UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

~~[X]~~x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~March 3031, ~~2009~~2010

[¨ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission ~~file~~File ~~number~~Number 333-137134

JADE ART GROUP INC.

(Exact name of registrant as specified in its charter)

Nevada

(State or other jurisdiction of incorporation or organization)

71-1021813

(IRS Employer Identification Number)

#35, Baita Zhong Road,

Yujiang County, Jiangxi Province, P.R. of China 335200

(Address of principal executive offices)

(Zip Code)

~~(646)~~+86-~~200~~701-~~6328~~5881082

(Registrant's telephone number, including area code)

Indicate by check mark whether the ~~registrant~~issuer (1) has filed all reports required to be ~~filed~~ 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~~ for the past 90 days. Yes ~~[X]~~ x No ~~[__]~~ ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ~~|_|~~¨ 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 ~~|_|~~ ¨ Accelerated filer ~~|_|~~¨ Non-accelerated filer ¨ Smaller reporting company x

Non-accelerated filer |_| Smaller reporting company |X|

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

Yes ~~[__]~~ ¨ No ~~[X]~~x

As of ~~November~~ 17May 19, ~~2009~~2010, 79,980,000 shares of the Registrant’s common stock, $0.001 par value, were outstanding.

JADE ART GROUP INC.

INDEX

Part I - Financial Information
		Page
Item 1.	Financial Statements	2
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	3
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	6
Item 4.	Controls and Procedures
Item 4T.	Controls and Procedures	6
Part II - Other Information		7
Item 1.	Legal Proceedings	7
Item 1A.	Risk Factors	7
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	7
Item 3.	Defaults Upon Senior Securities	7
Item 4.	~~Submission~~Other ~~of Matters to a Vote of Security Holders~~Information	7
Item 5.	~~Other Information~~Exhibits	8
Item 6.	Exhibits
Signatures		9
Signatures

2PART I

~~PART I.~~ FINANCIAL INFORMATION

Item 1. Financial Statements

JADE ART GROUP INC. AND ~~SUBIDIARIES CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2009, AND DECEMBER 31, 2008 (Unaudited)~~SUBSIDIARIES

ASSETS
	As of			As of
	September 30,			December 31,
	2009			2008
Current Assets:
Cash and cash equivalents	$	4,340,016		$	68,956
Accounts receivable -
Trade ($0 allowance for doubtful accounts in 2009 and 2008, respectively)		8,368,583			1,477,770
Other		34,991			19,014
Total accounts receivable		8,403,574			1,496,784
Total current assets		12,743,590			1,565,740
Property and Equipment:
Office furniture and equipment		6,526			6,526
Less: Accumulated depreciation		(1,515	)		(584	)
Net property and equipment		5,011			5,942
Other Assets
Distribution rights, net		63,826,820			65,978,151
Total other assets		63,826,820			65,978,151
Total Assets	$	76,575,421		$	67,549,833
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable	$	-		$	2,264,851
Accounts payable - Trade and accrued liabilities		1,025,914			622,208
Advance from customers		-			146,314
Taxes payable		3,085,819			1,268,617
Total current liabilities		4,111,733			4,301,990
Total liabilities		4,111,733			4,301,990
Commitments and Contingencies
Stockholders' Equity:
Common stock, par value $0.001 per share; 500,000,000 shares
authorized; 79,980,000 shares issued and outstanding in 2009,
and 2008, respectively		79,980			79,980
Additional paid-in capital		3,301,747			3,229,016
Statutory earnings reserve		2,008,152			2,008,152
Accumulated other comprehensive income		1,101,960			1,062,399
Retained earnings		65,971,849			56,868,296
Total stockholders' equity		72,463,688			63,247,843
Total Liabilities and Stockholders' Equity	$	76,575,421		$	67,549,833

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

~~The~~MARCH ~~accompanying~~31, ~~notes~~2010 ~~are~~AND ~~an integral part of these consolidated financial statements.~~2009

3(Unaudited)

JADE ART GROUP INC. AND SUBIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2009, AND 2008 (Unaudited)

Consolidated Financial Statements-

Consolidated Balance Sheets as of March 31, 2010 and December 31, 2009	F-1

Consolidated Statements of Operations and Comprehensive Income
for the Three Months Ended March 31, 2010 and 2009	F-2

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2010
and 2009	F-3

Notes to Consolidated Financial Statements March 31, 2010 and 2009	F-4

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2009			2008			2009			2008
Sales	$	10,667,585		$	7,609,684		$	17,592,611		$	24,995,461
Cost of sales		1,486,437			1,360,228			3,436,507			4,160,214
Gross profit		9,181,148			6,249,456			14,156,104			20,835,247
Operating Expenses:
Selling, general and administrative expenses		531,484			629,184			1,174,353			2,185,771
Total operating expenses		531,484			629,184			1,174,353			2,185,771
Income From Continuing Operations		8,649,664			5,620,272			12,981,751			18,649,476
Other Income (Expense):
Interest income		3,578			132,087			4,165			132,087
Interest (expense) and other		-			(126,027	)		(5,418	)		(336,712	)
Total other income (expense)		3,578			6,060			(1,253	)		(204,625	)
Income Before Income Taxes From Continuing Operations		8,653,242			5,626,332			12,980,498			18,444,851
Provision for Income Taxes		(2,359,012	)		(1,664,686	)		(3,876,945	)		(5,486,689	)
Net Income From Continuing Operations		6,294,230			3,961,646			9,103,553			12,958,162
Discontinued Operations, net of tax
Income from woodcarving operations, net of tax		-			-			-			96,751
Income from transfer of woodcarving
operations, net of tax		-			-			-			55,322,615
Net Income From Discontinued Operations		-			-			-			55,419,366
Net Income		6,294,230			3,961,646			9,103,553			68,377,528
Comprehensive Income
Foreign currency translation adjustment		13,370			222,485			39,561			813,953
Total Comprehensive Income	$	6,307,600		$	4,184,131		$	9,143,114		$	69,191,481
Earnings Per Common Share:
Earnings per common share - Basic
Income from continuing operations	$	0.08		$	0.05		$	0.11		$	0.16
Income from discontinued operations, net of tax		0.00			0.00			0.00			0.69
Net income	$	0.08		$	0.05		$	0.11		$	0.85
Earnings per common share - Diluted
Income from continuing operations	$	0.08		$	0.05		$	0.11		$	0.16
Income from discontinued operations, net of tax		0.00			0.00			0.00			0.68
Net income	$	0.08		$	0.05		$	0.11		$	0.84
Weighted Average Number of Common Shares
Outstanding - Basic		79,980,000			79,980,000			79,980,000			79,980,000
Weighted Average Number of Common Shares
Outstanding - Diluted		79,980,000			80,980,000			80,300,755			80,917,956

~~The~~JADE ~~accompanying~~ART ~~notes~~GROUP ~~are~~INC. anAND ~~integral part of these consolidated financial statements~~SUBSIDIARIES

4CONSOLIDATED BALANCE SHEETS

~~JADE~~AS OF ~~ART~~MARCH ~~GROUP~~31, ~~INC.~~2010 AND ~~SUBIDIARIES~~DECEMBER ~~CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30~~31, 2009~~, AND 2008 (Unaudited)~~

	Nine Months Ended
	September 30,
	2009			2008
Operating Activities:
Net income from continuing operations	$	9,103,553		$	12,958,162
Adjustments to reconcile net income to net cash
provided by operating activities:
Net income from discontinued operations		-			55,419,366
Income on transfer of woodcarving operations		-			(55,322,615	)
Depreciation and amortization		2,152,262			2,148,741
Valuation of warrants and options issued		72,731			762,362
Changes in net assets and liabilities-
Accounts receivable -
Trade		(6,890,813	)		(7,682,699	)
Other		(15,977	)		(401,040	)
Interest receivable		-			(132,087	)
Prepaid expenses		-			32,256
Inventories		-			(95,631	)
Accounts payable - Trade and accured liabilities		403,706			1,077,930
Other payables		-			321,602
Notes payable		(2,264,851	)		-
Advances from customers		(146,314	)		(59,191	)
Taxes payable		1,817,202			2,397,910
Net Cash Provided by Operating Activities		4,231,499			11,425,066
Investing Activities:
Purchase of distribution rights		-			(8,774,808	)
Notes receivable		-			(14,652,653	)
Cash paid for notes receivable		-			1,443,966
Purchases of property and equipment		-			(33,353	)
Net Cash (Used in) Investing Activities		-			(22,016,848	)
Financing Activities:
Proceeds from loans from related party		-			3,000,000
Proceeds from notes payable		-			7,000,000
Net Cash Provided by Financing Activities		-			10,000,000
Effect of Exchange Rate Changes on Cash		39,561			813,953
Net Increase in Cash and Cash Equivalents		4,271,060			222,171
Cash and Cash Equivalents - Beginning of Period		68,956			301,203
Cash and Cash Equivalents - End of Period	$	4,340,016		$	523,374
Supplemental Disclosure of Cash Flow Information:
Cash paid during the periods for:
Interest	$	5,418		$	-
Income taxes	$	4,623,068		$	5,656,657

(Unaudited)

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

	2010			2009

ASSETS

Current Assets:
Cash and cash equivalents	$	5,713,522		$	147,392
Accounts receivable - Trade (net of allowance for doubtful
accounts of $250,000 in 2010 and 2009)		5,987,008			7,502,004
Deferred tax assets – Current		62,500			-
Total current assets		11,763,030			7,649,396

Property and Equipment:
Office furniture and equipment		6,526			6,526
Less - Accumulated depreciation		(2,136	)		(1,825	)
Net property and equipment		4,390			4,701

Acquisition deposit		8,787,089			8,787,089
Exclusive jade distribution rights, net		62,391,084			63,108,842

Total Assets	$	82,945,593		$	79,550,028

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
Accounts payable - Trade and accrued liabilities	$	207,502		$	270,960
Advances payable		740,763			723,090
Taxes payable		2,240,915			2,050,385
Total current liabilities		3,189,180			3,044,435
Total liabilities		3,189,180			3,044,435

Commitments and Contingencies

Stockholders' Equity:
Common stock, par value $0.001 per share; 500,000,000 shares
authorized; 79,980,000 shares issued and outstanding in 2010,
and 2009, respectively		79,980			79,980
Additional paid-in capital		3,320,913			3,311,330
Statutory earnings reserve		3,678,080			3,678,080
Accumulated other comprehensive income		1,108,707			1,106,581
Retained earnings		71,568,733			68,329,622
Total stockholders' equity		79,756,413			76,505,593

Total Liabilities and Stockholders' Equity	$	82,945,593		$	79,550,028

5The accompanying notes to consolidated financial statements are

an integral part of these consolidated balance sheets.

F-1

JADE ART GROUP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009

(Unaudited)

	Three Months Ended
	March 31,
	2010			2009

Sales	$	5,910,871		$	4,967,029

Cost of Goods Sold		1,142,636			1,090,642

Gross Profit		4,768,235			3,876,387

Selling, General and Administrative Expenses		289,014			334,631

Income From Operations		4,479,221			3,541,756

Other Income:
Interest income		4,598			281

Income Before Income Taxes		4,483,819			3,542,037

Provision for Income Taxes		(1,244,708	)		(1,092,992	)

Net Income	$	3,239,111		$	2,449,045

Comprehensive Income:
Foreign currency translation adjustment		2,126			194

Total Comprehensive Income	$	3,241,237		$	2,449,239

Earnings Per Common Share:
Earnings per common share - Basic	$	0.04		$	0.03

Earnings per common share - Diluted	$	0.04		$	0.03
Weighted Average Number of Common Shares
Outstanding - Basic		79,980,000			79,980,000

Weighted Average Number of Common Shares
Outstanding - Diluted		79,980,000			80,528,117

The accompanying notes to consolidated financial statements are

an integral part of these consolidated financial statements.

F-2

JADE ART GROUP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three Months Ended
	March 31,
	2010			2009

Cash Flows Provided by Operating Activities:
Net income	$	3,239,111		$	2,449,045
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization		718,069			717,228
Deferred taxes		(62,500	)		-
Valuation of warrants and options issued for services		9,583			53,565
Changes in net assets and liabilities-
Accounts receivable -
Trade		1,514,996			(2,124,217	)
Other		-			19,014
Accounts payable - Trade and accrued liabilities		(63,458	)		359,464
Advances payable		17,673			-
Taxes payable		190,530			669,241

Net Cash Provided by Operating Activities		5,564,004			2,143,340

Cash Flows Used in Investing Activities:
Purchases of property and equipment		-			-

Net Cash Used in Investing Activities		-			-

Cash Flows Used in Financing Activities:
Payments made on Notes Payable		-			(1,361,777	)

Net Cash Used in Financing Activities		-			(1,361,777	)

Effect of Exchange Rate Changes on Cash		2,126			194

Net Increase in Cash and Cash Equivalents		5,566,130			781,757

Cash and Cash Equivalents - Beginning of Period		147,392			68,956

Cash and Cash Equivalents - End of Period	$	5,713,522		$	850,713

Supplemental Disclosure of Cash Flow Information:
Cash paid during the periods for:
Interest	$	-		$	-
Income taxes	$	1,054,178		$	1,268,488

The accompanying notes to consolidated financial statements are

an integral part of these consolidated financial statements.

F-3

JADE ART GROUP INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~SEPTEMBER~~MARCH 3031, ~~2009,~~2010 AND ~~2008~~2009

(Unaudited)

(1) Summary of Significant Accounting Policies

Basis of Presentation and Organization

Jade Art Group Inc. (the “Company” or "“Jade Art"”), was incorporated inunder the ~~State~~laws of the State of Nevada on September 30, 2005, ~~under~~ ~~the~~as ~~name of~~ Vella Productions, Inc. (“Vella”). The ~~and~~initial ~~entered~~business ~~into~~plan anwas ~~agreement~~to provide integrated brand management services to established and ~~plan~~start-up ofcompanies ~~merger~~in (the ~~"Merger~~food ~~Agreement") on~~industry. Such ~~October~~services 1included the marketing, ~~2007~~distribution, ~~with~~and sales ~~its~~of ~~wholly~~organic ~~owned~~and ~~subsidiary,~~natural ~~VELLA~~food products to retail and foodservice outlets worldwide. Prior to the Merger ~~Sub~~Transaction, ~~Inc.~~described below, ~~and~~the ~~each~~business operations of ~~Guoxi~~the ~~Holding~~Company ~~Limited~~were ~~("GHL"),~~limited ~~Hua-Cai~~to ~~Song,~~development stage activities with ~~Fu-Lan~~respect ~~Chen,~~to ~~Mei-Ling~~an ~~Chen,~~exclusive ~~Chen-Qing~~distribution ~~Luo,~~and ~~Mei-Qing~~marketing ~~Zhang,~~agreement ~~Song-Mao~~with ~~Cai~~Spike Tea, ~~Shenzhen~~Inc. ~~Hua~~for ~~Yin~~the ~~Guaranty~~development &of ~~Investment~~a ~~Company~~proprietary ~~Limited,~~line ~~Top~~of ~~Good~~six blends of tea and ~~International~~caffeine-free ~~Limited,~~hot ~~Total~~drinks ~~Giant~~for ~~Group~~distribution ~~Limited,~~to ~~Total~~the ~~Shine~~retail ~~Group~~and ~~Limited,~~foodservice ~~Sure~~sectors. For ~~Believe~~the ~~Enterprises~~period ~~Limited,~~from ~~Think~~inception ~~Big~~(September ~~Trading Limited~~30, ~~Huge Step~~2005) through ~~Enterprises~~December ~~Limited~~31, ~~and~~2007, ~~Billion~~the ~~Hero~~Company ~~Investments~~generated ~~Limited~~no revenues.

~~Pursuant~~In toSeptember 2006, the ~~Merger~~Company ~~Agreement,~~filed ~~GHL~~a ~~merged~~Registration ~~with~~Statement ~~VELLA~~on ~~Merger~~Form ~~Sub,~~SB-2 ~~Inc,~~ with ~~GHL as~~ the ~~surviving~~Securities ~~entity.~~and ~~GHL~~Exchange ~~has~~Commission ~~an operating subsidiary, Jiangxi XiDa~~ (~~formerly known as Jiangxi Xi Cheong Lacquer, Inc.) (the~~ “~~Merger Transaction~~SEC”). ~~Jiangxi~~to ~~XiDa~~register ~~was incorporated under the laws of the People’s Republic of China ("PRC") on December 4~~20, 2006. JiangXi XiDa is located in Yujiang, Jiangxi Province. Jiangxi XiDa then was engaged in the production of traditional art products, including religious woodcut lacquer, woodcut decorated furniture and woodcut decorations used in buildings and for display. As a result of the Merger Transaction, GHL became a wholly-owned subsidiary of the Company, which, in turn, made the Company the indirect owner of Jiangxi XiDa. Under the Merger Agreement, in exchange of surrendering their shares in GHL, the GHL shareholders received an aggregate of (i) 206,700,000 ~~(68~~,~~900,~~000 ~~before forward split) newly-issued~~ shares of ~~the Company's~~ its common stock, par value $0.001 per share ~~(the "Common Stock") and (ii) $14~~,~~334,500,~~ into ~~the~~raise ~~form~~proceeds of ~~promissory~~up ~~notes. Under accounting principles generally accepted in the United States, the share exchange is considered~~ to ~~be a capital transaction in substance~~$400,000 ~~rather than a business~~in ~~combination. Thus,~~ the ~~share~~public ~~exchange~~markets. The isRegistration ~~equivalent~~Statement towas ~~the~~declared ~~issuance of~~effective ~~stock~~ by ~~GHL for the net monetary assets of Vella Productions, Inc. Based on~~ the ~~consent~~SEC ~~of the Jade Art Group’s Board and all the GHL shareholders, the promissory notes are due to be paid~~ on orNovember ~~before June 30~~2, ~~2009~~2006. ~~As of June 30, 2009, the Company had paid $14,334,500 towards the notes.~~

~~Consideration,~~On ~~including~~October ~~participation~~1, in2007, the ~~promissory~~Company ~~notes~~entered into an Agreement and Plan of Merger (the "Merger Agreement") with its wholly owned subsidiary, ~~was~~VELLA ~~distributed~~Merger ~~pro~~Sub, ~~ratably~~Inc., ~~among~~and ~~the~~each of Guoxi Holding Limited ("GHL"), ~~shareholders~~a inBritish ~~accordance~~Virgin ~~with~~Islands ~~their~~holding company ~~respective~~founded ~~ownership~~on July 28, 2006, Hua-Cai Song, Fu-Lan Chen, Mei-Ling Chen, ~~interests~~Chen-Qing inLuo, ~~GHL~~Mei-Qing ~~immediately~~Zhang, ~~before~~Song-Mao ~~the~~Cai, ~~completion~~Shenzhen ofHua ~~the~~Yin ~~Merger~~Guaranty & ~~Transaction~~Investment Company Limited, Top Good International Limited, Total Giant Group Limited, Total Shine Group Limited, Sure Believe Enterprises Limited, Think Big Trading Limited, Huge Step Enterprises Limited, and Billion Hero Investments Limited.

