**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 September 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**
                (State
                  of Incorporation)
              
              **88-0405437**
                (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  o




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 o Accelerated
      Filer  o 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 o No o





APPLICABLE
      ONLY TO CORPORATE ISSUERS:




As
        of
        September 30, 2007, the Registrant had 24,598,344 shares of Common Stock
        outstanding.









**ASIAMART,
      INC.**





**INDEX**





Page NumberPART
                I. Financial StatementsItem
                1.
            Financial
                Information
            1Consolidated
                Balance Sheets as of September 30, 2007 (Unaudited) and December
                31,
                2006
            ****1Consolidated
                Statements of Operations for the Three Months and Nine Months Ended
                September 30, 2007 and 2006 (Unaudited)
            2Consolidated
                Statements of Shareholders' Equity
            3Consolidated
                Statements of Cash Flows for the Nine Months Ended September 30,
                2007 and
                2006 (Unaudited)
            4Notes
                to Consolidated Financial Statements - September 30, 2007
                (Unaudited)
            5Item
                2.
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            21Item
                3.
            Quantitative
                and Qualitative Disclosures About Market Risk
            28Item
                4.
            Controls
                and Procedures
            28**PART
                II. Other Information**Item
                1.
            Legal
                Proceedings
            29Item
                1A.
            Risk
                Factors
            29Item
                2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            38Item
                3.
            Defaults
                Upon Senior Securities
            38Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            38Item
                5.
            Other
                Information
            39Item
                6.
            Exhibits
            39Signatures
            
            40








**PART
      I. FINANCIAL INFORMATION**





**ITEM
      1.**  **FINANCIAL
      STATEMENTS**


ASIAMART,
        INC. AND SUBSIDIARIES
 
 CONSOLIDATED
        BALANCE SHEETS
 AS
        OF
        SEPTEMBER 30, 2007 AND DECEMBER 31, 2006
  2007
              
              2006(UNAUDITED)ASSETSCURRENT
                  ASSETS:Cash
                  and cash equivalents
              
              $
              488,934
              
              $
              2,560,304Trade
                  accounts receivable, net allowance for doubtful accounts of $30,864
                  and
                  $19,290 and net of allowance for sales returns of $257,200 and
                  $0 as of
                  September 30, 2007 and December 31, 2006, respectively
              
              
              2,727,986
              
              
              4,250,898Inventories
              
              
              3,254,847
              
              
              1,042,024Deposits
                  and prepaid expenses
              
              
              2,014,206
              
              
              1,264,949Other
                  receivables
              
              
              502,075
              
              
              560,185Total
                  current assets
              
              
              8,988,048
              
              
              9,678,360PROPERTY
                  AND EQUIPMENT, net
              
              
              913,016
              
              
              678,875OTHER
                  ASSETS:Long-term
                  loan, net
              
              
              1,310,296
              
              
              1,030,617Long-term
                  rental and utilities deposits
              
              
              18,219
              
              
              14,095Debt
                  issuance costs, net
              
              
              210,847
              
              
              289,914Total
                  other assets
              
              
              1,539,362
              
              
              1,334,626Total
                  assets
              
              $
              11,440,426
              
              $
              11,691,861LIABILITIES 
                  AND  SHAREHOLDERS'  EQUITYCURRENT
                  LIABILITIES:Accounts
                  payable
              
              $
              1,623,986
              
              $
              1,681,600Accrued
                  liabilities
              
              
              820,583
              
              
              1,018,409Customer
                  deposits
              
              
              10,978
              
              
              11,184Due
                  to shareholders
              
              
              285,619
              
              
              304,360Taxes
                  payable
              
              
              192,874
              
              
              312,322Other
                  payable
              
              
              60,483
              
              
              102,080Current
                  maturities of long-term debt
              
              
              652,520
              
              
              834,035Total
                  current liabilities
              
              
              3,647,043
              
              
              4,263,990LONG-TERM
                  LIABILITIES:Deferred
                  tax liabilities
              
              
              15,508
              
              
              15,508Long-term
                  debt
              
              
              54,148
              
              
              88,359Debentures
                  payable, net of discount of $2,061,314 and $2,828,789 as of September
                  30,
                  2007 and December 31, 2006, respectively
              
              
              1,008,581
              
              
              241,106Total
                  long - term liabilities
              
              
              1,078,237
              
              
              344,973Total
                  liabilities
              
              
              4,725,280
              
              
              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, 24,598,344
                  and
                  24,535,844 shares issued and outstanding as of September 30, 2007
                  and
                  December 31, 2006
              
              
              2,460
              
              
              2,454Additional
                  paid-in-capital
              
              
              3,455,435
              
              
              3,455,441Retained
                  earnings
              
              
              3,166,572
              
              
              3,577,445Accumulated
                  other comprehensive income
              
              
              90,679
              
              
              47,558Total
                  shareholders' equity
              
              
              6,715,146
              
              
              7,082,898Total
                  liabilities and shareholders' equity
              
              $
              11,440,426
              
              $
              11,691,861
 
 The
        accompanying notes are an integral part of this statement.
 
