UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





(Mark
One)





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





For
the quarterly period ended March 31, 2009





 ̈
            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
      801, 8/F.,
                  Yue
      Hwa International Building,
                  Kowloon
      Park Drive,
                  Tsim
      Sha Tsui, Kowloon
                
                (852)
      3580-8808(Address
      of principal executive offices,
                  including
      zip code)
                
                (Registrant’s
      telephone number,
                  including
      area code)





Securities
registered pursuant to Section 12(b) of the Act: None


Securities
registered pursuant to Section 12(g) of the Act:





Common
Stock, par value $0.0001 per share


(Title
of class)





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





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





Large
      Accelerated Filer  ̈
                
                Accelerated
      Filer  ̈Non-accelerated
      filer  ̈
                
                Smaller
      reporting company x





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





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes  ̈ No  ̈





As of
April 23, 2009, the Registrant had 24,744,177 shares of Common Stock
outstanding.





ASIAMART,
INC.





INDEX





Page NumberPART I. Financial
      StatementsItem
      1.
                Financial
      Information
                F-1Item
      2.
                Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                3Item
      3.
                Quantitative
      and Qualitative Disclosures About Market Risk
                8Item
      4.
                Controls
      and Procedures
                8PART
      II. Other InformationItem
      1.
                Legal
      Proceedings
                8Item
      1A.
                Risk
      Factors
                9Item
      2.
                Unregistered
      Sales of Equity Securities and Use of Proceeds
                16Item
      3.
                Defaults
      Upon Senior Securities
                16Item
      4.
                Submission
      of Matters to a Vote of Security Holders
                17Item
      5.
                Other
      Information
                17Item
      6.
                Exhibits
                17Signatures
                
                18


2


PART
I. FINANCIAL INFORMATION





ITEM 1.   FINANCIAL
STATEMENTS





ASIAMART,
INC. AND SUBSIDIARIES





INDEX
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS





(UNAUDITED)




PageCondensed
      Consolidated Balance Sheets as of March 31, 2009 and December 31,
      2008
                  
                  F-2Condensed
      Consolidated Statements of Operations And Comprehensive (Loss) Income for
      the three months ended March 31, 2009 and 2008
                  
                  F-3Condensed
      Consolidated Statements of Cash Flows for the three months ended March 31,
      2009 and 2008
                  
                  F-4Condensed
      Consolidated Statement of Changes in Stockholders’ Deficit for the three
      months ended March 31, 2009
                  
                  F-5Notes
      to Condensed Consolidated Financial Statements
                  
                  F-6 – F-18


F-1


ASIAMART,
INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED BALANCE SHEETS


AS
OF MARCH 31, 2009 AND DECEMBER 31, 2008


(Currency
expressed in United States Dollars (“US$”), except for number of
shares)





March 31, 2009
                                                  
                                                  
                                                  December 31, 2008(Unaudited)
                                                  
                                                  
                                                  (Audited)ASSETSCurrent
      assets:Cash
      and cash equivalents
                                                  
                                                  $
                                                  101,829
                                                  
                                                  
                                                  $
                                                  99,186Accounts
      receivable, net
                                                  
                                                  
                                                  1,622,930
                                                  
                                                  
                                                  
                                                  1,798,142Inventories
                                                  
                                                  
                                                  226,705
                                                  
                                                  
                                                  
                                                  159,569Deposits
      and prepaid expenses, net
                                                  
                                                  
                                                  659,577
                                                  
                                                  
                                                  
                                                  418,212Income
      tax recoverable
                                                  
                                                  
                                                  246,967
                                                  
                                                  
                                                  
                                                  144,885Other
      receivables, net
                                                  
                                                  
                                                  132,446
                                                  
                                                  
                                                  
                                                  54,152Total
      current assets
                                                  
                                                  
                                                  2,990,454
                                                  
                                                  
                                                  
                                                  2,674,146Plant
      and equipment, net
                                                  
                                                  
                                                  536,261
                                                  
                                                  
                                                  
                                                  592,141Debt
      issuance costs, net
                                                  
                                                  
                                                  52,711
                                                  
                                                  
                                                  
                                                  79,067Total
      non-current assets
                                                  
                                                  
                                                  588,972
                                                  
                                                  
                                                  
                                                  671,208TOTAL
      ASSETS
                                                  
                                                  $
                                                  3,579,426
                                                  
                                                  
                                                  $
                                                  3,345,354LIABILITIES
      AND STOCKHOLDERS’ DEFICITCurrent
      liabilities:Accounts
      payable
                                                  
                                                  $
                                                  1,642,661
                                                  
                                                  
                                                  $
                                                  1,104,528Accrued
      liabilities and other payables
                                                  
                                                  
                                                  2,472,084
                                                  
                                                  
                                                  
                                                  2,426,101Customer
      deposits
                                                  
                                                  
                                                  108,083
                                                  
                                                  
                                                  
                                                  108,515Amount
      due to stockholders
                                                  
                                                  
                                                  288,457
                                                  
                                                  
                                                  
                                                  288,456Bank
      borrowings
                                                  
                                                  
                                                  5,864
                                                  
                                                  
                                                  
                                                  23,216Current
      portion of obligation under capital leases
                                                  
                                                  
                                                  58,046
                                                  
                                                  
                                                  
                                                  82,287Convertible
      debenture, net of discount of $526,364
                                                  
                                                  
                                                  2,543,531
                                                  
                                                  
                                                  
                                                  2,287,706Total
      current liabilities
                                                  
                                                  
                                                  7,118,726
                                                  
                                                  
                                                  
                                                  6,320,809Long-term
      liabilitiesObligation
      under capital leases
                                                  
                                                  
                                                  148,193
                                                  
                                                  
                                                  
                                                  124,293Total
      long-term liabilities
                                                  
                                                  
                                                  148,193
                                                  
                                                  
                                                  
                                                  124,293Total
      liabilities
                                                  
                                                  
                                                  7,266,919
                                                  
                                                  
                                                  
                                                  6,445,102Commitments
      and contingenciesStockholders’
      deficit:Common
      stock, $0.001 par value; 200,000,000 shares authorized; 24,744,177 and
      24,744,177 shares issued and outstanding as of March 31, 2009 and December
      31, 2008
                                                  
                                                  
                                                  2,474
                                                  
                                                  
                                                  
                                                  2,474Additional
      paid-in capital
                                                  
                                                  
                                                  3,455,421
                                                  
                                                  
                                                  
                                                  3,455,421Accumulated
      deficit
                                                  
                                                  
                                                  (7,207,080
                                                  )
                                                  
                                                  
                                                  (6,619,390
                                                  )Accumulated
      other comprehensive income
                                                  
                                                  
                                                  61,692
                                                  
                                                  
                                                  
                                                  61,747Total
      stockholders’ deficit
                                                  
                                                  
                                                  (3,687,493
                                                  )
                                                  
                                                  
                                                  (3,099,748
                                                  )TOTAL
      LIABILITIES AND STOCKHOLDERS’ DEFICIT
                                                  
                                                  $
                                                  3,579,426
                                                  
                                                  
                                                  $
                                                  3,345,354





See
accompanying notes to condensed consolidated financial
statements.


F-2


ASIAMART,
INC AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF


OPERATIONS
AND COMPREHENSIVE (LOSS) INCOME


FOR
THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008


(Currency
expressed in United States Dollars (“US$”), except for number of
shares)


(Unaudited)





Three months ended March 31,2009
                                              
                                              
                                              2008REVENUES,
      NETSale
      of products
                                              
                                              $
                                              3,762,793
                                              
                                              
                                              $
                                              10,987,262Sale
      of products, related party
                                              
                                              
                                              -
                                              
                                              
                                              
                                              290,130Service
      income
                                              
                                              
                                              718,995
                                              
                                              
                                              
                                              -Total
      revenues, net
                                              
                                              
                                              4,481,788
                                              
                                              
                                              
                                              11,277,392COST
      OF REVENUE (exclusive of depreciation)
                                              
                                              
                                              4,331,353
                                              
                                              
                                              
                                              5,813,486GROSS
      PROFIT
                                              
                                              
                                              150,435
                                              
                                              
                                              
                                              5,463,906Operating
      expenses:Sales
      and marketing
                                              
                                              
                                              -
                                              
                                              
                                              
                                              3,215,785Depreciation
                                              
                                              
                                              43,727
                                              
                                              
                                              
                                              64,968General
      and administrative
                                              
                                              
                                              494,880
                                              
                                              
                                              
                                              1,774,674Total
      operating expenses
                                              
                                              
                                              538,607
                                              
                                              
                                              
                                              5,055,427(LOSS)
      INCOME FROM OPERATIONS
                                              
                                              
                                              (388,172
                                              )
                                              
                                              
                                              408,479Other
      income (expense):Other
      income
                                              
                                              
                                              66,706
                                              
                                              
                                              
