UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2008

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

For the transition period from ______________ to _______________

Commission File Number 000-30292

ASIAMART, INC.

(Exact name of registrant as specified in its charter)

Delaware (State of Incorporation)		88-0405437 (I.R.S. Employer Identification No.)

Room 1508 Peninsula Square 18 Sung On Street Hunghom, Kowloon, Hong Kong (Address of principal executive offices)		N/A (Zip Code)

(852) 3580-8808

(Registrant’s telephone number, including area code)

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

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. (Check one):

Large Accelerated filer o

Accelerated Filer o

Non-Accelerated Filer o

Smaller Reporting Company x

Indicate by check mark whether the registrant is a shell company (as determined in Rule 12b-2 of the Exchange Act).

Yes ¨ No x

As of September 30, 2008, the Registrant had 24,744,177 shares of Common Stock outstanding.

ASIAMART, INC.

INDEX

		Page Number
PART I. Financial Statements

Item 1.	Financial Information	F-1

	Consolidated Balance Sheets as of September 30, 2008 (Unaudited) and December 31, 2007	F-1

	Consolidated Statements of Operations for the Three Months and Nine Months Ended September30, 2008 and September30, 2007 (Unaudited)	F-2

	Consolidated Statements of Shareholders' Equity	F-3

	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2008 and September 30, 2007 (Unaudited)	F-4

	Notes to Consolidated Financial Statements - September 30, 2008 (Unaudited)	F-5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	9

Item 4.	Controls and Procedures	9

PART II. Other Information

Item 1.	Legal Proceedings	10

Item 1A.	Risk Factors	10

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	20

Item 3.	Defaults Upon Senior Securities	20

Item 4.	Submission of Matters to a Vote of Security Holders	20

Item 5.	Other Information	20

Item 6.	Exhibits	21

Signatures		22

PART 1: FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

ASIAMART, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

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

	September 30, 2008		December 31, 2007
	(Unaudited)		(Note 2)
ASSETS
Current assets:
Cash and cash equivalents	$	558,382	$	1,817,148
Accounts receivable, net		2,968,488		1,432,281
Due from related party		-		451,328
Inventories		2,441,628		3,817,215
Deposits and prepaid expenses		1,767,555		1,500,599
Other receivables		402,561		475,513
Total current assets		8,138,614		9,494,084

Plant and equipment, net		642,556		848,978

Other assets:
Long-term loan receivables, net		1,210,281		1,211,580
Long-term rental and utilities deposits		159,651		157,922
Tax recoverable		63,577		54,829
Total other assets		1,433,509		1,424,331
TOTAL ASSETS	$	10,214,679	$	11,767,393

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,418,988	$	2,482,382
Accrued liabilities		989,097		1,026,210
Customer deposits		110,508		95,292
Due to stockholders		287,785		286,585
Income tax payable		76,250		-
Other payable		23,677		110,771
Current maturities of long-term debt		150,048		523,435
Total current liabilities		3,056,353		4,524,675

Long-term liabilities
Deferred tax liabilities		15,520		15,455
Long-term debt		-		115,916
Debentures payable, net of discount and issuance costs		1,926,457		1,079,914
Total long-term liabilities		1,941,977		1,211,285
TOTAL LIABILITIES		4,998,330		5,735,960

Stockholders’ equity:
Common stock		2,474		2,474
Additional paid-in capital		3,455,421		3,455,421
Retained earnings		1,657,929		2,507,417
Accumulated other comprehensive income		100,525		66,121
Total stockholders’ equity		5,216,349		6,031,433
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	10,214,679	$	11,767,393

See accompanying notes to condensed consolidated financial statements.

F-1

ASIAMART, INC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF

OPERATIONS AND COMPREHENSIVE LOSS

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

(Unaudited)

	Three months ended September 30,						Nine months ended September 30,
	2008			2007			2008			2007

REVENUE
Sales	$	7,448,632		$	11,893,386		$	29,140,060		$	41,026,452
Referral income		-			-			-			426,442
Related party		-			-			604,264			496,753
Total revenue		7,448,632			11,893,386			29,744,324			41,949,647

COST OF SALES		4,566,826			5,742,136			16,598,543			25,916,759

GROSS PROFIT		2,881,806			6,151,250			13,145,781			16,032,888

OPERATING EXPENSES
Selling, general and administrative expenses		4,017,175			6,846,560			14,385,068			16,078,137
LOSS FROM OPERATIONS		(1,135,369	)		(695,310	)		(1,239,287	)		(45,249	)

OTHER INCOME (EXPENSE), NET		81,650			113,671			466,049			(234,413	)

LOSS BEFORE PROVISION FOR INCOME TAXES		(1,053,719	)		(581,639	)		(773,238	)		(279,662	)

Provision for Income Tax		(10,998	)		(81,695	)		76,250			131,211
NET LOSS		(1,042,721	)		(499,944	)		(849,488	)		(410,873	)
OTHER COMPREHENSIVE INCOME:
Foreign currency translation adjustment		32,126			41,424			34,404			43,121
COMPREHENSIVE LOSS	$	(1,010,595	)	$	(458,520	)	$	(815,084	)	$	(367,752	)

BASIC AND DILUTED LOSS PER SHARE	$	(0.042	)	$	(0.020	)	$	(0.034	)	$	(0.017	)

BASIC AND DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING		24,744,177			24,598,344			24,744,177			24,589,415

See accompanying notes to condensed consolidated financial statements.

F-2

ASIAMART, INC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

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

(Unaudited)

	Nine months ended September 30,
	2008			2007

Cash flow from operating activities:
Net cash (used in) provided by operating activities	$	(805,166	)	$	(1,159,437	)

Cash flows from investing activities:
Long-term loans to staff		-			(19,789	)
Decrease in long term rental and utility deposit		-			(4,084	)
Purchase of property and equipment		-			(94,212	)
Long-term loans from / (to) travel agencies		1,299			(257,074	)
Net cash provided by (used in) investing activities		1,299			(375,159	)

Cash flows from financing activities:
Repayments of amounts due to shareholders		-			(19,131	)
Proceeds from short term loan		-			255,800
Repayment of short term loan		-			(168,798	)
Proceeds from installment loan		-			128,040
Repayment of installment loan		(373,387	)		(383,274	)
Repayment of capital lease obligations		(115,916	)		(354,591	)
Net cash used in financing activities		(489,303	)		(541,954	)

EFFECT OF EXCHANGE RATE ON CASH		34,404			5,180

CHANGE IN CASH		(1,258,766	)		(2,071,370	)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		1,817,148			2,560,304

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	558,382		$	488,934

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid	$	194,050		$	210,927
Income taxes paid	$	54,845		$	243,900

See accompanying notes to condensed consolidated financial statements

F-3

ASIAMART, INC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008

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

(Unaudited)

	Common stock				Additional		Retained			Accumulated other comprehensive
	Shares		Par value		paid-in capital		Earnings			income		Totals

Balance as of December 31, 2007		24,744,177	$	2,474	$	3,455,421	$	2,507,417		$	66,121	$	6,031,433
Other comprehensive income (loss):
Net loss for the period		-		-		-		(849,488	)		-		(849,488	)
Foreign currency translation adjustment		-		-		-		-			34,404		34,404
Total comprehensive loss:													(815,084	)
Balance as of September 30, 2008		24,744,177	$	2,474	$	3,455,421	$	1,657,929		$	100,525	$	5,216,349

See accompanying notes to condensed consolidated financial statements

F-4

ASIAMART, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(Unaudited)

NOTE 1 – DESCRIPTION OF BUSINESS AND ORGANIZATION

The Company through its subsidiaries engages in two operating segments, trading and retailing. Trading consists of selling products wholesale to other retail operators and retail consists of selling products primarily to tourist through two discount shopping centers in Hong Kong.

