SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-KSB/A





(Amendment
No. 1)


(Mark
One)





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





For
the Fiscal Year Ended June 30, 2007





☐
            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)





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





31st Floor,
B31-23 Guomao Building, Renmin Rd. (South),


Shenzhen, China
518001


(Address
of principal executive offices)(Zip code)





Issuer’s
telephone number:  86 755 822 10238





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





Title of each
      class
              Name of each exchange
      on which each is registeredNone
              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 is not
required to file reports pursuant to Section 13 or 15(d) of the Exchange
Act.  ☐





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 ☒  No
☐





Check if there is no disclosure of
delinquent filers in response to Item 405 of Regulation S-B contained in this
form, and no disclosures will 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. ☐





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





State issuer’s revenues for its most
recent fiscal year.  $4,680,532





State the aggregate market value of the
voting and non-voting common equity held by non-affiliates computed by reference
to the price at which the common equity was sold, or the average bid price and
asked price of such common equity, as of a specified date within the past 60
days.  (See definition of affiliate in Rule 12b-2 of the Exchange
Act).  As of September 9, 2007 the aggregate market value of the
registrant’s common stock held by non-affiliates of the registrant was
approximately $24,182,461, based on the average bid and asked price of such
common stock as reported on the NASD Bulletin Board system.  Shares of
common stock held by each officer and director and each person who owns more
than 10% or more of the outstanding common stock have been excluded because
these persons may be deemed to be affiliates.  The determination of
affiliate status for purpose of this calculation is not necessarily a conclusive
determination for other purposes.





The number of shares of the
registrant’s common stock, $.001 par value per share, outstanding as of
September 9, 2007 was 215,370,278.





Transition Small Business Disclosure
Format:  Yes ☐  No
☒





EXPLANATORY
NOTE








Intermost
Corporation (the “Company”) is filing this Amendment No. 1 on Form 10-KSB/A to
its Annual Report on Form 10-KSB for the fiscal year ended June 30, 3007, as
filed with the Securities and Exchange Commission on October 26, 2007, solely to
(a) amend and restate Item 1 Description of Business, Item 3 Legal Proceedings,
Item 6 Management’s Discussion and Analysis or Plan of Operation, Item 7
Financial Statements, Item 8 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure, Item 13 Exhibit and Reports on Form 8-K,
Item 14 Principal Accountant Fees and Services, the consolidated financial
statements of the Company as of June 30, 2007 and the fiscal year then ended;
and (b) file as exhibits hereto currently dated certificates from our Principal
Executive Officer and Principal Financial Officer.  Only the amended
Items, consolidated financial statements and updated exhibits are being filed
herewith.  The restatement of the consolidated financial statements
includes adjustments to unusual items and extraordinary items and weighted
average common stock.  All consolidated financial statements,
including the consolidated balance sheet as of June 30, 2007, consolidated
statements of income and comprehensive income, and consolidated statements of
cash flow for the fiscal year then ended, were restated
accordingly.  These changes do not have impact on previous reported
consolidated financial statements as of June 30, 2006 and the fiscal year then
ended.  No other changes are being effect by this
filing.  Therefore, information not affected by this amendment is
unchanged and reflects the disclosure made at the time of the original
filing.





2





ITEM
1.        DESCRIPTION OF
BUSINESS





History
and Development of the Company





Intermost
Corporation (as used in this Annual Report on Form 10-KSB, unless the context
otherwise requires, the terms “we,” “us,” “the Company,” “IMOT,” and “Intermost”
refer to Intermost Corporation and its subsidiaries) 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 in 1987, to
Lord & Lazarus, Inc. in 1988, and to Utility Communication International,
Inc. in 1996.





From
the date of incorporation through October 1998, the Company’s operations were
limited to efforts to identify and acquire, or merge with, one or more operating
businesses.  In October 1998, the Company acquired all of the issued
shares of Intermost Limited, a British Virgin Islands Company (“IML”), by
issuing to the then shareholders of IML a total of 4,970,000 shares of the
Company’s common stock, par value $0.001 per share (the
“Merger”).  Following the Merger, (i) IML became a wholly-owned
subsidiary of the Company, (ii) the shareholders of IML held 58.7% of all issued
and outstanding shares of the Company, (iii) the Company changed its name to
Intermost Corporation, (iv) the Company terminated all its prior business
activities and adopted IML’s business plan, and (v) all officers and directors
of the Company resigned and were replaced by officers and directors of
IML.





In
February 2003, the Company reincorporated from Utah to the State of
Wyoming.





IML
was incorporated in January 1998 to develop a Chinese-language Internet business
portal and to render services in connection therewith in the People’s Republic
of China (“China”).  During the period following the Merger, the
Company entered into agreements with, and completed acquisitions of, some
businesses that provided or supported Internet services in an effort to
implement this business plan.  The Company also endeavored to develop
its own Internet services businesses, including e-commerce business
solutions.  However, the global decline in the demand for Internet
services after mid-2000, which resulted in a significant economic slowdown that
affected many of the companies with whom we do business, materially undermined
the effectiveness of our efforts.  While we continued (and still
continue) to offer web design and hosting services to customers in China through
our subsidiary, ChinaE.com Information Technology Ltd. (“ChinaE”), we also began
to look for ways to diversify or expand our business.





In
November 2002 ChinaE purchased eight licenses for HanWEB Publishing Server 3.0,
an online real time translation engine that translates traditional Chinese
characters, used in most of the world, to simplified Chinese characters, which
are used only in China, and vice versa, and six licenses for HanVoice Web to
Phone Server 1.0, a real time Internet to telephone conversion server for
Cantonese, Putonghua and English.  These were purchased from KanHan
Technologies Ltd. (“KanHan”) at a cost of $150K.  The Company was one
of two distributors of these licenses in China.





With
the assistance of KanHan, the Company opened an office in Guangzhou in April
2003.  The office was staffed with two persons who were responsible
for introducing these products to businesses and government agencies in
Guangdong Province.  For a period of approximately one year, KanHan
subsidized the costs related to maintaining this office and developing a market
for these products.  The amount of the subsidy was approximately
$12,800 per month.  The office was closed in March 2004 and the
Company is not longer receiving the subsidy, although it continues to market the
licenses.





In
May, 2003, the Company’s wholly owned subsidiary, IMOT Information Technology
(Shenzhen) Ltd. (“IMOT Technology”), received approval from the governments of
Shenzhen and Shanghai to its proposed acquisition of 51% of the issued and
outstanding shares of Shanghai Newray Photographic Equipment Co., Ltd.
(“Shanghai Newray”) from Shanghai Newray Business Development Co., Ltd.
(“Shanghai Newray Business”), the owner of 75.5% of the issued and outstanding
capital stock of Shanghai Newray.  Shanghai Newray is located in
Shanghai and is engaged in the sale of digital photographic
equipment.  Approval of the governments of Shenzhen and Shanghai was
required to complete the acquisition, which was memorialized by a Shareholding
Transfer Agreement entered into on May 23, 2003 between IMOT Technology and
Shanghai Newray Business.





3


Pursuant
to the Shareholding Transfer Agreement, IMOT Technology paid Shanghai Newray
Business Rmb200,000 (approximately $24,000) in cash to reimburse Shanghai Newray
Business for certain expenses related to the acquisition and agreed to transfer
to Shanghai Newray Business 4,000,000 shares of the Company’s restricted common
stock.  The cash used to reimburse Shanghai Newray Business for its
expenses was paid with the Company’s funds.





On
October 3, 2003 IMOT Technology entered into an agreement for the acquisition of
25% of the issued and outstanding shares of Shanghai Fortune Venture Limited
(“Shanghai Fortune”) from certain shareholders of Shanghai
Fortune.  Shanghai Fortune has the right to operate equity exchange
transactions in Shanghai, and through its investment in Xi’an Assets and Equity
Exchange, operate an equity exchange in Xi’an. In China, equity, including
intellectual property rights, may be listed on and transferred through such
exchanges.  The share transfer was approved by the government of
Shanghai on April 12, 2004.  The consideration for this acquisition
was Rmb600,000, approximately $72,464, in cash plus 10 million shares of our
restricted common stock.  The value of the common stock was determined
to be $0.24 per share, based upon the average of the closing prices for the
10-day period from September 22, 2003 to October 1, 2003.  The shares
were issued on April 14, 2004.





On
May 23, 2006, IMOT signed an agreement to sell the 25% shareholding investment
in Shanghai Fortune to Mr. Li Laohu.  The net asset value of Shanghai
Fortune as at December 31, 2005, the latest audited financial statements date,
was Rmb 21,957,791.  The consideration received by IMOT for the sale
of the 25% shareholding was agreed at redemption of 6,500,000 shares of
restricted common stock of IMOT with a value of US$0.18 per share, which was the
closing price of IMOT share of common stock as at May 23, 2006, held and
transferred by Mr. Li Laohu, Mr. Li Xiaoqin and Ms. Huang Xiujuan.





Since
December 6, 2002, Shanghai Fortune has been an official registered member of the
Shanghai Technology Exchange (the “STE”) and was entitled to conduct exchange
business with the STE. The STE was the major entity in the Shanghai Equity
Exchange Market.  Shanghai Fortune had the exclusive right to manage
and operate the North Shanghai Branch (the “NSB”) of the STE. The NSB had the
right to conduct the same exchange business as STE and share 80% of the profits
with the STE.





Shanghai
Fortune was also a founder and major participant in the Yangtze River Delta
Equity Exchange Market Place (the “YRDE”).  The YRDE included more
than 14 major exchanges in Shanghai and the surrounding cities and was the
largest equity exchange market place in China.





However,
in December 2003, the STE and another exchange were merged into the Shanghai
United Assets and Equity Exchange (the “SUAEE”).  The SUAEE is a
non-profit government-sponsored organization.





As
a result of the merger of the STE, although Shanghai Fortune continues to
maintain its membership, it is currently still unclear how the NSB and the YRDE
will conduct business going forward, and how Shanghai Fortune will participate
in the equity exchange markets following the issuance of final regulations by
the local PRC government.  Due to the uncertainty of the content and
timing of governmental regulations, IMOT entered into the May 23, 2006 agreement
for the sale of its interest in Shanghai Fortune





On
August 10, 2004, we purchased 51% of the issued and outstanding shares of Golden
Anke Technology Ltd. (“Golden Anke”) from two of its shareholders, Tu Guoshen
and Li Zhiquan, to IMOT Technology for $3.24 million, payable by issuance of 12
million shares of our common stock.  The value of our common stock was
determined by applying a 20% discount to the average closing price during the
period from January 20 to March 19, 2004.  On or about February 15,
2007 we sold approximately two percent (2%) of the outstanding shares in Golden
Anke to an unaffiliated minority stockholder so that this minority stockholder
could seek an independent listing of Golden Anke on a UK exchange, thus reducing
our ownership from approximately 51% to approximately 49%.  We
recently discovered that GATL is no longer seeking a public listing and
negotiated an exit settlement under which they will buy back our 49% ownership
interest at US$1 million.  In the attached report, the investment in
GATL is treated as “Impairment of Associated Company”.





4


In
September 2, 2004, IML incorporated a 100% owned subsidiary, ChinaE.com
Technology (Shenzhen) Ltd. (“ChinaE Tech”), to take over the business of ChinaE
to provide and support Internet services including, but not limited to,
web-hosting, web design, domain name registration and software
development.





On
December 8, 2004, IMOT Technology entered into an agreement for the acquisition
of 15% of the issued and outstanding shares of Shenzhen International Hi-Tech
Exchange (“Hi-Tech Exchange”) from Shenzhen Merchant Technology Investment Co.,
Ltd.  Hi-Tech Exchange is an enterprise authorized by the PRC
government to carry out business in the transfer of hi-tech property rights and
corporate equity interests.  The share transfer was approved by the
government of Shenzhen on February 25, 2005.  The consideration for
this acquisition was 2,470,355 shares of our common stock.  The value
of the common stock was determined to be $0.22 per share based upon the average
of the closing prices for the period from October 18, 2004 to November 18,
2004.  The shares were issued on February 28,
2005.  Subsequently, on December 8, 2006, we redeemed all of these
2,470,355 shares for an aggregate redemption price of
US$805,214.75.





On
January 6, 2005, all necessary government approvals were obtained to complete
the transfer of 80% of the issued and outstanding shares of Hainan Concord
Financial Products Development Co., Ltd. (“Hainan Concord”) from Guangzhou Ditai
Communication Co., Ltd. and Zhai Xiya to IMOT Technology.  Pursuant to
the Share Transfer Agreement signed on December 11, 2004 the purchase price paid
for the stock was $917,874.  On January 12, 2005 we issued to the
selling shareholders 5,000,000 shares of our restricted common stock, in full
payment of the purchase price.  The value of our common stock was
determined by applying a 15% discount to the average closing price for the 10
day trading period from November 16, 2004 to November 30,
2004.  Hainan Concord’s principal business is to issue and manage
multi-functional membership cards for the people who participate in private
equity exchange in Hainan.  Hainan Concord also provides financial
institutions with research and development services for their financial products
and instruments.





On
October 19, 2005, all necessary government approvals were obtained to complete
the transfer of 21% of the issued and outstanding shares of Hainan Special
Economic Zone Equity Exchange Center (the “Exchange Center”) from Hainan Concord
Investment Holding Co., Ltd. and Guangzhou Keensheng Science and Technology
Development Co., Ltd. Pursuant to the Stock Exchange Agreement, the Company
issued to the Exchange Stockholders 5,000,000 shares of the Company’s common
stock having a value of RMB8,799,350 (approximately
US$1,085,000).  The consideration for the transaction was agreed to
after arm’s-length negotiations between the parties, which are unrelated to each
other.  On October 19, 2005, we issued to the selling shareholders
5,000,000 shares of our common stock, in full payment of the purchase
price.





On
July 13, 2006, IML incorporated a 100% owned subsidiary, Leader Palace
International Ltd. (“LPI”), to explore businesses in Taiwan
region.  LPI started to negotiate an investment in touch panel
manufacturing and such acquisition was still ongoing.





Management
is continuing efforts to identify and explore acquisition, merger and
development opportunities.


5





Products
and Services





Internet
Services





Through
ChinaE Tech, our wholly-owned subsidiary, we offer web design, web hosting,
domain name registration, software development and office automation software to
our clients.  We operate within what is commonly referred to as the
“business-to-business” segment of the Internet market, where products and
services are offered principally to businesses, as compared to the
“business-to-consumer” segment of the Internet services market, where products
and services are offered to consumers directly.





We
locate web design and hosting customers and secure web design and hosting
projects primarily through the efforts of our sales team.  We
currently employ 10sales persons for our
Internet solution services.  All of our sales team members are based
in Shenzhen, but occasionally travel throughout China, as
necessary.  Our sales persons are paid a base salary, and earn
commissions on revenues we receive from the customers they secure.





Digital
Imaging System





Shanghai
Newray is a wholesaler of various brands of consumer digital photographic
equipment, including traditional 35mm cameras, digital cameras and camera
accessories.  During the year, the shareholders in a special meeting
passed a resolution (“the Resolution”) to terminate the operations of Shanghai
Newray.  However the legal representative of Shanghai Newray was
unavailable for contact.  The board of directors of IMOT is currently
considering how to properly account for this business and whether to write it
off in the coming year.





For
fiscal year ended 2006 through Golden Anke, we have our digital imaging services
business in digital imaging security systems for offices, department stores and
shopping malls.  Since IML has sold approximately 2% of the
outstanding shares of Golden Anke to a minor shareholder and our ownership in
Golden Anke has decreased to approximately 49% of the issued and outstanding
stock, in accordance with GAAP the sales revenue of Golden Anke has not
incorporated into our consolidated revenues.  We recently discovered
that GATL is no longer seeking a public listing and negotiated an exit
settlement under which they will buy back our 49% ownership interest at US$1
million.  In the restated financial report, the investment in GATL is
treated as “Impairment of Associated Company”.





Equity
Exchange





Equity
exchanges are platforms that permit privately-owned and state-owned equity
transactions.  Subject to the parameters established by the government
of China, equity exchanges provide services for the purchase and sale of equity
rights, debts, intellectual property rights and technology property
rights.  Equity listed on the exchanges may be traded through
negotiation, auction and bids.





Our
subsidiary, Hainan Concord’s principal business is to issue and manage
multi-functional membership cards for the people who participate in private
equity exchange in Hainan, and has an exclusive agreement with Hainan Exchange
Centre Non-Public Company Registration Co., Ltd. to issue multi-functional
membership and credit cards to their members.





Through
our 15% investment in Hi-Tech Exchange and 21% investment in Exchange Center, we
have further expanded our investment in Shenzhen and Hainan,
China.  Hi-Tech Exchange and Exchange Center are authorized by the
government of China to engage in the business of transferring equity and
corporate equity interests in Shenzhen and Hainan.





At
this time the various equity exchanges in China work, for the most part,
independently of one another.  We believe that this is
inefficient.  We are in the process of using our software technology
to develop, and we hope to eventually implement, an electronic information and
trading platform for equity exchanges that will enable the flow of information
regarding rights transfers, as well as payments, among the different equity
exchanges in China, including those owned and operated by Hi-Tech Exchange and
Exchange Center.





6


Competition





Internet
Services





The
market for Internet services and software is intensely competitive and we expect
it to become more competitive in the future.  Increased competition
could result in pricing pressures, low operating margins and the realization of
little or no market value.  Currently, our competitors are primarily
other Chinese owned and operated Internet services and software development
companies.





Most
of our current and potential competitors may have longer operating histories,
larger customer bases, greater brand recognition and greater financial,
marketing and other resources than we do, and may enter into strategic or
commercial relationships on more favorable terms than we can.  In
addition, new technologies and the expansion of existing technologies may
increase competitive pressure on us.  We have a significant presence
in the Chinese market for Internet services.





Equity
Exchange





There
is no national equity exchange in China.  It has been estimated that
there are approximately 100 equity exchanges in China, most of them small in
scale and serving only the local area.  There are also a few large
equity exchanges serving the largest cities in China, including the Beijing
Equity Exchange Center, the Tianjin Equity Exchange Center and the Shanghai
Equity Exchange Center.  Even the operations of the large equity
exchanges are localized.





Currently,
because of the localized nature of equity exchanges, there is not significant
competition among them.  However, further development and expansion of
other large equity exchanges, or the nationalization of equity exchanges, would
be likely to result in an increase in competition.  If that were to
happen, it could have a material adverse effect on our ability to attract
property owners to list their properties for sale on our exchange and to
identify and secure investors or buyers for the properties we list.





Regulation





Since
we operate principally through our subsidiaries in China, we are subject to and
affected by laws, regulations, administrative determinations, court decisions
and similar constraints that apply to business operations located in
China.





China
has enacted 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.  Our relevant subsidiaries have secured the
necessary licenses and approvals, and access the Internet through ChinaNet, an
approved channel of MII.





The
operation of our equity exchange will be largely dependent upon the development
of China’s policies and laws relating to the transfer of private and state-owned
equity.  The transfer and management of state-owned equity are subject
to the supervision of the Administrative Bureau of State-owned Assets, whereas
the equity of privately-owned enterprises must be transferred in compliance with
the Company Law and related regulations.





According
to the Provisional Procedures on the Administration of the Transfer of
State-owned Equity in Enterprises, all the transfers of state-owned equity must
be carried out through duly authorized equity exchange centers.  NSB
and Xi’an Assets and Equity Exchange have secured the necessary licenses and
approvals for their operations and qualify to transfer state-owned
equity.





7


We
work diligently to assure compliance with all applicable regulations which
impact our business, including cooperating with the MII, the Ministry of Public
Security and the Administrative Bureau of State-owned Assets.  There
can be no assurance, however, that additional regulations will not be enacted
that might adversely affect our operations.