~~The~~Pursuant ~~acquisition~~to ~~has~~the ~~been~~Merger ~~accounted~~Agreement, ~~for~~GHL merged with VELLA Merger Sub, Inc., with GHL identified as athe ~~reverse~~surviving ~~merger~~entity ~~and~~(the ~~recapitalization~~“Merger ~~and,~~Transaction”). GHL ~~accordingly,~~was the ~~accompanying~~sole ~~consolidated~~stockholder ~~financial~~of ~~statements~~100 ~~represent~~percent of the ~~historical~~ ~~operations~~capital stock of the operating entity known as Jiangxi XiDa (“Jiangxi XiDa” and ~~the~~formerly ~~capital~~known ~~structure~~as Jiangxi Xi Cheong Lacquer, Inc.). Jiangxi XiDa was incorporated under the laws of the People’s ~~former~~Republic of China (“PRC”) on December 4, 2006, and is located in ~~Vella~~Yujiang, ~~Productions~~Jiangxi Province, ~~Inc~~PRC.

OnAt the ~~November~~time 8of the Merger Transaction, ~~2007~~Jiangxi XiDa was engaged in the production of traditional art products, including religious woodcut lacquer, woodcut decorated furniture, and woodcut decorations used in buildings and for display. As a result of the Merger Transaction, GHL became a wholly owned subsidiary of the Company, ~~amended~~which, in turn, made the Company the indirect owner of Jiangxi XiDa. Under the Merger Agreement, in exchange for surrendering their shares in GHL, the GHL stockholders received an aggregate of (i) 68,900,000 newly issued shares of the Company's common stock, par value $.001 per share, and ~~restated~~(ii) $14,334,500, ~~its~~in ~~Articles~~the form of ~~Incorporation~~promissory notes resulting from declared dividends, topayable ~~reflect~~on or before the first year anniversary of the Merger Transaction. Such consideration, including participation in the promissory notes, was distributed pro rata among the GHL stockholders in accordance with their respective ownership interests in GHL immediately before the completion of the Merger Transaction. Based on the consent of Jade Art’s ~~Group~~Board of Directors, and ~~Inc.~~all asof ~~its~~the ~~new~~GHL ~~corporate~~stockholders, ~~name.~~the Ondue ~~January~~date 11for payment of the promissory notes was later extended to March 31, 2009. Subsequent to December 31, 2008, the Company ~~formed~~again aamended ~~new~~the ~~wholly~~due ~~owned~~date ~~Chinese~~of ~~subsidiary~~the promissory notes to March 31, ~~JiangXi~~2010. The ~~SheTai~~amendment ~~Jade~~included the calculation of accrued interest ~~Industrial~~payable ~~Company~~at ~~Limited~~a ~~(“STJ”)~~rate of 4 percent to be applied to the final amount owed of $903,074. During the year ended December 31, 2008, the Company paid $12,069,649 in principal related to ~~engage~~the promissory notes. In addition, during the year ended December 31, 2009, the Company paid an additional $2,264,851 in principal payments on the ~~processing~~promissory ~~and~~notes ~~sale~~with accrued interest of $5,418. As such, as of December 31, 2009, the Company had paid off all ~~jadeite~~of ~~and~~its ~~jade~~obligations related to the promissory notes under the Merger Agreement.

On January 17, 2008, the Company entered into an Exclusive Distribution Rights Agreement (the "Agreement") with Wulateqianqi XiKai Mining Co., Ltd. ("XiKai Mining"). Under the Agreement, XiKai Mining commited to sell to the Company 90% of the raw jade material produced from its SheTai Jade mine, located in Wulateqianqi, PRC, for a period of 50 years (the “Exclusive Rights”). In exchange for these Exclusive Rights, the Company agreed to pay RMB 60 million (approximately $8.8 million) by March 31, 2009 to XiKai Mining and, to transfer to XiKai Mining 100% of our ownership interest in all of the Company’s woodcarving operations, which were contained in Jiangxi XiDa. This transfer of Jiangxi XiDa was made on February 20, 2008.F-4

~~The~~Under ~~Agreement~~accounting ~~further~~principles ~~provides~~generally ~~that,~~accepted ifin the ~~Company~~United ~~requests~~States, ~~production~~the ~~from XiKai~~share ~~Mining~~exchange ~~will~~completed beunder nothe ~~less~~Merger ~~than~~Agreement ~~40,000~~was ~~metric~~considered ~~tons~~as ~~per~~a ~~year~~capital transaction ~~(the~~in ~~"Minimum Commitment")~~substance, ~~with~~rather anthan ~~initial~~a ~~average~~business ~~cost~~combination. As ~~per~~such, ~~ton~~GHL is considered to behave ~~paid~~acquired by the Company ~~not to~~by ~~exceed~~reverse ~~RMB 2,000 (approximately $285)~~merger. The ~~cost per ton paid by the Company~~reverse ~~shall~~merger behas ~~subject~~been torecorded ~~renegotiation~~as ~~every~~a ~~five~~recapitalization ~~years during the term~~ of the ~~Agreement~~ Company, with ~~adjustments not to exceed 10% of~~ the ~~cost for the immediately~~net ~~preceding~~assets ~~five year period. Failure by XiKai Mining to supply raw jade material ordered by the Company within the Minimum Commitment level during any~~ of the ~~initial~~ ~~five years of the Agreement entitles the~~ Company toand ~~payment~~GHL ~~from~~and ~~XiKai Mining~~its ofwholly ~~RMB~~owned ~~18,000~~subsidiary (~~approximately~~Jiangxi ~~$2,500~~XiDa) brought ~~for~~forward ~~each~~at ~~such~~their ~~ton~~historical ~~ordered~~bases. The bycosts ~~but~~associated ~~not supplied~~with to the reverse ~~Company~~merger ~~during~~were ~~any~~expensed ~~such~~as ~~fiscal year~~incurred.

~~Production~~On November 8, 2007, the Company amended and restated its Articles of ~~raw~~Incorporation to ~~jade~~change bythe ~~XiKai~~name ~~Mining~~of isthe ~~limited~~entity to ~~40,000~~Jade ~~metric~~Art ~~tons~~Group ~~per~~Inc. In ~~year~~addition, ~~under~~on ~~applicable~~January 11, 2008, the Company formed a new wholly owned Chinese ~~regulations~~subsidiary, JiangXi SheTai Jade Industrial Company Limited (“JST”), to engage in the processing and sale of jadeite and jade. JST is a wholly owned subsidiary of GHL.

~~The~~On January 17, 2008, the Company’s ~~approved~~entered ~~scope~~into ofan ~~business~~Exclusive ~~operations~~Distribution ~~includes~~Rights Agreement (the ~~production~~"Exclusive ~~and~~Jade ~~sale~~Distribution Rights Agreement") with Wulateqianqi XiKai Mining Co., Ltd. ("XiKai Mining"). Under the terms of the Exclusive Jade Distribution Rights Agreement, XiKai Mining agreed to sell to the Company 90 percent of the raw jade ~~and~~material ~~related~~produced ~~products~~from its SheTai Jade mine, located in Wulateqianqi, PRC, for a period of 50 years. In ~~For~~exchange for the ~~period~~Exclusive ~~ended~~Jade ~~September~~Distributions 30Rights, the Company agreed to pay RMB 60 million (approximately USD$8.8 million) to XiKai Mining by March 31, 2009, and to transfer to XiKai Mining 100 percent of its ownership interest in the ~~principal~~Company’s ~~activity~~woodcarving operations, which were contained and conducted by Jiangxi XiDa. The transfer of Jiangxi XiDa to XiKai Mining under the ~~Company~~Exclusive Jade Distribution Rights Agreement was ~~the~~completed ~~distribution~~on ofFebruary ~~raw~~20, ~~jade~~2008.

6The Exclusive Jade Distribution Rights Agreement further provides that, if the Company requests, production of jade by XiKai Mining will be no less than 40,000 metric tons per year (the "Minimum Commitment"), with an initial average cost per ton to be paid by the Company of not more than RMB 2,000 (approximately $290). The cost per ton paid by Jade Art is subject to renegotiation every five years during the term of the Exclusive Jade Distribution Rights Agreement, with adjustments not to exceed 10 percent of the cost for the immediately preceding five-year period. Failure by XiKai Mining to supply raw jade material ordered by the Company within the Minimum Commitment level during any of the initial five years of the Exclusive Jade Distribution Rights Agreement entitles the Company to payment from XiKai Mining of RMB 18,000 (approximately $2,630) for each ton ordered by but not supplied to the Company during any such fiscal year.

~~JADE~~The ~~ART~~Company’s ~~GROUP~~current ~~INC~~business operations include the production and sale of jade and related products. For &the ~~SUBSIDIARIES~~period from the date of completion of the Exclusive Jade Distribution Rights Agreement through March 31, 2010, the principal operations of the Company have been the distribution and sale of raw jade.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~F-5

~~SEPTEMBER~~Principles ~~30,~~of ~~2009,~~Accounting ~~AND~~and ~~2008~~Consolidation

The accompanying consolidated financial statements of the Company and its wholly owned subsidiaries were prepared in accordance with accounting principles generally accepted in the United States of America (~~Unaudited~~“US GAAP”), and include the assets, liabilities, revenues, expenses, and cash flows of all subsidiaries. All significant intercompany balances, transactions, and cash flows have been eliminated in consolidation.

Unaudited Interim Consolidated Financial Statements

The ~~accompanying~~ interim consolidated ~~financial~~balance ~~statements~~sheets of the Company as of ~~September~~ 30March 31, ~~2009~~2010, and December 31, ~~2008~~2009, and the related interim statements of operations and comprehensive income and cash flows for the three-month ~~months~~periods ~~and~~ended ~~nine~~March 31, ~~months~~2010 ~~ended September~~and 302009, ~~2009~~have been prepared in conformity with accounting principles generally accepted in the United States of America for interim reporting, and ~~2008~~in accordance with the requirements of this Quarterly Report on Form 10-Q. The accompanying interim consolidated financial statements are unaudited, and are ~~unaudited~~subject to year-end adjustments. ~~However,~~ inIn the opinion of management, the ~~interim~~accompanying interim consolidated financial statements include all known adjustments, ~~consisting~~(which consist ~~only~~primarily of normal, recurring ~~adjustments~~accruals, estimates, and assumptions that impact the financial statements) necessary to present fairly ~~Jade~~the ~~Art’s~~ consolidated financial position as of ~~September~~the ~~30,~~balance ~~2009,~~sheet ~~and~~dates ~~December 31, 2008,~~ and the consolidated results of ~~its~~ operations ~~and its cash flows~~ for the three-month ~~and~~periods ~~nine months~~ ended ~~September~~March 3031, ~~2009,~~2010 and ~~2008~~2009. ~~These~~ ~~results are not~~The ~~necessarily~~accompanying ~~indicative~~interim ofconsolidated ~~the~~financial ~~results~~statements ~~expected~~should ~~for~~be ~~the~~read ~~calendar year ending~~in ~~December~~conjunction ~~31,~~with ~~2009. The~~the ~~accompanying~~audited ~~consolidated~~ financial statements and ~~notes~~footnotes thereto doincluded within ~~not~~the ~~reflect~~Company’s ~~all~~Annual ~~disclosures~~Report ~~required~~on ~~under~~Form ~~accounting~~10-K for the fiscal year ended ~~principles~~December ~~generally~~31, ~~accepted~~2009 infiled with the ~~United~~SEC. ~~States~~The results of ~~America. Refer to~~operations for the ~~Company’s~~three months ~~audited~~ended ~~financial~~March ~~statements~~31, as2010 ofare ~~December~~not ~~31,~~necessarily ~~2008,~~indicative ~~filed~~of operating results ~~with~~of the ~~SEC~~full ~~for~~year ~~additional~~ending ~~information~~December 31, ~~including significant accounting policies~~2010.

Accounting Method

The consolidated financial statements are prepared using the accrual method of accounting. The Company changed its fiscal year-end from July 31 to December 31 in fiscal year 2007.

Principles of consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant inter-company transactions and balances have been eliminated on consolidation.

Cash and Cash Equivalents

For purposes of financial statement presentation, the Company considers all highly liquid investments with a maturity of three months or less, from the date of purchase, to be cash equivalents.

Foreign Currency Translation

The Company’s ~~functional~~accounts ~~currency~~for isforeign ~~the~~currency ~~Chinese~~translation ~~Yuan~~pursuant ~~Renminbi~~to ~~(“RMB”),~~ASC ~~and~~Topic ~~reporting~~830, Foreign ~~currency~~Currency isMatters (formerly ~~the~~SFAS ~~United~~No. ~~States~~52, Foreign Currency ~~Dollar~~Translation). The ~~financial~~functional ~~statements~~currency of ~~the Company~~Jade ~~are~~Art ~~translated~~is tothe ~~United~~Chinese Yuan ~~States~~Renminbi ~~Dollars~~(“RMB”). Under inASC ~~accordance~~Topic ~~with~~830-30, ~~SFAS~~all ~~No.52~~consolidated ~~“Foreign Currency Translation”. Monetary~~ assets and liabilities ~~denominated~~are ~~in foreign~~translated ~~currencies~~into ~~are~~United ~~translated~~States Dollars using the current exchange rate ~~prevailing~~in effect at the ~~balance~~ ~~sheet~~end ~~date~~of each fiscal period. The currency ~~Transactions~~exchange ~~affecting~~rates used by the Company’s ~~revenue~~as of March 31, 2010 and ~~expense~~December ~~accounts~~31, ~~are~~2009, ~~translated~~to translate ~~using~~Chinese anRMB ~~average~~into ~~exchange~~United ~~rate~~States ~~during~~Dollars ~~the~~were ~~period presented~~6. ~~Gains~~ 826:1 and ~~losses~~6.837:1, ~~arising~~respectively. Consolidated onrevenues ~~translation~~and orexpenses ~~settlement of~~were ~~foreign~~translated ~~currency~~using ~~denominated~~the ~~transactions~~average orexchange ~~balances~~rates ~~are~~prevailing ~~included~~throughout in the three- ~~determination~~month ofperiods ~~income.~~ended ~~Foreign~~March ~~currency~~31, ~~transactions~~2010 ~~are~~and ~~primarily~~2009, ~~undertaken in~~which ~~RMB.~~amounted ~~Foreign~~to ~~currency~~6.827:1 ~~translation~~and 6.835:1, respectively. Translation adjustments are included in other accumulated comprehensive ~~Income~~income ~~and~~in ~~disclosed~~the asaccompanying aconsolidated ~~separate category of Stockholders’~~balance ~~Equity~~sheets.

Cash and Cash Equivalents

For purposes of reporting within the consolidated statements of cash flows, the Company considers all cash on hand, cash accounts not subject to withdrawal restrictions or penalties, and all highly liquid investments purchased with a maturity of three months or less to be cash equivalents.

Accounts Receivable

The Company extends unsecured credit to its customers in the ordinary course of business but mitigates the associated risks by performing credit checks and actively pursuing past due accounts. An allowance for doubtful accounts is established and recorded based on management’s assessment of the credit history with the customer and current relationships with them.

~~The Company makes provision for bad debts based on an assessment of the recoverability of accounts receivable. Specific provisions are applied to related~~F-party receivables and third-party receivables where events or changes in circumstances indicate that the balances may not be collectible. However, due to the Company’s experience in the sale and distribution of raw jade in 2009, and the nature of the Company’s business, management did not expect any uncollectible receivables. As of September 30, 2009, and December 31, 2008, there was no allowance for doubtful accounts recorded.6

7The Company makes provision for bad debts based on an assessment of the recoverability of accounts receivable. Specific provisions are applied to related-party receivables and third-party receivables where events or changes in circumstances indicate that the balances may not be collectible. As of March 31, 2010 and December 31, 2009, the balance of the allowance for doubtful accounts was $250,000. While management uses the best information available upon which to base estimates, future adjustments to the allowance may be necessary if economic conditions differ substantially from the assumptions used for the purposes of analysis.