 1
  ASIAMART,
        INC. AND SUBSIDIARIES
 
 CONSOLIDATED
        STATEMENTS OF OPERATION AND OTHER COMPREHENSIVE INCOME
 (UNAUDITED)
 
 Three Months Ended September 30,
              
              Nine Months Ended September 30,2007
              
              2006
              
              2007
              
              2006REVENUESales
              
              $
              11,893,386
              
              $
              11,987,991
              
              $
              41,026,452
              
              $
              41,589,214Referral
                  income
              
              
              -
              
              
              -
              
              
              426,442
              
              
              361,484Related
                  party
              
              
              -
              
              
              -
              
              
              496,753
              
              
              63,881Total
                  Revenue
              
              
              11,893,386
              
              
              11,987,991
              
              
              41,949,647
              
              
              42,014,579COST
                  OF SALES
              
              
              5,742,136
              
              
              5,593,468
              
              
              25,916,759
              
              
              19,482,643GROSS
                  PROFIT
              
              
              6,151,250
              
              
              6,394,523
              
              
              16,032,888
              
              
              22,531,936SELLING,
                  GENERAL AND ADMINISTRATIVE EXPENSES
              
              
              6,846,560
              
              
              5,861,641
              
              
              16,078,137
              
              
              19,749,599MERGER
                  TRANSACTION EXPENSE
              
              
              -
              
              
              -
              
              
              -
              
              
              855,867(LOSS)
                  INCOME FROM OPERATIONS
              
              
              (695,310
              )
              
              532,882
              
              
              (45,249
              )
              
              1,926,470OTHER
                  INCOME (EXPENSE), net
              
              
              113,671
              
              
              569,822
              
              
              (234,413
              )
              
              1,295,186(LOSS)
                  INCOME BEFORE PROVISION FOR INCOME TAXES
              
              
              (581,639
              )
              
              1,102,704
              
              
              (279,662
              )
              
              3,221,656(CREDIT)
                  PROVISION FOR INCOME TAXES
              
              
              (81,695
              )
              
              (23,896
              )
              
              131,211
              
              
              436,760NET
                  (LOSS) INCOME
              
              
              (499,944
              )
              
              1,126,600
              
              
              (410,873
              )
              
              2,784,896OTHER
                  COMPREHENSIVE INCOME:Foreign
                  currency translation adjustment
              
              
              41,424
              
              
              (4,789
              )
              
              43,121
              
              
              (13,137
              )COMPREHENSIVE
                  (LOSS) INCOME
              
              $
              (458,520
              )
              $
              1,121,811
              
              $
              (367,752
              )
              $
              2,771,759(LOSS)
                  EARNINGS PER SHARE:Basic
              
              $
              (0.020
              )
              $
              0.046
              
              $
              (0.017
              )
              $
              0.114Diluted
              
              $
              (0.020
              )
              $
              0.046
              
              $
              (0.017
              )
              $
              0.114WEIGHTED
                  AVERAGE SHARES OUTSTANDING:Basic
              
              
              24,598,344
              
              
              24,535,844
              
              
              24,589,415
              
              
              24,535,844Diluted
              
              
              24,598,344
              
              
              24,535,844
              
              
              24,589,415
              
              
              24,535,844
 
 The
        accompanying notes are an integral part of this statement.
 
 2
 
 ASIAMART,
        INC. AND SUBSIDIARIES
 
 CONSOLIDATED
        STATEMENTS OF SHAREHOLDERS' EQUITY
  AccumulatedCommon Stock
                
                Additional
                
                
                
                otherPar
                
                Paid-in
                
                Retained
                
                comprehensiveShares
                
                value
                
                capital
                
                earnings
                
                income
                
                TotalsBALANCE,
                    December 31, 2005
                
                
                24,535,844
                
                $
                2,454
                
                $
                385,546
                
                $
                5,079,898
                
                $
                18,611
                
                $
                5,486,509Net
                    Income
                
                
                
                
                
                
                
                
                
                
                
                2,784,896
                
                
                
                
                
                2,784,8962006
                    Special Dividend
                
                
                
                
                
                
                
                
                
                
                
                (4,651,483
                )
                
                
                
                
                (4,651,483
                )Warrants
                    issuedConversion
                    optionForeign
                    currency translation adjustment
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (13,137
                )
                
                (13,137
                )BALANCE,
                    September 30, 2006, (unaudited)
                
                
                24,535,844
                
                $
                2,454
                
                $
                385,546
                
                $
                3,213,311
                
                $
                5,474
                
                $
                3,606,785Net
                    Income
                
                
                
                
                
                
                
                
                
                
                
                364,134
                
                
                
                
                
                364,1342006
                    Special DividendWarrants
                    issued
                
                
                
                
                
                
                
                
                1,000,757
                
                
                
                
                
                
                
                
                1,000,757Conversion
                    option
                
                
                
                
                
                
                
                
                2,069,138
                
                
                
                
                
                
                
                
                2,069,138Foreign
                    currency translation adjustment
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                42,084
                
                
                42,084BALANCE,
                    December 31, 2006
                
                
                24,535,844
                
                $
                2,454
                
                $
                3,455,441
                
                $
                3,577,445
                
                $
                47,558
                
                $
                7,082,898Net
                    Income
                
                
                
                
                
                
                
                
                
                
                
                (410,873
                )
                
                
                
                
                (410,873
                )Cashless
                    conversion of warrants
                
                
                62,500
                
                
                6
                
                
                (6
                )
                
                
                
                
                
                
                
                -Foreign
                    currency translation adjustment
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                43,121
                
                
                43,121BALANCE,
                    September 30, 2007, (unaudited)
                
                
                24,598,344
                
                $
                2,460
                
                $
                3,455,435
                
                $
                3,166,572
                
                $
                90,679
                
                $
                6,715,146
 
 The
        accompanying notes are an integral part of this statement.
 
