UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-K








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


For the
fiscal year ended December 31, 2008





OR




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





For the
transition period
from             
to




Commission File Number
0-50164











INNOCOM
TECHNOLOGY HOLDINGS, INC.




(Exact
name of registrant as specified in its charter)




Nevada
            
            87-0618756(State
      or other jurisdiction of
              Incorporation
      or organization)
            
            (IRS
      Employer Identification No.)




Suite
1501, Bank of East Asia Harbour View Centre,


56
Gloucester Road, Wanchai, Hong Kong, PRC


(Address
of principal executive offices)





(852) 3102 1602


(Issuer's
telephone number, including area code)







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





Securities
registered pursuant to Section 12(g) of the Act: Common Stock ($0.001 par
value)





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes o   Nox





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Exchange Act. Yes o No x





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





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  ̈





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange
Act.


Large
accelerated filer  ̈       Accelerated
filer  ̈       Non-accelerated
filer  ̈      Smaller reporting companyx





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





As of
December 31, 2008, the aggregate market value of the registrant’s common
stock held by non-affiliates of the registrant was $443,793.18 based on the
closing sale price as reported on the Over-the-Counter Bulletin Board. As of
April 13, 2009, there were 37,900,536 shares of common stock
outstanding.





DOCUMENTS
INCORPORATED BY REFERENCE





None








Innocom
Technology Holdings, Inc.





FORM
10-K





For the
Year Ended December 31, 2008




TABLE
OF CONTENTS





PART
      IITEM
      1.
                
                Business
                3ITEM
      1A.
                
                Risk
      Factors
                4ITEM
      1B.
                
                Unresolved
      Staff Comments
                11ITEM
      2.
                
                Properties
                12ITEM
      3.
                
                Legal
      Proceedings
                12ITEM
      4.
                
                Submission
      of Matters to a Vote of Security Holders
                12PART
      IIITEM
      5.
                
                Market
      for Registrant’s Common Equity, Related Stockholder Matters
      and
                  Issuer
      Purchases of Equity Securities
                12ITEM
      6.
                
                Selected
      Financial Data
                13ITEM
      7.
                
                Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations
                13ITEM
      7A.
                
                Quantitative
      and Qualitative Disclosures About Market Risk
                16ITEM
      8.
                
                Financial
      Statements and Supplementary Data
                F-1
      –
                  F-22ITEM
      9.
                
                Changes
      In and Disagreements with Accountants on Accounting and Financial
      Disclosure
                39ITEM
      9A (T).
                
                Controls
      and Procedures
                39ITEM
      9B.
                
                Other
      Information
                39PART
      IIIITEM
      10.
                
                Directors
      and Executive Officers of the Registrant
                40ITEM
      11.
                
                Executive
      Compensation
                41ITEM
      12.
                
                Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
                43ITEM
      13.
                
                Certain
      Relationships and Related Transactions
                43ITEM
      14.
                
                Principal
      Accountant Fees and Services
                44PART
      IVITEM
      15
                
                Exhibits,
      Financial Statement Schedules
                44SIGNATURES
                
                
                45


2


INFORMATION
REGARDING FORWARD-LOOKING STATEMENTS





This
Annual Report on Form 10-K contains forward-looking statements. These statements
relate to future events or our future financial performance. These statements
involve known and unknown risks, uncertainties and other factors that may cause
our actual results, levels of activity, performance or achievements to be
materially different from any future results, levels of activity, performance,
or achievements expressed or implied by forward-looking statements. In some
cases, you can identify forward-looking statements by terminology such as "may,"
"will," "should," "expect," "plan," "anticipate," "believe," "estimate,"
"predict," "potential" or "continue," the negative of such terms or other
comparable terminology. These statements are only predictions. Actual events or
results may differ materially.




Although
we believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. Moreover, neither we nor any other person assumes
responsibility for the accuracy and completeness of the forward-looking
statements. We undertake no duty to update any of the forward-looking statements
after the date of this report to conform such statements to actual results or to
changes in our expectations.




Readers
are also urged to carefully review and consider the various disclosures made by
us which attempt to advise interested parties of the factors which affect our
business, including without limitation the disclosures made in PART I. ITEM 1A:. Risk
Factors and PART  II. ITEM
6  "Management's Discussion and Analysis or Plan of Operation"
included herein.





PART
I.


Item
1. Business





History





Innocom
Technology Holdings, Inc., (the "Company") was organized under the laws of the
state of Nevada on June 26, 1998 under the name Dolphin Productions, Inc., The
Company has provided musical and other performance services for concerts and
public events.  During the fiscal year ended September 30, 2003, the
Company determined to shift its emphasis away from the presentation of concerts
and toward the Internet marketing of recorded music.  The Company has not
presented live musical concerts during then past two fiscal years.  The
Company owns the rights to the domain name "dolphinproductions.net."  The
Company has encountered substantial competitive, legal, technological and
financial obstacles to its entry into the business of marketing recorded music
through the Internet.  The Company has not generated substantial revenues
from Internet marketing of musical properties.





On March
30, 2006, pursuant to an Agreement and Plan of Reorganization dated March 15,
2006 among the Company, Innocom Technology Holdings Limited, a British Virgin
Islands corporation, (“Innocom”) and certain shareholders of Innocom, the
Company acquired 100% of Innocom’s issued and outstanding common stock making
Innocom a wholly owned subsidiary of the Company.  As a result, the
Company, which previously had no material operations, has acquired the business
of Innocom which have two principal business lines: design and solution
provision for mobile phones, and trading of mobile phone handsets and related
components.





In 2006,
we change the name of the Company from Dolphin Production, Inc. to Innocom
Technology Holdings, Inc.





Due to
keen competition, the Company ceased the business of design and solution
provision for mobile phone segment in the last quarter of 2006 and disposed of
entire segment in May 2007 with a profit of US$599,544.





In
February 2007, we have established a wholly-foreign owned subsidiary company to
acquire distressed land, factory building and equipments under receivership from
municipal government. Deposits have been paid by installments. We expect to
complete the acquisition in near future. The factory will be used for assembling
mobile phones under the trade mark we purchased in May 2007 and components parts
on OEM basis.





In May
2007, we acquire a trade mark, namely “Tsinghua Unisplendour” for a period of 10
years.





In 2007,
we discontinue the registration of domain name
“dolphinproductions.net”.





Our
Business





We
provide sourcing of mobile phone handsets and components for customers on a
wholesale basis.





Customers





Our
customers include major mobile handset brand owners in China, such as TCL, CECT,
Cosun Communications, Panda Communications and Zhejiang Holley Communication
Group Co., Ltd.





We
generate our revenue from sale of complete mobile handsets and component
parts.


3





Facilities





We do not
own any land and building. We currently rent a 260 square meters office with a
lease period of two years in Hong Kong as our headquarter office.





Employees





As of
December 31, 2008, we employed approximately 4 full-time employees. The Company
does not have any collective bargaining agreements with its employees and we
consider our employee relations to be good.





Website Access to our SEC
Reports


Our
Internet website address is www.innocomtechnology.com. Through our Internet
website, we will make available, free of charge, the following reports as soon
as reasonably practicable after electronically filing them with, or furnishing
them to, the SEC: our Annual Reports on Form 10-K; our Quarterly Reports on Form
10-Q; our Current Reports on Form 8-K; and amendments to those reports filed or
furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Our Proxy Statements for our Annual Stockholder
Meetings are also available through our Internet website. Our Internet website
and the information contained therein or connected thereto are not intended to
be incorporated into this Annual Report on Form 10-K.


You may
also obtain copies of our reports without charge by writing to:





Attn:
Investor Relations


Suite
1501, Bank of East Asia Harbour View Centre


56
Gloucester Road


Wanchai,
Hong Kong, PRC





The
public may also read and copy any materials filed with the SEC at the SEC's
Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549, or through
the SEC website at www.sec.gov. The Public Reference Room may be contact at
(800) SEC-0330. You may also access our other reports via that link to the SEC
website.





Item
1A. Risk Factors





Our
sales and profitability depend on the continued growth of the mobile
communications industry as well as the growth of the new market segments within
that industry in which we have recently invested. If the mobile communications
industry does not grow as we expect, or if the new market segments on which we
have chosen to focus and in which we have recently invested grow less than
expected, or if new faster-growing market segments emerge in which we have not
invested, our sales and profitability may be adversely affected.





Our
business depends on continued growth in mobile communications in terms of the
number of existing mobile subscribers who upgrade or simply replace their
existing mobile devices, the number of new subscribers and increased usage. As
well, our sales and profitability are affected by the extent to which there is
increasing demand for, and development of, value-added services, leading to
opportunities for us to successfully market mobile devices that feature these
services. These developments in our industry are to a certain extent outside of
our control. For example, we are dependent on operators in highly penetrated
markets to successfully introduce services that cause a substantial increase in
usage of voice and data. Further, in order to support a continued increase in
mobile subscribers in certain low-penetration markets, we are dependent on
operators to increase their sales volumes of lower-cost mobile devices and to
offer affordable tariffs. If operators are not successful in their attempts to
increase subscriber numbers, stimulate increased usage or drive replacement
sales, our business and results of operations could be materially adversely
affected.





Our
industry continues to undergo significant changes. First, the mobile
communications, information technology, media and consumer electronics
industries are converging in some areas into one broader industry leading to the
creation of new mobile devices, services and ways to use mobile devices. Second,
while participants in the mobile communications industry once provided complete
products and solutions, industry players are increasingly providing specific
hardware and software layers for products and solutions. As a result of these
changes, new market segments within our industry have begun to emerge and we
have made significant investments in new business opportunities in certain of
these market segments, such as smart-phones, imaging, games, music and
enterprise mobility infrastructure. However, a number of the new market segments
in the mobile communications industry are still in early states of their
development, and it may be difficult for us to accurately predict which new
market segments are the most advantageous for us to focus on. As a result, if
the segments on which we have chosen to focus grow less than expected, we may
not receive a return on our investment as soon as we expect, or at all. We may
also forego growth opportunities in new market segments of the mobile
communications industry on which we do not focus.





Our
results of operations, particularly our profitability, may be adversely affected
if we do not successfully manage price erosion related to our
products.





In the
future, if, for competitive reasons, we need to lower the selling prices of
certain of our products and if we cannot lower our costs at the same rate or
faster, this may have a material adverse effect on our business and results of
operations, particularly our profitability. To mitigate the impact of mix shifts
on our profitability, we implement product segmentation with the aim of
designing appropriate features with an appropriate cost basis for each customer
segment. Likewise, we endeavor to mitigate the impact on our profitability of
price erosion of certain features and functionalities by seeking to correctly
time the introduction of new products, in order to align such introductions with
declines in the prices of relevant components. We cannot predict with any
certainty whether or to what extent we may need to lower prices for competitive
reasons again and how successful we will be in aligning our cost basis to the
pricing at any given point in time. Price erosion is a normal characteristic of
the mobile devices industry, and the products and solutions offered by us are
also subject to natural price erosion over time. If we cannot reduce our costs
at the same rate, our business may be materially adversely affected. Although we
may take actions to mitigate price erosion, such as strengthening the Company
brand in order to support a price premium over certain of our competitors, there
can be no assurance that we will be successful in this regard.


4





We
must develop or otherwise acquire complex, evolving technologies to use in our
business. If we fail to develop these technologies or to successfully
commercialize them as new advanced products and solutions that meet customer
demand, or fail to do so on a timely basis, it may have a material adverse
effect on our business, our ability to meet our targets and our results of
operations.





In order
to succeed in our markets, we believe that we must develop or otherwise acquire
complex, evolving technologies to use in our business. However, the development
and use of new technologies, applications and technology platforms for our
mobile devices involves time, substantial costs and risks both within and
outside of our control. This is true whether we develop these technologies
internally, by acquiring or investing in other companies or through
collaboration with third parties.





The
technologies, functionalities and features on which we choose to focus may not
achieve as broad or timely customer acceptance as we expect. This may result
from numerous factors including the availability of more attractive alternatives
or a lack of sufficient compatibility with other existing technologies, products
and solutions. Additionally, even if we do select the technologies,
functionalities and features that customers ultimately want, we or the companies
that work with us may not be able to bring them to the market at the right
time.





Furthermore,
as a result of ongoing technological developments, our products and solutions
are increasingly used together with components or layers that have been
developed by third parties, whether or not the Company has authorized their use
with our products and solutions. However, such components, such as batteries, or
layers, such as software applications, may not be compatible with our products
and solutions and may not meet our and our customers' quality, safety or other
standards. As well, certain components or layers that may be used with our
products may enable our products and solutions to be used for objectionable
purposes, such as to transfer content that might be hateful or derogatory. The
use of our products and solutions with incompatible or otherwise substandard
components or layers, or for purposes that are inappropriate, is largely outside
of our control and could harm the Company brand.





We
need to understand the different markets in which we operate and meet the needs
of our customers, which include mobile network operators, distributors,
independent retailers and enterprise customers. We need to have a competitive
product portfolio, and to work together with our operator customers to address
their needs. Our failure to identify key market trends and to respond timely and
successfully to the needs of our customers may have a material adverse impact on
our market share, business and results of operations.





We serve
a diverse range of customers, ranging from mobile network operators,
distributors, independent retailers to enterprise customers, across a variety of
markets. In many of these markets, the mobile communications industry is at
different stages of development, and many of these markets have different
characteristics and dynamics, for example, in terms of mobile penetration rates
and technology, feature and pricing preferences. Establishing and maintaining
good relationships with our customers and understanding trends and needs in
their markets require us to constantly obtain and evaluate a complex array of
feedback and other data. We must do this efficiently in order to be able to
identify key market trends and address our customers' needs proactively and in a
timely manner. If we fail to analyze correctly and respond timely and
appropriately to customer feedback and other data, our business may be
materially adversely affected.





Certain
mobile network operators require mobile devices to be customized to their
specifications, by requesting certain preferred features, functionalities or
design, together with co-branding with the network operator's brand. We believe
that customization is an important element in gaining increased operator
customer satisfaction and we are working together with operators on product
planning as well as accelerating product hardware and software customization
programs. These developments may result in new challenges as we provide
customized products, such as the need for us to produce mobile devices in
smaller lot sizes, which can impede our economies of scale, or the potential for
the erosion of the Company brand, which we consider to be one of our key
competitive advantages.





In order
to meet our customers' needs, we need to introduce new devices on a timely basis
and maintain a competitive product portfolio. For the Company, a competitive
product portfolio means a broad and balanced offering of commercially appealing
mobile devices with attractive features, functionality and design for all major
user segments and price points. If we do not achieve a competitive portfolio, we
believe that we will be at a competitive disadvantage, which may lead to lower
revenue and lower profits.





The
competitiveness of our portfolio is also influenced by the value of the Company
brand. A number of factors, including actual or even alleged defects in our
products and solutions, may have a negative effect on our reputation and erode
the value of the Company brand.





Competition
in our industry is intense. Our failure to respond successfully to changes in
the competitive landscape may have a material adverse impact on our business and
results of operations.





The
markets for our products and solutions are intensely competitive. Industry
participants compete with each other mainly on the basis of the breadth and
depth of their product portfolios, price, operational and manufacturing
efficiency, technical performance, product features, quality, customer support
and brand recognition. We are facing increased competition from both our
traditional competitors in the mobile communications industry as well as a
number of new competitors, particularly from countries where production costs
tend to be lower. Some of these competitors have used, and we expect will
continue to use, more aggressive pricing strategies, different design approaches
and alternative technologies than ours. In addition, some competitors have
chosen a strategy of focusing on productization based on commercially available
technologies and components, which may enable them to introduce products faster
and with lower levels of research and development spending than the
Company.


