UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





FORM 10-Q





x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934





For the quarterly period ended March 31, 2011 or





o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934





For the transition period from _____________ to _____________





Commission file number 0-21384





INTERNATIONAL PACKAGING AND LOGISTICS GROUP, INC.


(Exact Name of Registrant as Specified in its Charter)





Nevada

13-3367421(State or Other Jurisdiction of

(I.R.S. EmployerIncorporation or Organization)

Identification No.)





7700 Irvine Center Drive, Suite 870


Irvine, California


(Address of Principal Executive Offices)





92608


(Zip Code)





(949) 861-3560


(Registrant’s Telephone Number, Including Area Code)








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





Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.


x Yes       o No





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





Large accelerated filer o
Accelerated filer oNon-accelerated filer o
Smaller reporting company x





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


o Yes      x No





The number of shares outstanding of the Issuer’s common stock as of April 30, 2011 was 4,961,357














International Packaging and Logistics Group, Inc.,


and Subsidiaries





Condensed Consolidated Financial Statements


for the Three Months Ended





March 31, 2011 and 2010
















C  O  N  T  E  N  T  S










Condensed Consolidated Balance Sheets
2Condensed Consolidated Statements of Operations and Comprehensive Income
3Condensed Consolidated Statements of Cash Flows
5Notes to Condensed Consolidated Financial Statements
7 – 18








1




International Packaging and Logistics Group, Inc., and Subsidiaries
 Condensed Consolidated Balance Sheets
 As of March 31, 2011, and December 31, 2010


31-Mar-11


31-Dec-10Current Assets

(unaudited)Cash

$
1,335,773


$
700,264Accounts receivable, net


5,616,360



5,959,793Other current assets


95,963



56,592Prepaid expenses


14,715



35,641Prepaid taxes


25,781



-Total Current Assets


7,088,592



6,752,290Property, Plant and Equipment, net


34,260



37,815Other AssetsDeposits


32,953



33,280Contract in place


1,295,726



1,295,726Deferred tax assets


126,216



126,216Total Other Assets


1,454,895



1,455,222Total Assets

$
8,577,747


$
8,245,327Liabilities and Stockholders' EquityCurrent LiabilitiesAccounts payable and accrued expenses

$
5,293,066


$
4,891,559Notes payable - related party


80,000



80,000Taxes payable


-



74,219Other current liabilities


24,524



19,127Total Current Liabilities


5,397,590



5,064,905




Commitments and contingencies


-



-Stockholders' EquityConvertible preferred shares: $0.0001 par value, 50,000,000 sharesauthorized, 974,730 Series A issued and outstanding


98



98400,000 Series B issued and outstanding


40



40Common stock: $0.001 par value, 900,000,000 shares authorized, 4,961,357 issued and outstanding


4,961



4,961Additional paid-in capital


2,202,877



2,202,877Accumulated other comprehensive income


36,155



50,333Retained earnings


98,928



92,147Total IPLO Stockholders' Equity


2,343,059



2,350,456Non-controlling interest


837,098



829,966Total Stockholders' Equity


3,180,157



3,180,422Total Liabilities and Stockholders' Equity

$
8,577,747


$
8,245,327





See accompanying notes.


2




International Packaging and Logistics Group, Inc., and Subsidiaries
 Condensed Consolidated Statements of Operations And Comprehensive Income
 For the Three Months Ended March 31, 2011 and 2010
 (Unaudited)


Three Months EndingMarch 31,2011


2010RevenuesPackaging

$
6,080,450


$
4,881,182Logistics


2,505,159



2,555,045Total Revenues


8,585,609



7,436,227Cost of Goods SoldPackaging


5,857,418



4,580,237Logistics


2,160,921



2,301,550Total Cost of Goods Sold


8,018,339



6,881,787Gross Profit


567,270



554,440Operating ExpensesAdministrative expenses


195,317



186,230Rent


46,542



41,966Salaries and wages


314,037



277,919Total Operating Expenses


555,896



506,115Income from Operations


11,374



48,325Other IncomeInterest income (expense)


(881
)


403Other income


683



3,046Rent Income


1,461



895Total Other Income


1,263



4,344Net Income before Income Taxes


12,637



52,669





See accompanying notes.


3





International Packaging and Logistics Group, Inc., and Subsidiaries
 Condensed Consolidated Statements of Operations And Comprehensive Income
 For the Three Months Ended March 31, 2011 and 2010
 (Unaudited)





Income tax benefit  (expense)


1,276



(24,392
)Net Income available to commonshareholder


13,913



28,277Net (gain) loss attributable to non-controlling interest


(7,132
)


2,160Net Income attributable to IPLO


6,781



30,437Comprehensive IncomeGain (loss) on currency exchange


(14,178
)


8,673Comprehensive Income (Loss)

$
(7,397
)

$
39,110Earnings per weighted average share of common stock -basic

$
0.00


$
0.01Earnings per weighted average share of common stock -diluted

$
0.00


$
0.00Weighted average shares outstanding - basic


4,961,357



4,961,357Weighted average shares outstanding - diluted


6,336,087



6,336,087











4





International Packaging and Logistics Group, Inc., and Subsidiaries
 Condensed Consolidated Statements of Cash Flows
 For the Three Months Ended March 31, 2011 and 2010
 (Unaudited)





March 31,


March 31,2011


2010Cash flow from operating activities:Net income

$
13,913


$
28,277Adjustments to reconcile net income to net cash provided by operating activities:Depreciation expense


