**U.S.
      SECURITIES AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**




**FORM
      10-QSB**




(Mark
      One)




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




**For
      the quarterly period ended September 30, 2007**




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




**For
      the transition period from ____ to ____**




Commission
      file number 000-51862




**Guilin
      Paper, Inc.**


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




**Nevada**
            
            **09-0420135**(State
                or other jurisdiction of
              incorporation
                or organization)
            
            (IRS
                Employer
              Identification
                No.)





**Yu
      Lei Bay, Lipu,**


**Guangxi,
      P.R. China**


(Address
      of principal executive offices)




**86-773-723
      3098**


(Issuer’s
      telephone number)









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




Check
      whether the issuer (1) 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 whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes o No
x




As
      of
      November 13, 2007 the issuer had 48,077,968 shares of common stock, $0.001
      par
      value outstanding.




The
      issuer’s revenues for the three months ended September 30, 2007 were
      $8,185,225




Transitional
      Small Business Disclosure Format: YES o NO
x









**INDEX**




PART
                  1 - FINANCIAL INFORMATIONItem
                  1. Financial StatementsReport
                  of Independent Registered Public Accounting Firm
              3Consolidated
                  Balance Sheets September 30, 2007 and December 31, 2006
              4Consolidated
                  Statements of Income for the Nine Months Ending September 30, 2007
                  and
                  2006
              5Consolidated
                  Statements of Income for the Three Months Ending September 30,
                  2007 and
                  2006
              6Consolidated
                  Statements of Cash Flows for the Nine Months Ending September 30,
                  2007 and
                  2006
              7Consolidated
                  Statement of Stockholders' Equity for the Nine Months Ended September
                  30,
                  2007
              8Notes
                  to Consolidated Financial Statements
              9Item
                  2. Management’s Discussion and Analysis or Plan of
                  Operation
              22Item
                  3. Controls and Procedures
              29PART
                  II - OTHER INFORMATIONItem
                  1. Legal Proceedings
              31Item
                  2. Unregistered Sales of Equity Securities and Use of
                  Proceeds
              31Item
                  3. Defaults Upon Senior Securities
              31Item
                  4. Submission of Matters to a Vote of Security Holders
              31Item
                  5. Other Information
              32Item
                  6. Exhibits
              32SIGNATURES
              33


2


***MORGENSTERN,
      SVOBODA, & BAER, CPA’s, P.C.***




*CERTIFIED
      PUBLIC ACCOUNTANTS*


40
      Exchange Place, Suite 1820


New
      York,
      NY 10005


TEL:
      (212) 925-9490


FAX:
      (212) 226-9134


E-MAIL:
      MSBCPAS@GMAIL.COM





Board
      of
      Directors and Stockholders of


Guilin
      Paper, Inc.





We
      have
      reviewed the accompanying consolidated balance sheets of Guilin Paper, Inc.,
      (“The Company”) as of September 30, 2007 and December 31, 2006 and the related
      consolidated statements of income, comprehensive losses, statement of
      stockholders' equity, and cash flows for the nine months and three months ended
      September 30, 2007 and 2006. These financial statements are the responsibility
      of the Company's management. Our responsibility is to express an opinion on
      these financial statements based on our audit.




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





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





Morgenstern,
      Svoboda & Baer, CPAs, P.C.


Certified
      Public Accountants





New
      York,
      NY


October
      31, 2007


3


**PART
      1 - FINANCIAL INFORMATION**


**ITEM
      1. FINANCIAL STATEMENTS**





**GUILIN
      PAPER, INC.**


**CONSOLIDATED
      BALANCE SHEETS**


**SEPTEMBER
      30, 2007 AND DECEMBER 31, 2006**





**9/30/07**
            
            **12/31/06****ASSETS****Current
                Assets**Cash
                and cash equivalents
            
            $
            200,660
            
            $
            115,521Accounts
                receivable, net
            
            
            12,337,780
            
            
            12,771,315Notes
                receivable
            
            
            201,700
            
            
            232,364Inventory
            
            
            7,225,790
            
            
            4,198,509Other
                receivables, net
            
            
            2,251,580
            
            
            1,783,749Trade
                deposits
            
            
            2,985,972
            
            
            4,312,558Prepaid
                expenses
            
            
            71,926
            
            
            40,217Total
                Current Assets
            
            
            25,275,408
            
            
            23,454,233**Property
                & equipment, net**
            
            
            13,860,165
            
            
            14,341,963**Other
                Assets**Intangibles
            
            
            2,513,398
            
            
            2,560,101Other
                assets
            
            
            36,403
            
            
            36,403Total
                Other Assets
            
            
            16,409,966
            
            
            16,938,467**Total
                Assets**
            
            $
            41,685,374
            
            $
            40,392,700**LIABILITIES
                AND STOCKHOLDERS' EQUITY****Current
                Liabilities**Notes
                payable –
                current
            
            $
            11,474,881
            
            
            12,641,516Accounts
                payable and accrued expenses
            
            
            4,685,372
            
            
            7,426,059Interest
                payable
            
            
            6,273,585
            
            
            5,890,420Customer
                advances
            
            
            1,846,186
            
            
            610,331Income
                tax payable
            
            
            376,811
            
            
            586,775Total
                Current Liabilities
            
            
            24,656,835
            
            
            27,155,101**Long
                Term Debts**Notes
                payable – net of current portion
            
            
            644,937
            
            
            640,409**Total
                Liabilities**
            
            
            25,301,772
            
            
            27,795,510**Stockholders'
                Equity**Common
                stock, par value, “nil”
            
            
            48,078
            
            
            48,078Additional
                paid in capital
            
            
            7,796,007
            
            
            7,796,007Statutory
                reserves
            
            
            5,246,450
            
            
            5,246,450Other
                comprehensive losses
            
            
            (418,744
            )
            
            (405,007
            )Retained
                earnings (deficit)
            
            
            3,711,811
            
            
            (88,338
            )Total
                Stockholders' Equity
            
            
            16,383,602
            
            
            12,597,190Total
                Liabilities and Stockholders' Equity
            
            $
            41,685,374
            
            
            40,392,700





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


4





**GUILIN
      PAPER, INC.**


**CONSOLIDATED
      STATEMENTS OF INCOME**


**FOR
      THE NINE MONTHS ENDING SEPTEMBER 30, 2007 AND 2006**





**9/30/2007**
            
            **9/30/2006**Sales,
                net
            
            $
            23,384,937
            
            $
            22,091,352Cost
                of sales
            
            
            17,197,950
            
            
            17,292,836**Gross
                profit**
            
            
            6,186,987
            
            
            4,798,516General
                and administrative expenses
            
            
            1,874,254
            
            
            1,492,170**Income
                from operations**
            
            
            4,312,733
            
            
            3,306,346Other
                (Income) ExpenseInterest
                expense
            
            
            564,751
            
            
            801,505Gain
                on restructuring of debt
            
            
            (384,618
            )
            
            -Other
                income, net
            
            
            (106,055
            )
            
            (274,471
            )Total
                Other (Income) Expense
            
            
            74,078
            
            
            527,034**Income
                before income taxes**
            
            
            4,238,655
            
            
            2,779,312Provision
                for income taxes
            
            
            438,506
            
            
            229,955**Net
                income**
            
            $
            3,800,149
            
            $
            2,549,357




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


5




**GUILIN
      PAPER, INC.**


**CONSOLIDATED
      STATEMENTS OF INCOME**


**FOR
      THE THREE MONTHS ENDING SEPTEMBER 30, 2007 AND 2006**


******9/30/2007**
              
              **9/30/2006**Sales,
                  net
              
              $
              8,185,225
              
              $
              8,232,274Cost
                  of sales
              
              
              6,063,299
              
              
              6,905,682**Gross
                  profit**
              
              
              2,121,926
              
              
              1,326,592General
                  and administrative expenses
              
              
              583,824
              
              
              730,554**Income
                  from operations**
              
              
              1,538,102
              
              
              596,038Other
                  (Income) ExpenseInterest
                  expense
              
              
              125,100
              
              
              87,736Gain
                  on restructuring of debt
              
              
              (384,618
              )
              
              -Other
                  income, net
              
              
              (90,209
              )
              
              (151,028
              )Total
                  Other (Income) Expense
              
              
              (349,727
              )
              
              (63,292
              )**Income
                  before income taxes**
              
              
              1,887,829
              
              
              659,330Provision
                  for income taxes
              
              
              215,049
              
              
              (860
              )**Net
                  income**
              
              $
              1,672,780
              
              $
              660,190




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


6





**GUILIN
      PAPER, INC.**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**FOR
      THE NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006**