 3
 
 ASIAMART,
        INC. AND SUBSIDIARIES
 
 CONSOLIDATED
        STATEMENTS OF CASH FLOWS
 FOR
        THE
        NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006
 (UNAUDITED)
  2007
                
                2006CASH
                    FLOWS FROM OPERATING ACTIVITIES:Net
                    income
                
                $
                (410,873
                )
                $
                2,784,896Adjustments
                    to reconcile net income to cash (used in) provided by operating
                    activities:Depreciation
                    and amortization
                
                
                188,645
                
                
                143,234Amortization
                    of debt issuance cost
                
                
                79,068
                
                
                -Amortization
                    of discount on convertible debentures
                
                
                767,475
                
                
                -Loss
                    on sale of assets
                
                
                -
                
                
                302Bad
                    debt expense
                
                
                11,524
                
                
                -Sales
                    return allowance
                
                
                256,080
                
                
                -Change
                    in operating assets and liabilitiesTrade
                    accounts receivable
                
                
                1,255,269
                
                
                (2,045,669
                )Inventories
                
                
                (2,201,571
                )
                
                226,937Deposits,
                    prepaid expenses and other receivables
                
                
                (685,307
                )
                
                (1,231,543
                )Accounts
                    payable
                
                
                (59,971
                )
                
                263,093Accrued
                    liabilities and customer deposits
                
                
                (198,766
                )
                
                15,354Taxes
                    payable
                
                
                (119,436
                )
                
                407,008Other
                    payable
                
                
                (41,574
                )
                
                -Net
                    cash (used in) provided by operating activities
                
                
                (1,159,437
                )
                
                563,612CASH
                    FLOWS FROM INVESTING ACTIVITIES:Proceeds
                    in amounts due from shareholders
                
                
                -
                
                
                3,740,819Proceeds
                    in amounts due from related parties
                
                
                -
                
                
                123,346Payments
                    to shareholders
                
                
                (19,131
                )
                
                -Long-term
                    loans to staff
                
                
                (19,789
                )
                
                -Long-term
                    loans to travel agency
                
                
                (257,074
                )
                
                -Decrease
                    in notes and loans receivables
                
                
                -
                
                
                70,201Decrease
                    in long term rental and utility deposit
                
                
                (4,084
                )
                
                -Proceeds
                    from disposal of property and equipment
                
                
                -
                
                
                465,124Purchase
                    of property and equipment
                
                
                (94,212
                )
                
                (371,825
                )Net
                    cash (used in) provided by investing activities
                
                
                (394,290
                )
                
                4,027,665CASH
                    FLOWS FROM FINANCING ACTIVITIES:Payment
                    on amounts due to related parties
                
                
                -
                
                
                (201,757
                )Payment
                    of dividends
                
                
                -
                
                
                (4,651,483
                )Proceeds
                    from short term loan
                
                
                255,800
                
                
                -Repayment
                    of short term loan
                
                
                (168,798
                )
                
                -Proceeds
                    from installment loan
                
                
                128,040
                
                
                -Repayment
                    of installment loan
                
                
                (383,274
                )
                
                (50,823
                )Proceeds
                    from capital lease
                
                
                -
                
                
                356,084Repayment
                    of capital lease obligations
                
                
                (354,591
                )
                
                (410,012
                )Net
                    cash used in financing activities
                
                
                (522,823
                )
                
                (4,957,991
                )EFFECT
                    OF EXCHANGE RATE ON CASH
                
                
                5,180
                
                
                (435
                )(DECREASE)
                    IN CASH
                
                
                (2,071,370
                )
                
                (367,149
                )CASH,
                    beginning of the period
                
                
                2,560,304
                
                
                935,138CASH,
                    end of period
                
                $
                488,934
                
                $
                567,989
 
 The
        accompanying notes are an integral part of this statement.
  4


ASIAMART,
        INC. AND SUBSIDIARIES
 
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
        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. Therefore, the
        transaction is accounted for as a reverse merger and recapitalization. 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.
  5
  ASIAMART,
        INC. AND SUBSIDIARIES
 
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
        30, 2007
 (UNAUDITED)
  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. The following is a list of subsidiaries with 100%
        ownership as of September 30, 2007:
  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.
 
 Consolidation
 
 The
        consolidated financial statements include the accounts of the Company and
        its
        wholly-owned subsidiaries. Significant intercompany transactions have been
        eliminated in consolidation.
  6
  ASIAMART,
        INC. AND SUBSIDIARIES
 
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
        30, 2007
 (UNAUDITED)
 
 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.
 
 Concentration
        of risk
 
 Cash
        includes cash on hand and demand deposits in accounts maintained within Hong
        Kong. Total cash in these banks at September
        30, 2007 and December
        31, 2006 amounted
        to $373,732 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.
 
 The
        three
        largest customers for the quarter ended September
        30, 2007 accounted for approximately 2.0%, 1.5% and 1.3%, respectively of the Company’s
        total revenues. Total receivables from these customers amounted to $665,098,
        $615,447 and $577,413 as of September
        30, 2007 .
        The
        three largest customers for the quarter ended September
        30, 2006 accounted for approximately 2.5%, 2.4% and 1.9%, respectively of the Company's
        total revenues.
 
 The
        three
        largest vendors for the quarter ended September
        30, 2007 accounted for approximately 23.7%, 7.4% and 7.4%, respectively of the Company’s
        total purchases. Total payable from these vendors amounted to $460,962 as
        of September
        30, 2007 .
        The
        three largest vendors for the quarter ended September
        30, 2006 accounted for approximately 10.5%, 5.6% and 4.4%, respectively for the Company's
        total purchases.
 
 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. Furthermore, the
        Company grants 180 days full refund to all of its customers. The
        Company evaluates the credit risks of its customers utilizing historical
        data
        and estimates of future performance.
  7
  ASIAMART,
        INC. AND SUBSIDIARIES
 
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
        30, 2007
 (UNAUDITED)
 
 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.
 
 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* .
  8
  ASIAMART,
        INC. AND SUBSIDIARIES
 
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
        30, 2007
 (UNAUDITED)
 
 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.
 