5





As a
result of developments in our industry, we also expect to face new competition
from companies in related industries, such as consumer electronics manufacturers
and business device and solution providers, including but not limited to Dell,
HP, Microsoft, Nintendo, Palm, Research in Motion and Sony. Additionally,
because mobile network operators are increasingly offering mobile devices under
their own brand, we face increasing competition from non-branded mobile device
manufacturers. If we cannot respond successfully to these competitive
developments, our business and results of operations may be materially adversely
affected.





Reaching our sales, profitability,
volume and market share targets depends on numerous factors. These include our
ability to offer products and solutions that meet the demands of the market and
to manage the prices and costs of our products and solutions, our operational
efficiency, the pace of development and acceptance of new technologies, our
success in the business areas that we have recently entered, and general
economic conditions. Depending on those factors, some of which we may influence
and others of which are beyond our control, we may fail to reach our targets and
we may fail to provide accurate forecasts of our sales and results of
operations .





A variety
of factors discussed throughout these Risk Factors could affect our ability to
reach our targets and give accurate forecasts. Although, we can influence some
of these factors, some of them depend on external factors that are beyond our
control.  In our mobile device businesses, we seek to maintain healthy
levels of sales and profitability through offering a competitive portfolio of
mobile devices, growing faster than the market, working to improve our
operational efficiency, controlling our costs, and targeting timely and
 successful product introductions and shipments. The quarterly and annual
sales and operating results in our mobile device businesses also depend on a
number of other factors that are not within our control. Such factors include
the global growth in mobile device volumes, which is influenced by, among other
factors, regional economic factors, competitive pressures, regulatory
environment, the timing and success of product and service introductions by
various market participants, including network operators, the commercial
acceptance of new mobile devices, technologies and services, and operators' and
distributors' financial situations. Our sales and operating results are also
impacted by fluctuations in exchange rates and at the quarterly level by
seasonality. In developing markets, the availability and cost, through
affordable tariffs, of mobile phone service compared with the availability and
cost of fixed line networks may also impact volume growth.





In our
mobile networks business, we also seek to maintain healthy levels of sales and
profitability and try to grow faster than the market. Our networks business's
quarterly and annual net sales and operating results can be affected by a number
of factors, some of which we can influence, such as our operational efficiency,
the level of our research and development investments and the deployment
progress and technical success we achieve under network contracts. Other
relevant factors include operator investment behavior, which can vary
significantly from quarter to quarter, competitive pressures and general
economic conditions although these are not within our control.





The new
business areas that we have entered may be less profitable than we currently
foresee, or they may generate more variable operating results than we currently
foresee. We expect to incur short-term operating losses in certain of these new
business areas given our early stage investments in research and development and
marketing in particular. Also our efforts in managing prices and costs in the
long-term, especially balancing prices and volumes with research and development
costs, may prove to be inadequate.





Although
we may announce forecasts of our results of operations, uncertainties affecting
any of these factors, particularly during difficult economic conditions, render
our forecasts difficult to make, and may cause us not to reach the targets that
we have forecasted, or to revise our estimates.





Our
sales and results of operations could be adversely affected if we fail to
efficiently manage our manufacturing and logistics without interruption, or fail
to ensure that our products and solutions meet our and our customers' quality,
safety and other requirements and are delivered in time.





Our
manufacturing and logistics are complex, require advanced and costly equipment
and include outsourcing to third parties. These operations are continuously
modified in an effort to improve manufacturing efficiency and flexibility. We
may experience difficulties in adapting our supply to the demand for our
products, ramping up or down production at our facilities, adopting new
manufacturing processes, finding the most timely way to develop the best
technical solutions for new products, or achieving manufacturing efficiency and
flexibility, whether we manufacture our products and solutions ourselves or
outsource to third parties. Such difficulties may have a material adverse effect
on our sales and results of operations and may result from, among other things:
delays in adjusting or upgrading production at our facilities, delays in
expanding production capacity, failure in our manufacturing and logistics
processes, failures in the activities we have outsourced, and interruptions in
the data communication systems that run our operations. Also, a failure or an
interruption could occur at any stage of our product creation, manufacturing and
delivery processes, resulting in our products and solutions not meeting our and
our customers' quality, safety and other requirements, or being delivered late,
which could have a material adverse effect on our sales, our results of
operations and reputation and the value of the Company brand.


6





We
depend on our suppliers for the timely delivery of components and for their
compliance with our supplier requirements, such as, most notably, our and our
customers' product quality, safety and other standards. Their failure to do so
could adversely affect our ability to deliver our products and solutions
successfully and on time.





Our
manufacturing operations depend to a certain extent on obtaining adequate
supplies of fully functional components on a timely basis. Our principal supply
requirements are for electronic components, mechanical components and software,
which all have a wide range of applications in our products. Electronic
components include integrated circuits, microprocessors, standard components,
memory devices, cameras, displays, batteries and chargers while mechanical
components include covers, connectors, key mats and antennas. In addition, a
particular component may be available only from a limited number of suppliers.
Suppliers may from time to time extend lead times, limit supplies or increase
prices due to capacity constraints or other factors, which could adversely
affect our ability to deliver our products and solutions on a timely basis.
Moreover, even if we attempt to select our suppliers and manage our supplier
relationships with scrutiny, a component supplier may fail to meet our supplier
requirements, such as, most notably, our and our customers' product quality,
safety and other standards, and consequently some of our products are
unacceptable to us and our customers, or we may fail in our own quality
controls. Moreover, a component supplier may experience delays or disruption to
its manufacturing, or financial difficulties. Any of these events could delay
our successful delivery of products and solutions, which meet our and our
customers' quality, safety and other requirements, or otherwise adversely affect
our sales and our results of operations. Also, our reputation and brand value
may be affected due to real or merely alleged failures in our products and
solutions.





We
are developing a number of our new products and solutions together with other
companies. If any of these companies were to fail to perform, we may not be able
to bring our products and solutions to market successfully or in a timely way
and this could have a material adverse impact on our sales and
profitability.





We
continue to invite the providers of technology, components or software to work
with us to develop technologies or new products and solutions. These
arrangements involve the commitment by each company of various resources,
including technology, research and development efforts, and personnel. Although
the target of these arrangements is a mutually beneficial outcome for each
party, our ability to introduce new products and solutions that meet our and our
customers' quality, safety and other standards successfully and on schedule
could be hampered if, for example, any of the following risks were to
materialize: the arrangements with the companies that work with us do not
develop as expected, the technologies provided by the companies that work with
us are not sufficiently protected or infringe third parties' intellectual
property rights in a way that we cannot foresee or prevent, the technologies,
products or solutions supplied by the companies that work with us do not meet
the required quality, safety and other standards or customer needs, our own
quality controls fail, or the financial standing of the companies that work with
us deteriorates.





Our
operations rely on complex and highly centralized information technology systems
and networks. If any system or network disruption occurs, this reliance could
have a material adverse impact on our operations, sales and operating
results.





Our
operations rely to a significant degree on the efficient and uninterrupted
operation of complex and highly centralized information technology systems and
networks, which are integrated with those of third parties. Any failure or
disruption of our current or future systems or networks could have a material
adverse effect on our operations, sales and operating results. Furthermore, any
data leakages resulting from information technology security breaches could also
adversely affect us.





All
information technology systems are potentially vulnerable to damage or
interruption from a variety of sources. We pursue various measures in order to
manage our risks related to system and network disruptions, including the use of
multiple suppliers and available information technology security. However,
despite precautions taken by us, an outage in a telecommunications network
utilized by any of our information technology systems, virus or other event that
leads to an unanticipated interruption of our information technology systems or
networks could have a material adverse effect on our operations, sales and
operating results.





Our
products and solutions include increasingly complex technology involving
numerous new Our patented and other proprietary technologies, as well as some
developed or licensed to us by certain third parties. As a consequence,
evaluating the protection of the technologies we intend to use is more and more
challenging, and we expect increasingly to face claims that we have infringed
third parties' intellectual property rights. The use of increasingly complex
technology may also result in increased licensing costs for us, restrictions on
our ability to use certain technologies in our products and solution offerings,
and/or costly and time-consuming litigation. Third parties may also commence
actions seeking to establish the invalidity of intellectual property rights on
which we depend.





Our
products and solutions include increasingly complex technology involving
numerous new Company patented and other proprietary technologies, as well as
some developed or licensed to us by certain third parties. As the amount of such
proprietary technologies needed for our products and solutions continues to
increase, the number of parties claiming rights continues to increase and become
more fragmented within individual products, and as the complexity of the
technology and the overlap of product functionalities increases, the possibility
of more infringement and related intellectual property claims against us also
continues to increase. The holders of patents potentially relevant to our
product and solution offerings may be unknown to us, or may otherwise make it
difficult for us to acquire a license on commercially acceptable terms. There
may also be technologies licensed to and relied on by us that are subject to
infringement or other corresponding allegations or claims by others which could
damage our ability to rely on such technologies.


7


In
addition, although we endeavor to ensure that companies that work with us
possess appropriate intellectual property rights or licenses, we cannot fully
avoid risks of intellectual property rights infringement created by suppliers of
components and various layers in our products and solutions or by companies with
which we work in cooperative research and development activities. Similarly, we
and our customers may face claims of infringement in connection with our
customers' use of our products and solutions. Finally, as all technology
standards, including those used and relied on by us, include some intellectual
property rights, we cannot fully avoid risks of a claim for infringement of such
rights due to our reliance on such standards. We believe that the number of
third parties declaring their intellectual property to be relevant to these
standards is increasing, which may increase the likelihood that we will be
subject to such claims in the future.





Any
restrictions on our ability to sell our products and solutions due to expected
or alleged infringements of third party intellectual property rights and any
intellectual property rights claims, regardless of merit, could result in
material losses of profits, costly litigation, the payment of damages and other
compensation, the diversion of the attention of our personnel, product shipment
delays or the need for us to develop non-infringing technology or to enter into
royalty or licensing agreements. If we were unable to develop non-infringing
technology, or if royalty or licensing agreements were not available on
commercially acceptable terms, we could be precluded from making and selling the
affected products and solutions. As new features are added to our products and
solutions, we may need to acquire further licenses, including from new and
 sometimes unidentified owners of intellectual property. The cumulative
costs of obtaining any necessary licenses are difficult to predict and may over
time have a negative effect on our operating results.





In
addition, other companies may commence actions seeking to establish the
invalidity of our intellectual property, for example, patent rights. In the
event that one or more of our patents are challenged, a court may invalidate the
patent or determine that the patent is not enforceable, which could harm our
competitive position. If any of our key patents are invalidated, or if the scope
of the claims in any of these patents is limited by a court decision, we could
be prevented from licensing the invalidated or limited portion of our
intellectual property rights. Even if such a patent challenge is not successful,
it could be expensive and time consuming, divert management attention from our
business and harm our reputation. Any diminution of the protection that our own
intellectual property rights enjoy could cause us to lose some of the benefits
of our investments in R&D, which may have a negative effect on our results
of operations.





If
we are unable to recruit, retain and develop appropriately skilled employees, we
may not be able to implement our strategies and, consequently, our results of
operations may suffer.





We must
continue to recruit, retain and through constant competence training develop
appropriately skilled employees with a comprehensive understanding of our
businesses and technologies. As competition for skilled personnel remains keen,
we seek to create a corporate culture that encourages creativity and continuous
learning. We are also continuously developing our compensation and benefit
policies and taking other measures to attract and motivate skilled personnel.
Nevertheless, we have encountered in the past, and may encounter in the future,
shortages of appropriately skilled personnel, which may hamper our ability to
implement our strategies and harm our results of operations.





The
global networks business relies on a limited number of customers and large
multi-year contracts. Unfavorable developments under such a contract or in
relation to a major customer may affect our sales, our results of operations and
cash flow adversely.





Large
multi-year contracts, which are typical in the networks industry, include a risk
that the timing of sales and results of operations associated with these
contracts will be different than expected. Moreover, they usually require the
dedication of substantial amounts of working capital and other resources, which
impacts our cash flow negatively. Any non-performance by us under these
contracts may have significant adverse consequences for us because network
operators have demanded and may continue to demand stringent contract
undertakings such as penalties for contract violations.





Our
sales derived from, and assets located in, emerging market countries may be
adversely affected by economic, regulatory and political developments in those
countries. As sales from these countries represent an increasing portion of our
total sales, economic or political turmoil in these countries could adversely
affect our sales and results of operations. Our investments in emerging market
countries may also be subject to other risks and uncertainties.





We
generate sales from and have invested in various emerging market countries. As
sales from these countries represent an increasing portion of our total sales,
economic or political turmoil in these countries could adversely affect our
sales and results of operations. Our investments in emerging market countries
may also be subject to risks and uncertainties, including unfavorable taxation
treatment, exchange controls, challenges in protecting our intellectual property
rights, nationalization, inflation, incidents of terrorist activity, currency
fluctuations, or the absence of, or unexpected changes in, regulation as well as
other unforeseeable operational risks.





Allegations
of health risks from the electromagnetic fields generated by base stations and
mobile devices, and the lawsuits and publicity relating to them, regardless of
merit, could affect our operations negatively by leading consumers to reduce
their use of mobile devices or by causing us to allocate monetary and personnel
resources to these issues.





There has
been public speculation about possible health risks to individuals from exposure
to electromagnetic fields from base stations and from the use of mobile devices.
While a substantial amount of scientific research conducted to date by various
independent research bodies has indicated that these radio signals, at levels
within the limits prescribed by public health authority safety standards and
recommendations, present no adverse effect to human health, we cannot be
 certain that future studies, irrespective of their scientific basis, will
not suggest a link between electromagnetic fields and adverse health effects
that would adversely affect our sales and share price. Research into these
issues is ongoing by government agencies, international health organizations and
other scientific bodies in order to develop a better scientific and public
understanding of these issues.


8





Although
the Company products and solutions are designed to meet all relevant safety
standards and recommendations globally, no more than a perceived risk of adverse
health effects of mobile communications devices could adversely affect us
through a reduction in sales of mobile devices or increased difficulty in
obtaining sites for base stations, and could have a negative effect on our
reputation and brand value as well as harm our share price.





Changes
in various types of regulation in countries around the world could affect our
business adversely.





Our
business is subject to direct and indirect regulation in each of the countries
in which we, the companies with which we work or our customers do business. As a
result, changes in various types of regulations applicable to current or new
technologies, products or services could affect our business adversely. For
example, it is in our interest that the Federal Communications Commission
maintains a regulatory environment that ensures the continued growth of the
wireless sector in the United States. In addition, changes in regulation
affecting the construction of base stations and other network infrastructure
could adversely affect the timing and costs of new network construction or
expansion and the commercial launch and ultimate commercial success of these
networks.





Moreover,
the implementation of new technological or legal requirements, such as the
requirement in the United States that all handsets must be able to indicate
their physical location, could impact our products and solutions, manufacturing
or distribution processes, and could affect the timing of product and solution
introductions, the cost of our production, products or solutions as well as
their commercial success. Finally, export control, tariff, environmental, safety
and other regulation that adversely affects the pricing or costs of our products
and solutions as well as new services related to our products could affect our
net sales and results of operations. The impact of these changes in regulation
could affect our business adversely even though the specific regulations do not
always directly apply to us or our products and solutions.





