UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 WASHINGTON,
D.C. 20549
 
 FORM
10-K/A
 (Amendment
No. 1)
 
 x ANNUAL REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
 
 For the
fiscal year ended December 31, 2008
 
 or
 
 o TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF
1934
 
 For the
transition period from _______ to _______
 
 Commission
File No.: 333-139008
 
 GREAT
EAST BOTTLES & DRINKS (CHINA) HOLDINGS, INC
 (Exact
Name of Registrant as Specified in Its Charter)
 
 Florida
              59-2318378(State
      or Other Jurisdiction of
              (I.R.S.
      EmployerIncorporation
      or Organization)
              Identification
      No.)
 
 203 Hankow Center, 5-15
Hankow Road, Tsimshatsui, Kowloon, Hong Kong
 (Address
of Principal Executive Offices) (Zip Code)
 
 Registrant’s
telephone number, including area code: 852-2192-4805
 
 Securities
registered pursuant to Section 12(b) of the Act:  None
 
 Securities
registered pursuant to Section 12(g) of the Act: Common Stock, par value $.01
per share
 
 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 the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes o 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 the 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. o
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.
 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
 
 State the
aggregate market value of the common stock held by non-affiliates of the Issuer
on June 30, 2008: $18,850,000
 
 Indicate
the number of shares outstanding of each of the Registrant’s classes of common
stock, as of the latest practicable date: 40,000,000 at April 22,
2009.
 
 Documents
incorporated by reference: None
 
  
  EXPLANATORY
NOTE
 
 We are
filing this Amendment Number 1 on Form 10-K/A (“Amendment Number 1”) to amend
our annual report on Form 10-K for the year ended December 31, 2008 (the
“Original Report”) to (i) restate our Financial Statements for the year ended
December 31, 2008, (ii) to amend Management’s Discussion and Analysis of
Financial Condition and Results of Operation to reflect the restated Financial
Statements for the year ended December 31, 2008, (iii) amend Item 9A(T) to
clarify the changes to our internal control over financial reporting during that
fiscal year, and (iv) amend Item 11 to account for executive compensation
accrued and waived in a fiscal year but not paid until
another.
 
 This
Amendment Number 1 continues to speak as of the date of the Original
Report.  We have not updated the disclosures contained therein to
reflect any events that have occurred at a date subsequent to the date of the
Original Report.
 
 Item
      7.
              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
 
 Note regarding forward –
looking statements
 
 This
annual report contains forward-looking statements within the meaning of the
federal securities laws. These include statements about our expectations,
beliefs, intentions or strategies for the future, which we indicate by words or
phrases such as "anticipate", "expect", "intend", "plan", "will", "we believe",
"the Company believes", "management believes" and similar language. The
forward-looking statements are based on the current expectations of the Company
and are subject to certain risks, uncertainties and assumptions, including those
set forth in the discussion under "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in this report. The actual
results may differ materially from results anticipated in these forward-looking
statements. We base the forward-looking statements on information currently
available to us, and we assume no obligation to update them.
 
 Investors
are also advised to refer to the information in our filings with the Securities
and Exchange Commission, specifically Forms 10-K, 10-Q and 8-K, in which we
discuss in more detail various important factors that could cause actual results
to differ from expected or historic results. It is not possible to foresee or
identify all such factors. As such, investors should not consider any list of
such factors to be an exhaustive statement of all risks and uncertainties or
potentially inaccurate assumptions.
 
 Except as
otherwise indicated by the context, references in this Form 10-K to “we”, “us”,
“our”, “the Registrant”, “our Company” or “the Company” are to Great East
Bottles & Drinks (China) Holdings, Inc., a Florida corporation and its
consolidated subsidiaries. Unless the context otherwise requires, all references
to (i) “BVI” are to British Virgin Islands; (ii) “PRC” and “China” are to
the People’s Republic of China; (iii) “U.S. dollar”, “$” and “US$” are to United
States dollars; (iv) “RMB” are to Yuan Renminbi of China; (v) “Securities Act”
are to the Securities Act of 1933, as amended; and (vi) “Exchange Act” are to
the Securities Exchange Act of 1934, as amended.
 
 Critical Accounting Policies
and Estimates
 
 Our
financial statements and related public financial information are based on the
application of accounting principles generally accepted in the United States
("US GAAP"). US GAAP requires the use of estimates; assumptions, judgments and
subjective interpretations of accounting principles that have an impact on the
assets, liabilities, revenues and expenses amounts reported. These estimates can
also affect supplemental information contained in our external disclosures
including information regarding contingencies, risk and financial condition. We
believe our use of estimates and underlying accounting assumptions adhere to
GAAP and are consistently and conservatively applied. We base our estimates
on historical experience and on various other assumptions that we believe to be
reasonable under the circumstances. Actual results may differ materially from
these estimates under different assumptions or conditions. We continue to
monitor significant estimates made during the preparation of our financial
statements.
  2
  
 
 We
believe the following is among the most critical accounting policies that impact
our consolidated financial statements. We suggest that our significant
accounting policies, as described in our consolidated financial statements in
the Summary of Significant Accounting Policies, be read in conjunction with this
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
 
 We
recognize revenue in accordance with Staff Accounting Bulletin ("SAB") No. 104.
All of the following criteria must exist in order for us to recognize
revenue:
 
 1.
Persuasive evidence of an arrangement exists;
 2.
Delivery has occurred;
 3. The
seller's price to the buyer is fixed or determinable; and
 4.
Collectability is reasonably assured.
 
 The
majority of the Company's revenue results from sales contracts with direct
customers and revenues are generated upon the shipment of goods. The Company's
pricing structure is fixed and there are no rebate or discount programs.
Management conducts credit background checks for new customers as a means to
reduce the subjectivity of assuring collectability. Based on these factors, the
Company believes that it can apply the provisions of SAB 104 with minimal
subjectivity.
 
 Recent Accounting
Pronouncements
 
 The
Company does not expect that the adoption of any recent accounting
pronouncements will have any material impact on its financial
statements.
 
 Results of Operations –
Three Months Ended December 31, 2008 as Compared to Three Months Ended December
31, 2007
 
 The
following table summarizes the results of our operations during the three-month
period ended December 31, 2008 and 2007, and provides information regarding the
dollar and percentage increase or (decrease) from the three-month period ended
December 31, 2008 to the three-month period ended December 31,
2007.
 
 Three
      months ended Dec 31,
              
              
              (Decrease)/
              
              
              (%Decrease)
              /2008
              
              
              2007
              
              
              Increase
              
              
              %
      IncreaseRevenue
              
              $
              6,368,010
              
              
              $
              4,133,828
              
              
              $
              2,234,182
              
              
              
              54.0
              %Cost
      of sales
              
              
              5,300,420
              
              
              
              2,954,273
              
              
              
              2,346,147
              
              
              
              79.4
              %Gross
      profit
              
              
              1,067,590
              
              
              
              1,179,555
              
              
              
              (111,965
              )
              
              
              (9.5
              %)General
      & administrative
              
              
              543,548
              
              
              
              276,453
              
              
              
              267,095
              
              
              
              96.6
              %Sales
      & marketing
              
              
              82,775
              
              
              
              15,667
              
              
              
              67,108
              
              
              
              428.3
              %Income
      from operations
              
              
              441,267
              
              
              
              887,435
              
              
              
              (446,168
              )
              
              
              (50.3
              %)Other
      income (expense)
              
              
              (119,709
              )
              
              
              199,754
              
              
              
              (319,463
              )
              
              
              (159.9
              %)Provision
      for taxation
              
              
              61,711
              
              
              
              195,596
              
              
              
              (133,885
              )
              
              
              (68.4
              %)Minority
      interests
              
              
              1,007
              
              
              
              7,226
              
              
              
              (6,219
              )
              
              
              (86.1
              %)Discontinued
      operations
              
              
              -
              
              
              
              9,968
              
              
              
              9,968
              
              
              
              (100
              %)Net
      income
              
              
              258,840
              
              
              
              874,399
              
              
              
              (615,559
              )
              
              
              (70.4
              %)
 
 Revenues
 
 Sales
revenue increased from $4,133,828 in the last quarter of 2007 to $6,368,010 in
the same period in 2008, representing a 54.0% increase. The increase in revenue
was mainly due to the increase in demand of PET bottles from Coca – Cola and
Pepsi, which are our major customers.
  3
  
 
 Cost of
sales and gross margin
 
 Cost of
sales increased from $2,954,273 in the last quarter of 2007 to $5,300,420 in the
same period in 2008, representing a 79.42% increase. The increase was due to the
increase in sales in the last quarter of 2008 as compared to the same period
last year. We recorded a gross margin of 16.8% in the last quarter of 2008, a
decrease of nearly 11.7% as compared to 28.5% in the same period last year. The
decrease was mainly due to the increase in production costs, which lowered the
gross profits.
 
 Sales and
marketing
 
 Sales and
marketing expenses increased by $67,108 or 428.3% from $15,667 in last quarter
2007 to $82,775 in the same period 2008. The increase was mainly due to the
increase in selling expenses.
 
 General
and administrative
 
 General
and administrative expenses increased from $276,453 in the last quarter of 2007
to $543,548 for the same period 2008, representing a increase of $267,095 or
96.6%. The increase was mainly a result of increase in staff costs, including
social insurance costs for staff.
 
 Net
income
 
 Net
income for the last quarter ended 2008 was $258,840 as compared to $874,399 in
the same period 2007. The material decrease was mainly attributable to the
increase in selling expenditures and staff costs during the
period.
 
 Results of Operations
– Twelve Months Ended December 31, 2008 as Compared to Twelve Months Ended
December 31, 2007
 
 The
following table summarizes the results of our operations during the twelve-month
period ended December 31, 2008 and 2007, and provides information regarding the
dollar and percentage increase or (decrease) from the twelve-month period ended
December 31, 2008 to the twelve-month period ended December 31,
2007.
 