JADE ART GROUP INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2009, AND 2008

(Unaudited)

Property and Equipment

Property and equipment is stated at cost. Betterments and improvements are capitalized and depreciated over their estimated useful lives ~~and leaseholds~~ . Leaseholds are depreciated over the lesser of lease life or useful life. Repairs and maintenance expenditures are charged to ~~expense~~operations as incurred. When assets are disposed of, the cost and related accumulated depreciation (the net book value of the assets) isare eliminated, and any resulting gain or loss is reflected in ~~the statements of~~ operations. Depreciation is and amortization are computed using the straight-line method over the estimated useful lives of the related assets. The estimated useful lives are as follows:

~~Buildings~~ Office furniture 20 and equipment 5 years

Plant and machinery 10 years

Furniture and equipment 5 years

Revenue Recognition

The Company ~~applies~~recognizes ~~the~~revenues ~~provisions~~when ofgoods ~~SEC~~are ~~Staff Accounting Bulletin (“SAB”) No. 104~~shipped, ~~Revenue~~ Recognition in Financial Statements (“SAB 104”), which provides guidance on the recognition, presentation and disclosure of revenue in financial statements filed with the SEC. SAB 104 outlines the basic criteria that must be met to recognize revenue and provides guidance for disclosure related to revenue recognition policies. Sales revenue is recognized when ~~(1)~~a ~~persuasive~~formal ~~evidence of an~~ arrangement exists;, ~~(2) delivery has occurred or services rendered; (3)~~ the ~~fee~~price is fixed ~~and~~or determinable;, ~~and~~the ~~(4) collectibility~~delivery is ~~reasonably~~completed, ~~assured. The~~no ~~Company determines whether~~other ~~criteria~~significant ~~(3)~~obligations ~~and (4) are met based on judgments regarding the nature~~ of the ~~price~~ ~~charged~~Company ~~for~~exist, ~~products~~ and, ~~the~~collectability ~~collectibility~~is ~~of those~~reasonably ~~fees~~assured. ~~Payments~~ Typical ~~received~~shipment ~~before~~terms ~~all of the relevant criteria~~ for ~~revenue~~ ~~recognition~~all ~~are~~customers ~~satisfied~~ are ~~recorded~~FOB ~~as advances from~~shipping ~~customers~~point. ~~Advances~~ Goods ~~from~~are ~~customers~~considered asshipped ~~of September 30, 2009,~~ and ~~December~~ ~~31,~~delivered ~~2008,~~when ~~were~~a $0customer’s ~~and~~truck picks ~~$146,314,~~up ~~respectively.~~goods at ~~Returns are not permitted after~~ the ~~customer~~finished ~~accepts~~goods ~~the~~inventory ~~product~~location.

Fair Value of Financial Instruments

OnThe ~~January~~Company 1,has ~~2008~~adopted ASC Topic 820, Fair ~~the~~Value ~~Company~~Measurements ~~adopted~~and Disclosures, (formerly SFAS No. 157, “ Fair Value Measurements.) ~~SFAS~~which ~~No. 157~~ defines fair value, establishes a ~~three-level~~framework ~~valuation~~for ~~hierarchy~~measuring fair value in US ~~for~~GAAP, and expands disclosures ofabout fair value ~~measurement~~measurements. ~~and~~It ~~enhances~~does ~~disclosure~~not ~~requirements~~require ~~for~~any new fair value ~~measures.~~measurements, ~~The~~but ~~three~~provides ~~levels~~guidance ~~are~~on ~~defined~~how asto ~~follows:~~measure fair value by providing a fair value hierarchy used to classify the source of the information.

Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3 inputs to valuation methodology are unobservable and significant to the fair measurement.

The carrying amounts reported in the balance sheets for the cash and cash equivalents, receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of fair value because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The carrying value of notes payable approximates fair value because negotiated terms and conditions are consistent with current market rates as of ~~September~~March 3031, ~~2009,~~2010 and December 31, ~~2008~~2009, respectively.

F-7

Earnings per share

Basic ~~earning~~earnings per share is computed by dividing the net ~~loss~~income attributable to the common stockholders by the weighted average number of shares of common stock outstanding during the periods. Diluted earnings per share is ~~computed~~ computed similar to basic earnings per share except that the denominator ~~is increased~~includes ~~to include~~ the number of net additional common shares that would have been outstanding if the potential common shares had been issued and if ~~the~~these additional common shares were dilutive.

Accounting for Stock-Based Compensation

The Company ~~accounts~~uses ~~for stock-based compensation in accordance with~~ the fair value recognition ~~provisions~~provision of ~~Statement~~FASB ofASC ~~Financial~~Topic 718, Compensation-Stock ~~Accounting Standards~~ Compensation (“formerly SFAS”) ~~No. 123R. Share Based Payments~~ 123(~~“SFAS 123R.”~~R)~~. The Company uses the Black-Scholes option-pricing model~~), which ~~involves~~requires ~~certain~~the ~~subjective assumptions. These~~Company ~~assumptions~~to ~~include~~expense ~~estimating~~ the ~~length~~cost of ~~time~~employee ~~employees~~services ~~will~~received ~~retain~~in ~~their~~exchange ~~vested~~for ~~stock~~an ~~options~~award ~~before exercising them, the number~~ of ~~options~~equity ~~for~~instruments ~~which~~based ~~vesting~~on ~~requirements will not be completed. Changes in~~ the ~~subjective assumptions can materially~~ ~~affect~~grant ~~estimates~~date of fair value ~~stock-based~~of ~~compensation,~~such ~~and~~instruments ~~the~~over ~~related amounts recognized on~~ the ~~consolidated~~vesting ~~statements of operations and comprehensive income~~period.

8The Company also applies the provisions of FASB ASC Topic 505-50, Equity Based Payments to Non-Employees (formerly EITF 96-18) to account for stock-based compensation awards issued to non-employees for services. Such awards for services are recorded at either the fair value of the consideration received or the fair value of the instruments issued in exchange for such services, whichever is more reliably measurable.

JADE ART GROUP INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2009, AND 2008

(Unaudited)

Impairment of Long-Lived Assets

In accordance with ~~Financial~~FASB ~~Accounting~~ASC ~~Standards~~Topic ~~Board~~360 ~~Statement~~(formerly SFAS No. 144), ~~“Accounting~~ ~~for the~~ “Impairment or Disposal of Long-~~Lived~~lived Assets,” Jade Art records an impairment of long-lived assets to be held and used or to be disposed of when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount.

Income Taxes

The Company ~~has~~accounts ~~adopted~~for ~~Financial~~income ~~Accounting~~taxes pursuant ~~Standards~~to FASB ASC Topic 740, Income Taxes (formerly SFAS No. 109,). ~~which~~Income ~~requires~~taxes ~~the~~are provided on an asset ~~recognition~~and liability approach for financial accounting and reporting of ~~deferred~~income taxes. Current tax ~~liabilities~~is ~~and~~based ~~assets~~on the profit or loss adjusted for ~~the~~items ~~expected~~that ~~future~~are non-assessable or disallowable for income tax purpose ~~consequences~~and ofis ~~events~~calculated using tax rates that have been ~~included~~enacted inor ~~the~~substantively enacted ~~financial~~at ~~statements~~the orbalance ~~tax~~sheet ~~returns~~date. ~~Under~~ASC ~~this~~Topic ~~method,~~740 also requires the recognition of deferred tax ~~liabilities~~assets and ~~assets~~liabilities ~~are~~for both ~~determined~~the ~~based~~expected onimpact ~~the~~of differences ~~difference~~ between the financial statements and the tax ~~bases~~basis of assets and liabilities, ~~using~~and ~~enacted~~for the expected future tax ~~rates~~benefit into ~~effect~~be ~~for~~derived ~~the~~from ~~year~~tax losses inand ~~which~~tax credit carryforwards. ASC Topic 740 additionally requires the ~~differences~~establishment ~~are~~of ~~expected~~a valuation allowance to ~~reverse~~reflect the likelihood of realization of deferred tax assets. ~~Temporary~~Realization ~~differences~~of ~~between~~deferred ~~taxable~~tax assets, ~~income~~including ~~reported~~those ~~for~~related ~~financial~~to ~~reporting~~the ~~purposes~~U.S. ~~and~~net ~~income~~operating ~~tax~~loss ~~purposes~~carryforwards, are ~~insignificant~~dependent upon future earnings, if any, of which the timing and amount are uncertain.

~~Foreign~~The ~~operations~~Company ofadopted ~~the~~FASB ~~Company~~ASC ~~are~~Topic ~~governed~~740-10-05, Income bytax, ~~the~~(formerly ~~Income~~FASB Interpretation ~~Tax~~No. ~~Laws~~48), which provides guidance for recognizing and measuring uncertain tax positions, it prescribes a threshold condition that a tax position must meet for any of the ~~PRC. Pursuant~~benefits of the uncertain tax position to be recognized in the ~~PRC~~financial ~~Income~~statements. It ~~Tax~~also ~~Laws~~provides accounting guidance on derecognizing, ~~the~~classification, ~~Enterprise~~and ~~Income~~disclosure ~~Tax~~of ~~(“EIT”)~~these isuncertain tax ~~imposed~~positions. The atCompany’s apolicy ~~statutory~~on ~~rate~~classification of 25all ~~percent~~interest and penalties related to unrecognized tax is to record such items, if any, as a component of income tax provisions.

F-8

Value Added Tax

Operations of Jade Art in the PRC are subject to a value added tax (“VAT”) imposed by the PRC government on the purchase and sales of goods. The output VAT is charged to customers that purchase goods from the Company and the input VAT is paid when the Company purchases goods from its vendors. The VAT rate is 17 percent in general, depending on the types of products purchased and sold. The input VAT can be offset against the output VAT.

Concentration of Risk

Foreign Operations: All of the Company’s operations and operational assets are located in the PRC. The Company may be adversely affected by possible political or economic instability in the PRC. The effect of these factors cannot be accurately predicted.

Cash: The Company’s cash accounts are held in ~~foreign~~PRC bank accounts which are not insured by by the FDIC. At ~~September~~March 3031, ~~2009,~~2010 and December 31, ~~2008~~2009, the Company’s ~~cash~~ ~~balance~~cash balances, net of outstanding checks, in ~~its~~these ~~foreign~~ bank accounts were $45,~~340~~713,~~016~~522 and $68147,~~956~~392, respectively.

Major Customers

For ~~the~~ ~~nine~~the period ~~months~~ ended ~~September~~March 3031, ~~2009~~2010, the Company had ~~four~~five major (four in 2009) customers that generated sales totaling $145,~~953~~910,~~719~~871 or 85100% of its total revenues (2009 - $4,321,315 or 87% of its total revenues). As of ~~September~~March 3031, ~~2009~~2010, the receivables ~~receivable balance~~ from these customers ~~was~~totaled $6,237,008, representing all of the Company’s accounts receivable (2009 – $73,~~079~~034,~~578~~602 or 85% of the Company’s accounts receivable). All of the Company’s revenue is derived from sources within the PRC. The sales from major customers were as follows:

	For the nine months ended September 30,
	For the Three Months ended March 31,
Customers	~~2009~~2010		~~2008~~	2009
A	~~22%~~	27%	~~24%~~		22%
B	~~21%~~	25%	~~21%~~		22%
C	~~21%~~	24%	~~21%~~		22%
D	~~21%~~	13%	~~21%~~		21%
E		11%			-

9Major Supplier

~~JADE~~For the ~~ART~~period ~~GROUP~~ended ~~INC~~March 31, 2010, the Company had one major supplier of raw jade, XiKai Mining, from which the Company purchased all of its raw jade. &The ~~SUBSIDIARIES~~total purchase price of raw jade purchased during the three months ended March 31, 2010 and 2009, from this supplier was $424,878 and $373,724, respectively. As of March 31, 2010, the accounts payable amount due to this vendor was $207,502. If there are any interruptions of this source of supply, the Company would have to cease operations until an alternative source of supply of jade could be found.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~F-9

~~SEPTEMBER~~Lease ~~30, 2009, AND 2008~~Obligations

~~(Unaudited)~~All noncancellable leases with an initial term greater than one year are categorized as either capital or operating leases. Assets recorded under capital leases are amortized according to the same methods employed for property and equipment or over the term of the related lease, if shorter.

~~Major~~Comprehensive ~~Suppliers~~Income

~~For the~~The ~~nine~~Company ~~months~~presents ~~ended~~comprehensive ~~September~~income ~~30,~~in ~~2009,~~accordance ~~the~~with ~~Company~~ASC ~~had~~220 ~~one~~“Comprehensive Income” ~~major~~(formerly ~~supplier~~SFAS ofNo. ~~raw jade,~~130). ASC ~~XiKai~~220 ~~Mining,~~states ~~from~~that ~~which~~all ~~the~~items ~~Company~~that ~~purchased~~are required ~~100%~~to ofbe ~~its~~recognized ~~raw~~under ~~jade.~~accounting ~~The total~~standards ~~purchase~~as ~~price~~components of comprehensive ~~raw~~income ~~jade~~be ~~purchased~~reported ~~during~~in the ~~nine~~financial ~~months~~statements. For ~~period~~the ~~ended~~years ~~September~~ended 30December 31, 2009, and 2008, ~~from~~the ~~this~~only ~~supplier~~components ~~was $3,436,507 and $4,160,214, respectively. As~~ of ~~September~~comprehensive ~~30, 2009, the accounts payable due to this vendor~~income ~~was $0. If there~~ were ~~any~~the ~~interruptions~~net ofincome ~~this~~for ~~source~~the ~~of supply~~periods, and the ~~Company would~~foreign ~~have~~currency ~~to cease operations until an alternative source of supply could be~~translation ~~found~~adjustments.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from those estimates.

(2) ~~Discontinued~~Acquisition ~~Operations~~Deposit

AsOn ~~discussed~~November ~~in Note~~ 1, on2009, ~~January~~and 18effective November 15, ~~2008~~2009, the Company ~~announced~~entered ~~that~~into ~~it would~~an ~~transfer~~Investment ~~100%~~Agreement ofwith ~~its~~Shenzhen ~~ownership~~Huanyatong ~~interest~~Investment inDevelopment ~~Jiangxi XiDa and pay approximately~~Co., $8Ltd.8 Per ~~million~~the toInvestment ~~XiKai Mining~~Agreement, ~~and~~the inCompany ~~return~~agreed itto ~~would receive the Exclusive~~pay ~~Rights~~Huanyatong toRMB ~~purchase~~60,000,000 ~~90%~~(USD of$8,787,089) ~~the~~as ~~raw~~an ~~jade~~acquisition ~~produced~~deposit, ~~by XiKai Mining’s SheTai jade~~and ~~mine~~Huanyatong atagreed ato ~~predetermined~~assist ~~price.~~the ~~The~~ Company ~~commenced~~in ~~its~~finding ~~purchasing~~an ~~and~~acquisition ~~subsequent~~target. The ~~resale~~term of ~~raw~~ ~~jade~~the inInvestment ~~late~~Agreement ~~January 2008. Jiangxi~~is ~~XiDa~~nine ~~held~~months, ~~all~~and ofwas effective ~~the~~on ~~Company’s~~November ~~woodcarving operations~~15, ~~which~~ ~~constituted~~2009. The ~~all~~acquisition ofdeposit ~~the~~will ~~Company’s~~be ~~previous~~returned ~~business~~to the ~~operations.~~Company ~~The~~with ~~results of~~no ~~operations~~interest ~~for~~before ~~the~~August ~~woodcarving~~14, ~~business~~2010, ~~and~~if ~~the~~there ~~gain~~are ~~resulting~~no ~~from the~~investments ~~transfer~~or ~~are~~acquisitions presented infor ~~the~~consideration ~~Company’s~~as ~~Consolidated Statements~~ of ~~Operations~~July ~~as Discontinued~~15, ~~Operations~~2010.

~~Accounting Principles Board Opinion No. 29, “Accounting for Non-monetary Transactions”~~ (~~“APB 29”~~3)~~, requires that the cost of a non-monetary asset acquired in exchange for~~ Advances another non-monetary asset be the fair value of the asset surrendered to acquire it and that a gain or loss be recognized as a result of the exchange. The Company’s woodcarving business was appraised at RMB 430,035,000 (then equivalent to approximately $60,400,000). The value of the exclusive jade distribution rights were determined as follows:Payable

Fair value of Jiangxi XiDa wood carving (RMB 430,035,000)	$	60,390,543
Cash consideration (RMB 60,000,000)		8,778,861
Foreign currency translation		(352,962	)
	$	68,816,442

As of March 31, 2010 and December 31, 2009, an unrelated party had advanced to the Company $740,763 and $723,090, respectively. These advances consisted of payments made on behalf of the Company by the unrelated party for expenses incurred by the Company. These amounts are payable by the Company on demand, are unsecured, and bear no interest.

The Exchange Agreement between the two companies was entered into in January 2008, however, the cash portion of the agreement was not paid until March 2008. As such, the exchange rate had fluctuated during that time period. Therefore, the Company adjusted the amount by $352,962. The value allocated to the Exclusive Distribution Rights acquired in the exchange was $68,816,442 which is amortized on a straightF-~~line basis over 25 years.~~10

~~The net~~ (4) Notes gain on the transfer of the Company’s woodcarving business was $55,322,615 after the deduction of the carrying value of the net assets of that business. The exchange of the assets and liabilities of Jiangxi XiDa, and the resulting gain on discontinued operations is as follows:Payable

Fair value of Jiangxi XiDa wood carving (RMB 430,035,000)			$	60,390,543
Total assets of Jiangxi XiDa	(5,151,444	)
Total liabilities of Jiangxi XiDa	83,516
				(5,067,928	)
Realized gain from the exchange of discontinued operations			$	55,322,615

Pursuant to the Merger Agreement, the operating company, GHL’s subsidiary, agreed to pay its stockholders the amount of $14,334,500, in the form of promissory notes representing declared dividends, on or before the first anniversary of the Merger Agreement. As of December 31, 2008, the Company had paid $12,069,649 towards the notes. Based on the consent of Jade Art’s Board of Directors, and all of the GHL stockholders, the due date for payment of the promissory notes was extended to March 31, 2009. Subsequent to December 31, 2008, the Company again amended the due date of the promissory notes to March 31, 2010. The amendment included the calculation of accrued interest payable at a rate of 4 percent to be applied to the final amount owed of $903,074. During the year ended December 31, 2008, the Company paid $12,069,649 in principal related to the promissory notes. In addition, during the year ended December 31, 2009, the Company paid an additional $2,264,851 in principal payments on the promissory notes with accrued interest of $5,418. As such, as of December 31, 2009, the Company had paid off all of its obligations related to the promissory notes under the Merger Agreement.

