**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**


_______________





**FORM
      10-Q**


**(Mark
      One)**





þ
            QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934 **For the quarterly period ended March 31,
              2007**







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







Commission
      File Number 000-30292





**ASIAMART,
      INC.**


(Exact
      name of registrant as specified in its charter)





**Delaware**
            **88-0405437**(State
                of Incorporation)
            (I.R.S.
                Employer Identification No.)**Room
                1508 Peninsula Square**
              **18
                Sung On Street**
              **Hunghom,
                Kowloon, Hong Kong**
              (Address
                of principal executive offices)
            **n/a**
              (Zip
                Code)




**(852)
                3580-8805**
              (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 þ No  ̈




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


Large
      Accelerated filer  ̈ Accelerated
      Filer  ̈ Non-Accelerated
      Filer þ




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






As
      of
      March 31, 2007, the Registrant had 24,598,255 shares of Common Stock
      outstanding.




Transitional
      Small Business Disclosure Format (Check one):  Yes  ̈ No þ















**ASIAMART,
      INC.**





**INDEX**








Page
                Number**PART
                I. Financial Information**Item
                1
            Financial
                Information
            
            2Consolidated
                Balance Sheets as of March 31, 2007 (unaudited) and December 31,
                2006
            
            2Consolidated
                Statements of Income and Other Comprehensive Income for the Three
                Months Ended March 31, 2007 and 2006 (unaudited)
            
            3Consolidated
                  Statements of Stockholders' Equity
            
            4Consolidated
                Statements of Cash Flows for the Three Months Ended March 31, 2007
                and
                2006 (unaudited)
            
            5Notes
                to Financial Statements - March 31, 2007
            
            6Item
                2
            Management’s
                Discussion and Analysis of Results of Operations
            
            25Item
                3
            Quantitative
                and Qualitative Disclosures About Market Risk
            
            31Item
                4
            Controls
                and Procedures
            
            32**PART
                II. Other Information**Item
                1
            Legal
                Proceedings
            
            33Item
                1A
            Risk
                Factors
            
            33Item
                2
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            
            42Item
                3
            Defaults
                Upon Senior Securities
            
            42Item
                4
            Submission
                of Matters to a Vote of Security Holders
            
            43Item
                5
            Other
                Information
            
            43Item
                6.
            Exhibits
                and Reports on Form 8-K
            
            43Signatures
            
            44




1




**PART
      I. FINANCIAL INFORMATION**


**ITEM
      1. FINANCIAL STATEMENTS**




**ASIAMART,
      INC. AND SUBSIDIARIES**





**CONSOLIDATED
      BALANCE SHEETS**


**AS
      OF MARCH 31, 2007 AND DECEMBER 31, 2006**




March
                31,
            
            December
                31,2007
            
            2006UnauditedA
                S S E T SCURRENT
                ASSETS:Cash
                and cash equivalents
            
            $
            3,267,815
            
            $
            2,560,304Trade
                accounts receivable, net allowance for doubtful accounts of$30,720
                and $19,290 at March 31, 2007 and December 31, 2006,
                respectively
            
            
            2,361,687
            
            
            4,250,898Inventories
            
            
            2,523,775
            
            
            1,042,024Deposits
                and prepaid expenses
            
            
            1,461,823
            
            
            1,264,949Other
                receivables
            
            
            852,770
            
            
            560,185Total
                current assets
            
            
            10,467,870
            
            
            9,678,360PROPERTY
                AND EQUIPMENT, net
            
            
            1,032,352
            
            
            678,875OTHER
                ASSETS:Long-term
                loans receivable, net
            
            
            1,130,776
            
            
            1,030,617Long-term
                rental and utilities deposits
            
            
            14,029
            
            
            14,095Debt
                issuance costs
            
            
            263,558
            
            
            289,914Total
                other assets
            
            
            1,408,363
            
            
            1,334,626Total
                assets
            
            $
            12,908,585
            
            $
            11,691,861LIABILITIES
                    AND SHAREHOLDERS' EQUITYCURRENT
                LIABILITIES:Accounts
                payable
            
            $
            1,572,398
            
            $
            1,681,600Accrued
                liabilities
            
            
            786,359
            
            
            1,018,409Customer
                deposits
            
            
            10,978
            
            
            11,184Due
                to shareholders
            
            
            285,221
            
            
            304,360Taxes
                payable
            
            
            365,041
            
            
            312,322Other
                payable
            
            
            101,400
            
            
            102,080Short
                term bank loan
            
            
            214,521
            
            
            -Current
                maturities of long-term debt
            
            
            813,553
            
            
            834,035Total
                current liabilities
            
            
            4,149,471
            
            
            4,263,990LONG-TERM
                LIABILITIES:Deferred
                tax liabilities
            
            
            15,435
            
            
            15,508Long-term
                debts
            
            
            184,176
            
            
            88,359Debentures
                payable, net of discount of $2,572,964 and $2,828,789 as ofMarch
                31, 2007 and December 31, 2006, respectively
            
            
            481,931
            
            
            241,106Total
                long - term liabilities
            
            
            681,542
            
            
            344,973Total
                liabilities
            
            
            4,831,013
            
            
            4,608,963COMMITMENTS
                AND CONTINGENCIES
            
            
            -
            
            
            -SHAREHOLDERS'
                EQUITY:Preferred
                stock, $0.0001 par value, 5,000,000 shares authorized,no
                shares issued or outstanding
            
            
            -
            
            
            -Common
                stock, $0.0001 par value, 200,000,000 shares authorized,24,598,255
                and 24,535,755 shares issued and outstanding as of March 31, 2007
                and
                December 31, 2006, respectively
            
            
            2,460
            
            
            2,454Additional
                paid-in-capital
            
            
            3,470,435
            
            
            3,455,441Retained
                earnings
            
            
            4,587,950
            
            
            3,577,445Accumulated
                other comprehensive income
            
            
            16,727
            
            
            47,558Total
                shareholders' equity
            
            
            8,077,572
            
            
            7,082,898Total
                liabilities and shareholders' equity
            
            $
            12,908,585
            
            $
            11,691,861





The
      accompanying notes are an integral part of this statement.




2




**ASIAMART,
      INC. AND SUBSIDIARIES**





**CONSOLIDATED
      STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME**


**FOR
      THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006**


**(UNAUDITED)**





2007
            
            2006REVENUESales
            
            $
            16,428,383
            
            $
            14,421,787Referral
                income
            
            
            426,609
            
            
            -Related
                party
            
            
            -
            
            
            19,892Total
                Revenue
            
            
            16,854,992
            
            
            14,441,679COST
                OF SALES
            
            
            10,190,187
            
            
            6,920,164GROSS
                PROFIT
            
            
            6,664,805
            
            
            7,521,515SELLING,
                GENERAL AND ADMINISTRATIVE EXPENSES
            
            
            5,512,364
            
            
            6,710,590INCOME
                FROM OPERATIONS
            
            
            1,152,441
            
            
            810,925OTHER
                INCOME, net
            
            
            154,644
            
            
            439,003INCOME
                BEFORE PROVISION FOR INCOME TAXES
            
            
            1,307,085
            
            
            1,249,928PROVISION
                FOR INCOME TAXES
            
            
            296,580
            
            
            191,717NET
                INCOME
            
            
            1,010,505
            
            
            1,058,211OTHER
              COMPREHENSIVE INCOME:Foreign
                currency translation adjustment
            
            
            (30,831
            )
            
            (4,252
            )COMPREHENSIVE
                INCOME
            
            $
            979,674
            
            $
            1,053,959BASIC
                EARNINGS PER SHARE
            
            $
            0.04
            
            $
            0.04DILUTED
                EARNINGS PER SHARE
            
            $
            0.04
            
            $
            0.04BASIC
                WEIGHTED AVERAGE SHARES OUTSTANDING
            
            
            24,570,477
            
            
            24,535,755DILUTED
                WEIGHTED AVERAGE SHARES OUTSTANDING
            
            
            27,768,284
            
            
            24,535,755





The
      accompanying notes are an integral part of this statement.




