UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
  FORM 10-Q
 x
              QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT
      OF 1934For
      the quarter ended September 30,
2008
 
 -OR-
 
 o
              TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT
      OF 1934For
      the transition period
      from                               to
  Commission File Number 0-50164
 INNOCOM
TECHNOLOGY HOLDINGS, INC.
 (Exact
Name of small business issuer as specified in Its charter)
  NEVADA
                
                87-0618756(State
      or other jurisdiction of
                
                (I.R.S.
      Employer Identification No.)incorporation
      or organization)
  Suite
      1501, Bank of East Asia Harbour View Centre, 56
                    Gloucester
      Road, Wanchai, Hong Kong, PRC
                    (Address
      of principal executive offices)
                  
                  (Zip
      code)
 
 Issuer’s
telephone number, including area code: (852) 3102 1602
 
 (Former
name, former address or former fiscal year, if changed since last
report)
 
 Indicate
by check mark whether the registrant: (1) 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 þNo  ̈
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange
Act.
 
 Large
      accelerated filer o
              Accelerated
      filer o
              Non-accelerated
      filer o
              Smaller
      reporting company þ
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rue
12b-2of the Exchange Act).
 Yes  oNo þ
  The
number of shares outstanding of each of the Registrant’s classes of common
stock, as of November 20, 2008 was 37,900,536 shares, all of one class of $0.001
par value Common Stock.
  
 
 INNOCOM
TECHNOLOGY HOLDINGS, INC.
 FORM
10-Q
 Quarter
Ended September 30, 2008
 TABLE
OF CONTENTS
 
 PagePART
      I— FINANCIAL INFORMATIONItem
      1
                                    Financial
      StatementsCondensed
      Consolidated Balance Sheets as of September 30, 2008 (unaudited)and
      December 31, 2007 (audited)
                                    
                                    
                                    F-2Condensed
      Consolidated Statements of Operations and Comprehensive(Loss) Income for
      the Three Months and Nine Months Ended September 30, 2008 and 2007
      (unaudited)
                                    
                                    
                                    F-3Condensed
      Consolidated Statements of Cash Flows for theNine
      Months Ended September 30, 2008 and 2007 (unaudited)
                                    
                                    
                                    F-4Condensed
      Consolidated Statement of Stockholders’ Equity for theNine
      Months Ended September 30, 2008 (unaudited)
                                    
                                    
                                    F-5Notes
      to Condensed Consolidated Financial Statements
                                    
                                    
                                    F-6
      – F-16Item
      2
                                    Managements
      Discussion and Analysis of Financial Condition andResults
      of Operation
                                    
                                    
                                    20Item
      3
                                    Quantitative
      and Qualitative Disclosures About Market Risk
                                    
                                    
                                    23Item
      4T
                                    Controls
      and Procedures
                                    
                                    
                                    24PART
      II—OTHER INFORMATIONItem
      1
                                    Legal
      Proceedings
                                    
                                    
                                    24Item
      1A
                                    Risk
      Factors
                                    
                                    
                                    24Item
      2
                                    Unregistered
      Sales of Equity Securities and Use of Proceeds
                                    
                                    
                                    35Item
      3
                                    Defaults
      Upon Senior Securities
                                    
                                    
                                    35Item
      4
                                    Submission
      of Matters to a Vote of Security Holders
                                    
                                    
                                    35Item
      5
                                    Other
      Information
                                    
                                    
                                    35Item
      6
                                    Exhibits
                                    
                                    
                                    35SIGNATURES
                                    
                                    
                                    35
  
 
 SPECIAL
NOTE ON FORWARD LOOKING STATEMENTS
  This
Quarterly Report on Form 10-Q, including "Management's Discussion and Analysis
of Financial Condition and Results of Operations" in Item 2 of Part I of this
report include forward-looking statements. These statements involve known and
unknown risks, uncertainties and other factors that may cause our actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance, or
achievements expressed or implied by forward-looking statements.
  In some
cases, you can identify forward-looking statements by terminology such as "may,"
"should," "expects," "plans," "anticipates," "believes," "estimates,"
"predicts," "potential," "proposed," "intended," or "continue" or the negative
of these terms or other comparable terminology. You should read statements that
contain these words carefully, because they discuss our expectations about our
future operating results or our future financial condition or state other
"forward-looking" information. There may be events in the future that we are not
able to accurately predict or control. Before you invest in our securities, you
should be aware that the occurrence of any of the events described in this
Annual Report could substantially harm our business, results of operations and
financial condition, and that upon the occurrence of any of these events, the
trading price of our securities could decline and you could lose all or part of
your investment. Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
growth rates, levels of activity, performance or achievements. We are under no
duty to update any of the forward-looking statements after the date of this
Quarterly Report to conform these statements to actual results.
  
  PART
I.  FINANCIAL INFORMATION
 
 ITEM
 1.  Financial Statements
 
 INDEX
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
 (UNAUDITED)
  PageCondensed
      Consolidated Balance Sheets as of September 30, 2008 and December 31,
      2007
                                
                                
                                F-2Condensed
      Consolidated Statements of Operations And Comprehensive (Loss)
      Incomefor
      the three and nine months ended September 30, 2008 and
2007
                                
                                
                                F-3Condensed
      Consolidated Statements of Cash Flowsfor
      the nine months ended September 30, 2008 and 2007
                                
                                
                                F-4Condensed
      Consolidated Statement of Stockholders’ Equityfor
      the nine months ended September 30, 2008
                                
                                
                                F-5Notes
      to Condensed Consolidated Financial Statements
                                
                                
                                F-6
      to F-16
  F-1
 
 INNOCOM
TECHNOLOGY HOLDINGS, INC.
 CONDENSED
CONSOLIDATED BALANCE SHEETS
 AS
OF SEPTEMBER 30, 2008 AND DECEMBER 31, 2007
 (Currency
expressed in United States Dollars (“US$”), except for number of
shares)
 
 September 30,2008
                                  
                                  
                                  December 31, 2007(Unaudited)
                                  
                                  
                                  (Audited)ASSETSCurrent
      assets:Cash
      and cash equivalents
                                  
                                  $
                                  527,146
                                  
                                  
                                  $
                                  3,597Inventories
                                  
                                  
                                  139,430
                                  
                                  
                                  
                                  -Prepayments
      and other receivables
                                  
                                  
                                  238,485
                                  
                                  
                                  
                                  26,636Total
      current assets
                                  
                                  
                                  905,061
                                  
                                  
                                  
                                  30,233Non-current
      assets:Investment
      in an unconsolidated affiliate
                                  
                                  
                                  -
                                  
                                  
                                  
                                  8,463,464Intangible
      assets, net
                                  
                                  
                                  5,179,121
                                  
                                  
                                  
                                  5,603,129Land
      use right, net
                                  
                                  
                                  3,109,170
                                  
                                  
                                  
                                  -Property,
      plant and equipment, net
                                  
                                  
                                  7,319,246
                                  
                                  
                                  
                                  2,082TOTAL
      ASSETS
                                  
                                  $
                                  16,512,598
                                  
                                  
                                  $
                                  14,098,908LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilities:Bank
      overdraft
                                  
                                  $
                                  33,503
                                  
                                  
                                  $
                                  -Short-term
      loan
                                  
                                  
                                  512,065
                                  
                                  
                                  
                                  -Accounts
      payable
                                  
                                  
                                  81,491
                                  
                                  
                                  
                                  -Amount
      due to a related party
                                  
                                  
                                  2,085,809
                                  
                                  
                                  
                                  128Deferred
      revenue
                                  
                                  
                                  76,411
                                  
                                  
                                  
                                  400,290Income
      tax payable
                                  
                                  
                                  -
                                  
                                  
                                  
                                  1,439,376Other
      payables and accrued liabilities
                                  
                                  
                                  1,972,447
                                  
                                  
                                  
                                  197,697Total
      current liabilities
                                  
                                  
                                  4,761,726
                                  
                                  
                                  
                                  2,037,491TOTAL
      LIABILITIES
                                  
                                  
                                  4,761,726
                                  
                                  
                                  
                                  2,037,491Commitments
      and contingenciesStockholders’
      equity:Common
      stock, $0.001 par value; 50,000,000 shares authorized; 37,898,251 shares
      and 37,898,251 shares issued and outstanding as of September 30, 2008 and
      December 31, 2007
                                  
                                  
                                  37,898
                                  
                                  
                                  
                                  37,898Additional
      paid-in capital
                                  
                                  
                                  6,901,232
                                  
                                  
                                  
                                  6,901,232Accumulated
      other comprehensive income
                                  
                                  
                                  789,571
                                  
                                  
                                  
                                  171,652Retained
      earnings
                                  
                                  
                                  4,022,171
                                  
                                  
                                  
                                  4,950,635Total
      stockholders’ equity
                                  
                                  
                                  11,750,872
                                  
                                  
                                  
                                  12,061,417TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
                                  
                                  $
                                  16,512,598
                                  
                                  
                                  $
                                  14,098,908
  See
accompanying notes to condensed consolidated financial
statements.
  F-2
 
 INNOCOM
TECHNOLOGY HOLDINGS, INC.
 CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
 AND
COMPREHENSIVE (LOSS) INCOME
 FOR
THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
 (Currency
expressed in United States Dollars (“US$”), except for number of
shares)
 (Unaudited)
 
 Three months ended September 30,
                              
                              
                              Nine months ended September 30,2008
                              
                              
                              2007
                              
                              
                              2008
                              
                              
                              2007REVENUE,
      NET
                              
                              $
                              73,078
                              
                              
                              $
                              1,138,238
                              
                              
                              $
                              324,490
                              
                              
                              $
                              1,792,083OPERATING
      EXPENSES:Sales
      and marketing
                              
                              
                              -
                              
                              
                              
                              
                              
                              
                              
                              -
                              
                              
                              
                              30,128General
      and administrative
                              
                              
                              295,505
                              
                              
                              
                              740,958
                              
                              
                              
                              1,194,887
                              
                              
                              
                              1,909,936Total
      operating expenses
                              
                              
                              295,505
                              
                              
                              
                              740,958
                              
                              
                              
                              1,194,887
                              
                              
                              
                              1,940,064LOSS
      FROM OPERATIONS
                              
                              
                              (222,427
                              )
                              
                              
                              397,280
                              
                              
                              
                              (870,397
                              )
                              
                              
                              (147,981
                              )Other
      income (expenses):Gain
      on disposal of subsidiaries
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              599,737Exchange
      gain
                              
                              
                              98,346
                              
                              
                              
                              -
                              
                              
                              
                              191,540
                              
                              
                              
                              -Interest
      income
                              
                              
                              9,719
                              
                              
                              
                              11
                              
                              
                              
                              20,796
                              
                              
                              
                              17Interest
      expenses
                              
                              
                              (167,699
                              )
                              
                              
                              -
                              
                              
                              
                              (270,403
                              )
                              
                              
                              -(LOSS)
      INCOME BEFORE INCOME TAXES
                              
                              
                              (282,061
                              )
                              
                              
                              397,291
                              
                              
                              
                              (928,464
                              )
                              
                              
                              451,773Income
      tax expenses
                              
                              
                              -
                              
                              
                              
                              (199,193
                              )
                              
                              
                              -
                              
                              
                              
                              (282,623
                              )NET
      (LOSS) INCOME
                              
                              $
                              (282,061
                              )
                              
                              $
                              198,098
                              
                              
                              $
                              (928,464
                              )
                              
                              $
                              169,150Other
      comprehensive income (loss):-
      Foreign currency translation gain (loss)
                              
