**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**


_______________




**FORM
      10-Q**


**(Mark
      One)**





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


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




o
              TRANSITION
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                  ACT OF
                  1934
 **For
        the transition period from ______________ to
        _______________**


Commission
      File Number 000-30292





**ASIAMART,
      INC.**


(Exact
      name of registrant as specified in its charter)





**Delaware**
            **88-0405437**(State
                of Incorporation)
            (I.R.S.
                Employer Identification No.)**Room
                1508 Peninsula Square**
              **18
                Sung On Street**
              **Hunghom,
                Kowloon, Hong Kong**
              (Address
                of principal executive offices)
            **N/A**
              (Zip
                Code)**(852)
                3580-8808**
              (Registrant’s
                telephone number, including area
                code)




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




Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
      one):


Large
      Accelerated filer  ̈ Accelerated
      Filer  ̈ Non-Accelerated
      Filer  x




Indicate
      by check mark whether the registrant is a shell company (as determined by rule
      12b-2 of the Exchange Act). Yes  ̈ No  x




APPLICABLE
      ONLY TO ISSUERS INVOLVED IN BANKRUPTCY


PROCEEDINGS
      DURING THE PRECEDING FIVE YEARS:





Indicate
      by check mark whether the registrant has filed all documents and reports
      required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange
      Act
      of 1934 subsequent to the distribution of securities under a plan confirmed
      by a
      court. Yes  ̈ No  ̈





APPLICABLE
      ONLY TO CORPORATE ISSUERS:





As
      of
      August 17, 2007, the Registrant had 24,598,344 shares of Common Stock
      outstanding.




1




**ASIAMART,
      INC.**





**INDEX**





Page
                Number**PART
                I. Financial Statements**
            
            3Item
                1.
            Financial
                Information
            
            3Consolidated
                Balance Sheets as of June 30, 2007 (unaudited) and December 31,
                2006
            
            3Consolidated
                Statements of Operations for the Three Months and Six Months Ended
                June
                30, 2007 and 2006 (unaudited)
            
            4Consolidated
                Statements of Shareholders’
                Equity
                (unaudited)
            
            5Consolidated
                Statements of Cash Flows for the Six Months Ended June 30, 2007 and
                2006
                (unaudited)
            
            6Condensed
                Notes to Financial Statements - June 30, 2007 (unaudited)
            
            7Item
                2.
            Management’s
                Discussion and Analysis of Financial Condition and Results of Operations
            
            25Item
                3.
            Quantitative
                and Qualitative Disclosures About Market Risk
            
            31Item
                4.
            Controls
                and Procedures
            
            32**PART
                II. Other Information**
            
            33Item
                1.
            Legal
                Proceedings
            
            33Item
                1A.
            Risk
                Factors
            
            33Item
                2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            
            42Item
                3.
            Defaults
                Upon Senior Securities
            
            42Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            
            42Item
                5.
            Other
                Information
            
            43Item
                6.
            Exhibits
            
            43Signatures
            
            44





2




**PART
                 I.**
              
              **FINANCIAL
                    STATEMENTS**





**ITEM
      1. FINANCIAL STATEMENTS**





ASIAMART,
                INC. AND SUBSIDIARIESCONSOLIDATED
                BALANCE SHEETSAS
                OF JUNE 30, 2007 AND DECEMBER 31,
                2006




ASSETSJune
                30,
            
            December
                31,2007
            
            2006UnauditedCURRENT
                ASSETS:Cash
                and cash equivalents
            
            $
            625,180
            
            $
            2,560,304Trade
                    accounts receivable, net allowance for doubtful accounts of $31,029
                    and
                    $19,290 and net of allowance for sales returns of $230,220 and
                    $0 as of
                    June 30, 2007 and December 31, 2006,
                    respectively
            
            
            2,112,486
            
            
            4,250,898Inventories
            
            
            4,136,048
            
            
            1,042,024Due
                from related parties
            
            
            333
            
            
            -Deposits
                and prepaid expenses
            
            
            2,801,671
            
            
            1,264,949Other
                receivables
            
            
            741,009
            
            
            560,185Total
                current assets
            
            
            10,416,727
            
            
            9,678,360PROPERTY
                AND EQUIPMENT, net
            
            
            967,295
            
            
            678,875OTHER
                ASSETS:Long-term
                loans receivable
            
            
            1,183,073
            
            
            1,030,617Long-term
                rental and utilities deposits
            
            
            14,018
            
            
            14,095Debt
                issuance costs
            
            
            237,203
            
            
            289,914Total
                other assets
            
            
            1,434,294
            
            
            1,334,626Total
                assets
            
            $
            12,818,316
            
            $
            11,691,861LIABILITIES
                AND  SHAREHOLDERS' EQUITYCURRENT
                LIABILITIES:Accounts
                payable
            
            $
            2,205,285
            
            $
            1,681,600Accrued
                liabilities
            
            
            970,022
            
            
            1,018,409Customer
                deposits
            
            
            10,829
            
            
            11,184Due
                to shareholders
            
            
            284,999
            
            
            304,360Taxes
                payable
            
            
            281,460
            
            
            312,322Other
                payable
            
            
            101,118
            
            
            102,080Short
                term bank loan
            
            
            151,305
            
            
            -Current
                maturities of long-term debt and leases
            
            
            667,489
            
            
            834,035Total
                current liabilities
            
            
            4,672,507
            
            
            4,263,990LONG-TERM
                LIABILITIES:Deferred
                tax liabilities
            
            
            15,423
            
            
            15,508Long-term
                debt, net of current maturities
            
            
            189,064
            
            
            88,359Debentures
                payable, net of discount of $2,317,139 and $2,828,789 as ofJune
                30, 2007
              andDecember
                31, 2006, respectively
            
            
            752,756
            
            
            241,106Total
                long - term liabilities
            
            
            957,243
            
            
            344,973Total
                liabilities
            
            
            5,629,750
            
            
            4,608,963COMMITMENTS
                AND CONTINGENCIES
            
            
            -
            
            
            -SHAREHOLDERS'
                EQUITY:Preferred
                  stock, $0.0001 par value, 5,000,000 shares authorized, no shares
                  issued or
                  outstanding
            
            
            -
            
            
            -Common
                    stock, $0.0001 par value, 200,000,000 shares authorized, 24,598,255
                    and
                    24,535,755 shares issued and outstanding as of June 30, 2007
                    andDecember
                    31, 2006, respectively
            
            
            2,460
            
            
            2,454Additional
                paid-in-capital
            
            
            3,470,435
            
            
            3,455,441Retained
                earnings
            
            
            3,666,416
            
            
            3,577,445Accumulated
                other comprehensive income
            
            
            49,255
            
            
            47,558Total
                shareholders' equity
            
            
            7,188,566
            
            
            7,082,898Total
                liabilities and shareholders' equity
            
            $
            12,818,316
            
            $
            11,691,861




The
        accompanying notes are an integral part of this statement.




3




ASIAMART,
                  INC. AND SUBSIDIARIESCONSOLIDATED
                  STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME(UNAUDITED)
  Three
                  Months Ended June 30,
              
              Six
                  Months Ended June 30,2007
              
              2006
              
              2007
              
              2006REVENUESales
              
              $
              12,540,700
              
              $
              15,511,929
              
              $
              29,133,066
              
              $
              29,933,716Referral
                  income
              
              
              -
              
              
              -
              
              
              426,342
              
              
              -Related
                  party
              
              
              496,753
              
              
              43,989
              
              
              496,753
              
              
              63,881Total
                  Revenue
              
              
              13,037,453
              
              
              15,555,918
              
              
              30,056,161
              
              
              29,997,597COST
                  OF SALES
              
              
              9,984,436
              
              
              6,969,012
              
              
              20,174,623
              
              
              13,889,176GROSS
                  PROFIT
              
              
              3,053,017
              
              
              8,586,906
              
              
              9,881,538
              
              
              16,108,421SELLING,
                  GENERAL AND ADMINISTRATIVE EXPENSES
              
              
              3,719,213
              
              
              8,033,234
              
              
              9,231,577
              
              
              14,743,824(LOSS)
                  INCOME FROM OPERATIONS
              
              
              (666,196
              )
              
              553,672
              
              
              649,961
              
              
              1,364,597OTHER
                  (LOSS) INCOME, net
              
              
              (339,012
              )
              
              315,352
              
              
              (348,084
              )
              
              754,355INCOME
                  BEFORE PROVISION FOR INCOME TAXES
              
              
              (1,005,208
              )
              
              869,024
              
              
              301,877
              
              
              2,118,952(INCOME
                  TAX BENEFIT) PROVISION FOR INCOME TAXES
              
              
              (83,674
              )
              
              268,939
              
              
              212,906
              
              
              460,656NET
                  INCOME
              
              
              (921,534
              )
              
              600,085
              
              
              88,971
              
              
              1,658,296OTHER
                  COMPREHENSIVE (LOSS) INCOME:Foreign
                  currency translation adjustment
              
              
              (15,030
              )
              
              (4,096
              )
              
              1,697
              
              
              (8,348
              )COMPREHENSIVE
                  INCOME
              
              $
              (936,564
              )
              $
              595,989
              
              $
              90,668
              
              $
              1,649,948EARNINGS
                  (LOSS) PER SHARE:BASIC
              
              $
              (0.037
              )
              $
              0.024
              
              $
              0.004
              
              $
              0.068DILUTED
              
              $
              (0.037
              )
              $
              0.024
              
              $
              0.003
              
              $
              0.068WEIGHTED
                  AVERAGE SHARES OUTSTANDING:BASIC
              
              
              24,598,255
              
              
              24,535,755
              
              
              24,584,366
              
              
              24,535,755DILUTED
              
              
              24,598,255
              
              
              24,535,755
              
              
              27,733,215
              
              
              24,535,755




The
      accompanying notes are an integral part of this
      statement.




4


ASIAMART,
                  INC. AND SUBSIDIARIESCONSOLIDATED
                  STATEMENTS OF SHAREHOLDERS' EQUITY
  AccumulatedCommon
                  Stock
              
              Additional
              
              
              
              otherPar
              
              Paid-in
              
              Retained
              
              comprehensiveShares
              
              value
              
              capital
              
              earnings
              
              income
              
              TotalsBALANCE,
                  December 31, 2005
              
              
              24,535,755
              
              $
              2,454
              
              $
              385,546
              
              $
              5,079,898
              
              $
              18,611
              
              $
              5,486,509Net
                  Income
              
              
              
              
              
              
              
              
              
              
              
              1,658,296
              
              
              
              
              
              1,658,2962006
                  Special Dividend
              
              
              
              
              
              
              
              
              
              
              
              (4,666,180
              )
              
              
              
              
              (4,666,180
              )Foreign
                  currency translation adjustment
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (8,348
              )
              
              (8,348
              )BALANCE,
                  June 30, 2006, (unaudited)
              
              
              24,535,755
              
              $
              2,454
              
              $
              385,546
              
              $
              2,072,014
              
              $
              10,263
              
              $
              2,470,277Net
                  Income
              
              
              
              
              
              
              
              
              
              
              
              1,505,431
              
              
              
              
              
              1,505,431Warrants
                  issued
              
              
              
              
              
              
              
              
              1,000,757
              
              
              
              
              
              
              
              
              1,000,757Conversion
                  option
              
              
              
              
              
              
              
              
              2,069,138
              
              
              
              
              
              
              
              
              2,069,138Foreign
                  currency translation adjustment
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              37,295
              
              
              37,295BALANCE,
                  December 31, 2006
              
              
              24,535,755
              
              $
              2,454
              
              $
              3,455,441
              
              $
              3,577,445
              
              $
              47,558
              
              $
              7,082,898Net
                  Income
              
              
              
              
              
              
              
              
              
              
              
              88,971
              
              
              
              
              
              88,971Conversion
                  of warrants
              
              
              62,500
              
              $
              6
              
              
              14,994
              
              
              
              
              
              
              
              
              15,000Foreign
                  currency translation adjustment
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,697
              
              
              1,697BALANCE,
                  June 30, 2007, (unaudited)
              
              
              24,598,255
              
              $
              2,460
              
              $
              3,470,435
              
              $
              3,666,416
              
              $
              49,255
              
              $
              7,188,566




The
      accompanying notes are an integral part of this
      statement.


5




ASIAMART,
                  INC. AND SUBSIDIARIESCONSOLIDATED
                  STATEMENTS OF CASH FLOWSFOR
                  THE SIX MONTHS ENDED JUNE 30, 2007 AND 2006(UNAUDITED)
  2007
              
              2006CASH
                  FLOWS FROM OPERATING ACTIVITIES:Net
                  income
              
              $
              88,971
              
              $
              1,658,296Adjustments
                  to reconcile net income to cash(used
                  in) provided by operating activities:Depreciation
                  and amortization
              
              
              149,761
              
              
              91,550Amortization
                  of debt issuance cost
              
              
              52,708
              
              
              -Amortization
                  of discount on convertible debentures
              
              
              511,656
              
              
              -Loss
                  on sale of assets
              
              
              -
              
              
              303Bad
                  debt expense
              
              
              11,844
              
              
              -Sales
                  return allowance
              
              
              230,220
              
              
              -(Increase)
                  decrease in assets:Trade
                  accounts receivable
              
              
              1,884,465
              
              
              (356,904
              )Inventories
              
              
              (3,057,259
              )
              
              57,411Due
                  from related party
              
              
              (333
              )Deposits,
                  prepaid expenses and other receivables
              
              
              (1,740,271
              )
              
              (202,884
              )Increase
                  (decrease) in liabilities:Accounts
                  payable
              
              
              402,849
              
              
              (259,001
              )Accrued
                  liabilities and customer deposits
              
              
              (49,156
              )
              
              (4,087
              )Taxes
                  payable
              
              
              (29,162
              )
              
              444,863Other
                  payable
              
              
              8,977
              
              
              -Net
                  cash (used in) provided by operating activities
              
              
              (1,534,732
              )
              
              1,429,547CASH
                  FLOWS FROM INVESTING ACTIVITIES:Proceeds
                  in amounts due from shareholders
              
              
              -
              
              
              123,451Proceeds
                  in amounts due from related parties
              
              
              (20,060
              )
              
              3,744,349Long-term
                  loans to staff
              
              
              12,790
              
              
              -Long-term
                  loans to travel agency
              
              
              (11,255
              )
              
              -Decrease
                  in notes and loans receivables
              
              
              (138,006
              )
              
              -Proceeds
                  from disposal of property and equipment
              
              
              -
              
              
              464,974Purchase
                  of property and equipment
              
              
              (115,730
              )
              
              (315,010
              )Net
                  cash (used in) provided by investing activities
              
              
              (272,261
              )
              
              4,017,764CASH
                  FLOWS FROM FINANCING ACTIVITIES:Payment
                  on amounts due to related parties
              
              
              108,916
              
              
              (201,929
              )Payment
                  of dividends
              
              
              -
              
              
              (4,666,904
              )Proceeds
                  from short term loan
              
              
              127,900
              
              
              -Repayment
                  of short term loan
              
              
              (104,495
              )
              
              -Proceeds
                  from installment loan
              
              
              255,800
              
              
              -Repayment
                  of installment loan
              
              
              (258,485
              )
              
              (33,470
              )Proceeds
                  from capital lease
              
              
              -
              
              
              356,389Repayment
                  of capital lease obligations
              
              
              (249,156
              )
              
              (256,848
              )Net
                  cash used in financing activities
              
              
              (119,520
              )
              
              (4,802,762
              )EFFECT
                  OF EXCHANGE RATE ON CASH
              
              
              (8,611
              )
              
              (3,273
              )(DECREASE)
                  INCREASE IN CASH
              
              
              (1,935,124
              )
              
              641,276CASH,
                  beginning of the period
              
              
              2,560,304
              
              
              935,138CASH,
                  end of period
              
              $
              625,180
              
              $
              1,576,414SUPPLEMENTAL
                  DISCLOSURE INFORMATIONInterest
                  expense paid
              
              $
              160,793
              
              $
              27,368Income
                  taxes paid
              
              $
              243,900
              
              $
              15,793




The
      accompanying notes are an integral part of this
      statement.