3




**ASIAMART,
      INC. AND SUBSIDIARIES**





**CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS' EQUITY**




AccumulatedCommon
                Stock
            
            Additional
            
            
            
            otherPar
            
            Paid-in
            
            Retained
            
            comprehensiveShare
            
            Value
            
            capital
            
            earnings
            
            income
                (loss)
            
            TotalsBALANCE,
              December 31, 2005
            
            
            24,535,755
            
            
            2,454
            
            
            385,546
            
            
            5,079,898
            
            
            18,611
            
            
            5,486,509Net
                Income
            
            
            
            
            
            
            
            
            
            
            
            1,058,211
            
            
            
            
            
            1,058,2112006
                Special Dividend
            
            
            
            
            
            
            
            
            
            
            
            (4,651,483
            )
            
            
            
            
            (4,651,483
            )Warrants
                issued
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            -Foreign
                currency translation adjustment
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (4,252
            )
            
            (4,252
            )BALANCE,
                March 31, 2006, (unaudited)
            
            
            24,535,755
            
            $
            2,454
            
            $
            385,546
            
            $
            1,486,626
            
            $
            14,359
            
            $
            1,888,985Net
                Income
            
            
            
            
            
            
            
            
            
            
            
            2,090,819
            
            
            
            
            
            2,090,819Warrants
                issued
            
            
            
            
            
            
            
            
            1,000,757
            
            
            
            
            
            
            
            
            1,000,757Conversion
                option
            
            
            
            
            
            
            
            
            2,069,138
            
            
            
            
            
            
            
            
            2,069,138Foreign
                currency translation adjustment
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            33,199
            
            
            33,199BALANCE,
                December 31, 2006
            
            
            24,535,755
            
            $
            2,454
            
            $
            3,455,441
            
            $
            3,577,445
            
            $
            47,558
            
            $
            7,082,898Net
                Income
            
            
            
            
            
            
            
            
            
            
            
            1,010,505
            
            
            
            
            
            1,010,505Conversion
                of warrants
            
            
            62,500
            
            $
            6
            
            
            14,994
            
            
            
            
            
            
            
            
            15,000Foreign
                currency translation adjustment
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (30,831
            )
            
            (30,831
            )BALANCE,
                March 31, 2007, (unaudited)
            
            
            24,598,255
            
            $
            2,460
            
            $
            3,470,435
            
            $
            4,587,950
            
            $
            16,727
            
            $
            8,077,572





The
      accompanying notes are an integral part of this statement.




4


**ASIAMART,
      INC. AND SUBSIDIARIES**





**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**FOR
      THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006**


**(UNAUDITED)**








2007
            
            2006CASH
                FLOWS FROM OPERATING ACTIVITIES:Net
                income
            
            $
            1,010,505
            
            $
            1,058,211Adjustments
                to reconcile net income to cashprovided
                by (used in) operating activities:Depreciation
                and amortization
            
            
            57,874
            
            
            42,409Amortization
                of debt issuance cost
            
            
            26,356
            
            
            -Amortization
                of discount on convertible debentures
            
            
            255,825
            
            
            -Loss
                on sale of assets
            
            
            -
            
            
            303Bad
                debt expense
            
            
            11,520
            
            
            -(Increase)
                decrease in assets:Accounts
                receivable, trade
            
            
            1,859,173
            
            
            (114,303
            )Inventories
            
            
            (1,445,319
            )
            
            362,679Deposits,
                prepaid expenses and other receivables
            
            
            (498,529
            )
            
            (712,430
            )Increase
                (decrease) in liabilities:Accounts
                payable
            
            
            (101,430
            )
            
            (463,196
            )Accrued
                expenses and customers deposit
            
            
            (227,612
            )
            
            9,731Taxes
                payable
            
            
            54,213
            
            
            175,927Net
                cash provided by operating activities
            
            
            1,002,576
            
            
            359,331CASH
                FLOWS FROM INVESTING ACTIVITIES:Increase
                in amounts due from shareholders
            
            
            -
            
            
            123,432Decrease
                in amounts due from related parties
            
            
            -
            
            
            3,488,869Long-term
                loans to travel agency
            
            
            (105,041
            )
            
            -Proceeds
                from disposal of property and equipment
            
            
            -
            
            
            419,250Purchase
                of property and equipment
            
            
            (88,140
            )
            
            (48,657
            )Net
                cash used in investing activities
            
            
            (193,181
            )
            
            3,982,894CASH
                FLOWS FROM FINANCING ACTIVITIES:Decrease
                in amounts due to shareholders
            
            
            (17,731
            )
            
            (364,959
            )Payment
                of dividends
            
            
            -
            
            
            (3,884,793
            )Proceeds
                from installment loan
            
            
            256,180Repayment
                of installment loan
            
            
            (171,088
            )
            
            (16,516
            )Repayment
                of capital lease obligations
            
            
            (117,355
            )
            
            (105,532
            )Net
                cash used in financing activities
            
            
            (49,994
            )
            
            (4,371,800
            )EFFECT
                OF EXCHANGE RATE ON CASH
            
            
            (51,891
            )
            
            (727
            )INCREASE
                (DECREASE) IN CASH
            
            
            707,511
            
            
            (30,302
            )CASH,
                beginning of period
            
            
            2,560,304
            
            
            935,138CASH,
                end of period
            
            $
            3,267,815
            
            $
            904,836SUPPLEMENTAL
                DISCLOSURE INFORMATIONInterest
                expense paid
            
            $
            13,620
            
            $
            17,373Income
                taxes paid
            
            $
            243,900
            
            $
            15,790





The
      accompanying notes are an integral part of this statement.


5


**ASIAMART,
      INC. AND SUBSIDIARIES**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**MARCH
      31, 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.


6
 **ASIAMART,
          INC. AND SUBSIDIARIES**
 
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **MARCH
          31, 2007**
 **(UNAUDITED)**
 In
          accordance with the Accounting and Financial Reporting Interpretations
          and
          Guidance prepared by the staff of the U.S. Securities and Exchange Commission,
          the Company (the legal acquirer) is considered the accounting acquiree
          and PDD
          (the legal acquiree) is considered the accounting acquirer. The consolidated
          financial statements of the combined entity will in substance be those
          of PDD,
          with the assets and liabilities, and revenues and expenses, of the Company
          being
          included effective from the date of consummation of the Exchange Transaction.
          The Company is deemed to be a continuation of the business of PDD. The
          outstanding stock of the Company prior to the Exchange Transaction will
          be
          accounted for at their net book value and no goodwill will be recognized. As
          a
          result of the Exchange Agreement with the Horizon Group, the Company acquired
          100% of the capital stock of PDD. From and after the Closing Date of the
          Exchange Agreement, the Company’s primary operations consist of the retail and
          trading operations of the Horizon Group, which are conducted through the
          five
          operating subsidiaries in Hong Kong.