**9/30/2007**
              
              **9/30/2006****CASH
                  FLOWS FROM OPERATING ACTIVITIES**Net
                  income
              
              $
              3,800,149
              
              $
              2,549,357Adjustments
                  to reconcile net income to net cashProvided
                  by operating activities:Depreciation
                  and amortization
              
              
              880,996
              
              
              907,924Gain
                  on restructuring of debt
              
              
              (384,618
              )
              
              -Provision
                  for doubtful accounts
              
              
              605,928
              
              
              (155,222
              )(Increase)
                  decrease in assets:Accounts
                  receivable
              
              
              (124,397
              )
              
              (2,252,461
              )Other
                  receivables
              
              
              (515,827
              )
              
              180Trade
                  deposits
              
              
              1,326,586
              
              
              (1,473,819
              )Inventory
              
              
              (3,027,281
              )
              
              401,491Other
                  current assets
              
              
              (1,045
              )
              
              (196,480
              )Increase
                  (decrease) in current liabilities:Accounts
                  payable and accrued expenses
              
              
              (2,740,687
              )
              
              1,138,805Interest
                  payable
              
              
              383,165
              
              
              651,660Customer
                  advances
              
              
              1,235,855
              
              
              (616,171
              )Income
                  tax payable
              
              
              (209,964
              )
              
              (393,253
              )**Net
                  cash provided by operating activities**
              
              
              1,228,860
              
              
              562,011**CASH
                  FLOWS FROM INVESTING ACTIVITIES**Purchase
                  of property & equipment
              
              
              (352,495
              )
              
              (1,003,985
              )**Net
                  cash used in investing activities**
              
              
              (352,495
              )
              
              (1,003,985
              )**CASH
                  FLOWS FROM FINANCING ACTIVITIES**Notes
                  Payable – net
              
              
              (777,489
              )
              
              427,173Paid
                  in capital
              
              
              -
              
              
              18,873**Net
                  cash (used in) provided by financing activities**
              
              
              (777,489
              )
              
              446,046Effect
                  of exchange rate changes on cash and cash equivalents
              
              
              (13,737
              )
              
              (229,187
              )Net
                  change in cash and cash equivalents
              
              
              85,139
              
              
              (225,115
              )**Cash
                  and cash equivalents, beginning balance**
              
              
              115,521
              
              
              414,995**Cash
                  and cash equivalents, ending balance**
              
              $
              200,660
              
              $
              189,880**SUPPLEMENTAL
                  DISCLOSURES:**Cash
                  paid during the year for:Income
                  tax payments
              
              $
              648,470
              
              $
              623,308Interest
                  payments
              
              $
              181,586
              
              $
              149,845





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


7




**GUILIN
      PAPER, INC.**


**CONSOLIDATED
      STATEMENT OF STOCKHOLDERS' EQUITY**


**FOR
      THE NINE MONTHS ENDED SEPTEMBER 30, 2007**








Common
              Stock
            
            Additional
              Paid
                I
              Capital
            
            Statutory
              Reserves
            
            Comprehensive
              Loss
            
            Retained
              Earnings
            
            Total
              Shareholders
              EquityBalance
                12/31/2006
            
            
            48,078
            
            
            7,796,007
            
            
            5,246,450
            
            
            (405,007
            )
            
            (88,338
            )
            
            12,597,190Comprehensive
            
            
            
            
            
            
            
            
            
            
            
            (13,737
            )
            
            
            
            
            (13,737
            )Net
                Income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            3,800,149
            
            
            3,800,149Balance
                06/30/2007
            
            $
            48,078
            
            $
            7,796,007
            
            $
            5,246,450
            
            $
            (418,744
            )
            $
            3,711,811
            
            $
            16,383,602





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


8


**GUILIN
      PAPER, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2007**





**Note
      1 -** **ORGANIZATION**





We
      were
      originally incorporated in the State of Nevada on March 2, 2004 under the name
      LogSearch, Inc. Our original business plan was to market and sell database
      management and analysis software to the oil & gas industry in the United
      States pursuant to a Commercialization Agreement with Unitech Energy Corp.





China
      Lipu Paper Limited (“CLP”) was formed on August 10, 2006 under the laws of the
      British Virgin Islands. On August 20, 2006, CLP acquired all of the outstanding
      ownership interest of Guangxi Forestry Lipu Paper Ltd. (“GFLP”), Guangxi Lvbao
      Waste Paper Recycling Ltd. (“GLWP”), and Guangxi Hengli Power Ltd. (“GHLP”).
      GFLP was registered on June 4, 1998 in Lipu, in the People’s Republic of China
      (“PRC”) with a registered capital of RMB 2.9 million Chinese Yuan and a defined
      period of existence of 20 years from 1998 to 2018. GWLP was registered on April
      7, 2000 in Lipu, in the PRC with a registered capital of RMB 0.5 million Chinese
      Yuan and a defined period of existence of 10 years from 2000 to 2010. Hengli
      was
      registered on December 25, 2003 in Lipu, in the PRC with a registered capital
      of
      RMB 2 million Chinese Yuan and a defined period of existence of 10 years from
      2003 to 2013. GFLP, GLWP and GHLP were classified as Sino-foreign joint venture
      enterprises with limited liabilities.





On
      March
      20, 2007, Mr. James Durward, the Company’s former Chief Executive Officer, Board
      member and principal stockholder, through an entity of which he is the President
      and deemed to be the beneficial owner, entered into an agreement with Biao
      Tan,
      the Company’s Chairman of the Board, pursuant to which Mr. Durward sold Mr. Tan
      approximately 4% of the issued and outstanding shares of the Company’s common
      stock. On March 21, 2007, the Company, Mr. Durward and Mr. Tan entered into
      a
      stock purchase agreement pursuant to which Mr. Durward sold Mr. Tan
      approximately 81% of the issued and outstanding shares of common stock of the
      Company. As a result, as of March 21, 2007, Mr. Tan had acquired approximately
      85% of the issued and outstanding shares of the Company’s common
      stock.





On
      April
      17, 2007, the Company, LGSE Merger Sub, Inc., a Nevada corporation and a
      wholly-owned subsidiary of the Company (“Merger Sub”), China Lipu Paper Limited,
      a British Virgin Islands corporation (“CLP”), and the shareholders of CLP
      entered into an Agreement and Plan of Merger pursuant to which Merger Sub was
      merged with and into CLP and the Company issued 27,027,968 shares of its common
      stock to the shareholders of CLP in exchange for 100% of the registered capital
      of CLP. The Company then changed its name to Guilin Paper, Inc.





These
      transactions were treated for financial reporting purposes as a reverse
      acquisition, with Guilin Paper, Inc. (formerly LogSearch Inc.) being the
      surviving entity. The Company did not recognize goodwill or any intangible
      assets in connection with the transaction. Prior to the reverse acquisition,
      the
      Company was a shell company with no significant assets and liabilities.





The
      Company’s principal activities are conducted through its principal subsidiaries
      Guangxi Forestry Lipu Paper Ltd., Guangxi Lvbao Waste Paper Recycling Ltd,
      and
      Guangxi Hengli Power Ltd. The Company is principally engaged in the manufacture
      and sales of kraft paper and paper cartons for packaging, the manufacture and
      sale of printing paper, including colored art printing paper, newsprint paper
      among others, and waste paper recycling. The Company’s subsidiary, Guangxi
      Hengli Power, operates a coal-fired power plant which generates power almost
      exclusively for the Company’s own consumption.


9


**GUILIN
      PAPER, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2007**





**Note
      1 –** **ORGANIZATION
      (CONTINUED)**





The
      accompanying financial statements present the historical financial condition,
      results of operations and cash flows of the operating company prior to the
      merger.





Basis
      of Presentation





The
      accompanying financial statements have been prepared in conformity with
      accounting principles generally accepted in the United States of America (“US
      GAAP”). The Company's functional currency is the Chinese Renminbi; however the
      accompanying consolidated financial statements have been translated and
      presented in United States dollars.





Translation
      Adjustment





The
      Company’s principal country of operations is in the PRC. The financial position
      and results of operations of the Company are determined using the local currency
      ("Renminbi" or "Yuan") as the functional currency. The Company’s financial
      statements were translated into U.S. Dollars (USD) in accordance with Statement
      of Financial Accounts Standards (SFAS) No. 52, Foreign Currency Translation.
      According to the Statement, all assets and liabilities were translated at the
      current exchange rate, stockholders’ equity is translated at the historical
      rates and income statement items are translated at the average exchange rate
      for
      the period. The resulting translation adjustments are reported under other
      comprehensive income in accordance with SFAS No. 130, Reporting Comprehensive
      Income as a component of shareholders’ equity. Transaction gains and losses are
      reflected in the income statement.