 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 September
        30, 2007 and December
        31, 2006 ,
        allowance of sales returns amounted to $257,200 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 $133,288
        and $202,638 for the nine months ended September
        30, 2007 and 2006 ,
        respectively. Total contributions amounted to $45,202 and $67,643 for the
        three
        months ended September
        30, 2007 and 2006 ,
        respectively.
  9
  ASIAMART,
        INC. AND SUBSIDIARIES
 
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
        30, 2007
 (UNAUDITED)
 
 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.
 
 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 all warrants
        are anti-dilutive since there is an operating loss for the nine months ended September
        30, 2007 .
        They
        are excluded from the calculation of earnings per share.
 
 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$"); because HK$ is the primary currency of the economic
        environment in which their operations are conducted, that is their functional
        currency. 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 $90,679 and
        $47,558 as of September
        30, 2007 and December
        31, 2006 ,
        respectively. The balance sheet amounts with the exception of equity at September
        30, 2007 were
        translated at 7.78 HK$ 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 nine months ended September
        30, 2007 and 2006 were
        7.81 HK$ and 7.76 HK$ to $1.00 USD, respectively.
  10
  ASIAMART,
        INC. AND SUBSIDIARIES
 
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
        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 $677,407, and $1,024,300 for the nine months ended September
        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
        loan.
 
 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.
 
 Recently
        issued accounting pronouncements
 
 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.
  11
  ASIAMART,
        INC. AND SUBSIDIARIES
 
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
        30, 2007
 (UNAUDITED)
 
 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
 
 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 nine months ended September
        30, 2007 and 2006 amounted
        to $243,900 and $15,793, respectively.
 
 Interest
        expense paid for the nine months ended September
        30, 2007 and
        2006
        amounted to $210,927 and $39,726, respectively.
  On
        January 2007, the Company issued 62,500 shares of common stock for
        260,000 cashless exercise of warrants.
  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:
 
 September 30, 2007
              
              December 31, 2006(Unaudited)Accounts
                  receivable
              
              $
              3,016,050
              
              $
              2,331,622Amounts
                  due from referral customer
              
              
              -
              
              
              1,899,425Amounts
                  due from credit card company
              
              
              -
              
              
              39,141Less:
                  allowance for doubtful accounts
              
              
              (30,864
              )
              
              (19,290
              )allowance
                  for sales return
              
              
              (257,200
              )
              
              -Accounts
                  receivable, net
              
              $
              2,727,986
              
              $
              4,250,898
 
 Bad
        debt
        expense amounted to $11,524 and $0
        for the nine months ended September
        30, 2007 and 2006 ,
        respectively. Bad debt expense amounted to $0 and $0 for the three months
        ended September
        30, 2007 and 2006 ,
        respectively.
  12
  ASIAMART,
        INC. AND SUBSIDIARIES
 
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
        30, 2007
 (UNAUDITED)
 
 **Note
        5 – Inventories**
 
 Inventories
        consist of the following:
  September 30, 2007
              
              December 31, 2006UnauditedInventories
              
              $
              3,555,957
              
              $
              1,343,134Less:
                  valuation allowance
              
              
              (301,110
              )
              
              (301,110
              )Total
              
              $
              3,254,847
              
              $
              1,042,024
 
 The
        following table represents the changes of provision for obsolete
        inventories:
 
 September 30, 2007
              
              December 31, 2006UnauditedBeginning
                  balance
              
              $
              301,110
              
              $
              268,623Charge
                  to costs and expenses
              
              
              -
              
              
              32,229Difference
                  due to foreign currency exchange
              
              
              -
              
              
              258$
              301,110
              
              $
              301,110
 
 **Note
        6 – Long-term loans receivable, net**
 
 Long-term
        loans receivable consist of the following:
 
 September 30, 2007
              
              December 31, 2006(Unaudited)Employee
                  loans unsecured and non-interest bearing payable after one year,
                  but
                  without a fixed repayment term
              
              $
              27,093
              
              $
              52,056Unsecured,
                  non-interest bearing, 2-year term loan to travel agencies
              
              
              1,283,203
              
              
              978,5611,310,296
              
              
              1,030,617Less:
                  Allowance for doubtful accounts
              
              
              -
              
              
              -Total
                  long-term loans receivable, net
              
              $
              1,310,296
              
              $
              1,030,617
 
 **Note
        7 – Property and equipment**
 
 Property
        and equipment including those acquired under capital leases, consists of
        the
        following:
 
 September 30, 2007
              
              December 31, 2006(Unaudited)Leasehold
                  improvements
              
              $
              473,872
              
              $
              441,684Furniture
                  and fixtures
              
              
              46,075
              
              
              44,371Office
                  equipment
              
              
              824,572
              
              
              434,887Motor
                  vehicles
              
              
              129,677
              
              
              129,6771,474,196
              
              
              1,050,619Less:
                  Accumulated depreciation
              
              
              (561,180
              )
              
              (371,744
              )Property
                  and equipment, net
              
              $
              913,016
              
              $
              678,875
  13
  ASIAMART,
        INC. AND SUBSIDIARIES
 
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
        30, 2007
 (UNAUDITED)
 
 The
        depreciation expense amounted to $ 188,645 and
        $143,234 for the nine months ended September
        30, 2007 and 2006 ,
        respectively. The depreciation expense amounted to $62,184 and $86,940 for
        the
        three months ended September
        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:
 
 September 30, 2007
              
              December 31, 2006(Unaudited)Leased
                  equipment
              
              $
              774,005
              
              $
              342,323Leased
                  motor vehicles
              
              
              84,816
              
              
              84,750Accumulated
                  depreciation
              
              
              (94,952
              )
              
              (54,779
              )Total
              
              $
              763,869
              
              $
              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 September
        30, 2007 ,
        the
        amount outstanding on the loan was $87664. Interest expense on the short-term
        loan for the nine months ended September
        30, 2007 amounted
        to $8,228. Interest expense amounted to $2,196 for the three months ended September
        30, 2007 .
 