2,989



2,724Bad debt expense


-



1,708Changes in operating assets and liabilities:(Increase )decrease in accounts receivable


324,031



(781,440
)Increase in other current assets


(39,668
)


(7,461
)Decrease in prepaid expenses


20,722



-Increase in prepaid taxes


(25,781
)


-Decrease in deferred tax asset


-



29,221Increase in  accounts payable and accrued expenses


423,083



855,983Decrease in income taxes payable


(74,219
)


-Increase in other current liabilities


5,696



14,363Net cash provided by operating activities


650,766



143,375Cash flow from investing activities:Cash acquired in acquisition of subsidiary


-



579,538Net cash provided by investing activities


-



579,538








5


International Packaging and Logistics Group, Inc., and Subsidiaries
 Condensed Consolidated Statements of Cash Flows
 For the Three Months Ended March 31, 2011 and 2010
 (Unaudited)





Cash flow from financing activities:Payments on short-term loans


-



(111,470
)Proceeds from related party


-



4,000Net cash used in financing activities


-



(107,470
)Effect of currency translation


(15,257
)


9,286Net increase in cash and cash equivalents


635,509



624,729Cash and cash equivalents at beginning of period


700,264



9,918Cash and cash equivalents at end of period

$
1,335,773


$
634,647Supplementary disclosures of cash flow informationCash paid during the year forInterest

$
881


$
-Taxes

$
-


$
-








6




International Packaging and Logistics Group, Inc., and Subsidiaries
 Notes to Condensed Consolidated Financial Statements
 March 31, 2011





1.Summary of Significant Accounting Policies





Organization and Basis of Presentation





These interim condensed consolidated financial statements represent the financial activity of International Packaging and Logistics Group, Inc., (“IPL Group” or “the Company”) a publicly traded company listed and traded on the NASDAQ Over the Counter Bulletin Board (“OTCBB”).  The interim condensed consolidated financial statements for the three months ended March 31, 2011 and 2010 have been prepared in accordance with accounting principles generally accepted in the United States.  The interim condensed consolidated financial statements include the accounts of the Company and its subsidiaries.  All intercompany transactions have been eliminated.  The Company’s fiscal year end is on December 31.





The foregoing unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Regulation S-X as promulgated by the Securities and Exchange Commission (“SEC”). Accordingly, these condensed consolidated financial statements do not include all of the disclosures required by generally accepted accounting principles in the United States of America for complete financial statements.  These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited condensed consolidated financial statements and the notes thereto included on Form 10-K for the period ended December 31, 2010.  In the opinion of management, the unaudited interim condensed consolidated financial statements furnished herein include all adjustments, all of which are of a normal recurring nature, necessary for a fair statement of the results for the interim period presented.





The preparation of interim condensed consolidated financial statements in accordance with generally accepted accounting principles in the United States of America requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities known to exist as of the date the condensed consolidated financial statements are published, and the reported amounts of revenues and expenses during the reporting period.  Uncertainties with respect to such estimates and assumption are inherent in the preparation of the Company’s condensed consolidated financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions that could have a material effect on the reported amounts of the Company’s financial position and results of operations.





Operating results for the three month periods ended March 31, 2011, are not necessarily indicative of the results that may be expected for the year ending December 31, 2011.





Nature of Operations





On July 2, 2007, International Packaging and Logistics Group, Inc., through its wholly-owned subsidiary, YesRx.com (“YesRx”) acquired all the outstanding shares of H&H Glass, Inc. (“H&H Glass” or “H&H”), in exchange for 3,915,000 shares of its common stock in a reverse triangular merger (the “Merger”).  H&H Glass is a glass importer that supplies custom products such as perfume bottles and food condiment bottles, plus provides complementary services such as container design and mold making.  H&H Glass imports glass containers from Asia and distributes to North America.  H&H Glass acquires its products mainly from one supplier in China and Taiwan and sells its products through several distributors in the United States and Canada who service small to medium sized customers.  H&H imports in excess of 1,000 shipping containers of glass a year.  Depending on the size of the product, a container can contain anywhere from 3,000 to 300,000 pieces.





7





International Packaging and Logistics Group, Inc., and Subsidiaries


Notes to Condensed Consolidated Financial Statements


March 31, 2011






1.Summary of Significant Accounting Policies (continued)





On January 1, 2010, International Packaging and Logistics Group, Inc., (“IPL Group Inc.”), acquired a majority interest in EZ Link Holdings, Ltd., company organized under the laws of the British Virgin Islands which contractually controls EZ Link Corporation (“EZ Link”), a logistics company headquartered in Taiwan.  EZ Link was established in July 2003 under the laws of Taiwan, Republic of China (“PRC”)  EZ LINK is a full service international freight forwarder, who has current networks to locations in China, Hong Kong, South East Asia, North East Asia, North America, Latin America and Europe.





EZ Link International, Samoa (“ELIS”) was incorporated in Samoa.  ELIS is a wholly owned subsidiary of EZ Link Corporation and was set up to facilitate shipping operations in the Republic of China.





Organization and Line of Business





International Packaging and Logistics Group, Inc., a Nevada corporation, was originally incorporated as Interactive Medical Technologies, Ltd., on June 2, 1986, in the state of Delaware.  On April 17, 2008, IPL Group converted from a Delaware corporation to a Nevada Corporation.