                              
                              188,384
                              
                              
                              
                              -
                              
                              
                              
                              617,919
                              
                              
                              
                              (266,193
                              )COMPREHENSIVE
      (LOSS) INCOME
                              
                              $
                              (93,677
                              )
                              
                              $
                              198,098
                              
                              
                              $
                              (310,545
                              )
                              
                              $
                              (97,043
                              )Net
      (loss) income per share – Basic and diluted
                              
                              $
                              (0.01
                              )
                              
                              $
                              0.01
                              
                              
                              $
                              (0.02
                              )
                              
                              $
                              (0.00
                              )Weighted
      average shares outstanding – basic and diluted
                              
                              
                              37,898,251
                              
                              
                              
                              37,898,251
                              
                              
                              
                              37,898,251
                              
                              
                              
                              37,898,251
 
 See
accompanying notes to condensed consolidated financial
statements.
  F-3
  INNOCOM
TECHNOLOGY HOLDINGS, INC.
 CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
 FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
 (Currency
expressed in United States Dollars (“US$”))
 
 Nine months ended September 30,2008
                                                  
                                                  
                                                  2007Cash
      flows from operating activities:Net
      (loss) income
                                                  
                                                  $
                                                  (928,464
                                                  )
                                                  
                                                  $
                                                  169,150Adjustments
      to reconcile net (loss0 income to net cash used in operating
      activities:Depreciation
                                                  
                                                  
                                                  2,384
                                                  
                                                  
                                                  
                                                  9,008Amortization
      of long-term deferred charges
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  979,646Amortization
      of intangible assets
                                                  
                                                  
                                                  447,472
                                                  
                                                  
                                                  
                                                  -Gain
      on disposal of subsidiaries
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  (599,737
                                                  )Income
      tax
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  83,432Loss
      on disposal of property, plant and equipment
                                                  
                                                  
                                                  1,667
                                                  
                                                  
                                                  
                                                  -Change
      in operating assets and liabilities:Inventories
                                                  
                                                  
                                                  (139,430
                                                  )
                                                  
                                                  
                                                  -Accounts
      receivable, trade
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  (303,190
                                                  )Prepayments
      and other receivables
                                                  
                                                  
                                                  (211,849
                                                  )
                                                  
                                                  
                                                  (4,882,489
                                                  )Accounts
      payable, trade
                                                  
                                                  
                                                  81,491
                                                  
                                                  
                                                  
                                                  (1,305,419
                                                  )Deferred
      revenue
                                                  
                                                  
                                                  (323,879
                                                  )
                                                  
                                                  
                                                  -Other
      payables and accrued liabilities
                                                  
                                                  
                                                  37,562
                                                  
                                                  
                                                  
                                                  (29,686
                                                  )Income
      tax payable
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  199,192Amount
      due to a related party
                                                  
                                                  
                                                  99,937
                                                  
                                                  
                                                  
                                                  5,158,918Net
      cash used in operating activities
                                                  
                                                  
                                                  (933,109
                                                  )
                                                  
                                                  
                                                  (521,175
                                                  )Cash
      flows from investing activities:Proceeds
      from disposal of subsidiaries (net of cash)
                                                  
                                                  
                                                  5,617,101
                                                  
                                                  
                                                  
                                                  5,811,904Acquisition
      of deferred expenditure
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  (5,316,362
                                                  )Payment
      for property, plant and equipment
                                                  
                                                  
                                                  (240,722
                                                  )
                                                  
                                                  
                                                  -Payment
      for land use right
                                                  
                                                  
                                                  (261,840
                                                  )
                                                  
                                                  
                                                  -Net
      cash provided by investing activities
                                                  
                                                  
                                                  5,114,539
                                                  
                                                  
                                                  
                                                  495,542Cash
      flows from financing activities:Repayment
      of amount due to a related party
                                                  
                                                  
                                                  (4,797,925
                                                  )
                                                  
                                                  
                                                  -Proceed
      from short-term loans
                                                  
                                                  
                                                  512,065
                                                  
                                                  
                                                  
                                                  -Net
      increase in bank overdraft
                                                  
                                                  
                                                  33,503
                                                  
                                                  
                                                  
                                                  -Net
      cash used in financing activities
                                                  
                                                  
                                                  (4,252,357
                                                  )
                                                  
                                                  
                                                  -Effect
      of exchange rate changes on cash and cash equivalents
                                                  
                                                  
                                                  594,476
                                                  
                                                  
                                                  
                                                  -NET
      CHANGE IN CASH AND CASH EQUIVALENTS
                                                  
                                                  
                                                  523,549
                                                  
                                                  
                                                  
                                                  (25,633
                                                  )CASH
      AND CASH EQUIVALENTS, BEGINNING OF PERIOD
                                                  
                                                  
                                                  3,597
                                                  
                                                  
                                                  
                                                  101,288CASH
      AND CASH EQUIVALENTS, END OF PERIOD
                                                  
                                                  $
                                                  527,146
                                                  
                                                  
                                                  $
                                                  75,655SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATION:Cash
      paid for income taxes
                                                  
                                                  $
                                                  -
                                                  
                                                  
                                                  $
                                                  -Cash
      paid for interest expenses
                                                  
                                                  $
                                                  270,403
                                                  
                                                  
                                                  $
                                                  -
 See
accompanying notes to condensed consolidated financial
statements.
  F-4
  INNOCOM
TECHNOLOGY HOLDINGS, INC.
 CONDENSED
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
 FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2008
 (Currency
expressed in United States Dollars (“US$”), except for number of
shares)
 (Unaudited)
  Common stock
                                        
                                        
                                        Additional
                                        
                                        
                                        Accumulated
                                          other
                                          comprehensive
                                        
                                        
                                        Retained
                                        
                                        
                                        Total stockholders’No. of shares
                                        
                                        
                                        Amount
                                        
                                        
                                        paid-in capital
                                        
                                        
                                        income
                                        
                                        
                                        earnings
                                        
                                        
                                        equityBalance
      as of January 1, 2008
                                        
                                        
                                        37,898,251
                                        
                                        
                                        $
                                        37,898
                                        
                                        
                                        $
                                        6,901,232
                                        
                                        
                                        $
                                        171,652
                                        
                                        
                                        $
                                        4,950,635
                                        
                                        
                                        $
                                        12,061,417Foreign
      currency translation adjustment
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        617,919
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        617,919Net
      loss for the period
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (928,464
                                        )
                                        
                                        
                                        (928,464
                                        )Balance
      as of September 30, 2008
                                        
                                        
                                        37,898,251
                                        
                                        
                                        $
                                        37,898
                                        
                                        
                                        $
                                        6,901,232
                                        
                                        
                                        $
                                        789,571
                                        
                                        
                                        $
                                        4,022,171
                                        
                                        
                                        $
                                        11,750,872
 
 See
accompanying notes to condensed consolidated financial statements.
  F-5
  INNOCOM
TECHNOLOGY HOLDINGS, INC.
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2008
 (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, 2007
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 September 30, 2008 are not
necessarily indicative of the results to be expected for the entire fiscal year
ending December 31, 2008 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, 2007.
 
 NOTE-2 ORGANIZATION
AND BUSINESS BACKGROUND
 
 Innocom
Technology Holdings, Inc. (the “Company” or “INCM”) was incorporated in the
State of Nevada on June 26, 1998. On June 20, 2006, the Company changed its name
from “Dolphin Productions, Inc.” to “Innocom Technology Holdings,
Inc.”
 
 For the
nine months ended September 30, 2008, the Company, through its subsidiaries is
engaged in trading of mobile phone handsets and components.
 
 On April
28, 2008, the Company disposed of a subsidiary, Chinarise Capital
(International) Ltd. at a purchase price of $5,617,101.
 
 On May 8,
2008, the Company completed the establishment of a new subsidiary, Changzhou
Innocom Communication Technology Limited in the People’s Republic of China (“the
PRC”) upon the approval of its local government.
 
 As of
September 30, 2008, details of the Company’s subsidiaries are described
below:
 
 Name of company
                    
                    Place and date of
                      incorporation
                    
                    Issued and fully
                      paid capital
                    
                    Principal activitiesInnocom
      Technology Holdings Limited (“ITHL”)
                      (Formerly
      Wisechamp Group Limited)
                    
                    British Virgin Islands
                      July 12,
      2005
                    
                    US$1
      ordinary
                    
                    Investment
      holdingSky
      Talent Development Limited (“STDL”)
                    
                    British Virgin Islands
                      September
      8, 2005
                    
                    US$1
      ordinary
                    
                    Investment
      holdingInnocom
      Mobile Technology Limited (“IMTL”)
                    
                    Hong
      Kong
                      June
      21, 2006
                    
                    HK$2,000,000
      ordinary
                    
                    InactivePender
      Holdings Ltd. (“Pender”)
                    
                    British Virgin Islands
                      August
      15, 2003
                    
                    US$1
      ordinary
                    
                    Trading
      of mobile phone handsets and componentsFavor
      Will International Ltd. (“FWIL”)
                    
                    British Virgin Islands
                      July
      11, 2007
                    
                    US$1
      ordinary
                    
                    Investment
      holdingChangzhou
      Innocom Communication Technology Limited (“CICTL”)
                    
                    The PRC
                      January
      19, 2007
                    
                    RMB50,000,000
                    
                    Manufacture
      of mobile phone handsets and
components
  F-6
 
 INCM 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
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.
 
 As of
September 30, 2008, the Company has incurred a net loss of $928,464 and a
negative operating cash flow of $933,109. The continuation of the Company is
dependent upon the continuing financial support of shareholders and obtaining
short-term and long-term financing, generating significant revenue and achieving
profitability. The actions involve certain cost-saving initiatives and growing
strategies, including the commencement of assembly lines in the production of
mobile handsets in China. As a result, the 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.
 
 NOTE-4 SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
 
 l
              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.
 
 l
              Basis
      of consolidation
 
 The
condensed consolidated financial statements include the financial statements of
INCM and its subsidiaries.
 
 All
significant inter-company balances and transactions within the Company have been
eliminated upon consolidation.
 
 l
              Cash
      and cash equivalents
 
 Cash and
cash equivalents are carried at cost and represent cash on hand, demand deposits
placed with banks or other financial institutions and all highly liquid
investments with an original maturity of three months or less as of the purchase
date of such investments.
  F-7
  l         Inventories
 
 Inventories
are stated at the lower of cost or market (net realizable value), cost being
determined on a weighted average method. Costs mainly include purchase of raw
materials.
 
 l
              Intangible
      assets
 
 Intangible
assets include trademarks of mobile phone handsets purchased from a third party.
In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 142,
“Goodwill and Other Intangible
Assets” (“SFAS No. 142”), intangible assets with finite useful lives
related to developed technology, customer lists, trade names and other
intangibles are being amortized on a straight-line basis over the estimated
useful life of the related asset.
 
 These
assets are carried at cost less accumulated amortization and are amortized on a
straight-line basis over their estimated useful lives of 10 years beginning at
the time the related trademarks are granted.
 
 l         Land
use right
 
 All lands
in the People’s Republic of China (the “PRC”) are owned by the PRC government.
The government in the PRC, according to the relevant PRC law, may sell the right
to use the land for a specified period of time. Thus, all of the Company’s land
purchases in the PRC are considered to be leasehold land and are stated at cost
less accumulated amortization and any recognized impairment loss. Amortization
is provided over the term of the land use right agreements on a straight-line
basis, which is 45 years and they will expire in 2054.
 