Employees





As
of June 30, 2007, we employed 37 full-time employees consisting of 2 management
executives, 16 engineering and technical staff, 13 administrative and clerical
staff, and 6 sales persons.  None of our employees are members 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.





RISK
FACTORS





In
addition to other information in this Form 10-KSB, including many risks
presented in our Management’s Discussion and Analysis, the following risk
factors should be carefully considered in evaluating our business since it
operates in a highly changing and complex business environment that involves
numerous risks, some of which are beyond our control.  The following
discussion highlights a few of these risk factors, any one of which may have a
significant adverse impact on our business, operating results and financial
condition.  As a result of the risk factors set forth below and
elsewhere in this 10-KSB, and the risks discussed in our other Securities and
Exchange Commission filings, actual results could differ materially from those
projected in any forward-looking statements.





We
face significant risks, and the risks described below may not be the only risks
we face.  Additional risks that we do not know of or that we currently
consider immaterial may also impair our business operations.  If any
of the events or circumstances described in the following risks actually occurs,
our business, financial condition or results of operations could be harmed and
the trading price of our common stock could decline.





We
are restating several of our financial statements and may have other or future
restatements.





On
August 12, 2008, the Company’s current management team, following
discussions with its Board of Directors and its auditors, concluded that the
previously filed audited financial statements and other financial information as
of and for the year ended June 30, 2007, issued with the Company’s Form 10-KSB
filed with the Commission on October 26, 2007 should no longer be relied
upon.  In response to an inquiry from the Securities and Exchange
Commission concerning the Company’s financial statements, the Company reexamined
certain accounts which it has now determined should have been
impaired.  Impairment of these accounts is not temporary and expected
to result in an increased loss for the fiscal year ended June 30, 2007 of
$5,507,510 from the loss of $3,090,547 reported in the Annual Report, to a loss
of $8,598,057.





Owing
to the above mentioned impairment, the Company will restate the audited
financial statements as of and for the year ended June 30, 2007 by filing
amendments to the Form 10-KSB for the year ended June 30, 2007 and to
the Form 10-QSB for the period ended December 31, 2007 and March 31, 2008 as
soon as practicable.





Similarly,
on October 14, 2008, the Company announced that its board of directors and its
officers also concluded that, in the same context and for the same reasons, the
Company must also file amendments to its quarterly reports for the periods ended
September 30, 2007, December 31, 2007 and March 31, 2008.





In
connection with these restatements, the Company is re-evaluating its procedures
concerning long-life asset impairment, its disclosure and presentation criteria,
and its internal controls over financial reporting.  The Company
intends to examine enhancements to its internal controls over financial
reporting to provide reasonable assurance that errors of this type will not
recur.  In addition, the Company is examining the implementation of
well-defined standards for long-life asset impairment.  The Company
expects to complete this reporting examination by December 31,
2008.





8


The
above conclusions were reached in consultation with the Company’s Board of
Directors and the Company’s independent registered public accounting firm,
Albert Wong & Co.  A copy of these disclosures was provided to
Albert Wong & Co.





Our
success depends on identifying and closing acquisitions of emerging and growing
businesses in China.





Our
success is largely dependent on our identifying good acquisition targets,
negotiating and structuring transactions that are beneficial to us, closing
those transactions, finding suitable management to operate those businesses and
successfully operate and grow the businesses we acquire.





We must work
cooperatively with governmental authorities.





We
are engaged in business in a country with a planned economy heavily influenced
by government activities and we must work cooperatively with a variety of
national, federal, regional, state, provincial, and local government authorities
and entities.  The economy of China differs significantly from the
economies of the “western” industrialized nations in such respects as structure,
level of development, gross national product, growth rate, capital reinvestment,
resource allocation, self-sufficiency, rate of inflation and balance of payments
position, among others.  Only recently has the Chinese government
encouraged substantial private economic activities.  The Chinese
economy has experienced significant growth in the past several years, but such
growth has been uneven among various sectors of the economy and geographic
regions.  Actions by the Chinese government to control inflation have
significantly restrained economic expansion in the recent
past.  Similar actions by the Chinese government in the future could
have a significant adverse effect on economic conditions in China and the
results of operations of the Company.





If we deliver
products with defects, our credibility will be harmed and the sales and market
acceptance of our products will decrease.





Our
product and services are complex and may at times contained errors, defects and
bugs.  If we deliver products with errors, defects or bugs, our
credibility and the market acceptance and sales of our products would be
harmed.  Further, if our products contain errors, defects or bugs, we
may be required to expend significant capital and resources to alleviate such
problems.  We may agree to indemnify our customers in some
circumstances against liability arising from defects in our products. Defects
could also lead to product liability as a result of product liability lawsuits
against us or against our customers. We carry product and information liability
and errors and omissions insurance, but in the event that we are required to
defend more than a few such actions, or in the event that we are found liable in
connection with such an action, our business and operations may be severely and
materially adversely affected.





We compete with
large companies.





We
operate in a highly competitive industry.  Although we believe that
some of our technology is unique, can be protected, and, if adopted, will confer
benefits that will be otherwise unavailable for some time, we face very large
competitors with greater resources who may adopt various strategies to block or
slow our market penetration, thereby straining our more limited
resources.  We are aware of efforts by competitors to introduce doubt
about our financial stability as we compete to make sales and win customers and
business.  Large competitors may also seek to hinder our operations
through attempts to recruit key staff with exceptionally attractive terms of
employment, including signing bonuses, or by offer of highly competitive terms
to potential or newly acquired customers.





We will need to
continue our product development efforts.





We
believe that our market will be characterized by increasing technical
sophistication.  We also believe that our eventual success will depend
on our ability to continue to provide increased and specialized technical
expertise.  There is no assurance that we will not fall
technologically behind competitors with greater resources.  Although
we believe that we enjoy a lead in our product development, and are hopeful that
our patents provide some protection, we will likely need significant additional
capital in order to continue to enjoy such a technological lead over competitors
with more resources.





9


If we are unable
to protect our intellectual property, our competitive position would be
adversely affected.





We
may rely on patent protection, as well as trademark and copyright law, trade
secret protection and confidentiality agreements with our employees and others
to protect our intellectual property.  Despite our precaution,
unauthorized third parties may copy our products and services or reverse
engineer or obtain and use information that we regard as
proprietary.  We have filed eleven patent applications with the United
States Patent and Trademark Office and intend to file more.  Six
patents have been granted; however, we do not know if the remaining applications
will be granted or whether we will be successful in prosecuting any future
patents.  In addition, the laws of some foreign countries do not
protect proprietary rights to the same extent, as do the laws of the United
States.  Our means of protecting our proprietary rights may not be
adequate and third parties may infringe or misappropriate our patents,
copyrights, trademarks and similar proprietary rights.  If we fail to
protect our intellectual property and proprietary rights, our business,
financial condition and results of operations would suffer.  We
believe that we do not infringe upon the proprietary rights of any third party,
and no third party has asserted an infringement claim against us.  It
is possible, however, that such a claim might be asserted successfully against
us in the future.  We may be forced to suspend our operations to pay
significant amounts to defend our rights, and a substantial amount of the
attention of our management may be diverted from our ongoing business, all of
which would materially adversely affect our business.





We focus on the
research and development of our proprietary technologies and the marketing of
our first product.





We
believe that these technologies are the basis for marketable commercial
products.  However, there can be no assurance of this, and it is
possible that our proprietary technologies and products will have no commercial
benefit or potential.  In addition, from our inception to the present,
we have not recognized any substantial operating revenues.





We depend on our
key personnel and may have difficulty attracting and retaining the skilled staff
we need to execute our growth plans.





Our
success will be dependent largely upon the efforts of our management
team.  The loss of key staff could have a material adverse effect on
our business and prospects.  To execute our plans, we will have to
retain current employees. Competition for highly skilled employees with
technical, management, marketing, sales, product development and other
specialized training is intense.  We may not be successful in
retaining such qualified personnel. Specifically, we may experience increased
costs in order to retain skilled employees. If we are unable to retain
experienced employees as needed, we would be unable to execute our business
plan.





We may face rapid
technological change.





The
market for our products and services may be characterized by rapidly changing
technologies, extensive research and the introduction of new products and
services. We believe that our future success will depend in part upon our
ability to continue to enhance our existing products and to develop, manufacture
and market new products and services. As a result, we expect to continue to make
a significant investment in engineering, research and
development.  There can be no assurance that we will be able to
develop and introduce new products and services or enhance our initial products
in a timely manner to satisfy customer needs, achieve market acceptance or
address technological changes in our target markets. Failure to develop products
and services and introduce them successfully and in a timely manner could
adversely affect our competitive position, financial condition and results of
operations.





If we experience
rapid growth, we will need to manage such growth well.





We
may experience substantial growth in the size of our staff and the scope of our
operations, resulting in increased responsibilities for
management.  To manage this possible growth effectively, we will need
to continue to improve our operational, financial and management information
systems, will possibly need to create entire departments that do not now exist,
and hire, train, motivate and manage a growing number of staff.  Due
to a competitive employment environment for qualified technical, marketing and
sales personnel, we expect to experience difficulty in filling our needs for
qualified personnel.  There can be no assurance that we will be able
to effectively achieve or manage any future growth, and our failure to do so
could delay product development cycles and market penetration or otherwise have
a material adverse effect on our financial condition and results of
operations.





10


We could face
information and product liability risks and may not have adequate
insurance.





Our
products may be used in connection with critical business applications. We may
become the subject of litigation alleging that one or more of our products are
ineffective or disruptive in our treatment of data, or with regard to critical
business information.  Thus, we may become the target of lawsuits from
injured or disgruntled businesses or other users.  In the event that
we are required to defend more than a few such actions, or in the event that it
is found liable in connection with such an action, our business and operations
may be severely and materially adversely affected.





Future
profitability is not guaranteed.





We
have not recognized any substantial operating revenues to
date.  Assuming we can attract sufficient financing, and revenues
increase, there is no assurance that our plans will be realized or that we will
achieve break-even status or profitability in the future.





Changes to
financial accounting standards may affect our results of operations and cause us
to change business practices.





We
prepare financial statements in conformity with U.S. generally accepted
accounting principles.  These accounting principles are subject to
interpretation by the American Institute of Certified Public Accountants, the
Public Company Accounting Oversight Board, the SEC and various other bodies
formed to interpret and create appropriate accounting principles.  A
change in those principles can have a significant effect on our reported results
and may affect our reporting of transactions completed before a change is
announced.  Changes to those rules or the questioning of current
practices may adversely affect our reported financial results or the way we
conducts business.  For example, accounting principles affecting many
aspects of our business, including rules relating to equity-related
compensation, have recently been revised.  The Financial Accounting
Standards Board and other agencies finalized changes to U.S. generally accepted
accounting principles that required us, starting January 1, 2006, to record a
charge to earnings for employee stock option grants and other equity incentives.
We will have significant ongoing accounting charges resulting from option grant
and other equity incentive expensing that could reduce net income or increase
losses.  In addition, since we historically used equity-related
compensation as a component of our total employee compensation program, the
accounting change could make the use of equity-related compensation less
attractive and therefore make it more difficult to attract and retain
employees.





There is a
limited market for our common stock.





Our
common stock is not listed on any exchange and trades in the over-the-counter
(the “OTC”) market.  Additionally, one stockholder holds a majority of
our stock.  As such, the market for our common stock is limited and is
not regulated by the rules and regulations of any exchange. Further, the price
of our common stock and its volume in the OTC market may be subject to wide
fluctuations. Our stock price could decline regardless of our actual operating
performance, and stockholders could lose a substantial part of their investment
as a result of industry or market-based fluctuations. Our stock trades
relatively thinly.  If a more active public market for our stock is
not sustained, it may be difficult for stockholders to sell shares of our common
stock.  Because we do not anticipate paying cash dividends on our
common stock for the foreseeable future, stockholders will not be able to
receive a return on their shares unless they are able to sell
them.  The market price of our common stock will likely fluctuate in
response to a number of factors, including but not limited to, the
following:





·
            sales,
      sales cycle and market acceptance or rejection of our
    product;


·
            economic
      conditions within our industry;


·
            our
      failure to meet performance estimates or the performance estimates of
      securities analysts;


·
            the
      timing of announcements by us or our competitors of significant products,
      contracts or acquisitions or publicity regarding actual or potential
      results or performance thereof; and


·
            domestic
      and international economic, business and political
    conditions.





11


Failure to
maintain effective internal controls in accordance with Section 404 of the
Sarbanes-Oxley Act of 2002 could have a material adverse effect on our stock
price.





Section 404
of the Sarbanes-Oxley Act of 2002 and the related rules and regulations of the
SEC require annual management assessments of the effectiveness of our internal
control over financial reporting and a report by our independent registered
public accounting firm attesting to and reporting on these
assessments.  If we fail to adequately maintain compliance with, or
maintain the adequacy of, our internal control over financial reporting, as such
standards are modified, supplemented or amended from time to time, we may not be
able to ensure that we can conclude on an ongoing basis that we have effective
internal control over financial reporting in accordance with Section 404 of
the Sarbanes-Oxley Act of 2002 and the related rules and regulations of the
SEC.  If we cannot favorably assess, or our independent registered
public accounting firm is unable to provide an unqualified attestation report on
our assessment of the effectiveness of our internal control over financial
reporting, investor confidence in the reliability of our financial reports may
be adversely affected, which could have a material adverse effect on our stock
price.





ITEM
3.          LEGAL
PROCEEDINGS





We
are a party to the following legal proceedings:





(1)
Hainan Concord Financial Products Co., Ltd.





On
December 11, 2004, the Company’s wholly subsidiary, IMOT Information Technology
(Shenzhen) Ltd. (“IMOT Technology”) entered into a stock exchange agreement and
a profit guarantee agreement (respectively, the “Stock Swap Agreement” &
“Profit Guarantee Agreement”) with Guangzhou Di Tai Communication Co. Ltd &
Mr. Zai (collectively “Sellers”).  The Stock Swap Agreement called for
the Company to ultimately issue 5,000,000 shares of common stock in January 2005
in exchange for 80% of the issued and outstanding capital of Hainan Financial
Products Development Co., Ltd (“Hainan Financial Products”).  Under
the Profit Guarantee Agreement, the Sellers guaranteed that the net profit after
taxation of Hainan Financial Products for the year ended December 31, 2005 would
not be less than Rmb 5,000,000.  On February 7, 2005, the Sellers
received the share certificates of the 3,000,000 common stocks of the Company
from IMOT Technology.  In late 2006, IMOT Technology discovered that
the profit requirement of Rmb 5,000,000 of Hainan Financial Products had not met
and Hainan Financial Products was a shelf company without any registered
capital.





In
accordance with the terms of Stock Swap Agreement, any dispute in a deadlock
situation should be referred to an Arbitration tribunal in Shenzhen to be
resolved.  As such, IMOT Technology and the Company decided to refer
the dispute (“the Dispute”) and apply to China International Economic and Trade
Arbitration Commission, South China Sub-Commission in Shenzhen (“Arbitration
Commission”).  On December 20, 2006, Arbitration Commission approved
the application.  Under the application, IMOT Technology and the
Company were named as joint applicants (“the Applicants”); and the Sellers
together with Hainan Special Economic Zone Property Rights Exchange Centre and a
securities-broker in Hainan province as respondents (“the
Respondents”).  The three orders sought under this arbitration include
rescission of Share Swap Agreement and Profit Guarantee Agreement; return of
3,000,000 shares of common stock of the Company by the Sellers to the
Applicants; and to have all the legal costs and other costs incurred in this
arbitration to be reimbursed or born by the Sellers.  The share
certificate of the remaining 2,000,000 shares common stock is currently under
the custody of IMOT Technology.





The
Respondents at the same time also applied to a court in Haikou of the Hainan
province to request that the Dispute be handled by the court.  On
April 29, 2007, this court ruled that the Dispute could be subject to its
jurisdiction.  IMOT Technology appealed to the Haikou Intermediate
Court arguing that the dispute should be under the jurisdiction of the
Arbitration Commission.  On August 16, the Haikou Intermediate Court
made a final decision that the Dispute should be under the jurisdiction of the
Arbitration Commission,  On January 24, 2008, the Arbitration
Commission issued a verdict stating that the Stock Swap Agreement was invalid
and that the Respondents should return all IMOT shares to the
Applicant.





12


(2)
Hainan Special Economic Zone Property Rights Exchange Centre





Pursuant
to an agreement (“the Agreement”) signed with a third party on December 16,
2003, IMOT Information Technology (Shenzhen) Ltd. (“IMOT Technology”) acquired
21% of the issued and outstanding capital of Hainan Special Economic Zone
Property Rights Exchange Centre (“Hainan Exchange”).





In
2006, Hainan Exchange rejected the request of IMOT Technology to hold a general
meeting for its shareholders, and Hainan Exchange also declined to provide any
current financial information or reports.  In addition, Hainan refused
to fulfill certain obligations under the Co-operative Agreement.  The
Company is currently seeking legal advice as to those matters.  The
Company believes that Hainan Exchange has contravened its Articles of
Association, and IMOT Technology has the right to sue under the current
legislation.





(3)
Shanghai Newray Photographic Equipment Co. Ltd





In
prior years, IMOT Information Technology (Shenzhen) Ltd. (“IMOT Technology”)
acquired 51% of the issued and outstanding capital of Shanghai Newray
Photographic Equipment Co. Ltd (“Shanghai Newray”) from Mr. Tang who in turn
acts as the trustee of IMOT Technology, holding shares in Shanghai Newray on
behalf of IMOT Technology.  On September 30, 2006, the shareholders in
a special meeting passed a resolution (“the Resolution”) to take action to
terminate the operation of Shanghai Newray.  On November 2, 2006,
Shanghai Newray set up a liquidation working team to take over the operations
with one of its duties being to commence all the necessary procedures for the
members’ voluntary liquidation.





Mr.
Zhu, as the legal representative, manager and the executive director of Shanghai
Newray, refused to comply with all the requests of the liquidation working team,
resulting in delay of the liquidation procedures.  On January 18,
2007, Mr. Tang took civil action under the Companies Law against Mr.
Zhu.  Under this action, Mr. Zhu Wei was requested to comply with the
Resolution passed on September 30, 2006 to reimburse legal and other related
costs of Rmb 30,000 incurred by Mr. Tang for this case, and also to bear all the
court costs to be incurred.





On
January 24, 2007, Shanghai Hongkou District Court accepted the
case.   Recently discovery was completed.  However,
IMOT could not contact Mr. Zhu.  The IMOT board of directors will
consider whether this business should be written off in the upcoming reporting
periods.





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





Critical
Accounting Policies and Estimates





Management’s
discussion and analysis of results of operations and financial condition are
based upon the Company’s consolidated financial statements.  These
statements have been prepared in accordance with accounting principles generally
accepted in the United States of America.  These principles require
management to make certain estimates, judgments and assumptions that affect the
reported amounts of assets, liabilities, revenues and expenses, and related
disclosure of contingent assets and liabilities.  On an on-going
basis, we evaluate our estimates based on historical experience and various
other assumptions that are believed to be reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates under different
assumptions or conditions.





The
following critical accounting policies rely upon assumptions, judgments and
estimates and were used in the preparation of the Company’s consolidated
financial statements:





13


Revenue
Recognition





Revenues
are recognized (i) with respect to services, at the time a project (or a
milestone thereof) is completed and accepted by the customer, and (ii) with
respect to products, at the time products are delivered to customers and
collectability for such sales is reasonably assured. We have adopted Staff
Accounting Bulletin No.101, Revenue Recognition (“SAB 101”) in our financial
statements. SAB 101 provides in part further interpretive guidance for public
companies on the recognition, presentation, and disclosure of revenues in
financial statements. The adoption of SAB 101 did not have a material impact on
our revenue recognition practices.