EZ Link Holdings Ltd.





EZ Link Holdings Ltd. was incorporated in 2009, under the laws of the British Virgin Islands. The Company has no substantive operations of its own.





EZ Link Corp., a Taiwan company established in July 2003 with initial registered capital of NTD 13,500,000, is a freight forwarder with current networks of locations in China, Hong Kong, South East Asia, North East Asia, North America, Latin America and Europe, and holds the licenses and approvals necessary to operate its business in China.





Taiwan law currently has limits on foreign ownership of companies. To comply with these foreign ownership restrictions, on December 31, 2009, EZ Link Holdings entered into following exclusive agreements with EZ Link Corp. and its owners (collectively the “Contractual Arrangements”):





(1) Consulting Services Agreement, through which EZ Link Holdings has the right to advise, consult, manage and operate EZ Link Corp. and collect and own all of its net profits;





(2) Operating Agreement, through which EZ Link Holdings has the right to recommend director candidates and appoint the senior executives of EZ Link Corp, approve any transactions that may materially affect the assets, liabilities, rights or operations of EZ Link Corp, and guarantee the contractual performance by EZ Link Corp. of any agreements with third parties, in exchange for a pledge by EZ Link Corp. of its accounts receivable and assets.





In consideration of services provided by the consultant, EZ Link Corp will pay a consulting fee equal to all of its net income on a quarterly basis.





The terms of these Consulting Agreements begin as of the date of the Contractual Agreements, and shall continue in perpetuity, unless terminated in accordance with relevant provisions in the agreements or by any other agreement reached by all parties.





8


International Packaging and Logistics Group, Inc., and Subsidiaries
 Notes to Condensed Consolidated Financial Statements
 March 31, 2011





1.Summary of Significant Accounting Policies (continued)





Principles of Consolidation





The accompanying consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America.  EZ Link Corp’s functional currency is New Taiwan Dollars (NTD), however, the accompanying consolidated financial statements have been re-measured and presented in United States Dollars ($).





The consolidated financial statements include the accounts of IPL Group and its subsidiaries (collectively the “Company”).  The Company’s subsidiaries include H&H Glass and of EZ Link Holdings, Ltd. All significant intercompany accounts and transactions have been eliminated in consolidation.  The Company determines whether it has a controlling financial interest in an entity by first evaluating whether the entity is a voting interest entity or a variable interest entity (“VIE”).





Voting interest entities are entities that have sufficient equity and provide the equity investors voting rights that give them the power to make significant decisions related to the entity’s operations.  The usual condition for a controlling financial interest in a voting interest entity is ownership of a majority voting interest.  Accordingly, the Company consolidates its majority-owned subsidiary, EZ Link Corp, in which it holds more than 50% of the voting rights or where control is exercised through other contractual rights.





VIEs are entities that lack one or more of the characteristics of a voting interest entity.  Either the entity does not have sufficient equity at risk to finance its activities without additional subordinated financial support from other parties or the equity investors do not have the characteristics of a controlling financial interest.  The entity that has a controlling financial interest in a VIE is referred to as the primary beneficiary and is required to consolidate the VIE.  The Company’s majority-owned subsidiaries are not considered VIEs.





The Company's consolidated financial statements include 100% of the assets, liabilities and earnings of a subsidiary, EZ Link Corp, which is more than 50% owned and control is established.  The ownership interest of the minority owners of the Company’s subsidiary is called non-controlling interest.





The Company has concluded that EZ Link Corp is a VIE and that the Company’s 51% owned subsidiary, EZ Link Holdings, absorbs a majority of the risk of loss from the activities of EZ Link Corp. and enables the Company to receive a majority of its expected residual returns. Accordingly, the Company accounts for EZ Link Corp. as a VIE as of January 1, 2010.





The initial measurement of the assets and liabilities of EZ Link Corp. for the purpose of consolidation by the Company is at fair value. EZ Link Holdings, Ltd. has had no other business activities except for the entering into of the exclusive agreements with EZ Link Corp. and its shareholders.





The consolidated financial statements include the financial statements for the Company, its subsidiaries and the variable interest entity, EZ Link Corp. and EZ Link Corp.’s subsidiary EZ Link International.  All significant inter-company transactions and balances between the Company, its subsidiaries and the variable interest entity are eliminated upon consolidation.





9


International Packaging and Logistics Group, Inc., and Subsidiaries
 Notes to Condensed Consolidated Financial Statements
 March 31, 2011




1.       Summary of Significant Accounting Policies (continued)




Estimates





The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosures of contingent assets and liabilities at the date of the consolidated financial statements.  Significant estimates include an allowance for doubtful accounts and depreciation of property, plant and equipment.





Cash and Cash Equivalents





The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.  Cash equivalents include amounts invested in a money market account with a financial institution.  Cash equivalents are carried at cost, which approximates fair value.





Contract in Place





Goodwill and indefinite-lived intangible assets are not amortized. Rather, they are tested for impairment at least annually or more frequently if events or changes in circumstances indicate that the asset might be impaired.  Contracts in place is the only intangible asset with an indefinite life on our consolidated balance sheets.  We have elected December 31 as the date to perform our annual impairment test.





The contract in place represents the fair value of the consulting contract and operating agreement between EZ Link Holdings, Ltd. and EZ Link Corp.