	Company name	Trade Name	Place of incorporation	Date of incorporation	Principal business
1	Raffle Limited	N/A	Hong Kong	August 7, 1998	Trading of general merchandise

2	Sure Profits Trading Limited	N/A	Hong Kong	August 3, 2001	Trading of general merchandise
3	Manigood International Industrial Limited	Hong Kong (Duty Free) Center	Hong Kong	December 15, 2003	Operating a discount shopping center in Hong Kong

4	Allied Fine Development Limited	Super Star Department Store	Hong Kong	September 19 2003	Operating a discount shopping center in Hong Kong

5	Max Surplus International Development Limited	Golden Bauhinia Duty Free	Hong Kong	July 26, 2004	Operating a discount shopping center in Hong Kong, closed on Nov, 2006

The Company’s outlets and discount shopping centers cater to tourists visiting Hong Kong from other parts of China (“mainland China”) who are transported directly to the Company’s shopping centers by a large network of travel companies and tour operators. The Company’s outlets and shopping centers offer the tourists discount prices on a limited selection of international branded and selected private label products in a wide range of merchandise categories such as consumer electronics, cosmetics, watches, dietary supplements, health care products and optical instruments. A number of travel companies and tour operators have agreements, partnerships or affiliation arrangements with the Company to transport tourists from mainland China to the Company’s outlets and shopping centers for shopping.

All current operations and assets of the Company are located in Hong Kong.

NOTE 2 - BASIS OF PRESENTATION

The accompanying condensed consolidated balance sheet as of December 31, 2007 has been derived from audited financial statements and the accompanying unaudited condensed consolidated financial statements as of September 30, 2008 and for the three and nine months ended September 30, 2008 and 2007 have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the interim reporting requirements of Regulation S-X. They do not include all of the information and footnotes for complete consolidated financial statements as required by GAAP. In management's opinion, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. The results of operations for the periods ended September 30, 2008 and 2007 presented are not necessarily indicative of the results to be expected for the year. These financial statements should be read in conjunction with the annual financial statements included in the Company’s Form 10-K filed with the U.S. Securities and Exchange Commission on April 15, 2008.

F-5

ASIAMART, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(Unaudited)

Prior year balances have been reclassified to conform to the current period presentation. The balance sheet includes a reclassification of debt issue costs that was shown as part of total asset to debentures payable, net.

There is no provision for dividends for the quarter to which this quarterly report relates.

NOTE 3 – RECENT ACCOUNTING PRONOUNCEMENTS

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

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

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

F-6

ASIAMART, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(Unaudited)

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

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

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

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

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

F-7

ASIAMART, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(Unaudited)

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

NOTE 4 – INVENTORIES

Inventory consisted of the following:

	September 30, 2008			December 31, 2007
	(Unaudited)			(Note 2)

Inventories	$	2,916,923		$	4,292,510
Less: valuation allowance		(475,295	)		(475,295	)

Total	$	2,441,628		$	3,817,215

NOTE 5 – INCOME TAXES

The Company is registered in the State of Delaware and conducts all of its business through its subsidiaries incorporated in Hong Kong and therefore is not subject to U.S. income tax. Pursuant to Hong Kong tax law, the Company’s Hong Kong subsidiaries are subject to profits tax at the rate of 16.5%.

NOTE 6 – RELATED PARTY TRANSACTIONS

Trade receivable and sales – related party

For the nine months ended September 30, 2008 and 2007, the Company earned sales revenue from Prince Digital in the amounts of $604,264 and $496,753, respectively, a related company, which is controlled by Mr. Tsoi Kee Kwong Ricky, a beneficial shareholder of the Company. As of September 30, 2008, there were no amounts due from Prince Digital.

NOTE 7 – OTHER INCOME (EXPENSE)

Other income (expense) consisted of the following:

	Three months ended September 30,						Nine months ended September 30,
	2008			2007			2008			2007
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)

Income from concessionaire sales	$	47,285		$	124,803			406,322			369,073
Transaction gain		228,838			252,034			766,293			677,407
Interest income		-			-			136			9,821
Finance costs		(390,740	)		(361,539	)		(1,030,231	)		(1,032,752	)
Others		196,267			98,373			323,529			(257,962	)

Total	$	81,650		$	113,671		$	466,049		$	(234,413	)

F-8

ASIAMART, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(Unaudited)

NOTE 8 – SEGMENT INFORMATION

The Company’s operating businesses are structured and managed separately, according to the nature of their operations and the products and services they provide. The Company identifies its reportable segments based on management responsibility: (i) the trading segment, and (ii) the retailing segment.

	Three months ended September 30,				Nine months ended September 30,
	2008		2007		2008		2007
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Revenue:
Trading	$	1,290,699	$	1,221,435	$	4,398,622	$	3,671,781
Retailing		6,157,933		10,672,051		25,345,702		38,277,866

	$	7,448,632	$	11,893,486	$	29,744,324	$	41,949,647

	Three months ended September 30,						Nine months ended September 30,
	2008			2007			2008			2007
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Income (loss) before provision for income tax
Trading	$	47,580		$	389,176		$	442,909		$	345,993
Retailing		(1,101,299	)		(970,715	)		(1,216,147	)		(625,655	)

	$	(1,053,719	)	$	(581,539	)	$	(773,238	)	$	(279,662	)

	September, 30, 2008		December 31, 2007
	(Unaudited)		(Note 2)

Total assets:
Trading	$	1,521,848	$	6,446,113
Retailing		8,692,831		5,321,280

	$	10,214,679	$	11,767,393

All of the Company’s revenue and assets are located in Hong Kong.

F-9

ASIAMART, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(Unaudited)

NOTE 9 – NET LOSS PER SHARE

The following table sets forth the computation of basic and diluted net loss per share for the three and nine months ended September 30, 2008 and 2007:

	Three months ended September 30,						Nine months ended September 30,
	2008			2007			2008			2007
Numerator:
- Net loss in computing basic and diluted net income per share	$	(1,042,721	)	$	(499,944	)	$	(849,488	)	$	(410,873	)

Denominator:
- Weighted average ordinary shares outstanding in computing basic net loss per share		24,744,177			24,598,344			24,744,177			24,598,415
- Weighted average incremental warrant shares outstanding		-			-			-			-

Total weighted average shares outstanding in computing diluted net loss per share		24,744,177			24,598,344			24,744,177			24,598,415

Basic net loss per share	$	(0.04	)	$	(0.02	)	$	(0.03	)	$	(0.017	)

Diluted net loss per share	$	(0.04	)	$	(0.02	)	$	(0.03	)	$	(0.017	)

NOTE 10 – LEGAL PROCEEDINGS

On or about November 5, 2007, Everest Special Situations Fund, LP filed a Complaint in the Supreme Court for the State of New York, County of New York (the “Court”), alleging claims for fraud and breach of contract related to a Securities Purchase Agreement entered into with the Company on October 6, 2006. The Company filed a Motion to Dismiss the Complaint, which was submitted on March 26, 2008. The Court granted the Motion and dismissed the action pursuant to an Order entered on April 8, 2008. Everest Special Situations Fund, LP filed a Motion for Reargument of the Motion to Dismiss the Complaint in May 2008. On June 24, 2008, the Court entered an order partially granting and partially denying the Motion for Reargument. The Court ruled that Everest Special Situations Fund, LP could amend the complaint to assert a claim for rescission, but that order dismissing claims for damages was affirmed.