Accounts
Receivable





We
typically extend credit to our customers.  From time to time,
e-commerce solution services are provided under fixed-price contracts where the
revenues and the payment of related receivable balances are due upon the
achievement of certain milestones. Management estimates the probability of
collection of the receivable balances and provides an allowance for doubtful
accounts based upon its judgment in assessing the realization of these
receivable balances taking into account aging, historical experience, the
customer’s financial condition and general economic conditions.





Long-lived
assets and goodwill





The
Company periodically evaluates the carrying value of long-lived assets held or
used whenever events and circumstances indicate that the carrying value of the
asset may no longer be recoverable.  An impairment loss, measured on
the fair value of the asset, is recognized if expected future undiscounted cash
flows are less than the carrying value of the assets.





We
evaluate goodwill, at a minimum, on an annual basis and whenever events and
changes in circumstances suggest that the carrying amount may not be recoverable
in accordance with SFAS No. 142 “Goodwill and Other Intangible
Assets”.  Impairment of goodwill is tested at the reporting unit level
by comparing the reporting unit’s carrying amount, including goodwill, to the
fair value of the reporting unit.  The fair values of the reporting
units are estimated using discounted cash flows approach.  If the
carrying amount of the reporting unit exceeds its fair value, goodwill is
considered impaired and a second step is performed to measure the amount of
impairment loss, if any.





Overview





We
believe that the People’s Republic of China represents an exciting emerging
world market whose role in the global economy is increasing
steadily.  China’s economic growth rate, measured by its gross
domestic product, has consistently been higher than 7% over the past 10
years.  This economic growth is attributable to many factors,
including investment in the country’s infrastructure, increased privatization of
businesses and an abundant source of labor.  Currently, we offer
products and services to businesses and consumers located primarily in
China.  Our plan is to take advantage of China’s economic growth to
expand our existing businesses and, possibly, in the future, to sell our
products and services outside of China.  We also have begun to acquire
diverse businesses that are not dependent on, or directly related to, each
other.  We believe that diversification is a good hedge against the
collapse of a single industry, such as the global collapse of the technology
industry that occurred in 2000.  We expect that any acquisitions we
make will improve our financial condition, although we cannot guarantee any such
result.





Currently
over half of our revenues are generated by our subsidiary, Leader Palace
International Ltd., which provide VOIP services.  The balance of our
revenues are generated primarily by our subsidiaries, ChinaE and ChinaE Tech
both of which distributes licenses for Chinese language translation software and
offer web design and hosting services.





In
response to the economic recovery, we began to diversify our business, so that
we will no longer be dependent on one market for
revenue.   Generally, the issuance of our common stock represents
some or all of the purchase price we pay for an acquired business.  We
believe that the continued active trading of our common stock will be important
to the principals of target companies and future acquisitions may be dependent
on the active trading of our common stock.  However, our common stock
has not been actively traded and, if our common stock continues to trade with
limited volume and at current levels we may not be able to make acquisitions as
planned.


14


During
the fiscal year ended June 30, 2007 we incurred a net operating loss of
$8,598,057, including a goodwill impairment of $3,119,872, impairment of
associated company of $3,454,693 and impairment of deposit of investment
$1,217,475.  Our auditor, Albert Wong & Co., CPA has issued a
“going concern” opinion for our financial statements at June 30,
2007.





Results
of Operations





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





Year Ended June
      30,2006
                    
                    
                    2007(Restated)Net
      revenues
                    
                    $
                    12,319,459
                    
                    
                    $
                    4,680,532Cost
      of revenues
                    
                    
                    (9,445,712
                    )
                    
                    
                    (4,608,566
                    )Gross
      profit
                    
                    
                    2,873,747
                    
                    
                    
                    71,966Selling,
      general and administrative
                    
                    
                    (1,137,716
                    )
                    
                    
                    (1,016,653
                    )Exchange
      difference
                    
                    
                    -
                    
                    
                    
                    (6,413
                    )Amortization
      on intangible assets
                    
                    
                    (99,005
                    )
                    
                    
                    (5,459
                    )Impairment
      of goodwill
                    
                    
                    (563,323
                    )
                    
                    
                    (3,119,872
                    )Impairment
      of associated company
                    
                    
                    -
                    
                    
                    
                    (3,454,693
                    )Impairment
      of deposit of investment
                    
                    
                    -
                    
                    
                    
                    (1,217,475
                    )Written
      off of loan receivables
                    
                    
                    -
                    
                    
                    
                    (49,818
                    )Interest
      income
                    
                    
                    44,772
                    
                    
                    
                    83,861Investment
      income
                    
                    
                    168,395
                    
                    
                    
                    102,230Profit/(Loss)
      from operations
                    
                    
                    1,286,870
                    
                    
                    
                    (8,612,326
                    )Share
      of profit/(loss) of associated Companies
                    
                    
                    27,684
                    
                    
                    
                    (3,398
                    )Other
      income, net
                    
                    
                    3,551
                    
                    
                    
                    458Profit/(Loss)
      before taxation
                    
                    
                    1,318,105
                    
                    
                    
                    (8,615,266
                    )Taxation
                    
                    
                    (427,809
                    )
                    
                    
                    -Profit/(Loss)
      before minority interest
                    
                    
                    890,296
                    
                    
                    
                    (8,615,266
                    )Minority
      interests
                    
                    
                    (1,192,791
                    )
                    
                    
                    17,209Profit
      (loss) before extra ordinary item
                    
                    
                    (302,495
                    )
                    
                    
                    (8,598,057
                    )Loss
      on disposal of an associated company
                    
                    
                    (1,814,705
                    )
                    
                    
                    -Net
      profit/(loss)
                    
                    $
                    (2,117,200
                    )
                    
                    $
                    (8,598,057
                    )





Year
Ended June 30, 2007 Compared to Year Ended June 30, 2006





Net revenues.





Net
revenues for the year ended June 30, 2007 decreased by $7,639K1, or 62%, to $4,681K from $12,319K for the year
ended June 30, 2006.





Net
revenues during fiscal 2007 were derived principally from e-commerce solutions,
sales of photographic equipment and VOIP services.  Net revenues
during fiscal 2006 were derived principally from e-commerce solutions, sales of
photographic equipment, sales of digital security system and consultancy fee
income.  The term “e-commerce solutions” includes web site design and
development and web hosting.








1 As used
in this Annual Report on Form 10-KSB, the letter “K” appearing immediately after
a dollar amount denotes rounding to the nearest $1,000; as an example, $380,499
may be rounded to “$380K”


15


The
following table reflects the total net revenues and percentage of net revenues
by major category for the periods indicated:





Total Net
      Revenues
              
              
              Percent of Total Net
      RevenuesYear Ended June
      30,
              
              
              Year Ended June
      30,2006
              
              
              2007
              
              
              2006
              
              
              2007US$
              
              
              US$E-commerce
      solutions- Web site design and development
              
              
              172,051
              
              
              
              80,285
              
              
              
              1.40
              %
              
              
              1.72
              %Sales
      of photographic equipment
              
              
              96,215
              
              
              
              1,628
              
              
              
              0.78
              %
              
              
              0.03
              %Sales
      of digital security system
              
              
              12,052,118
              
              
              
              -
              
              
              
              97.83
              %
              
              
              -
              %VOIP
      services
              
              
              -
              
              
              
              4,598,619
              
              
              
              -
              %
              
              
              98.25
              %Consultancy
      fee income
              
              
              (925
              )
              
              
              -
              
              
              
              -0.01
              %
              
              
              -
              %Total
              
              
              12,319,459
              
              
              
              4,680,532
              
              
              
              100.00
              %
              
              
              100.00
              %





Total
revenues derived from e-commerce solutions decreased by $92K, or 53%, to $80K in
fiscal 2007 as compared to $172K in fiscal 2006.  Sales of
photographic equipment decreased by $94K, or 98%, to $2K in fiscal 2007 as
compared to $96K in fiscal 2006.  Sales of digital security systems
decreased by $12,052K, or 100%, to $0K in fiscal 2007 as compared to $12,052K in
fiscal 2006 because the share holdings in this business has been decreased to
49%.  Sales of VOIP services was newly developed in fiscal 2007 and
got revenues of $4,599K.





The
decrease in total net revenues and the character of those sales was primarily
attributable to management’s decision to revise the Company’s plan of operation
to develop our business beyond the market for Internet products and services as
well as to the recovery of the economy of China, as well as the sale during 2007
of a portion of our majority ownership interest in Golden Anke resulting in
cessation of consolidation of Golden Anke’s revenue.





We
believe that the expansion of the Chinese economy will continue, and that by
diversifying our business we will be able to better capitalize on this
expansion by being in different markets.  Although we have no revenue
generated during the year using the trading platform for the trading of private
equity exchange centre in China, we believe that our technology for the design
and operation of the trading platform will have additional source of revenue for
the Company in the fiscal 2007.  Even though the businesses we have
acquired are diverse from our core business, we believe that our technological
expertise can be used to enhance the products and services that we now offer or
that we will offer in the future.





Costs of
Revenues.





Costs
of revenues consist principally of salaries for computer network technicians,
costs of photographic equipment, costs of digital security systems,
depreciation, and other costs including travel, employee benefits, office
expenses and related expenses allocated to the engineering and technician
staff.





The
following table reflects the principal components of costs of revenues and the
percentage of net revenues represented by each component for the periods
indicated:





Total Cost of
      Revenues
              
              
              Percent of Total Net
      RevenuesYear Ended June
      30,
              
              
              Year Ended June
      30,2006
              
              
              2007
              
              
              2006
              
              
              2007US$
              
              
              US$Engineers/technician
      salaries
              
              
              111,884
              
              
              
              116,879
              
              
              
              0.91
              %
              
              
              2.50
              %Cost
      of digital security system
              
              
              9,181,851
              
              
              
              -
              
              
              
              74.53
              %
              
              
              -
              %Cost
      of photographic equipment
              
              
              90,203
              
              
              
              1,798
              
              
              
              0.73
              %
              
              
              0.04
              %VOIP
      services
              
              
              -
              
              
              
              4,427,016
              
              
              
              -
              %
              
              
              94.58
              %Depreciation
              
              
              3,981
              
              
              
              17,835
              
              
              
              0.03
              %
              
              
              0.38
              %Other
              
              
              57,793
              
              
              
              45,038
              
              
              
              0.47
              %
              
              
              0.96
              %Total
              
              
              9,445,712
              
              
              
              4,608,566
              
              
              
              76.67
              %
              
              
              98.55
              %





16


Compared
to the 2006 fiscal year, the total costs of revenues for the 2007 fiscal year
decreased by $4,837K, or 51%, to $4,609K. The decrease in costs of revenues was
due to the exclusion of cost from digital security system, cost containment
effort implemented by management and a deadline in sales. The increase in
salaries was due to the increase of engineer and technician to develop the
equity platform in the PRC.  The principal components of costs of
revenues during the 2007 fiscal year were costs associated with support of the
engineering and technician staff, engineer and 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) salaries for administrative and sales staff, (3)
corporate overhead, and (4) allowances for bad and doubtful
accounts.  The following table reflects the principal components of
SG&A and the percentage of net revenues represented by each component for
the periods indicated:





Total
      SG&A
              
              
              Percent of
      Total
                Net
      RevenuesYear Ended June
      30,
              
              
              Year Ended June
      30,2006
              
              
              2007
              
              
              2006
              
              
              2007US$
              
              
              US$Sales
      and marketing salaries and commissions
              
              
              81,521
              
              
              
              55,887
              
              
              
              0.66
              %
              
              
              1.19
              %Other
      sales and marketing
              
              
              115,129
              
              
              
              52,510
              
              
              
              0.93
              %
              
              
              1.12
              %Rent
      obligation
              
              
              74,652
              
              
              
              75,856
              
              
              
              0.61
              %
              
              
              1.62
              %Administrative
      salaries
              
              
              170,054
              
              
              
              166,209
              
              
              
              1.38
              %
              
              
              3.55
              %Corporate
      overhead
              
              
              695,178
              
              
              
              666,191
              
              
              
              5.64
              %
              
              
              14.23
              %Bad
      and doubtful debt - account receivables
              
              
              1,182
              
              
              
              -
              
              
              
              0.01
              %
              
              
              0.00
              %Total
              
              
              1,137,716
              
              
              
              1,016,653
              
              
              
              9.23
              %
              
              
              21.71
              %








The
principal components of SG&A during the 2007 year were sales and marketing
salaries and commissions, other marketing expenditures, administrative salaries
and benefits, and other corporate expenses, which includes legal and
professional fees, general office expenses, traveling expenses, general employee
benefit expense, depreciation consultancy fees.





For
the 2007 fiscal year, SG&A decreased by $121K, or 10%, to $1,017K as
compared to $1,138K for the 2006 fiscal year.  Sales and marketing
salaries and commissions decreased 31% during the 2007 fiscal year, to $56K, as
compared to $81K for the 2006 fiscal year.  During the 2007 fiscal
year, administrative salaries decreased by $4K or 2% to $166K during the 2007
fiscal year, as compared to $170K in the 2006 fiscal year.  Other
corporate expense decreased during the 2007 fiscal year, by $29K or 4% to $666K,
as compared to $695K in the 2006 fiscal year.





Minority
Interest.





We
reported a minority interest in our losses of $17K for the 2007 fiscal year,
reflecting the   proportionate interest in the losses of Shanghai
Newray, and Hainan Concord owned by other parties as compared to a minority
interest in an earnings of $1,193K for the 2006 fiscal year, reflecting the
ownership of third parties in Shanghai Newray, Golden Anke and Hainan
Concord.


17





Liquidity
and Capital Resources





To
date, we have funded our operations with cash from our operating activities,
sales of our securities and by using our common stock to make acquisitions and
purchases.





At
June 30, 2007 we had cash and cash equivalents of $530K and working capital of
$2,553K as compared to $693K of cash and cash equivalents and $10,632K of
working capital at June 30, 2006.





Net
cash used in operating activities totaled $1,848K during the 2007 fiscal year as
compared to $970K of cash in operating activities used during the 2006 fiscal
year. Cash generated from operating activities was partially offset by non-cash
charges, including depreciation expense in the amount of $27K and amortization
of intangible assets in the amount of $5K, impairment of goodwill of $3,120,
impairment of associated company of $3,454,693 and impairment of deposit of
investment $1,217,475.





Net
cash used in investing activities was $1,390K for the 2007 fiscal year while net
cash provided by investing activities was $823K for the 2006 fiscal
year.  Funds used in investing activities consisted of addition of
office equipment, addition of intangible assets, increased in short-term
investment and short-term loan.





Net
cash provided by financing activities was $2,174K for the 2007 fiscal year while
net cash used in financing activities was $2,548K for the 2006 fiscal
year.  Funds provided by financing activity were the net proceeds from
the issuance of common stock during fiscals 2007 and 2006.





We
had no long term debt as of June 30, 2007.  Except as otherwise
described herein, we have no plans to make any major capital expenditures during
the next 12 months and we are not aware of any trends or uncertainties that
could affect sales of our products.  We do not have any off balance
sheet arrangements.





We
have implemented various cost management measures to reduce our
overhead.  We are also evaluating various opportunities to accelerate
the path to, and attain, profitability.  The investment in Shanghai
Newray, and Leader Palace are the part of our plan to invest in or acquire
businesses that are not dependent on the Internet market.  The
investment in Hainan Concord and Hi-Tech Exchange are part of a plan to
develop and expand our investment in Equity Exchange in the
PRC.  However, there can be no assurance that the cash provided by our
current operations will be sufficient to meet our cash needs in the 2007 fiscal
year.  The Company will likely need to borrow money or obtain
additional equity financing in order to sustain operations.  At
present, we have no commitments for funding and there is no
assurance  that funding will be available to us, or that any such
funding would be on acceptable terms.  If we need financing and cannot
obtain it, we may be required to severely curtail, or even cease, our
operations.





Our
operating results have been, and will continue to be, affected by a wide variety
of factors that could have a material adverse effect on revenues and
profitability during any particular period. Some of these factors
include:





·
            Our
      ability to successfully implement our business
  plan;





·
            Whether
      or not we will be able to obtain the additional capital necessary to
      support our operations;





·
            Whether
      or not we will find joint venture prospects or acquisition prospects with
      which to enhance our business;





·
            Whether
      or not we can successfully integrate acquisitions that we make into our
      business;





·
            The
      level and rate of acceptance of our products and services by the Chinese
      people;





·
            Continued
      growth in the use of the Internet in
China;





18


·
            Entry
      of new competition (including established companies from outside China and
      companies with substantially greater resources) into our
      market;





·
            Fluctuations
      in the level of orders for services 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, which result in our technology becoming
      obsolete;





·
            Availability
      and cost of computer technicians;





·
            Loss
      of any strategic relationships;





·
            Loss
      of our largest customers;





·
            Our
      ability to introduce new products and services on a timely
      basis;





·
            New
      product and service introductions by our
  competitors;





·
            Fluctuations
      in exchange rates, and





·
            Adverse
      changes in the general economic, social or political conditions in the
      People’s Republic of China.





19





ITEM
7.  FINANCIAL STATEMENTS





REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





To:
            The
      Board of Directors and Stockholders
of


Intermost
      Corporation





We
have audited the accompanying consolidated balance sheet of Intermost
Corporation and subsidiaries as of June 30, 2007 and the related consolidated
statements of income, stockholders' equity and cash flows for the year then
ended. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.





We
conducted our audit in accordance with standards of the Public Company
Accounting Oversight Board (United States).  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, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Intermost Corporation as of June 30, 2007 and the results of its operations and
its cash flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.





The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 14 to the
consolidated financial statements, the Company has suffered recurring losses
from operations and has a significant accumulated deficit. In addition, the
Company continues to experience negative cash flows from operations. These
factors raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans in regard to these matters are also described
in Note 14. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.