The
      Company through its five 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. The following
      is a
      list of subsidiaries with 100% ownership as of December 31, 2006. However,
      one
      of the shopping centers, Golden Bauhinia Duty Free ceased conducting retail
      shop
      business effective October 8, 2006 and hence only two discount shopping centers
      are operating.





Company
                name
            
            Trade
                Name
            
            Place
                of incorporation
            
            Date
                of incorporation
            
            Principal
                business1
            
            Raffle
                Limited
            
            N/A
            
            Hong
                Kong
            
            August
                7, 1998
            
            Trading
                of general merchandise2
            
            Sure
                Profits Trading Limited
            
            N/A
            
            Hong
                Kong
            
            August
                3, 2001
            
            Trading
                of general merchandise3
            
            Manigood
                International Industrial Limited
            
            Hong
                Kong (Duty Free) Center
            
            Hong
                Kong
            
            December
                15, 2003
            
            Operating
                a discount shopping center in Hong Kong4
            
            Allied
                Fine Development Limited
            
            Super
                Star Department Store
            
            Hong
                Kong
            
            September
                19, 2003
            
            Operating
                a discount shopping center in Hong Kong5
            
            Max
                Surplus International Development Limited
            
            Golden
                Bauhinia Duty Free
            
            Hong
                Kong
            
            July
                26, 2004
            
            Operating
                a discount shopping center in Hong
                Kong





7
 **ASIAMART,
        INC. AND SUBSIDIARIES**
 
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **MARCH
        31, 2007**
 **(UNAUDITED)**


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
      five wholly-owned subsidiaries. Significant intercompany transactions have
      been
      eliminated in consolidation.





**Use
      of estimates**





The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect the reported amounts of assets and liabilities, disclosure of contingent
      assets and liabilities at the date of the financial statements, and the reported
      amounts of revenues and expenses during the reporting period. For example,
      the
      Company establishes reserves for the carrying value of inventory for slow moving
      or potentially obsolete products. Because of the use of estimates inherent
      in
      the financial reporting process, actual results could differ from those
      estimates.





**Cash
      and cash equivalents**





Cash
      and
      cash equivalents include cash on hand, demand and time deposits with banks
      and
      liquid investments with an original maturity of three months or less.





**Accounts
      receivable**





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




8
 **ASIAMART,
        INC. AND SUBSIDIARIES**
 
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **MARCH
        31, 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. The
      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*.


9
 **ASIAMART,
        INC. AND SUBSIDIARIES**
 
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **MARCH
        31, 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 actual returns at the time
      when
      the merchandise is sold to the customer. Based on historical experience,
      management estimates that sales returns are immaterial and has not made
      allowance for estimated sales returns.





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 is recognized as occurred.


10
 **ASIAMART,
        INC. AND SUBSIDIARIES**
 
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **MARCH
        31, 2007**
 **(UNAUDITED)**


**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 $46,891
      and $63,804 for the three months ended March 31, 2007 and 2006,
      respectively.





**Income
      taxes**





The
      Company accounts for income taxes in accordance with SFAS No. 109, *Accounting
      for Income Taxes* .
      SFAS
      No. 109 requires an asset and liability approach for financial accounting and
      reporting for income taxes and allows recognition and measurement of deferred
      tax assets based upon the likelihood of realization of tax benefits in future
      years. Under the asset and liability approach, deferred taxes are provided
      for
      the net tax effects of temporary differences between the carrying amounts of
      assets and liabilities for financial reporting purposes and the amounts used
      for
      income tax purposes. A valuation allowance is provided for deferred tax assets
      if it is more likely than not these items will either expire before the Company
      is able to realize their benefits, or that future deductibility is
      uncertain.





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. Diluted EPS includes the effect of the common share equivalents of
        the
        company’s convertible preferred stock outstanding.
 
 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.


11
 **ASIAMART,
        INC. AND SUBSIDIARIES**
 
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **MARCH
        31, 2007**
 **(UNAUDITED)**
 **Foreign
        currency translation**





The
      Company uses the United States dollar (“USD”) for financial reporting purposes.
      The Company’s subsidiaries maintain their books and accounting records in Hong
      Kong Dollar ("HK$") as their functional currency, being the primary currency
      of
      the economic environment in which their operations are conducted. In general,
      for consolidation purposes, the Company translates the subsidiaries’ assets and
      liabilities into U.S. dollars using the applicable exchange rates prevailing
      at
      the balance sheet date, and their statements of income and cash flows are
      translated at average exchange rates during the reporting period. Adjustments
      resulting from the translation of the subsidiaries’ financial statements are
      recorded as accumulated other comprehensive income.





Translation
      adjustments amounted to $16,727 and $47,558 as of March 31, 2007 and December
      31, 2006, respectively. The balance sheet amounts with the exception of equity
      at March 31, 2007 were translated at 7.81 HK$ 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 three months ended March 31, 2007
      and
      2006 were 7.81 HK$ and 7.76 HK$ to $1.00 USD, respectively.





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 $257,459, and $332,660 for the three months ended March 31, 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.




**Cash
      and concentration of risk**




Cash
      includes cash on hand and demand deposits in accounts maintained within Hong
      Kong. Total cash in these banks at March 31, 2007 and December 31, 2006 amounted
      to $3,267,815 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.


12
 **ASIAMART,
        INC. AND SUBSIDIARIES**
 
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **MARCH
        31, 2007**
 **(UNAUDITED)**


**Concentrations
      of credit risk**





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
      largest three customers for the quarter ended March 31, 2007 accounted for
      approximately 1.7%, 1.6% and 1.2%, respectively of the Company’s total revenues.
      Total receivables from these customers amounted to $694,937, $482,707 and
      $599,830 as of March 31, 2007. The largest three customers for the quarter
      ended
      March 31,2006 accounted for approximately 2.2%, 2.2% and 1.8%, respectively
      of
      the Company's total revenues.




The
      largest three vendors for the quarter ended March 31, 2007 accounted for
      approximately 63.9%, 6.9% and 5.2%, respectively of the Company’s total
      purchases. Total payable from these vendors amounted to $561,852 as of March
      31,
      2007. The largest three vendors for the quarter ended March 31, 2006 accounted
      for approximately 22.7%, 13.8% and 7.6%, respectively for the Company's total
      purchases.







**Recently
      issued accounting pronouncements**





In
      June
      2006, the Emerging Issues Task Force (EITF) reached a consensus on EITF No.
      06-3, How Taxes Collected from Customers and Remitted to Governmental
      Authorities Should Be Presented in the Income Statement (EITF No. 06-3). EITF
      No. 06-3 permits that such taxes may be presented on either a gross basis or
      a
      net basis as long as that presentation is used consistently. The adoption of
      EITF No. 06-3 on January 1, 2007 did not impact our consolidated financial
      statements. We present the taxes within the scope of EITF No. 06-3 on a net
      basis.