 No
provision for amortization is made until such time as the relevant assets are
put into operational use.
 
 l
              Property,
      plant and equipment, net
 
 Plant and
equipment are stated at cost less accumulated depreciation and accumulated
impairment losses, if any. Depreciation is calculated on the straight-line basis
(after taking into account their respective estimated residual values) over the
following expected useful lives from the date on which they become fully
operational:
 
 Depreciable life
                              
                              Residual valuePlant
      and machinery
                              5-10
      years
                              
                              
                              5
                              %Furniture,
      fixtures and office equipment
                              5
      years
                              
                              
                              5
                              %Leasehold
      improvement
                              2
      years
                              Nil
 
 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.
 
 l
              Valuation
      of long-lived assets
 
 Long-lived
assets primarily include plant and equipment, land use right and intangible
assets. In accordance with SFAS No. 144, “Accounting for the Impairment or
Disposal of Long-Lived Assets”, the Company periodically reviews
long-lived assets for impairment whenever events or changes in business
circumstances indicate that the carrying amount of the assets may not be fully
recoverable or that the useful lives are no longer appropriate. Each impairment
test is based on a comparison of the undiscounted cash flows to the recorded
value of the asset. If an impairment is indicated, the asset is written down to
its estimated fair value based on a discounted cash flow analysis. Determining
the fair value of long-lived assets includes significant judgment by management,
and different judgments could yield different results. There has been no
impairment as of September 30, 2008.
  F-8
 
 l
              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.
 
 Starting
from 2007, the Company has changed its role from a principal to an agent in
trading activities of mobile phone handsets & related components. The
Company recognizes its revenue on a net basis in compliance with EITF 99-19,
“Reporting Revenues Gross as a
Principal versus Net as an Agent”(“EITF 99-19”), because the
Company:
 
 (1)         determined
that it no longer operates as the primary obligor in the trading
activities,
 (2)         typically
is not responsible for damages to goods,
 (3)         bears
no credit and inventory risk,
 (4)         earns
commission income at a fixed rate of the gross amount billed to the
customer.
 
 For the
period ended September 30, 2008, the Company recognizes $324,490 as net
revenues, at a rate of 6.04% based on the gross amount of $5,370,542 billed to
the customers.
 
 For the
period ended September 30, 2007, the Company recognizes $1,792,083 as net
revenues, at a rate of 5.84% based on the gross amount of $30,700,871 billed to
the customers.
 
 l
              Comprehensive
      (loss) 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.
 
 l
              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 also adopts Financial Accounting Standards Board ("FASB") Interpretation
No. (FIN) 48, "Accounting for
Uncertainty in Income Taxes" and FSP FIN 48-1, which amended certain
provisions of FIN 48. FIN 48 clarifies the accounting for uncertainty in income
taxes recognized in financial statements in accordance with SFAS No. 109, "Accounting for Income Taxes."FIN 48 prescribes a recognition threshold and measurement attribute for
the financial statement recognition and measurement of a tax position taken or
expected to be taken in a tax return. FIN 48 requires that the Company determine
whether the benefits of the Company's tax positions are more likely than not of
being sustained upon audit based on the technical merits of the tax position.
The provisions of FIN 48 also provide guidance on de-recognition,
classification, interest and penalties, accounting in interim periods and
disclosure.
  F-9
  In
connection with the adoption of FIN 48, the Company analyzed the filing
positions in all of the federal, state and foreign jurisdictions where the
Company and its subsidiaries are required to file income tax returns, as well as
all open tax years in these jurisdictions. The Company adopted the policy of
recognizing interest and penalties, if any, related to unrecognized tax
positions as income tax expense. The Company did not have any unrecognized tax
positions or benefits and there was no effect on the financial condition or
results of operations for the period ended September 30, 2008. The Company’s tax
returns remain open subject to examination by major tax
jurisdictions.
 
 l
              Net
      (loss) income per share
 
 The
Company calculates net (loss) income per share in accordance with SFAS No.
128,“Earnings per
Share”. Basic (loss) income per share is computed by dividing the net
(loss) income by the weighted-average number of common shares outstanding during
the period. Diluted (loss) income per share is computed similar to basic (loss)
income 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.
 
 l
              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.
 
 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 period. 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$ has been made at the following exchange rates for
the respective period:
 2008
                  
                  
                  2007Period
      end RMB:US$ exchange rate
                  
                  
                  6.8351
                  
                  
                  
                  -Average
      monthly RMB:US$ exchange rate
                  
                  
                  6.9734
                  
                  
                  
                  -Period
      end HK$:US$ exchange rate
                  
                  
                  7.7701
                  
                  
                  
                  7.8000Average
      monthly HK$:US$ exchange rate
                  
                  
                  7.7984
                  
                  
                  
                  7.8000
 
 l
              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.
  F-10
  l         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 period ended September 30, 2008 and 2007, the Company
operates in one reportable segment in trading of mobile phone handsets &
related components in Hong Kong.
 
 l
              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,
prepaid expenses and other receivable, bill payable, amount due to a related
party, income tax payable, other payables and accrued liabilities.
 
 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.
 
 l
              Recent
      accounting pronouncements
 
 The
Company has reviewed all recently issued, but not yet effective, accounting
pronouncements and do 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 SFAS No. 141 (Revised 2007), "Business Combinations"("SFAS No. 141R"). SFAS No. 141R will change the accounting for business
combinations. Under SFAS No. 141R, an acquiring entity will be required to
recognize all the assets acquired and liabilities assumed in a transaction at
the acquisition-date fair value with limited exceptions. SFAS No. 141R will
change the accounting treatment and disclosure for certain specific items in a
business combination. SFAS No. 141R 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.
Accordingly, any business combinations the Company engages in will be recorded
and disclosed following existing GAAP until January 1, 2009. The Company expects
SFAS No. 141R will have an impact on accounting for business combinations once
adopted but the effect is dependent upon acquisitions at that time. The Company
is still assessing the impact of this pronouncement.
 
 In
December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in
Consolidated Financial Statements—An Amendment of ARB No. 51, or SFAS No.
160" ("SFAS No. 160"). SFAS No. 160 establishes new accounting and
reporting standards for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary. SFAS No. 160 is effective for fiscal years
beginning on or after December 15, 2008. The Company believes that SFAS 160
should not have a material impact on the consolidated financial position or
results of operations.
 
 In March
2008, the FASB issued SFAS No. 161, "Disclosures about Derivative
Instruments and Hedging Activities" ("SFAS No. 161"). SFAS 161 requires
companies with derivative instruments to disclose information that should enable
financial-statement users to understand how and why a company uses derivative
instruments, how derivative instruments and related hedged items are accounted
for under FASB Statement No. 133 "Accounting for Derivative
Instruments and Hedging Activities" and how derivative instruments and
related hedged items affect a company's financial position, financial
performance and cash flows. SFAS No. 161 is effective for financial statements
issued for fiscal years and interim periods beginning after November 15, 2008.
The adoption of this statement is not expected to have a material effect on the
Company's future financial position or results of operations.
  F-11
  In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles” ("SFAS No. 162"). This statement identifies the
sources of accounting principles and the framework for selecting the principles
to be used in the preparation of financial statements in conformity with
generally accepted accounting principles (GAAP) in the United States. This
statement is effective 60 days following the SEC’s approval of the Public
Company Accounting Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in
Conformity With Generally Accepted Accounting Principles”. The Company
does not expect the adoption of SFAS No. 162 to have a material effect on the
financial condition or results of operations of the Company.
 
 In May
2008, the FASB issued SFAS No. 163, "Accounting for Financial Guarantee
Insurance Contracts—an interpretation of FASB Statement No. 60" ("SFAS
No. 163"). SFAS No. 163 interprets Statement 60 and amends existing accounting
pronouncements to clarify their application to the financial guarantee insurance
contracts included within the scope of that Statement. SFAS No. 163 is effective
for financial statements issued for fiscal years beginning after December 15,
2008, and all interim periods within those fiscal years. As such, the Company is
required to adopt these provisions at the beginning of the fiscal year ended
December 31, 2009. The Company is currently evaluating the impact of SFAS No.
163 on its financial statements but does not expect it to have an effect on the
Company's financial position, results of operations or cash flows.
 
 Also in
May 2008, the FASB issued FSP APB 14-1, "Accounting for Convertible Debt
Instruments that may be Settled in Cash upon Conversion (Including Partial Cash
Settlement)" ("FSP APB 14-1"). FSP APB 14-1 applies to convertible debt
securities that, upon conversion, may be settled by the issuer fully or
partially in cash. FSP APB 14-1 specifies that issuers of such instruments
should separately account for the liability and equity components in a manner
that will reflect the entity's nonconvertible debt borrowing rate when interest
cost is recognized in subsequent periods. FSP APB 14-1 is effective for
financial statements issued for fiscal years after December 15, 2008, and must
be applied on a retrospective basis. Early adoption is not permitted. The
Company does not expect it to have an effect on the Company's financial
position, results of operations or cash flows.
 
 In June
2008, the FASB issued FASB Staff Position ("FSP") EITF 03-6-1, "Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities"
("FSP EITF 03-6-1"). FSP EITF 03-6-1 addresses whether instruments granted in
share-based payment transactions are participating securities prior to vesting,
and therefore need to be included in the earnings allocation in computing
earnings per share under the two-class method as described in SFAS No. 128,
Earnings per Share. Under the guidance of FSP EITF 03-6-1, unvested share-based
payment awards that contain nonforfeitable rights to dividends or dividend
equivalents (whether paid or unpaid) are participating securities and shall be
included in the computation of earnings-per-share pursuant to the two-class
method. FSP EITF 03-6-1 is effective for financial statements issued for fiscal
years beginning after December 15, 2008 and all prior-period earnings per share
data presented shall be adjusted retrospectively. Early application is not
permitted. The Company does not expect it to have an effect on the Company's
financial position, results of operations or cash flows.
 
 Also in
June 2008, the FASB ratified EITF No. 07-5, "Determining Whether an Instrument
(or an Embedded Feature) is Indexed to an Entity's Own Stock" ("EITF
07-5"). EITF 07-5 provides that an entity should use a two-step approach to
evaluate whether an equity-linked financial instrument (or embedded feature) is
indexed to its own stock, including evaluating the instrument's contingent
exercise and settlement provisions. EITF 07-5 is effective for financial
statements issued for fiscal years beginning after December 15, 2008. Early
application is not permitted. The Company is assessing the potential impact of
this EITF 07-5 on the financial condition and results of operations and does not
expect it to have an effect on the Company's financial position, results of
operations or cash flows.
  F-12


NOTE-5 BUSINESS
COMBINATION
 
 On April
28, 2008, the Company entered into a Share Purchase Agreement with Xie Guo Qiang
(“Qiang”) to sell the Company’s interest in Chinarise Capital (International)
Ltd. for a consideration of $5,617,101 (equivalent to HK$43,813,385). For the
nine month ended September 30, 2008, no gain or loss was recognized from the
disposal of a subsidiary.
 
 On May 8,
2008, the Company completed the establishment of a new subsidiary upon the
approval from the PRC local government. The subsidiary is registered as a
limited liability company on January 19, 2007 in Chang Zhou City, Jiang Su
Province, the PRC with the registered and paid-in capital of $4,943,997
(equivalent to RMB37,960,812). As of September 30, 2008, the total investment in
a subsidiary is approximated as $8,487,661 including the acquisition of land use
rights and plant and equipment. Its operation is currently considered as the
start up phase and principally engaged in manufacturing and trading of mobile
communication products and components. The production from its assembly line
will be commenced in the end of the first quarter of 2009.
 