                                              -Reversal
      of allowance for doubtful accounts
                                              
                                              
                                              19,345
                                              
                                              
                                              
                                              -Gain
      on disposal of plant and equipment
                                              
                                              
                                              16,223
                                              
                                              
                                              
                                              -Interest
      expense
                                              
                                              
                                              (318,305
                                              )
                                              
                                              
                                              (322,934
                                              )Foreign
      exchange gain
                                              
                                              
                                              16,513
                                              
                                              
                                              
                                              201,462Other
      expense
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (2,670
                                              )Total
      other expense
                                              
                                              
                                              (199,518
                                              )
                                              
                                              
                                              (124,142
                                              )(LOSS)
      INCOME BEFORE INCOME TAXES
                                              
                                              
                                              (587,690
                                              )
                                              
                                              
                                              284,337Income
      tax expense
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (45,835
                                              )NET
      (LOSS) INCOME
                                              
                                              
                                              (587,690
                                              )
                                              
                                              
                                              238,502Other
      comprehensive (loss) income:-
      Foreign currency translation (loss) gain
                                              
                                              
                                              (55
                                              )
                                              
                                              
                                              6,830COMPREHENSIVE
      (LOSS) INCOME
                                              
                                              $
                                              (587,745
                                              )
                                              
                                              $
                                              245,332Net
      (loss) income per share – Basic and diluted
                                              
                                              $
                                              (0.02
                                              )
                                              
                                              $
                                              0.01Weighted
      average shares outstanding – Basic and diluted
                                              
                                              
                                              24,744,177
                                              
                                              
                                              
                                              24,744,177





See
accompanying notes to condensed consolidated financial
statements.


F-3


ASIAMART,
INC AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


FOR
THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008


(Currency
expressed in United States Dollars (“US$”))


(Unaudited)





Three months ended March 31,2009
                            
                            
                            2008Cash
      flow from operating activities:Net
      (loss) income
                            
                            $
                            (587,690
                            )
                            
                            $
                            238,502Adjustments
      to reconcile net (loss) income to net cash used in operating
      activities:Depreciation
                            
                            
                            43,727
                            
                            
                            
                            64,968Reversal
      of allowance for doubtful accounts
                            
                            
                            19,345
                            
                            
                            
                            -Gain
      on disposal of plant and equipment
                            
                            
                            (16,223
                            )
                            
                            
                            -Amortization
      of discount and debt issuance costs on convertible
    debenture
                            
                            
                            282,180
                            
                            
                            
                            282,181Change
      in operating assets and liabilities:Accounts
      receivable, trade
                            
                            
                            175,212
                            
                            
                            
                            (245,683
                            )Inventories
                            
                            
                            (67,136
                            )
                            
                            
                            253,343Deposits,
      prepaid expenses and other receivables
                            
                            
                            (339,004
                            )
                            
                            
                            (189,015
                            )Income
      tax recoverable
                            
                            
                            (102,082
                            )
                            
                            
                            45,776Accounts
      payable
                            
                            
                            538,133
                            
                            
                            
                            (727,709
                            )Amount
      due to stockholders
                            
                            
                            -
                            
                            
                            
                            306Accrued
      liabilities and other payables
                            
                            
                            45,983
                            
                            
                            
                            (102,783
                            )Customers
      deposit
                            
                            
                            (432
                            )
                            
                            
                            -Deferred
      tax liabilities
                            
                            
                            -
                            
                            
                            
                            16Net
      cash used in operating activities
                            
                            
                            (7,987
                            )
                            
                            
                            (380,098
                            )Cash
      flows from investing activities:Proceed
      from disposal of plant and equipment
                            
                            
                            21,828
                            
                            
                            
                            -Long-term
      loans from travel agencies
                            
                            
                            -
                            
                            
                            
                            15,011Net
      cash provided by investing activities
                            
                            
                            21,828
                            
                            
                            
                            15,011Cash
      flows from financing activities:Repayment
      of installment loan
                            
                            
                            (17,338
                            )
                            
                            
                            (136,975
                            )Proceed
      from capital lease obligations
                            
                            
                            56,562
                            
                            
                            
                            -Repayment
      of capital lease obligations
                            
                            
                            (56,765
                            )
                            
                            
                            (69,962
                            )Net
      cash used in financing activities
                            
                            
                            (17,541
                            )
                            
                            
                            (206,937
                            )Effect
      of exchange rate changes in cash and cash equivalents
                            
                            
                            6,343
                            
                            
                            
                            6,830CHANGE
      IN CASH AND CASH EQUIVALENTS
                            
                            
                            2,643
                            
                            
                            
                            (565,194
                            )CASH
      AND CASH EQUIVALENTS, BEGINNING OF PERIOD
                            
                            
                            99,186
                            
                            
                            
                            1,817,148CASH
      AND CASH EQUIVALENTS, END OF PERIOD
                            
                            $
                            101,829
                            
                            
                            $
                            1,251,954SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATIONCash
      paid for income taxes
                            
                            $
                            135,144
                            
                            
                            $
                            -Cash
      paid for interest
                            
                            $
                            2,540
                            
                            
                            $
                            6,750NON-CASH
      INVESTING AND FINANCING ACTIVITIES:Motor
      vehicle purchased under capital lease
                            
                            $
                            56,562
                            
                            
                            $
                            -




See
accompanying notes to condensed consolidated financial
statements


F-4


ASIAMART,
INC AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT


FOR
THE THREE MONTHS ENDED MARCH 31, 2009


(Currency
expressed in United States Dollars (“US$”), except for number of
shares)


(Unaudited)





Common stock
                              
                              
                              Additional
                              
                              
                              Accumulated
                              
                              
                              Accumulated other
                                comprehensive
                              
                              
                              Total
                                stockholders’No. of shares
                              
                              
                              Amount
                              
                              
                              paid-in capital
                              
                              
                              deficit
                              
                              
                              (loss) income
                              
                              
                              deficitBalance
      as of January 1, 2009
                              
                              
                              24,744,177
                              
                              
                              $
                              2,474
                              
                              
                              $
                              3,455,421
                              
                              
                              $
                              (6,619,390
                              )
                              
                              $
                              61,747
                              
                              
                              $
                              (3,099,748
                              )Foreign
      currency translation adjustment
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              (55
                              )
                              
                              
                              (55
                              )Net
      loss for the period
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              (587,690
                              )
                              
                              
                              -
                              
                              
                              
                              (587,690
                              )Balance
      as of March 31, 2009
                              
                              
                              24,744,177
                              
                              
                              $
                              2,474
                              
                              
                              $
                              3,455,421
                              
                              
                              $
                              (7,207,080
                              )
                              
                              $
                              61,692
                              
                              
                              $
                              (3,687,493
                              )





See
accompanying notes to condensed consolidated financial
statements


F-5


ASIAMART,
INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2009


(Currency
expressed in United States Dollars (“US$”))


(Unaudited)





NOTE
      1
            BASIS
      OF PRESENTATION





The
accompanying unaudited condensed consolidated financial statements have been
prepared by management in accordance with both accounting principles generally
accepted in the United States (“GAAP”), and the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X. Certain information and note disclosures normally
included in audited financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to those
rules and regulations, although the Company believes that the disclosures made
are adequate to make the information not misleading.





In the
opinion of management, the consolidated balance sheet as of December 31, 2008
which has been derived from audited financial statements and these unaudited
condensed consolidated financial statements reflect all normal and recurring
adjustments considered necessary to state fairly the results for the periods
presented. The results for the period ended March 31, 2009 are not necessarily
indicative of the results to be expected for the entire fiscal year ending
December 31, 2009 or for any future period.





These
unaudited condensed consolidated financial statements and notes thereto should
be read in conjunction with the Management’s Discussion and the audited
financial statements and notes thereto included in the Annual Report on Form
10-K for the year ended December 31, 2008.





NOTE
      2
            DESCRIPTION
      OF BUSINESS AND ORGANIZATION





Asiamart,
Inc. (“AAMA” or the “Company”) was incorporated under the laws of the State of
Delaware on August 25, 1997 as WT Holdings Corporation. On November 30, 2006,
the Company further changed to its current name.





The
Company through its subsidiaries, engages in two operating segments, a retailing
segment providing management services to other retailers, and a trading
segment which is primarily involved in the import and local distribution of
consumer electronic products.





Since the
fourth quarter of 2008, the Company has restructured its major operation from
being an outlet and discount shopping center operator to a retail service
provider. The Company has closed its two retail outlets at the end of 2008 and
shifted its resources to provide management services to other retail operators
in Hong Kong.





AAMA and
its subsidiaries are hereinafter referred to as “the Company”.





NOTE
      3
            GOING
      CONCERN UNCERTAINTIES





These
condensed consolidated financial statements have been prepared assuming that the
Company will continue as a going concern, which contemplates the realization of
assets and the discharge of liabilities in the normal course of business for the
foreseeable future.