~~The~~(5) Intangible following table summarizes the operating results of the discontinued operations for Jiangxi XiDa for the nine months ended September 30, 2009, and the period January 1, 2008, through February 20, 2008, respectively.Assets

	September 30,		February 20,
	2009		2008
Revenue	$	-	$	615,930
Operating expenses		-		(519,179	)
Income from discontinued operations, Net of tax	$	-	$	96,751

Exclusive Jade Distribution Rights

10The Company accounts for intangible assets in accordance with ASC Topic 350, Goodwill and Other Intangible Assets (formerly named as SFAS No. 142, “Goodwill and Other Intangible Assets,”) which requires that intangible assets that have indefinite lives not be amortized but instead be tested at least annually for impairment, or more frequently when events or a change in circumstances indicate that the asset might be impaired. For indefinite lived intangible assets, impairment is tested by comparing the carrying value of the asset to its fair value and assessing the ongoing appropriateness of the indefinite life classification. For intangible assets with a definite life classification, the Company amortizes the asset over its useful or economic life, whichever is shorter. At least annually, the Company performs an analysis of impairment of the definite life intangible assets. In performing this assessment, management considers current market analysis and appraisal of the asset, along with estimates of future cash flows. The Company recognizes impairment losses when undiscounted cash flows estimated to be generated from long-lived assets are less than the amount of unamortized assets. If the Company determines that the asset has been impaired, a charge to the Company’s statements of operations is recorded. At December 31, 2009, and 2008, the Company determined that there was no impairment to the intangible assets.

~~JADE~~In ~~ART~~January ~~GROUP~~2008, ~~INC~~the Company transferred its ownership in its woodcarving operations, which had been its sole business operation, and agreed to pay RMB 60 million (approximately $8.8 &million) ~~SUBSIDIARIES~~to XiKai Mining. In return, the Company received the Exclusive Jade Distribution Rights, which enable it to purchase 90 percent of the raw jade produced by XiKai’s SheTai mine at a fixed price for five years, subject to adjustment every five years thereafter. The woodcarving operations were appraised as having a fair value of USD$60,400,000 at the time of the Exchange Agreement. The appraised value plus the cash payment (approximately $8.8 million) are the basis of the valuation of the Exclusive Jade Distribution Rights Agreement.

~~NOTES~~Intangible TOassets ~~CONSOLIDATED~~consisted ~~FINANCIAL~~of ~~STATEMENTS~~the following as of March 31, 2010 and December 31, 2009:

SEPTEMBER 30, 2009, AND 2008

	March 31,			December 31,
	2010			2009
Exclusive Jade Distribution Rights	$	68,816,442		$	68,816,442

Less: Accumulated Amortization		(6,425,358	)		(5,707,600	)

Net Exclusive Jade Distribution Rights	$	62,391,084		$	63,108,842

~~(Unaudited)~~F-11

The Company has elected to amortize the Exclusive Jade Distribution Rights using the straight-line method over an economic useful life of 25 years. Management of the Company is of the opinion that the useful life of Exclusive Jade Distribution Rights (325 years) ~~Notes~~ is shorter than the 50-year term of the agreement ~~Payable~~due to uncertainties regarding the practical life of the SheTai Jade mine, its production capacity, quality of jade produced, pricing of jade purchased, and the strength of the Company’s markets in the PRC. In addition, the use of the straight-line method of amortization of the value of Exclusive Jade Distribution Rights is based on management’s estimate of future production requirements and sale of jade.

~~Pursuant~~Amortization toexpense on the ~~Merger~~intangible ~~Agreement,~~asset ~~the~~has ~~operating~~been ~~company,~~included ~~GHL’s~~in ~~subsidiary,~~Cost ~~agreed~~of toSales ~~pay~~as it ~~its~~represents ~~shareholders~~a incomponent ~~the amount~~ of ~~$14,334,500, in~~ the ~~form~~cost of ~~promissory notes. As~~the ofjade ~~December~~product ~~31,~~acquired ~~2008,~~by the Company. The ~~had~~amortization ~~paid~~expense was $12717,~~069~~758,~~649 towards~~ ~~the~~and ~~notes. Subsequently~~$716,918, ~~the~~for ~~Company and~~ the ~~GHL shareholders agreed to~~three ~~defer~~months ended ~~payment~~March ~~of these notes until June 30~~31, ~~2009.~~2010 Asand ~~of June 30,~~ 2009, ~~the Company had paid off the notes~~respectively.

~~(4) Intangible~~Future ~~Assets~~amortization of these costs is as follows:

Jade Distribution Rights

Rest of 2010	$	2,153,274
2011		2,871,032
2012		2,871,032
2013		2,871,032
2014		2,871,032
Thereafter		48,753,682
	$	62,391,084

The Company accounts for intangible assets in accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,” which requires that intangible assets that have indefinite lives not be amortized but instead be tested at least annually for impairment, or more frequently when events or a change in circumstances indicate that the asset might be impaired. ~~For~~(6) Commitments ~~indefinite lived intangible assets, impairment is tested by comparing the carrying value of the asset to its fair value~~ and assessing the ongoing appropriateness of the indefinite life classification. For intangible assets with a definite life classification, the Company amortizes the asset over its useful or economic life, whichever is shorter. At least quarterly, the Company performs an analysis of impairment of the definite life intangible assets. In performing this assessment, management considers current market analysis and appraisal of the asset, along with estimates of future cash flows. The Company recognizes impairment losses when undiscounted cash flows estimated to be generated from long-lived assets are less than the amount of unamortized assets. If the Company determines that the asset has been impaired, a charge to the Company’s statements of operations is recorded. At September 30, 2009, and December 31, 2008, the Company determined that there was no impairment to the intangible assets.Contingencies

As discussed in Note 2, the Company transferred its woodcarving operations and agreed to pay RMB 60 million (approximately $8.8 million) to XiKai Mining. In return, the Company received the Exclusive Distribution Rights to purchase 90% of the raw jade produced by XiKai’s SheTai mine at a fixed price for 5 years, subject to adjustment every 5 years thereafter. The woodcarving operations were assessed as having a fair value of $60,400,000 at the time of the exchange agreement. The assessed value plus the cash payment (approximately $8.8 million) is the basis of the exclusive distribution rights.

Intangible assets consisted of the following as of September 30, 2009, and December 31, 2008:

	September 30,			December 31,
	2009			2008
Exclusive Jade Distribution rights	$	68,816,442		$	68,816,442
Less: Accumulated amortization		(4,989,622	)		(2,838,291	)
Net Exclusive Jade Distribution Rights	$	63,826,820		$	65,978,151

The Company has elected to amortize the exclusive jade distribution rights using straight-line basis over an economic useful life of 25 years.

JADE ART GROUP INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2009, AND 2008

(Unaudited)

Amortization expense on the intangible asset has been included in Cost of Sales as it represents a component of the cost of the jade product acquired by the Company. The amortization expense was $2,151,331, and $2,121,300 for the nine months ended September 30, 2009, and 2008, respectively.

Further amortization of these costs is as follows:

Five Year Disclosure
2009			717,110
2010			2,868,441
2011			2,868,441
2012			2,868,441
2013			2,868,441
Thereafter			51,635,946
			63,826,820

(5) Commitments and Contingencies

Employee Benefits

As required under certain relevant PRC laws, the Company participates in the following employee benefits plans: (i) medical insurance plan; (ii) unemployment insurance plan, and (iii) state pension plan, all of which are organized by PRC municipal and provincial governments (collectively, the “General Employee Benefits”). The Company is required to contribute a fixed percentage of of payroll costs to the General Employee Benefits scheme to fund the benefits. The only obligation of the Company with respect to the plan is to make the specified contributions. The Company’s contributions to the plan for the ~~nine~~three months ended ~~September~~March ~~30,~~31 ~~2009~~2010, and ~~2008~~2009, were $103,~~365~~973 and $103,~~032~~455, respectively.

Lease Agreement

On December 10, 2007, the Company entered into a lease agreement with GuoXi Group located at Yujiang City of Jiangxi Province in the PRC for administrative operations. The lease has a term of two years and requires monthly payments of RMB 20,000 (approximately $2,~~927~~929). Future minimum lease payments are as follows:

Year	Amount
2009	$	2,927
2010	$	26,361

Rent expense for the ~~nine~~three months ended ~~September~~March 3031, ~~2009,~~2010 and ~~2008~~2009 were ~~was~~ $268,~~342~~787 and $268,~~244~~778 respectively. The rent ~~expense~~expenses ~~was~~were for the office space relating to manage the operations of the jade distribution business.

~~(6) Statutory Earnings Reserve~~F-12

~~As stipulated by the Company Law of the PRC, net income after taxes can only be distributed as dividends after appropriation has been made for the following:~~ (i7) ~~making up cumulative prior years’ losses, if any; (ii) allocations to the~~ Statutory ~~“reserve~~Earnings fund” of at least 10% of income after taxes, as determined under PRC accounting rules and regulations, until the fund amounts to 50% of the Company’s registered capital; and (iii) allocations to the “enterprise expansion fund” and “ Staff and worker’s bonus and welfare fund” of at least 10% and 5%,respectively, if approved in the stockholders’ general meeting. This regulation was included in the articles of incorporation when the Company was formed and applied by the Company. As of September 30, 2009, and December 31, 2008, the total reserves of $2,008,152 and $2,008,152 were distributed, respectively.Reserve

As stipulated by the Company Law of the PRC, net income after taxes can only be distributed as dividends after appropriation has been made for the following: (7i) ~~Common~~ making up cumulative prior years’ losses, if any; and (ii) allocations to ~~Stock~~the “reserve fund” of at least 10 percent of income after taxes, as determined under PRC accounting rules and regulations, until the fund amounts to 50 percent of the Company’s registered capital; if approved in the stockholders’ general meeting (see Note 4).This regulation was included in the Articles of Incorporation when the Company was formed and is applied by the Company. As of March 31, 2010, and December 31, 2009, the total reserves were $3,678,080.

~~The~~(8) Common Company has one class of stock. The Company has voting common stock of 500,000,000 shares authorized, with 79,980,000 shares issued and outstanding. Dividends relating to the Merger Transaction of $2,264,851 and $12,069,649 were paid during the periods ended September 30, 2009, and December 31, 2008, respectively. No dividends were declared during the period ended September 30, 2009.Stock

The Company has one class of stock. The Company has voting common stock of 500,000,000 shares authorized, par value $0.001 per share, with 79,980,000 shares issued and outstanding as of March 31, 2010 and December 31, 2009. Dividends relating to the period prior to the Merger Transaction of $2,264,851 and $12,069,649 were evidenced as promissory notes, and paid during the periods ended December 31, 2009 and 2008, respectively. No dividends were declared during the years ended December 31, 2009 and 2008, or for the three-month period ended March 31, 2010.

~~JADE~~(9) Common ~~ART~~Stock ~~GROUP~~Warrants ~~INC.~~and ~~& SUBSIDIARIES~~Options

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2009, AND 2008

(Unaudited)

On November 28, 2007, the Company issued 15,000,000 shares (previously 5,000,000 shares before forward split) of its common stock to consultants for services rendered on behalf of the company. The shares were valued at $1,500,000, which the Board determined was the fair value of the shares on the date they were issued.

On December 7, 2007, the Company’s Board of Directors approved a 3:1 forward stock split, in the nature of a share dividend, with respect to the shares of the Company’s common stock issued and outstanding at the close of business on December 28, 2007. The effect of the forward stock split has been retroactively applied to all prior stock transactions of the Company.

On April 28, 2008, the Company announced that its Board of Directors authorized a one-for-three reverse stock split of its outstanding common stock. The reverse stock split was approved by a majority of the Company’s shareholders. The Company’s Board of Directors established May 15, 2008, as the effective date for the reverse stock split. The effect of the reverse split has been retroactively applied to all prior stock transactions of the Company.

(8) Common Stock Warrants and Options

Warrants

On January 17, 2008, the Company granted warrants to purchase 1333,~~000,000~~333 shares of ~~the~~ the Company’s common stock at a price of $13.0824 to its investor relations firm pursuant to a consulting agreement which the Company entered into with this firm. ~~Neither~~ ~~the exercise price per share of the warrants, nor the number of shares for which the warrants are exercisable, were affected by the Company’s one-for-three reverse stock split in May 2008.~~ These warrants can be exercised over a three -year period. The consulting expense for these services is was recognized on a straight-line basis over the one -year period of the related consulting contract. The Company estimated the fair value of warrants using the Black-Scholes pricing model and recorded the compensation expenses ratably over the warrants’ vesting period.

The fair value of each warrant granted has been estimated on the date of grant using the Black-Scholes pricing model, using the following assumptions:

	2009			2008
Five Year Risk Free Interest Rate		2.46	%		2.46	%
Dividend Yield		0.00	%		0.00	%
Volatility		314	%		314	%
Average Expected Term (Years to Exercise)		3			3

A summary of the status of warrants granted as of ~~September~~March 3031, ~~2009~~2010 isand asDecember 31, 2009, was as follows:

	For The Period Ended September 30, 2009
	Shares		Weighted Average Exercise Price
Outstanding at January 1, 2008		-		-
Granted		1,000,000	$	1.08
Exercised		-		-
Forfeited		-		-
Expired		-		-
Outstanding at December 31, 2008		1,000,000	$	1.08
Granted		-		-
Exercised		-		-
Forfeited		-		-
Expired		-		-
Outstanding at September 30, 2009		1,000,000	$	1.08
Exercisable at September 30, 2009		1,000,000	$	1.08
Exercisable at December 31, 2008		1,000,000	$	1.08

F-13

			Weighted Average
	Shares		Exercise Price

Outstanding - January 1, 2009		333,333	$	3.24

Granted		-		-

Exercised		-		-

Forfeited		-		-

Expired		-		-

Outstanding - December 31, 2009		333,333	$	3.24

Granted		-		-

Exercised		-		-

Forfeited		-		-

Expired		-		-

Outstanding - March 31, 2010		333,333	$	3.24

~~JADE~~No ~~ART~~warrants ~~GROUP~~were ~~INC~~granted or exercised in 2009 or during the first three months of 2010. &The ~~SUBSIDIARIES~~remaining life of these warrants as of March 31, 2010 was 0.79 years.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2009, AND 2008

(Unaudited)

A summary of the status of warrants outstanding as of September 30, 2009, was presented below:

	Warrants Outstanding			Warrants Exercisable
Range of Exercise prices	Number Outstanding	Weighted Average Remaining Life years	Weighted Average Exercise Price	Number exercisable	Weighted Average Exercise Price
$ 1.08	1,000,000	2.04	$ 1.08	1,000,000	$ 1.08

The weighted average grant date fair value of warrants granted during the period ended September 30, 2009, was $3.03 post reverse spilt. The fair value of warrants vested during the nine months ended September 30, 2009, totaled $43,982.

Options

On April 15, 2008, the Company granted to ~~Mr. Khaleel,~~ a member of the Company’~~sBoard~~s Board of Directors, nonqualified stock options to purchase up to ~~100,000 shares (~~33,333 ~~post~~ ~~reverse~~shares ~~split)~~ of the Company’s common stock (the “Option Shares”), exercisable at a price of $~~1.15 per share ($~~3.45 per share ~~post reverse split)~~ (a price equal to the closing price per share of the Company’s common stock on April 15, 2008, as reported by the Over-the-Counter Bulletin Board). Options to purchase one third of the Option Shares were to be exercisable immediately; options to purchase an additional one third of the Option Shares ~~may~~were beto ~~exercised~~be exercisable commencing April 15, 2009, and options to purchase the remaining one third of the Option Shares ~~may~~were to be ~~exercised~~exercisable commencing April 15, 2010. All ~~outstanding~~ ~~and~~of ~~unexercised~~these options ~~shall~~expired ~~expire~~when onthis ~~the~~person ~~date~~resigned ~~that~~from ~~Mr. Khaleel is no longer serving as a member of~~ the ~~Board of Directors of the Company or~~ ~~otherwise engaged by the Company to provide services to the Company. Subject to the foregoing~~Board, ~~the~~which ~~options~~was ~~may~~on beJuly ~~exercised until April 15~~31, ~~2018, at which time any such options that have not been exercised shall automatically expire~~2009.

~~The fair~~ (10) Income ~~value of each option granted has been estimated on the date of grant using the Black-Scholes pricing model, using the following assumptions:~~Tax

	September 30, 2009			September 30, 2008
Five Year Risk Free Interest Rate		3	%		-
Dividend Yield		0.00	%		-
Volatility		248	%		-
Average Expected Term (Years to Exercise)		10			-

The Company has adopted ASC Topic 740, Income Taxes (formerly SFAS No. 109), which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between financial statements and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

~~A summary~~Components of ~~the~~deferred ~~status~~tax assets as of ~~options~~March ~~granted~~31, as2010 ofand ~~September~~December 3031, 2009 ~~is as~~respectively as follows:

	For The Period Ended September 30, 2009
	March 31,			December 31,
	Shares			Weighted Average Exercise Price
	2010			2009
Outstanding at January 1, 2008		-			-
Net operating loss carry forward	$	263,935		$	257,749
Granted		33,333		$	3.45
Allowance for doubtful accounts		62,500			-
Exercised		-			-
Valuation allowance		(263,935	)		(257,749	)
Forfeited		-			-
Net deferred tax asset	$	62,500		$	-
Expired		-			-
Outstanding at December 31, 2008		33,333		$	3.45
Granted		-			-
Exercised		-			-
Forfeited		-			-
Expired		-			-
Outstanding at September 30, 2009		33,333		$	3.45
Exercisable at September 30, 2009		11,111		$	3.45
Exercisable at December 31, 2008		11,111		$	3.45

F-14

~~JADE~~The ~~ART~~components ~~GROUP~~of ~~INC.~~current &income ~~SUBSIDIARIES~~tax expense for the three months ended March 31, 2010 and 2009 respectively are as follows:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

	March 31, 2010			March 31, 2009

Domestic - Current	$	-		$	-
Foreign – Current		1,307,208			1,092,992
Domestic – Deferred		-			-
Foreign – Deferred		(62,500	)		-
Income tax expense	$	1,244,708		$	1,092,992

SEPTEMBER 30, 2009, AND 2008

(Unaudited)

A summary of the status of options outstanding as of September 30, 2009, is presented below:

	Options Outstanding			Options Exercisable
Range of Exercise prices	Number Outstanding	Weighted Average Remaining Life (Years)	Weighted Average Exercise Price	Number exercisable	Weighted Average Exercise Price
$ 3.45	33,333	9.375	$ 3.45	11,111	$ 3.45

The aggregate intrinsic value of stock options outstanding and exercisable as of September 30, 2009, totaled $0. The weighted average grant date fair value of options granted during the nine months ended September 30, 2009, was $3.42 post reverse split. The fair value of options vested during the period ended September 30, 2009, totaled $94,227.

