UNITED STATES
 SECURITIES AND EXCHANGE
COMMISSION
 Washington,D.C.20549
 _____________________
  FORM 10-Q/A
 (Amendment No. 1)
 (Mark One)
  ☒
              QUARTERLY REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
  For the quarterly period
ended:September
30,
2007
 
 ☐
              TRANSITION REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
  For the transition period from
_________________ to ________________
 
 CommissionFileNumber:000-30430
 ________________
  INTERMOST
CORPORATION
 (Exact name of registrant as specified
in its charter)
 
 Wyoming
              87-0418721(State or other jurisdiction
      of
              (IRS Employer Identification
      Number)incorporation or organization)Suite
      5204, Central Plaza, 18 Harbour Road,
                Wanchai,
      Hong Kong(Address of principal executive
      offices)
              (Zip
  Code)
 
 011-86-755-8221-0238
 (Registrant’s telephonenumber, including area
code)
 
  Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes☒No☐
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
  Large acelerated
      filer☐
              Accelerated filer☐Non-accelerated
      filer☐(Do not
      check if a smaller reporting company)
              Smaller reporting company☒
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act.): Yes☐No☒
 
 Indicatethe number of shares outstanding of
each of the issuer’s classes of commonstock, as of the latest practicable
date:  ++215,370,278 shares of common stock as of November 4,
2007.





EXPLANATORY NOTE


Intermost Corporation (the“Company”) is filing this Amendment
No.1 on Form 10Q/A to its Quarterly Report
on Form 10-QSB for the three months ended September 30, 2007, as filed with theSecurities and Exchange Commission on
November 14, 2007 to (a) amend and restate(i)PART I, Item 1, Financial Statements and
restate thefinancialstatements of the Company as of
September 30, 2007 and the three months then ended,(ii)Item 2, ManagementDiscussion Analysis or Plan of
Operations,and(iii)PART II, Item 1, Legal
Proceedings;and(b) file as exhibits hereto currently
dated certifications from our Principal Executive Officer and Principal
Financial Officer.Only the amended Items,
financialstatements and
updated exhibits are being filed herewith.The restatement of the financial
statements includes adjustmentsresultingfromourrestatement ofthe Company’sfinancial statementsfor the year ended June 30,
2007, adjustments to the
Company’sdisposal of subsidiary companies and the
consolidation of the other Company’s subsidiaries.No other changes are beingeffected by this filing.Therefore, information not affected by
this amendment isunchangedand reflects the disclosures made at
the time of the original
filing.





-1-


INTERMOST
CORPORATION AND SUBSIDIARIES


CONDENSED
CONSOLIDATED BALANCE SHEETS





Sept 30,
    2007
            
            
            June 30,
    2007(unaudited)(restated)
            
            
            (restated)ASSETS
            
            USD
            
            
            USDCurrent
    AssetsCash and cash
      equivalents
            
            
            438,299
            
            
            
            530,468Accounts receivable,
      net
            
            
            4,066,438
            
            
            
            4,085,123Inventories
            
            
            199,047
            
            
            
            195,946Deposits, prepayments
      and other receivables
            
            
            1,476,064
            
            
            
            1,538,435Deposit of
      investment
            
            
            150,000
            
            
            
            150,000Short-term
      loan
            
            
            673,659
            
            
            
            670,763Short-term
      investment
            
            
            373,909
            
            
            
            368,083Total
      current assets
            
            
            7,377,416
            
            
            
            7,538,818Other
AssetsRestricted
      cash
            
            
            303,525
            
            
            
            303,525Unlisted
      investment
            
            
            907,669
            
            
            
            893,526Property and
      equipment, net
            
            
            46,098
            
            
            
            51,414Intangible assets,
      net
            
            
            19,253
            
            
            
            20,354Investment in an
      associated company
            
            
            1,152,388
            
            
            
            1,134,433TOTAL
ASSETS
            
            
            9,806,349
            
            
            
            9,942,070LIABILITIES AND SHAREHOLDERS'
      EQUITYCurrent
      LiabilitiesAccounts
      payable
            
            
            3,903,138
            
            
            
            3,927,964Accrued liabilities
      and other payable
            
            
            807,294
            
            
            
            792,560Customer
      deposits
            
            
            96,545
            
            
            
            105,708Deferred
      revenue
            
            
            9,244
            
            
            
            0Advance from
      shareholder
            
            
            160,000
            
            
            
            160,000Total
      current liabilities
            
            
            4,976,221
            
            
            
            4,986,232Minority
      interests
            
            
            271,269
            
            
            
            267,046STOCKHOLDERS'
      EQUITYPreferred stock, par
      value US$0.001 per shareAuthorized
      - 5,000,000 sharesIssued and
      outstanding - NoneCommon stock, par
      value US$0.001 per shareAuthorized
      - 5000,000,000 sharesIssued and
      outstanding - 215,370,278 shares
            
            
            215,371
            
            
            
            215,371at
      June 30, 2007 and Sept 30, 2007Treasury
      stock
            
            
            (8,970
            )
            
            
            (8,970
            )Additional
      paid-in capital
            
            
            24,216,705
            
            
            
            24,216,705Accumulated
      deficit
            
            
            (19,468,557
            )
            
            
            (19,289,509
            )Accumulated other
      comprehensive loss
            
            
            (395,690
            )
            
            
            (444,805
            )4,558,859
            
            
            
            4,688,792TOTAL LIABILITIES, MINORITY
      INTERESTS ANDSTOCKHOLDERS'
      EQUITY
            
            
            9,806,349
            
            
            
            9,942,070





The accompanying notesare an integral part of these condensed
consolidated financial statements.


-2-





INTERMOST
CORPORATION AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)





Three months ended Sept
      30,2007
            
            
            2006(restated)USD
            
            
            USDNet revenue
            
            
            7,598
            
            
            
            280,399Cost of
      revenues
            
            
            (36,965
            )
            
            
            (260,767
            )Gross
profit
            
            
            (29,367
            )
            
            
            19,632Costs and
      expenses:Selling, general and
      administrative expenses
            
            
            (173,122
            )
            
            
            (347,001
            )Impairment of
      goodwill
            
            
            0
            
            
            
            (896,725
            )Exchange
      differences
            
            
            0
            
            
            
            0Amortization of intangible
      assets
            
            
            (832
            )
            
            
            (8,034
            )Total costs and
      expenses
            
            
            (173,954
            )
            
            
            (1,251,760
            )Loss from
      operations
            
            
            (203,321
            )
            
            
            (1,232,128
            )Interest
    income
            
            
            8,025
            
            
            
            1,823Loan interest
      income
            
            
            16,244
            
            
            
            11,837Investment income
      (loss)
            
            
            0
            
            
            
            (3,509
            )Other income,
      net
            
            
            0
            
            
            
            (62
            )Loss before income taxes, minority
      interestsand equity in earnings
      of associated companies
            
            
            (179,052
            )
            
            
            (1,222,039
            )Income
taxes
            
            
            0
            
            
            
            (5,264
            )Loss before minority interests and
      equity inearnings ofassociated
      companies
            
            
            (179,052
            )
            
            
            (1,227,303
            )Minority
      interests
            
            
            4
            
            
            
            1,277Loss before equity in earnings
      ofassociated
      companies
            
            
            (179,048
            )
            
            
            (1,226,026
            )Equity in earnings of associated
      companies
            
            
            0
            
            
            