For the
three months ended March 31, 2009, the Company incurred a net loss of $587,690.
Additionally, the Company had a working capital deficit of $4,128,272 and the
accumulated deficit of $3,687,493, as of March 31, 2009. The continuation of the
Company is dependent upon the continuing financial support of shareholders and
the anticipation of business restructuring plan. As a result, the condensed
consolidated financial statements do not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets or
the amounts and classification of liabilities that may result from the outcome
of the Company’s ability to continue as a going concern.


F-6





ASIAMART,
INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2009


(Currency
expressed in United States Dollars (“US$”))


(Unaudited)





NOTE
      4
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES





Basis
of consolidation





The
condensed consolidated financial statements include the financial statements of
AAMA and its subsidiaries.





All
significant inter-company balances and transactions within the Company have been
eliminated upon consolidation.





Use
of estimates





In
preparing these condensed consolidated financial statements, management makes
estimates and assumptions that affect the reported amounts of assets and
liabilities in the balance sheets and revenues and expenses during the periods
reported. Actual results may differ from these estimates.





Cash
and cash equivalents





Cash and
cash equivalents are carried at cost and represent cash on hand, demand and time
deposits with banks and liquid investments with an original maturity of three
months or less as of the purchase date of such investments.




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 the adequacy of the allowance for doubtful accounts
on an ongoing basis, using historical collection trends and aging of
receivables. Management also periodically evaluates individual customer’s
financial condition, credit history, and the current economic conditions to make
adjustments in the allowance when it is considered necessary. Account balances
are charged off against the allowance after all means of collection have been
exhausted and the potential for recovery is considered remote.





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.




Plant
and equipment





Plant and
equipment are stated at cost less accumulated depreciation and accumulated
impairment losses, if any. Depreciation is calculated on the straight-line basis
over the following expected useful lives from the date on which they become
fully operational:





Depreciable lifeLeasehold improvements
                  the shorter of the useful life or the remaining lease termFurniture
      and fixtures
                  5
      yearsOffice
      equipment
                  5
      yearsMotor
      vehicles
                  5
      years


F-7


ASIAMART,
INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2009


(Currency
expressed in United States Dollars (“US$”))


(Unaudited)





Expenditure
for repairs and maintenance is expensed as incurred. When assets have retired or
sold, the cost and related accumulated depreciation are removed from the
accounts and any resulting gain or loss is recognized in the results of
operations.





Depreciation
expense for the three months ended March 31, 2009 and 2008 were $43,727 and
$64,968, respectively.





As of
March 31, 2009, motor vehicles and certain equipment under capital leases were
included with the aggregate net book value of $341,961.





Capital leases





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”.





Impairment of long-lived
assets





The
Company accounts for impairment of plant and equipment and long-term loans
receivables 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
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.





Revenue
recognition





In
accordance with the SEC’s Staff Accounting Bulletin No. 104, “Revenue Recognition”, the
Company records revenue when services are received by the customers and realized
the amounts net of provisions for discounts, allowance and taxes which are
recognized at the time of services performed.





Sale of
products represents the sale of electronic appliances through trading network.
Sale of products is 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 collectability is reasonably assured.
Revenue is recorded, 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.





Service
income is primarily derived from the provision of management service to other
retail operators. These services are generally billed on a monthly basis.
Revenue is recognized when service is rendered and accepted by the
customers.





Interest
income is recognized on a time apportionment basis, taking into account the
principal amounts outstanding and the interest rates
applicable.


F-8


ASIAMART,
INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2009


(Currency
expressed in United States Dollars (“US$”))


(Unaudited)





Income taxes





The
Company accounts for income tax using SFAS No. 109 “Accounting for Income
Taxes”, which requires the asset and liability approach for financial
accounting and reporting for income taxes. Under this approach, deferred income
taxes are provided for the estimated future tax effects attributable to
temporary differences between financial statement carrying amounts of assets and
liabilities and their respective tax bases, and for the expected future tax
benefits from loss carry-forwards and provisions, if any. Deferred tax assets
and liabilities are measured using the enacted tax rates expected in the years
of recovery or reversal and the effect from a change in tax rates is recognized
in the consolidated statement of operations and comprehensive income in the
period of enactment. A valuation allowance is provided to reduce the amount of
deferred tax assets if it is considered more likely than not that some portion
of, or all of the deferred tax assets will not be realized.





The
Company adopts Financial Accounting Standards Board ("FASB") Interpretation No.
48, "Accounting for
Uncertainty in Income Taxes"(FIN 48). FIN 48 prescribes a more likely
than not threshold for financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return. FIN 48 also provides
guidance on derecognition of income tax assets and liabilities, classification
of current and deferred income tax assets and liabilities, accounting for
interest and penalties associated with tax positions, accounting for income
taxes in interim periods, and income tax disclosures. In accordance with FIN 48,
the Company also adopted the policy of recognizing interest and penalties, if
any, related to unrecognized tax positions as income tax expense. For the three
months ended March 31, 2009 and 2008, the Company did not have any interest and
penalties associated with tax positions. As of March 31, 2009, the Company did
not have any significant unrecognized uncertain tax positions.





The
Company conducts major businesses in Hong Kong and is subject to tax in this
jurisdiction. As a result of its business activities, the Company files tax
returns that are subject to examination by the foreign tax
authority.





Net
loss per share





The
Company calculates net loss per share in accordance with SFAS No. 128,“Earnings per Share”. Basic
loss per share is computed by dividing the net loss by the weighted-average
number of common shares outstanding during the period. Diluted loss per share is
computed similar to basic loss per share except that the denominator is
increased to include the number of additional common shares that would have been
outstanding if the potential common stock equivalents had been issued and if the
additional common shares were dilutive.





Comprehensive income





SFAS No.
130, “Reporting Comprehensive
Income”, establishes standards for reporting and display of comprehensive
income, its components and accumulated balances. Comprehensive income as defined
includes all changes in equity during a period from non-owner sources.
Accumulated comprehensive income, as presented in the accompanying consolidated
statements of stockholders’ equity consists of changes in unrealized gains and
losses on foreign currency translation. This comprehensive income is not
included in the computation of income tax expense or benefit.





Foreign
currencies
translation





Transactions
denominated in currencies other than the functional currency are translated into
the functional currency at the exchange rates prevailing at the dates of the
transaction. Monetary assets and liabilities denominated in currencies other
than the functional currency are translated into the functional currency using
the applicable exchange rates at the balance sheet dates. The resulting exchange
differences are recorded in the statement of operations.


F-9


ASIAMART,
INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2009


(Currency
expressed in United States Dollars (“US$”))


(Unaudited)





The
reporting currency of the Company is the United States dollar ("US$"). The
Company’s subsidiaries operating in Hong Kong maintained their books and records
in its local currency, Hong Kong Dollars ("HK$"), which are functional
currencies as being the primary currency of the economic environment in which
these entities operate.





In
general, assets and liabilities are translated into US$, in accordance with SFAS
No. 52, “Foreign Currency
Translation”, using the exchange rate on the balance sheet date. Revenues
and expenses are translated at average rates prevailing during the year. The
gains and losses resulting from translation of financial statements of foreign
subsidiaries are recorded as a separate component of accumulated other
comprehensive income within the statement of stockholders’ equity.





Translation
of amounts from HK$ into US$1 has been made at the following exchange rates for
the respective period:


Three months ended March 31,2009
                
                
                2008Period
      end HK$ : US$1 exchange rate
                
                
                7.7519
                
                
                
                7.7827Average
      period HK$ : US$1 exchange rate
                
                
                7.7537
                
                
                
                7.7954





Related
parties





Parties,
which can be a corporation or individual, are considered to be related if the
Company has the ability, directly or indirectly, to control the other party or
exercise significant influence over the other party in making financial and
operating decisions. Companies are also considered to be related if they are
subject to common control or common significant influence.





Segment reporting





SFAS No.
131 “Disclosures about
Segments of an Enterprise and Related Information” establishes standards
for reporting information about operating segments on a basis consistent with
the Company’s internal organization structure as well as information about
geographical areas, business segments and major customers in the financial
statements. For the three months ended March 31, 2009, the Company operates in
two reportable segments in Hong Kong.





Fair
value of 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 and appropriate
valuation methodologies. The estimates presented herein are not necessarily
indicative of amounts that the Company could realize in a current market
exchange.





The
Company’s financial instruments primarily consist of cash and cash equivalents,
accounts receivable, deposits and prepaid expenses, other receivables, accounts
payable, accrued liabilities and other payables, customer deposits, amount due
to stockholders and income tax payable.





As of the
balance sheet dates, the estimated fair values of the financial instruments were
not materially different from their carrying values as presented due to the
short term maturities of these instruments and that the interest rates on the
borrowings approximate those that would have been available for loans of similar
remaining maturity and risk profile at respective period-ends.