(9) Income Tax

The Company has adopted Financial Accounting Standards No. 109, which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between financial statements and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Temporary differences between taxable income reported for financial reporting purposes and income tax purposes are insignificant.

Components of deferred tax assets as of September 30, 2009 and December 31, 2008 respectively were as follows:

	September 30,		December 31,
	2009		2008
Net operating loss carry forward	$	-	$	-
Valuation allowance		-		-
Net deferred tax asset	$	-	$	-

The components of current income tax expense as of September 30, 2009, and September 30, 2008, respectively were as follows:

	September 30, 2009		September 30, 2008
Domestic - Current	$	-	$	-
Foreign – Current		3,876,945		5,486,689
Domestic – Defend		-		-
Foreign – Defend		-		-
Income tax expense	$	3,876,945	$	5,486,689

JADE ART GROUP INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2009, AND 2008

(Unaudited)

Because all of the Company’s operations are conducted by a subsidiary in the PRC, the income tax provision is not applicable to U.S. taxation.

The following is a reconciliation of the provision for income taxes at the prevailing PRC income tax rate to the income taxes reflected in the statement of operations:

	Nine months ended September 30,2009		Nine months ended September 30,2008
	Three Months Ended March 31, 2010			Three Months Ended March 31, 2009
Tax expense at statutory PRC rate	~~25%~~	25.0%	~~25%~~		25.0%
Effect of non-deductible items	5%	4.2%	5%		5.2%
Tax expense at actual rate	30%		30%
Other		(1.4)%			0.7%
Tax expense at actual rate		27.8%			30.9%

Due to uncertainty of the deductibility of consulting and professional expense and other general and administrative expenses incurred during the nine months ended September 30, 2009, and 2008, the tax provision did not assume that this expense would be deductible. The total income tax expense was $31,~~876~~244,~~945~~708 and $51,~~486~~092,~~689~~ 992 for the ~~nine~~ three months ended March ~~September 30~~31, ~~2009,~~2010 and ~~September 30~~2009, ~~2008,~~ respectively.

~~(10) Recent~~The ~~Accounting~~accumulated ~~Pronouncements~~US net operating losses available to the Company are approximately $754,100. These operating losses expire between 2028 and 2030.

~~In March 2008, the FASB issued FASB Statement No. 161, “Disclosures about Derivative Instruments and Hedging Activities – an amendment of FASB Statement 133”~~ (~~“SFAS No. 161”~~11)~~. SFAS~~ ~~No.~~Recent 161 enhances required disclosures regarding derivatives and hedging activities, including enhanced disclosures regarding how: (a) an entity uses derivative instruments; (b) derivative instruments and related hedged items are accounted for under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”; and (c) derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. Specifically, SFAS No. 161 requires:Pronouncements

●In ~~Disclosure~~March 2008, the FASB issued FASB ASC 815, “Disclosures about Derivative Instruments and Hedging Activities – an amendment of ~~the~~FASB ~~objectives~~Statement 133.” FASB ASC 815 enhances required disclosures regarding derivatives and hedging activities, including enhanced disclosures regarding how: (a) an entity uses derivative instruments; (b) derivative instruments and related hedged items are accounted for; ~~using~~and (c) derivative instruments inand related ~~terms~~hedged ofitems ~~underlying~~affect ~~risk~~an entity’s financial position, financial performance, and ~~accounting~~cash ~~designation;~~flows. Specifically, ASC 815 requires:

~~● Disclosure of the fair values of derivative instruments and their gains and losses in a tabular format;~~F-15

●· ~~Disclosure~~disclosure of ~~information~~the ~~about~~objectives ~~credit-risk-related~~for ~~contingent~~using ~~features;~~derivative instruments be disclosed in terms of underlying risk and accounting designation;

●· ~~Cross-reference~~disclosure ~~from~~of the fair values of derivative ~~footnote~~instruments toand ~~other~~their ~~footnotes~~gains inand ~~which~~losses ~~derivative-related~~in ~~information~~a istabular ~~disclosed.~~format;

~~SFAS~~· ~~No. 161~~disclosure ~~is effective for fiscal years and interim periods beginning after November 15, 2008. Earlier application is encouraged. The management~~ of ~~the~~information ~~Company~~about ~~does~~credit-risk-related ~~not~~contingent ~~expect the adoption of this pronouncement to have a material impact on its financial statements.~~features;

In· ~~May 2008, the FASB issued FASB Statement No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS No. 162”). SFAS No. 162 identifies the sources of accounting principles~~ and ~~the~~cross-reference ~~framework~~from ~~for selecting~~ the ~~principles~~derivative ~~used~~footnote into ~~the~~other ~~preparation~~footnotes ~~of financial statements of nongovernmental entities that are presented~~ in ~~conformity~~which ~~with~~derivative-related ~~generally accepted~~information ~~accounting~~is ~~principles in the United States of America~~disclosed. ~~The sources of accounting principles that are generally accepted are categorized in descending order as follows:~~

a) FASB ~~Statements~~ASC 815 ofis ~~Financial~~effective ~~Accounting~~for ~~Standards~~fiscal years and ~~Interpretations,~~interim ~~FASB~~periods ~~Statement~~beginning ~~133~~after ~~Implementation Issues~~November 15, ~~FASB~~2008. Earlier ~~Staff~~application ~~Positions,~~is ~~and~~encouraged. The ~~American~~management ~~Institute~~ of ~~Certified~~Company does ~~Public~~not ~~Accountants~~expect ~~(AICPA)~~the ~~Accounting~~adoption ~~Research~~of ~~Bulletins~~this ~~and~~pronouncement ~~Accounting~~to ~~Principles~~have ~~Board~~a ~~Opinions~~material ~~that~~impact ~~are~~on its ~~not~~financial ~~superseded by actions of the FASB~~statements.

b)On May 9, 2008, the FASB ~~Technical~~issued ~~Bulletins~~FASB ~~and~~ASC 105, if“The ~~cleared~~Hierarchy byof ~~the~~Generally Accepted Accounting Principles.” FASB ASC 105 is intended to improve financial reporting by identifying a consistent framework, ~~AICPA~~or ~~Industry~~hierarchy, ~~Audit~~for selecting ~~and~~accounting ~~Accounting~~principles ~~Guides~~to ~~and~~be ~~Statements~~used ofin ~~Position~~preparing financial statements that are presented in conformity with U.S. generally accepted accounting principles for nongovernmental entities.

16Prior to the issuance of FASB ASC 105, US GAAP hierarchy was defined in the American Institute of Certified Public Accountants (“AICPA”) Statement on Auditing Standards (“SAS”) No. 69, “ The Meaning of Present Fairly in Conformity with Generally Accept Accounting Principles .” SAS No. 69 has been criticized because it is directed to the auditor rather than the entity. ASC 105 addresses these issues by establishing that the US GAAP hierarchy should be directed to entities because it is the entity (not the auditor) that is responsible for selecting accounting principles for financial statements that are presented in conformity with US GAAP.

~~JADE~~The ~~ART~~sources ~~GROUP~~of ~~INC.~~accounting &principles ~~SUBSIDIARIES~~that are generally accepted are categorized in descending order as follows:

~~NOTES TO~~e. ~~CONSOLIDATED~~FASB ~~FINANCIAL~~Statements ~~STATEMENTS~~of Financial Accounting Standards and Interpretations, FASB Statement 133 Implementation Issues, FASB Staff Positions, and American Institute of Certified Public Accountants (AICPA) Accounting Research Bulletins and Accounting Principles Board Opinions that are not superseded by actions of the FASB.

~~SEPTEMBER 30~~f. FASB Technical Bulletins and, ~~2009~~if cleared by the FASB, ~~AND~~AICPA ~~2008~~Industry Audit and Accounting Guides and Statements of Position.

g. AICPA Accounting Standards Executive Committee Practice Bulletins that have been cleared by the FASB, consensus positions of the FASB Emerging Issues Task Force (~~Unaudited~~EITF), and the Topics discussed in Appendix D of EITF Abstracts (EITF D-Topics).

ch. Implementation guides (Q&As) ~~AICPA~~published ~~Accounting~~by ~~Standards~~the ~~Executive~~FASB ~~Committee~~staff, ~~Practice~~AICPA ~~Bulletins~~Accounting ~~that~~Interpretations, ~~have~~AICPA ~~been~~Industry ~~cleared~~Audit byand ~~the~~Accounting ~~FASB,~~Guides ~~consensus~~and ~~positions~~Statements of ~~the~~Position ~~FASB~~not ~~Emerging~~cleared ~~Issues~~by ~~Task~~the ~~Force (EITF)~~FASB, and ~~the~~practices ~~Topics~~that ~~discussed~~are inwidely ~~Appendix~~recognized Dand ofprevalent ~~EITF~~either ~~Abstracts~~generally ~~(EITF~~or ~~D-Topics)~~in the industry.

d) Implementation guides (Q&As) published by the FASB staff, AICPA Accounting Interpretations, AICPA Industry Audit and Accounting Guides and Statements of Position not cleared by the FASB, and practices that are widely recognized and prevalent either generally or in the industry.F-16

OnFASB ~~May~~ASC ~~26,~~105 ~~2008,~~is ~~the~~effective ~~FASB~~60 ~~issued~~days ~~FASB~~following ~~Statement~~the ~~No.~~SEC’s ~~163,~~approval ~~“Accounting~~of ~~for~~the ~~Financial~~Public ~~Guarantee~~Company ~~Insurance~~Accounting Oversight ~~Contracts”~~Board ~~(“SFAS~~amendment ~~No.~~to ~~163”). SFAS~~its Noauthoritative literature. It ~~163~~is ~~clarifies how~~only ~~FASB~~effective ~~Statement~~for ~~No.~~nongovernmental 60entities; therefore, the ~~“Accounting~~US ~~and~~GAAP ~~Reporting~~hierarchy ~~by Insurance~~will ~~Enterprises”~~remain ~~(“SFAS~~in ~~No.~~SAS ~~60”),~~69 ~~applies~~for tostate ~~financial~~and ~~guarantee~~local governmental ~~insurance~~entities ~~contracts~~and ~~issued~~federal bygovernmental ~~insurance~~entities. The ~~enterprises,~~management ~~including~~of ~~the~~Company ~~recognition~~does ~~and~~not ~~measurement~~expect ofthe ~~premium~~adoption ~~revenue~~of ~~and~~this ~~claim~~pronouncement ~~liabilities. It~~to ~~also requires~~have ~~expanded~~a ~~disclosures~~material ~~about~~impact ~~financial~~on ~~guarantee insurance~~its ~~contracts~~financial statements.

~~The~~On May ~~accounting~~26, ~~and~~2008, ~~disclosure~~the ~~requirements~~FASB ofissued ~~SFAS~~FASB ~~No.~~ASC ~~163~~944, ~~are~~“Accounting ~~intended~~for toFinancial ~~improve~~Guarantee ~~the~~Insurance ~~comparability~~Contracts.” FASB ~~and~~ASC ~~quality~~944 ofclarifies ~~information~~accounting ~~provided to users of financial~~and ~~statements~~reporting by ~~creating~~insurance ~~consistency. Diversity~~enterprises, ~~exists~~and inapplies ~~practice~~to ~~in accounting for~~ financial guarantee insurance contracts issued by insurance enterprises ~~under SFAS No. 60~~, ~~“Accounting and~~including ~~Reporting by Insurance Enterprises.” That diversity results in inconsistencies in~~ the recognition and measurement of ~~claim liabilities~~premium ~~because~~revenue ofand ~~differing views about when a loss has been incurred under FASB Statement No. 5, “Accounting for Contingencies” (“SFAS No. 5”). SFAS No. 163 requires that an insurance enterprise recognize a~~ claim ~~liability prior to an event of default when there is evidence that credit deterioration has occurred in an insured financial obligation~~liabilities. It also requires expanded ~~disclosure~~disclosures about ~~(a) the risk-management activities used by an insurance enterprise to evaluate credit deterioration in its insured~~ financial ~~obligations~~guarantee ~~and (b) the~~ insurance ~~enterprise’s surveillance or watch list~~contracts.

~~SFAS No.~~The ~~163~~accounting isand ~~effective~~disclosure ~~for~~requirements ~~financial~~of ~~statements~~FASB ~~issued~~ASC ~~for~~944 ~~fiscal~~are ~~years~~intended ~~beginning~~to improve ~~after~~the ~~December~~comparability ~~15,~~and ~~2008,~~quality ~~and~~of ~~all~~information ~~interim~~provided ~~periods~~to ~~within~~users ~~those~~of ~~fiscal~~financial statements ~~years,~~by creating consistency. Diversity exists in practice in ~~except~~accounting for ~~disclosures~~financial ~~about~~guarantee ~~the~~ insurance ~~enterprise’s~~contracts ~~risk-management~~by insurance ~~activities~~enterprises. ~~Disclosures~~ That ~~about~~diversity ~~the~~results ~~insurance~~in ~~enterprise’s~~inconsistencies in the recognition ~~risk-management~~and ~~activities~~measurement ~~are~~of ~~effective~~claim ~~the~~liabilities ~~first~~because ~~period~~of ~~beginning~~differing ~~after~~views about when a ~~issuance~~loss ofhas ~~SFAS~~been Noincurred. FASB ~~163. Except~~ASC ~~for~~944 ~~those~~requires ~~disclosures,~~that ~~earlier~~an insurance enterprise ~~application~~recognize isa ~~not~~claim ~~permitted. The~~liability ~~management~~prior to an event of ~~Jade~~default ~~Art~~when ~~does~~there ~~not~~is evidence ~~expect~~that credit deterioration has occurred in an insured financial obligation. It also requires disclosure about (a) the ~~adoption~~risk-management activities ofused ~~this~~by ~~pronouncement~~an toinsurance ~~have~~enterprise ~~material~~to ~~impact~~evaluate oncredit ~~its~~deterioration in its insured financial ~~statements~~obligations and (b) the insurance enterprise’s surveillance or watch list.

OnFASB ~~May~~ASC ~~22,~~944 ~~2009,~~is ~~the~~effective ~~FASB~~for ~~issued~~financial ~~FASB~~statements ~~Statement~~issued ~~No. 164, “Not-~~for~~-Profit~~ ~~Entities:~~fiscal ~~Mergers~~years ~~and~~beginning ~~Acquisitions”~~after ~~(“SFAS~~December ~~No.~~15, ~~164”). Statement~~2008, ~~164~~and isall ~~intended~~interim ~~to improve~~periods ~~the~~within ~~relevance,~~those ~~representational~~fiscal ~~faithfulness~~years, except ~~and~~for ~~comparability~~disclosures ofabout the ~~information~~ ~~that~~insurance aenterprise’s ~~not~~risk-~~for-profit~~management activities. Disclosures ~~entity~~about ~~provides~~the ininsurance ~~its~~enterprise’s ~~financial~~risk-management activities ~~reports~~are ~~about a~~effective ~~combination~~the ~~with~~first ~~one~~period orbeginning ~~more~~after ~~other~~issuance ~~not-~~of FASB ASC 944. Except for~~-profit~~ ~~entities,~~those ~~businesses~~disclosures, ~~or nonprofit~~earlier ~~activities~~application is not permitted. The Tomanagement ~~accomplish~~of ~~that,~~Company ~~this~~does ~~Statement~~not ~~establishes~~expect ~~principles~~the adoption of this ~~and~~pronouncement ~~requirements~~to ~~for~~have ~~how~~material aimpact ~~not-for-profit~~on ~~entity:~~its financial statements.

aOn May 22, 2009, the FASB issued FASB ASC 958, “Not-for-Profit Entities: Mergers and Acquisitions.” FASB ~~Determines~~ASC ~~whether~~958 is intended to improve the relevance, representational faithfulness, and comparability of the information that a ~~combination~~not-for-profit isentity provides in its financial reports about a ~~merger~~combination with one or anmore ~~acquisition~~other not-for-profit entities, businesses, or nonprofit activities. To accomplish that, this Statement establishes principles and requirements for how a not-for-profit entity:

be. ~~Applies~~Determines ~~the~~whether ~~carryover~~a ~~method~~combination inis ~~accounting for~~ a merger or an acquisition.

cf. Applies the ~~acquisition~~carryover method in accounting for ana ~~acquisition, including determining which of the combining entities the acquirer is~~merger.

dg. ~~Determines~~Applies ~~what~~the ~~information~~acquisition tomethod ~~disclose~~in toaccounting ~~enable~~for ~~users~~an ofacquisition, ~~financial~~including ~~statements~~determining towhich ~~evaluate~~of the ~~nature~~combining ~~and~~entities ~~financial~~is ~~effects~~the ~~of a merger or an acquisition~~acquirer.

~~This Statement~~h. ~~also~~Determines ~~improves~~what ~~the~~ information ato ~~not-for-profit~~disclose ~~entity~~to ~~provides~~enable ~~about goodwill~~users ~~and~~of ~~other~~financial ~~intangible~~statements ~~assets~~to ~~after~~evaluate anthe ~~acquisition~~nature ~~by amending FASB Statement No. 142, Goodwill~~ and ~~Other~~financial ~~Intangible~~effects ~~Assets,~~of toa ~~make~~merger itor ~~fully~~an ~~applicable to not-for-profit entities~~acquisition.

~~Statement~~This ~~No.~~Statement ~~164~~also isimproves ~~effective~~the ~~for~~information ~~mergers~~a ~~occurring on or after December 15, 2009, and acquisitions~~ not-for-profit ~~which~~entity ~~the~~provides ~~acquisition date is on or after the beginning of the~~about ~~first~~goodwill ~~annual~~and ~~reporting~~other ~~period~~intangible ~~beginning~~assets ~~on or~~ after ~~December~~an ~~15, 2009. Early~~acquisition ~~application~~by isamendment ~~prohibited. The~~to ~~management of~~make ~~the~~it ~~Company~~fully ~~does~~applicable ~~not expect the adoption of this pronouncement~~ to ~~have~~not-for-profit ~~material impact on its financial statements~~entities.