            (3,280
            )Loss before extra-ordinary
      items
            
            
            (179,048
            )
            
            
            (1,229,306
            )Loss on closing a subsidiary
      company
            
            
            0
            
            
            
            0Net loss
            
            
            (179,048
            )
            
            
            (1,229,306
            )Net loss per common share-basic
      and diluted
            
            
            (0.001
            )
            
            
            (0.008
            )Weighted average number of common
      sharesoutstanding-basicand
diluted
            
            
            215,370,278
            
            
            
            153,290,278





-3-


INTERMOST
CORPORATION AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)





Three months ended Sept
      30,2007
            
            
            2006(restated)USD
            
            
            USDCash flows from operating
      activitesNet
      loss
            
            
            (179,048
            )
            
            
            (1,229,306
            )Impairment of
      goodwill
            
            
            0
            
            
            
            896,725Amortization of
      intangible assets
            
            
            832
            
            
            
            8,034Equity in earnings of
      associated companies
            
            
            0
            
            
            
            3,280Loss on disposal of a
      subsidiary
            
            
            0
            
            
            
            0Depreciation
            
            
            6,125
            
            
            
            7,354Minority
      interests
            
            
            11,593
            
            
            
            (1,277
            )Increase (decrease) in
      operating assets-Accounts
      receivables
            
            
            18,685
            
            
            
            2,288,680Inventories
            
            
            (3,101
            )
            
            
            (159,730
            )Deposits,
      prepayments and other receivables
            
            
            98,610
            
            
            
            (2,282,739
            )Increase (decrease) in operating
      liabilities-Accounts
      payable
            
            
            (24,826
            )
            
            
            4,936Accrued
      liabilities
            
            
            (11,121
            )
            
            
            484,341Cutomer
      deposits
            
            
            1,505
            
            
            
            8,508Deferred
      revenue
            
            
            (1,424
            )
            
            
            (8,919
            )Business
      taxes and government surchargespayable
            
            
            211
            
            
            
            (14,301
            )Net cash used in operating
      activities
            
            
            (81,959
            )
            
            
            5,586Cash flows from investing
      activitiesAcquisition of plant
      and equipment
            
            
            0
            
            
            
            (14,895
            )Increase (decrease) in
      short term loan
            
            
            (2,896
            )
            
            
            600,148Net cash provided by investing
      activities
            
            
            (2,896
            )
            
            
            585,253Cash flows from financing
      activitiesIncrease in security
      bond
            
            
            0
            
            
            
            (1,000,000
            )Net proceeds from
      issuance of common stock
            
            
            0
            
            
            
            1,000,000Net cash provided by financing
      activities
            
            
            
            
            
            
            0Cash andcash
      equivalentsNet increase
      (decrease)
            
            
            (84,855
            )
            
            
            590,839Accumulated other
      comprehensive loss
            
            
            (7,314
            )
            
            
            0Balance at beginning
      of period
            
            
            530,468
            
            
            
            692,624Balance at end of
      period
            
            
            438,299
            
            
            
            1,283,463Supplemental cash flowinformation:Cash paid
      for interest
            
            
            0
            
            
            
            0Cash paid
      for income taxes
            
            
            0
            
            
            
            0Non-cash investing and financing
      activities:Receivable
      from issuance of common stock
            
            
            0
            
            
            
            0Issuance
      of reserved common stock
            
            
            0
            
            
            
            0Issuance of common stock for
      service
            
            
            0
            
            
            
            0Acquisition of
      associated companies
            
            
            0
            
            
            
            0Acquisition of
      subsidiaries:Non-cash
      assets acquired
            
            
            0
            
            
            
            0Liabilities
      assumed in acquisition
            
            
            0
            
            
            
            0Issuance
      of common stock for service
            
            
            0
            
            
            
            0





The accompanying notes are an integral
part of these condensed consolidated financial
statements


-4-


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


THREE
MONTHS ENDED SEPT 30, 2006 AND 2007





1.  ORGANIZATION
AND BASIS OF PRESENTATION





The
condensed consolidated financial statements include the accounts of the
Intermost Corporation (the "Company") and its majority-owned subsidiaries, of
which the Company has the ability to exercise control and direct operations and
the minority interests do not possess participatory rights. All material
intercompany balances and transactions have been eliminated on
consolidation.





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





The
condensed consolidated financial statements are unaudited, but in the opinion of
management of the Company, contain all adjustments, which include normal
recurring adjustments, necessary to present fairly the financial position at
September 31, 2007, the results of operations for the three months ended
September 30, 2007 and 2006, and the cash flows for the three months ended
September 30, 2007 and 2006. The balance sheet as of June 30, 2007 is derived
from the Company’s audited financial statements included in the Company’s Annual
Report, as amended on Form 10-KSB/A for the fiscal year ended June 30,
2007.





Certain
information and footnote disclosures normally included in financial statements
that have been prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and regulations
of the Securities and Exchange Commission, although management of the Company
believes that the disclosures contained in these financial statements are
adequate to make the information presented therein not misleading. For further
information, refer to the financial statements and the notes thereto included in
the Company’s Annual Report, as amended on Form 10-KSB/A for the fiscal year
ended June 30, 2007, as filed with the Securities and Exchange
Commission.





The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.





The
results of operations for the three months ended September 30, 2007 are not
necessarily indicative of the results of operations to be expected for the full
fiscal year ending June 30, 2008.





2.  NET
INCOME (LOSS) PER COMMON SHARE





Statement
of Financial Accounting Standards No. 128, “Earnings Per Share,” requires
presentation of basic earnings per share (“Basic EPS”) and diluted earnings per
share (“Diluted EPS”). Basic earnings (loss) per share is computed by dividing
earnings (loss) available to common stockholders by the weighted average number
of common shares outstanding (including shares reserved for issuance) during the
period. Diluted earnings per share gives effect to all dilutive potential common
shares outstanding during the period. The Company did not have any potentially
dilutive securities outstanding during the three months ended September 30, 2006
and 2007. Accordingly, basic and diluted earnings per share are the same for all
periods presented.





3.  FOREIGN
CURRENCY TRANSLATION





The
Company maintains its books and records in Renminbi (“Rmb”), the currency of the
People’s Republic of China (the “PRC”). The Rmb is the Company's functional
currency, as the Company's business activities are located in the PRC and
denominated in Rmb. Translation of amounts into United States dollars ("US$")
has been made at the rate of Rmb7.506 to US$1.00. The translation of the
financial statements of subsidiaries whose functional currencies are other than
Rmb into Rmb is performed for balance sheet accounts using closing exchange
rates in effect at the balance sheet date and for revenue and expense accounts
using an average exchange rate during each reporting period. The gains or losses
resulting from translation are included in stockholders' equity separately as
accumulated other comprehensive loss.





-5-


Transactions
in currencies other than functional currencies during the period are translated
into the respective functional currencies at the applicable rates of exchange
prevailing at the time of the transactions. Monetary assets and liabilities
denominated in currencies other than functional currencies are translated into
the respective functional currencies at the applicable rates of exchange in
effect at the balance sheet date. Exchange gains and losses are included in the
statement of operations. On July 21, 2005, Rmb was revalued from Rmb 8.28 to
Rmb8.11 for US$1 following the removal of the peg to the US dollar and pressure
for the United States. With the strong Rmb continuously appreciated to Rmb
7.6248 for US$1 at June 30, 2007. And the Rmb was further appreciated to Rmb
7.506 for US$ 1 at this quarter ended September 30, 2007.