 NOTE-6 INTANGIBLE
ASSETS, NET
 
 September 30, 2008
                        
                        
                        December 31, 2007Trademarks
                        
                        $
                        5,960,775
                        
                        
                        $
                        5,960,775Foreign
      translation difference
                        
                        
                        26,696
                        
                        
                        
                        -5,987,471
                        
                        
                        
                        5,960,775Less:
      accumulated amortization
                        
                        
                        (805,118
                        )
                        
                        
                        (357,754
                        )Less:
      foreign translation difference
                        
                        
                        (3,232
                        )
                        
                        
                        108Net
      book value
                        
                        $
                        5,179,121
                        
                        
                        $
                        5,603,129
 
 Amortization
expense for the three and nine months ended September 30, 2008 were $150,213 and
$447,472.
 
 Trademarks
will be used in the planned assembly line for mobile phone communication
products and components in the PRC.
 
 NOTE-7 PROPERTY,
PLANT AND EQUIPMENT, NET
 
 Property,
plant and equipment, net, consisted of the following:
 
 September 30, 2008
                        
                        
                        December 31, 2007Plant
      and machinery
                        
                        $
                        7,308,769
                        
                        
                        $
                        3,331Furniture,
      fixtures and office equipment
                        
                        
                        6,174
                        
                        
                        
                        -Leasehold
      improvement
                        
                        
                        6,290
                        
                        
                        
                        -Foreign
      translation difference
                        
                        
                        3
                        
                        
                        
                        -7,321,236
                        
                        
                        
                        3,331Less:
      accumulated depreciation
                        
                        
                        (1,966
                        )
                        
                        
                        (1,249
                        )Less:
      foreign translation difference
                        
                        
                        (24
                        )
                        
                        
                        -Property,
      plant and equipment, net
                        
                        $
                        7,319,246
                        
                        
                        $
                        2,082
 
 Depreciation
expense for the three and nine months ended September 30, 2008 were $1,138 and
$2,384.
  F-13
  For the
nine months ended September 30, 2008, the Company tested for impairment in
accordance with the SFAS No. 142 and no impairment charge was
required.
 
 NOTE-8 SHORT-TERM
LOAN
 
 As of
September 30, 2008, the balance was represented by a short-term loan of
US$512,065 (approximately RMB3,500,000) which was unsecured, accrued interest at
3.78% per annum payable monthly, with a term of 6 months.
 
 During
October 2008, the Company fully repaid the outstanding principal and accrued
interest upon its maturity.
 
 NOTE-9 AMOUNT
DUE TO A RELATED PARTY
 
 As of
September 30, 2008, a balance of $2,085,809 due to a director and a major
shareholder of the Company, Mr. William Hui, represented temporary advance to
the Company which was unsecured, interest-free and has no fixed repayment term.
The imputed interest on the amount due to a stockholder was not
significant.
 
 NOTE-10 OTHER
PAYABLES AND ACCRUED LIABILITIES
 
 Other
payables and accrued liabilities consisted of the followings:
 
 September 30, 2008
                        
                        
                        December 31, 2007(Unaudited)
                        
                        
                        (Audited)Salaries
      and welfare payable
                        
                        $
                        18,789
                        
                        
                        $
                        -Temporary
      advances
                        
                        
                        37,264
                        
                        
                        
                        -Accrued
      expenses
                        
                        
                        179,206
                        
                        
                        
                        197,697Purchase
      payable to equipment vendors
                        
                        
                        1,737,188
                        
                        
                        
                        -$
                        1,972,447
                        
                        
                        $
                        197,697
 
 NOTE-11 INCOME
TAXES
 
 For the
period ended September 30, 2008 and 2007, the local (“the United States”) and
foreign components of (loss) income before income taxes were comprised of the
following:
 
 Nine months ended September 30,2008
                        
                        
                        2007Local
                        
                        $
                        (28,894
                        )
                        
                        $
                        (1,504,344
                        )Foreign
                        
                        
                        (899,570
                        )
                        
                        
                        1,673,494(Loss)
      income before income taxes
                        
                        $
                        (928,464
                        )
                        
                        $
                        169,150
  F-14
 
 The
provision for income taxes consisted of the following:
 
 Nine months ended September 30,2008
                        
                        
                        2007Current:Local
                        
                        $
                        -
                        
                        
                        $
                        -Foreign
                        
                        
                        -
                        
                        
                        
                        282,623Deferred:Local
                        
                        
                        -
                        
                        
                        
                        -Foreign
                        
                        
                        -
                        
                        
                        
                        -Provision
      for income taxes
                        
                        $
                        -
                        
                        
                        $
                        282,623
 
 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 has subsidiaries that operate in various countries: United
States, British Virgin Island and Hong Kong that are subject to tax in the
jurisdictions in which they operate, as follows:
 
 United
States of America
 
 The
Company is registered in the State of Neveda and is subject to United States
current tax law.
 
 As of
September 30, 2008, the United States operation incurred $6,177,370 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. The Company has provided for a full valuation allowance for any
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.
 
 British
Virgin Island
 
 Under the
current BVI law, the Company is not subject to tax on income.
 
 Hong
Kong
 
 For the
nine months ended September 30, 2008, no income tax expense for Hong Kong
Profits Tax is provided for as the Company’s income neither arises in, nor is
derived form Hong Kong under its tax law.
 
 NOTE-12 CONCENTRATIONS
OF RISK
 
 The
Company is exposed to the followings concentrations of risk:
 
 (a)         Major
customers
 
 For the
nine months ended September 30, 2008 and 2007, 100% of the Company’s assets were
located in the PRC and Hong Kong and 100% of the Company’s revenues were
generated from customers located in the PRC.
 
 For the
three and nine months ended September 30, 2008, one customer represented more
than 10% of the Company’s revenue and accounts receivable, respectively. This
customer accounts for 100% of revenue amounting to $73,078 and 100% of revenue
amounting to $324,490 for the three and nine months ended respectively, with $0
of accounts receivable as of September 30, 2008.
 
 F-15
 
 For the
three and nine months ended September 30, 2007, one customer represented more
than 10% of the Company’s revenue and accounts receivable, respectively. This
customer accounts for 100% of revenue amounting to $1,138,238 and 100% of
revenue amounting to $1,792,083 for the three and nine months ended
respectively, with $0 of accounts receivable as of September 30,
2007.
 
 (b)         Credit
risk
 
 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.
 
 (c)         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 exchange rate of RMB
converted to US$ on that date. The exchange rate could fluctuate depending on
changes in political and economic environments without notice.
 
 NOTE-13 COMMITMENTS
AND CONTINGENCIES
 
 (a)         Operating
lease commitment
 
 The
Company leases an office premise under a non-cancelable operating lease for a
term of 2 years due June 15, 2010. Costs incurred under this operating lease are
recorded as rent expense and totaled approximately $76,368 and $78,462 for the
nine months ended September 30, 2008 and 2007.
 
 Period ending September 30,2009
                    
                    $
                    131,5572010
                    
                    
                    93,156Total
                    
                    $
                    224,713
 
 (b)         Capital
commitments
 
 As of
September 30, 2008, the Company has the following capital
commitments:
 
 Planned establishment of a
joint venture
 
 The
Company has entered into a Memorandum of Understanding (“MOU”) dated February
27, 2007 with a Korean listed company. Pursuant to this MOU, both parties are
willing to set up a joint venture in PRC to promote a 3-D mobile contents
platform. There is no definitive joint venture agreement entered up to the date
of this report.
  Planned acquisition of a
company
 
 The
wholly-owned subsidiary of the Company, ITHL, has entered into a Letter of
Intent (“LOI”) dated February 12, 2007 with a third party. Pursuant to this LOI,
ITHL intends to acquire 100% interest of Shanghai BODA Electronic Co., Ltd.
There is no definitive equity transfer agreement entered up to the date of this
report.
  F-16
 ITEM
      2.
                MANAGEMENTS
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF
      OPERATION
 
 The
following review concerns three months ended September 30, 2008 and September
30, 2007, and nine months ended September 30, 2008 and September 30, 2007, which
should be read in conjunction with the financial statements and notes thereto
presented in the Form 10-K.
 
 Forward
Looking Statements
 
 The
information in this discussion contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. These forward-looking
statements involve risks and uncertainties, including statements regarding our
capital needs, business strategy and expectations. Any statements contained
herein that are not statements of historical facts may be deemed to be
forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as "may", "will", "should", "expect", "plan",
"intend", "anticipate", "believe", "estimate", "predict", "potential" or
"continue", the negative of such terms or other comparable terminology. Actual
events or results may differ materially. We disclaim any obligation to publicly
update these statements, or disclose any difference between its actual results
and those reflected in these statements. The information constitutes
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995.
 
 Overview
and Future Plan of Operations
 
 In three
quarters of 2008, our revenues dropped by 82% from $1,792,083 in 2007 to
$324,490 in 2008 primarily resulting from shift of our focus from Trading of
Mobile Phone and Related Components operations to assembling of mobile
phones.
 
 On May 8,
2008, we have completed the establishment of a new subsidiary, Changzhou Innocom
Communication Technology Limited in Changzhou, Jiangsu Province, China upon the
approval of its local government. We will put this assembling production factory
in commercial production to assemble mobile phones under the purchased trade
mark namely “Tsinghua Unisplendour” and other mobile phone components on OEM
basis. On August 13, 2008, this subsidiary has entered into an annual assembling
service agreement for a brand-name mobile phone manufacturer on OEM basis. We
expect to start assembling service in first quarter of 2009.
 
 Results
of Operations for Three Months ended September 30, 2008 and September 30, 2007
and Nine Months Ended September 30, 2008 and September 30, 2007
 
 During
the three months ended September 30, 2008, we experienced a net loss of $282,061
compared to a net income of $198,098 for three months ended September 30, 2007.
During nine months ended September 30, 2008, we experienced a net loss of
$928,464 compared to a net income of $169,150 for nine months ended September
30, 2007. The loss is attributable to increase of staff cost upon establishment
of assembling plant.
 
 Revenue
 
 During
three months ended September 30, 2008, we derived $73,078 revenue from our
Trading of Mobile Phone and Related Component operations, representing a
decrease in revenue of $1,065,160 or 94% decrease from comparable three months
ended September 30, 2007 in which revenue amounts to $1,138,238.
 
 During
nine months ended September 30, 2008, we derived $324,490 revenue from our
Trading of Mobile Phone and Related Component operations, representing a
decrease in revenue of $1,467,593 or 82% decrease from the comparable nine
months ended September 30, 2007 in which revenue amounts to
$1,792,083.
 
 As a
result of shift of focus from Trading of Mobile Phone and Related Components
operations to assembling of mobile phones, we sustain a drop in revenue in both
reported periods.
 
