**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549





**FORM
      10-QSB**





(Mark
      One)





**x** QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
      FOR THE QUARTERLY PERIOD ENDED **MARCH 31, 2007**





**o** **** TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934. ****





**Commission
      File No.** **00** **1-15643**








**INFOSMART
      GROUP, INC.**


(Exact
      name of small business issuer as specified in it charter)


**California**
            
            **95-4597370**(State
                or other jurisdiction of incorporation or
            
            (IRS
                Employer Identificationorganization)
            
            No.)





**5** **th** **Floor, QPL Industrial Building**


**126-140
      Texaco Road,**


**Tsuen
      Wan, Hong Kong**


(Address
      of principal executive offices)





**(852)
      2944-9905**


(Registrant's
      telephone number, including area code)





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





The
      registrant is a shell company (as defined by Rule 12b-2 of the Exchange
      Act).    Yes o No x




APPLICABLE
      ONLY TO CORPORATE ISSUERS:





Indicate
      the number of shares outstanding of each issuer's classes of common stock,
      as of
      the latest practicable date: 136,867,922 issued and outstanding as of May 10,
      2007.





Transitional
      Small Business Disclosure Form (Check one): Yes o No x














**INFOSMART
      GROUP, INC.**


TABLE
      OF
      CONTENTS


TO
      QUARTERLY REPORT ON FORM 10-QSB


FOR
      PERIOD ENDED MARCH 31, 2007











**PART
                I**
            **FINANCIAL
                INFORMATION**
            **Page**Item
                1.
            Financial
                Statements
            1Condensed
                Consolidated Statements of Operations
            1Condensed
                Consolidated Balance Sheets
            2Condensed
                Consolidated Statements of Cash Flows
            4Notes
                to Condensed Consolidated Financial Statements
            6Item
                2.
            Management's
                Discussion and Analysis of Financial Condition and Results of
                Operations
            21Item
                3.
            Controls
                and Procedures
            38








**PART
                II**
            **OTHER
                INFORMATION**
            40Item
                1.
            Legal
                Proceedings
            40Item
                2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            40Item
                3.
            Defaults
                Upon Senior Securities
            40Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            40Item
                5.
            Other
                Information
            40Item
                6.
            Exhibits
            40**Signatures**
            
            44**Exhibits**





(REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK)














**PART
      I - FINANCIAL INFORMATION**





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





**Infosmart
      Group Inc.**





Condensed
      Consolidated Financial Statements


For
      the
      three months ended March 31, 2007 and 2006


(Stated
      in US Dollars)

















**INFOSMART
      GROUP INC.**


**CONDENSED
      CONSOLIDATED FINANCIAL STATEMENTS**


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




















Index
      to
      financial statements




















PAGESCondensed
                consolidated statements of operations
            1Condensed
                consolidated balance sheets
            2
                -
                3Condensed
                consolidated statements of cash flows
            4
                -
                5Notes
                to condensed consolidated financial statements
            6
                -
                20











**INFOSMART
      GROUP INC.**


**CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS**


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


**(Unaudited)**


**(Stated
      in US Dollars)**














***Three
                months ended March 31,******2007***
            
            ***2006***Net
                sales
            
            $
            7,698,415
            
            $
            6,231,518Cost
                of sales
            
            
            (5,733,147
            )
            
            (4,558,625
            )Gross
                profit
            
            
            1,965,268
            
            
            1,672,893Administrative
                expenses
            
            
            (931,050
            )
            
            (340,210
            )Selling
                and distributing costs
            
            
            (79,516
            )
            
            (121,504
            )Income
                from operations
            
            
            954,702
            
            
            1,211,179Other
                income - note 5
            
            
            308,759
            
            
            51,525Interest
                expenses
            
            
            (142,540
            )
            
            (148,151
            )Income
                before income taxes
            
            
            1,120,921
            
            
            1,114,553Income
                taxes - note 6
            
            
            (215,637
            )
            
            (195,047
            )Net
                income
            
            $
            905,284
            
            $
            919,506Series
                B preferred dividend
            
            
            (125,411
            )
            
            -Net
                income applicable to common shareholders
            
            $
            779,873
            
            $
            919,506Earning
                per share - note 13-
                basic
            
            $
            0.01
            
            $
            0.01-
                dilutive
            
            $
            0.01
            
            $
            0.01Weighted
                average shares outstanding-
                basic
            
            
            136,252,633
            
            
            110,236,841-
                dilutive
            
            
            159,936,810
            
            
            110,236,841








See
      the
      accompanying notes to condensed consolidated financial
      statements


1


**INFOSMART
      GROUP INC.**


**CONDENSED
      CONSOLIDATED BALANCE SHEETS**


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


**(Stated
      in US Dollars)**








***As
                of******March
                31,***
            
            ***December
                31,******2007***
            
            ***2006******(Unaudited)***
            
            ***(Audited)*****ASSETS**Current
                assetsCash
                and cash equivalents
            
            $
            157,322
            
            $
            206,258Restricted
                cash
            
            
            256,839
            
            
            552,193Trade
                receivables (net of allowance for doubtful accounts
              of
                $Nil for 2007 and 2006)
            
            
            9,582,732
            
            
            6,171,366Prepaid
                expenses and other receivables - note 8
            
            
            1,054,757
            
            
            269,477Inventories
                (net of allowance of $Nil for 2007 and 2006) - note 9
            
            
            1,662,344
            
            
            1,058,039Total
                current assets
            
            
            12,713,994
            
            
            8,257,333Deferred
                tax assets - note 6
            
            
            213,534
            
            
            459,823Plant
                and equipment, net - note 10
            
            
            33,055,542
            
            
            33,911,540Intangible
                assets
            
            
            2,020,958
            
            
            2,092,809**TOTAL
                ASSETS**
            
            $
            48,004,028
            
            $
            44,721,505**LIABILITIES
                AND STOCKHOLDERS’ EQUITY****LIABILITIES**Current
                liabilitiesTrade
                payables
            
            $
            5,730,567
            
            $
            2,926,078Other
                payables and accrued liabilities - note 11
            
            
            7,735,344
            
            
            8,756,675Income
                tax payable
            
            
            350,027
            
            
            363,645Current
                portion of bank borrowings - note 12
            
            
            4,754,353
            
            
            3,503,654Current
                portion of other loans
            
            
            1,477,537
            
            
            1,268,044Total
                current liabilities
            
            
            20,047,828
            
            
            16,818,096Non-current
                portion of bank borrowings - note 12
            
            
            2,458,171
            
            
            2,893,927Non-current
                portion of other loans
            
            
            1,592,310
            
            
            1,884,202Advance
                from a related party
            
            
            928,282
            
            
            927,991Deferred
                tax liabilities - note 6
            
            
            2,931,127
            
            
            3,001,360**TOTAL
                LIABILITIES**
            
            $
            27,957,718
            
            $
            25,525,576**COMMITMENTS
                AND CONTINGENCIES - note 14**





2


**INFOSMART
      GROUP INC.**


**CONDENSED
      CONSOLIDATED BALANCE SHEETS (CONT’D)**


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


**(Stated
      in US Dollars)**








**As
                of*****March
                31,***
            
            ***December
                31,******2007***
            
            ***2006******(Unaudited)***
            
            ***(Audited)***Series
                B Redeemable Convertible Preferred Stock: No par value -note
                15Authorized
                1,800,000 shares; Issued and outstanding:2007
                - 883,081.43 shares and 2006 - 911,974.54 shares
            
            $
            2,500,126
            
            $
            2,581,926**STOCKHOLDERS’
                EQUITY**Common
                stock: No par value - note 15Authorized:
                300,000,000 shares; Issued and outstanding:2007
                - 136,576,337.44 shares and 2006 -
              135,801,426.44
                shares
            
            
            1,602,701
            
            
            1,520,901Preferred
                stock: No par value
              Authorized
                7,000,000 shares; Issued and outstanding:
              2007
                and 2006 - nil shares
            
            
            -
            
            
            -Series
                A Convertible Preferred Stock: No par value
              Authorized
                1,200,000 shares; Issued and outstanding:
              2007
                and 2006 - nil shares
            
            
            -
            
            
            -Additional
                paid-in-capital - note 15
            
            
            8,118,664
            
            
            8,118,664Accumulated
                other comprehensive income
            
            
            89,745
            
            
            19,237Retained
                earnings
            
            
            7,735,074
            
            
            6,955,201**TOTAL
                STOCKHOLDERS’ EQUITY**
            
            
            17,546,184
            
            
            16,614,003**TOTAL
                LIABILITIES AND STOCKHOLDERS’ EQUITY**
            
            $
            48,004,028
            
            $
            44,721,505








See
      the
      accompanying notes to condensed consolidated financial
      statements


3


**INFOSMART
      GROUP INC.**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


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


**(Unaudited)**


**(Stated
      in US Dollars)**








***Three
                months ended March 31,******2007***
            
            ***2006*****Cash
                flows from operating activities**Net
                income
            
            $
            905,284
            
            $
            919,506Adjustments
                to reconcile net income to net cash flows(used
                in) provided by operating activities:Depreciation
            
            
            554,819
            
            
            441,766Deferred
                income taxes
            
            
            177,590
            
            
            195,047Amortization
                of license usage right
            
            
            70,545
            
            
            -Loss
                on disposal of property, plant and equipment
            
            
            181,617
            
            
            -Changes
                in operating assets and liabilities:Trade
                receivables
            
            
            (3,414,499
            )
            
            (1,059,834
            )Prepaid
                expenses and other receivables
            
            
            (785,410
            )
            
            (391,399
            )Inventories
            
            
            (604,842
            )
            
            336,935Trade
                payables
            
            
            2,805,974
            
            
            (79,032
            )Income
                tax payable
            
            
            (13,433
            )
            
            -Other
                payables and accrued liabilities
            
            
            (189,250
            )
            
            (176,682
            )Net
                cash flows (used in) provided by operating activities
            
            
            (311,605
            )
            
            186,307**Cash
                flows from investing activities**Payment
                for acquisition of plant and equipment
            
            
            (1,045,351
            )
            
            (201,527
            )Proceeds
                from disposal of plant and equipment
            
            
            400,926
            
            
            -Net
                cash flows (used in) investing activities
            
            
            (644,425
            )
            
            (201,527
            )**Cash
                flows from financing activities**Dividend
                paid
            
            
            (125,411
            )
            
            -Net
                advancement of other bank loans
            
            
            1,206,745
            
            
            618,720Repayment
                of non-recurring bank loans
            
            
            (434,287
            )
            
            (503,485
            )Repayment
                of other loans
            
            
            (80,798
            )
            
            -Decrease
                (increase) in restricted cash
            
            
            295,216
            
            
            (1,444
            )Increase
                in bank overdrafts
            
            
            45,733
            
            
            205,886Repayment
                from a related party
            
            
            -
            
            
            (241,056
            )Repayment
                of obligations under capital leases
            
            
            -
            
            
            (52,651
            )Net
                cash flows provided by financing activities
            
            
            907,198
            
            
            25,970Effect
                of foreign currency translation on cash and cash
                equivalents
            
            
            (104
            )
            
            (120
            )Net
                (decrease) increase in cash and cash equivalents
            
            
            (48,936
            )
            
            10,630Cash
                and cash equivalents, beginning of period
            
            
            206,258
            
            
            154,368Cash
                and cash equivalents, end of period
            
            $
            157,322
            
            $
            164,998


4





**INFOSMART
      GROUP INC.**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


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


**(Unaudited)**


**(Stated
      in US Dollars)**








***Three
                months ended March 31,******2007***
            
            ***2006***Supplemental
                disclosures for cash flow information:Cash
                paid for:Interest
            
            $
            238,004
            
            $
            92,651Income
                taxes
            
            
            51,480
            
            
            -




Non-cash
      investing and financing activities:


Conversion
                of Series B shares to common stock
            
            $
            81,800
            
            
            -








See
      the
      accompanying notes to condensed consolidated financial
      statements


5


**INFOSMART
      GROUP INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


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


**(Unaudited)**


**(Stated
      in US Dollars)**








**1.**
            **Basis
                of presentation**





The
      accompanying condensed consolidated financial statements of the Company and
      its
      subsidiaries have been prepared in accordance with generally accepted accounting
      principles in the United States of America for interim consolidated financial
      information. Accordingly, they do not include all the information and notes
      necessary for comprehensive consolidated financial statements.





In
      the
      opinion of the management of the Company, all adjustments, which are of a normal
      recurring nature, necessary for a fair statement of the results for the
      three-month periods have been made. Results for the interim period presented
      are
      not necessarily indicative of the results that might be expected for the entire
      fiscal year. These condensed financial statements should be read in conjunction
      with the consolidated financial statements and the notes for the year ended
      December 31, 2006.








**2.**
            **Descriptions
                of business**





The
      Company, through its wholly owned subsidiary, Infosmart Group Limited
      (“Infosmart”), is engaged in the business of developing, manufacturing,
      marketing and sales of recordable digital versatile disc (“DVDR”) and recordable
      compact discs (“CDR”), optical digital discs used for storing data and
      interactive sequences as well as audio and video files, under a cooperation
      agreement signed with a wholly owned subsidiary. With the cooperation agreement,
      the Company is able to manufacture DVDR and CDR under license agreement granted
      from the intellectual property owner and the manufacturing license issued by
      the
      Customs and Excise Department of Hong Kong.





The
      key
      raw materials for the production of the Company’s products are PC resin and
      silver granule. PC resin is mainly used in the molding of DVDR and CDR. Silver
      granule is mainly used in coating the DVDR and CDR.





The
      Company’s main suppliers are located in Hong Kong while the Company’s customers
      are located in both Hong Kong and overseas including Australia, Europe, North
      America and South America. The Company’s major customers include
      distributors and retail traders. The Company currently manufactures and ships
      the products from Hong Kong where the Company operates a state of the art DVDR
      and CDR manufacturing facilities.




For
      the
      development of the market in Brazil, the Company entered into an agreement
      on
      March 20, 2006 with two independent third parties for setting up a subsidiary,
      Discobrás Indústria E Comércio De Eletro Eletrônica Ltda (“Discobrás”), in
      Brazil for the new DVDR production facility. Recently, Discobras has completed
      construction of the DVDR production facility. The subsidiary had obtained all
      required government licenses and all other documents and approvals necessary
      to
      operate a DVDR production facility in Brazil. Discobras installed DVDR
      manufacturing equipment in February 2007 and began trial production in March
      2007. Regular production was commenced gradually from April
      2007.