 Twelve months ended December 31,2008
              
              
              2007
              
              
              Increase
              
              
              % IncreaseRevenue
              
              $
              30,502,327
              
              
              $
              24,410,570
              
              
              $
              6,091,757
              
              
              
              24.96
              %Cost
      of sales
              
              
              23,612,335
              
              
              
              18,950,517
              
              
              
              4,661,818
              
              
              
              24.60
              %Gross
      profit
              
              
              6,889,992
              
              
              
              5,460,053
              
              
              
              1,429,939
              
              
              
              26.2
              %General
      & administrative
              
              
              1,807,013
              
              
              
              1,430,781
              
              
              
              376,232
              
              
              
              27.0
              %Sales
      & marketing
              
              
              120,786
              
              
              
              52,343
              
              
              
              68,443
              
              
              
              130.8
              %Income
      from operations
              
              
              4,962,193
              
              
              
              3,976,929
              
              
              
              985,264
              
              
              
              24.8
              %Other
      income (expense)
              
              
              (559,207
              )
              
              
              (180,257
              )
              
              
              (378,950
              )
              
              
              210.2
              %Provision
      for taxation
              
              
              948,949
              
              
              
              783,283
              
              
              
              165,666
              
              
              
              21.2
              %Minority
      interests
              
              
              12,012
              
              
              
              7,226
              
              
              
              4,786
              
              
              
              66.2
              %Discontinued
      operations
              
              
              30,094
              
              
              
              9,968
              
              
              
              20,126
              
              
              
              201.9
              %Net
      income
              
              
              3,411,931
              
              
              
              2,996,195
              
              
              
              415,736
              
              
              
              13.9
              %
 
 Revenues
 
 Sales
revenue increased from $24,410,570 in the twelve months of 2007 to $30,502,327
in the same period in 2008, representing a 24.96% increase. The increase in
revenue was mainly due to the increase in demand of PET bottles from Coca – Cola
and Pepsi, which are our major customers.
  4
  
 
 Cost of
sales and gross margin
 
 Cost of
sales increased from $18,950,517 in the twelve months of 2007 to $23,612,335 in
the same period in 2008, representing a 24.6% increase. The increase was due to
the increase in sales in the twelve months of 2008 as compared to the same
period last year. We recorded a gross margin of 22.59% in the twelve months of
2008, an increase of 26.2% as compared to 22.4% in the same period last year.
The increase was mainly due to the increase in production costs, which lowered
gross profits.
 
 Sales and
marketing
 
 Sales and
marketing expenses increased by $68,443 or 130.8% from $52,343 in twelve months
of 2007 to $120,786 in the same period 2008. The increase was mainly due to
selling expenses.
 
 General
and administrative
 
 General
and administrative expenses increased from $1,430,781 in the twelve months of
2007 to $1,807,013 for the same period 2008, representing an increase of
$376,232 or 27.0%. The increase was mainly due to significant increase in staff
costs, including salary and insurance costs as a result of the implementation of
the PRC Labor Contract Law commencing January 1, 2008.
 
 Net
income
 
 Net
income for the twelve months ended 2008 was $3,411,931 as compared to $2,996,195
in the same period 2007. The material increase was mainly attributable to the
increase in sales and the improved in gross margin during the
period.
 
 Liquidity and Capital
Resources
 
 Cash
 
 Our cash
balance at December 31, 2008 was $69,958, representing a decrease of $51,616,
compared with our cash balance of $121,574 as at December 31, 2007. The cash was
mainly used to fund our operations.
 
 Cash
flow
 
 Operating
Activities
 
 Net cash
inflows from operating activities during the twelve months ended December 31,
2008 amounted to $4,860,761, representing a increase in inflow of $346,522
compared with net cash inflows from operating activities of $4,514,239 in the
same period of 2007. The increase in cash inflow was mainly due to decrease in
trade receivables and inventory as at December 31, 2008.
 
 Investing
Activities
 
 Net cash
outflow from investing activities increased from $1,482,236 for the twelve
months ended 2007 to $7,625,282 for the same period of 2008, representing an
increase of $6,143,046. The net cash outflows for both periods were mainly
attributable to payments made for purchases of imported and domestic production
equipments.
  5
  
 
 Financing
Activities
 
 Net cash
inflow for financing activities was $1,615,098 for the twelve months of 2008,
representing a increase of $5,703,734 over the net cash outflow of $ 4,088,636
recorded in the same period of 2007. The change was primarily due to the
decrease in amount due to related party for the period ended December 31,
2008.
 
 Working
capital
 
 Our
working capital increased by $72,088 to $520,257 at December 31, 2008 from
$448,169 at December 31, 2007, mainly due to increase in net cash inflow from
operating activities as well as increase in long term bank loan during the
twelve months of 2008.
 
 We
currently generate our cash flow through production and sales of PET bottles and
PET preforms in China. We believe that our cash flow generated from operations
will be sufficient to sustain operations for at least the next 12 months. There
is no identifiable expansion plan as of December 31, 2008, but from time to
time, we may identify new expansion opportunities for which there will be a need
for use of cash.
 
 Off-Balance Sheet
Arrangements
 
 We do not
have any off balance sheet arrangements
 
 Inflation
 
 Inflation
has not had a material impact on our business and we do not expect inflation to
have an impact on our business in the near future
 
 Currency Exchange
Fluctuations
 
 All of
the Company’s revenues and a majority of its expenses in the twelve months ended
December 31, 2008 were denominated in Renminbi (“RMB”), the currency of China,
and were converted into US dollars at the exchange rate of 7.766 to 1. In the
third quarter of 2005, the Renminbi began to rise against the US dollar. There
can be no assurance that RMB-to-U.S. dollar exchange rates will remain stable. A
devaluation of RMB relative to the U.S. dollar would adversely affect our
business, consolidated financial condition and results of operations. We do not
engage in currency hedging.
 
 Item
      9A.
              (T)
      Controls and Procedures Evaluation of Disclosure Controls and
      Procedures
 
 We
maintain disclosure controls and procedures (as defined
in Rule 13a-15(e) under the Exchange Act) that are designed to
ensure that information required to be disclosed by us in reports that we file
under the Exchange Act is recorded, processed, summarized and reported as
specified in the SEC’s rules and forms and that such information required to be
disclosed by us in reports that we file under the Exchange Act is accumulated
and communicated to our management, including our Chief Executive Officer, or
CEO, and our Chief Financial Officer, or CFO, to allow timely decisions
regarding required disclosure. Management, with the participation of our CEO and
CFO, performed an evaluation of the effectiveness of our disclosure controls and
procedures as of December 31, 2008. Based on that evaluation and as
described below under “Management’s Report on Internal Control Over Financial
Reporting,” we have identified a material weakness in our internal control over
financial reporting. As a result of this material weakness and as a result
of our failure to identify this material weakness in our internal control over
financial reporting as a material weakness in our disclosure controls and
procedures, our management, including our CEO and CFO, concluded that our
disclosure controls and procedures were not effective as of December 31,
2008.
  6
  
 
 Management’s
Report on Internal Control over Financial Reporting
 
 Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Exchange Act
Rules 13a-15(f) and 15d-15(f).  Under the supervision and with
the participation of our management, including our principal executive officer
and principal financial officer, we conducted an evaluation of the effectiveness
of our internal control over financial reporting based on the framework in Internal Control – Integrated
Frameworkissued by the Committee of Sponsoring Organizations of the
Treadway Commission. In connection with management's assessment of our internal
control over financial reporting as required under Section 404 of the
Sarbanes-Oxley Act of 2002, we identified the following material weakness in our
internal control over financial reporting as of December 31, 2008:
 
 1.
              Insufficient
      accounting personnel with the appropriate level of accounting knowledge,
      experience and training in the application of accounting principles
      generally accepted in the United States commensurate with financial
      statement reporting requirements.
 
 As a
result, we have concluded that our internal controls over financial reporting
are not effective as of December 31, 2008.
 
 Remediation
of Material Weakness in Internal Control
 
 All
internal control systems, no matter how well designed, have inherent
limitations. Therefore, even those systems determined to be effective can only
provide reasonable assurances with respect to financial statement preparation
and presentation. In addition, any evaluation of effectiveness for future
periods is subject to the risk that controls may become inadequate because of
changes in conditions 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.
 
 To
remediate the material weakness surrounding this, we have performed, among
others, the following actions:
 •
                additional
      training of our accounting personnel by our independent accountants of the
      proper format and compilation of data for US GAAP financial
      statements;
 
 •
                implementation
      of new software to facilitate the handling of all financial data as well
      as the accumulation of data in a format more user friendly to the
      preparation of US GAAP financial statements;
and
 
 •
                additional
      coordination with our local accountants and auditors to strengthen our
      controls in an attempt to supplement the additional training of our
      employees.
 
 The
Company has begun to convene meetings among its top executives to address
budgeting issues.  As a private company for over fourteen years, the
budgeting process was never formalized.  We have recently begun to
utilize an independent third party to assist in the preparation of formal budget
forecasts
  Changes
in Internal Control over Financial Reporting
 
 There
have been no changes in our internal controls over financial reporting that
occurred during the year ended December 31, 2008 that have materially affected,
or are reasonably likely to materially affect, our internal control over
financial reporting.
  7
  
 
 Item
      11.
              Executive
      Compensation
 
 The
following table sets forth all cash compensation paid or to be paid by the
Company, as well as certain other compensation paid or accrued, during each of
the Company’s last two fiscal years to each of the following named executive
officers (the “Named Executive Officers”):
 
 SUMMARY
COMPENSATION TABLE
 Name &
                Principal
                Position
              Year
              
              Salary
                ($)
              
              
              Bonus
                ($)
              
              
              Stock
                Awards
                ($)
              
              
              Option
                Awards
                ($)
              
              
              Non-Equity
                Incentive Plan
                Compensation
                ($)
              
              
              Change in
                Pension value
                and
                Nonqualified
                deferred
                compensation
                earnings
                ($)
              
              
              All other
                Compensation
                ($)
              
              
              Total
                ($)Stetson
      Chung
              2008
              
              
              0(1)
              
              
              
              0
              
              
              
              0
              
              
              
              0
              
              
              
              0
              
              
              
              0
              
              
              
              0
              
              
              
              0(1)CEO,
      President,
              2007
              
              
              0
              
              
              
              0
              
              
              
              0
              
              
              
              0
              
              
              
              0
              
              
              
              0
              
              
              
              0
              
              
              
              0(Acting
      CFO)Joseph
      Flad
              2008
              
              
              0
              
              
              
              0
              
              
              
              0
              
              
              
              0
              
              
              
              0
              
              
              
              0
              
              
              
              0
              
              
              
              0Former
      President and CFO
              2007
              
              
              0
              
              
              
              0
              
              
              
              0
              
              
              
              0
              
              
              
              0
              
              
              
              0
              
              
              
              12,000
              
              
              
              12,000
 
 (1)  Although
no compensation was paid to our officers in 2008, in 2008 Stetson Chung accrued
compensation in the amount of $90,000. Mr. Chung waived such compensation and it
has been accounted for as paid in capital.
 