 20
 
 Cost
of Sales
 
 As our
trading cost is netted with billed value as revenue, the Company does not have
any cost of sales.
  Administrative
Expenses
 
 Below
table sets out the analysis of general and administrative expenses:
 
 Three
      Months ended Sept 30,
                    
                    
                    Nine
      Months ended Sept 30,2008
                    
                    
                    2007
                    
                    
                    2008
                    
                    
                    2007Total
      general and administrative expenses before recovery from over-provided
      audit fee of $110,000 during three months March 31, 2008
                    
                    $
                    295,505
                    
                    
                    $
                    740,958
                    
                    
                    $
                    1,304,887
                    
                    
                    $
                    1,909,936Less:
      Non-cash items
                    
                    
                    151,351
                    
                    
                    
                    656,665
                    
                    
                    
                    449,856
                    
                    
                    
                    988,654$
                    144,154
                    
                    
                    $
                    84,293
                    
                    
                    $
                    855,031
                    
                    
                    $
                    921,282
 
 The
increase in general and administrative expenses was primarily attributable to
increase in full time employees from 2 to 130 upon completion of establishment
of a new subsidiary in Changzhou.
  Below
table sets out the components of non-cash items:
 
 Three
      Months ended Sept 30,
                  
                  
                  Nine
      Months ended Sept 30,2008
                  
                  
                  2007
                  
                  
                  2008
                  
                  
                  2007Depreciation
                  
                  $
                  1,138
                  
                  
                  $
                  8,508
                  
                  
                  $
                  2,384
                  
                  
                  $
                  9,008Amortization
      of intangible assets
                  
                  
                  150,213
                  
                  
                  
                  -
                  
                  
                  
                  447,472
                  
                  
                  
                  -Amortization
      of long-term deferred consultancy fee
                  
                  
                  -
                  
                  
                  
                  648,157
                  
                  
                  
                  -
                  
                  
                  
                  979,646$
                  151,351
                  
                  
                  $
                  656,665
                  
                  
                  $
                  449,856
                  
                  
                  $
                  988,654
 
 The
depreciation policy adopted in for the fiscal year 2008 was consistent with that
adopted in 2007.
 
 The
increase in amortization of intangible assets is due to acquisition of trade
mark for our mobile phones at the end of the second quarter period of 2007. The
amortization is made over purchase period of 10 years.
 
 The
decrease of amortization of long-term deferred consultancy fee is attributable
to the deferred charges being written off during the last quarter of
2007.
 
 Other
Income
 
 Total
other income for both periods presented was immaterial and consisted of the
following:
  Three Months
                        ended
                        Sept 30, 2008
                      
                      
                      Three Months
                        ended
                        Sept 30, 2007
                      
                      
                      Nine Months
                        ended
                        Sept 30, 2008
                      
                      
                      Nine Months
                        ended
                        Sept 30, 2007Interest
      income
                      
                      $
                      9,719
                      
                      
                      $
                      11
                      
                      
                      $
                      20,796
                      
                      
                      $
                      17Interest
      expense
                      
                      $
                      167,699
                      
                      
                      $
                      -
                      
                      
                      $
                      270,403
                      
                      
                      $
                      -
  21
  Net
Loss
 
 Net loss
for the nine months ended September 30, 2008 was $928,464 compared to net income
of $169,150 for the nine months ended September 30, 2007. Loss of this period
and the increase of loss for the nine months ended September 30, 2008 is
attributable and increase of staff cost upon establishment of assembling
plant.
 
 Trends,
Events, and Uncertainties
 
 On May 8,
2008, we have completed the establishment of a new subsidiary, Changzhou Innocom
Communication Technology Limited in Changzhou, Jiangsu Province, China upon the
approval of its local government. Trial assembling of mobile phones has been
completed. We will assemble mobile phones under the purchased trade mark namely
“Tsinghua Unisplendour” and other mobile phone components on OEM basis. On
August 13, 2008, this subsidiary has entered into an annual assembling service
agreement for a brand-name mobile phone manufacturer on OEM basis. We expect to
start assembling service in first quarter of 2009.
 
 Liquidity
and Capital Resources for Nine Months Ended September 30, 2008 and
2007
 
 Cash
flows from operating activities
 
 We
experienced negative cash flows used in operations in the amount of $933,109 for
nine months ended September 30, 2008 as compared with negative cash flow used in
the operations in the amount of $521,175 for nine months ended September 30,
2007.
 
 Cash
flows from investing activities
 
 During
nine months ended September 30, 2008, we had positive cash flow provided by
investment activities in the amount of $5,114,539. We received proceed from
disposal of subsidiaries of $5,617,101. We used $240,722 to purchase property,
plant and equipment and made a capital payment of $261,840 in acquisition of
land use right.
 
 During
nine months ended September 20, 2007, we experienced positive cash flow used in
investment activities in the amount of $495,542. We received proceed from
disposal of subsidiaries of $5,811,904 and incurred a capital payment of
$5,316,362 in acquisition of deferred expenditure
 
 Cash
flows from financing activities
 
 During
nine months ended September 30, 2008, we experienced negative cash flows in
financing activities in the amount of $4,252,357. We repay advance from a
related party in the amount of $4,797,925. On the other hand, we obtained
short-term loans and bank overdraft of $512,065 and $33,503
respectively.
 
 During
nine months ended September 30, 2007, there are no financing
activities.
 
 Liquidity
 
 On a
long-term basis, our liquidity will be dependent on establishing profitable
operations, receipt of revenues, additional infusions of capital and additional
financing. If necessary, we may raise capital through an equity or debt
offering. The funds raised from this offering will be used to develop and
execute our business plan. However, there can be no assurance that we will be
able to obtain additional equity or debt financing in the future, if at all. If
we are unable to raise additional capital, our growth potential will be
adversely affected. Additionally, we will have to significantly modify our
plans.
 
 Critical
Accounting Policies
 
 The
financial statements are prepared in accordance with accounting principles
generally accepted in the U.S., which requires us to make estimates and
assumptions in certain circumstances that affect amounts reported in the
accompanying financial statements and related footnotes. In preparing these
financial statements, management has made its best estimates and judgments of
certain amounts included in the financial statements, giving due consideration
to materiality. We do not believe there is a great likelihood that materially
different amounts would be reported related to the accounting policies described
below. However, application of these accounting policies involves the exercise
of judgment and use of assumptions as to future uncertainties and, as a result,
actual results could differ from these estimates.
  22
  Details
of critical accounting policies are set out in notes to the financial statements
included in Item 1.
 
 Employees
 
 As of
September 30, 2008, we had approximately 130 full-time employees employed in
Greater China. From time to time we employ independent contractors to support
our production, engineering, marketing, and sales departments.
 
 Website
Access to our SEC Reports
  Our
Internet website address is www.innocomtechnology.com. Through our Internet
website, we will make available, free of charge, the following reports as soon
as reasonably practicable after electronically filing them with, or furnishing
them to, the SEC: our Annual Reports on Form 10-K; our Quarterly Reports on Form
10-Q; our Current Reports on Form 8-K; and amendments to those reports filed or
furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Our Proxy Statements for our Annual Stockholder
Meetings are also available through our Internet website. Our Internet website
and the information contained therein or connected thereto are not intended to
be incorporated into this Annual Report on Form 10-K.
  You may
also obtain copies of our reports without charge by writing to:
 
 Attn:
Investor Relations
 Suite
1501, Bank of East Asia Harbour View Centre
 56
Gloucester Road
 Wanchai,
Hong Kong, PRC
 
 The
public may also read and copy any materials filed with the SEC at the SEC's
Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549, or through
the SEC website at www.sec.gov. The Public Reference Room may be contact at
(800) SEC-0330. You may also access our other reports via that link to the SEC
website.
 
 ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
 
 Foreign
Exchange Risk
 
 While our
reporting currency is the U.S. Dollar, all of our consolidated revenues and
consolidated costs and expenses are denominated in Renminbi. All of our assets
are denominated in RMB except for cash. As a result, we are exposed to foreign
exchange risk as our revenues and results of operations may be affected by
fluctuations in the exchange rate between U.S. Dollars and RMB. If the RMB
depreciates against the U.S. Dollar, the value of our RMB revenues, earnings and
assets as expressed in our U.S. Dollar financial statements will decline. We
have not entered into any hedging transactions in an effort to reduce our
exposure to foreign exchange risk.
 
 Inflation
 
 Inflationary
factors such as increases in the cost of our product and overhead costs may
adversely affect our operating results. Although we do not believe that
inflation has had a material impact on our financial position or results of
operations to date, a high rate of inflation in the future may have an adverse
effect on our ability to maintain current levels of gross margin and selling,
general and administrative expenses as a percentage of net revenues if the
selling prices of our products do not increase with these increased
costs.
 
 23
 
 ITEM
4T.  CONTROLS AND PROCEDURES.
 
 Evaluation of Disclosure
Controls and Procedures.
 
 Based on
an evaluation under the supervision and with the participation of management,
our Chief Executive Officer and Chief Financial Officer have concluded that our
disclosure controls and procedures as defined in Section 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934, as amended
("Exchange  Act") were effective as of March 31, 2008 to ensure that
information required to be disclosed by us in reports that we file or submit
under the Exchange Act is (i) recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange Commission
rules and forms and (ii) accumulated and communicated to our management,
including our Chief Executive Officer and Chief Financial Officer, as
appropriate to allow timely decisions regarding required
disclosure.
 
 Changes in Internal Control
over Financial Reporting
 
 There
were no changes in our internal control over financial reporting during the
quarter ended September 30, 2008, which were identified in connection with
management's evaluation required by paragraph (d) of rules 13a-15 and 15d-15
under the Exchange Act, that have materially affected, or are reasonably likely
to materially affect, our internal control over financial
reporting.
 
 PART
II - OTHER INFORMATION
 
 ITEM
1.  LEGAL PROCEEDINGS
 
 We are
not involved in any material pending legal proceedings at this time, and
management is not aware of any contemplated proceeding by any governmental
authority.
 
 ITEM
1A.  RISK FACTORS
 
 Our
sales and profitability depend on the continued growth of the mobile
communications industry as well as the growth of the new market segments within
that industry in which we have recently invested. If the mobile communications
industry does not grow as we expect, or if the new market segments on which we
have chosen to focus and in which we have recently invested grow less than
expected, or if new faster-growing market segments emerge in which we have not
invested, our sales and profitability may be adversely affected.
 
 Our
business depends on continued growth in mobile communications in terms of the
number of existing mobile subscribers who upgrade or simply replace their
existing mobile devices, the number of new subscribers and increased usage. As
well, our sales and profitability are affected by the extent to which there is
increasing demand for, and development of, value-added services, leading to
opportunities for us to successfully market mobile devices that feature these
services. These developments in our industry are to a certain extent outside of
our control. For example, we are dependent on operators in highly penetrated
markets to successfully introduce services that cause a substantial increase in
usage of voice and data. Further, in order to support a continued increase in
mobile subscribers in certain low-penetration markets, we are dependent on
operators to increase their sales volumes of lower-cost mobile devices and to
offer affordable tariffs. If operators are not successful in their attempts to
increase subscriber numbers, stimulate increased usage or drive replacement
sales, our business and results of operations could be materially adversely
affected.
 
 Our
industry continues to undergo significant changes. First, the mobile
communications, information technology, media and consumer electronics
industries are converging in some areas into one broader industry leading to the
creation of new mobile devices, services and ways to use mobile devices. Second,
while participants in the mobile communications industry once provided complete
products and solutions, industry players are increasingly providing specific
hardware and software layers for products and solutions. As a result of these
changes, new market segments within our industry have begun to emerge and we
have made significant investments in new business opportunities in certain of
these market segments, such as smart-phones, imaging, games, music and
enterprise mobility infrastructure. However, a number of the new market segments
in the mobile communications industry are still in early states of their
development, and it may be difficult for us to accurately predict which new
market segments are the most advantageous for us to focus on. As a result, if
the segments on which we have chosen to focus grow less than expected, we may
not receive a return on our investment as soon as we expect, or at all. We may
also forego growth opportunities in new market segments of the mobile
communications industry on which we do not focus.
  24
  Our
results of operations, particularly our profitability, may be adversely affected
if we do not successfully manage price erosion related to our
products.
 