Recent
accounting
pronouncements


F-10


ASIAMART,
INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2009


(Currency
expressed in United States Dollars (“US$”))


(Unaudited)








The
Company has reviewed all recently issued, but not yet effective, accounting
pronouncements and does not believe the future adoption of any such
pronouncements may be expected to cause a material impact on its financial
condition or the results of its operations.





In
December 2007, the FASB issued a revision to SFAS No. 141, “Business Combinations”
(“SFAS No. 141(R)”). SFAS No. 141(R) revises the accounting for business
combinations. Under SFAS No. 141(R), an acquiring entity will be required to
recognize the assets acquired and liabilities assumed in a transaction at the
acquisition-date fair value with limited exceptions. Specifically, SFAS No.
141(R) will change the accounting for acquisition costs, noncontrolling
interests, acquired contingent liabilities, restructuring costs associated with
a combination and certain tax-related items, as well as require additional
disclosures. SFAS No. 141(R) applies prospectively to business combinations for
which the acquisition date is on or after the beginning of the first annual
reporting period beginning on or after December 15, 2008. The Company is
required to apply SFAS No. 141(R) to any acquisitions in 2009 or
thereafter.





In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements—an amendment of ARB No. 51” (“SFAS No.
160”). SFAS No. 160 establishes accounting and reporting standards for
noncontrolling interests in subsidiaries. This statement requires the reporting
of all noncontrolling interests as a separate component of stockholders’ equity,
the reporting of consolidated net income (loss) as the amount attributable to
both the parent and the noncontrolling interests and the separate disclosure of
net income (loss) attributable to the parent and to the noncontrolling
interests. In addition, this statement provides accounting and reporting
guidance related to changes in noncontrolling ownership interests. Other than
the reporting requirements described above which require retrospective
application, the provisions of SFAS No. 160 are to be applied prospectively in
the first annual reporting period beginning on or after December 15, 2008. The
Company’s adoption of SFAS No. 160 on January 1, 2009 did not have an impact on
its consolidated results of operations or financial position.





In
December 2008, the FASB issued Staff Position (“FSP”) No. 140-4 and FIN 46(R)-8,
“Disclosures by Public
Entities about Transfers of Financial Assets and Interests in Variable Interest
Entities”. The purpose of this FSP is to promptly increase disclosures by
public entities and enterprises until the pending amendments to SFAS No. 140,
“Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities”, (“SFAS
No. 140”) and FASB Interpretation No. 46 (revised December 2003), “Consolidation of Variable Interest
Entities”, (“FIN 46(R)”) are finalized and approved by the FASB. The FSP
is effective for reporting periods (interim and annual) ending after December
15, 2008. This adoption did not have any impact on the condensed consolidated
financial statements.





On
January 12, 2009, the FASB issued FSP EITF 99-20-01, “Amendment to the Impairment
Guidance of EITF Issue No. 99-20”. This FSP amends the impairment
guidance in EITF Issue No. 99-20, “Recognition of Interest Income and
Impairment on Purchased Beneficial Interests and Beneficial Interests That
Continue to be Held by a Transferor in Securitized Financial Assets,” to
achieve more consistent determination of whether an other-than-temporary
impairment has occurred. The FSP also retains and emphasizes the objective of an
other-than-temporary impairment assessment and the related disclosure
requirements in SFAS No. 115, “Accounting for Certain Investments
in Debt and Equity Securities”, and other related guidance. The FSP is
shall be effective for interim and annual reporting periods ending after
December 15, 2008, and shall be applied prospectively. Retrospective application
to a prior interim or annual reporting period is not permitted. The Company does
not believe this pronouncement will impact its financial
statements.





NOTE
      5
            ACCOUNTS
      RECEIVABLE





The
majority of the Company’s sales are on open credit terms and in accordance with
terms specified in the contracts governing the relevant transactions. The
Company evaluates the need of an allowance for doubtful accounts based on
specifically identified amounts that management believes to be uncollectible. If
actual collections experience changes, revisions to the allowance may be
required.


F-11


ASIAMART,
INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2009


(Currency
expressed in United States Dollars (“US$”))


(Unaudited)





March 31, 2009
                  
                  
                  December 31, 2008(Unaudited)
                  
                  
                  (Audited)Accounts
      receivable, cost
                  
                  $
                  2,126,181
                  
                  
                  $
                  2,301,393Less:
      allowance for doubtful accounts
                  
                  
                  (503,251
                  )
                  
                  
                  (503,251
                  )Accounts
      receivable, net
                  
                  $
                  1,622,930
                  
                  
                  $
                  1,798,142





For the
three months ended March 31, 2009 and 2008, no allowance for doubtful accounts
was provided.





NOTE
      6
            DEPOSITS
      AND PREPAID EXPENSES





Deposits
and prepaid expenses consisted of the following:





March 31, 2009
                  
                  
                  December 31, 2008(Unaudited)
                  
                  
                  (Audited)Rental
      & utility expense
                  
                  $
                  131,954
                  
                  
                  $
                  156,415Purchase
      and other deposits
                  
                  
                  856,722
                  
                  
                  
                  641,003Prepaid
      expense
                  
                  
                  805,892
                  
                  
                  
                  775,1301,794,568
                  
                  
                  
                  1,572,548Less:
      allowance for doubtful accounts
                  
                  
                  (1,134,991
                  )
                  
                  
                  (1,154,336
                  )Deposits
      and prepaid expenses, net
                  
                  $
                  659,577
                  
                  
                  $
                  418,212





For the
three months ended March 31, 2009, the Company has reversed $19,345 allowance
for doubtful accounts due to subsequent recovery from other
deposits.





NOTE
      7
            ACCRUED
      LIABILITIES AND OTHER PAYABLES





Accrued
liabilities and other payables consisted of the following:





March 31, 2009
                                    
                                    
                                    December 31, 2008(Unaudited)
                                    
                                    
                                    (Audited)Accrued
      liabilities
                                    
                                    $
                                    316,407
                                    
                                    
                                    $
                                    314,552Commission
      payable
                                    
                                    
                                    1,460,101
                                    
                                    
                                    
                                    1,460,101Salaries
      payable
                                    
                                    
                                    432,917
                                    
                                    
                                    
                                    303,387Other
      payables
                                    
                                    
                                    262,659
                                    
                                    
                                    
                                    348,061$
                                    2,472,084
                                    
                                    
                                    $
                                    2,426,101


F-12


ASIAMART,
INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2009


(Currency
expressed in United States Dollars (“US$”))


(Unaudited)








NOTE
      8
            BANK
      BORROWINGS





Bank
borrowings consisted of the following:





March 31, 2009
                      
                      
                      December 31, 2008(Unaudited)
                      
                      
                      (Audited)Payable
      to financial institutions in Hong Kong:Installment
      loan from Dah Sing Bank, with an effective annual interest rate of 11%,
      due April 18, 2009, guaranteed by two of the Company's
      directors
                      
                      $
                      5,864
                      
                      
                      $
                      23,216Obligation
      under capital leases
                      
                      
                      206,239
                      
                      
                      
                      206,580Total
                      
                      
                      212,103
                      
                      
                      
                      229,796Less:
      current portion of bank borrowings
                      
                      
                      (5,864
                      )
                      
                      
                      (23,216
                      )Less:
      current portion of obligation under capital leases
                      
                      
                      (58,046
                      )
                      
                      
                      (82,287
                      )Total
      debts, net of current portion
                      
                      $
                      148,193
                      
                      
                      $
                      124,293





The
Company purchased certain equipment and motor vehicles under capital lease
arrangements with several independent financial institutions in Hong Kong, with
an effective interest rate ranging from 6.0% to 9.6% per annum, due through 2009
to 2013 and repayable the principal and interest monthly. The maturities of the
capital leases obligation for the next five years are as follows:





Period
      ending March 31:2010
                
                $
                66,4282011
                
                
                66,4282012
                
                
                53,4222013
                
                
                44,795Total
      capital leases obligation
                
                
                231,073Less:
      interest
                
                
                (24,834
                )Present
      value of net minimum obligation
                
                $
                206,239





The
Company’s certain equipment and motor vehicles are held under capital lease and
the related depreciation is included in depreciation expense.





NOTE
      9
            CONVERTIBLE
      DEBENTURE





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.


F-13


ASIAMART,
INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2009


(Currency
expressed in United States Dollars (“US$”))


(Unaudited)





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





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





The
debentures were discounted for the fair value of warrants, pursuant to APB 14
“Accounting for Convertible
Debt and Debt Issued with Stock Purchase Warrants”. The debentures were
further discounted for the intrinsic value of the beneficial conversion feature,
pursuant to EITF 98-5 “Accounting for Convertible
Securities with Beneficial Conversion Features or Contingently Adjustable
Conversion Ratios.” The discount is being amortized over the life of the
debentures. For the three months ended March 31, 2009 and 2008, $255,825 and
$255,825 were amortized and recorded as part of financing expenses,
respectively.