6




**ASIAMART,
      INC. AND SUBSIDIARIES**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**JUNE
      30, 2007**


**(UNAUDITED)**




**Note
        1** **-** **Description
        of business and organization**
 
 Asiamart,
        Inc. formerly known as WT Holdings Corporation (the “Company”) is a Delaware
        corporation which was incorporated under the laws of the State of Delaware
        on
        August 25, 1997.
 
 Effective
        April 4, 2006, the Company effected a one-for-twenty (1:20) reverse stock
        split
        of its common stock. Effective November 30, 2006, the Company effected a
        one-for-four (1:4) reverse stock split of its common stock.
 
 On
        June
        22, 2006, the Company executed an Agreement and Plan of Share Exchange
        (“Exchange Agreement”) by and among the Company on the one hand, and Horizon
        Corporation Limited, a Hong Kong corporation (“Horizon”), Mr. Ricky Kee Kwong
        Tsoi and Mr. Alex Chun Shan Yue as the shareholders (the “PDD Shareholders”) of
        Profits Dreams Development Ltd. (“PDD”), and the shareholders (the “FRHL
        Shareholders”) of Forever Rise Holdings Limited (“FRHL”) on the other hand.
        Prior to the Exchange Agreement, FRHL was the parent company of Horizon,
        which
        in turn was the parent company of PDD, which in turn owns five operating
        subsidiaries. The business and operations of the Horizon Group are more fully
        described below.
 
 The
        Exchange Agreement provided for (i) the acquisition by the Company of all
        of the
        issued and outstanding shares of capital stock of PDD, consisting of a total
        of
        1,000 ordinary shares (collectively, the “PDD Shares”), such that PDD became a
        wholly owned subsidiary of the Company; and in exchange therefore (ii) the
        issuance by the Company at the closing of an aggregate of 68,699,565 shares
        of
        restricted common stock of the Company to the PDD Shareholders, or their
        assigns, which shall constitute 70% of the issued and outstanding common
        stock
        of the Company immediately after closing of the transaction.
 
 In
        accordance with the Accounting and Financial Reporting Interpretations and
        Guidance prepared by the staff of the U.S. Securities and Exchange Commission,
        the Company (the legal acquirer) is considered the accounting acquiree and
        PDD
        (the legal acquiree) is considered the accounting acquirer. The consolidated
        financial statements of the combined entity will in substance be those of
        PDD,
        with the assets and liabilities, and revenues and expenses, of the Company
        being
        included effective from the date of consummation of the Exchange Transaction.
        The Company is deemed to be a continuation of the business of PDD. The
        outstanding stock of the Company prior to the Exchange Transaction will be
        accounted for at their net book value and no goodwill will be recognized.
        As a
        result of the Exchange Agreement with the Horizon Group, the Company acquired
        100% of the capital stock of PDD. From and after the Closing Date of the
        Exchange Agreement, the Company’s primary operations consist of the retail and
        trading operations of the Horizon Group, which are conducted through the
        five
        operating subsidiaries in Hong Kong.
  The
        Company through its 5 wholly-owned subsidiaries engages in two operating
        segments, trading and retail. Trading consists of selling products wholesale
        to
        other retail operators and retail consists of selling products primarily
        to
        tourist through three discount shopping centers in Hong Kong.
  7
 **ASIAMART,
          INC. AND SUBSIDIARIES**
 
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **JUNE
          30, 2007**
 **(UNAUDITED)**
  The
        following is a list of subsidiaries with 100% ownership as of June 30, 2007.
        However, one of the shopping centers, Golden Bauhinia Duty Free ceased
        conducting retail shop business effective October 8, 2006 and hence only
        two
        discount shopping centers are operating .
  Company
                    name
                Trade
                    Name
                Place
                    of incorporation
                Date
                    of incorporation
                Principal
                    business1
                Raffle
                    Limited
                N/A
                Hong
                    Kong
                August
                    7, 1998
                Trading
                    of general merchandise2
                Sure
                    Profits Trading Limited
                N/A
                Hong
                    Kong
                August
                    3, 2001
                Trading
                    of general merchandise3
                Manigood
                    International Industrial Limited
                Hong
                    Kong (Duty Free) Center
                Hong
                    Kong
                December
                    15, 2003
                Operating
                    a discount shopping center in Hong Kong4
                Allied
                    Fine Development Limited
                Super
                    Star Department Store
                Hong
                    Kong
                September
                    19, 2003
                Operating
                    a discount shopping center in Hong Kong5
                Max
                    Surplus International Development Limited
                Golden
                    Bauhinia Duty Free
                Hong
                    Kong
                July
                    26, 2004
                Fomerly
                    operated a discount shopping center in Hong
                    Kong
 
 The
        Company’s outlets and discount shopping centers cater to tourists visiting Hong
        Kong from other parts of China (“Mainland China”) who are transported directly
        to the Company’s shopping centers by a large network of travel companies and
        tour operators. The Company’s outlets and shopping centers offer the tourists
        discount prices on a limited selection of international branded and selected
        private label products in a wide range of merchandise categories such as
        consumer electronics, cosmetics, watches, dietary supplements, health care
        products and optical instruments. A number of travel companies and tour
        operators have agreements, partnerships or affiliation arrangements with
        the
        Company to transport tourists from Mainland China to the Company’s outlets and
        shopping centers for shopping.
 
 All
        current operations and assets of the Company are located in Hong Kong.
 
 **Note
        2 - Summary of significant accounting polices**
 
 Basis
        of presentation
 
 The
        accompanying financial statements are prepared in accordance with accounting
        principles generally accepted in the United States of America.
  8
 **ASIAMART,
          INC. AND SUBSIDIARIES**
 
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **JUNE
          30, 2007**
 **(UNAUDITED)**
 Consolidation
 
 The
        consolidated financial statements include the accounts of the Company and
        its
        wholly-owned subsidiaries. Significant intercompany transactions have been
        eliminated in consolidation.
 
 Use
        of
        estimates
 
 The
        preparation of financial statements in conformity with generally accepted
        accounting principles requires management to make estimates and assumptions
        that
        affect the reported amounts of assets and liabilities, 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. For example,
        the
        Company establishes reserves for the carrying value of inventory for slow-moving
        or potentially obsolete products. Because of the use of estimates inherent
        in
        the financial reporting process, actual results could differ from those
        estimates.
 
 Cash
        and cash equivalents
 
 Cash
        and
        cash equivalents include cash on hand, demand and time deposits with banks
        and
        liquid investments with an original maturity of three months or less.
 
 Accounts
        receivable
 
 Accounts
        receivable consist primarily of trade receivables and amounts due from banks
        for
        customer credit card transactions. Accounts receivable are recognized and
        carried at original invoiced amount less an allowance for any uncollectible
        accounts. Management reviews and adjusts this allowance periodically based
        on
        historical experience, current economic climate as well as its evaluation
        of the
        collectibility of outstanding accounts. The Company evaluates the credit
        risks
        of its customers utilizing historical data and estimates of future performance.
 
 Inventories
 
 The
        Company values inventory at the lower of cost or market, using the first-in,
        first-out or weighted average method, and regularly reviews the book value
        of
        discontinued product lines and stock to determine if these items are properly
        valued. If the market value of the product is less than cost, management
        will
        write down the related inventory to its estimated net realizable value.
        Management regularly evaluates the composition of its inventory to identify
        slow-moving and obsolete inventories to determine if additional write-downs
        are
        required. This valuation requires significant judgment from management as
        to the
        salability of its inventory based on forecasted sales. It is particularly
        difficult to judge the potential sales of new products. Should the forecasted
        sales not materialize, it would have a significant impact on the Company’s
        results of operations and the valuation of its inventory, resulting in a
        charge
        to income in the period if such determination is made.
  9
 **ASIAMART,
          INC. AND SUBSIDIARIES**
 
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **JUNE
          30, 2007**
 **(UNAUDITED)**
 Property
        and equipment
 
 Property
        and equipment are recorded at cost less accumulated depreciation and impairment
        losses if any. Gains or losses on disposals are reflected as gain or loss
        in the
        year of disposal. The cost of improvements that extend the life of property,
        plant and equipment are capitalized. These capitalized costs may include
        structural improvements, equipment and fixtures. All ordinary repair and
        maintenance costs are expensed as incurred.
 
 Depreciation
        for financial reporting purposes is provided using the straight-line method
        over
        the estimated useful lives of the assets as follows:
  Leasehold
                    properties
                the
                    shorter of the useful life or the remaining lease termLeasehold
                    improvements
                the
                    shorter of the useful life or the remaining lease termFurniture
                    and fixtures
                5
                    yearsMotor
                    vehicles
                5
                    yearsOffice
                    equipment
                5
                    years
  The
        Company accounts for its leasehold properties as capital leases in accordance
        with SFAS No. 13, *Accounting
        for Leases,* which
        requires that a lease involving only part of a building be accounted for
        as a
        capital lease, if the fair value of the leasehold property cannot be objectively
        determinable and if the term of the lease is 75% or more of the estimated
        remaining economic life of the building in which the leased premises are
        located.
 
 Leases
        that transfer substantially all the rewards and risks of ownership to the
        lessee, other than legal title, are accounted for as capital leases.
        Substantially all of the risks or benefits of ownership are deemed to have
        been
        transferred if any one of the four criteria is met: (i) transfer of ownership
        to
        the lessee at the end of the lease term, (ii) the lease containing a bargain
        purchase option, (iii) the lease term exceeding 75% of the estimated economic
        life of the leased asset, (iv) the present value of the minimum lease payments
        exceeding 90% of the fair value. At the inception of a capital lease, the
        Company as the lessee records an asset and an obligation at an amount equal
        to
        the present value of the minimum lease payments. The leased asset is amortized
        over the shorter of the lease term or its estimated useful life if title
        does
        not transfer to the Company, while the leased asset is depreciated in accordance
        with the Company’s normal depreciation policy if the title is to eventually
        transfer to the Company. The periodic rent payments made during the lease
        term
        are allocated between a reduction in the obligation and interest element
        using
        the effective interest method in accordance with APB Opinion No. 21, *Interest
        on Receivables and Payables* .
 
 Operating
        leases
 
 The
        Company accounts for an operating lease if the lease meets none of the four
        criteria for a capital lease. Rental payments under operating leases are
        charged
        to expense on a straight-line basis over the lease term. Rent holidays are
        considered in the determining straight-line rent expense for operating
        leases.
 
 Impairment
        of long-lived assets
 
 The
        Company accounts for impairment of property and equipment and amortizable
        intangible assets in accordance with SFAS No. 144, *Accounting
        for Impairment or Disposal of Long-Lived Assets* ,
        which
        requires the Company to evaluate a long-lived asset for recoverability when
        there is event or circumstance that indicate the carrying value of the asset
        may
        not be recoverable. An impairment loss is recognized when the carrying amount
        of
        a long-lived asset or asset group is not recoverable (when carrying amount
        exceeds the gross, undiscounted cash flows from use and disposition)and is
        measured as the excess of the carrying amount over the asset’s (or asset
        group’s) fair value.
  10
 **ASIAMART,
          INC. AND SUBSIDIARIES**
 
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **JUNE
          30, 2007**
 **(UNAUDITED)**
 Comprehensive
        income
 
 SFAS
        No.
        130, *Reporting
        Comprehensive Income* ,
        requires disclosure of all components of comprehensive income and loss on
        an
        annual and interim basis. Comprehensive income and loss is defined as the
        change
        in equity of a business enterprise during a period from transactions and
        other
        events and circumstances from non-owner sources.
 
 Revenue
        recognition
 
 Revenue
        of the Company includes sales and referral income. Referral income is derived
        from referring our customers to other non-directly competitive shops. Sales
        and
        referral income are recognized when the following four revenue criteria are
        met:
        persuasive evidence of an arrangement exists, delivery has occurred, the
        selling
        price is fixed or determinable, and collectibility is reasonably assured.
 
 Sales
        revenue is recognized net of sales discount and sales return and allowances.
        Generally, customers may return merchandise within 180 days of purchase.
        Revenues are recognized net of expected returns, based upon management’s
        experience. As of June 30, 2007 and December 31, 2006, allowance of sales
        returns amounted to $230,220 and $0, respectively.
 
 Referral
        income is the income derived from referring customers to other non-directly
        competitive duty-free shops of which there is no associated cost of sales.
        Referral income is determined according to the number of visitors referred
        during the reporting period and recognized as occurred.
 
 Employees’
        benefits and pension obligations
 
 Mandatory
        contributions of five percent of gross salary payments, subject to certain
        minimum and maximum levels, are made to defined contribution Mandatory Provident
        Fund schemes (“MPF schemes”) pursuant to the laws of Hong Kong. These
        contributions are charged to expense in the same period as the related salary
        cost. Total contributions made by the Company to the MPF schemes were $88,086
        and $134,995 for the six months ended June 30, 2007 and 2006, respectively. Total
        contributions amounted to $41,195 and $71,191 for the three months ended
        June
        30, 2007 and 2006, respectively.
  Income
        taxes
 
 The
        Company accounts for income taxes in accordance with SFAS No. 109, *Accounting
        for Income Taxes* .
        SFAS
        No. 109 requires an asset and liability approach for financial accounting
        and
        reporting for income taxes and allows recognition and measurement of deferred
        tax assets based upon the likelihood of realization of tax benefits in future
        years. Under the asset and liability approach, deferred taxes are provided
        for
        the net tax effects of temporary differences between the carrying amounts
        of
        assets and liabilities for financial reporting purposes and the amounts used
        for
        income tax purposes. A valuation allowance is provided for deferred tax assets
        if it is more likely than not these items will either expire before the Company
        is able to realize their benefits, or that future deductibility is
        uncertain.
  11
 **ASIAMART,
          INC. AND SUBSIDIARIES**
 
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **JUNE
          30, 2007**
 **(UNAUDITED)**
 The
        Company adopted FASB Interpretation 48, “Accounting for Uncertainty in Income
        Taxes” (“FIN 48”), as of January 1, 2007. A tax position is recognized as a
        benefit only if it is “more likely than not” that the tax position would be
        sustained in a tax examination, with a tax examination being presumed to
        occur.
        The amount recognized is the largest amount of tax benefit that is greater
        than
        50% likely of being realized on examination. For tax positions not meeting
        the
“more likely than not” test, no tax benefit is recorded. The adoption had no
        affect on the Company’s financial statements.
 
 Earnings
        per share
 
 Basic
        earnings per share (“EPS”) is computed by dividing income available to common
        shareholders by the weighted average number of common shares outstanding
        for the
        period. The
        common stock equivalents for the convertible debt and for all warrants are
        anti-dilutive since there is an operating loss for the three months ended
        June
        30, 2007. They are excluded from the earnings per share calculation.
 
 The
        Company accounts for a stock dividend or split in accordance with SFAS No.
        128,
“Earnings Per Share”, which requires that a stock dividend or split be accounted
        for retrospectively if the stock dividend or split occurs during the period,
        or
        retroactively if the stock dividend or split occurs after the end of the
        period
        but before the release of the financial statements, by considering it
        outstanding for the entirety of each period presented.
 