Our
future revenues and results of operations may be difficult to forecast and
results in prior periods may no be indicative of future results.





At times
in the past and in certain segments, our revenues have fluctuated on a quarterly
and annual basis as well as grown significantly and has decreased significantly.
Accurate predictions of future revenues are difficult because of the rapid
changes in the markets in which we operate.


Our
results of operations have fluctuated and may continue to fluctuate
significantly in the future as a result of a variety of factors, many of which
are beyond our control. These factors include:





o the
addition of new clients or the loss of existing clients;


o changes
in fees paid by advertisers or other clients;


o the
introduction of new mobile technology services by us or our
competitors;


o
variations in the levels of capital or operating expenditures and other costs
relating to the maintenance or expansion of our operations, including personnel
costs;


o
seasonality;


o changes
in results of operations brought about by newly acquired businesses or new joint
ventures, which may be exceedingly difficult to predict due to management's lack
of history with such businesses or joint ventures;


o changes
in governmental regulation of mobile communications; and


o general
economic conditions.





Our
future revenues and results of operations may be difficult to forecast due to
the above factors and the time we may need to adequately respond to any changes
in them. Our profit margins may suffer if we are unable to pass some of the
costs on to our customers. In addition, our expense levels are based in large
part on our investment plans and estimates of future revenues. Any increased
expenses may precede or may not be followed by increased revenues, as we may be
unable to, or may elect not to, adjust spending in a timely manner to compensate
for any unexpected revenue shortfall. As a result, we believe that
period-to-period and year-to-year comparisons of our results of operations may
not be meaningful.





Acquisitions
may harm our financial results.





Acquisitions
have been part of our growth and may continue to be part of our growth in the
future. Our acquisitions may be of entire companies, certain assets of
companies, controlling interests in companies or of minority interests in
companies where we intend to invest as part of a strategic alliance. If we are
not successful in integrating companies that we acquire or are not able to
generate adequate sales from the acquired entities, our business could be
materially and adversely affected.





We
depend on proprietary rights and we face the risk of infringement.





Our
success and ability to compete are substantially dependent on our internally
developed technologies and trademarks, which we protect through a combination of
copyright, trade secret and trademark law. Patent applications and trademark
applications we submit may not be approved. Even if they are approved, such
patents or trademarks may be successfully challenged by others or invalidated.
If our trademark registrations are not approved because third parties own such
trademarks, our use of such trademarks will be restricted unless we enter into
arrangements with such third parties that may be unavailable on commercially
reasonable terms.


9


We
generally enter into confidentiality or license agreements with our employees,
consultants and corporate partners, and generally control access to and
distribution of our technologies, documentation and other proprietary
information. Despite our efforts to protect our proprietary rights from
unauthorized use or disclosure, parties may attempt to disclose, obtain or use
our solutions or technologies. The steps we have taken may not prevent
misappropriation of our solutions or technologies, particularly in many foreign
countries in which we operate, where laws or law enforcement practices may not
protect our proprietary rights as fully as in the United States.





We have,
from time to time, been, and may in the future be, subject to claims of alleged
infringement of the trademarks and other intellectual property rights of third
parties by us or by customers who employ our advertising solutions. We may be
required, or may elect, to indemnify these parties against such claims. Such
claims and any resultant litigation could subject us to significant liability
for damages and could result in the invalidation of our proprietary rights. In
addition, even if we prevail, such litigation could be time-consuming and
expensive to defend, and could result in the diversion of our time and
attention, any of which could materially and adversely affect our business,
results of operations and financial condition. Any claims or litigation from
third parties may also result in limitations on our ability to use the
trademarks and other intellectual property subject to such claims or litigation
unless we enter into arrangements with the third parties responsible for such
claims or litigation, which may be unavailable on commercially reasonable terms,
if at all.





Future
currency fluctuations and restrictions on currency exchange may adversely affect
our business, including limiting our ability to convert Chinese renminbi into
foreign currencies and, if Chinese renminbi were to decline in value, reducing
our revenues in U.S. dollar terms.





Our
reporting currency is the U.S. dollar and our operations in China and Hong Kong
use their respective local currencies as their functional currencies. The
majority of our revenues derived and expenses incurred are in currencies other
than the U.S. dollar. We are subject to the effects of exchange rate
fluctuations with respect to any of these currencies. We can offer no assurance
that these will be stable against the U.S. dollar or any other foreign
currency.





The
income statements of our international operations are translated into U.S.
dollars at the average exchange rates in each applicable period. To the extent
the U.S. dollar strengthens against foreign currencies, the translation of these
foreign currencies denominated transactions results in reduced revenues,
operating expenses and net income for our international operations. Similarly,
to the extent the U.S. dollar weakens against foreign currencies, the
translation of these foreign currency denominated transactions results in
increased revenues, operating expenses and net income for our international
operations. We are also exposed to foreign exchange rate fluctuations as we
convert the financial statements of our foreign subsidiaries into U.S. dollars
in consolidation. If there is a change in foreign currency exchange rates, the
conversion of the foreign subsidiaries' financial statements into U.S. dollars
will lead to a translation gain or loss which is recorded as a component of
other comprehensive income. In addition, we have certain assets and liabilities
that are denominated in currencies other than the relevant entity's functional
currency. Changes in the functional currency value of these assets and
liabilities create fluctuations that will lead to a transaction gain or loss. We
have not entered into agreements or purchased instruments to hedge our exchange
rate risks, although we may do so in the future. The availability and
effectiveness of any hedging transactions may be limited and we may not be able
to successfully hedge our exchange rate risks.





Changes
to existing accounting pronouncements, including SFAS 123R, or taxation rules or
practices may adversely affect our reported results of operations or how we
conduct our business.





A change
in accounting pronouncements or taxation rules or practices can have a
significant effect on our reported results and may even affect our reporting of
transactions completed before the change is effective. Pursuant to SEC rules, we
are required to implement the Statement of Financial Accounting Standards No.
123 (revised 2004), "Share-Based Payment" ("SFAS 123R") starting in the first
quarter of 2006. SFAS 123R requires us to measure compensation costs for all
share-based compensation (including stock options and our employee stock
purchase plan, as currently constructed) at fair value and take compensation
charges equal to that value. The method that we use to determine the fair value
of stock options is based upon, among other things, the volatility of our
ordinary shares. The price of our ordinary shares has historically been
volatile. Therefore, the requirement to measure compensation costs for all
share-based compensation under SFAS 123R could negatively affect our
profitability and the trading price of our ordinary shares. SFAS 123R and the
impact of expensing on our reported results could also limit our ability to
continue to use stock options as an incentive and retention tool, which could,
in turn, hurt our ability to recruit employees and retain existing employees.
Other new accounting pronouncements or taxation rules and varying
interpretations of accounting pronouncements or taxation practice have occurred
and may occur in the future. This change to existing rules, future changes, if
any, or the questioning of current practices may adversely affect our reported
financial results or the way we conduct our business.





While
we believe that we currently have adequate internal control procedures in place,
we are still exposed to potential risks from recent legislation requiring
companies to evaluate controls under Section 404 of the Sarbanes-Oxley Act of
2002.





While we
believe that we currently have adequate internal control procedures in place, we
are still exposed to potential risks from recent legislation requiring companies
to evaluate controls under Section 404 of the Sarbanes-Oxley Act of 2002. Under
the supervision and with the participation of our management, we have evaluated
our internal controls systems in order to allow management to report on our
internal controls, as required by Section 404 of the Sarbanes-Oxley Act. We have
performed the system and process evaluation and testing required in an effort to
comply with the management certification requirements of Section 404. As a
result, we have incurred additional expenses and a diversion of management's
time. If we are not able to continue to meet the requirements of Section 404 in
a timely manner or with adequate compliance, we might be subject to sanctions or
investigation by regulatory authorities, such as the SEC or the Nasdaq National
Market. Any such action could adversely affect our financial results and the
market price of our ordinary shares.


10





Our
stock price has been historically volatile and may continue to be volatile,
which may make it more difficult for you to resell shares when you want at
prices you find attractive.





The
trading price of our ordinary shares has been and may continue to be subject to
considerable daily fluctuations. During the twelve months ended December 31,
2008, the closing sale prices of our ordinary shares on the Over-the-Counter
Bulletin Board ranged from $0.03 to $0.35 per share and the closing sale price
on April 14, 2009 was $0.031 per share. Our stock price may fluctuate in
response to a number of events and factors, such as quarterly variations in
operating results, announcements of technological innovations or new products
and media properties by us or our competitors, changes in financial estimates
and recommendations by securities analysts, the operating and stock price
performance of other companies that investors may deem comparable, new
governmental restrictions or regulations and news reports relating to trends in
our markets. In addition, the stock market in general, and the market prices for
China-related and mobile phone-related companies in particular, have experienced
extreme volatility that often has been unrelated to the operating performance of
such companies. These broad market and industry fluctuations may adversely
affect the price of our ordinary shares, regardless of our operating
performance.





We
may be classified as a passive foreign investment company, which could result in
adverse U.S. tax consequences to U.S. investors.





Based
upon the nature of our income and assets, we may be classified as a passive
foreign investment company, or PFIC, by the United States Internal Revenue
Service for U.S. federal income tax purposes. This characterization could result
in adverse U.S. tax consequences to you. For example, if we are a PFIC, our U.S.
investors will become subject to increased tax liabilities under U.S. tax laws
and regulations and will become subject to more burdensome reporting
requirements. The determination of whether or not we are a PFIC is made on an
annual basis, and those determinations depend on the composition of our income
and assets, including goodwill, from time to time. Although in the past we have
operated our business and in the future we intend to operate our business so as
to minimize the risk of PFIC treatment, you should be aware that certain factors
that could affect our classification as PFIC are out of our control. For
example, the calculation of assets for purposes of the PFIC rules depends in
large part upon the amount of our goodwill, which in turn is based, in part, on
the then market value of our shares, which is subject to change. Similarly, the
composition of our income and assets is affected by the extent to which we spend
the cash we have raised on acquisitions and capital expenditures. In addition,
the relevant authorities in this area are not clear and so we operate with less
than clear guidance in our effort to minimize the risk of PFIC treatment.
Therefore, we cannot be sure whether we are not and will not be a PFIC for the
current or any future taxable year. In the event we are determined to be a PFIC,
our stock may become less attractive to U.S. investors, thus negatively
impacting the price of our stock.





We
may be exposed to infringement claims by third parties, which, if successful,
could cause us to pay significant damage awards.





Third
parties may initiate litigation against us alleging infringement of their
proprietary rights. In the event of a successful claim of infringement and our
failure or inability to develop non-infringing technology or license the
infringed or similar technology on a timely basis, our business could be harmed.
In addition, even if we are able to license the infringed or similar technology,
license fees could be substantial and may adversely affect our results of
operations.





Our
failure to compete successfully may hinder our growth.





The
markets for mobile technology and related products and services are intensely
competitive and such competition is expected to increase. Our failure to compete
successfully may hinder our growth. We believe that our ability to compete
depends upon many factors both within and beyond our control,
including:





o the
development of new mobile technology;


o the
timing and market acceptance of new products and enhancements of existing
services developed by us and our competitors;


o the
ability to attract and retain qualified personnel;


o
changing demands regarding customer service and support;


o shifts
in sales and marketing efforts by us and our competitors; and


o the
ease of use, performance, price and reliability of our services and
products.





Some of
our competitors have longer operating histories, greater name recognition,
larger customer bases and significantly greater financial, technical and
marketing resources than ours. In addition, current and potential competitors
have established or may establish cooperative relationships among themselves or
with third parties to increase the ability of their products or services to
address the needs of our prospective clients. In addition, most online
advertising companies are seeking to broaden their business models, so that
companies that do not currently compete directly with us may decide to compete
more directly with us in the future. We may be unable to compete successfully
against current or future competitors.





The
adverse effect of global financial crises has deferred our commencement of our
production facilities which might hinder our future growth.





Item
1B. Unresolved Staff Comments





None.


11





Item
2. Properties





Our
principal executive offices are located at Suite 1501, Bank of East Asia Harbour
View Centre, 56 Gloucester Road, Wanchai, Hong Kong, PRC. In 2008, we began
renting office facilities consisting of approximately 266 square meters in Hong
Kong, our current headquarters, for a period of 2 (2) years on a month-to-month
basis at $10,667 per month.  During the twelve months ended December
31, 2008, total payments for all property rent was $109,292 (Twelve months ended
December 31, 2007: $104,581).





We
periodically evaluate our facilities requirements. Some of our facilities are
sublet in whole or in part.





Item
3. Legal Proceedings





We are
not involved in any material pending legal proceedings at this time, and
management is not aware of any contemplated proceeding by any governmental
authority.





Item
4. Submission of Matters to a Vote of Security Holders.





No
matters were submitted during the fourth quarter of the fiscal year covered by
this report to a vote of security holders.





PART
II.





ITEM
5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities.





Our
common stock is traded on the Over-the-Counter Bulletin Board under the symbol
“INCM.OB”.  As of April 13, 2009, there were: (i) 249 shareholders of
record, without giving effect to determining the number of shareholders who hold
shares in "street name" or other nominee status; (ii) no outstanding options to
purchase shares of our common stock; (iii) outstanding 37,900,536 shares of our
common stock, of which 14,793,106 shares are either freely tradable or eligible
for sale under Rule 144 or Rule 144K, and (v) no shares subject to registration
rights.





The
following table sets forth, for the fiscal quarters indicated, the high and low
closing prices as reported by the Over-the-Counter Bulletin Board. These
quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commission, and may not represent actual transactions.





Sales
Price





High
                                      
                                      
                                      LowFiscal
      2008First
      Quarter
                                      
                                      $
                                      0.35
                                      
                                      
                                      $
                                      0.17Second
      Quarter
                                      
                                      $
                                      0.30
                                      
                                      
                                      $
                                      0.15Third
      Quarter
                                      
                                      $
                                      0.22
                                      
                                      
                                      $
                                      0.09Fourth
      Quarter
                                      
                                      $
                                      0.20
                                      
                                      
                                      $
                                      0.03Fiscal
      2007First
      Quarter
                                      
                                      $
                                      1.93
                                      
                                      
                                      $
                                      0.45Second
      Quarter
                                      
                                      $
                                      0.65
                                      
                                      
                                      $
                                      0.24Third
      Quarter
                                      
                                      $
                                      0.99
                                      
                                      
                                      $
                                      0.16Fourth
      Quarter
                                      
                                      $
                                      0.50
                                      
                                      
                                      $
                                      0.13





Dividend
Policy





We have
not paid, nor declared, any dividends since our inception and do not intend to
declare any such dividends in the foreseeable future. Our ability to pay
dividends is subject to limitations imposed by Nevada law. Under Nevada law,
dividends may be paid to the extent that a corporation’s assets exceed its
liabilities and it is able to pay its debts as they become due in the usual
course of business.





Recent
Sales of Unregistered Securities





During
the year ended December 31, 2008, we did not issue any securities that were not
registered under the Securities Act of 1933, as amended (the “Securities
Act”).


12





Item
6. Selected Financial Data.