The
Rmb is not readily convertible into US$ or other foreign currencies. Translation
of amounts from Rmb into US$ is for the convenience of readers. No
representation is made that the Rmb amounts could have been, or could be,
converted into US$ at that rate or at any other rate.





For
the purposes of financial statements presentation, the United States dollars
equivalents of the all numbers are translated at the rate of USD 1 to Rmb
7.506.





4.  STOCK-BASED
COMPENSATION





The
Company may periodically issue shares of common stock for services rendered or
for financing costs. The Company may also periodically issue shares of common
stock in conjunction with the acquisition of an, all or a portion of the equity
interest in a business. The shares of common stock vest immediately on issuance
and are not subject to any redemption rights.





The
value of the shares of common stock issued for accounting purposes is based on
the market price of the shares at the date of the transaction or on the fair
value of the services rendered or net assets acquired, whichever is more
determinable, based on the specific facts and circumstances of each transaction.
The Company did not issue any stock during the three-month period ended
September 30, 2007 for any services rendered or assets acquired.





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





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





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





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





In
accordance with SFAS No. 123, the Company will provide footnote disclosure with
respect to stock-based employee compensation. The value of a stock-based award
will be determined using the Black-Scholes option-pricing model, whereby
compensation cost is the fair value of the award as determined by the pricing
model at the grant date or other measurement date. The resulting amount will be
charged to expense on the straight-line basis over the period in which the
Company expects to receive benefit, which is generally the vesting period. Stock
options issued to non-employee directors at fair market value will be accounted
for under the intrinsic value method.





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


-6-


5.  RECENT
ACCOUNTING PRONOUNCEMENTS





In
June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB
Interpretation No. 48, “Accounting for Uncertainty in Income Taxes an
interpretation of FASB Statement No. 109 - Accounting for Income Taxes” (“FIN
48”), to create a single model to address accounting for tax positions.
Interpretation No. 48 requires the use of 1 two-step approach for recognizing
and measuring tax benefits taken or expected to be taken in a tax return and
disclosures regarding uncertainties in income tax positions including a
roll-forward of tax benefits taken that do not qualify for financial statement
recognition. The provisions of FIN 48 becomes effective for the Company on July
1, 2007, with the cumulative effect of the change in accounting principle, if
any, recorded as an adjustment to opening retained earnings. The adoption of FIN
48 is not expected to have a material impact on its financial position, cash
flows, and results of operations.





In
September 2006, the Securities and Exchange Commission (“SEC”) released Staff
Accounting Bulletin No. 108, “Considering the Effects of Prior Year
Misstatements when Qualifying Misstatements in Current Year Financial
Statements”. Bulletin No. 108 expresses the SEC staff’s views regarding the
process of quantifying financial statement misstatements. Bulletin No. 108
requires that, in addition, to considering the amount of the error originating
in the current year statement of operations, the misstatements existing at each
balance sheet date should be considered, irrespective of the period of origin of
the error (rollover approach versus iron curtain approach). The Company adopted
Bulletin No. 108 during the quarter ended September 30, 2007. The adoption did
not have a material impact on its financial position, cash flows, and results of
operations.





In
September 2006, the FASB issued Statement No. 157, “Fair Value Measurements”.
Statement No. 157 defines fair value, establishes a framework for measuring fair
value in accordance with U.S. GAAP, and expands disclosures about fair value
measurements. Statement No. 157 does not require any new fair value
measurements; rather, it applies to other accounting pronouncements that require
or permit fair value measurements. We are required to apply the provision of
Statement No. 157 prospectively as of July 1, 2008, and recognize any transition
adjustment as a cumulative-effect adjustment to the opening balance of retained
earnings. The adoption of SFAS 157 is not expected to have a material impact on
the Company’s consolidated financial statements.





In
February 2007, the FASB issued Statement No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities” which permits entities to choose to
measure any financial instruments and certain other items at fair value that are
not currently required to be measured at fair value. Statement No. 159 will be
effective for the Company on July 1, 2008. The adoption of SFAS 159 is not
expected to have a material impact on the Company’s consolidated financial
statements.





6.  CERTAIN
SIGNIFICANT RISKS AND UNCERTAINTIES





Country
Risk - The Company is subject to the consideration and risks of operating in the
People's Republic of China (the "PRC"). These include risks associated with the
political and economic environment, foreign currency exchange and the legal
system in the PRC. The economy of PRC differs significantly from the economies
of the "western" industrialized nations in such respects as structure, level of
development, gross national product, growth rate, capital reinvestment, resource
allocation, self-sufficiency, rate of inflation and balance of payments
position, among others. Only recently has the PRC government encouraged
substantial private economic activities. The Chinese economy has experienced
significant growth in the past several years, but such growth has been uneven
among various sectors of the economy and geographic regions. Actions by the PRC
government to control inflation have significantly restrained economic expansion
in the recent past. Similar actions by the PRC government in the future could
have a significant adverse effect on economic conditions in PRC.





Many
laws and regulations dealing with economic matters in general and foreign
investment in particular have been enacted in the PRC. However, the PRC still
does not have a comprehensive system of laws, and enforcement of existing laws
may be uncertain and sporadic.





The
Company’s primary sources of revenues and cash flows are derived from its
business operations in the PRC. The Company’s business activity is with
customers in the PRC. The PRC economy has, for many years, been a
centrally-planned economy, operating on the basis of annual, five-year and
ten-year state plans adopted by central PRC governmental authorities, which set
out national production and development targets. The PRC government has been
pursuing economic reforms since it first adopted its "open-door" policy in 1978.
There is no assurance that the PRC government will continue to pursue economic
reforms or that there will not be any significant change in its economic or
other policies, particularly in the event of any change in the political
leadership of, or the political, economic or social conditions in, the PRC.
There is also no assurance that the Company will not be adversely affected by
any such change in governmental policies or any unfavorable change in the
political, economic or social conditions, the laws or regulations, or the rate
or method of taxation in the PRC.


-7-


As
many of the economic reforms that have been or are being implemented by the PRC
government are unprecedented or experimental, they may be subject to adjustment
or refinement, which may have adverse effects on the Company. Further, through
state plans and other economic and fiscal measures such as the leverage of
exchange rate, it remains possible for the PRC government to exert significant
influence on the PRC economy.





The
Company's financial instruments that are exposed to concentration of credit risk
consist primarily of cash and cash equivalents. Cash and cash equivalents are
maintained with government-owned banks in the PRC with high credit
ratings.  Accordingly, the Company believes that no significant credit
risk exists.





On
January 1, 1994, the PRC government introduced a single rate of exchange of
Renminbi ("Rmb") against United States Dollar (“US$”) as quoted daily by the
People’s Bank of China (the "Unified Exchange Rate"). On July 21, 2006, Rmb was
revalued from Rmb 8.28 to Rmb8.11 for US$1 following the removal of the peg to
the US dollar and pressure for the United States. The Peoples Bank of China also
announced that the Renminbi would be pegged to a basket of foreign currencies,
rather than being strictly tied to the US dollar and would trade within a narrow
0.3% band against this basket of currencies, which is dominated by the US
dollar, Euro, Japanese Yen and South Korean Won, with a smaller proportion made
up of the British pound, Thai Baht and Russian Ruble. No representation is made
that the Rmb amounts have been, or could be, converted into US$ at that rate.
This quotation of exchange rates does not imply free convertibility of Rmb to
other foreign currencies. All foreign exchange transactions continue to take
place either through the Bank of China or other banks authorized to buy and sell
foreign currencies at the exchange rate quoted by the People's Bank of China.
Approval of foreign currency payments by the People's Bank of China or other
institutions requires submitting a payment application form together with
suppliers' invoices, shipping documents and signed contracts.