Hong
      Kong
            Albert
      Wong & Co.August
      11, 2008Certified
      Public Accountants





20





INTERMOST
      CORPORATIONCONSOLIDATED
      BALANCE SHEETSAS
      AT JUNE 30, 2007 AND 2006(Stated
      in US Dollars)








Notes
                                
                                2007
                                
                                
                                2006ASSETS
                                
                                
                                
                                (Restated)Current
      assetsCash
      and cash equivalents
                                
                                2(e)
                                
                                $
                                530,468
                                
                                
                                $
                                692,624Accounts
      receivable, net
                                
                                2(g)
                                
                                
                                4,085,123
                                
                                
                                
                                8,431,792Inventories
                                
                                
                                
                                
                                195,946
                                
                                
                                
                                126,520Deposits,
      prepayment and other receivables
                                
                                3
                                
                                
                                1,538,435
                                
                                
                                
                                834,242Deposit
      of investment
                                
                                4
                                
                                
                                150,000
                                
                                
                                
                                -Short-term
      loan
                                
                                6
                                
                                
                                670,763
                                
                                
                                
                                600,148Short-term
      investment
                                
                                2(i)
                                
                                
                                368,083
                                
                                
                                
                                346,062Stock
      in custodian
                                
                                
                                
                                
                                -
                                
                                
                                
                                1,170,000Total
      current assets
                                
                                
                                
                                $
                                7,538,818
                                
                                
                                $
                                12,201,388Restricted
      cash
                                
                                2(f)
                                
                                
                                303,525
                                
                                
                                
                                -Unlisted
      investment
                                
                                2(i)
                                
                                
                                893,526
                                
                                
                                
                                593,991Plant
      and equipment, net
                                
                                7
                                
                                
                                51,414
                                
                                
                                
                                50,880Intangible
      assets, net
                                
                                
                                
                                
                                20,354
                                
                                
                                
                                108,366Investment
      in associated companies
                                
                                2(m)
                                
                                
                                1,134,433
                                
                                
                                
                                1,069,843Goodwill
                                
                                2(k),5
                                
                                
                                -
                                
                                
                                
                                3,011,701TOTAL
      ASSETS
                                
                                
                                
                                $
                                9,942,070
                                
                                
                                $
                                17,036,169LIABILITIES
      ANDSTOCKHOLDERS’
      EQUITYCurrent
      liabilitiesAccounts
      payable
                                
                                
                                
                                $
                                3,927,964
                                
                                
                                $
                                34,458Accrued
      liabilities and other payable
                                
                                8
                                
                                
                                792,560
                                
                                
                                
                                177,375Customers
      deposits
                                
                                
                                
                                
                                105,708
                                
                                
                                
                                172,270Advance
      from shareholder
                                
                                
                                
                                
                                160,000
                                
                                
                                
                                -Business
      and other taxes payable
                                
                                
                                
                                
                                -
                                
                                
                                
                                1,185,060Total
      current liabilities
                                
                                
                                
                                $
                                4,986,232
                                
                                
                                $
                                1,569,163TOTAL
      LIABILITIES
                                
                                
                                
                                $
                                4,986,232
                                
                                
                                $
                                1,569,163





The
accompanying notes are an integral part of the financial
statements


21





INTERMOST
      CORPORATIONCONSOLIDATED BALANCE SHEETS (Continued)AS
      AT JUNE 30, 2007 AND 2006(Stated
      in US Dollars)





Notes
                      
                      
                      2007
                      
                      
                      2006(Restated)Minority
      interests
                      
                      
                      
                      
                      $
                      267,046
                      
                      
                      $
                      4,137,005STOCKHOLDERS’
      EQUITYPreferred
      Stock $0.001 par value,5,000,000
      shares authorized,nil
      share issued and outstandingat
      June 30, 2007 and 2006
                      
                      
                      
                      
                      $
                      -
                      
                      
                      $
                      -Common
      stock at $0.001 par value,500,000,000
      shares authorized,215,370,278
      shares issued andoutstanding
      at June 30, 2007;153,290,278
      shares issued andoutstanding
      at June 30, 2006
                      
                      10
                      
                      
                      
                      215,371
                      
                      
                      
                      153,291Treasury
      stock
                      
                      10
                      
                      
                      
                      (8,970
                      )
                      
                      
                      -Additional
      paid-in capital
                      
                      10
                      
                      
                      
                      24,216,705
                      
                      
                      
                      21,715,793Accumulated
      deficit
                      
                      
                      
                      
                      
                      (19,289,509
                      )
                      
                      
                      (10,691,452
                      )Accumulated
      other comprehensive income
                      
                      2(t)
                      
                      
                      
                      (444,805
                      )
                      
                      
                      152,369$
                      4,688,792
                      
                      
                      $
                      11,330,001TOTAL
      LIABILITIES ANDSTOCKHOLDERS’
      EQUITY
                      
                      
                      
                      
                      $
                      9,942,070
                      
                      
                      $
                      17,036,169





The
accompanying notes are an integral part of the financial
statements


22





INTERMOST
      CORPORATIONCONSOLIDATED
      STATEMENTS OF INCOME AND COMPREHENSIVE INCOMEFOR
      THE YEARS ENDED JUNE 30, 2007 AND 2006(Stated
      in US Dollars)





Notes
                      
                      
                      2007
                      
                      
                      2006(Restated)Net
      revenues
                      
                      2(n)
                      
                      
                      $
                      4,680,532
                      
                      
                      $
                      12,319,459Cost
      of net revenues
                      
                      
                      
                      
                      
                      (4,608,566
                      )
                      
                      
                      (9,445,712
                      )Gross
      profit
                      
                      
                      
                      
                      $
                      71,966
                      
                      
                      $
                      2,873,747Selling,
      general and administrative expenses
                      
                      
                      
                      
                      
                      (1,028,525
                      )
                      
                      
                      (1,236,721
                      )(Loss)/profit
      from operations
                      
                      
                      
                      
                      $
                      (956,559
                      )
                      
                      $
                      1,637,026Investment
      income
                      
                      
                      
                      
                      
                      102,230
                      
                      
                      
                      168,395Interest
      income
                      
                      
                      
                      
                      
                      83,861
                      
                      
                      
                      44,772Other
      income
                      
                      
                      
                      
                      
                      458
                      
                      
                      
                      3,551Written
      off of loan receivables
                      
                      
                      
                      
                      
                      (49,818
                      )
                      
                      
                      -Equity
      in earnings of associated companies
                      
                      
                      
                      
                      
                      (3,398
                      )
                      
                      
                      27,684$
                      (823,226
                      )
                      
                      $
                      1,881,428Unusual
      itemsImpairment
      of goodwill
                      
                      5
                      
                      
                      
                      (3,119,872
                      )
                      
                      
                      (563,323
                      )Impairment
      of associated company
                      
                      13
                      
                      
                      
                      (3,454,693
                      )
                      
                      
                      -Impairment
      of deposit of investment
                      
                      4
                      
                      
                      
                      (1,217,475
                      )Loss
      on disposal of an associated company
                      
                      
                      
                      
                      
                      -
                      
                      
                      
                      (1,814,705
                      )Loss
      before income taxes and minority interests
                      
                      
                      
                      
                      $
                      (8,615,266
                      )
                      
                      $
                      (496,600
                      )Income
      taxes
                      
                      9
                      
                      
                      
                      -
                      
                      
                      
                      (427,809
                      )Net
      loss before minority interests
                      
                      
                      
                      
                      $
                      (8,615,266
                      )
                      
                      $
                      (924,409
                      )Minority
      interests
                      
                      
                      
                      
                      
                      17,209
                      
                      
                      
                      (1,192,791
                      )Net
      loss
                      
                      
                      
                      
                      $
                      (8,598,057
                      )
                      
                      $
                      (2,117,200
                      )Net
      loss per share:-Basic
                      
                      
                      
                      
                      $
                      (0.0469
                      )
                      
                      $
                      (0.0157
                      )-Diluted
                      
                      
                      
                      
                      $
                      (0.0469
                      )
                      
                      $
                      (0.0157
                      )Weighted
      average number of common stock-Basic
                      
                      
                      
                      
                      $
                      183,458,168
                      
                      
                      $
                      134,978,079-Diluted
                      
                      
                      
                      
                      $
                      183,458,168
                      
                      
                      $
                      134,978,079




The
accompanying notes are an integral part of the financial
statements


23





INTERMOST
      CORPORATIONCONSOLIDATED
      STATEMENTS OF STOCKHOLDERS’ EQUITYFOR
      THE YEARS ENDED JUNE 30, 2007 AND 2006(Stated
      in US Dollars)




Additional
                                                    
                                                    
                                                    AccumulatedNo.
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    Paid
                                                    
                                                    
                                                    othershares
                                                    
                                                    
                                                    Common
                                                    
                                                    
                                                    Treasury
                                                    
                                                    
                                                    In
                                                    
                                                    
                                                    comprehensive
                                                    
                                                    
                                                    Accumulatedoutstanding
                                                    
                                                    
                                                    stock
                                                    
                                                    
                                                    stock
                                                    
                                                    
                                                    Capital
                                                    
                                                    
                                                    Income/(loss)
                                                    
                                                    
                                                    deficit
                                                    
                                                    
                                                    TotalBalance,
      July 1, 2005
                                                    
                                                    
                                                    87,949,472
                                                    
                                                    
                                                    $
                                                    87,949
                                                    
                                                    
                                                    $
                                                    -
                                                    
                                                    
                                                    $
                                                    17,479,933
                                                    
                                                    
                                                    $
                                                    (3,731
                                                    )
                                                    
                                                    $
                                                    (8,574,252
                                                    )
                                                    
                                                    $
                                                    8,989,899Net
      income
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    (2,117,200
                                                    )
                                                    
                                                    
                                                    (2,117,200
                                                    )Issuance
      of common stocks
                                                    
                                                    
                                                    65,340,806
                                                    
                                                    
                                                    
                                                    65,342
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    4,235,860
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    4,301,202Foreign
      currency translationAdjustment
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    156,100
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    156,100Balance,
      June 30, 2006
                                                    
                                                    
                                                    153,290,278
                                                    
                                                    
                                                    $
                                                    153,291
                                                    
                                                    
                                                    $
                                                    -
                                                    
                                                    
                                                    $
                                                    21,715,793
                                                    
                                                    
                                                    $
                                                    152,369
                                                    
                                                    
                                                    $
                                                    (10,691,452
                                                    )
                                                    
                                                    $
                                                    11,330,001Balance,
      July 1, 2006
                                                    
                                                    
                                                    153,290,278
                                                    
                                                    
                                                    $
                                                    153,291
                                                    
                                                    
                                                    $
                                                    -
                                                    
                                                    
                                                    $
                                                    21,715,793
                                                    
                                                    
                                                    $
                                                    152,369
                                                    
                                                    
                                                    $
                                                    (10,691,452
                                                    )
                                                    
                                                    $
                                                    11,330,001Net
      loss
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    (8,598,057
                                                    )
                                                    
                                                    
                                                    (8,598,057
                                                    )Issuance
      of common stocks
                                                    
                                                    
                                                    62,080,000
                                                    
                                                    
                                                    
                                                    62,080
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    2,500,912
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    2,562,992Redemption
      of common stocks
                                                    
                                                    
                                                    0
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    (2,470
                                                    )
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    (2,470
                                                    )Cancellation
      of common stocks
                                                    
                                                    
                                                    0
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    (6,500
                                                    )
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    (6,500
                                                    )Foreign
      currency translationAdjustment
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    (597,174
                                                    )
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    (597,174
                                                    )Restated
      Balance, June 30, 2007
                                                    
                                                    
                                                    215,370,278
                                                    
                                                    
                                                    $
                                                    215,371
                                                    
                                                    
                                                    $
                                                    (8,970
                                                    )
                                                    
                                                    $
                                                    24,216,705
                                                    
                                                    
                                                    $
                                                    (444,805
                                                    )
                                                    
                                                    $
                                                    (19,289,509
                                                    )
                                                    
                                                    $
                                                    4,688,792




The
accompanying notes are an integral part of the financial
statements





24





INTERMOST
      CORPORATIONCONSOLIDATED
      STATEMENTS OF CASH FLOWSFOR
      THE YEARS ENDED JUNE 30, 2007 AND 2006(Stated
      in US Dollars)





Note
                                
                                
                                2007
                                
                                
                                2006Cash
      flows from operating activities
                                
                                
                                
                                
                                (Restated)Net
      loss
                                
                                
                                
                                
                                $
                                (8,598,057
                                )
                                
                                $
                                (2,117,200
                                )Amortization
      of intangible assets
                                
                                
                                
                                
                                
                                5,459
                                
                                
                                
                                99,005Impairment
      of goodwill
                                
                                5
                                
                                
                                
                                3,119,872
                                
                                
                                
                                563,323Impairment
      of associated company
                                
                                13
                                
                                
                                
                                3,454,693
                                
                                
                                
                                -Impairment
      of deposit of investment
                                
                                4
                                
                                
                                
                                1,217,475
                                
                                
                                
                                -Depreciation
                                
                                
                                
                                
                                
                                27,414
                                
                                
                                
                                20,002Loss
      on disposal of fixed assets
                                
                                
                                
                                
                                
                                1,820
                                
                                
                                
                                -Loss
      on disposal of an associated company
                                
                                
                                
                                
                                
                                -
                                
                                
                                
                                1,814,705Written
      off of loan receivables
                                
                                
                                
                                
                                
                                49,818Equity
      in loss (earnings) of associated companies
                                
                                
                                
                                
                                
                                3,398
                                
                                
                                
                                (27,684
                                )Issuance
      of common stock in exchange for services
                                
                                
                                
                                
                                
                                -
                                
                                
                                
                                663,034Bad
      debts written off
                                
                                
                                
                                
                                
                                -
                                
                                
                                
                                1,182Minority
      interests
                                
                                
                                
                                
                                
                                (17,209
                                )
                                
                                
                                1,192,791Adjustments
      to reconcile net loss to net cashprovided
      by operating activities:Accounts
      receivable, net
                                
                                
                                
                                
                                
                                (3,916,275
                                )
                                
                                
                                (846,040
                                )Inventories
                                
                                
                                
                                
                                
                                (150,290
                                )
                                
                                
                                (114,726
                                )Deposits,
      prepayment and other receivable
                                
                                
                                
                                
                                
                                (1,403,102
                                )
                                
                                
                                (611,646
                                )Short-term
      loan
                                
                                
                                
                                
                                
                                (31,581
                                )
                                
                                
                                (600,148
                                )Accounts
      payables
                                
                                
                                
                                
                                
                                3,825,757
                                
                                
                                
                                (1,279,967
                                )Accrued
      liabilities and other payable
                                
                                
                                
                                
                                
                                613,485
                                
                                
                                
                                (773,440
                                )Customers
      deposits
                                
                                
                                
                                
                                
                                (11,622
                                )
                                
                                
                                44,253Deferred revenue
                                
                                
                                
                                
                                
                                (14,556
                                )
                                
                                
                                (14,958
                                )Business and other taxes
      payable
                                
                                
                                
                                
                                
                                (24,471
                                )
                                
                                
                                417,217Net
      cash used in operating activities
                                
                                
                                
                                
                                $
                                (1,847,972
                                )
                                
                                $
                                (1,570,297
                                )Cash
      flows from investing activitiesAcquisition
      of plant and equipment
                                
                                
                                
                                
                                $
                                (26,601
                                )
                                
                                $
                                (43,008
                                )Acquisition
      of intangible asset
                                
                                
                                
                                
                                
                                -
                                
                                
                                
                                (26,350
                                )Increase
      in short-term investment
                                
                                
                                
                                
                                
                                -
                                
                                
                                
                                (153,707
                                )Deposit
      of investment
                                
                                
                                
                                
                                
                                (1,363,572
                                )
                                
                                
                                -Net
      cash used in investing activities
                                
                                
                                
                                
                                $
                                (1,390,173
                                )
                                
                                $
                                (223,065
                                )Cash
      flows from financing activitiesAdvances
      from related parties
                                
                                
                                
                                
                                $
                                155,837
                                
                                
                                $
                                -Redemption
      of common stocks
                                
                                
                                
                                
                                
                                (790,594
                                )
                                
                                
                                -Proceeds
      from issuance and redemption of common stocks, net
                                
                                
                                
                                
                                
                                3,104,000
                                
                                
                                
                                2,548,438Restricted
      cash
                                
                                
                                
                                
                                
                                (295,627
                                )
                                
                                
                                -Net
      cash provided by financing activities
                                
                                
                                
                                
                                $
                                2,173,616
                                
                                
                                $
                                2,548,438





25





INTERMOST
      CORPORATIONCONSOLIDATED
      STATEMENTS OF CASH FLOWS (Continued)FOR
      THE YEARS ENDED JUNE 30, 2007 AND 2006(Stated
      in US Dollars)





2007
              
              
              2006(Restated)Net
      (decrease) increase in cash and cash equivalents
              
              $
              (1,064,529
              )
              
              $
              755,076Effect
      of foreign currency translation on cash and cash
    equivalents
              
              
              902,373
              
              
              
              (200,105
              )Cash
      and cash equivalents–beginning of year
              
              
              692,624
              
              
              
              137,653Cash
      and cash equivalents–end of year
              
              $
              530,468
              
              
              $
              692,6242007
              
              
              2006Supplementary
      cash flow information:Tax
      paid
              
              $
              -
              
              
              $
              481Interest
      paid
              
              
              -
              
              
              
              -








The
accompanying notes are an integral part of the financial
statements


26





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





On
May 15, 2007, the Company dismissed E. Randall Gruber, CPA, PC as the
independent auditors for the Company and engaged Samuel H. Wong & Co., LLC,
CPA, PC to serve as its registered independent auditor.  On May
23, 2008 the Company dismissed Samuel H. Wong & Co., LLC, CPA, PC and
engaged Albert Wong & Co., CPA to serve as its registered independent
auditor to re-audit restate the financial statements for the year ended June 30,
2007 and to perform services on an ongoing basis.





The
report of E. Randall Gruber, CPA, PC, on the financial statements of the Company
as of and for the years ended June 30, 2006 did not contain an adverse opinion,
or a disclaimer of opinion.  However the report was qualified as to
the Company’s ability to continue as a going concern.  During the year
ended June 30, 2006, and the period from July 1, 2006 through the date of the
dismissal of E. Randall Gruber, CPA, PC, the Company did not have any
disagreements with E. Randall Gruber, CPA, PC, 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 E.
Randall Gruber, CPA, PC, would have caused it to make a reference to the subject
matter of the disagreements in connection with its reports.





Prior
to engaging Samuel H. Wong & Co., LLP, CPA, PC, the Company had not
consulted Samuel H. Wong & Co., LLP, CPA, PC regarding the application of
accounting principles to a specified transaction, completed or proposed, or the
type of audit opinion that might be rendered on the Registrant’s financial
statements.





ITEM
      13.
            EXHIBITS
      AND REPORTS ON FORM 8-K





(a)
                          ExhibitsExhibitNumber
                          Description
      of Exhibit16
                          Letter
      on Change in Certifying Accountant (1)21
                          Significant
      Subsidiaries *31.1
                          Certification
      of Chief Executive Officer Pursuant to Rule 13a-14(a) and 15d-14(a)
      *31.2
                          Certification
      of Chief Financial Officer Pursuant to Rule 13a-14(a) and 15d-14(a)
      *31.3
                          Certification
      Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002 *31.4
                          Certification
      Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002
*




*Filed
herewith.
  (1)
            Incorporated
      by reference to the exhibit filed with the Registrant’s Current Report on
      Form 8-K filed with the SEC on  March 8,
  2004.





(b)
            Reports
      on Form 8-K





On
July 27, 2006 the Registrant filed a Current Report disclosing the disposition
of 25% share investment in Shanghai Fortune Venture Limited to Mr. Li
Laohu.





On
August 14, 2006 the Registrant filed a Current Report disclosing the resignation
of Mr. Andy Lin as the Chief Executive Officer and appointment of Mr. Andy Lin
and Mr. Deng Xiang Xiong as the Chief Financial Officer & Company Secretary
and Acting Chief Executive Officer respectively with effect from August 8,
2006.





On
October 16, 2006 the Registrant filed a Current Report disclosing the
resignation of Mr. Andy Lin as the Chief Financial Officer and appointment of
Ms. Yang Liu as the Acting Chief Financial Officer with effect from October 11,
1006.


27


On
November 6, 2006 the Registrant filed a Current Report disclosing the
resignation of Mr. Andy Lin as Executive Director and appointment of Mr. James
Woo and Mr. Wilbert Kim as the Directors until the next annual meeting of the
shareholders.  The board also appointed Mr. Syh-kwan Chan as the new
Chief Financial Officer.





On
January 3, 2007 the Registrant filed a Current Report disclosing election of Mr.
Deng Xiang Xiong, Chen Syh Kwan and Mr. Chris Liu as President & Acting
Chief Executive Officer, Chief Financial Officer and Secretary
respectively.  The board also took the action to protect and optimize
the interests of the Company and its shareholders in: 1. terminating the “Hainan
Concord Financial Products Development Co., Ltd. Stock Swap Agreement” and the
“Profit Guarantee Agreement” and requiring the counterparts to return the
5,000,000 shares of IMOT stock; 2. suing the management of Shanghai Newray
Photographic Equipment Co., Ltd.; 3. issuing a legal notice to the Hainan
Special Economic Zone Property Rights Exchange Centre.