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
                
                
                5
                %Risk-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.





NOTE
      10
            INCOME
      TAXES





For the
three months ended March 31, 2009 and 2008, the local (United States) and
foreign components of (loss) income before income taxes were comprised of the
following:





Three months ended March 31,2009
                                                      
                                                      
                                                      2008Tax
      jurisdictions from:–
      Local
                                                      
                                                      $
                                                      (342,121
                                                      )
                                                      
                                                      $
                                                      (342,540
                                                      )–
      Foreign
                                                      
                                                      
                                                      (245,569
                                                      )
                                                      
                                                      
                                                      626,877(Loss)
      income before income taxes
                                                      
                                                      $
                                                      (587,690
                                                      )
                                                      
                                                      $
                                                      284,337


F-14


ASIAMART,
INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2009


(Currency
expressed in United States Dollars (“US$”))


(Unaudited)





Significant
components of the provision for income taxes are as follows:





Three months ended March 31,2009
                      
                      
                      2008Current:–
      Local
                      
                      $
                      -
                      
                      
                      $
                      -–
      Foreign
                      
                      
                      -
                      
                      
                      
                      45,835Deferred:–
      Local
                      
                      
                      -
                      
                      
                      
                      -–
      Foreign
                      
                      
                      -
                      
                      
                      
                      -Income
      tax expense
                      
                      $
                      -
                      
                      
                      $
                      45,835





The
effective tax rate in the periods presented is the result of the mix of income
earned in various tax jurisdictions that apply a broad range of income tax
rates. The Company and its subsidiaries are mainly operated in United States and
Hong Kong that are subject to tax in the jurisdiction in which they operate, as
follows:





United
States of America





AAMA is
registered in the State of Delaware and is subject to the tax laws of United
States of America.





As of
March 31, 2009, the operation in the United States of America has $342,121 net
operating losses available for federal tax purposes, which are available to
offset future taxable income. The net operating loss carry forwards begin to
expire in 2029, if unutilized. The Company has provided for a full valuation
allowance against the deferred tax assets of the expected future tax benefits
from the net operating loss carryforwards as the management believes it is more
likely than not that these assets will not be realized in the
future.





Hong
Kong





The
Company’s subsidiaries operating in Hong Kong are subject to Hong Kong Profits
Tax at the statutory income rate of 16.5% and 17.5% on assessable income for the
three months ended March 31, 2009 and 2008, respectively.





For the
period ended March 31, 2009, Hong Kong operations incurred net operating losses
and, accordingly, no provision for income taxes has been recorded. In addition,
no benefit for income taxes has been recognized due to the uncertainty of the
realization of any tax assets. As of March 31, 2009, the aggregate net operating
loss carryforwards was approximately $245,569 for Hong Kong tax purpose at no
expiration.





The
following table sets forth the significant components of the aggregate net
deferred tax assets and liabilities of the Company as of March 31, 2009 and
December 31, 2008:





March 31, 2009
                
                
                December 31, 2008(Unaudited)
                
                
                (Audited)Deferred
      tax assets:Net
      operating loss carryforwards:-
      United States
                
                $
                1,158,189
                
                
                $
                1,041,868-
      Hong Kong
                
                
                884,635
                
                
                
                844,117Total
      net deferred tax assets
                
                
                2,042,824
                
                
                
                1,885,985Less:
      valuation allowance
                
                
                (2,042,824
                )
                
                
                (1,885,985
                )Net
      deferred tax assets
                
                $
                -
                
                
                $
                -


F-15


ASIAMART,
INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2009


(Currency
expressed in United States Dollars (“US$”))


(Unaudited)





Management
believes that it is more likely than not that the deferred tax assets will not
be fully realizable in the future. Accordingly, the Company provided for a full
valuation allowance against its deferred tax assets of $2,042,824 as of March
31, 2009. For the three months ended March 31, 2009, the valuation allowance
increased by $156,839, primarily relating to net operating loss
carryforwards.





NOTE
      11
            RELATED
      PARTY TRANSACTIONS





(a)        Trade
receivable and sales – related party





For the
three months ended March 31, 2009, the Company incurred no related party
transactions.





For the
three months ended March 31, 2008, the Company earned revenue from the sale of
products to Prince Digital, a related company which was previously controlled by
Mr. Ricky Kee Kwong Tsoi, a stockholder of the Company, with the sales
amounts of $290,130 and trade receivable of $737,991, respectively. The sales
transactions were recorded at the fair market value in a normal course of
business.





(b)        Amounts
due to stockholders





As of
March 31, 2009 and December 31, 2008, amounts due to stockholders totaling
$288,457 and $288,456, represented the temporary advances to the Company. The
balances were unsecured, interest-free and repayable on demand.





NOTE
      12
            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 retailing
segment.





Three months ended March 31,2009
                
                
                2008Revenue,
      net:Trading
                
                $
                3,792,424
                
                
                $
                5,658,488Retailing
                
                
                718,995
                
                
                
                10,357,771Less:
      inter-segment sales
                
                
                (29,631
                )
                
                
                (4,738,867
                )$
                4,481,788
                
                
                $
                11,277,392





Three months ended March 31,2009
                  
                  
                  2008(Loss)
      income before income tax:Trading
                  
                  $
                  (91,977
                  )
                  
                  $
                  339,071Retailing
                  
                  
                  (495,713
                  )
                  
                  
                  (54,734
                  )$
                  (587,690
                  )
                  
                  $
                  284,337





All of
the Company’s revenue and assets are located in Hong Kong.


F-16


ASIAMART,
INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2009


(Currency
expressed in United States Dollars (“US$”))


(Unaudited)





NOTE
      13
            CONCENTRATIONS
      OF RISK





The
Company is exposed to the following concentrations of risk:





(a)         Major
customers





Three months ended March 31, 2009Customers
                      
                      Sales
                      
                      
                      Percentage of
                        total sales
                      
                      
                      Accounts
                        receivable, netCustomer
      A
                      
                      $
                      1,776,028
                      
                      
                      
                      47
                      %
                      
                      $
                      457,721Customer
      B
                      
                      
                      1,673,252
                      
                      
                      
                      44
                      %
                      
                      
                      254,414Total:
                      
                      $
                      3,449,280
                      
                      
                      
                      91
                      %
                      
                      $
                      712,135





For the
three months ended March 31, 2008, there was no customer account for 10% or more
of revenues.





(b)         Major
vendors





The
following is a table summarizing the purchases from vendors that individually
represents greater than 10% of the total purchases for each of the three months
ended March 31, 2009 and 2008 their outstanding balances as at period-end
date:





Three
      months ended March 31, 2009Vendors
                      
                      Purchases
                      
                      
                      Percentage
      of
                        total
      purchases
                      
                      
                      Accounts
                        payable,
      tradeVendor
      A
                      
                      $
                      1,951,767
                      
                      
                      
                      52
                      %
                      
                      $
                      764,854Vendor
      D
                      
                      
                      450,778
                      
                      
                      
                      12
                      %
                      
                      
                      194,552Total:
                      
                      $
                      2,402,545
                      
                      
                      
                      64
                      %
                      
                      $
                      959,406





Three
      months ended March 31, 2008Vendors
                      
                      Purchases
                      
                      
                      Percentage
      of
                        total
      purchases
                      
                      
                      Accounts
                        payable,
      tradeVendor
      A
                      
                      $
                      1,484,011
                      
                      
                      
                      28
                      %
                      
                      $
                      426,905Vendor
      B
                      
                      
                      1,031,716
                      
                      
                      
                      20
                      %
                      
                      
                      222,491Vendor
      C
                      
                      
                      518,382
                      
                      
                      
                      10
                      %
                      
                      
                      121,659Total:
                      
                      $
                      3,034,109
                      
                      
                      
                      58
                      %
                      
                      $
                      771,055





(c)       Credit
risks





Financial
instruments that potentially subject the Company to significant concentrations
of credit risk consist principally of cash and trade accounts receivable. The
Company performs ongoing credit evaluations of its customers’ financial
condition, but does not require collateral to support such
receivables.


F-17


ASIAMART,
INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2009


(Currency
expressed in United States Dollars (“US$”))


(Unaudited)





(d)       Interest
rate risk





As the
Company has no significant interest-bearing assets, the Company’s income and
operating cash flows are substantially independent of changes in market interest
rates.





The
Company’s interest-rate risk arises from bank borrowings and capital leases.
Borrowings issued at variable rates expose the Company to cash flow
interest-rate risk. Borrowings issued at fixed rates expose the Company to fair
value interest-rate risk. Company policy is to maintain approximately all of its
borrowings in fixed rate instruments. As of March 31, 2009, all borrowings were
at fixed rates.