F-10

ASIAMART, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(Unaudited)

NOTE 11 – SUBSEQUENT EVENTS

Management Service Agreements:

On October 28, 2008, three of the subsidiaries of Asiamart, Inc. (the “Company”) entered into a series of Management Service Agreements (the “Agreements”) with Best Paramount Industrial Limited (“Best Paramount”) whereby they will act as a service provider to Best Paramount. The Company shall provide technical, commercial and operational management for Best Paramount. Under the terms of the Agreements, the scope of services provided by the Company includes, but is not limited to, accounting, human resources, administrative, marketing and sales consultancy, retail operation and inventory management. The Company shall be in charge of running Best Paramount’s premises and will provide its employees to staff Best Paramount’s operation. Best Paramount shall be responsible for paying its own rent, cost of sales, commissions to travel agents and taxes. The Company shall be responsible for paying all other expenses of the operation, including, but not limited to, advertising, utilities, insurance, salaries, transportation, cleaning and administrative (“Actual Costs”) on the behalf of Best Paramount. Best Paramount shall reimburse the Company for the Actual Costs, and in addition pay Company a 5% mark-up of such Actual Costs as consideration for the Company’s services. Under the terms of the Agreements, the Company shall also have the discretion to charge Best Paramount a discretionary fee, to be negotiated in detail in three to six months pursuant to actual performance of the operation. The Agreements may be terminated by mutual agreement, by either party giving the other written notice in the event of material breach, or by giving a 60-day prior written notice without cause.

Change in Business Model:

The Company plans to change its business model from being an outlet and discount shopping center operator to a retail service provider. The Company foresees a significant slowdown in retail sales, anticipates a reduction in tourist visits from mainland China to Hong Kong, and a reduction in spending per tourist, partly as a result of adverse changes in travel policy and the domestic economic environment in China. During the third quarter of 2008, the revenue of the Company significantly decreased due to these trends. In addition in the period leading up to and during the Beijing 2008 Olympic Games, the Chinese government restricted outbound travel visas, and this policy has not been reversed following the Olympics. Further, management believes that the current ongoing global financial crisis is discouraging tourist visits to Hong Kong. In the present economic climate, management believes that the Company is not likely to be able to sustain profitability with operation of its retail outlets in their current form, and believes that changing its business model will be in its best interest. Management believes the Company faces fierce competition from other local retailers seeking to make sales to a dwindling group of tourists, which is causing a trend toward lower profits. The Company is considering the closure of its two outlets in the next few months and shifting its focus to provide management services to other retail operators. Best Paramount is reputed to be an experienced retail operator that sells a wide variety of appealing items that attract tourists, including, but not limited to, cosmetics, electronics, jewelry and branded watches, and it also has the advantage of securing an excellent location in the coveted Emax within Hong Kong International Trade and Exhibition Center, an attractive location with heavy foot traffic from visiting tourists. The Company believes its new direction will position the Company to produce a more stable stream of income and achieve profitability for the Company and its shareholders.

F-11

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

Note Regarding Forward-Looking Statements

This quarterly report on Form 10-Q and other reports filed by Registrant from time to time with the Securities and Exchange Commission (collectively the “Filings”) contain or may contain forward-looking statements and information that are based upon beliefs of, and information currently available to, Registrant’s management as well as estimates and assumptions made by Registrant’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used in the filings, the words “anticipate”, “believe”, “estimate”, “expect”, “future”, “intend”, “plan”, or the negative of these terms and similar expressions as they relate to Registrant or Registrant’s management identify forward-looking statements. Such statements reflect the current view of Registrant with respect to future events and are subject to risks, uncertainties, assumptions, and other factors (including the risks contained in the section of this report entitled “Risk Factors”) relating to Registrant’s industry, Registrant’s operations and results of operations, and any businesses that Registrant may acquire. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.

Although Registrant believes that the expectations reflected in the forward-looking statements are reasonable, Registrant cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Registrant does not intend to update any of the forward-looking statements to conform these statements to actual results. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this quarterly report, which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations, and prospects.

In this Form 10-Q, references to “we”, “our”, “us”, “our company”, “Asiamart” or the “Registrant” refer to Asiamart, Inc., a Delaware corporation.

Overview

We operate outlet and discount shopping centers catering principally to tourists visiting Hong Kong from other parts of mainland China. We offer tourists discount prices on selected international brands in a wide range of merchandise categories such as consumer electronics, cosmetics, watches, dietary supplements, health care products and optical instruments, producing high sales volume and rapid inventory turnover.

We own and operate five subsidiaries, of which two are trading subsidiaries. The two trading subsidiaries, Raffle Limited and Sure Profits Trading Limited, engage in the import and local distribution of consumer electronic products. We believe we have established a reputation of reliable, quality service among our business and retail customers. We source our products from suppliers worldwide in order to provide our customers with an extensive variety of products at competitive prices. We have also established a comprehensive quality assurance and service protocol. Our customers are entitled to a full refund within 180 days of their purchase of a product if the product does not meet their satisfaction. In cases where there is a manufacturer’s warranty, during the warranty period our customers can bring their products directly to manufacturers in China, including Hong Kong and Macau, for repairs. We mark the receipts for our products with a special symbol to denote our guarantee that the product is authentic and sourced directly from the manufacturer or an authorized dealer.

Over the past few years, our goal has been the development of our retail business with a focus on international tourists in Hong Kong and we became one of the largest retail enterprises in this market. Under the weight of a global recession, management has re-evaluated the Company’s current business model and operation. In the near future, the Company foresees a significant slowdown in retail sales and fierce competition from other retailers, anticipates a reduction in tourist visits from mainland China to Hong Kong, and a reduction in spending per tourist, partly as a result of adverse changes in travel policy and the domestic economic environment in China.

During the third quarter of 2008, the revenue of the Company significantly decreased due to the above-mentioned trends. In addition in the period leading up to and during the Beijing 2008 Olympic Games, the Chinese government restricted outbound travel visas, and this policy has not been reversed following the Olympics. Further, management believes that the current ongoing global financial crisis is discouraging tourist visits to Hong Kong. In the present economic climate, management believes that the Company is unlikely to sustain profitability with operation of its retail outlets in their current form, and believes that changing its business model will be in its best interest. Management believes the Company faces heavy competition from other local retailers seeking to make sales to a dwindling group of tourists, which is causing a trend toward lower profits. Retailers that wish to stay afloat have to compete fiercely by drastically marking down their prices, lowering their margins, and offering higher commissions to travel operators. Some of our competitors are in a better position to weather the economic storm because they have better locations with heavier foot traffic and attract a higher density of tourists. Management believes that our sales will not improve in the near future due to the difficult economic climate, the location of our outlets, and the intense competition surrounding our area. Therefore, the Company is considering the closure of its two outlets in the next few months and shifting its focus to provide management services to other retail operators.

The Company plans to change its business model from being an outlet and discount shopping center operator to a retail service provider. On October 28, 2008, three of the subsidiaries of the Company entered into a series of Management Service Agreements (the “Agreements”) with Best Paramount Industrial Limited (“Best Paramount”) whereby they will act as a service provider to Best Paramount at the Emax premises, a coveted location within Hong Kong International Trade and Exhibition Center with heavy foot traffic from visiting tourists. The Company shall provide technical, commercial and operational management for Best Paramount. Under the terms of the Agreements, the scope of services provided by the Company includes, but is not limited to, accounting, human resources, administrative, marketing and sales consultancy, retail operation and inventory management. The Company is also planning to set up a website to market the products on the internet. The Company shall be in charge of running Best Paramount’s Emax premises and will provide its employees to staff Best Paramount’s operation at the Emax location. Best Paramount shall be responsible for paying its own rent, cost of sales, commissions to travel agents and taxes. The Company shall be responsible for paying all other expenses of the operation, including, but not limited to, advertising, utilities, insurance, salaries, transportation, cleaning and administrative (“Actual Costs”) on the behalf of Best Paramount. Best Paramount shall reimburse the Company for the Actual Costs, and in addition pay Company a 5% mark-up of such Actual Costs as consideration for the Company’s services.