Revenue Recognition





The Company recognizes product revenue provided that (1) persuasive evidence of an arrangement exists, (2) delivery to the customer has occurred, (3) the selling price is fixed or determinable and (4) collection is reasonably assured.  Delivery is considered to have occurred when title and risk of loss have transferred to the customer.  The price is considered fixed or determinable when it is not subject to refund or adjustments.  Outbound shipping and handling charges are included in net sales.





Foreign Currency Translation





As of March 31, 2011 the accounts of the EZ Link were maintained, and its consolidated financial statements were expressed, in NTD. Such consolidated financial statements were translated into USD with NTD as the functional currency.  All assets and liabilities were translated at the exchange rate on the consolidated balance sheet dates, stockholders’ equity are translated at the historical rates and the statements of income items are translated at the weighted average exchange rate for the year. The resulting translation adjustments are reported under other comprehensive income.








10




International Packaging and Logistics Group, Inc., and Subsidiaries


Notes to Condensed Consolidated Financial Statements


March 31, 2011




1.       Summary of Significant Accounting Policies (continued)





Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred. Such amounts were not material during each of the periods ended March 31, 2011 and 2010.





Cash flow from the Company's operations included in the statement of cash flows is calculated based upon the functional currency using the average translation rate. As a result, amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree with arithmetical changes in the corresponding balances on the consolidated balance sheet. No presentation is made that the NTD amounts could have been, or could be, converted into USD at the rates used in translation.





Concentration of Credit Risk





The Company maintains balances in a Money Market Fund that is not federally insured.  Balances in this fund were $640,789 and $137,986 at March 31, 2011 and December 31, 2010, respectively.





Accounts receivable are typically unsecured.  The Company performs ongoing credit evaluations of its customers’ financial condition.  It generally requires no collateral and maintains reserves for potential credit losses on customer accounts, when necessary. As of March 31, 2010, 87.2% of H&H Glass’s Accounts Receivable were attributable to four customers. As of December 31, 2010, 84.7% of H&H Glass’s Accounts Receivable were attributable to four customers.    At March 31, 2011 and December 31, 2010 H&H Glass had no reserve for doubtful accounts.





At March 31, 2011 and December 31, 2010 EZ Link Holdings, Ltd had no reserve for doubtful accounts.





In general the Company will reserve a receivable based one of the following reasons;  If the receivable is over 90 days old the company will reserve 50% and if over 12 months old the Company will reserve 100% of the amount.





H&H Glass purchased 100% of its glass from one vendor in the three month periods ending March 31, 2011 and 2010.  During the three-month period ending March 31, 2011 and 2010, H&H Glass purchased $4,934,614 and $3,884,289 of products from this vendor, respectively. This concentration is due to the relatively small size of H&H Glass’s orders.  H&H Glass’s specialized short-run custom orders generally are not attractive to larger glass manufacturers.





Non-controlling Interest





The Company accounts for its non-controlling interest of 49% in EZ Link Holdings, Ltd. in the condensed consolidated financial statements classified as a separate component of equity. In addition, net earnings, and components of other comprehensive income are attributed to both the Company and non-controlling interest.





Net Earnings/(Loss) per Share





Earnings/(loss) per common share is computed on the weighted average number of common shares outstanding during each year.  Basic earnings per share is computed as net loss applicable to common stockholders’ divided by the weighted average number of common shares outstanding for the period.  Diluted earnings per share reflects the potential dilution that could occur from common shares issuable through convertible preferred shares, stock options, warrants and other convertible securities when the effect would be dilutive.





Comprehensive Income (Loss)





The Company reports and displays comprehensive income and its components in a full set of general-purpose consolidated financial statements. The Company’s realized loss of $14,178 and a realized gain of $8,673 for the three month periods ended March 31, 2011 and 2010, respectively, relate to the translation of financial statements from New Taiwan Dollar to US Dollars.





11




International Packaging and Logistics Group, Inc., and Subsidiaries
 Notes to Condensed Consolidated Financial Statements
 March 31, 2011





2.Preferred Stock Transactions





The Preferred Shares shall be convertible into common shares in two equal traunches, the first being upon completion and receipt of the year ending December 31, 2010, financials if all of the following performance targets are met by EZ Link:





(a) Maintain revenues and before tax earnings same as the prior 12 month period; and


(b) Maintained a positive cash flow from operations over the prior 12 month period.





These criteria were not met, so there were no conversions as of December 31, 2010.  However, the first tranche will be eligible for conversion again at December 31, 2011.





The second tranche of the Preferred Shares shall be convertible after the second 12 month period, i.e. the year ending December 31, 2011, if all of the following performance targets are met by EZ Link:





(a) 5% increase in revenues and 1% before tax earnings over the prior 12 month period; and


(b) Maintained a positive cash flow from operations over the prior 12 month period.





If EZ Link does not reach its performance goals at December 31, 2011, the conversion rights will be extended one additional year.





ASC Topic 480, “Distinguishing Liabilities from Equity,” establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity.





A mandatorily redeemable financial instrument shall be classified as a liability unless the redemption is required to occur only upon the liquidation or termination of the reporting entity.  A financial instrument issued in the form of shares is mandatorily redeemable if it embodies an unconditional obligation requiring the issuer to redeem the instrument by transferring its assets at a specified or determinable date (or dates) or upon an event certain to occur.  A financial instrument that embodies a conditional obligation to redeem the instrument by transferring assets upon an event not certain to occur becomes mandatorily redeemable—and, therefore, becomes a liability—if that event occurs, the condition is resolved, or the event becomes certain to occur.