Use
      of
      Estimates





The
      preparation of financial statements in conformity with generally accepted
      accounting principles 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 could differ from those estimates.





Risks
      and Uncertainties





The
      Company is subject to substantial risks from, among other things, intense
      competition associated with the industry in general, other risks associated
      with
      financing, liquidity requirements, rapidly changing customer requirements,
      limited operating history, foreign currency exchange rates and the volatility
      of
      public markets.


10


**GUILIN
      PAPER, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2007**





**Note
      1 –** **ORGANIZATION
      (CONTINUED)**





Contingencies





A
      contingent liability is a possible obligation that arises from past events
      and
      whose existence will only be confirmed by the occurrence or non-occurrence
      of
      one or more uncertain future events not wholly within the control of the
      Company. It can also be a present obligation arising from past events that
      is
      not recognized because it is not probable that outflow of economic resources
      will be required or the amount of obligation cannot be measured reliably. A
      contingent





**Note
      2 -** **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES**





liability
      is not recognized but is disclosed in the notes to the financial statements.
      When a change in the probability of an outflow occurs so that outflow is
      probable, they will then be recognized as a provision. A contingent asset is
      a
      possible asset that arises from past events and whose existence will be
      confirmed only by the occurrence or non-occurrence of one or more uncertain
      events not wholly within the control of the Company. Contingent assets are
      not
      recognized but are disclosed in the notes to the financial statements when
      an
      inflow of economic benefits is probable. When inflow is virtually certain,
      an
      asset is recognized.





If
      the
      assessment of a contingency indicates that it is probable that a material loss
      has been incurred and the amount of the liability can be estimated, then the
      estimated liability would be accrued in the Company’s financial statements. If
      the assessment indicates that a potential material loss contingency is not
      probable but is reasonably possible, or is probable but cannot be estimated,
      then the nature of the contingent liability, together with an estimate of the
      range of possible loss if determinable and material would be disclosed.





Loss
      contingencies considered to be remote by management are generally not disclosed
      unless they involve guarantees, in which case the guarantee would be
      disclosed.





Cash
      and Cash Equivalents





Cash
      and
      cash equivalents include cash on hand and cash in time deposits, certificates
      of
      deposit and all highly liquid debt instruments with original maturities of
      three
      months or less.





Accounts
      Receivable





The
      Company maintains reserves for potential credit losses on accounts receivable.
      Management reviews the composition of accounts receivable and analyzes
      historical bad debts, customer concentrations, customer credit worthiness,
      current economic trends and changes in customer payment patterns to evaluate
      the
      adequacy of these reserves. Terms of sales vary. Reserves are recorded primarily
      on a specific identification basis. Allowance for doubtful accounts amounted
      to
      $1,505,480 and $1,236,657 at September 30, 2007 and December 31, 2006,
      respectively.


11


**GUILIN
      PAPER, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2007**





**Note
      2 -** **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED** **)**





Inventories





Inventories
      are valued at the lower of cost (determined on a weighted average basis) or
      market. Management compares the cost of inventories with the market value and
      allowance is made for writing down inventories to market value, if lower. As
      of
      September 30, 2007 and December 31, 2006, inventory consisted of finished goods
      valued at $1,636,999 and $1,142,784, respectively and raw material inventory
      was
      $5,588,791 and $3,055,725, respectively.




Property,
      Plant & Equipment




Property,
      plant and equipment are stated at cost. Expenditures for maintenance and repairs
      are charged to earnings as incurred; additions, renewals and betterments are
      capitalized. When property and equipment are retired or otherwise disposed
      of,
      the related cost and accumulated depreciation are removed from the respective
      accounts, and any gain or loss is included in operations. Depreciation of
      property and equipment is provided using the straight-line method for
      substantially all assets with estimated lives of:





Real
                Property
            
            
            50
                yearsMachinery
                & Equipment
            
            
            15
                yearsDelivery
                Equipment
            
            
            10
                yearsComputers
                & Office Equipment
            
            
            5
                years




As
      of
      September 30, 2007 and December 31, 2006, Property, Plant & Equipment
      consisted of the following:





9/30/2007
            
            12/31/2006Real
                Property
            
            $
            5,103,112
            
            $
            5,089,310Machinery
                & Equipment
            
            
            15,799,787
            
            
            15,579,647Delivery
                Equipment
            
            
            851,813
            
            
            793,765Computers
                and Office equipment
            
            
            196,408
            
            
            135,90121,951,120
            
            
            21,598,623Accumulated
                depreciation
            
            
            (8,090,955
            )
            
            (7,256,660
            )$
            13,860,165
            
            $
            14,341,963





Intangible
      Assets





Intangible
      assets are amortized using the straight-line method over their estimated period
      of benefit, ranging from one to ten years. Management evaluates the
      recoverability of intangible assets periodically and takes into account events
      or circumstances that warrant revised estimates of useful lives or that indicate
      that impairment exists. All of our intangible assets are subject to
      amortization. No impairments of intangible assets have been identified during
      any of the periods presented. In August of 2000, the Company purchased land
      rights which expire in 2050.


12


**GUILIN
      PAPER, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2007**





**Note
      2 -** **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED** **)**





The
      components of finite-lived intangible assets are as follows:





September 30, 2007
            
            December 31, 2006$
            2,940,343
            
            $
            2,940,343





The
      estimated future amortization expense related to intangible asset as of
      September 30, 2007 is as follows:




2007
            
            $
            62,8162008
            
            
            62,8162009
            
            
            62,8162010
            
            
            62,8162011
            
            
            62,816Thereafter
            
            $
            2,199,318





Long-Lived
      Assets




Effective
      January 1, 2002, the Company adopted Statement of Financial Accounting Standards
      No. 144, *Accounting
      for the Impairment or Disposal of Long-Lived Assets* (SFAS
      144), which addresses financial accounting and reporting for the impairment
      or
      disposal of long-lived assets and supersedes SFAS No. 121, *Accounting
      for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
      Of* ,
      and the
      accounting and reporting provisions of APB Opinion No. 30, *Reporting
      the Results of Operations for a Disposal of a Segment of a
      Business* .
      The
      Company periodically evaluates the carrying value of long-lived assets to be
      held and used in accordance with SFAS 144. SFAS 144 requires impairment losses
      to be recorded on long-lived assets used in operations when indicators of
      impairment are present and the undiscounted cash flows estimated to be generated
      by those assets are less than the assets carrying amounts. In that event, a
      loss
      is recognized based on the amount by which the carrying amount exceeds the
      fair
      market value of the long-lived assets. Loss on long-lived assets to be disposed
      of is determined in a similar manner, except that fair market values are reduced
      for the cost of disposal. Based on its review, the Company believes that, as
      of
      September 30, 2007, there were no significant impairments of its long-lived
      assets.




Fair
      Value of Financial Instruments




Statement
      of Financial Accounting Standard No. 107, *Disclosures
      About Fair Value of Financial Instruments* ,
      requires that the Company disclose estimated fair values of financial
      instruments. The carrying amounts reported in the statements of financial
      position for current assets and current liabilities qualifying as financial
      instruments are a reasonable estimate of fair value.




Revenue
      Recognition





The
      Company’s revenue recognition policies are in compliance with Staff Accounting
      Bulletin (SAB) 104. Sales revenue is recognized at the date of shipment to
      customers when a formal arrangement exists, the price is fixed or determinable,
      the delivery is completed, no other significant obligations of the Company
      exist
      and collectibility is reasonably assured.




Payments
      received before all of the relevant criteria for revenue recognition are
      satisfied are recorded as unearned revenue.


13


**GUILIN
      PAPER, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2007**





**Note
      2 -** **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED** **)**




Stock-Based
      Compensation




In
      October 1995, the FASB issued SFAS No. 123, *Accounting
      for Stock-Based Compensation* .
      SFAS
      No. 123 prescribes accounting and reporting standards for all stock-based
      compensation plans, including employee stock options, restricted stock, employee
      stock purchase plans and stock appreciation rights. SFAS No. 123 requires
      compensation expense to be recorded (i) using the new fair value method or
      (ii)
      using the existing accounting rules prescribed by Accounting Principles Board
      Opinion No. 25, Accounting for stock issued to employees (APB 25) and related
      interpretations with proforma disclosure of what net income and earnings per
      share would have been had the Company adopted the new fair value method. The
      Company uses the intrinsic value method prescribed by APB 25 and has opted
      for
      the disclosure provisions of SFAS No.123.





