SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

(Mark One)

[X]  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE ACT OF
     1934

                     For the Fiscal Year Ended June 30, 2001

[  ] TRANSITION  REPORT UNDER SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934

       For the transition period from _______________ to ________________

                         Commission File Number 0-30430

                              INTERMOST CORPORATION
                 ----------------------------------------------
                 (Name of Small Business Issuer in its charter)

              Utah                                         87-0418721
----------------------------------          ------------------------------------
(State or other jurisdiction                (I.R.S. Employer Identification No.)
 of incorporation or organization)

     27th Floor, 600 Renmin Rd.(South), Tower C, TianAn International Plaza
                             Shenzhen, China 518005
     ----------------------------------------------------------------------
               (Address of principal executive offices)(Zip code)

Issuer's telephone number, including area code:  86 755 220 1941

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

      Title of each class      Name of each exchange on which each is registered
      -------------------      -------------------------------------------------
            None                                 None

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

                         Common Stock, $0.001 par value
                                (Title of class)

     Check  whether  the issuer:  (1) filed all reports  required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 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
    ---   ----

         Check if  disclosure  of  delinquent  filers in response to Item 405 of
Regulation S-B is not contained in this form, and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB. [ ]

         The  Issuer's  revenues  for the fiscal  year ended June 30,  2001 were
$984,179.

         The number of shares of the registrant's  common stock, $.001 par value
per share,  outstanding as of September 19, 2001 was  13,120,481.  The aggregate
market value of the voting and non-voting  common equity held by  non-affiliates
of the  registrant on September  19, 2001,  based on the last sales price on the
OTC Bulletin Board as of such date, was approximately $656,024.

                       DOCUMENTS INCORPORATED BY REFERENCE

     None

     Transition Small Business Disclosure Format: Yes   No  X
                                                     ---   ----
<PAGE>


                                TABLE OF CONTENTS

                                                                           Page

PART I

         ITEM 1.      DESCRIPTION OF BUSINESS..........................     1
         ITEM 2.      DESCRIPTION OF PROPERTY..........................     7
         ITEM 3.      LEGAL PROCEEDINGS................................     7
         ITEM 4.      SUBMISSION OF MATTERS TO A VOTE OF
                      SECURITY HOLDERS.................................     7

PART II

         ITEM 5.      MARKET FOR COMMON EQUITY AND
                      RELATED STOCKHOLDER MATTERS......................     8
         ITEM 6.      MANAGEMENT'S DISCUSSION AND ANALYSIS.............     9
         ITEM 7.      FINANCIAL STATEMENTS.............................    15
         ITEM 8.      CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
                      ON ACCOUNTING AND FINANCIAL DISCLOSURE...........    15

PART III

         ITEM 9.      DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
                      CONTROL PERSONS; COMPLIANCE WITH
                      SECTION 16(a) OF THE EXCHANGE ACT................    16
         ITEM 10.     EXECUTIVE COMPENSATION...........................    18
         ITEM 11.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
                      OWNERS AND MANAGEMENT............................    19
         ITEM 12.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...    19
         ITEM 13.     EXHIBITS AND REPORTS OF FORM 8-K.................    20

SIGNATURES

<PAGE>


         This annual report on Form 10-KSB contains  forward-looking  statements
within the  meaning of the federal  securities  laws.  These  forwarding-looking
statements include without limitation  statements regarding our expectations and
beliefs  about the  market and  industry,  our goals,  plans,  and  expectations
regarding our products and services and product development,  our intentions and
strategies  regarding customers and customer  relationships,  our intentions and
strategies  regarding  the  formation  of strategic  relationships,  our beliefs
regarding the future success of our products and services,  our expectations and
beliefs  regarding  competition,  competitors,  the basis of competition and our
ability to  compete,  our  beliefs  regarding  trademark,  copyright  and patent
protections,  our beliefs and expectations  regarding  infringement  claims, our
beliefs and expectations regarding our ability to hire and retain personnel, our
beliefs  regarding  period to period  results of  operations,  our  expectations
regarding  sales and  revenues,  our  expectations  regarding  future growth and
financial  performance,  our  beliefs  regarding  the  development  of  industry
standards,  our expectations and beliefs regarding  revenue growth,  our beliefs
and  expectations  regarding  the  adequacy of our  facilities,  our beliefs and
expectations regarding our financial position, ability to finance operations and
growth and the amount of  financing  necessary  to support  operations,  and our
intentions and expectations  regarding deferred tax assets. These statements are
subject to risks and uncertainties that could cause actual results and events to
differ  materially.  These risks and  uncertainties  include without  limitation
those  identified in the section of this annual  report on Form 10-KSB  entitled
"Factors That May Affect Future  Results"  below.  We undertake no obligation to
update forward-looking  statements to reflect events or circumstances  occurring
after the date of this annual report on Form 10-KSB.

         As used in this  annual  report  on Form  10-KSB,  unless  the  context
otherwise  requires,  the terms "we," "us," "the Company," and "Intermost" refer
to Intermost Corporation, a Utah corporation, and its subsidiaries.

         We  operate  through  various  subsidiaries,  all of which are  located
outside  of the United  States.  All  references  to China or the PRC are to the
People's  Republic of China.  Our financial  statements  are presented in United
States Dollars  ("US$").  Our sales are principally in Hong Kong Dollars ("HK$")
and Renminbi ("Rmb"). At June 30, 2001, the prevailing exchange rate of US$ into
HK$ and Rmb was US$1.00 = HK$7.738 and US$1.00 = Rmb8.28.

                                     PART I

ITEM 1.  BUSINESS

General

         Intermost is an enterprise  e-commerce  solutions provider in China. We
operate  within  what  is  commonly  referred  to as the  "business-to-business"
segment of the  Internet  market in which  products  and  services  are  offered
principally to businesses as compared to the  "business-to-consumer"  segment of
the  Internet  in  which  products  and  services  are  offered  principally  to
consumers.  It is our objective to become a top provider of e-commerce solutions
in our selected  market  segment,  namely  Chinese  enterprises.  Here we define
`enterprises'   as  those   firms  or   organizations   operating   outside  the
telecommunications,  government, and financial services (insurance,  securities,
banking)  industries.  Our  principal  products are  e-commerce  solutions  that
address the needs of our clients for enterprise resource management, ("SCM") and
customer relations management ("CRM") systems.

         In addition to our CRM solutions,  we provide e-commerce solutions that
center on web design and hosting  targeted to smaller firms and software  system
integration  and  web-based  security  products,  including  firewalls and virus
protection.

         Our operations are located entirely in China and Hong Kong.

History and Development of the Company

     The Company was  incorporated  as La Med Tech,  Inc.  under the laws of the
State of Utah on March 6, 1985.  The Company  changed its name to  Entertainment
Concepts  International during 1987, to Lord & Lazarus,  Inc. during 1988 and to
Utility Communication International, Inc. during 1996.

     From  inception  through  October of 1998,  the Company's  operations  were
limited to efforts to identify and acquire, or merge with, one or more operating
businesses.

                                       1
<PAGE>

         In October 1998, the Company acquired all of the issued and outstanding
shares of Intermost  Limited  ("IML"),  a British  Virgin  Islands  Company,  in
exchange (the  "Exchange") for the issuance of 4,970,000 shares of the Company's
common  stock,  representing  58.7% of the  outstanding  shares  of the  Company
following  the  Exchange.  IML was  formed  in  January  of 1998  to  develop  a
Chinese-language  Internet business portal and provide state-of-the-art internet
services  with a view to becoming a leading  provider of such services in China.
Following the Exchange,  the Company changed its name to Intermost  Corporation,
terminated  all of its prior  activities,  adopted the business  plan of IML and
appointed the officers and directors of IML to replace previous management.

         Our current principal  offices are located at 27th Floor,  Tower C, 600
Renmin Road South, TianAn International Plaza, Shenzhen, China 518005.

Developments During Fiscal Year 2001

         From the fourth  quarter of fiscal 2000 through the end of fiscal 2001,
the global market for Internet services and products experienced a sharp decline
in growth which was  accompanied by a general  reduction in technology  spending
and a broad decline in the equity markets.

         In response to the sharp and rapid  decline in Internet and  technology
spending,  our  management  team  undertook  an in-depth  review of our business
strategy in June 2000. The focus of the review was to identify areas of strength
within the Company and viable  market  opportunities  which could be serviced by
the  Company,   and  to  phase  out  product  and  service  offerings  requiring
substantial  future  investment  on our part or  exhibiting  limited  short-  to
intermediate-term revenue and profitability prospects.

         Despite the sharp decline in Internet and technology spending globally,
as a result of the early stage of  development  of the Internet in China and the
efficiencies  which can be  obtained  by  adopting  an  Internet  strategy,  our
management believes the Internet industry in Greater China will continue to grow
in both size and  importance.  The  revised  strategy of  management,  which was
deployed  during fiscal 2001,  focuses on the delivery of enterprise  e-commerce
solutions in Greater China.  Management will analyze  technologies  selected for
development  or  implementation  to ensure  that they  complement  our  existing
technology  knowledge  base such that each  successive  technology  builds  core
knowledge and  expertise.  Our business  strategy  positions us to cultivate and
profit from  industry  growth at this  fundamental  level.  In other words,  the
Intermost  position  does not depend on the success of a particular  industry or
technology, but on the growth of the overall Chinese Internet market.

         With the adoption of our revised business  strategy,  fiscal 2001 was a
transition  period  during  which  we (1)  developed  our SCM  and  CRM  product
offerings,  (2) pursued  opportunities  to establish  alliances with established
companies  seeking to introduce  Internet and related  software  products in the
Chinese market, and (3) terminated  ventures in areas identified to be no longer
attractive  or  requiring  substantial  investment  without  certainty as to the
timing and amount of return on investment.

         Significant activities and developments during fiscal 2001 included:

         -  Introduction  of SCM and CRM  Products.  Following  almost a year of
development  and testing,  we introduced our supply chain  management  software,
known as imSCM, and our distribution management software, known as imPARTNER, in
June 2001.

         - Software Development  Alliances.  During fiscal 2001, we entered into
strategic  alliances or contracts to (1) jointly develop with Interact  Commerce
Corporation,   a  U.S.  provider  of  mid-market  electronic  customer  relation
management  software,  e-CRM software for the Chinese market;  and (2) develop a
code management software product for Natoma  Technologies,  a technical products
and  services  firm  specializing  in  custom-made  Internet  and  Web  software
development.

         - Termination  of Ventures.  During fiscal 2001, we terminated  various
ongoing  or  pending  ventures  which  were  determined  by  management  to have
diminished  profit  prospects  as a result of the  downturn in the  Internet and
technology markets and related  developments.  Ventures or operations terminated
during fiscal 2001 included:



                                       2
<PAGE>


o    Jiayin Joint Venture.  Management  determined that market  conditions would
     not support the investment of additional funds needed to commercialize  the
     telephone payment software products  developed by the Jiayin Joint Venture.
     As a result of such  determination,  we terminated our efforts  relative to
     Jiayin Joint  Venture and recorded a loss on  abandonment  of phone payment
     system in the amount of $813,370.

o    Sino-E  Venture.  Operations  of Shenzhen  Sino-E  E-commerce  Company Ltd.
     ("Sino-E"),  involving  the  development  of an  exchange  platform  system
     serving Chinese  manufacturers,  were suspended as a result of the downturn
     in Internet related markets and Sino-E is being liquidated. As a result, we
     recorded an  impairment of our  investment in an associated  company in the
     amount of $143,622.


o    Dunwell  Computer  Acquisition.  As a  result  of the  downturn  in  market
     conditions  which have  adversely  affected the web hosting  operations  of
     Dunwell Computer (H.K.) Limited ("Dunwell"),  the proposed acquisition of a
     70% interest in Dunwell was never consummated and the Company is evaluating
     its legal rights to terminate  the  transaction  and recover the portion of
     the purchase  price paid and  advances to Dunwell  totaling  $284,300.  The
     Company  recorded a valuation  allowance  relating  to the amounts  paid or
     advanced  to  Dunwell,   totaling  $284,300,  which  is  accounted  for  as
     compensation  expense due to the  relationship of a director of the Company
     to the controlling  shareholder of Dunwell. See "Certain  Relationships and
     Related Transactions".

o    J.R.  Hi-Tech/Huifeng  Acquisition.  In September 2000, the Company entered
     into an  agreement  to  acquire  58.3% of the  outstanding  shares  of J.R.
     Hi-Tech  Investment  Corporation  from  its  shareholders.  J.R.  Hi-Tech's
     principal   holding  is  an  indirect  90%   interest  in  Shenzhen   China
     Websecurity.com,  a Chinese-foreign  equity joint venture, which engages in
     the  provision  of Internet  security  services,  systems  integration  and
     software  development  services.  Based on the terms of the agreement,  the
     purchase  price of the  shares of J.R.  Hi-Tech  was  $181,159  in cash and
     510,300  shares of common  stock of the Company.  The Company  tendered the
     cash portion of the purchase price in January 2001 but the  shareholders of
     J.R.  failed to deliver the shares of J.R.  Hi-Tech and the Company did not
     issue the shares  representing  the  balance  of the  purchase  price.  The
     Company has commenced legal  proceedings  against J.R. Hi-Tech to terminate
     the transaction and recover the cash portion of the purchase price.  Due to
     uncertainty  of any recovery from the  shareholders  of J.R.  Hi-Tech,  the
     Company  recorded a valuation  allowance  for the full amount paid to those
     shareholders,  totaling  $181,159,  which  is  accounted  for as a bad debt
     expense.

     - Management Changes. During fiscal 2001, eBiz Incubation Co. Ltd. invested
$360,000 in the Company  and, in  conjunction  with that  investment,  appointed
Francis Tsui to our board of directors.  Subsequently,  in June,  2001, Mr. Tsui
was elected  Acting  Chairman and Mr. Andy Lin assumed the role of President and
Chief  Executive  Officer  following the resignation of Mr. Jun Liang from those
positions.

Intermost's Strategy

         Our strategy is to target and  capitalize on the delivery of enterprise
e-commerce  solutions in the Chinese market based on naturally  occurring stages
in the development of that market. It is our belief that the Chinese  enterprise
e-commerce  market is a potentially  large market which is in the early stage of
development and that the market will develop in stages  approximating the stages
experienced  in the  development  of more  mature  markets.  We do not intend to
target  specific  industries or  technologies.  Instead,  we plan to develop and
offer Web based software  solutions that offer  efficiencies and cost-savings to
Chinese enterprises and meet the specific needs of the Chinese market.

         Key elements of our strategy include:


o    Capitalize on "first mover" advantage. Our imSCM and imPartner products are
     believed to be among the first SCM and CRM products specifically  developed
     for, and introduced in, the Chinese market. We believe that we will be able
     to capitalize on our China-based operations and early entry into the market
     to establish  name  recognition,  embed our solutions  and create  customer
     loyalty.


o    Partnering  with  established  software  developers  seeking  to enter  the
     Chinese  market.  We  have  entered  into  alliances,  and  intend  to form
     additional alliances, with established U.S. developers of Internet software
     products  seeking to enter the  Chinese  market  with a Chinese  technology
     partner.



                                       3
<PAGE>

o    Create  localized  versions  of  software  products.  We intend to  provide
     software  development,  marketing  and  integration  services  to adapt our
     overseas  partners'  software  products to the needs of the Chinese market,
     while our partners  continue to provide technical and marketing support for
     the products.

o    Provide  low-cost   contract  program  services  to  non-Chinese   software
     developers.  We intend to  capitalize  on our low cost  structure  to offer
     standard  Java  programming   services  to  U.S.  software  developers  and
     integrators  seeking to reduce their product  development cost and possible
     entry into the Chinese market.

         Our  objective  is to establish  Intermost as a recognized  provider of
cost-effective  reliable  e-commerce  solutions  developed  specifically for the
Chinese market, including internally developed solutions and solutions developed
by our overseas partners.

Products and Services

         At June 30, 2001,  we had offered,  or were  developing,  the following
products and services:

         -- imSCM

         We introduced imSCM, our e-commerce  supply chain management  software,
in  June  2001.  imSCM  is  a  modular  software  product  designed  to  control
information flow between internal  purchase  organizations  (such as purchasing,
inventory  warehouse and accounting  departments) and suppliers.  imSCM utilizes
Internet  technology to extend an  enterprise's  extranet to suppliers in remote
locations,  streamlining the purchasing  process and improving  information flow
between purchasers and suppliers.