 Employment
Agreements
 
 None.
 
 Equity
Compensation Plans
 
 We do not
maintain any equity compensation plans and we have not granted any stock options
or stock appreciation rights or any awards under long-term incentive
plans.
 
 Pension
Benefits
 
 We do not
sponsor any qualified or non-qualified defined benefit plans.
 
 Nonqualified
Deferred Compensation
 
 We do not
maintain any non-qualified defined contribution or deferred compensation
plans.
 
  8
  DIRECTOR
COMPENSATION
 
 The
following table summarizes compensation that our directors earned during 2008
for services as members of our Board.
 
 Name
              
              Fees Earned or
                Paid
      in Cash
                ($)
              
              
              Options
                Awards
                ($)
      (1)
              
              
              All
      Other
                Compensation
                ($)
      (2)
              
              
              Total
                ($)Stetson
      Chung
              
              
              0
              
              
              
              0
              
              
              
              0
              
              
              
              0
 
 Item 15.
              Exhibits,
      Financial Statement Schedules
 
 (a)(1)
Financial Statements
 
 An index
to Consolidated Financial Statements appears on page F-1.
 
 (b)
Exhibits
 
 The
following Exhibits are filed as part of this report:
 
 Exhibit
      No.
              
              Description2.1
              
              Agreement
      for Share Exchange, dated as of March 10, 2008 by and among Jomar
      Specialties Inc., Citysky Investment Holdings Inc. and Guy A-Tsan Chung –
      filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K dated
      March 10, 20083.1
              
              Amended
      and Restated Articles of Incorporation – filed as Exhibit 3 to the
      Company’s Registration Statement on Form SB-2 (Registration No.
      333-139008)3.2
              
              Amendment
      to Amended and Restated Articles of Incorporation – filed as Exhibit 3.1
      to the Company’s Current Report on Form 8-K dated April 16,
      20083.3
              
              By-Laws
      -  filed as Exhibit 3 to the Company’s Registration Statement on
      Form SB-2 (Registration No. 333-139008)14.1
              
              Code
      of Ethics – filed as Exhibit 14 to the Company’s Registration Statement on
      Form SB-2 (Registration No. 333-139008)21.1
              
              List
      of Subsidiaries.31.1
              
              Certification
      of the Principal Executive Officer pursuant to Rule 13-14(a) of the
      Securities Exchange of 193431.2
              
              Certification
      of the Chief Financial Officer and Acting Principal Accounting Officer
      pursuant to Rule 13-14(a) of the Securities Exchange of
    193432.1
              
              Certificate
      of the Principal Executive Officer and Principal Financial Officer
      pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the
      Sarbanes-Oxley Act of 200232.2
              
              Certificate
      of the Chief Financial Officer and Acting Principal Accounting Officer
      pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002
 
  9
  
 SIGNATURES
 
 In
accordance with the requirements of the Securities and Exchange Act of 1934, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
 
 GREAT
      EAST BOTTLES & DRINKS (CHINA) HOLDINGS, INCFebruary
      10, 2010
              By:
              /s/
      Stetson ChungName:
              Stetson
      ChungTitle:
              Chief
      Executive Officer, President, Director and Acting Chief Financial
      Officer
 
 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.
 
 February
      10, 2010
              By:
              /s/
      Stetson ChungName:
              Stetson
      ChungTitle:
              Chief
      Executive Officer, President, Director and Acting Chief Financial Officer
      (Principal Executive Officer and Principal Financial
    Officer)
 
   10
   GREAT
EAST BOTTLES & DRINKS (CHINA) HOLDINGS, INC. AND SUBSIDIARIES
 CONSOLIDATED BALANCE
SHEETS
 As
of December 31, 2008 and 2007
 
 2008
              
              
              2007(Restated)ASSETSCURRENT ASSETSCash
      and cash equivalent
              
              $
              69,958
              
              
              $
              121,574Pledged
      deposits
              
              
              3,704,253
              
              
              
              4,106,258Accounts
      receivable, net
              
              
              2,016,545
              
              
              
              2,426,566Inventories,
      net
              
              
              1,555,782
              
              
              
              1,998,961Amount
      due from a related party, net
              
              
              1,094,679
              
              
              
              -Prepaid
      expenses and other receivables
              
              
              830,471
              
              
              
              477,605Total current
      assets
              
              
              9,271,688
              
              
              
              9,130,964PROPERTY,
      PLANT & EQUIPMENT, NET
              
              
              21,322,104
              
              
              
              14,457,424LAND
      USE RIGHT, NET OF AMORTIZATION
              
              
              346,544
              
              
              
              334,367OTHER
      ASSETS
              
              
              -
              
              
              
              275TOTAL
      ASSETS
              
              $
              30,940,336
              
              
              $
              23,923,030
 
 LIABILITIES
      AND STOCKHOLDERS’ EQUITYLIABILITIESCURRENT
    LIABILITIESBank
      loans
              
              $
              4,006,774
              
              
              $
              5,346,561Accounts
      payable
              
              
              1,647,176
              
              
              
              1,419,985Notes
      payable
              
              
              2,303,646
              
              
              
              1,085,956Accrued
      expenses and other payables
              
              
              101,288
              
              
              
              103,591VAT
      payables
              
              
              429,237
              
              
              
              342,178Income
      tax payables
              
              
              263,310
              
              
              
              379,444Amount
      due to a related party, net
              
              
              -
              
              
              
              5,080Total current
      liabilities
              
              
              8,751,431
              
              
              
              8,682,795LONG-TERM BANK
    LOAN
              
              
              3,334,646
              
              
              
              1,576,543TOTAL
      LIABILITIES
              
              
              12,086,077
              
              
              
              10,259,338MINORITY
      INTERESTS
              
              
              113,984
              
              
              
              101,874STOCKHOLDERS’
      EQUITYCommon
      stock, Par value $0.01; 375,000,000 shares authorized; $0.01 par value;
      40,000,000 shares and 8,000,000 shares issued and outstanding on December
      31, 2008 and 2007, respectively
              
              
              400,000
              
              
              
              80,000Additional
      paid in capital
              
              
              9,885,277
              
              
              
              10,115,277Capital
      reserves
              
              
              2,410,701
              
              
              
              2,124,040Retained
      earnings/(accumulated deficits)
              
              
              2,144,341
              
              
              
              (976,888
              )Other
      comprehensive income
              
              
              3,899,956
              
              
              
              2,219,389TOTAL
      STOCKHOLDERS’ EQUITY
              
              
              18,740,275
              
              
              
              13,561,818TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
              
              $
              30,940,336
              
              
              $
              23,923,030
 
 See
accompanying notes to consolidated financial statements
  11
  GREAT
EAST BOTTLES & DRINKS (CHINA) HOLDINGS, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS
OF INCOME
 For
the Years Ended December 31, 2008 and 2007
 
 2008
              
              
              2007(Restated)REVENUE
              
              $
              30,502,327
              
              
              $
              24,410,570COST
      OF SALES
              
              
              23,612,335
              
              
              
              18,950,517GROSS
      MARGIN
              
              
              6,889,992
              
              
              
              5,460,053EXPENSESSelling and
      distribution
              
              
              120,786
              
              
              
              52,343General and
      administrative
              
              
              1,807,013
              
              
              
              1,430,781OPERATING
      INCOME
              
              
              4,962,193
              
              
              
              3,976,929OTHER
      INCOME/(EXPENSE)Other
      income
              
              
              266,621
              
              
              
              306,793Interest income
              
              
              269,011
              
              
              
              300,624Bank loan
    interest
              
              
              (619,172
              )
              
              
              (467,867
              )Other interest
      expense
              
              
              (475,667
              )
              
              
              (319,807
              )TOTAL
      OTHER INCOME (EXPENSE)
              
              
              (559,207
              )
              
              
              (180,257
              )INCOME
      FROM CONTINUING OPERATIONS
                BEFORE
      PROVISION FOR INCOME TAXES
                AND
      MINORITY INTEREST
              
              
              4,402,986
              
              
              
              3,796,672PROVISION
      FOR INCOME TAXES
              
              
              948,949
              
              
              
              783,283INCOME
      FROM CONTINUING OPERATIONS
                BEFORE
      MINORITY INTERESTS
              
              
              3,
      454,037
              
              
              
              3,013,389MINORITY
      INTEREST
              
              
              12,012
              
              
              
              7,226INCOME
      FROM CONTINUING OPERATIONS
              
              $
              3,442,025
              
              
              $
              3,006,163DISCONTINUED
      OPERATIONSRevenue
              
              
              1,311
              
              
              
              127,271General and administrative
      expenses
              
              
              (31,405
              )
              
              
              (137,239
              )LOSS
      FROM DISCONTINUED OPERATIONS
              
              
              (30,094
              )
              