 **Note
        9 – Long-term debt**
 
 September 30,
                2007
              
              December 31,
                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
              
              
              87,313
              
              
              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
              
              
              82,415
              
              
              321,500
 Installment
                  loan from Dah Sing Bank, with effective annual interest rate of
                  11%, due
                  April 18, 2009, guaranteed by two of the Company's
                  directors
              
              
              104,080
              
              
              -Total
              
              
              273,808
              
              
              551,915Capital
                  lease obligations
              
              
              345,196
              
              
              370,479Total
              
              
              619,004
              
              
              922,394Less
                  Current maturities - loans
              
              
              (258,962
              )
              
              (508,258
              )Less
                  Current maturities - capital leases
              
              
              (305,894
              )
              
              (325,777
              )Total
                  long-term debts, net of current maturities
              
              $
              54,148
              
              $
              88,359
 
 14
  Interest
        expense on all long-term loans for the nine months ended September
        30, 2007 and the
        year ended December
        31, 2006 was
        $22,965 and $45,774, respectively. Interest expense amounted to $4,673 for
        the
        three months ended September
        30, 2007 .
 
 The
        maturities of the installment loans for the next five years are as
        follows:
 
 Period
                  ending December 31,2007
              
              $
              215,3052008
              
              
              43,6572009
              
              
              14,846Thereafter
              
              
              -Total
              
              $
              273,808
  The
        maturities for capital leases are included with other commitments and
        contingencies in Note 14.
 
 **Note
        10 - Earnings per share**
  Earnings
        per share for the period ended September
        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.
  15
  ASIAMART,
        INC. AND SUBSIDIARIES
 
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
        30, 2007
 (UNAUDITED)
  The
          following is a reconciliation of the basic and diluted earnings per share
          computations for the three months and nine months ended September 30, 2007
          and
          2006:
  Three months ended
                  September 30,
                
                Nine months ended
                  September 30,2007
                
                2006
                
                2007
                
                2006Unaudited
                
                Unaudited
                
                Unaudited
                
                UnauditedNet
                    (Loss) income for basic and diluted earnings per
                    share
                
                $
                (499,944
                )
                $
                1,126,600
                
                $
                (410,873
                )
                $
                2,784,896Weighted
                    average shares used in basic computation
                
                
                24,598,344
                
                
                24,535,844
                
                
                24,589,415
                
                
                24,535,844Diluted
                    effect of warrants and conversion option
                
                
                -
                
                
                -
                
                
                -
                
                
                -Weighted
                    average shares used in diluted computation
                
                
                24,598,344
                
                
                24,535,844
                
                
                24,589,415
                
                
                24,535,844(Loss)
                    earnings per share:Basic
                    and diluted
                
                $
                (0.02
                )
                $
                0.046
                
                $
                (0.017
                )
                $
                0.114
 
 At September
        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
        exercise price is adjustable based upon the conversion price of the debentures.
        The warrants are excluded from the three months earning per share calculation
        because of their antidilutive 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%.
 
 Significant
        components of the provision for income taxes for the three months and nine
        months ended September 30 are as follows:
 Three Months Ended September 30,
                
                Nine Months Ended September 30,2007
                
                2006
                
                2007
                
                2006(Unaudited)
                
                (Unaudited)
                
                (Unaudited)
                
                (Unaudited)Hong
                    Kong profit tax:Current
                
                $
                (81,695
                )
                $
                (23,896
                )
                $
                131,211
                
                $
                436,760Deferred
                
                
                -
                
                
                -
                
                
                -
                
                
                -Total
                
                $
                (81,695
                )
                $
                (23,896
                )
                $
                131,211
                
                $
                436,760
 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
              %Effective
                  income tax rate
              
              
              17.5
              %
              
              17.5
              %
  16
  ASIAMART,
        INC. AND SUBSIDIARIES
 
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
        30, 2007
 (UNAUDITED)
 
 **Note
        12 – Related party transactions** ****
 
 For
        the
        nine months ended September
        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 September
        30, 2007 and 2006 ,
        the
        Company earned sales revenue from Prince Digital and another related party
        in
        the amount of $0 and $0, respectively. Prince Digital is controlled by Mr.
        Tsoi
        Kee Kwong Ricky, a director and shareholder of the Company.
  For
        the
        nine months ended September
        30, 2007 and for
        the three months ended September
        30, 2007 ,
        Horizon
        Corporation Limited, a previous intermediate holding company, charged a service
        fee of $143,220, and $319,226, respectively. Horizon Corporation Limited
        is
        controlled by Mr. Tsoi Kee Kwong Ricky and Chun Shan Yue Alex, directors
        and
        shareholders of the Company.
 