6


**INFOSMART
      GROUP INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


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


**(Unaudited)**


**(Stated
      in US Dollars)**








**3.**
            **Continuance
                of operations**





These
      financial statements have been prepared on a going concern basis. Due to the
      fact that the Company is engaged in a capital intensive industry, the Company’s
      working capital (deficit) as of March 31, 2007 was $7,333,834. Its ability
      to
      continue as a going concern is dependent upon the ability of the Company to
      meet
      its obligations and repay its liabilities arising from normal business
      operations when they come due. The Company plans to satisfy its capital needs
      through revenue generated from its business and financing transactions through
      the sale of equity or debt securities.








**4.**
            **Summary
                of significant accounting
                policies**





*Principals
      of consolidation*





The
      condensed consolidated financial statements include the accounts of the Company
      and its subsidiaries. All significant inter-company accounts and transactions
      have been eliminated on consolidation.





*Minority
      Interests*





For
      the
      development of the market in Brazil, the Company entered into an agreement
      on
      March 20, 2006 with two independent third parties for setting up a subsidiary,
      Discobrás, in Brazil. Discobrás has a social capital of $8,046,281 (equivalent
      to R$17,385,600), of which  99.42% or $8,000,000 (equivalent to
      R$17,285,600) (“Investment Cost”) has been subscribed by the Company. As of
      March 31, 2007, neither one of the two independent third parties had fully
      satisfied their required capital contribution by any means. As a result, no
      minority interests have been recognized in the accompanying financial
      statements.





*Use
      of estimates*





In
      preparing financial statements in conformity with accounting principles
      generally accepted in the United States of America, management makes estimates
      and assumptions that affect the reported amounts of assets and liabilities
      and
      disclosures of contingent assets and liabilities at the dates of the financial
      statements, as well as the reported amounts of revenues and expenses during
      the
      reporting periods. These accounts and estimates include, but are not limited
      to,
      the valuation of accounts receivable, inventories, deferred income taxes and
      the
      estimation on useful lives of property, plant and equipment. Actual results
      could differ from those estimates.





*Intangible
      assets*





Intangible
      assets are license usage rights and stated at cost less accumulated
      amortization. Amortization is provided using the straight-line method over
      the
      remaining term of the license obtained by one of the Company’s subsidiaries,
      Infoscience Holdings Limited (“IHL”).





*Revenue
      recognition*





Revenue
      from sales of the Company’s products is recognized when the significant risks
      and rewards of ownership have been transferred to the buyer at the time of
      delivery and the sales price is fixed or determinable and collection is
      reasonably assured.


7


**INFOSMART
      GROUP INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


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


**(Unaudited)**


**(Stated
      in US Dollars)**








**4.**
            **Summary
                of significant accounting policies
                (cont’d)**





*Stock-based
      payment*





The
      Company adopted the SFAS No. 123R, "Share-Based Payment" ("SFAS 123R") using
      the
      modified prospective method. Under SFAS 123R, equity instruments issued to
      service providers for their services are measured at the grant-date fair value
      and recognized in the statement of operations over the vesting
      period.





*Basic
      and diluted earnings per share*





The
      Company reports basic earnings per share in accordance with SFAS No. 128,
“Earnings Per Share”. Basic earnings per share is computed using the weighted
      average number of shares outstanding during the periods presented. The weighted
      average number of shares of the Company represents the common stock outstanding
      during the period.





Diluted
      earning per share is based on the assumption that all dilutive convertible
      shares and stock options were converted or exercised. Dilution is computed
      by
      applying the treasury stock method. Under this method, options and warrants
      are
      assumed to be exercised at the beginning of the period (or at the time of
      issuance, if later), and as if funds obtained thereby were used to purchase
      common stock at the average market price during the period.





The
      weighted average number of shares outstanding for 2006 represents the number
      of
      common stock equivalent of Series A Convertible Preferred Stock (110,236,841)
      issued to the Original Infosmart Shareholders for the Exchange transaction
      as
      they were mandatory converted to common stock.





The
      Company’s common stock equivalents at March 31, 2007 include the
      following:





Convertible
                redeemable preferred stock Series B
            
            
            23,684,177Detachable
                common stock warrants
            
            
            28,510,345Placement
                agent warrants
            
            
            2,931,03555,125,557





*Trade
      receivables*





Trade
      receivables are stated at original amount less allowance made for doubtful
      receivables, if any, based on a review of all outstanding amounts at the period
      end. The Company extends unsecured credit to customers in the normal course
      of
      business and believes all trade receivables in excess of the allowances for
      doubtful receivables to be fully collectible. Full allowances for doubtful
      receivables are made when the receivables are overdue for 1 year and an
      allowance is also made when there is objective evidence that the Company will
      not be able to collect all amounts due according to the original terms of
      receivables. Bad debts are written off when identified. The Company does not
      accrue interest on trade accounts receivable.


8


**INFOSMART
      GROUP INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


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


**(Unaudited)**


**(Stated
      in US Dollars)**








**4.**
            **Summary
                of significant accounting policies
                (cont’d)**





*Inventories*





Inventories
      are valued at the lower of cost or market with cost determined on a first-in,
      first-out basis. In assessing the ultimate realization of inventories, the
      management makes judgments as to future demand requirements compared to current
      or committed inventory levels. The Company’s reserve requirements generally
      increase/decrease due to management projected demand requirements, market
      conditions and product life cycle changes. During the reporting periods, the
      Company did not make any allowance for slow-moving or defective
      inventories.





*Plant
      and equipment*





Plant
      and
      equipment are stated at cost less accumulated depreciation. Cost represents
      the
      purchase price of the asset and other costs incurred to bring the asset into
      its
      existing use. Maintenance, repairs and betterments, including replacement of
      minor items, are charged to expense; major additions to physical properties
      are
      capitalized.





Depreciation
      of plant and equipment is provided using the straight-line method over their
      estimated useful lives. The principal annual rates are as follows:-





Production
                lines and equipment
            10%
                with 30% residual valueLeasehold
                improvements and others
            20%





*Construction
      in progress*





Construction
      in progress represents a factory under construction and production lines and
      equipment not ready for use, which are stated at cost less any impairment
      losses, and are not depreciated. Construction in progress is reclassified to
      the
      appropriate category of fixed assets when completed and ready for
      use.





*Impairment
      of long-live assets*





Long-lived
      assets are reviewed for impairment whenever events or changes in circumstances
      indicate that the carrying amount of the assets may not be recoverable. The
      Company recognizes impairment of long-lived assets in the event that the net
      book values of such assets exceed the future undiscounted cashflows attributable
      to such assets. No impairment of long-lived assets was recognized for any of
      the
      periods presented.





*Recent
      accounting pronouncements*





In
      July
      2006, the FASB issued FIN 48 “Accounting for Uncertainty in Income Taxes.” This
      interpretation requires that we recognize in our financial statements, the
      impact of a tax position, if that position is more likely than not of being
      sustained on audit, based on the technical merits of the position. The
      provisions of FIN 48 are effective as of the beginning of our 2007 fiscal year.
      The adoption of FIN 48 has no material effect on our financial
      statements.


9


**INFOSMART
      GROUP INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


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


**(Unaudited)**


**(Stated
      in US Dollars)**








**4.**
            **Summary
                of significant accounting policies
                (cont’d)**





*Recent
      accounting pronouncements (cont’d)*





In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurement” (“SFAS
      157”). SFAS 157 defines fair value, establishes a framework for measuring fair
      value, and expands disclosures about fair value measurements. This Statement
      shall be effective for financial statements issued for fiscal years beginning
      after November 15, 2007, and interim periods within those fiscal years. Earlier
      application is encouraged, provided that the reporting entity has not yet issued
      financial statements for that fiscal year, including any financial statements
      for an interim period within that fiscal year. The provisions of this statement
      should be applied prospectively as of the beginning of the fiscal year in which
      this Statement is initially applied, except in some circumstances where the
      statement shall be applied retrospectively. The Company is currently evaluating
      the effect, if any, of SFAS 157 on its financial statements.





In
      September 2006, the SEC issued SAB No. 108, which provides guidance on the
      process of quantifying financial statement misstatements. In SAB No. 108, the
      SEC staff establishes an approach that requires quantification of financial
      statement errors, under both the iron-curtain and the roll-over methods, based
      on the effects of the error on each of the Company’s financial statements and
      the related financial statement disclosures. SAB No. 108 is generally effective
      for annual financial statements in the first fiscal year ending after November
      15, 2006. The transition provisions of SAB No. 108 permits existing public
      companies to record the cumulative effect in the first year ending after
      November 15, 2006 by recording correcting adjustments to the carrying values
      of
      assets and liabilities as of the beginning of that year with the offsetting
      adjustment recorded to the opening balance of retained earnings. The adoption
      of
      SAB No. 108 has no material effect on our financial statements.





In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities - Including an Amendment of FASB
      Statement No. 115” (“SFAS 159”). SFAS 159 permits entities to choose to
      measure many financial instruments and certain other items at fair value.
      Entities that elect the fair value option will report unrealized gains and
      losses in earnings at each subsequent reporting date. The fair value option
      may
      be elected on an instrument-by-instrument basis, with few exceptions. SFAS
      159
      also establishes presentation and disclosure requirements to facilitate
      comparisons between companies that choose different measurement attributes
      for
      similar assets and liabilities. The requirements of SFAS 159 are effective
      for
      our fiscal year beginning January 1, 2008. We are in the process of
      evaluating this guidance and therefore have not yet determined the impact that
      SFAS 159 will have on our financial statements upon adoption.





10


**INFOSMART
      GROUP INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


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


**(Unaudited)**


**(Stated
      in US Dollars)**








**5.**
            **Other
                income**


***Three
                months ended March 31,******2007***
            
            ***2006******(Unaudited)***
            
            ***(Unaudited)***Interest
                income
            
            $
            3,684
            
            $
            2,315Scrap
                sales and other income
            
            
            305,075
            
            
            49,210$
            308,759
            
            $
            51,525








**6.**
            **Income
                taxes**





The
      components of the provision for income taxes in Hong Kong are:





***Three
                months ended March 31,******2007***
            
            ***2006******(Unaudited)***
            
            ***(Unaudited)***Current
                taxes
            
            $
            38,047
            
            $
            -Deferred
                taxes
            
            
            177,590
            
            
            195,047$
            215,637
            
            $
            195,047





The
      Company is subject to income tax in the United States. No provision for income
      tax in the United States has been made as the Company had no taxable income
      for
      the three months ended March 31, 2007 and 2006. The statutory tax rate is
      34%.





The
      Company’s subsidiary incorporated in the BVI is not subject to income taxes
      under the current laws of BVI.





The
      Company’s subsidiaries operating in Hong Kong are subject to profits tax rate of
      17.5% on the estimated assessable profits during the periods.


11


**INFOSMART
      GROUP INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


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


**(Unaudited)**


**(Stated
      in US Dollars)**








**6.**
            **Income
                taxes (cont’d)**





Deferred
      tax (assets) liabilities as of March 31, 2007 and December 31, 2006 are composed
      of the following:


***As
                of******March
                31,***
            
            ***December
                31,******2007***
            
            ***2006******(Unaudited)***
            
            ***(Audited)***Hong
                KongOperating
                losses available for future periods
            
            $
            (298,116
            )
            $
            (475,704
            )Temporary
                difference on accelerated taxdepreciation
                on plant and equipment
            
            
            3,015,709
            
            
            3,017,241The
                United StatesOperating
                losses available for future periods
            
            
            (34,062
            )
            
            (512,105
            )Valuation
                allowance
            
            
            34,062
            
            
            512,105Deferred
                tax liabilities, net
            
            $
            2,717,593
            
            $
            2,541,537Recognized
                in the balance sheet:Net
                deferred tax assets
            
            $
            (213,534
            )
            $
            (459,823
            )Net
                deferred tax liabilities
            
            
            2,931,127
            
            
            3,001,360$
            2,717,593
            
            $
            2,541,537








**7.**
            **Comprehensive
                income**





***Three
                months ended March 31,******2007***
            
            ***2006******(Unaudited)***
            
            ***(Unaudited)***Net
                income applicable to common shareholders
            
            $
            779,873
            
            $
            919,506Foreign
                currency translation adjustments
            
            
            70,508
            
            
            (7,009
            )Total
                comprehensive income
            
            $
            850,381
            
            $
            912,497








**8.**
            **Prepaid
                expenses and other
                receivables**





***As
                of******March
                31,***
            
            ***December
                31,******2007***
            
            ***2006******(Unaudited)***
            
            ***(Audited)***Prepayment
                for operating activities
            
            $
            268,196
            
            $
            41,409Rental
                and utility deposits
            
            
            83,016
            
            
            96,260Other
                receivables for advancement
            
            
            703,545
            
            
            131,808$
            1,054,757
            
            $
            269,477


12


**INFOSMART
      GROUP INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


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


**(Unaudited)**


**(Stated
      in US Dollars)**








**9.**
            **Inventories**





***As
                of******March
                31,***
            
            ***December
                31,******2007***
            
            ***2006******(Unaudited)***
            
            ***(Audited)***Raw
                materials
            
            $
            492,391
            
            $
            205,481Finished
                goods
            
            
            1,169,953
            
            
            852,558$
            1,662,344
            
            $
            1,058,039








**10.**
            **Plant
                and equipment**





***As
                of******March
                31,***
            
            ***December
                31,******2007***
            
            ***2006******(Unaudited)***
            
            ***(Audited)***CostsProduction
                lines and equipment
            
            $
            38,172,667
            
            $
            36,689,884Leasehold
                improvements
            
            
            1,962,937
            
            
            1,144,540Furniture,
                fixtures and office equipment
            
            
            82,062
            
            
            70,247Motor
                vehicles
            
            
            54,753
            
            
            54,75340,272,419
            
            
            37,959,424Accumulated
                depreciationProduction
                lines and equipment
            
            
            6,668,346
            
            
            6,151,290Leasehold
                improvements
            
            
            491,875
            
            
            637,856Furniture,
                fixtures and office equipment
            
            
            24,718
            
            
            32,020Motor
                vehicles
            
            
            31,938
            
            
            29,2027,216,877
            
            
            6,850,368NetProduction
                lines and equipment
            
            
            31,504,321
            
            
            30,538,594Leasehold
                improvements
            
            
            1,471,062
            
            
            506,684Furniture,
                fixtures and office equipment
            
            
            57,344
            
            
            38,227Motor
                vehicles
            
            
            22,815
            
            
            25,551$
            33,055,542
            
            $
            31,109,056Construction
                in progress, at cost
            
            
            -
            
            
            2,802,484$
            33,055,542
            
            $
            33,911,540





13


**INFOSMART
      GROUP INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


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


**(Unaudited)**


**(Stated
      in US Dollars)**








**10.**
            **Plant
                and equipment (cont’d)**





An
      analysis of production lines and equipment pledged to banks for banking
      facilities (note 12(a)) granted to the Company is as follows:





***Pledged
                for banking facilities******As
                of******March
                31,***
            
            ***December
                31,******2007***
            
            ***2006******(Unaudited)***
            
            ***(Audited)***Costs
            
            $
            8,333,280
            
            $
            8,333,280Accumulated
                depreciation
            
            
            (279,062
            )
            
            (133,230
            )Net
            
            $
            8,054,218
            
            $
            8,200,050***Three
                months ended March
                31,******2007***
            
            
            ***2006******(Unaudited)***
            
            
            ***(Unaudited***
            ***)***Depreciation
                for the period
            
            $
            145,832
            
            $
            84,139








The
      components of depreciation charged are:





***Three
                months ended March 31,******2007***
            
            ***2006******(Unaudited)***
            
            ***(Unaudited)***Included
                in factory overheadsProduction
                lines and equipment
            
            $
            471,716
            
            $
            383,629Included
                in operating expensesLeasehold
                improvements
            
            
            76,384
            
            
            49,529Furniture,
                fixtures and office equipment
            
            
            3,983
            
            
            5,864Motor
                vehicles
            
            
            2,736
            
            
            2,74483,103
            
            
            58,137$
            554,819
            
            $
            441,766





14


**INFOSMART
      GROUP INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


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


**(Unaudited)**


**(Stated
      in US Dollars)**








**11.**
            **Other
                payables and accrued
                liabilities**





***As
                of******March
                31,***
            
            ***December
                31,******2007***
            
            ***2006******(Unaudited)***
            
            ***(Audited)***Customers
                deposits
            
            $
            184,512
            
            $
            117,306Accrued
                professional fee
            
            
            14,300
            
            
            264,327Staff
                costs payable
            
            
            73,755
            
            
            210,920Other
                loans interest payable
            
            
            32,168
            
            
            127,632Due
                to the ex-shareholder of IHL
            
            
            4,275,484
            
            
            4,277,656Due
                to a related company, Eternal Scene
            
            
            119,692
            
            
            514,401Payables
                for acquisition costs of plant and equipment
            
            
            2,056,555
            
            
            2,871,667Other
                accrued expenses for operations
            
            
            978,878
            
            
            372,766$
            7,735,344
            
            $
            8,756,675








**12.**
            **Bank
                borrowings**





***As
                of******March
                31,***
            
            ***December
                31,******2007***
            
            ***2006******(Unaudited)***
            
            ***(Audited)***Secured:Bank
                overdrafts repayable on demand
            
            $
            45,733
            
            $
            -Repayable
                within one yearNon-recurring
                bank loans
            
            
            1,737,145
            
            
            1,738,029Other
                bank borrowings
            
            
            2,971,475
            
            
            1,765,6254,754,353
            
            
            3,503,654Repayable
                after one year
              Non-recurring
                bank loans
            
            
            2,458,171
            
            
            2,893,927$
            7,212,524
            
            $
            6,397,581





The
      above
      banking borrowings were secured by the following:-





(a)
            first
                fixed legal charge over 7 DVDR production lines with carrying amounts
                of
                $8,054,218 (note 10); and





(b)
            joint
                and several guarantees executed by two beneficial shareholders of
                the
                Company, a spouse of one of the beneficial shareholders and a director
                of
                the Company’s subsidiary.














15


**INFOSMART
      GROUP INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


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


**(Unaudited)**


**(Stated
      in US Dollars)**








**13.**
            **Earnings
                per share**





The
      weighted average number of shares outstanding for 2006 represents the number
      of
      common stock equivalent of Series A Convertible Preferred Stock (110,236,841)
      issued to the Original Infosmart Shareholders for the Exchange transaction
      as
      they were mandatory converted to common stock.





The
      Company’s common stock equivalents at March 31, 2007 include the
      following:





Convertible
                redeemable preferred stock Series B
            
            
            23,684,177Detachable
                common stock warrants
            
            
            28,510,345Placement
                agent warrants
            
            
            2,931,03555,125,557








The
      calculation of basic earnings per share is based on the net income applicable
      to
      common shareholders for the three months ended March 31, 2007 of $779,873 (three
      months ended March 31, 2006: $919,506) and the weighted average number of common
      shares on issue during the three months ended March 31, 2007 of 136,252,633
      (three months ended March 31, 2006: 110,236,841).





The
      calculation of diluted earnings per share is based on the net income applicable
      to common shareholders for the three months ended March 31, 2007 of $905,284
      (three months ended March 31, 2006: $919,506) after adjusting for Series B
      preferred dividend of $125,411 (three months ended March 31, 2006 : $Nil) and
      the weighted average number of common shares on issue during the three months
      ended March 31, 2007 of 159,936,810 (three months ended March 31, 2006:
      110,236,841) after adjusting for the number dilutive potential common shares
      of
      23,684,177 (three months ended March 31, 2006 : $Nil). Detachable common stock
      warrants and placement agent warrants have been excluded from the computation
      of
      diluted earnings per share as they were non-dilutive.










16


**INFOSMART
      GROUP INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


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


**(Unaudited)**


**(Stated
      in US Dollars)**








**14.**
            **Commitments
                and contingences**




Contingencies




The
      case
      of In Re: Factory 2-U Stores, Inc. (U.S. Bankruptcy Court, District of Delaware
      - Adv. Proc. No. 005-30480) remains outstanding.  On March 7, 2006, a
      complaint was filed against Cyber Merchants in a Chapter 7 bankruptcy proceeding
      in U.S. Bankruptcy Court in the District of Delaware in the matter captioned
      In
      Re: Factory 2-U Stores, Inc. The complaint seeks to recover from Cyber $91,572
      in alleged preferential transfers made to the Company by the debtor during
      the
      ninety-day period prior to the filing of the debtor's bankruptcy petition.
      The
      Company has defended against the preference claim by asserting that
      such transfers were made in the ordinary course of business. This bankruptcy
      proceeding is currently scheduled for trial on May 17, 2007.  The Company
      plans to defend this claim vigorously. No provision has been made in respect
      of
      this claim.








**15.**
            **Common
                stock and convertible preferred
                stock**








*Common
                stock*
            
            *Series
                B*
            
            *Additional**No.
                of*
            
            
            
            *No.
                of*
            
            
            
            *paid-in**shares*
            
            *Amount*
            
            *shares*
            
            *Amount*
            
            *Capital*Balance,
                January 1, 2007
            
            
            135,801,426
            
            $
            1,520,901
            
            
            911,974
            
            $
            2,581,926
            
            $
            8,118,664Conversion
                of Series B tocommon
                stock onvarious
                dates
            
            
            774,911
            
            
            81,800
            
            
            (28,893
            )
            
            (81,800
            )
            
            -Balance,
                March 31, 2007
            
            
            136,576,337
            
            $
            1,602,701
            
            
            883,081
            
            $
            2,500,126
            
            $
            8,118,664








Series
      B Preferred Stock and Warrants





The
      material terms of the Company’s Series B Preferred Stock are summarized below.





Voting:
      The holders of Preferred Stock (including the Investors acquiring such shares
      as
      part of the Financing after the closing of the Exchange) are entitled to vote
      together with the holders of the common stock, as a single class, upon all
      matters submitted to holders of common stock for a vote. Each share of Preferred
      Stock will carry a number of votes equal to the number of shares of common
      stock
      issuable as if converted at the record date.





Dividends:
      The Series B Convertible Preferred Stock is cumulative, non-participating and
      carries dividends at 8% per annum payable quarterly in cash in US
      Dollars.





17


**INFOSMART
      GROUP INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


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


**(Unaudited)**


**(Stated
      in US Dollars)**








**15.**
            **Common
                stock and convertible preferred stock
                (cont’d)**





Series
      B Preferred Stock and Warrants (cont’d)





Conversion:
      The outstanding and unconverted Series B Convertible Preferred Stock shall
      be
      converted into shares of the Company’s common stock at the Conversion Price then
      in effect by delivering to the holders an Automatic Conversion Notice upon
      the
      happening of all of the following events: (i) for each of the twenty (20)
      consecutive Trading Days immediately preceding the date of delivery of the
      Automatic Conversion Notice, the daily Closing Price of the Common Stock shall
      be equal to at least two hundred fifty percent (250%) of the Conversion Price
      in
      effect as of the date immediately preceding the date of the Automatic Conversion
      Notice; and (ii) the daily trading volume of the Common Stock for each of the
      Trading Days during such twenty (20) Trading day period shall be at least
      500,000 shares; provided, however, no such conversion is permitted unless at
      the
      time of the delivery of the Automatic Conversion Notice and on the Automatic
      Conversion Date, (A) The Company is in compliance with all of its obligations
      under this Certificate of Determination and the Transaction Documents, (B)
      during each of the Trading Days in such twenty (20) day period, the Registration
      Statement has been effective and has not been suspended by the SEC, (C) as
      of
      the Conversion Date, the Registration Statement is effective and has not been
      suspended by the SEC and no event has occurred which will likely result in
      the
      Registration Statement being declared ineffective or suspended by the SEC,
      and
      (D) no Triggering Event (as described under “Redemption Rights” in the Company's
      Current Report on Form 8-K filed with the Commission on August 24, 2006) has
      occurred and is continuing.





Any
      outstanding Series B Convertible Preferred Stock not yet converted will be
      converted automatically two years from the date of the issuance of such stock
      at
      the then effective Conversion Price.








**16.**
            **Pension
                plans**





The
      Company participates in a defined contribution pension scheme under the
      Mandatory Provident Fund Schemes Ordinance (“MPF Scheme”) for all its eligible
      employees in Hong Kong.





The
      MPF
      Scheme is available to all employees aged 18 to 64 with at least 60 days of
      service in employment in Hong Kong. Contributions are made by the Company
      operating in Hong Kong at 5% of the participants’ relevant income with a ceiling
      of $2,580 (equivalent of HK$20,000). The participants are entitled to 100%
      of
      the Company’s contributions together with accrued returns irrespective of their
      length of service with the Company, but the benefits are required by law to
      be
      preserved until the retirement age of 65. The only obligation of the Company
      with respect to MPF Scheme is to make the required contributions under the
      plan.





The
      assets of the schemes are controlled by trustees and held separately from those
      of the Company. The Company fully complied the contribution requirement and
      total pension cost was $18,482 and $12,220 for the three months ended March
      31,
      2007 and 2006 respectively.





18


**INFOSMART
      GROUP INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


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


**(Unaudited)**


**(Stated
      in US Dollars)**








**17.**
            **Segment
                Information**





The
      Company is engaged in the manufacture and distribution of DVDR and CDR. The
      nature of the products, their production processes, the type of their customers
      and their distribution methods are substantially similar. Information for the
      products of DVDR and CDR is disclosed under FAS 131, “Disclosures about Segments
      of an Enterprise and Related Information” as below:-












***DVDR
                  and Related Products***
              
              ***CDR***
              
              ***Total******Three
                  months ended***
                ***March
                  31***
              
              ***Three
                  months ended***
                ***March
                  31***
              
              ***Three
                  months ended***
                ***March
                  31******2007***
              
              ***2006***
              
              ***2007***
              
              ***2006***
              
              ***2007***
              
              ***2006******(Unaudited)***
              
              ***(Unaudited)***
              
              ***(Unaudited)***
              
              ***(Unaudited)***
              
              ***(Unaudited)***
              
              ***(Unaudited)***Revenue
                  fromexternalcustomers
              
              $
              7,075,858
              
              $
              6,206,023
              
              $
              622,557
              
              $
              25,495
              
              $
              7,698,415
              
              $
              6,231,518Segment
                  profit
              
              
              1,030,274
              
              
              1,109,993
              
              
              90,647
              
              
              4,560
              
              
              1,120,921
              
              
              1,114,553
  ***As
                    of***
                
                ***As
                    of***
                
                ***As
                    of******March
                    31,***
                
                ***December
                    31,***
                
                ***March
                    31,***
                
                ***December
                    31,***
                
                ***March
                    31,***
                
                ***December
                    31,******2007***
                
                ***2006***
                
                ***2007***
                
                ***2006***
                
                ***2007***
                
                ***2006******(Unaudited)***
                
                ***(Audited)***
                
                ***(Unaudited)***
                
                ***(Audited)***
                
                ***(Unaudited)***
                
                ***(Audited)***Segment
                    assets
                
                
                45,565,399
                
                
                42,584,004
                
                
                2,438,629
                
                
                2,137,501
                
                
                48,004,028
                
                
                44,721,505








Other
      than the production lines and equipment, leasehold improvements and furniture,
      fixtures and office equipment with carrying amounts of $14,222,397, $1,133,401
      and $30,713 respectively (December 31, 2006 : production lines and equipment
      and
      construction in progress of $12,900,406 and $2,802,484 respectively) located
      in
      Brazil, all of the Company’s long-lived assets are located in Hong Kong.
      Geographic information about net sales, which are classified based on location
      of the customers, is set out as follows:





***Three
                months ended March 31,******2007***
            
            ***2006******(Unaudited)***
            
            ***(Unaudited)***Australia
            
            $
            2,845,838
            
            $
            417,927Brazil
            
            
            2,521,387
            
            
            1,886,536Chile
            
            
            -
            
            
            93,302Czech
                Republic
            
            
            20,573
            
            
            206,161Hong
                Kong
            
            
            673,373
            
            
            495,661Thailand
            
            
            427,110
            
            
            16,215Turkey
            
            
            147,498
            
            
            11,854United
                Kingdom
            
            
            142,926
            
            
            2,862,107United
                States
            
            
            769,767
            
            
            91,591Other
                countries
            
            
            149,943
            
            
            150,164Total
            
            $
            7,698,415
            
            $
            6,231,518


19


**INFOSMART
      GROUP INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


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


**(Unaudited)**


**(Stated
      in US Dollars)**








**18.**
            **Comparative
                amounts**





Certain
      amounts included in prior periods’ condensed consolidated statement of
      operations have been reclassified to conform to the current period’s
      presentation. These reclassifications had no effect on reported total assets,
      liabilities, shareholders’ equity, or net income.