OnFASB ~~May~~ASC ~~28,~~958 ~~2009,~~is ~~the~~effective ~~FASB~~for ~~issued~~mergers ~~FASB~~occurring ~~Statement~~on ~~No.~~or ~~165,~~after ~~“Subsequent~~December ~~Events”~~15, ~~(“SFAS~~2009, ~~No.~~and ~~165”). Statement~~acquisitions ~~165~~for ~~establishes~~which ~~general~~the ~~standards~~acquisition ofdate ~~accounting~~is ~~for and~~on ~~disclosure~~or after the beginning of ~~events~~the first ~~that~~annual ~~occur~~reporting period beginning on or after ~~the~~December ~~balance~~15, 2009. Early ~~sheet~~application ~~date~~is ~~but~~prohibited. The ~~before~~management of Company does ~~financial~~not ~~statements~~expect ~~are~~the ~~issued~~adoption orof ~~are~~this ~~available~~pronouncement to behave ~~issued.~~material ~~Specifically, SFAS~~impact ~~No.~~on ~~165~~its financial ~~provides:~~statements.

1. The period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements.F-17

2On May 28, 2009, the FASB issued FASB ASC 855, “Subsequent Events.” ~~The~~FASB ~~circumstances~~ASC 855 ~~under~~establishes ~~which~~general anstandards ~~entity~~of ~~should~~accounting ~~recognize~~for ~~events~~and ordisclosure ~~transactions~~of ~~occurring~~events that occur after the balance sheet date inbut ~~its~~before financial statements are issued or are available to be issued. Specifically, FASB ASC 855 provides:

34. The ~~disclosures~~period ~~that~~after anthe balance sheet date during which management of a reporting entity should ~~make~~evaluate ~~about~~ events or transactions that ~~occurred~~may ~~after~~occur ~~the~~for ~~balance~~potential ~~sheet~~recognition ~~date~~or disclosure in the financial statements.

175. The circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements.

~~JADE ART~~6. ~~GROUP~~The ~~INC.~~disclosures &that ~~SUBSIDIARIES~~an entity should make about events or transactions that occurred after the balance sheet date.

~~NOTES~~In TOaccordance ~~CONSOLIDATED~~with ~~FINANCIAL~~this ~~STATEMENTS~~Statement, an entity should apply the requirements to interim or annual financial periods ending after June 15, 2009. The adoption of this pronouncement did not have a material impact on the financial statements of the Company.

~~SEPTEMBER~~In June 302009, ~~2009~~the FASB issued FASB ASC 860, ~~AND~~“Accounting ~~2008~~for Transfers of Financial Assets.” FASB ASC 860 is a revision to an existing pronouncement and will require more information about transfers of financial assets, including securitization transactions, and where companies have continuing exposure to the risks related to transferred financial assets. It eliminates the concept of a “qualifying special-purpose entity,” changes the requirements for derecognizing financial assets, and requires additional disclosures.

~~(Unaudited)~~This statement is effective for financial asset transfers occurring after the beginning of an entity's first fiscal year that begins after November 15, 2009. The management of Company does not expect the adoption of this pronouncement to have material impact on its financial statements.

In June ~~accordance~~2009, ~~with~~the ~~this~~FASB ~~Statement~~issued FASB ASC 810, an"Amendments ~~entity~~to ~~should~~FASB ~~apply~~Interpretation No. ~~the~~46(R).” FASB ASC 810 amends certain requirements toof this ~~interim~~pronouncement and changes how a company determines when an entity that is insufficiently capitalized or ~~annual~~is ~~financial~~not ~~periods~~controlled ~~ending~~through ~~after~~voting ~~June~~(or ~~15,~~similar rights) ~~2009~~should be consolidated. The ~~management~~ determination of ~~the~~whether ~~Company~~a ~~does~~company ~~not~~is required ~~expect~~to ~~the~~consolidate ~~adoption~~an ofentity ~~this~~is ~~pronouncement~~based on, among other things, an entity’s purpose and design and a company’s ability to direct the activities of the ~~have~~entity ~~material~~that ~~impact~~most onsignificantly ~~its~~impact ~~financial~~the ~~statements~~entity’s economic performance.

~~On June~~This 9,statement ~~2009,~~is ~~the~~effective ~~FASB~~as ~~issued FASB Statement No. 166, “Accounting for Transfers~~ of ~~Financial~~ ~~Assets~~the –beginning ~~an amendment~~ of ~~FASB~~each ~~Statement~~reporting ~~No.~~entity’s ~~140” (“SFAS No.~~first ~~166”). SFAS~~annual ~~No.~~reporting ~~166~~period ~~revises~~that ~~the~~begins ~~de-reorganization~~after ~~provision~~November of15, ~~FASB Statement No~~2009. ~~140~~ ~~“Accounting~~The ~~for~~management ~~Transfers and Servicing~~ of ~~Financial Assets and Extinguishment of Liabilities” and will~~ ~~require~~Company ~~entities~~does tonot ~~provide~~expect ~~more~~the ~~information~~adoption ~~about sales~~ of ~~securitized financial~~this ~~assets~~pronouncement ~~and similar transactions, particularly if the seller retains some risk with respect~~ to ~~the~~have ~~assets. It also eliminates the concept~~material ofimpact aon ~~"qualifying~~its ~~special-purpose~~financial ~~entity~~statements."

~~This~~In June ~~statement~~2009, isthe ~~effective~~FASB ~~for~~issued ~~financial~~FASB ~~asset~~ASC ~~transfers~~105, ~~occurring~~"The ~~after~~FASB ~~the~~Accounting Standards ~~beginning~~Codification and the Hierarchy of anGenerally ~~entity's~~Accepted ~~first~~Accounting ~~fiscal~~Principles ~~year~~- ~~that~~a replacement ~~begins~~of ~~after~~FASB ~~November~~Statement ~~15,~~No. ~~2009~~162. ~~The~~” ~~management~~FASB ofASC 105 establishes the ~~Company~~FASB ~~does~~Accounting ~~not~~Standards ~~expect~~Codification (the ~~adoption~~"Codification") to become the single official source of ~~this~~authoritative, ~~pronouncement~~nongovernmental U.S. togenerally ~~have~~accepted aaccounting ~~material~~principles. ~~impact~~The onCodification ~~its~~did ~~financial~~not ~~statements~~change US GAAP but reorganizes the literature.

InFASB ~~June~~ASC ~~2009,~~105 ~~the~~is ~~FASB~~effective ~~issued~~for ~~FASB~~interim ~~Statement~~and ~~167,~~annual ~~"Amendments~~periods toending ~~FASB~~after ~~Interpretation No.~~September ~~46(R)"~~15, ~~(“SFAS No~~2009. ~~167”). SFAS No. 167 amends certain~~ ~~requirements~~The ofadoption ~~FASB Interpretation No. 46(R), “Consolidation~~ of ~~Variable~~this ~~Interest Entities”~~pronouncement todid ~~improve~~not ~~financial~~have ~~reporting~~a bymaterial ~~companies~~impact ~~involved~~on ~~with variable interest entities and to provide additional disclosures about~~ the ~~involvement~~financial ~~with~~statements ~~variable~~of ~~interest entities and any significant changes in risk exposure due to that involvement. A reporting entity will be required to disclose how its involvement with a variable interest entity affects~~ the ~~reporting~~ ~~entity's financial statements~~Company.

This Statement shall be effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009. The management of the Company does not expect the adoption of this pronouncement to have a material impact on its financial statements.F-18

In June 2009, the FASB issued FASB Statement 168, "The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles - a replacement of FASB Statement No. 162" ("SFAS No. 168"). SFAS No. 168 establishes the FASB Accounting Standards Codification (the "Codification") to become the single official source of authoritative, nongovernmental US generally accepted accounting principles (GAAP). The Codification did not change GAAP but reorganizes the literature.

SFAS No. 168 is effective for interim and annual periods ending after September 15, 2009. The management of the Company does not expect the adoption of this pronouncement to have a material impact on its financial statements.

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

Cautionary Notice Regarding Forward-Looking Statements

Jade Art Group Inc. (referred to in this Quarterly Report on Form 10-Q as "we" or the "Company") desires to take advantage of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. This report contains a number of forward-looking statements that reflect management's current views and expectations with respect to our business, strategies, future results and events and financial performance. All statements made in this report, other than statements of historical fact, including statements that address operating performance, events or developments that management expects or anticipates will or may occur in the future, including statements related to future cash flows, revenues, profitability, adequacy of funds from operations, statements expressing general optimism about future operating results and non-historical information, are forward-looking statements. In particular, the words "believe," "expect," "intend," "anticipate," "estimate," "may," "plan," "will," variations of such words and similar expressions identify forward-looking statements, but are not the exclusive means of identifying such statements and their absence does not mean that the statement is not forward-looking.

Forward-looking statements are subject to certain known and unknown risks and uncertainties, which may cause our actual results, performance or achievements to differ materially from historical results as well as those expressed in, anticipated or implied by these forward-looking statements. We do not undertake any obligation to revise forward-looking statements to reflect any future events or circumstances. Factors that could cause or contribute to such differences include, but are not limited to, those set forth in our Annual Report on Form 10-K for the year ended December 31, ~~2008~~2009, and in our quarterly reports to be filed with the Securities and Exchange Commission, together with the risks discussed in our press releases and other communications to shareholders issued by us from time to time, which attempt to advise interested parties of the risks and factors that may affect our business. Important factors that could cause actual results to differ materially from those in the forward-looking statements herein include, but are not limited to, our ability to raise capital as and when required, the availability of raw products and other supplies, competition, environmental risks, the prices of goods and services, government regulations, and political and economic factors in the People's Republic of China ("China" or the "PRC") in which our operating subsidiary operates.

Overview

The Company is a seller and distributor in China of raw jade, ranging in uses from decorative construction material for both the commercial and residential markets to high-end jewelry. For more than 30 years, the Company's business had consisted of manufacturing and selling hand and machine-carved wood products, such as furniture, architectural accents and Buddhist figurines, in China. Commencing in 2007, we experienced a reduction of revenue from our woodcarving business, which largely resulted from increased competition. As a result, we decided to dispose of our wood products business and to enter the business of raw jade sales and distribution, which management believed presented a better long-term growth potential. On January 11, 2008, we formed a new wholly owned Chinese subsidiary, JiangXi SheTai Jade Industrial Company Limited ("STJ"), to engage in the sale and distribution of raw jade throughout China. Our goal iswas and continues to ~~meet~~be to develop a meaningful participation in China'’s ~~increasing~~ ~~demand~~raw ~~for~~ jade market and to eventually vertically integrate our raw jade ~~distribution~~ distribution activities with jade processing, carving, polishing, and, at a later date, retail sales.

On January 17, 2008, the Company entered into an Exclusive Distribution Rights Agreement (the "Exchange Agreement") with Wulateqianqi XiKai Mining Co., Ltd. ("XiKai Mining"). Under the Exchange Agreement, XiKai Mining committed to sell to the Company 90% of the raw jade material produced from its SheTai Jade mine, located in Wulateqianqi, China, for a period of 50 years (the "Exclusive Rights"). In exchange for these Exclusive Rights, the Company agreed to pay XiKai Mining RMB 60 million (approximately $8.8 million) by March 31, 2009, and, to transfer to XiKai Mining 100% of our ownership interest in all of the Company's woodcarving operations, which were contained in Jiangxi XiDa. This transfer of Jiangxi XiDa was made on February 20, 2008.

XiKai Mining is the Company's sole source for raw jade. Under the Exchange Agreement, the price for the raw jade material has been set for the first five years at RMB ~~2000~~2,000 (approximately $~~285~~290) per metric ton, and is subsequently subject to renegotiation every five years with adjustments not to exceed 10%. This mine commenced operation in 2002, and isthe ~~estimated to have an~~ annual ~~operating~~ capacity ofin ~~approximately~~2009 40was approximately 25,000 metric tons ~~by 2009~~. It has one of the largest jade reserves in China. According to a survey report issued by the Inner Mongolia Geological Institution, the mine has proven and probable reserves of approximately six million metric tons. SheTai Jade is a form of jadeite found in the mountain ranges of Inner Mongolia, China. The jade from the SheTai mine is stainless, non-corrosive, non-weathering and ~~unfadable~~resists fading. ItObservers have stated that it has a glassy luster and a pure and an attractive green color. It is also much harder and more durable than other forms of jade. As a result of such characteristics, SheTai Jade has a broad spectrum of applications, ranging from commercial and ~~residential~~ residential construction, and decorative jade artwork to intricately carved jade jewelry.

193

WeThe ~~commenced~~supply ~~the distribution and sale~~ of ~~jade~~Jade infrom ~~January~~XiKai ~~2008.~~Mining ~~During~~was ~~the~~interrupted ~~quarter ended~~on ~~March~~June 3110, 2008, wewhen ~~entered~~an earthquake ~~into~~damaged ~~five~~the ~~contracts~~only ~~for~~road ~~the~~on ~~sale~~which of raw jade~~. During~~ ~~the~~is ~~quarter~~transported ~~ended~~from ~~June~~Xikai Mining's ~~30,~~warehouse. ~~2008,~~A ~~the~~smaller ~~Company~~service ~~entered~~road ~~into~~was ~~one~~still ~~additional contract.~~navigable, ~~The~~allowing ~~total value of~~basic ~~these~~mining ~~contracts~~operations isto ~~approximately $42 million~~continue. The ~~contracts~~mine ~~require~~was ~~the customers~~able to ~~purchase~~continue ~~specified~~to ~~amounts~~mine raw jade, cut ~~over~~jade, ~~periods~~and ~~ranging from six months~~ to ~~one~~prepare ~~year at times which are at~~ the ~~discretion~~jade ~~of the customer. The contracts~~ for ~~the~~transport ~~sale~~by ~~of raw jade generally provide that~~ the Company's iscustomers toat ~~receive~~XiKai ~~30%~~Mining’s ofwarehouse. ~~the~~However, ~~contracted~~due ~~value~~to of the ~~order~~tonnage ~~before shipment~~load, ~~with~~ the ~~balance~~ toactual beshipment of ~~paid~~raw ~~within~~jade 10from ~~days after customer's inspection and acceptance of~~ the ~~jade.~~warehouse ~~However,~~by the Company's customers ~~generally~~was ~~have,~~completely ~~instead, paid the~~halted. ~~balance~~The ~~within~~road 45was ~~days~~subsequently ~~after~~repaired, ~~shipment.~~and ~~Xikai Mining mines~~ the ~~raw~~shipment ~~jade~~of ~~and prepares the~~ raw jade ~~for~~from ~~pick-up by~~ the ~~Company's customers at a warehouse~~mine ~~which~~commenced ~~Xikai~~again ~~Mining~~on ~~maintains~~September ~~near~~23, ~~its She Tai Jade mine~~2008.

The ~~supply~~Company ofhad ~~Jade~~sales ~~from~~revenue ~~XiKai~~of ~~Mining was interrupted on June 10~~$5, ~~2008~~910,871 ~~when~~during ~~an earthquake damaged~~ the ~~sole~~quarter ~~road~~ended onMarch ~~which raw jade is transported from Xikai Mining's warehouse. A smaller service road was still navigable~~31, ~~allowing basic~~2010. ~~mining~~These ~~operations~~sales toresulted ~~continue.~~from ~~The~~orders ~~mine~~for ~~was able to continue to mine~~ raw jade~~, cut~~ ~~jade~~received ~~and prepared for pick-up~~ by the Company's ~~customers at the warehouse, however due to the larger tonnage requirements, the shipments of raw jade~~ from ~~the~~existing ~~warehouse by the Company's~~ customers ~~were completely halted~~. The road was subsequently repaired and the shipments of raw jade from the mine commenced again on September 23, 2008. As a result of the interruption in the shipments of raw jade from the SheTai Jade mine, the Company's revenues in its second quarter ended June 30, 2008, and its third quarter ended September 30, 2008, were substantially below the levels which the Company had anticipated.

The Company had sales revenue of $10,667,585 during the quarter ended September 30, 2009. These sales resulted from orders for raw jade received by the Company from existing customers in 2008. As more fully described below, because of the downturn in the Chinese economy, the Company did not acquire any new customers or enter into any new contracts with existing customers during the first nine months of 2009.

Results of Operations

The following table presents certain information, ~~relating solely to our continuing operations,~~ derived from the consolidated statements of operations of the Company for the three ~~and~~month ~~nine~~periods ~~months~~ ended ~~September~~March 3031, 2010 and March 31, 2009.

	Three months ended September 30, 2009			Nine months ended September 30, 2009
	Three months ended									Percentage
Revenues	$	10,667,585		$	17,592,611
	March 31,						Increase			Increase
Cost of Sales	$	1,486,437		$	3,436,507
	2010			2009			(Decrease)			(Decrease)
Gross Profit	$	9,181,148		$	14,156,104
Revenues	$	5,910,871		$	4,967,029		$	943,842			19.0	%
Selling, General and Administrative Expenses	$	531,484		$	1,174,353
Cost of Sales		1,142,636			1,090,642			51,994			4.8	%
Income from Operations	$	8,649,664		$	12,981,751
Gross Profit		4,768,235			3,876,387			891,848			23.0	%
Interest Income (Expense)	$	3,578		$	(1,253	)
Selling, General and Administrative Expenses		289,014			334,631			(45,617	)		(13.6	)%
Income from Continuing Operations before Taxes	$	8,653,242		$	12,980,498
Income from Operations		4,479,221			3,541,756			937,465			26.5	%
Income Tax Expense	$	(2,359,012	)	$	(3,876,945	)
Interest Income		4,598			281			4,317			N/M
Net Income from Continuing Operations	$	6,294,230		$	9,103,553
Pre-Tax Income		4,483,819			3,542,037			941,782			26.6	%
Net Income	$	6,294,230		$	9,103,553
Provision for Income Taxes		(1,244,708	)		(1,092,992	)		(151,716	)		(13.9	)%
Net Income	$	3,239,111		$	2,449,045		$	790,066			32.3	%

Revenue. Subsequent to the acquisition of the Exclusive Rights pursuant to the Exchange Agreement, The Company's sales revenue has been derived solely from the sale of raw jade. The revenue from the sale of raw jade was $10,667,585 and $17,592,611 for the three and nine months ended September 30, 2009, respectively, compared to $7,609,684 and $24,995,461 for the three and nine months ended September 30, 2008, an increase of $3,057,901, or 40%, and a decrease of $7,402,850, or 30% respectively. The increase in revenue resulted from an increase in orders of raw jade received by the Company from our customers due to better economic environment and the new sales policy of our company. Having experienced a slowing growth rate, Chinese economy is recovering and showing great improvement. This has a positive impact on the commercial and residential construction markets and the high-end jewelry market into which the company sells raw jade. The new sales policy, reduction on the rate of sales advances on new orders from 30% to 10%, is another factor that contributes improving the revenue.