Under the terms of the Agreements, the Company shall also have the discretion to charge Best Paramount a discretionary fee, to be negotiated in detail in three to six months pursuant to actual performance of the operation. The Management Agreements may be terminated by mutual agreement, by either party giving the other written notice in the event of material breach, or by giving a 60-day prior written notice without cause. Best Paramount is reputed to be an experienced retail operator that sells a wide variety of appealing items that attract tourists, including, but not limited to, cosmetics, electronics, jewelry and branded watches, and it also has the advantage of securing an excellent location in the coveted Emax. The Company believes its new direction will position the Company to produce a more stable stream of income and achieve profitability for the Company and its shareholders.

Quarterly Results May Fluctuate

Our sales may be influenced by general economic cycles. A prolonged period of depressed consumer spending would have a material adverse effect on our profitability. Our business is also subject to some seasonality, with decrease in sales during the winter months due to decrease in travel and tourist activities, and increase in sales during the summer months due to an increase in such activities. Due to the swing of the economy and the seasonality of our sales, our quarterly results will fluctuate, perhaps significantly. Our operating results can also be impacted by the supply of products from suppliers caused by manufacturing delays or delivery issues. Additionally, the offering of new products or utilization of new sales channels can also cause our quarterly operating results to fluctuate. For a discussion of these and other risks related to economic cycles and seasonality of our business, see “Risk Factors” in Part II below.

Critical Accounting Policies and Estimates

Management’s discussion and analysis of our financial condition or plan of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make 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 as well as the reported net sales and expenses during the reporting periods. We evaluate our estimates and assumptions on an ongoing basis. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are described in Note 2 to our consolidated financial statements, we believe that the following accounting policies are the most critical to assist you in fully understanding and evaluating our reported financial results.

Revenue recognition. Revenue of the Company includes sales and referral income. Referral income is derived from referring our customers to other non-directly competitive shops. Sales and referral income are recognized when the following four revenue criteria are met: persuasive evidence of an arrangement exists, delivery has occurred, the selling price is fixed or determinable, and collectability is reasonably assured. Sales revenue is recognized net of sales discount and the actual returns at the time when the merchandise is sold to the customer. Based on historical experience, the management estimates that sales returns are immaterial and has not made allowance for estimated sales returns. Referral income is the income derived from referring customers to other non-directly competitive duty-free shops. The Company recognized referral income according to the number of visitors referred during the financial period.

Accounts receivable. Accounts receivable consist primarily of trade receivables and amounts due from banks for customer credit card transactions. Accounts receivable are recognized and carried at the original invoiced amount less an allowance for any uncollectible accounts. Management reviews and adjusts this allowance periodically based on historical experience, current economic climate as well as its evaluation of the collectability of outstanding accounts. We evaluate the credit risks of our customers utilizing historical data and estimates of future performance.

Inventories. We value inventory at the lower of cost or market, using the first-in, first-out or weighted average basis method, and regularly review the book value of discontinued product lines and SKUs to determine if these items are properly valued. If the market value of the product is less than cost, the management will write down the related inventory to the estimated net realizable value. The management regularly evaluates the composition of its inventory to identify slow-moving and obsolete inventories to determine if additional write-downs are required. This valuation requires significant judgment from management as to the salability of its inventories based on forecasted sales. It is particularly difficult to judge the potential sales of new products. Should the forecasted sales fail to materialize, it would have a significant impact on the company’s results of operations and the valuation of its inventory, resulting in a change to income in the period such determination is made.

Property and equipment. Property and equipment are recorded at cost less accumulated depreciation and amortization and impairment losses. Gains or losses on disposals are reflected as either a gain or a loss in the year of disposal. The cost of improvements that extend the life of plant, property and equipment are capitalized. These capitalized costs may include structural improvements, equipment and fixtures. All ordinary repair and maintenance costs are expensed as incurred. Property and equipment held-for-sale are measured at the lower of their carrying amount or fair value less cost to sell. Depreciation or amortization for financial reporting purposes is provided using the straight-line method over the estimated useful lives of the assets.

Impairment of long-lived assets. We account for impairment of property, plant and equipment and amortizable intangible assets in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which requires us to evaluate a long-lived asset for recoverability when there is an event or circumstance that indicates the carrying value of the asset may not be recoverable. An impairment loss is recognized when the carrying amount of a long-lived asset or asset group is not recoverable (when the carrying amount exceeds the gross, undiscounted cash flows from use and disposition) and is measured as the excess of the carrying amount over the asset’s (or asset group’s) fair value.

Results of Operations

Comparisons of Nine Months Ended September 30, 2008 Compared to Nine Months Ended September 30, 2007

Sales. For the nine months ended September 30, 2008, sales decreased 29% from $42 million to $29.7 million relative to the nine months ended September 30, 2007. The decrease in sales is attributable to both decreases in retail sales and luxury watches. The marked slowdown in sales is most evident in the last three months of the nine months ended September 30, 3008, coinciding with the pace of the aggressive breakdown of the global financial system. Management believes that we are entering into a period of uncertainty regarding future economic prospects, and as a result, consumer spending, particularly on discretionary items, and disposable income is in decline. Aside from a global recession, China also suffered from several of its own financial mishaps in 2008, such as the Sichuan earthquake and the nationwide tainted milk scandal. In the current economic climate, the Company experienced a significant slowdown in overall retail sales and the sale of our luxury watches has also heavily declined. For the first nine months of 2008, watch sales totaled $1.5 million as compared to $14 million for the same period in 2007. Of the remaining $28.2 million in sales for 2008, $23.8 million was generated by our retail segment (excluding watches), and $4.4 million was generated from our trading segment as compared to $24 million and $4 million, respectively, for 2007. The average spending per capita slightly increased from $73 for the nine months ended September 30, 2007 to $77 for the same period in 2008. During the nine months ended September 30, 2008 and especially during the third quarter of 2008, management believes overall group tour visits from China to Hong Kong declined dramatically and this trend is reflected in our sales. For a discussion of the factors affecting travel to Hong Kong during third quarter 2008, see section below on “Comparison of Three Months Ended September 30, 2008 and September 30, 2007”. Our retail sales (excluding watches) decreased due to decreased patronage from 332,412 customer visits in the nine months ended September 30, 2007 to 263,033 customer visits in the nine months ended September 30, 2008, a decrease of 20.9% for the corresponding periods. In the period leading up to and during the 2008 Beijing Olympic Games, the Chinese government restricted outbound travel visas which management believes had a big impact on tourists visiting Hong Kong. Management also believes that the current ongoing global financial crisis is discouraging tourist visits to Hong Kong.

Cost of Sales. Cost of sales decreased from $25.9 million for the nine months ended September 30, 2007 to $16.6 million for the nine months ended September 30, 2008, a decrease of 36% as compared to a 29% decrease in sales over the same comparable nine month periods in 2008 and 2007. The decrease of the cost of sales is in line with our decrease in sales. Our gross profit margin increased from 38% for the nine months ended September 30, 2007 to 44% for the same period this year. The increase of margin was mainly due to increased sales proportion of the higher margin retail products as compared to the luxury watch line.

Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased from $16.1 million for the nine months ended September 30, 2007 to $14.4 million for the same period in 2008. Our selling expenses slightly decreased from $9.9 million for the nine months period in 2007 to $9.1 million for the same period of 2008. As to the percentage of retail sales, our selling expenses increased to 57% for the nine months ended September 30, 2008 from 42% for the same period in 2007. The percentage of our selling expenses increased due to our special incentives to agents. In the first nine months of 2008, there were increased competition from other local retailers seeking to make sales to a dwindling group of tourists, and therefore we had to offer more attractive incentives to agents in order to encourage them to bring us business over other retailers. Salaries and other administrative expenses decreased from $6.2 million in the first nine month period of 2007, to $5.3 million for the same period of 2008. Salaries and other administrative expenses in 2008 were lower due to our continuous cost-cutting efforts and reduction in sales commissions to staff. During downturn of the economy when job cuts are increasing, we were able to offer slimmer commissions to our staff and still be able to retain talent.