The
following tables summarize the consolidated financial data of Innocom Technology
Holdings, Inc. for the periods presented. You should read the following
financial information together with the information under “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” and
our consolidated financial statements and the related notes to these
consolidated financial statements appearing elsewhere in this Form
10-K.





Fifteen months
                    ended
                    December31,
                  
                  
                  Year ended December 31,2006
                  
                  
                  2007
                  
                  
                  2008Revenue
                  
                  $
                  52,722,732
                  
                  
                  $
                  2,241,726
                  
                  
                  $
                  401,190Cost
      of sales
                  
                  
                  (48,806,531
                  )
                  
                  
                  0
                  
                  
                  
                  0Gross
      profit
                  
                  
                  3,916,201
                  
                  
                  
                  2,241,726
                  
                  
                  
                  401,190Depreciation
      and amortization
                  
                  
                  (505,557
                  )
                  
                  
                  (6,000,306
                  )
                  
                  
                  (602,124
                  )Impairment
      loss on long-lived assets
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (14,481,991
                  )Selling
      and distribution expenses
                  
                  
                  (156,591
                  )
                  
                  
                  0
                  
                  
                  
                  0General
      and administrative expenses
                  
                  
                  (353,552
                  )
                  
                  
                  (468,665
                  )
                  
                  
                  (1,139,336
                  )Other
      income
                  
                  
                  126,437
                  
                  
                  
                  592,696
                  
                  
                  
                  19,058Interest
      expense
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  (240,497
                  )Income
      (loss) before income tax
                  
                  
                  3,026,938
                  
                  
                  
                  (3,634,549
                  )
                  
                  
                  (16,043,700
                  )Income
      tax expense
                  
                  
                  (574,777
                  )
                  
                  
                  0
                  
                  
                  
                  0Net
      income (loss) attributable to the Shareholders of the
    Company
                  
                  $
                  2,452,161
                  
                  
                  $
                  (3,634,549
                  )
                  
                  $
                  (16,043,700
                  )Earnings
      (loss) per Share — basic (US$)
                  
                  $
                  0.11
                  
                  
                  $
                  (0.10
                  )
                  
                  $
                  (0.42
                  )Earnings
      (loss) per Share — diluted (US$)
                  
                  $
                  0.11
                  
                  
                  $
                  (0.10
                  )
                  
                  $
                  (0.42
                  )





As atDecember31,2006
                            
                            
                            2007
                            
                            
                            2008Cash and cash
      equivalents
                            
                            $
                            101,288
                            
                            
                            $
                            3,597
                            
                            
                            $
                            11,553Total current
      assets
                            
                            
                            14,885,879
                            
                            
                            
                            30,233
                            
                            
                            
                            84,422Total
assets
                            
                            
                            21,191,881
                            
                            
                            
                            14,098,908
                            
                            
                            
                            822,281Short-term
      borrowings
                            
                            
                            0
                            
                            
                            
                            0
                            
                            
                            
                            0Total current
      liabilities
                            
                            
                            5,487,149
                            
                            
                            
                            2,037,491
                            
                            
                            
                            4,443,968Total stockholders’equity(deficit)
                            
                            
                            15,704,732
                            
                            
                            
                            12,061,417
                            
                            
                            
                            (3,621,687
                            )





Item
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations.





The
information in this discussion contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. These forward-looking
statements involve risks and uncertainties, including statements regarding our
capital needs, business strategy and expectations. Any statements contained
herein that are not statements of historical facts may be deemed to be
forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as "may", "will", "should", "expect", "plan",
"intend", "anticipate", "believe", "estimate", "predict", "potential" or
"continue", the negative of such terms or other comparable terminology. Actual
events or results may differ materially. We disclaim any obligation to publicly
update these statements, or disclose any difference between its actual results
and those reflected in these statements. The information constitutes
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995.





Overview
and Future Plan of Operations





In 2008,
our revenues dropped by 82% from $2,241,726 in 2007to $401,190primarily resulting from
slow down of economy.





In 2009,
we will suspend our trading of mobile phones and related components and close
the assembling production factory situated in Changzhou, Jiangsu Province, China
in commercial production temporarily.





Results
of Operations for the Years Ended December 31, 2008 and December 31,
2007





During
the year ended December 31, 2008, we experienced a net loss of $16,043,700 which isattributable to
impairment loss of long-lived assets resulting from temporary closure of
production facilities during the first quarter of 2009.





During
the year ended December 31, 2007, we experienced a net loss of $3,634,549which is attributable to write
off long-term deferred consulting fee of $5,637,887 during the
year.


13





Revenue





During
year ended December 31, 2008, we derived $401,190 revenue from our Trading of
Mobile Phone and Related Component operations, representing a decrease in
revenue of $1,840,536 or 82% decrease from comparable year ended December 31,
2007 in which revenue amounts to $2,241,726. The decrease is attributable to the
slow down of economy.





Cost
of Sales





As our
trading cost is netted with billed value as revenue, the Company does not have
any cost of sales.





Administrative
Expenses





Below
table sets out the analysis of administrative expenses:





Year
      ended
                      December
      31, 2008
                    
                    
                    Year
      ended
                      December
      31, 2007Total general and administrative
      expenses
                    
                    $
                    1,741,460
                    
                    
                    $
                    6,468,971Less: non-cash
      items
                    
                    
                    (689,423
                    )
                    
                    
                    (6,000,306
                    )$
                    1,052,037
                    
                    
                    $
                    468,665





The
increase in administrative expenses was primarily attributable to increase in
full time employees from 2 to 130 upon completion of establishment of a
production facilities in Changzhou, which is temporarily closed due to slow down
of economy in the last quarter of 2008.





Non-cash
items





Below
table set out the components of non-cash items:





Year ended
                    December 31,2008
                  
                  
                  Yearended
                    December 31,2007Amortization of intangible
      assets
                  
                  $
                  598,562
                  
                  
                  $
                  357,754Amortization of long-term deferred
      consultancy fee
                  
                  
                  -
                  
                  
                  
                  5,637,887Depreciation
                  
                  
                  3,562
                  
                  
                  
                  4,665Write-off of obsolete
      inventories
                  
                  
                  87,299
                  
                  
                  
                  -$
                  689,423
                  
                  
                  $
                  6,000,306





The
increase in amortization of intangible assets as we have acquired trade mark for
our mobile phones during the year ended December 31, 2007. The amortization is
made over purchase period of 10 years.





The
amortization of long-term deferred consultancy fee during the year ended
December 31, 2008 decrease as the deferred charges have been written off during
the last quarter of 2007.





The
depreciation policy adopted in 2008 was consistent with that adopted in
2007.





Other
Income (Expenses)





Total
other income (expenses) for both periods presented was immaterial and consisted
of the following:





Year ended
                    December 31, 2008
                  
                  
                  Year ended
                    December 31, 2007Interest
      income
                  
                  $
                  20,727
                  
                  
                  $
                  1,240Gain
      on disposal of subsidiaries
                  
                  
                  -
                  
                  
                  
                  599,544$
                  20,727
                  
                  
                  $
                  600,784Interest
      expense
                  
                  $
                  240,497
                  
                  
                  $
                  -Loss
      on disposal of plant and equipment
                  
                  
                  1,669
                  
                  
                  
                  8,088$
                  242,166
                  
                  
                  $
                  8088


14





Net
Loss





Net loss
for 2007 was $3,634,549compared to net profit of
$2,452,161 in 2006. Loss is primarily attributed to write-off of long-term
deferred consultancy fee of $5,637,887.





Net loss
for 2008 of $16,043,700 isattributable to
impairment loss of long-lived assets resulting from temporary closure of
production facilities during the first quarter of 2009.





Trends,
Events, and Uncertainties





N/A





Liquidity
and Capital Resources for the Twelve Month Period Ended December 31, 2008 and
2007





Cash
flows from operating activities





We
experienced negative cash flows used in operations in the amount of $910,288 for
the year ended December 31, 2008.





We
experienced positive cash flows provided by operations in the amount of
$2,456,180 for the year ended December 31, 2007.





Cash
flows from investing activities





During
2008, we purchase $258,982 plant and equipment and $185,402 land use right
financed by amount due from a related party





Cash
flows from financing activities





During
2008, we obtain short term loan of $6,080,032 which is fully repaid during the
year.





Liquidity





On a
long-term basis, our liquidity will be dependent on establishing profitable
operations, receipt of revenues, additional infusions of capital and additional
financing. If necessary, we may raise capital through an equity or debt
offering. The funds raised from this offering will be used to develop and
execute our business plan. However, there can be no assurance that we will be
able to obtain additional equity or debt financing in the future, if at all. If
we are unable to raise additional capital, our growth potential will be
adversely affected. Additionally, we will have to significantly modify our
plans.





Critical
Accounting Policies





The
financial statements are prepared in accordance with accounting principles
generally accepted in the U.S., which requires us to make estimates and
assumptions in certain circumstances that affect amounts reported in the
accompanying financial statements and related footnotes. In preparing these
financial statements, management has made its best estimates and judgments of
certain amounts included in the financial statements, giving due consideration
to materiality. We do not believe there is a great likelihood that materially
different amounts would be reported related to the accounting policies described
below. However, application of these accounting policies involves the exercise
of judgment and use of assumptions as to future uncertainties and, as a result,
actual results could differ from these estimates.





Details
of critical accounting policies are set out in notes to the financial statements
included in Item 8.


15





Item
7A. Quantitative and Qualitative Disclosures About Market Risk.





Foreign
Exchange Risk





While our
reporting currency is the U.S. Dollar, all of our consolidated revenues and
consolidated costs and expenses are denominated in Renminbi. All of our assets
are denominated in RMB except for cash. As a result, we are exposed to foreign
exchange risk as our revenues and results of operations may be affected by
fluctuations in the exchange rate between U.S. Dollars and RMB. If the RMB
depreciates against the U.S. Dollar, the value of our RMB revenues, earnings and
assets as expressed in our U.S. Dollar financial statements will decline. We
have not entered into any hedging transactions in an effort to reduce our
exposure to foreign exchange risk.





Inflation





Inflationary
factors such as increases in the cost of our product and overhead costs may
adversely affect our operating results. Although we do not believe that
inflation has had a material impact on our financial position or results of
operations to date, a high rate of inflation in the future may have an adverse
effect on our ability to maintain current levels of gross margin and selling,
general and administrative expenses as a percentage of net revenues if the
selling prices of our products do not increase with these increased
costs.


16


Item
8. Financial Statements and Supplementary Data.





INNOCOM
TECHNOLOGY HOLDINGS, INC.





INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS





PageReport
      of Independent Registered Public Accounting Firm
                    
                    F-2Consolidated
      Balance Sheets
                    
                    F-3Consolidated
      Statements of Operations And Comprehensive Loss
                    
                    F-4Consolidated
      Statements of Cash Flows
                    
                    F-5Consolidated
      Statements of Stockholders’ (Deficit) Equity
                    
                    F-6Notes
      to Consolidated Financial Statements
                    
                    F-7
      to F-22


F-1








REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





The Board
of Directors and Stockholders of


Innocom
Technology Holdings, Inc.





We have
audited the accompanying consolidated balance sheets of Innocom Technology
Holdings, Inc. and its subsidiaries (“the Company”) as of December 31, 2008 and
2007, and the related consolidated statements of operations and comprehensive
loss, cash flows and stockholders’ (deficit) equity for the years ended December
31, 2008 and 2007. The financial statements are the responsibility of the
Company’s management. Our responsibility is to express an opinion on these
financial statements based on our audits.





We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits include consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, 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 financial position of the Company as of December
31, 2008 and 2007, and the results of operations and cash flows for the years
ended December 31, 2008 and 2007 and 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 2 to the
consolidated financial statements, the Company has incurred substantial losses,
all of which raise substantial doubt about its ability to continue as a going
concern. Management’s plans in regard to these matters are also described in
Note 2. These consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.





/s/ ZYCPA Company
Limited





ZYCPA
Company Limited


(Formerly
Zhong Yi (Hong Kong) C.P.A. Company Limited)


Certified
Public Accountants





Hong
Kong, China


April 15,
2009









F-2


INNOCOM
TECHNOLOGY HOLDINGS, INC.


CONSOLIDATED
BALANCE SHEETS


AS
OF DECEMBER 31, 2008 AND 2007


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





As of December 31,2008
                              
                              
                              2007ASSETSCurrent
      assets:Cash
      and cash equivalents
                              
                              $
                              11,553
                              
                              
                              $
                              3,597Prepayments
      and other receivables
                              
                              
                              72,869
                              
                              
                              
                              26,636Total
      current assets
                              
                              
                              84,422
                              
                              
                              
                              30,233Non-current
      assets:Investment
      in an unconsolidated affiliate
                              
                              
                              -
                              
                              
                              
                              8,463,464Intangible
      assets, net
                              
                              
                              -
                              
                              
                              
                              5,603,129Plant
      and equipment, net
                              
                              
                              737,859
                              
                              
                              
                              2,082TOTAL
      ASSETS
                              
                              $
                              822,281
                              
                              
                              $
                              14,098,908LIABILITIES
      AND STOCKHOLDERS’ (DEFICIT) EQUITYCurrent
      liabilities:Accounts
      payable
                              
                              $
                              80,692
                              
                              
                              $
                              -Amount
      due to a related party
                              
                              
                              4,152,410
                              
                              
                              
                              128Deferred
      revenue
                              
                              
                              -
                              
                              
                              
                              400,290Income
      tax payable
                              
                              
                              -
                              
                              
                              
                              1,439,376Other
      payables and accrued liabilities
                              
                              
                              210,866
                              
                              
                              
                              197,697Total
      current liabilities
                              
                              
                              4,443,968
                              
                              
                              
                              2,037,491Total
      liabilities
                              
                              
                              4,443,968
                              
                              
                              
                              2,037,491Commitments
      and contingenciesStockholders’
      (deficit) equity:Common
      stock, $0.001 par value; 50,000,000 shares authorized; 37,898,251 and
      37,898,251 shares issued and outstanding as of December 31, 2008 and
      2007
                              
                              
                              37,898
                              
                              
                              
                              37,898Additional
      paid-in capital
                              
                              
                              6,901,232
                              
                              
                              
                              6,901,232Accumulated
      other comprehensive income
                              
                              
                              532,248
                              
                              
                              
                              171,652(Accumulated
      deficit) retained earnings
                              
                              
                              (11,093,065
                              )
                              
                              
                              4,950,635Total
      stockholders’ (deficit) equity
                              
                              
                              (3,621,687
                              )
                              
                              
                              12,061,417TOTAL
      LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY
                              
                              $
                              822,281
                              
                              
                              $
                              14,098,908




See
accompanying notes to consolidated financial statements.


F-3


INNOCOM
TECHNOLOGY HOLDINGS, INC.