Advertising





Advertising
      expenses consist primarily of costs of promotion for corporate image and product
      marketing and costs of direct advertising. The Company expenses all advertising
      costs as incurred.




Income
      Taxes





The
      Company utilizes SFAS No. 109, Accounting for Income Taxes, which requires
      the
      recognition of deferred tax assets and liabilities for the expected future
      tax
      consequences of events that have been included in the financial statements
      or
      tax returns. Under this method, deferred income taxes are recognized for the
      tax
      consequences in future years of differences between the tax bases of assets
      and
      liabilities and their financial reporting amounts at each period end based
      on
      enacted tax laws and statutory tax rates applicable to the periods in which
      the
      differences are expected to affect taxable income. Valuation allowances are
      established, when necessary, to reduce deferred tax assets to the amount
      expected to be realized.





Basic
      and Diluted Earnings Per Share




Earnings
      per share is calculated in accordance with the Statement of Financial Accounting
      Standards No. 128 (SFAS No. 128), *Earnings
      per share* .
      SFAS
      No. 128 superseded Accounting Principles Board Opinion No.15 (APB 15). Net
      loss
      per share for all periods presented has been restated to reflect the adoption
      of
      SFAS No. 128. Basic net loss per share is based upon the weighted average number
      of common shares outstanding. Diluted net loss per share is based on the
      assumption that all dilutive convertible shares and stock options were converted
      or exercised. Dilution is computed by applying the treasury stock method. Under
      this method, options and warrants are assumed to be exercised at the beginning
      of the period (or at the time of issuance, if later), and as if funds obtained
      thereby were used to purchase common stock at the average market price during
      the period.


14


**GUILIN
      PAPER, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2007**





**Note
      2 -** **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED** **)**





Statement
      of Cash Flows




In
      accordance with SFAS No. 95, Statement of Cash Flows, cash flows from the
      Company’s operations are based upon local currencies. As a result, amounts
      related to assets and liabilities reported on the statement of cash flows will
      not necessarily agree with changes in the corresponding balances on the balance
      sheet.





Concentration
      of Credit Risk




Financial
      instruments that potentially subject the Company to concentrations of credit
      risk are cash, accounts receivable and other receivables arising from its normal
      business activities. The Company places its cash in what it believes to be
      credit-worthy financial institutions. The Company has a diversified customer
      base, most of which are in China. The Company controls credit risk related
      to
      accounts receivable through credit approvals, credit limits and monitoring
      procedures. The Company routinely assesses the financial strength of its
      customers and, based upon factors surrounding the credit risk, establishes
      an
      allowance, if required, for uncollectible accounts and, as a consequence,
      believes that its accounts receivable credit risk exposure beyond such allowance
      is limited.




Segment
      Reporting





Statement
      of Financial Accounting Standards No. 131 (SFAS 131), *Disclosure
      about Segments of an Enterprise and Related Information* requires
      use of the management approach model for segment reporting. The management
      approach model is based on the way a company's management organizes segments
      within the company for making operating decisions and assessing performance.
      Reportable segments are based on products and services, geography, legal
      structure, management structure, or any other manner in which management
      disaggregates a company.




The
      Company reports in only one segment.





Recent
      accounting pronouncements





In
      December 2004, the FASB issued FASB Statement No. 123R, *Share-Based
      Payment, an Amendment of FASB Statement No. 123* ("FAS
      No. 123R"). FAS No. 123R requires companies to recognize in the statement of
      operations the grant-date fair value of stock options and other equity-based
      compensation issued to employees. FAS No. 123R was effective beginning in the
      Company's first quarter of fiscal 2006.





In
      May
      2005, the FASB issued SFAS No. 154, *Accounting
      Changes and Error Corrections* .
      This
      statement applies to all voluntary changes in accounting principles and requires
      retrospective application to prior periods' financial statements of changes
      in
      accounting principles, unless this would be impracticable. This statement also
      makes a distinction between "retrospective application" of an accounting
      principle and the "restatement" of financial statements to reflect the
      correction of an error. This statement is effective for accounting changes
      and
      corrections of errors made in fiscal years beginning after December 15, 2005.


15


**GUILIN
      PAPER, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2007**





**Note
      2 -** **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED** **)**





In
      June
      2005, the EITF reached consensus on Issue No. 05-6, *Determining
      the Amortization Period for Leasehold Improvements* ("EITF
      05-6.") EITF 05-6 provides guidance on determining the amortization period
      for
      leasehold improvements acquired in a business combination or acquired subsequent
      to lease inception. The guidance in EITF 05-6 will be applied prospectively
      and
      is effective for periods beginning after June 29, 2005. EITF 05-6 is not
      expected to have a material effect on the Company’s consolidated financial
      position or results of operations.





In
      June
      2005, the FASB Staff issued FASB Staff Position 150-5 (FSP 150-5), *Issuers
      Accounting Under FASB Statement No. 150 for Freestanding Warrants and Other
      Similar Instruments on Shares that are Redeemable* .
      FSP 150-5 addresses whether freestanding warrants and other similar
      instruments on shares that are redeemable, either put able or mandatorily
      redeemable, would be subject to the requirements of FASB Statement No. 150, *Accounting
      for Certain Financial Instruments with Characteristics of Both Liabilities
      and
      Equity* ,
      regardless of the timing or the redemption feature or the redemption price.
      The
      FSP is effective after June 30, 2005.





In
      February 2006, FASB issued SFAS No. 155, *Accounting
      for Certain Hybrid Financial Instruments* SFAS No.
      155 amends SFAS No 133, *Accounting
      for Derivative Instruments and Hedging Activities* ,
      and
      SFAF No. 140, *Accounting
      for Transfers and Servicing of Financial Assets and Extinguishments of
      Liabilities* .
      SFAS
      No. 155, permits fair value re-measurement for any hybrid financial instrument
      that contains an embedded derivative that otherwise would require bifurcation,
      clarifies which interest-only strips and principal-only strips are not subject
      to the requirements of SFAS No. 133, establishes a requirement to evaluate
      interest in securitized financial assets to identify interests that are
      freestanding derivatives or that are hybrid financial instruments that contain
      an embedded derivative requiring bifurcation, clarifies that concentrations
      of
      credit risk in the form of subordination are not embedded derivatives, and
      amends SFAS No. 140 to eliminate the prohibition on the qualifying
      special-purpose entity from holding a derivative financial instrument that
      pertains to a beneficial interest other than another derivative financial
      instrument. This statement is effective for all financial instruments acquired
      or issued after the beginning of the Company’s first fiscal year that begins
      after September 15, 2006.





In
      March
      2006, the FASB issued FASB Statement No. 156, Accounting for Servicing of
      Financial Assets - an amendment to FASB Statement No. 140. Statement 156
      requires that an entity recognize a servicing asset or servicing liability
      each
      time it undertakes an obligation to service a financial asset by entering into
      a
      service contract under certain situations. The new standard is effective for
      fiscal years beginning after





September
      15, 2006. The Company does not expect its adoption of this new standard to
      have
      a material impact on its financial position, results of operations or cash
      flows.





In
      September 2006, FASB issued SFAS 157 *Fair
      Value Measurements* .
      This
      Statement defines fair value, establishes a framework for measuring fair value
      in generally accepted accounting principles (GAAP), and expands disclosures
      about fair value measurements. This Statement applies under other accounting
      pronouncements that require or permit fair value measurements, the Board having
      previously concluded in those accounting pronouncements that fair value is
      the
      relevant measurement attribute. Accordingly, this Statement does not require
      any
      new fair value measurements. However, for some entities, the application of
      this
      Statement will change current practice. This Statement is effective for
      financial statements issued for fiscal years beginning after November 15, 2007,
      and interim periods within those fiscal years. Management is currently
      evaluating the effect of this pronouncement on the Company’s financial
      statements.


16


**GUILIN
      PAPER, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2007**





**Note
      2 -** **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED** **)**





In
      September 2006, FASB issued SFAS 158 *Employers’
      Accounting for Defined Benefit Pension and Other Postretirement
      Plans* - *an
      amendment of FASB Statements No. 87, 88, 106, and 132(R)* .
      This
      Statement improves financial reporting by requiring an employer to recognize
      the
      over funded or under funded status of a defined benefit postretirement plan
      (other than a multiemployer plan) as an asset or liability in its statement
      of
      financial position and to recognize changes in that funded status in the year
      in
      which the changes occur through comprehensive income of a business entity or
      changes in unrestricted net assets of a not-for-profit organization. This
      Statement also improves financial reporting by requiring an employer to measure
      the funded status of a plan as of the date of its year-end statement of
      financial position, with limited exceptions. An employer with publicly traded
      equity securities is required to initially recognize the funded status of a
      defined benefit postretirement plan and to provide the required disclosures
      as
      of the end of the fiscal year ending after December 15, 2006. An employer
      without publicly traded equity securities is required to recognize the funded
      status of a defined benefit postretirement plan and to provide the required
      disclosures as of the end of the fiscal year ending after June 15, 2007.
      However, an employer without publicly traded equity securities is required
      to
      disclose the following information in the notes to financial statements for
      a
      fiscal year ending after December 15, 2006, but before June 16, 2007, unless
      it
      has applied the recognition provisions of this Statement in preparing those
      financial statements.