         Main functionalities of imSCM are:


o    Supplier  Management.  Supplier  Management  allows  enterprises  to manage
     suppliers and products they supply,  including  facilitating  online annual
     inspections.

o    Purchase Process Management.  Purchase Process Management allows the entire
     purchasing process, from purchase requirements to accounts payable data, to
     be controlled and maintained online. Forms utilized in the purchase process
     can be  generated  online  and  transmitted  seamlessly  to  suppliers  and
     suppliers  can respond to  purchase  requests  immediately  with the entire
     process recorded online.

o    Bidding/Reverse Auction Process Management. Bidding/Reverse Auction Process
     Management    allows    enterprises   to   efficiently    conduct   initial
     bidding/reverse auction processes for all purchase requirements online.

         imSCM has been  developed  specifically  for the Chinese  market and is
particularly suitable for manufacturing and assembly oriented enterprises.

         --  imPARTNER

         We  introduced   imPARTNER,   our  e-commerce   customer   relationship
management  software,   in  June  2001.  imPARTNER  is  designed  to  extend  an
enterprise's  internal information to its customers,  distributors and branches,
enhancing   communication   between  internal   organizations  (such  as  sales,
marketing, production and customer service) and downstream parties.

         Main functionalities of imPARTNER are:

o    Customer  Management.  Customer  Management  allows  enterprises  to manage
     customer/distributor  information  efficiently  in a centralized  location.
     Historical  information  of all  customer  contact  is stored in a database
     allowing  enterprises to generate customer  intelligence and build customer
     relations.

o    Selling Process  Management.  Selling Process Management allows enterprises
     to manage the entire  selling  process  starting  from  initial  contact to
     accounts  receivable,  following  confirmation  of shipment with the entire
     process recorded online.



                                       4
<PAGE>

o    Inventory and  Logistics  Management.  Inventory  and Logistics  Management
     allows enterprises to manage  inventories,  including  inventory located at
     branches  in  different  geographical  areas with  inventory  status  being
     entered,   verified   and  checked   online  and   logistics   requirements
     automatically generated.

         imSCM and imPartner have received industry awards in a Survey conducted
by Information Industry Association of Shenzhen.  More than 100 software vendors
nationwide participated in the survey.

         -- Software Programming Services

         We  provide  subcontract   software   programming   services  to  U.S.,
Singaporean,  Hong  Kong  and  other  developers  and  integrators  of  software
solutions.

         Our team of programmers  and software  engineers are trained in the use
of, and utilize, the Capability Maturity Model ("CMM"), a comprehensive  process
for making  software  development  streamlined,  cost-effective,  efficient  and
predictable.  CMM  methodologies  and  standards,   developed  by  the  Software
Engineering  Institute at Carnegie Mellon  University,  are designed to create a
process of continuous improvement to create high quality products.

         Our software programming capabilities at June 30, 2001 included:

o    Languages.  Java (IDM Visual Age and Inprise's  JBuilder) C++  (MicroSoft's
     Visual C++ and Inprise's C++ Builder)

o    Application Server. (BEA's Weblogic and IBM's Websphere)

o    Data Base. (Oracle, Sybase, SQL Server and DB2)

o    Modeling Tools. (Rational Rose)

         We perform  software  planning,  tracking and oversight  activities for
subcontracted  work based on criteria set by our  clients.  We work closely with
our clients' project teams to ensure the integrity of both process and product.

Marketing

         Our  focus  on  enterprise  e-commerce  solutions  allows  us  to  find
marketing  success  on  a  limited  budget.  Unlike  many   business-to-consumer
e-commerce  companies  who face a  requirement  of reaching  mass  audiences via
expensive marketing campaigns,  Intermost can target its efforts to its selected
niche. Our marketing efforts include press releases, participation in technology
conferences, seminars, tradeshows, and programs of client training. The delivery
of training to our clients  allows us to better  learn of their  future  product
needs while  providing us the  opportunity  to educate  them on possible  future
e-commerce software solutions.

         Our marketing  efforts are conducted  under the direction of our senior
management personnel and our director of marketing.

Competition

         Our market share and that of our competitors may be materially affected
by regulatory,  technological and financial developments in the future. With the
imminent admission of China to the World Trade Organization (WTO), certain trade
and regulatory  barriers which have limited foreign competition within China may
be removed  resulting  in a  potential  shift in market  share to large  foreign
competitors  which may enter the Internet market in China.  Management  believes
that such a shift,  should it occur,  would involve a phase-in period of between
three and five years.  Likewise,  rapid changes in technology  may allow certain
competitors to offer better services at lower costs, and access to financing may
allow certain competitors to grow their businesses rapidly through acquisitions,
increased marketing and investments in personnel and advanced technologies.  Any
of these factors could adversely affect our potential market share.

                                       5
<PAGE>

         We have no patented  technology to preclude  competitors  from entering
our  markets.  As a  professional  service  firm,  we rely on the  skill  of our
personnel and the core  competencies  we build through  training over time.  Our
services will be compared based upon performance,  price, and reliability.  Some
of our  competitors  offer more  comprehensive  technology  solutions,  and have
longer   operating   histories,   larger   installed   customer  bases,   longer
relationships with clients, and significantly  greater financial,  technical and
public  relations  resources  than we do. There can be no assurance  that we can
successfully compete with existing competitors or with new competitors which may
enter one or more of our markets.

Intellectual Property and Proprietary Rights

         While  we do not  presently  hold  any  copyrights,  service  marks  or
trademarks,  we expect to rely on  trademark  and  copyright  law,  trade secret
protection  and  confidentiality   and/or  license  agreements  with  employees,
customers, partners and others to protect intellectual property rights. There is
no assurance,  however,  that such  applications will be adequate to protect our
interest.  We  maintain a policy  requiring  all key  technical  and  managerial
personnel to enter into employment agreements and/or non-disclosure, non-compete
agreements  containing  provisions preventing the unauthorized use or disclosure
of  intellectual  property.  We  intend  to  review  our  intellectual  property
protection  policies with  intellectual  property counsel on a periodic basis in
the future to assure appropriate protective measures continue to be in place.

         Many parties are actively developing  homepage,  search and related Web
technologies.  Developers of such  technologies can be expected to take steps to
protect these  technologies,  including seeking patent protection.  There may be
patents  issued or pending  that are held by others  and that cover  significant
parts of our technology,  business methods or services.  Disputes over rights to
these  technologies  may arise in the  future.  We cannot  be  certain  that our
products and services do not or will not infringe upon valid patents, copyrights
or other intellectual  property rights held by third parties.  We may be subject
to legal  proceedings and claims from time to time relating to the  intellectual
property  of others in the  ordinary  course  of our  business.  In the event we
determine that licensing this intellectual  property is appropriate,  we may not
be able to obtain a license  on  reasonable  terms or at all.  We may also incur
substantial  expenses in  defending  against  third-party  infringement  claims,
regardless of the merit of these claims.  Successful infringement claims against
us may  result  in  substantial  monetary  liability  or  may  prevent  us  from
conducting all or a part of our business.

         We also intend to continue to license  technology  from third  parties,
including  Web-server,  encryption,  exchange platform,  and enterprise resource
management  technology.  The  market  is  evolving  and we may  need to  license
additional  technologies  to remain  competitive.  We may not be able to license
these technologies on commercially  reasonable terms or at all. In addition,  it
is possible that licensed  technologies may not be successfully  integrated into
our services.  The inability to obtain any of these licenses could delay product
and  service  development  until  alternative  technologies  can be  identified,
licensed and integrated.

Regulation

         We  are  subject  to  and  affected  by  Chinese   laws,   regulations,
administrative determinations, court decisions and similar constraints regarding
operation in China, Internet usage and e-commerce.

         Investment  and  operation  in China  are  governed  by  various  rules
regulating permissible forms of foreign investment.  We have obtained government
approval  to  operate  in  China,  and do  operate,  as a wholly  foreign  owned
enterprise  and, as such,  are not required to maintain  Chinese  government  or
private ownership in our company.

         China has enacted other regulations  governing Internet  connection and
the  distribution of information via the Internet.  Pursuant to Article 6 of the
Revised  Provisional  Regulations  Governing the Management of Chinese  Computer
Information  Networks  Connected  to  International  Networks,   individuals  or
entities  operating  computer  networks  within China which are connected to the
Internet  and  conduct   international   information   exchange   must  use  the
international  access channels provided by the Ministry of Information  Industry
("MII") and obtain various licenses and approvals. We have secured the necessary
licenses and approvals  and access the Internet  through  ChinaNet,  an approved
channel of the MII.

         We intend to work  diligently to assure  compliance with all applicable
regulations  which may impact our business,  including  cooperating with the MII
and the Ministry of Public Security. There can be no assurance, however, that we
will be  successful  in our  efforts  to assure  full  compliance  with  Chinese
regulations affecting our operations or that additional  regulations will not be
enacted which might adversely impact our operations.

                                       6
<PAGE>

Employees

         As of June 30, 2001, we employed 62 full-time employees, 2 of whom were
management executives, 20 of whom were  engineering/technical  staff, 16 of whom
were  administrative  and  clerical,  and 24 of whom were  sales  personnel.  We
anticipate the need to hire additional computer  programmer/systems  specialists
to support our expansion plans.  None of our employees are a member of any labor
union,  and we have never  experienced any business  interruption as a result of
any labor disputes.  We do not provide any special benefit or incentive programs
for our  employees.  We  believe  that we enjoy good  relations  with all of our
employees.

ITEM 2.  DESCRIPTION OF PROPERTY

         Our  principal  office is located at 600 Renmin  South Road,  Shenzhen,
China  518005,  on the 27th  floor of the Tower C,  TianAn  International  Plaza
covering  6000  square feet of office  space.  The  premises  are leased from an
unrelated  third party with rental  payments and management  fees of $60,000 per
year and the lease will expire in September  2002. We moved to the above address
in August 2001,  after spending one year in our previous office in 43rd floor of
Shenfang  Plaza.  The move was part of a  coordinated  effort  to cut  operating
costs.

         Management  believes  that the  Company's  facilities  are  adequate to
support  operations for the foreseeable  future.  The Company owns a 5000 square
feet office space in Guomao Building,  which is leased out to an unrelated third
party at market price.

ITEM 3.  LEGAL PROCEEDINGS

     In June  2001,  we  filed a law suit in the  High  Court  of the Hong  Kong
Special Administrative Region,  Intermost Corporation v. J.R. Hi-Tech Investment
Corporation,  et.al, against J.R. Hi-Tech Investment Corporation and the control
persons of  Huifeng.  The suit  alleges  breach of  contract  on the part of the
defendants  for failure to perform  under the  contract  wherein the  defendants
agreed to convey a controlling interest in Huifeng to Intermost.  We are seeking
return of the cash  portion of the  purchase  price in the amount of 1.5 million
Hong Kong Dollars,  plus additional damages and injunctive relief. An injunction
freezing  the 1.5 million Hong Kong Dollars was granted in our favor on June 22,
2001 and,  following a hearing on July 3, 2001, the injunction has been extended
until further order. In conjunction with, and as a condition of, the injunction,
we have posted a bond in the amount of HK$500,000  with the court.  We intend to
vigorously pursue our rights under the agreement relating to Huifeng.

     In conjunction with the proceeding against J.R. Hi-Tech and its principals,
Xinlei Wang, one of the principals of J.R.  Hi-Tech and a defendant in the suit,
filed an action against  Intermost in September 2001 before a Labour Tribunal in
Hong Kong alleging wrongful  termination of employment and seeking  compensation
in the amount of  HK$294,166.60.  We, in turn, filed an action in the High Court
of the Hong Kong Special  Administration  Region seeking  declaratory  judgement
that the  termination of employment was valid and that no severance pay or other
amounts are due to Xinlei Wang.

         The Company is from time to time a party to lawsuits  incidental to its
business. We are not aware of any current,  pending, or threatened litigation or
proceedings  that  could  have a  material  adverse  effect  on our  results  of
operations,  cash flows or  financial  condition,  other than the one  mentioned
above.

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

         None.


                                       7
<PAGE>

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         Our common  stock  trades on the OTC  Bulletin  Board  under the symbol
"IMOT".

         The  following  table  presents  the range of high and low  closing bid
prices for our common stock on the OTC Bulletin Board for each quarterly  period
during the last two fiscal years. Such quotations  reflect  inter-dealer  prices
without retail  mark-up,  mark-down or commission  and may not represent  actual
transactions.

                                                        High             Low
                                                       ------           -----
Fiscal 2000

              Quarter ended September 30, 1999          7.652            3.000
              Quarter ended December 31, 1999           7.875            2.375
              Quarter ended March 31, 2000              6.500            3.750
              Quarter ended June 30, 2000               4.062            1.875

Fiscal 2001

              Quarter ended September 30, 2000          3.000            1.000
              Quarter ended December 31, 2000           1.250            0.310
              Quarter ended March 31, 2001              0.530            0.310
              Quarter ended June 30, 2001               0.330            0.050

         As of  September  19,  2001,  the last  sales  price  per  share of the
Company's common stock as reported by the OTC Bulletin Board was $ 0.05.

         As of  September  19,  2001,  there were  approximately  525 holders of
record of the Company's common stock.

         We have never  declared or paid any cash  dividend on our common  stock
and do not expect to declare or pay any such dividend in the foreseeable future.


                                       8
<PAGE>

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

         The following  discussion  and analysis  should be read in  conjunction
with the Company's financial  statements and notes thereto included elsewhere in
this Form 10-KSB.  Except for the historical  information  contained herein, the
discussion in this Form 10-KSB contains certain forward looking  statements that
involve risks and  uncertainties,  such as  statements  of the Company's  plans,
objectives,  expectations and intentions. The cautionary statements made in this
Form 10-KSB should be read as being applicable to all related forward statements
wherever  they appear in this Form 10-KSB.  The Company's  actual  results could
differ materially from those discussed here.

General

         The  following  discussion  should  be read  in  conjunction  with  the
financial statements appearing elsewhere herein.

         Intermost's  predecessor  was  formed in  January  of 1998 to develop a
Chinese-language  Internet business portal and provide state-of-the-art internet
services  with a view to becoming a leading  provider of such services in China.
We pursued our portal and Internet services strategy from 1998 through mid-2000.

         From the fourth  quarter of fiscal 2000 to the end of fiscal 2001,  the
global market for Internet services and products  experienced a sharp decline in
growth which was accompanied by a general reduction in technology spending and a
broad decline in the equity markets.

         In response to the sharp and rapid  decline in Internet and  technology
spending,  our management  team undertook an in-depth  examination and review of
our  business  strategy  in June 2000.  The focus of the review was to  identify
areas of strength within the Company and viable market opportunities which could
be  serviced by the  Company,  and phase out  products  and  services  requiring
substantial  future  investment  on our part or  exhibiting  limited  short-  to
intermediate-term revenue and profitability prospects.

         Despite the sharp decline in Internet and technology spending globally,
as a result of the early stage of  development  of the Internet in China and the
efficiencies  which can be  obtained  by  adopting  an  Internet  strategy,  our
management believes the Internet industry in Greater China will continue to grow
in both size and  importance.  The  revised  strategy of  management,  which was
deployed  during fiscal 2001,  focuses on the delivery of enterprise  e-commerce
solutions in Greater China.  Management will analyze  technologies  selected for
development  or  implementation  to ensure  that they  complement  our  existing
technology  knowledge  base such that each  successive  technology  builds  core
knowledge and  expertise.  Our business  strategy  positions us to cultivate and
profit from industry growth at this fundamental  level.  Stated another way, the
Intermost  position  does not depend on the success of a particular  industry or
technology. Instead, success of the strategy depends in large part on the growth
of the overall Chinese Internet market.

         With the adoption of our revised business  strategy,  fiscal 2001 was a
transition  period  during  which  we (1)  developed  our SCM  and  CRM  product
offerings,  (2) pursued  opportunities  to establish  alliances with established
companies  seeking to introduce  Internet and related  software  products in the
Chinese  market,  and (3)  terminated  ventures in areas  deemed to be no longer
attractive  or  requiring  substantial  investment  without  certainty as to the
timing and amount of return on investment.

         Significant activities and developments during fiscal 2001 included:

         - Introduction of SCM and CRM Products.  We introduced our supply chain
management software,  known as imSCM, and our distribution  management software,
known as imPARTNER, in June 2001.

         - Software Development  Alliances.  During fiscal 2001, we entered into
strategic  alliances or contracts to (1) jointly develop with Interact  Commerce
Corporation,   a  U.S.  provider  of  mid-market  electronic  customer  relation
management  software,  e-CRM software for the Chinese market;  and (2) develop a
code management software product for Natoma  Technologies,  a technical products
and services firm specializing in custom Internet and Web software development.