In
      July
      2006, the FASB issued FASB Interpretation No. 48, “Accounting for
      Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109”
(“FIN 48”). The Company adopted Interpretation No. 48 on January 1, 2007. (See
      Note 2 - Income taxes)





In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      No. 157, “Fair Value Measurements” (“SFAS 157”), which provides enhanced
      guidance for using fair value to measure assets and liabilities. This standard
      also responds to investors’ requests for expanded information about the extent
      to which companies measure assets and liabilities at fair value, the information
      used to measure fair value, and the effect of fair value measurements on
      earnings. The standard applies whenever other standards require (or permit)
      assets or liabilities to be measured at fair value. The standard does not expand
      the use of fair value in any new circumstances. SFAS 157 is effective for
      financial statements issued for fiscal years beginning after November 12,
      2007, and interim periods within those fiscal years. Early adoption is
      permitted. We are currently evaluating whether the adoption of SFAS157 will
      have
      a material effect on our consolidated results of operations and financial
      condition.





In
      February 2007, the Financial Accounting Standards Board issued SFAS
      No. 159, The Fair Value Option for Financial Assets and Financial
      Liabilities—Including an Amendment of SFAS 115 (SFAS No. 159), which allows
      for the option to measure financial instruments and certain other items at
      fair
      value. Unrealized gains and losses on items for which the fair value option
      has
      been elected are reported in earnings. The
      objective of SFAS 159 is to provide opportunities to mitigate volatility in
      reported earnings caused by  measuring
      related assets and liabilities differently without having to apply hedge
      accounting provisions.


13
 **ASIAMART,
        INC. AND SUBSIDIARIES**
 
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **MARCH
        31, 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 three months ended March 31, 2007 and 2006 amounted to
        $243,900 and $15,790, respectively.
 
 Interest
        expense paid for the three months ended March 31, 2007 and 2006 amounted
        to
        $13,620 and $17,373, respectively.
 
 On
        January 30, 2007, the Company issued 62,500 shares of common stock upon
        conversion of $15,000 of debentures payable.
 
 On
        March
        14, 2007, the Company entered into a capital lease contract for automatic
        multi-media office equipment in the amount of $384,000.
   **NOTE 4
        - TRADE ACCOUNTS RECEIVABLE**





Trade
      accounts receivable consist of the following:




March
                31,
            
            December
                31,2007
            
            2006(unaudited)Accounts
                receivable
            
            $
            2,362,193
            
            $
            2,331,622Amounts
                due from referral customer
            
            
            72
            
            
            1,899,425Amounts
                due from credit card company
            
            
            30,142
            
            
            39,141Less:
                allowance for doubtful accounts
            
            
            (30,720
            )
            
            (19,290
            )Accounts
                receivable, net
            
            $
            2,361,687
            
            $
            4,250,898




Bad
      debt
      expenses amounted to $11,520 and $0 for the three months ended March 31, 2007
      and 2006, respectively.




**NOTE 5
      - INVENTORIES**




Inventories
      consist of the following:




March
                31,
            
            December
                31,2007
            
            2006(unaudited)Inventories
            
            $
            2,780,728
            
            $
            1,343,134Less:
                valuation allowance
            
            
            (256,953
            )
            
            (301,110
            )Total
            
            $
            2,523,775
            
            $
            1,042,024





14
 **ASIAMART,
        INC. AND SUBSIDIARIES**
 
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **MARCH
        31, 2007**
 **(UNAUDITED)**


The
      following table represents the changes of provision for obsolete
      inventories:









Balance
                at Beginning of Period
            
            Charged
                to Costs and Expenses
            
            Recovery
            
            Foreign
                Currency Exchange Effect
            
            Balance
                at End of PeriodPeriod
                ended March 31, 2007Reserves
                and allowances deducted from asset accounts:Allowance
                for doubtful accounts
            
            $
            301,110
            
            $
            -
            
            $
            (43,588
            )
            $
            (569
            )
            $
            256,953Year
                ended December 31, 2006Reserves
                and allowances deducted from asset accounts:Allowance
                for doubtful accounts
            
            $
            268,623
            
            $
            32,229
            
            $
            -
            
            $
            258
            
            $
            301,110







15
 **ASIAMART,
        INC. AND SUBSIDIARIES**
 
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **MARCH
        31, 2007**
 **(UNAUDITED)**


**NOTE 6
      - LONG-TERM LOANS RECEIVABLE, NET**




Long-term
      loans receivable consist of the following:




March
                31,
            
            December
                31,2007
            
            2006(unaudited)Employee
                loans unsecured and non-interest bearing payable after one year,
                but
                without a fixed repayment term
            
            $
            33,238
            
            $
            52,056Unsecured,
                non-interest bearing, 2-year term loan to travel agencies
            
            
            1,097,538
            
            
            978,5611,130,776
            
            
            1,030,617Less:
                Allowance for doubtful accounts
            
            
            -
            
            
            -Total
                long-term loans receivable, net
            
            $
            1,130,776
            
            $
            1,030,617






**NOTE 7
      - PROPERTY AND EQUIPMENT**





Property
      and equipment, including that acquired under capital leases, consists of
      the following:




March
                31,
            
            December
                31,2007
            
            2006(unaudited)Leasehold
                improvements
            
            $
            467,412
            
            $
            441,684Furniture
                and fixtures
            
            
            45,700
            
            
            44,371Office
                equipment
            
            
            818,010
            
            
            434,887Motor
                vehicles
            
            
            129,072
            
            
            129,6771,460,194
            
            
            1,050,619Less:
                Accumulated depreciation
            
            
            (427,842
            )
            
            (371,744
            )Property
                and equipment, net
            
            $
            1,032,352
            
            $
            678,875







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:




March
                  31
              
              December
                  31,2007
              
              2006(Unaudited)Leased
                  equipment
              
              $
              769,792
              
              $
              342,323Leased
                  motor vehicles
              
              
              84,354
              
              
              84,750Accumulated
                  depreciation
              
              
              (68,170
              )
              
              (54,779
              )Total
              
              $
              785,976
              
              $
              372,294




16
 **ASIAMART,
        INC. AND SUBSIDIARIES**
 
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **MARCH
        31, 2007**
 **(UNAUDITED)**


The
      depreciation expense amounted to $57,874 and $42,409 for the three months ended
      March 31, 2007 and 2006, respectively.






**NOTE 8
      - SHORT TERM BANK LOAN**




In
      January 2007, the Company entered into a loan agreement with Bank of China,
      Hong
      Kong for a $257,200 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 March 31, 2007, the amounts outstanding on the loan
      was $214,521.








**NOTE 9
      - LONG-TERM DEBTS**





March
                31,
            
            December
                31,2007
            
            2006(unaudited)Installment
                loan from a finance company, with effective annual interest rate
                of 10.4%,
                due February 21, 2007, guaranteed by one of the Company's
                directors
            
            $
            -
            
            $
            12,131Installment
                loan from Citic Ka Wah Bank, with effective annual interest rate
                of 4.10%,
                due March 23, 2008, guaranteed by one of the Company's
                directors
            
            
            173,812
            
            
            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
            
            
            242,008
            
            
            321,500Total
            
            
            415,820
            
            
            551,915Capital
                lease obligations
            
            
            581,909
            
            
            370,479Total
            
            
            997,729
            
            
            922,394Less
                Current maturities - loans
            
            
            (415,820
            )
            
            (508,258
            )Less
                Current maturities - capital leases
            
            
            (397,733
            )
            
            (325,777
            )Total
                long-term debts, net of current maturities
            
            $
            184,176
            
            $
            88,359







Interest
      expense on all long-term loans for the three months ended March 31, 2007 and
      the
      year ended December 31, 2006 was $13,620 and $45,774, respectively.