 In the
future, if, for competitive reasons, we need to lower the selling prices of
certain of our products and if we cannot lower our costs at the same rate or
faster, this may have a material adverse effect on our business and results of
operations, particularly our profitability. To mitigate the impact of mix shifts
on our profitability, we implement product segmentation with the aim of
designing appropriate features with an appropriate cost basis for each customer
segment. Likewise, we endeavor to mitigate the impact on our profitability of
price erosion of certain features and functionalities by seeking to correctly
time the introduction of new products, in order to align such introductions with
declines in the prices of relevant components. We cannot predict with any
certainty whether or to what extent we may need to lower prices for competitive
reasons again and how successful we will be in aligning our cost basis to the
pricing at any given point in time. Price erosion is a normal characteristic of
the mobile devices industry, and the products and solutions offered by us are
also subject to natural price erosion over time. If we cannot reduce our costs
at the same rate, our business may be materially adversely affected. Although we
may take actions to mitigate price erosion, such as strengthening the Company
brand in order to support a price premium over certain of our competitors, there
can be no assurance that we will be successful in this regard.
 
 We
must develop or otherwise acquire complex, evolving technologies to use in our
business. If we fail to develop these technologies or to successfully
commercialize them as new advanced products and solutions that meet customer
demand, or fail to do so on a timely basis, it may have a material adverse
effect on our business, our ability to meet our targets and our results of
operations.
 
 In order
to succeed in our markets, we believe that we must develop or otherwise acquire
complex, evolving technologies to use in our business. However, the development
and use of new technologies, applications and technology platforms for our
mobile devices involves time, substantial costs and risks both within and
outside of our control. This is true whether we develop these technologies
internally, by acquiring or investing in other companies or through
collaboration with third parties.
 
 The
technologies, functionalities and features on which we choose to focus may not
achieve as broad or timely customer acceptance as we expect. This may result
from numerous factors including the availability of more attractive alternatives
or a lack of sufficient compatibility with other existing technologies, products
and solutions. Additionally, even if we do select the technologies,
functionalities and features that customers ultimately want, we or the companies
that work with us may not be able to bring them to the market at the right
time.
 
 Furthermore,
as a result of ongoing technological developments, our products and solutions
are increasingly used together with components or layers that have been
developed by third parties, whether or not the Company has authorized their use
with our products and solutions. However, such components, such as batteries, or
layers, such as software applications, may not be compatible with our products
and solutions and may not meet our and our customers' quality, safety or other
standards. As well, certain components or layers that may be used with our
products may enable our products and solutions to be used for objectionable
purposes, such as to transfer content that might be hateful or derogatory. The
use of our products and solutions with incompatible or otherwise substandard
components or layers, or for purposes that are inappropriate, is largely outside
of our control and could harm the Company brand.
 
 25
 
 We
need to understand the different markets in which we operate and meet the needs
of our customers, which include mobile network operators, distributors,
independent retailers and enterprise customers. We need to have a competitive
product portfolio, and to work together with our operator customers to address
their needs. Our failure to identify key market trends and to respond timely and
successfully to the needs of our customers may have a material adverse impact on
our market share, business and results of operations.
 
 We serve
a diverse range of customers, ranging from mobile network operators,
distributors, independent retailers to enterprise customers, across a variety of
markets. In many of these markets, the mobile communications industry is at
different stages of development, and many of these markets have different
characteristics and dynamics, for example, in terms of mobile penetration rates
and technology, feature and pricing preferences. Establishing and maintaining
good relationships with our customers and understanding trends and needs in
their markets require us to constantly obtain and evaluate a complex array of
feedback and other data. We must do this efficiently in order to be able to
identify key market trends and address our customers' needs proactively and in a
timely manner. If we fail to analyze correctly and respond timely and
appropriately to customer feedback and other data, our business may be
materially adversely affected.
 
 Certain
mobile network operators require mobile devices to be customized to their
specifications, by requesting certain preferred features, functionalities or
design, together with co-branding with the network operator's brand. We believe
that customization is an important element in gaining increased operator
customer satisfaction and we are working together with operators on product
planning as well as accelerating product hardware and software customization
programs. These developments may result in new challenges as we provide
customized products, such as the need for us to produce mobile devices in
smaller lot sizes, which can impede our economies of scale, or the potential for
the erosion of the Company brand, which we consider to be one of our key
competitive advantages.
 
 In order
to meet our customers' needs, we need to introduce new devices on a timely basis
and maintain a competitive product portfolio. For the Company, a competitive
product portfolio means a broad and balanced offering of commercially appealing
mobile devices with attractive features, functionality and design for all major
user segments and price points. If we do not achieve a competitive portfolio, we
believe that we will be at a competitive disadvantage, which may lead to lower
revenue and lower profits.
  The
competitiveness of our portfolio is also influenced by the value of the Company
brand. A number of factors, including actual or even alleged defects in our
products and solutions, may have a negative effect on our reputation and erode
the value of the Company brand.
 
 Competition
in our industry is intense. Our failure to respond successfully to changes in
the competitive landscape may have a material adverse impact on our business and
results of operations.
 
 The
markets for our products and solutions are intensely competitive. Industry
participants compete with each other mainly on the basis of the breadth and
depth of their product portfolios, price, operational and manufacturing
efficiency, technical performance, product features, quality, customer support
and brand recognition. We are facing increased competition from both our
traditional competitors in the mobile communications industry as well as a
number of new competitors, particularly from countries where production costs
tend to be lower. Some of these competitors have used, and we expect will
continue to use, more aggressive pricing strategies, different design approaches
and alternative technologies than ours. In addition, some competitors have
chosen a strategy of focusing on productization based on commercially available
technologies and components, which may enable them to introduce products faster
and with lower levels of research and development spending than the
Company.
  As a
result of developments in our industry, we also expect to face new competition
from companies in related industries, such as consumer electronics manufacturers
and business device and solution providers, including but not limited to Dell,
HP, Microsoft, Nintendo, Palm, Research in Motion and Sony. Additionally,
because mobile network operators are increasingly offering mobile devices under
their own brand, we face increasing competition from non-branded mobile device
manufacturers. If we cannot respond successfully to these competitive
developments, our business and results of operations may be materially adversely
affected.
 
 26
 
 Reaching our sales, profitability,
volume and market share targets depends on numerous factors. These include our
ability to offer products and solutions that meet the demands of the market and
to manage the prices and costs of our products and solutions, our operational
efficiency, the pace of development and acceptance of new technologies, our
success in the business areas that we have recently entered, and general
economic conditions. Depending on those factors, some of which we may influence
and others of which are beyond our control, we may fail to reach our targets and
we may fail to provide accurate forecasts of our sales and results of
operations.
 
 A variety
of factors discussed throughout these Risk Factors could affect our ability to
reach our targets and give accurate forecasts. Although, we can influence some
of these factors, some of them depend on external factors that are beyond our
control.  In our mobile device businesses, we seek to maintain healthy
levels of sales and profitability through offering a competitive portfolio of
mobile devices, growing faster than the market, working to improve our
operational efficiency, controlling our costs, and targeting timely and
successful product introductions and shipments. The quarterly and annual sales
and operating results in our mobile device businesses also depend on a number of
other factors that are not within our control. Such factors include the global
growth in mobile device volumes, which is influenced by, among other factors,
regional economic factors, competitive pressures, regulatory environment, the
timing and success of product and service introductions by various market
participants, including network operators, the commercial acceptance of new
mobile devices, technologies and services, and operators' and distributors'
financial situations. Our sales and operating results are also impacted by
fluctuations in exchange rates and at the quarterly level by seasonality. In
developing markets, the availability and cost, through affordable tariffs, of
mobile phone service compared with the availability and cost of fixed line
networks may also impact volume growth.
 
 In our
mobile networks business, we also seek to maintain healthy levels of sales and
profitability and try to grow faster than the market. Our networks business's
quarterly and annual net sales and operating results can be affected by a number
of factors, some of which we can influence, such as our operational efficiency,
the level of our research and development investments and the deployment
progress and technical success we achieve under network contracts. Other
relevant factors include operator investment behavior, which can vary
significantly from quarter to quarter, competitive pressures and general
economic conditions although these are not within our control.
 
 The new
business areas that we have entered may be less profitable than we currently
foresee, or they may generate more variable operating results than we currently
foresee. We expect to incur short-term operating losses in certain of these new
business areas given our early stage investments in research and development and
marketing in particular. Also our efforts in managing prices and costs in the
long-term, especially balancing prices and volumes with research and development
costs, may prove to be inadequate.
 
 Although
we may announce forecasts of our results of operations, uncertainties affecting
any of these factors, particularly during difficult economic conditions, render
our forecasts difficult to make, and may cause us not to reach the targets that
we have forecasted, or to revise our estimates.
 
 Our
sales and results of operations could be adversely affected if we fail to
efficiently manage our manufacturing and logistics without interruption, or fail
to ensure that our products and solutions meet our and our customers' quality,
safety and other requirements and are delivered in time.
 
 Our
manufacturing and logistics are complex, require advanced and costly equipment
and include outsourcing to third parties. These operations are continuously
modified in an effort to improve manufacturing efficiency and flexibility. We
may experience difficulties in adapting our supply to the demand for our
products, ramping up or down production at our facilities, adopting new
manufacturing processes, finding the most timely way to develop the best
technical solutions for new products, or achieving manufacturing efficiency and
flexibility, whether we manufacture our products and solutions ourselves or
outsource to third parties. Such difficulties may have a material adverse effect
on our sales and results of operations and may result from, among other things:
delays in adjusting or upgrading production at our facilities, delays in
expanding production capacity, failure in our manufacturing and logistics
processes, failures in the activities we have outsourced, and interruptions in
the data communication systems that run our operations. Also, a failure or an
interruption could occur at any stage of our product creation, manufacturing and
delivery processes, resulting in our products and solutions not meeting our and
our customers' quality, safety and other requirements, or being delivered late,
which could have a material adverse effect on our sales, our results of
operations and reputation and the value of the Company brand.
  27
  We
depend on our suppliers for the timely delivery of components and for their
compliance with our supplier requirements, such as, most notably, our and our
customers' product quality, safety and other standards. Their failure to do so
could adversely affect our ability to deliver our products and solutions
successfully and on time.
 
 Our
manufacturing operations depend to a certain extent on obtaining adequate
supplies of fully functional components on a timely basis. Our principal supply
requirements are for electronic components, mechanical components and software,
which all have a wide range of applications in our products. Electronic
components include integrated circuits, microprocessors, standard components,
memory devices, cameras, displays, batteries and chargers while mechanical
components include covers, connectors, key mats and antennas. In addition, a
particular component may be available only from a limited number of suppliers.
Suppliers may from time to time extend lead times, limit supplies or increase
prices due to capacity constraints or other factors, which could adversely
affect our ability to deliver our products and solutions on a timely basis.
Moreover, even if we attempt to select our suppliers and manage our supplier
relationships with scrutiny, a component supplier may fail to meet our supplier
requirements, such as, most notably, our and our customers' product quality,
safety and other standards, and consequently some of our products are
unacceptable to us and our customers, or we may fail in our own quality
controls. Moreover, a component supplier may experience delays or disruption to
its manufacturing, or financial difficulties. Any of these events could delay
our successful delivery of products and solutions, which meet our and our
customers' quality, safety and other requirements, or otherwise adversely affect
our sales and our results of operations. Also, our reputation and brand value
may be affected due to real or merely alleged failures in our products and
solutions.
 