CONSOLIDATED
STATEMENTS OF OPERATIONS AND


COMPREHENSIVE
LOSS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


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





Years ended December 31,2008
                  
                  
                  2007REVENUE,
      NET
                  
                  $
                  401,190
                  
                  
                  $
                  2,241,726Operating
      expenses:Impairment
      loss on long-lived assets
                  
                  
                  14,481,991
                  
                  
                  
                  -General
      and administrative
                  
                  
                  1,741,460
                  
                  
                  
                  6,468,971LOSS
      FROM OPERATIONS
                  
                  
                  (15,822,261
                  )
                  
                  
                  (4,227,245
                  )Other
      income (expenses):Loss
      on disposal of plant and equipment
                  
                  
                  (1,669
                  )
                  
                  
                  (8,088
                  )Gain
      from disposal of subsidiaries
                  
                  
                  -
                  
                  
                  
                  599,544Interest
      income
                  
                  
                  20,727
                  
                  
                  
                  1,240Interest
      expense
                  
                  
                  (240,497
                  )
                  
                  
                  -LOSS
      BEFORE INCOME TAXES
                  
                  
                  (16,043,700
                  )
                  
                  
                  (3,634,549
                  )Income
      tax expense
                  
                  
                  -
                  
                  
                  
                  -NET
      LOSS
                  
                  $
                  (16,043,700
                  )
                  
                  $
                  (3,634,549
                  )Other
      comprehensive income (loss):-
      Foreign currency translation gain (loss)
                  
                  
                  360,596
                  
                  
                  
                  (8,766
                  )COMPREHENSIVE
      LOSS
                  
                  $
                  (15,683,104
                  )
                  
                  $
                  (3,643,315
                  )Net
      loss per share – Basic and diluted
                  
                  $
                  (0.42
                  )
                  
                  $
                  (0.10
                  )Weighted
      average shares outstanding – basic and diluted
                  
                  
                  37,898,251
                  
                  
                  
                  37,898,251





See
accompanying notes to consolidated financial statements.


F-4


INNOCOM
TECHNOLOGY HOLDINGS, INC.


CONSOLIDATED
STATEMENTS OF CASH FLOWS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


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





Years ended December 31,2008
                
                
                2007Cash
      flows from operating activities:Net
      loss
                
                $
                (16,043,700
                )
                
                $
                (3,634,549
                )Adjustments
      to reconcile net loss to net cash (used in) provided by operating
      activities:Depreciation
                
                
                3,562
                
                
                
                4,665Amortization
      of long-term deferred charges
                
                
                -
                
                
                
                5,637,887Amortization
      of intangible assets
                
                
                598,562
                
                
                
                357,754Write-off
      of obsolete inventories
                
                
                87,299
                
                
                
                -Impairment
      loss on long-lived assets
                
                
                14,481,991
                
                
                
                -Loss
      on disposal of plant and equipment
                
                
                1,669
                
                
                
                8,088Gain
      from disposal of subsidiaries
                
                
                -
                
                
                
                (599,544
                )Change
      in operating assets and liabilities:Inventories
                
                
                (87,299
                )
                
                
                -Accounts
      receivable, trade
                
                
                -
                
                
                
                1,458,289Prepayments
      and other receivables
                
                
                (46,233
                )
                
                
                55,185Accounts
      payable, trade
                
                
                80,692
                
                
                
                (1,334,983
                )Deferred
      revenue
                
                
                -
                
                
                
                400,411Other
      payables and accrued liabilities
                
                
                13,169
                
                
                
                102,977Net
      cash (used in) provided by operating activities
                
                
                (910,288
                )
                
                
                2,456,180Cash
      flows from investing activities:(Payment
      on) proceeds from disposal of subsidiaries
                
                
                (2,382
                )
                
                
                5,808,243Payment
      on the investment in an unconsolidated entity
                
                
                -
                
                
                
                (8,448,584
                )Purchase
      of intangible assets
                
                
                -
                
                
                
                (5,960,775
                )Payment
      on plant and equipment
                
                
                (258,982
                )
                
                
                (3,331
                )Payment
      on land use rights
                
                
                (185,402
                )
                
                
                -Net
      cash used in investing activities
                
                
                (446,766
                )
                
                
                (8,604,447
                )Cash
      flows from financing activities:Advance
      from a related party
                
                
                836,052
                
                
                
                6,050,643Proceed
      from short-term borrowings
                
                
                6,080,032
                
                
                
                -Repayment
      of short-term borrowings
                
                
                (6,080,032
                )
                
                
                -Net
      cash provided by financing activities
                
                
                836,052
                
                
                
                6,050,643Effect
      of exchange rate changes on cash and cash equivalents
                
                
                528,958
                
                
                
                (67
                )NET
      CHANGE IN CASH AND CASH EQUIVALENTS
                
                
                7,956
                
                
                
                (97,691
                )BEGINNING
      OF YEAR
                
                
                3,597
                
                
                
                101,288END
      OF YEAR
                
                $
                11,553
                
                
                $
                3,597SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATION:Cash
      paid for income taxes
                
                $
                -
                
                
                $
                -Cash
      paid for interest expenses
                
                $
                240,497
                
                
                $
                1,149NON-CASH
      INVESTING AND FINANCING ACTIVITIES:Settlement
      of amount due to related party with proceeds from disposal of
      subsidiaries
                
                $
                5,617,101
                
                
                $
                -


See
accompanying notes to consolidated financial statements.


F-5


INNOCOM
TECHNOLOGY HOLDINGS, INC.


CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


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





Accumulated
                                  
                                  
                                  Retainedother
                                  
                                  
                                  earnings
                                  
                                  
                                  TotalCommon stock
                                  
                                  
                                  Additional
                                  
                                  
                                  comprehensive
                                  
                                  
                                  (accumulated
                                  
                                  
                                  stockholders’No. of shares
                                  
                                  
                                  Amount
                                  
                                  
                                  paid-in capital
                                  
                                  
                                  (loss) income
                                  
                                  
                                  deficit)
                                  
                                  
                                  equity (deficit)Balance
      as of January 1, 2007
                                  
                                  
                                  37,898,251
                                  
                                  
                                  $
                                  37,898
                                  
                                  
                                  $
                                  6,901,232
                                  
                                  
                                  $
                                  180,418
                                  
                                  
                                  $
                                  8,585,184
                                  
                                  
                                  $
                                  15,704,732Foreign
      currency translation adjustment
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (8,766
                                  )
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (8,766
                                  )Net
      loss for the year
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (3,634,549
                                  )
                                  
                                  
                                  (3,634,549
                                  )Balance
      as of December 31, 2007
                                  
                                  
                                  37,898,251
                                  
                                  
                                  $
                                  37,898
                                  
                                  
                                  $
                                  6,901,232
                                  
                                  
                                  $
                                  171,652
                                  
                                  
                                  $
                                  4,950,635
                                  
                                  
                                  $
                                  12,061,417Foreign
      currency translation adjustment
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  360,596
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  360,596Net
      loss for the year
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (16,043,700
                                  )
                                  
                                  
                                  (16,043,700
                                  )Balance
      as of December 31, 2008
                                  
                                  
                                  37,898,251
                                  
                                  
                                  $
                                  37,898
                                  
                                  
                                  $
                                  6,901,232
                                  
                                  
                                  $
                                  532,248
                                  
                                  
                                  $
                                  (11,093,065
                                  )
                                  
                                  $
                                  (3,621,687
                                  )





See
accompanying notes to consolidated financial statements.


F-6




INNOCOM
TECHNOLOGY HOLDINGS, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
 (Currency
expressed in United States Dollars (“US$”))




1.
            ORGANIZATION
      AND BUSINESS BACKGROUND





Innocom
Technology Holdings, Inc. (the “Company” or “INCM”) was incorporated in the
State of Nevada on June 26, 1998. On June 20, 2006, the Company changed its name
from “Dolphin Productions, Inc.” to “Innocom Technology Holdings,
Inc.”





The
Company, through its subsidiaries is engaged in trading of mobile phone handsets
and components in Hong Kong and in the People’s Republic of China.





On April
28, 2008, the Company disposed of a subsidiary, Chinarise Capital
(International) Ltd. at a purchase price of $5,617,101.





On May 8,
2008, the Company completed the establishment of a new subsidiary, Changzhou
Innocom Communication Technology Limited in the PRC upon the approval of its
local government.





As of
December 31, 2008, details of the Company’s subsidiaries are described
below:





Name of company
                              
                              Place and date of
    incorporation
                              
                              Issued and fully
                                paid capital
                              
                              Principal activitiesInnocom
      Technology Holdings Limited (“ITHL”)
                                (Formerly
      Wisechamp Group Limited)
                              
                              British
      Virgin Islands
                                July
      12, 2005
                              
                              US$1
      ordinary
                              
                              Investment
      holdingSky
      Talent Development Limited (“STDL”)
                              
                              British
      Virgin Islands
                                September
      8, 2005
                              
                              US$1
      ordinary
                              
                              Investment
      holdingInnocom
      Mobile Technology Limited (“IMTL”)
                              
                              Hong
      Kong
                                June
      21, 2006
                              
                              HK$2,000,000
      ordinary
                              
                              InactivePender
      Holdings Ltd. (“Pender”)
                              
                              British
      Virgin Islands
                                August
      15, 2003
                              
                              US$1
      ordinary
                              
                              Trading
      of mobile phone handsets and componentsFavor
      Will International Ltd. (“FWIL”)
                              
                              British
      Virgin Islands
                                July
      11, 2007
                              
                              US$1
      ordinary
                              
                              Investment
      holdingChangzhou
      Innocom Communication Technology Limited (“CICTL”)
                              
                              The
      PRC
                                January
      19, 2007
                              
                              RMB50,000,000
                              
                              Manufacture
      of mobile phone handsets and
components





INCM and
its subsidiaries are hereinafter referred to as (the
“Company”).


F-7




INNOCOM
TECHNOLOGY HOLDINGS, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
 (Currency
expressed in United States Dollars (“US$”))


2.
            GOING
      CONCERN UNCERTAINTIES





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





As of
December 31, 2008, the Company had incurred a net loss of $16,043,700 and an
accumulated deficit of $11,093,065. Additionally, the Company had a working
capital deficit of $4,359,546. The continuation of the Company is dependent upon
the continuing financial support of shareholders and obtaining external
financing. The actions involve certain cost-saving initiatives and business
restructuring strategies in the PRC and Hong Kong. As a result, the consolidated
financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the outcome of the
Company’s ability to continue as a going concern.





3.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES





l
            Basis
      of presentation





These
accompanying consolidated financial statements have been prepared in accordance
with generally accepted accounting principles in the United States of
America.





l
            Use
      of estimates





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





l
            Basis
      of consolidation





The
consolidated financial statements include the financial statements of INCM and
its subsidiaries.





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





l
            Cash
      and cash equivalents





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


F-8




INNOCOM
TECHNOLOGY HOLDINGS, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
 (Currency
expressed in United States Dollars (“US$”))


l
            Intangible
      assets





Intangible
assets include (i) trademarks of mobile phone handsets purchased from a third
party and (ii) land use rights. In accordance with Statement of Financial
Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible
Assets” (“SFAS No. 142”), intangible assets with finite useful lives
related to developed technology, customer lists, trade names and other
intangibles are being amortized on a straight-line basis over the estimated
useful life of the related asset.





Trademarks
are carried at cost less accumulated amortization and are amortized on a
straight-line basis over their estimated useful lives of 10 years beginning at
the time the related trademarks are granted.





l
            Land
      use rights





All lands
in the People’s Republic of China (the “PRC”) are owned by the PRC local
government. The local government in the PRC, according to the relevant PRC law,
may sell the right to use the land for a specified period of time. Thus, all of
the Company’s land purchases in the PRC are considered to be leasehold land and
are stated at cost less accumulated amortization and any recognized impairment
loss. Amortization is provided over the term of the land use right agreements on
a straight-line basis, which is 45 years and they will expire in 2054. No
provision for amortization is made until such time as the relevant assets are
put into operational use.





l
            Plant
      and equipment, net





Plant and
equipment are stated at cost less accumulated depreciation and accumulated
impairment losses, if any. Depreciation is calculated on the straight-line basis
(after taking into account their respective estimated residual values) over the
following expected useful lives from the date on which they become fully
operational:





Depreciable life
                  
                  Residual valuePlant
      and machinery
                  5-10
      years
                  
                  
                  5
                  %Furniture,
      fixtures and office equipment
                  5
      years
                  
                  
                  5
                  %Leasehold
      improvement
                  2
      years
                  
                  Nil





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





l
            Valuation
      of long-lived assets





Long-lived
assets primarily include plant and equipment, land use rights and intangible
assets. In accordance with the Statement of Financial Accounting Standard
("SFAS") No. 144, “Accounting
for the Impairment or Disposal of Long-Lived Assets”, the Company reviews
its long-lived assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of the assets may not be fully recoverable. If
the total of the expected undiscounted future net cash flows is less than the
carrying amount of the asset, a loss is recognized for the difference between
the fair value and carrying amount of the asset. For the year ended December 31, 2008,
the Company has made an impairment loss of$14,481,991to the statement of operationoncertain long-lived assets relating tothe manufacturing facilities of mobile phone handsets in CICTL, whose assembly lines were temporarily
closed down during the first quarter of 2009.


F-9




INNOCOM
TECHNOLOGY HOLDINGS, INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


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





l
            Revenue
      recognition





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





Starting
from 2007, the Company has changed its role from a principal to an agent in
trading activities of mobile phone handsets & related components. The
Company recognizes its revenue on a net basis in compliance with EITF 99-19,
“Reporting Revenues Gross as a
Principal versus Net as an Agent”(“EITF 99-19”), because the
Company:





(1)       determined
that it no longer operates as the primary obligor in the trading
activities,


(2)       typically
is not responsible for damages to goods,


(3)       bears
no credit and inventory risk,


(4)       earns
commission income at a fixed rate of the gross amount billed to the
customer.





For the
year ended December 31, 2008, the Company recognizes $401,190 as net revenues,
at a rate of 7.5% based on the gross amount of $5,369,441 billed to the
customers.





For the
year ended December 31, 2007, the Company recognizes $2,241,726 as net revenues,
at a rate of 6% based on the gross amount of $36,729,800 billed to the
customers.





l
            Advertising
      cost





The
Company expenses advertising costs as incurred in accordance with SOP 93-7 “Reporting for Advertising
Costs”. No advertising expenses were incurred for the years ended
December 31, 2008 and 2007, respectively.





l
            Research
      and development costs





Research
and development costs mainly related to labor cost incurred in the development
of new products and manufacturing methods and are charged to expense as
incurred. Research and development costs for the years ended December 31, 2008
and 2007 was $22,260 and $0.





l
            Comprehensive
      loss





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


F-10


INNOCOM
TECHNOLOGY HOLDINGS, INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


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





l
            Income
      taxes





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





The
Company also adopts Financial Accounting Standards Board ("FASB") Interpretation
No. (FIN) 48, "Accounting for
Uncertainty in Income Taxes" and FSP FIN 48-1, which amended certain
provisions of FIN 48. FIN 48 clarifies the accounting for uncertainty in income
taxes recognized in financial statements in accordance with SFAS No. 109, "Accounting for Income Taxes."FIN 48 prescribes a recognition threshold and measurement attribute for
the financial statement recognition and measurement of a tax position taken or
expected to be taken in a tax return. FIN 48 requires that the Company determine
whether the benefits of the Company's tax positions are more likely than not of
being sustained upon audit based on the technical merits of the tax position.
The provisions of FIN 48 also provide guidance on de-recognition,
classification, interest and penalties, accounting in interim periods and
disclosure.