 Foreign
        currency translation
 
 The
        Company uses the United States dollar (“USD”) for financial reporting purposes.
        The Company’s subsidiaries maintain their books and accounting records in Hong
        Kong Dollar ("HK$") as their functional currency, being the primary currency
        of
        the economic environment in which their operations are conducted. In general,
        for consolidation purposes, the Company translates the subsidiaries’ assets and
        liabilities into U.S. dollars using the applicable exchange rates prevailing
        at
        the balance sheet date, and their statements of income and cash flows are
        translated at average exchange rates during the reporting period. Adjustments
        resulting from the translation of the subsidiaries’ financial statements are
        recorded as accumulated other comprehensive income.
  Translation
        adjustments amounted to $49,225 and $47,558 as of June 30, 2007 and December
        31,
        2006, respectively. The balance sheet amounts with the exception of equity
        at
        June 30, 2007 were translated at 7.82 HK$ to $1.00 USD as compared to $7.78
        HK$
        at December 31, 2006. The average translation rates applied to income statement
        and cash flows accounts for the six months ended June 30, 2007 and 2006 were
        7.81 HK$ and 7.76 HK$ to $1.00 USD, respectively.
  12
 **ASIAMART,
          INC. AND SUBSIDIARIES**
 
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **JUNE
          30, 2007**
 **(UNAUDITED)**
 Transaction
        gains and losses that arise from exchange rate fluctuations on transactions
        denominated in a currency other than the functional currency are included
        in the
        results of operations as incurred. Gains and losses from foreign currency
        transactions included in the results of operation, total transaction gains
        amounted to $425,373, and $742,359 for the six months ended June 30, 2007
        and
        2006, respectively. In accordance with Statement of Financial Accounting
        Standards No. 95, "Statement of Cash Flows," cash flows from the Company's
        operations is calculated based upon the local currencies using the average
        translation rate. As a result, amounts related to assets and liabilities
        reported on the statement of cash flows will not necessarily agree with changes
        in the corresponding balances on the balance sheet.
 
 Financial
        instruments
 
 The
        Company values its financial instruments as required by SFAS No. 107, *Disclosures
        about Fair Value of Financial Instruments* .
        The
        estimated fair value amounts have been determined by the Company, using
        available market information or other appropriate valuation methodologies.
        However, considerable judgment is required in interpreting market data to
        develop estimates of fair value. Consequently, the estimates are not necessarily
        indicative of the amounts that could be realized or would be paid in a current
        market exchange.
 
 The
        Company’s financial instruments primarily consist of cash and cash equivalents,
        trade accounts receivable, other current assets; trade accounts payable,
        accrued
        expenses, other current liabilities, capital lease obligations, and installment
        loans.
 
 As
        of the
        balance sheet dates, the estimated fair values of the financial instruments
        were
        not materially different from their carrying values as presented because
        the
        interest rates on the borrowings approximate those that would have been
        available for loans of similar remaining maturity and risk profile at respective
        year ends.
 
 Cash
        and concentration of risk
 
 Cash
        includes cash on hand and demand deposits in accounts maintained within Hong
        Kong. Total cash in these accounts at June 30, 2007 and December 31, 2006
        amounted to $586,010 and $2,469,756, respectively, of which no deposits are
        covered by insurance. The Company has not experienced any losses in such
        accounts and believes it is not exposed to any risks on its cash in bank
        accounts.
 
 Financial
        instruments potentially subject the Company to significant concentrations
        of
        credit risk consist of trade accounts receivable. Credit is extended to
        customers based on the evaluation of their financial condition and collateral
        is
        not required. The Company performs ongoing assessment of its customers and
        maintains an allowance for doubtful accounts.
  13
 **ASIAMART,
          INC. AND SUBSIDIARIES**
 
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **JUNE
          30, 2007**
 **(UNAUDITED)**
 The
        three
        largest customers for the quarter ended June 30, 2007 accounted for
        approximately 1.7%, 1.4% and 1.3%, respectively of the Company’s total revenues.
        Total receivables from these customers amounted to $641,905, $577,406 and
        $545,216 as of June 30, 2007. The three largest customers for the quarter
        ended
        June 30, 2006 accounted for approximately 2.4%, 1.9% and 1.1%, respectively
        of
        the Company's total revenues.
 
 The
        three
        largest vendors for the quarter ended June 30, 2007 accounted for approximately
        13.8%, 10.9% and 7.8%, respectively of the Company’s total purchases. Total
        payable from these vendors amounted to $517,768 as of June 30, 2007. The
        three
        largest vendors for the quarter ended June 30, 2006 accounted for approximately
        10.5%, 5.6% and 4.4%, respectively for the Company's total purchases.
 
 Recently
        issued accounting pronouncements
 
 In
        June
        2006, the Emerging Issues Task Force (EITF) reached a consensus on EITF No.
        06-3, How Taxes Collected from Customers and Remitted to Governmental
        Authorities Should Be Presented in the Income Statement (EITF No. 06-3).
        EITF
        No. 06-3 permits that such taxes may be presented on either a gross basis
        or a
        net basis as long as that presentation is used consistently. The adoption
        of
        EITF No. 06-3 on January 1, 2007 did not impact our consolidated financial
        statements. We present the taxes within the scope of EITF No. 06-3 on a net
        basis.
 
 In
        July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for
        Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109”
(“FIN 48”). The Company adopted Interpretation No. 48 on January 1, 2007. (See
        Note 2 - Income taxes)
 
 In
        September 2006, the FASB issued Statement of Financial Accounting Standards
        No. 157, “Fair Value Measurements” (“SFAS 157”), which provides enhanced
        guidance for using fair value to measure assets and liabilities. This standard
        also responds to investors’ requests for expanded information about the extent
        to which companies measure assets and liabilities at fair value, the information
        used to measure fair value, and the effect of fair value measurements on
        earnings. The standard applies whenever other standards require (or permit)
        assets or liabilities to be measured at fair value. The standard does not
        expand
        the use of fair value in any new circumstances. SFAS 157 is effective for
        financial statements issued for fiscal years beginning after November 12,
        2007, and interim periods within those fiscal years. Early adoption is
        permitted. We are currently evaluating whether the adoption of SFAS157 will
        have
        a material effect on our consolidated results of operations and financial
        condition.
 
 In
        February 2007, the Financial Accounting Standards Board issued SFAS
        No. 159, The Fair Value Option for Financial Assets and Financial
        Liabilities—Including an Amendment of SFAS 115 (SFAS No. 159), which allows
        for the option to measure financial instruments and certain other items at
        fair
        value. Unrealized gains and losses on items for which the fair value option
        has
        been elected are reported in earnings. The
        objective of SFAS 159 is to provide opportunities to mitigate volatility
        in
        reported earnings caused by  measuring
        related assets and liabilities differently without having to apply hedge
        accounting provisions.
 
 SFAS
        159 also establishes presentation and disclosure  requirements
        designed to facilitate comparisons between companies that choose different
        measurement attributes for similar types of assets and liabilities. This
        statement is effective for financial statements issued for fiscal years
        beginning after November 15, 2007. The Company is currently evaluating the
        impact of SFAS No. 159 on our consolidated financial
        statements
  14
 **ASIAMART,
          INC. AND SUBSIDIARIES**
 
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **JUNE
          30, 2007**
 **(UNAUDITED)**
 Reclassification
 
 Certain
        prior year amounts have been reclassified to conform to the current year's
        presentation. These reclassifications have no effect on net income or cash
        flows.
 
 **Note** **3
        - Supplemental cash flow**
 
 Income
        taxes paid for the six months ended June 30, 2007 and 2006 amounted to $243,900
        and $15,793, respectively.
 
 Interest
        expense paid for the six months ended June 30, 2007 and 2006 amounted to
        $160,793 and $27,368, respectively.
 
 On
        January 30, 2007, the Company issued 62,500 shares of common stock upon
        conversion of $15,000 of debentures payable.
 
 On
        March
        14, 2007, the Company entered into a capital lease contract for office equipment
        in the amount of $326,145.
 
 **Note** **4
        - Trade accounts receivable**
 
 Trade
        accounts receivable consist of the following:
 June
                    30,
                
                December
                    31,2007
                
                2006(Unaudited)Accounts
                    receivable
                
                $
                2,369,478
                
                $
                2,331,622Amounts
                    due from referral customer
                
                
                -
                
                
                1,899,425Amounts
                    due from credit card company
                
                
                4,257
                
                
                39,141Less: 
                    allowance for doubtful accounts
                
                
                (31,029
                )
                
                (19,290
                )allowance
                    for sales return
                
                
                (230,220
                )
                
                -Accounts
                    receivable, net
                
                $
                2,112,486
                
                $
                4,250,898
  Bad
        debt
        expenses amounted to $11,844 and $0 for the six months ended June 30, 2007
        and
        2006, respectively. Bad
        debt
        expenses amounted to $333 and $0 for the three months ended June 30, 2007
        and
        2006, respectively.
  15
 **ASIAMART,
          INC. AND SUBSIDIARIES**
 
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **JUNE
          30, 2007**
 **(UNAUDITED)**
  **Note
          5 - Inventories**
 
 Inventories
        consist of the following:
 June
                    30,
                
                December
                    31,2007
                
                2006(Unaudited)Inventories
                
                $
                4,392,801
                
                $
                1,343,134Less:
                    valuation allowance
                
                
                (256,753
                )
                
                (301,110
                )Total
                
                $
                4,136,048
                
                $
                1,042,024
  The
        following table represents the changes of provision for obsolete
        inventories:
 Balance
                    at
                  Beginning
                  of
                    Period
                
                Charged
                    to
                  Costs
                    and
                  Expenses
                
                Recovery
                
                Foreign
                  Currency
                  Exchange
                  Effect
                
                Balance
                    at
                  End
                    of
                  PeriodPeriod
                    ended June 30, 2007Reserves
                    and allowances deducted from asset accounts:Allowance
                    for doubtful accounts
                
                $
                301,110
                
                $
                -
                
                $
                (42,719
                )
                $
                (1,638
                )
                $
                256,753Year
                    ended December 31, 2006Reserves
                    and allowances deducted from asset accounts:Allowance
                    for doubtful accounts
                
                $
                268,623
                
                $
                32,229
                
                $
                -
                
                $
                258
                
                $
                301,110
  **Note
        6 - Long-term loans receivable**
 
 Long-term
        loans receivable consist of the following:
 June
                    30,
                
                December
                    31,2007
                
                2006(Unaudited)Employee
                    loans unsecured and non-interest bearing payable after one year,
                    but
                    without a fixed repayment term
                
                $
                20,060
                
                $
                52,056Unsecured,
                    non-interest bearing, 2-year term loan to travel agencies
                
                
                1,163,013
                
                
                978,5611,183,073
                
                
                1,030,617Less:
                    Allowance for doubtful accounts
                
                
                -
                
                
                -Total
                    long-term loans receivable
                
                $
                1,183,073
                
                $
                1,030,617
  16
 **ASIAMART,
          INC. AND SUBSIDIARIES**
 
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **JUNE
          30, 2007**
 **(UNAUDITED)**
 **Note
        7 - Property and equipment**
 
 Property
        and equipment including those acquired under capital leases, consists of
        the
        following:
 June
                    30,
                
                December
                    31,2007
                
                2006(Unaudited)Leasehold
                    improvements
                
                $
                503,959
                
                $
                441,684Furniture
                    and fixtures
                
                
                45,824
                
                
                44,371Office
                    equipment
                
                
                786,745
                
                
                434,887Motor
                    vehicles
                
                
                128,972
                
                
                129,6771,465,500
                
                
                1,050,619Less:
                    Accumulated depreciation
                
                
                (498,205
                )
                
                (371,744
                )Property
                    and equipment, net
                
                $
                967,295
                
                $
                678,875
  The
        depreciation expense amounted to $126,461 and $56,294 for the six months
        ended
        June 30, 2007 and 2006, respectively. The
        depreciation expense amounted to $68,587 and $13,885 for the three months
        ended
        June 30, 2007 and 2006, respectively.
  The
        Company also leases equipment under non-cancelable capital leases as further
        discussed in note 14. The amount of capital leases under such arrangements
        included in these financial statements consisted of the following:
 June
                    30,
                
                December
                    31,2007
                
                2006(Unaudited)Leased
                    equipment
                
                $
                769,792
                
                $
                342,323Leased
                    motor vehicles
                
                
                84,354
                
                
                84,750Accumulated
                    depreciation
                
                
                (81,561
                )
                
                (54,779
                )Total
                
                $
                772,585
                
                $
                372,294
  **Note
        8 - Short term bank loan**
 
 In
        January 2007, the Company entered into a loan agreement with Bank of China,
        Hong
        Kong for a $255,800 installment loan with effective annual interest rate
        of
        6.75% and 12 installment payments. This loan was guaranteed by two of the
        Company’s directors. As of June 30, 2007, the amount outstanding on the loan was
        $151,305. Interest expense on the short-term loan for the six months ended
        June
        30, 2007 amounted to $6,031. Interest
        expense amounted to $3,015 for the three months ended June 30,
        2007.
  17
 **ASIAMART,
          INC. AND SUBSIDIARIES**
 
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **JUNE
          30, 2007**
 **(UNAUDITED)**
 **Note** **9
        - Long-term debt, net of current maturities**
 June
                    30,
                
                December
                    31,2007
                
                2006(Unaudited)Installment
                    loan from a finance company, with effective annual interest rate
                    of 10.4%,
                    due February 21, 2007, guaranteed by one of the Company's
                    directors
                
                $
                -
                
                $
                12,131Installment
                    loan from Citic Ka Wah Bank, with effective annual interest rate
                    of 4.10%,
                    due March 23, 2008, guaranteed by one of the Company's
                    directors
                
                
                130,257
                
                
                218,284Installment
                    loan from Bank of China, with effective annual interest rate
                    of 6.75%, due
                    December 22, 2007, guaranteed by two of the Company's
                    directors
                
                
                162,565
                
                
                321,500Installment
                    loan from Dah Sing Bank, with effective annual interest rate
                    of 11%, due
                    April 18, 2009, guaranteed by two of the Company's
                    directors
                
                
                118,279
                
                
                -Total
                
                
                411,101
                
                
                551,915Capital
                    lease obligations
                
                
                445,452
                
                
                370,479Total
                
                
                856,553
                
                
                922,394Less
                    Current maturities - loans
                
                
                (354,388
                )
                
                (508,258
                )Less
                    Current maturities - capital leases
                
                
                (313,101
                )
                
                (325,777
                )Total
                    long-term debts, net of current maturities
                
                $
                189,064
                
                $
                88,359
  Interest
        expense on all long-term loans for the six months ended June 30, 2007 and
        the
        year ended December 31, 2006 was $18,293 and $45,774, respectively. Interest
        expense amounted to $4,673 for the three months ended June 30,
        2007.
  The
        maturities of the installment loans for the next five years are as
        follows:
 Period
                    ending December 31,2007
                
                $
                279,3442008
                
                
                108,4492009
                
                
                23,308Thereafter
                
                
                -Total
                
                $
                411,101
  The
        maturities for capital leases are included with other commitments and
        contingencies in Note 14.
  18
 **ASIAMART,
          INC. AND SUBSIDIARIES**
 
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **JUNE
          30, 2007**
 **(UNAUDITED)**
 **Note
        10 - Earnings per share**
  Earnings
        per share for the period ended June 30, 2007 and 2006 were determined by
        dividing net income for the years by the weighted average number of common
        shares outstanding. The Company has retroactively adjusted the weighted average
        number of common shares outstanding by deeming that the one-for-twenty (1:20)
        reverse stock split effected on April 4, 2006 and the one-for-four (1:4)
        reverse
        stock split effected on November 30, 2006 had occurred as of the beginning
        of
        the earliest period presented.
 