20


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





**Forward
      Looking Statements**





Certain
      statements in the Management’s Discussion and Analysis (“MD&A”), other than
      purely historical information, including estimates, projections, statements
      relating to our business plans, objectives and expected operating results,
      and
      the assumptions upon which those statements are based, are “forward-looking
      statements” within the meaning of the Private Securities Litigation Reform Act
      of 1995, Section 27A of the Securities Act of 1933 and Section 21E of
      the Securities Exchange Act of 1934. These forward-looking statements generally
      are identified by the words “believe,” “project,” “expect,” “anticipate,”
“estimate,” “intend,” “strategy,” “plan,” “may,” “should,” “will,” “would,”
“will be,” “will continue,” “will likely result,” and similar expressions.
      Forward-looking statements are based on current expectations and assumptions
      that are subject to risks and uncertainties which may cause actual results
      to
      differ materially from the forward-looking statements. A detailed discussion
      of
      risks and uncertainties that could cause actual results and events to differ
      materially from such forward-looking statements is included in the section
      under
      Part I, Item 2 entitled “Risk Factors”. We undertake no obligation to update or
      revise publicly any forward-looking statements, whether as a result of new
      information, future events, or otherwise.




As
      used
      in this Form 10-QSB, unless the context requires otherwise, “we” or “us” or the
“Company” or “Infosmart” means Infosmart Group, Inc. and its
      subsidiaries.




**INFOSMART
      OVERVIEW**





We
      are in
      the business of developing, manufacturing, marketing and sales of recordable
      digital versatile disc (“DVDR”) media. In addition, due to customer demand,
      in the third quarter of 2006, we also started manufacturing recordable compact
      discs (“CDR”). We currently manufacture DVDRs with 8x and 16x writable speeds as
      well as CDRs with 52x writable speeds. We are also preparing to manufacture
      high
      density format DVDR (“HD DVDR”) or Blu-Ray format DVDR discs. We have customers
      in Western Europe, Australia, China, South America and other
      countries.





We
      produce our products through our main operational business subsidiary,
      Infoscience Media Limited (“IS Media”), at our state of the art DVDR and CDR
      manufacturing facilities in Hong Kong. In December 2006, IS Media acquired
      100%
      of the issued and outstanding common stock of Infoscience Holdings Limited
      (“IHL”). IS Media has a cooperation agreement with IHL wherein it manufactures
      its DVDRs using certain patent licenses owned by IHL. IS Media acquired IHL
      to
      guarantee the continuation of this cooperation agreement. In addition, we
      recently completed construction of our DVDR production facility in Brazil. 
Our Brazilian subsidiary, Discobras Industria E Comercio de Electro Eletronica
      Limiteda (“Discobras”) has obtained all required government-issued licenses and
      necessary documents and approvals for operating a DVDR production facility
      in
      Brazil. We installed DVDR manufacturing equipment at the Brazilian subsidiary
      in
      February 2007 and began trial production there in March 2007. Regular production
      commenced gradually beginning April 2007.




**CRITICAL
      ACCOUNTING POLICIES AND ESTIMATES**





***Principles
      of consolidation.*** The
      condensed consolidated financial statements include the accounts of the Company
      and its subsidiaries. All significant inter-company balances and transactions
      are eliminated on consolidation.





***Minority
      Interests.*** For
      the
      development of the market in Brazil, the Company entered into an agreement
      on
      March 20,
      2006
      with two independent third parties for setting up a subsidiary, Discobrás, in
      Brazil. Discobrás has a social capital of $8,046,281 (equivalent to
      R$17,385,600),of which 99.42% or $8,000,000 (equivalent to R$17,285,600)
      (“Investment Cost”) has been subscribed by the Company. As of March 31, 2007,
      neither one of the two independent third parties had fully satisfied their
      required capital contribution by any means. As a result, no minority interests
      have been recognized in the accompanying financial statements.





***Use
      of estimates.*** ** In
      preparing financial statements in conformity with accounting principles
      generally accepted in the United States of America, management makes estimates
      and assumptions that affect the reported amounts of assets and liabilities
      and
      disclosures of contingent assets and liabilities at the dates of the financial
      statements, as well as the reported amounts of revenues and expenses during
      the
      reporting periods. These accounts and estimates include, but are not limited
      to,
      the valuation of accounts receivable, inventories, deferred income taxes and
      the
      estimation on useful lives of property, plant and equipment. Actual results
      could differ from those estimates.


21





***Intangible
      assets.*** Intangible
      assets are ****** license
      usage rights and stated at cost less accumulated amortization. Amortization
      is provided using the straight-line method over the remaining term of the
      license obtained by one of the Company’s subsidiaries , Infoscience Holdings
      Limited (“IHL”).





***Revenue
      recognition.*** ** Revenue
      from sales of the Company’s products is recognized when the significant risks
      and rewards of ownership have been transferred to the buyer at the time of
      delivery and the sales price is fixed or determinable and collection is
      reasonably assured.





***Stock-based
      payment*** *.* The
      Company adopted the SFAS No. 123R, "Share-Based Payment" ("SFAS 123R") using
      the
      modified prospective method. Under SFAS 123R, equity instruments issued to
      service providers for their services are measured at the grant-date fair value
      and recognized in the statement of operations over the vesting
      period.





***Basic
      and diluted earnings per share.*** ** The
      Company reports basic earnings per share in accordance with SFAS No. 128,
“Earnings Per Share”. Basic earnings per share is computed using the weighted
      average number of shares outstanding during the periods presented. The weighted
      average number of shares of the Company represents the common stock outstanding
      during the periods presented.





Diluted
      earning per share is based on the assumption that all dilutive convertible
      shares and stock options were converted or exercised. Dilution is computed
      by
      applying the treasury stock method. Under this method, options and warrants
      are
      assumed to be exercised at the beginning of the period (or at the time of
      issuance, if later), and as if funds obtained thereby were used to purchase
      common stock at the average market price during the period.




The
      Company's common stock equivalents at March 31, 2007
      include the following:




Convertible
                redeemable preferred stock Series B
            
            
            23,684,177Detachable
                common stock warrants
            
            
            28,510,345Placement
                agent warrants
            
            
            2,931,03555,125,557





***Trade
      receivables.*** ** Trade
      receivables are stated at original amount less allowance made for doubtful
      receivables, if any, based on a review of all outstanding amounts at the period
      end. The Company extends unsecured credit to customers in the normal course
      of
      business and believes all trade receivables in excess of the allowances for
      doubtful receivables to be fully collectible. Full allowances for doubtful
      receivables are made when the receivables are overdue for one (1) year and
      an
      allowance is also made when there is objective evidence that the Company will
      not be able to collect all amounts due according to original terms of
      receivables. Bad debts are written off when identified. The Company does not
      accrue interest on trade accounts receivable.





***Inventories.*** Inventories
      are valued at the lower of cost or market with cost determined on a first-in,
      first-out basis. In assessing the ultimate realization of inventories, the
      management makes judgments as to future demand requirements compared to current
      or committed inventory levels. The Company’s reserve requirements generally
      increase/decrease due to management projected demand requirements, market
      conditions and product life cycle changes. During the reporting periods, the
      Company did not make any allowance for slow-moving or defective inventories.





***Plant
      and equipment.*** ** Plant
      and
      equipment are stated at cost less accumulated depreciation. Cost represents
      the
      purchase price of the asset and other costs incurred to bring the asset into
      its
      existing use. Maintenance, repairs and betterments, including replacement of
      minor items, are charged to expense; major additions to physical properties
      are
      capitalized.





Depreciation
      of plant and equipment is provided using the straight-line method over their
      estimated useful lives. The principal annual rates are as follows:


Production
                lines and equipment
            10%
                with 30% residual valueLeasehold
                improvements and others
            20%





***Construction
      in progress.*** Construction in progress represents a factory under construction and production
      lines and equipment not ready for use, which are stated at cost less any
      impairment losses, and are not depreciated. Construction in progress is
      reclassified to the appropriate category of fixed assets when completed and
      ready for use.


22





***Impairment
      of long-live assets.*** ** Long-lived
      assets are reviewed for impairment whenever events or changes in circumstances
      indicate that the carrying amount of the assets may not be recoverable. The
      Company recognizes impairment of long-lived assets in the event that the net
      book values of such assets exceed the future undiscounted cashflows attributable
      to such assets. No impairment of long-lived assets was recognized for any of
      the
      periods presented.




***Recent
      accounting pronouncements.*** In
      July
      2006, the Financial Accounting Standards Board (“FASB”) issued FIN 48
“Accounting for Uncertainty in Income Taxes.” This interpretation requires that
      we recognize in our financial statements, the impact of a tax position, if
      that
      position is more likely than not of being sustained on audit, based on the
      technical merits of the position. The provisions of FIN 48 are effective as
      of
      the beginning of our 2007 fiscal year. The
      adoption of FIN 48 has no material effect on our financial
      statements.





In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurement” (“SFAS
      157”). SFAS 157 defines fair value, establishes a framework for measuring fair
      value, and expands disclosures about fair value measurements. This Statement
      shall be effective for financial statements issued for fiscal years beginning
      after November 15, 2007, and interim periods within those fiscal years. Earlier
      application is encouraged, provided that the reporting entity has not yet issued
      financial statements for that fiscal year, including any financial statements
      for an interim period within that fiscal year. The provisions of this statement
      should be applied prospectively as of the beginning of the fiscal year in which
      this Statement is initially applied, except in some circumstances where the
      statement shall be applied retrospectively. The Company is currently evaluating
      the effect, if any, of SFAS 157 on its financial statements.





In
      September 2006, the SEC issued SAB No. 108, which provides guidance on the
      process of quantifying financial statement misstatements. In SAB No. 108, the
      SEC staff establishes an approach that requires quantification of financial
      statement errors, under both the iron-curtain and the roll-over methods, based
      on the effects of the error on each of the Company’s financial statements and
      the related financial statement disclosures. SAB No. 108 is generally effective
      for annual financial statements in the first fiscal year ending after November
      15, 2006. The transition provisions of SAB No. 108 permits existing public
      companies to record the cumulative effect in the first year ending after
      November 15, 2006 by recording correcting adjustments to the carrying values
      of
      assets and liabilities as of the beginning of that year with the offsetting
      adjustment recorded to the opening balance of retained earnings. The adoption
      of
      SAB No. 108 has no material effect on our financial statements.





In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities - Including an Amendment of FASB
      Statement No. 115” (“SFAS 159”). SFAS 159 permits entities to choose to
      measure many financial instruments and certain other items at fair value.
      Entities that elect the fair value option will report unrealized gains and
      losses in earnings at each subsequent reporting date. The fair value option
      may
      be elected on an instrument-by-instrument basis, with few exceptions. SFAS
      159
      also establishes presentation and disclosure requirements to facilitate
      comparisons between companies that choose different measurement attributes
      for
      similar assets and liabilities. The requirements of SFAS 159 are effective
      for
      our fiscal year beginning January 1, 2008. We are in the process of
      evaluating this guidance and therefore have not yet determined the impact that
      SFAS 159 will have on our financial statements upon adoption.








23





**RESULTS
      OF OPERATIONS**





**Quarter
      Ended March 31, 2007 Compared to Quarter Ended March 31, 2006**





The
      following table sets forth the results of our operations for the periods
      indicated as a percentage of net sales:





Quarter
                ended March 312007
            
            %
                of
            
            2006
            
            %
                ofUnaudited
            
            Revenue
            
            Unaudited
            
            RevenueNET
                SALES
            
            $
            7,698,415
            
            
            100.00
            %
            $
            6,231,518
            
            
            100.00
            %COST
                OF SALES
            
            
            5,733,147
            
            
            74.47
            %
            
            4,558,625
            
            
            73.15
            %GROSS
                PROFIT
            
            
            1,965,268
            
            
            25.53
            %
            
            1,672,893
            
            
            26.85
            %A
                ADMINISTRATIVE EXPENSES
            
            
            931,050
            
            
            12.10
            %
            
            340,210
            
            
            5.46
            %SESELLING
                AND DISTRIBUTING COSTS
            
            
            79,516
            
            
            1.03
            %
            
            121,504
            
            
            1.95
            %INCOME
                FROM OPERATIONS
            
            
            954,702
            
            
            12.40
            %
            
            1,211,179
            
            
            19.44
            %OTHER
                INCOME
            
            
            308,759
            
            
            4.01
            %
            
            51,525
            
            
            0.83
            %INTEREST
                EXPENSES
            
            
            142,540
            
            
            1.85
            %
            
            148,151
            
            
            2.38
            %INCI
                INCOME BEFORE INCOME TAXES
            
            
            1,120,921
            
            
            14.56
            %
            
            1,114,553
            
            
            17.89
            %INCOME
                TAXES
            
            
            215,637
            
            
            2.80
            %
            
            195,047
            
            
            3.13
            %NET
                INCOME
            
            
            905,284
            
            
            11.76
            %
            
            919,506
            
            
            14.76
            %SESERIES
                B PREFERRED DIVIDENDS
            
            
            125,411
            
            
            1.63
            %
            
            -
            
            
            0.00
            %NET
                INCOME APPLICABLE TO COMMON SHAREHOLDERS
            
            $
            779,873
            
            
            10.13
            %
            $
            919,506
            
            
            14.76
            %




**Comparison
      of Three Months Ended March 31, 2007 and 2006**





***Net
      Sales*** *.* For
      the
      three months ended March 31, 2007, net sales increased approximately 23.5%
      from
      $6,231,518 to $7,698,415 relative to the three months ended March 31, 2006.
      The
      substantial increase in revenue was mainly due to the continuous growth in
      our
      Brazilian, Australian, North American and Asian markets, but this was
      partly offset by a significant decrease of net sales in Europe. This decrease
      resulted from our policy of geographical diversification and reflects our shift
      of focus from the lower margin European markets to higher margin markets, such
      as Brazil.





***Cost
      of Sales*** *.* Cost
      of
      sales increased from $4,558,625, or approximately 73.15% of net sales for the
      three months ended March 31, 2006, to $5,733,147, or approximately 74.47% of
      net
      sales for the three months ended March 31, 2007. The approximately 25.8%
      increase was primarily attributable to the increase in our volume of sales.
      The
      increase in the cost of sales was also in line with the increase in our net
      sales.





***Gross
      Profit.*** Gross
      profit increased approximately 17.5% from $1,672,893 for the three months ended
      March 31, 2006 to $1,965,268 for the three months ended March 31, 2007. This
      increase in gross profit was primarily due to the increase in our volume of
      sales generally as well as in higher margin markets, such as Brazil. In
      addition, the slight decrease of our gross profit percentage from approximately
      26.85% for the three months ended March 31, 2006 to approximately 25.53% for
      the
      three months ended March 31, 2007 was due to the slight decrease in sales prices
      for our Hong Kong manufactured products. As our new Brazil facilities were
      not
      fully operational during the first quarter of 2007, their contribution to the
      Company was minimal. We expect that the real potentials of the Brazilian market
      will be reflected beginning in the next quarter.