 **Note
        13 – Other income (loss)**
 
 Other
        income consisted of the following:
 
 Three months ended
                September 30,
              
              Nine months ended
                September 30,2007
              
              2006
              
              2007
              
              2006(Unaudited)
              
              (Unaudited)
              
              (Unaudited)
              
              (Unaudited)Transaction
                  gain
              
              $
              252,034
              
              $
              281,941
              
              $
              677,407
              
              $
              1,024,300Interest
                  income
              
              
              -
              
              
              1,161
              
              
              9,821
              
              
              4,709Loss
                  on disposal of property and equipment
              
              
              -
              
              
              -
              
              
              -
              
              
              (302
              )Amortization
                  on debt discount
              
              
              (255,825
              )
              
              -
              
              
              (767,475
              )
              
              -Interest
                Expense
              
              
              (105,714
              )
              
              (12,358
              )
              
              (265,277
              )
              
              (39,726
              )Other
                  Income (expense)
              
              
              223,176
              
              
              299,078
              
              
              111,111
              
              
              306,205Total
              
              $
              113,671
              
              $
              569,822
              
              $
              (234,413
              )
              $
              1,295,186
 
 Transaction
        gain is a result of converting monies received from customers in Chinese
        Yuan
        (“Renminbi”) to Hong Kong Dollars. For the three months and nine months ended September
        30, 2007 ,
        finance
        costs included $282,180 and $846,542 of amortization of the discount and
        issuance cost on the debentures payable, and $61,604and $182,894 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 nine months ended September
        30, 2007 and the
        year ended December
        31, 2006 ,
        amounted to $41,893 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 September
        30, 2007 :
  17
 ASIAMART,
          INC. AND SUBSIDIARIES
 
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
          30, 2007
 (UNAUDITED)
 
 Period
                  ending December 31,2007
              
              $
              95,6272008
              
              
              220,9482009
              
              
              45,9722010
              
              
              1,3942011
              
              
              581Total
                  minimum lease payments
              
              
              364,522Less
                  amounts represent interest
              
              
              (19,326
              )Total
                  present value of minimum payments
              
              
              345,196Less
                  current portion of such obligations
              
              
              (305,894
              )Long-term
                  capital lease obligations, net
              
              $
              39,302
  Operating
        lease commitments
 
 The
        Company entered into several tenancy agreements for office premises and outlets
        expiring through 2009. Total rent expense for the nine months ended September
        30, 2007 and 2006 amounted
        to $329,713 and $563,366, 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
              
              $
              137,5432008
              
              
              479,9542009
              
              
              322,3512010
                  and thereafter
              
              
              -$
              939,848
 
 **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”).
  18
  ASIAMART,
        INC. AND SUBSIDIARIES
 
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
        30, 2007
 (UNAUDITED)
 
 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.
 
 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 nine months ended September
        30, 2007 ,
        $767,475 as amortized and recorded as part of financing costs. For the three
        months ended September
        30, 2007 ,
        $255,825 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.
  19
  ASIAMART,
        INC. AND SUBSIDIARIES
 
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
        30, 2007
 (UNAUDITED)
 
 **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.
 
 Information
        on segments and the reconciliation to income from operations before income
        taxes
        are as follows:
 
 Nine
                  months ended September 30, 2007
              
              Trading
              
              Retail
              
              Consolidated(Unaudited)Total
                  segment revenues
              
              $
              13,750,982
              
              $
              40,130,818
              
              $
              53,881,800Intersegment
                  revenue
              
              
              (10,079,201
              )
              
              (1,852,952
              )
              
              (11,932,153
              )Revenue
                  from external customers
              
              $
              3,671,781
              
              $
              38,277,866
              
              $
              41,949,647Total
                  segment profits
              
              $
              406,635
              
              $
              (625,655
              )
              $
              (219,020
              )Intersegment
                  profits
              
              
              (60,642
              )
              
              -
              
              
              (60,642
              )Income
                  (Loss) before income taxes
              
              $
              345,993
              
              $
              (625,655
              )
              $
              (279,662
              )Included
                  in segment profits:Depreciation
                  and amortization
              
              $
              25,978
              
              $
              162,667
              
              $
              188,645Interest
                  expense
              
              $
              50,134
              
              $
              182,894
              
              $
              233,028Total
                  segment assets
              
              $
              14,930,078
              
              $
              13,412,426
              
              $
              28,342,504Intersegment
                  receivables
              
              
              (8,576,749
              )
              
              (8,325,329
              )
              
              (16,902,078
              )Total
                  assets
              
              $
              6,353,329
              
              $
              5,087,097
              
              $
              11,440,426
 
 Nine
                  months ended September 30, 2006
              
              Trading
              
              Retail
              
              Consolidated(Unaudited)Total
                  segment revenues
              
              $
              16,679,552
              
              $
              37,302,934
              
              $
              53,982,486Intersegment
                  revenue
              
              
              (11,967,907
              )
              
              -
              
              
              (11,967,907
              )Revenue
                  from external customers
              
              $
              4,711,645
              
              $
              37,302,934
              
              $
              42,014,579Total
                  segment profits
              
              $
              1,648,837
              
              $
              1,576,952
              
              $
              3,225,789Intersegment
                  profits
              
              
              (4,133
              )
              
              -
              
              
              (4,133
              )Income
                  before income taxes
              
              $
              1,644,704
              
              $
              1,576,952
              
              $
              3,221,656Included
                  in segment profits:Depreciation
                  and amortization
              
              $
              52,208
              
              $
              91,026
              
              $
              143,234Interest
                  expense
              
              $
              39,726
              
              $
              -
              
              $
              39,726Total
                  segment assets
              
              $
              4,534,710
              
              $
              5,747,290
              
              $
              10,282,000Intersegment
                  receivables
              
              
              (1,082,394
              )
              
              -
              
              
              (1,082,394
              )Total
                  assets
              
              $
              3,452,316
              
              $
              5,747,290
              
              $
              9,199,606
  20




**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, the 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 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 1,000 visitors per day in 2005, and received
      an average of approximately 1,800 visitors per day in 2006, principally from
      mainland China.




21




In
      the
      fourth quarter of 2006, we diversified our marketing strategy to focus on high
      quality customers who are among those 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, the number
      of visitors to our stores began to gradually increase to 1,200 per day in the
      first three quarters of 2007. Although the total number of visitors varied,
      the
      average spending per visitor increased from $67 in the third quarter of 2006
      to
      $82 in the first quarter of 2007, to $71 in the second quarter of 2007, and
      to
      $73 in the third quarter 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. We nevertheless experienced declined in profitability due to fierce
      market competition which required us to pay more incentives to tour operators
      for bringing more visitors to us.