(e)       Exchange
rate risk





The
Company cannot guarantee that the current exchange rate will remain steady;
therefore there is a possibility that the Company could post the same amount of
net income for two comparable periods and because of the fluctuating exchange
rate actually post higher or lower profit depending on the exchange rate of HK$
converted to US$ on that date. The exchange rate could fluctuate depending on
changes in political and economic environments without notice.





NOTE
      14
            COMMITMENTS
      AND CONTINGENCIES





(a)         Operating
lease commitments





The
Company has entered into several non-cancelable operating agreements for office
premises and outlets expiring through 2009. Total rent expense for the three
months ended March 31, 2009 and 2008 amounted to $101,290 and $105,511,
respectively.





As of
March 31, 2009, the Company has future minimum rental payments of $203,368 under
these operating leases in the next 12 months.





(b)         Legal
proceedings





On
November 5, 2007, Everest Special Situations Fund, LP filed a Complaint in the
Supreme Court for the State of New York, County of New York (the “Court”),
alleging claims for fraud and breach of contract related to a Securities
Purchase Agreement entered into with the Company on October 6, 2006. The Company
filed a Motion to Dismiss the Complaint, which was submitted on March 26, 2008.
The Court granted the Motion and dismissed the action pursuant to an Order
entered on April 8, 2008. Everest Special Situations Fund, LP filed a Motion for
Reargument of the Motion to Dismiss the Complaint in May 2008. On June 24, 2008,
the Court entered an order partially granting and partially denying the Motion
for Reargument. The Court ruled that Everest Special Situations Fund, LP could
amend the complaint to assert a claim for rescission, but the order dismissing
claims for damages was affirmed. On or about January 29, 2009, Everest Special
Situations Fund, LP filed a motion for leave to amend and supplement the
complaint. The case is presently proceeding to the discovery phase. No trial
date has been set.





NOTE
      15
            COMPARATIVE
      FIGURES





Certain
of the comparative figures have been reclassified to conform to the current
period's presentation.


F-18




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





Note
Regarding Forward-Looking Statements





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





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





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





Overview





Our core
business, prior to the third quarter of 2008, was the operation of outlets and
discount shopping centers catering principally to tourists visiting Hong Kong
from other parts of mainland China. We offered 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. Nearly all of our customers were brought to
our shopping centers by various mainland Chinese travel companies and travel
tour operators.





Over the
past few years, our goal has been the development of our retail business with a
focus on international tourists in Hong Kong. With the downturn of the economy,
management has re-evaluated the Company’s business model and
operation.  In the near future, management foresees a significant
slowdown in retail sales, anticipates a reduction in tourist visits from
mainland China to Hong Kong, and a reduction in spending per tourist, partly as
a result of adverse changes in travel policy and the domestic economic
environment in China. As such, management has changed its business model from
being an outlet and discount shopping center operator to a retail service
provider.





During
the third quarter of 2008, the revenue of the Company significantly decreased
due to the above-mentioned trends.  In addition, in the period leading
up to and during the Beijing 2008 Olympic Games, the Chinese government
restricted outbound travel visas, and this policy has not been reversed
following the Olympics. Further, management believes that the current ongoing
global economic recession is discouraging tourist visits to Hong
Kong.





In the
present economic climate, management believes that the Company is unlikely to
sustain profitability with the operation of its retail outlets, and believes
that changing its business model will be in its best interest. Management
believes the Company faces heavy competition from other local retailers seeking
to make sales to a dwindling group of tourists, which is causing a trend toward
lower profits. Retailers that wish to stay afloat have to compete fiercely by
drastically marking down their prices, lowering their margins, and offering
higher commissions to travel operators. Some of our competitors are in a better
position to weather the economic storm because they have better locations with
heavier foot traffic and attract a higher density of tourists. Management
believes that our sales will not improve in the near future due to the difficult
economic climate, the location of our outlets, and the intense competition
surrounding our area. Therefore, starting the third quarter of 2008, the Company
has shifted its business model from being an outlet and discount shopping center
operator to a retail service provider and has closed the operation of its two
outlets at the end of 2008.


3


On
October 28, 2008, three of our subsidiaries entered into a series of Management
Service Agreements (the “Agreements”) with Best Paramount Industrial Limited
(“Best Paramount”) whereby they agreed to act as a service provider to Best
Paramount. Best Paramount is reputed to be an experienced retail operator that
sells a wide variety of appealing items that attract tourists, including, but
not limited to, cosmetics, electronics, jewelry and branded watches, and it also
has the advantage of securing an excellent location in the coveted Emax within
Hong Kong International Trade and Exhibition Center, an attractive location with
heavy foot traffic from visiting tourists.





Under the
Agreements, the Company agreed to provide technical, commercial and operational
management for Best Paramount. The scope of services provided by the Company
includes, but is not limited to, accounting, human resources, administrative,
marketing and sales consultancy, retail operation and inventory management. The
Company is responsible for running Best Paramount’s premises and agreed to
provide its employees to staff Best Paramount’s operation. Best Paramount is
responsible for paying its own rent, cost of sales, commissions to travel agents
and taxes. The Company is responsible for paying all other expenses of the
operation, including, but not limited to, advertising, utilities, insurance,
salaries, transportation, cleaning and administrative (“Actual Costs”) on the
behalf of Best Paramount. Best Paramount reimburses the Company for the Actual
Costs, and in addition pay Company a 5% mark-up of such Actual Costs as
consideration for the Company’s services. The Agreements may be terminated by
mutual agreement, by either party giving the other written notice in the event
of material breach, or by giving a 60-day prior written notice without
cause.  The Company believes its new direction will position the
Company to produce a more stable stream of income and achieve profitability for
the Company and its shareholders.





In
addition, 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 source our products from suppliers worldwide in
order to provide our customers with an extensive variety of products at
competitive prices. We have also established a comprehensive quality assurance
and service protocol. Our customers are entitled to a full refund within 180
days of their purchase of a product if the product does not meet their
satisfaction. In cases where there is a manufacturer’s warranty, during the
warranty period our customers can bring their products directly to manufacturers
in China, including Hong Kong and Macau, for repair. We mark the receipts for
our products with a special symbol to denote our guarantee that the product is
authentic and sourced directly from the manufacturer or an authorized
dealer.





Critical
Accounting Policies and Estimates





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





While our
significant accounting policies are described in Note 4 to our consolidated
financial statements, we believe that the following accounting policies are the
most critical to assist you in fully understanding and evaluating our reported
financial results.





Revenue recognition.In
accordance with the SEC’s Staff Accounting Bulletin No. 104, “Revenue Recognition”, the
Company records revenue when services are received by the customers and realized
the amounts net of provisions for discounts, allowance and taxes which are
recognized at the time of services performed.





Sale of
products represents the sale of electronic appliances through our trading
network. Sale of products is 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 collectability is reasonably
assured. Revenue is recorded, 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.


4


Service
income is primarily derived from the provision of management service to other
retail operators. These services are generally billed on a monthly basis.
Revenue is recognized when service is rendered and accepted by the
customers.





Interest
income is recognized on a time apportionment basis, taking into account the
principal amounts outstanding and the interest rates applicable.





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 the adequacy of
the allowance for doubtful accounts on an ongoing basis, using historical
collection trends and aging of receivables. Management also periodically
evaluates individual customer’s financial condition, credit history, and the
current economic conditions to make adjustments in the allowance when it is
considered necessary. Account balances are charged off against the allowance
after all means of collection have been exhausted and the potential for recovery
is considered remote.





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.





Plant and equipment. Plant
and equipment are stated at cost less accumulated depreciation and accumulated
impairment losses, if any. Depreciation is calculated on the straight-line basis
over the following expected useful lives from the date on which they become
fully operational. Expenditure for repairs and maintenance is expensed as
incurred. When assets have retired or sold, the cost and related accumulated
depreciation are removed from the accounts and any resulting gain or loss is
recognized in the results of operations. Depreciation expense for the three
months ended March 31, 2009 and 2008 were $43,727 and $64,968, respectively. As
of March 31, 2009, motor vehicles and certain equipment under capital leases
were included with the aggregate net book value of $341,961.





Impairment of long-lived
assets. The Company accounts for impairment of plant and equipment and
long-term loans receivables 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
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, 2009 and March 31, 2008.





Revenues. For the three
months ended March 31, 2009, total revenue decreased 60% from $11.3 million to
$4.5 million relative to the three months ended March 31,
2008.  During the latter half of 2008, we switched business direction
from being a retail operator to a retail service provider due to the economic
recession which led to a significant slowdown in retail sales and fierce
competition from other retailers. We terminated the retail operations of our
business and closed our two shopping centers during the fourth quarter of 2008,
which caused a significant reduction in our revenue. We currently derive our
revenue from providing management services to Best Paramount and the
distribution of consumer electronic products through our trading
segment.