         - Termination  of Ventures.  During fiscal 2001, we terminated  various
ongoing  or  pending  ventures  which  were  determined  by  management  to have
diminished  profit  prospects  as a result of the  downturn in the  Internet and
technology markets and related  developments.  Ventures or operations terminated
during fiscal 2001 included:

                                       9
<PAGE>

o    Jiayin Joint Venture.  Management  determined that market  conditions would
     not support the investment of additional funds needed to commercialize  the
     telephone payment software products  developed by the Jiayin Joint Venture.
     As a result of such  determination,  we terminated our efforts  relative to
     Jiayin Joint  Venture and recorded a loss on  abandonment  of phone payment
     system in the amount of $813,370.

o    Sino-E  Venture.  Operations  of Shenzhen  Sino-E  E-commerce  Company Ltd.
     ("Sino-E"),  involving  the  development  of an  exchange  platform  system
     serving Chinese  manufacturers,  were suspended as a result of the downturn
     in Internet related markets and Sino-E is being liquidated. As a result, we
     recorded an  impairment of our  investment in an associated  company in the
     amount of $143,622.

o    Dunwell  Computer  Acquisition.  As a  result  of the  downturn  in  market
     conditions  which have  adversely  affected the web hosting  operations  of
     Dunwell Computer (H.K.) Limited ("Dunwell"),  the proposed acquisition of a
     70% interest in Dunwell was never consummated and the Company is evaluating
     its legal rights to terminate  the  transaction  and recover the portion of
     the purchase  price paid and  advances to Dunwell  totaling  $284,300.  The
     Company  recorded a valuation  allowance  relating  to the amounts  paid or
     advanced  to  Dunwell,   totaling  $284,300,  which  is  accounted  for  as
     compensation  expense due to the  relationship of a director of the Company
     to the controlling  shareholder of Dunwell. See "Certain  Relationships and
     Related Transactions".

o    J.R.  Hi-Tech/Huifeng  Acquisition.  In September 2000, the Company entered
     into an  agreement  to  acquire  58.3% of the  outstanding  shares  of J.R.
     Hi-Tech  Investment  Corporation  from  its  shareholders.  J.R.  Hi-Tech's
     principal   holding  is  an  indirect  90%   interest  in  Shenzhen   China
     Websecurity.com,  a Chinese-foreign  equity joint venture, which engages in
     the  provision  of Internet  security  services,  systems  integration  and
     software  development  services.  Based on the terms of the agreement,  the
     purchase  price of the  shares of J.R.  Hi-Tech  was  $181,159  in cash and
     510,300  shares of common  stock of the Company.  The Company  tendered the
     cash portion of the purchase price in January 2001 but the  shareholders of
     J.R.  failed to deliver the shares of J.R.  Hi-Tech and the Company did not
     issue the shares  representing  the  balance  of the  purchase  price.  The
     Company has commenced legal  proceedings  against J.R. Hi-Tech to terminate
     the transaction and recover the cash portion of the purchase price.  Due to
     uncertainty  of any recovery from the  shareholders  of J.R.  Hi-Tech,  the
     Company  recorded a valuation  allowance  for the full amount paid to those
     shareholders,  totaling  $181,159,  which  is  accounted  for as a bad debt
     expense.

     - Management Changes. During fiscal 2001, eBiz Incubation Co. Ltd. invested
$360,000 in the Company  and, in  conjunction  with that  investment,  appointed
Francis Tsui to our board of directors.  Subsequently,  in June,  2001, Mr. Tsui
was elected Acting Chairman and Andy Lin assumed the role of President and Chief
Executive Officer following the resignation of Jun Liang from those positions.

Results of Operations

         Following is summary  financial  information  reflecting the operations
for the periods indicated.

                                                         Year Ended June 30,
                                                     2000                 2001
                                                     ----                 ----

         Net sales                               $  1,568,636      $    984,179
         Cost of services                           1,392,248           844,215
         Gross profit                                 176,388           139,964
         Selling, general and administrative        1,942,447         3,493,575
         Operating loss                            (1,766,059)       (3,353,611)
         Loss on abandonment of fixed assets               -            (39,184)
         Loss on abandonment of phone
            payment system                                 -           (813,370)
         Share of loss in an associated company      (166,718)         (275,035)
         Impairment of investment in an
           associated company                              -           (143,622)
         Other income, net                             24,539            17,088
         Loss before minority interest             (1,908,238)       (4,607,734)
         Minority interest                            137,839           403,510
         Net income (loss)                       $ (1,775,065)     $ (4,204,225)

                                       10
<PAGE>


Year Ended June 30, 2001 Compared to Year Ended June 30, 2000

         Net  Sales.  Net sales for the year ended June 30,  2001  decreased  to
$984,179, or 37.3%, from $1,568,636 for the year ended June 30, 2000.

         Net sales during fiscal 2001 were derived  principally  from E-commerce
solutions  and  advertisement  sales while net sales during fiscal 2000 included
E-commerce solutions,  software development and advertisement sales. "E-commerce
solutions"  include  web site design and  development,  including  web  hosting,
system sales and integration, and telephone payment system.

         The following  table reflects the total net sales and percentage of net
sales  represented by E-commerce  solutions and by software  development for the
periods indicated:
<TABLE>

                                             Total Net Sales      Percent of Total Net Sales
                                         ----------------------   --------------------------
                                           Year Ended June 30,        Year Ended June 30,
                                          -------------------        -------------------
                                           2000          2001        2000           2001
                                           ----          ----        ----           ----
                                            US$           US$
<S>                                      <C>          <C>           <C>          <C>

E-commerce solutions
     - Web site design and development    534,555       469,096      34.08%       47.66%
     - System sales and integration       826,613       421,746      52.70%       42.85%
     - Telephone payment system               901             0       0.06%        n/a %
                                        ---------      --------    --------    ---------
                                        1,362,089       890,842      86.83%       90.52%
Software development                      118,790             0       7.57%        n/a %
Advertisement                              87,777        93,337       5.60%        9.48%
                                        ---------      --------     -------      -------
     Total                              1,568,636       984,179      100.0%       100.0%
                                        =========      ========      ======       ======
</TABLE>

     Total net sales decreased 37.3% to $984,179 during the fiscal year end June
30, 2001  compared  to  $1,568,636  during the fiscal year ended June 30,  2000.
Total E-commerce  solutions revenues decreased 34.6 % to $890,842 in fiscal 2001
as compared to $1,362,069  during fiscal 2000.  Among the individual  components
comprising E-commerce  solutions:  Web design and development revenues decreased
12.25% to $469,096 in fiscal 2001 as compared to $534,555  during  fiscal  2000;
system sales and integration  revenues  decreased 49% to $421,746 in fiscal 2001
as compared to $826,613  during  fiscal  2000;  and,  telephone  payment  system
revenues decreased to $0 in fiscal 2001 as compared to $901 during fiscal 2000.

     There were no software  development revenues during fiscal 2001 as compared
to $118,790 of software development revenues during fiscal 2000.

     Advertisement  revenues increased 6 % to $93,337 in fiscal 2001 as compared
to $87,777during fiscal 2000.

     The  decline  in  total  net  sales,   e-commerce  solutions  and  software
development  revenues  were  primarily  attributable  to the  transition  of the
Company's business, due to the review of the Company business plan in June 2000.
Under the restructured business model, the Company focused on providing Internet
based e-commerce  solutions to Chinese companies in two to five industries.  Our
resources were shifted  during fiscal 2001 to focus on the in-house  development
and       marketing      of       Supply-Chain-Management       ("SCM")      and
Customer-Relation-Management  ("CRM")  solutions.  Our SCM and CRM software were
released in June 2001.

     The plan to develop the  Company's  ChinaE.com  web site into an e-commerce
platform has been terminated.

     Revenues  historically  generated by traditional web hosting and web design
operations,  began to decline during the September 2000 quarter and are expected
to  continue  to  decline  as those  services  are being  phased  out.  With the
introduction  of our SCM and CRM products,  and web hosting and design  services
expected to decline as a percentage of our total revenues,  sales in SCM and CRM
are expected to become the principal source of revenues.

     Before the  introduction of our own SCM and CRM software  products,  during
fiscal 2001, we acted as a re-seller of Saleslogic,  a CRM product, and provided
network security services in an effort to offset declines in revenues associated
with the transition of our business.

     Advertisement  revenue  for our web site is not  expected  to  reflect  any
meaningful increase.

                                       11
<PAGE>

     Costs of Services.  Costs of services  consist  principally of salaries for
computer   network   technicians,   costs  of  systems  sales  and  integration,
depreciation and amortization, and other costs including travel, welfare, office
and  related  expenses  allocated  to  the  engineering  and  technician  staff.
Additionally,  other cost of services  during the 2000 period  includes  certain
other costs associated with the offering of special promotional packages,  which
included participation in a seminar, lodging and advertisement.

     The following  table reflects the principal  components of cost of services
and  percentage  of net sales  represented  by each  component  for the  periods
indicated:
<TABLE>

                                       Total Cost of Services     Percent of Total Net Sales
                                         Year Ended June 30,         Year Ended June 30,
                                        2000           2001          2000         2001
                                      ---------      --------      --------     --------
                                         US$           US$
<S>                                  <C>             <C>           <C>          <C>

Engineers/technician salaries           210,885       132,355       13.44%       13.45%
Subcontract fees                        153,622       143,550        9.79%       14.59%
Cost of system sales and integration    745,059       325,309       47.50%       33.05%
Depreciation                             25,230        17,965        1.61%        1.83%
Other                                   257,452       225,036       16.41%       22.87%
                                      ---------      --------      -------      -------
     Total                            1,392,248       844,215       88.76%       85.78%
                                      =========      ========     ========      =======
</TABLE>

         Compared  to the same  period  of 2000,  the  total  costs of  services
decreased 39.4% to $844,215.  Engineers/technician salaries decreased 37.2%. The
other services  related cost decreased  39.7%.  The decline in costs of services
was due to cost containment  efforts and lower volume. The principal  components
of cost of  services  during  fiscal  2001 were cost of  hardware;  other  costs
associated with support on the engineering/technician staff; engineer/technician
salaries; and depreciation of equipment utilized in connection with services.

         Selling,  General  and  Administrative  Expense.  Selling,  general and
administrative  expense ("SG&A") consists  principally of (1) sales commissions,
advertising,  trade show and seminar expenses,  and direct-field  sales expense,
(2) salary for  administrative  and sales staff,  (3)  corporate  overhead,  (4)
amortization of  intangibles,  and (5) research and  development.  During fiscal
2001,  SG&A also  included  certain  bad debt  expenses  and a noncash  director
compensation  expense  associated with a terminated  acquisition.  The following
table  reflects the  principal  components  of SG&A and  percentage of net sales
represented by each component for the periods indicated:
<TABLE>

                                               Total SG&A           Percent of Total Net Sales
                                            Year Ended June 30,         Year Ended June 30,
                                           2000           2001         2000         2001
                                         --------       --------     --------     --------
                                            US$            US$
<S>                                   <C>              <C>            <C>          <C>

Sales and marketing salaries and
     commissions                          107,859        175,374        6.88%       17.82%
Other sales and marketing expenses        306,088        224,699       19.51%       22.83%
Rentals                                    42,010        134,875        2.68%       13.70%
Administrative salaries                   199,834        554,695       12.74%       56.36%
Other corporate                         1,074,142      1,630,963       68.48%      165.72%
Amortization of intangibles               144,928        144,927        9.24%       14.73%
Bad debt                                        0        198,767        n.a.%       20.20%
Director compensation -
 valuation allowance                            0        284,300        n.a.%       28.89%
Research and development                   67,586        144,975        4.30%       14.73%
                                       ----------     ----------    ----------------------
     Total                              1,942,447      3,493,575      123.83%      354.97%
                                        =========      =========      =======     ========
</TABLE>

         For  fiscal  2001,  SG&A  increased  79.8%,  to  $3,493,575.  Sales and
marketing  salaries and commissions  increased 62.6%.  Rentals increased 221.1%.
Administrative  salaries  increased  177.6%.  The  increase  in  SG&A  has  been
principally  attributable to a combination of (1) an increase in  administrative
support staff, including the addition of three senior management personnel,  (2)
corporate overhead  including rental,  professional fee and legal fee for annual
auditing and due diligence  reports,  (3) marketing efforts  associated with the
promotion and other costs associated with marketing  research,  industry journal
advertising,   relocation  of  new  office  and  other  related  expenses,   (4)
commencement of research and  development  relating to the Company's SCM and CRM
products, (5) a bad debt charge relating to a terminated transaction,  and (6) a
compensation charge relating to a terminated transaction.

                                       12
<PAGE>


         The  principal  components  of SG&A  during  fiscal 2001 were sales and
marketing salaries and commissions; other marketing expenditures; administrative
salaries  and  benefits;  other  corporate  expense,  which  includes  occupancy
expense,  general office  expenses,  travel,  general staff welfare  expense and
consulting fees, among others; and amortization of intangibles. Also included in
SG&A during fiscal 2001 were the following  non-recurring non-cash expenses: (1)
bad debt expense of $198,767, of which $181,159 represents a valuation allowance
with  respect  to  the  cash  portion  of the  purchase  price  of the  proposed
acquisition of shares of J.R. Hi-Tech Investment,  which acquisition the Company
has not been  consummated  and with  respect to which the  Company is  presently
engaged in legal  proceedings  to  terminate  the  acquisition  and  recover the
purchase price, and (2)  compensation  expense of $284,300 arising from proposed
acquisition  of  Dunwell  Computer,  a company  controlled  by a  relative  of a
director of the Company,  which  acquisition  has not been  consummated and with
respect to which the Company is  evaluating  its legal rights to  terminate  the
transaction  and  recover  the  portion  of the  purchase  price paid along with
advances to Dunwell.

          Amortization  expense  related  to the acquisition  of  eighty  system
integration  contracts from Labtam Corporation in July 1999 for 69,700 shares of
common stocks of the Company.  The intangible  assets are being amortized over a
24-month period,  representing the life of the contracts and the expected useful
life of the technological  know-how.  We incurred amortization expense quarterly
of approximately  $36,000 for the system integration  contracts through June 30,
2001.

         Research and development  expense,  totaling  $144,975 for fiscal 2001,
was principally attributable to expenditures to support the shift in the Company
strategy,  including technology team salary which was related to the development
of SCM and CRM products. R&D expenses totaled $67,586 in the prior fiscal year.

         Loss on  Abandonment of Phone Payment  System.  During fiscal 2001, the
Company's  management  determined that market  conditions  would not support the
investment of additional  funds needed to  commercialize  the telephone  payment
software  products  developed by the Jiayin Joint  Venture.  As a result of such
determination,  the Company  recorded a loss on abandonment of the phone payment
system developed by Jiayin in the amount of $813,370.

         Share of Loss of an Associated  Company and Impairment of Investment in
an Associated  Company.  During fiscal 2000, the Company acquired a 40% interest
in Shenzhen Sino-E E-commerce Company Ltd. ("Sino-E"),  a venture engaged in the
development of an exchange platform system serving Chinese manufacturers.  Under
the equity method of accounting,  the Company reports its allocable share of the
loss of  Sino-E,  which  share  totaled  $166,718  during  fiscal  year 2000 and
$275,035 during fiscal year 2001. During fiscal 2001,  operations of Sino-E were
suspended as a result of the downturn in Internet  related markets and Sino-E is
being  liquidated.  As a result,  during  fiscal 2001,  the Company  recorded an
impairment of investment in an associated company in the amount of $143,622.

         Minority Interest. Minority interest represents the portion of the loss
of Jiayin  Joint  Venture not  attributable  to the Company.  Minority  interest
totaled $137,839 during fiscal 2000 and $403,510 during fiscal 2001. As a result
of the  termination  of operations of Jiayin Joint Venture,  no future  minority
interests are expected to be reported.

Liquidity and Capital Resources

         At June  30,  2001 we had cash and cash  equivalents  of  $498,326  and
working  capital  of  $128,420  as  compared  to  $1,637,317  of cash  and  cash
equivalents and $2,087,982 of working capital at June 30, 2000.

         Our primary  sources of financing has been cash from the sale of common
stock and, to a lesser degree, cash provided by operating activities and various
loans from shareholders and directors.

         Operations  used $1,487,492 of cash during the year ended June 30, 2001
as compared  to  $1,572,809  of cash used  during the year ended June 30,  2000.
Funds used in  operations  primarily  relate to the losses  incurred  during the
period and reductions in payables during the period, which were partially offset
by various non-cash charges to earnings.

         Investing  activities used $272,209 during the year ended June 30, 2001
and  $1,681,437  during the year ended June 30,  2000.  Funds used in  investing
activities  during  fiscal 2001  consist of  purchases  of  equipment to support
operations and advances to related  companies,  which were  partially  offset by
repayments of amounts owed by a director.  Funds used in investing activities in
fiscal 2000 consist of  purchases of  equipment,  investments  in an  affiliated
company,  loans to a  director  and  reductions  in  amounts  due from our joint
venture partner, Jiayin Investment Company Limited.