 The
        following is a reconciliation of the basic and diluted earnings per share
        computations for the three months and six months ended June 30, 2007 and
        2006:
 Three
                    Months Ended June 30,
                
                Six
                    Months Ended June 30,2007
                
                2006
                
                2007
                
                2006(Unaudited)
                
                (Unaudited)
                
                (Unaudited)
                
                (Unaudited)Net
                    (loss) income for basic and diluted earnings per share
                
                $
                (921,534
                )
                $
                600,085
                
                $
                88,971
                
                $
                1,658,296Weighted
                    average shares used in basic computation
                
                
                24,584,366
                
                
                24,535,755
                
                
                24,584,366
                
                
                24,535,755Diluted
                    effect of warrants and conversion option
                
                
                -
                
                
                -
                
                
                3,148,849
                
                
                -Weighted
                    average shares used in diluted computation
                
                
                24,584,366
                
                
                24,535,755
                
                
                27,733,215
                
                
                24,535,755Earnings
                    per share:Basic
                
                $
                (0.037
                )
                $
                0.024
                
                $
                0.004
                
                $
                0.068Diluted
                
                $
                (0.037
                )
                $
                0.024
                
                $
                0.003
                
                $
                0.068
  At
        June
        30, 2006, all options and warrants outstanding were included in diluted earnings
        per share. At June 30, 2007, 1,598,904 warrants (whose exercise price is
        $1.056
        and 255,825 warrants (whose exercise price is $1.056) were excluded from
        the
        calculation because of their antidilutive nature.
 On
          October 6, 2006, the Company issued warrants to investors that are exercisable
          up to approximately 8 million shares of common stock of the Company with
          an
          exercise price ranging from $0.2112 to $0.2904 per share. The warrants
          are
          excluded from the three months earnings per share calculation because of
          their
          anti-dilutive nature.
  **Note
        11 - Income taxes**
 
 The
        Company conducts all of its business through its subsidiaries in Hong Kong
        and,
        therefore, is currently not subject to any U.S. income tax. Pursuant to Hong
        Kong tax law, the Company’s Hong Kong subsidiaries are subjected to profits tax
        imposed at the rate of 17.5%.
  19
 **ASIAMART,
          INC. AND SUBSIDIARIES**
 
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **JUNE
          30, 2007**
 **(UNAUDITED)**
 Significant
        components of the provision for income taxes for three months and six months
        ended June 30 are as follows:
 Three
                    Months Ended June 30,
                
                Six
                    Months Ended June 30,2007
                
                2006
                
                2007
                
                2006(Unaudited)
                
                (Unaudited)
                
                (Unaudited)
                
                (Unaudited)Hong
                    Kong profit tax:Current
                
                $
                (83,674
                )
                $
                268,939
                
                $
                212,906
                
                $
                460,656Deferred
                
                
                -
                
                
                -
                
                
                -
                
                
                -Total
                
                $
                (83,674
                )
                $
                268,939
                
                $
                212,906
                
                $
                460,656
 
 The
        following table reconciles the U.S. statutory rates to the Company's effective
        tax rate:
 2007
                
                2006U.S.
                    Statutory rate
                
                
                34%
                
                
                34%Foreign
                    income not recognized in the U.S.
                
                
                (34%
                )
                
                (34%
                )Hong
                    Kong statutory rate
                
                
                17.5%
                
                
                17.5%Other
                
                
                5.2%
                
                
                (2.2%
                )Effective
                    income tax rate
                
                
                22.7%
                
                
                15.3%
  **Note
        1** **2
        - Related party transactions**
 For
          the
          six months ended June 30, 2007 and 2006, the Company earned sales revenue
          from
          Prince Digital and another related party in the amount of $496,753 and
          $63,881, respectively. For the three months ended June 30, 2007 and 2006,
          the
          Company earned sales revenue from Prince Digital and another related in
          the
          amount of $496,753 and $43,989, respectively. Prince Digital is controlled
          by
          Mr. Tsoi Kee Kwong Ricky, a former officer and director of the Company
          until his
          resignation in November 2006 and a current shareholder of the
          Company.
 
 For
        the
        six months ended June 30, 2007 and the three months ended June 30, 2007,
        Horizon
        Corporation Limited, a previous intermediate holding company, charged a service
        fee of $143,220 and $61,704, respectively. Horizon Corporation Limited is
        controlled by Mr. Tsoi Kee Kwong Ricky and Chun Shan Yue Alex, an
        officer, director, and shareholder of the Company.
  20
  **ASIAMART,
          INC. AND SUBSIDIARIES**
 
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **JUNE
          30, 2007**
 **(UNAUDITED)**
 **Note
        13 - Other (Loss) income**
 
 Other
        income consisted of the following:
 Three Months
                      Ended June 30,
                  
                  Six
                      Months Ended June 30,2007
                  
                  2006
                  
                  2007
                  
                  2006(Unaudited)
                  
                  (Unaudited)
                  
                  (Unaudited)
                  
                  (Unaudited)Transaction
                      gain
                  
                  $
                  167,914
                  
                  $
                  310,963
                  
                  $
                  425,373
                  
                  $
                  742,359Interest
                      income
                  
                  
                  3,200
                  
                  
                  1,776
                  
                  
                  9,813
                  
                  
                  3,548Loss
                      on disposal of property and equipment
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (303
                  )Finance
                      costs
                  
                  
                  (463,929
                  )
                  
                  (9,995
                  )
                  
                  (793,733
                  )
                  
                  (27,368
                  )Other
                      Income
                  
                  
                  13,366
                  
                  
                  12,608
                  
                  
                  70,026
                  
                  
                  36,119Other
                      Expense
                  
                  
                  (59,563
                  )
                  
                  -
                  
                  
                  (59,563
                  )
                  
                  -Total
                  
                  $
                  (339,012
                  )
                  $
                  315,352
                  
                  $
                  (348,084
                  )
                  $
                  754,355
  Transaction
          gain is a result of converting monies received from customers in Chinese
          Yuan
          (“Renminbi”) to Hong Kong Dollars. For the three months and six months ended
          June 30, 2007, finance costs included $308,536 and $564,361 of amortization
          of
          the discount and issuance cost on the debentures payable, and $63,885 and
          $124,244 interest expense on the convertible debenture note and other bank
          charges.
 
 **Note
        14 - Commitments and contingencies**
 
 Capital
        leases
 
 The
        Company entered into several capital leases for office equipment and motor
        vehicles expiring through 2011, interest rates vary from approximately 4.25%
        to
        11.48%. Total interest expense for the six months ended June 30, 2007 and
        the
        year ended December 31, 2006, amounted to $18,256 and $40,957, respectively.
        The
        following is a schedule, by year, of the future minimum lease payments under
        these leases, together with the present value of the net minimum lease payments
        as of June 30, 2007:
  Period
                    ending December 31,2007
                
                $
                205,8982008
                
                
                219,7472009
                
                
                45,7212010
                
                
                1,3862011
                
                
                575Total
                    minimum lease payments
                
                
                473,327Less
                    amounts represent interest
                
                
                (27,875
                )Total
                    present value of minimum payments
                
                
                445,452Less
                    current portion of such obligations
                
                
                (313,101
                )Long-term
                    capital lease obligations, net
                
                $
                132,351
  21
  **ASIAMART,
          INC. AND SUBSIDIARIES**
 
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **JUNE
          30, 2007**
 **(UNAUDITED)**
 Operating
        lease commitments
 
 The
        Company entered into several tenancy agreements for office premises and outlets
        expiring through 2009. Total rent expense for the six months ended June 30,
        2007
        and 2006 amounted to $206,290 and $349,516, respectively.
 
 The
        Company’s commitments for minimum lease payments under these leases for the next
        five years and thereafter are as follows:
 Period
                    ending December 31,2007
                
                $
                438,2972008
                
                
                307,7472009
                
                
                76,9372010
                    and thereafter
                
                
                -$
                822,981
  **Note
        15 - Debentures payable**
 
 On
        October 6, 2006, the Company issued $3,069,895 of senior convertible
        debentures in a private placement to fourteen accredited investors
        (“Financing”). The Financing was conducted pursuant to a Securities Purchase
        Agreement. Maxim Group LLC acted as the lead placement agent with Chardan
        Capital Markets LLC as the co-placement agent.
 
 Under
        the
        terms of the Financing, the debentures are unsecured, bear 8% interest, and
        mature in three years. The debentures are convertible into a quantity of
        common
        stock ranging from approximately 11.6 to 16.0 million shares, depending
        upon a one-time adjustment to the conversion price, available on October 6,
        2007. The initial conversion price of the debentures is $0.24 per share which
        may be adjusted to equal the volume-weighted average trading price of the
        Company’s common stock for all trading days during the one year following the
        closing of the Financing, subject to a maximum conversion price of $0.264
        per
        share, and a minimum conversion price of $0.192 per share (“Conversion Price
        Collar”).
 
 The
        conversion price of the debentures is also subject to anti-dilution adjustments,
        within the Conversion Price Collar, in the event the Company sells and issues
        shares of its common stock for below $0.24 per share. The Company may, at
        its
        election, force conversion of the debentures after the first anniversary
        of the
        closing, if the volume weighted average trading price of its common stock
        exceeds $0.48 per share for 30 consecutive trading days, and the average
        daily
        trading dollar volume exceeds $350,000. The Company may also redeem the
        debentures at 125% of the principal amount of the debentures plus accrued
        unpaid
        dividends, at any time after the first anniversary of the closing.
 
 In
        connection with the Financing, on October 6, 2006 the Company issued
        warrants to investors that are exercisable up to approximately 8 million
        shares of common stock of the Company with an exercise price ranging from
        $0.2112 to $0.2904 per share. The exercise price is adjustable based upon
        the
        conversion price of the debentures. The warrants are exercisable for a five-year
        period commencing on October 6, 2006.
  The
        Company also agreed to issue, in connection with the Financing, a warrant
        to the
        lead placement agent for the purchase of up to 1,279,123 shares of common
        stock
        of the Company, with an exercise price ranging from $0.2112 to $0.2904 per
        share.
  22
 **ASIAMART,
          INC. AND SUBSIDIARIES**
 
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **JUNE
          30, 2007**
 **(UNAUDITED)**
 The
        Company also entered into a registration rights agreement, under which it
        agreed
        to use its commercially reasonable efforts to register the common stock
        underlying the convertible debentures and all warrants related to the Financing,
        within 30 days following the closing. The Company is subject to a monthly
        penalty of 1% of the offering amount, up to a maximum of 24% for failing
        to
        register the shares timely.
 
 The
        debentures were discounted for the fair value of warrants, pursuant to APB
        14
        "Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants”.
        The debentures were further discounted for the intrinsic value of the beneficial
        conversion feature, pursuant to EITF 98-5 “Accounting for Convertible Securities
        with Beneficial Conversion Features or Contingently Adjustable Conversion
        Ratios.” The discount is being amortized over the life of the debentures. For
        the six months ended June 30, 2007, $511,650 was amortized and recorded as
        part
        of financing costs. For the three months ended June 30, 2007, $265,825 was amortized.
 
 The
        fair
        value of the warrants was determined using the Black-Scholes option pricing
        model, using the following assumptions:
 Expected
                    volatility
                
                
                201.4
                %Expected
                    term in years
                
                
                5Risk-free
                    interest rate
                
                
                4.64
                %Expected
                    dividend yield
                
                
                0
                %
  Expected
        volatilities are calculated using the historical prices of the Company's
        common
        stock and based on the historical volatility of a similar company’s common stock
        that has similar characteristic in terms of revenue and share price and other
        factors. The expected term of warrants granted is based on the term of the
        exercisable periods. The risk-free interest rates are based on the U.S. Treasury
        yield for a period consistent with the expected term of the option in effect
        at
        the time of grant.
  On
        January 30, 2007, the Company issued 62,500 shares of common stock upon
        conversion of $15,000 of debentures payable, at $0.24 per share.
 
 **Note
        16 - Segment information**
 
 The
        Company’s operating businesses are structured and managed separately, according
        to the nature of their operations and the products and services they provide.
        The Company identifies its reportable segments based on management
        responsibility: (i) the trading segment, and (ii) the retail
        segment.
 
 23
  **ASIAMART,
          INC. AND SUBSIDIARIES**
 
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **JUNE
          30, 2007**
 **(UNAUDITED)**
 Information
        on segments and the reconciliation to income from operations before income
        taxes
        are as follows:
 Six
                    months ended June 30, 2007
                
                Trading
                
                Retail
                
                Consolidated(Unaudited)Total
                    segment revenues
                
                $
                8,727,093
                
                $
                29,150,698
                
                $
                37,877,791Intersegment
                    revenue
                
                
                (6,276,747
                )
                
                (1,544,883
                )
                
                (7,821,630
                )Revenue
                    from external customers
                
                $
                2,450,346
                
                $
                27,605,815
                
                $
                30,056,161Total
                    segment profits
                
                $
                47,527
                
                $
                367,748
                
                $
                415,275Intersegment
                    profits
                
                
                (90,710
                )
                
                (22,688
                )
                
                (113,398
                )Income
                    before income taxes
                
                $
                (43,183
                )
                $
                345,060
                
                $
                301,877Included
                    in segment profits:Depreciation
                    and amortization
                
                $
                36,887
                
                $
                89,574
                
                $
                126,461Interest
                    expense
                
                $
                98,671
                
                $
                62,122
                
                $
                160,793Total
                    segment assets
                
                $
                9,402,945
                
                $
                17,246,432
                
                $
                26,649,377Intersegment
                    receivables
                
                
                (5,989,789
                )
                
                (7,841,272
                )
                
                (13,831,061
                )Total
                    assets
                
                $
                3,413,156
                
                $
                9,405,160
                
                $
                12,818,316
  Six
                    months ended June 30, 2006
                
                Trading
                
                Retail
                
                Consolidated(Unaudited)Total
                    segment revenues
                
                $
                11,358,497
                
                $
                27,085,967
                
                $
                38,444,464Intersegment
                    revenue
                
                
                (8,779,360
                )
                
                -
                
                
                (8,779,360
                )Revenue
                    from external customers
                
                $
                2,579,137
                
                $
                27,085,967
                
                $
                29,665,104Total
                    segment profits
                
                $
                808,164
                
                $
                2,171,489
                
                $
                2,979,653Intersegment
                    profits
                
                
                (4,834
                )
                
                -
                
                
                (4,834
                )Income
                    before income taxes
                
                $
                803,330
                
                $
                2,171,489
                
                $
                2,974,819Included
                    in segment profits:Depreciation
                    and amortization
                
                $
                31,795
                
                $
                59,755
                
                $
                91,550Interest
                    expense
                
                $
                27,368
                
                $
                -
                
                $
                27,368Total
                    segment assets
                
                $
                3,160,994
                
                $
                5,499,346
                
                $
                8,660,340Intersegment
                    receivables
                
                
                (916,960
                )
                
                -
                
                
                (916,960
                )Total
                    assets
                
                $
                2,244,034
                
                $
                5,499,346
                
                $
                7,743,380


24




**ITEM****2.**
            **MANAGEMENT’S
                DISCUSSION AND ANALYSIS OF RESULTS OF
                OPERATIONS**





**Note
      Regarding Forward-Looking Statements**





*This
      quarterly report on Form 10-Q and other reports filed by Registrant from time
      to
      time with the Securities and Exchange Commission (collectively the “Filings”)
      contain or may contain forward-looking statements and information that are
      based
      upon beliefs of, and information currently available to, Registrant’s management
      as well as estimates and assumptions made by Registrant’s management. Readers
      are cautioned not to place undue reliance on these forward-looking statements,
      which are only predictions and speak only as of the date hereof. When used
      in
      the filings, the words “anticipate”, “believe”, “estimate”, “expect”, “future”,
“intend”, “plan”, or the negative of these terms and similar expressions as they
      relate to Registrant or Registrant’s management identify forward-looking
      statements. Such statements reflect the current view of Registrant with respect
      to future events and are subject to risks, uncertainties, assumptions, and
      other
      factors (including the risks contained in the section of this report entitled
      “Risk Factors”) relating to Registrant’s industry, Registrant’s operations and
      results of operations, and any businesses that Registrant may acquire. Should
      one or more of these risks or uncertainties materialize, or should the
      underlying assumptions prove incorrect, actual results may differ significantly
      from those anticipated, believed, estimated, expected, intended, or
      planned.*





*Although
      Registrant believes that the expectations reflected in the forward-looking
      statements are reasonable, Registrant cannot guarantee future results, levels
      of
      activity, performance, or achievements. Except as required by applicable law,
      including the securities laws of the United States, Registrant does not intend
      to update any of the forward-looking statements to conform these statements
      to
      actual results. Readers are urged to carefully review and consider the various
      disclosures made throughout the entirety of this quarterly report, which attempt
      to advise interested parties of the risks and factors that may affect our
      business, financial condition, results of operations, and
      prospects.*





*In
      this Form 10-Q, references to “we”, “our”, “us”, “our company”, “Asiamart” or
      the “Registrant” refer to Asiamart, Inc., a Delaware
      corporation.*




**Overview**




We
      operate outlet and discount shopping centers catering principally to tourists
      visiting Hong Kong from other parts of mainland China. We offer this captive
      group of tourists discount prices on selected international brands on a wide
      range of merchandise categories such as consumer electronics, cosmetics,
      watches, dietary supplements, health care products, and optical instruments,
      producing a high sales volume and rapid inventory turnover. The high sales
      volume and rapid inventory turnover provide us with volume purchasing power,
      and
      we also benefit from the relatively low overhead of our shopping centers
      strategically located in low to moderate rent districts.