On
February 15, 2007 the Registrant filed a Current Report disclosing the
wholly-owned subsidiary of the Intermost Corporation, IMOT Information
Technology (Shenzhen) Co., Ltd., entered into an agreement on the restructuring
and listing of the Shenzhen Golden Anke Technology Lted.





On
June 20, 2007 the Registrant filed a Current Report disclosing the termination
of Mr. Deng Xiang Xiong and Mr. Chen Syh Kwan as Chief Executive Officer &
President and Chief Financial Officer and accepting the resignation of Mr. Chris
Liu as Secretary with effective as of June 13, 2007 and on the same date,
appointment of Mr. Rocky Wulianghai and Mr. Thomas Lee as Chief Executive
Officer & President and Chief Financial Officer respectively.





On
October 30, 2007 the Registrant filed a Current Report disclosing the
resignation of Mr. Shim Yang as Director with effective as of October 25,
2007





On
February 21, 2008 the Registrant filed a Current Report disclosing the departure
of Mr. Fred Peck, Mr. Chia Hsun Wu, Mr. Rocky Wulianghai, Mr. Wilbert Kim, Ms.
Catalina Chan, Mr. Deng Xiang Xiong and election of Mr. Fred Peck, Mr. Chia Hsun
Wu, Mr. Rocky Wulianghai and Mr. Hiroshi Shinohara as Directors and pursuant to
a Special Shareholders Meeting, the Bylaws were amended to reduce the number of
directors, within an authorized range of directors of three to seven, from seven
to four with effective as of February 18, 2008.





On
May 23, 2008 the Registrant filed a Current Report dismissing Samuel H. Wong
& Company, LLP and engaging Albert Wong & Co., CPA as the Company’s
independent accountant with effective as of May 23, 3008.





ITEM
14.      PRINCIPAL ACCOUNTANT
FEES AND SERVICES





The
following table sets forth fees billed to us by our auditors during the fiscal
years ended June 30, 2007 and June 30, 2006 for: (i) services rendered for the
audit of our annual financial statements and the review of our quarterly
financial statements, (ii) services by our auditor that are reasonably related
to the performance of the audit or review of our financial statements and that
are not reported as Audit Fees, (iii) services rendered in connection with tax
compliance, tax advice and tax planning, and (iv) all other fees for services
rendered.





June 30,
      2007
                                  
                                  
                                  June 30,
      2006(i)
                                  Audit
      Fees
                                  
                                  $
                                  159,500
                                  *
                                  
                                  $
                                  75,261(ii)
                                  Audit
      Related Fees
                                  
                                  $
                                  --
                                  
                                  
                                  $
                                  --(iii)
                                  Tax
      Fees
                                  
                                  $
                                  --
                                  
                                  
                                  $
                                  --(iv)
                                  All
      Other Fees
                                  
                                  $
                                  --
                                  
                                  
                                  $
                                  --





*
                    Audit
      fee for fiscal year ended June 30, 2007 was paid to the former auditors,
      E. Randall Gruber, CPA, K.M. Lee & Co., CPA and Samuel H. Wong &
      Company, LLP, in amount of US$100,000, US$16,500 and US$40,000
      respectively.





28


Documents
filed as part of this report:








PAGEREPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
            30CONSOLIDATED
      BALANCE SHEET
            31-32CONSOLIDATED
      STATEMENT OF INCOME AND COMPREHENSIVE INCOME
            33CONSOLIDATED
      STATEMENT OF STOCKHOLDERS’ EQUITY
            34CONSOLIDATED
      STATEMENT OF CASH FLOWS
            35-36NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS
            37-59SIGNATURES
      AND EXHIBITS
            60





29


To:  
The board of directors and stockholders of


Intermost
Corporation





Report of Independent
Registered Public Accounting Firm





We
have audited the accompanying consolidated balance sheet of Intermost
Corporation and subsidiaries as of June 30, 2007 and the related consolidated
statements of income, stockholders' equity and cash flows for the year then
ended. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.





We
conducted our audit in accordance with standards of the Public Company
Accounting Oversight Board (United States).  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, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Intermost Corporation as of June 30, 2007 and the results of its operations and
its cash flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.





The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 14 to the
consolidated financial statements, the Company has suffered recurring losses
from operations and has a significant accumulated deficit. In addition, the
Company continues to experience negative cash flows from operations. These
factors raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans in regard to these matters are also described
in Note 14. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.








Hong
      Kong
            Albert
      Wong & Co.August
      11, 2008
            Certified
      Public Accountants





30




INTERMOST
      CORPORATIONCONSOLIDATED
      BALANCE SHEETSAS
      AT JUNE 30, 2007 AND 2006(Stated
      in US Dollars)
  Notes
                                  
                                  2007
                                  
                                  
                                  2006ASSETS
                                  
                                  
                                  
                                  (Restated)Current
      assetsCash
      and cash equivalents
                                  
                                  2(e)
                                  
                                  $
                                  530,468
                                  
                                  
                                  $
                                  692,624Accounts
      receivable, net
                                  
                                  2(g)
                                  
                                  
                                  4,085,123
                                  
                                  
                                  
                                  8,431,792Inventories
                                  
                                  
                                  
                                  
                                  195,946
                                  
                                  
                                  
                                  126,520Deposits,
      prepayment and other receivables
                                  
                                  3
                                  
                                  
                                  1,538,435
                                  
                                  
                                  
                                  834,242Deposit
      of investment
                                  
                                  4
                                  
                                  
                                  150,000
                                  
                                  
                                  
                                  -Short-term
      loan
                                  
                                  6
                                  
                                  
                                  670,763
                                  
                                  
                                  
                                  600,148Short-term
      investment
                                  
                                  2(i)
                                  
                                  
                                  368,083
                                  
                                  
                                  
                                  346,062Stock
      in custodian
                                  
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  1,170,000Total
      current assets
                                  
                                  
                                  
                                  $
                                  7,538,818
                                  
                                  
                                  $
                                  12,201,388Restricted
      cash
                                  
                                  2(f)
                                  
                                  
                                  303,525
                                  
                                  
                                  
                                  -Unlisted
      investment
                                  
                                  2(i)
                                  
                                  
                                  893,526
                                  
                                  
                                  
                                  593,991Plant
      and equipment, net
                                  
                                  7
                                  
                                  
                                  51,414
                                  
                                  
                                  
                                  50,880Intangible
      assets, net
                                  
                                  
                                  
                                  
                                  20,354
                                  
                                  
                                  
                                  108,366Investment
      in associated companies
                                  
                                  2(m)
                                  
                                  
                                  1,134,433
                                  
                                  
                                  
                                  1,069,843Goodwill
                                  
                                  2(k),5
                                  
                                  
                                  -
                                  
                                  
                                  
                                  3,011,701TOTAL
      ASSETS
                                  
                                  
                                  
                                  $
                                  9,942,070
                                  
                                  
                                  $
                                  17,036,169LIABILITIES
      ANDSTOCKHOLDERS’
      EQUITYCurrent
      liabilitiesAccounts
      payable
                                  
                                  
                                  
                                  $
                                  3,927,964
                                  
                                  
                                  $
                                  34,458Accrued
      liabilities and other payable
                                  
                                  8
                                  
                                  
                                  792,560
                                  
                                  
                                  
                                  177,375Customers
      deposits
                                  
                                  
                                  
                                  
                                  105,708
                                  
                                  
                                  
                                  172,270Advance
      from shareholder
                                  
                                  
                                  
                                  
                                  160,000
                                  
                                  
                                  
                                  -Business
      and other taxes payable
                                  
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  1,185,060Total
      current liabilities
                                  
                                  
                                  
                                  $
                                  4,986,232
                                  
                                  
                                  $
                                  1,569,163TOTAL
      LIABILITIES
                                  
                                  
                                  
                                  $
                                  4,986,232
                                  
                                  
                                  $
                                  1,569,163
  See
accompanying notes to consolidated financial
statements




31




INTERMOST
      CORPORATIONCONSOLIDATED BALANCE SHEETS (Continued)AS
      AT JUNE 30, 2007 AND 2006(Stated
      in US Dollars)
 
 Notes
                        
                        
                        2007
                        
                        
                        2006(Restated)Minority
      interests
                        
                        
                        
                        
                        $
                        267,046
                        
                        
                        $
                        4,137,005STOCKHOLDERS’
      EQUITYPreferred
      Stock $0.001 par value,5,000,000
      shares authorized,nil
      share issued and outstandingat
      June 30, 2007 and 2006
                        
                        
                        
                        
                        $
                        -
                        
                        
                        $
                        -Common
      stock at $0.001 par value,500,000,000
      shares authorized,215,370,278
      shares issued andoutstanding
      at June 30, 2007;153,290,278
      shares issued andoutstanding
      at June 30, 2006
                        
                        10
                        
                        
                        
                        215,371
                        
                        
                        
                        153,291Treasury
      stock
                        
                        10
                        
                        
                        
                        (8,970
                        )
                        
                        
                        -Additional
      paid-in capital
                        
                        10
                        
                        
                        
                        24,216,705
                        
                        
                        
                        21,715,793Accumulated
      deficit
                        
                        
                        
                        
                        
                        (19,289,509
                        )
                        
                        
                        (10,691,452
                        )Accumulated
      other comprehensive income
                        
                        2(t)
                        
                        
                        
                        (444,805
                        )
                        
                        
                        152,369$
                        4,688,792
                        
                        
                        $
                        11,330,001TOTAL
      LIABILITIES ANDSTOCKHOLDERS’
      EQUITY
                        
                        
                        
                        
                        $
                        9,942,070
                        
                        
                        $
                        17,036,169


See
accompanying notes to consolidated financial statements




32




INTERMOST
      CORPORATIONCONSOLIDATED
      STATEMENTS OF INCOME AND COMPREHENSIVE INCOMEFOR
      THE YEARS ENDED JUNE 30, 2007 AND 2006(Stated
      in US Dollars)
 
 Notes
                        
                        
                        2007
                        
                        
                        2006(Restated)Net
      revenues
                        
                        2(n)
                        
                        
                        $
                        4,680,532
                        
                        
                        $
                        12,319,459Cost
      of net revenues
                        
                        
                        
                        
                        
                        (4,608,566
                        )
                        
                        
                        (9,445,712
                        )Gross
      profit
                        
                        
                        
                        
                        $
                        71,966
                        
                        
                        $
                        2,873,747Selling,
      general and administrative expenses
                        
                        
                        
                        
                        
                        (1,028,525
                        )
                        
                        
                        (1,236,721
                        )(Loss)/profit
      from operations
                        
                        
                        
                        
                        $
                        (956,559
                        )
                        
                        $
                        1,637,026Investment
      income
                        
                        
                        
                        
                        
                        102,230
                        
                        
                        
                        168,395Interest
      income
                        
                        
                        
                        
                        
                        83,861
                        
                        
                        
                        44,772Other
      income
                        
                        
                        
                        
                        
                        458
                        
                        
                        
                        3,551Written
      off of loan receivables
                        
                        
                        
                        
                        
                        (49,818
                        )
                        
                        
                        -Equity
      in earnings of associated companies
                        
                        
                        
                        
                        
                        (3,398
                        )
                        
                        
                        27,684$
                        (823,226
                        )
                        
                        $
                        1,881,428Unusual
      itemsImpairment
      of goodwill
                        
                        5
                        
                        
                        
                        (3,119,872
                        )
                        
                        
                        (563,323
                        )Impairment
      of associated company
                        
                        13
                        
                        
                        
                        (3,454,693
                        )
                        
                        
                        -Impairment
      of deposit of investment
                        
                        4
                        
                        
                        
                        (1,217,475
                        )Loss
      on disposal of an associated company
                        
                        
                        
                        
                        
                        -
                        
                        
                        
                        (1,814,705
                        )Loss
      before income taxes and minority interests
                        
                        
                        
                        
                        $
                        (8,615,266
                        )
                        
                        $
                        (496,600
                        )Income
      taxes
                        
                        9
                        
                        
                        
                        -
                        
                        
                        
                        (427,809
                        )Net
      loss before minority interests
                        
                        
                        
                        
                        $
                        (8,615,266
                        )
                        
                        $
                        (924,409
                        )Minority
      interests
                        
                        
                        
                        
                        
                        17,209
                        
                        
                        
                        (1,192,791
                        )Net
      loss
                        
                        
                        
                        
                        $
                        (8,598,057
                        )
                        
                        $
                        (2,117,200
                        )Net
      loss per share:-Basic
                        
                        
                        
                        
                        $
                        (0.0469
                        )
                        
                        $
                        (0.0157
                        )-Diluted
                        
                        
                        
                        
                        $
                        (0.0469
                        )
                        
                        $
                        (0.0157
                        )Weighted
      average number of common stock-Basic
                        
                        
                        
                        
                        $
                        183,458,168
                        
                        
                        $
                        134,978,079-Diluted
                        
                        
                        
                        
                        $
                        183,458,168
                        
                        
                        $
                        134,978,079
  The
accompanying notes are an integral part of the financial
statements


33


INTERMOST
      CORPORATIONCONSOLIDATED
      STATEMENTS OF STOCKHOLDERS’ EQUITYFOR
      THE YEARS ENDED JUNE 30, 2007 AND 2006(Stated
      in US Dollars)
  Additional
                                        
                                        
                                        AccumulatedNo.
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        Paid
                                        
                                        
                                        othershares
                                        
                                        
                                        Common
                                        
                                        
                                        Treasury
                                        
                                        
                                        In
                                        
                                        
                                        comprehensive
                                        
                                        
                                        Accumulatedoutstanding
                                        
                                        
                                        stock
                                        
                                        
                                        stock
                                        
                                        
                                        Capital
                                        
                                        
                                        Income/(loss)
                                        
                                        
                                        deficit
                                        
                                        
                                        TotalBalance,
      July 1, 2005
                                        
                                        
                                        87,949,472
                                        
                                        
                                        $
                                        87,949
                                        
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        17,479,933
                                        
                                        
                                        $
                                        (3,731
                                        )
                                        
                                        $
                                        (8,574,252
                                        )
                                        
                                        $
                                        8,989,899Net
      income
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (2,117,200
                                        )
                                        
                                        
                                        (2,117,200
                                        )Issuance
      of common stocks
                                        
                                        
                                        65,340,806
                                        
                                        
                                        
                                        65,342
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        4,235,860
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        4,301,202Foreign
      currency translationAdjustment
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        156,100
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        156,100Balance,
      June 30, 2006
                                        
                                        
                                        153,290,278
                                        
                                        
                                        $
                                        153,291
                                        
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        21,715,793
                                        
                                        
                                        $
                                        152,369
                                        
                                        
                                        $
                                        (10,691,452
                                        )
                                        
                                        $
                                        11,330,001Balance,
      July 1, 2006
                                        
                                        
                                        153,290,278
                                        
                                        
                                        $
                                        153,291
                                        
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        21,715,793
                                        
                                        
                                        $
                                        152,369
                                        
                                        
                                        $
                                        (10,691,452
                                        )
                                        
                                        $
                                        11,330,001Net
      loss
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (8,598,057
                                        )
                                        
                                        
                                        (8,598,057
                                        )Issuance
      of common stocks
                                        
                                        
                                        62,080,000
                                        
                                        
                                        
                                        62,080
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        2,500,912
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        2,562,992Redemption
      of common stocks
                                        
                                        
                                        0
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (2,470
                                        )
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (2,470
                                        )Cancellation
      of common stocks
                                        
                                        
                                        0
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (6,500
                                        )
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (6,500
                                        )Foreign
      currency translationAdjustment
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (597,174
                                        )
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (597,174
                                        )Restated
      Balance, June 30, 2007
                                        
                                        
                                        215,370,278
                                        
                                        
                                        $
                                        215,371
                                        
                                        
                                        $
                                        (8,970
                                        )
                                        
                                        $
                                        24,216,705
                                        
                                        
                                        $
                                        (444,805
                                        )
                                        
                                        $
                                        (19,289,509
                                        )
                                        
                                        $
                                        4,688,792


See
accompanying notes to consolidated financial statements


34




INTERMOST
      CORPORATIONCONSOLIDATED
      STATEMENTS OF CASH FLOWSFOR
      THE YEARS ENDED JUNE 30, 2007 AND 2006(Stated
      in US Dollars)
 
 Note
                                  
                                  
                                  2007
                                  
                                  
                                  2006Cash
      flows from operating activities
                                  
                                  
                                  
                                  
                                  (Restated)Net
      loss
                                  
                                  
                                  
                                  
                                  $
                                  8,598,057
                                  )
                                  
                                  $
                                  2,117,200
                                  )Amortization
      of intangible assets
                                  
                                  
                                  
                                  
                                  
                                  5,459
                                  
                                  
                                  
                                  99,005Impairment
      of goodwill
                                  
                                  5
                                  
                                  
                                  
                                  3,119,872
                                  
                                  
                                  
                                  563,323Impairment
      of associated company
                                  
                                  13
                                  
                                  
                                  
                                  3,454,693
                                  
                                  
                                  
                                  -Impairment
      of deposit of investment
                                  
                                  4
                                  
                                  
                                  
                                  1,217,475
                                  
                                  
                                  
                                  -Depreciation
                                  
                                  
                                  
                                  
                                  
                                  27,414
                                  
                                  
                                  
                                  20,002Loss
      on disposal of fixed assets
                                  
                                  
                                  
                                  
                                  
                                  1,820
                                  
                                  
                                  
                                  -Loss
      on disposal of an associated company
                                  
                                  
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  1,814,705Written
      off of loan receivables
                                  
                                  
                                  
                                  
                                  
                                  49,818Equity
      in loss (earnings) of associated companies
                                  
                                  
                                  
                                  
                                  
                                  3,398
                                  
                                  
                                  
                                  (27,684
                                  )Issuance
      of common stock in exchange for services
                                  
                                  
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  663,034Bad
      debts written off
                                  
                                  
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  1,182Minority
      interests
                                  
                                  
                                  
                                  
                                  
                                  (17,209
                                  )
                                  
                                  
                                  1,192,791Adjustments
      to reconcile net loss to net cashprovided
      by operating activities:Accounts
      receivable, net
                                  
                                  
                                  
                                  
                                  
                                  (3,916,275
                                  )
                                  
                                  
                                  (846,040
                                  )Inventories
                                  
                                  
                                  
                                  
                                  
                                  (150,290
                                  )
                                  
                                  
                                  (114,726
                                  )Deposits,
      prepayment and other receivable
                                  
                                  
                                  
                                  
                                  
                                  (1,403,102
                                  )
                                  
                                  
                                  (611,646
                                  )Short-term
      loan
                                  
                                  
                                  
                                  
                                  
                                  (31,581
                                  )
                                  
                                  
                                  (600,148
                                  )Accounts
      payables
                                  
                                  
                                  
                                  
                                  
                                  3,825,757
                                  
                                  
                                  
                                  (1,279,967
                                  )Accrued
      liabilities and other payable
                                  
                                  
                                  
                                  
                                  
                                  613,485
                                  
                                  
                                  
                                  (773,440
                                  )Customers
      deposits
                                  
                                  
                                  
                                  
                                  
                                  (11,622
                                  )
                                  
                                  
                                  44,253Deferred revenue
                                  
                                  
                                  
                                  
                                  
                                  (14,556
                                  )
                                  
                                  
                                  (14,958
                                  )Business and other taxes
      payable
                                  
                                  
                                  
                                  
                                  
                                  (24,471
                                  )
                                  
                                  
                                  417,217Net
      cash used in operating activities
                                  
                                  
                                  
                                  
                                  $
                                  (1,847,972
                                  )
                                  
                                  $
                                  (1,570,297
                                  )Cash
      flows from investing activitiesAcquisition
      of plant and equipment
                                  
                                  
                                  
                                  
                                  $
                                  (26,601
                                  )
                                  
                                  $
                                  (43,008
                                  )Acquisition
      of intangible asset
                                  
                                  
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (26,350
                                  )Increase
      in short-term investment
                                  
                                  
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (153,707
                                  )Deposit
      of investment
                                  
                                  
                                  
                                  
                                  
                                  (1,363,572
                                  )
                                  
                                  
                                  -Net
      cash used in investing activities
                                  
                                  
                                  
                                  
                                  $
                                  (1,390,173
                                  )
                                  
                                  $
                                  (223,065
                                  )Cash
      flows from financing activitiesAdvances
      from related parties
                                  
                                  
                                  
                                  
                                  $
                                  155,837
                                  
                                  
                                  $
                                  -Redemption
      of common stocks
                                  
                                  
                                  
                                  
                                  
                                  (790,594
                                  )
                                  
                                  
                                  -Proceeds
      from issuance and redemption of common stocks, net
                                  
                                  
                                  
                                  
                                  
                                  3,104,000
                                  
                                  
                                  
                                  2,548,438Restricted
      cash
                                  
                                  
                                  
                                  
                                  
                                  (295,627
                                  )
                                  
                                  
                                  -Net
      cash provided by financing activities
                                  
                                  
                                  
                                  
                                  $
                                  2,173,616
                                  
                                  
                                  $
                                  2,548,438


35


INTERMOST
      CORPORATIONCONSOLIDATED
      STATEMENTS OF CASH FLOWS (Continued)FOR
      THE YEARS ENDED JUNE 30, 2007 AND 2006(Stated
      in US Dollars)
 
 2007
                    
                    
                    2006(Restated)Net
      (decrease) increase in cash and cash equivalents
                    
                    $
                    (1,064,529
                    )
                    
                    $
                    755,076Effect
      of foreign currency translation on cash and cash
    equivalents
                    
                    
                    902,373
                    
                    
                    
                    (200,105
                    )Cash
      and cash equivalents–beginning of year
                    
                    
                    692,624
                    
                    
                    
                    137,653Cash
      and cash equivalents–end of year
                    
                    $
                    530,468
                    
                    
                    $
                    692,6242007
                    
                    
                    2006Supplementary
      cash flow information:Tax
      paid
                    
                    $
                    -
                    
                    
                    $
                    481Interest
      paid
                    
                    
                    -
                    
                    
                    
                    -


See
accompanying notes to consolidated financial statements


36





INTERMOST
CORPORATION


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED JUNE 30, 2007 AND 2006


(Stated
in US Dollars)





1.
            ORGANIZATION
      AND PRINCIPAL ACTIVITIES





Intermost
Corporation (hereinafter referred to as the “Company”, including its
subsidiaries and associated companies when the context so requires) was
originally incorporated in the State of Utah on March 6, 1985 under the name
Utility Communications International, Inc. The Company changed its name from
Utility Communications International, Inc. to Intermost Corporation on October
23, 1998. In February 2003, the Company re-domiciled from the State of Utah to
the State of Wyoming.