A
      brief
      description of the provisions of this Statement;





The
      date
      that adoption is required; and





The
      date
      the employer plans to adopt the recognition provisions of this Statement, if
      earlier.





The
      requirement to measure plan assets and benefit obligations as of the date of
      the
      employer’s fiscal year-end statement of financial position is effective for
      fiscal years ending after December 15, 2008.





The
      Company believes that the adoption of these standards will have no material
      impact on its financial statements.





In
      December 2006, the FASB issued FSP EITF 00-19-2, *Accounting
      for Registration Payment Arrangements* (“FSP
      00-19-2”), which addresses accounting for registration payment arrangements. FSP
      00-19-2 specifies that the contingent obligation to make future payment or
      otherwise transfer consideration under a registration payment arrangement,
      whether issued as a separate agreement or included as a provision of a financial
      instrument or other agreement , should be separately recognized and measured
      in
      accordance with FASB Statement No. 5, *Accounting
      for Contingencies* .
      FSP
      00-19-2 further clarifies that a financial instrument subject to a registration
      payment arrangement should be accounted for in accordance with other applicable
      generally accepted accounting principles without regard to the contingent
      obligation to transfer consideration pursuant to the registration payment
      arrangement.


17


**GUILIN
      PAPER, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2007**





**Note
      2 -** **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED** **)**





For
      registration payment arrangements and financial instruments subject to those
      arrangements that were entered into prior to the issuance of EITF 00-19-2,
      this
      guidance shall be effective for financial statements issued for fiscal years
      beginning after December 15, 2006 and interim periods within those fiscal years.
      The Company has not yet determined the impact that the adoption of FSP 00-19-2
      will have on its financial statements.





In
      February 2007, the FASB issued SFAS No. 159, *The
      Fair Value Option for Financial Assets and Financial
      Liabilities* .
      SFAS
      159 permits entities to choose to measure many financial instruments, and
      certain other items, at fair value. SFAS 159 applies to reporting periods
      beginning after November 15, 2007. The adoption of SFAS 159 is not expected
      to
      have a material impact on the Company’s financial condition or results of
      operations.





**Note
      3 -** **NOTES
      PAYABLE**





The
      following summarizes notes payable as of September 30, 2007 and December 31,
      2006.





9/30/2007
            
            12/31/2006Cinda
                Trustor Of China - Nanning(1)
            
            $
            8,121,210
            
            $
            8,121,681Note
                originally held by Bank of China - Guilin. On June 25, 2004 the loans
                were
                transferred to Cinda Trustor of China. Original terms of these loans
                call
                for interest between 5.223% and 5.475% per annum, with principal
                due
                between 1996-2002.Changcheng
                Trustor Of China- Nanning(2)
            
            
            -
            
            $
            1,189,773Note
                originally held by Industry and Commercial Bank of China. On June
                30,
                2005, the loans were transferred to China Great Wall Asset Management
                Corp. Original term of this loan called for interest of 6.15% interest
                per
                annum. Principal past due at date of transfer.Agricultural
                Bank Of China(1)
            
            
            3,998,608
            
            $
            3,970,471Term
                of notes call for interest from 6.912% to 7.488% per annum with principal
                due in 2007 & 2008.Total
            
            $
            12,119,818
            
            $
            13,281,925Current
                Portion
            
            
            11,474,881
            
            
            12,641,516Long
                term Portion
            
            $
            644,937
            
            $
            640,409





(1)
      Notes
      held by Cinda Trustor of China are collateralized with pledged machinery and
      equipment. Notes held by Agricultural Bank of China are collateralized with
      both
      pledged machinery and equipment and plant buildings.


18


**GUILIN
      PAPER, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2007**





(2)
      During the quarter ended September 30, 2007, the Company restructured the debt
      originally due Industry and Commercial Bank of China. As a result of this
      restructuring, the debt was assigned to a new creditor at a discount and
      subsequently paid off, resulting in a gain of $384,618.





As
      of
      September 30, 2007 and December 31, 2006, accrued interest unpaid on these
      notes
      was $6,273,585 and $5,890,420, respectively.





**Note
      4 -** **COMPENSATED
      ABSENCES**




Regulation
      45 of local labor law entitles employees to annual vacation leave after 1 year
      of service. In general all leave must be utilized annually, with proper
      notification. Any unutilized leave is cancelled.





**Note
      5 -** **INCOME
      TAXES**





The
      Company is governed by the Income Tax Laws of the PRC. Pursuant to the PRC
      Income Tax Laws, the Enterprise Income Tax (EIT) is at a statutory rate of
      33%,
      which is comprised of 30% national income tax and 3% local income tax.





The
      following is a reconciliation of income tax expense:





09/30/2007Current
            
            
            
            
            $
            438,506Deferred
            
            
            
            
            
            -Total
            
            
            
            
            $
            438,50609/30/2006Current
            
            
            
            
            $
            229,955Deferred
            
            
            
            
            
            -Total
            
            
            
            
            $
            229,955PRC
                income tax
            
            
            33
            %Effective
                rate
            
            
            33
            %





**Note
      6 -** **STATUTORY
      RESERVES**





In
      accordance with the laws and regulations of the PRC, a percentage
      of income, after the payment of PRC income taxes, must be allocated to
      a statutory surplus reserve and statutory public affair fund. The public affair
      reserve is limited to 50% of registered capital. Effective January 1, 2006,
      there is only one fund requirement, which is 10% of after-tax income, not to
      exceed 50% of registered capital.


19


**GUILIN
      PAPER, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2007**





**Note
      6 -** **STATUTORY
      RESERVES (CONTINUED** **)**





Statutory
      reserve funds are protected from set off against losses, expansion of production
      and operation or increase in the registered capital of the respective company.
      Statutory public welfare funds are restricted to the capital expenditures for
      the collective welfare of employees. These reserves are not transferable to
      the
      Company in the form of cash dividends, loans or advances. These reserves are
      therefore not available for distribution except in liquidation. As of September
      30, 2007 and December 31, 2006, the Company had allocated $5,246,450 to these
      non-distributable reserve funds.





**Note
      7 -** **OTHER
      COMPREHENSIVE INCOME**





Balances
      of related after-tax components comprising accumulated other comprehensive
      income (loss), included in stockholders’ equity at September 30, 2007 and
      December 31, 2006, are as follows:





Foreign Currency
              Translation
              Adjustment
            
            Accumulated
              Other
              Comprehensive
              IncomeBalance
                at December 31, 2006
            
            $
            (405,007
            )
            $
            (405,007
            )Change
                for Nine Months
            
            
            (13,737
            )
            
            (13,737
            )Balance
                at June 30, 2007
            
            $
            (418,744
            )
            $
            (418,744
            )





**Note
      8**  **-** **CURRENT
      VULNERABILITY DUE TO CERTAIN RISK FACTORS**





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





**Note
      9 -** **MAJOR
      CUSTOMERS AND CREDIT RISK**





The
      Company had no customers who accounted for more than 10% of revenues during
      the
      nine months ended September 30, 2007 and 2006. One customer accounted for 18.4%
      and 16.6% of the Company’s accounts receivable at September 30, 2007 and
      December 31, 2006, respectively. The Company had no vendors during the six
      months ended June 30, 2007 and 2006 who accounted for more than 10% of the
      total
      purchases. One vendor as of December 31, 2006 comprised 12.93% of the Company’s
      accounts payable and no vendors at September 30, 2007 comprised more than 10%
      of
      the Company’s accounts payable.


20


**GUILIN
      PAPER, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2007**





**Note
      10 -** **RELATED
      PARTY TRANSACTIONS**





The
      Company, through common ownership, is related to Feitao Paper Product Ltd.
      The
      Company sells raw materials and electrical power to Feitao and buys waste paper
      from them. During the nine months ended September 30, 2007, sales of raw
      materials and power to Feitao totaled $1,496,822 and the Company purchases
      of
      waste paper totaled approximately $128,000. At September 30, 2007, accounts
      receivable included $2,252,512 due from Feitao. As discussed in Note 11, the
      Company has entered into a tentative agreement to acquire Feitao.