 We
are developing a number of our new products and solutions together with other
companies. If any of these companies were to fail to perform, we may not be able
to bring our products and solutions to market successfully or in a timely way
and this could have a material adverse impact on our sales and
profitability.
 
 We
continue to invite the providers of technology, components or software to work
with us to develop technologies or new products and solutions. These
arrangements involve the commitment by each company of various resources,
including technology, research and development efforts, and personnel. Although
the target of these arrangements is a mutually beneficial outcome for each
party, our ability to introduce new products and solutions that meet our and our
customers' quality, safety and other standards successfully and on schedule
could be hampered if, for example, any of the following risks were to
materialize: the arrangements with the companies that work with us do not
develop as expected, the technologies provided by the companies that work with
us are not sufficiently protected or infringe third parties' intellectual
property rights in a way that we cannot foresee or prevent, the technologies,
products or solutions supplied by the companies that work with us do not meet
the required quality, safety and other standards or customer needs, our own
quality controls fail, or the financial standing of the companies that work with
us deteriorates.
 
 Our
operations rely on complex and highly centralized information technology systems
and networks. If any system or network disruption occurs, this reliance could
have a material adverse impact on our operations, sales and operating
results.
 
 Our
operations rely to a significant degree on the efficient and uninterrupted
operation of complex and highly centralized information technology systems and
networks, which are integrated with those of third parties. Any failure or
disruption of our current or future systems or networks could have a material
adverse effect on our operations, sales and operating results. Furthermore, any
data leakages resulting from information technology security breaches could also
adversely affect us.
 
 All
information technology systems are potentially vulnerable to damage or
interruption from a variety of sources. We pursue various measures in order to
manage our risks related to system and network disruptions, including the use of
multiple suppliers and available information technology security. However,
despite precautions taken by us, an outage in a telecommunications network
utilized by any of our information technology systems, virus or other event that
leads to an unanticipated interruption of our information technology systems or
networks could have a material adverse effect on our operations, sales and
operating results.
 
 28
 
 Our
products and solutions include increasingly complex technology involving
numerous new patented and other proprietary technologies, as well as some
developed or licensed to us by certain third parties. As a consequence,
evaluating the protection of the technologies we intend to use is more and more
challenging, and we expect increasingly to face claims that we have infringed
third parties' intellectual property rights. The use of increasingly complex
technology may also result in increased licensing costs for us, restrictions on
our ability to use certain technologies in our products and solution offerings,
and/or costly and time-consuming litigation. Third parties may also commence
actions seeking to establish the invalidity of intellectual property rights on
which we depend.
 
 Our
products and solutions include increasingly complex technology involving
numerous new Company patented and other proprietary technologies, as well as
some developed or licensed to us by certain third parties. As the amount of such
proprietary technologies needed for our products and solutions continues to
increase, the number of parties claiming rights continues to increase and become
more fragmented within individual products, and as the complexity of the
technology and the overlap of product functionalities increases, the possibility
of more infringement and related intellectual property claims against us also
continues to increase. The holders of patents potentially relevant to our
product and solution offerings may be unknown to us, or may otherwise make it
difficult for us to acquire a license on commercially acceptable terms. There
may also be technologies licensed to and relied on by us that are subject to
infringement or other corresponding allegations or claims by others which could
damage our ability to rely on such technologies.
 
 In
addition, although we endeavor to ensure that companies that work with us
possess appropriate intellectual property rights or licenses, we cannot fully
avoid risks of intellectual property rights infringement created by suppliers of
components and various layers in our products and solutions or by companies with
which we work in cooperative research and development activities. Similarly, we
and our customers may face claims of infringement in connection with our
customers' use of our products and solutions. Finally, as all technology
standards, including those used and relied on by us, include some intellectual
property rights, we cannot fully avoid risks of a claim for infringement of such
rights due to our reliance on such standards. We believe that the number of
third parties declaring their intellectual property to be relevant to these
standards is increasing, which may increase the likelihood that we will be
subject to such claims in the future.
 
 Any
restrictions on our ability to sell our products and solutions due to expected
or alleged infringements of third party intellectual property rights and any
intellectual property rights claims, regardless of merit, could result in
material losses of profits, costly litigation, the payment of damages and other
compensation, the diversion of the attention of our personnel, product shipment
delays or the need for us to develop non-infringing technology or to enter into
royalty or licensing agreements. If we were unable to develop non-infringing
technology, or if royalty or licensing agreements were not available on
commercially acceptable terms, we could be precluded from making and selling the
affected products and solutions. As new features are added to our products and
solutions, we may need to acquire further licenses, including from new
and sometimes unidentified owners of intellectual property. The cumulative
costs of obtaining any necessary licenses are difficult to predict and may over
time have a negative effect on our operating results.
 
 In
addition, other companies may commence actions seeking to establish the
invalidity of our intellectual property, for example, patent rights. In the
event that one or more of our patents are challenged, a court may invalidate the
patent or determine that the patent is not enforceable, which could harm our
competitive position. If any of our key patents are invalidated, or if the scope
of the claims in any of these patents is limited by a court decision, we could
be prevented from licensing the invalidated or limited portion of our
intellectual property rights. Even if such a patent challenge is not successful,
it could be expensive and time consuming, divert management attention from our
business and harm our reputation. Any diminution of the protection that our own
intellectual property rights enjoy could cause us to lose some of the benefits
of our investments in R&D, which may have a negative effect on our results
of operations.
 
 29
 
 If
we are unable to recruit, retain and develop appropriately skilled employees, we
may not be able to implement our strategies and, consequently, our results of
operations may suffer.
 
 We must
continue to recruit, retain and through constant competence training develop
appropriately skilled employees with a comprehensive understanding of our
businesses and technologies. As competition for skilled personnel remains keen,
we seek to create a corporate culture that encourages creativity and continuous
learning. We are also continuously developing our compensation and benefit
policies and taking other measures to attract and motivate skilled personnel.
Nevertheless, we have encountered in the past, and may encounter in the future,
shortages of appropriately skilled personnel, which may hamper our ability to
implement our strategies and harm our results of operations.
 
 The
global networks business relies on a limited number of customers and large
multi-year contracts. Unfavorable developments under such a contract or in
relation to a major customer may affect our sales, our results of operations and
cash flow adversely.
 
 Large
multi-year contracts, which are typical in the networks industry, include a risk
that the timing of sales and results of operations associated with these
contracts will be different than expected. Moreover, they usually require the
dedication of substantial amounts of working capital and other resources, which
impacts our cash flow negatively. Any non-performance by us under these
contracts may have significant adverse consequences for us because network
operators have demanded and may continue to demand stringent contract
undertakings such as penalties for contract violations.
 
 Our
sales derived from, and assets located in, emerging market countries may be
adversely affected by economic, regulatory and political developments in those
countries. As sales from these countries represent an increasing portion of our
total sales, economic or political turmoil in these countries could adversely
affect our sales and results of operations. Our investments in emerging market
countries may also be subject to other risks and uncertainties.
 
 We
generate sales from and have invested in various emerging market countries. As
sales from these countries represent an increasing portion of our total sales,
economic or political turmoil in these countries could adversely affect our
sales and results of operations. Our investments in emerging market countries
may also be subject to risks and uncertainties, including unfavorable taxation
treatment, exchange controls, challenges in protecting our intellectual property
rights, nationalization, inflation, incidents of terrorist activity, currency
fluctuations, or the absence of, or unexpected changes in, regulation as well as
other unforeseeable operational risks.
 
 Allegations
of health risks from the electromagnetic fields generated by base stations and
mobile devices, and the lawsuits and publicity relating to them, regardless of
merit, could affect our operations negatively by leading consumers to reduce
their use of mobile devices or by causing us to allocate monetary and personnel
resources to these issues.
 
 There has
been public speculation about possible health risks to individuals from exposure
to electromagnetic fields from base stations and from the use of mobile devices.
While a substantial amount of scientific research conducted to date by various
independent research bodies has indicated that these radio signals, at levels
within the limits prescribed by public health authority safety standards and
recommendations, present no adverse effect to human health, we cannot be
 certain that future studies, irrespective of their scientific basis, will
not suggest a link between electromagnetic fields and adverse health effects
that would adversely affect our sales and share price. Research into these
issues is ongoing by government agencies, international health organizations and
other scientific bodies in order to develop a better scientific and public
understanding of these issues.
  Although
the Company products and solutions are designed to meet all relevant safety
standards and recommendations globally, no more than a perceived risk of adverse
health effects of mobile communications devices could adversely affect us
through a reduction in sales of mobile devices or increased difficulty in
obtaining sites for base stations, and could have a negative effect on our
reputation and brand value as well as harm our share price.
  30
 
 Changes
in various types of regulation in countries around the world could affect our
business adversely.
 
 Our
business is subject to direct and indirect regulation in each of the countries
in which we, the companies with which we work or our customers do business. As a
result, changes in various types of regulations applicable to current or new
technologies, products or services could affect our business adversely. For
example, it is in our interest that the Federal Communications Commission
maintains a regulatory environment that ensures the continued growth of the
wireless sector in the United States. In addition, changes in regulation
affecting the construction of base stations and other network infrastructure
could adversely affect the timing and costs of new network construction or
expansion and the commercial launch and ultimate commercial success of these
networks.
 
 Moreover,
the implementation of new technological or legal requirements, such as the
requirement in the United States that all handsets must be able to indicate
their physical location, could impact our products and solutions, manufacturing
or distribution processes, and could affect the timing of product and solution
introductions, the cost of our production, products or solutions as well as
their commercial success. Finally, export control, tariff, environmental, safety
and other regulation that adversely affects the pricing or costs of our products
and solutions as well as new services related to our products could affect our
net sales and results of operations. The impact of these changes in regulation
could affect our business adversely even though the specific regulations do not
always directly apply to us or our products and solutions.
  Our
future revenues and results of operations may be difficult to forecast and
results in prior periods may no be indicative of future results.
  At times
in the past and in certain segments, our revenues have fluctuated on a quarterly
and annual basis as well as grown significantly and have decreased
significantly. Accurate predictions of future revenues are difficult because of
the rapid changes in the markets in which we operate.
  Our
results of operations have fluctuated and may continue to fluctuate
significantly in the future as a result of a variety of factors, many of which
are beyond our control. These factors include:
  o the
addition of new clients or the loss of existing clients;
  o changes
in fees paid by advertisers or other clients;
  o the
introduction of new mobile technology services by us or our
competitors;
  o
variations in the levels of capital or operating expenditures and other costs
relating to the maintenance or expansion of our operations, including personnel
costs;
  o
seasonality;
  o changes
in results of operations brought about by newly acquired businesses or new joint
ventures, which may be exceedingly difficult to predict due to management's lack
of history with such businesses or joint ventures;
  o changes
in governmental regulation of mobile communications; and
  o general
economic conditions.
  Our
future revenues and results of operations may be difficult to forecast due to
the above factors and the time we may need to adequately respond to any changes
in them. Our profit margins may suffer if we are unable to pass some of the
costs on to our customers. In addition, our expense levels are based in large
part on our investment plans and estimates of future revenues. Any increased
expenses may precede or may not be followed by increased revenues, as we may be
unable to, or may elect not to, adjust spending in a timely manner to compensate
for any unexpected revenue shortfall. As a result, we believe that
period-to-period and year-to-year comparisons of our results of operations may
not be meaningful.
 