On
October 23, 1998, the Company acquired a 100% interest in Intermost Limited
("IL"), a company incorporated in the British Virgin Islands, by issuing
4,970,000 shares of its common stock with a par value of US$0.001 per share
(after the redenomination of par value and a stock split) to the shareholders of
IL.





The
acquisition of IL by the Company was treated as a reverse acquisition since IL
was the continuing entity as a result of the exchange
reorganization.





The
Company is engaged in providing, directly and through its subsidiaries and
associated companies, business portal and e-commerce solutions, the sale of
photographic equipment and the sale of digital security imaging system in the
People's Republic of China (the "PRC" or "China"), including Hong Kong; and VOIP
services in Taiwan. Segment information is provided at Note 12. The Company's
fiscal year-end is June 30.





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING
      POLICIES





(a)
            Method
      of Accounting





The
Group maintains its general ledger and journals with the accrual method
accounting for financial reporting purposes. The consolidated financial
statements and notes are representations of management.  Accounting
policies adopted by the Group conform to generally accepted accounting
principles in the United States of America and have been consistently applied in
the presentation of consolidated financial statements, which are compiled on the
accrual basis of accounting.





(b)
            Principles
      of Consolidation





The
consolidated financial statements include the accounts of Intermost Corporation
(the Company) and its ten subsidiaries, two associate companies and one
affiliate company, constituting the group. Significant inter-company
transactions have been eliminated in consolidation. The consolidated financial
statements include 100% of the assets and liabilities of these majority-owned
subsidiaries, and the ownership interests of minority investors are recorded as
minority interests.





37


2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)





The
Company’s subsidiaries and affiliated companies and their principal activities
as of June 30, 2007 are summarized as follows:




Name
                
                Place
      of incorporation of organization
                
                Percentage
      of Equity Interest Attributable to the Company
                
                Principal
      ActivitiesIntermost
      Limited ("IL")
                
                British
      Virgin Islands
                
                100%
                
                Investment
      holdingChina
      E.com Information Technology Ltd.("CECITL")*
                
                PRC
                
                100%
                
                Business
      portal ande-commerce
      solutionsIMOT
      Information Technology (Shenzhen) Ltd. ("IITSL")*
                
                PRC
                
                100%
                
                Investment
      holdingChinaE.com
      Investment Consultants (Shenzhen) Company Ltd.
    (“CECICSL”)**
                
                PRC
                
                100%
                
                InactiveIntermost
      (H.K.) Limited ("IHKL")
                
                Hong
      Kong
                
                100%
                
                InactiveShenzhen
      Bank Union & Jiayin E-commerce Company Ltd.
("SBUJE")**
                
                PRC
                
                55.30%
                
                InactiveIntermost
      Focus Advertising Company Ltd.("IFACL")**
                
                PRC
                
                90%
                
                InactiveShanghai
      Newray Photographic Equipment Co., Ltd. ("SNPE")**
                
                PRC
                
                51%
                
                Sales
      of photographic equipment, and LCD monitorsChina
      E.com Technology (Shenzhen) Ltd.("CECTSL")*
                
                PRC
                
                100%
                
                Business
      postal ande-commerce
      solutionsHainan
      Concord Financial Products Development Co., Ltd.
    ("HCFPDCL")**
                
                PRC
                
                80%
                
                Private
      equity exchange & investment holdingShenzhen
      International Hi-Tech Property Right Exchange Centre
      ("SIHTPREC")***
                
                PRC
                
                15%
                
                Private
      equity exchangeGolden
      Anke (GATL) ***
                
                PRC
                
                49%
                
                Sales
      of photographic equipment, and LCD monitorsHainan
      Special Economic Zone Property Right Exchange Center
    (PREC)***
                
                PRC
                
                21%
                
                Private
      Property Right ExchangeLeader
      Palace (LP)
                
                British
      Virgin Islands
                
                100%
                
                VOIP
      services





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





**     SBUJE,
IFACL, SNPE, HCFPDCL and CECICSL are equity joint ventures established in the
PRC to be operated for a period of 10 years and 20 years until 2009, 2010, 2013,
2015 and 2026 respectively. They are subsidiaries of the Company and their
operations are consolidated into the Company's financial
statements.





38


***  PREC
is equity joint venture established in the PRC to operate for a period of years
until 2033. GATL and PREC are associated companies of the Company and are
accounted for under the equity method of accounting. SIHTPREC is an affiliated
company and is accounted for under the cost method.





The
Company owns certain of its subsidiaries through trusts that were created by a
Declaration of Trust executed by Huang Liqiong and Jun Liang in February 2000.
The trusts were created by, and therefore are revocable by, IL. Accordingly, IL
consolidates the operations of CECITL since it is the beneficial owner of a
majority of the outstanding interests and, through its ability to revoke the
trusts, retains control of these interests.





(c)
            Use
      of estimates





The
preparation of the consolidated financial statements in conformity with
generally accepted accounting principles in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting
periods.  Management makes these estimates using the best information
available at the time the estimates are made; however actual results could
differ materially from those estimates.





(d)
            Economic
      and political risks





The
Company’s operations are mainly conducted in the PRC and Taiwan (ROC).
Accordingly, the Company’s business, financial condition and results of
operations in the PRC and Taiwan may be influenced by the political, economic
and legal environment in the PRC and Taiwan, and by the general state of the PRC
and Taiwan economy.





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





(e)
            Cash
      and cash equivalents





The
Company considers all highly liquid investments purchased with original
maturities of three months or less to be cash equivalents.  The
Company maintains bank accounts only in the PRC, Taiwan and Hong Kong. The
Company does not maintain any bank accounts in the United States of
America.





(f)
              Restricted
      cash





Restricted
cash represents time deposit accounts in Mega International Commercial Bank
under one year Performance Guarantee Contract between Innocom Telecom Holdings
and Leader Palace International Limited to secure the performance of Innocom as
a service provider to Chunghwa Telecom Co. Ltd. The contract will be ended at
April 9, 2008 with renewable terms.





39


(g)
            Accounts
      receivable





Accounts
receivable is carried at the net invoiced value charged to
customer.  The Company records an allowance for doubtful accounts to
cover estimated credit losses. Management reviews and adjusts this allowance
periodically based on historical experience and its evaluation of the
collectability of outstanding accounts receivable. The Company evaluates the
credit risk of its customers utilizing historical data and estimates of future
performance.





(h)
            Inventories





Inventories
are raw materials which are stated at the lower of weighted average cost or
market value. As of June 30, 2007, inventories were comprised of digital
security imaging system and digital camera.





(i)
              Investments





The
non-marketable equity security investments are presented at historical cost
because the Company does not have significant influence over the underlying
investments. These investments are subject to a periodic impairment review. To
the extent any impairment is considered other-than-temporary, the investment is
written down to its fair value and the loss is recorded as interest income and
other, net. See Note 13 for impairment of investment.





(j)
              Property
      and equipment





Plant
and equipment are carried at cost less accumulated
depreciation.  Depreciation is provided over their estimated useful
lives, using the straight-line method. Estimated useful lives of the plant and
equipment are as follows:





Computer
      equipment
              3
      yearsMotor
      vehicles
              5
      yearsFurniture
      and office equipment
              5
      years





The
cost and related accumulated depreciation of assets sold or otherwise retired
are eliminated from the accounts and any gain or loss is included in the
statement of income. The cost of maintenance and repairs is charged to income as
incurred, whereas significant renewals and betterments are
capitalized.





(k)
            Goodwill





Goodwill
represents the excess of the purchase price over the fair value of the net
tangible and identifiable intangible assets acquired in a business combination.
In accordance with Statement of Financial Accounting Standards ("SFAS") No. 142,
"Goodwill and Other Intangible Assets", goodwill is no longer subject to
amortization. Rather, goodwill is subject to at least an annual assessment for
impairment, applying a fair-value based test. Fair value is generally determined
using a discounted cash flow analysis. See Note 5 for goodwill impairment
details.





40


(l)
              Accounting
      for the impairment of long-lived
assets





Impairment
of Long-Lived Assets is evaluated for impairment at a minimum on an annual basis
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable in accordance with SFAS No. 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets". An asset is considered
impaired if its carrying amount exceeds the future net cash flow the asset is
expected to generate. If an asset is considered to be impaired, the impairment
to be recognized is measured by the amount by which the carrying amount of the
asset exceeds its fair market value. The recoverability of long-lived assets is
assessed by determining whether the unamortized balances can be recovered
through undiscounted future net cash flows of the related assets. The amount of
impairment, if any, is measured based on projected discounted future net cash
flows using a discount rate reflecting the Company's average cost of
capital.





See
Note 4 for impairment of deposit of investment and Note 13 for impairment of
investment in associated company.





(m)
            Associated
      Company





An
associated company is a business enterprise in which the Company owns between
20% and 50% of the equity capital, and does not have direct or indirect or joint
control, and therefore, has only limited ability to participate in financial and
operating policy decisions.





The
Company's investment in associated companies is accounted for under
the  equity method of accounting, whereby the investment is initially
recorded at cost and the carrying amount is adjusted thereafter for the post
acquisition change in the Company's share of the associated company's results of
operations. See Note 13 for investment in associated company impairment
details.





(n)
            Revenue
      recognition





The
Company recognizes revenue in accordance with SEC Staff Accounting Bulletin No.
101, "Revenue Recognition in Financial Statements". The Company recognizes
revenue when the significant risks and rewards of ownership have been
transferred to the customer pursuant to PRC law, including factors such as when
persuasive evidence of an arrangement exists, delivery has occurred, the sales
price is fixed or determinable, sales and value-added tax laws have been
complied with, and collectability is probable.





Revenues
from the sale of photographic equipment and digital security imaging system are
recognized from the invoiced value of the goods supplied to customers. Revenues
are recognized upon delivery of goods and passage of title to
customers.





Revenues
from the sale of VOIP services are recognized upon the services provided and
invoices sent out to customers.





Revenue
from web-site development contracts is recognized based on the terms of the
contract. The Company uses either the percentage of completion when the contract
is long-term or the completed contract method when the contract is short-term to
recognize such revenue. Contracts are short-term in nature and require
acceptance by the customer pursuant to the respective contracts are accounted
for under the completed contract method. Revenues are allocated to the elements
of the contract based on the fair values of the elements. Provisions for
estimated contract losses are recognized in the year the loss becomes probable
and can be reasonably estimated.





41


Revenue
from maintenance contracts is recognized on a straight-line basis over the term
of the maintenance contract, generally twelve months. The unearned portion of
maintenance revenue is classified as deferred revenue and amortized over the
life of the contract.





(o)
            Stock
      compensation





The
Company may periodically issue shares of common stock for services rendered or
for financing costs. Such shares are valued based on the market price of the
shares on the transaction date.





The
Company may periodically issue stock options to employees and stock options or
warrants to non-employees in non-capital raising transactions for services and
for financing costs.





The
Company has adopted Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS No. 123"), which establishes a
fair value method of accounting for stock-based compensation plans.





The
provisions of SFAS No. 123 allow companies to either record an expense in the
financial statements to reflect the estimated fair value of stock options to
employees, or to continue to follow the intrinsic value method set forth in
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees", but to disclose on an annual basis the pro forma effect on net
income (loss) and net income (loss) per share had the fair value of the stock
options been recorded in the financial statements. SFAS No. 123 was amended by
SFAS No. 148, which now requires companies to disclose in interim financial
statements the pro forma effect on net income (loss) and net income (loss) per
common share of the estimated fair market value of stock options issued to
employees. The Company has elected to continue to account for stock-based
compensation plans utilizing the intrinsic value method. Accordingly,
compensation cost for stock options will be measured as the excess, if any, of
the fair market price of the Company's common stock at the date of grant above
the amount an employee must pay to acquire the common stock.





In
accordance with SFAS No. 123, the cost of stock options and warrants issued to
non-employees is measured at the grant date based on the fair value of the
award. The fair value of the stock-based award is determined using the
Black-Scholes option-pricing model. The resulting amount is charged to expense
on the straight-line basis over the period in which the Company expects to
receive benefit, which is generally the vesting period.





Stock
options issued to non-employee directors at fair market value will be accounted
for under the intrinsic value method.





The
Company did not have any stock options outstanding during the year ended June
30, 2007. Accordingly, no pro forma financial disclosure is provided
herein.





(p)
            Advertising





The
Company expensed all advertising costs as incurred.  Advertising
expenses included in selling expenses were $3,125 and $2,991 for the years ended
June 30, 2007 and 2006 respectively.





42


(q)
            Income
      taxes





The
Company uses the accrual method of accounting to determine and report its
taxable income and tax credit in the year in which they are
available.  The Company has implemented Statement of Financial Accounting
Standards (SFAS) No. 109, Accounting for Income Taxes.





Income
tax liabilities computed according to the United States, People’s Republic of
China (PRC), Taiwan (ROC) and Hong Kong SAR tax laws are provided for the tax
effects of transactions reported in the financial statements and consists of
taxes currently due plus deferred taxes related primarily to differences between
the basis of fixed assets and intangible assets for financial and tax
reporting.  The deferred tax assets and liabilities represent the
future tax return consequences of those differences, which will either be
taxable or deductible when the assets and liabilities are recovered or
settled.  Deferred taxes also are recognized for operating losses that
are available to offset future income taxes.  A valuation allowance is
created to evaluate deferred tax assets if it is more likely than not that these
items will either expire before the Company is able to realize that tax benefit,
or that future realization is uncertain.





In
respect of the Company’s subsidiaries domiciled and operated in China, Taiwan
and Hong Kong, the taxation of these entities can be summarized as
follows:





The
subsidiaries incorporated in PRC are subject to the corporation income tax rate
of 33%. However, in accordance with the relevant tax laws and regulations of
PRC, the local corporation income tax rate is 15%.





The
subsidiaries incorporated in BVI while operating in Taiwan will be
considered  non-resident for the purpose of the profit-seeking
enterprise income tax which is from 0% to 25%. However, it will be subject to
profit-seeking enterprise income tax only for its income derived from Taiwan
sources.





The
subsidiaries are subject to Hong Kong profits tax rate of 17.5%.





The
Company is subject to United States federal corporate income tax according to
Internal Revenue Code Sections 951 and 957.  Corporate income tax is
imposed on graduated rates.





Taxable
Income


Rate
                        Over
                        But
      not over
                        Of
      Amount Over15%
                        0
                        50,000
                        025%
                        50,000
                        75,000
                        50,00034%
                        75,000
                        100,000
                        75,00039%
                        100,000
                        335,000
                        100,00034%
                        335,000
                        10,000,000
                        335,00035%
                        10,000,000
                        15,000,000
                        10,000,00038%
                        15,000,000
                        18,333,333
                        15,000,00035%
                        18,333,333
                        -
                        0





43


(r)
            Earnings
      per share





In
September 2004, the Emerging Issues Task Force (“EITF”) reached consensus on
EITF 04-8 “The effect of Contingently Convertible Debt on Diluted Earnings per
Share.” The new rule requires companies to include shares to be issued upon
conversion of contingently convertible debt in their diluted earnings per share
(“EPS”) calculations regardless of whether or not the debt is currently
convertible. Potential shares should be calculated using the if-converted method
or the net share settlement method. The change has no effect on net income, but
it does affect the related dilution per share amount. The new rule is effective
for reporting periods ending on or after December 31, 2004.





(s)
            Foreign
      currency translation





The
accompanying consolidated financial statements are presented in United States
dollars. The functional currencies of the Company are Hong Kong Dollar (HKD),
Taiwan Dollar (TWD) and Renminbi (RMB).  The consolidated financial
statements are translated into United States dollars from HKD, TWD and RMB at
year-end exchange rates as to assets and liabilities and average exchange rates
as to revenues and expenses. Capital accounts are translated at their historical
exchange rates when the capital transactions occurred.





June
      30, 2007
                
                June
      30, 2006Year
      end HKD : US$ exchange rate
                7.8172
                
                7.7680Average
      yearly HKD : US$ exchange rate
                7.7959
                
                7.7585





June
      30, 2007
                
                June
      30, 2006Year
      end TWD : US$ exchange rate
                32.8599
                
                32.6190Average
      yearly TWD : US$ exchange rate
                32.9517
                
                32.5920





June
      30, 2007
                
                June
      30, 2006Year
      end RMB : US$ exchange rate
                7.6248
                
                8.0065Average
      yearly RMB : US$ exchange rate
                7.8285
                
                8.0229





The
RMB is not freely convertible into foreign currency and all foreign exchange
transactions must take place through authorized institutions.  No
representation is made that the RMB amounts could have been, or could be,
converted into US$ at the rates used in translation.