24




***Selling
      and Distribution Costs*** .
      For the
      three months ended March 31, 2007, selling and distribution costs decreased
      approximately 34.6% from $121,504 to $79,516 relative to the three months ended
      March 31, 2006. This decrease in selling and distribution costs was mainly
      due
      to the continuous effect of using a more competitive freight forwarder which
      led
      to a reduction of freight expenses for the first quarter of 2007.




***Administrative
      Expenses.*** Administrative
      expenses included depreciation and amortization charges of $153,648 and $58,137
      for the three months ended March 31, 2007 and three months ended March 31,
      2006
      respectively. The increase of depreciation and amortization charges was mainly
      due to the amortization of license usage rights of approximately $71,000 for
      the
      three months ended March 31, 2007. Excluding the above depreciation and
      amortization charges, the balance of the administrative expenses increased
      approximately 175.6% from $282,073 for the three months ended March 31, 2006
      to
      $777,402 for the three months ended March 31, 2007. This substantial increase
      in
      administrative expenses during the three months ended March 31, 2007 was mainly
      because we wrote off certain leasehold improvements and other fixed assets
      of
      approximately $120,000 during the three months ended March 31, 2007 relating
      to
      certain leases that terminated after the consolidation of our Hong Kong
      production facilities last year. We incurred approximately $188,000 in
      additional expenses for top management’s remuneration and the employment of new
      administrative personnel especially for our new Brazil operation, as well as
      approximately $46,000 in additional expenses for business travel and
      advertisements. We also incurred approximately $82,000 mainly for the provision
      of supporting services after the share exchange transaction and financing
      activities.





***Net
      Income*** **.** Net
      income slightly decreased approximately 1.5% from $919,506 for the three months
      ended March 31, 2006 to $905,284 for the three months ended March 31, 2007.
      Further, the net income margin was 11.76% and 14.76% in the same comparable
      periods in 2007 and 2006, respectively. This slight decrease in net income
      was
      primarily due to the increase in administrative expenses, especially in readying
      our new Brazil facilities for full operation. We believe, however, that the
      positive impact of our Brazil operations to our business will be reflected
      beginning in the second quarter of 2007.





**LIQUIDITY
      AND CAPITAL RESOURCES**





***Three
      Months Ended March 31, 2007***





Three
                MonthsEnded
                March 31,
            
            2007
            
            2006
            
            ChangeNet
                cash (used in) provided byoperating
                activities
            
            $
            (311,605
            )
            $
            186,307
            
            $
            (497,912
            )Net
                cash (used in)investing
                activities
            
            
            (644,425
            )
            
            (201,527
            )
            
            (442,898
            )Net
                cash provided byfinancing
                activities
            
            
            907,198
            
            
            25,970
            
            
            881,228





Net
      cash
      flow used in operating activities was $311,605 for the three months ended March
      31, 2007, as compared to net cash flow provided by operating activities of
      $186,307 for the three months ended March 31, 2006. The increase in our net
      cash
      flow used in operating activities for the three months ended March 31, 2007
      was
      mainly due to the increase of the inventories relating to the raw materials
      which we were shipping from Hong Kong to Brazil as of March 31,
      2007.





Net
      cash
      flow used in investing activities was $644,425 for the three months ended March
      31, 2007 and $201,527 for the three months ended March 31, 2006. The increase
      in
      net cash flow used in investing activities mainly related to the
      payment for acquisition of plant and equipment.





Net
      cash
      flow provided by financing activities was $907,198 for the three months ended
      March 31, 2007. Compared with net cash flow provided by financing activities
      of
      $25,970 for the three months ended March 31, 2006, the increase in our net
      cash
      flow was mainly due to the increase in trust receipts loans and bills payable
      for the three months ended March 31, 2007.





25








As
      we are
      engaged in a capital intensive industry, our ability to continue as a going
      concern is dependent upon our ability to meet our obligations and repay our
      liabilities arising from normal business operations when they come due. While
      the Company plans to satisfy its capital needs through revenue generated from
      its business and financing transactions through the sale of equity or debt
      securities, we may raise additional capital as necessary to further develop
      our
      business operations.





**OFF-BALANCE
      SHEET ARRANGEMENTS**





A
      bank
      guarantee was given by a bank to an electric utility company on Infosmart’s
      behalf. This guarantee exempted Infosmart from the obligation of paying a
      deposit required by the electric utility company. This off-balance sheet
      arrangement has no effect on the Infosmart’s liquidity, capital resources,
      market risk support or credit risk support, other than allowing Infosmart to
      retain approximately $154,000 deposit that would have been required by the
      utility company. Infosmart is not aware of any events, demands, commitments,
      trends or uncertainties that will result in of reasonably likely result in
      the
      termination of this arrangement.





Other
      than the arrangement described above, we have not entered into any other
      financial guarantees or other commitments to guarantee the payment obligations
      of any third parties. We have not entered into any derivative contracts that
      are
      indexed to our shares and classified as shareholder’s equity or that are not
      reflected in our condensed consolidated financial statements. Furthermore,
      we do
      not have any retained or contingent interest in assets transferred to an
      unconsolidated entity that serves as credit, liquidity or market risk support
      to
      such entity. We do not have any variable interest in any unconsolidated entity
      that provides financing, liquidity, market risk or credit support to us or
      engages in leasing, hedging or research and development services with us.




**CONTRACTUAL
      OBLIGATIONS**





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





The
      following tables summarize our contractual obligations as of March 31, 2007,
      and
      the effect these obligations are expected to have on our liquidity and cash
      flows in future periods.







**Payments
                Due by Period****Total**
            
            **Less
                than 1 year**
            
            **1-3
                Years**
            
            **3-5
                Years**
            
            **5
                Years +****In
                Thousands**Contractual
                Obligations:Bank
                Indebtedness
            
            $
            7,212
            
            $
            4,754
            
            $
            2,458
            
            $
            -
            
            $
            -Other
                Indebtedness
            
            
            5,127
            
            
            3,534
            
            
            1,528
            
            
            65
            
            
            -Operating
                Leases
            
            
            712
            
            
            335
            
            
            374
            
            
            3
            
            
            -Total
                Contractual Obligations:
            
            $
            13,051
            
            $
            8,623
            
            $
            4,360
            
            $
            68
            
            $
            -




Bank
      indebtedness consists of secured and unsecured borrowings from our banking
      facilities arrangements including letters of credit, bank overdrafts, and
      non-recurring bank loans.





Other
      indebtedness consists of loans and debt financing from independent third parties
      for working capital and the acquisition of DVDR production lines and
      equipment.





Operating
      leases amounts include a lease for factory premises under non-cancelable
      operating lease agreement that expires in year 2010, with an option to renew
      the
      lease. The lease is on a fixed repayment basis. The lease does not include
      contingent rentals.





26





**RISK
      FACTORS**





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





**Risks
      Relating to Our Business**





**The
      limited operating history of Infosmart makes evaluation of our business
      difficult.**





We
      have
      limited operating histories. Infosmart was incorporated in the British Virgin
      Islands on August 23, 2005, and IS Technology was founded in August of 2002.
      These limited operating histories and the unpredictability of our industry
      make
      it difficult for investors to evaluate our business and future operating
      results. An investor in the Company’s securities must consider the risks,
      uncertainties and difficulties frequently encountered by companies in new and
      rapidly evolving markets. The risks and difficulties we face include challenges
      in accurate financial planning as a result of limited historical data and the
      uncertainties resulting from having had a relatively limited time period in
      which to implement and evaluate our business strategies as compared to older
      companies with longer operating histories.





**We
      continually seek to develop new products and standards, which may not be widely
      adopted by consumers or, if adopted, may reduce demand by consumers for our
      older products.**





We
      continually seek to develop new products and standards and enhance existing
      products and standards with higher memory capacities and other enhanced
      features. We cannot assure you that our new products and standards will gain
      market acceptance or that we will be successful in penetrating the new markets
      that we target. As we introduce new products and standards, it will take time
      for these new products and standards to be adopted, for consumers to accept
      and
      transition to these new products and standards and for significant sales to
      be
      generated from them, if this happens at all. Moreover, broad acceptance of
      new
      products and standards by consumers may reduce demand for our older products
      and
      standards. If this decreased demand is not offset by increased demand for our
      new products and standards, our results of operations could be harmed. We cannot
      assure you that any new products or standards we develop will be commercially
      successful.





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





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





●
            price
                competition;





●
            general
                price increases by suppliers and manufacturers;●
            our
                ability to maintain and expand our customer
                relationships;●
            the
                introduction of new or enhanced products and strategic alliances
                by us and
                our competitors;●
            the
                success of our brand-building and marketing campaigns;





●
            consumer
                acceptance of our products and general shifts in consumer behavior
                with
                respect to our
                industry;





●
            our
                ability to maintain, upgrade and develop our production facilities
                and
                infrastructure;●
            technical
                difficulties and system downtime;





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





27





●
            general
                economic conditions as well as economic conditions specific to our
                industry; and●
            our
                ability to attract and retain qualified management and
                employees.




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





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





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





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





We
      do not
      make allowances for product returns in our financial statements based on the
      fact that we have not had a material historical return rate. In order to keep
      product returns low, we continuously monitor product purchases and returns
      and
      may change our product offerings based on the rates of returns. If our actual
      product returns significantly increase, especially as we expand into new product
      categories, our revenues and profitability could decrease. Any changes in our
      policies related to product returns may result in customer dissatisfaction
      and
      fewer repeat customers.





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





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





●
            fund
                more rapid expansion;●
            acquire
                or expand into new facilities;●
            maintain,
                enhance and further develop our manufacturing systems;




●
            develop
                new product categories or enhanced services;●
            fund
                acquisitions; or





●
            respond
                to competitive pressures.


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





**The
      loss of key senior management personnel could negatively affect our
      business.**




We
      depend
      on the continued services and performance of our senior management and other
      key
      personnel, particularly Chung Kwok, our Chief Executive Officer and President,
      Gavin Wong, our V.P. of Sales and Marketing and Sebastian Tseng, our Regional
      Director for South America and V.P. of Production and R&D. The loss of any
      of our executive officers or other key employees could harm our business.
      Infosmart currently has employment agreements with its key personnel. Further,
      the Company expects to assume the employment agreements our
      executive officers currently have with Infosmart that are described in
      more detail in the section titled “Executive Compensation - Employment and
      Director Agreements” in this prospectus. Infosmart has a “key person” life
      insurance policy for Chung Kwok.


28





**Rapid
      changes in technology could adversely affect our business and hurt our
      competitive position.**




We
      believe that our ability to increase sales by developing appealing, innovative
      products has an important role to play in our growth. However, it is extremely
      difficult to predict future demand in the rapidly changing storage media
      industry and develop new technologies to meet that demand. We may fail to
      develop and supply in a timely manner attractive, new products with innovative
      technologies for this industry and its markets. In the event that our management
      misreads the industry and market and/or is slow in developing innovative
      technologies on a cost competitive basis, actual earnings could differ
      significantly from our forecasts. At the same time, we may cease to be able
      to
      compete in markets, resulting in a significant adverse effect on our business
      results and growth prospects.




**The
      use of technologies and intellectual properties for the production of all of
      our
      products are derived from one cooperation agreement and the failure to maintain
      the effectiveness of such agreement could substantially and adversely affect
      our
      business.**





Our
      ability to produce our products depends on a cooperation agreement (the
“Cooperation Agreement”) with IS Holdings, that has been granted licenses (the
“Patent Licenses”) for the use of technologies and intellectual properties
      necessary for the production of all of our products. Such Cooperation Agreement
      has currently been extended to December 31, 2008, and can be renewed thereafter.
      If we are unable to renew this Cooperation Agreement or otherwise lose our
      rights under the Cooperation Agreement, we could lose our ability to manufacture
      our products.





**The
      patents required for manufacturing our DVDR products are owned by multiple
      companies. Our failure to obtain all of the required patents to manufacture
      our
      products may interfere with our current or future product development and
      sales.**





We
      have
      never conducted a comprehensive patent search relating to the technology we
      use
      in our products. The Patent Licenses held by IS Holdings with whom we have
      a
      Cooperation Agreement were obtained through a joint patent licensing program
      (the “DVDR Patent License Program”) that is administered by Koninklijke Philips
      Electronics, N.V. (“Philips”). Parties acquiring the patent licenses through
      this DVDR Patent License Program are allowed to use patents owned by companies
      including Philips, Sony, Pioneer and/or Hewlett Packard (or for which such
      companies have patent applications pending) that are essential for manufacturing
      DVDR products. However, there may be other issued or pending patents owned
      by
      third parties that are required for manufacturing our products for which IS
      Holdings does not have a patent license. If so, we could incur substantial
      costs
      defending against patent infringement claims or we could even be blocked from
      selling our products. We cannot determine with certainty whether any other
      existing third party patents or the issuance of any new third party patents
      would require us or IS Holdings to alter, or obtain licenses relating to, our
      processes or products, or implement alternative non-infringing approaches,
      all
      at a significant additional cost to the Company. There is no assurance that
      we
      or IS Holdings will be able to obtain any such licenses on terms favorable
      to
      us, if at all, and obtaining and paying royalties on new licenses might
      materially increase our costs. Additionally, the fees in respect of existing
      licenses could increase materially in the future when these licenses are
      renewed, and such increase may have a significantly and adversely impact our
      business.





**We
      may be unable to obtain our own Hong Kong business customs license for our
      manufacturing facilities in Hong Kong**





The
      Hong
      Kong government requires companies manufacturing DVDRs to obtain a business
      license for the manufacture of optical Disc/Stampers (the “Hong Kong Business
      License”) from the Customs and Excise Department of Hong Kong. We currently
      manufacture our products under Hong Kong Business License held by IS Holdings
      under the Cooperation Agreement. If we are unable to renew this Cooperation
      Agreement or otherwise lose our rights under the Cooperation Agreement, there
      is
      no guarantee that we will be able to obtain the Hong Kong Business Licenses
      necessary to operate our manufacturing facilities in Hong Kong.





**Our
      business may suffer if we are sued for infringing upon the intellectual property
      rights of third parties.**





There
      may
      be cases where it is alleged that our products infringe on the intellectual
      property rights of third parties. As a result, we may suffer damages or may
      be
      sued for damages. In either case, settlement negotiations and legal procedures
      would be inevitable and could be expected to be lengthy and expensive. If our
      assertions are not accepted in such disputes, we may have to pay damages and
      royalties and suffer losses such as the loss of our market share. The failure
      to
      prevent infringement on the rights of others could have a materially adverse
      effect on our business development, business results and financial condition.