The Company determined that the preferred shares are not mandatorily or conditionally redeemable and are properly classified as permanent equity in the accompanying consolidated financial statements.




3.Common Stock Transactions





During the three months ending March 31, 2011 no stock was issued.





Common stock transactions during the three months ending March 31, 2010:




As of January 1, 2010, pursuant to the purchase agreement for 51% ownership in EZ Link Holdings Ltd., approximately one half of the purchase price amount $457,143 was paid in common shares of IPL Group, Inc. at a per share value of $1.00, or 457,143 shares.





12


International Packaging and Logistics Group, Inc., and Subsidiaries
 Notes to Condensed Consolidated Financial Statements
 March 31, 2011





4.Related Party Transactions





Allen Lin





The Company paid Mr. Allen Lin, President of H&H Glass and a member of the board of directors of the Company, salary of $57,500 and $55,125 for the three-month periods ended March 31, 2011 and 2010, respectively.





Mr. Allen Lin advanced the Company $4,000 during the three months ended March 31, 2010.




Josephine Lin





Josephine Lin, Mr. Lin’s wife, is employed by the Company and was paid salary of $14,000 for each three-month period ending March 31, 2011 and 2010, respectively.





Steven Westlund





For each three-month period ending March 31, 2011 and 2010, Mr. Westlund, the Company’s Chief Executive Officer and acting Chief Financial Officer, was paid $1,500 in cash for Director fees.





William Gresher





For the three-month periods ending March 31, 2011 and 2010, Mr. Gresher, a member of the Board of Directors, was paid $1,500 in cash for Director fees.





Easy Global Company, Ltd.





The chairman of Easy Global Company, Ltd. is also a shareholder of EZ Link Corporation.  EZ Link rents its offices from Easy Global Company, Ltd.  During the three months ended March 31, 2011 and 2010, EZ Link paid $11,691 and $10,738, respectively, to Easy Global Company for rent expense.





5. Property and Equipment





The Company’s property and equipment at March 31, 2011 and December 31, 2010, consisted of the following:





March 31, 2011


December 31, 2010Furniture and fixtures

$
14,552


$
14,552Computers and equipment


149,645



151,655Leasehold improvements


62,974



63,977227,171



230,184Less accumulated depreciation


(192,911
)


(192,369
)Total

$
34,260


$
37,815





The Company recorded depreciation expense for the three-month periods ending March 31, 2011 and 2010, of $2,989 and $2,724, respectively.





13




International Packaging and Logistics Group, Inc., and Subsidiaries
 Notes to Condensed Consolidated Financial Statements
 March 31, 2011






6.Commitments and Contingencies





Leases





Operating leases





H&H Glass rents 2,887 square feet of office space for its headquarters.  The lease began on January 1, 2005, and was renewed on September 1, 2008 and expires on August 31, 2013.  As of March 31, 2011, total monthly base rent is $8,854 per month.





EZ Link rents 2,388 square feet of office space for its headquarters.  The lease began on October 1, 2009, and was renewed in September 2010.  The lease is renewed annually.  As of March 31, 2011, total base monthly rent is $5,133 per month.





EZ Link also rents 182 square feet of office space.  The lease began on October 1, 2009, and expires on September 30, 2011.  The lease renews every two years.  As of March 31, 2011, total base monthly rent is $1,424.





Future minimum payments on this lease for fiscal years following March 31, 2011, are:





Year ended December 31,2011 (nine months)


121,8872012


111,2452013


75,8742014


-2015


-Thereafter


-$
309,006




7. Earnings per Share





Earnings per share have been calculated using the weighted average number of shares outstanding during each period.  The Company’s Convertible Preferred Shares constituted potentially dilutive securities as of March 31, 2011.  Earnings per share at March 31, 2011, is calculated using the number of common shares issued to effect the business combination as being outstanding during the entire period.




14


International Packaging and Logistics Group, Inc., and Subsidiaries
 Notes to Condensed Consolidated Financial Statements
 March 31, 2011






Earnings (loss) per share of common stock are calculated as follows:





For the Three Months Ended March 31,2011


2010BASIC EARNINGS PER SHARE OF COMMON STOCK:Net earnings available to IPLO common stockholders

$
6,781


$
30,437Weighted average common shares outstanding


4,961,357



4,961,357Basic earnings per share of common stock

$
0.00


$
0.01DILUTED EARNINGS PER SHARE OF COMMON STOCK:Net earnings available to IPLO common stockholders

$
6,781


$
30,437Weighted average common shares outstanding


4,961,357



4,961,357Effect of dilutive securities:Convertible preferred stock


1,374,730



1,374,730Weighted average common shares outstanding after effect of dilutive securities


6,336,087



6,336,087Diluted earnings per share of common stock

$
0.00


$
0.00




8.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.