Virtually
      all of our customers are directed to our shopping centers by various mainland
      Chinese travel companies and travel tour operators. Through our relationships
      with over 100 of these Chinese travel companies and tour operators, our shopping
      centers received an average of over 1,800 visitors per day in 2006, and received
      an average of approximately 1,100 visitors per day in 2007, principally from
      mainland China.




In
      the
      fourth quarter of 2006, we diversified our marketing strategy to focus on high
      quality customers who are most likely to generate sales. Accordingly, the number
      of visitors to our shopping centers dropped significantly from over 2,000
      visitors per day in the first two quarters of 2006 to 1,000 in the fourth
      quarter of 2006. After a period of adjustment, because of a shift from group
      tours towards individual travel, the number of visitors to our stores began
      to
      gradually increase in the first two months of 2007. Although the total number
      of
      visitors decreased, the average spending per visitor averaged at $77 in the
      first half of 2007. Management believes this is a direct result of a shift
      in
      our focus to the quality of customers and to effective customer
      management.




25




By
      concentrating on selected valued customers, we also diversified our income
      sources and derived referral income from introducing our customers to other
      retail stores that specialize in products not currently offered in our stores.
      Commencing from July 2006, we began an arrangement with travel agents who would
      direct their travelers not only to our shopping centers but also to visit the
      shops we designated. The results from this arrangement proved satisfactory
      in
      the third quarter of 2006. We increased our efforts to enter into these
      arrangements with travel agents in the fourth quarter of 2006, and our referral
      income increased substantially. Accordingly, we paid higher commissions to
      travel agents and received referral income from the shops we introduced.
      Management believes these arrangements allow us to strengthen our relationships
      with other retailers that do not directly compete with us, and to enhance our
      relationships with travel agents who source tourist traffic, without having
      to
      expand our product variety.




We
      generally collect referral income from retailers within 60 to 90 days from
      the
      date of a tourist’s purchase that generates the referral income. On the other
      hand, we generally pay referral fees to travel agents within 30 days of a
      tourist’s completion of travel. This arrangement exposes us to a certain amount
      of credit risk, but we have taken steps to mitigate this risk by shortening
      our
      collection period from retailers and negotiating extended grace periods for
      our
      payments to travel agents. Due to keen competition, we stopped collecting
      referral income from April, 2007.





For
      our retail operation, we source products from over 110 vendors. Our strong
      sales
      volume, rapid inventory turnover, and strong relationships with vendors allow
      us
      to take advantage of volume discounts and favorable trade credit
      terms.




Each
      of
      our shopping centers are 20,000 square feet, and the floor plans resemble a
      typical department store. We seek shopping center locations in areas with
      reasonable rent and readily available parking spaces for large tour buses.
      Because such locations tend to be in non-commercial areas of Hong Kong, tourists
      who are transported to our shopping centers generally have little opportunity
      to
      shop elsewhere. By selecting sites with very reasonable rents located in
      non-commercial areas, we are able to reduce our overhead expenses and face
      virtually no competition from other nearby retailers.




Our
      merchandising strategy is to provide our customers with a broad range of well
      known, branded products that are the most popular in their respective categories
      at prices consistently lower than could be obtained by our shoppers in mainland
      China. We seek to limit specific items in each product line to fast selling
      models, sizes, and colors, focusing on selling popular products at high volume.
      As such, our product line is relatively streamlined and each shopping center
      only carries approximately 1,100 active stock keeping units
      (“SKUs”).




We
      own
      and operate two trading subsidiaries - Raffle Limited and Sure Profits Trading
      Limited, which engage in the import and local distribution of consumer
      electronic products. We believe we have established a reputation of reliable,
      quality service among our business and retail customers. We source our products
      from suppliers worldwide in order to provide our customers with an extensive
      variety of products at competitive prices. We have also established a
      comprehensive quality assurance and service protocol. Our customers are entitled
      to a full refund within 180 days of their purchase of a product if the
      product does not meet their satisfaction. In cases where there is a
      manufacturer’s warranty, our customers may bring their products directly to the
      manufacturers in China, including Hong Kong and Macau, during the warranty
      period for repair. We mark receipts for our products with a special symbol
      to
      denote our guarantee that the product is authentic and sourced directly from
      the
      manufacturer or an authorized dealer.




26




We
      aggressively and strategically pursue development of our retail business with
      a
      focus on international tourists in Hong Kong. Over the past several years,
      we
      have become the largest retail enterprise in this market, and operated three
      shopping centers with a combined total area of 53,000 square feet in 2006.
      Due
      to the change in our marketing strategy to focus on higher quality customers,
      however, in the second half of 2006, we consolidated our three stores into
      two
      locations.




Tourists
      from mainland China account for over 90% of our customers. Because of our
      extensive product selection and high quality service, we believe we have become
      the well-regarded tourist shopping center for mainland China tour groups and
      other tour groups visiting Hong Kong.




**Recent
        Developments**
  *Change
        in Travel Patterns and Cost Containment Measures*
  The
        number of China inbound visitors to our stores dropped significantly in the
        second quarter of 2007, as compared to the first quarter of 2007, partially
        due
        to a shift toward individual travel as opposed to group tours. The number
        of
        visitors per day to our stores dropped from 109,695 to 88,332 in the second
        quarter as compared with the first quarter of 2007. Meanwhile, spending per
        capita decreased from US $82 to US $71 during the second quarter of 2007,
        as
        compared with the first quarter of 2007. In response to this downward shift
        in
        customer traffic, we have adopted immediate measures such as a reduction
        in the
        base salaries of senior staff with bonuses linked to retention and unpaid
        leave
        for general staff during slower periods. In addition, we have restructured
        the
        commission agreements we have with our travel agents; specifically, we have
        negotiated cuts in commission rates and began using progressive commission
        rates
        based on turnover in order to encourage quality tours and higher spending
        per
        tourist. Management believes these recent developments present some difficult
        challenges for us which are likely to harm our profitability in the near
        term.
        However, management also believes that is the company successfully adapts
        to
        these conditions, the company would be able to return to profitability, and
        that
        the continued growth in outbound tourism from China presents numerous promising
        long term opportunities for our Company.
  *Recently
        Enacted Refund Protection Scheme*
 
 On
        June
        15, 2007, the Hong Kong government implemented its “Refund Protection Scheme for
        Mainland China’s Inbound Tour Group Shoppers,” enacted by the Travel Industry
        Council of Hong Kong. The Refund Protection Scheme is aimed at protecting
        the
        consumer rights of mainland China’s tourist visitors to Hong Kong, and improving
        the service standards in the industry as a whole.
  Under
        the
        Refund Protection Scheme, retailers who intend to arrange for mainland China's
        Inbound group visitors must register with the Travel Industry Council and
        one of
        the conditions of registration is that registered retailers shall offer
        six-month, full refund protection to mainland China's inbound group visitors.
        As
        a part of the conditions of the Refund Protection Scheme, registered retailers
        must assist tour operators and inbound visitors seeking refunds. Registered
        retailers who fail to comply may be subjected to penalties imposed by the
        Travel
        Industry Council. The Company has registered with the Travel Industry Council
        under the new rules, and has begun offering a 180-day refund policy to its
        customers.
  Management
        believes the new Refund Protection Scheme will help boost confidence among
        China
        inbound visitors in the Hong Kong retail sector in the long run. However,
        management also anticipates an increase in returned products, as certain
        customers exercise their refund rights. Management believes that since the
        Company offers quality, genuine branded products, and has built and will
        continue to build a good reputation with its customers, the Company stands
        to
        benefit in the long run from these heightened industry standards. However,
        management believes that in the near term our financial results of operations
        will be negatively impacted by these heightened standards and implementation
        of
        the new rules, and anticipates undergoing an adjustment period which could
        last
        12 months or longer.
  *Changes
        in Management*
 
 On
        July
        1, 2007, Mr. Albert Wong resigned as our Chief Financial Officer. Also
        o n
        July 1, 2007, we entered into an employment agreement with Mr. Kwan Pui Wong
        whereby Mr. Kwan Pui Wong accepted the position of Chief Financial Officer
        of
        the Company to assume the responsibilities of our former Chief Financial
        Officer. Under the terms of our agreement, Mr. Kwan Pui Wong shall receive
        compensation comprised of an annual salary of HK $960,000 (USD $122,795)
        and
        certain employee benefits, including grants of stock options for the purchase
        of
        shares of our common stock to be granted from time to time in the sole
        discretion of our Board of Directors.
 
 In
        addition, we have experienced a higher level of turnover in our middle
        management in the second quarter of 2007, including the departure of our
        controller and public relations manager. The board of directors and senior
        management is presently undertaking efforts to fill these vacated positions.




**Quarterly
      Results May Fluctuate**




Our
      business is subject to some seasonality, with decreases in sales during the
      winter months due to decreases in travel and tourist activity, and increases
      in
      sales during the summer months due to increases in such activity. Due to the
      seasonality of our sales, our quarterly results will fluctuate, perhaps
      significantly. Our operating results can also be impacted by the supply of
      products from suppliers caused by manufacturing delays or delivery issues.
      Additionally, the offering of new products or utilization of new sales channels
      can cause our quarterly operating results to fluctuate. For a discussion of
      these and other risks related to the seasonality of our business, see
“ *Risk
      Factors* ”
in
      Part
      II below.




**Critical
      Accounting Policies and Estimates**




Management’s
      discussion and analysis of our financial condition and results of operations
      are
      based on our consolidated financial statements, which have been prepared in
      accordance with accounting principles generally accepted in the United States.
      The preparation of these financial statements requires us to make estimates
      and
      assumptions that affect the reported amounts of assets and liabilities and
      the
      disclosure of contingent assets and liabilities at the date of the financial
      statements as well as the reported net sales and expenses during the reporting
      periods. We evaluate our estimates and assumptions on an ongoing basis. We
      base
      our estimates on historical experience and on various other factors that we
      believe are reasonable under the circumstances, the results of which form the
      basis for making judgments about the carrying value of assets and liabilities
      that are not readily apparent from other sources. Actual results may differ
      from
      these estimates under different assumptions or conditions.




While
      our
      significant accounting policies are described in Note 2 to our consolidated
      financial statements, we believe that the following accounting policies are
      the
      most critical to aid you in fully understanding and evaluating our reported
      financial results.


*Revenue
        recognition* .
        Our
        revenue includes sales and referral income. Referral income is derived from
        referring our customers to other non-directly competitive shops. Sales and
        referral income are recognized when the following four revenue criteria are
        met:
        persuasive evidence of an arrangement exists, delivery has occurred, the
        selling
        price is fixed or determinable, and collectibility is reasonably assured.
        Sales
        revenue is recognized net of sales discount and sales return and allowances.
        Generally, customers may return merchandise within 180 days of purchase.
        Revenues are recognized net of expected returns, based upon management’s
        experience. Referral income is the income derived from referring customers
        to
        other non-directly competitive duty-free shops of which there is no associated
        cost of sales. Referral income is determined according to the number of visitors
        referred during the reporting period and recognized as occurred.


*Accounts
      receivable* .
      Accounts receivable consist primarily of trade receivables and amounts due
      from
      banks for customer credit card transactions. Accounts receivable are recognized
      and carried at the original invoiced amount less an allowance for any
      uncollectible accounts. Management reviews and adjusts this allowance
      periodically based on historical experience, current economic climate, and
      an
      evaluation of the collectibility of outstanding accounts. We evaluate the credit
      risks of our customers utilizing historical data and estimates of future
      performance.




27




*Inventories* .
      We
      value inventory at the lower of cost or market, using the first-in, first-out
      or
      weighted average basis method, and we regularly review the book value of
      discontinued product lines and SKUs to determine if these items are properly
      valued. If the market value of the product is less than cost, management will
      write down the related inventory to the estimated net realizable value.
      Management regularly evaluates the composition of its inventory to identify
      slow-moving and obsolete inventory and to determine if additional write-downs
      are required. This valuation requires significant judgment from management
      as to
      the salability of its inventory based on forecasted sales. It is particularly
      difficult to judge the potential sales of new products. Should forecasted sales
      fail to materialize, there would be a significant impact on the company’s
      results of operations and the valuation of our inventory, resulting in a charge
      to income in the period such determination is made.




*Property
      and equipment* .
      Property and equipment are recorded at cost less accumulated depreciation and
      amortization and impairment losses. Gains or losses on disposals are reflected
      as gain or loss in the year of disposal. The cost of improvements that extend
      the life of plant, property, and equipment are capitalized. These capitalized
      costs may include structural improvements, equipment, and fixtures. All ordinary
      repair and maintenance costs are expensed as incurred. Property and equipment
      held-for-sale are measured at the lower of their carrying amount or fair value
      less cost to sell. Depreciation or amortization for financial reporting purposes
      is provided using the straight-line method over the estimated useful lives
      of
      the assets.




*Impairment
      of long-lived assets* .
      We
      account for impairment of property and equipment and amortizable intangible
      assets in accordance with SFAS No. 144, *Accounting
      for the Impairment or Disposal of Long-Lived Assets* ,
      which
      requires us to evaluate a long-lived asset for recoverability when there is
      an
      event or circumstance that indicates the carrying value of the asset may not
      be
      recoverable. An impairment loss is recognized when the carrying amount of a
      long-lived asset or asset group is not recoverable (when carrying amount exceeds
      the gross, undiscounted cash flows from use and disposition) and is measured
      as
      the excess of the carrying amount over the asset’s (or asset group’s) fair
      value.