Other Income. Other income primarily represents the gain on the exchange rate from converting RMB received from customers to Hong Kong Dollars and amortization expenses on the debt discount. The total of other income increased from a net expense of $0.2 million for the nine months ended September 30, 2007 to net income of $0.5 million for the same period in 2008.

Comparison of Three Months Ended September 30, 2008 and September 30, 2007.

Sales. For the three months ended September 30, 2008, sales decreased 37% from $11.9 million to $7.4 million relative to the three months ended September 30, 2007. During the third quarter of 2008, management believes that our revenue significantly decreased due to several domestic factors affecting travel, such as the Beijing Olympics in August and the Chinese tainted milk scandal in September. Instead of visiting Hong Kong, we believe that many tourists from other parts of mainland China either opted to travel to Beijing to join the festivity of the Olympics in August or chose to stay home and watch the Olympics on television. The Chinese government also restricted outbound travel visas in the period leading up to and during the Olympics which further discouraged outbound travel and led to fewer tourists visiting Hong Kong. We postulate that the tainted milk scandal that unraveled early September 2008 which caused a nationwide panic in mainland China also caused many tourists, especially those with children, to opt out of traveling to stay close to home. For the three months ended September 30, 2008, we faced especially strong competition from other retailers around our area, which management believes pulled away a lot of our business. These competitors have the advantage of having their shopping outlets in better locations with a higher density of tourists and heavier foot traffic; they are also willing to drastically mark down their prices, lower their margins, and offer higher commissions to travel operators in order to compete for tourist business. For the three months ended September 30, 2008, there was such a sharp decline in retail sales that we decided to consolidate the operation of our two outlets. During this period, our primary outlet would be open full time and our secondary outlet would only be open when the primary outlet has reached full capacity. We asked our staff to take annual leaves and the staff that resigned were not replaced since we had enough staff to rotate between the two outlets. By consolidating our operation during third quarter 2008, we were able to cut down on employee salaries and utilities expenses to save costs. Management believes that our sales will not improve in the near future due to the difficult economic climate, the location of our outlets, and the fierce competition surrounding our area. Considering these trends, management decided not to renew the leases of our outlets when they expire in the next few months, and to switch business direction from being a retail operator to a service provider. For the three months ended 2008, watch sales totaled $0.4 million as compared to $1 million for the same period in 2007. Of the remaining $7 million in sales for 2008, $5.7 million was generated by our retail segment (excluding watches), and $1.3 million was generated from our trading segment as compared to $8.5 million and $2.4 million, respectively, for 2007. The average spending per capita decreased from $77 for the three months ended September 30, 2007 to $75 for the same period in 2008, a decrease of 2.7% mainly due to more cautious spending by tourists. Retail sales (excluding watches) decreased also due to decreased patronage from 112,886 customer visits during the three months ended September 30, 2007 to 60,083 customer visits during the three months ended September 30, 2008, a decrease of 47% for the corresponding periods; and such significant decrease in the number of tourists is reflected in the considerable decrease of our sales during the third quarter of 2008.

Cost of Sales. Cost of sales decreased from $5.7 million for the three months ended September 30, 2007 to $4.6 million for the three months ended September 30, 2008, a decrease of 20% as compared to a 37% decrease in sales over the same comparable quarters in 2008 and 2007, in line with the decrease in our sales. Our gross profit margin decreased from 51% for the three months ended September 30, 2007 to 38% for the same period this year. The decrease in margins was mainly due to our competitive pricing strategy which was required due to fierce competition from other retailers. Due to the economic downturn and fewer tourists in the third quarter of 2008, we took aggressive measures to compete for sales revenue from a diminishing group of tourists with strategies such as paying higher commissions to agents, promotion and lower prices, and this led to a decrease of our margins.

Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased from $6.8 million for the three months ended September 30, 2007 to $4 million for the same period in 2008. Our selling expenses decreased from $3.3 million for the third quarter in 2007 to $2.3 million for the same period in 2008. Management decided to cut down on advertising spending during this period in order to save costs. As to the percentage of retail sales, our selling expenses increased to 37% for the three months ended September 30, 2008 from 33% for the same period in 2007. The percentage of our selling expenses increased due to the increase of our incentives to agents. As above-mentioned, since all our competitors are offering greater incentives to agents in order to compete for diminishing tourist business, we had to keep up with more attractive incentives as well to compete in this difficult retail climate. Salaries and other administrative expenses decreased from $3.5 million in the third quarter of 2007 to $1.7 million for the same period of 2008. Salaries and other administrative expenses in 2008 were lower due to our continuous cost-cutting efforts in 2008. Also, with fewer employment opportunities during economic slowdown, we were able to retain our staff even with fewer incentives.

Other Income. Other income primarily represents the gain on the exchange rate from converting RMB received from customers to Hong Kong Dollars and amortization expenses on the debt discount. The total of other income slightly decreased from $0.11 million for the three months ended September 30, 2007 to less than $0.08 million for the same period in 2008.

Business Segments

Our operating businesses are structured and managed separately, according to the nature of their operations and the products and services they provide. We identify our reportable segments based on management responsibility, and these reportable segments are (i) the trading segment (“Trading Segment”) and (ii) the retail segment (“Retail Segment”). Information on segments and reconciliations to income before income taxes are described in Note 8 to our consolidated financial statements and is incorporated herein by reference.

Trading Segment

Segment sales and profit for our Trading Segment were as follows:

Sales revenues from external customers in the Trading Segment during the first nine months of 2008 increased 20%, from $3.7 million for the nine month period ended September 30, 2007 to $4.4 million for the same period in 2008. Our sales revenue increased because we were able to take advantage of lower product prices with purchases paid with cash.

Total segment profit as a percentage of sales for the Trading Segment was 10% for the nine months period ended September 30, 2008, as compared to 9% for the same period in 2007.

Retail Segment

Segment revenue and profit for the Retail Segment, were as follows:

Sales revenues from external customers in the Retail Segment during the first nine months of 2008 decreased 34%, from $38.3 million for the nine months period ended September 30, 2007 to $25.3 million for the same period in 2008. The decrease in revenues is attributed to more cautious spending from tourists with the downturn of the economy.

Total segment loss as a percentage of sales for the Retail Segment was 4.8% and 1.6% in loss for the nine month period ended September 30, 2008 and 2007, respectively.

Liquidity and Capital Resources

Cash Flows. For the nine months period ended September 30, 2008, the net cash flow drawn by operations was $805,166, which was due to pre-payment to vendors for new models of their products. Net cash flow used in investing activities in the third quarter of 2008 was $1,299, which was minimal.

Net cash flow used in financing activities was $489,303 mainly due to the repayment of capital lease arrangements and payments for installment loans.

We believe that our existing cash balances and anticipated cash flows from operations will be sufficient to meet our operating and capital requirements for at least the next twelve months. There is no assurance, however, that we will not need to raise additional equity or debt financing within this period. We also may require additional capital for other purposes not presently contemplated. If we are unable to obtain sufficient capital, we could be required to curtail our expenditures, including capital expenditures for property and equipment, which could potentially harm our business.

Contractual Obligations

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

The following tables summarize our contractual obligations as of September 30, 2008, and the effect that these obligations are expected to have on our liquidity and cash flows in future periods.