                                       13
<PAGE>

         Financing  activities  provided  $620,711 of cash during the year ended
June 30, 2001 and $4,367,619 during the year ended June 30, 2000. Funds provided
by  financing   activities  during  the  year  ended  June  30,  2001  consisted
principally  of (1) $335,000 of proceeds  from the sale of  1,152,000  shares of
common stock to eBiz  Incubation Co. Ltd., (2) $75,000 of proceeds from the sale
of 60,000 shares which had been  subscribed but not previously paid for, and (3)
loans  from  directors  totaling  $211,049.   The  cash  provided  by  financing
activities in the 2000 period was  attributable to (1) the receipt of $3,821,269
of net proceeds from the sale of 1,753,334  shares of common stock,  and (2) the
receipt of $551,932 of capital  contributions by joint venture  partners,  which
was  partially  offset by  repayments  of loans from  directors in the amount of
$5,582.

         We had no long term debt at June 30, 2001 or June 30, 2000.

         During the 2001  period,  the  Company  incurred  substantial  non-cash
charges,  write-downs  and  impairments of  investments  in connection  with the
termination  or  abandonment  of  various   ongoing  or  pending   ventures  and
investments and the transition of the Company's business and the marked downturn
in the  Internet  related  markets.  Included in the  charges,  write-downs  and
impairments  were (1) a $181,159 bad debt  representing  the cash portion of the
purchase price of the J.R. Hi-Tech  transaction,  which transaction is presently
the subject of legal  proceedings  instituted  by the Company to  terminate  the
transaction and recover the funds paid to shareholders  of J.R.  Hi-Tech,  (2) a
$284,300  directors  compensation  charge  representing  the cash portion of the
purchase  price of a 70% interest in Dunwell,  which is  controlled  by a family
member of a director of the Company, plus advances to Dunwell, which transaction
the Company is seeking to  terminate,  (3) a $143,622  loss from  impairment  of
investment in an associated company attributable to the suspension of operations
of Sino-E,  and (4) a $813,370 loss on the  abandonment  of phone payment system
attributable to the termination of operations of Jiayin.

         Based on our current  operating  losses, we anticipate that our cash on
hand is only sufficient to support operations  through November 2002.  Beginning
in the second  half of fiscal  2001,  we have  implemented  broad  cost  control
measures  in order to  reduce  our  overhead.  Included  in those  cost  control
measures are  reductions in our payroll with the  executive  staff being reduced
from 6 to 2 persons  and total head count  being  reduced  from 62 to 32 between
January 1, 2001 and September 30, 2001.  Additionally,  we relocated our offices
to reduce our lease  expense.  We anticipate  that a combination of cost control
measures and the  commencement of revenues from the roll out and commencement of
sales of our SCM and CRM  software  will  allow us to  reduce or  eliminate  our
operating losses beginning in the second half of fiscal 2002. Depending upon the
timing and ultimate  achievement of profitability and the growth initiatives and
investments  undertaken,  we may be required to seek  additional  capital in the
future to support  operations  and  acquisitions.  We are presently  involved in
discussions  with various  financing  sources  with respect to providing  equity
financing  but have no  agreements  in that  regard  at this  time.  There is no
assurance that we will be successful in securing any additional capital that may
be  required.  If  additional  capital is required  but cannot be  secured,  our
operations may be substantially adversely effected.

Certain Factors Affecting Future Operating Results

         Our operating results have been, and will continue to be, affected by a
wide variety of factors, in addition to those discussed above, that could have a
material  adverse  effect on revenues and  profitability  during any  particular
period,  including  the  timing  of  introduction  of our SCM  and CRM  software
products,  the level and rate of  acceptance of our products and services by the
Chinese people,  continued growth in use of the Internet in China,  entry of new
competition (including established companies from outside of China and companies
with substantially  greater resources),  fluctuations in the level of orders for
services which are received and can be delivered in a quarter,  rescheduling  or
cancellation  of orders by customers,  competitive  pressures on selling prices,
changes in  product,  service or  customer  mix,  rapid  changes in  technology,
dependence  upon  certain  key  employees,  availability  and  cost of  computer
technicians,  loss of any strategic relationships,  our ability to introduce new
products and services on a timely basis,  new product and service  introductions
by our competitors, requirements for additional capital to support future growth
and   acquisitions,   fluctuations  in  exchange  rates,  and  general  economic
conditions, among others.

                                       14
<PAGE>


         Additionally,  our  operations  may  be  impacted  by  various  factors
associated  with  doing  business  in  China,  including,  but not  limited  to,
uncertainty  regarding the  application or  enforcement  of various  regulations
relating to business  generally,  and the Internet  specifically,  and potential
changes in such regulations, political or economic conditions, methods and rates
of  taxation,  and  other  factors.  We may be  impacted  by the  ongoing  Asian
financial crisis. Countries in the Asia Pacific region have recently experienced
weaknesses in their currency,  banking and equity markets. These weaknesses,  as
well as  uncertainty  arising in connection  with the September  2001  terrorist
attacks in the United  States,  could  adversely  affect,  among  other  things,
consumer demand for  discretionary  goods in the region  (perhaps  including our
products and services which may be considered  expenditures  by consumers),  and
the U.S. dollar value of our foreign  currency  denominated  sales (e.g., to the
extent sales are denominated in Renminbi or Hong Kong dollars). In addition, our
interest  income and expense may be  sensitive  to  fluctuations  in the general
level  of  Hong  Kong  and  Chinese  interest  rates.  However,  as  we  conduct
substantially  all of our operations,  including  substantially all of our sales
and expenses,  in Renminbi or Hong Kong dollars,  management does not believe we
are  exposed to undue risk  arising  from  fluctuations  of the  exchange  rates
between those currencies and the U.S. dollar.

         Except  as noted  above,  we are not  aware of any  trends,  events  or
uncertainties  which  have had,  or are  reasonably  likely to have,  a material
impact on our operations or our short-term or long-term liquidity.

Currency Presentation and Foreign Currency Translation

         Translation of amounts from Renminbi ("Rmb") into United States dollars
("US$") is for the  convenience  of readers and has been made at the noon buying
rate in New York City for cable transfers in foreign currencies as certified for
customs  purposes by the  Federal  Reserve  Bank of New York on June30,  2001 of
US$1.00 = Rmb8.28.  No  representation  is made that the Renminbi  amounts could
have been, or could be,  converted into United States dollars at that rate or at
any other rate.

Inflation

         Inflation has historically not had a material effect on our operations.
When the price of products  and services  increases,  we believe that we will be
able to pass those higher  prices on to the  customer.  Accordingly,  we believe
inflation will not have a material effect on our future operations.

ITEM 7.  FINANCIAL STATEMENTS

         The  financial  statements,  together  with the  independent  auditors'
report thereon of Blackman Kallick  Bartelstein LLP, appear beginning on page 22
of this report.

ITEM 8.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
         FINANCIAL DISCLOSURE

     In July 1999, the Company's Board of Directors dismissed Andersen, Andersen
& Strong,  L.C. as the independent  auditors for the Company and selected Arthur
Andersen & Co. to serve as its new independent auditors.

     In October 2000, Arthur Andersen & Co. resigned as the independent auditors
for the Company and, in February 2001, the Company's Board of Directors selected
PricewaterhouseCoopers to serve as its new independent auditors.

     In  September   2001,   the   Company's   Board  of   Directors   dismissed
PricewaterhouseCoopers  as the independent auditors for the Company and selected
Blackman Kallick Bartelstein LLP to serve as its new independent auditors.

     Andersen,  Andersen & Strong's  reports on the financial  statements of the
Company for the fiscal years ended  December 31, 1995,  1996 and 1997 contain no
adverse  opinion or  disclaimer of opinion and were not qualified or modified as
to uncertainty (other than uncertainty as to the Company's continuing as a going
concern),  audit scope, or accounting principles.  In connection with its audits
for fiscal years 1995,  1996 and 1997, and through the date of their  dismissal,
there were no disagreements with Andersen, Andersen & Strong, L.C. on any matter
of accounting  principles  or  practices,  financial  statement  disclosure,  or
auditing  scope  or  procedure,  which  disagreements  if  not  resolved  to the
satisfaction of Andersen, Andersen & Strong, L.C. would have caused them to make
reference thereto in its reports on the financial statements for such years.

                                       15
<PAGE>

         Arthur Andersen & Co.'s audit report on the financial statements of the
Company as of June 30,  2000 and for the two years  ended June 30, 1999 and 2000
contained no adverse  opinion or  disclaimer of opinion and was not qualified or
modified as to uncertainty,  audit scope, or accounting  principles.  During the
Company's  two most  recent  fiscal  years  and any  subsequent  interim  period
preceding the resignation of Arthur Andersen & Co., there were no  disagreements
with Arthur Andersen & Co. on any matter of accounting  principles or practices,
financial  statement   disclosure,   or  auditing  scope  or  procedure,   which
disagreements  if not  resolved to the  satisfaction  of Arthur  Andersen & Co.,
would have caused Arthur  Andersen & Co. to make reference to the subject matter
of the disagreements in connection with its report.

         PricewaterhouseCoopers   did  not  render  any  audit  reports  on  the
financial statements of the Company. During the Company's two most recent fiscal
years  and  any   subsequent   interim   period   preceding   the  dismissal  of
PricewaterhouseCoopers,  there were no disagreements with PricewaterhouseCoopers
on any  matter  of  accounting  principles  or  practices,  financial  statement
disclosure, or auditing scope or procedure,  which disagreements if not resolved
to   the   satisfaction   of    PricewaterhouseCoopers,    would   have   caused
PricewaterhouseCoopers   to  make   reference  to  the  subject  matter  of  the
disagreements  in  connection  with its report.  During the  Company's  two most
recent fiscal years and any subsequent interim period preceding the dismissal of
PricewaterhouseCoopers,  there  have  been  no  reportable  events  of the  type
required to be disclosed by Item 304(a)(1)(v) of Regulation S-K.

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
        WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT

Identification  of  Directors,   Executive  Officers  and  Certain   Significant
Employees

         The  following  table  sets forth  certain  information  regarding  the
directors and executive officers of the Company.

         Name            Age            Position

         Andy LIN         55   President, Chief Executive Officer and Director
         Francis TSUI     40   Acting Chairman of the Board
         Sai Keung CHAN   45   Secretary and Director
         Jun LIANG        40   Director
         Shim YANG        43   Director
         Sonny HUNG       39   Director

         There  are no  family  relationships  among  any of  the  directors  or
officers of the Company.

Business Experience

         Andy LIN has served as  President  and Chief  Executive  Officer of the
Company since June 2001 and as a director of the Company since October 1998. Mr.
Lin  co-founded the Company's  predecessor,  IML, in January 1998 and previously
served as Vice  President of the Company  from the  Exchange,  in October  1998.
Prior to forming IML, he was the vice president of China Business Resources from
1994 to 1998. Mr. Lin graduated from Tsinghua University in 1970 with a Bachelor
degree and from the Chinese Academy of Sciences in 1981 with a Master of Science
degree in computer science.

         Francis TSUI has served as Acting Chairman of the Board of Directors of
the Company  since June 2001.  Mr. Tsui has served as Managing  Director of Ebiz
Incubation,  an  information  technology  investment  holding firm,  since 2000.
Previously,  Mr. Tsui served as  Assistant  Director of John  Hancock  Financial
Services,  a private equities company,  from 1995 to 1998. From 1998 to 1999, Mr
Tsui was the Director of Business Development in Eastgate (HK) Limited. Mr. Tsui
received a PhD in Chinese  Culture and History and an MBA from the University of
Hawaii.

                                       16
<PAGE>

         Jun LIANG  co-founded the Company's  predecessor,  IML, in January 1998
and served as its President and a Director from inception  until the Exchange in
October 1998 and as President of the Company from the date of the Exchange until
June 2001 and as a Director of the Company since the Exchange.  Prior to forming
IML, from 1994 to 1998, Mr. Liang was the president of China Business Resources,
a  privately-owned   Hong  Kong  company  specializing  in  providing  companies
directories,  business  directory  services and other  business  information  in
print,  CD-ROM and electronic  format.  Mr. Liang  graduated from Beijing Shijou
University in 1982 with a Bachelor of Science degree in Chemical Engineering and
from  Stanford  University  in 1986 with a Master of Science  degree in Chemical
Engineering.

         Sai Keung CHAN joined the Company's predecessor,  IML, as Secretary and
a Director  in January  1998 and  assumed  the same  positions  with the Company
following the Exchange in October 1998.  Mr. Chan received a law degree from the
University  of  Southampton,  U.K.  and since 1986 has been a partner in the law
firm of Liau, Ho & Chan in Hong Kong.

         Shim YANG  joined the  Company's  predecessor,  IML,  as a Director  in
January 1998 and was appointed a Director of the Company  following the Exchange
in October 1998.  Since December 1997, Mr. Yang has been a Managing  Director of
Corporate Finance International Ltd., a privately-held investment consulting and
business  brokerage  company in Hong Kong  specializing in corporate finance and
business  restructuring  consulting,  where  he  is  responsible  for  corporate
development  and strategic  management.  From January 1997 to December 1997, Mr.
Yang served as Managing  Director of CEC (HK) Ltd., a privately-held  company in
Hong Kong specializing in securing  financing for start-up internet companies in
Hong Kong and China.  From 1993 to 1996, Mr. Yang served as Managing Director of
Eagle Gain Ltd., a privately-held  company in Hong Kong specializing in securing
financing for real estate  development  in China.  Mr. Yang received a Bachelors
degree in Economics from the University of Foreign Trade in China in 1982.

     Sonny HUNG has served as a Director of the Company  since August 2001.  Mr.
Hung has  served as Vice  President  of  Yorkshire  Capital,  a Hong  Kong-based
investment  banking  firm,  since  June 2000.  Previously,  Mr.  Hung  served as
Director of Corporate  Development of Man Sang  International from November 1996
to March 2000.  From 1991 to 1997 he was in various  senior  positions  with Dah
Sing Bank,  Hong Kong Bank. Mr. Hung received  Bachelors  degrees in Finance and
Banking from San Francisco State  Universety and an MBA from Baptist  University
in Hong Kong.

Term of Office

         The directors  named above will serve until the next annual  meeting of
the Company's  shareholders.  Officers will hold their positions at the pleasure
of the Board of Directors, absent any employment agreement.

Compliance With Section 16(a) of Exchange Act

         Under  the  securities  laws  of  the  United  States,   the  Company's
directors,  its executive officers, and any person holding more than ten percent
of the Company's Common Stock are required to report their initial  ownership of
the Company's  Common Stock and any subsequent  changes in that ownership to the
Securities  and Exchange  Commission.  Specific due dates for these reports have
been  established and the Company is required to disclose any failure to file by
these dates during  fiscal year 2001.  To the  Company's  knowledge,  all of the
filing requirements were satisfied on a timely basis in fiscal year 2001, except
for the  following:  (1) Francis Tsui, an outside  director,  failed to file one
Form 3 reporting his initial appointment as a director;  and (2) eBiz Incubation
Co. Ltd., failed to file one Form 3 reporting its initial  acquisition of 10% of
the Company's shares. In making these disclosures, the Company has relied solely
on written statements of its directors,  executive officers and shareholders and
copies of the reports that they filed with the Commission.

                                       17
<PAGE>

ITEM 10. EXECUTIVE COMPENSATION

         The following table sets forth  information as to the compensation paid
or accrued to each executive officer receiving compensation of at least $100,000
per year and the Chief  Executive  Officer  for the three  years  ended June 30,
2001:
<TABLE>

                                            Annual Compensation
                                 -------------------------------------------
                                                               Other Annual   All Other
  Name and Principal Position    Year      Salary    Bonus     Compensation  Compensation
------------------------------   -----     ------    ------    ------------- ------------
<S>                              <C>       <C>       <C>       <C>           <C>

Andy Lin.......................  2001     $ 33,860  $    -        $2,173    $       0
   Chief Executive Officer.....  2000       67,720       -         4,348            0
   and President (1)...........  1999       33,860       -         2,173            0

Jun Liang......................  2001     $ 40,633  $    -         2,173    $       0
  Chief Executive Officer,.....  2000       81,266       -         4,348            0
  Chairman and President (2)...  1999       40,633       -         2,173            0
</TABLE>

-------------

(1)  Mr. Lin was  appointed  as Chief  Executive  Officer and  President  of the
     Company in June 2001.  Previously,  Mr. Lin served as Vice President of the
     Company.

(2)  Mr.  Liang  served as Chief  Executive  Officer of the Company from October
     1998 until June 2001.