~~Cost~~Subsequent to the Company’s acquisition of the Exclusive Distribution Rights pursuant to ~~Sales. The~~the ~~cost~~Exchange ofAgreement, the Company's sales ~~was~~revenue ~~$1,486,437~~has ~~and~~been ~~$3,436,507~~derived ~~during~~solely from the ~~three~~sale ~~months~~of ~~and~~raw ~~nine~~jade. The revenue for the three months ended ~~September~~March 3031, ~~2009,~~2010 ~~respectively,~~from ~~compared~~the tosale of raw jade was $15,~~360~~910,~~228~~871, ~~and~~compared to $4,~~160~~967,~~214~~029 ~~during~~for the three ~~and nine~~ months ~~ended~~ ~~September~~ended 30March 31, ~~2008~~2009, an increase of $~~126~~943,~~209~~842, or 919.0%,. ~~and~~This resulted from a higher ~~decrease~~volume of ~~$723~~orders for the raw jade received by the Company from its customers due,~~707~~ we believe, in part to an improved economic environment. There orwere ~~17%~~shipments of approximately 1,696 ~~respectively~~metric tons of jade in the first quarter of 2010 as compared to 1,494 metric tons shipped in the first quarter of 2009. The ~~increase~~price isper ~~primarily~~metric ~~due~~ton increased slightly to $3,480 as compared to $3,325, reflecting slightly higher size and grade of jade being shipped. After a slowing of its growth, the ~~increase~~Chinese economy is recovering and showing improvement. This inhas ~~sales~~had ina positive impact on the ~~third~~commercial and residential construction markets and the jade jewelry market into which the Company sells the raw jade. Compared to the first quarter of 2009, the improved weather conditions in the first quarter of 2010 facilitated the customers’ ability to transport the jade.

~~Gross Profit. The~~Cost ~~resulting gross profit for the three and nine months ended September 30, 2009 was $9,181,148 and $14,156,104, respectively, which represented approximately 86% and 81%~~ of ~~revenue, respectively, compared~~ ~~to $6,249,456 and $20,835,247 for~~Sales

20The cost of sales was $1,142,636 during the three months ended March 31, 2010, compared to $1,090,642 during the three months ended March 31, 2009, an increase of $51,994, or 4.8%. The increase is primarily due to the increased tonnage shipped in the first quarter of 2010.

the three and nine months ended September 30, 2008, which represented approximately 82% and 83% of revenue, respectively. The increase of the percentage of gross profit to revenue in the three months ended September 30, 2009 is primarily due to the increase in sales in the nine months of 2009.4

~~Selling, General~~Gross and Administrative Expenses. Selling, General and Administrative Expenses (SG&A) were $531,484 and $1,174,353 for the three and nine months ended September 30, 2009, respectively, compared to $629,184 and $2,185,771 for the three and nine months ended September 30, 2008, a decrease of $97,700, or 16%, and $1,011,418, or 46%, respectively. The decrease in SG&A was mainly due to the decrease in the Company's normal operational activities, especially the US operation.Profit

~~Income Before~~The ~~Taxes~~resulting ~~From~~gross ~~Continuing~~profit ~~Operations. Income~~for ~~before~~the ~~taxes~~three ~~from continuing~~months ~~operations~~ended March 31, 2010 was $84,~~653~~768,~~242~~235, which ~~and~~represented approximately 80.7% of revenue, comparing to $123,~~980~~876,~~498~~387 for the three ~~and nine~~ months ended ~~September~~March 3031, 2009, ~~respectively,~~which ~~compared~~represented toapproximately ~~$5,626,332~~78.0% ~~and~~of ~~$18,444,851~~revenue. ~~for~~The increase of the ~~three~~percentage ~~and~~of ~~nine~~gross profit to revenue in the three months ended ~~September~~March 3031, ~~2008,~~2010 anis ~~increase of~~primarily ~~$3,026,910,~~due orto ~~54%,~~the ~~and~~increase ain ~~decrease~~sales ofin ~~$5,464,353,~~the three ormonths ~~30%, respectively~~of 2010. The increase of ~~the~~2.7 ~~third~~percentage ~~quarter~~points ~~ended~~in ~~September~~the ~~30,~~gross profit ~~2009~~as isa ~~primarily~~percentage ~~due~~of torevenue reflects the ~~same~~benefit ~~reason~~of ~~that~~the ~~affects~~fixed ~~our~~cost ~~revenue~~amortization ~~above. The~~of ~~income~~the ~~resulted~~Exclusive ~~primarily~~Distribution ~~from~~Rights ~~the~~Agreement ~~sale~~being ofspread ~~raw~~over ~~jade~~a ~~from~~higher level ~~SheTai~~of ~~mine by the Company~~revenue.

~~Income Tax Expense. The income tax expense pertaining to continuing operations for the three and nine months ended September 30~~Selling, ~~2009 was $2,359,012~~General and ~~$3,876,945,~~Administrative compared to $1,664,686 and $5,486,689 for the three and nine months ended September 30, 2008, respectively, an increase of $694,326, or 42%, and a decrease of $1,639,744, or 30%, respectively. The increase of the third quarter ended September 30, 2009 is primarily due to the increase in revenue.Expenses

~~Net Income From~~Selling, ~~Continuing~~general ~~Operations. The~~and ~~Company~~administrative ~~recorded~~expenses ~~Net~~were ~~Income from Continuing Operations of~~ $6289,~~294,230~~014 ~~and~~for ~~$9,103,553 during~~ the three ~~and nine~~ months ended March ~~September 30~~31, ~~2009~~2010, ~~respectively,~~ compared to $3334,~~961,646~~631 ~~and $12,958,162~~for ~~recorded during~~ the three months ended ~~September~~March 3031, ~~2008~~2009, an ~~increase of $2,332,584, or 59%, and~~ a decrease of $345,~~854~~617,~~609,~~ or 3014%~~, respectively~~. This ~~increase~~decrease ofwas mainly due to the ~~third~~decrease ~~quarter~~in the ~~ended~~Company's ~~September~~promotional 30expenses, ~~2009~~since ~~is primarily~~the ~~due~~Company’s tosales in the ~~increase~~first quarter inof ~~our~~2010 ~~revenue~~were assolely ~~explained~~derived ~~above~~from our existing customers.

~~Net~~ Income~~. The~~ ~~net income for the three and nine months ended~~before September 30, 2009 was $6,294,230 and $9,103,553, respectively, compared to $3,961,646 and $68,377,528 for the three and nine months ended September 30, 2008, an increase of $2,332,584, or 59%, and a decrease of $59,273,975, or 96%, respectively. This increase of the third quarter ended September 30, 2009 is primarily due to the increase in our revenue as explained above; and the huge discrepancy for the nine months ended September 30, 2009 is the fact that net income from discontinued operations, totaling $55,419,366, was included in net income for the first quarter of 2008, which contributes 93% of the difference.Taxes

Income before taxes was $4,483,819 for the three months ended March 31, 2010, compared to $3,542,037 for the three months ended March 31, 2009, an increase of $941,782, or 27%. This is primarily due to the increase in sales in the three months of 2010.

Provision for Income Tax

The income tax expense for the three months ended March 31, 2010 was $1,244,708, compared to $1,092,992 for the three months ended March 31, 2009, an increase of $151,716, or 13.9%.

Net Income

The net income for the three months ended March 31, 2010 was $3,239,111, compared to $2,449,045 for the three months ended March 31, 2009, an increase of $790,066, or 32.3%. This increase is primarily due to the increase in our sales revenue.

LIQUIDITY AND CAPITAL RESOURCES

As of ~~September~~March 3031, ~~2009~~2010, the Company's cash ~~was~~and cash equivalents were $45,~~340~~713,~~016~~522 as compared to and $~~523~~147,~~374~~392 as of ~~September~~December 3031, ~~2008~~2009. This $5,566,130 increase since December 31, 2009 consists of the following:

Cash Flow

	Nine months ended September 30, 2009		Nine months ended September 30, 2008
	Three months ended March 31,
Net cash provided by operating activities	$	4,231,499	$	11,425,066
	2010		2009
Net cash (used by) investing activities		-	$	(22,016,848	)
Net cash provided by operating activities	$	5,564,004	$	2,143,340
Net cash provided (used) by financing activities		-	$	10,000,000
Net cash used in investing activities		-		-
Effect of exchange rate changes	$	39,561	$	813,953
Net cash used in financing activities		-	$	(1,361,777	)
Net cash inflow	$	4,271,060	$	222,171
Effect of exchange rate changes	$	2,126	$	194
Net cash inflow	$	5,566,130	$	781,757

During the ~~nine~~three months ended ~~September~~March 3031, ~~2009~~2010, the Company met its working capital ~~and~~ and capital investment requirements by using operating cash flows. The Company is obligated to pay the remaining balance of $903,074 owed to former GHL shareholders in connection with the Merger Transaction on or before March 31, 2010, together with interest at the rate of 4% per year.

Net Cash Provided by Operating Activities

During the ~~nine~~three months ended ~~September~~March 3031, ~~2009~~2010, the Company had net cash flow from operating activities of $45,~~231~~564,~~499~~004, compared to $112,~~425~~143,~~066~~340 for the ~~nine~~three months ended ~~September~~March 3031, ~~2008~~2009, aan increase of $73,~~193~~420,~~567 decrease~~664, or 63160%, primarily attributable to ~~the~~a ~~decrease~~reduction in ~~net~~accounts ~~income~~receivable ~~from~~due ~~continuing~~to ~~operation~~intensified collection, and ~~advances~~an increase ~~from~~in ~~our customers~~net income.

Net Cash ~~Provided (~~Used in) Investing Activities and Financing Activities

The Company ~~used~~had ~~$0.00~~no ~~in its~~ Investing Activities during the ~~nine~~three months ended ~~September~~ ~~30,~~March ~~2009~~31, ~~compared to $22~~ 2010,~~016,848~~ ~~used~~and innone ~~investing activities~~ for the ~~nine~~ three months ended ~~September~~March 3031, ~~2008~~2009.

The Chinese economy has experienced a slowing growth rate due to a number of factors, including the global economic crisis, the appreciation of the RMB and economic and monetary policies adopted by the Chinese government aimed at preventing overheating of the Chinese economy and inflation. This has had a negative impact on the commercial and residential construction markets and the high-end jewelry markets into which the Company sells raw jade. As demand has declined, our customers have been negatively affected which, in turn, has resulted in a slowdown in customer orders and the inability of the Company to obtain new customers in the second half of 2008, and the first half of 2009. The Company cannot predict how long the downturn in the Chinese economy will last, the continuing impact of the downturn on its business and operating results and the timing of any subsequent recovery.5

~~The~~During ~~Company~~the ~~has~~first ~~continued~~three tomonths ~~receive~~of ~~orders from, and make sales to, its existing customers through its quarter ended September 30,~~ 2009~~. However~~, the Company ~~has not~~paid ~~obtained new customers since the second quarter ended June 30~~$1,361,777 ~~2008. Four of the Company's nine customers have fulfilled their purchase obligations under their respective contracts with the Company. Two of the Company's customers remain obligated~~ to ~~purchase~~reduce ~~a total of 3,750 metric tons of raw jade, for a~~its ~~total~~outstanding ~~purchase~~notes ~~price of $11~~payable.5 ~~million.~~There ~~However,~~was asno afinancing ~~result~~activity ofduring the ~~adverse~~first ~~impact~~three months of the downturn in the Chinese economy on these customers, the Company has informally agreed to extend the period in which the customers must fulfill their purchase obligations to a date to be mutually agreed upon in the future2010.

~~Due to~~The ~~the nature of the~~ Company's ~~business~~has ascontinued ato ~~reseller~~receive ~~and~~orders ~~distributor of raw jade~~from, ~~principal~~ ~~components of the Company's overhead, such as salaries~~ and ~~lease obligations,~~make ~~are~~sales ~~relatively low. Management presently anticipates that the Company's present cash on hand and cash expected~~ to, beits ~~generated from operating~~existing ~~activities~~customers ~~will,~~through ~~under current conditions, be sufficient to finance~~ the ~~Company's~~ ~~planned~~quarter ~~operations~~ended ~~until~~March ~~December~~ 31, 2010. ~~Subsequent~~ ~~to that time~~However, in the ~~event~~Company ~~that~~has ~~the Company~~not ~~does~~obtained ~~not obtain~~ new customers orsince ~~new~~the ~~orders~~second ~~from~~quarter ~~existing~~ended ~~customers~~June 30, ~~the~~2008. The Company ~~will~~and ~~not be able to meet~~ its ~~operating~~existing ~~expenses~~customers ~~with~~agreed ~~cash~~to ~~flow~~have ~~from~~future ~~operations. Under~~sales ~~such~~orders ~~circumstances,~~based ~~the~~on ~~Company would need to obtain additional debt or~~verbal ~~equity financing~~contracts.

~~The Company~~Due ~~does not have any credit facilities with banks or other~~to ~~lenders. Furthermore,~~ the ~~economic~~nature ~~downturn~~of ~~and~~ the ~~deterioration~~Company's ~~in equity~~business ~~and~~as ~~credit~~a ~~markets~~reseller ~~generally~~and ~~has~~distributor ~~made~~of ~~obtaining~~raw ~~financing more difficult~~jade, ~~and~~principal ~~costly~~components ~~and~~of ~~potentially~~the ~~more~~Company's ~~dilutive~~overhead, tosuch ~~our~~as ~~existing~~salaries ~~investors.~~and ~~The failure~~lease toobligations, ~~secure~~are ~~any~~relatively ~~necessary~~low. ~~additional~~Management ~~financing~~presently inanticipates athat ~~timely~~the Company's ~~manner~~cash ~~and~~ on ~~favorable terms~~hand ~~could~~and ~~have~~cash aexpected ~~material~~to ~~adverse~~be ~~affect~~generated onfrom ~~our ability to conduct our~~operating ~~operations,~~activities ~~satisfy~~will be ~~our~~sufficient ~~existing~~to ~~debt~~finance ~~obligations~~the ~~and~~Company's tocurrent ~~implement~~operations through December ~~our~~31, ~~expansion plans~~2010.

The Company does not currently have any credit facilities with banks or other lenders. Furthermore, obtaining such financing may be difficult and costly and potentially more dilutive to our existing investors. The failure to secure such financing, if it were to be required, on favorable terms could have a material adverse affect on our operations.

Critical Accounting Policies and Estimates

~~The~~See ~~following~~“Note ~~discussion~~1. ~~and~~Summary ~~analysis~~ of ~~financial condition and results of~~ ~~operations~~Significant ~~are~~Accounting ~~based~~Policies ~~upon~~” ~~the Company's consolidated financial statements, which have been prepared~~ in ~~conformity~~“ ~~with~~Item ~~accounting principles generally accepted in the United States of America~~1. ~~The~~Financial ~~Company's significant accounting policies~~Statements ~~are~~” ~~more~~herein ~~fully~~for ~~described~~a indiscussion ~~Note 1~~ of the ~~Notes~~critical ~~to Consolidated Financial Statements. Certain~~ accounting ~~estimates~~policies ~~are particularly important to the understanding of the Company's financial position~~ and ~~results of operations and~~ ~~require~~estimates ~~the~~adopted ~~application of significant judgment by the Company's management or can be materially affected by changes from period to period~~ in ~~economic~~this ~~factors or~~Quarterly ~~conditions~~Report that are outside the control of management. The Company's management uses its judgment to determine the appropriate assumptions to be used in the determination of certain estimates. Those estimates are based on ~~historical~~ ~~operations,~~Form future business plans and projected financial results, the terms of existing contracts, the observance of trends in the industry, information provided by customers and information available from other outside sources, as appropriate10-Q. ~~The following discusses the Company's critical accounting policies and estimates.~~

Accounting Method. The consolidated financial statements are prepared using the accrual method of accounting. The Company changed its fiscal year-end from July 31 to December 31 in fiscal year 2007.

Principles of Consolidation. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant inter-company transactions and balances have been eliminated on consolidation.

Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from those estimates.

Foreign Currency Translation. The Company's functional currency is the Chinese Yuan Renminbi ("RMB"), and reporting currency is the United States Dollar. The financial statements of the Company are translated to United States Dollars in accordance with SFAS No.52 "Foreign Currency Translation". Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Transactions affecting the Company's revenue and expense accounts are translated using an average exchange rate during the period presented. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income. Foreign currency transactions are primarily undertaken in RMB. Foreign Currency Translation Adjustments are included in Other Comprehensive Income and disclosed as a separate category of Stockholders' Equity.

Accounts Receivable and Notes Receivable. The Company extends unsecured credit to its customers in the ordinary course of business but mitigates the associated risks by performing credit checks and actively pursuing past due accounts. An allowance for doubtful accounts is established and recorded based on management's assessment of the credit history with the customer and current relationships with them.

The Company makes provision for bad debts based on an assessment of the recoverability of accounts receivable. Specific provisions are applied to related-party receivables and third-party receivables where events or changes in circumstances indicate that the balances may not be collectible. However, due to the Company's experience in the sale and distribution of raw jade in 2008, and the nature of the Company's business, management did not expect any uncollectible receivables. As of March 31, 2009, there was no allowance recorded for the doubtful accounts.