              
              (9,968
              )NET
      INCOME
              
              
              3,411,931
              
              
              
              2,996,195OTHER
      COMPREHENSIVE INCOMEGain
      on foreign exchange translation
              
              
              1,680,567
              
              
              
              1,324,933COMPREHENSIVE
      INCOME
              
              $
              5,092,498
              
              
              $
              4,321,128WEIGHTED
      AVERAGE NUMBER OF SHARES OUTSTANDING, BASIC AND DILUTED
              
              $
              40,000,000
              
              
              $
              40,000,000EARNINGS
      PER SHARE, BASIC AND DILUTED
              
              
              0.085
              
              
              
              0.075
 
 See
accompanying notes to consolidated financial statements
 
 
  12
  GREAT
EAST BOTTLES & DRINKS (CHINA) HOLDINGS, INC. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDER’S EQUITY
 AND
COMPREHENSIVE INCOME
 For
the Years Ended December 31, 2008 and 2007
 
 Common
      stockNumber
      of shares
              
              
              Amount
              
              
              Additional
      paid in capital
              
              
              Capital
                reserves
              
              
              Retained
      earnings/
                (accumulated
      deficits)
              
              
              Other
                comprehensive
      income
              
              
              Total
      equity(Restated)
              
              
              
              
              
              (Restated)Balance
      at January 1, 2007
              
              
              8,000,000
              
              
              $
              80,000
              
              
              $
              7,562,483
              
              
              $
              1,923,865
              
              
              $
              (3,769,401
              )
              
              $
              894,456
              
              
              $
              6,691,403Net
      income for the year
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              2,996,195
              
              
              
              -
              
              
              
              2,996,195Capital
      contribution during the year
              
              
              -
              
              
              
              -
              
              
              
              2,552,794
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              2,552,794Utilization
      during the year
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (3,507
              )
              
              
              -
              
              
              
              -
              
              
              
              (3,507
              )Transfer
      from accumulated deficits to capital reserves
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              203,682
              
              
              
              (203,682
              )
              
              
              -
              
              
              
              -Foreign
      currency translation adjustments
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              1,324,933
              
              
              
              1,324,933Balance
      at December 31, 2007 and
                January
      1, 2008
              
              
              8,000,000
              
              
              $
              80,000
              
              
              $
              10,115,277
              
              
              $
              2,124,040
              
              
              $
              (976,888
              )
              
              $
              2,219,389
              
              
              $
              13,561,8181
      for 5 forward split
              
              
              32,000,000
              
              
              
              320,000
              
              
              
              (320,000
              )
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Non-cash
      capital contribution by an officer
              
              
              -
              
              
              
              -
              
              
              
              90,000
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              90,000Net
      income for the year
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              3,411,931
              
              
              
              -
              
              
              
              3,411,931Utilization
      during the year
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (4,041
              )
              
              
              -
              
              
              
              -
              
              
              
              (4,041
              )Transfer
      from retained earnings to capital reserves
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              290,702
              
              
              
              (290,702
              )
              
              
              -
              
              
              
              -Foreign
      currency translation adjustments
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              1,680,567
              
              
              
              1,680,567Balance
      at December 31, 2008
              
              
              40,000,000
              
              
              $
              400,000
              
              
              $
              9,885,277
              
              
              $
              2,410,701
              
              
              $
              2,144,341
              
              
              $
              3,899,956
              
              
              $
              18,740,275
 
 
 See
accompanying notes to consolidated financial statements
 
  13
  GREAT
EAST BOTTLES & DRINKS (CHINA) HOLDINGS, INC. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 For
the Years Ended December 31, 2008 and 2007
 
 2008
              
              
              2007(Restated)Cash
      flow from operating activitiesNet
      income
              
              $
              3,411,931
              
              
              $
              2,996,195Adjustments
      for:Depreciation
              
              
              1,735,831
              
              
              
              2,019,790Amortization
      of land use rights
              
              
              9,244
              
              
              
              8,410Allowance
      for doubtful accounts
              
              
              -
              
              
              
              55,082Provision
      for slow moving inventories
              
              
              93,768
              
              
              
              -Officer
      compensation contributed to additional paid-in capital
              
              
              90,000
              
              
              
              -Other
      non cash income
              
              
              -
              
              
              
              (23,922
              )Minority
      interests
              
              
              12,012
              
              
              
              7,226Changes
      in assets and liabilities:Decrease/(increase)
      in trade receivables
              
              
              410,021
              
              
              
              (454,379
              )Decrease/(increase)
      in inventory
              
              
              349,411
              
              
              
              (29,423
              )Increase
      in amount due from a related party
              
              
              (1,094,679
              )
              
              
              -Increase
      in deposits, prepayments and other receivables
              
              
              (352,866
              )
              
              
              (118,074
              )Decrease/(increase)
      in other assets
              
              
              275
              
              
              
              (275
              )Increase/(decrease)
      in trade payables
              
              
              227,191
              
              
              
              (167,948
              )Increase
      in VAT payables
              
              
              87,059
              
              
              
              124,485(Decrease)/increase
      in income tax payables
              
              
              (116,134
              )
              
              
              210,678Decrease
      in other payables and accruals
              
              
              (2,303
              )
              
              
              (113,606
              )Net
      cash inflow from operating activities
              
              
              4,860,761
              
              
              
              4,514,239Investing
      activitiesPurchase
      of plant and equipment
              
              
              (7,625,282
              )
              
              
              (1,482,236
              )Net
      cash outflow from investing activities
              
              
              (7,625,282
              )
              
              
              (1,482,236
              )Financing
      activitiesProceeds
      from bank loans
              
              
              5,876,497
              
              
              
              6,920,913Repayment
      of bank loans
              
              
              (5,871,973
              )
              
              
              (6,900,231
              )Decrease
      in pledged deposits
              
              
              402,005
              
              
              
              1,337,769Increase/(decrease)
      in notes payable
              
              
              1,217,690
              
              
              
              (142,029
              )Decrease
      in amount due to a related party
              
              
              (5,080
              )
              
              
              (5,301,551
              )Decrease
      in capital reserves
              
              
              (4,041
              )
              
              
              (3,507
              )Net
      cash inflow/(outflow) from financing activities
              
              
              1,615,098
              
              
              
              (4,088,636
              )Net
      decrease in cash and cash equivalents
              
              
              (1,149,423
              )
              
              
              (1,056,633
              )Effect
      of foreign exchange rate changes
              
              
              1,097,807
              
              
              
              529,397Cash
      and cash equivalents at beginning of year
              
              
              121,574
              
              
              
              648,810Cash
      and cash equivalents at end of year
              
              $
              69,958
              
              
              $
              121,574Analysis
      of cash and cash equivalents:Cash and cash
      equivalents
              
              $
              69,958
              
              
              $
              121,574Cash
      paid for interest
              
              $
              1,094,839
              
              
              $
              787,674Cash
      paid for income taxes
              
              $
              1,065,083
              
              
              $
              572,605Major
      non-cash transaction:Officer
      compensation contributed to additional paid-in capital
              
              
              90,000
              
              
              
              -Gain
      on disposal of a subsidiary
              
              
              -
              
              
              
              (23,922
              )90,000
              
              
              
              (23,922
              )
 
 See
accompanying notes to consolidated financial statements
  14
  GREAT EAST BOTTLES &
DRINKS (CHINA) HOLDINGS, INC. AND SUBSIDIARIES
 Notes
to Consolidated Financial Statements
 December
31, 2008 and 2007
 
 
 NOTE 1 – ORGANIZATION AND
PRINCIPAL ACTIVITIES
 
 Great
East Bottles & Drinks (China) Holdings, Inc. and subsidiaries (the
“Company”) are a group of manufacturers producing beverage bottles which mainly
is made of PET, a type of plastic with desirable characteristic for packaging
including clear and wide range of color and shape, tough, good resistance to
heat, moisture and dilute acid. Beverage bottles are manufactured and sold in
the People’s Republic of China (“PRC” or “China”) for bottling of Carbonated
Soft Drinks (“CSD”) for world brands and these beverage bottles are referred to
as PET CSD bottles.
 
 At
December 31, 2008, details of the Company’s subsidiaries are as
follows:
 
 Name
              
              Place
      of
                incorporation
              
              Effective
                Ownership
              
              Principal
      activitiesCitysky
      Investment Holding Inc (“Citysky”)
              
              the
      British Virgin Islands (“BVI”)
              
              100%
              
              Investment
      holdingsGreat
      East Packaging International Limited
              
              BVI
              
              100%
              
              Investment
      holdingGreat
      East Packaging (Nanjing) Limited
              
              BVI
              
              100%
              
              Investment
      holdingGreat
      East Packaging (Xian) Limited
              
              BVI
              
              100%
              
              Investment
      holdingHangzhou
      Great East Packaging Co., Limited
              
              PRC
              
              99%
              
              Production
      of beverage bottlesNanjing
      Great East Packaging Co., Limited
              
              PRC
              
              100%
              
              Production
      of beverage bottlesXian
      Great East Packaging Co., Limited
              
              PRC
              
              100%
              
              Production
      of beverage bottles
 
 
 NOTE 2 – RECAPITALIZATION
AND REORGANIZATION
 
 On March
10, 2008, the Company entered into a Share Exchange Agreement (the “Share
Exchange Agreement”) with Citysky and the sole shareholder of Citysky.
 Pursuant to the terms of the Share Exchange Agreement, the Company
acquired 100% ownership of Citysky from the
Shareholder.  Consideration by the Company was the issuance of
6,492,000 shares of its common stock to Citysky (the “Exchange Shares”) in
exchange for 100% ownership of Citysky. Immediately upon completion of the share
exchange transaction through issuance of the Exchange Shares, the Company had a
total of approximately 8,000,000 shares of its common stock issued and
outstanding. The Share Exchange Agreement closed subject to the provisions
and conditions of the Share Exchange Agreement and the discretion of the
parties.  The transaction set forth in the Share Exchange Agreement closed
on March 10, 2008.
 