Director's Compensation

         The Company  currently pays its  non-employee  directors  approximately
$125  per  meeting  attended  with  compensation  limited  to  $125  in a  month
regardless  of the number of  meetings  attended.  The  Company  reimburses  its
directors for out-of-pocket expenses incurred on behalf of the Company.

Other Compensation and Employment Arrangements

         The Company, at June 30, 2001, had no employment  agreements but enters
into confidentiality agreements with substantially all of its employees pursuant
to  which  those  employees  are  prohibited  from  disclosing  confidential  or
proprietary information of the Company.

         Beginning  in  January  1999,  until  the  Company  attains  sufficient
revenues through operations,  the Company pays to each of its executive officers
approximately  $2,600  per  month.  The  Company  does  not  have  any  pension,
profit-sharing,  stock bonus,  or other benefit  plans.  The Company  expects to
enter into employment agreements with key employees,  to implement comprehensive
compensation  arrangements  with its officers and to adopt  benefit plans in the
future at the  discretion  of the  Board of  Directors  to  attract  and  retain
officers and key employees.

         In  February  2001,  the  Board  of  Directors   adopted,   subject  to
shareholder approval within 12 months, a stock option plan under which 3,000,000
shares of common  stock are  reserved  for  issuance  pursuant  to options to be
granted to key employees. As of June 30, 2001, no options had been granted under
the plan.

                                       18
<PAGE>

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Common Stock

         The following  table is furnished as of September 19, 2001, to indicate
beneficial  ownership  of  shares  of the  Company's  Common  Stock  by (1) each
shareholder of the Company who is known by the Company to be a beneficial  owner
of more than 5% of the  Company's  Common  Stock,  (2) each  director  and named
officer of the Company,  individually, and (3) all officers and directors of the
Company as a group.
<TABLE>

         Name and Address of                           Number of Shares
         Beneficial Owner (1)                          Beneficially Owned    Percent
     <S>                                              <C>                    <C>
     Allied Point Limited (3)..........................   3,218,653   (2)    24.0%
     Jun LIANG (3).....................................   3,218,653   (2)    24.0%
     Andy LIN (3)......................................   3,218,653   (2)    24.0%
     eBiz Incubation Co. Ltd. (4)......................   1,152,000   (5)     8.6%
     Francis TSUI (4)..................................   1,152,000   (5)     8.6%
     Shim YANG.........................................     250,000           1.9%
     Sai Keung CHAN....................................     200,000           1.5%
     Sonny HUNG........................................           0             0%
     All officers and directors as a group (6 persons).   4,820,653          35.9%
</TABLE>

------------------

(1)  Unless  otherwise  noted,  each person or group  identified  possesses sole
     voting and  investment  power with respect to the shares shown opposite the
     name of each person or group.
(2)  Allied  Point  Limited  is a  corporation  organized  under the laws of the
     British  Virgin  Islands and is owned 50% by Jun Liang and 50% by Andy Lin.
     Therefore,  Mr. Liang and Mr. Lin are deemed to be the beneficial owners of
     those shares.
(3)  Address is 27th Floor, Tower C, Tian An Int'l Plaza, 600 Renmin Rd.(South),
     Shenzhen, China.
(4)  Address is Rm 3106, China Merchants Tower,  Shun Tak Centre,  200 Connaught
     Road, Central, Hong Kong.
(5)  Francis Tsui is Managing  Director of eBiz  Incubation  Co. Ltd. and may be
     deemed to be the beneficial owner of the shares held by eBiz Incubation Co.
     Ltd.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         During the years ended June 30, 2000 and 2001,  Jun Liang and Andy Lin,
officers,  directors and principal  shareholders of the Company,  advanced funds
to, and were  advanced  funds by,  the  Company  on an  unsecured,  non-interest
bearing basis without pre-determined  repayment terms. At June 30, 2000, the net
balance  owed to Mr.  Liang was $25,145 and no amounts  were owed to or from Mr.
Lin.  At June 30,  2001,  the net  balances  owed to Mr.  Liang and Mr. Lin were
$124,340 and $111,853, respectively.

         During  September  of 1999,  the Company  entered  into an agreement to
acquire 70% of Dunwell Computer for approximately $362,000,  payable $181,000 in
cash and the balance  being  payable by the issuance of 51,282  shares of common
stock  with  an  agreed  value  of  $181,000.  Dunwell  Computer  is  a  company
substantially  owned by Chan Sai Tak, the brother of Chan Sai Keung,  a director
of the Company.  During  2000,  the Company paid $181,00 in cash and advanced an
additional  $39,000 to Dunwell.  During 2001, the Company advanced an additional
$65,000 to Dunwell. The Company never issued the shares representing the balance
of the  purchase  price of the  interest  in  Dunwell  and the  purchase  of the
interest  in  Dunwell  was not  legally  consummated.  The  Company  intends  to
terminate  the proposed  acquisition  of the interest in Dunwell and to evaluate
whether the funds paid to Dunwell can be recovered, in part or in whole. Because
of the  apparent  inability of Dunwell to repay the amounts paid and advanced by
the Company to Dunwell, the Company has established a valuation reserve, and has
accounted for the reserve as compensation, in the amount of $284,300.

                                       19
<PAGE>

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits
<TABLE>

         Exhibit
         Number       Description of Exhibit
        ---------    -------------------------
        <S>        <C>

         2.1       Exchange Agreement with Shareholders of Intermost Limited (1)
         3.1       Articles of Incorporation (1)
         3.2       Bylaws (1)
         10.3      Cooperative Agreement re:formation of Jiayin E-Commerce joint venture (1)
         10.4      Agreement re: acquisition of customer accounts from Labtam Corporation (1)
         10.5      Subscription Agreement re: sale of common stock (1)
         10.8      Agreement Regarding Transfer of Properties on 38th Floor, Guomao Building (2)
         10.9      Joint Venture Agreement, dated June 1, 2000, re: Shenzhen SinoE E-commerce Co. Ltd. (3)
         10.10     Subscription  Agreement  dated October 24, 2000, by and among Intermost  Corporation,  J.R.
                   Hi-Tech Investment Corporation, Xinlei Wang and Yong Jiang (4)
         10.11*    Intermost Corporation 2001 Stock Compensation Plan
</TABLE>

-----------

*    Filed herewith.

**   Compensatory plan or management agreement.

(1)  Incorporated   by  reference  to  the   respective   exhibits   filed  with
     Registrant's  Registration  Statement  on Form 10-SB  (Commission  File No.
     0-30430).

(2)  Incorporated   by  reference  to  the   respective   exhibits   filed  with
     Registrant's  Quarterly  Report on Form 10-QSB for the quarter  ended March
     31, 2000.

(3)  Incorporated   by  reference  to  the   respective   exhibits   filed  with
     Registrant's Annual Report on Form 10-KSB for the year ended June 30, 2000.

(4)  Incorporated   by  reference  to  the   respective   exhibits   filed  with
     Registrant's Current Report on Form 8-K dated January 20, 2001.

     (b)  Reports on Form 8-K

     No reports on Form 8-K were filed during the quarter ended June 30, 2001.


                                       20
<PAGE>

                                   SIGNATURES

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

                                     INTERMOST CORPORATION



                                     By: /s/ Andy Lin
                                        ---------------------------------------
                                        Andy Lin
                                        President and Chief Executive Officer
Dated:   November 5, 2001

         In accordance  with the Exchange Act, this report has been signed below
by the following  persons on behalf of the  registrant and in the capacities and
on the dates indicated.

<TABLE>

    Signature                        Title                              Date
   -----------                      -------                            -------
<S>                             <C>                                 <C>

/s/ Andy Lin                     President, Chief Executive Officer   November 5, 2001
------------------------------
Andy Lin                        (Principal Executive Officer and
                                 Principal Financial and Accounting
                                 Officer) and Director

 /s/ Francis Tsui                Acting Chairman of the Board         November 5, 2001
------------------------------
Francis Tsui


                                Director                              November 5, 2001
------------------------------
Jun Liang


/s/ Sai Keung Chang              Director                             November 5, 2001
------------------------------
Sai Keung Chang


                                 Director                             November 5, 2001
------------------------------
Shim Yang


 /s/ Sonny Hung                  Director                             November 5, 2001
------------------------------
Sonny Hung
</TABLE>


                                       21
<PAGE>

                              INTERMOST CORPORATION

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS




Report of Independent Public Accountants                      F-1

Report of Independent Public Accountants                      F-2

Consolidated Balance Sheets                                   F-3

Consolidated Statements of Operations                         F-5

Consolidated Statements of Cash Flows                         F-6

Consolidated Statements of Changes in Stockholders' Equity    F-8

Notes to Consolidated Financial Statements                   F-10


                                       22
<PAGE>

                    Report of Independent Public Accountants


To the Stockholders and the Board of Directors of Intermost Corporation:


We have  audited  the  accompanying  consolidated  balance  sheet  of  Intermost
Corporation and  Subsidiaries  ("the Group") as of June 30, 2001 and the related
consolidated  statements of operations,  cash flows and changes in stockholders'
equity  for  the  year  then  ended.   These   financial   statements   are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these  consolidated  financial  statements  based on our  audit.  The
financial  statements for the Company as of and for the year ended June 30, 2000
were audited by other auditors whose report dated October 9, 2000,  expressed an
unqualified opinion on those financial statements.

We conducted our audit in accordance with auditing standards  generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audit  provides  a
reasonable basis for our opinion.

In our  opinion,  based on our  audit,  the  consolidated  financial  statements
referred to above  present  fairly,  in all  material  respects,  the  financial
position of Intermost  Corporation and  Subsidiaries as of June 30, 2001 and the
results  of their  operations  and their  cash flows for the year ended June 30,
2001, in conformity with accounting  principles generally accepted in the United
States of America.


/ s / Blackman Kallick Bartelstein, LLP

Chicago, Illinois
October 22, 2001


                                       F-1
<PAGE>



REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders and the Board of Directors of Intermost Corporation:

We have  audited  the  accompanying  consolidated  balance  sheets of  Intermost
Corporation  (a  company  incorporated  in the State of Utah,  United  States of
America;  formerly known as Utility  Communications  International,  Inc.;  "the
Company" and  Subsidiaries  ("the Group") as of June 30, 1999 and 2000,  and the
related  consolidated  statements  of  operations,  cash  flows and  changes  in
shareholders'  equity for the period  from  January 2, 1998 to June 30, 1998 and
the  years  ended  June 30,  1999 and  2000.  These  financial  statements  give
retroactive  effect  to  the  acquisition  of  Intermost  Limited  as a  reverse
acquisition  as described in Note 2 to the  accompanying  financial  statements.
These financial statements are the responsibility of the Company management. Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing standards
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our  opinion,  based on our audits,  the  consolidated  financial  statements
referred to above  present  fairly,  in all  material  respects,  the  financial
position of Intermost  Corporation and Subsidiaries as of June 30, 1999 and 2000
and the  results of their  operations  and their cash flows for the period  from
January 2, 1998 to June 30,  1998 and the years  ended  June 30,  1999 and 2000,
after giving  retroactive  effect to the  acquisition of Intermost  Limited as a
reverse  acquisition  as  described  in  Note  2 to the  accompanying  financial
statements,  in conformity with generally accepted accounting  principles in the
United States of America.


                                                /s/ Arthur Andersen & Co.
                                                Certified Public Accountants

Hong Kong,
October 9, 2000

                                      F-2


<PAGE>
                     Intermost Corporation and Subsidiaries

                           Consolidated Balance Sheets

                             June 30, 2000 and 2001
================================================================================
                                     Assets
<TABLE>

                                                               2000                      2001
                                                                           ------------------------------
                                                                Rmb                Rmb          US$
                                                           --------------  ---------------  -------------
<S>                                                         <C>             <C>             <C>

Current Assets
    Cash and bank deposits                                     13,556,982        4,126,138        498,326
    Accounts receivable, net of allowance for
      doubtful accounts of Rmb511,000 and
      Rmb0, respectively                                          794,035          459,279         55,468
    Costs and estimated earnings in excess of
      billings                                                    644,200          353,210         42,658
    Deposits, prepayments and other receivables, net
       of allowance for doubtful accounts of Rmb0
       and Rmb1,500,000, respectively                           3,614,815        1,786,050        215,707
    Inventories                                                    57,058           15,818          1,910
    Due from a director                                           284,265                -              -
    Due from related companies (Net of allowance for
       doubtful accounts of Rmb0 and Rmb2,354,000,
       respectively)                                            1,895,625           72,345          8,738
                                                           --------------  ---------------  -------------

                 Total Current Assets                          20,846,980        6,812,840        822,807


Investment in an Associated Company                             4,638,796        1,153,093        139,262


Plant and Equipment, Net                                        5,315,170        5,480,166        661,856


Phone Payment System, Net                                       7,976,196                -              -


Intangible Assets                                               1,199,996                -              -


Deferred Compensation Costs, Net                                1,744,878                -              -
                                                           --------------  ---------------  -------------


             Total Assets                                      41,722,016       13,446,099      1,623,925
                                                           ==============  ===============  =============

</TABLE>

   The accompanying notes are an integral part of these financial statements

                                      F-3
<PAGE>

================================================================================

                      Liabilities and Stockholders' Equity
<TABLE>


                                                                2000                      2001
                                                                            ----------------------------------
                                                                 Rmb                Rmb              US$
                                                             -------------  ---------------  -----------------
<S>                                                         <C>               <C>               <C>

Current Liabilities
    Accruals and other payables                                  2,442,236        1,868,961            225,720
    Deposit on liquidation of investment in
      associated company                                                 -        1,000,000            120,773
    Deposits from customers                                        262,900           61,400              7,415
    Deferred revenue                                               593,649          412,103             49,771
    Deferred rent                                                        -          362,638             43,797
    Business tax and government
      surcharges payable                                            51,508           88,744             10,718
    Due to directors                                               208,197        1,955,680            236,193
                                                             -------------  ---------------  -----------------

                 Total Current Liabilities                       3,558,490        5,749,526            694,387
                                                             -------------  ---------------  -----------------

Minority Interests                                               3,428,693           87,630             10,583
                                                             -------------  ---------------  -----------------

Stockholders' Equity
    Preferred stock, par value of US$0.001:
    - authorized - 5,000,000 shares as
        of June 30, 2000 and 2001
    - None outstanding                                                   -                -                  -
        as of June 30, 2000 and 2001
    Common stock, par value US$0.001:
    - authorized - 100,000,000 shares as of
        June 30, 2000 and 2001
    - outstanding and fully paid -                                  90,840          108,679             13,125
        10,971,468 and 13,120,481 shares
        as of June 30, 2000 and 2001,
        respectively
    - reserved and to be issued - 800,000                            6,624                -                  -
        as of June 30, 2000
    Additional paid-in capital                                  51,902,537       58,955,419          7,120,220
    Less - Subscription receivable                                (621,000)               -                  -
                                                             -------------  ---------------  -----------------

                                                                51,379,001       59,064,098          7,133,345

Accumulated Deficit                                            (16,613,282)     (51,424,259)        (6,210,659)
Cumulative Translation Adjustments                                 (30,886)         (30,896)            (3,731)
                                                             -------------  ---------------- ------------------

             Total Stockholders' Equity                         34,734,833        7,608,943            918,955
                                                             -------------  ---------------  -----------------

             Total Liabilities and Stockholders' Equity         41,722,016       13,446,099          1,623,925
                                                             =============  ===============  =================
</TABLE>

                                      F-4
<PAGE>


                     Intermost Corporation and Subsidiaries

                      Consolidated Statements of Operations

                       Years Ended June 30, 2000 and 2001

================================================================================

<TABLE>
                                                                2000                      2001
                                                                            --------------------------------
                                                                 Rmb                Rmb              US$
                                                           ---------------  ---------------  ---------------
<S>                                                       <C>                 <C>               <C>

Net Sales                                                  12,988,310         8,149,002           984,179

Cost of Services                                          (11,527,817)       (6,990,102)         (844,215)
                                                        ---------------      -------------     -----------

                  Gross Profit                              1,460,493         1,158,900            139,964

Selling, General and Administrative Expenses              (16,083,455)      (28,926,800)        (3,493,575)
                                                        ---------------      -------------     ------------

                 Loss from Operations                    (14,622,962)       (27,767,900)        (3,353,611)
                                                       ----------------     --------------    -------------

Other Income (Expense)
    Loss on disposal of fixed assets                              -            (324,441)           (39,184)
    Loss on abandonment of phone payment system                   -          (6,734,706)          (813,370)
    Share of loss in an associated company               (1,380,429)         (2,277,286)          (275,035)
    Impairment of investment in an associated
      company                                                     -          (1,189,192)          (143,622)
    Interest income                                          97,756             101,259             12,230
    Other                                                   105,426              40,226              4,858
                                                      ----------------      -------------    --------------