Restrictions
on the Payment of Dividends - PRC law requires net profits after taxes to be
used to set-off any losses carried forward before any distribution of profits
may be made. Furthermore, PRC law imposes a Mandatory Provident Reserve on all
businesses. Under this law, a business must set aside 10% of its distributable
profits as a mandatory reserve before a distribution of profits may occur. Once
the business accumulates a mandatory reserve equal to 50% of its capitalization,
no further accumulation of the reserve is required.





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





7.  INCOME
TAXES





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





The
Company is subject to the United States federal tax at a rate of
35%.





Intermost
Limited, and Leader Palace International limited, the Company's subsidiaries
incorporated under the International Business Companies Act of the British
Virgin Islands, is exempted from payment of the British Virgin Islands income
taxes.





Intermost
(H.K.) Limited, the Company's subsidiary incorporated in Hong Kong, is subject
to Hong Kong profits tax at a rate of 17.5%.





The
Company’s key consolidated subsidiaries organized in the PRC (ChinaE.com
Information Technology Ltd., IMOT Information Technology (Shenzhen) Ltd.,
ChinaE.com Technology (Shenzhen) Ltd., Intermost Focus Advertising Company Ltd.,
and ChinaE.com Investment Consultant (Shenzhen) Limited) are subject to PRC
enterprise income taxes at a rate of 15%.


-8-


8.  CONCENTRATION





On
August 10, 2004, we purchased 51% of the issued and outstanding shares of Golden
Anke Technology Ltd. (“Golden Anke”) from two of its shareholders, Tu Guoshen
and Li Zhiquan, to IMOT Technology for $3.24 million, payable by issuance of 12
million shares of our common stock.  The value of our common stock was
determined by applying a 20% discount to the average closing price during the
period from January 20 to March 19, 2004.  On or about February 15,
2007 we sold approximately two percent (2%) of the outstanding shares in Golden
Anke to an unaffiliated minority stockholder so that this minority stockholder
could seek an independent listing of Golden Anke on a UK exchange, thus reducing
our ownership from approximately 51% to approximately 49%.  We
recently discovered that GATL is no longer seeking a public listing and
negotiated an exit settlement under which they will buy back our 49% ownership
interest for US$1 million.  This investment was treated as “Impairment
of Associated Company” in our annual report, as amended under cover of form
10-KSB/A for the fiscal year ended June 30, 2007.





9.  SEGMENT
INFORMATION





The
Company adopted SFAS No. 131, “Disclosures About Segments of an Enterprise and
Related Information,” in respect of its operating segments.  The
Company currently operates in four principle business segments which are:
E-Commerce solutions, Digital security imaging system, Consulting, and
Photographic business. E-Commerce Solutions comprises revenue from web-site
development contracts and maintenance contracts. The Digital security imaging
system segment consists of sales of surveillance system and maintenance
services.  The Consulting segment comprises services rendered for
provision of information on property exchange matters, and the Photographic
Business consists of sales of photographic equipment.





Each
segment is managed separately because each business requires different
technology and marketing strategies. The Company evaluates performance based on
operating earnings of the respective business units. The accounting policies of
the segments are the same as those described in the summary of significant
accounting policies. The corporate assets include primarily cash and cash
equivalents and deposits and other receivables. There were no significant
intercompany transactions during any of the reported periods. In determining
operating income (loss) by reportable segment, general corporate expenses and
other income and expense items of a non-operating nature are not considered; as
such items are not allocated to the Company's segments. Management believes that
the following table presents the useful information to the chief operation
decision makers for measuring business performance and financing needs etc.
Except for the customers of VOIP call minutes, all of the other customers are
located in the PRC. As such, no geographical Segment information is presented.
Segment information for the three months period ended September 30, 2007 is as
follows:





(a)  Net
revenues:





Three Months Ended
      September 30, 2007Rmb’000
            
            
            US$’000E-commerce
      solutions
            
            
            54
            
            
            
            7VOIP
      call minutes
            
            
            3
            
            
            
            -Photographic
      business
            
            
            -
            
            
            
            -Digital
      security imaging system
            
            
            -
            
            
            
            -57
            
            
            
            7





-9-


(b)  Net
loss before equity in earnings of associated companies:





Three Months Ended
      September 30, 2007Rmb’000
            
            
            US$’000E-commerce
      solutions
            
            
            (596
            )
            
            
            (79
            )Consulting
            
            
            -
            
            
            
            -Photographic
      business
            
            
            -
            
            
            
            -VOIP
      call minutes
            
            
            11
            
            
            
            2Digital
      security imaging system
            
            
            -
            
            
            
            -Corporate
            
            
            (769
            )
            
            
            (102
            )(1,354
            )
            
            
            (179
            )





(c)  Assets:





As at September 30,
      2007Rmb’000
            
            
            US$’000E-commerce
      solutions
            
            
            737
            
            
            
            98Consulting
            
            
            3,375
            
            
            
            450Digital
      security imaging system
            
            
            -
            
            
            
            -Photographic
      business
            
            
            1,984
            
            
            
            264VOIP
      call minutes
            
            
            36,937
            
            
            
            4,921Corporate
            
            
            30,425
            
            
            
            4,07373,458
            
            
            
            9,806





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





(d)  Other
items:





Three Months Ended
      September 30, 2007Rmb’000
            
            
            US$’000Depreciation:E-commerce
      solutions
            
            
            44
            
            
            
            6Consulting
            
            
            0
            
            
            
            0Corporate
      expenses
            
            
            2
            
            
            
            046
            
            
            
            6





There
was no fixed expenditure for fixed assets during the three months ended
September 30, 2007.


-10-


ITEM
2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION





Certain
statements contained in this Form 10-Q constitute 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.  Such
forward-looking statements herein are based on current expectations that involve
a number of risks and uncertainties. Such forward-looking statements are based
on assumptions that there will be no material adverse change in our operations
or business, that we will meet success in marketing and selling our products,
and that we will be able to continue to attract and retain skilled employees
necessary for our business, among other things.  The foregoing
assumptions are based on judgments with respect to, among other things,
information available to our, future economic, competitive and market conditions
and future business decisions.  All of these assumptions are difficult
or impossible to predict accurately and many are beyond our control.
Accordingly, although we believe that the assumptions underlying the
forward-looking statements are reasonable, any such assumption could prove to be
inaccurate and therefore there can be no assurance that the results contemplated
in the forward-looking statements will be realized. There are a number of risks
presented by our business and operations, which could cause our financial
performance to vary markedly from prior results, or results contemplated by the
forward-looking statements. Such risks include failure of the our technology or
products to work as anticipated, failure to develop commercially viable products
or services from our technology, delays or failure in financing efforts, delays
in or lack of market acceptance, failure to recruit adequate personnel, and
problems with protection of intellectual property, among others. The words “believe,”“estimate,”“expect,”“intend,”“anticipate”“should”, “could”, “may”, “plan”and similar expressions and variations
thereof identify some of these forward-looking statements.Management
decisions, including budgeting, are subjective in many respects and periodic
revisions must be made to reflect actual conditions and business developments,
the impact of which may cause us to alter our capital investment and other
expenditures, which may also adversely affect our results of operations. In
light of significant uncertainties inherent in forward-looking information
included in this Quarterly Report on Form 10-Q, the inclusion of such
information should not be regarded as a representation by us that our objectives
or plans will be achieved. We undertake no obligation to revise or publicly
release the results of any revision to these forward-looking
statements.