29





**We
      are dependent on certain raw materials and other products, and our business
      will
      suffer if we are unable to procure such materials and products.**





Our
      manufacturing systems are premised on deliveries of raw materials and other
      supplies in adequate quality and quantity in a timely manner from many external
      suppliers. In new product development, we may rely on certain irreplaceable
      suppliers for materials. Because of this, there may be cases where supplies
      of
      raw materials and other products to us are interrupted by: an accident or some
      other event at a supplier; supply is suspended due to quality or other issues;
      or there is a shortage of or instability in supply due to a rapid increase
      in
      demand for finished products that use certain materials and products. If any
      of
      these situations becomes protracted, we may have difficulty finding substitutes
      in a timely manner from other suppliers, which could have a significant, adverse
      effect on our production and prevent us from fulfilling our responsibilities
      to
      supply products to our customers. Furthermore, if an imbalance arises in the
      supply-demand equation, there could be a spike in the price of raw materials.
      In
      the event of these or other similar occurrences, there could be a material
      adverse effect on our business results and financial condition.





**We
      compete in a highly competitive industry where some of our competitors are
      larger and have more resources than we do.**





We
      operate in a highly competitive environment. Our competitors are both larger
      and
      smaller than we are in terms of resources and market share. The marketplaces
      in
      which we operate are generally characterized by rapid technological change,
      frequent new product introductions and declining prices. In these highly
      competitive markets, our success will depend to a significant extent on its
      ability to continue to develop and introduce differentiated and innovative
      products and customer solutions successfully on a timely basis. The success
      of
      our product offerings is dependent on several factors including understanding
      customer needs, strong digital technology, differentiation from competitive
      offerings, market acceptance and lower costs. Although we believe that we can
      take the necessary steps to meet the competitive challenges of these
      marketplaces, no assurance can be given with regard to our ability to take
      these
      steps, the actions of competitors, some of which will have greater resources
      than us, or the pace of technological changes.





**Technology
      in our industry evolves rapidly, potentially causing our products to become
      obsolete, and we must continue to enhance existing systems and develop new
      systems or we will lose sales.**




Rapid
      technological advances, rapidly changing customer requirements and fluctuations
      in demand characterize the current market for our products. Further, there
      are
      alternative data storage media and additional media is under development,
      including high capacity hard drives, new CD-R/DVDR technologies, file servers
      accessible through computer networks and the Internet. Our existing and
      development-stage products may become obsolete if our competitors introduce
      newer or more appealing technologies. If these technologies are patented by
      or
      are proprietary to our competitors, then we may not be able to access these
      technologies. We believe that we must continue to innovate and anticipate
      advances in the storage media industry in order to remain competitive. If we
      fail to anticipate or respond to technological developments or customer
      requirements, or if we are significantly delayed in developing and introducing
      products, our business will suffer lost sales.





**Our
      market is becoming more competitive. Competition may result in price reductions,
      lower gross profits and loss of market share.**




The
      storage media industry is becoming more competitive and we face the potential
      for increased competition in developing and selling our products. Our
      competitors may have or could develop or acquire significant marketing,
      financial, development and personnel resources. We cannot assure you that we
      will be able to compete successfully against our current or future competitors.
      The storage media industry has increased visibility, which may lead to large,
      well-known, well-financed companies entering into this market. Increased
      competition from manufacturers of systems or consumable supplies may result
      in
      price reductions, lower gross profit margins, increased discounts to
      distribution and loss of market share and could require increased spending
      by us
      on research and development, sales and marketing and customer support.





**If
      we are unable to compete effectively with existing or new competitors, the
      loss
      of our competitive position could result in price reductions, fewer customer
      orders, reduced revenues, reduced margins, reduced levels of profitability
      and
      loss of market share.**





We
      have
      several competitors, which include the largest DVDR manufacturers in the world.
      Certain of these competitors compete aggressively on price and seek to maintain
      very low cost structures. Some of these competitors are seeking to increase
      their market share, which creates increased pressure, including pricing
      pressure, within the market. In addition, certain of the competitors, including
      CMC and Ritek, have financial and human resources that are substantially greater
      than ours, which increases the competitive pressures we face. Customers make
      buying decisions based on many factors, including among other things, new
      product and service offerings and features; product performance and quality;
      ease of doing business; a vendor’s ability to adapt to customers’ changing
      requirements; responsiveness to shifts in the marketplace; business model;
      contractual terms and conditions; vendor reputation and vendor viability. As
      competition increases, each factor on which we compete becomes more important
      and the lack of competitive advantage with respect to one or more of these
      factors could lead to a loss of competitive position, resulting in fewer
      customer orders, reduced revenues, reduced margins, reduced levels of
      profitability and loss of market share. We expect competitive pressure to remain
      intense.


30





**The
      products we make have a life cycle. If we are unable to successfully time market
      entry and exit and manage its inventory, it may fail to enter profitable markets
      or exit unprofitable markets.**





We
      operate in a highly competitive, quickly changing environment. We are preparing
      for high density format DVDR (“HD DVDR”) or Blu-Ray format DVDR production.
      Thirty two (32) of Infosmart’s forty-nine (49) production lines can be upgraded
      to HD DVDR production at a time of management’s choosing. However, if the market
      turns in favor of Blu-Ray, the Company will have to purchase new equipment
      to
      produce Blu-Ray DVDR discs, and thus the Company’s business and operating
      results could be adversely affected. If strong competitors challenge us in
      Brazil and other key markets, we will need to quickly develop an adequate
      competitive response. If we fail to accurately anticipate market and
      technological trends, then our business and operating results could be
      materially and adversely affected.





We
      must
      also be able to manufacture the products at acceptable costs. This requires
      us
      to be able to accurately forecast customer demand so that it can procure the
      appropriate inputs at optimal costs. We must also try to reduce the levels
      of
      older product inventories to minimize inventory write-offs. If we have excess
      inventory, it may be necessary to reduce its prices and write down inventory,
      which could result in lower gross margins. Additionally, our customers may
      delay
      orders for existing 8x or 16x writable speed DVDR products in anticipation
      of
      new HD DVDR or Blu-Ray product introductions. As a result, we may decide to
      adjust prices of existing products during this process to try to increase
      customer demand for these products. Our future operating results would be
      materially and adversely affected if such pricing adjustments were to occur
      and
      we are unable to mitigate the resulting margin pressure by maintaining a
      favorable mix of products, or if we are unsuccessful in achieving input cost
      reductions, operating efficiencies and increasing sales volumes.





If
      we are
      unable to timely develop, manufacture, and introduce new products in sufficient
      quantity to meet customer demand at acceptable costs, or if we are unable to
      correctly anticipate customer demand for our new and existing products, then
      our
      business and operating results could be materially adversely
      affected.





**If
      our products fail to compete successfully with other existing or newly-developed
      products for the storage media industry, our business will
      suffer.**





The
      success of our products depends upon end users choosing our DVDR technology
      for
      their storage media needs. However, alternative data storage media exist, such
      as high capacity hard drives, new CD-R/DVDR technologies, file servers
      accessible through computer networks and the Internet, and additional media
      is
      under development. If end users perceive any technology that is competing with
      ours as more reliable, higher performing, less expensive or having other
      advantages over our technology, the demand for our DVDR products could decrease.
      Further, some of our competitors may make strategic acquisitions or establish
      cooperative relationships with suppliers or companies that produce complementary
      products such as cameras, computer equipment, software or biometric
      applications. Competition from other storage media is likely to increase. If
      our
      products do not compete successfully with existing or new competitive products,
      our business will suffer.





**Our
      products may have manufacturing or design defects that we discover after
      shipment, which could negatively affect our revenues, increase our costs and
      harm our reputation.**




Our
      products may contain undetected and unexpected defects, errors or failures.
      If
      these product defects are substantial, the result could be product recalls,
      an
      increased amount of product returns, loss of market acceptance and damage to
      our
      reputation, all of which could increase our costs and cause us to lose sales.
      We
      do not carry general commercial liability insurance covering our products.
      In
      addition, we are preparing to launch production of HD format or Blu-Ray format
      DVDRs in 2007. HD and Blu-Ray format DVDR production will require us to master
      new production techniques and modify existing or purchase new machinery and
      equipment. It is possible that we may fail to achieve mastery of these new
      techniques and production yields could suffer as a result.





**The
      development of digital distribution alternatives, including the copying and
      distribution of music and video and other electronic data files could lessen
      the
      demand for our products.**


31





We
      are
      dependent on the continued viability and growth of physical distribution of
      music, video and other electronic data through recordable media. Alternative
      distribution channels and methods, both authorized and unauthorized, for
      delivering music, video and other electronic data may erode our volume of sales
      and the pricing of its products and services. The growth of these alternatives
      is driven by advances in technology that allow for the transfer and downloading
      of music, video and other electronic data files from the Internet. The
      proliferation of this copying, use and distribution of such files is supported
      by the increasing availability and decreasing price of new technologies, such
      as
      personal video recorders, DVD burners, portable MP3 music and video players,
      widespread access to the Internet, and the increasing number of peer-to-peer
      digital distribution services that facilitate file transfers and downloading.
      We
      expect that file sharing and downloading, both legal and illegal, will continue
      to exert downward pressure on the demand for traditional DVDRs. As current
      technologies and delivery systems improve, the digital transfer and downloading
      of music, video and other electronic data files will likely become more
      widespread. As the speed and quality with which music, video and other
      electronic data files can be transferred and downloaded improves, file sharing
      and downloading may in the future exert significant downward pressure on the
      demand for DVDRs. In addition, our business faces pressure from the emerging
      distribution alternatives, like video on demand (“VOD”) and personal digital
      video recorders. As substantially all of our revenues are derived from the
      sale
      of DVDRs, increased file sharing, downloading and piracy or the growth of other
      alternative distribution channels and methods, could materially adversely affect
      its business, financial condition and results of operations.





**Our
      revenues, cash flows and operating results may fluctuate for a number of
      reasons.**





Future
      operating results and cash flows will continue to be subject to quarterly
      fluctuations based on a wide variety of factors, including seasonality. Although
      our sales and other operating results can be influenced by a number of factors
      and historical results are not necessarily indicative of future results, our
      sequential quarterly operating results generally fluctuate downward in the
      fourth quarter of each fiscal year when compared with the immediately preceding
      quarter. For example, our first calendar quarter is modestly affected by the
      Chinese New Year.





**A
      significant portion of the revenues will depend on the success of our new
      venture in Brazil.**





A
      significant portion of the Company’s revenues will depend on the success of our
      new Brazilian venture. We have no prior manufacturing and distribution
      experience in Brazil, and will rely on the local knowledge of its Brazilian
      joint venture partner and the general knowledge of the South American
      marketplace of its regional director Sebastian Tseng. Our results could suffer
      should its relationships with either of these two parties deteriorate in the
      early months of the Brazilian venture.





**We
      are at risk of losing our significant investment in Brazil if we are unable
      to
      obtain the intellectual property licenses required for our Discobras
      manufacturing facility.**





The
      owners of the technologies and intellectual property necessary for the
      production of our products require that we obtain separate Patent Licenses
      for
      the use of intellectual property in our new DVDR manufacturing facility in
      Brazil. We have completed the required procedures in applying the Patent
      Licenses for use at the Discobras manufacturing facility and are now waiting
      for
      the patent owners to complete their own procedures, including the submission
      of
      the Patent Licenses to the Patent Office in Brazil for final approval. However,
      if there is a substantial delay in obtaining approval for our use of the Patent
      Licenses, then we may be unable to manufacture a sufficient amount of our
      products to fill our sales orders, and this could cause us to lose substantial
      revenues. Further, in the event we are unable to obtain the Patent Licenses,
      then we may not be able to manufacture our products in Brazil, thus placing
      us
      at risk of losing its significant investment in the Brazilian
      venture.





**Past
      activities of the Company and its affiliates may lead to future liability for
      the combined companies.**





Prior
      to
      the closing of the share exchange transaction in August 2006, the Company
      engaged in businesses unrelated to that of our current business operations.
      Any
      liabilities relating to such prior business against which we are not completely
      indemnified may have a material adverse effect on the Company.




**Risks
      Relating To Doing Business in Hong Kong and Brazil**





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




Although,
      as described above, we have a new venture in Brazil, we continue to conduct a
      substantial portion of our business operations in Hong Kong, a special
      administrative region in the People’s Republic of China (“PRC”). Accordingly,
      our results of operations, financial condition and prospects are subject to
      a
      significant degree to economic, political and legal developments in Hong Kong
      and the PRC. The PRC’s economy differs from the economies of most developed
      countries in many respects, including with respect to the amount of government
      involvement, level of development, growth rate, control of foreign exchange
      and
      allocation of resources. While the PRC economy has experienced significant
      growth in the past 20 years, growth has been uneven across different regions
      and
      among various economic sectors of China. The PRC government has implemented
      various measures to encourage economic development and guide the allocation
      of
      resources. Some of these measures benefit the overall PRC economy, but may
      also
      have a negative effect on us.


32








**You
      may experience difficulties in effecting service of legal process, enforcing
      foreign judgments or bringing original actions in Hong Kong or China based
      on
      United States or other foreign laws against us, our management or the experts
      named in the prospectus.**




We
      currently conduct a substantial portion of our operations in Hong Kong and
      a
      substantial amount of our assets are located in Hong Kong. In addition, all
      of
      our senior executive officers reside within Hong Kong. As a result, it may
      not
      be possible to effect service of process within the United States or elsewhere
      outside Hong Kong upon our senior executive officers, including with respect
      to
      matters arising under U.S. federal securities laws or applicable state
      securities laws. Moreover, neither the PRC nor Hong Kong have treaties with
      the
      United States or many other countries providing for the reciprocal recognition
      and enforcement of judgment of courts.





**Fluctuation
      in the value of the Hong Kong Dollar may have a material adverse effect on
      your
      investment.**




The
      value
      of the Hong Kong dollar against the U.S. dollar and other currencies may
      fluctuate and is affected by, among other things, changes in political and
      economic conditions. Although the exchange rate between the Hong Kong dollar
      and
      the U.S. dollar has been effectively pegged, there can be no assurance that
      the
      Hong Kong dollar will remain pegged, to the U.S. dollar, especially in light
      of
      the significant international pressure on the Chinese government to permit
      the
      free floatation of the RMB and the Hong Kong dollar, which could result in
      an
      appreciation of RMB or the Hong Kong dollar against the U.S. dollar. Our
      revenues and costs are mostly denominated in Hong Kong dollars, while a
      significant portion of our financial assets are also denominated in Hong Kong
      dollars. Any significant revaluation of the Hong Kong dollar may materially
      and
      adversely affect our cash flows, revenues, earnings and financial position,
      and
      the value of, and any dividends payable on, our stock in U.S. dollars.