                 Total Other Expense, Net                (1,177,247)        (10,384,140)        (1,254,123)
                                                      ----------------      -------------    --------------

                 Loss before Minority Interests         (15,800,209)        (38,152,040)        (4,607,734)

Minority Interests                                        1,141,307           3,341,063            403,510
                                                      ---------------      --------------    --------------

                 Net Loss                               (14,658,902)        (34,810,977)        (4,204,224)

Other Comprehensive Loss
    Currency translation adjustments                        (38,639)                (10)                (1)
                                                      ---------------      --------------    ---------------

                 Comprehensive Loss                     (14,697,541)        (34,810,987)        (4,204,225)
                                                      ===============      ==============    ===============
Net Loss per Share
     Weighted average number of -
       shares outstanding
        Basic                                            10,284,765          11,899,202         11,899,202
                                                      ===============      ==============    ===============
Loss per Common Share - Basic                                 (1.43)              (2.93)             (0.35)
                                                      ===============      ==============    ===============

</TABLE>

   The accompanying notes are an integral part of these financial statements


                                      F-5
<PAGE>

                     Intermost Corporation and Subsidiaries

                      Consolidated Statements of Cash Flows

                       Years Ended June 30, 2000 and 2001

================================================================================

<TABLE>
                                                                        2000                      2001
                                                                                    ----------------------------------
                                                                         Rmb                Rmb              US$
                                                                 -----------------  ---------------  -----------------
<S>                                                              <C>                  <C>             <C>

Cash Flows From Operating Activities
    Net loss                                                      (14,658,902)       (34,810,977)      (4,204,224)
    Adjustments to reconcile net loss to net
      cash used in operating activities -
        Bad debt
             Operations                                                     -            145,793           17,608
             Deposit on investment in JRHIC                                 -          1,500,000          181,159
        Director compensation arising from
          valuation allowance                                               -          2,354,000          284,300
        Marketing expenses and employee
          compensation paid through issuance of
          common stock                                                      -          4,293,097          518,490
        Loss on disposal of fixed assets                                    -            324,441           39,184
        Loss on abandonment of phone payment system                         -          6,734,706          813,370
        Depreciation and amortization of plant and
           equipment and phone payment system                         993,921          2,759,488          333,271
        Amortization of intangible assets                           1,200,004          1,199,996          144,927
        Share of loss of an associated company                      1,380,429          2,277,286          275,035
        Impairment of investment in an associated
          company                                                           -          1,189,192          143,622
        Minority interests                                         (1,141,307)        (3,341,063)        (403,510)
        Stock-based compensation costs                              3,569,052          1,744,878          210,734
        (Increase) decrease in operating assets
             Accounts receivable, net                              (1,374,238)           328,486           39,672
             Costs and estimated earnings in excess
               billings                                                     -            290,990           35,144
             Deposits prepayments and other
               receivables                                         (4,234,025)           208,467           25,177
             Inventories                                              (57,058)            41,240            4,981
        Increase (decrease) in operating liabilities
             Accruals and other payables                              576,281           (573,275)         (69,237)
             Deposit on liquidation of investment in an
               associated company                                           -          1,000,000          120,773
             Deferred revenue                                               -           (181,546)         (21,926)
             Deferred rent                                                  -            362,638           43,797
             Deposits from customers                                  697,649           (201,500)         (24,336)
             Business tax and government surcharge
               payable                                                 25,331             37,236            4,497
                                                                ---------------      -------------  -------------

                 Net Cash Used in Operating Activities            (13,022,863)       (12,316,427)      (1,487,492)
                                                               ----------------      -------------  -------------
</TABLE>

   The accompanying notes are an integral part of these financial statements

                                      F-6
<PAGE>

                     Intermost Corporation and Subsidiaries

                      Consolidated Statements of Cash Flows

                       Years Ended June 30, 2000 and 2001

================================================================================
<TABLE>

                                                                      2000                   2001
                                                                                  ---------------------------
                                                                       Rmb             Rmb            US$
                                                                  --------------  ------------  -------------
<S>                                                               <C>              <C>           <C>

Cash Flows From Investing Activities
    Investment in an associated company                            (6,019,225)              -
-
    Additions of plant and equipment and phone
      payment system                                               (7,701,594)     (2,007,435)     (242,444)
    (Loans to) repayments from a director                            (284,265)        284,265        34,332
    Due from related companies                                         82,777        (530,720)      (64,097)
                                                                 --------------- --------------- ------------

                 Net Cash Used in Investing
                   Activities                                     (13,922,307)     (2,253,890)     (272,209)
                                                                 --------------- --------------- ------------

Cash Flows From Financing Activities
    Net proceeds from issuance of common stock                     31,640,108       3,392,000       409,662
    Capital contribution by minority stockholders
      of subsidiaries                                               4,570,000               -             -
    (Repayments to) proceeds from directors                           (46,223)      1,747,483       211,049
                                                                 --------------- -------------- -------------

                 Net Cash Provided by Financing
                   Activities                                      36,163,885       5,139,483        620,711
                                                                 --------------- --------------  ------------

Effect of Exchange Rate Changes on Cash and
  Bank Deposits                                                      (38,639)             (10)           (1)
                                                                 --------------- -------------- -------------

Net Increase (Decrease) in Cash and Bank
  Deposits                                                         9,180,076       (9,430,844)   (1,138,991)

Cash and Bank Deposits, Beginning of Year                          4,376,906       13,556,982     1,637,317
                                                                 --------------- -------------- -------------

Cash and Bank Deposits, End of Year                               13,556,982        4,126,138      498,326
                                                                 =============== ============== =============
</TABLE>

   The accompanying notes are an integral part of these financial statements


                                       F-7
<PAGE>



                     Intermost Corporation and Subsidiaries

           Consolidated Statements of Changes in Stockholders' Equity

                       Years Ended June 30, 2000 and 2001

================================================================================

<TABLE>
                                                             Common Stock
                                           -------------------------------------------------------
                                                     Issued             Reserved and to be Issued
                                           --------------------------   --------------------------
                                            Number of                    Number of
                                             Shares         Amount        Shares        Amount
                                           ------------  ------------   -----------   ------------
                                                             Rmb                          Rmb
<S>                                        <C>           <C>            <C>           <C>

Balance as of June 30, 1999                 9,754,412        80,742        69,700           576
Issuance of Common Stock                       69,700           576       (69,700)         (576)
Proceeds on Issuance of Common
  Stock of Which Shares Have Not
  Been Issued, Net of Issuance Costs
  of $331,200                                       -             -       800,000         6,624
Granting of Stock-based
  Compensation to an Employee                       -             -             -             -
Acquisition of Phone Payment
  System                                       75,712           629             -             -
Granting of Common Stock to
  Employees                                    41,110           339             -             -
Proceeds on Issuance of Common
  Stock                                       953,334         7,916             -             -
Common Stock Issuance Costs                         -             -             -             -
Acquisition of a Building                      77,200           638             -             -
Net Loss                                            -             -             -             -
Currency Translation Adjustments                    -             -             -             -
                                           ----------     ----------     ---------        ------

Balance as of June 30, 2000                10,971,468        90,840       800,000         6,624
Common Stock Issued                         1,984,013        16,473      (800,000)       (6,624)
Issuance of Common Stock for
  Marketing Services Received                 150,000         1,242             -             -
Issuance of Common Stock to
  Employee in Lieu of Salary                   15,000           124             -             -
Currency Translation Adjustments                    -             -             -             -
Net Loss                                            -             -             -             -
                                           ----------  ------------     ----------   -----------

Balance as of June 30, 2001                13,120,481      108,679              -             -
                                           ==========  ============     ==========   ===========
</TABLE>

   The accompanying notes are an integral part of these financial statements

                                      F-8
<PAGE>

================================================================================
                                                                  Accumulated
                                                                    Other
                                                                Comprehensive
                                                                  Income -
      Additional                                                 Cumulative
        Paid-in          Subscription    Accumulated        Translation
        Capital           Receivable           Deficit           Adjustments
   ----------------  ------------------  -----------------  ------------------
          Rmb                 Rmb                Rmb                 Rmb

          9,278,166                   -         (1,954,380)              7,753
                  -                   -                  -                   -



          7,942,176            (621,000)                 -                   -

          3,611,968                   -                  -                   -

          3,125,567                   -                  -                   -

          1,701,623                   -                  -                   -

         25,594,109                   -                  -                   -
         (1,987,200)                  -                  -                   -
          2,636,128                   -                  -                   -
                  -                   -        (14,658,902)                  -
                  -                   -                  -             (38,639)
   ----------------  ------------------  -----------------  -------------------

         51,902,537            (621,000)       (16,613,282)            (30,886)
          2,761,151             621,000                  -                   -

          3,749,598                   -                  -                   -

            542,133                   -                  -                   -
                  -                   -                  -                 (10)
                  -                   -        (34,810,977)                  -
   ----------------  ------------------  ------------------ ------------------

         58,955,419                   -        (51,424,259)            (30,896)
   ================  ==================  ================== ==================

                                      F-9
<PAGE>

                     Intermost Corporation and Subsidiaries

                   Notes to Consolidated Financial Statements

                       Years Ended June 30, 2000 and 2001

================================================================================


Note 1 - Organization and Principal Activities

Intermost  Corporation  ("the  Company") was  incorporated in the State of Utah,
United  States of America on March 6, 1985.  The  Company  changed its name from
Utility Communications  International,  Inc. to Intermost Corporation on October
23, 1998.

During the period  from  January 2, 1998 to October  22,  1998,  the Company was
inactive.  On October 23, 1998, the Company  acquired 100% interest in Intermost
Limited ("IL"; a company  incorporated in the British Virgin Islands) by issuing
4,970,000  shares  of common  stock of par value of  US$0.001  each  (after  the
redenomination  of par value and a stock  split) to Mr.  Jun Liang and Mr.  Andy
Lin, directors and stockholders of IL. IL was equally owned by Mr. Jun Liang and
Mr. Andy Lin. IL and its subsidiaries  ("the IL Group") are principally  engaged
in the provision of business portal and e-commerce solutions, the development of
software and the provision of consultation  services in the People's Republic of
China ("the PRC") and Hong Kong.

The  acquisition  of IL by the Company on October 23, 1998 has been treated as a
reverse  acquisition  since  IL is the  continuing  entity  as a  result  of the
exchange reorganization.


                                      F-10
<PAGE>


Note 2 - Subsidiaries

Details of the  Company's  subsidiaries  (which  together  with the  Company are
collectively referred to as "the Group") as of June 30, 2001 were as follows:
<TABLE>

                                                          Percentage of Equity
                                     Place of             Interest Attributable
             Name                  Incorporation              to the Group         Principal Activities
  ----------------------------  ----------------------   -----------------------  ----------------------
                                                           2000        2001
                                                         ----------  -----------
<S>                             <C>                      <C>         <C>          <C>

  Intermost Limited ("IL")      The British Virgin       100%              100%           Investment holding
                                 Islands                                                  and development
                                                                                          of software.Ceased
                                                                                          operations of
                                                                                          developmentof soft-
                                                                                          ware in 2001.

  China E. Com                  The PRC                  100%             100%            Provisionof business
  Information                                                                             portal and
  Technology                                                                              e-commerce
  Ltd. ("CECITL")*                                                                        solutions

  IMOT Information              The PRC                  100%             100%            Inactive
  Technology
  (Shenzhen) Ltd. ("IITSL")*

  Intermost (Hong Kong)Hong Kong                         100%             100%            Inactive
  Limited ("IHKL")

Shenzhen Bank Union &           The PRC                  55.3%            55.3%           Provision of phone
Jiayin E-commerce                                                                         payment system
Company Ltd.** ("SBUJE")                                                                  services.  Ceased
                                                                                          operations in 2001.
                                                                                          See Note 7.

  Intermost Focus               The PRC                  90%            90%               Provision of
  Advertising Company                                                                     advertising
  Ltd. **("IFACL")                                                                        consultancy, and
                                                                                          agency services and
                                                                                          production of
                                                                                          advertisingmaterials
</TABLE>


*    CECITL and IITSL are wholly  foreign owned  enterprises  established in the
     PRC to be operated for a period of 10 years until 2008.

**   SBUJE and IFACL are  equity  joint  ventures  established  in the PRC to be
     operated for a period of 10 years until 2009 and 2010, respectively.

                                      F-11
<PAGE>


Note 3 - Summary of Significant Accounting Policies

a.      Basis of consolidation

The consolidated  financial  statements  include the accounts of the Company and
its subsidiaries.  All material  intra-group balances and transactions have been
eliminated on consolidation.

b.    Associated company

An  associated  company  is an  enterprise  in which the  Group has  significant
influence,  but not control or joint  control,  and thereby  have the ability to
participate in their financial and operating policy decisions.

In the consolidated financial statements, investment in an associated company is
accounted for under the equity method of  accounting,  whereby the investment is
initially  recorded at cost and the carrying amount is adjusted to recognize the
Group's  share of the post  acquisition  profits  or  losses  of the  associated
company,  additional  investments  and  contributions  made  to  the  associated
company,  distributions received from the associated company and other necessary
alterations  in the Group's  proportionate  interest in the  associated  company
arising from changes in the equity of the associated  company that have not been
included in the statement of operations.

c.    Plant and equipment

Plant and equipment are recorded at cost less accumulated depreciation. Gains or
losses on  disposals  are  reflected  in current  operations.  Depreciation  for
financial reporting purposes is provided using the straight-line method over the
estimated useful lives of the assets as follows:  building - 20 years,  computer
equipment  - 3 years,  furniture  and  office  equipment  - 5  years,  leasehold
improvements - 1 to 3 years (over the lease terms) and motor vehicles - 5 years.
Major  expenditures for betterments and renewals are  capitalized.  All ordinary
repair and maintenance costs are expensed as incurred.

The Group  recognizes an impairment  loss on plant and equipment  when evidence,
such as the sum of expected future cash flows (undiscounted and without interest
charges) indicates that future operations will not produce sufficient revenue to
cover the related  future  costs,  including  depreciation.  Measurement  of the
impairment loss is based on the fair value of the assets.

                                      F-12
<PAGE>


Note 3 - Summary of Significant Accounting Policies (Continued)

d.       Phone payment system

The Company  capitalizes  costs incurred for the production of computer software
developed for sale to outside  parties.  Capitalized  costs include direct labor
and related  overhead  for software  produced by the  Company.  All costs in the
software  development  process which are classified as research and  development
are expensed as incurred until  technological  feasibility has been established.
Once technological feasibility has been established,  such costs are capitalized
until the software has  completed  beta testing and is generally  available  for
sale. Amortization, a cost of revenue is provided on a product-by-product basis,
using the straight-line  method over five years,  commencing the month after the
date of  product  release.  Annually,  the  Company  reviews  and  expenses  the
unamortized cost of any feature  identified as being impaired.  The Company also
reviews  recoverability  of the  total  unamortized  cost  of all  features  and
software  products in relation to estimated  relevant  other  revenues and, when
necessary, makes an appropriate adjustment to net realizable value.

e.    Intangible assets

Intangible  assets consisted of the cost of system  integration  contracts and a
customer list acquired from an independent third party, which was amortized on a
straight-line  basis over a period of 24 months.  The  Company's  directors  and
management   review  and  evaluate  the  carrying  value  of  intangible  assets
periodically,  taking into  consideration  current  operating  result and future
prospects generated from the intangible assets.

f.    Net sales

Net sales represent (i) fees for the provision of business portal and e-commerce
solutions,  net of business  tax,  which are  recognized  when the  services are
rendered,  (ii)  fees for  provision  of  software  development  and  consulting
services,  which  are  recognized  when the  services  are  rendered,  and (iii)
advertising  fees, net of business tax,  which are recognized  when the services
are rendered.

Advance payments from customers, usually for maintenance contracts, are recorded
as deferred revenue and amortized over the life of the contract.

g.    Research and development expenditures

Research  and  development  expenses  are  charged to expense as  incurred.  The
Company  incurred costs totaling  Rmb559,612 and Rmb1,200,397 in the years ended
June 30, 2000 and 2001, respectively.

h.    Income taxes

Income  taxes are  provided  under the  provisions  of  Statement  of  Financial
Accounting  Standards No. 109, which requires recognition of deferred tax assets
and liabilities  for expected  future tax  consequences of events that have been
included in the financial  statements.  Deferred income taxes are provided using
the liability  method.  Under the liability  method,  deferred  income taxes are
recognized for all temporary differences between the tax and financial statement
bases of assets and liabilities.