Cost of Sales. Cost of sales
decreased from $5.8 million for the three months ended March 31, 2008 to $4.3
million for the three months ended March 31, 2009, a decrease of 25.5% in cost
of sales.  The decrease in cost of sales is due to the fact that the
cost of sales for the first quarter of 2009 represented only the cost of the
trading segment compared to the cost of sales for the first quarter of 2008
which is inclusive of both the trading and retail segments of our
business.


5




Gross
Profit.  Gross profit decreased from $5.5 million for the three
months ended March 31, 2008 to $0.2 million for the three months ended March 31,
2009, a decrease of 97.2% in gross profit. The decrease in gross profit was
because the gross profit for the first quarter of 2009 represented the gross
profit of the trading segment and the management services provided compared to
the gross profit for the first quarter of 2008 which is inclusive of both the
trading and retail segments of our business. This significant decrease of gross
profit was mainly attributable to the change from the closure of our shopping
centers in 2008 to the provision of management services.  The retail
operations produced a much higher gross profit margin compared to our trading
segment.  Therefore, the termination of our retail operations caused a
significant decrease in our overall gross profit.





Selling, General and Administrative
Expenses. Selling, general and administrative expenses decreased from
$5.1 million for the three months ended March 31, 2008 to $0.5 million for the
same period in 2009, a decrease of 89.3%. Our selling, general and
administrative expenses significantly decreased due to the closure of our
shopping centers which reduced our overall overhead expenses.





Other Income (Expense). Other income
(expense) primarily represents the gain or loss on exchange from converting RMB
received from customers to Hong Kong Dollars and amortization expenses on the
debt discount. Total other expense increased from $0.1 million for the three
months ended 2008 to $0.2 million for the same period in 2009.




Business
Segments
 
 Our
operating businesses are structured and managed separately, according with the
nature of their operations and the products and services they provide. We
identify our reportable segments based on management responsibility, and these
reportable segments are (i) the trading segment (“Trading Segment”) and
(ii) the retailing segment providing management services to other retailers
(“Retailing Segment”). Information on segments and reconciliations to income
before income taxes are described in Note 12 to our consolidated financial
statements and is incorporated herein by reference.
 
 Trading
Segment
 
 Sales
revenue from external customers in the Trading Segment during the first quarter
decreased 33.0%, from $5.7 million for the three month period ended March 31,
2008 to $3.8 million for the same period in 2009.  The decrease was
attributable to a downturn in the economy.  During times of economic
downturn, consumers tend to spend less on electronics and other discretionary
products, and we believe this larger economic trend has affected our sales
revenue in our trading segment.
 
 Retailing
Segment
 
 Management
services revenue during the first quarter ended March 31, 2009 was $0.7 million,
compared to $10.2 million revenue earned by our retail operations during the
first quarter ended March 31, 2008.  Since our two shopping centers
closed at the end of 2008, the revenue from our retail operations in the
Retailing Segment has been replaced with the revenue from our management
services.
  Liquidity
and Capital Resources





Cash
Flows





For the
three month period ended March 31, 2009, net cash flow used in operating
activities was $7,987, compared to the net cash flow used in operating
activities of $380,098 for the same period in 2008.  The improvement
in cash flow used in operating activities was mainly due to deferred payments
and an increase in accounts payable.


6


Net cash
flow provided by investing activities in the first quarter of 2009 was
$21,828, compared to $15,011 of net cash flow provided by investing
activities in the first quarter of 2008.  The increase of net cash
flow provided by investing activities was due to the disposal of plant and
equipment.





Net cash
flow used in financing activities was $17,541 for the three month period ended
March 31, 2009 compared to the net cash flow used in financing activities of
$206,937 for the same period in 2008.  The decrease was mainly due to
a decrease in repayment of installment loan.





Capital
Resources





At March
31, 2009, we had cash and cash equivalents of $0.1 million, other current assets
of $2.9 million and current liabilities of $7.1 million. We presently finance
our operations primarily from the cash flow from our operations, and we
anticipate that this will continue to be our primary source of funds to finance
our short-term cash needs.





The
continuation of the Company is dependent upon the continuing financial support
of shareholders and the anticipation of a business restructuring
plan. There is no assurance, however, that we will not need to raise
additional equity or debt financing within this period. We also may require
additional capital for other purposes not presently contemplated. If we are
unable to obtain sufficient capital, we could be required to curtail our
expenditures, including capital expenditures for property and equipment, which
could harm our business.





Contractual
Obligations





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





The
following tables summarize our contractual obligations as of March 31, 2009, and
the effect that these obligations are expected to have on our liquidity and cash
flows in future periods.




Payments Due by PeriodTotal
                  
                  
                  Less than
                    1year
                  
                  
                  1-3 Years
                  
                  
                  4-5 Years
                  
                  
                  5 Years +(in thousands of dollars)Contractual Obligations
      :Total
      Indebtedness
                  
                  $
                  6
                  
                  
                  $
                  6
                  
                  
                  $
                  —
                  
                  
                  
                  —
                  
                  
                  $
                  —Capital
      Lease Obligations
                  
                  
                  231
                  
                  
                  
                  66
                  
                  
                  
                  165
                  
                  
                  
                  —
                  
                  
                  
                  —Operating
      Leases
                  
                  
                  203
                  
                  
                  
                  203
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —Total
      Contractual Obligations:
                  
                  $
                  440
                  
                  
                  $
                  275
                  
                  
                  $
                  165
                  
                  
                  $
                  -
                  
                  
                  $
                  —





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.





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.


7


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





Off-Balance
Sheet Arrangements





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





Effects
of Inflation





We are
subject to price risks arising from price fluctuations in the market prices of
the products that we sell under our Trading Segment.  Price risks are
managed by our Trading 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.





Derivative
Financial Instruments





We do not
use derivative financial instruments in our investment portfolio and do not have
any foreign exchange contracts. Our financial instruments consist of cash and
cash equivalents, trade accounts receivable, accounts payable, and long-term
obligations. We consider investments in highly-liquid instruments purchased with
a remaining maturity of 90 days or less at the date of purchase to be cash
equivalents.





Interest
Rates





Our
exposure to market risk for changes in interest rates relates primarily to our
short-term investments and short-term obligations; thus, fluctuations in
interest rates do not have a material impact on the fair value of these
securities. At March 31, 2009, we had approximately $0.1 million in cash and
cash equivalents. A hypothetical 5% increase or decrease in either short-term or
long-term interest rates would not have a material impact on our earnings or
loss, or the fair market value or cash flows of these instruments.





Foreign
Exchange Rates





We
generally transact business in Hong Kong Dollars, and we do not have significant
exposure to exchange rates between and among the U.S. Dollar or Chinese Renminbi
(RMB). Since 1983, the Hong Kong Dollar has been pegged to the U.S. Dollar and
currently has an exchange rate of 7.8 Hong Kong Dollars for each U.S.
Dollar.  However, see the risk factor in Part II below entitled
“Fluctuation in the value of RMB and the Hong Kong Dollar relative to other
currencies may have a material adverse effect on our business and/or an
investment in our shares.”





ITEM 4.   CONTROLS AND
PROCEDURES





Based on
an evaluation of the effectiveness of our disclosure controls and procedures (as
defined in Rule 13a-15(e) or Rule 15d-15(e) under the Securities Exchange Act of
1934 (the “Exchange Act”)) as of March 31, 2009, our Chief Executive Officer and
Chief Financial Officer believe that our disclosure controls and procedures (as
defined in Rule 13a-15(e) or 15d-15(e) of the Exchange Act) are effective to
ensure that information required to be disclosed by us in this report is
accumulated and communicated to our management, including our principal
executive officer and principal financial officer, as appropriate, to allow
timely decisions regarding required disclosure. There were no changes in our
internal control over financial reporting (as defined in Rules 13a-15(f) and
15d-15(f) under the Securities Exchange Act of 1934, as amended) during the
quarter ended March 31, 2009 that have been materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.





PART
II. OTHER INFORMATION





ITEM 1.   LEGAL PROCEEDINGS





Other
than the proceeding described below, we are not currently involved in any
material legal proceedings, nor have we been involved in any such proceeding
that has had, or may have, a significant effect on us. We are not aware of any
material legal proceedings pending against us.


8


We are
involved in a legal proceeding called Everest Special Situations Fund, LP v.
Asiamart, Inc. (Index No. 603666/07). On or about November 5, 2007, Everest
Special Situations Fund, LP filed a Complaint in the Supreme Court for the State
of New York, County of New York (the “Court”), alleging claims for fraud and
breach of contract related to a Securities Purchase Agreement entered into with
the Company on October 6, 2006. The Company filed a Motion to Dismiss the
Complaint, which was submitted on March 26, 2008. The Court granted the Motion
and dismissed the action pursuant to an Order entered on April 8, 2008. Everest
Special Situations Fund, LP filed a Motion for Reargument of the Motion to
Dismiss the Complaint in May 2008. On June 24, 2008, the Court entered an order
partially granting and partially denying the Motion for Reargument. The Court
ruled that Everest Special Situations Fund, LP could amend the complaint to
assert a claim for rescission, but the order dismissing claims for damages was
affirmed.  On or about January 29, 2009, Everest Special Situations
Fund, LP filed a motion for leave to amend and supplement the complaint. The
case is presently proceeding to the discovery phase. No trial date has been
set.