17
 **ASIAMART,
        INC. AND SUBSIDIARIES**
 
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **MARCH
        31, 2007**
 **(UNAUDITED)**
 Long-term
        debts





The
      maturities of the installment loans for the next five years are as
      follows:




Year
                ending December 312007
            
            $
            350,2462008
            
            
            65,5742009
                and thereafter
            
            
            -Total
            
            $
            415,820








The
      maturities for capital leases is included with other commitments and
      contingencies in Note 14.








**NOTE 10
      - EARNINGS PER SHARE**




Earnings
      per share for the period ended March 31, 2007 and 2006 were determined by
      dividing net income for the years by the weighted average number of common
      shares outstanding. The Company has retroactively adjusted the weighted average
      number of common shares outstanding by deeming that the one-for-twenty (1:20)
      reverse stock split effected on April 4, 2006 and the one-for-four (1:4) reverse
      stock split effected on November 30, 2006 had occurred as of the beginning
      of
      the earliest period presented.




The
      following is a reconciliation of the basic and diluted earnings per share
      computations for the three months ended March 31, 2007 and 2006:




2007
            
            2006(unaudited)
            
            (unaudited)Net
                income for basic and diluted earnings per share
            
            $
            1,010,505
            
            $
            1,058,211Weighted
                average shares used in basic computation
            
            
            24,570,477
            
            
            24,535,755Diluted
                effect of warrants and conversion option
            
            
            3,197,807
            
            
            -Weighted
                average shares used in diluted computation
            
            
            27,768,284
            
            
            24,535,755Earnings
                per share:Basic
            
            $
            0.04
            
            $
            0.04Diluted
            
            $
            0.04
            
            $
            0.04




At
        December 31, 2006, all options and warrants outstanding were included in
        diluted
        earnings per share. At March 31, 2007, warrants for the purchase of 1,598,904
        shares of common stock (with an exercise price of $1.056) and warrants for
        the
        purchase of 255,825 shares of common stock (with an exercise price of $1.056)
        were excluded from the calculation because of their antidilutive nature.


18
 **ASIAMART,
        INC. AND SUBSIDIARIES**
 
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **MARCH
        31, 2007**
 **(UNAUDITED)**


**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 three months ended March 31
      are
      as follows:





2007
            
            2006(unaudited)
            
            (unaudited)Hong
                Kong profits tax:Current
            
            $
            296,580
            
            $
            191,717Deferred
            
            
            -
            
            
            -Total
            
            $
            296,580
            
            $
            191,717





The
      following table reconciles the U.S. statutory rates to the Company's effective
      tax rate:





2007
            
            2006U.S.
                Statutory rate
            
            
            34
            %
            
            34
            %Foreign
                income not recognized in the U.S.
            
            
            (34
            %)
            
            (34
            %)Hong
                Kong statutory rate
            
            
            17.5
            %
            
            17.5
            %Other
            
            
            5.2
            %
            
            (2.2
            %)Effective
                income tax rate
            
            
            22.7
            %
            
            15.3
            %





**NOTE
      12 - RELATED PARTY TRANSACTIONS**





For
      the
      three months ended March 31, 2007 and 2006, the Company earned sales revenue
      from Prince Digital in the amount of $0 and $19,892, respectively. Prince
      Digital is controlled by Mr. Tsoi Kee Kwong Ricky, a director and
      shareholder of the Company.




For
      the
      three months ended March 31, 2007 and 2006, Horizon Corporation Limited, a
      previous intermediate holding company, charged a service fee of $0, and $81,516,
      respectively. Horizon Corporation Limited is controlled by Mr. Tsoi Kee Kwong
      Ricky, and Mr. Yue Chun Shan Alex, directors and stockholders of the
      Company.


19
 **ASIAMART,
        INC. AND SUBSIDIARIES**
 
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **MARCH
        31, 2007**
 **(UNAUDITED)**


**NOTE
      13 - OTHER INCOME**




Other
      income consisted of the following:




2007
            
            2006(unaudited)
            
            (unaudited)Income
                from concessionaire sales
            
            $
            159,873
            
            $
            94,869Rental
                income
            
            
            3,843
            
            
            3,867Transaction
                gain
            
            
            257,459
            
            
            332,660Interest
                income
            
            
            6,613
            
            
            1,772Loss
                on disposal of property and equipment
            
            
            -
            
            
            (303
            )Finance
                costs
            
            
            (329,804
            )
            
            (17,373
            )Other
            
            
            56,660
            
            
            23,511Total
            
            $
            154,644
            
            $
            439,003





Transaction
      gain is a result of converting Chinese Yuan (“Renminbi”) to Hong Kong Dollars.
      Finance costs included $255,825 of amortization of the discount on the
      debentures payable and $60,359 interest expense on the convertible debenture
      note.






**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 4.28%
        to
        11.48%. Total interest expense for the three months ended March 31, 2007
        and the
        year ended December 31, 2006, amounted to $10,923 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 December 31:




Period
                  ending December 31,2007
              
              $
              353,4862008
              
              
              219,9192009
              
              
              45,7572010
              
              
              1,3872011
              
              
              578Total
                  minimum lease payments
              
              
              621,127Less
                  amounts represent interest
              
              
              (39,218
              )Total
                  present value of minimum payments
              
              
              581,909Less
                  current portion of such obligations
              
              
              (397,733
              )Long-term
                  capital lease obligations, net
              
              $
              184,176




**Operating
      lease commitments**





The
      Company entered into several tenancy agreements for office premises and outlets
      expiring through 2009. Total rent expense for the three months ended March
      31,
      2007 and 2006 amounted to $96,739 and $58,570, respectively.


20
 **ASIAMART,
        INC. AND SUBSIDIARIES**
 
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **MARCH
        31, 2007**
 **(UNAUDITED)**


The
      Company’s commitments for minimum lease payments under these leases for the next
      five years and thereafter are as follows:





Year
                ending December 31,2007
            
            $
            261,9832008
            
            
            123,8402009
            
            
            61,9202010
                and thereafter
            
            
            -$
            447,743








**NOTE
      15 - DEBENTURES PAYABLE**





On
      October 6, 2006, the Company issued $3,069,895 of senior convertible
      debentures in a private placement to fourteen accredited investors
      (“Financing”). The Financing was conducted pursuant to a Securities Purchase
      Agreement. Maxim Group LLC acted as the lead placement agent with Chardan
      Capital Markets LLC as the co-placement agent.





Under
      the
      terms of the Financing, the debentures are unsecured, bear 8% interest, and
      mature in three years. The debentures are convertible into a quantity of common
      stock ranging from approximately 11.6 to 16.0 million shares, depending
      upon a one-time adjustment to the conversion price, available on October 6,
      2007. The initial conversion price of the debentures is $0.24 per share which
      may be adjusted to equal the volume-weighted average trading price of the
      Company’s common stock for all trading days during the one year following the
      closing of the Financing, subject to a maximum conversion price of $0.264 per
      share, and a minimum conversion price of $0.192 per share (“Conversion Price
      Collar”).