                                      F-13
<PAGE>

Note 3 - Summary of Significant Accounting Policies (Continued)

i.    Operating leases

Operating leases represent those leases under which  substantially all the risks
and rewards of ownership of the leased  assets  remain with the lessors.  Rental
payments  under  operating  leases are  charged to expense on the  straight-line
basis over the period of the relevant leases.

j.    Comprehensive income (loss)

The Group has adopted Statement of Financial Accounting Standards No. 130, which
requires the Group to report all changes in equity  during a period,  except for
those   resulting  from   investment  by   stockholders   and   distribution  to
stockholders,  in the  financial  statements  for the  period in which  they are
recognized.

k.    Foreign currency translation

The Company  considers  Renminbi  as its  functional  currency as a  substantial
portion of the Group's business activities are based in Renminbi.

The  translation of the financial  statements of subsidiaries  whose  functional
currencies are other than Renminbi, into Renminbi is performed for balance sheet
accounts  using closing  exchange  rates in effect at the balance sheet date and
for revenue  and expense  accounts  using an average  exchange  rate during each
reporting period. The gains or losses resulting from translation are included in
stockholders' equity separately as cumulative translation adjustments.

Transactions in currencies other than functional  currencies during the year are
translated into the respective  functional currencies at the applicable rates of
exchange  prevailing  at the  time  of the  transactions.  Monetary  assets  and
liabilities  denominated  in currencies  other than  functional  currencies  are
translated  into  respective  functional  currencies at the applicable  rates of
exchange in effect at the  balance  sheet  date.  Exchange  gains and losses are
dealt with in the statement of operations.

Aggregate  gains  (losses) from foreign  currency  transactions  included in the
consolidated  results of  operations  for the years ended June 30, 2000 and 2001
were approximately Rmb113,000 and Rmb(71,000), respectively.

                                      F-14
<PAGE>


Note 3 - Summary of Significant Accounting Policies (Continued)

l.    Loss per common share

Loss per common  share is computed in  accordance  with  Statement  of Financial
Accounting  Standards  No.  128,  by  dividing  net loss for each  period by the
weighted average number of shares of common stock outstanding during the period,
as if the common  stock issued for the  acquisition  of IL (see Note 1) had been
consummated prior to the years presented.

The  computation  of diluted  loss per common share is similar to basic loss per
common share,  except that the denominator is increased to include the number of
additional  common  shares  that would  have been  outstanding  if all  dilutive
securities outstanding during the period were exercised.

No diluted loss per common share was presented in the consolidated statements of
operations  as there were no dilutive  securities  available  for exercise as of
June 30,  2000,  and as of June 30, 2001 the options  exercisable  contained  an
exercise price greater than the average market price of the common shares.

m.    Stock-based compensation

The Company  accounts for employee stock options in accordance  with  Accounting
Principles Board Opinion (APB No. 25). Pro forma  disclosures were made assuming
the  application  of fair value method as  prescribed  by Statement of Financial
Accounting Standards No. 123.

n.    Use of estimates

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States of America requires  management to make
estimates and assumptions  that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.

o.    Fair value of financial instruments

All financial  instruments  are carried at cost,  which  approximate  their fair
values.


                                      F-15
<PAGE>

Note 3- Summary of Significant Accounting Policies (Continued)

p.    Accounting pronouncements

In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin  ("SAB") 101,  "Revenue  recognition  in financial  statements",  which
provides guidance on applying  accounting  principles  generally accepted in the
United  States of America for  recognizing  revenue.  SAB 101 is  effective  for
fiscal years  beginning after December 15, 1999. The adoption of SAB 101 did not
have a  significant  impact  on the  Group's  consolidated  financial  position,
results of operations and cash flows.

In June 1999,  the  Financial  Accounting  Standards  Board issued SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities" which delayed the
effective  date of SFAS No.  133  "Accounting  for  Derivative  Instruments  and
Hedging  Activities"  for one  year.  SFAS No.  133  provides  guidance  for the
recognition and measurement of derivatives and hedging  activities.  It requires
an entity  to  record,  at fair  value,  all  derivatives  as  either  assets or
liabilities in the balance sheet, and it establishes  specific  accounting rules
for certain  types of hedges.  SFAS No. 133 is now  effective  for fiscal  years
beginning  after June 15, 2000. The adoption of this new standard did not have a
material impact on the Group's financial position or results of operations.

New accounting standards not yet adopted

In June 2001, the FASB issued SFAS No. 141, "Business Combinations" and SFAS No.
142, "Goodwill and Other Intangible Assets", effective for years beginning after
December 15, 2001.  Under the new rules,  goodwill  will no longer be amortized,
but  will  be  subject  to  annual  impairment  tests  in  accordance  with  the
Statements.  Other  intangible  assets will continue to be amortized  over their
useful lives. The pooling of interest method is no longer permitted for business
combinations after June 30, 2001. Early adoption is permitted for companies with
fiscal years  beginning  after March 15, 2001  provided that their first quarter
financial  statements have not been issued. The Company is not required to adopt
this new  standard  until  fiscal  year  ended  June 30,  2003 and is  currently
evaluating its impact.

                                      F-16
<PAGE>

Note 4  - Deposits, Prepayments and Other Receivables

Deposits, prepayments and other receivables consisted of:
<TABLE>

                                                      2000         2001         2001
                                                      Rmb          Rmb          US$
                                                    ----------   ----------  ----------
       <S>                                        <C>            <C>         <C>

         Deposit for leasing of advertising
           space (Note a)                             800,000            -           -
         Rental and utilities deposits                527,310      166,739      20,138
         Deposits for purchase of leasehold
           improvements and office equipment        1,205,738            -           -
         Deposits for investment in Internet.com
           Limited (Note b)                           500,760      500,760      60,478
         Advance to employees                         182,793       48,458       5,852
         Advance to Jiayin Investment Company
           Limited ("JICL") (Note c)                   56,803       56,803       6,860
         Prepaid expenses                             226,165      203,910      24,627
         Advances to China Chance Technology
           & Electronics Co. Ltd. (Note d)                  -      197,950      23,907
         Deposit on furniture and leasehold
           improvements (Note e)                            -      521,963      63,039
         Deposit for acquisition of J.R. Hi-Tech
           Investment Corporation ("JRHIC"),
           net of valuation allowance of
           Rmb1,500,000 in 2001 (Note f)                    -            -           -
         Others                                       115,246       89,467      10,806
                                                   ----------   ----------  ----------

                                                    3,614,815    1,786,050     215,707
                                                   ==========   ==========  ==========
</TABLE>


Notes -

a.    The Group has leased  certain  pages in a weekly  computer  magazine for a
      period of 24 months for sub-lease  purpose and paid a deposit amounting to
      Rmb800,000. The Group bears the risk and rewards of leasing these pages in
      the computer  magazine.  During 2001,  the Group  terminated the sub-lease
      agreement and forfeited the deposit under the terms of the agreement.

b.    The Group  paid a  deposit  for an  intended  investment  in  Internet.com
      Limited,   a  company   incorporated   in  the  British  Virgin   Islands.
      Internet.com  Limited  plans to provide  all kinds of visual  image to its
      users through the Internet.  As of June 30, 2001,  the Group believes that
      Internet.com  Limited will move forward with the  implementation  of their
      business plan. The Group is still  negotiating with  Internet.com  Limited
      for the percentage of equity interest to be held by the Group.

c.    JICL was a minority  shareholder of one of the Group's  subsidiaries until
      February  2000 when it  disposed of all its  interest in that  subsidiary.
      Thereafter, JICL was not classified as a related party.

                                      F-17
<PAGE>


Note 4 - Deposits, Prepayments and Other Receivables (Continued)

Notes-

d.   This  advance  was for  future  fund  raising  activities  or support to be
     provided by that  company and is  collateralized  with an asset held in the
     P.R.C.

e.   One of the Group's  subsidiaries,  SBUJE, entered in to an agreement to buy
     furniture and  equipment  and made a deposit on the purchase.  Subsequently
     the subsidiary  decided to cease operations and transfer its tenancy rights
     together  with the fixed  assets  attached  to the  rented  premises  for a
     receivable of Rmb521,963 from a third party.

f.   During  September of 2000,  the Group  entered into an agreement to acquire
     58.3% of the outstanding shares of JRHIC from its two stockholders. JRHIC's
     main investment via a holding  company,  is an ownership of 90% of Shenzhen
     China  Websecurity.com,  a Chinese-foreign equity joint venture established
     in the PRC, which engages in the provision of Internet  security  services,
     systems integration and software development  services.  Based on the terms
     of the agreement,  the  consideration  was to be  Rmb1,500,000  in cash and
     510,300 shares of common stock of the Company valued at Rmb10,974,001 or US
     2.60 per share.  As of June 30, 2001,  the Group had paid  Rmb1,500,000  in
     cash, but had not issued the 510,300  shares of common stock,  nor had they
     received the transfer of shares from the  stockholders of JRHIC.  The Group
     is in the process of commencing legal action to terminate the agreement and
     attempt  the  recovery  of Rmb  1,500,000.  Due to the  uncertainty  of any
     recovery from the stockholders of JRHIC, the Group has provided a valuation
     allowance on the full amount of this  receivable,  and has accounted for it
     as a bad debt expense.


Note 5 - Investment in an Associated Company

Details of investment in an associated company are:
<TABLE>

                                                         2000             2001            2001
                                                          Rmb              Rmb             US$
                                                    --------------   --------------  -------------
        <S>                                         <C>              <C>             <C>

         Unlisted shares, at cost                      6,000,000        6,000,000        724,638
         Share of post-acquisition loss               (1,380,429)      (3,657,715)      (441,754)
                                                    -------------    -------------   -------------

         Share of net assets                           4,619,571        2,342,285        282,884
         Impairment of investment in an associated
           company                                             -       (1,189,192)      (143,622)
         Amount due from an associated
           company                                        19,225                -              -
                                                    ------------     ------------    ------------

                                                       4,638,796        1,153,093        139,262
                                                    ============     ============    ============
</TABLE>
                                      F-18

<PAGE>

Note 5 - Investment in an Associated Company (Continued)

During the year ended June 30,  2000,  the Group  invested in a 40%  interest in
Shenzhen  SinoE-commerce Co. Ltd. (SECL , an equity joint venture established in
the PRC to be operated for a period of 20 years until 2020).  SECL is engaged in
the provision of an internet-based platform for buyers and sellers of industrial
products. As of June 30, 2001, SECL had not launched the platform.

Under the joint venture  agreement for the  establishment of SECL, the Group had
an option to contribute to SECL additional capital of Rmb14,000,000  before July
15, 2000 in return for additional  interests in SECL. The Group did not exercise
the option and no additional capital contribution was made.

As of June 30, 2001, the parties to the joint venture  commenced  procedures for
the orderly  dissolution  and  liquidation  of SECL. In June of 2001,  the Group
received  Rmb1,000,000 as a deposit on their share of the liquidation  proceeds.
As of  June  30,  2001,  the  Group  wrote  down  their  investment  in  SECL by
Rmb1,189,192  to the total  estimated  amount they expect to receive  upon final
liquidation.


Note 6 - Plant and Equipment, Net

Plant and equipment consisted of:
<TABLE>

                                              2000             2001            2001
                                               Rmb              Rmb             US$
                                           ------------   --------------  -------------
        <S>                                <C>            <C>             <C>

         Building                           2,790,204        2,790,204        336,982
         Computer equipment                 1,791,932        1,598,687        193,078
         Furniture and office equipment       294,452          716,220         86,500
         Leasehold improvements               135,777        1,486,136        179,484
         Motor vehicles                       942,625          942,625        113,844
                                           ----------   --------------  -------------

         Cost                               5,954,990        7,533,872        909,888
         Less:  Accumulated depreciation     (639,820)      (2,053,706)      (248,032)
                                           ----------   --------------- --------------

         Plant and equipment, net           5,315,170        5,480,166        661,856
                                           ==========   =============== ==============
</TABLE>

During the year ended June 30,  2000,  the Group has  acquired a building in the
PRC by (i) issuance of 77,200  shares of common stock of the Company,  valued at
approximately  Rmb2,637,000  (see  Note  12),  and (ii)  cash  consideration  of
approximately Rmb153,000. The building is situated in Shenzhen, the PRC.

                                      F-19
<PAGE>

Note 7 - Phone Payment System

Capitalized product development costs consist of the following:


                                       2000           2001            2001
                                        Rmb            Rmb             US$
                                     -----------   ------------  -------------

         Balance, beginning of year            -      7,976,196        963,306
         Costs capitalized             8,426,196              -              -
         Costs amortized                (450,000)    (1,241,490)      (149,936)
         Costs abandoned                       -     (6,734,706)      (813,370)
                                     -----------   ------------  -------------

         Balance, end of year          7,976,196              -              -
                                     ===========   ============  =============

In January 2000,  the Group  acquired a phone payment  system by (i) issuance of
75,512  shares  of  common  stock  of  the  Company,   valued  at  approximately
Rmb3,126,000  (see Note 12), and (ii) cash  consideration  of  Rmb2,300,000.  In
addition, the Group incurred  approximately  Rmb3,000,000 for the upgrade of the
phone payment  system.  During 2001, due to a lack of demand in the  marketplace
for the system and the continued cost to develop and market, the Group abandoned
the phone system and  recorded a loss of  Rmb7,059,147.  In addition,  the Group
ceased  operations in SBUJE,  whose  primary  activity was the  development  and
marketing of the phone system.

Note 8 - Intangible Assets

Intangible assets consisted of:
<TABLE>

                                               2000          2001         2001
                                                Rmb           Rmb          US$
                                             -----------   -----------  ----------
        <S>                                  <C>           <C>          <C>

         System integration contracts and a
           customer list                       2,400,000     1,199,996     144,927
         Less:  Accumulated amortization      (1,200,004)   (1,199,996)   (144,927)
                                             -----------   ------------ -----------

         Intangible assets, net                1,199,996             -           -
                                             ===========   ============ ===========
</TABLE>


In June 1999,  the Group  entered into an agreement  with an  independent  third
party to acquire certain system integration contracts and a customer list, to be
satisfied  by  69,700   shares  of  common  stock  of  the  Company   valued  at
Rmb2,400,000. These shares were issued in December 1999.

                                      F-20
<PAGE>

Note 9 - Deferred Compensation Costs, Net

Deferred compensation costs consisted of:
<TABLE>

                                                     2000        2001         2001
                                                      Rmb        Rmb          US$
                                                  ----------  -----------  ----------
        <S>                                       <C>         <C>          <C>

         Costs                                    4,970,401    4,970,401    600,290
         Less:  Adjustment to costs attributable
           to change of stock options plan
           (Note 13)                             (1,358,433)  (1,358,433)  (164,062)
         Less:  Accumulated amortization         (1,867,090)  (3,611,968)  (436,228)
                                                ------------  ------------ ----------

         Deferred compensation costs, net         1,744,878            -          -
                                                ============  ============ ==========
</TABLE>

Deferred  compensation  costs  are  associated  with  stock-based   compensation
described  in Note 13,  and are  determined  using the  intrinsic  value  method
prescribed  by APB No. 25 and are  amortized  over the term of  employment.  The
deferred  compensation  costs  represent the difference  between the fair market
value of the common  stock on the date of grants and the  exercise  price of the
grants to the  employee.  The costs are  amortized  over the  vesting  terms and
recorded as compensation expense.

Note 10 - Accruals and Other Payables

Accruals and other payables consisted of:
<TABLE>

                                                    2000         2001        2001
                                                    Rmb          Rmb         US$
                                                 ----------   ----------  ---------
        <S>                                      <C>          <C>         <C>

         Accrued Operating Expenses
              Wages and bonus                       438,953      831,189    100,385
              Rental deposit received                     -       46,350      5,598
              Legal and professional fees           888,998      382,453     46,190
              Marketing expenses                    297,691      386,007     46,619
         Payable for Common Stock Issuance Costs    697,482      151,830     18,337
         Others                                     119,112       71,132      8,591
                                                 ----------   ----------  ---------

                                                  2,442,236    1,868,961    225,720
                                                 ==========   ==========  =========
</TABLE>

                                      F-21
<PAGE>

Note 11 - Income Taxes

The Company and its  subsidiaries are subject to income taxes on an entity basis
on income arising in or derived from the tax jurisdiction in which they operate.

The Company is subject to the United States federal tax at a rate of 35%. IL was
incorporated  under the  International  Business  Companies  Act of the  British
Virgin Islands and, accordingly,  is exempted from payment of the British Virgin
Islands income taxes.  The  subsidiaries  (IITSL,  CECITL,  SBUJE and IFACL) and
associated  company (SECL)  established in the PRC are subject to PRC enterprise
income  taxes at a rate of 15%.  IHKL is subject to Hong Kong  profits  tax at a
rate of 16%.  As of June  30,  2001,  all  group  companies  were in a tax  loss
position.