Following is a summary of segment information for the three months ended March 31, 2011:




Packaging


Logistics


TotalRevenue

$
6,080,450



2,505,159



8,585,609Operating Income


(9,333
)


20,707



11,374Total Assets


6,937,493



1,640,254



8,577,747Capital Expenditures


-



-



-Interest Income


10



-



10Interest Expense


-



(891
)


(891
)Depreciation


150



2,839



2,989




9.Unrestricted Net Assets





EZ Link Corp. has retained earnings of approximately $25,000as of March 31, 2011. Distributions and other payments to EZ Link Holdings, Ltd. from its subsidiary, EZ Link Corp. may not permitted by the Taiwan government.  Condensed financial information of the United States operations is as follows:








15


International Packaging and Logistics Group, Inc., and Subsidiaries
 Notes to Condensed Consolidated Financial Statements
 March 31, 2011


9.Unrestricted Net Assets - continued





Information of the United States operations is as follows:











March 31,


December 31,Balance Sheets

2011


2010AssetsCash and cash equivalents

$
880,716


$
191,414Accounts receivable, net


4,596,172



4,722,353Other current assets


25,781



59,824Total current assets


5,502,669



4,986,024Investment in EZ Link Holdings, Ltd.


857,143



857,143Deposits


12,433



12,433Property and equipment


449



599Other assets


126,216



126,216Total assets

$
6,498,910


$
5,982,415LiabilitiesAccounts payable

$
4,046,377


$
3,438,497Accrued liabilities


65,629



168,894Accounts payable to related party


80,000



80,000Total current liabilities


4,192,006



3,687,391Total liabilities


4,192,006



3,687,391Stockholders' equityCommon stock


4961



4,961Preferred stock


138



138APIC


2,202,877



2,202,877Accumulated deficit


98,928



92,147Total stockholders' equity


2,306,904



2,295,024Total liabilities and stockholders' equity

$
6,498,910


$
5,982,415








16





International Packaging and Logistics Group, Inc., and Subsidiaries
 Notes to Condensed Consolidated Financial Statements
 March 31, 2011


9.Unrestricted Net Assets - continued





Information of the United States operations is as follows:





March 31,


March 31,Statement of Operations

2011


2010Net sales

$
6,080,450


$
4,881,182Cost of goods sold


5,857,418



4,580,237General and administrative expenses


216,261



244,410Income (loss) from operations


6,771



56,535Other income and (expense)Interest expenses


10



404Other income


-



-Provision for taxes


-



(24,392
)10



(23,988
)Net income (loss)

$
6,781


$
32,547March 31,


March 31,Statements of Cash Flows

2011


2010Cash flows from operating activities:

$
689,302


$
426,052Cash flow from investing activities:






-Proceeds from sale of investment


-



-Net cash flows from investing


689,302



426,052Cash flow from financing activities:Net borrowings , related party


-



-Net cash flows from financing activities


-



-Cash, beginning of year


191,414



9,918Cash, end of year

$
880,716


$
435,970








17


International Packaging and Logistics Group, Inc., and Subsidiaries
 Notes to Condensed Consolidated Financial Statements
 March 31, 2011








10.           Reclassifications





The Company changed its presentation of revenues and related costs associated with EZ Link’s subsidiary, EZ Link International, Samoa, within the Consolidated Statements of Operations to report these revenues and cost of revenues gross within continuing operations to better reflect the nature of the transactions.   It had previously been presented on a net basis within operating expense.  This reclassification had no effect on net income, accumulated surplus/(deficit), or earnings per share.





The following table provides a summary of the reclassifications:





For the ThreeMonths EndedMarch 31,2010Revenue previously reported

$
6,885,602Reclassification of EZ Link International


550,625Total Revenue

$
7,436,227Cost of revenues previously reported

$
6,315,419Reclassification of EZ Link International


566,368Total cost of revenues

$
6,881,787Total gross profit

$
(15,743
)Reclassification to income and costs of revenues from expense

$
15,743








18




International Packaging and Logistics Group, Inc.
 and Subsidiaries
 March 31, 2011


Item 2.   Management's Discussion and Analysis of Financial Condition and Results of Operations.








SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS’





This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  In some cases, forward-looking statements are identified by terms such as “may”, “will”, “should”, “could”, “would”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “projects”, “predicts”, “potential”, and similar expressions intended to identify forward-looking statements.





These forward-looking statements are only predictions and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by such forward-looking statements. Also, these forward-looking statements represent our estimates and assumptions only as of the date of this Report.  Except as otherwise required by law, we expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained in this Report to reflect any change in our expectations or any change in events, conditions, or circumstances on which any of our forward-looking statements are based or to conform to actual results.  We qualify all of our forward-looking statements by these cautionary statements.





You should read this section in combination with the section entitled Management’s Discussion and Analysis of Financial Condition and Results of Operations for the year ended December 31, 2010 included in our Annual Report on Form 10-K for the year ended December 31, 2010.





Overview





We import glass containers from Asia and distribute to the North American market including Canada. This was a result of International Packaging and Logistic Group, Inc. (“IPLO”) acquiring H&H Glass in July of 2007.  IPLO closed its pharmacy business in February 2007.





H&H Glass is a glass importer that supplies custom products such as perfume bottles and food condiment bottles, plus provides complementary services such as product design and the making of product molds.  H&H Glass acquires its products from 3 to 5 suppliers in China and Taiwan and sells its products through several distributors in the United States and Canada who service small- to medium-sized customers.    H&H imports in excess of 1,000 containers of glass a year.  Depending on the size of the product a containers can contain anywhere from 3,000 to 300,000 pieces.