	Payments Due by Period
	Total		Less than 1 year		1-3 Years		4-5 Years		5 Years +
	(in thousands of dollars)
Contractual Obligations:

Total Indebtedness	$	61	$	61	$	0		0	$	0

Capital Lease Obligations		92		91		1		0		0

Operating Leases		457		451		6		0		0

Total Contractual Obligations:	$	610	$	603	$	7	$	0	$	0

Total indebtedness consists of installment loans from financial institutions in Hong Kong.

Capital lease amounts primarily consist of vehicles and equipment to support our retail operations.

Operating lease amounts include minimum lease payments under our non-cancelable operating leases for office facilities, as well as limited computer and office equipment that we utilize under certain lease arrangements. The leases for our shopping centers are about to expire in the next few months. As previously discussed, the Company is considering the closure of its two outlets at the expiration of its lease agreements and shifting its focus to provide management services to other retail operators.

Other purchase obligation amounts include minimum purchase commitments for advertising and other goods and services that were entered into through our ordinary course of business.

Off-Balance Sheet Arrangements

We have not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that would be considered material to investors.

Effects of Inflation

We are subject to price risks arising from price fluctuations in the market prices of the products that we sell. Price risks are managed by each business segment through productivity improvements and cost-containment measures. Management does not believe that inflation risk is material to our business or our consolidated financial position, results of operations, or cash flows.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Derivative Financial Instruments

We do not use derivative financial instruments in our investment portfolio and do not have any foreign exchange contracts. Our financial instruments consist of cash and cash equivalents, trade accounts receivable, accounts payable, and long-term obligations. We consider investments in highly-liquid instruments purchased with a remaining maturity of 90 days or less at the date of purchase to be cash equivalents.

Interest Rates

Our exposure to market risk for changes in interest rates relates primarily to our short-term investments and short-term obligations; thus, fluctuations in interest rates do not have a material impact on the fair value of these securities. At September 30, 2008, we had approximately $0.6 million in cash and cash equivalents. A hypothetical 5% increase or decrease in either short-term or long-term interest rates would not have a material impact on our earnings or loss, or the fair market value or cash flows of these instruments.

Foreign Exchange Rates

We generally transact business in Hong Kong Dollars, and we do not have significant exposure to exchange rates between and among the U.S. Dollar or Chinese Renminbi (RMB). Since 1983, the Hong Kong Dollar has been pegged to the U.S. Dollar and currently has an exchange rate of 7.8 Hong Kong Dollars for each U.S. Dollar. Our stores typically hold insignificant amounts of U.S. Dollars and RMB, i.e., 100,000 to 150,000 RMB, and $2,000 to $3,000 in U.S. Dollars. However, see the risk factor in Part II below entitled “Fluctuation in the value of RMB and the Hong Kong Dollar relative to other currencies may have a material adverse effect on our business and/or an investment in our shares.”

ITEM 4. CONTROLS AND PROCEDURES

Based on an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of September 30, 2008, our Chief Executive Officer and Chief Financial Officer believe that our disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) of the Exchange Act) are effective to ensure that information required to be disclosed by us in this report is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended) during the quarter ended September 30, 2008 that have been materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Other than the proceeding described below, we are not currently involved in any material legal proceedings, nor have we been involved in any such proceeding that has had, or may have, a significant effect on us. We are not aware of any material legal proceedings pending against us.

Everest Special Situations Fund, LP v. Asiamart, Inc. (Index No. 603666/07). On or about November 5, 2007, Everest Special Situations Fund, LP filed a Complaint in the Supreme Court for the State of New York, County of New York (the “Court”), alleging claims for fraud and breach of contract related to a Securities Purchase Agreement entered into with the Company on October 6, 2006. The Company filed a Motion to Dismiss the Complaint, which was submitted on March 26, 2008. The Court granted the Motion and dismissed the action pursuant to an Order entered on April 8, 2008. Everest Special Situations Fund, LP filed a Motion for Reargument of the Motion to Dismiss the Complaint in May 2008. On June 24, 2008, the Court entered an order partially granting and partially denying the Motion for Reargument. The Court ruled that Everest Special Situations Fund, LP could amend the complaint to assert a claim for rescission, but the order dismissing claims for damages was affirmed.

ITEM 1A. RISK FACTORS

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

Risks Relating to Our Business

Our sales are influenced by general economic cycles. A prolonged period of depressed consumer spending would have a material adverse effect on our profitability.

Retail is a cyclical industry that is dependent upon the overall level of consumer spending. The global economy is currently experiencing a downturn. Retail tends to decline in periods of uncertainty regarding future economic prospects, when consumer spending, particularly on discretionary items, and disposable income decline. Many factors affect the level of consumer spending in the retail industry, including, among others: prevailing economic conditions, levels of employment, salaries and wage rates, energy costs, interest rates, the availability of consumer credit, taxation and consumer confidence in future economic conditions. During periods of economic uncertainty, we may not be able to maintain or increase our sales or maintain or improve our margins from operations as a percentage of net sales. A prolonged period of depressed consumer spending would have a material adverse effect on our profitability.

We face intense competition and operate in an industry with limited barriers to entry, and some of our competitors may be better positioned to capitalize on the rapidly growing retail sector in our geographic area.

The retail sector in our geographic area is rapidly evolving and intensely competitive. Many of our current and potential competitors have longer operating histories, larger customer bases, greater brand recognition and significantly greater financial, marketing, technical, management and other resources than we do. In addition, some of our competitors have used, and may continue to use, aggressive pricing or carry a larger inventory than we do. We expect that competition will further intensify in the future. Because barriers to entry are limited, current and new competitors may open retail locations that will compete with ours.

We believe that the primary competitive factors in the retail sector include brand recognition, price, shipping offers, product selection, product availability and customer service. We currently compete against other retailers within the specialized niche of travel retail in Asia.

We may also experience significant competitive pressure if any of our suppliers were to initiate their own retail operations in the locations we serve. Since our suppliers have access to merchandise at very low costs, they could sell products at lower prices and maintain a higher gross margin on their product sales than we can. In this event, our current and potential customers may decide to purchase directly from these suppliers. Increased competition from any supplier capable of maintaining high sales volumes and acquiring products at lower prices than us could significantly reduce our market share and adversely impact our financial results.

We compete not only for customers, but also for favorable product allocations from product manufacturers. Some of our competitors could enter into exclusive distribution arrangements with our suppliers, deny us access to their products and devote greater resources to marketing and promotional campaigns.

The seasonality of our business places increased strain on our operations.

We generally experience an increase in sales during the summer months, as travel and tourist activity increases. On the other hand, we generally experience a decrease in sales during the winter months when there are fewer travelers. In addition, if we are unable to meet customer demand for our products during these peak periods, our revenues and future growth could be adversely affected. Furthermore, we may be unable to adequately staff our retail outlets and warehousing operations during these periods.

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

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

seasonality of the business;

price competition from other retailers;

general price increases by suppliers and manufacturers;

our ability to maintain and expand our distribution relationships;

increases in the cost of advertising;

unexpected increases in shipping costs or delivery times;

our ability to build and maintain customer loyalty;

the introduction of new services, products and strategic alliances by us and our competitors;

the success of our brand-building and marketing campaigns;

government regulations, changes in tariffs, duties, and taxes;

our ability to maintain, upgrade and develop our retail stores;

changes in our store leasing costs;

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

general economic conditions as well as economic conditions specific to the retail sector.

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

Our efforts to successfully develop private label brands are costly and may not generate corresponding revenues.

Developing private label brands is an important part of our strategy to build future revenue and achieve higher profit margins. Accordingly, we intend to continue to invest in the development of our own brand of products in selected categories. These initiatives require significant expenditures. If we are unsuccessful in our development efforts, we may not be able to recover these expenses or increase our revenues or margins.