In
connection with the adoption of FIN 48, the Company analyzed the filing
positions in all of the federal, state and foreign jurisdictions where the
Company and its subsidiaries are required to file income tax returns, as well as
all open tax years in these jurisdictions. The Company adopted the policy of
recognizing interest and penalties, if any, related to unrecognized tax
positions as income tax expense. The Company did not have any unrecognized tax
positions or benefits and there was no effect on the financial condition or
results of operations for the years ended December 31, 2008 and 2007. The
Company’s tax returns remain open subject to examination by major tax
jurisdictions.





l
            Net
      loss per share





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





l
            Foreign
      currencies translation





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





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


F-11


INNOCOM
TECHNOLOGY HOLDINGS, INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


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





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





Translation
of amounts from HK$ and RMB into US$ has been made at the following exchange
rates for the respective year:


2008
                    
                    
                    2007Year-end
      RMB:US$1 exchange rate
                    
                    
                    6.8175
                    
                    
                    
                    7.3141Average
      yearly RMB:US$1 exchange rate
                    
                    
                    6.9985
                    
                    
                    
                    7.5633Year-end
      HK$:US$1 exchange rate
                    
                    
                    7.7507
                    
                    
                    
                    7.8049Average
      yearly HK$:US$1 exchange rate
                    
                    
                    7.7874
                    
                    
                    
                    7.8026





l
            Stock-based
      compensation





The
Company adopts SFAS No. 123 (revised 2004), "Share-Based Payment" ("SFAS
No. 123(R)") using the fair value method. Under SFAS No. 123(R), the stock-based
compensation is measured using the Black-Scholes Option-Pricing model on the
date of grant under the modified prospective method. The fair value of
stock-based compensation that are expected to vest are recognized using the
straight-line method over the requisite service period.





l
            Retirement
      plan costs





Contributions
to retirement schemes (which are defined contribution plans) are charged to
general and administrative expenses in the consolidated statements of operation
and comprehensive loss as and when the related employee service is
provided.





l
            Related
      parties





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





l
            Segment
      reporting





SFAS No.
131 “Disclosures about
Segments of an Enterprise and Related Information” establishes standards
for reporting information about operating segments on a basis consistent with
the Company’s internal organization structure as well as information about
geographical areas, business segments and major customers in the financial
statements. For the years ended December 31, 2008 and 2007, the Company operates
in one reportable segment in trading of mobile phone handsets & related
components in Hong Kong and the PRC.


F-12


INNOCOM
TECHNOLOGY HOLDINGS, INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


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





l
            Fair
      value of financial instruments





The
Company values its financial instruments as required by SFAS No. 107, “Disclosures about Fair Value of
Financial Instruments”. The estimated fair value amounts have been
determined by the Company, using available market information and appropriate
valuation methodologies. The estimates presented herein are not necessarily
indicative of amounts that the Company could realize in a current market
exchange.





The
Company’s financial instruments primarily consist of cash and cash equivalents,
prepayments and other receivable, accounts payable, amount due to a related
party, other payables and accrued liabilities.





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





l
            Recent
      accounting pronouncements





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





In
September 2006, the FASB issued Statement of Financial Accounting Standard
(“SFAS“) No. 157,
"Fair Value Measurements"("SFAS
No. 157"). SFAS
No. 157 defines fair value, establishes a framework for measuring fair
value and enhances disclosures about fair value measures required under other
accounting pronouncements, but does not change existing guidance as to whether
or not an instrument is carried at fair value. SFAS No. 157 is effective
for fiscal years beginning after November 15, 2007. In February 2008, the
FASB deferred SFAS No. 157's effective date for all non-financial assets
and liabilities, except those items recognized or disclosed at fair value on an
annual or more frequently recurring basis, until years beginning after
November 15, 2008. The Company believes that
SFASNo.157should not have a
material impact on the consolidated financial position or results of
operations.





In
February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and
Financial Liabilities"("SFAS No. 159"). SFAS No. 159 permits
entities to choose to measure, on an item-by-item basis, specified financial
instruments and certain other items at fair value. Unrealized gains and losses
on items for which the fair value option has been elected are required to be
reported in earnings at each reporting date. SFAS No. 159 is effective for
fiscal years beginning after November 15, 2007, the provisions of which are
required to be applied prospectively. The Company believes that SFAS No. 159
should not have a material impact on the consolidated financial position or
results of operations.





In
December 2007, the FASB issued SFAS No. 141 (Revised 2007), "Business Combinations"("SFAS No. 141R"). SFAS No. 141R will change the accounting for business
combinations. Under SFAS No. 141R, an acquiring entity will be required to
recognize all the assets acquired and liabilities assumed in a transaction at
the acquisition-date fair value with limited exceptions. SFAS No. 141R will
change the accounting treatment and disclosure for certain specific items in a
business combination. SFAS No. 141R applies prospectively to business
combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15, 2008.
Accordingly, any business combinations the Company engages in will be recorded
and disclosed following existing GAAP until January 1, 2009. The Company expects
SFAS No. 141R will have an impact on accounting for business combinations once
adopted but the effect is dependent upon acquisitions at that time. The Company
is still assessing the impact of this pronouncement.


F-13


INNOCOM
TECHNOLOGY HOLDINGS, INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


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





In
December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in
Consolidated Financial Statements--An Amendment of ARB No. 51, or SFAS No.
160" ("SFAS No. 160"). SFAS No. 160 establishes new accounting and
reporting standards for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary. SFAS No. 160 is effective for fiscal years
beginning on or after December 15, 2008. The Company believes that SFAS 160
should not have a material impact on the consolidated financial position or
results of operations.





In March
2008, the FASB issued SFAS No. 161, "Disclosures about Derivative
Instruments and Hedging Activities" ("SFAS No. 161"). SFAS No. 161
requires companies with derivative instruments to disclose information that
should enable financial-statement users to understand how and why a company uses
derivative instruments, how derivative instruments and related hedged items are
accounted for under FASB Statement No. 133 "Accounting for Derivative
Instruments and Hedging Activities" and how derivative instruments and
related hedged items affect a company's financial position, financial
performance and cash flows. SFAS No. 161 is effective for financial statements
issued for fiscal years and interim periods beginning after November 15, 2008.
The adoption of this statement is not expected to have a material effect on the
Company's future financial position or results of operations.





In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles” ("SFAS No. 162"). This statement identifies the
sources of accounting principles and the framework for selecting the principles
to be used in the preparation of financial statements in conformity with
generally accepted accounting principles (GAAP) in the United States. This
statement is effective 60 days following the SEC’s approval of the Public
Company Accounting Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in
Conformity With Generally Accepted Accounting Principles”. The Company
does not expect the adoption of SFAS No. 162 to have a material effect on the
financial condition or results of operations of the Company.





In May
2008, the FASB issued SFAS No. 163, "Accounting for Financial Guarantee
Insurance Contracts--an interpretation of FASB Statement No. 60" ("SFAS
No. 163"). SFAS No. 163 interprets Statement 60 and amends existing accounting
pronouncements to clarify their application to the financial guarantee insurance
contracts included within the scope of that Statement. SFAS No. 163 is effective
for financial statements issued for fiscal years beginning after December 15,
2008, and all interim periods within those fiscal years. As such, the Company is
required to adopt these provisions at the beginning of the fiscal year ended
December 31, 2009. The Company is currently evaluating the impact of SFAS No.
163 on its financial statements but does not expect it to have an effect on the
Company's financial position, results of operations or cash flows.





Also in
May 2008, the FASB issued FSP APB 14-1, "Accounting for Convertible Debt
Instruments that may be Settled in Cash upon Conversion (Including Partial Cash
Settlement)" ("FSP APB 14-1"). FSP APB 14-1 applies to convertible debt
securities that, upon conversion, may be settled by the issuer fully or
partially in cash. FSP APB 14-1 specifies that issuers of such instruments
should separately account for the liability and equity components in a manner
that will reflect the entity's nonconvertible debt borrowing rate when interest
cost is recognized in subsequent periods. FSP APB 14-1 is effective for
financial statements issued for fiscal years after December 15, 2008, and must
be applied on a retrospective basis. Early adoption is not permitted. The
Company does not expect it to have an effect on the Company's financial
position, results of operations or cash flows.


F-14


INNOCOM
TECHNOLOGY HOLDINGS, INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


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





In June
2008, the FASB issued FASB Staff Position ("FSP") EITF 03-6-1, "Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities"
("FSP EITF 03-6-1"). FSP EITF 03-6-1 addresses whether instruments granted in
share-based payment transactions are participating securities prior to vesting,
and therefore need to be included in the earnings allocation in computing
earnings per share under the two-class method as described in SFAS No. 128,
Earnings per Share. Under the guidance of FSP EITF 03-6-1, unvested share-based
payment awards that contain nonforfeitable rights to dividends or dividend
equivalents (whether paid or unpaid) are participating securities and shall be
included in the computation of earnings-per-share pursuant to the two-class
method. FSP EITF 03-6-1 is effective for financial statements issued for fiscal
years beginning after December 15, 2008 and all prior-period earnings per share
data presented shall be adjusted retrospectively. Early application is not
permitted. The Company does not expect it to have an effect on the Company's
financial position, results of operations or cash flows.





Also in
June 2008, the FASB ratified EITF No. 07-5, "Determining Whether an Instrument
(or an Embedded Feature) is Indexed to an Entity's Own Stock" ("EITF
07-5"). EITF 07-5 provides that an entity should use a two-step approach to
evaluate whether an equity-linked financial instrument (or embedded feature) is
indexed to its own stock, including evaluating the instrument's contingent
exercise and settlement provisions. EITF 07-5 is effective for financial
statements issued for fiscal years beginning after December 15, 2008. Early
application is not permitted. The Company is assessing the potential impact of
this EITF 07-5 on the financial condition and results of operations and does not
expect it to have an effect on the Company's financial position, results of
operations or cash flows.





In
September 2008, the FASB issued FSP 133-1 and FIN 45-4, “Disclosures about Credit Derivatives
and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB
Interpretation No. 45; and Clarification of theEffective Date of FASB Statement No.
161” (“FSP FAS 133-1” and “FIN 45-4”). FSP FAS 133-1 and FIN 45-4 amends
disclosure requirements for sellers of credit derivatives and financial
guarantees. It also clarifies the disclosure requirements of SFAS No. 161 and is
effective for quarterly periods beginning after November 15, 2008, and fiscal
years that include those periods. The adoption of FSP FAS 133-1 and FIN 45-4 did
not have a material impact on the Company’s current consolidated financial
position, results of operation or cash flows.





In
October 2008, the FASB issued Staff Position (“FSP”) No. 157-3, “Determining the Fair Value of a
Financial Asset When the Market for That Asset is Not Active” (“FSP FAS
157-3.”) FSP FAS 157-3 clarifies the application of SFAS No. 157 in an inactive
market. It illustrated how the fair value of a financial asset is determined
when the market for that financial asset is inactive. FSP FAS 157-3 was
effective upon issuance, including prior periods for which financial statements
had not been issued. The adoption of FSP FAS 157-3 did not have a material
impact on the Company’s current consolidated financial position, results of
operations or cash flows.





4.
            BUSINESS
      COMBINATION





On April
28, 2008, the Company entered into a Share Purchase Agreement with Xie Guo Qiang
(“Qiang”) to sell the Company’s interest in Chinarise Capital (International)
Ltd. for a consideration of $5,617,101 (equivalent to HK$43,813,385), based upon
its carrying value at the disposal date. For the year ended December 31, 2008,
no gain or loss was recognized from the disposal of a
subsidiary.


F-15


INNOCOM
TECHNOLOGY HOLDINGS, INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


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





On May 8,
2008, the Company completed the establishment of a new subsidiary upon the
approval from the PRC local government. The subsidiary is registered as a
limited liability company on January 19, 2007 in Chang Zhou City, Jiang Su
Province, the PRC with the registered and paid-in capital of $4,943,997
(equivalent to RMB37,960,812). As of December 31, 2008, the total investment in
a subsidiary is approximated as $8,487,661 including the acquisition of land use
rights and plant and equipment. Its operation was considered as the start up
phase and principally engaged in manufacturing and trading of mobile
communication products and components. The production from its assembly line was
expected to be commenced in the first quarter of 2009.





However,
starting from the fourth quarter 2008, global economic conditions have
deteriorated significantly across the countries and the demand for communication
products and components was adversely slowed down. During challenging economic
times, the Company determined to temporarily discontinue operation in the
manufacture of mobile communication products and components in February
2009.





In
conjunction with the temporary discontinuance of operations, the Company
recognized an impairment loss of $14,481,991 to write down the carrying amounts
of the related long-lived assets to their fair values.




5.
            PREPAYMENTS
      AND OTHER RECEIVABLES





As of December 31,2008
                          
                          
                          2007Deposits
      and prepayments
                          
                          $
                          37,666
                          
                          
                          $
                          26,636VAT
      recoverable
                          
                          
                          35,203
                          
                          
                          
                          -$
                          72,869
                          
                          
                          $
                          26,636





6.
            INTANGIBLE
      ASSETS, NET





As of December 31,2008
                        
                        
                        2007Trademarks
                        
                        $
                        5,960,775
                        
                        
                        $
                        5,960,775Land
      use rights
                        
                        
                        3,123,822
                        
                        
                        
                        -Foreign
      translation difference
                        
                        
                        41,683
                        
                        
                        
                        -9,126,280
                        
                        
                        
                        5,960,775Less:
      accumulated amortization
                        
                        
                        (956,316
                        )
                        
                        
                        (357,754
                        )Less:
      impairment loss
                        
                        
                        (8,053,681
                        )
                        
                        
                        -Less:
      foreign translation difference
                        
                        
                        (116,283
                        )
                        
                        
                        108Net
      book value
                        
                        $
                        -
                        
                        
                        $
                        5,603,129





Amortization
expense for the years ended December 31, 2008 and 2007 was $598,562 and
$357,754.





For the
year ended December 31, 2008, the Company tested for impairment in accordance
with the SFAS No. 142.Based on the results of the Company's undiscounted cash flows
calculation, the Company evaluated whether or not there was an impairment loss
by comparing the fair value of the intangible asset to its carrying value. Since
the carrying value of the intangible assets exceeded its fair value, the Company
recognized an impairment loss of $8,053,681 for the year ended December 31,
2008.


F-16


INNOCOM
TECHNOLOGY HOLDINGS, INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


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





7.
            PLANT
      AND EQUIPMENT, NET





Plant and
equipment, consisted of the following:





As of December 31,2008
                        
                        
                        2007Plant
      and machinery
                        
                        $
                        7,327,707
                        
                        
                        $
                        3,331Furniture,
      fixtures and office equipment
                        
                        
                        6,190
                        
                        
                        
                        -Leasehold
      improvement
                        
                        
                        6,301
                        
                        
                        
                        -Foreign
      translation difference
                        
                        
                        8
                        
                        
                        
                        -7,340,206
                        
                        
                        
                        3,331Less:
      accumulated depreciation
                        
                        
                        (3,142
                        )
                        
                        
                        (1,249
                        )Less:
      impairment loss
                        
                        
                        (6,428,310
                        )Less:
      foreign translation difference
                        
                        
                        (170,895
                        )
                        
                        
                        -Plant
      and equipment, net
                        
                        $
                        737,859
                        
                        
                        $
                        2,082





Depreciation
expense for the years ended December 31, 2008 and 2007 was $3,562 and
$4,665.





For the
year ended December 31, 2008, the Company tested for impairment in accordance
with the SFAS No. 142.Based on the results of the Company's undiscounted cash flows
calculation, the Company evaluated whether or not there was an impairment loss
by comparing the fair value of the intangible asset to its carrying value. Since
the carrying value of the intangible asset exceeded its fair value, the Company
recognized an impairment loss of $6,428,310 for the year ended December 31,
2008.