The reconciliation of the United States federal income tax rate to the effective
income tax rate based on loss before  income  taxes  stated in the  consolidated
statements of operations is as follows:
<TABLE>


                                                       2000         2001          2001
                                                        Rmb          Rmb          US$
                                                     ----------   -----------  ----------
        <S>                                          <C>          <C>          <C>

         United States federal income tax rate           35%          35%          35%
         Effect of different tax rates in foreign
           jurisdictions                                 (8)%         (8)%         (8)%
         Valuation allowance for deferred tax assets    (27)%        (27)%        (27)%
                                                     --------     -----------  ----------
                                                          -            -            -
                                                     ========     ===========  ==========
Deferred taxation consisted of:

                                                       2000           2001        2001
                                                        Rmb           Rmb          US$
                                                     ----------   -----------  -----------
         Temporary difference arising from
               Net operating loss carryforwards      1,002,794     2,690,196     324,903
               Provision for doubtful accounts          63,600             -           -
                                                    -----------   -----------  -----------

         Deferred tax assets, gross                  1,066,394     2,690,196     324,903
         Valuation allowance                        (1,066,394)   (2,690,196)   (324,903)
                                                    -----------  ------------  -----------

         Deferred taxes, net                                 -              -           -
                                                    ===========  ============  ===========
</TABLE>

The  change  in  valuation  allowance  from  June 30,  2000 to June 30,  2001 is
primarily  related to the tax effects of the increase in the net operating  loss
in the current year. The Company has net operating loss  carryforwards  totaling
approximately  Rmb17,929,000,  which begin to expire in the year 2004, primarily
relating to their operations in the PRC.

A valuation  allowance has been  established for the full amount of the deferred
tax benefit related to those loss carryforwards and other deferred tax assets as
management believes that it is more likely than not that the benefit will not be
realized.

                                      F-22
<PAGE>

Note 12 - Share Capital

On June 8, 1999,  the Company  reserved to issue 69,700  shares of common stock,
par  value  US$0.001  each,  valued  at  Rmb2,400,000,  in  connection  with its
acquisition  of system  integration  contracts and a customer list (see Note 8).
Such shares were issued in December 1999.

In September 1999, the Company reserved to issue 800,000 shares of common stock,
par  value  US$0.001  each,  for  cash  at  US$1.25  per  share,   amounting  to
approximately Rmb8,280,000 (equivalent of US$1,000,000),  of which approximately
Rmb621,000 was yet to be received as of June 30, 2000.  These shares were issued
in January 2001. In 2001,  Rmb331,200 of issuance  costs  initially  recorded as
subscription  receivable were  appropriately  reclassified to additional paid-in
capital.

On January 26, 2000, the Company issued 75,712 shares of common stock, par value
US$0.001  each,   valued  at   approximately   Rmb3,126,000,   as  part  of  the
consideration  for the  acquisition  of a phone payment system of the Group (see
Note 7).

On January 26, 2000, the Company issued 41,110 shares of common stock, par value
US$0.001 each,  valued at approximately  Rmb1,702,000,  to certain  employees as
rewards for their  contribution to the Group. The cost for these shares has been
recorded as part of employee compensation.

In January and February  2000, the Company issued an aggregate of 953,334 shares
of common stock,  par value  US$0.001  each,  for cash at US$3.00 to US$3.23 per
share. The net proceeds amounted to approximately  Rmb23,615,000  (equivalent of
US$2,852,000).

On March 22, 2000, the Company  issued 77,200 shares of common stock,  par value
US$0.001 each valued at approximately Rmb2,637,000, as part of the consideration
for the acquisition of a building in the PRC (see Note 6).

In August 2000,  the Company  issued  15,000  shares of common stock to the vice
president in charge of business development,  par value US$0.001 each in lieu of
employee salary, at US$4.37 per share.

In February 2001, the Company issued 1,152,000 shares of common stock, par value
US$0.001  each,  for cash at US$0.3125 per share.  The net proceeds  amounted to
approximately  Rmb2,800,000  (equivalent of US$335,000).  In connection with the
issuance,  the Company  paid a  commission  of Rmb 238,464 to Sanway  Consulting
Limited, a company owned by Mr. Yang Wang Jian, a director of the Company.

In October 2000, the Company  issued  150,000 shares of common stock,  par value
US$0.001 each for marketing  services  performed by an unrelated third party, at
US$3.02 per share.


                                      F-23
<PAGE>

Note 13 - Stock-Based Compensation

In November 1999, the Company entered into a two-year  employment  contract with
the vice president in charge of business development.  Pursuant to the contract,
the Company granted to the employee stock options to purchase (i) 250,000 shares
of common stock of the Company at US$3.50 per share,  exercisable  from November
2000 to November  2006,  (ii)  250,000  shares of common stock of the Company at
US$4.00 per share, exercisable from November 2001 to November 2006. In addition,
the employee is also  entitled to receive  15,000  shares of common stock of the
Company after each six months of employment.

In May 2000,  the  Company  entered  into a new  one-and-a-half-year  employment
contract  with this  employee to replace the previous  one.  Pursuant to the new
contract,  the Company  granted to the employee  options to purchase (i) 125,000
shares of common  stock of the  Company at US$3.00  per share  exercisable  from
November 2000 to May 2010 and (ii) 250,000 shares of common stock of the Company
at US$4.00 per share  exercisable  from November 2001 to May 2010. Under the new
contract,  the  employee is not  entitled to receive  any  additional  shares of
common  stock  of the  Company  during  the  remaining  term  of the  employment
contract.

Changes in  outstanding  options under the employee  stock options for the years
ended June 30, are presented below:
<TABLE>


                                         2000                        2001
                               -------------------------  ----------------------------------
                                              Weighted-
                                                Average
                                               Exercise                   Weighted-Average
                                Options          Price     Options        Exercise Price
                               ----------   ------------  ---------  -----------------------
                                                Rmb                      Rmb            US$
<S>                            <C>          <C>           <C>        <C>               <C>


Outstanding, beginning of year          -           -      375,000      30.39          3.67

Granted                           375,000       30.39            -          -             -
                               ----------    ---------    --------    --------       -------

Outstanding, end of year          375,000       30.39      375,000      30.39          3.67
                               ==========    =========    ========    ========       =======
Exercisable, end of year                -           -      125,000      24.84          3.00
                               ==========    =========    ========    ========       =======

</TABLE>

                                      F-24

<PAGE>

Note 13 - Stock-Based Compensation (Continued)

As of June 30,  2000,  all the  options  outstanding  were in the price range of
US$3.00  to  US$4.00   with  a   weighted-average   unexpired   option  life  of
approximately 8.3 years.

The Company  accounts for  stock-based  compensation  using the intrinsic  value
method  prescribed by APB No. 25. Had compensation  expense for the options been
accounted for based on fair value on the grant date in accordance  with SFAS No.
123, the Company pro forma net loss and loss per common share would have been as
follows:

                                             2000          2001          2001
                                              Rmb           Rmb           US$
                                        ------------  ------------  ------------

         Proforma net loss             (18,548,921)   (41,043,347)   (4,956,926)
                                        ===========   ============  ============
         Proforma net loss per common
           share - basic                     (1.80)         (3.45)         (.42)
                                        ===========   ============  ============
The pro forma  effects of  applying  SFAS No. 123 may not be  representative  of
actual  results had the Company  accounted  for stock  option  awards  using the
fair-value-based  method. The weighted-average fair value of the options granted
during  the year  ended  June 30,  2000 is  estimated,  using the  Black-Scholes
option-pricing  model, to be US$4.63 to US$4.69.  The fair value is estimated on
the date of grant using the following assumptions:

                                                                    2000
                                                                  --------
         Risk-free interest rate                                    5.87%
         Expected dividend yield                                       -
         Expected option life (years)                                8-9
         Expected stock price volatility                          1.3756

Note 14 - Operating Lease Commitments

The Group has operating lease agreements for office premises and staff quarters,
which extend through 2003. Rental expenses for the years ended June 30, 2000 and
2001 were approximately Rmb417,000 and Rmb853,000,  respectively. Future minimum
rental payments as of June 30, 2001,  under  agreements  classified as operating
leases with non-cancelable terms, are as follows:

                                                        2001           2001
                                                         Rmb            US$
                                                     ------------   ------------

         Payable during the following period
               For the year ending June 30, 2002       989,297        119,480
               For the year ending June 30, 2003     1,031,299        124,553
                                                     ----------     ------------

               Total                                 2,020,596        244,033
                                                     ==========     ============

                                      F-25
<PAGE>

Note 15 - Retirement Plan and Post-Employment Benefits

The Group has no retirement plan or post-employment benefits for its employees.


Note 16 - Other Related Party Transactions

Name and relationship of additional related parties:
<TABLE>


                     Name of Related Parties              Existing Relationship with the Group
    -------------------------------------------------    --------------------------------------
     <S>                                                 <C>

    Chuangshengxin Corporate Conventions (Shenzhen)      Subsidiary of a company with common
    Company Limited                                       director

    Corporate Conventions International Limited          Subsidiary of a company with common director

    Dunwell Computer (H.K.) Limited ("DCL")              During September of 1999, the Group entered
                                                         into an agreement to acquire 70% of DCL, whose
                                                         principal business activity is web hosting,
                                                         for Rmb2,996,000.  Based on the agreement, the
                                                         consideration was to be the issuance of 51,282
                                                         shares of common stock of the Company, valued
                                                         at Rmb 1,498,000 or US 3.53 per share, and the
                                                         remainder in cash of Rmb1,498,000.  DCL is a
                                                         company substantially owned by Mr. Chan Sai
                                                         Tak, brother of Mr. Chan Sai Keung, an outside
                                                         Director of the Company and 7% stockholder of
                                                         DCL.  During 2000, the Group paid the
                                                         Rmb1,498,000 and advanced an additional
                                                         Rmb321,000 to DCL.  In 2001, the Group
                                                         advanced an additional Rmb535,000 to DCL,
                                                         bringing the total amount paid and advanced to
                                                         Rmb2,354,000.  As of October 22, 2001, the
                                                         Company had not issued the 51,282 shares of
                                                         common stock, nor had they received the
                                                         transfer of shares from the stockholders of
                                                         DCL.  The Group is currently in discussions
                                                         with legal counsel to ascertain their rights
                                                         to terminate the agreement for cause and
                                                         attempt to recover the Rmb2,354,000.    Due to
                                                         DCL's current inability to repay, the Group
                                                         has provided a valuation allowance on the full
                                                         amount of this receivable, and has accounted
                                                         for it as compensation.
</TABLE>

                                      F-26

Note 16 - Other Related Party Transactions (Continued)
<TABLE>


                                                   2000          2001          2001
                                                   Rmb           Rmb           US$
                                               ------------   -----------  -----------
        <S>                                    <C>             <C>         <C>

         Due from related companies
               Corporate Conventions
                 International Limited             72,345        72,345        8,738
               Dunwell Computer (H.K.) Limited  1,823,280             -            -
                                               ------------   -----------  -----------

                                                1,895,625        72,345        8,738
                                               ============   ===========  ===========
         Due from a director
               Mr. Andy Lin                       284,265             -            -
                                               ============   ===========  ===========
         Due to directors
               Mr. Jun Liang                      208,197     1,029,536      124,340
               Mr. Andy Lin                             -       926,144      111,853
                                               ------------   -----------  -----------

                                                  208,197     1,955,680      236,193
                                               ============   ===========  ===========
</TABLE>

The  outstanding  balances with related  companies and directors were unsecured,
non-interest bearing and without pre-determined repayment terms.

                                      F-27

<PAGE>

Note 16 - Other Related Party Transactions (Continued)

Summary of related party transactions is as follows:

                                                        2000      2001     2001
                                                         Rmb       Rmb     US$
                                                      ---------  ------  -------

         Management fees paid to
           Chuangshenxin Corporate Conventions
           (Shenzhen) Company Limited                   75,950      -         -

         Office rentals and utilities fees charged
           to Chuangshengxin Corporate
           Conventions (Shenzhen) Company
           Limited                                     102,000    311        38

         See other related party disclosures in Note 12.


Note 17 - Segment Information

a.       Net sales
<TABLE>

                                                        2000             2001            2001
                                                         Rmb              Rmb             US$
                                                   --------------   --------------  -------------
        <S>                                        <C>              <C>              <C>

         Business portal and e-commerce solutions    11,277,935       7,376,169       890,842

         Software development and consulting
           services                                     983,580               -             -

         Placement of advertisements                    726,795         772,833        93,337
                                                   --------------   --------------  -------------

                                                     12,988,310        8,149,002        984,179
                                                   ==============   ==============  =============

                                                        2000             2001            2001
                                                         Rmb              Rmb             US$
                                                   --------------   --------------  -------------

         The PRC                                     12,004,730        8,062,895        973,780

         Hong Kong                                      983,580           86,107         10,399
                                                   --------------   --------------  -------------

                                                     12,988,310        8,149,002        984,179
                                                   ==============   ==============  =============

</TABLE>

                                      F-28

<PAGE>

Note 17 - Segment Information (Continued)

b.    Loss before income taxes:

Loss before income taxes is analyzed as:
<TABLE>

                                                        2000           2001            2001
                                                         Rmb            Rmb            US$
                                                    ----------       ---------      ----------
        <S>                                         <C>              <C>            <C>

       Business portal and e-commerce solutions    (12,957,204)     (24,411,390)    (2,948,235)

       Software development and consulting
           services                                   (812,619)               -              -

       Placement of advertisements                    (329,183)         (74,758)        (9,029)

       Loss of investment holding companies,
         including nonallocated corporate
         expenses                                     (559,896)      (9,924,911)    (1,198,661)
                                                  ------------       ------------  ------------

                                                   (14,658,902)     (34,411,059)    (4,155,925)
                                                  ============       ============  ============
</TABLE>

c.    Assets

Substantially all of the Group's identifiable assets are located in the PRC.

d.    Major customers

Details of individual  customers  accounting for 5% or more of the Group's sales
are as follows:


                                                        2000       2001
                                                       -------   --------

         Youlidian (Shenzhen) Company Limited           10%         5%
         Duracel (China) Company Limited                 5%          -
         Good Prominent Technology Company
           Limited                                       8%          -
         Nantai Electronics Company Ltd.                 -          6%


                                      F-29
<PAGE>

Note 17 - Segment Information (Continued)

e.    Major suppliers

Details  of  individual  suppliers  accounting  for 5% or  more  of the  Group's
purchases are as follows:

                                                         2000         2001
                                                      ----------   ----------

         Yitong Electronic Products Company
           Limited                                       23%           5%
         China Unicom (Guangzhou) Company
           Limited                                        6%            -
         Chuangxingsiwei Computer Technology
           Company Limited                                5%           5%
         Megaway Development Limited                     12%            -
         China Auto E. Commerce Co. Ltd.                  -            7%

Note 18 - Operating Risk

a.    Country risk

The Group's operations are conducted in the PRC and Hong Kong. Accordingly,  the
Group's  business,   financial  condition  and  results  of  operations  may  be
influenced by the political, economic and legal environments in the PRC and Hong
Kong, and by the general state of the PRC and Hong Kong economies.

The  Group's  operations  in the PRC are subject to special  considerations  and
significant  risks not typically  associated with companies in North America and
Western  Europe.   These  include  risks  associated  with,  among  others,  the
political,  economic and legal environments and foreign currency  exchange.  The
Group's results may be adversely affected by changes in the political and social
conditions in the PRC, and by changes in  governmental  policies with respect to
laws  and  regulations,  anti-inflationary  measures,  currency  conversion  and
remittance abroad, and rates and methods of taxation, among other things.

b.    Industry risk

The Company  operates  in business  segments  which are  characterized  by rapid
technological advances, changes in customer requirements and evolving regulatory
requirements and industry standards. Any failure by the Company to anticipate or
to respond adequately to technological changes in its industry segments, changes
in  customer  requirements  or changes in  regulatory  requirements  or industry
standards,  could have a material  adverse affect on the Company's  business and
operating results.

                                      F-30
<PAGE>

Note 18 - Operating Risk (Continued)

c.    Concentration of credit

Concentration of accounts receivable as of June 30, 2000 and 2001 is as follows:

                                                             2000        2001
                                                           ---------   ---------

         Five largest accounts receivable                     41%         60%

The Group  performs  ongoing  credit  evaluation  of each  customer's  financial
condition.  It maintains reserves for potential credit losses and such losses in
the aggregate have not exceeded management's projections.

Note 19 - Supplemental Disclosure of Cash Flow Information

Cash paid for interest and income taxes:

                                     2000             2001            2001
                                      Rmb              Rmb             US$
                                 -------------   --------------  -------------

         Interest                       -                -               -
         Income taxes                   -                -               -


                                      F-31