form 8-K filed on January 4,
      200821.1
            
            List
      of Subsidiaries of the Company (incorporated by reference to Exhibit 21.1
      of the Registrant’s Form 8-K filed on August 15, 2007)31.1
            
            Certifications
      of Principal Executive Officer  pursuant to Rule 13a-14(a) of
      the Securities Exchange Act of 1934, the “Act”31.2
            
            Certifications
      of Principal Financial Officer pursuant to Rule 13a-14(a) of the
      “Act”32.1
            
            Certification
      of Principal Executive Officer pursuant to 18 U.S.C. Section
      1350.32.2
            
            Certifications
      of Principal Financial Officer pursuant to 18 U.S.C. Section
      1350














87









In
accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.





Jpak
      Group, Inc.By:
            /s/Yijun
    WangYijun
      Wang
              PRESIDENT
      AND CHIEF EXECUTIVE OFFICERBy:
            /s/ Dongliang (Frank) SuDongliang
      (Frank) Su
              ACTING
      CHIEF FINANCIAL OFFICER








Date: 
December 8, 2009





Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.





Date:
      December 8, 2008
            
            By:
            /s/ 
      Yijun WangYijun
      Wang
              PRESIDENT,
      CHIEF EXECUTIVE OFFICER, DIRECTORDate: 
      December 8, 2008
            
            By:
            /s/  Ming QiMing
      Qi
              DIRECTORDate: 
      December 8, 2008
            
            By:
            /s/  Huation ShaHuatian
      Sha
              DIRECTORDate:
      December 8, 2008
            
            By:
            /s/  Qingjun YangQingjun
      Yang
              DIRECTORDate: 
      December 8, 2008
            
            By:
            /s/  Stewart Shiang
LorStewart
      Shiang Lor
              DIRECTORDate: 
      December 8, 2008
            
            By:
            /s/  Dongliang (Frank)
    SuDongliang
      (Frank) Su
              ACTING
      CHIEF FINANCIAL OFFICER





88