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




Our
      business could be adversely affected by the effects of SARS, Avian flu or
      another epidemic or outbreak. Any prolonged recurrence of SARS or other adverse
      public health developments in China or in Hong Kong may have a material adverse
      effect on our business operations. For instance, health or other government
      regulations adopted in response may require temporary closure of our production
      facilities or of our offices in Hong Kong. Such closures would severely disrupt
      our business operations and adversely affect our results of operations. We
      have
      not adopted any written preventive measures or contingency plans to combat
      any
      future outbreak of SARS, Avian flu or any other epidemic.





**Changes
      in Hong Kong or Brazil’s political or economic situation could harm our
      operational results.**





In
      addition to our operations in Hong Kong, we also have our production facility
      and a sales base in Brazil. Economic reforms adopted by the Chinese or Brazilian
      governments have had positive effects on the economic development of these
      countries, but the governments could change these economic reforms or any of
      the
      legal systems at any time. This could either benefit or damage the Company’s
      operations and profitability. Some of the things that could have this effect
      are:





·
            Level
                of government involvement in the
                economy;





·
            Control
                of foreign exchange;





·
            Methods
                of allocating resources;





·
            Balance
                of payments position;





·
            International
                trade restrictions; and





·
            International
                conflict.




33





Any
      of
      the foregoing events or other unforeseen consequences of public health problems
      could damage the Company’s operations.





**The
      Brazilian government has historically exercised, and continues to exercise,
      significant influence over the Brazilian economy. Brazilian political and
      economic conditions will have a direct impact on our business and the market
      price of our securities.**




The
      Brazilian government frequently intervenes in the Brazilian economy and
      occasionally makes substantial changes in policy, as often occurs in other
      emerging economies. The Brazilian government’s actions to control inflation and
      carry out other policies have in the past involved wage and price controls,
      currency devaluations, capital controls and limits on imports, among other
      things. Our business, financial condition and results of operations may be
      adversely affected by factors in Brazil including:





●
            Currency
                volatility;





●
            Inflation
                acceleration;





●
            Monetary
                policy and interest rate increases;





●
            Fiscal
                policy and tax changes;




●
            International
                trade policy including tariff and non-tariff trade
                barriers;





●
            Foreign
                exchange controls;





●
            Energy
                shortages; and





●
            Other
                political, social and economic developments in or affecting
                Brazil.





In
      2005
      and 2006, government figures, legislators and political party officials,
      especially those of the President’s party, have been the subject of a variety of
      allegations of unethical or illegal conduct. These accusations, which are being
      investigated by the Brazilian Congress, involve campaign financing and election
      law violations, and influencing of government officials and Congressmen in
      exchange for political support. Several members of the President’s party and of
      the federal government, including the President’s chief of staff, have resigned.
      We cannot predict what effect these accusations and investigations may have
      on
      the Brazilian economy.





**Inflation
      and government measures to curb inflation may contribute significantly to
      economic uncertainty in Brazil and to heightened volatility in the Brazilian
      securities markets and, consequently, may adversely affect our business in
      Brazil.**




Brazil
      has in the past experienced extremely high rates of inflation, with annual
      rates
      of inflation reaching as high as 2,567% in 1993 (as measured by the *Índice
      Geral de Preços do Mercado* published by *Fundação
      Getúlio Vargas* ,
      or
      IGP-M Index). More recently, Brazil’s rates of inflation were 10.4% in 2001,
      25.3% in 2002, 8.7% in 2003, 12.4% in 2004, 1.2% in 2005, 3.8% in 2006, and
      1.1%
      in the three months ended March 31, 2007 (as measured by the IGP-M Index).
      Inflation, governmental measures to combat inflation and public speculation
      about possible future actions have in the past had significant negative effects
      on the Brazilian economy and have contributed to economic uncertainty in Brazil.
      If Brazil experiences substantial inflation in the future, our costs may
      increase and our operating and net margins may decrease. Inflationary pressures
      may also lead to further government intervention in the economy, which could
      involve the introduction of government policies that may adversely affect the
      overall performance of the Brazilian economy.





**Restrictions
      on currency exchange may limit our ability to receive and use our revenues
      effectively** .





Since
      we
      have established our business operations in Brazil, some of our revenues will
      be
      settled in the Brazilian Real. Any future restrictions on currency exchanges
      may
      limit our ability to use revenue generated in Reals to fund any future business
      activities outside Brazil or to make dividend or other payments in U.S. dollars.




**The
      value of our securities will be affected by the foreign exchange rate between
      the U.S. dollar, the Hong Kong dollar and the Real.**


34





The
      value
      of our common stock will be affected by the foreign exchange rate between U.S.
      and Hong Kong dollars and Real, and between those currencies and other
      currencies in which our sales may be denominated. For example, to the extent
      that we need to convert U.S. or Hong Kong dollars into Real for our operational
      needs and should the Real appreciate against the U.S. dollar at that time,
      our
      financial position, our business, and the price of our common stock may be
      harmed. Conversely, if we decide to convert our Reals into U.S. or Hong Kong
      dollars for the purpose of declaring dividends on our common stock or for other
      business purposes and the U.S. Dollar appreciates against the Real, the U.S.
      or
      Hong Kong dollar equivalent of our earnings from our subsidiaries in Hong Kong
      and Brazil would be reduced. We will engage in hedging activities to manage
      our
      financial exposure related to currency exchange fluctuation. In these hedging
      activities, we might use fixed-price, forward, futures, financial swaps and
      option contracts traded in the over-the-counter markets or on exchanges, as
      well
      as long-term structured transactions when feasible.





**We
      will depend on Brazil’s foreign investment incentive programs, which provide
      reductions in taxation or exemptions from taxation for our operations in Brazil.
      The loss of the tax benefits from these incentive programs may substantially
      affect our earnings.**





Under
      the
      State of Bahia’s investment incentive program, our Brazilian subsidiary,
      Discobras, has been granted a reduction in the Value Added Tax (“VAT”) it is
      required to pay for products. Discobras pays only 2.28%, as compared to VAT
      of
      12% in Salvador, or 18% in São Paulo. This VAT reduction will be available to us
      until June 2016. We will also avail ourselves of an incentive program for
      foreign investment which exempts Discobras from paying Brazil’s ICMS taxes on
      raw materials it imports for production in Brazil and create substantial tax
      savings for Infosmart. This tax exemption will last through ****** June ****** 2016.
      In
      the event that the VAT reduction program is no longer available to us or we
      are
      unable to extend the ICMS tax-exemption, our after-tax earnings would decline
      by
      the amount of the tax benefits, which may be substantial.





**Risks
      Relating to this Offering and Ownership of Our Securities**





**Your
      rights with respect to ownership of the Company's Series B Preferred
      Shares are set forth in the Certificate of Determination of Rights,
      Preferences, Privileges and Restrictions for the Series B Preferred Stock and
      form of Warrants and such documents should be reviewed carefully with your
      legal
      counsel.**





Your
      rights with respect to ownership of our Series B Preferred Shares and the
      Warrants are set forth in the Certificate of Determination of Rights,
      Preferences, Privileges and Restrictions for the Series B Preferred Stock
      that was attached as Exhibit 3.4 and in the form of Warrant attached as
      Exhibit 10.17 to our Current Report on Form 8-K filed with SEC on August 24,
      2006. These documents contain important provisions that provide you with rights,
      limitations and obligations and should be reviewed carefully with your legal
      counsel. We will also provide copies of these documents upon request.





**We
      are a public company subject to evolving corporate governance and public
      disclosure regulations that may result in additional expenses and continuing
      uncertainty regarding the application of such regulations.**




Changing
      laws, regulations and standards relating to corporate governance and public
      disclosure, including the Sarbanes-Oxley Act of 2002 and related rules and
      regulations, are creating uncertainty for public companies. We are presently
      evaluating and monitoring developments with respect to new and proposed rules
      and cannot predict or estimate the amount of the additional compliance costs
      we
      may incur or the timing of such costs. These new or changed laws, regulations
      and standards are subject to varying interpretations, in many cases due to
      their
      lack of specificity, and as a result, their application in practice may evolve
      over time as new guidance is provided by courts and regulatory and governing
      bodies. This could result in continuing uncertainty regarding compliance matters
      and higher costs necessitated by ongoing revisions to disclosure and governance
      practices. Maintaining appropriate standards of corporate governance and public
      disclosure may result in increased general and administrative expenses and
      a
      diversion of management time and attention from revenue-generating activities
      to
      compliance activities. In addition, if we fail to comply with new or changed
      laws, regulations and standards, regulatory authorities may initiate legal
      proceedings against us and our business and our reputation may be harmed.




**Our
      shares may have limited liquidity.**




A
      substantial portion of our shares of common stock are closely held by certain
      institutional and insider investors. Consequently, the public float for our
      shares may be highly limited. As a result, you may encounter difficulty selling
      large blocks of your shares or obtaining a suitable price at which to sell
      your
      shares.


35







**Our
      stock price may be volatile, which may result in losses to our shareholders.**




The
      stock
      markets have experienced significant price and trading volume fluctuations,
      and
      the market prices of companies quoted on the Over-The-Counter Bulletin Board,
      the stock market in which shares of our common stock will be quoted, generally
      have been very volatile and have experienced sharp share price and trading
      volume changes. The trading price of our common stock is likely to be volatile
      and could fluctuate widely in response to many of the following factors, some
      of
      which are beyond our control:




●
            variations
                in our operating results;




●
            announcements
                of technological innovations, new services or product lines by us
                or our
                competitors;




●
            changes
                in expectations of our future financial performance, including financial
                estimates by securities analysts and
                investors;




●
            changes
                in operating and stock price performance of other companies in our
                industry;




●
            additions
                or departures of key personnel; and





●
            future
                sales of our common stock.




Domestic
      and international stock markets often experience significant price and volume
      fluctuations. These fluctuations, as well as general economic and political
      conditions unrelated to our performance, may adversely affect the price of
      our
      common stock. In particular, following initial public offerings, the market
      prices for stocks of companies often reach levels that bear no established
      relationship to the operating performance of these companies. These market
      prices are generally not sustainable and could vary widely. In the past,
      following periods of volatility in the market price of a public company’s
      securities, securities class action litigation has often been
      initiated. ****




**We
      have broad discretion as to the use of proceeds from this Financing and may
      not use the proceeds effectively.**





Our
      management team will retain broad discretion as to the allocation and timing
      of
      the use of proceeds from the Financing and may spend these proceeds in ways
      with which our shareholders may not agree. The failure of our management to
      apply these funds effectively could result in unfavorable returns and
      uncertainty about our prospects, each of which could cause the price of our
      common stock to decline.





**Our
      officers and directors own a substantial portion of our outstanding common
      stock, which will enable them to influence many significant corporate actions
      and in certain circumstances may prevent a change in control that would
      otherwise be beneficial to our shareholders.**





Our
      directors and executive officers control approximately 56% of our outstanding
      shares of stock that are entitled to vote on all corporate actions.
      Specifically, Andrew Chang, our Chairman of the Board of Directors, Chung Kwok,
      our Chief Executive Officer, President and Director and Po Nei Sze, our Chief
      Financial Officer, Secretary, Treasurer and Director, control approximately
      56%
      of the outstanding voting. These stockholders, acting together, could have
      a
      substantial impact on matters requiring the vote of the shareholders, including
      the election of our directors and most of our corporate actions. This control
      could delay, defer or prevent others from initiating a potential merger,
      takeover or other change in our control, even if these actions would benefit
      our
      shareholders and us. This control could adversely affect the voting and other
      rights of our other shareholders and could depress the market price of our
      common stock.





**A
      large number of additional shares may be sold into the public market in the
      near
      future, which may cause the market price of our common stock to decline
      significantly, even if our business is doing well.**





Sales
      of
      a substantial amount of common stock in the public market, or the perception
      that these sales may occur, could adversely affect the market price of our
      common stock. Assuming the full conversion of our Series B Preferred Stock,
      we
      will have approximately 160,260,513 shares of common stock outstanding as of
      May
      10, 2007. As restrictions on resale of such additional shares end, the market
      price could drop significantly if the holders of these restricted shares sell
      them or are perceived by the market as intending to sell them.




**A
      large number of common shares are issuable upon exercise of outstanding common
      share warrants and upon conversion of our Series B Preferred Stock. The exercise
      or conversion of these securities could result in the substantial dilution
      of
      your investment in terms of your percentage ownership in the Company as well
      as
      the book value of your common shares. The sale of a large amount of common
      shares received upon exercise of these warrants on the public market to finance
      the exercise price or to pay associated income taxes, or the perception that
      such sales could occur, could substantially depress the prevailing market prices
      for our shares.**


36





As
      of May
      10, 2007, there are outstanding warrants entitling the holders to purchase
      up to
      31,441,380 **** common
      shares at an exercise price of $0.326 per share. The exercise price for all
      of
      the aforesaid warrants may be less than your cost to acquire our common shares.
      In the event of the exercise of these securities, you could suffer substantial
      dilution of your investment in terms of your percentage ownership in the company
      as well as the book value of your common shares. In addition, the holders of
      the
      common share purchase warrants may sell common shares in tandem with their
      exercise of those options or warrants to finance that exercise, or may resell
      the shares purchased in order to cover any income tax liabilities that may
      arise
      from their exercise of the warrants.