Overview





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





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





We
intend to finalize an acquisition of a Taiwan touch panel manufacturing company
which we believe will be a good addition to our business.





Risks
Associated with Doing Business in China





There
are significant risks in operating in the Peoples’ Republic of China (the
“PRC”). These include risks associated with the political and economic
environment, foreign currency exchange and the legal system in the
PRC.  The economy of PRC differs significantly from the economies of
the industrialized nations of the west in such respects as structure, level of
development, gross national product, growth rate, capital reinvestment, resource
allocation, self-sufficiency, rate of inflation and balance of payments
position, among others. Only recently has the PRC government encouraged
substantial private economic activities. The Chinese economy has experienced
significant growth in the past several years, but such growth has been uneven
among various sectors of the economy and geographic regions. Actions by the PRC
government to control inflation have significantly restrained economic expansion
in the recent past. Similar actions by the PRC government in the future could
have a significant adverse effect on economic conditions
there.


-11-


Many
laws and regulations dealing with economic matters in general and foreign
investment in particular have been enacted in the PRC.  However, the
PRC still does not have a comprehensive system of laws, and enforcement of
existing laws may be uncertain and sporadic.  Our primary sources of
revenues and cash flows are derived from our business operations in the
PRC.  The PRC economy has, for many years, been a centrally-planned
economy, operating on the basis of annual, five-year and ten-year state plans
adopted by central PRC governmental authorities, which set out national
production and development targets. The PRC government has been pursuing
economic reforms since it first adopted its “open-door” policy in 1978. There is
no assurance that the PRC government will continue to pursue economic reforms or
that there will not be any significant change in its economic or other policies,
particularly in the event of any change in the political leadership of, or the
political, economic or social conditions in, the PRC. There is also no assurance
that the Company will not be adversely affected by any such change in
governmental policies or any unfavorable change in the political, economic or
social conditions, the laws or regulations, or the rate or method of taxation in
the PRC.





As
many of the economic reforms that have been or are being implemented by the PRC
government are unprecedented or experimental, they may be subject to adjustment
or refinement, which may have adverse effects on the Company. Further, through
state plans and other economic and fiscal measures such as the leverage of
exchange rate, it remains possible for the PRC government to exert significant
influence on the PRC economy. The Company's financial instruments that are
exposed to concentration of credit risk consist primarily of cash and cash
equivalents. Cash and cash equivalents are maintained with government-owned
banks in the PRC with high credit ratings.





On
January 1, 1994, the PRC government introduced a single rate of exchange of
Renminbi (“Rmb”) against United States Dollar (“US$”) as quoted daily by the
People's Bank of China (the “Unified Exchange Rate”). On July 21, 2006, Rmb was
revalued from Rmb 8.28 to Rmb8.11 for US$1 following the removal of the peg to
the US dollar and pressure for the United States. The Peoples Bank of China also
announced that the Renminbi would be pegged to a basket of foreign currencies,
rather than being strictly tied to the US dollar and would trade within a narrow
0.3% band against this basket of currencies, which is dominated by the US
dollar, Euro, Japanese Yen and South Korean Won, with a smaller proportion made
up of the British pound, Thai Baht and Russian Ruble. No representation is made
that the Rmb amounts have been, or could be, converted into US$ at that rate.
This quotation of exchange rates does not imply free convertibility of Rmb to
other foreign currencies. All foreign exchange transactions continue to take
place either through the Bank of China or other banks authorized to buy and sell
foreign currencies at the exchange rate quoted by the People's Bank of China.
Approval of foreign currency payments by the People's Bank of China or other
institutions requires submitting a payment application form together with
suppliers’ invoices, shipping documents and signed contracts.





Restriction
on the Payment of Dividends - PRC law requires net profits after taxes to be
used to set-off any losses carried forward before any distribution of profits
may be made. Furthermore, PRC law imposes a Mandatory Provident Reserve on all
businesses. Under this law, a business must set aside 10% of its distributable
profits as a mandatory reserve before a distribution of profits may occur. Once
the business accumulates a mandatory reserve equal to 50% of its capitalization,
no further accumulation of the reserve is required.





Certain
Factors Affecting Future Operating Results





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





·
            the
      Company's ability to successfully implement its current business
      plans;





·
            whether
      the Company will be able to obtain additional capital, if necessary, to
      support its operations;





·
            whether
      the Company will be able to find joint venture prospects or acquisition
      prospects with which to enhance its
business;





·
            whether
      the Company can successfully integrate acquisitions that it makes into its
      business;





·
            the
      level and rate of acceptance of the Company's products and services by
      consumers in China;





·
            continued
      economic growth in China;





·
            entry
      of new competition (including established companies from outside China and
      companies with substantially greater resources) into the Company's
      market;





·
            fluctuations
      in the level of demand for services or
products;


-12-


·
            rescheduling
      or cancellation of orders by
customers;





·
            competitive
      pressures on selling prices;





·
            rapid
      changes in technology, which could result in the Company's technology
      becoming obsolete;





·
            dependence
      upon key employees;





·
            availability
      and cost of computer technicians;





·
            loss
      of any of the Company's major
customers;





·
            the
      Company's ability to introduce new products and services on a timely
      basis;





·
            new
      product and service introductions by the Company's
      competitors;





·
            fluctuations
      in exchange rates; and





·
            adverse
      changes in the general economic, social or political conditions in the
      PRC.





Critical
Accounting Policies





The
Company prepares its consolidated financial statements in accordance with
accounting principles generally accepted in the United States of America. The
preparation of these financial statements requires the use of estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amount of revenues and expenses during the reporting
period. Management periodically evaluates the estimates and judgments made.
Management bases its estimates and judgments on historical experience and on
various factors that are believed to be reasonable under the circumstances.
Actual results may differ from these estimates as a result of different
assumptions or conditions.





The
following critical accounting policies affect the more significant judgments and
estimates used in the preparation of the Company's consolidated financial
statements.





Revenue
Recognition





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





Accounts
Receivable





The
Company typically extends credit to its customers. In order to determine the
value of the Company's accounts receivable, the Company records a provision for
doubtful accounts to cover estimated credit losses. Management reviews and
adjusts this allowance periodically based on historical experience and its
evaluation of the collectability of outstanding accounts receivable. The Company
evaluates the credit risk of its customers by analyzing its aged accounts
receivable, utilizing historical data, the customer's financial condition,
general economic conditions and estimates of future performance.





Long-Lived
Assets and Goodwill





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


-13-


The
Company evaluates the carrying value of investments in associated companies, at
a minimum, on an annual basis and whenever events and circumstances indicate
that the carrying value of the asset may no longer be recoverable. Impairment
loss, measured on the fair value of the asset, is recognized if expected future
undiscounted cash flows are less than the carrying value of the
assets.