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 believed that these arrangements allowed us to strengthen our
      relationships with other retailers that did not directly compete with us, and
      to
      enhance our relationships with travel agents who sourced tourist traffic,
      without having to expand our product variety.




We
      generally collected referral income from retailers within 60 to 90 days from
      the
      date of a tourist’s purchase that generated the referral income. On the other
      hand, we generally paid referral fees to travel agents within 30 days of a
      tourist’s completion of travel. This arrangement exposed us to a certain amount
      of credit risk, but we took steps to mitigate this risk by shortening our
      collection period from retailers and negotiating extended grace periods for
      our
      payments to travel agents. In the second quarter of 2007, we ended this
      arrangement with travel agents and returned to our policy of promoting our
      own
      products to visitors directed from our main travel agency partners.




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.




22




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 our market, and operated three
      shopping centers with a combined total area of 53,000 square feet in 2006.
      In
      conjunction with our change in our marketing strategy to focus on high quality
      customers, we consolidated our three stores into two during the second quarter
      of 2006.




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
      a well-regarded tourist shopping destination for mainland China tour groups
      and
      other tour groups visiting Hong Kong.




**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. Sales 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 discounts and
      actual returns at the time when the merchandise is sold to the
      customer.




*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 collectability of outstanding accounts. We evaluate the credit
      risks of our customers utilizing historical data and estimates of future
      performance.




23




*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 our 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 Three Months Ended September 30, 2006 and September 30,
      2007.***





*Sales* .
      For the
      three months ended September 30, 2007, sales decreased 0.8% from $11.99 million
      to $11.89 million relative to the three months ended September 30, 2006. The
      average spending per capita increased from $67 for the three months ended
      September 30, 2006 to $77 for the same period of 2007, an increase of 15% mainly
      due to an increase in the number of tourists from cities with higher average
      household income and a decrease in the sales price of electronic products.
      Retail sales fell from the third quarter of 2006 to the third quarter of 2007
      due to decreased patronage from 146,325 for the three months ended September
      30,
      2006 to 112,886 for the three months ended September 30, 2007, a decrease of
      23%
      for the corresponding periods. Our retail sales for the three months ended
      September 30, 2007 were $8.5 million, a decrease of 13.6% from $9.9 million
      for
      the same quarter last year.





*Cost
      of Sales.* Cost
      of
      sales slightly increased from $5.6 million for the three months ended September
      30, 2006 to $5.7 million for the three months ended September 30, 2007, an
      increase of 2.7% as compared to a 0.8% decrease in sales over the same
      comparable quarters in 2007 and 2006. Therefore, our gross profit margin
      decreased from 53.3% for the three months ended 2006 to 51.7% for the same
      period this year. The slight drop of margin was mainly due to our tactic of
      keeping our prices competitive.




24




*Selling,
      General and Administrative Expenses.* Selling,
      general and administrative expenses increased from $5.9 million for the three
      months ended September 30, 2006 to $6.8 million for the same period in 2007.
      As
      a percentage of retail sales, our selling expenses increased slightly to 37.6%
      for the three months ended September 30, 2007 from 32.4% for the same period
      in
      2006. Our selling expenses increased due to an increase in the sale amount-based
      incentives payable to tour operators. Salaries and other administrative expenses
      remained stable.





*Other
      Income* .
      Other
      income primarily represented the gain on exchange from converting RMB received
      from customers to Hong Kong Dollars and amortization expenses on the debt
      discount. Total other income decreased from $0.6 million for the three months
      ended 2006 to $0.1 million for the same period in 2007.





***Comparison
      of Nine Months Ended September 30, 2006 and September 30,
      2007.*** ****





*Sales* .
      For the
      nine months ended September 30, 2007, our overall sales decreased 0.2% from
      $42.0 million to $41.9 million relative to the nine months ended September
      30,
      2006. For the three quarters of 2007, $13.6 million in sales resulted from
      watches, a new addition to our product line. Of the remaining $28.3 million
      in
      sales, approximately $24.2 million were sales generated by our retail segment
      (excluding watches), $3.7 million was generated from our trading segment, and
      $0.4 million was referral income. Since January 2007, we began cooperating
      with
      a watch retailer in Hong Kong in an arrangement in which we merchandized some
      high-value watches and sold them through our cooperating watch retailer’s store
      on a consignment basis. We earned net income on these watch sales, after all
      relevant expenses and commissions to our co-operating watch retailer, and those
      expenses were reflected in our cost of sales. The profit margin from our watch
      sales was about 6%. Excluding watch sales, the remainder of our retail segment
      generated $24.2 million in sales. The number of customer visits to our stores
      for the first nine months ended September 30, 2007 dropped from 548,036 to
      332,412 a decrease of 39%, compared with the same period in 2006. Although
      the
      number of customer visits declined, the average spending per capita increased
      from $67 in the three quarters of 2006 to $73 in that 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.




*Cost
      of Sales.* Cost
      of
      sales increased from $19.5 million for the nine months ended September 30,
      2006
      to $25.9 million for the nine months ended September 30, 2007, representing
      an
      increase of 33%. 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 $12.8 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 $13.1
      million. Our overall gross profit margin declined by 16%, from 54% for the
      nine
      months ended September 30, 2006 to 38% for the same period in 2007. However,
      if
      the effect of watch sales is excluded, our gross profit margin with respect
      to
      all other parts of our business improved from 53% to 54% over the third quarter
      of 2006 and 2007.