 The above
stock exchange transaction resulted in the sole shareholder of Citysky obtaining
a majority voting interest in the Company. Generally accepted accounting
principles in the United States of America require that the Company whose
shareholders retain the majority interest in a combined business be treated as
the acquirer for accounting purposes. Consequently, the stock exchange
transaction has been accounted for as a recapitalization of Citysky as Citysky
acquired a controlling equity interest in the Company as of March 10, 2008. The
reverse acquisition process utilizes the capital structure of the Company and
the assets and liabilities of Citysky recorded at historical cost.
 
 Citysky
is the continuing operating entity for financial reporting purposes, and the
financial statements prior to March 10, 2008 represent Citysky’s financial
position and results of operations. Although Citysky is deemed to be the
acquiring corporation for financial accounting and reporting purposes, the legal
status of the Company as the surviving corporation did not change.
 
 Subsequent
to completion of the reverse takeover transaction, the Company changed its name
to Great East Bottles & Drinks (China) Holdings, Inc..
  15
  NOTE 3 – PRINCIPLES OF
CONSOLIDATION
 
 The
accompanying consolidated financial statements include the accounts of the
Company and the Company’s subsidiaries (see Note 1). The consolidated financial
statements are prepared in accordance with generally accepted accounting
principles used in the United States of America, and all significant
intercompany balances and transactions have been eliminated. The functional
currency for the majority of the Company’s operations is the Renminbi (“RMB”),
while the reporting currency is the US Dollar.
 
 
 NOTE 4 – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
 
 (a)
              Economic
      and Political Risk
 
 The
Company’s major operations are conducted in the People’s Republic of China
(“China” or “PRC”). Accordingly, the political, economic, and legal environments
in the PRC, as well as the general state of the PRC’s economy may influence the
Company’s business, financial condition, and results of operations.
 
 The
Company’s major operations in the PRC are subject to special considerations and
significant risks not typically associated with companies in North America and
Western Europe. These include risks associated with, among others, the
political, economic, and legal environment. The Company’s results may be
adversely affected by changes in governmental policies with respect to laws and
regulations, anti-inflationary measures, and rates and methods of taxation,
among other things.
 
 (b)
              Cash
      and Cash Equivalents
 
 The
Company considers all highly liquid investments purchased with original
maturities of three months or less to be cash equivalents.  The
Company maintains bank accounts in Hong Kong and China through its wholly-owned
subsidiaries.
 
 (c)
              Accounts
      Receivable
 
 Trade
receivables are recognized and carried at the original invoice amount less
allowance for any uncollectible amounts. An estimate for doubtful accounts is
made when collection of the full amount is no longer probable. Bad debts are
written off as incurred. The Company has recorded an allowance for doubtful
accounts of $55,082 at December 31, 2007. The allowance was charged off against
gross receivable during the year ended December 31, 2008 as the amount is
determined to be uncollectible. There were no additional bad debts incurred for
accounts receivables during the year ended December 31, 2008.
 
 (d)
              Inventories
 
 Inventories
consisting of raw materials, work-in-progress, goods in transit and finished
goods are stated at the lower of cost or net realizable value. Finished goods
are comprised of direct materials, direct labor and a portion of overhead.
Inventory costs are calculated using a weighted average, first in first out
(FIFO) method of accounting.The Company
has recorded a provision for slow moving inventories of $93,768 during the year
ended December 31, 2008.
 
 (e)
              Property,
      Plant and Equipment, Net
 
 Property,
plant and equipment are carried at cost less accumulated depreciation. The cost
of maintenance and repairs is charged to the statement of income as incurred,
whereas significant renewals and betterments are capitalized. The cost and the
related accumulated depreciation of assets sold or otherwise retired are
eliminated from the accounts and any gain or loss is included in the statement
of income.
  16
  
 (f)
              Land
      Use Rights
 
 According
to the law of PRC, the government owns all the land in the PRC. Companies or
individuals are authorized to possess and use the land only through land use
rights granted by the PRC government for 40 to 50 years.
 
 Land use
rights represent the cost for purchasing the rights to use the leasehold land
for the production facilities of Hangzhou Great East Packaging Co., Limited and
Nanjing Great East Packaging Co., Limited.  It is stated at cost less
amortization. Land use rights are being amortized using the straight-line method
over the lease term of 50 years.
 
 Amortization
expenses for the years ended December 31, 2008 and 2007 were $9,244 and $8,410,
respectively.
 
 (g)
              Depreciation
      and Amortization
 
 The
Company provides for depreciation of plant and equipment principally by use of
the straight-line method for financial reporting purposes. Plant and equipment
are depreciated over the following estimated useful lives:
 
 Building
              20
      yearsLeasehold
      improvement
              5
      yearsOffice
      equipment
              5
      yearsMachinery
      and equipment
              5 –
      15 yearsTransportation
      equipment
              5
      years
 
 The
depreciation expense for the year ended December 31, 2008 and 2007 amounted to
$1,735,831 and $2,019,790, respectively.
 
 (h)
              Accounting
      for the Impairment of Long-Lived
Assets
 
 The
long-lived assets held and used by the Company are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
assets may not be recoverable. It is reasonably possible that these assets could
become impaired as a result of technology or other industry changes.
Determination of recoverability of assets to be held and used is by comparing
the carrying amount of an asset to future net undiscounted cash flows to be
generated by the assets. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less costs to
sell. There were no impairments of long-lived assets for the years ended
December 31, 2008 and 2007.
 
 (i)
              Income
      Tax
 
 The
Company has adopted the provisions of statements of Financial Accounting
Standards No. 109, “Accounting for Income Taxes,” which incorporates the use of
the asset and liability approach of accounting for income taxes. The Company
allows for recognition of deferred tax benefits in future years. Under the asset
and liability approach, deferred taxes are provided for the net tax effects of
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes. A
valuation allowance is provided for deferred tax assets if it is more likely
than not these items will either expire before the Company is able to realize
their benefits, or that future realization is uncertain.
 
 In
accordance with the relevant tax laws and regulations of PRC, the applicable
corporation income tax rate was 25% for the year ended December 31, 2008 and
ranges from 27% to 33% for the year ended December 31, 2007.  At times
generally accepted accounting principles requires the Company to recognize
certain income and expenses that do not conform to the timing and conditions
allowed by the PRC. The Company’s provision for income taxes for the years ended
December 31, 2008 and 2007 were $948,949 and $783,283 respectively.
 
 (j)
              Fair
      Value of Financial Instruments
 
 The
Company values its financial instruments as required by SFAS No. 157,
Disclosures about Fair Value of Financial Instruments . The estimated fair value
amounts have been determined by the Company, using available market information
or other appropriate valuation methodologies. However, considerable judgment is
required in interpreting market data to develop estimates of fair value.
Consequently, the estimates are not necessarily indicative of the amounts that
could be realized or would be paid in a current market
exchange.
  17
  
 
 The
Company’s financial instruments primarily consist of cash and cash equivalents,
accounts receivable, other deposits and prepayments, amount due from a related
party, accounts payable, short-term bank loans, other payables and accruals,
taxes payable, and amount due to a related party.
 
 As of the
balance sheet dates, the estimated fair values of the financial instruments were
not materially different from their carrying values as presented, due to the
short maturities of these instruments and the fact that the interest rates on
the borrowings approximate those that would have been available for loans of
similar remaining maturity and risk profiles at respective year
ends.
 
 (k)
              Revenue
      Recognition
 
 Revenue
represents the invoiced value of goods sold recognized upon the shipment of
goods to customers. Revenue is recognized when all of the following criteria are
met:
 
 a)
              Persuasive
      evidence of an arrangement exists,
 b)
              Delivery
      has occurred,
 c)
              The
      seller’s price to the buyer is fixed or determinable,
  and
 d)
              Collectability
      is reasonably assured.
 
 (l)
              Earnings
      Per Share
 
 Basic
earnings per share is computed by dividing income available to common
shareholders by the weighted-average number of common shares outstanding during
the period. Diluted earnings per share is computed similar to basic earnings per
share except that the denominator is increased to include the number of
additional common shares that would have been outstanding if the potential
common shares had been issued and if the additional common shares were
dilutive.  As of December 31, 2008 and December 31, 2007, there were
no dilutive securities outstanding.
 
 (m)
              Use
      of Estimates
 
 The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States 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. Actual results may differ from those estimates.
 
 (n)
              Retirement
      Benefits
 
 The
country of PRC mandates companies to contribute funds into the national
retirement system, which benefits qualified employees based on where they were
born within the country. The Company pays the required payment for qualified
employees of the Company as a payroll tax expense. Very few employees in the
Company fall under the mandatory conditions requiring the Company to pay as a
payroll tax expense into the retirement system of the PRC.
 
 The
Company’s PRC subsidiaries are required to make appropriations to staff welfare
fund, based on after-tax net income determined in accordance with generally
accepted accounting principles of the People’s Republic of China (the “PRC
GAAP”). Appropriations to the staff welfare fund are made at the discretion of
the Board of Directors. The staff welfare fund is established for the purpose of
providing employee facilities and other collective benefits to the employees and
is non-distributable other than in liquidation.
 
 The
Company provides no other retirement benefits to its employees.
 
 (o)
              Comprehensive
      Income
 
 Comprehensive
income is defined to include all changes in equity except those resulting from
investments by owners and distributions to owners. Among other disclosures, all
items that are required to be recognized under current accounting standards as
components of comprehensive income are required to be reported in a financial
statement that is presented with the same prominence as other financial
statements.  Comprehensive income includes net income and the foreign
currency translation gain, net of tax.
  18
  
 (p)
              Foreign
      Currency Translation
 
 The
accompanying consolidated financial statements are presented in United States
Dollars (US$). The functional currency of the Company is the Renminbi (RMB).
Capital accounts of the consolidated financial statements are translated into
United States dollars from RMB at their historical exchange rates when the
capital transactions occurred. Assets and liabilities are translated at the
exchange rates as of balance sheet date. Income and expenditures are translated
at the average exchange rate of the year.  The translation rates are
as follows:
 
 2008
              
              
              2007Year
      end RMB : US$ exchange rate
              
              
              0.1458
              
              
              
              0.1370Average
      yearly RMB : US$ exchange rate
              
              
              0.1446
              
              
              
              0.1315
 On July
21, 2005, the PRC changed its foreign currency exchange policy from a fixed
RMB/US$ exchange rate into a flexible rate under the control of the PRC’s
government.
 