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
this report 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





Our
sales are influenced by general economic cycles. A prolonged period of depressed
consumer spending would have a material adverse effect on our profitability or
the profitability of our affiliate retailers.





Retail is
a cyclical industry that is dependent upon the overall level of consumer
spending. The global economy is currently experiencing a downturn. Retail tends
to decline in periods of uncertainty regarding future economic prospects, when
consumer spending, particularly on discretionary items, and disposable income
decline. Many factors affect the level of consumer spending in the retail
industry, including, among others: prevailing economic conditions, levels of
employment, salaries and wage rates, energy costs, interest rates, the
availability of consumer credit, taxation and consumer confidence in future
economic conditions. During periods of economic uncertainty, we may not be able
to maintain or increase our sales or maintain or improve our margins from
operations as a percentage of net sales. A prolonged period of depressed
consumer spending would have a material adverse effect on our
profitability.





We
or our affiliate retailers 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.


9


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





The
seasonality of our business places increased strain on our operations or the
operations of our affiliate retailers.





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 the retail stores managed by
      us;


•
            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.





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





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





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





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


10


If
we or our affiliate retailers do not successfully optimize and operate retail
locations under our management, our business could decline.





If we do
not successfully operate the retail locations under our management, this could
significantly limit our ability to meet customer demand and cause a decline in
sales at retail locations under our management.  This in turn cuts
into our profits since our management fees are a percentage of actual costs paid
by us on the behalf of the retail locations we manage.  Because it is
difficult to predict demand, we may not manage our facilities optimally, which
may result in excess or insufficient inventory, and distribution capacity.
Failure to optimize inventory will increase our net shipping cost by requiring
us to make long-distance shipments or partial shipments from different
locations. As we continue to sign on new retailers under our management 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 or our affiliate retailers,
distributors, retailers or their vendors.





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





We
or our affiliate retailers 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 or our
affiliate retailers 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
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 maintain our current operation
as a retail service provider.  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.


11


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





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





We
or our affiliate retailers may be adversely affected by the financial health of
the retail industry in Asia.





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





We
or our affiliate retailers may be adversely affected by the trend towards retail
trade consolidation.





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





Risks
Related to Doing Business in China





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





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





Abrupt
and forceful regulation by governmental authorities may impose costly
requirements on our business, which could have a material adverse effect on our
business and overall financial results.





Our
industry, particularly the market segment dealing with inbound visitors from
China, is relatively new, and until recent times it has been left unregulated.
Governmental authorities in the PRC and in Hong Kong may impose regulations
designed to protect consumers, or even to curtail what the PRC government might
view as a loss of domestic retail sales, import duties and tax revenue. Changes
in policies affecting the tourist retail industry may be enacted abruptly
without transitional periods that may force us to make rapid and costly
adjustments in our operations in an effort to comply. It is not always possible
for management to anticipate changes in government policies, or the impact of
those changes to our business.





On June
15, 2007, the Hong Kong government implemented its “Refund Protection Scheme for
Mainland China’s Inbound Tour Group Shoppers,” enacted by the Travel Industry
Council of Hong Kong. The Refund Protection Scheme is aimed at protecting the
consumer rights of mainland China’s tourist visitors to Hong Kong, and improving
the service standards in the industry as a whole.


12


Under the
Refund Protection Scheme, retailers who intend to arrange for mainland China's
Inbound group visitors must register with the Travel Industry Council and one of
the conditions of registration is that registered retailers shall offer
six-month, full refund protection to mainland China's inbound group visitors. As
a part of the conditions of the Refund Protection Scheme, registered retailers
must assist tour operators and inbound visitors seeking refunds. Registered
retailers who fail to comply may be subjected to penalties imposed by the Travel
Industry Council. We have registered with the Travel Industry Council under the
new rules and offer a 180-day refund policy to our customers.





Our
operations may be negatively impacted by these heightened standards and
implementation of the new rules.





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





The value
of RMB and the Hong Kong Dollar against the U.S. dollar and other currencies may
fluctuate and is affected by, among other things, changes in political and
economic conditions. Although the exchange rate between RMB and the U.S. dollar
has been effectively pegged by the People’s Bank of China since 1994, and the
rate between the Hong Kong Dollar has been pegged to the U.S. dollar since 1983,
there can be no assurance that these currencies will remain pegged to the U.S.
dollar, especially in light of the significant international pressure on the
Chinese government to permit the free floatation of 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, Swine Flu,
or other epidemics or outbreaks. China reported a number of cases of SARS
in the spring of 2003, which severely impacted the tourism industry for many
months. Any prolonged recurrence of SARS or other adverse public health
developments in China could negatively impact tourism in Hong Kong, which would
have a material adverse effect on our business operations. For instance, health
or other government regulations adopted in response may require temporary travel
restrictions, or even closure of our facilities or offices. Such closures would
severely disrupt our customer flow and business operations, and adversely affect
our results of operations. We have not adopted any written preventive measures
or contingency plans to combat any future outbreak of SARS or any other
epidemic.





Risks
Related to an Investment in Our Securities





We
will need additional capital, which may not be accessible on attractive terms or
at all.





We
anticipate that we will need to raise additional funds in the future through
public or private financing. Our ability to obtain additional financing will be
subject to a number of factors, including market conditions, our operating
performance and the terms of our existing indebtedness. The terms of our senior
convertible debentures limit our ability to incur additional debt because any
such additional debt we incur, other than a limited senior credit facility, must
be contractually subordinated, as to payment and liquidation, to the payment in
full of the debentures. We cannot assure you that we will be able to raise
additional funds on terms favorable to us or at all. If we raise additional
funds through the sale of equity or convertible debt securities, your ownership
percentage of our common stock will be reduced. In addition, any such
transactions may dilute the value of our common stock. We may have to issue
securities that have rights, preferences and privileges senior to our common
stock. The terms of any additional indebtedness may include restrictive
financial and operating covenants that would limit our ability to compete and
expand. Our failure to obtain any required future financing could materially and
adversely affect our financial condition.





Conversion
of the debentures into shares of our common stock will dilute the ownership
interests of existing stockholders, including holders who will have already
converted their debentures.





The
conversion of some or all of the debentures into our shares of our common stock
will dilute the ownership interests of existing stockholders. Any sales in the
public market of the shares of common stock issuable upon such conversion could
adversely affect prevailing market prices of our shares of common stock. In
addition, the existence of the debentures may encourage short selling by market
participants because the conversion of the debentures could depress the price of
our shares of common stock.


13


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





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





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





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





Our
common shares are not currently traded at high volume, and you may be unable to
sell at or near ask prices or at all if you need to sell or liquidate a
substantial number of shares at one time.





We 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 Capital Market or other
markets.





Our
common shares are currently traded, but currently with low volume, based on
quotations 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.





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.




14


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





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





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





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





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





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





Past
activities of the company and our affiliates may lead to future liability for
us.





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





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





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


15


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





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





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





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





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





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





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








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





None.





ITEM 3.   DEFAULTS UPON SENIOR
SECURITIES





None.


16


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





None.




ITEM 5.   OTHER INFORMATION





None.





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
              
              Description10.20
              
              Addendum
      to Management Service Agreement dated April 29, 2009 by and between Allied
      Fine Development Limited and Best Paramount Industrial
      Limited*10.21
              
              Addendum
      to Management Service Agreement dated April 29, 2009 by and between
      Manigood International Industrial Limited and Best Paramount Industrial
      Limited*10.22
              
              Addendum
      to Management Service Agreement dated April 29, 2009 by and between
      Profits Dreams Development Limited and Best Paramount Industrial
      Limited*31.1
              
              Rule
      13a-14(a)/15d-14(a)(4) Certification by Principal Executive Officer
      *31.2
              
              Rule
      13a-14(a)/15d-14(a)(4) Certification by Principal Accounting and
      Financial Officer *32.1
              
              Section
      1350 Certification by Principal Executive Officer *32.2
              
              Section
      1350 Certification by Principal Accounting and Financial Officer
      *









* Filed
herewith


17


SIGNATURES





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





ASIAMART, INC.Dated:
      May 20, 2009
              By:
              /s/
      Alex Chun Shan YueAlex
      Chun Shan Yue
                Chief
      Executive Officer
                (Principal
      Executive Officer)




Dated:  May
      20, 2009
              By:
              /s/
      Edward Man Wai MaEdward
      Man Wai Ma
                Chief Financial Officer
                (Principal
      Financial and Accounting
Officer)




18