(t)
              Comprehensive
      income





Comprehensive
income is defined to include all changes in equity except those resulting from
investments by owners and distributions to owners.  Among other
disclosures, all items that are required to be recognized under current
accounting standards as components of comprehensive income are required to be
reported in a financial statement that is presented with the same prominence as
other consolidated financial statements.  The Company’s current
components of other comprehensive income are the foreign currency translation
adjustment.





(u)
            Reclassification





Certain
amounts in the prior year have been reclassified to conform to the current
year’s presentation.





44


(v)
            Recent
      accounting pronouncements





In
February 2006, the FASB issued a SFAS 155, “Accounting for Certain Hybrid
Financial Instruments” to amend FASB Statements No. 133, Accounting for
Derivative Instruments and Hedging Activities, and No. 140, Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.
This statement permits fair value re-measurement for any hybrid financial
instrument that contains an embedded derivative that otherwise would require
bifurcation and eliminate the prohibition on a qualifying special-purpose entity
from holding a derivative financial instrument that pertains to a beneficial
interest other than another derivative financial instrument.  This
statement is effective for all financial instruments acquired or issued after
the beginning of an entity’s first fiscal year that begins after September 15,
2006.





In
July 2006, the FASB issued FIN 48, Accounting for Uncertainty in Income Taxes—an
Interpretation of FASB Statement No. 109, which clarifies the accounting for
uncertainty in tax positions. This Interpretation requires that the Company
recognizes in its consolidated financial statements the impact of a tax position
if that position is more likely than not of being sustained on audit, based on
the technical merits of the position. The provisions of FIN 48 are effective for
the Company on January 1, 2007, with the cumulative effect of the change in
accounting principle, if any, recorded as an adjustment to opening retained
earnings.




In
September 2006, the FASB issued SFAS 157, Fair Value Measurements, which defines
fair value, establishes a framework for measuring fair value in generally
accepted accounting principles, and expands disclosures about fair value
measurements. SFAS 157 applies under other accounting pronouncements that
require or permit fair value measurements, where fair value is the relevant
measurement attribute. The standard does not require any new fair value
measurements. SFAS 157 is effective for financial statements issued for fiscal
year beginning after November 15, 2007, and interim periods within those fiscal
years.




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




The
Company does not anticipate that the adoption of the above standards will have a
material impact on these consolidated financial statements.





45


3.
            DEPOSITS,
      PREPAYMENTS AND OTHER RECEIVABLES





Deposits,
prepayments and other receivables are summarized as follow:





2007
                    
                    
                    2006Rental
      and utilities deposits
                    
                    $
                    7,508
                    
                    
                    $
                    9,617Advance
      to employees
                    
                    
                    2,142
                    
                    
                    
                    2,065Prepaid
      expenses
                    
                    
                    35,889
                    
                    
                    
                    2,842Loan
      Interest receivable (a)
                    
                    
                    116,547
                    
                    
                    
                    40,810Investment
      Income (b)
                    
                    
                    -
                    
                    
                    
                    5,272Due
      from stockholders (c)
                    
                    
                    65,575
                    
                    
                    
                    30,210Other
      Loan
                    
                    
                    -
                    
                    
                    
                    48,088Advance
      to supplier (d)
                    
                    
                    298,931
                    
                    
                    
                    -Trade
      deposit paid (e)
                    
                    
                    1,293
                    
                    
                    
                    694,160Other
      receivables (f)
                    
                    
                    1,000,000
                    
                    
                    
                    -Others
                    
                    
                    10,550
                    
                    
                    
                    1,178$
                    1,538,435
                    
                    
                    $
                    834,242





(a)
            Cash
      loan interest receivable from an un-related third party of US$250,000 and
      US$350,000 at 12% p.a. for period from July 1, 2006 to June 30, 2007
      and for period from November 28, 2005 to June 30, 2006 and December 12,
      2005 to June 30, 2006,
respectively.





(b)
            Investment
      income for period from June 1, 2006 to June 30, 2007 and for period from
      April 1, 2005 to June 30, 2005.





(c)
            The
      amount receivable from the minority stockholders of Shanghai Newray
      Photographic Equipment Co., Ltd. of Rmb245,000 is unsecured, non-interest
      bearing, and due and payable on
demand.





(d)
            An
      advance to supplier of RMB 2,574,289 for the VOIP services. This advance
      is unsecured, non-interest bearing, and due on
  demand.





(e)
            Trade
      deposit of security systems and spare parts prepaid to the suppliers for
      the sales orders placed by the
customers.





(f)
            Other
      receivables are the amount that will be collected from an associated
      company, Golden Anke Technology, Ltd. It is unsecured, non-interest
      bearing, and, due and payable on demand.





4.
            DEPOSIT
      OF INVESTMENT





The
initial deposit $1,400,000 was paid to an unrelated company in Taiwan for a
pending acquisition. In June 2008, the company was no longer active in the
acquisition. The expected refund could be confirmed at $150,000. The remaining
part of the deposit $1,250,000 less $32,525 translation adjustment, at
$1,217,475, was unable to confirm. This impairment was considered not a
temporary one, no other future cash flow value could be calculated and so
impairment should be provided in current year to recognize the impairment
loss.


46


5.
            GOODWILL





On
May 29, 2003, the Company completed the acquisition of a 51% interest in
Shanghai Newray Photographic Equipment Co., Ltd. ("SNPE"), a company
incorporated in Shanghai, PRC. SNPE had no operations prior to the acquisition
and had no assets and liabilities other than cash balances. Subsequent to the
acquisition, staff with expertise in the photographic business in Shanghai was
recruited and SNPE commenced business operations, including sales of
photographic equipment, and sales of LCD monitors to PRC Railway
Dept.





Consequently,
based on the results of the Company's discounted cash flows calculation, and the
discontinuance of the primary business activity of Shanghai Newray Photographic
Equipment Co., Ltd. it is management's conclusion that the Shanghai Newray
Photographic Equipment Co., Ltd. has no goodwill. The Company has recorded an
impairment charge of RMB 4,568,552 (US $563,323) in the fiscal year ended June
30, 2006.





On
August 10, 2004, the Company's wholly-owned subsidiary, IMOT Information
Technology (Shenzhen) Ltd. ("IMOT Technology"), received all necessary
government approval required to complete the transfer of 51% of the issued and
outstanding shares of Golden Anke Technology, Ltd. ("Golden Anke") from two of
its shareholders to IMOT Technology.





The
total purchase price of Rmb 27,542,592 consisted of 12,000,000 shares of the
Company's common stock valued at Rmb26,827,200 (US$0.27 per share) and
commission expenses of Rmb715,392 ($86,400) paid to an unrelated advisor. The
value of the common stock issued was based on the market value of the common
stock at the completion date of the acquisition.





Goodwill
of RMB17,152,456 represented the excess of the purchase price over the fair
value of the net tangible asset acquired. The goodwill has been included in the
digital security system segment.





RMB
                  
                  
                  USDGoodwill
      acquired in GATL transaction on August 10, 2004
                  
                  $
                  17,152,456
                  
                  
                  $
                  2,114,976Impairment
      for the year ended June 30, 2006
                  
                  
                  -
                  
                  
                  
                  -Balance
      at June 30, 2006
                  
                  
                  17,152,456
                  
                  
                  $
                  2,114,976Foreign
      currency translation adjustment
                  
                  
                  -
                  
                  
                  
                  75,927Impairment
      for the year ended June 30, 2007
                  
                  
                  (17,152,456
                  )
                  
                  
                  (2,190,903
                  )Balance
      at June 30, 2007
                  
                  $
                  -
                  
                  
                  $
                  -





Pursuant
to the Stock Exchange Agreement relating to Hainan Concord Financial Products
Development Co., Ltd. ("Development"), IITSL issued to the Development
Stockholders 5,000,000 shares of the Company's restricted common stock having a
value of Rmb7,617,600 (US$920,000). The consideration for the transaction was
determined by arm's-length negotiations between the parties, none of whom is
related.





The
total purchase price of Rmb8,213,760 consisted of 5,000,000 shares of the
Company’s common stock valued at Rmb7,617,600 (US$0.184 per share) and
commission expenses of Rmb596,160 (US$72,000) paid to unrelated advisor. The
value of the common stock issued was based on the market value of the common
issued was based on the market value of the common stock at the completion dated
of the acquisition.


47


Goodwill
of Rmb7,272,437 represented the excess of the purchase price over the fair value
of the net tangible asset acquired. The goodwill has been included in the
unallocated segment.





RMB
                    
                    
                    USDGoodwill
      acquired in HCFPDCL transaction on Jan 6, 2005
                    
                    $
                    7,272,437
                    
                    
                    $
                    896,725Impairment
      for the year ended June 30, 2006
                    
                    
                    -
                    
                    
                    
                    -Balance
      at June 30, 2006
                    
                    $
                    7,272,437
                    
                    
                    $
                    896,725Foreign
      currency translation adjustment
                    
                    
                    -
                    
                    
                    
                    32,244Impairment
      for the year ended June 30, 2007
                    
                    
                    (7,272,437
                    )
                    
                    
                    (928,969
                    )Balance
      at June 30, 2007
                    
                    $
                    -
                    
                    
                    $
                    -





6.
            SHORT-TERM
      LOAN





The
Company loaned to an un-related third party, the amounts of US$250,000 and
US$350,000 on November 28, 2005 and December 12, 2005, respectively, at an
interest rate of 12% per annum.  The amounts are due and payable on
September 28, 2006 and September 12, 2006 respectively. These loans are still
outstanding and the Company  continues charge loan interest
accordingly.





7.
            PLANT
      AND EQUIPMENT, NET





Plant
and equipment comprise the followings:





2007
                  
                  
                  2006At
      costComputer
      equipment
                  
                  $
                  166,813
                  
                  
                  $
                  159,232Furniture
      and office equipment
                  
                  
                  51,562
                  
                  
                  
                  51,562Motor
      vehicles
                  
                  
                  7,049
                  
                  
                  
                  10,262$
                  225,424
                  
                  
                  $
                  221,056Less:
      accumulatedDepreciation
                  
                  
                  (174,010
                  )
                  
                  
                  (170,176
                  )$
                  51,414
                  
                  
                  $
                  50,880





Depreciation
expenses were $28,146 and $ 20,002 for the years ended June 30, 2007 and June
30, 2006 respectively.


48


8.
            ACCRUED
      LIABILITIES AND OTHER PAYABLES





Accrued
liabilities and other payables are summarized as follows:





2007
                  
                  
                  2006Wages
      and bonus
                  
                  $
                  23,031
                  
                  
                  $
                  31,410Consultancy
      fees
                  
                  
                  100,071
                  
                  
                  
                  88,506Legal
      and professional fees
                  
                  
                  37,737
                  
                  
                  
                  35,563Audit
      and review fees
                  
                  
                  43,000
                  
                  
                  
                  2,500Loan
      interest payable
                  
                  
                  7,275
                  
                  
                  
                  -Loan
      from shareholder
                  
                  
                  500,000
                  
                  
                  
                  -Other
                  
                  
                  81,446
                  
                  
                  
                  19,396$
                  792,560
                  
                  
                  $
                  177,375





9.
            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 corporate income tax at a rate
of 33%. 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, IFACL, CECTSC and HCFPDCL) established in the PRC are subject to PRC
enterprise income taxes at a rate of 15%.  SNPE is subject to a
special PRC enterprise income tax at a rate 0.5% of turnover.  The
subsidiary (LP) established in British Virgin Islands while operated in Taiwan
is subject to Taiwan non-resident profit-seeking enterprise income tax, which is
from 0% to 25%, only for the income derived from Taiwan sources. Since the
company derived most of the income outside Taiwan, there will be no domestic
income tax effect for the operation of LP. IHKL is subject to Hong Kong profits
tax at a rate of 17.5%.





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:





Deferred
taxation consisted of:





2007
                  
                  
                  2006Net
      operating loss carry forwards
                  
                  $
                  8,598,057
                  
                  
                  $
                  990,526Valuation
      allowance
                  
                  
                  (8,598,057
                  )
                  
                  
                  (990,526
                  )Deferred
      tax assets, net
                  
                  $
                  -
                  
                  
                  $
                  -





The
change in valuation allowance from June 30, 2006 to June 30, 2007 is primarily
related to the tax effects of the increase in the net operating loss in the
current fiscal year. The Company has net operating loss carry forwards totaling
approximately $8.6 million as of June 30 2007, primarily relating to operations
in the PRC and Taiwan. A valuation allowance has been established for the full
amount of the deferred tax benefit related to those loss carry forwards and
other deferred tax assets as management believes that their realization is
uncertain.





49


10.
            STOCKHOLDERS’
      EQUITY





Year
ended June 30, 2007





On
September 25, 2006, November 17, 2006 and May 21, 2007, we authorize the
issuance of 20,000,000, 20,000,000 and 22,000,000 shares respectively of common
stock with a value of $0.05 per share to First Federal Holding Ltd. for private
placement. The stock was issued in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933. There was no general
solicitation or advertising engaged in by the Company in making this offering
and the offeree and the parties they designated to receive the stock were
accredited investors.





On
November 17, 2006, we authorized the issuance of 80,000 shares of common stock
with a value of $0.05 per share to an individual. The stock was issued in
reliance on the exemption from registration provided by Section 4(2) of the
Securities Act of 1933. There was no general solicitation or advertising engaged
in by the Company in making this offering and the offeree and the parties they
designated to receive the stock were accredited investors.





The
Company redeemed 2,470,000 shares at $0.326 from Shenzhen International Hi-Tech
Property Right Exchange Centre in December 2006. The share certificate was kept
in Hong Kong office as at June 30, 2007.





The
Company invested 25% of SFVI in October 2003. The Company decided to withdraw
the investment in May 2006.





The
Company redeemed 6,500,000 shares at $0.18 and the loss was erroneously
overstated by $390,000. This accounting error had been corrected to the
accumulated deficit at June 30, 2007 as prior year adjustment.  The
share certificates were kept in Hong Kong office as at June 30,
2007.





Year
Ended June 30, 2006





On
July 26, 2005, we authorize the issuance of 1,028,278 shares of common stock
with a value of $0.05 per share to A3W Infrastructure Corporation for private
placement. The stock was issued in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933. There was no general
solicitation or advertising engaged in by the Company in making this offering
and the offeree and the parties they designated to receive the stock were
accredited investors.





On
August 22, 2005, we authorized the issuance of (i) 474,900 shares of common
stock with a value of $0.09 per share to Stanford Capital International Limited
for settlement of investment relation services already rendered to us having a
value of $45,000; (ii) 200,000 shares of common stock with a value of $0.076 per
share to Vanderkam &Associates for settlement of legal professional services
already rendered to us having a value of $15,188; (iii) 1,700,000 shares of
common stock with a value of $0.09 per share to directors and CEO for
compensation; (iv) 700,000 shares of common stock with a value of $0.09 per
share to consultants for services already rendered; (v)
2,600,000  shares of common stock with a value of $0.09 per share to
Yorkshire  Capital Ltd, Wei, Xiping and Fang Hailing as commission for
the  completion of a private placement of 40million shares of common
stock of the Company; (vi) 3,000,000 shares of common stock with a value of
$0.05 per share to Worldwide Gateway for private placement.





50


The
stock was issued in reliance on the exemption from registration provided by
Section 4(2) of the Securities Act of 1933. There was no general solicitation or
advertising engaged in by the Company in making this offering and the offerees
and the parties they designated to receive the stock were accredited
investors.




On
September 26, 2005, we authorized the issuance of 40,000,000 shares of common
stock with a value of $0.05 per share to Alferdo Properties; Piaster Assets;
Original Group Holdings and Magnate Trading Services for private placement. The
stock was issued in reliance on the exemption from registration provided by
Section 4(2) of the Securities Act of 1933. There was no general solicitation or
advertising engaged in by the Company in making this offering and the offerees
and the parties they designated to receive the stock were accredited
investors.





On
September 27, 2005, we authorized the issuance of 5,000,000 shares of common
stock with a value of $0.217 per share to acquire 21% of the issued and
outstanding shares of Hainan Special Economic Zone Property Rights Exchange
Centre from the shareholders of the Exchange Centre. The stock was issued in
reliance on the exemption from registration provided by Section 4(2) of the
Securities Act of 1933.  There was no general solicitation or
advertising engaged in by the Company in making this offering and the offerees
and the parties they designated to receive the stock were accredited investor.
The stock was delivered to the designated parties on October 17, 2005 after the
approval and completion of the transfer of the 21% shareholding of the Exchange
Centre to IMOT Technology.





On
January 19, 2006, we authorized the issuance of 1,000,000 shares of common stock
with a value of $0.05 per share to Xu ZIJIAN for private placement. The stock
was issued in reliance on the exemption from registration provided by Section
4(2) of the Securities Act of 1933. There was no general solicitation or
advertising engaged in by the Company in making this offering and the offerees
and the parties they designated to receive the stock were accredited
investor.





On
March 9, 2006, we authorized the issuance of 5,880,000 shares of common stock
with a value of $0.068 per share to Tian Suishang, Chow Siu Chun, Zhou Xiao Si,
Ka Shishi, Huang Yi and Zhang Zheng for private placement. The stock was issued
in reliance on the exemption from registration provided by Section 4(2) of the
Securities Act of 1933. There was no general solicitation or advertising engaged
in by the Company in making this offering and the offerees and the parties they
designated to receive the stock were accredited investors.





On
May 30, 2006, we authorized the issuance of 1,000,000 shares of common stock
with a value of $0.05 per share to Pan Zheng and Liu Wei Liang for private
placement. The stock was issued in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933. There was no general
solicitation or advertising engaged in by the Company in making this offering
and the offerees and the parties they designated to receive the stock were
accredited investors.





11.
            COMMITMENTS





Operating
Leases - The Company has operating lease agreements for office premises, which
extend through May 2008. Future minimum rental payments under agreements
classified as operating leases with non-cancelable terms for the year ended June
30, 2008 are $61,347.





Rental
expense paid for the years ended June 30, 2007 and 2006 were $60,238 and $74,652
respectively.


51





12.
            SEGMENT
      INFORMATION





The
Company adopted SFAS No. 131, "Disclosures About Segments of an Enterprise and
Related Information", in respect of its operating segments. The Company's
reportable segments are E-Commerce Solutions, System Sales Integration, Phone
Payment System, Web Advertisement, Sales of Computer Software, Photographic
Business and Digital Security System Business. E-Commerce Solutions comprises
revenue from web-site development contracts and maintenance contracts. The
Photographic Business consists of sales of photographic equipment and the
Digital Security System Business consists of sales of digital image security
surveillance system.