8.
            SHORT-TERM
      BORROWINGS





During
the year ended December 31, 2008, the Company obtained the aggregate short-term
borrowings of $6,080,032 (approximately RMB41,450,000) which was unsecured,
accrued with effective weighted average interest rate of 14.4% per annum payable
monthly, with the various terms from 1 to 6 months.





In the
fourth quarter of 2008, the Company fully repaid the outstanding principal and
accrued interest upon its maturity.





9.
            AMOUNT
      DUE TO A RELATED PARTY





As of
December 31, 2008, a balance of $4,152,410 due to a director and a major
shareholder of the Company, Mr. William Hui, represented temporary advance to
the Company which was unsecured, interest-free and has no fixed repayment term.
The imputed interest on the amount due to a stockholder was not
significant.


F-17


INNOCOM
TECHNOLOGY HOLDINGS, INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


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





10.
            OTHER
      PAYABLES AND ACCRUED LIABILITIES





Other
payables and accrued liabilities consisted of the following:





As of December 31,2008
                        
                        
                        2007Salaries
      and welfare payable
                        
                        $
                        69,561
                        
                        
                        $
                        -Accrued
      expenses
                        
                        
                        136,486
                        
                        
                        
                        197,697Other
      taxes payable
                        
                        
                        4,819
                        
                        
                        
                        -$
                        210,866
                        
                        
                        $
                        197,697





11.
            LONG-TERM
      DEFERRED CHARGES





In
November 2006, the Company issued 3,000,000 shares upon exercise of rights under
the share options. The fair value of the services for the grant is appraised at
$5,932,000 based on Black-Scholes Model by an independent valuer, Ample
Corporate Valuation and Consulting Limited.





On
November 19, 2007, the Board of Directors approved the termination of certain
service agreements because no services were rendered to the Company during 2007.
Consistent with SFAS No. 123(R), “Share-Based Payment” using
the fair value method, the Company immediately recognized as expense, over the
requisite service period. Amortization expense of such long-term deferred
charges was $5,637,887 for the year ended December 31, 2007.





12.
            INCOME
      TAXES





For the
years ended December 31, 2008 and 2007, the local (“the United States”) and
foreign components of loss before income taxes were comprised of the
following:





Years ended December 31,2008
                        
                        
                        2007Tax
      jurisdiction from:–
      Local
                        
                        $
                        (56,480
                        )
                        
                        $
                        (5,729,657
                        )–
      Foreign
                        
                        
                        (15,987,220
                        )
                        
                        
                        2,095,108Loss
      before income taxes
                        
                        $
                        (16,043,700
                        )
                        
                        $
                        (3,634,549
                        )





The
effective tax rate in the periods presented is the result of the mix of income
earned in various tax jurisdictions that apply a broad range of income tax
rates. The Company operates in various countries: United States, British Virgin
Island, Hong Kong and the PRC that are subject to tax in the jurisdictions in
which they operate, as follows:


F-18


INNOCOM
TECHNOLOGY HOLDINGS, INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


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





United
States of America





The
Company is registered in the State of Nevada and is subject to United States
current tax law.





For the
year ended December 31, 2008, the United States operation incurred $56,480 net
operating losses available for federal tax purposes, which are available to
offset future taxable income. The net operating loss carry forwards begin to
expire in 2029. The Company has provided for a full valuation allowance against
the deferred tax assets of $2,163,964 for any future tax benefits from the net
operating loss carryforwards as the management believes it is more likely than
not that these assets will not be realized in the future.





British
Virgin Island





Under the
current BVI law, the Company is not subject to tax on income.





Hong
Kong





The
Company’s subsidiary, IMTL is subject to Hong Kong Profits Tax, which is charged
at the statutory income tax rate of 16.5% and 17.5% on assessable income for the
years ended December 31, 2008 and 2007, respectively. The reconciliation of
income tax rate to the effective income tax rate based on loss before income
taxes from foreign operation for the years ended December 31, 2008 and 2007 are
as follows:





Years ended December 31,2008
                  
                  
                  2007Loss
      before income taxes
                  
                  $
                  (418,872
                  )
                  
                  $
                  (239,715
                  )Statutory
      income tax rate
                  
                  
                  16.5
                  %
                  
                  
                  17.5
                  %Income
      tax impact at Hong Kong Profits Tax statutory rate
                  
                  
                  (69,114
                  )
                  
                  
                  (41,950
                  )Non-taxable
      interest income
                  
                  
                  (1
                  )
                  
                  
                  (16
                  )Net
      operating loss
                  
                  
                  69,115
                  
                  
                  
                  41,966Income
      tax benefit
                  
                  $
                  -
                  
                  
                  $
                  -





For the
years ended December 31, 2008 and 2007, IMTL incurred net operating losses and,
accordingly, no provision for income taxes has been recorded.





The
PRC





The
Company’s subsidiary, CICTL is operating as a foreign investment enterprise and
is subject to PRC Foreign Enterprise Income Tax at a preferential rate of 15% on
its assessable profits, under the PRC tax legislation, interpretations and
practices in respect thereof.





On March
16, 2007, the National People’s Congress approved the Corporate Income Tax Law
of the PRC (the “New CIT Law”). The New CIT Law, among other things, imposes a
unified income tax rate of 25% for both domestic and foreign invested
enterprises with effect from January 1, 2008. Hence, CICTL is subject to the
unified income rate of 25% on the taxable income. For the year ended December
31, 2008, CICTL generated net operating losses and accordingly, no provision for
income tax has been recorded.


F-19


INNOCOM
TECHNOLOGY HOLDINGS, INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


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





The
following table sets forth the significant components of the aggregate net
deferred tax assets of the Company as of December 31, 2008 and
2007:


As of December 31,2008
                      
                      
                      2007Deferred
      tax assets:Net
      operating loss carryforward–
      United States of America
                      
                      $
                      2,163,964
                      
                      
                      $
                      2,144,196–
      Hong Kong
                      
                      
                      108,682
                      
                      
                      
                      39,568–
      The PRC
                      
                      
                      461,715
                      
                      
                      
                      -Total
      deferred tax assets
                      
                      
                      2,734,361
                      
                      
                      
                      2,183,764Less:
      valuation allowance
                      
                      
                      (2,734,361
                      )
                      
                      
                      (2,183,764
                      )Net
      deferred tax assets
                      
                      $
                      -
                      
                      
                      $
                      -





As of
December 31, 2008, the Company incurred $8,688,293 the aggregate net operating
loss carryforwards available to offset its taxable income for income tax
purposes. The Company has provided for a full valuation allowance against the
deferred tax assets of $2,734,361 on the expected future tax benefits from the
net operating loss carryforwards as the management believes it is more likely
than not that these assets will not be realized in the future. For the year
ended December 31, 2008, the valuation allowance increased by $550,597,
primarily relating to net operating loss carryforwards.





13.
            NET
      LOSS PER SHARE





The
following table sets forth the computation of basic and diluted net loss per
share for the years indicated:


Years ended December 31,2008
                    
                    
                    2007Basic
      and diluted net loss per share calculationNumerator:Net
      loss in computing basic net loss per share
                    
                    $
                    16,043,700
                    
                    
                    $
                    3,634,549Denominator:Weighted
      average ordinary shares outstanding
                    
                    
                    37,898,251
                    
                    
                    
                    37,898,251Basic
      and diluted net loss per share
                    
                    $
                    0.42
                    
                    
                    $
                    0.10





14.
            PENSION
      PLANS





Hong
Kong





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


F-20


INNOCOM
TECHNOLOGY HOLDINGS, INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


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





The MPF
Scheme is available to all employees aged 18 to 64 with at least 60 days of
service in the employment in Hong Kong. Contributions are made at 5% of the
participants’ relevant income with a ceiling of HK$20,000. The participants are
entitled to 100% of the contributions together with accrued returns irrespective
of their length of service, but the benefits are required by law to be preserved
until the retirement age of 65. The total contributions made for MPF Scheme were
$6,549 and $3,141 for the years ended December 31, 2008 and 2007,
respectively.





The
PRC





Under the
PRC Law, full-time employees of its subsidiary of the Company in the PRC are
entitled to staff welfare benefits including medical care, welfare subsidies,
unemployment insurance and pension benefits through a China government-mandated
multi-employer defined contribution plan. They are required to accrue for these
benefits based on certain percentages of the employees’ salaries. The total
contributions made for such employee benefit were $1,417 and $0 for the years
ended December 31, 2008 and 2007, respectively.





15.
            CONCENTRATIONS
      OF RISK





The
Company is exposed to the following concentrations of risk:





(a)       Major
customers





For the
year ended December 31, 2008, one customer represented more than 10% of the
Company’s revenue and accounts receivable, respectively. This customer accounts
for 100% of revenue amounting to $401,190, with $0 of accounts receivable for
the year ended December 31, 2008.





For the
year ended December 31, 2007, one customer represented more than 10% of the
Company’s revenue and accounts receivable, respectively. This customer accounts
for 100% of revenue amounting to $2,241,726 and $0 of accounts receivable for
the year ended December 31, 2007.





(b)       Credit
risk





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





(c)       Exchange
rate risk





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


F-21


INNOCOM
TECHNOLOGY HOLDINGS, INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


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





16.
            COMMITMENTS
      AND CONTINGENCIES





Operating lease
commitment





The
Company leases an office premise under a non-cancelable operating lease for a
term of 2 years due June 15, 2010. Costs incurred under this operating lease are
recorded as rent expense and totaled approximately $109,292 and $104,581 for the
years ended December 31, 2008 and 2007, respectively.





Year
      ending December 31,2009
                  
                  $
                  131,8862010
                  
                  
                  60,448Total
                  
                  $
                  192,334





17.
            COMPARATIVE
      FIGURES





Certain
amounts presented in the prior period have been reclassified to conform to the
current period financial statement presentation.




18.
            SUBSEQUENT
      EVENTS





In
February 2009, the Company determined to have a temporary closure in the
manufacturing facility in Changzhou City, Zhejiang Province, the PRC. Starting
from the fourth quarter 2008, global economic conditions have deteriorated
significantly across the countries and the demand for communication products and
components was adversely slowed down. During such challenging economic times,
the Company temporarily discontinued operation in the manufacture of mobile
communication products and components in the PRC. However, the Company did not
intend to dispose by sale and may continue to operate the manufacturing facility
depending upon the market recovery condition in the next 12 months.





In
conjunction with the temporary discontinuance of operations, the Company
recognized an impairment loss of $14,481,991 to write down the carrying amounts
of the related long-lived assets to their fair values.


F-22





Item
9. Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure




None





ITEM
9A(T). CONTROLS AND PROCEDURES





(a) 
 Evaluation of
Disclosure Controls and Procedures .   Our chief executive
officer and chief financial officer evaluated the effectiveness of our
disclosure controls and procedures as of December 31, 2008. The term
“disclosure controls and procedures,” as defined in
Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means
controls and other procedures of a company that are designed to ensure that
information required to be disclosed by a company in the reports that it files
or submits under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the SEC’s rules and forms.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed by a
company in the reports that it files or submits under the Exchange Act is
accumulated and communicated to the company’s management, including its
principal executive and principal financial officers, as appropriate to allow
timely decisions regarding required disclosure. Management recognizes that any
controls and procedures, no matter how well designed and operated, can provide
only reasonable assurance of achieving their objectives and management
necessarily applies its judgment in evaluating the cost-benefit relationship of
possible controls and procedures. Based on the evaluation of our disclosure
controls and procedures as of December 31, 2008, our chief executive
officer and chief financial officer concluded that, as of such date, our
disclosure controls and procedures were effective.




(b) 
 Management’s
Report on Internal Control Over Financial Reporting .




Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting. Internal control over financial reporting is
defined in Rule 13a-15(f) or 15d-15(f) promulgated under the
Exchange Act as a process designed by, or under the supervision of, the
company’s principal executive officer and principal financial officer and
effected by the Company’s Board of Directors, management and other personnel, to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles and includes those policies and
procedures that:





·
            pertain
      to the maintenance of records that, in reasonable detail, accurately and
      fairly reflect the transactions and dispositions of the assets of the
      Company;·
            provide
      reasonable assurance that transactions are recorded as necessary to permit
      preparation of financial statements in accordance with generally accepted
      accounting principles, and that receipts and expenditures of the Company
      are being made only in accordance with management authorization,
      and·
            provide
      reasonable assurance regarding prevention or timely detection of
      unauthorized acquisition, use or disposition of the Company’s assets that
      could have a material effect on the financial
  statements.





Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.





Our
management assessed the effectiveness of our internal control over financial
reporting as of December 31, 2008. In making this assessment, the company’s
management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal Control-Integrated
Framework.





Based on
this assessment, our management concluded that, as of December 31, 2008,
our internal control over financial reporting is effective.





This
annual report does not include an attestation report of our Company’s
independent registered public accounting firm regarding internal control over
financial reporting. Management’s report was not subject to attestation by our
independent registered public accounting firm pursuant to temporary
rules of the Securities and Exchange Commission that permit us to provide
only management’s report in this annual report.




(c)    Changes
in Internal Controls




No change
in our internal control over financial reporting occurred during the fiscal year
ended December 31, 2008 that has materially affected, or is reasonably
likely to materially affect, our internal control over financial
reporting.





Item
9B. Other Information





None


39





PART
III.





Item 10. Directors, Executive
Officers and Corporate Governance.





DIRECTORS
AND EXECUTIVE OFFICERS





Our
directors and officers, as of December 31, 2008, are set forth below. The
directors hold office for their respective term and until their successors are
duly elected and qualified. Vacancies in the existing Board are filled by a
majority vote of the remaining directors. The officers serve at the will of the
Board of Directors.





Name
                    
                    Age
                    
                    Position
                    
                    Director SinceHui
      Yan Sui, William
                    
                    43
                    
                    Chairman
      and Chief Executive Officer
                    
                    2006Tang
      Chin Pang, Eric
                    
                    47
                    
                    Executive
      Director
                    
                    2006Tan
      Ah Mee
                    
                    62
                    
                    Non-executive
      Director
                    
                    2006Lau
      Yiu Nam, Eric
                    
                    49
                    
                    Non-executive
      Director
                    
                    2006Qian
      Jian Yu, Mike
                    
                    45
                    
                    Non-executive
      Director
                    
                    2007Cheung
      Wai Hung, Eddie
                    
                    54
                    
                    Chief
      Financial Controller
                    
                    2007





Hui Yan
Sui, William, age 43, has approximately 20 years experience in industrial
management.  In 1986, Mr. Hui established Yat Lung Industrial Limited (Yat
Lung), a company that manufactures cassette and video tapes.  Mr. Hui is
currently a director of Yat Lung.  In 2002, Yat Lung became a wholly owned
subsidiary of Swing Media Technology Group Limited (Swing Media), an investment
holding company that manufactures and trades cassette tapes, video tapes, VCD's,
CDR's and DVDR's through its subsidiaries.  From January 2002 until May
2003, Mr. Hui served as Chairman and Chief Executive Officer of Swing Media.
 Mr. Hui resigned as CEO of Swing Media in May 2003 and retains his
position as Chairman.  Swing Media is a company listed on the Singapore
Stock Exchange Dealings and Automated Quotation System (the “SGX-SESDAQ”).
 In 2003, Mr. Hui established Chinarise Capital (International) Limited
(Chinarise), a company that trades mobile phone handsets and components in Hong
Kong.  He is currently the director of Chinarise.