The
      conversion price of the debentures is also subject to anti-dilution adjustments,
      within the Conversion Price Collar, in the event the Company sells and issues
      shares of its common stock for below $0.24 per share. The Company may, at its
      election, force conversion of the debentures after the first anniversary of
      the
      closing, if the volume weighted average trading price of its common stock
      exceeds $0.48 per share for 30 consecutive trading days, and the average daily
      trading dollar volume exceeds $350,000. The Company may also redeem the
      debentures at 125% of the principal amount of the debentures plus accrued unpaid
      dividends, at any time after the first anniversary of the closing.





In
      connection with the Financing, on October 6, 2006 the Company issued
      warrants to investors that are exercisable up to approximately 8 million
      shares of common stock of the Company with an exercise price ranging from
      $0.2112 to $0.2904 per share. The exercise price is adjustable based upon the
      conversion price of the debentures. The warrants are exercisable for a five-year
      period commencing on October 6, 2006. The Company also agreed to issue, in
      connection with the Financing, a warrant to the lead placement agent for the
      purchase of up to 1,279,123 shares of common stock of the Company, with an
      exercise price ranging from $0.2112 to $0.2904 per share.





On
      January 30, 2007, warrants were exercised for 62,500 shares of common stock
      at
      an exercise price, paid in cash, of $0.24 per share.


21
 **ASIAMART,
        INC. AND SUBSIDIARIES**
 
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **MARCH
        31, 2007**
 **(UNAUDITED)**


The
      Company also entered into a registration rights agreement, under which it agreed
      to use its commercially reasonable efforts to register the common stock
      underlying the convertible debentures and all warrants related to the Financing,
      within 30 days following the closing. The Company is subject to a monthly
      penalty of 1% of the offering amount, up to a maximum of 24% for failing to
      register the shares timely.





The
      debentures were discounted for the fair value of warrants, pursuant to APB
      14
“Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants”.
      The debentures were further discounted for the intrinsic value of the beneficial
      conversion feature, pursuant to EITF 98-5 “Accounting for Convertible Securities
      with Beneficial Conversion Features or Contingently Adjustable Conversion
      Ratios.” The discount is being amortized over the life of the debentures. For
      the three months ended March 31, 2007, $255,825 was amortized and recorded
      as
      part of financing costs.





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.


22
 **ASIAMART,
        INC. AND SUBSIDIARIES**
 
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **MARCH
        31, 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:





Three
                months ended March 31, 2007 (unaudited)
            
            Trading
            
            Retail
            
            ConsolidatedTotal
                segment revenues
            
            $
            4,468,950
            
            $
            16,449,842
            
            $
            20,918,792Intersegment
                revenue
            
            
            (3,344,946
            )
            
            (718,854
            )
            
            (4,063,800
            )Revenue
                from external customers
            
            $
            1,124,004
            
            $
            15,730,988
            
            $
            16,854,992Total
                segment profits
            
            $
            214,978
            
            $
            1,126,512
            
            $
            1,341,490Intersegment
                profits
            
            
            (34,405
            )
            
            -
            
            
            (34,405
            )Income
                before income taxes
            
            $
            180,573
            
            $
            1,126,512
            
            $
            1,307,085Included
                in segment profits:Depreciation
                and amortization
            
            $
            16,881
            
            $
            40,993
            
            $
            57,874Interest
                expense
            
            $
            -
            
            $
            13,620
            
            $
            13,620Total
                segment assets
            
            $
            8,818,083
            
            $
            14,487,889
            
            $
            23,305,972Intersegment
                receivables
            
            
            (5,421,308
            )
            
            (4,976,079
            )
            
            (10,397,387
            )Total
                assets
            
            $
            3,396,775
            
            $
            9,511,810
            
            $
            12,908,585




23
 **ASIAMART,
        INC. AND SUBSIDIARIES**
 
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **MARCH
        31, 2007**
 **(UNAUDITED)**


Three
                months ended March 31,2006 (unaudited)
            
            Trading
            
            Retail
            
            ConsolidatedTotal
                segment revenues
            
            $
            5,385,336
            
            $
            13,217,156
            
            $
            18,602,492Intersegment
                revenue
            
            
            (4,160,813
            )
            
            -
            
            
            (4,160,813
            )Revenue
                from external customers
            
            $
            1,224,523
            
            $
            13,217,156
            
            $
            14,441,679Total
                segment profits
            
            $
            374,025
            
            $
            870,012
            
            $
            1,244,037Intersegment
                profits
            
            
            5,891
            
            
            -
            
            
            5,891Income
                before income taxes
            
            $
            379,916
            
            $
            870,012
            
            $
            1,249,928Included
                in segment profits:Depreciation
                and amortization
            
            $
            13,080
            
            $
            29,329
            
            $
            42,409Interest
                expense
            
            $
            17,373
            
            $
            -
            
            $
            17,373Total
                segment assets
            
            $
            2,982,103
            
            $
            4,998,387
            
            $
            7,980,490Intersegment
                receivables
            
            
            (817,518
            )
            
            -
            
            
            (817,518
            )Total
                assets
            
            $
            2,164,585
            
            $
            4,998,387
            
            $
            7,162,972








**NOTE
      17 - SUBSEQUENT EVENTS**





In
      April
      2007, the Company entered into a loan agreement with Dah Sing Bank, Hong Kong
      for a $128,200 installment loan with effective annual interest rate of 11%
      and
      24 installments. This loan was guaranteed by two of the Company’s
      directors.




24




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





**Note
      Regarding Forward-Looking Statements**





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





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





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




**Overview**




We
      operate outlet and discount shopping centers catering principally to tourists
      visiting Hong Kong from other parts of mainland China who are brought directly
      to our shopping centers through a large network of travel companies and tour
      operators. We offer this captive group of tourists discount prices on selected
      international brands in a wide range of merchandise categories such as consumer
      electronics, cosmetics, watches, dietary supplements, health care products
      and
      optical instruments, producing high sales volume and rapid inventory turnover.
      The high sales volume and rapid inventory turnover provide us with volume
      purchasing power, and combined with the relatively low overhead of our shopping
      centers strategically located in low to moderate rent districts, we have been
      able to quickly achieve profitability since our inception, and continue to
      grow
      our profits over the past several years.




Virtually
      all of our customers are brought to our shopping centers by various mainland
      Chinese travel companies and travel tour operators. Through our relationships
      with over 100 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.




In
      the
      fourth quarter of 2006, we diversified our marketing strategy to focus on high
      quality customers. Accordingly, the number of visitors to our shopping centers
      dropped significantly from over 2,000 visitors per day in the first two quarters
      to 1,000 in the fourth quarter. After a period of adjustment, the number of
      visitors to our stores began to gradually increase in the first two months
      of
      2007. Although the total number of visitors decreased, the average spending
      per
      visitor increased from $67 in the third quarter of 2006 to $74 in the last
      quarter. Management believes this is a direct result of a shift in our focus
      on
      quality customers and effective customer management.