In addition, as of January 1, 2010, International Packaging and Logistics Group, Inc., (“IPL Group Inc.”), acquired a majority interest in EZ Link Holdings, Ltd., company organized under the laws of the British Virgin Islands on December 18, 2009, which controls EZ Link Corporation, a logistics company headquartered in Taiwan.  EZ Link was established in July 2003 under the laws of Taiwan, Republic of China. EZ Link Holdings, Ltd. consolidates  EZ Link under ASC Topic 810 (FIN 46R) as it controls EZ Link through a management contract.  EZ LINK is a full service international freight forwarder, who has current networks to locations in China, Hong Kong, South East Asia, North East Asia, North America, Latin America and Europe.




EZ Link International, Samoa (“ELIS”) was incorporated in Samoa. ELIS is a wholly owned subsidiary of EZ Link Corporation and was set up to facilitate shipping operations in the Republic of China.





19


International Packaging and Logistics Group, Inc.
 and Subsidiaries
 March 31, 2011








Plan of Operation





Our general operating plan is as follows:





Short Term





●
Continue growing revenue and profits through the existing business;●
Meet the challenge of the declining world economy while maintaining revenue and profitability - our goal will be to  focus closely on product mix, improve our gross margin and develop new projects with existing clients;●
Expand the supply network for our products;●
Expand our current business model to include other areas that fall within our distribution expertise such as packaging that uses plastic and acrylic material.●
Integrate our new logistics business into our overall plan





Long Term





●
Expand our service into other areas such as Europe and Australia through the same supplier channel.  Our existing business model copies to other markets naturally.●
Expand the client base and areas of service of our logistics business.





Results of Operations





Three months ending March 31, 2011 and 2010





Revenue:





For the three months ending March 31, 2011 and 2011, revenues were $8,585,609 and $7,436,227 respectively, for an increase of $1,149,382 (15.5%) over the same period in 2010. The increase in revenue is a mainly due to two factors; 1) an increase in packaging revenue of $1,199,268 (24.6%) due to an upturn in the worldwide economy and due to customers’ replenishing their inventory levels, which had been kept at low levels due to the global recession, and 2) offset by a slight decrease in Logistics revenues of $49,886 (2.0%).





Cost of Goods Sold:





Cost of goods sold for the three months ending March 31, 2011 and 2010 were $8,018,339 and $6,881,787 respectively, for an increase of $1,136,552 (16.5%) over the same period in 2010. This increase consists of an increase in packaging cost of goods sold of $1,277,181 (27.9%) which was a direct result of the increase in sales, offset by a decrease in logistics cost of goods sold of $140,629 (6.1%) from the same period in 2010.






20


International Packaging and Logistics Group, Inc.
 and Subsidiaries
 March 31, 2011







Gross Profit:





Gross profit was $567,270 and $554,440 for the three months ending March 31, 2011 and 2010, an increase of $12,830 (2.3%) over the same period in 2010.   The gross profit margin as a percent of sales for the three months ending March 31, 2011 and 2010 was 6.6% and 7.4 % respectively for a decrease of 0.8%.  The decrease is a result of a 13.7% gross profit percent from the logistics business offset by a lower gross profit percent from the packaging business of 3.7%.





Operating Expenses:





Operating expenses for the three month period ended March 31, 2011 and 2010 were $555,896 and $506,115, respectively for an increase of $49,781 (9.2%) from the same period prior year.  These differences in operating expenses were mostly attributable to the following:





Three months ending:

3/31/2010


3/31/2011


$ VAR


% VARSalaries & Related Expense

$
277,919


$
314,037


$
36,118



13.0
%

Packaging salary lower in 2011 by $12,165 offset by $44,235 increase in EZ Link salary expense (bonus)Rent


41,966



46,542



4,576



10.9
%

Packaging rent increased by $898 and EZ Link rent increased by $3,677.  Increase due to annual rate increases.Insurance


32,327



44,955



12,628



39.1
%

Packaging Insurance based on prior revenue which was lower plus increase in EZ Link Group insurance of $3,312.Meals & Entertainment


19,711



20,904



(1,193
)


-5.7
%

EZ Link expense of $20,861 for 2011 vs $19,602 for 2010Travel Expense


58,131



34,865



-23,266



-40.0
%

Decrease in packaging travel of $23,906.Miscellaneous


76,061



94,593



18,032



20.0
%

Miscellaneous itemsTotal Expenses

$
506,115


$
555,896


$
49,781



9.3
%




Other Income (Expenses):





Interest income (expense) for the three months ended March 31, 2011 and 2010 was $(881) (expense) and $403 (income) respectively for an increase of expense $1,284 (318.6%) from the same period prior year.





Other income was $683 for the three months ending March 31, 2011, an decrease of $2,363 over the same period in 2010.  Rent income was $1,461 for the three months ending March 31, 2011, an increase of $566 over the same period in 2010.








Liquidity and Capital Resources





Cash flow generated in operations for the three months ending March 31, 2011 amounted to $650,766, which mainly consisted the following: 1) increase in accounts payable and accrued expenses of $423,083, 2) decrease in accounts receivable of $324,031, 3) decrease in prepaid expenses of $20,722, 4) increase in other current liabilities of $5,696 and  5) depreciation expense of $2,989 offset by 1) increase in other current assets of $39,668, 2) decrease in taxes payable of $74,219, and 3) the net income of $13,913.