 31
  Acquisitions
may harm our financial results.
 
 Acquisitions
have been part of our growth and may continue to be part of our growth in the
future. Our acquisitions may be of entire companies, certain assets of
companies, controlling interests in companies or of minority interests in
companies where we intend to invest as part of a strategic alliance. If we are
not successful in integrating companies that we acquire or are not able to
generate adequate sales from the acquired entities, our business could be
materially and adversely affected.
  We
depend on proprietary rights and we face the risk of infringement.
  Our
success and ability to compete are substantially dependent on our internally
developed technologies and trademarks, which we protect through a combination of
copyright, trade secret and trademark law. Patent applications and trademark
applications we submit may not be approved. Even if they are approved, such
patents or trademarks may be successfully challenged by others or invalidated.
If our trademark registrations are not approved because third parties own such
trademarks, our use of such trademarks will be restricted unless we enter into
arrangements with such third parties that may be unavailable on commercially
reasonable terms.
  We
generally enter into confidentiality or license agreements with our employees,
consultants and corporate partners, and generally control access to and
distribution of our technologies, documentation and other proprietary
information. Despite our efforts to protect our proprietary rights from
unauthorized use or disclosure, parties may attempt to disclose, obtain or use
our solutions or technologies. The steps we have taken may not prevent
misappropriation of our solutions or technologies, particularly in many foreign
countries in which we operate, where laws or law enforcement practices may not
protect our proprietary rights as fully as in the United States.
  We have,
from time to time, been, and may in the future be, subject to claims of alleged
infringement of the trademarks and other intellectual property rights of third
parties by us or by customers who employ our advertising solutions. We may be
required, or may elect, to indemnify these parties against such claims. Such
claims and any resultant litigation could subject us to significant liability
for damages and could result in the invalidation of our proprietary rights. In
addition, even if we prevail, such litigation could be time-consuming and
expensive to defend, and could result in the diversion of our time and
attention, any of which could materially and adversely affect our business,
results of operations and financial condition. Any claims or litigation from
third parties may also result in limitations on our ability to use the
trademarks and other intellectual property subject to such claims or litigation
unless we enter into arrangements with the third parties responsible for such
claims or litigation, which may be unavailable on commercially reasonable terms,
if at all.
  Future
currency fluctuations and restrictions on currency exchange may adversely affect
our business, including limiting our ability to convert Chinese renminbi into
foreign currencies and, if Chinese renminbi were to decline in value, reducing
our revenues in U.S. dollar terms.
  Our
reporting currency is the U.S. dollar and our operations in China and Hong Kong
use their respective local currencies as their functional currencies. The
majority of our revenues derived and expenses incurred are in currencies other
than the U.S. dollar. We are subject to the effects of exchange rate
fluctuations with respect to any of these currencies. We can offer no assurance
that these will be stable against the U.S. dollar or any other foreign
currency.
  The
income statements of our international operations are translated into U.S.
dollars at the average exchange rates in each applicable period. To the extent
the U.S. dollar strengthens against foreign currencies, the translation of these
foreign currencies denominated transactions results in reduced revenues,
operating expenses and net income for our international operations. Similarly,
to the extent the U.S. dollar weakens against foreign currencies, the
translation of these foreign currency denominated transactions results in
increased revenues, operating expenses and net income for our international
operations. We are also exposed to foreign exchange rate fluctuations as we
convert the financial statements of our foreign subsidiaries into U.S. dollars
in consolidation. If there is a change in foreign currency exchange rates, the
conversion of the foreign subsidiaries' financial statements into U.S. dollars
will lead to a translation gain or loss which is recorded as a component of
other comprehensive income. In addition, we have certain assets and liabilities
that are denominated in currencies other than the relevant entity's functional
currency. Changes in the functional currency value of these assets and
liabilities create fluctuations that will lead to a transaction gain or loss. We
have not entered into agreements or purchased instruments to hedge our exchange
rate risks, although we may do so in the future. The availability and
effectiveness of any hedging transactions may be limited and we may not be able
to successfully hedge our exchange rate risks.
  32
  Changes
to existing accounting pronouncements, including SFAS 123R, or taxation rules or
practices may adversely affect our reported results of operations or how we
conduct our business.
  A change
in accounting pronouncements or taxation rules or practices can have a
significant effect on our reported results and may even affect our reporting of
transactions completed before the change is effective. Pursuant to SEC rules, we
are required to implement the Statement of Financial Accounting Standards No.
123 (revised 2004), "Share-Based Payment" ("SFAS 123R") starting in the first
quarter of 2006. SFAS 123R requires us to measure compensation costs for all
share-based compensation (including stock options and our employee stock
purchase plan, as currently constructed) at fair value and take compensation
charges equal to that value. The method that we use to determine the fair value
of stock options is based upon, among other things, the volatility of our
ordinary shares. The price of our ordinary shares has historically been
volatile. Therefore, the requirement to measure compensation costs for all
share-based compensation under SFAS 123R could negatively affect our
profitability and the trading price of our ordinary shares. SFAS 123R and the
impact of expensing on our reported results could also limit our ability to
continue to use stock options as an incentive and retention tool, which could,
in turn, hurt our ability to recruit employees and retain existing employees.
Other new accounting pronouncements or taxation rules and varying
interpretations of accounting pronouncements or taxation practice have occurred
and may occur in the future. This change to existing rules, future changes, if
any, or the questioning of current practices may adversely affect our reported
financial results or the way we conduct our business.
  While
we believe that we currently have adequate internal control procedures in place,
we are still exposed to potential risks from recent legislation requiring
companies to evaluate controls under Section 404 of the Sarbanes-Oxley Act of
2002.
  While we
believe that we currently have adequate internal control procedures in place, we
are still exposed to potential risks from recent legislation requiring companies
to evaluate controls under Section 404 of the Sarbanes-Oxley Act of 2002. Under
the supervision and with the participation of our management, we have evaluated
our internal controls systems in order to allow management to report on our
internal controls, as required by Section 404 of the Sarbanes-Oxley Act. We have
performed the system and process evaluation and testing required in an effort to
comply with the management certification requirements of Section 404. As a
result, we have incurred additional expenses and a diversion of management's
time. If we are not able to continue to meet the requirements of Section 404 in
a timely manner or with adequate compliance, we might be subject to sanctions or
investigation by regulatory authorities, such as the SEC or the NASDAQ National
Market. Any such action could adversely affect our financial results and the
market price of our ordinary shares.
  Our
stock price has been historically volatile and may continue to be volatile,
which may make it more difficult for you to resell shares when you want at
prices you find attractive.
  The
trading price of our ordinary shares has been and may continue to be subject to
considerable daily fluctuations. During the three months ended September 30,
2008, the closing sale prices of our ordinary shares on the Over-the-Counter
Bulletin Board ranged from $0.09 to $0.22 per share and the closing sale price
on December 11, 2008 was $0.07 per share. Our stock price may fluctuate in
response to a number of events and factors, such as quarterly variations in
operating results, announcements of technological innovations or new products
and media properties by us or our competitors, changes in financial estimates
and recommendations by securities analysts, the operating and stock price
performance of other companies that investors may deem comparable, new
governmental restrictions or regulations and news reports relating to trends in
our markets. In addition, the stock market in general, and the market prices for
China-related and mobile phone-related companies in particular, have experienced
extreme volatility that often has been unrelated to the operating performance of
such companies. These broad market and industry fluctuations may adversely
affect the price of our ordinary shares, regardless of our operating
performance.
  33
  We
may be classified as a passive foreign investment company, which could result in
adverse U.S. tax consequences to U.S. investors.
  Based
upon the nature of our income and assets, we may be classified as a passive
foreign investment company, or PFIC, by the United States Internal Revenue
Service for U.S. federal income tax purposes. This characterization could result
in adverse U.S. tax consequences to you. For example, if we are a PFIC, our U.S.
investors will become subject to increased tax liabilities under U.S. tax laws
and regulations and will become subject to more burdensome reporting
requirements. The determination of whether or not we are a PFIC is made on an
annual basis, and those determinations depend on the composition of our income
and assets, including goodwill, from time to time. Although in the past we have
operated our business and in the future we intend to operate our business so as
to minimize the risk of PFIC treatment, you should be aware that certain factors
that could affect our classification as PFIC are out of our control. For
example, the calculation of assets for purposes of the PFIC rules depends in
large part upon the amount of our goodwill, which in turn is based, in part, on
the then market value of our shares, which is subject to change. Similarly, the
composition of our income and assets is affected by the extent to which we spend
the cash we have raised on acquisitions and capital expenditures. In addition,
the relevant authorities in this area are not clear and so we operate with less
than clear guidance in our effort to minimize the risk of PFIC treatment.
Therefore, we cannot be sure whether we are not and will not be a PFIC for the
current or any future taxable year. In the event we are determined to be a PFIC,
our stock may become less attractive to U.S. investors, thus negatively
impacting the price of our stock.
  We
may be exposed to infringement claims by third parties, which, if successful,
could cause us to pay significant damage awards.
  Third
parties may initiate litigation against us alleging infringement of their
proprietary rights. In the event of a successful claim of infringement and our
failure or inability to develop non-infringing technology or license the
infringed or similar technology on a timely basis, our business could be harmed.
In addition, even if we are able to license the infringed or similar technology,
license fees could be substantial and may adversely affect our results of
operations.
  Our
failure to compete successfully may hinder our growth.
  The
markets for mobile technology and related products and services are intensely
competitive and such competition is expected to increase. Our failure to compete
successfully may hinder our growth. We believe that our ability to compete
depends upon many factors both within and beyond our control,
including:
  o the
development of new mobile technology;
  o the
timing and market acceptance of new products and enhancements of existing
services developed by us and our competitors;
  o the
ability to attract and retain qualified personnel;
  o
changing demands regarding customer service and support;
  o shifts
in sales and marketing efforts by us and our competitors; and
  o the
ease of use, performance, price and reliability of our services and
products.
  Some of
our competitors have longer operating histories, greater name recognition,
larger customer bases and significantly greater financial, technical and
marketing resources than ours. In addition, current and potential competitors
have established or may establish cooperative relationships among themselves or
with third parties to increase the ability of their products or services to
address the needs of our prospective clients. In addition, most online
advertising companies are seeking to broaden their business models, so that
companies that do not currently compete directly with us may decide to compete
more directly with us in the future. We may be unable to compete successfully
against current or future competitors.
 
 34
  ITEM
2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
 
 None.
 
 ITEM
3.  DEFAULTS UPON SENIOR SECURITIES
 
 None.
 ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS
 
 None.
 
 ITEM
5.  OTHER INFORMATION
 
 None.
 
 ITEM
6.  EXHIBITS
 
 INDEX
TO EXHIBITS
 OF
 INNOCOM
TECHNOLOGY HOLDINGS, INC.
 
 31.1
                      Rule
      13a-14 (a)/15d-14 (a) Certification of Chief Executive
    Officer31.2
                      Rule
      13a-14 (a)/15d-14 (a) Certification of Chief Financial
    Officer32.1
                      Section
      1350 Certification of Chief Executive Officer32.2
                      Section
      1350 Certification of Chief Financial
Officer
 
 SIGNATURES
  In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
  INNOCOM
      TECHNOLOGY HOLDINGS, INC./s/ William yan Sui HuiDated:
      December 11, 2008
                William
      Yan Sui Hui, Chief Executive Officer
                  (Principal
      executive officer)
 
 /s/ Cheung Wai Hung,
  EddieDated:
      December 11, 2008
                Cheung
      Wai Hung, Eddie, Chief Financial Officer
                  (Principal
      financial officer)
 
 35