 The RMB
is not freely convertible into foreign currency and all foreign exchange
transactions must take place through authorized institutions.  No
representation is made that the RMB amounts could have been, or could be,
converted into US$ at the rates used in translation.
 
 (q)
              Reclassifications
 
 Certain
prior period amounts have been reclassified to conform to current period
presentation.
 
 (r)
              Recent
      Accounting Pronouncements
 
 Below is
a listing of the most recent accounting standards and their effect on the
Company.
 
 In
December 2007, the FASB issued SFAS 160, “Noncontrolling Interests in
Consolidated Financial Statements – an amendment of Accounting Research Bulletin
No. 51”, which establishes accounting and reporting standards for ownership
interests in subsidiaries held by parties other than the parent, the amount of
consolidated net income attributable to the parent and to the noncontrolling
interest, changes in a parent’s ownership interest and the valuation of retained
non-controlling equity investments when a subsidiary is deconsolidated. The
Statement also establishes reporting requirements that provide sufficient
disclosures that clearly identify and distinguish between the interests of the
parent and the interests of the non-controlling owners. SFAS 160 is effective
for fiscal years beginning after December 15, 2008. The adoption of SFAS 160 is
not expected to have any effect on the Company’s consolidated financial
statements.
 
 In
December 2007, the FASB issued SFAS 141®, “Business Combinations”, which
replaces SFAS 141, “Business Combinations”. SFAS 141R retains the fundamental
requirements in SFAS 141 that the acquisition method of accounting (which SFAS
141 called the purchase method) be used for all business combinations and for an
acquirer to be identified for each business combination. SFAS 141R requires an
acquirer to recognize the assets acquired, the liabilities assumed, and any
noncontrolling interest in the acquiree at the acquisition date, measured at
their fair values as of that date, with limited exceptions. This replaces SFAS
141’s cost-allocation process, which required the cost of an acquisition to be
allocated to the individual assets acquired and liabilities assumed based on
their estimated fair values. SFAS 141R also requires the acquirer in a business
combination achieved in stages (sometimes referred to as a step acquisition) to
recognize the identifiable assets and liabilities, as well as the noncontrolling
interest in the acquiree, at the full amounts of their fair values (or other
amounts determined in accordance with SFAS 141R). SFAS 141R applies
prospectively to business combinations for which the acquisition date is on or
after the beginning of the first annual reporting period beginning on or after
December 15, 2008. An entity may not apply it before that date. The Company
believes that there would be no material impact on our financial statements upon
adoption of this standard.
 
 In April
2008, the FASB issued FSP FAS 142-3 “Determination of the useful life of
Intangible Assets”, which amends the factors a company should consider when
developing renewal assumptions used to determine the useful life of an
intangible asset under SFAS142. This FSP is effective for financial statements
issued for fiscal years beginning after December 15, 2008, and interim periods
within those fiscal years. SFAS 142 requires companies to consider whether
renewal can be completed without substantial cost or material modification of
the existing terms and conditions associated with the asset. FSP FAS 142-3
replaces the previous useful life criteria with a new requirement—that an entity
consider its own historical experience in renewing similar arrangements. If
historical experience does not exist, then the Company would consider market
participant assumptions regarding renewal including 1) highest and best use of
the asset by a market participant, and 2) adjustments for other entity-specific
factors included in SFAS 142.
  19
  
 
 In
September 2006, the FASB issued SFAS No. 158 “Employers’ Accounting for
Defined Benefit Pension and Other Postretirement Plans — an amendment of
FASB Statements No. 87, 88, 106, and 132®”. SFAS 158 requires plan
sponsors of defined benefit pension and other postretirement benefit plans
(collectively, “postretirement benefit plans”) to fully recognize the funded
status of their postretirement benefit plans in the statement of financial
position, measure the fair value of plan assets and benefit obligations as of
the date of the fiscal year-end statement of financial position and provide
additional disclosures.  The Company believes that implementation of
SFAS 158 will have little or no impact on our consolidated financial
statements since we have no applicable plans.
 
 In May
2008, the FASB issued SFAS 162, “The Hierarchy of Generally Accepted Accounting
Principles.” This Statement identifies the sources of accounting principles and
the framework for selecting the principles to be used in the preparation of
financial statements of nongovernmental entities that are presented in
conformity with generally accepted accounting principles (GAAP) in the United
States.
 
 In
considering all recent accounting pronouncements issued by the FASB, EITF, AICPA
or SEC, the Company does not expect that the adoption of any of these accounting
pronouncements will have a material effect on the Company’s future reported
financial position or results of operations.
 
 
 NOTE 5 – PLEDGED
DEPOSITS
 
 Amount
represents restricted cash pledged as deposits for bankers’ notes facilities
(Notes payable – see Footnote 13). As of December 31, 2008 and 2007, pledged
deposits are summarized as follows:
 
 As
      of December 31,2008
              
              
              2007China
      Construction Bank
              
              $
              2,172,967
              
              
              $
              2,055,385Bank
      of China
              
              
              1,458,367
              
              
              
              1,365,745Industrial
      and Commercial Bank of China
              
              
              72,919
              
              
              
              -Guangdong
      Development Bank
              
              
              -
              
              
              
              685,128Total
              
              $
              3,704,253
              
              
              $
              4,106,258
 
 NOTE 6 – ACCOUNTS
RECEIVABLE, NET
 
 As
      of December 31,2008
              
              
              2007Accounts
      receivable
              
              $
              2,016,545
              
              
              $
              2,481,648Less:
      Allowance for doubtful accounts
              
              
              -
              
              
              
              (55,082
              )Accounts
      receivable, net
              
              $
              2,016,545
              
              
              $
              2,426,566
 Allowance
for doubtful accounts for the years ended December 31, 2007 was
$55,082.  The allowance was charged off against gross receivable
during the year ended December 31, 2008 as the amount is determined to be
uncollectible.
  20
  
 
 NOTE 7 – INVENTORIES,
NET
 
 Inventories
consisting of raw materials and finished goods are stated at the lower of
weighted average cost or market value. Inventories are PET CSD bottles and its
raw material, PET, that is used to manufacture the PET CSD bottles.
 
 Inventories
as of December 31, 2008 and 2007 are summarized as follows:
 
 As
      of December 31,2008
              
              
              2007Raw
      materials
              
              $
              592,281
              
              
              $
              850,545Work-in-progress
              
              
              725,482
              
              
              
              796,190Finished
      goods
              
              
              331,787
              
              
              
              352,010Goods-in-transit
              
              
              -
              
              
              
              216Less:
      Provision for slow moving inventories
              
              
              (93,768
              )
              
              
              -Inventories,
      net
              
              $
              1,555,782
              
              
              $
              1,998,961
 Provision
for slow moving inventories for the years ended December 31, 2008 and 2007 was
$93,768 and nil, respectively.
 
 
 NOTE 8 – AMOUNT DUE
FROM/(TO) A RELATED PARTY, NET
 
 Amount
due from/(to) a related party as of December 31, 2008 and 2007 are summarized as
follows:
 
 As
      of December 31,2008
              
              
              2007Receivable
      from Great East Packaging Holdings Limited (“GEPH”)
              
              $
              6,199,539
              
              
              $
              7,121,480Notes
      payable to GEPH
              
              
              (5,104,860
              )
              
              
              (7,126,560
              )Net
              
              $
              1,094,679
              
              
              $
              (5,080
              )
 
 GEPH is
considered as a related party because of the common ownership with the sole
shareholder of the Company. The net amount due from GEPH bears a 9% interest per
annum, calculating on an accrual basis using the effective interest method by
applying the rates to the net carrying amount of the assets.  Interest
income accrued for the years ended December 31, 2008 and 2007 were $108,277 and
nil, respectively.
 
 
 NOTE 9 – PREPAID EXPENSES
AND OTHER RECEIVABLES
 
 Prepaid
expenses consists of payments and deposits made by the Company to third parties
in the normal course of business operations with no interest being charged and
no fixed terms of repayment. These payments are made for the purchase of goods
and services that are used by the Company for its current
operations.
 
 The
Company evaluates the amounts recorded as prepaid expenses and other receivables
on a periodic basis and records a charge to the current operations of the
Company when the related expense has been incurred or when the amounts reported
as other receivables is no longer deemed to be collectible by the
Company.
 
 Prepaid
expenses and other receivables as of December 31, 2008 and 2007 are summarized
as follows:
 
 As
      of December 31,2008
              
              
              2007Prepaid
      expenses
              
              $
              654,327
              
              
              $
              298,421Other
      receivables
              
              
              176,144
              
              
              
              179,184Total
              
              $
              830,471
              
              
              $
              477,605
 
  21
  
 NOTE 10 – PROPERTY, PLANT
AND EQUIPMENT, NET
 
 Property,
plant and equipment of the Company consist primarily of manufacturing facilities
and equipment owned and operated by the Company’s wholly-owned subsidiaries in
China. Property, plant and equipment as of December 31, 2008 and 2007 are
summarized as follows:
 
 As
      of December 31,2008
              
              
              2007At
      cost:Building
              
              $
              2,311,935
              
              
              $
              2,140,326Machinery
              
              
              33,405,303
              
              
              
              26,217,279Leasehold
      improvement
              
              
              393,426
              
              
              
              373,156Office
equipment
              
              
              1,134,841
              
              
              
              1,143,358Transportation
      vehicles
              
              
              746,700
              
              
              
              595,193Construction in
      progress
              
              
              1,995,134
              
              
              
              -39,987,339
              
              
              
              30,469,312Less:
      Accumulated depreciation
              
              $
              (18,665,235
              )
              
              $
              (16,011,888
              )Property,
      plant and equipment, net
              
              $
              21,322,104
              
              
              $
              14,457,424
 Depreciation
expense for the years ended December 31, 2008 and 2007 was $1,735,831 and
$2,019,790, respectively.
 