25


By
      concentrating on selected valued customers, we also diversified our income
      sources and derived referral income from introducing our customers to other
      retail stores that specialize in products not currently offered in our stores.
      Commencing from July 2006, we began an arrangement with travel agents under
      which the tourists brought in by these travel agents would also visit the shops
      designated by us. 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 as a result, our referral
      income increased substantially. Accordingly, we paid higher commissions to
      travel agents and received referral income from the shops we introduced.
      Management believes these arrangements allows us to strengthen our relationships
      with other retailers that do not directly compete with us, and to enhance our
      relationships with travel agents who source tourist traffic, without having
      to
      expand our product variety.




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







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.




Our
      shopping centers are each 20,000 square feet and the floor plans resemble a
      typical department store. We seek shopping center locations in areas with
      reasonable rents and with readily available parking space for large tour buses.
      Because such locations tend to be in the non-commercial areas of Hong Kong,
      the
      tourists that are transported to our shopping centers generally have little
      opportunity to shop elsewhere other than at our shopping centers. 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
      retailers near our shopping centers.




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 product
      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 14 days of their purchase of a product if the product
      does not meet their satisfaction. In cases where there is a manufacturer’s
      warranty, during the warranty period our customers can bring their products
      directly to manufacturers in China, including Hong Kong and Macau, for repair.
      We mark receipts for our products with a special symbol to denote our guarantee
      that the product authentic and sourced directly from the manufacturer or an
      authorized dealer.


26


We
      have
      aggressively and strategically pursued development of our retail business with
      a
      focus on international tourists in Hong Kong. Over the past several years,
      we
      have become the largest retail enterprise in this market, and operated three
      shopping centers with a combined total area of 53,000 square feet in 2006.
      However, due to changing the marketing strategy of in focusing high quality
      customers, in 2007 we decided to consolidate our three stores into two,
      beginning on March 15, 2007.




Tourists
      from mainland China account for over 90% of our customers. Because of our
      extensive product selection and high quality service, we believe we have become
      the tourist shopping mall of first choice 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 seasonality of our business, see “ *Risk
      Factors* .”




**Critical
      Accounting Policies and Estimates**




Our
      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. On an ongoing basis, we evaluate our estimates
      and
      assumptions. 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 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. We evaluate the credit risks of our
      customers utilizing historical data and estimates of future
      performance.


27


*Inventories* .
      We
      value inventory at the lower of cost or market, using the first-in, first-out
      or
      weighted average basis method, and regularly review the book value of
      discontinued product lines and stock keeping units 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. The 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 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. 121, *Accounting
      for Impairment of Long-Lived Assets to be Disposed Of* ,
      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 March 31, 2006 and March 31, 2007.**





*Sales* .
      For the
      three months ended March 31, 2007, our overall sales increased 17.4% from $14.4
      million to $16.9 million relative to the three months ended March 31, 2006.
      For
      the first quarter of 2007, $6.3 million in sales resulted from watches, a new
      addition to our product line. Of the remaining $10.6 million in sales,
      approximately $9.0 were sales generated by our retail segment (excluding
      watches), $1.1 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 January 2007, 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 cooperating watch
      retailer, and those expenses were reflected in our cost of sales. The profit
      margin from our watch sales was about 10%. Excluding watch sales, the remainder
      of our retail segment generated $9.0 million in sales. The number of customer
      visits to our stores for the first three months ended March 31, 2007 dropped
      from 191,851 to 109,695, a decrease of 42.8%, compared with the same quarter
      in
      2006. Although the number of customer visits declined, the average spending
      per
      capita increased from $74 in the fourth quarter 2006 to $82 in the first quarter
      of 2007, as a result of our continued focus on quality customers and a shift
      toward more first-time visitors from higher income cities. In addition, we
      diversified our income sources and derived referral income by introducing
      tourists to other retailers that do not directly compete with us. For the three
      months ended March 31, 2007, we earned referral income of $0.4 million, which
      partially offset a reduction in retail sales.


28


*Cost
      of Sales.* Cost
      of
      sales increased from $6.9 million for the three months ended March 31, 2006
      to
      $10.2 million for the three months ended March 31, 2007, representing an
      increase of 47.8%. 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 $5.7 million and the profit margin was about 10%. 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 $4.5
      million. Our overall gross profit margin declined by 12.6%, from 52.1% for
      the
      three months ended March 31, 2006 to 39.5% 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 52.1% to 55.1% over the first
      quarter of 2006 and 2007.





*Selling,
      General and Administrative Expenses.* Selling,
      general and administrative expenses decreased from $6.7 million for the three
      months ended March 31, 2006 to $5.5 million for the same period in 2007. Our
      selling expenses decreased from $4.4 million for the three months ended March
      31, 2006 to $3.7 million for the three months ended March 31, 2007. During
      the
      second half of 2006, we began to develop referral income by introducing our
      customers to other non-directly competitive retailers, which has increased
      our
      selling expenses. As a percentage of retail sales, our selling expenses
      increased to 40.7% for the three months ended March 31, 2007 from 33.4% for
      the
      same period in 2006. In order for travel agents and operator to accept an
      arrangement in which we refer our customers to non-directly competitive
      retailers, we paid increased commissions to travel agents and operators. The
      increase in our selling costs is due in part to the increased commissions that
      we paid to these travel agents and operators.





*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 first 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 $255,825 of amortization of the discount
      on the debentures payable and $60,359 interest expenses on our convertible
      debentures issued in October of 2006. As a result, total other income decreased
      from $0.4 million for the three months ended March 31, 2006 to $0.2 million
      for
      the same period in 2007.




**BUSINESS
      SEGMENTS**




The
      Company’s operating businesses are structured and managed separately, according
      to the nature of their operations and the products and services they provide.
      The Company identifies its reportable segments based on management
      responsibility: (i) the trading segment (“Trading Segment”), and
      (ii) the retail segment (“Retail Segment”). Information on segments and
      reconciliations to income before the merger transactions expenses and income
      taxes are described in Note 14 of the Notes to the Consolidated Financial
      Statements and is incorporated herein by reference.




***Trading
      Segment***




Segment
      sales and profit for the Company’s Trading Segment were as follows:




Sales
      revenues from external customers in the Trading Segment during the first quarter
      of 2007 decreased 8.3%, from $1.2 million for three month period ended March
      31,
      2006 to $1.1 million for the same period in 2007.




Total
      segment profit as a percentage of sales for the Trading Segment was 16.1% for
      the three month ended March 31, 2007, as compared to 31.0% for the same period
      in 2006. The decrease in total segment profit as a percentage of sales resulted
      from setting lower profit margin to external customers due to keen competition
      in the market for the first quarter of 2007.


29


***Retail
      Segment***




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




Sales
      revenues from external customers in the Retail Segment during the first quarter
      of 2007 increased 18.9%, from $13.2 million for three month period ended March
      31, 2006 to $15.7 million for the same period in 2007. The increase in revenues
      was because sales of watches contributed $6.3 million revenue and referral
      income of $0.4 million was generated for the first quarter of 2007. The sales
      in
      relation to normal operation was $9.0 million.




Total
      segment profit as a percentage of sales for the Retail Segment was 7% for both
      the three month period ended March 31, 2007 and 2006.