Inventories. During 2007, raw materials and supplies were stated at the lower of cost (computed on an average cost basis) or market. Work-in-process and finished goods were stated at the lower of average cost or market. If required, the Company provided inventory allowances based on excess and obsolete inventories determined principally by customer demand. This policy only applied to the Company's woodcarving business that was discontinued in early 2008.

Revenue Recognition. The Company applies the provisions of SEC Staff Accounting Bulletin ("SAB") No. 104, Revenue Recognition in Financial Statements ("SAB 104"), which provides guidance on the recognition, presentation and disclosure of revenue in financial statements filed with the SEC. SAB 104 outlines the basic criteria that must be met to recognize revenue and provides guidance for disclosure related to revenue recognition policies. Sales revenue is recognized when (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services rendered; (3) the fee is fixed and determinable; and (4) collectability is reasonably assured. The Company determines whether criteria (3) and (4) are met based on judgments regarding the nature of the price charged for products and the collectability of those fees. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as advances from customers.

Accounting for Stock-Based Compensation. The Company accounts for stock-based compensation in accordance with the fair value recognition provisions of Statement of Financial Accounting Standards ("SFAS") No. 123R. Share Based Payments ("SFAS 123R."). The Company uses the Black-Scholes option-pricing model, which involves certain subjective assumptions. These assumptions include estimating the length of time employees will retain their vested stock options before exercising them ("expected term"), the number of options for which vesting requirements will not be completed ("forfeitures"). Changes in the subjective assumptions can materially affect estimates of fair value stock-based compensation, and the related amount recognized on the consolidated statement of operations.

Recent Accounting Pronouncements

In March 2008, the FASB issued FASB Statement No. 161, “Disclosures about Derivative Instruments and Hedging Activities – an amendment of FASB Statement 133” (“SFAS No. 161”). SFAS No. 161 enhances required disclosures regarding derivatives and hedging activities, including enhanced disclosures regarding how: (a) an entity uses derivative instruments; (b) derivative instruments and related hedged items are accounted for under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”; and (c) derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. Specifically, SFAS No. 161 requires:

· Disclosure of the objectives for using derivative instruments in terms of underlying risk and accounting designation;

· Disclosure of the fair values of derivative instruments and their gains and losses in a tabular format;

· Disclosure of information about credit-risk-related contingent features; and

· Cross-reference from the derivative footnote to other footnotes in which derivative-related information is disclosed.

SFAS No. 161 is effective for fiscal years and interim periods beginning after November 15, 2008. Earlier application is encouraged. The management of the Company does not expect the adoption of this pronouncement to have a material impact on its financial statements.

In May 2008, the FASB issued FASB Statement No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS No. 162”). SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States of America. The sources of accounting principles that are generally accepted are categorized in descending order as follows:

· FASB Statements of Financial Accounting Standards and Interpretations, FASB Statement 133 Implementation Issues, FASB Staff Positions, and American Institute of Certified Public Accountants (AICPA) Accounting Research Bulletins and Accounting Principles Board Opinions that are not superseded by actions of the FASB.

· FASB Technical Bulletins and, if cleared by the FASB, AICPA Industry Audit and Accounting Guides and Statements of Position.

· AICPA Accounting Standards Executive Committee Practice Bulletins that have been cleared by the FASB, consensus positions of the FASB Emerging Issues Task Force (EITF), and the Topics discussed in Appendix D of EITF Abstracts (EITF D-Topics).

· Implementation guides (Q&As) published by the FASB staff, AICPA Accounting Interpretations, AICPA Industry Audit and Accounting Guides and Statements of Position not cleared by the FASB, and practices that are widely recognized and prevalent either generally or in the industry.

On May 26, 2008, the FASB issued FASB Statement No. 163, “Accounting for Financial Guarantee Insurance Contracts” (“SFAS No. 163”). SFAS No. 163 clarifies how FASB Statement No. 60, “Accounting and Reporting by Insurance Enterprises” (“SFAS No. 60”), applies to financial guarantee insurance contracts issued by insurance enterprises, including the recognition and measurement of premium revenue and claim liabilities. It also requires expanded disclosures about financial guarantee insurance contracts.

The accounting and disclosure requirements of SFAS No. 163 are intended to improve the comparability and quality of information provided to users of financial statements by creating consistency. Diversity exists in practice in accounting for financial guarantee insurance contracts by insurance enterprises under SFAS No. 60, “Accounting and Reporting by Insurance Enterprises.” That diversity results in inconsistencies in the recognition and measurement of claim liabilities because of differing views about when a loss has been incurred under FASB Statement No. 5, “Accounting for Contingencies” (“SFAS No. 5”). SFAS No. 163 requires that an insurance enterprise recognize a claim liability prior to an event of default when there is evidence that credit deterioration has occurred in an insured financial obligation. It also requires disclosure about (a) the risk-management activities used by an insurance enterprise to evaluate credit deterioration in its insured financial obligations and (b) the insurance enterprise’s surveillance or watch list.

SFAS No. 163 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and all interim periods within those fiscal years, except for disclosures about the insurance enterprise’s risk-management activities. Disclosures about the insurance enterprise’s risk-management activities are effective the first period beginning after issuance of SFAS No. 163. Except for those disclosures, earlier application is not permitted. Management of the Company does not expect the adoption of this pronouncement to have material impact on its financial statements.

On May 22, 2009, the FASB issued FASB Statement No. 164, “Not-for-Profit Entities: Mergers and Acquisitions” (“SFAS No. 164”). Statement 164 is intended to improve the relevance, representational faithfulness, and comparability of the information that a not-for-profit entity provides in its financial reports about a combination with one or more other not-for-profit entities, businesses, or nonprofit activities. To accomplish that, this Statement establishes principles and requirements for how a not-for-profit entity:

e. Determines whether a combination is a merger or an acquisition.

f. Applies the carryover method in accounting for a merger.

g. Applies the acquisition method in accounting for an acquisition, including determining which of the combining entities the acquirer is.

h. Determines what information to disclose to enable users of financial statements to evaluate the nature and financial effects of a merger or an acquisition.

This Statement also improves the information a not-for-profit entity provides about goodwill and other intangible assets after an acquisition by amending FASB Statement No. 142, Goodwill and Other Intangible Assets, to make it fully applicable to not-for-profit entities.

Statement 164 is effective for mergers occurring on or after December 15, 2009, and acquisitions for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2009. Early application is prohibited. The management of the Company does not expect the adoption of this pronouncement to have material impact on its financial statements.

On May 28, 2009, the FASB issued FASB Statement No. 165, “Subsequent Events” (“SFAS No. 165”). Statement 165 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. Specifically, Statement 165 provides:

· The period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements.

· The circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements.

· The disclosures that an entity should make about events or transactions that occurred after the balance sheet date.

In accordance with this Statement, an entity should apply the requirements to interim or annual financial periods ending after June 15, 2009. The management of the Company does not expect the adoption of this pronouncement to have material impact on its financial statements.

On June 9, 2009, the FASB issued FASB Statement No. 166, “Accounting for Transfers of Financial Assets- an amendment of FASB Statement No, 140” (“SFAS No.166”). SFAS No.166 revises the derecognization provision of SFAS No. 140 “Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities” and will require entities to provide more information about sales of securitized financial assets and similar transactions, particularly if the seller retains some risk with respect to the assets. It also eliminates the concept of a "qualifying special-purpose entity."

This statement is effective for financial asset transfers occurring after the beginning of an entity's first fiscal year that begins after November 15, 2009. The management of Jade Art Group does not expect the adoption of this pronouncement to have material impact on its financial statements.

In June 2009, the FASB issued SFAS 167 "Amendments to FASB Interpretation No. 46(R)." SFAS No.167 amends certain requirements of FASB Interpretation No. 46(R), “Consolidation of Variable Interest Entities” to improve financial reporting by companies involved with variable interest entities and to provide additional disclosures about the involvement with variable interest entities and any significant changes in risk exposure due to that involvement. A reporting entity will be required to disclose how its involvement with a variable interest entity affects the reporting entity's financial statements.

This Statement shall be effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009. The management of Jade Art Group does not expect the adoption of this pronouncement to have material impact on its financial statements.

In June 2009, the FASB issued SFAS 168, "The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principle - a replacement of FASB Statement No. 162" ("SFAS No.168"). SFAS No.168 establishes the FASB Accounting Standards Codification (the "Codification") to become the single official source of authoritative, nongovernmental US generally accepted accounting principles (GAAP). The Codification did not change GAAP but reorganizes the literature.

SFAS No.168 is effective for interim and annual periods ending after September 15, 2009. The management of Jade Art Group does not expect the adoption of this pronouncement to have material impact on its financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

~~The~~Not Company's principal wholly owned subsidiary operates in China, and is exposed to foreign exchange rate fluctuations related to the translation of the financial results of our operations in China into Urequired.S. dollars during consolidation. The value of the RMB-to-U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions. As exchange rates fluctuate, these results, when translated, may vary from expectations and adversely impact overall expected profitability.

25Item 4T. Controls and Procedures.

~~Since~~Evaluation ~~1994, the conversion~~ of ~~RMB~~Disclosure ~~into~~Controls ~~foreign currencies, including U.S. dollars, had been based on rates set by the People's Bank of China, which are set daily based on the previous day's inter-bank foreign exchange market rates~~ and current exchange rates on the world financial markets. Since 1994, the official exchange rate for the conversion of RMB to U.S. dollars had generally been stable and RMB had appreciated slightly against the U.S. dollar.Procedures

~~However,~~Under the onsupervision ~~July~~and 21with the participation of our management, ~~2005~~including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness ~~Chinese~~of ~~government~~the ~~changed~~design ~~its~~and ~~policy~~operation of ~~pegging~~our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the ~~value~~Securities Exchange Act of ~~RMB~~1934, toas ~~the~~amended, ~~U.S.~~as ~~dollar.~~of ~~Under~~the end of the ~~new~~period ~~policy,~~covered ~~RMB~~by ~~may~~this Quarterly ~~fluctuate~~Report ~~within~~on aForm 10-Q (the “Evaluation Date”). The evaluation of our ~~narrow~~disclosure controls and ~~managed~~procedures ~~band~~included ~~against~~ a ~~basket~~review of ~~certain~~our ~~foreign~~processes ~~currencies.~~and ~~Recently~~the ~~there~~effect ~~has~~on ~~been~~the ~~increased~~information ~~political~~generated ~~pressure~~for use in this Quarterly Report on Form 10-Q. In the ~~Chinese~~course ~~government~~of this evaluation, we sought to identify any material ~~decouple~~weaknesses ~~the~~in ~~RMB~~our ~~from~~disclosure ~~the~~controls ~~United~~and ~~States~~procedures ~~dollar.~~and Atto ~~the~~confirm ~~recent~~that ~~quarterly~~any necessary ~~regular~~corrective action, including process improvements, was taken. The ~~meeting~~purpose of ~~People's~~this ~~Bank~~evaluation is to determine if, as of ~~China~~the Evaluation Date, our ~~its~~disclosure ~~Currency~~controls ~~Policy~~and ~~Committee~~procedures ~~affirmed~~were operating effectively such that the information, required to be disclosed in our Securities and ~~effects~~Exchange ofCommission (“SEC”) reports (i) was recorded, processed, summarized and reported within the ~~reform~~time onperiods ~~RMB~~specified ~~exchange~~in ~~rate~~SEC rules and forms, and (ii) was accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

~~Since~~As of ~~February~~March ~~2006~~31, 2010, the ~~new~~Company’s ~~currency~~Chief ~~rate~~Executive ~~system~~Officer ~~has~~and ~~operated;~~its ~~the~~Chief ~~currency~~Financial Officer ~~rate~~have concluded that, as of that date, the Company’s controls and ~~RMB~~procedures ~~has~~were ~~become~~not ~~more~~effective ~~flexible~~due ~~while~~to ~~basically~~some ~~maintaining~~significant ~~stability~~deficiencies in the Company’s internal controls over financial reporting. This is due to the fact that the Company lacks sufficient personnel with the appropriate level of knowledge, experience and training in the application of U.S. generally accepted ~~expectation~~accounting ~~for~~principals (“GAAP”) standards, especially related to complicated accounting issues. This could cause the Company to be unable to fully identify and resolve certain accounting and disclosure issues that could lead to a failure ~~larger~~to ~~appreciation~~maintain ~~range~~effective iscontrols ~~shrinking~~over preparation, review and approval of certain significant account reconciliation from Chinese GAAP to U.S. GAAP and necessary journal entries.

The Company has ~~never~~relatively ~~engaged~~small number of professionals employed by the Company in bookkeeping ~~currency~~and ~~hedging~~accounting ~~operations~~functions, which prevents the Company from appropriately segregating duties within its internal control systems. The inadequate segregation of duties is a weakness because it could lead to the untimely identification and ~~has~~resolution noof ~~present~~accounting and disclosure matters or ~~intention~~could lead to doa sofailure to perform timely and effective reviews.

~~Item~~Based 4.on the ~~Controls~~control deficiency identified above, we have designed and plan to implement, ~~Procedures.~~or in some cases have already implemented, the specific remediation initiatives described below:

~~Disclosure Controls~~· We will evaluate the roles of our existing accounting personnel in an effort to realign the reporting structure of our internal auditing staff in China that will test and ~~Procedures~~monitor the implementation of our accounting and internal control procedures.

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934 (the "Exchange Act") is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (the "SEC"), and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of "disclosure controls and procedures" in Rule 15d-15(e) under the Exchange Act. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.6

At· ~~the end~~We ofare ~~the~~in ~~period covered by this Quarterly Report, we carried out an evaluation, under~~ the ~~supervision~~process ~~and with the participation~~ of ~~our~~completing ~~management, including~~a ~~our~~review ~~Chief Executive Officer~~ and ~~Chief~~revision ~~Financial Officer,~~ of the ~~effectiveness~~ ofdocumentation ~~the design and operation~~ of the Company'’s ~~disclosure~~internal ~~controls and~~control procedures. ~~Based upon the foregoing, our Chief Executive Officer~~ and Chief Financial Officer concluded that, as of September 30, 2009, the disclosure controls and procedures of the Company were effective to ensure that the information required to be disclosed in our Exchange Act reports was recorded, processed, summarized and reported on a timely basispolicies.

We will begin implementation an initiative and training in China to ensure the importance of internal controls and compliance with established policies and procedures are fully understood throughout the organization and will provide additional U.S. GAAP training to all employees involved with the performance of or compliance with those procedures and policies.

We will implement a formal financial reporting process that includes review by our Chief Executive Officer and the full Board of Directors of financial statements prior to filing with the SEC.

We will increase our accounting and financing personnel resources, by retaining more U.S. GAAP knowledgeable financial professionals.

The remedial measures being undertaken may not be fully effectuated or may be insufficient to address the significant deficiencies we identified, and there can be no assurance that significant deficiencies or material weaknesses in our internal control over financial reporting will not be identified or occur in the future. If additional significant deficiencies (or if material weaknesses) in our internal controls are discovered or occur in the future, among other similar or related effects: (i) the Company may fail to meet future reporting obligations on a timely basis, (ii) the Company’s consolidated financial statements may contain material misstatements, (iii) the Company’s business and operating results may be harmed.

Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, our disclosure controls and procedures were not operating effectively.

Changes in Internal Control Over Financial Reporting

~~The~~There ~~Company's~~were ~~former~~no ~~independent~~changes ~~registered~~in ~~public~~our ~~accounting~~internal ~~firm~~control ~~advised~~over ~~the Company~~financial ofreporting for the ~~following~~six months ~~material~~ended ~~weakness~~March in31, ~~its~~2010 ~~financial~~that ~~reporting:~~materially ~~lack~~affected, ~~of sufficient~~or ~~resources~~are reasonably likely to ~~identify~~materially ~~and~~affect, ~~properly~~our ~~address~~internal ~~technical~~control ~~SEC~~over ~~reporting~~financial ~~issues~~reporting.

There were no changes in internal controls over financial reporting that occurred during the quarter ended June 30, 2009, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 1A. Risk Factors.

AAs of the ~~discussion~~date of this filing, there have been no material changes from the risk factors disclosed ofin the ~~company~~Company’s isAnnual Report on Form 10-K filed on May 17, 2010. We operate in a changing environment that involves numerous known and unknown risks and uncertainties that could materially affect our operations. The risks, uncertainties and other factors set forth in ~~Part~~our IAnnual Report on Form 10-K may cause our actual results, ~~Item~~performances IAand orachievements ~~the~~to be ~~company's~~materially ~~report~~different onfrom ~~Form~~those 10expressed or implied by our forward-Klooking statements. ~~for~~If ~~the~~any ~~year~~of ~~ended~~these ~~December~~risks 31or events occur, our business, financial ~~2008~~condition or results of operations may be adversely affected.

26Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Item 2. Recent Sales of Unregistered Securities; Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None

Item 4. ~~Submission~~Other ~~of Matters to Vote of Security Holders~~Information.

None

Item 5. Other Information.

None.

~~Item 6. Exhibits.~~7

Item 5. Exhibits.

(a) Exhibits

Exhibit No.		Description
31.1		Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended.
31.2		Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended.
32.1		Certification of the Chief Executive Officer pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification of the Chief Financial Officer pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

278

SIGNATURES

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

		JADE ART GROUP INC.
Date: November 18, 2009		/s/ Hua-Cai Song
Date: May 21, 2010		/s/ Hua-Cai Song
		Hua-Cai Song Chief Executive Officer
		Hua-Cai Song
Date: November 18, 2009		/s/ Chen-Qing Luo
		Chief Executive Officer (Principal
		Chen-Qing Luo Chief Financial Officer
		Executive Officer)
Date: May 21, 2010		/s/ Chen-Qing Luo
		Chen-Qing Luo
		Chief Financial Officer (Principal Financial
		and Accounting Officer)

289

Filing Compare · Jade Art Group Inc.