*Selling,
      General and Administrative Expenses.* Selling,
      general and administrative expenses decreased from $19.7 million for the nine
      months ended September 30, 2006 to $16 million for the same period in 2007.
      As a
      percentage of retail sales, our selling expenses increased to 41% for the nine
      months ended September 30, 2007 from 34% for the same period in 2006. In order
      for travel agents and operators to support our refund guarantee scheme, we
      paid
      increased commissions to travel agents and operators, which represented about
      4%
      of the increase in our selling expenses percentage. The increase in our selling
      expenses is also attributed to an advertising campaign, in which we spent
      approximately $0.3 million as compared to minimal advertising expenses in 2006.





25




*Other
      Income* .
      Other
      income mainly represented the gain on exchange from converting RMB received
      from
      customers to Hong Kong Dollars. Another significant source of other income
      was
      from concessionaire sales, which was expanded to two shops in the third quarter
      2007 comparing to only one shop in the same period of 2006. On the other hand,
      higher finance costs were incurred due to issuing convertible debentures in
      October 2006. Financing costs included $0.77 million of amortization of the
      discount on the debentures payable and $0.18 million interest expenses on our
      convertible debentures issued in October of 2006. As a result, total other
      income decreased from $1.2 million for the nine months ended September 30,
      2006
      to net costs of $0.2 million for the same period in 2007.





**Business
      Segments**





Our
      operating businesses are structured and managed separately, according to the
      nature of their operations and the products and services they provide. We
      identify our 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 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 our Trading Segment were as follows:




Sales
      revenues from external customers in the Trading Segment during the third quarter
      of 2007 decreased 21%, from $4.7 million for nine month period ended September
      30, 2006 to $3.7 million for the same period in 2007.





Total
      segment profit as a percentage of sales for the Trading Segment was 5% for
      the
      nine month ended September 30, 2007, as compared to 4.9% for the same period
      in
      2006.





*Retail
      Segment*





Segment
      revenue and profit for the Retail Segment, were as follows:





Sales
      revenues from external customers in the Retail Segment during the third quarter
      of 2007 increased 2%, from $37.3 million for nine month period ended September
      30, 2006 to $38.2 million for the same period in 2007. The increase in revenues
      is attributed to $13.5 million in revenue from watch sales generated in the
      third quarter of 2007. Sales in relation to normal operations were $24.7
      million.





Total
      segment profit (loss) as a percentage of sales for the Retail Segment was
      1.6% in loss and 6.5% in profit for the nine months period ended
      September 30, 2007 and 2006 respectively.





**Liquidity
      and Capital Resources**





*Cash
      Flows.* For the
      nine month period ended September 30, 2007, net cash flow drawn by operations
      was ($1,159,437). The increase in net cash flow used in operations in 2007
      was
      due to an increase in inventories and also prepayment for advertising. 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 third quarter of 2007 was $394,290,
      which was primarily due to the loan to travel agency and the purchase of office
      equipment.




26




Net
      cash
      flow used in financing activities was $522,823 mainly because we financed our
      acquisition of office equipment though capital lease arrangements and payments
      for the installment loans.




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 twelve months. There is no assurance,
      however, 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 September 30,
      2007,
      and the effect that these obligations are expected to have on our liquidity
      and
      cash flows in future periods.




**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
              
              $
              273
              
              $
              259
              
              $
              14
              
              
              —
              
              $
              —Capital
                  Lease Obligations
              
              
              345
              
              
              306
              
              
              39
              
              
              —
              
              
              —Operating
                  Leases
              
              
              940
              
              
              137
              
              
              803
              
              
              —
              
              
              —Total
                  Contractual Obligations:
              
              $
              1,558
              
              $
              702
              
              $
              856
              
              $
              —
              
              $
              —




Total
      indebtedness consists of an installment loan from a financial institution 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.




27




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.





*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 September 30, 2007, we had approximately $ 0.5 million
      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**





Based
      on
      an evaluation of the effectiveness of our 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 September 30, 2007, our Chief Executive Officer
      and Chief Financial Officer believe that our 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 us in this report is
      accumulated and communicated to our management, including our principal
      executive officer and principal financial officer, as appropriate, to allow
      timely decisions regarding required disclosure. There were no changes in our
      internal control over financial reporting (as defined in Rules 13a-15(f) and
      15d-15(f) under the Securities Exchange Act of 1934, as amended) during the
      quarter ended September 30, 2007 that have materially affected, or are
      reasonably likely to materially affect, our internal control over financial
      reporting.




28


**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.




29





**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.




30




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




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.




31




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




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.




32




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





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 founder and 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. On July 1, 2007, Albert Wong resigned as our Chief Financial Officer,
      and Mr. Kwan Pui Wong was appointed by the Board of Directors as our Chief
      Financial Officer effective July 1, 2007.





**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.




33




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





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**





**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.


**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. We have registered with the Travel Industry Council under
        the
        new rules and offer a 180-day refund policy to our customers.
  Our
        operations may be negatively impacted by these heightened standards and
        implementation of the new rules.





**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.




34




**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 our 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.**





Wey
      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.




35




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 of our stockholders.





**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.




36




**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 our affiliates may lead to future liability for
      us.**





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 our
      operations. Although for a period of two years after the Closing Date the major
      shareholders of the Horizon Group will indemnify us 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 we
      are
      not completely indemnified may have a material adverse effect on us.





**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.




37




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 our 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 our 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.




38




**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**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.)




39




**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:  November 19, 2007
            By:
            /s/ Alex YueAlex YuePresident and Chief Executive Officer(Principal Executive Officer)Dated:  November 19, 2007
            By:
            /s/ Kwan Pui WongKwan Pui WongChief Financial Officer(Principal Financial and Accounting Officer)




40