Each
segment is managed separately because each business requires different
technology and marketing strategies. The Company evaluates performance based on
operating earnings of the respective business units. The accounting policies of
the segments are the same as those described in the summary of significant
accounting policies. The corporate assets include primarily cash and cash
equivalents and deposits and other receivables. There were no significant
inter-company transactions during any of the reported periods. In determining
operating income (loss) by reportable segment, general corporate expenses and
other income and expense items of a non-operating nature are not considered, as
such items are not allocated to the Company's segments. Segment information for
the year ended June 30, 2007 and 2006 are as follows:





(a)
            Net
      revenues


2007
                
                
                2006E-commerce
      solutions
                
                $
                80,285
                
                
                $
                172,051Consultancy
      fee
                
                
                -
                
                
                
                (925
                )Photographic
      business
                
                
                1,628
                
                
                
                96,215VOIP
      services
                
                
                4,598,619
                
                
                
                -Sales
      of digital security system
                
                
                -
                
                
                
                12,052,118$
                4,680,532
                
                
                $
                12,319,459PRC
                
                
                81,913
                
                
                
                12,319,459Taiwan
                
                
                4,598,619
                
                
                
                -$
                4,680,532
                
                
                $
                12,319,459





(b)
            Net
      Profit/(loss)


2007
                  
                  
                  2006E-commerce
      solutions
                  
                  $
                  (417,439
                  )
                  
                  $
                  (328,386
                  )Consultancy
      fee
                  
                  
                  -
                  
                  
                  
                  111,261Photographic
      business
                  
                  
                  (27,110
                  )
                  
                  
                  (588,538
                  )VOIP
      services
                  
                  
                  (1,164,073
                  )
                  
                  
                  -Sales
      of digital security system
                  
                  
                  -
                  
                  
                  
                  1,127,721$
                  (1,608,622
                  )
                  
                  $
                  322,058Reconciliation:(Loss)/profit
      for reportable segments
                  
                  $
                  (1,608,622
                  )
                  
                  $
                  322,058Unallocated
      corporate expenses
                  
                  
                  10,206,679
                  
                  
                  
                  (2,439,258
                  )$
                  (8,598,057
                  )
                  
                  $
                  (2,117,200
                  )





52


(c
)         Assets


2007
                
                
                2006E-commerce
      solutions
                
                $
                477,168
                
                
                $
                98,779Consultancy
      fee
                
                
                -
                
                
                
                1,314,122Photographic
      business
                
                
                -
                
                
                
                246,004VOIP
      services
                
                
                4,700,131
                
                
                
                -Sales
      of digital security system
                
                
                3,780,744
                
                
                
                11,360,773$
                8,958,043
                
                
                $
                13,019,678Reconciliation:Total
      assets for reportable segments
                
                $
                8,958,043
                
                
                $
                13,019,678Other
      corporate assets
                
                
                984,027
                
                
                
                4,016,491$
                9,942,070
                
                
                $
                17,036,169





(d)         Other
items


2007
                
                
                2006E-commerce
      solutions
                
                $
                25,541
                
                
                $
                16,053Consultancy
      fee
                
                
                1,051
                
                
                
                1,810Photographic
      business
                
                
                37
                
                
                
                416Unallocated
      corporate assets
                
                
                1,517
                
                
                
                1,723$
                28,146
                
                
                $
                20,002Expenditures
      for fixed assets:E-commerce
      solutions
                
                $
                24,119
                
                
                $
                41,519Consultancy
      fee
                
                
                -
                
                
                
                1,489Unallocated
      corporate assets
                
                
                2,482
                
                
                
                -$
                26,601
                
                
                $
                43,008





(e)         Major
customers and concentrations:





For
the year ended June 30, 2007, the three largest customers in the VOIP segment,
accounted for 86% and in VOIP segment, accounted for 85% of total revenues,
respectively. As of June 30, 2007, two customers accounted for 94% of the total
accounts receivable balance.





For
the year ended June 30, 2006, the two largest customers in the digital security
system segment, accounted for 35%, and in the photographic business segment,
accounted for 58%, of total revenues, respectively. As of June 30, 2006, one
customer accounted for 32% of the total accounts receivable
balance.





53





13.
            IMPAIRMENT
      OF INVESTMENT IN ASSOCIATED COMPANY





An
investment in an associated company Golden Anke Technology, Ltd. with an equity balance of
$3,454,693 was found being impaired in a non-temporary nature and written-off in
the current year statement of income to recognize the impairment loss. See Note
3(f) for the balance to be recovered.





14.
            GOING
      CONCERN





As
shown in the accompanying consolidated financial statements, the Company
incurred a net loss of $8,598,057 for the year ended June 30, 2007 and has an
accumulated deficit of $19,289,509 as of June 30, 2007. The Company also
continues to experience negative cash flows from operations. The Company will be
required to raise additional capital to fund its operations, and will continue
to attempt to raise capital resources from both related and unrelated parties
until such time as the Company is able to generate revenues sufficient to
maintain itself as a viable entity. These factors have raised substantial doubt
about the Company's ability to continue as a going concern. There can be no
assurances that the Company will be able to raise additional capital or achieve
profitability. These consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.





The
Company plans to strengthen its core business, control its overall expenditures,
improve the efficiency of its operations and continue its efforts to expand by
acquiring other business opportunities. During the year ended June 30, 2007, the
Company raised additional capital by several private placements of
$3,104,000.





15.
            SUBSEQUENT
      EVENT





In
July 2007, the Company has signed a letter of intent to invest in a Taiwan
company, which is a manufacturer of touch screen with clientele mainly in
Taiwan. In June 2008, the company is no longer active in this transaction and
has been getting partial refund from the other party. Impairment loss was
provided accordingly for the non-confirmable part.





16.
            RESTATEMENTS





On
October 26, 2007, the Company filed the consolidated balance sheets as of June
30, 2007 and 2006, its consolidated statements of income, stockholders’ equity
and cash flow for the year ended June 30, 2007, in Form 10KSB Part III Item 14
Page 37-63 with the Securities and Exchange Commission (SEC). The Company
received a comment letter from the Office of the Chief Accountant of the
Division of Corporation Finance of SEC regarding certain disclosures in the
Company’s financial statements for the year ended June 30, 2007. The Company
could not reach the original auditor for assistance. Therefore, it determined to
re-do the 2007 audit and restate the financial statements. This financial
statements contained in this report reflect the newly-performed
audit.  Other statements and reports affected by these developments
will be filed with SEC. The effects of the restatements are shown in the
following tables.


54


CONSOLIDATED
BALANCE SHEETS





Original
                            
                            
                            RestatedJune
      30,ITEMS
                            
                            2007
                            
                            
                            2007Current
      assetsCash
      and cash equivalents
                            
                            $
                            833,993
                            
                            
                            $
                            530,468Accounts
      receivable, net
                            
                            
                            4,085,123
                            
                            
                            
                            4,085,123Inventories
                            
                            
                            195,946
                            
                            
                            
                            195,946Deposits,
      prepayment and other receivables
                            
                            
                            2,269,083
                            
                            
                            
                            1,538,435Deposit
      of investment
                            
                            
                            -
                            
                            
                            
                            150,000Short-term
      loan
                            
                            
                            670,763
                            
                            
                            
                            670,763Short-term
      investment
                            
                            
                            368,083
                            
                            
                            
                            368,083Stock
      in custodian
                            
                            
                            -
                            
                            
                            
                            -Total
      current assets
                            
                            $
                            8,422,991
                            
                            
                            $
                            7,538,818Restricted
      cash
                            
                            
                            -
                            
                            
                            
                            303,525Unlisted
      investment
                            
                            
                            893,526
                            
                            
                            
                            893,526Plant
      and equipment, net
                            
                            
                            51,414
                            
                            
                            
                            51,414Intangible
      assets, net
                            
                            
                            20,354
                            
                            
                            
                            20,354Investment
      in associated companies
                            
                            
                            6,497,267
                            
                            
                            
                            1,134,433Goodwill
                            
                            
                            -
                            
                            
                            
                            -TOTAL
      ASSETS
                            
                            $
                            15,885,552
                            
                            
                            $
                            9,942,070LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilitiesAccounts
      payable
                            
                            $
                            3,927,964
                            
                            
                            $
                            3,927,964Accrued
      liabilities and other payable
                            
                            
                            792,560
                            
                            
                            
                            792,560Customers
      deposits
                            
                            
                            105,708
                            
                            
                            
                            105,708Advance
      from shareholder
                            
                            
                            160,000
                            
                            
                            
                            160,000Business
      and other taxes payable
                            
                            
                            -
                            
                            
                            
                            -Total
      current liabilities
                            
                            $
                            4,986,232
                            
                            
                            $
                            4,986,232TOTAL
      LIABILITIES
                            
                            $
                            4,986,232
                            
                            
                            $
                            4,986,232





55


CONSOLIDATED BALANCE
SHEETS (Continued)





Original
                              
                              
                              RestatedJune
      30,ITEMS
                              
                              2007
                              
                              
                              2007Minority
      interests
                              
                              $
                              732,762
                              
                              
                              $
                              267,046STOCKHOLDERS’
      EQUITYPreferred
      Stock $0.001 par value,5,000,000
      shares authorized,nil
      share issued and outstandingat
      June 30, 2007 and 2006
                              
                              $
                              -
                              
                              
                              $
                              -Common
      stock at $0.001 par value,500,000,000
      shares authorized,215,370,278
      shares issued andoutstanding
      at June 30, 2007;153,290,278
      shares issued andoutstanding
      at June 30, 2006
                              
                              
                              215,371
                              
                              
                              
                              215,371Treasury
      stock
                              
                              
                              (8,970
                              )
                              
                              
                              (8,970
                              )Additional
      paid-in capital
                              
                              
                              23,235,236
                              
                              
                              
                              24,216,705Accumulated
      deficit
                              
                              
                              (13,391,999
                              )
                              
                              
                              (19,289,509
                              )Accumulated
      other comprehensive income
                              
                              
                              116,920
                              
                              
                              
                              (444,805
                              )$
                              10,166,558
                              
                              
                              $
                              4,688,792TOTAL
      LIABILITIES ANDSTOCKHOLDERS’
      EQUITY
                              
                              $
                              15,885,552
                              
                              
                              $
                              9,942,070





As
a result of restatement of the consolidated balance sheet as of June 30, 2007,
total assets decreased from $15,885,552 as originally reported, to $9,942,070, a
decrease of $5,943,482. The decrease of total assets was derived from a decrease
of $303,525 in cash and cash equivalents, a decrease of $730,648 in deposit,
prepayment and other receivables, an increase of $150,000 for deposit in
investment and a decrease of $5,362,834 in investment in associated companies
and an increase of $303,525 in restricted cash. There were no changes in
liabilities. The minority interest was decreases from $732,762 to $267,046, a
$561,725 reduction. The corresponding changes in Stockholders’ equity were: an
increase of $981,469 in additional paid-in capital, an increase of accumulated
deficit $5,897,510, and a decrease of accumulated other comprehensive income of
$561,725. The total stockholders’ equity was restated from $10,166,558 as
originally reported, to $4,688,792, a decrease of $5,477,766. The total
liabilities and stockholders’ equity were restated from $15,885,552 as
originally reported, to $9,942,070, a decrease of $5,943,482.





56





CONSOLIDATED
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME





Original
                            
                            
                            RestatedFor
      the year ended June 30,ITEMS
                            
                            2007
                            
                            
                            2007Net
      revenues
                            
                            $
                            4,680,532
                            
                            
                            $
                            4,680,532Cost
      of net revenues
                            
                            
                            (4,608,566
                            )
                            
                            
                            (4,608,566
                            )Gross
      profit
                            
                            $
                            71,966
                            
                            
                            $
                            71,966Selling,
      general and administrative expenses
                            
                            
                            (1,957,494
                            )
                            
                            
                            (1,028,525
                            )(Loss)/profit
      from operations
                            
                            $
                            (1,885,528
                            )
                            
                            $
                            (956,559
                            )Investment
      income
                            
                            
                            102,230
                            
                            
                            
                            102,230Interest
      income
                            
                            
                            83,861
                            
                            
                            
                            83,861Other
      income
                            
                            
                            458
                            
                            
                            
                            458Written
      off of loan receivables
                            
                            
                            -
                            
                            
                            
                            (49,818
                            )Equity
      in earnings of associated companies
                            
                            
                            -
                            
                            
                            
                            (3,398
                            )$
                            (1,698,979
                            )
                            
                            $
                            (823,226
                            )Unusual
      itemsImpairment
      of goodwill
                            
                            
                            -
                            
                            
                            
                            (3,119,872
                            )Impairment
      of associated company
                            
                            
                            -
                            
                            
                            
                            (3,454,693
                            )Impairment
      of deposit of investment
                            
                            
                            -
                            
                            
                            
                            (1,217,475
                            )Loss
      on disposal of an associated company
                            
                            
                            -
                            
                            
                            
                            -Loss
      before income taxes and minority interests
                            
                            $
                            (1,698,979
                            )
                            
                            $
                            (8,615,266
                            )Income
      taxes
                            
                            
                            -
                            
                            
                            
                            -Net
      loss before minority interests
                            
                            $
                            (1,698,979
                            )
                            
                            $
                            (8,615,266
                            )Minority
      interests
                            
                            
                            17,209
                            
                            
                            
                            17,209Equity
      in earnings of associated companies
                            
                            
                            (1,408,777
                            )
                            
                            
                            -Net
      loss
                            
                            $
                            (3,090,547
                            )
                            
                            $
                            (8,598,057
                            )Net
      loss per share:-Basic
                            
                            $
                            (0.0242
                            )
                            
                            $
                            (0.0469
                            )-Diluted
                            
                            $
                            (0.0242
                            )
                            
                            $
                            (0.0469
                            )Weighted
      average number of common stock-Basic
                            
                            $
                            127,894,970
                            
                            
                            $
                            183,458,168-Diluted
                            
                            $
                            127,894,970
                            
                            
                            $
                            183,458,168


57


As
a result of restatement of consolidated income and comprehensive income for the
year ended June 30, 2007, total net loss increased from $3,090,547 as originally
reported, to $8,598,057, an increase of $5,507,510. The increased loss was
composed of a decrease of $928,969 in selling, general and administrative
expenses, an increase of 49,818 in written-off loan receivables and 3,398 in
other receivables, an increase of $3,119,872 in impairment of goodwill,
impairment of associated company of $3,454,693, impairment of deposit of
investment of $1,217,475, and a decrease of $1,408,777 in equity in earnings of
associated companies. The movement of shares provided from the stock transfer
agent was applied to calculate the weighted average number of shares of common
stock, so the net loss per share was changed from $0.0242 to $0.0469, an
increase of $0.0227. The basic and dilute weighted average number of common
stock was changed from 127,894,970 to 183,458,168, an increase of
55,563,192.





CONSOLIDATED
      STATEMENTS OF CASH FLOWS





Original
                            
                            
                            RestatedFor
      the year ended June 30,ITEMS
                            
                            2007
                            
                            
                            2007Cash
      flows from operating activitiesNet
      loss
                            
                            $
                            (3,090,547
                            )
                            
                            $
                            (8,598,057
                            )Amortization
      of intangible assets
                            
                            
                            -
                            
                            
                            
                            5,459Impairment
      of goodwill
                            
                            
                            -
                            
                            
                            
                            3,119,872Impairment
      of associated company
                            
                            
                            -
                            
                            
                            
                            3,454,693Impairment
      of deposit of investment
                            
                            
                            -
                            
                            
                            
                            1,217,475Depreciation
                            
                            
                            28,146
                            
                            
                            
                            27,414Loss
      on disposal of fixed assets
                            
                            
                            1,869
                            
                            
                            
                            1,820Loss
      on disposal of an associated company
                            
                            
                            934,428
                            
                            
                            
                            -Written
      off of loan receivables
                            
                            
                            -
                            
                            
                            
                            49,818Equity
      in loss (earnings) of associated companies
                            
                            
                            1,408,777
                            
                            
                            
                            3,398Issuance
      of common stock in exchange for services
                            
                            
                            -
                            
                            
                            
                            -Bad
      debts written off
                            
                            
                            -
                            
                            
                            
                            -Minority
      interests
                            
                            
                            (3,404,243
                            )
                            
                            
                            (17,209
                            )Adjustments
      to reconcile net loss to net cashprovided
      by operating activities:Accounts
      receivable, net
                            
                            
                            4,346,669
                            
                            
                            
                            (3,916,275
                            )Inventories
                            
                            
                            (69,426
                            )
                            
                            
                            (150,290
                            )Deposits,
      prepayment and other receivable
                            
                            
                            (1,434,841
                            )
                            
                            
                            (1,403,102
                            )Short-term
      loan
                            
                            
                            -
                            
                            
                            
                            (31,581
                            )Accounts
      payables
                            
                            
                            3,893,506
                            
                            
                            
                            3,825,757Accrued
      liabilities and other payable
                            
                            
                            615,185
                            
                            
                            
                            613,485Customers
      deposits
                            
                            
                            (66,562
                            )
                            
                            
                            (11,622
                            )Deferred
      revenue
                            
                            
                            -
                            
                            
                            
                            (14,556
                            )Business
      and other taxes payable
                            
                            
                            (1,185,060
                            )
                            
                            
                            (24,471
                            )Net
      cash used in operating activities
                            
                            $
                            1,977,901
                            
                            
                            $
                            (1,847,972
                            )Cash
      flows from investing activitiesAcquisition of plant and equipment
                            
                            $
                            (27,312
                            )
                            
                            $
                            (26,601
                            )Acquisition
      of intangible asset
                            
                            
                            -
                            
                            
                            
                            -Increase in short-term investment
                            
                            
                            (3,666,248
                            )
                            
                            
                            -Increase in note receivables
                            
                            
                            (70,615
                            )Deposit of investment
                            
                            
                            -
                            
                            
                            
                            (1,363,572
                            )Net
      cash used in investing activities
                            
                            $
                            (3,764,175
                            )
                            
                            $
                            (1,390,173
                            )


58





CONSOLIDATED
      STATEMENTS OF CASH FLOWS
(Continued)





Original
                            
                            
                            RestatedFor
      the year ended June 30,ITEMS
                            
                            2007
                            
                            
                            2007Cash
      flows from financing activitiesAdvances
      from related parties
                            
                            $
                            160,000
                            
                            
                            $
                            155,837Redemption
      of common stocks
                            
                            
                            (805,215
                            )
                            
                            
                            (790,594
                            )Proceeds
      from issuance and redemption of commonstocks,
      net
                            
                            
                            3,104,000
                            
                            
                            
                            3,104,000Restricted
      cash
                            
                            
                            -
                            
                            
                            
                            (295,627
                            )Net
      cash provided by financing activities
                            
                            $
                            2,458,785
                            
                            
                            $
                            2,173,616Net
      (decrease) increase in cash and cash equivalents
                            
                            $
                            672,511
                            
                            
                            $
                            (1,064,529
                            )Effect
      of foreign currency translation oncash
      and cash equivalents
                            
                            
                            (531,142
                            )
                            
                            
                            902,373Cash
      and cash equivalents–beginning of year
                            
                            
                            692,624
                            
                            
                            
                            692,624Cash
      and cash equivalents–end of year
                            
                            $
                            833,993
                            
                            
                            $
                            530,468








Original
                              
                              
                              RestatedFor
      the year ended June 30,2007
                              
                              
                              2007Supplementary
      cash flow information:Tax
      paid
                              
                              $
                              -
                              
                              
                              $
                              -Interest
      paid
                              
                              
                              -
                              
                              
                              
                              -





As
a result of the restatement, the net cash provided by operating activities for
the year ended June 30, 2007 decreased by $3,825,873 from $1,977,901 as
originally reported, to ($1,847,972); net cash used in investing activities
decreased by $2,374,002 from ($3,764,175) as originally reported,, to
($1,390,173); net cash provided by financing activities decreased by $2,851,69
from $2,458,785 as originally reported, to $2,173,616; and the effect of foreign
currency translation on cash and cash equivalents was increased by $1,594,997
from ($531,142) as originally reported, to $902,373. The cash and cash
equivalents at end of year was decreased by $303,525 from $833,993 as originally
reported, to $530,468 owing to the reclassification of cash and cash equivalents
to restricted cash.





59




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
      CORPORATIONBy:
                  /s/ Rocky
      WulianghaiRocky
      WulianghaiPresident
      and Chief Executive OfficerBy:
                  /s/ Thomas LeeThomas
      LeeChief
      Financial Officer





Dated:  November
25, 2008





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.





Signature
            Title
            Date:/s/ Fred Peck
            Director
            November
      25, 2008Fred
      Peck/s/ Chia Hsun Wu
            Director
            November
      25, 2008Chia
      Hsun Wu/s/ Rocky
      Wulianghai
            Director,
      President
            November
      25, 2008Rocky
      Wulianghai
            and
      Chief Executive Officer/s/ Hiroshi
      Shinohara
            Director
            November
      25, 2008Hiroshi
      Shinohara







60