 
 NOTE 11 – LAND USE
RIGHTS
 
 Land use
rights as of December 31, 2008 and 2007 are summarized as follows:
 
 As
      of December 31,2008
              
              
              2007At
      cost:Land use rights
              
              $
              466,203
              
              
              $
              438,036Less:
      Accumulated amortization
              
              
              (119,659
              )
              
              
              (103,669
              )Total
              
              $
              346,544
              
              
              $
              334,367
 
 NOTE 12 – ACCRUED EXPENSES
AND OTHER PAYABLES
 
 As
      of December 31,2008
              
              
              2007Accrued
      expenses
              
              
              36,861
              
              
              
              16,213Other
      payables
              
              $
              64,427
              
              
              $
              87,378Total
              
              $
              101,288
              
              
              $
              103,591
 Other
payables consist of amounts owed by the Company to various entities that are
incurred by the Company outside of the normal course of business
operations.  These liabilities and accrued expenses are non interest
bearing and are payable within a year.
  22
  
 
 NOTE 13 –NOTES
PAYABLE
 
 Banks
issued notes to the Company’s suppliers payable at any time prior to a maturity
date as part of the credit facility granted to the Company.  Should the
supplier want to call the note prior to maturity, the bank would satisfy the
note at a discount, and then be paid the full face amount of the note by the
Company, at maturity.  The Company is also required to lodge certain
deposits on its bank accounts at the date of issue and until maturity.  As
such, there is no interest payable by the Company to the banks under this credit
facility, and Company payments are always due at the maturity
date.
 
 As of the
balance sheet dates, the Company’s notes payable were summarized as
follows:
 
 
 Maturity
      date
              
              2008
              
              
              2007China
      Construction Bank
              January
      2009
              
              $
              247,922
              
              
              $
              -China
      Construction Bank
              February
      2009
              
              
              408,343
              
              
              
              -China
      Construction Bank
              March
      2009
              
              
              218,755
              
              
              
              -China
      Construction Bank
              February
      2008
              
              
              -
              
              
              
              166,856Bank
      of China
              February
      2009
              
              
              291,674
              
              
              
              -Bank
      of China
              May
      2009
              
              
              262,506
              
              
              
              -Bank
      of China
              February
      2008
              
              
              -
              
              
              
              890,667DBS
      Bank (Hong Kong) Limited
              January
      2009
              
              
              820,304
              
              
              
              -DBS
      Bank (Hong Kong) Limited
              April
      2009
              
              
              54,142
              
              
              
              -DBS
      Bank (Hong Kong) Limited
              March
      2008
              
              
              -
              
              
              
              28,433Total
              
              
              $
              2,303,646
              
              
              $
              1,085,956
 As of the
balance sheet dates, all the notes of the Company are repayable within one
year.
 
 
 NOTE 14 – BANK
LOANS
 
 The
Company has entered into an arrangement with several banks to borrow funds on a
short term basis to purchase raw materials or finance the business operations of
the Company. Bank loans as of December 31, 2008 included Hong Kong Dollar
(“HKD”) and RMB bank loans whereas bank loans as of December 31, 2007 included
RMB bank loans only. The table below shows the amounts owed by the Company to
these banks along with the stated interest rate charged by these
banks.
 
 Bank
loans of the Company as of December 31, 2008 and 2007 were summarized as
follows:
 
 Interest
      rate
              
              
              Bank
      loans balanceAs
      of December 31,
              
              
              As
      of December 31,Name
      of banks
              
              2008
              
              
              2007
              
              
              2008
              
              
              2007Hang
      Seng Bank
              
              
              7.750
              %
              
              
              -
              
              
              
              2,338,544
              
              
              
              -China
      Construction Bank
              
              
              7.470
              %
              
              
              6.757
              %
              
              $
              875,020
              
              
              $
              2,740,513Industrial
      and Commercial Bank of China
              
              7.920%
      to
                8.217%
              
              
              
              8.019
              %
              
              
              1,283,363
              
              
              
              1,205,826Bank
      of Communications
              
              
              7.330
              %
              
              
              5.115
              %
              
              
              1,166,694
              
              
              
              1,096,205DBS
      Bank (Hong Kong) Limited
              
              
              9.180
              %
              
              
              7.320
              %
              
              
              1,677,799
              
              
              
              1,878,369Others
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              2,1917,341,420
              
              
              
              6,923,104Less:Repayable
      after one year but within two years
              
              
              
              
              
              
              
              
              
              
              (740,304
              )
              
              
              (347,754
              )Repayable
      after two years but within five years
              
              
              
              
              
              
              
              
              
              
              (2,056,504
              )
              
              
              (1,228,789
              )Repayable
      after five years
              
              
              
              
              
              
              
              
              
              
              (537,838
              )
              
              
              -Current
      portion
              
              
              
              
              
              
              
              
              
              $
              4,006,774
              
              
              $
              5,346,561
 
  23
  The
maturity dates for the above bank loans are summarized as follows:
 Name
      of banks
              Drawn
      down currency
              Due
      date
              
              Bank
      loans balanceAs
      of December 31,2008
              
              
              2007Hang
      Seng Bank
              HKD
              February
      2015
              
              
              1,163,054
              
              
              
              -Hang
      Seng Bank
              HKD
              March
      2015
              
              
              1,175,490
              
              
              
              -China
      Construction Bank
              RMB
              April
      2009
              
              
              875,020
              
              
              
              -China
      Construction Bank
              RMB
              March
      2008
              
              
              -
              
              
              
              685,128China
      Construction Bank
              RMB
              April
      2008
              
              
              -
              
              
              
              685,128China
      Construction Bank
              RMB
              June
      2008
              
              
              -
              
              
              
              1,370,257Industrial
      and Commercial Bank of China
              RMB
              September
      2009
              
              
              845,853
              
              
              
              -Industrial
      and Commercial Bank of China
              RMB
              September
      2009
              
              
              437,510
              
              
              
              -Industrial
      and Commercial Bank of China
              RMB
              September
      2008
              
              
              -
              
              
              
              1,205,826Bank
      of Communications
              RMB
              June
      2009
              
              
              1,166,694
              
              
              
              -Bank
      of Communications
              RMB
              June
      2008
              
              
              -
              
              
              
              1,096,205DBS
      Bank (Hong Kong) Limited
              RMB
              November
      2012
              
              
              1,677,799
              
              
              
              1,878,369Others
              
              
              
              
              -
              
              
              
              2,191$
              7,341,420
              
              
              $
              6,923,104
 
 All bank
loans were secured and guaranteed by the following:
 
 Secured
      by:
              Building
      and land use rights of the CompanyBuilding
      and land use rights of Nanjing Crystal Pines Beverages & Packaging Co.
      Ltd., a related partyGuaranteed
      by:
              DirectorsMr.
      Guy ChungMr.
      Stetson ChungRelated companiesShanghai
      Great East Packaging Co. Ltd.Shenyang
      Great East Packaging Co. Ltd.Great
      East Packaging Holdings Ltd.Janwise
      LimitedGreat
      East Packaging (Hong Kong) Limited
 Interest
expenses for the bank loan for the years ended December 31, 2008 and 2007 were
$619,172 and $467,867, respectively.
 
 
 NOTE 15 – INCOME TAX AND
DEFERRED TAX LIABILITIES
 
 (a)
              Corporation
      Income Tax
 
 Provision
for PRC corporate income tax is calculated at the prevailing rate based on the
estimated assessable profits.  On March 1, 2007, the Fifth Plenary
Session of the Tenth National People’s Congress passed the new Corporate Income
Tax Law.   Pursuant to the new tax law, the statutory rate of
corporate income tax will change to 25% with effect from January 1,
2008.
 
 BVI
companies are not subjected to tax in accordance with the relevant tax laws and
regulations of the BVI.
 
 The
corporate income tax rates applicable to the Company and its subsidiaries for
the year ended December 31, 2008 and 2007 were as follows:
 
 Place
      of incorporation
              
              2008
              
              
              2007Citysky
      Investment Holdings, Inc
              BVI
              
              
              0
              %
              
              
              0
              %Great
      East Packaging (Nanjing) Limited
              BVI
              
              
              0
              %
              
              
              0
              %Great
      East Packaging International Limited
              BVI
              
              
              0
              %
              
              
              0
              %Great
      East Packaging (Xian) Limited
              BVI
              
              
              0
              %
              
              
              0
              %Hangzhou
      Great East Packaging Co., Limited
              PRC
              
              
              25.0
              %
              
              
              27.0
              %Nanjing
      Great East Packaging Co., Limited
              PRC
              
              
              25.0
              %
              
              
              27.0
              %Xian
      Great East Packaging Co., Limited
              PRC
              
              
              25.0
              %
              
              
              33.0
              %
 
  24
  The
actual and effective corporate income tax was 21.1% and 20.6% for the years
ended December 31, 2008 and 2007, respectively.  The PRC subsidiaries
of the Company are registered as foreign investment enterprises.
 