**Results
      of Operations**





***Comparison
      of Six Months Ended June 30, 2007 and June 30, 2006.***





*Sales* .
      For the
      six months ended June 30, 2007, our sales decreased from $29.9 million to
      $29.1 million compared to the six months ended June 30, 2006. The
      decrease in sales can be attributed to a shift toward individual travel as
      opposed to group tours and the effect of the Hong Kong government’s Refund
      Protection Scheme, which are discussed in the section above titled “Recent
      Developments.” For the first half year of 2007, additional sales of $12.5
      million were contributed by our new product line - watches. Out of our $29.1
      million in sales, approximately $0.4 million was referral income; $2.5 million
      was sales from trading segment, $15.3 million was other sales from retail
      segment and $0.3 million was profits from concessionaire sales. In January
      2007,
      we began cooperating with a watch retailer in Hong Kong in which we merchandized
      some high-valued watches consigned the products to the shop. The shop managed
      sales and relevant expenses, including selling expenses, to travel agents or
      operators. We earned net income on these watch sales, after all relevant
      expenses and commission to the shop and those relevant expenses were reflected
      in the cost of sales. The profit margin from our watch sales was about 6%.
      For
      the normal sales from retail of $15.3 million, the number of customer visits
      for
      the first six months ended June 30, 2007 dropped from 401,711 to 198,027, a
      decrease of 51%, compared with the same period in 2006. Although the number
      of
      customer visits declined, the average spending per capita increased from $67
      in
      the first half year of 2006 to $77 in the same period of 2007, as a result
      of
      our continued focus on quality customers and a shift toward more first-time
      visitors from higher income cities. In addition, we diversified our income
      sources and derived referral income by introducing tourists to other retailers
      that do not directly compete with us. For the six months ended June 30, 2007,
      we
      earned referral income of $0.4 million, which partially offset a reduction
      in
      retail sales. We also earned sales revenue from Prince Digital and another
      related party in the amount of $496,753 and $63,881 for the six months ended
      June 30, 2007 and 2006, respectively.




28




*Cost
      of Sales.* Cost
      of
      sales increased from $13.9 million for the six months ended June 30, 2006 to
      $20.2 million for the six months ended June 30, 2007, representing an increase
      of 45%. The increase of cost of sales was mainly due to the addition of watches
      to our product line. For watch sales considered alone, the cost of watch sales
      was $11.8 million and the profit margin was about 6%. Excluding the cost of
      sales from watches, and for purposes of comparison of our cost of sales in
      the
      same period in the prior year, all of our other cost of sales was $8.4 million.
      Our overall gross profit margin declined by 21%, from 54% for the six months
      ended June 30, 2006 to 33% for the same period in 2007. If the effect of watch
      sales is excluded, our gross profit margin with respect to all other parts
      of
      our business remained constant at 53% over the first half year of 2006
      and 2007.





*Selling,
      General and Administrative Expenses.* Selling,
      general and administrative expenses decreased from $14.7 million for the six
      months ended June 30, 2006 to $9.2 million for the same period in 2007. Our
      selling expenses alone decreased from $9.1 million for the six months ended
      June
      30, 2006 to $6.6 million for the six months ended June 30, 2007. As a percentage
      of retail sales, our selling expenses increased to 43% for the six months ended
      June 30, 2007 from 34% for the same period in 2006. For encouraging the travel
      agents and operators to accept our arrangement, higher selling loss per
      each dollar of revenue was incurred.





*Other
      (Loss) Income* .
      Other
      income mainly represented the gain on exchange from converting RMB received
      from
      customers to Hong Kong Dollars. For the first half year of 2007, higher finance
      costs were incurred due to issuing convertible debentures in October 2006.
      Financing costs included $511,650 of amortization of the discount on the
      debentures payable and $124,244 interest expenses on our convertible debentures
      issued in October of 2006. As a result, net other income decreased from $0.8
      million for the six months ended June 30, 2006 to net other loss of $0.3
      million for the same period in 2007.





***Comparison
      of Three Months Ended June 30, 2007 and June 30,
      2006.***





*Sales* .
      For the
      three months ended June 30, 2007, our sales decreased 16% from $15.6 million
      to
      $13 million relative to the three months ended June 30, 2006. The
      decrease in sales can be attributed to a shift toward individual travel as
      opposed to group tours and the effect of the Hong Kong government’s Refund
      Protection Scheme, which are discussed in the section above titled “Recent
      Developments.”For the second quarter of 2007, additional sales of $6.2
      million were contributed by our new product line - watches. Out of our $13
      million in sales, approximately $1.4 million was sales from trading segment,
      $6.3 million was other sales from retail segment and $0.1 million was the profit
      from concessionaire sales. In January 2007, we began cooperating with a watch
      retailer in Hong Kong in which we merchandized some high-valued watches
      consigned the products to the shop. The shop managed sales and relevant
      expenses, including selling expenses, to travel agents or operators. We earned
      net income on these watch sales, after all relevant expenses and commission
      to
      the shop and those relevant expenses were reflected in the cost of sales. The
      profit margin from our watch sales was about 2% for the second quarter of 2007.
      For the normal sales from retail of $6.3 million, the number of customer visits
      for the second quarter ended June 30, 2007 dropped from 209,860 to 88,332,
      a
      decrease of 58%, compared with the same quarter in 2006. Although the number
      of
      customer visits declined, the average spending per capita increased from $66
      in
      second quarter 2006 to $71 in the same period of 2007. Income from related
      party
      transactions amounted to $496,753 and $43,989 for the three months ended June
      30, 2007 and 2006, respectively.





*Cost
      of Sales.* Cost
      of
      sales increased from $6.9 million for the three months ended June 30, 2006
      to
      $10.0 million for the three months ended June 30, 2007, representing an increase
      of 43%. The increase of cost of sales was mainly due to the addition of watches
      to our product line. For watch sales considered alone, the cost of watch sales
      was $6.1 million and the profit margin was about 2%. Excluding the cost of
      sales
      from watches, and for purposes of comparison of our cost of sales in the same
      period in the prior year, all of our other cost of sales was $3.9 million.
      Our
      overall gross profit margin declined by 48%, from 55% for the three months
      ended
      June 30, 2006 to 29% for the same period in 2007. If the effect of watch sales
      is excluded, our gross profit margin with respect to all other parts of our
      business slightly dropped from 54% to 49% over the second quarter of 2006 and
      2007.




29




*Selling,
      General and Administrative Expenses.* Selling,
      general and administrative expenses decreased from $8.0 million for the three
      months ended June 30, 2006 to $3.7 million for the same period in 2007. Our
      selling expenses decreased from $4.7 million for the three months ended June
      30,
      2006 to $2.9 million for the three months ended June 30, 2007. As a percentage
      of retail sales, our selling expenses increased to 46% for the three months
      ended June 30, 2007 from 34% for the same period in 2006. For encouraging the
      travel agents and operators to accept our arrangement, higher selling expenses
      per each dollar of revenue was incurred.





*Other
      (Loss) Income* .
      Other
      income mainly represented the gain on exchange from converting RMB received
      from
      customers to Hong Kong Dollars. On the other hand, higher finance costs were
      incurred due to issuing convertible debentures in October 2006. For the
      three months ended June 30, 2007, financing costs included $308,536 of
      amortization of the discount on the debentures payable and $63,885 interest
      expenses on our convertible debentures issued in October of 2006. As a result,
      net other income decreased from $0.3 million for the three months ended June
      30,
      2006 to net other loss of $0.3 million for the same period in 2007.


**Business
        Segments**
 
 The
        Company’s operating businesses are structured and managed separately, according
        to the nature of their operations and the products and services they provide.
        The Company identifies its reportable segments based on management
        responsibility, and these reportable segments are (i) the trading segment
        (“Trading Segment”) and (ii) the retail segment (“Retail Segment”).
        Information on segments and reconciliations to income before the merger
        transactions expenses and income taxes are described in Note 16 to our
        consolidated financial statements and is incorporated herein by reference.
 
 *Trading
        Segment*
 
 Segment
        sales and profit for the Company’s Trading Segment were as follows:
 
 Sales
        revenues from external customers in the Trading Segment during the first
        half of
        2007 decreased 5% from $2.6 million for six months period ended June 30,
        2006 to
        $2.5 million.
 
 Total
        segment profit as a percentage of sales for the Trading Segment was 1.8%
        for the
        six months ended June 30, 2007, as compared to 31.0% for the same period
        in
        2006. The decrease in total segment profit as a percentage of sales resulted
        from setting lower profit margin to external customers due to keen competition
        in the market for the first half of 2007.
 
 *Retail
        Segment*
 
 Segment
        revenue and profit for the Retail Segment, were as follows:
 
 Sales
        revenues from external customers in the Retail Segment during the first half
        of
        2007 increased 2%, from $27.1 million for six months period ended June 30,
        2006
        to $27.6 million for the same period in 2007.
 
 Total
        segment profit as a percentage of sales for the Retail Segment was 0.1% for
        the
        first half 2007 and 10% for the first half of 2006 because of a large drop
        in
        high end visitors in the second quarter of 2007.
  **Liquidity
        and Capital Resources**





*Cash
      Flows.* For the
      six month period ended June 30, 2007, net cash flow used in operations was
      $1,534,732. The increase in net cash flow used in operations in 2007
      was due to a decrease in trade receivables. We collected almost all trade
      receivables derived from referral income in the first quarter of 2007.





Net
      cash
      flow used in investing activities in the second quarter of 2007 was $272,261,
      which was primarily due to purchases of office equipment.





Net
      cash
      flow used in financing activities was $119,520 mainly because we financed our
      acquisition of office equipment though capital lease arrangements.




We
      believe that our existing cash balances and anticipated cash flows from
      operations will be sufficient to meet our operating, acquisition and capital
      requirements for at least the next 12 months. However, there is no assurance
      that we will not need to raise additional equity or debt financing within this
      period. We also may require additional capital for other purposes not presently
      contemplated. If we are unable to obtain sufficient capital, we could be
      required to curtail our expenditures, including capital expenditures for
      property and equipment, which could harm our business.





**Contractual
      Obligations**





We
      have
      certain fixed contractual obligations and commitments that include future
      estimated payments. Changes in our business needs, cancellation provisions,
      changing interest rates, and other factors may result in actual payments
      differing from the estimates. We cannot provide certainty regarding the timing
      and amounts of payments. We present below a summary of the most significant
      assumptions used in our determination of amounts presented in the tables in
      order to assist in the review of this information within the context of our
      consolidated financial position, results of operations, and cash flows.





The
      following tables summarize our contractual obligations as of June 30, 2007,
      and
      the effect that these obligations are expected to have on our liquidity and
      cash
      flows in future periods.




30




**Payments
                Due by Period****Total**
            
            **Less than 1**
              **year**
            
            **1-3 Years**
            
            **4-5 Years**
            
            **5 Years +****(in
                thousands of dollars)***Contractual
                Obligations*:Total
                Indebtedness
            
            **562**
            
            
            **506**
            
            
            **56**
            
            
            **—**
            
            
            **—**Capital
                Lease Obligations
            
            **445**
            
            
            **313**
            
            
            **132**
            
            
            **—**
            
            
            **—**Operating
                Leases
            
            **822**
            
            
            **438**
            
            
            **384**
            
            
            **—**
            
            
            **—**Total
                Contractual Obligations:
            
            **1,829**
            
            
            **1,257**
            
            
            **572**
            
            
            **—**
            
            
            **—**




Total
      indebtedness consists of installment loans from financial institutions in Hong
      Kong.





Capital
      lease amounts primarily consist of vehicles and equipment to support our
      wholesale operations. See “Note 7— *Property
      and Equipment* ”
in
      the
      notes to the consolidated financial statements, included elsewhere in this
      report.





Operating
      lease amounts include minimum lease payments under our non-cancelable operating
      leases for office facilities, as well as limited computer and office equipment
      that we utilize under lease arrangements. The amounts presented are consistent
      with contractual terms and are not expected to differ significantly, unless
      a
      substantial change in our headcount needs requires us to exit an office facility
      early or expand our occupied space.





Other
      purchase obligation amounts include minimum purchase commitments for advertising
      and other goods and services that were entered into through our ordinary course
      of business.





**Off-Balance
      Sheet Arrangements**





We
      have
      not entered into any off-balance sheet arrangements that have or are reasonably
      likely to have a current or future effect on our financial condition, changes
      in
      financial condition, revenues or expenses, results of operations, liquidity,
      capital expenditures, or capital resources that would be considered material
      to
      investors.





**Effects
      of Inflation**





We
      are
      subject to price risks arising from price fluctuations in the market prices
      of
      the products that we sell. Price risks are managed by each business segment
      through productivity improvements and cost-containment measures. Management
      does
      not believe that inflation risk is material to our business or our consolidated
      financial position, results of operations, or cash flows.




**ITEM****3.**
              **QUANTITATIVE
                  AND QUALITATIVE DISCLOSURES ABOUT MARKET
                  RISK**




We
      do not
      use derivative financial instruments in our investment portfolio and have no
      foreign exchange contracts. Our financial instruments consist of cash and cash
      equivalents, trade accounts receivable, accounts payable, and long-term
      obligations. We consider investments in highly-liquid instruments purchased
      with
      a remaining maturity of 90 days or less at the date of purchase to be cash
      equivalents.




31




*Interest
      Rates* .
      Our
      exposure to market risk for changes in interest rates relates primarily to
      our
      short-term investments and short-term obligations; thus, fluctuations in
      interest rates do not have a material impact on the fair value of these
      securities. At June 30, 2007, we had approximately $625,180 in cash and cash
      equivalents. A hypothetical 5% increase or decrease in either short-term or
      long-term interest rates would not have a material impact on our earnings or
      loss, or the fair market value or cash flows of these instruments.





*Foreign
      Exchange Rates* .
      We
      generally transact business in Hong Kong Dollars, and we do not have significant
      exposure to exchange rates between and among the U.S. Dollar or Chinese Renminbi
      (RMB). Since 1983, the Hong Kong Dollar has been pegged to the U.S. Dollar
      and
      currently has an exchange rate of 7.82 Hong Kong Dollars for each U.S. Dollar.
      Our stores typically hold insignificant amounts of U.S. Dollars and RMB, i.e.,
      100,000 to 150,000 RMB, and $2,000 to $3,000 in U.S. Dollars. However, see
      the
      Risk Factor in Part II below entitled “Fluctuation in the value of RMB and Hong
      Kong Dollar relative to other currencies may have a material adverse effect
      on
      our business and/or an investment in our shares.”




**ITEM
                4.**
              
              **CONTROLS
                  AND PROCEDURES**


**CONTROLS
      AND PROCEDURES**





Based
      on
      an evaluation of the effectiveness of the Company’s disclosure controls and
      procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Securities
      Exchange Act of 1934 (the “Exchange Act”)) as of June 30, 2007, the Company’s
      Chief Executive Officer and Chief Financial Officer believe that the Company’s
      disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e)
      of
      the Exchange Act) are effective to ensure that information required to be
      disclosed by the Company in this report is accumulated and communicated to
      the
      Company’s management, including its principal executive officer and principal
      financial officer, as appropriate, to allow timely decisions regarding required
      disclosure. There have been no changes in the Company’s internal control over
      financial reporting identified in connection with the evaluation described
      above
      that occurred during our last fiscal quarter ended June 30, 2007, that has
      materially affected, or is reasonably likely to materially affect, the Company’s
      internal control over financial reporting.




32




**PART
      II. OTHER INFORMATION**




****ITEM 1.****
              
              **LEGAL PROCEEDINGS**




We
      are
      not currently involved in any material legal proceedings, nor have we been
      involved in any such proceedings that have had or may have a significant effect
      on our company. We are not aware of any other material legal proceedings pending
      against us.