Tang Chin
Pang, Eric, age 47, has been our Chief Financial Officer since October 2005.
Before joining us in October 2005, Mr. Tang is the corporate consultant for
three years. From 1984 to 2001, Mr. Tang worked at Deloitte Touche Tohmatsu for
seventeen years, including his last position as an audit senior manager. Mr.
Tang graduated from Hong Kong Shue Yan University in 1984. He is a fellow of the
Association of Chartered Certified Accountants and an associate member of the
Hong Kong Institute of Certified Public Accountants.





Dr. Tan
Ah Mee, age 62, holds Doctor of Philosphy from International Management Centre,
Buckingham, United Kingdom. Dr. Tan is Ex-Rotarian (Chartered) of Rotary Club of
Tebrau, Jogn Baru and Elected Council Member of the Sinagpore Confederation of
Industries (1998 – 2000), He is director of Heng Da Investments Pte. Limited,
Ingmedia Pte. Limited and Yorkshire Capital Pte. Limited





Lau Yiu
Nam , Eric, age 49, was admitted as a barrister in England and Australia . Mr.
Lau returned to Hong Kong in 1983 and was employed in the Attorney General's
Chambers as Crown Counsel before he went into private practice in 1996.
Currently, Mr. Lau is the Head of his Chambers in Hong Kong which comprised of
over 15 barristers practicing in commercial and civil litigation. He is
independent non-executive director of Swing Media.





Qian Jian
Yu, Mike, age 45, is the General Manager and founder of Shanghai Boda
Electronics Co., Ltd. (“Boda”).  Prior to the establishment of Boda in
September 2001, Mr. Qian worked for Arrow Electronics China Limited from 1998 to
2001. From 1986 to 1998, Mr. Qian worked for the Shanghai Space Bureau. Mr. Qian
graduated from Nanjing University in 1986.





Cheung
Wai Hung, Eddie, age 54, has been a branch manager of Shanghai Commercial Bank
Limited for the past 12 years up to May 14, 2007. Mr. Cheung possesses a
Bachelor degree of Commerce from Curtin University of Technology, Perth W.
Australia, in 1998.





(a)
Significant Employees





Other
than our officers, there are no employees who are expected to make a significant
contribution to our corporation.


40


(b)
Family Relationships





Our
directors currently have terms which will end at our next annual meeting of the
stockholders or until their successors are elected and qualify, subject to their
prior death, resignation or removal. Officers serve at the discretion of the
Board of Directors. There are no family relationships among any of our directors
and executive officers. There are no family relationships among our officers,
directors, or persons nominated for such positions.





LEGAL
PROCEEDINGS





No
officer, director, or persons nominated for these positions, and no promoter or
significant employee of our corporation has been involved in legal proceedings
that would be material to an evaluation of our management.





AUDIT
COMMITTEE





The Board
does not have standing audit committee.





CODE OF
ETHICS





The
Company does not have a Code of Ethics.





COMPLIANCE
WITH SECTION 16 OF THE SECURITIES EXCHANGE ACT OF 1934





Section
16(a) of the Securities Exchange Act of 1934, as amended, requires our directors
and executive officers and beneficial holders of more than 10% of our common
stock to file with the Commission initial reports of ownership and reports of
changes in ownership of our equity securities. As of the date of this Report,
the Company is in the process of reviewing all transactions that may cause
initial reports of ownership or changes in ownership to be filed on Form 3
(Initial Statement of Beneficial Ownership), Form 4 (Changes in Beneficial
Ownership) and Form 5 (Annual Statement of Changes in Beneficial Ownership)
which is required to be filed under applicable rules of the
Commission.





Item
11. Executive Compensation





COMPENSATION
DISCUSSION AND ANALYSIS





Background
and Compensation Philosophy





Our board
of directors consists of six individuals:  (1) William Hui Yan Sui,
our Chief Executive Officer, Chairman of the Board and beneficial owner of
60.97% of our common stock; (2) Tang Chin Pang, Eric, our Executive Director;
(3) Cheung Wai Hung, Eddie, our Chief Financial Officer; (4) Tan Ah Mee, a
non-executive director; (5) Lau Yiu Nam, Eric, a non-executive director and (6)
Qian Jian Yu, Mike, a non-executive director.  Our board of directors
have historically determined the compensation to be paid to our executive
officers based on our financial and operating performance and prospects, the
level of compensation paid to similarly situated executives in comparably sized
companies and contributions made by the officers’ to our
success.  Each of the named officers will be measured by a series of
performance criteria by the board of directors, or the compensation committee
when it is established, on a yearly basis.  Such criteria will be set
forth based on certain objective parameters such as job characteristics,
required professionalism, management skills, interpersonal skills, related
experience, personal performance and overall corporate performance.





Our board
of directors have not adopted or established a formal policy or procedure for
determining the amount of compensation paid to our executive
officers.  Mr. Hui Yan Sui, William, Mr. Tang Chin Pang, Eric and Mr.
Cheung Wai Hung, Eddie  have been and may continue to be involved when
our board of directors deliberate compensation issues related to their
compensation.





As our
executive leadership and board of directors grow, our board of directors may
decide to form a compensation committee charged with the oversight of executive
compensation plans, policies and programs.





Elements
of Compensation





We
provide our executive officers solely with a base salary to compensate them for
services rendered during the year.  Our policy of compensating our
executives with a cash salary has served us well.  Because of our
history of attracting and retaining executive talent, we do not believe it is
necessary at this time to provide our executives discretionary bonuses, equity
incentives, or other benefits in order for us to continue to be
successful.


41





Base
Salary





The
yearly base salary of Mr. Cheung Wai Hung, Eddie for the 2008 was $53,846 (2007:
$33,654).  Mr. Hui Yan Sui and Mr. Tang Chin Pang received no salary
in 2008.





Discretionary
Bonus





We have
not provided our executive officers with any discretionary bonuses at the moment
but our board of directors may consider the necessity of such scheme in the
future based on our financial and operating performance and prospects, the level
of compensation paid to similarly situated executives in comparably sized
companies and contributions made by the officers’ to our success.





Equity
Incentives





We have
not established equity based incentive program and have not granted stock based
awards as a component of compensation.  In the future, we may adopt
and establish an equity incentive plan pursuant to which awards may be granted
if our board of directors determines that it is in the best interests of our
stockholders and the Company to do so.





Retirement
Benefits





Our
executive officers are not presently entitled to company-sponsored retirement
benefits.





Perquisites





We have
not provided our executive officers with any material perquisites and other
personal benefits and, therefore, we do not view perquisites as a significant or
necessary element of our executive’s compensation.





Deferred
Compensation





We do not
provide our executives the opportunity to defer receipt of annual
compensation.





SUMMARY
COMPENSATION TABLE





The
following table sets forth the cash and non-cash compensation for the years
indicated earned by or awarded to Hui Yan Sui, William, our Chief Executive
Officer, Tang Chin Pang, Eric, our Chief Financial Officer, and our other
executive officers and employees whose total cash compensation exceeded
$100,000, or the Named Executive Officers and employees, in fiscal year
2007.





Summary
Compensation Table




Name and Principal Position
                            
                            Year
                            
                            Salary
                              ($)
                            
                            
                            Bonus
                              ($)
                            
                            
                            Stock
                              Awards ($)
                            
                            
                            All Other
                              Compensation
                              ($)
                            
                            
                            Total
                              ($)Hui
      Yan Sui, William
                              Chief
      Executive Officer; Director
                            
                            2008
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -Tang
      Chin Pang, Eric
                              Executive
      Director
                            
                            2008
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -Cheung
      Wai Hung, Eddie
                              Chief
      Financial Officer
                            
                            2008
                            
                            
                            53,846
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            53,846





Employment
Agreements





No
directors and offices have service contact with the Company or its subsidiary
companies.





Compensation
of Directors





There is
no compensation awarded to or paid to the directors during
2008.


42





Item
12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.





Beneficial
ownership is shown as of April 14, 2009, for shares held by (i) each person or
entity known to us to be the beneficial owner of more than 5% of our issued and
outstanding shares of common stock based solely upon a review of filings made
with the Commission and our knowledge of the issuances by us, (ii) each of our
directors, (iii) our Chief Executive Officer and our three other most highly
compensated officers whose compensation exceeded $100,000 during the fiscal year
ended December 31, 2008, or the Named Executive Officers, and (iv) all of our
current directors and executive officers as a group. Unless otherwise indicated,
the persons listed below have sole voting and investment power with respect to
the shares and may be reached at Suite 1501, Bank of East Asia Harbour View
Centre, 56 Gloucester Road, Wanchai, Hong Kong, PRC.





Security
Ownership - Certain Beneficial Owners





There are
no Beneficial Owners outside of management that own more than 5% of the issued
and outstanding shares of common stock.  Please see the table below
for certain beneficial ownership by management.





Security
Ownership – Management





AmountAnd
                                
                                
                                
                                
                                
                                
                                PercentageNature of
                                
                                
                                
                                
                                
                                
                                of ClassBeneficial
                                
                                
                                
                                
                                
                                
                                BeneficiallyBeneficial Owner (including address)
                                
                                Title of class
                                
                                Ownership(1)
                                
                                
                                
                                Total
                                
                                
                                OwnedHui
      Yan Siu William (2)
                                
                                Common
                                
                                
                                23,107,430
                                D
                                
                                
                                
                                
                                23,107,430
                                
                                
                                
                                60.97
                                %Cheung
      Wai Hung, Eddie (2)
                                
                                Common
                                
                                
                                -0-
                                
                                
                                
                                
                                
                                -0-
                                
                                
                                
                                -0-
                                %Tang
      Chin Pang, Eric (2)
                                
                                Common
                                
                                
                                -0-
                                
                                
                                
                                
                                
                                -0-
                                
                                
                                
                                -0-
                                %Dr.
      Tan Ah Mee (2)
                                
                                Common
                                
                                
                                -0-
                                
                                
                                
                                
                                
                                -0-
                                
                                
                                
                                -0-
                                %Lau
      Yiu Nam, Eric (2)
                                
                                Common
                                
                                
                                -0-
                                
                                
                                
                                
                                
                                -0-
                                
                                
                                
                                -0-
                                %Qian
      Jian Yu, Mike (2)
                                
                                Common
                                
                                
                                -0-
                                
                                
                                
                                
                                
                                -0-
                                
                                
                                
                                -0-
                                %Total
                                
                                Common
                                
                                
                                23,107,430
                                
                                
                                
                                
                                
                                23,107,430
                                
                                
                                
                                60.97
                                %





Notes:





(1)
            –
      (D) stands for direct ownership; (I) stands for indirect
      ownership





(2)
            All
      officers and directors use the Company’s address, Suite 1501, Bank of East
      Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong,
      PRC.





Changes
in Control





There are
no arrangements, known to the Registrant, including any pledge by any person of
securities of the Registrant which may at a subsequent date result in a change
in control of the Registrant.





Securities
Authorized for Issuance Under Equity Compensation Plans





There is
no equity or option granted during 2008.





Item
13. Certain Relationships and Related Transactions, and Director
Independence





Certain
Relationships and Related Transactions





As of
December 31, 2008, a balance of $4,152,410 due to a director and a major
shareholder of the Company, Mr. William Hui, represented temporary advance to
the Company which was unsecured, interest-free and has no fixed repayment term.
The imputed interest on the amount due to a stockholder was not
significant.





Director
Independence





The
following members of our Board of Directors are independent, as “independent” is
defined in the rules of the NASDAQ National Market System:  Dr. Tan Ah
Mee, Lau Yiu Nam and Qian Jian Yu.




43


Item
14. Principal Accountant Fees and Services.





The
following is a summary of the fees billed to us by ZYCPA Company Limited
(formerly Zhong Yi (Hong Kong) C.P.A. Company Limited) (“ZYCPA”), the Company’s
current auditors and Dominic K.F. Chan & Co., the Company’s former auditors
(“Chan” for the services rendered during the first three quarters of the fiscal
year 2007) for professional services rendered for the years ended December 31,
2008 and December 31, 2007:





2008
                      
                      
                      2007Service
                      
                      ZYCPA
                      
                      
                      ZYCPA
                      
                      
                      ChanAudit
      Fees
                      
                      $
                      55,000
                      
                      
                      $
                      64,981
                      
                      
                      $
                      25,434Audit
      RelatedFeesTax
      FeesAll
      Other FeesTOTAL
                      
                      $
                      55,000
                      
                      
                      $
                      64,981
                      
                      
                      $
                      25,434





Audit
fees consist of the aggregate fees billed for services rendered for the audit of
our annual financial statements, the reviews of the financial statements
included in our Forms 10-Q and for any other services that are normally provided
by our independent auditors in connection with our statutory and regulatory
filings or engagements.





Audit
related fees consist of the aggregate fees billed for professional services
rendered for assurance and related services that reasonably related to the
performance of the audit or review of our financial statements that were not
otherwise included in Audit Fees.





Tax fees
consist of the aggregate fees billed for professional services rendered for tax
compliance, tax advice and tax planning. These services include assistance
regarding federal, state and local tax compliance and consultation in connection
with various transactions and acquisitions.





All other
fees consist of the aggregate fees billed for products and services provided by
our independent auditors and not otherwise included in Audit Fees, Audit Related
fees or Tax Fees.





Item
15. Exhibits, Financial Statement Schedules.





(a)
Financial Statements





The
financial statements are set forth under Item 8 of this Annual Report on
Form 10-K. Financial statement schedules have been omitted since they are either
not required, not applicable, or the information is otherwise
included.





(b)
Exhibits





3.1
            Articles
      of Incoporation (Filed with the Commission on January 29, 2003 as Exhibit
      1 to the Form 10-SB.)





3.2
            Bylaws
      (Filed with the Commission on January 29, 2003 as Exhibit 2 to the Form
      10-SB.)





21
            Subsidiaries
      List (filed herewith)




24
            Power
      of Attorney (filed herewith) (see signature
  page)





31.1
            Certification
      of Chief Executive Officer pursuant to 13a-14 and 15d-14 of the Exchange
      Act (filed herewith)





31.2
            Certification
      of Chief Financial Officer pursuant to 13a-14 and 15d-14 of the Exchange
      Act (filed herewith)





32.1
            Certificate
      pursuant to 18 U.S.C. ss. 1350 for Hui Yan Siu, William, Chief Executive
      Officer (filed herewith)


44





32.2
            Certificate
      pursuant to 18 U.S.C. ss. 1350 for Cheung Wai Hung, Eddie, Chief Financial
      Officer (filed herewith)





SIGNATURES





Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.





INNOCOM
      TECHNOLOGY HOLDINGS, INC./s/
      William Yan Sui HuiDated:
      April 15, 2009
                  William
      Yan Sui Hui, Chief Executive Officer
                    (Principal
      executive
officer)




/s/
      Cheung Wai Hung, EddieDated:
      April 15, 2009
                  Cheung
      Wai Hung, Eddie, Chief Financial Officer
                    (Principal
      financial officer)





Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities indicated by the dates.





/s/ William Yan Sui Hui
                
                /s/ Tang Chin Pan, EricYan
      Sui Hui, William Director
                
                Tang
      Chin Pang, Eric, DirectorDated:
      April 15, 2009
                
                Dated:
      April 15, 2009


45