 For
      the year ended December 31,2008
              
              
              2007Amount
              
              
              %
              
              
              Amount
              
              
              %Net
      income before provision for income taxes
              
              $
              4,402,986
              
              
              
              
              
              $
              3,796,672Tax
      at the applicable rate
              
              
              1,100,747
              
              
              
              25.0
              
              
              
              1,023,691
              
              
              
              27.0Tax
      effect of tax exemption
              
              
              -
              
              
              
              -
              
              
              
              (55,843
              )
              
              
              (1.5
              )Tax
      loss utilized from previous periods
              
              
              (67,041
              )
              
              
              (1.5
              )
              
              
              -
              
              
              
              -Underprovision
      in prior year
              
              
              28,309
              
              
              
              0.6
              
              
              
              -
              
              
              
              -Tax
      effect of income not subject to tax
              
              
              (113,066
              )
              
              
              (2.5
              )
              
              
              (184,565
              )
              
              
              (4.9
              )TOTAL
              
              $
              948,949
              
              
              
              21.6
              
              
              $
              783,283
              
              
              
              20.6
 
 The
provisions for income taxes for each of the two years ended December 31 are
summarized as follows:
 
 2008
              
              
              2007Current
              
              $
              920,640
              
              
              $
              783,283Underprovision
      in prior year
              
              
              28,309
              
              
              
              -948,949
              
              
              
              783,283Deferred
              
              
              -
              
              
              
              -TOTAL
              
              $
              948,949
              
              
              $
              783,283
 There are
no timing differences between reported book or financial income and income
computed for income tax purposes.  Therefore, the Company has made no
adjustment for deferred tax assets or liabilities.
 
 (b)
              Value
      Added Tax ("VAT")
 
 In
accordance with the current tax laws in the PRC, the VAT for domestic sales is
levied at 17% on the invoiced value of sales and is payable by the purchaser.
The PRC subsidiaries of the Company are required to remit the VAT they collects
to the tax authority, but may offset these tax liabilities from the VAT for the
taxes that they have paid on eligible purchases. The VAT payable balance of
$429,237 and $342,178 at December 31, 2008 and 2007, respectively has been
accrued and reflected as taxes payable in the accompanying consolidated balance
sheets.
 
 There is
no VAT under current tax laws in the BVI.
 
 
 NOTE 16 – COMMON
STOCK
 
 The
Company authorized 375,000,000 shares $0.01 par value of common stock as of
December 31, 2008.
 
 On March
10, 2008, the Company entered into and completed the Share Exchange Agreement
with Citysky and the Shareholder. Pursuant to the terms of the Share Exchange
Agreement, the Company acquired 100% ownership of Citysky from the Shareholder.
Consideration by the Company was the issuance of 6,492,000 shares of its common
stock to the Shareholder. Subsequent to the completion of the Share Exchange
Agreement, Citysky became a wholly owned subsidiary of the Company and the
Company had a total of 8,000,000 shares of its common stock issued and
outstanding.
 
 On April
16, 2008, our Board of Directors approved a 1 for 5 forward stock split of our
common stock. The record date for the stock split was April 26, 2008. Upon the
completion of forward split, the Company has a total of 40,000,000 shares of
common stock issued and outstanding.
 
  25
  
 NOTE 17 – ADDITIONAL PAID-IN
CAPITAL
 
 In 2007,
GEPH converted certain advances to the Company of $2,552,794 in aggregate to
additional paid-in capital.
 
 In 2008,
the Chief Executive Officer of the Company contributed his compensation for the
year of $90,000 to the Company’s additional paid-in capital.
 
 
 NOTE 18 – CAPITAL
RESERVES
 In
accordance with the PRC Companies Law, the Company’s PRC subsidiaries were
required to transfer 10% of their profit after tax, as determined in accordance
with accounting standards and regulations of the PRC, to the statutory surplus
reserve and a percentage of not less than 5%, as determined by management, of
the profit after tax to the public welfare fund. With the amendment of the PRC
Companies Law which was effective January 1, 2006, enterprises in the PRC are no
longer required to transfer any profit to the public welfare fund. Any balance
of public welfare fund brought forward from December 31, 2005 should be
transferred to the statutory surplus reserve. The statutory surplus reserve is
non-distributable.
 
 
 NOTE 19 – OTHER
INCOME
 
 Other
income for the years ended December 31, 2008 and 2007 are summarized as
follows:
 
 For
      the year ended December 31,2008
              
              
              2007Sale
      of scrapped materials
              
              $
              180,858
              
              
              $
              236,746Others
              
              
              85,763
              
              
              
              70,047TOTAL
              
              $
              266,621
              
              
              $
              306,793
 
 NOTE 20 – INTEREST
INCOME
 
 Interest
income for the years ended December 31, 2008 and 2007 are summarized as
follows:
 
 For
      the year ended December 31,2008
              
              
              2007Bank
      interest income
              
              $
              160,734
              
              
              $
              300,624Interest
      income from a related party
              
              
              108,277
              
              
              
              -TOTAL
              
              $
              269,011
              
              
              $
              300,624
 The
Company levied interest on amount due from GEPH, a related company, at a rate of
9% per annum, calculating on an accrual basis using the effective interest
method by applying the rates to the net carrying amount of the
receivable.
 
 
 NOTE 21 – RELATED PARTY
TRANSACTIONS
 
 In
addition to the transactions detailed elsewhere in these financial statements,
the Company entered into the following material transactions with GEPH for the
years ended December 31, 2008 and 2007:
 
 2008
              
              
              2007Sale
      of PET CSD bottles and materials
              
              $
              11,528,164
              
              
              $
              9,077,259Purchase
      of PET CSD bottles and materials-Included
      in cost of sales
              
              
              6,857,640
              
              
              
              4,260,538-Included
      in inventories
              
              
              436,949
              
              
              
              867,579Total
              
              $
              7,294,589
              
              
              $
              5,128,117
 
 In our
opinion, the above transactions were entered into by the Company in the normal
course of business.
  26
  
 
 NOTE 22 – CONTINGENCIES AND
COMMITMENTS
 
 As of
December 31, 2008 and 2007, Nanjing Great East Packaging Co., Limited and Xian
Great East Packaging Co., Limited, the subsidiaries of the Company, had arranged
three non-cancelable operating leases with three third parties for their
production plants.   The expected annual lease payments under
these operating leases are as follows:
 
 As
      of December 31,2008
              
              
              2007For
      the year ended December 31,2008
              
              $
              -
              
              
              $
              153,8462009
              
              
              107,570
              
              
              
              68,1322010
              
              
              20,820
              
              
              
              68,1322011
              
              
              20,820
              
              
              
              28,3882012
              
              
              20,820
              
              
              
              -TOTAL
              
              $
              170,030
              
              
              $
              318,498
 
 NOTE
23 – RESTATEMENT
 
 (a)
              To reflect the
      contribution of Chief Executive Officer’s compensation of $90,000 for
      fiscal 2008 to additional paid-in
capital
 
 The
Company has restated the consolidated financial statements for the year ended
December 31, 2008 to reflect the contribution of Chief Executive Officer’s
compensation of $90,000 for fiscal 2008 to additional paid-in
capital.  The Company’s net income and comprehensive income for the
year then ended have been decreased by $90,000, respectively, and additional
paid-in capital as of December 31, 2008 has been increased by the same
amount.
 
 The
impacts of such restatement on the Company’s financial statements for the year
ended December 31, 2008 is summarized as follows:
 
 Originally
                reported
              
              
              Restatement
                adjustments
              
              
              RestatedGeneral
      and administrative expense
              
              $
              1,717,013
              
              
              $
              90,000
              
              
              $
              1,807,013Income
      from continuing operations before provision for income taxes and minority
      interest
              
              
              4,492,986
              
              
              
              (90,000
              )
              
              
              4,402,986Net
      income
              
              
              3,501,931
              
              
              
              (90,000
              )
              
              
              3,411,931Comprehensive
      income
              
              
              5,182,498
              
              
              
              (90,000
              )
              
              
              5,092,498Additional
      paid-in capital
              
              
              9,795,277
              
              
              
              90,000
              
              
              
              9,885,277Retained
      earnings
              
              
              2,234,341
              
              
              
              (90,000
              )
              
              
              2,144,341
 In the
consolidated statements of cash flows for the year ended December 31, 2008, we
have restated the net income and added “Officer compensation contributed to
additional paid in capital” of $90,000 under cash flow from operating
activities.
 
 We have
also restated the tax reconciliation statement as shown in Notes to Income Tax
and Deferred Tax Liabilities (Footnote 15) in order to reflect the changes in
pre-tax income.
  27
  
 (b)
              To show the activity
      of the notes payable in financing
  activities.
 
 The
Company has restated the consolidated statements of cash flows to show the
activity of the notes payable in financing activities.  Net cash flows
from operating activities has been decreased by $1,217,690, and net cash flows
from financing activities has been increased by $1,217,690.
 
 
 Originally
                reported
              
              
              Restatement
                adjustments
              
              
              RestatedFor
      the year ended December 31, 2008Cash
      flow from operating activities:Increase
      in notes payable
              
              $
              1,217,690
              
              
              $
              (1,217,690
              )
              
              $
              -Net
      cash inflow from operating activities
              
              
              6,078,451
              
              
              
              (1,217,690
              )
              
              
              4,860,761Cash
      flow from financing activities:Increase
      in notes payable
              
              
              -
              
              
              
              1,217,690
              
              
              
              1,217,690Net
      cash inflow from financing activities
              
              $
              397,408
              
              
              $
              1,217,690
              
              
              $
              1,615,098
 (c)
              Other
      restatements
 
 We have
restated the earnings per share amount for the year ended December 31, 2008 from
$0.13 to $0.08. This restatement represents the use of net income instead
of comprehensive income in the calculation of earnings per share
amount.
 
 We have
added the following footnotes to provide further explanation and additional
detail for amounts reported in the financial statements:
 (i)
              Footnote
      5 – Pledged deposits
 (ii)
              Footnote
      13 – Notes payable
 (iii)
              Footnote
      17 – Additional paid-in capital
 (iv)
              Footnote
      19 – Other income
 (v)
              Footnote
      20 – Interest income
 
 We have
also amended the presentation of the following footnotes to clarify amounts
reported in the financial statements:
 (i)
              Footnote
      8 – Amount due from/(to) a related party,
net
 (ii)
              Footnote
      21 – Related party
transactions.