**Note
      11 -** **SUBSEQUENT
      EVENTS**





In
      July
      2007, the Company entered into a tentative agreement with Feitao Paper Product
      Ltd. a related party. Under the terms of the agreement, the Company agreed
      to
      purchase all the outstanding shares of Feitao for $1,279,000 of which $1,023,200
      is payable in cash, and $255,800 is payable in shares of the Company’s common
      stock. As of September 30, 2007, this agreement had not been
      finalized.


21


**ITEM 2.
      MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF
      OPERATION**




**FORWARD-LOOKING
      STATEMENTS**




Certain
      statements in this Quarterly Report on Form 10-QSB, and in particular,
      statements found in Item 2, Management’s Discussion and Analysis of
      Financial Condition and Results of Operations, which are not historical in
      nature may constitute forward-looking statements. These statements are often
      identified by the words, “will,” “may,” “should,” “continue,” “anticipate,”
“believe,” “expect,” “plan,” “appear,” “project,” “estimate,” “intend,” and
      words of similar import. Such statements reflect the current views of Guilin
      Paper with respect to future events and are subject to risks and uncertainties
      that could cause actual results to differ materially from those expressed or
      implied in these statements. We undertake no obligation to publicly update
      any
      forward-looking statements, whether as a result of new information, future
      events or otherwise.





**CORPORATE
      HISTORY**





We
      were
      originally incorporated in the State of Nevada on March 2, 2004 under the name
      LogSearch, Inc. Our original business plan was to market and sell database
      management and analysis software to the oil & gas industry in the United
      States pursuant to a Commercialization Agreement with Unitech Energy Corp.





China
      Lipu Paper Limited (“CLP”) was formed on August 10, 2006, under the laws of the
      British Virgin Islands. On August 20, 2006, CLP acquired all of the outstanding
      ownership interest in Guangxi Forestry Lipu Paper Ltd. (“GFLP”), Lipu Lvbao
      Waste paper Recycling Ltd. (“GLWP”), and Guangxi Hengli Power Company Ltd.
      (“GHLP”). GFLP was registered on June 4, 1998 in Lipu Town, in the People’s
      Republic of China (“PRC”) with a registered capital of RMB 2.9 million Chinese
      Yuan and a defined period of existence of 20 years from 1998 to 2018. GLWP
      was
      registered on April 7, 2000 in Lipu Town, in the PRC with a registered capital
      of RMB 0.5 million Chinese Yuan and a defined period of existence of 10 years
      from 2000 to 2010. GHLP was registered on December 25, 2003 in Lipu Town, in
      the
      PRC with a registered capital of RMB 2 million Chinese Yuan and a defined period
      of existence of 10 years from 2003 to 2013. GFLP, GLWP and GHLP were classified
      as Sino-foreign joint venture enterprises with limited liabilities.





On
      April
      17, 2007, the Company, LGSE Merger Sub, Inc., a Nevada corporation and a
      wholly-owned subsidiary of the Company (“Merger Sub”), China Lipu Paper Limited,
      a British Virgin Islands corporation (“CLP”), and the shareholders of CLP
      entered into an Agreement and Plan of Merger pursuant to which Merger Sub was
      merged with and into CLP and the Company issued 27,027,968 shares of its common
      stock to the shareholders of CLP in exchange for 100% of the registered capital
      of CLP. The Company then changed its name to Guilin Paper, Inc.





These
      transactions were treated for financial reporting purposes as a reverse
      acquisition, with Guilin Paper, Inc. (formerly LogSearch Inc.) being the
      surviving entity. The Company did not recognize goodwill or any intangible
      assets in connection with the transaction. Prior to the reverse acquisition,
      the
      Company was a shell company with no significant assets and
      liabilities.





We
      conduct our operations principally in China through our wholly-owned operating
      subsidiaries, Guangxi Forestry Lipu Paper Company Limited, Guangxi Lvbao Waste
      Paper Recycling Company Limited and Guangxi Hengli Power Company Limited. To
      date, all of our sales are made domestically in China.


22


**BUSINESS
      OVERVIEW**





*Guangxi
      Forestry Lipu Paper Company Limited*





Our
      primary business is conducted through our subsidiary Guangxi Forestry Lipu
      Paper
      Company Limited, which produces and sells high quality paper products primarily
      for packaging applications, including kraft paper, a durable, typically brown
      paper made from wood pulp, which is used predominantly for bags, wrapping paper
      and cardboard, high-grade specialty papers designed for custom packaging
      applications; and wood pulp, a raw material used in the manufacture of paper
      products. The Company has a diversified product portfolio with various types,
      grades, burst indices, stacking strengths, basis weights, printability and
      brands to meet a variety of customer requirements.





Guangxi
      Forestry has three major production lines, seven papermaking machines and more
      than 600 employees, with an annual production capacity of over 100,000 tons.
      Guangxi Forestry sells its paper products in China under the “LITA” brand. In
      addition, in 2000 they became ISO 9000 certified.





Guangxi
      Forestry manufactures its products from two sources of raw material: recycled
      or
      waste paper and wood pulp. It is the Company’s policy to maximize the use of
      recovered/recycled paper to produce high-quality products that meet its
      customers’ cost objectives and environmental policies. The Company’s largest raw
      material component is waste paper, which typically accounts for more than half
      the production cost of the Company’s products. As a result, the Company’s
      ability to source large volumes of consistently high-quality recovered paper
      under stable, long-term arrangements is critical to its success. The Company
      seeks to purchase recovered/recycled paper from suppliers that can offer a
      high
      volume of supply with consistent quality.





Wood
      pulp
      is the Company’s second largest raw materials component. The Company uses both
      bleached and unbleached wood pulp in the production of some of its products
      to
      increase consistency of appearance and product strength. Due to the short supply
      of wood pulp in China, a stable supply of substantial volumes of consistent
      high
      quality wood pulp is critical to the Company’s success. In addition, as a result
      of the short supply of wood pulp in China, wood pulp prices have increased
      year
      over year and are expected to continue to increase in the future.





Guangxi
      Forestry is located on 50 acres of land in Lipu Town and near the major sources
      of lumber used for wood pulp in China. Because of its proximity to the sources
      of wood pulp, the Company has access to a number of suppliers in the surrounding
      area. There are five major suppliers of lumber used for wood pulp in proximity
      to the Company’s plant: Guangxi Heda Paper Ltd.; Guangxi Nanning Phoenix Paper
      Product Company Limited; Guangxi Jiayu Paper Pulp Manufacturer Ltd. Nanning
      Phoenix Business Company Limited; and Hezhou Yaolong Business Company Limited.
      The Company has long-term relationships with these suppliers, although the
      Company has not entered into any long-term supply agreements.


The
      Company has also invested substantially in developing more efficient
      manufacturing techniques to reduce its raw materials costs. These new
      manufacturing techniques enable the Company to use wood pulp that includes
      materials such as brushwood and bamboo, the cost of which is half that of raw
      wood. With its new production methods, the Company has been able to reduce
      its
      raw material costs as a percentage of sales from 65.5% in the third quarter
      2006
      to 60.77% in the same period in 2007.





In
      addition, the Company is also considering developing its own source of lumber
      for wood pulp. The Company is considering an investment in forestry assets
      near
      Guilin City. The Company is currently analyzing several prospects that could
      provide excellent forestry resources, with advanced forestry planting
      technologies and reasonable forestry growth speed.


23


Finally,
      in addition to producing wood pulp for itself, in 2006, the Company started
      selling wood pulp directly to second-line manufacturers. The main material
      comprising the wood pulp sold to other manufacturers is needle bush, which
      is
      used to produce high quality paper. The gross profit margin from wood pulp
      is
      over 30%, twice as much as the gross profit margin of kraft paper. In 2007,
      the
      sale of wood pulp has become a major contributor to the Company’s net
      income.





*Guangxi
      Lvbao Waste Paper Recycling Company Limited*





Guangxi
      Lvbao Waste Paper Recycling Company Limited was established in April 2004,
      to
      source and purchase high-quality recycled paper for Guangxi Forestry. The scope
      of business is within the limits sets in the Resource Multipurpose Utilization
      Catalogue, which means it meets China’s policy to encourage the multipurpose
      utilization of resources. It was qualified as a Recycling Enterprise by the
      Resources Multipurpose Utilization Production (Project) Cognizance Committee
      in
      Guangxi Chuang Autonomous Region, in 2001. In 2001 it received the “Excellent
      Recycling Enterprise Award” from the Guangxi Resources Multipurpose Utilization
      Production (Project) Cognizance Committee.