To promote our private label brands in response to competitive pressures, we may increase our marketing budget or otherwise increase our financial commitment to creating and maintaining brand loyalty among our customers. We cannot be certain that our advertising efforts will be a successful means of attracting customers or that this measure of resource allocation will correspond with providing additional revenues. If we fail to promote and maintain our brand, or if we incur excessive expenses while attempting to promote and maintain our brand, our business may be adversely affected.

We depend on our relationships with tour companies to bring customers to retail locations, and losing these sources would adversely affect our revenues and financial results.

We attract retail traffic by entering into arrangements with tour companies who schedule shopping tours with their customers. In order to maintain a flow of tourist traffic, we must continually monitor and maintain our relationships with the tour companies with which we do business. If the tour companies modify or terminate their relationship with us, we could lose customers, and traffic in our retail stores could decrease.

If we fail to offer a broad selection of products and brands that customers find attractive, our revenues could decrease.

In order to meet our strategic goals, we must successfully offer, on a continuous basis, a broad selection of appealing products that reflect our customers’ preferences. The taste of consumers is subject to frequent, significant and sometimes unpredictable changes. To be successful in our line of business, our product offerings must be broad, deep in scope and affordable to a wide range of consumers whose preferences may change regularly. We cannot predict with certainty that we will be successful in offering products that meet these requirements. If our product offerings fail to satisfy our customers’ taste or respond to changes in customers’ preferences, our revenues could decline. In addition, any failure to offer products that satisfy customers’ preferences could allow our competitors to gain market share.

If we do not successfully optimize and operate our retail locations, our business could decline.

If we do not successfully operate our retail locations, this could significantly limit our ability to meet customer demand. Because it is difficult to predict demand, we may not manage our facilities optimally, which may result in excess or insufficient inventory, and distribution capacity. Failure to optimize inventory will increase our net shipping cost by requiring us to make long-distance shipments or partial shipments from different locations. As we continue to add warehouse capability or add new businesses with different inventory management requirements, operating our inventory management system becomes more challenging and there can be no assurance that we will be able to operate our system effectively.

We have limited control over the actions of our distributors, retailers or their vendors.

We rely on distributors for the sale of our branded products, and those distributors maintain inventory and prepare merchandise for shipment to retailers and individual customers. We have limited control over the products that our distributors purchase or keep in stock, and our arrangements with our distributors do not require them to set aside any amount of inventory to satisfy demand. Our distributors may not accurately forecast the products that will be in high demand. In addition, we have limited control over their sales process, shipping and order processing procedures. Although we have not experienced disruptions in the past, and we do not presently foresee possible disruptions in the near future, a widespread inability of our distributors to successfully supply our branded products, if it occurred, would substantially harm our business.

We are dependent upon third parties for significant functions, and if these functions or operations are interrupted for any significant period of time or if we experience other problems with our third-party service providers, our business and results of operations would be substantially harmed.

In addition, we rely upon third party tour operators for a large portion of our customer flow. As a result, we are subject to cancellations and disruptions due to factors that are beyond our control, including employee strikes and inclement weather. Further, increased fuel costs may adversely affect tourist traffic. If cooperating tour companies were to experience cancellations and disruptions, this could negatively affect our sales revenue.

We rely on foreign sources for the supply of many of the products we sell.

We rely on long term supply relationships with several manufacturers in the PRC, and in the future may rely upon supply relationships with other foreign sources. Regional disruptions relating to political or environmental conditions could cause shipping delays, which could interfere with our ability to supply our customers and harm our financial results. A significant breakdown in the manufacturing process or among suppliers could result in product shortages, and our revenues could decline due to the loss of these suppliers and manufacturers.

Our ability to manage our future growth is uncertain.

Our corporate growth strategy aims to among other things, further develop our distribution channels, expand our merchandise offerings, leverage our customer database, reach new customer segments, and increase traffic. In pursuing these objectives, the resulting strain on our managerial, operational, financial and other resources could be significant. Success in managing such expansion and growth will depend, in part, upon the ability of senior management to manage effectively. Any failure to manage the anticipated growth and expansion could have a material adverse effect on our business.

Our operations are based, to a certain extent, on the successful integration of certain supply chain and operating technologies. Our inability to integrate these technologies may negatively impact our ability to effectively manage inventory, and may harm our business and operating results.

We rely on certain hardware and software systems, purchased from a third-party and customized by our technicians, to perform vital functions with respect to our operations. In addition, we rely upon hardware and software systems for warehouse management. Our inability to properly operate, implement or integrate these technologies will negatively impact our product supply chain and may harm our business and operating results.

Increased product returns will decrease our revenues and impact profitability.

We make allowances for product returns in our financial statements based on historical return rates. In order to keep product returns low or within our estimates, we continuously monitor product purchases and returns and may change our product offerings based on the return rates. If our actual product returns significantly exceed our allowances for returns, our revenues and profitability could decrease, especially as we expand into new product categories. In addition, because our allowances are based on historical return rates, the introduction of new merchandise categories or new products, changes in our product mix or other factors may cause actual returns to increase. Any new policies intended to reduce the number of product returns may result in customer dissatisfaction and fewer repeat customers.

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

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

fund more rapid expansion;

acquire or expand into new retail locations, warehousing facilities or office space;

maintain, enhance and further develop our information technology systems;

develop new product categories or enhanced services;

fund acquisitions; or

respond to competitive pressures.

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

The loss of key members of our executive management could negatively affect our business.

We depend on the continued services and performance of our executive management and other key personnel, in particular, Alex Chun Shan Yue, our Chief Executive Officer, and Danny Sau Kwong Leung, our Chief Operating Officer. The loss of either of these executive officers or any other key persons could harm our business.

We may be adversely affected by the financial health of the retail industry in Asia.

We are subject to broad economic factors that drive consumer spending and maintain the health of the retail industry in Asia. These factors include, but are not limited to, unemployment rates, consumer credit levels, consumer confidence, and household discretionary income. If any of these or other economic factors should erode, consumer spending may fall and the Asian retail industry may suffer a downturn. Consequently, our earnings would be adversely impacted by lower sales.

We may be adversely affected by the trend towards retail trade consolidation.

As we pursue our retail distribution strategy, our sales will be contingent upon favorable wholesale prices that we can obtain from retailers. If retailers merge or the retail industry consolidates, the larger, combined retailers will have significant pricing power because of the sheer size of their retail networks. As a result, we may not be able to obtain reasonable prices for our products. Consequently, our margins may decline and our results of operations may be reduced. There can be no assurance that we will be able to obtain reasonable wholesale prices for our products under a scenario where retailers merge and consolidate into larger entities.

Risks Related to Doing Business in China

Adverse changes in economic and political policies of the PRC government could have a material adverse effect on the overall economic growth of China, which could adversely affect our business.

All of our business operations are currently conducted in Hong Kong, under the jurisdiction of the PRC government. Accordingly, our results of operations, financial condition and prospects are subject to a significant degree to economic, political and legal developments in China. China’s economy differs from the economies of most developed countries in many aspects, including with respect to the amount of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. While the PRC economy has experienced significant growth in the past 20 years, growth has been uneven across different regions and among various economic sectors of China. The PRC government has implemented various measures to encourage economic development and guide the allocation of resources. Some of these measures benefit the overall PRC economy, but may also have a negative effect on us. For example, our financial condition and results of operations may be adversely affected by government control over capital investments or changes in tax regulations that are applicable to us. Since early 2004, the PRC government has implemented certain measures to control the pace of economic growth. Such measures may cause a decrease in the level of economic activity in China, which in turn could adversely affect our results of operations and financial condition.

Abrupt and forceful regulation by governmental authorities may impose costly requirements on our business, which could have a material adverse effect on our business and overall financial results.