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





Income
Taxes





The
Company records a valuation allowance to reduce its deferred tax assets derived
from operating loss of certain subsidiaries in the PRC to the amount that is
more likely than not to be realized. In the event the Company was to determine
that it would be able to realize its deferred tax assets in the future in excess
of its recorded amount, an adjustment to the deferred tax assets would be
credited to operations in the period such determination was made. Likewise,
should the Company determine that it would not be able to realize all or part of
its deferred tax assets in the future, an adjustment to the deferred tax assets
would be charged to operations in the period such determination was made. The
adoption of FIN 48 “Accounting for Uncertainty in Income Taxes – an
Interpretation of FASB Statement No. 109” is not expected to have a material
impact on the Company’s consolidated financial statements.





Results
of Operations - Three Months Ended September 30, 2007 and 2006





All
amounts shown below are presented in US$. As used below, the letter “K”
appearing immediately after a dollar amount denotes that it has been rounded to
the nearest $1,000.





Net
Revenues





Net
revenues for the three months ended September 30, 2007 consisted primarily from
ChinaE.com Tech, which provide e-commerce solutions. The term "e-commerce
solutions" includes web-site design and development and
web-hosting.





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





Net
      Revenue
            
            Net
      Revenue2006
            2006
            
            2007
            20073
      months ended September 30
            USD'000
            %
            
            USD'000
            %E-commerce
      solutions
            22
            8%
            
            7
            100%Sale
      of digital security imaging equipments
            257
            92%
            
            -
            0%VOIP
            0
            0%
            
            -
            0%Sale
      of photographic equipments
            1
            0%
            
            -
            0%Consulting
            0
            0%
            
            -
            0%280
            100%
            
            7
            100%





Total
net revenues decreased by 98% to $7K during the three months ended September 30,
2007, as compared to $280K during the three months ended September 30, 2006. The
decrease in total net revenues was primarily due to the decrease in sales of
digital security imaging systems made through the Company's previous subsidiary,
Shenzhen Golden Anke.


-14-


Cost
of Revenues





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





Cost of
      Revenue
            
            Cost of
      Revenue2006
            2006
            
            2007
            20073
      months ended September 30
            USD'000
            %
            
            USD'000
            %Salaries
      of technicians / engineers
            32
            12%
            
            25
            67%Sale
      of photographic equipments
            2
            1%
            
            0
            0%Sale
      of digital security imaging equipments
            213
            81%
            
            0
            0%Depreciation
            4
            2%
            
            5
            14%VOIP
            0
            0%
            
            0
            0%Others
            10
            4%
            
            7
            19%261
            100%
            
            37
            100%





Cost
of revenues decreased by 99% to $37K or 96% of net revenues for the three months
ended September 30, 2007, as compared to $261K during the three months ended
September 30, 2006.





The
principal components of cost of revenues during the three months ended September
30, 2007 were engineer and technician salaries, other costs associated with
engineering and technical staff support and depreciation of equipment utilized
in connection with the Company's operations.





The
decrease in costs of revenues in 2007 as compared to 2006 was principally
attributable to the decrease in sales volume of the Company's e-commerce
solutions.





Selling,
General and Administrative Expense





Selling,
general and administrative (“SG&A”) expense consists principally of sales
commissions, advertising, other marketing expenses, rental expenses, salaries
for administrative and sales staff, and corporate overhead.


-15-


The
following table reflects the principal components of SG&A expense and the
percentage of net sales represented by each component for the periods
indicated:





SG&A
      Expenses
            
            SG&A
      Expenses2006
            2006
            
            2007
            20073
      months ended September 30
            USD'000
            %
            
            USD'000
            %Sales
      & Marketing salaries & commissions
            18
            12%
            
            34
            20%Advertising
      & other sales & marketing expenses
            7
            9%
            
            4
            2%Rentals
            23
            10%
            
            15
            8%Administrative
      salaries
            53
            23%
            
            67
            39%Corporate
      overhead
            246
            46%
            
            53
            31%347
            100%
            
            173
            100%





For
the three months ended September 30, 2007, SG&A expense decreased by 50% to
$173K, as compared to $347K for the three months ended September 30,
2006.





The
increase in SG&A expense in 2007 as compared to 2006 was principally
attributable to cost cutting measures implemented in the quarter ended September
30, 2007.  During the three months ended September 30, 2007, the
Company reduced its sales team as a result of management's reassessment of the
manpower required to generate sales and service to the Company's customers and
the Company also implemented a firm-wide cost-cutting exercise.





Income
Taxes





Income
taxes for the three months ended September 30, 2007 were $0K and $5K for the
three months ended September 30, 2006.





Other
Items





Minority
interests reflect the minority shareholders' proportionate interests in the net
income of the Company’s non-wholly-owned subsidiaries. The balance is derived
from Intermost Focus Advertising Co.





Equity
in losses of an associated company represents the Company's proportionate share
of the loss of Hainan Property Right Exchange Centre.





Net
Income (Loss)





The
Company had net loss of $179K during the three months ended September 30, 2007,
as compared to a net income of $1,229K during the three months ended September
30, 2006.





Liquidity
and Capital Resources – September 30, 2007





At
September 30, 2007, the Company had cash and cash equivalents of $ 742K and
working capital of $2,704K, as compared to $1,283K of cash and cash equivalents
and $11,302K of working capital at September 30, 2006.





Net
cash used in operating activities was $82K for the three months ended September
30, 2007, as compared to net cash used in operating activities of $6K for the
three months ended September 30, 2006. The decrease in net cash provided by
operating activities in 2007 as compared to 2006 is reflected in the disposal of
a subsidiary.





Net
cash used in investing activities was $3K for the three months ended September
30, 2007, consisting of increase in short term loan. Net cash generated from
investing activities were $585K for the three months ended September 30,
2006.


-16-


Net
cash provided by financing activities were $0K for both three months ended
September 30, 2007 and 2006.





The
Company continues to evaluate various opportunities to improve the operating
performance of the Company’s businesses and to invest in or acquire other types
of businesses.





Principal
Commitments





At
September 30, 2007, the Company does not have any material commitments for
operating leases or capital expenditures, or have any transactions, obligations
or relationships that could be considered off-balance sheet
arrangements.





The
Company has no long-term debt at September 30, 2007.





Off-Balance
Sheet Arrangements





The
Company does not have any transactions, obligations or relationships that could
be considered off-balance sheet arrangements at September 30, 2007.





Restatements





The
Company received a comment letter from the Office of the Chief Accountant of the
Division of Corporation Finance of SEC regarding certain disclosures in the
Company’s financial statements for the year ended June 30, 2007. The Company
could not reach the original auditor for assistance. Therefore, it determined to
re-do the 2007 audit and restate the financial statements.  The change
of balance sheet figures and retained earnings had affected the quarterly
reporting for Sept 30, 2007.  The effects of the restatements are
shown in the following tables.