*Guangxi
      Hengli Power Company Limited*





On
      December 25, 2003, Guangxi Hengli Power Company Limited was founded to provide
      stable and inexpensive electricity to the Company. Guangxi Hengli operates
      a
      coal-fired plant that is equipped with a 1×3MW backpressure turbine generator, a
      1×6MW steam-extraction turbine generator, and a 1×75t/t boiler with slurry
      re-circulating fluidized bed. Guangxi Hengli has the capacity to generate 60
      million kilowatt-hours of electricity per year and steam power of about 400
      thousand tons per year and has over 60 full time employees. Environmental issues
      are of primary concern to the Company. The boiler smoke (flue gas) is purified
      through a Venturi Wet Water Film Dust Trap, sulfured and dust removed, and
      the
      plant’s emission levels are in compliance with national flue gas standard
      rules.





The
      Company expects that in the next few years it may face shortages in the supply
      of coal and resulting price increases primarily as a result of an uneven coal
      distribution in China. In order to relieve this situation, the Chinese
      government has announced plans to expand coal transportation routes from the
      country's coal-rich regions, including Shanxi and Shaanxi provinces and the
      western area, and improve coal transportation facilities.





An
      increase in coal prices will have an adverse affect on the Company’s financial
      performance. Guangxi Hengli is close to the country’s coal-rich regions, and is
      not currently experiencing any coal supply issues. However, in order to minimize
      the effect of coal shortages in the future, the Company has begun to establish
      relationships with coal suppliers and is looking for additional coal suppliers
      to enlarge its supply network. In addition, the Company is continuing to seek
      ways to improve efficiencies to reduce coal consumption.





**Taxes**





Income
      Tax





The
      Company’s current statutory tax rate is 33%, comprised of national income tax of
      30% and local income tax of 3%. On March 16, 2007, the Enterprise Income Tax
      Law
      was passed in China which becomes effective on January 1, 2008. The new law
      introduces fundamental changes to the Chinese tax system for both domestic
      and
      foreign-owned entities. Pursuant to the new law, the Company’s statutory tax
      rate will be reduced to 25% beginning with the 2008 tax year.


24


Value
      added tax





The
      Provisional Regulations of the People’s Republic of China Concerning Value Added
      Tax promulgated by the State Council came into effect on January 1, 1994. Under
      these regulations and the Implementing Rules of the Provisional Regulations
      of
      the People’s Republic of China Concerning Value Added Tax, value added tax is
      imposed on goods sold in or imported into the PRC and on processing, repair
      and
      replacement services provided within the PRC.





Value
      added tax payable in the PRC is charged on an aggregated basis at a rate of
      13%
      or 17% (depending on the type of goods involved) on the full price collected
      for
      the goods sold or, in the case of taxable services provided, at a rate of 17%
      on
      the charges for the taxable services provided, but excluding, in respect of
      both
      goods and services, any amount paid in respect of value added tax included
      in
      the price or charges, and less any deductible value added tax already paid
      by
      the taxpayer on purchases of goods and services in the same financial year.
      Value added tax paid by the Company is included in cost of goods
      sold.





**Retirement
      Benefit Costs**





According
      to the PRC regulations on pension, the Company contributes to a defined
      contribution retirement scheme organized by municipal government in the province
      in which the Company’s subsidiaries are registered and all qualified employees
      are eligible to participate in the scheme. Contributions to the scheme are
      calculated at 23.5% of the employees’ salaries above a fixed threshold amount
      and the employees contribute 2% to 8%, while the Company contributes the balance
      contribution of 21.5%% to 15.5%. The Company has no other material obligation
      for the payment of retirement benefits beyond the annual contributions under
      this scheme.





For
      period from January 01, 2007 to September 30, 2007, the total amount of social
      security that the company paid for employees were around RMB 1.54
      million.


25


**RESULTS
      OF OPERATIONS**




**Financial
      Review**





The
      following table presents certain aspects from consolidated income statement
      for
      the three and nine months ended September 30, 2007 and 2006. The
      discussion following the table is based on these results. Certain
      columns may not add due to rounding.





Three Months Ended September 30,
            
            Nine Months Ended September 30,2007
            
            2006
            
            2007
            
            2006Revenue,
                net
            
            $
            8,185,225
            
            $
            8,232,274
            
            
            23,384,937
            
            
            22,091,352Cost
                of Goods Sales
            
            
            6,063,299
            
            
            6,905,682
            
            
            17,197,950
            
            
            17,292,836**Gross
                profit**
            
            
            2,121,926
            
            
            1,326,592
            
            
            6,186,987
            
            
            4,798,516General
                and administrative expenses
            
            
            583,824
            
            
            730,554
            
            
            1,874,254
            
            
            1,492,170**Income
                from operations**
            
            
            1,538,102
            
            
            596,038
            
            
            4,312,733
            
            
            3,306,346Total
                other(income) expense
            
            
            (349,727
            )
            
            (63,292
            )
            
            74,078
            
            
            527,034**Net
                Income**
            
            $
            1,672,780
            
            $
            660,190
            
            $
            3,800,149
            
            $
            2,549,357




**Three
      Months Ended September 30, 2007 versus 2006**





**Net
      sales, Cost of Goods Sold and Gross Profit**





Net
      sales
      were $8,185,225 in the three months ended September 30, 2007 compared to
      $8,232,274 for the same period in 2006, a decrease of $47,049. However, gross
      profit increased 60% from $1,326,592 to $2,121,926 and cost of goods sold as
      a
      percentage of total sales decreased from 83.89% to 74.08%. The increase in
      gross
      profit margin principally resulted from a change in product mix over the period,
      which produced increased sales of higher margin products, and decreased
      production costs.





A
      break-down of our production by product for the quarter ended September 30,
      2007
      and 2006 is as follows:


**Three
                  Months Ended**
                **September
                  30, 2006**
                **(tons)**
              
              **Three
                  Months Ended**
                **September
                  30, 2007**
                **(tons)**
              
              **% Change****Kraft
                  Paper**
              
              
              19,800
              
              
              13,600
              
              
              -31
              %**Specialty
                  Paper & Wood Pulp**
              
              
              1,500
              
              
              5,000
              
              
              233
              %




*Lower
      Production of Kraft Paper.*





The
      Company reduced production of kraft paper in the third quarter by 31% to 13,600
      tons compared with 19,800 tons in 2006, and increased its production of
      specialty paper and wood pulp by 233% to 5,000 tons. The gross profit on
      specialty paper and wood pulp is significantly higher than kraft paper and
      the
      Company chose to make the most efficient use of existing production capacity.




26




*Increased
      Production of Specialty Wrapping Paper*





Utilizing
      new technology developed by the Company in 2007, the Company increased its
      production of specialty wrapping paper, which is used in packaging applications
      and is made from any combination of bleached or unbleached, virgin or recovered
      fibers. The Company’s gross margin on these products is 3-4 times greater than
      for kraft paper products. In addition, demand for this kind of product in China
      is increasing. As a result, the Company increased the average unit price on
      products sold.


*Increased
      Production of Wood Pulp*





Because
      of the short supply of wood pulp in the domestic market in China, the price
      of
      wood pulp keeps increasing year after year. Besides producing wood pulp for
      itself, in 2006, the Company started selling wood pulp directly to second-line
      manufacturers, and in 2007, the Company continued to increase sales of wood
      pulp. The gross profit margin from wood pulp is over 30%, approximately twice
      as
      high as from kraft paper.





*More
      efficient paper recycling system*





During
      the three months ended September 30, 2007, the supply of recycled paper remained
      stable and reliable.





*Appreciation
      of Chinese currency*





During
      the quarter ended September 30, 2007, the Chinese Yuan appreciated approximately
      5.45 percent against the U.S. Dollar. The Company imports a percentage of its
      raw material and other components and the appreciation of the Chinese currency
      reduced the cost of these materials.





**General
      and Administrative Expense**





General
      and Administrative Expense decreased by 20.09% from $730,554 in the
      third quarter of 2006 to $583,824 in the same period of 2007 as a result of
      efforts undertaken by management to reduce general and administrative
      expenses.





**Income
      (Loss) from Operations**





Income
      from operations for the quarter ended September 30, 2007 increased to $1,538,102
      from $596,038 in the prior year period or approximately 158.05%. The lower
      cost
      of goods sold and lower general and administrative expenses were the driving
      factors in this growth. ****





**Net
      Income**





Net
      income for the quarter ended September 30, 2007 was $ 1,672,780, an increase
      of
      $1,012,590 or 153.38% compared to $660,190 in same period number in 2006 as
      a
      result of the improvement in our gross margins.