**We
      will incur increased costs and compliance risks as a result of becoming a public
      company with substantial business operations.**





As
      a
      public company, we will incur significant legal, accounting and other expenses
      that we did not incur prior to the closing of the share exchange transaction
      as
      a shell company with no business operations and nominal assets. We will incur
      costs associated with our public company reporting requirements. We also
      anticipate that we will incur costs associated with recently adopted corporate
      governance requirements, including certain requirements under the Sarbanes-Oxley
      Act of 2002, as well as new rules implemented by the SEC and the National
      Association of Securities Dealers (“NASD”). We expect these rules and
      regulations, in particular Section 404 of the Sarbanes-Oxley Act of 2002, to
      significantly increase our legal and financial compliance costs and to make
      some
      activities more time-consuming and costly. Like many smaller public companies,
      we face a significant impact from required compliance with Section 404 of the
      Sarbanes-Oxley Act of 2002. Section 404 requires management of public companies
      to evaluate the effectiveness of internal control over financial reporting
      and
      the independent auditors to attest to the effectiveness of such internal
      controls and the evaluation performed by management. The SEC has adopted rules
      implementing Section 404 for public companies as well as disclosure
      requirements. The Public Company Accounting Oversight Board, or PCAOB, has
      adopted documentation and attestation standards that the independent auditors
      must follow in conducting its attestation under Section 404. We are currently
      preparing for compliance with Section 404; however, there can be no assurance
      that we will be able to effectively meet all of the requirements of Section
      404
      as currently known to us in the currently mandated timeframe. Any failure to
      implement effectively new or improved internal controls, or to resolve
      difficulties encountered in their implementation, could harm our operating
      results, cause us to fail to meet reporting obligations or result in management
      being required to give a qualified assessment of our internal controls over
      financial reporting or our independent auditors providing an adverse opinion
      regarding management’s assessment. Any such result could cause investors to lose
      confidence in our reported financial information, which could have a material
      adverse effect on our stock price.




We
      also
      expect these new rules and regulations may make it more difficult and more
      expensive for us to obtain director and officer liability insurance and we
      may
      be required to accept reduced policy limits and coverage or incur substantially
      higher costs to obtain the same or similar coverage. As a result, it may be
      more
      difficult for us to attract and retain qualified individuals to serve on our
      Board of Directors or as executive officers. We are currently evaluating and
      monitoring developments with respect to these new rules, and we cannot predict
      or estimate the amount of additional costs we may incur or the timing of such
      costs.





**If
      we fail to maintain the adequacy of our internal controls, our ability to
      provide accurate financial statements and comply with the requirements of the
      Sarbanes-Oxley Act of 2002 could be impaired, which could cause our stock price
      to decrease substantially.**





We
      have
      recently taken measures to address and improve our financial reporting and
      compliance capabilities and we are in the process of instituting changes to
      satisfy our obligations in connection with Infosmart’s becoming a public
      company. We plan to obtain additional financial and accounting resources to
      support and enhance our ability to meet the requirements of being a public
      company. We will need to continue to improve our financial and managerial
      controls, reporting systems and procedures, and documentation thereof. If our
      financial and managerial controls, reporting systems or procedures fail, we
      may
      not be able to provide accurate financial statements on a timely basis or comply
      with the Sarbanes-Oxley Act of 2002 as it applies to us. Any failure of our
      internal controls or our ability to provide accurate financial statements could
      cause the trading price of our common stock to decrease substantially.


37





**Our
      common shares are thinly traded and, you may be unable to sell at or near ask
      prices or at all if you need to convert your Series B Preferred Stock and sell
      your shares to raise money or otherwise desire to liquidate such
      shares.**





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




The
      market price for the Company’s common stock is particularly volatile given our
      status as a relatively small company with a small and thinly traded “float” and
      lack of current revenues that could lead to wide fluctuations in our share
      price. The price at which you convert your Series B Preferred Stock into our
      common stock many be indicative of the price that will prevail in the trading
      market. You may be unable to sell your common stock at or above your purchase
      price if at all, which may result in substantial losses to you.





The
      market for the Company’s common shares is characterized by significant price
      volatility when compared to seasoned issuers, and we expect that our share
      price
      will continue to be more volatile than a seasoned issuer for the indefinite
      future. The volatility in our share price is attributable to a number of
      factors. First, as noted above, our common shares are sporadically and/or thinly
      traded. As a consequence of this lack of liquidity, the trading of relatively
      small quantities of shares by its shareholders may disproportionately influence
      the price of those shares in either direction. The price for its shares could,
      for example, decline precipitously in the event that a large number of our
      common shares are sold on the market without commensurate demand, as compared
      to
      a seasoned issuer which could better absorb those sales without adverse impact
      on its share price. Secondly, an investment in us is a speculative or “risky”
investment due to our lack of revenues or profits to date and uncertainty of
      future market acceptance for current and potential products. As a consequence
      of
      this enhanced risk, more risk-adverse investors may, under the fear of losing
      all or most of their investment in the event of negative news or lack of
      progress, be more inclined to sell their shares on the market more quickly
      and
      at greater discounts than would be the case with the stock of a seasoned issuer.




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





**Other
      than the dividend payments that are due for the Series B Preferred Stock, we
      do
      not anticipate paying any cash dividends.**





Other
      than the dividend payments that are due for the Series B Preferred Stock, we
      presently do not anticipate that we will pay any dividends on any of our capital
      stock in the foreseeable future. The payment of dividends, if any, would be
      contingent upon our revenues and earnings, if any, capital requirements, and
      general financial condition. The payment of any dividends will be within the
      discretion of our Board of Directors. We presently intend to retain all
      earnings, if any, to implement our business plan; accordingly, we do not
      anticipate the declaration of any dividends in the foreseeable
      future.




**ITEM
      3.**  **CONTROLS
      AND PROCEDURES**





***Disclosure
      Controls and Procedures***





As
      of the
      end of the period covered by this quarterly report, we carried out an
      evaluation, under the supervision of, and with the participation of our
      management, including our Chief Executive Officer and Chief Financial Officer,
      of the effectiveness of the Company’s disclosure controls and procedures (as
      defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act
      of 1934, as amended) as of the end of the period covered by this report. Based
      on that evaluation, our Chief Executive Officer and Chief Financial Officer
      have
      concluded that, as of the end of the period covered by this report, our
      disclosure controls and procedures were effective to enable us to record,
      process, summarize and report information required to be included in our reports
      that we file or submit under the Exchange Act within the time periods required.


38








***Changes
      in Internal Control over Financial Reporting***





There
      were no changes in our internal control over financial reporting (as defined
      in
      Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as
      amended) during the quarter ended March 31, 2007 that have materially
      affected, or are reasonably likely to materially affect our internal control
      over financial reporting.





39


**PART
      II - OTHER INFORMATION**





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





The
      Company is from time to time subject to legal claims and legal proceedings
      that
      arise in the ordinary course of its business. In the opinion of management,
      the
      ultimate outcome of claims and litigation of which management is aware will
      not
      have a material adverse effect on our consolidated financial position or results
      of operation. Other than the summary below, the Management is not currently
      aware of any claims and litigation against Infosmart.




In
      Re:
      Factory 2-U Stores, Inc.,
      U.S.
      Bankruptcy Court, District of Delaware - Adv. Proc. No. 005-30480. On March
      7,
      2006, a complaint was filed against the Company in a Chapter 7 bankruptcy
      proceeding in U.S. Bankruptcy Court in the District of Delaware in the matter
      captioned In Re: Factory 2-U Stores, Inc. The complaint seeks to recover from
      the Company $91,572 in alleged preferential transfers made to the Company by
      the
      debtor during the ninety-day period prior to the filing of the debtor's
      bankruptcy petition. The Company has defended against the preference
      claim by asserting that such transfers were made in the ordinary course of
      business. This bankruptcy proceeding is currently scheduled for trial on May
      17,
      2007.  The Company plans to defend this claim vigorously.******





**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**





(a)
            None.




(b)
            There
                were no changes to the procedures by which security holders may recommend
                nominees to our board of directors.





**ITEM
      6.**  **EXHIBITS**





**EXHIBIT
      INDEX**





**Exhibit
                Number**
            
            **Description**2.1
            
            Amended
                and Restated Securities Purchase Agreement, dated August 25, 2005
                (5)2.2
            
            Transfer
                and Assumption Agreement dated as of May 31, 2005 (5)2.3
            
            Exchange
                Agreement by and among Cyber, KI Equity, Hamptons Investment Group,
                Ltd.,
                Prime and the Prime Shareholders dated July 7, 2006
                *(6)2.4
            
            Guarantee
                and Assumption Agreement by and among Cyber, Infosmart, IS International,
                IS Technology and IS Media dated July 7, 2006 (6)2.5
            
            First
                Amendment to the Exchange Agreement dated August 16, 2006 between
                Cyber,
                KI Equity Partners, LLC, Hamptons Investment Group, Ltd., Prime,
                Prime
                Shareholders, Infosmart Group Ltd. and the Infosmart Shareholders
                *
                (7)





40





2.6
            
            Amended
                and Restated Guarantee and Assumption Agreement by and among Cyber,
                IS
                International, IS Technology and IS Media dated August 16, 2006
                (7)2.7
            
            Voting
                Agreement by and among the Infosmart Stockholders and KI Equity dated
                August 16, 2006 (7)2.8
            
            Escrow
                Agreement by and among Cyber, KI Equity, Infosmart, the Infosmart
                Stockholders and Richardson, as escrow agent, dated August 16, 2006
                (7)2.9
            
            Financial
                Advisory Agreement by an among Keating Securities LLC and Cyber Merchants
                Exchange Inc. dated August 16, 2006 (7)3.1
            
            Articles
                of Incorporation (1)





3.2
            
            Bylaws
                (1)3.3
            
            Text
                of Amendment to Bylaws (9)3.4
            
            Certificate
                Of Determination Of Rights, Preferences, Privileges And Restrictions
                Of
                Series A Convertible Preferred Stock3.5
            
            Certificate
                Of Determination Of Rights, Preferences, Privileges And Restrictions
                Of
                Series B Convertible Preferred Stock4.1
            
            Lock-Up
                Agreement (2)4.2
            
            Specimen
                Stock Certificate for Shares of Common Stock of the Company
                (4)4.3
            
            Warrant
                expiring October 15, 2002 issued by the Company to Burlington Coat
                Factory
                Warehouse Corporation on October 15, 1997 (1)4.4
            
            Warrant
                expiring February 10, 2004 issued by the Company to Imperial Bank
                on
                February 10, 1999 (4)4.5
            
            Warrant
                expiring May 25, 2005 issued by the Company to Factory 2-U on May
                25, 2000
                (3)10.1
            
            Lease
                of registrant's facilities dated January 29, 200410.2
            
            Lease
                of registrant's facilities dated March 22, 200610.3
            
            Lease
                of registrant's facilities dated September 16, 200310.4
            
            Lease
                of registrant's facilities dated July 25, 200310.5
            
            Lease
                of registrant's facilities dated September 30, 200310.6
            
            Placement
                Agent Agreement dated July 7, 2006 between the Registrant, Securities,
                LLC
                and Axiom Capital Management, Inc. * (7)10.7
            
            Form
                of Subscription Agreement between the Registrant and the Investor
                to be
                identified therein (7)10.8
            
            Registration
                Rights Agreement (7)10.9
            
            Form
                of Common Stock Purchase Warrant (7)





41





10.10
            
            Assignment
                and Assumption of Placement Agreement by an among Infosmart, Cyber,
                Keatings Securities, LLC and Axiom Capital Management, Inc. dated
                August
                16, 2006 (7)10.11
            
            Appointment
                Letter Agreement by and among Po Nei Sze and Infosmart Group Limited
                dated
                June 1, 2006 (7)10.12
            
            Appointment
                Letter Agreement by and among Andrew Chang and Infosmart Group Limited
                dated July 1, 2006 (7)10.13
            
            Appointment
                Letter Agreement by and among Chung Kwok (aka Andy Kwok) and Infosmart
                Group Limited dated July 1, 2006
                (7)




10.14
            
            Cooperation
                Agreement by and among Infoscience Media Ltd. and Infoscience Holdings
                Ltd. dated December 1, 2005 (7)10.15
            
            Cooperation
                Agreement by and among Info Smart Technology Limited. and Mega Century
                Limited dated January 1, 2006 (7)10.16
            
            Amendment
                Agreement by and among Info smart Technology Limited, Info Smart
                International Enterprises Limited, and Mega Century Ltd. dated January
                1,
                2006 (7)10.17
            
            Banking
                Facilities Letter Agreement by and between Infoscience Media Limited
                and Hang Seng Bank Limited dated September 15, 2005
                (7)10.18
            
            General
                Banking Facilities Agreement by and between Info Smart Technology
                Ltd. and
                Chiyu Banking Corporation Limited dated November 28, 2003
                (7)10.19
            
            Contract
                for two Automatic Dual Track DVDR Manufacturing Systems "Streamline
                II
                DVDR" between Infoscience Media Ltd. and ACME Cassette Manufacturing
                Limited dated September 15, 2004 (7)10.20
            
            Sale
                and Purchase Agreement between Infoscience Media Limited and New
                Passion
                Investments Limited dated December 1, 2006 (8)31.1
            
            Section 302
                Certification by the Corporation’s Chief Executive Officer
                (9)31.2
            
            Section 302
                Certification by the Corporation’s Chief Financial Officer
                (9)32.1
            
            Section 906
                Certification by the Corporation’s Chief Executive Officer
                (9)32.2
            
            Section 906
                Certification by the Corporation’s Chief Financial Officer
                (9)




* 
      The schedules to this document are not being filed herewith.  The Company
      agrees to furnish supplementally a copy of any such schedule to the Securities
      and Exchange Commission upon request.




(1)
            Filed
                on May 6, 1999 as an exhibit to the Company's Registration Statement
                on
                Form SB-2 (File No. 333-60487), as amended, and incorporated herein
                by
                reference.





(2)
            Filed
                on January 27, 2000 as an exhibit to a report by the Company on a
                Form 8-A
                and incorporated herein by
                reference.





(3)
            Filed
                on September 15, 2006 as an exhibit to the Company 's Registration
                Statement on Form SB-2 (File No. 333-137362) and incorporated herein
                by
                reference.





(4)
            Filed
                on September 29, 2000 as an exhibit to the Company 's report on Form
                10-KSB for the fiscal year ended June 30, 2000 and incorporated herein
                by
                reference.





42


(5)
            Filed
                on August 26, 2005 as an exhibit to a report by the Company on a
                Form 8-K
                dated August 25, 2005 and incorporated herein by
                reference.





(6)
            Filed
                on July 12, 2006 as an exhibit to a report by the Company on a Form
                8-K
                dated July 7, 2006 and incorporated herein by
                reference.





(7)
            Filed
                as an exhibit to the Company 's first Current Report on Form 8-K
                filed on August 24, 2006.





(8)
            Filed
                as an exhibit to the Company 's second Current Report on Form 8-K
                filed on August 24, 2006.





(9)
            Filed
                herewith.





**[SIGNATURES
      PAGE FOLLOWS]**


43


**SIGNATURES**





In
      accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
      as
      amended, the registrant caused this report to be signed on its behalf by the
      undersigned, thereunto duly authorized.




**INFOSMART
                GROUP, INC.**
              (Registrant)Date:
                May 15, 2007
            By:
            /s/
              Chung KwokChung
                Kwok
              Chief
                Executive Officer and President








44