****ITEM 1A.****
              
              **RISK FACTORS**





*You
      should carefully consider the risks described below together with all of the
      other information included in this report before making an investment decision
      with regard to our securities. The statements contained in or incorporated
      into
      these risk factors that are not historic facts are forward-looking statements
      that are subject to risks and uncertainties that could cause actual results
      to
      differ materially from those set forth in or implied by forward-looking
      statements. If any of the following risks actually occurs, our business,
      financial condition, or results of operations could be harmed. In that case,
      the
      trading price of our common stock could decline, and you may lose all or part
      of
      your investment.*





**Risks
      Relating to Our Business**





**We
      face intense competition and operate in an industry with limited barriers to
      entry, and some of our competitors may be better positioned to capitalize on
      the
      rapidly growing retail sector in our geographic area.**





The
      retail sector, in our geographic area, is rapidly evolving and intensely
      competitive. Many of our current and potential competitors have longer operating
      histories, larger customer bases, greater brand recognition, and significantly
      greater financial, marketing, technical, management, and other resources than
      we
      do. In addition, some of our competitors have used and may continue to use
      aggressive pricing or carry a larger inventory than we do. We expect that
      competition will further intensify in the future. Because barriers to entry
      are
      limited, current and new competitors may open retail locations that will compete
      with ours.





We
      believe that the primary competitive factors in the retail sector include brand
      recognition, price, shipping offers, product selection, product availability,
      and customer service. We currently compete against other retailers within the
      specialized niche of travel retail in Asia.





We
      may
      also experience significant competitive pressure if any of our suppliers were
      to
      initiate their own retail operations in the locations we serve. Since our
      suppliers have access to merchandise at very low costs, they could sell products
      at lower prices and maintain a higher gross margin on their product sales than
      we can. In this event, our current and potential customers may decide to
      purchase directly from these suppliers. Increased competition from any supplier
      capable of maintaining high sales volumes and acquiring products at lower prices
      than us could significantly reduce our market share and adversely impact our
      financial results.





We
      compete not only for customers, but also for favorable product allocations
      from
      product manufacturers. Some of our competitors could enter into exclusive
      distribution arrangements with our suppliers, deny us access to their products,
      and devote greater resources to marketing and promotional campaigns.





33




**The
      seasonality of our business places increased strain on our operations.**





We
      generally experience increases in sales during the summer months, as travel
      and
      tourist activity increases. On the other hand, we generally experience a
      decrease in sales during the winter months when there are fewer travelers.
      In
      addition, if we are unable to meet customer demand for our products during
      these
      peak periods, our revenues and future growth could be adversely affected.
      Furthermore, we may be unable to adequately staff our retail outlets and
      warehousing operations during these periods.





**Our
      future operating results may fluctuate and cause the price of our common stock
      to decline.**





We
      expect
      that our revenues and operating results will continue to fluctuate significantly
      from quarter to quarter due to various factors, many of which are beyond our
      control. The factors that could cause our operating results to fluctuate
      include, but are not limited to:




•
            
            seasonality
                of the business;




•
            
            price
                competition from other retailers;




•
            
            general
                price increases by suppliers and manufacturers;




•
            
            our
                ability to maintain and expand our distribution relationships;




•
            
            increases
                in the cost of advertising;




•
            
            unexpected
                increases in shipping costs or delivery times;




•
            
            our
                ability to build and maintain customer loyalty;




•
            
            the
                introduction of new services, products, and strategic alliances by
                us and
                our competitors;




•
            
            the
                success of our brand-building and marketing campaigns;




•
            
            government
                regulations, changes in tariffs, duties, and taxes;




•
            
            our
                ability to maintain, upgrade, and develop our retail stores;




•
            
            changes
                in our store leasing costs;




•
            
            the
                amount and timing of operating costs and capital expenditures relating
                to
                expansion of our business, operations, and infrastructure; and




•
            
            general
                economic conditions as well as economic conditions specific to the
                retail
                sector.





If
      our
      quarterly revenues or operating results fall below the expectations of investors
      or securities analysts, the price of our common stock could significantly
      decline.





**Our
      efforts to successfully develop private label brands are costly and may not
      generate corresponding revenues.**




34




Developing
      private label brands is an important part of our strategy to build future
      revenue and achieve higher profit margins. Accordingly, we intend to continue
      to
      invest in the development of our own brand of products in selected categories.
      These initiatives require significant expenditures. If we are unsuccessful
      in
      our development efforts, we may not be able to recover these expenses or
      increase our revenues or margins.





To
      promote our private label brands in response to competitive pressures, we may
      increase our marketing budget or otherwise increase our financial commitment
      to
      creating and maintaining brand loyalty among our customers. We cannot be certain
      that our advertising efforts will be a successful means of attracting customers
      or that this allocation of resources will provide additional revenues
      commensurate with this dedication of our resources. If we fail to promote and
      maintain our brand, or if we incur excessive expenses attempting to promote
      and
      maintain our brand, our business may be adversely affected.





**We
      depend on our relationships with tour companies to bring customers to retail
      locations, and losing these sources would adversely affect our revenues and
      financial results.**





We
      attract retail traffic by entering into arrangements with tour companies who
      schedule shopping tours with their customers. In order to maintain a flow of
      tourist traffic, we must continually monitor and maintain our relationships
      with
      the tour companies with which we do business. If the tour companies modify
      or
      terminate their relationship with us, we could lose customers, and traffic
      in
      our retail stores could decrease.





**If
      we fail to offer a broad selection of products and brands that customers find
      attractive, our revenues could decrease.**





In
      order
      to meet our strategic goals, we must successfully offer, on a continuous basis,
      a broad selection of appealing products that reflect our customers’ preferences.
      Consumer tastes are subject to frequent, significant, and sometimes
      unpredictable changes. To be successful in our line of business, our product
      offerings must be broad, deep in scope, and affordable to a wide range of
      consumers whose preferences may change regularly. We cannot predict with
      certainty that we will be successful in offering products that meet these
      requirements. If our product offerings fail to satisfy customers’ tastes or
      respond to changes in customer preferences, our revenues could decline. In
      addition, any failure to offer products that satisfy customers’ preferences
      could allow our competitors to gain market share.





**If
      we do not successfully optimize and operate our retail locations, our business
      could decline.**





If
      we do
      not successfully operate our retail locations, this could significantly limit
      our ability to meet customer demand. Because it is difficult to predict demand,
      we may not manage our facilities optimally, which may result in excess or
      insufficient inventory and distribution capacity. Failure to optimize inventory
      will increase our net shipping cost by requiring us to make long-distance
      shipments or partial shipments from different locations. As we continue to
      add
      warehouse capability or add new businesses with different inventory management
      requirements, operating our inventory management system becomes more
      challenging, and there can be no assurance that we will be able to operate
      our
      system effectively.





**We
      have limited control over the actions of our distributors, retailers, or their
      vendors.**




35




We
      rely
      on distributors for the sale of our branded products, and those distributors
      maintain inventory and prepare merchandise for shipment to retailers and
      individual customers. We have limited control over the products that our
      distributors purchase or keep in stock, and our arrangements with our
      distributors do not require them to set aside any amount of inventory to satisfy
      demand. Our distributors may not accurately forecast the products that will
      be
      in high demand. In addition, we have limited control over their sales process,
      shipping and order processing procedures. Although we have not experienced
      disruptions in the past, and we do not presently foresee possible disruptions
      in
      the near future, a widespread inability of our distributors to successfully
      supply our branded products, if it occurred, would substantially harm our
      business.





**We
      are dependent upon third parties for significant functions, and if these
      functions or operations are interrupted for any significant period of time
      or if
      we experience other problems with our third-party service providers, our
      business and results of operations would be substantially harmed.**





In
      addition, we rely upon third party tour operators for a large portion of our
      customer flow. As a result, we are subject to cancellations and disruptions
      due
      to factors that are beyond our control, including employee strikes and inclement
      weather. Further, increased fuel costs may adversely affect tourist traffic.
      If
      cooperating tour companies were to experience cancellations and disruptions,
      this could negatively affect our sales revenue.





**We
      rely on foreign sources for the supply of many of the products we sell.**





We
      rely
      on long term supply relationships with several manufacturers in the People’s
      Republic of China (“PRC”), and in the future may rely upon supply relationships
      with other foreign sources. Regional disruptions relating to political or
      environmental conditions could cause shipping delays, which could interfere
      with
      our ability to supply our customers and harm our financial results. A
      significant breakdown in the manufacturing process or among suppliers could
      result in product shortages, and our revenues could decline due to the loss
      of
      these suppliers and manufacturers.





**Our
      ability to manage our future growth is uncertain.**





We
      are
      currently anticipating a period of growth as a result of our corporate growth
      strategy, which aims to, among other things, further develop our distribution
      channels, expand our merchandise offerings, leverage our customer database,
      reach new customer segments, and increase traffic. In pursuing these objectives,
      the resulting strain on our managerial, operational, financial, and other
      resources could be significant. Success in managing such expansion and growth
      will depend, in part, upon the ability of senior management to manage
      effectively. Any failure to manage the anticipated growth and expansion could
      have a material adverse effect on our business.





**Our
      operations are based, to a certain extent, on the successful integration of
      certain supply chain and operating technologies. Our inability to integrate
      these technologies may negatively impact our ability to effectively manage
      inventory, and may harm our business and operating results.**





We
      rely
      on certain hardware and software systems, purchased from a third-party and
      customized by our technicians, to perform vital functions with respect to our
      operations. In addition, we rely upon hardware and software systems for
      warehouse management. Our inability to properly operate, implement, or integrate
      these technologies will negatively impact our product supply chain and may
      harm
      our business and operating results.





**Increased
      product returns will decrease our revenues and impact profitability.**




36




We
      make
      allowances for product returns in our financial statements based on historical
      return rates. In order to keep product returns low or at our estimated rates,
      we
      continuously monitor product purchases and returns and may change our product
      offerings based on the rates of returns. If our actual product returns
      significantly exceed our allowances for returns, especially as we expand into
      new product categories, our revenues and profitability could decrease. In
      addition, because our allowances are based on historical return rates, the
      introduction of new merchandise categories or new products, changes in our
      product mix, or other factors may cause actual returns to increase. Any new
      policies intended to reduce the number of product returns may result in customer
      dissatisfaction and fewer repeat customers.





**Our
      growth and operating results could be impaired if we are unable to meet our
      future capital needs.**





We
      may
      need to raise additional capital in the future to:




•
            
            fund
                more rapid expansion;




•
            
            acquire
                or expand into new retail locations, warehousing facilities, or office
                space;




•
            
            maintain,
                enhance, and further develop our information technology systems;




•
            
            develop
                new product categories or enhanced services;




•
            
            fund
                acquisitions; or




•
            
            respond
                to competitive pressures.





If
      we
      raise additional funds by issuing equity or convertible debt securities, the
      percentage ownership of our stockholders will be diluted. Furthermore, any
      new
      securities could have rights, preferences, and privileges senior to those of
      our
      common stock. We currently do not have any commitments for additional financing.
      We cannot be certain that additional financing will be available when and to
      the
      extent required or that, if available, it will be on acceptable terms. If
      adequate funds are not available on acceptable terms, we may not be able to
      fund
      our expansion, develop, or enhance our products or services or respond to
      competitive pressures.





**The
      loss of key members of our executive management could negatively affect our
      business.**





We
      depend
      on the continued services and performance of our executive management and other
      key personnel, in particular, Alex Chun Shan Yue, our Chief Executive Officer,
      and Danny Sau Kwong Leung, our Chief Operating Officer. The loss of any of
      these
      executive officers or other key persons could harm our business.





**We
      may be adversely affected by the financial health of the retail industry in
      Asia.**





We
      are
      subject to broad economic factors that drive consumer spending and maintain
      the
      health of the retail industry in Asia. These factors include, but are not
      limited to, unemployment rates, consumer credit levels, consumer confidence,
      and
      household discretionary income. If any of these or other economic factors should
      erode, consumer spending may fall, and the Asian retail industry may suffer
      a
      downturn. Consequently, our earnings would be adversely impacted by lower sales.





**We
      may be adversely affected by the trend towards retail trade consolidation.**




37




As
      we
      pursue our retail distribution strategy, our sales will be contingent upon
      favorable wholesale prices that we can obtain from retailers. If retailers
      merge
      or the retail industry consolidates, the larger, combined retailers will have
      significant pricing power because of the sheer size of their retail networks.
      As
      a result, we may not be able to obtain reasonable prices for our products.
      Consequently, our margins may decline, and our results of operations may be
      reduced. There can be no assurance that we will be able to obtain reasonable
      wholesale prices for our products under a scenario where retailers merge and
      consolidate into larger entities.





**Risks
      Related to Doing Business in China**


**Abrupt
        and forceful regulation by governmental authorities may impose costly
        requirements on our business, which could have a material adverse effect
        on our
        business and overall financial results.**
 
 Our
        industry, particularly the market segment dealing with inbound visitors from
        China, is relatively new, and until recent times it has been left unregulated.
        Governmental authorities in the PRC and in Hong Kong may impose regulations
        designed to protect consumers, or even to curtail what the PRC government
        might
        view as a loss of domestic retail sales, import duties and tax revenue. Changes
        in policies affecting the tourist retail industry may be enacted abruptly
        without transitional periods that may force us to make rapid and costly
        adjustments in our operations in an effort to comply. It is not always possible
        for management to anticipate changes in government policies, or the impact
        of
        those changes to our business.
 
 On
        June
        15, 2007, the Hong Kong government implemented its “Refund Protection Scheme for
        Mainland China’s Inbound Tour Group Shoppers,” enacted by the Travel Industry
        Council of Hong Kong. The Refund Protection Scheme is aimed at protecting
        the
        consumer rights of mainland China’s tourist visitors to Hong Kong, and improving
        the service standards in the industry as a whole.
  Under
        the
        Refund Protection Scheme, retailers who intend to arrange for mainland China's
        Inbound group visitors must register with the Travel Industry Council and
        one of
        the conditions of registration is that registered retailers shall offer
        six-month, full refund protection to mainland China's inbound group visitors.
        As
        a part of the conditions of the Refund Protection Scheme, registered retailers
        must assist tour operators and inbound visitors seeking refunds. Registered
        retailers who fail to comply may be subjected to penalties imposed by the
        Travel
        Industry Council. Asiamart has registered with the Travel Industry Council
        under
        the new rules, and has begun offering a 180-day refund policy to its customers.
  Management
        believes that in the near term Asiamart’s financial results of operations will
        be negatively impacted by these heightened standards and implementation of
        the
        new rules, and anticipates undergoing an adjustment period which could last
        12
        months or longer.


**Adverse
      changes in economic and political policies of the PRC government could have
      a
      material adverse effect on the overall economic growth of China, which could
      adversely affect our business.**





All
      of
      our business operations are currently conducted in Hong Kong, under the
      jurisdiction of the PRC government. Accordingly, our results of operations,
      financial condition, and prospects are subject, to a significant degree, to
      economic, political, and legal developments in China. China’s economy differs
      from the economies of most developed countries in many respects, including
      with
      respect to the amount of government involvement, level of development, growth
      rate, control of foreign exchange, and allocation of resources. While the PRC
      economy has experienced significant growth in the past 20 years, growth has
      been
      uneven across different regions and among various economic sectors of China.
      The
      PRC government has implemented various measures to encourage economic
      development and guide the allocation of resources. Some of these measures
      benefit the overall PRC economy, but may also have a negative effect on us.
      For
      example, our financial condition and results of operations may be adversely
      affected by government control over capital investments or changes in tax
      regulations that are applicable to us. Since early 2004, the PRC government
      has
      implemented certain measures to control the pace of economic growth. Such
      measures may cause a decrease in the level of economic activity in China, which
      in turn could adversely affect our results of operations and financial
      condition.