27




**Nine
      Months Ended September 30, 2007 versus 2006**





Net
      sales
      were $23,384,937 in the nine months ended September 30, 2007 compared to
      $22,091,352 for the same period in 2006, an increase of $1,293,585. Gross profit
      increased 28.94% from $4,798,516 to $6,186,987 and cost of goods sold as a
      percentage of total sales decreased from 78.28% to 73.54%. The increase in
      gross
      profit margin principally resulted from a change in product mix over the period,
      which produced increased sales of higher margin products, and decreased
      production costs.





A
      break-down of our production by product for the nine months ended September
      30,
      2007 and 2006 is as follows:





Product
      Capacity Breakdown Table





**Nine Months Ended**
              **September 30, 2006**
              **(tons)**
            
            **Nine Months Ended**
              **September 30, 2007**
              **(tons)**
            
            **% Change****Kraft
                Paper**
            
            
            57,978
            
            
            54,462
            
            
            -6
            %**Specialty
                Paper & Wood Pulp**
            
            
            3,481
            
            
            13,333
            
            
            283
            %





**General
      and Administrative Expense**





General
      and Administrative Expense increased approximately 25.6% from $1,492,170 in
      the
      nine months ended September 30, 2006 to $1,874,254 in the same period of 2007.
      General and administrative expenses increased primarily as a result of increases
      in employee salaries, professional and consulting fees incurred as part of
      becoming a publicly traded company and marketing expenses. In 2007 management
      took steps to reduce general and administrative expenses, the results of which
      were seen in the third quarter of 2007.




**Income
      from Operations**





Income
      from operations for the nine months ended September 30, 2007 increased to
      $4,312,733 from $3,306,346 in the prior year period or approximately 30.44%.
      The
      lower cost of goods sold and lower general and administrative expenses were
      the
      driving factors in this growth. ****





**Net
      Income**





Net
      income for the nine months ended September 30, 2007 was $3,800,149 compared
      to
      $2,549,357 for the prior year period, an increase of 49% as a result of the
      improvement in our gross margins.





**Liquidity
      and Capital Resources**





As
      of
      September 30, 2007, we had cash and cash equivalents of $200,600 compared to
      $189,880 as of September 30, 2006. Our current assets are $25,275,408, and
      our
      current liabilities are $23,454,233 giving us working capital of $1,821,175.





In
      the
      quarter ended September 30, 2007, the Company restructured and paid off
      approximately $1.2 million in outstanding debt resulting in a gain of $384,618.
      As of September 30, 2007, the Company had outstanding notes payable of $12.1
      million and accrued interest thereon of $6.3 million. The Company is currently
      negotiating with the holders of these outstanding obligations to restructure
      this debt. The Company believes that it will be able to restructure all of
      this
      outstanding debt, although there is no assurance that it will be able to do
      so.


28


We
      expect
      that our cash and cash equivalents will be sufficient to satisfy our cash
      requirements for the next twelve months. On a long-term basis, our liquidity
      is
      dependent on successfully executing our business plan, receipt of revenues,
      and
      additional infusions of capital through equity and debt financing. Any funds
      rose from an offering of our equity or debt will be used to continue to develop
      and execute our business plan. However, there can be no assurance that we will
      be able to obtain additional equity or debt financing on terms acceptable to
      us.





**Inventory**





As
      of
      September 30, 2007, inventory increased to $7,225,790 as compared to $4,198,509
      at December 31, 2006. Because of the increasing costs of raw materials and
      fluctuating supplies, the Company decided to accumulate additional raw material,
      in order to ensure an adequate supply and to minimize the effect of cost
      fluctuations. In addition, orders for the Company’s products typically increase
      in the 4 th quarter
      and the Company purchased additional inventory to ensure sufficient supply.





**CRITICAL
      ACCOUNTING POLICIES**





The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States requires Guilin Paper to establish
      accounting policies and to make estimates that affect both the amounts and
      timing of the recording of assets, liabilities, revenues and expenses. Some
      of
      these estimates require judgments about matters that are inherently uncertain.




Accounting
      policies whose application may have a significant effect on the reported results
      of operations and financial position of Guilin Paper, and that can require
      judgments by management that affect their application, include SFAS No. 5,
“Accounting for Contingencies,” SFAS No. 144, “Accounting for the
      Impairment or Disposal of Long-Lived Assets,” SFAS No. 142, “Goodwill and
      Other Intangible Assets,” SFAS No. 87, “Employers’ Accounting for
      Pensions,” SFAS No. 106, “Employers’ Accounting for Postretirement Benefits
      Other Than Pensions,” as amended by SFAS No. 132 and 132(R), “Employers’
Disclosures About Pension and Other Postretirement Benefits,” SFAS No. 158,
“Employers’ Accounting for Defined Benefit Pension and Other Postretirement
      Plans,” and SFAS No. 109, “Accounting for Income Taxes,” including recent
      accounting requirements under FASB Interpretation No. 48 (FIN 48),
“Accounting for Uncertainty in Income Taxes.”




The
      Company has included in its Annual Report on Form 10-K for the year ended
      December 31, 2006, a discussion of these critical accounting policies,
      which are important to the portrayal of the Company’s financial condition and
      results of operations and require management’s judgments. Other than the
      adoption of FIN 48, the Company has not made any changes in any of these
      critical accounting policies during the first six months of 2007.





**ITEM
      3.**  **CONTROLS
      AND PROCEDURES**




**Evaluation
      of Disclosure Controls and Procedures**




As
      of
      September 30, 2007, the end of the period covered by this report, our Chief
      Executive Officer and our Chief Financial Officer reviewed and evaluated the
      effectiveness of our disclosure controls and procedures (as defined in Exchange
      Act Rule 13a-15(e) and 15d-15(e)), which are designed to ensure that material
      information we must disclose in our report filed or submitted under the
      Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded,
      processed, summarized, and reported on a timely basis, and have concluded,
      based
      on that evaluation, that as of such date, our disclosure controls and procedures
      were effective to ensure that information required to be disclosed by us in
      reports that we file or submit under the Exchange Act is accumulated and
      communicated to our Chief Executive Officer and Chief Financial Officer as
      appropriate to allow timely decisions regarding required disclosure. Based
      on
      that evaluation, the Chief Executive Officer and Chief Financial Officer
      concluded that the Company's disclosure controls and procedures were effective
      as of the end of the period covered by this report.


29


**Changes
      in Internal Control over Financial Reporting**




There
      was
      no change in our internal control over financial reporting that occurred during
      the fiscal quarter covered by this report on Form 10-QSB that has materially
      affected, or is reasonably likely to materially affect, our internal control
      over financial reporting.


30


**PART
      II - OTHER INFORMATION**




**Item
      1.**  **Legal
      Proceedings**




None.




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





None.




**Item
      3.**  **Defaults
      Upon Senior Securities**




The
      following summarizes outstanding notes which the Company is in default as per
      the terms of such instruments as of September 30, 2007.





Principal
              Amount due as of
              9/30/2007Cinda Trustor
                Of China - Nanning
            
            $
            8,121,210Note
                originally held by Bank of China - Guilin. On June 25, 2004 the loans
                were
                transferred to Cinda Trustor of China. Original terms of these loans
                call
                for interest between 5.223% & 5.475% interest per annum, with
                principal due between 1996-2002.Agricultural
                Bank Of China
            
            
            3,998,608Term
                of notes call for interest from 6.912% to 7.488% per annum with
                principal due in 2007 & 2008.Total
            
            $
            12,119,818




As
      of
      September 30, 2007, accrued and unpaid interest on these notes was
      $6,273,585.




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




None.


31




Item
      5. Other
      Information




None.




**Item
      6. Exhibits**




**Exhibit No.**
            
            **Description**31.1
            
            Certification
                of CEO pursuant to Rule 13a-14(a) or 15d-14 (a) as adopted pursuant
                to
                Section 302 of the Sarbanes-Oxley Act of 2002.31.2
            
            Certification
                of CFO pursuant to Rule 13a-14(a) and Rule 15d-14(a) as adopted pursuant
                to Section 302 of the Sarbanes-Oxley Act of 2002.32
            
            Certification
                of CEO and CFO Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
                to
                Section 906 of the Sarbanes-Oxley Act of
                2002




32




**SIGNATURES**




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




Guilin
                Paper, Inc.Date:
                November 14, 2007
            By:
            /s/
                Fangde ZhangFangde
                Zhang, Chief Executive OfficerBy:
            /s/
                Mingzhu ZhangMingzhu
                Zhang, Chief Financial Officer




33