-17-





CONSOLIDATED BALANCE SHEET
      (Unaudited)Original
            
            
            RestatedSept 30ITEMS
            
            2007
            
            
            2007Current AssetsCash and cash
      equivalents
            
            
            741,824
            
            
            
            438,299Accounts receivable,
      net
            
            
            4,066,438
            
            
            
            4,066,438Inventories
            
            
            199,047
            
            
            
            199,047Deposits, prepayments
      and other receivables
            
            
            2,196,117
            
            
            
            1,476,064Deposit of
      investment
            
            
            0
            
            
            
            150,000Short-term
      loan
            
            
            673,659
            
            
            
            673,659Short-term
      investment
            
            
            373,909
            
            
            
            373,909Total
      current assets
            
            
            8,250,994
            
            
            
            7,377,416Other
AssetsRestricted
      cash
            
            
            0
            
            
            
            303,525Unlisted
      investment
            
            
            907,669
            
            
            
            907,669Property and
      equipment,
      net
            
            
            46,098
            
            
            
            46,098Intangible assets,
      net
            
            
            19,253
            
            
            
            19,253Investment in an
      associated company
            
            
            6,605,320
            
            
            
            1,152,388TOTAL
ASSETS
            
            
            15,829,334
            
            
            
            9,806,349LIABILITIES AND SHAREHOLDERS'
      EQUITYCurrent
      LiabilitiesAccounts
      payable
            
            
            3,903,138
            
            
            
            3,903,138Accrued liabilities
      and other payable
            
            
            967,294
            
            
            
            807,294Customer
      deposits
            
            
            96,545
            
            
            
            96,545Deferred
      revenue
            
            
            9,244
            
            
            
            9,244Advance from
      shareholder
            
            
            0
            
            
            
            160,000Total
      current liabilities
            
            
            4,976,221
            
            
            
            4,976,221Minority
      interests
            
            
            744,355
            
            
            
            271,269STOCKHOLDERS'
      EQUITYPreferred stock, par
      value US$0.001 per shareAuthorized
      - 5,000,000 sharesIssued and
      outstanding - NoneCommon stock,
      par value US$0.001
      per shareAuthorized
      - 5000,000,000 sharesIssued and
      outstanding - 215,370,278 shares
            
            
            215,371
            
            
            
            215,371at
      June 30, 2007 and Sept 30, 2007Treasury
      stock
            
            
            (8,970
            )
            
            
            (8,970
            )Additional
      paid-in capital
            
            
            23,235,236
            
            
            
            24,216,705Accumulated
      deficit
            
            
            (14,710,902
            )
            
            
            (19,468,557
            )Accumulated other
      comprehensive loss
            
            
            1,378,023
            
            
            
            (395,690
            )10,108,758
            
            
            
            4,558,859TOTAL LIABILITIES, MINORITY
      INTERESTS ANDSTOCKHOLDERS'
      EQUITY
            
            
            15,829,334
            
            
            
            9,806,349





As
a result of the restatement of our consolidated balance sheet as of Sept 30,
2007, total assets decreased from $15,829,334 as originally reported, to
$9,780,705, a decrease of $6,022,985. The decrease of total assets was derived
from a decrease of $303,525 in cash and cash equivalents, a decrease of $720,053
in deposits, prepayments and other receivables, an increase of $150,000 for
deposit of investment, a decrease of $5,452,932 for investments in associated
companies, and an increase $303,525 in restricted cash. There were no changes in
liabilities, but we reported a decrease of $160,000 in accrued liabilities and
other payables and an increase of $160,000 for an advance from shareholder. The
minority interest was decreased from $744,355 to $271,269, a $473,086 reduction.
The corresponding changes in Stockholders’ equity were an increase of $981,469
in addition to a paid-in capital, increase of accumulated deficit in the amount
of $4,757,655 and an increase of accumulated other comprehensive loss of
$1,773,713 from $1,378,023 as originally reported, to ($395,690). The total
stockholders’ equity was restated from $10,108,758 as originally reported, to
$4,558,859, a decrease of $5,549,899. The total liabilities and stockholders’
equity were restated from $15,829,334 as originally reported, to $9,806,349, a
decrease of $6,022,985


-18-





CONSOLIDATED BALANCE
      SHEETOriginal
            
            
            RestatedJune 30ITEMS
            
            2007
            
            
            2007Current
    AssetsCash and cash
      equivalents
            
            
            833,993
            
            
            
            530,468Accounts receivable,
      net
            
            
            4,085,123
            
            
            
            4,085,123Inventories
            
            
            195,946
            
            
            
            195,946Deposits, prepayments
      and other receivables
            
            
            2,269,083
            
            
            
            1,538,435Deposit of
      investment
            
            
            0
            
            
            
            150,000Short-term
      loan
            
            
            670,763
            
            
            
            670,763Short-term
      investment
            
            
            368,083
            
            
            
            368,083Total
      current assets
            
            
            8,422,991
            
            
            
            7,538,818Other
AssetsRestricted
      cash
            
            
            0
            
            
            
            303,525Unlisted
      investment
            
            
            893,526
            
            
            
            893,526Property and
      equipment, net
            
            
            51,414
            
            
            
            51,414Intangible assets,
      net
            
            
            20,354
            
            
            
            20,354Investment in an
      associated company
            
            
            6,497,267
            
            
            
            1,134,433TOTAL
ASSETS
            
            
            15,885,552
            
            
            
            9,942,070LIABILITIES AND SHAREHOLDERS'
      EQUITYCurrent
      LiabilitiesAccounts
      payable
            
            
            3,927,964
            
            
            
            3,927,964Accrued
      liabilities and other
      payable
            
            
            792,560
            
            
            
            792,560Customer
      deposits
            
            
            105,708
            
            
            
            105,708Advance from
      shareholder
            
            
            160,000
            
            
            
            160,000Total
      current liabilities
            
            
            4,986,232
            
            
            
            4,986,232Minority
      interests
            
            
            732,762
            
            
            
            267,046STOCKHOLDERS' EQUITYPreferred stock, par
      value US$0.001 per shareAuthorized
      - 5,000,000 sharesIssued and
      outstanding - NoneCommon stock, par
      value US$0.001 per shareAuthorized
      - 5000,000,000 sharesIssued and
      outstanding -
      215,370,278 shares
            
            
            215,371
            
            
            
            215,371at
      June 30, 2007 and Sept 30, 2007Treasury
      stock
            
            
            (8,970
            )
            
            
            (8,970
            )Additional
      paid-in capital
            
            
            23,235,236
            
            
            
            24,216,705Accumulated
      deficit
            
            
            (13,391,999
            )
            
            
            (19,289,509
            )Accumulatedother comprehensive
      loss
            
            
            116,920
            
            
            
            (444,805
            )10,166,558
            
            
            
            4,688,792TOTAL LIABILITIES, MINORITY
      INTERESTS ANDSTOCKHOLDERS'
      EQUITY
            
            
            15,885,552
            
            
            
            9,942,070





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


-19-





CONDENSED CONSOLIDATED STATEMENTS
      OF OPERATIONS (Unaudited)Original
            
            
            RestatedThree months ended Sept
      30ITEMS
            
            2007
            
            
            2007Net revenue
            
            
            7,598
            
            
            
            7,598Cost of
      revenues
            
            
            (36,965
            )
            
            
            (36,965
            )Gross
profit
            
            
            (29,367
            )
            
            
            (29,367
            )Costs and
      expenses:Selling, general and
      administrative expenses
            
            
            (173,122
            )
            
            
            (173,122
            )Impairment of
      goodwill
            
            
            0
            
            
            
            0Exchange
      differences
            
            
            0
            
            
            
            0Amortization of intangible
      assets
            
            
            (832
            )
            
            
            (832
            )Total costs and
      expenses
            
            
            (173,954
            )
            
            
            (173,954
            )Loss from
      operations
            
            
            (203,321
            )
            
            
            (203,321
            )Interest
    income
            
            
            8,025
            
            
            