21


International Packaging and Logistics Group, Inc.
 and Subsidiaries
 March 31, 2011


On March 31, 2011 the Company had total assets of $8,577,747 compared to $8,245,327 on December 31, 2010, an increase of $332,420 or 4.0%.  The Company had total stockholders’ equity of $3,180,157 on March 31, 2011, compared to stockholders’ equity of $3,180,422 on December 31, 2010, a decrease of $265 (0.0%).  As of March 31, 2011 the Company's working capital position increased by $3,617 (0.2%) from working capital of $1,687,385 at December 31, 2010 to working capital of $1,691,002 at March 31, 2011.





Capital Resources





Over the next twelve months, management is of the opinion that sufficient working capital will be obtained from operations.







ITEM 4T. CONTROLS AND PROCEDURES




Evaluation of Disclosure and Procedures





We have adopted and maintain disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act, is recorded, processed, summarized and reported within the time periods required under the SEC’s rules and forms and that the information is gathered and communicated to our management, including our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), as appropriate, to allow for timely decisions regarding required disclosure.





As required by SEC Rule 15d-15(b), our Chief Executive Officer and Chief Financial Officer carried out an evaluation under the supervision and with the participation of our management, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 15d-14 as of the end of the period covered by this report. Based on the foregoing evaluation, they have concluded that our disclosure controls and procedures are not effective in timely alerting them to material information required to be included in our periodic SEC filings and to ensure that information required to be disclosed in our periodic SEC filings is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure about our internal control over financial reporting discussed below.





MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING





Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) of the Exchange Act. Our internal control over financial reporting is a process designed by, and under the supervision of, our principal executive and principal financial officers, or persons performing similar functions, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America.





Our internal control over financial reporting includes those policies and procedures that:






22




International Packaging and Logistics Group, Inc.
 and Subsidiaries
 March 31, 2011


1.
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;2.
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with the authorization of our management and directors; and3.
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.




Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
  Management assessed the effectiveness of our internal control over financial reporting as of March 31, 2011. Based on this assessment, management concluded that the Company did not maintain effective internal controls over financial reporting as a resulted of identified material weakness in our financial reporting described below. In making this assessment, management used the framework set forth in the report entitled Internal Control—Integrated  Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO. The COSO framework summarizes each of the components of a company's internal control system, including (i) the control environment, (ii) risk assessment, (iii) control activities, (iv) information and communication, and (v) monitoring. This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permits us to provide only management's report in this quarterly report.
  IDENTIFIED MATERIAL WEAKNESS
  A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected.
  Management identified the following material weakness in internal control during its assessment of internal controls over financial reporting as of March 31, 2011:






●
We lack an effective period-end financial statement reconciliation process to transition from Taiwan Accounting Standards to U.S. Generally Accepted Accounting Principles (“GAAP”).●
We lack formal guidance or checklist of procedures to facilitate the reconciliation of the financial statements reported under Taiwan accounting standards to GAAP.





MANAGEMENT'S REMEDIATION INITIATIVES




We are undertaking the remedial measures to establish effective disclosure controls and procedures and internal control over financial reporting, including improving the supervision and training of our accounting staff to understand and implement accounting requirements, policies and procedures for the accounting of variable interest entities. We are reviewing the qualifications of qualified GAAP consultants who can work with the Company’s Chief Financial Officer and Taiwan accounting team to indentify GAAP related issues and help evaluate and address such issues before they present problems in reporting in the United States. We are planning to utilize a qualified consultant on an on-going basis. We also appointed an independent director who is knowledgeable in US GAAP to our board of directors.  The remediation initiatives are an ongoing process of establishing and meeting recording and reporting milestones that are designed to provide an effective system of internal control over financial reporting. We expect to have the system fully operational within the current fiscal year. Until then, executive and financial management is closely scrutinizing the recording and reporting of all material financial transactions.




23





International Packaging and Logistics Group, Inc.


and Subsidiaries


March 31, 2011




In light of the identified material weaknesses, management, performed (1) significant additional substantive review of those areas described above, and (2) performed additional analyses, including but not limited to a detailed balance sheet and statement of operations analytical review that compared changes from the prior period's financial statements and analyzed all significant differences. These procedures were completed so management could gain assurance that the financial statements and schedules included in this Form 10-Q fairly present in all material respects the Company's financial position, results of operations and cash flows for the periods presented.




Changes in Internal Controls




There has been no additional changes except for what is discussed above in our internal control over financial reporting during this fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.








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





None






ITEM 4.  Submission of Matters of a Vote to Security Holders





None






ITEM 5.  Other Information





None






ITEM 6.  Exhibits








24





International Packaging and Logistics Group, Inc.


and Subsidiaries


March 31, 2011






a) Exhibits





31.1
Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)( Section 302 of the Sarbanes-Oxley Act of 2002)





31.2
Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)( Section 302 of the Sarbanes-Oxley Act of 2002)





32.1
Certification of the Chief Executive Officer pursuant to 18 U.S.C.ss.1350(Section 906 of the Sarbanes-Oxley Act of 2002)





32.2
Certification of the Chief Financial Officer pursuant to 18 U.S.C.ss.1350(Section 906 of the Sarbanes-Oxley Act of 2002)








25




SIGNATURES




Pursuant to the requirements of Section 13 or 15(d) 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.








International Packaging and Logistics Group, Inc.


(Registrant)










Dated:  May 17, 2011

By: /s/Steven  R.WestlundSteven WestlundChief Executive OfficerPrincipal Financial Officer and DirectorBy: /s/Allen LinAllen Lin, DirectorPresident H&H GlassBy: /s/William GresherWilliam Gresher, Director