**Liquidity
        and Capital Resources**
 
 *Cash
        Flows* .
        For the
        three month period ended March 31, 2007, net cash flow provided by operations
        was $1,002,577. The increase in net cash flow provided by operations in 2007
        was
        due to a decrease in trade receivables. We collected almost all trade
        receivables derived from referral income in the first quarter of
        2007.
 
 Net
        cash
        flow used in investing activities in the first quarter of 2007 was $193,181,
        which was primarily due to an increase in loans to travel agents and
        operators.
 
 Net
        cash
        flow used in financing activities was $49,994 mainly because we repaid certain
        capital lease obligations and 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 12 months. However, there is no assurance
      that we will not need to raise additional equity or debt financing within this
      period. We also may require additional capital for other purposes not presently
      contemplated. If we are unable to obtain sufficient capital, we could be
      required to curtail our expenditures, including capital expenditures for
      property and equipment, which could harm our business.




*Contractual
      Obligations and Off-Balance Sheet Arrangements.* 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 have presented 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 March 31, 2007,
      and
      the effect of 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
            
            
            416
            
            
            350
            
            
            66
            
            
            —
            
            
            —Capital
                Lease Obligations
            
            
            621
            
            
            353
            
            
            268
            
            
            —
            
            
            —Operating
                Leases
            
            
            448
            
            
            262
            
            
            186
            
            
            —
            
            
            —Total
                Contractual Obligations:
            
            
            1,485
            
            
            965
            
            
            520
            
            
            —
            
            
            —


30


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 8— *Property
      and Equipment* ”
in
      the
      notes to the consolidated financial statements, included elsewhere in this
      report.




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




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





*Off-Balance
      Sheet Arrangements*





We
      have
      not entered into any off-balance sheet arrangements that have or are reasonably
      likely to have a current or future effect on our financial condition, changes
      in
      financial condition, revenues or expenses, results of operations, liquidity,
      capital expenditures or capital resources and 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 would not have a material impact on the fair value of these
      securities. At March 31, 2007, we had approximately $3.3 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 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 7.75 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
      section titled “Risk Factors - 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.”


31


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





Based
      on
      their most recent evaluation, which was completed as of the end of the period
      covered by this quarterly report on Form 10-Q, the Company’s Chief Executive
      Officer and Chief Financial Officer believe that the Company’s disclosure
      controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
      are
      effective to ensure that information required to be disclosed by the Company
      in
      this report is accumulated and communicated to the Company’s management,
      including its principal executive officer and principal financial officer,
      as
      appropriate, to allow timely decisions regarding required disclosure. During
      the
      last fiscal quarter to which this report relates, there were no significant
      changes in the Company’s internal controls or other factors that could
      significantly affect these controls subsequent to the date of their evaluation
      and there were no corrective actions with regard to significant deficiencies
      and
      material weaknesses.





32


**PART
      II. OTHER INFORMATION**





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





We
      are
      not currently involved in any material legal proceedings, nor have we been
      involved in any such proceedings that has 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 and deny us access to their
      products and devote greater resources to marketing and promotional campaigns.


33





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





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





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





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




•
            
            seasonality
                of the business;




•
            
            price
                competition from other retailers;




•
            
            general
                price increases by suppliers and manufacturers;




•
            
            our
                ability to maintain and expand our distribution relationships;




•
            
            increases
                in the cost of advertising;




•
            
            unexpected
                increases in shipping costs or delivery times;




•
            
            our
                ability to build and maintain customer loyalty;




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




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




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




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




•
            
            changes
                in our store leasing costs;




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




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





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





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





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.


34


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 whom 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 and 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. A failure to optimize
      inventory will increase our net shipping cost by requiring us to make
      long-distance shipments or partial shipments from different locations. As we
      continue to add warehouse capability or add new businesses with different
      inventory management requirements, operating our inventory management system
      becomes more challenging and there can be no assurance that we will be able
      to
      operate our system effectively.





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





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, nor do we 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.


35


**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 PRC, and
      in
      the future may rely upon supply relationships with other foreign sources.
      Regional disruptions relating to political or environmental conditions could
      cause shipping delays, which could interfere with our ability to supply our
      customers and harm our financial results. A significant breakdown in the
      manufacturing process or among suppliers could result in product shortages,
      and
      our revenues could decline due to the loss of these suppliers and manufacturers.





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





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





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





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





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





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.


36


**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, Ricky Kee Kwong Tsoi, our founder and Chief
      Executive Officer, Danny Sau Kwong Leung, our Chief Operating Officer, and
      Alex
      Chun Shan Yue, the Chairman of our board of directors. The loss of any of these
      executive officers or other key persons could harm our business.





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





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





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





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 would decline and our results of operations would
      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.


37


**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.





**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.**





The
      value
      of RMB and 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 the RMB, which would result
      in fluctuations in the exchange rate between the RMB and the U.S. dollar, and
      other geopolitical factors. If the 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 the 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 or another epidemic
      or outbreak. China reported a number of cases of SARS in the spring of 2003,
      which severely impacted the tourism industry for many months. Any prolonged
      recurrence of SARS or other adverse public health developments in China could
      negatively impact tourism in Hong Kong, which would have a material adverse
      effect on our business operations. For instance, health or other government
      regulations adopted in response may require temporary travel restrictions,
      or
      even closure of our facilities or offices. Such closures would severely disrupt
      our customer flow and business operations, and adversely affect our results
      of
      operations. We have not adopted any written preventive measures or contingency
      plans to combat any future outbreak of SARS or any other epidemic.


38


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





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





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





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





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





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





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





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


39


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





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





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





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





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


40


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





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





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





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





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





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





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





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


41


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





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





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





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





As
      a
      public company, we will incur significant legal, accounting and other expenses
      that we did not incur as a private company. In addition, the Sarbanes-Oxley
      Act,
      as well as new rules subsequently implemented by 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.


42


**ITEM
      4.****SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS**





Not
      applicable.





**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
            
            Section
                302 Certification by the Corporation’s Chief Executive Officer. (Filed
                herewith).31.2
            
            Section
                302 Certification by the Corporation’s Chief Financial Officer. (Filed
                herewith).32.1
            
            Section
                906 Certification by the Corporation’s Chief Executive Officer. (Filed
                herewith).32.2
            
            Section
                906 Certification by the Corporation’s Chief Financial Officer. (Filed
                herewith).





**Reports
      on Form 8-K**





On
      January 5, 207, we filed a current report on Form 8-K/A in order to amend our
      8-K filed on June 28, 2006, and to make certain exhibits available, including
      a
      rental agreement and a duty free cooperation agreement.





On
      March
      20, 2007, we filed a current report on Form 8-K in order to make the contents
      of
      a recent investor presentation publicly available, by including it as an
      exhibit.


43





**SIGNATURES**





Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
      1934, the Company has duly caused this quarterly report on Form 10-Q to be
      signed on its behalf by the Undersigned, thereunto duly authorized.





**ASIAMART,
                INC.**
              a
                Delaware corporationDated: 
                May 16, 2007
            By:
            /s/ Alex
                YueAlex
                Yue
              President
                and Chief Executive Officer
              (principal
                executive officer)Dated: 
                May 16, 2007
            By:
            /s/ Albert
                WongAlbert
                Wong
              Chief
                Financial Officer
              (principal
                financial and accounting officer)


44