            8,025Loan interest
      income
            
            
            16,244
            
            
            
            16,244Investment income
      (loss)
            
            
            0
            
            
            
            0Other income,
      net
            
            
            0
            
            
            
            0Loss before income taxes, minority
      interestsand equity in earnings of associated
      companies
            
            
            (179,052
            )
            
            
            (179,052
            )Income
taxes
            
            
            0
            
            
            
            0Loss before minority interests and
      equity inearnings of associated
      companies
            
            
            (179,052
            )
            
            
            (179,052
            )Minority
      interests
            
            
            4
            
            
            
            4Loss before equity in earnings
      ofassociated
      companies
            
            
            (179,048
            )
            
            
            (179,048
            )Equity in earnings of associated
      companies
            
            
            5,182
            
            
            
            0Loss before extra-ordinary
      items
            
            
            (173,866
            )
            
            
            (179,048
            )Loss on closing a subsidiary
      company
            
            
            (1,145,037
            )
            
            
            0Net loss
            
            
            (1,318,903
            )
            
            
            (179,048
            )Net loss per common share-basic
      and diluted
            
            
            (0.006
            )
            
            
            (0.001
            )Weighted average number of common
      sharesoutstanding-basic and
      diluted
            
            
            215,370,278
            
            
            
            215,370,278





As
a result of the restatement of our consolidated statement of operations for the
three months ended Sept 30, 2007, total net loss decreased from $1,318,903 as
originally reported, to $179,048, a decrease of $1,139,855. The decreased loss
was composed of a decrease of $5,182 in equity in earnings of associated
companies and a decrease of $1,145,037 loss on the closing of a subsidiary
company.


-20-





CONSOLIDATED STATEMENTS OF CASH
      FLOWS (Unaudited)Original
            
            
            RestatedThree months ended Sept
      30ITEMS
            
            2007
            
            
            2007Cash flows from operating
      activitesNet
      loss
            
            
            (173,866
            )
            
            
            (179,048
            )Impairment of
      goodwill
            
            
            0
            
            
            
            0Amortization of
      intangible assets
            
            
            832
            
            
            
            832Equity in earnings of
      associated companies
            
            
            (5,182
            )
            
            
            0Loss on disposal of a
      subsidiary
            
            
            (1,145,037
            )
            
            
            0Depreciation
            
            
            6,125
            
            
            
            6,125Minority
      interests
            
            
            11,593
            
            
            
            11,593Increase (decrease) in
      operating assets-Accounts
      receivables
            
            
            18,685
            
            
            
            18,685Inventories
            
            
            (3,101
            )
            
            
            (3,101
            )Deposits,
      prepayments and other receivables
            
            
            98,610
            
            
            
            98,610Increase (decrease) in
      operating
      liabilities-Accounts
      payable
            
            
            (24,826
            )
            
            
            (24,826
            )Accrued
      liabilities
            
            
            (11,121
            )
            
            
            (11,121
            )Cutomer
      deposits
            
            
            1,505
            
            
            
            1,505Deferred
      revenue
            
            
            (1,424
            )
            
            
            (1,424
            )Business
      taxes and government surcharges payable
            
            
            211
            
            
            
            211Net cash used in operating
      activities
            
            
            (1,226,996
            )
            
            
            (81,959
            )Cash flows from investing
      activitiesAcquisition of plant
      and equipment
            
            
            0
            
            
            
            0Increase (decrease) in
      short term loan
            
            
            (2,896
            )
            
            
            (2,896
            )Net cash used in investing
      activities
            
            
            (2,896
            )
            
            
            (2,896
            )Cash flows from financing
      activitiesIncrease in security
      bond
            
            
            0
            
            
            
            0Net proceeds from
      issuance of common stock
            
            
            0
            
            
            
            0Net cash provided by financing
      activities
            
            
            0Cash and cash
      equivalentsNet increase
      (decrease)
            
            
            (1,229,892
            )
            
            
            (84,855
            )Accumulated other
      comprehensive loss
            
            
            1,137,723
            
            
            
            (7,314
            )Balance at beginning
      of period
            
            
            833,993
            
            
            
            530,468Balance at end of
      period
            
            
            741,824
            
            
            
            438,299Supplemental cash flow
      information:Cash paid
      for interest
            
            
            0
            
            
            
            0Cash paid
      for income taxes
            
            
            0
            
            
            
            0Non-cash investing and financing
      activities:Receivable
      from issuance of common stock
            
            
            0
            
            
            
            0Issuance
      of reserved common stock
            
            
            0
            
            
            
            0Issuance
      of common stock for service
            
            
            0
            
            
            
            0Acquisition of
      associated companies
            
            
            0
            
            
            
            0Acquisition of
      subsidiaries:Non-cash
      assets acquired
            
            
            0
            
            
            
            0Liabilities
      assumed in acquisition
            
            
            0
            
            
            
            0Issuance
      of common stock for service
            
            
            0
            
            
            
            0





As
a result of the restatement, the net cash used in operating activities for three
months ended Sept 30, 2007 decreased by $1,145,037 from $1,226,996 as originally
reported, to $81,959; no change in net cash used in investing activities; and
the effect of foreign currency translation on cash and cash equivalents was
increased by $1,145,037 from $1,137,723 as originally reported, to ($7,314). The
cash and cash equivalents at year-end was decreased by $303,525 from $741,824 as
originally reported, to $438,299 owing to the reclassification of cash and cash
equivalents to restricted cash.


-21-


PART
II - OTHER INFORMATION





Item
1.  Legal Proceedings.





We
are a party to the following legal proceedings:





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





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





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





The
Respondents at the same time also applied to a court in Haikou of the Hainan
province to request that the Dispute be handled by the court.  On
April 29, 2007, this court ruled that the Dispute could be subject to its
jurisdiction.  IMOT Technology appealed to the Haikou Intermediate
Court arguing that the dispute should be under the jurisdiction of the
Arbitration Commission.  On August 16, the Haikou Intermediate Court
made a final decision that the Dispute should be under the jurisdiction of the
Arbitration Commission. For the subsequent development of this case, please
refer to Page 13 of the 10-KSB filed on November 7, 2008





(2)
Hainan Special Economic Zone Property Rights Exchange Centre





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





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





(3)
Shanghai Newray Photographic Equipment Co. Ltd





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


-22-


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





On
January 24, 2007, Shanghai Hongkou District Court accepted the
case.  Recently discovery was completed.





Item
6.  Exhibits





Exhibit
      Number
            Description of
      Exhibit31.1
            Certification
      of the Chief Executive Officer required by Rule 13a-14(a) of the
      Securities Exchange Act of 1934, as amended, as adopted pursuant to
      Section 302 of the Sarbanes-Oxley Act of 2002. *31.1
            Certification
      of the Chief Financial Officer required by Rule 13a-14(a) of the
      Securities Exchange Act of 1934, as amended, as adopted pursuant to
      Section 302 of the Sarbanes-Oxley Act of 2002.*32.2
            Certification
      of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
      *32.232.2
            Certification
      of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
      *





SIGNATURES





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








Date:  November
      25, 2008
            
            INTERMOST
      CORPORATIONBy:
            /s/ Rocky
      WulianghaiRocky
      WulianghaiPresident
      and Chief Executive OfficerBy:
            /s/ Thomas
      LeeThomas
      LeeChief
      Financial Officer








-23-