**Fluctuation
      in the value of RMB and the Hong Kong Dollar relative to other currencies may
      have a material adverse effect on our business and/or an investment in our
      shares.**





The
      value
      of RMB and the Hong Kong Dollar against the U.S. dollar and other currencies
      may
      fluctuate and is affected by, among other things, changes in political and
      economic conditions. Although the exchange rate between RMB and the U.S. dollar
      has been effectively pegged by the People’s Bank of China since 1994, and the
      rate between the Hong Kong Dollar has been pegged to the U.S. dollar since
      1983,
      there can be no assurance that these currencies will remain pegged to the U.S.
      dollar, especially in light of the significant international pressure on the
      Chinese government to permit the free floatation of RMB, which would result
      in
      fluctuations in the exchange rate between RMB and the U.S. dollar, and other
      geopolitical factors. If RMB were to increase in value against the dollar,
      for
      example, mainland Chinese consumers would experience a reduction in the relative
      prices of goods and services, which may translate into a positive increase
      in
      sales. On the other hand, a decrease in the value of RMB against the dollar
      would have the opposite effect. In addition, a strengthening of the U.S. dollar
      against the Hong Kong Dollar, if it occurred, would adversely affect the value
      of your investment.





**We
      face risks related to health epidemics and other outbreaks.**





Our
      business could be adversely affected by the effects of SARS and other epidemics
      or outbreaks. China reported a number of cases of SARS in the spring of 2003,
      which severely impacted the tourism industry for many months. Any prolonged
      recurrence of SARS or other adverse public health developments in China could
      negatively impact tourism in Hong Kong, which would have a material adverse
      effect on our business operations. For instance, health or other government
      regulations adopted in response may require temporary travel restrictions,
      or
      even closure of our facilities or offices. Such closures would severely disrupt
      our customer flow and business operations, and adversely affect our results
      of
      operations. We have not adopted any written preventive measures or contingency
      plans to combat any future outbreak of SARS or any other epidemic.




38


**Risks
      Related to an Investment in Our Securities**





**To
      date, we have not paid any cash dividends, and no cash dividends will be paid
      in
      the foreseeable future.**





We
      do not
      anticipate paying cash dividends on our common stock in the foreseeable future,
      and we may not have sufficient funds legally available to pay dividends. Even
      if
      the funds are legally available for distribution, we may nevertheless decide
      not
      to pay any dividends. We intend to retain all earnings for the company’s
      operations.





**The
      application of the “Penny Stock” rules could adversely affect the market price
      of our common stock and increase your transaction costs to sell those shares.**





If
      our
      stock becomes quoted on an exchange, as long as the trading price of our common
      shares is below $5 per share, the open-market trading of our common shares
      will
      be subject to the “penny stock” rules. The “penny stock” rules impose additional
      sales practice requirements on broker-dealers who sell securities to persons
      other than established customers and accredited investors (generally those
      with
      assets in excess of $1,000,000 or annual income exceeding $200,000 or $300,000
      together with their spouse). For transactions covered by these rules, the
      broker-dealer must make a special suitability determination for the purchase
      of
      securities and have received the purchaser’s written consent to the transaction
      before the purchase. Additionally, for any transaction involving a penny stock,
      unless exempt, the broker-dealer must deliver, before the transaction, a
      disclosure schedule prescribed by the Securities and Exchange Commission
      relating to the penny stock market. The broker-dealer also must disclose the
      commissions payable to both the broker-dealer and the registered representative
      and current quotations for the securities. Finally, monthly statements must
      be
      sent disclosing recent price information on the limited market in penny stocks.
      These additional burdens imposed on broker-dealers may restrict the ability
      or
      decrease the willingness of broker-dealers to sell our common shares, and may
      result in decreased liquidity for our common shares and increased transaction
      costs for sales and purchases of our common shares as compared to other
      securities.





**Our
      common shares are not currently traded, and if and when our stock becomes
      quoted, you may be unable to sell at or near ask prices or at all if you need
      to
      sell or liquidate your shares.**





We
      cannot
      predict the extent to which an active public market for our common stock will
      develop or be sustained. However, we do not rule out the possibility of applying
      for listing on the Nasdaq Small Cap Market or other markets.





Our
      common shares are currently not traded, and if and when they do become quoted,
      they may be “thinly-traded” on the “Over-the-Counter Bulletin Board”, meaning
      that the number of persons interested in purchasing our common shares at or
      near
      bid prices at any given time may be relatively small or non-existent. This
      situation is attributable to a number of factors, including the fact that we
      are
      a small company which is still relatively unknown to stock analysts, stock
      brokers, institutional investors, and others in the investment community that
      generate or influence sales volume, and that even if we came to the attention
      of
      such persons, they tend to be risk-averse and would be reluctant to follow
      an
      unproven company such as ours or purchase or recommend the purchase of our
      shares until such time as we became more seasoned and viable. As a consequence,
      there may be periods of several days or more when trading activity in our shares
      is minimal or non-existent, as compared to a seasoned issuer which has a large
      and steady volume of trading activity that will generally support continuous
      sales without an adverse effect on share price. We cannot give you any assurance
      that a broader or more active public trading market for our common stock will
      develop or be sustained, or that trading levels will be sustained.




39




Stockholders
      should be aware that, according to SEC Release No. 34-29093, the market for
      penny stocks has suffered in recent years from patterns of fraud and abuse.
      Such
      patterns include (1) control of the market for the security by one or a few
      broker-dealers that are often related to the promoter or issuer;
      (2) manipulation of prices through prearranged matching of purchases and
      sales and false and misleading press releases; (3) boiler room practices
      involving high-pressure sales tactics and unrealistic price projections by
      inexperienced sales persons; (4) excessive and undisclosed bid-ask
      differentials and markups by selling broker-dealers; and (5) the wholesale
      dumping of the same securities by promoters and broker-dealers after prices
      have
      been manipulated to a desired level, along with the resulting inevitable
      collapse of those prices and with consequent investor losses. Our management
      is
      aware of the abuses that have occurred historically in the penny stock market.
      Although we do not expect to be in a position to dictate the behavior of the
      market or of broker-dealers who participate in the market, management will
      strive within the confines of practical limitations to prevent the described
      patterns from being established with respect to our securities. The occurrence
      of these patterns or practices could increase the future volatility of our
      share
      price.





**Our
      corporate actions are substantially controlled by our principal stockholders
      and
      affiliated entities.**





Our
      principal stockholders and their affiliated entities own approximately 80%
      of
      our outstanding ordinary shares, representing approximately 80% of our voting
      power. These stockholders, acting individually or as a group, could exert
      substantial influence over matters such as electing directors and approving
      mergers or other business combination transactions. In addition, because of
      the
      percentage of ownership and voting concentration in these principal stockholders
      and their affiliated entities, elections of our board of directors will
      generally be within the control of these stockholders and their affiliated
      entities. While all of our stockholders are entitled to vote on matters
      submitted to our stockholders for approval, the concentration of shares and
      voting control presently lies with these principal stockholders and their
      affiliated entities. As such, it would be difficult for stockholders to propose
      and have approved proposals not supported by management. There can be no
      assurances that matters voted upon by our officers and directors in their
      capacity as stockholders will be viewed favorably by all stockholders of the
      company.





**The
      elimination of monetary liability against our directors, officers, and employees
      under Delaware law and the existence of indemnification rights to our directors,
      officers, and employees may result in substantial expenditures by our company
      and may discourage lawsuits against our directors, officers and employees.**





Our
      certificate of incorporation does not contain any specific provisions that
      eliminate the liability of our directors for monetary damages to our company
      and
      stockholders, but we are prepared to give such indemnification to our directors
      and officers to the extent provided by Delaware law. We may also have
      contractual indemnification obligations under our employment agreements with
      our
      officers. The foregoing indemnification obligations could result in our company
      incurring substantial expenditures to cover the cost of settlement or damage
      awards against directors and officers, which we may be unable to recoup. These
      provisions and resultant costs may also discourage our company from bringing
      a
      lawsuit against directors and officers for breaches of their fiduciary duties,
      and may similarly discourage the filing of derivative litigation by our
      stockholders against our directors and officers even though such actions, if
      successful, might otherwise benefit our company and stockholders.




40




**Legislative
      actions, higher insurance costs, and potential new accounting pronouncements
      may
      impact our future financial position and results of operations.**





There
      have been regulatory changes, including the Sarbanes-Oxley Act of 2002, and
      there may potentially be new accounting pronouncements or additional regulatory
      rulings that will have an impact on our future financial position and results
      of
      operations. The Sarbanes-Oxley Act of 2002 and other rule changes as well as
      proposed legislative initiatives following the Enron bankruptcy are likely
      to
      increase general and administrative costs and expenses. In addition, insurers
      are likely to increase premiums as a result of high claims rates over the past
      several years, which we expect will increase our premiums for insurance
      policies. Further, there could be changes in certain accounting rules. These
      and
      other potential changes could materially increase the expenses we report under
      generally accepted accounting principles, and adversely affect our operating
      results.





**Past
      activities of the company and its affiliates may lead to future liability for
      the company.**





Prior
      to
      our entry into the Agreement and Plan of Share Exchange (“Share Exchange
      Agreement”) on June 22, 2006, the Horizon Group was engaged in the
      Company’s operations. Although for a period of two years after the Closing Date
      the major shareholders of the Horizon Group will indemnify the Company against
      any loss, liability, claim, damage, or expense arising out of or based on any
      breach of or inaccuracy in any of their representations and warranties made
      in
      the Share Exchange Agreement, any liabilities relating to such prior business
      against which the Company is not completely indemnified may have a material
      adverse effect on the Company.





**We
      may need additional capital, and the sale of additional shares or other equity
      securities could result in additional dilution to our shareholders.**





We
      believe that our current cash and cash equivalents, anticipated cash flow from
      operations and the net proceeds from this offering will be sufficient to meet
      our anticipated cash needs for the near future. We may, however, require
      additional cash resources due to changed business conditions or other future
      developments, including any investments or acquisitions we may decide to pursue.
      If our resources are insufficient to satisfy our cash requirements, we may
      seek
      to sell additional equity or debt securities or obtain a credit facility. The
      sale of additional equity securities could result in additional dilution to
      our
      shareholders. The incurrence of indebtedness would result in increased debt
      service obligations and could result in operating and financing covenants that
      would restrict our operations. We cannot assure you that financing will be
      available in amounts or on terms acceptable to us, if at all.





**You
      may face difficulties in protecting your interests, and your ability to protect
      your rights through the U.S. federal courts may be limited because our
      subsidiaries are incorporated in non-U.S. jurisdictions, we conduct
      substantially all of our operations in Hong Kong, and all of our officers reside
      outside the United States.**





Although
      we are incorporated in Delaware, we conduct substantially all of our operations
      in China through our wholly owned subsidiaries in Hong Kong. All of our officers
      reside outside the United States and some or all of the assets of those persons
      are located outside of the United States. As a result, it may be difficult
      or
      impossible for you to bring an action against us or against these individuals
      in
      Hong Kong in the event that you believe that your rights have been violated
      under U.S. securities laws or otherwise. Even if you are successful in bringing
      an action of this kind, the laws of Hong Kong may render you unable to enforce
      a
      judgment against our assets or the assets of our directors and officers.




41




As
      a
      result of all of the above, our public shareholders may have more difficulty
      in
      protecting their interests through actions against our management, directors,
      or
      major stockholders than would shareholders of a corporation doing business
      entirely within the United States.





**If
      we fail to maintain an effective system of internal controls, we may not be
      able
      to accurately report our financial results or prevent fraud.**





We
      will
      be subject to reporting obligations under the U.S. securities laws. The
      Securities and Exchange Commission (“SEC”), as required by Section 404 of
      the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”), adopted rules requiring
      every public company to include a management report on such company’s internal
      controls over financial reporting in its annual report, which contains
      management’s assessment of the effectiveness of the company’s internal controls
      over financial reporting. In addition, an independent registered public
      accounting firm must attest to and report on management’s assessment of the
      effectiveness of the company’s internal controls over financial reporting. These
      requirements will first apply to our annual report on Form 10-K for the fiscal
      year ending December 31, 2007. Our management may conclude that our
      internal controls over our financial reporting are not effective. Moreover,
      even
      if our management concludes that our internal controls over financial reporting
      are effective, our independent registered public accounting firm may still
      decline to attest to our management’s assessment or may issue a report that is
      qualified if it is not satisfied with our controls or the level at which our
      controls are documented, designed, operated, or reviewed, or if it interprets
      the relevant requirements differently from us. Our reporting obligations as
      a
      public company will place a significant strain on our management, operational,
      and financial resources and systems for the foreseeable future. Effective
      internal controls, particularly those related to revenue recognition, are
      necessary for us to produce reliable financial reports and are important to
      help
      prevent fraud. As a result, our failure to achieve and maintain effective
      internal controls over financial reporting could result in the loss of investor
      confidence in the reliability of our financial statements, which in turn could
      harm our business and negatively impact the trading price of our stock.
      Furthermore, we anticipate that we will incur considerable costs and use
      significant management time and other resources in an effort to comply with
      Section 404 and other requirements of the Sarbanes-Oxley Act.





**We
      will incur increased costs as a result of being a public company.**





As
      a
      public company, we will incur significant legal, accounting, and other expenses
      that we did not incur as a private company. In addition, the Sarbanes-Oxley
      Act,
      as well as new rules subsequently implemented by the SEC, have required changes
      in corporate governance practices of public companies. We expect these new
      rules
      and regulations to increase our legal, accounting, and financial compliance
      costs and to make certain corporate activities more time-consuming and costly.
      In addition, we will incur additional costs associated with our public company
      reporting requirements. We are currently evaluating and monitoring developments
      with respect to these new rules, and we cannot predict or estimate the amount
      of
      additional costs we may incur, or the timing of such costs.




**ITEM 2.**
              
              **UNREGISTERED
                SALES OF
                EQUITY SECURITIES AND USE OF
                PROCEEDS**


Not
      applicable.




****ITEM
                3.****
              
              **DEFAULTS
                UPON SENIOR
                SECURITIES**




Not
      applicable.




**ITEM
                4.**
              
              **SUBMISSION
                OF MATTERS TO
                A VOTE OF SECURITY HOLDERS**
  Not
        applicable.
  42


****ITEM
                5.****
              
              **OTHER
                INFORMATION**


Not
      applicable.




****ITEM
                6.****
              
              **EXHIBITS
                AND REPORTS ON
                FORM 8-K**


The
      following exhibits are included in this report or incorporated by reference
      into
      this report:





**Exhibit**
              **Number**
            
            **Description**10.1
            
            Employment
                Agreement by and between the Company and Mr. Kwan Pui Wong, dated
                July 1,
                2007. (Incorporated herein by reference to Form 8-K filed with the
                U.S.
                Securities and Exchange Commission on July 6, 2007.)31.1
            
            Rule
                13a-14(a) / 15d-14(a)(4) Certification by the Company’s Chief Executive
                Officer. (Filed herewith.)31.2
            
            Rule
                13a-14(a) / 15d-14(a)(4) Certification by the Company’s Chief Financial
                Officer. (Filed herewith.)32.1
            
            Section
                1350 Certification by the Company’s Chief Executive Officer. (Filed
                herewith.)32.2
            
            Section
                1350 Certification by the Company’s Chief Financial Officer. (Filed
                herewith.)





43




**SIGNATURES**





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




**ASIAMART,
                INC.**
              a
                Delaware corporationDated: 
                August 20, 2007
            By:
            /s/
                Alex YueAlex
              YuePresident
                and Chief Executive Officer
              (Principal
                Executive Officer)




Dated: 
                August 20, 2007
            By:
            /s/
                Kwan Pui WongKwan
              Pui WongChief
                Financial Officer
              (Principal
                Financial and Accounting Officer)




44