Our industry, particularly the market segment dealing with inbound visitors from China, is relatively new, and until recent times it has been left unregulated. Governmental authorities in the PRC and in Hong Kong may impose regulations designed to protect consumers, or even to curtail what the PRC government might view as a loss of domestic retail sales, import duties and tax revenue. Changes in policies affecting the tourist retail industry may be enacted abruptly without transitional periods that may force us to make rapid and costly adjustments in our operations in an effort to comply. It is not always possible for management to anticipate changes in government policies, or the impact of those changes to our business.

On June 15, 2007, the Hong Kong government implemented its “Refund Protection Scheme for Mainland China’s Inbound Tour Group Shoppers,” enacted by the Travel Industry Council of Hong Kong. The Refund Protection Scheme is aimed at protecting the consumer rights of mainland China’s tourist visitors to Hong Kong, and improving the service standards in the industry as a whole.

Under the Refund Protection Scheme, retailers who intend to arrange for mainland China's Inbound group visitors must register with the Travel Industry Council and one of the conditions of registration is that registered retailers shall offer a six-month, full refund protection to mainland China's inbound group visitors. As a part of the conditions of the Refund Protection Scheme, registered retailers must assist tour operators and inbound visitors seeking refunds. Registered retailers who fail to comply may be subject to penalties imposed by the Travel Industry Council. We have registered with the Travel Industry Council under the new rules and offer a 180-day refund policy to our customers.

Our operations may be negatively impacted by these heightened standards and implementation of the new rules.

Fluctuation in the value of RMB and the Hong Kong Dollar relative to other currencies may have a material adverse effect on our business and/or an investment in our shares.

The value of RMB and the Hong Kong Dollar against the U.S. Dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions. Although the exchange rate between RMB and the U.S. dollar has been effectively pegged by the People’s Bank of China since 1994, and the rate between the Hong Kong Dollar has been pegged to the U.S. dollar since 1983, there are no assurances that these currencies will remain pegged to the U.S. Dollar, especially in light of the significant international pressure on the Chinese government to permit the free floatation of the RMB, which would result in fluctuations in the exchange rate between the RMB and the U.S. Dollar, and other geopolitical factors if the RMB were to increase in value against the dollar, for example, mainland Chinese consumers would experience a reduction in the relative prices of goods and services, which may translate into a positive increase in sales. On the other hand, a decrease in the value of the RMB against the dollar would have the opposite effect. In addition, a strengthening of the U.S. Dollar against the Hong Kong Dollar, if it occurred, would adversely affect the value of your investment.

We face risks related to health epidemics and other outbreaks.

Our business could be adversely affected by the effects of SARS and other epidemics or outbreaks. China reported a number of cases of SARS in the spring of 2003, which severely impacted the tourism industry for many months. Any prolonged reoccurrence of SARS or other adverse public health developments in China could negatively impact tourism in Hong Kong, which would have a material adverse effect on our business operations. For instance, health or other government regulations adopted in response may require temporary travel restrictions, or even closure of our facilities or offices. Such closures would severely disrupt our customer flow and business operations, and adversely affect our results of operations. We have not adopted any written preventive measures or contingency plans to combat any future outbreak of SARS or any other epidemic.

We face risks related to earthquakes and other natural disasters.

Our business could be adversely affected by the effects of earthquakes and other natural disasters. In May 2008, China reported an earthquake measuring 7.9 on the Richter scale in Sichuan Province, a mountainous region in Western China. Earthquakes and other natural disasters are especially catastrophic in China due to the poor infrastructure system. Any reoccurrence of earthquakes or other natural disasters in China could negatively impact tourism in Hong Kong, which would provide some challenges on our business. Earthquakes and natural disasters cause ripples in the economy, and discourage tourism and traveling in general, which could reduce the number of tourists visiting Hong Kong and our customer flow. We have not adopted any written preventive measures or contingency plans to combat any future earthquakes or any other natural disasters.

Risks Related to an Investment in Our Securities

We will need additional capital, which may not be accessible on attractive terms or at all.

We anticipate that we will need to raise additional funds in the future through public or private financing. Our ability to obtain additional financing will be subject to a number of factors, including market conditions, our operating performance and the terms of our existing indebtedness. The terms of our senior convertible debentures limit our ability to incur additional debt because any such additional debt we incur, other than a limited senior credit facility, must be contractually subordinated, as to payment and liquidation, to the payment in full of the debentures. We cannot assure you that we will be able to raise additional funds on terms favorable to us or at all. If we raise additional funds through the sale of equity or convertible debt securities, your ownership percentage of our common stock will be reduced. In addition, any such transactions may dilute the value of our common stock. We may have to issue securities that have rights, preferences and privileges senior to our common stock. The terms of any additional indebtedness may include restrictive financial and operating covenants that would limit our ability to compete and expand. Our failure to obtain any required future financing could materially and adversely affect our financial condition.

Conversion of the debentures into shares of our common stock will dilute the ownership interests of existing stockholders, including holders who will have already converted their debentures.

The conversion of some or all of the debentures into our shares of our common stock will dilute the ownership interests of existing stockholders. Any sales in the public market of the shares of common stock issuable upon such conversion could adversely affect prevailing market prices of our shares of common stock. In addition, the existence of the debentures may encourage short selling by market participants because the conversion of the debentures could depress the price of our shares of common stock.

To date, we have not paid any cash dividends and no cash dividends will be paid in the foreseeable future.

We do not anticipate paying cash dividends on our common stock in the foreseeable future and we may not have sufficient funds legally available to pay dividends. Even if the funds are legally available for distribution, we may nevertheless decide not to pay any dividends. We intend to retain all earnings for our operations.

The application of the “penny stock” rules could adversely affect the market price of our common stock and increase your transaction costs to sell those shares.

If our stock becomes quoted on an exchange, as long as the trading price of our common shares is below $5 per share, the open-market trading of our common shares will be subject to the “penny stock” rules. The “penny stock” rules impose additional sales practice requirements on broker-dealers who sell securities to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 together with their spouse). For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase of securities and have received the purchaser’s written consent to the transaction before the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the broker-dealer must deliver, before the transaction, a disclosure schedule prescribed by the Securities and Exchange Commission relating to the penny stock market. The broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements must be sent disclosing recent price information on the limited market in penny stocks. These additional burdens imposed on broker-dealers may restrict the ability or decrease the willingness of broker-dealers to sell our common shares, and may result in decreased liquidity for our common shares and increased transaction costs for sales and purchases of our common shares as compared to other securities.

Our common shares are not currently traded at high volume, and you may be unable to sell at or near ask prices or at all if you need to sell or liquidate a substantial number of shares at one time.

We cannot predict the extent to which an active public market for its common stock will develop or be sustained. However, the Company does not rule out the possibility of applying for listing on the Nasdaq Capital Market or other markets.

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

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

Our corporate actions are substantially controlled by our principal stockholders and affiliated entities.

Our principal stockholders and their affiliated entities own approximately 80% of our outstanding ordinary shares, representing approximately 80% of our voting power. These stockholders, acting individually or as a group, could exert substantial influence over matters such as electing directors and approving mergers or other business combination transactions. In addition, because of the percentage of ownership and voting concentration in these principal stockholders and their affiliated entities, elections of our board of directors will generally be within the control of these stockholders and their affiliated entities. While all of our stockholders are entitled to vote on matters submitted to our stockholders for approval, the concentration of shares and voting control presently lies with these principal stockholders and their affiliated entities. As such, it would be difficult for stockholders to propose and have approved proposals not supported by management. There can be no assurances that matters voted upon by our officers and directors in their capacity as stockholders will be viewed favorably by all of our stockholders.

The elimination of monetary liability against our directors, officers and employees under Delaware law and the existence of indemnification rights to our directors, officers and employees may result in substantial expenditures by our company and may discourage lawsuits against our directors, officers and employees.

Our certificate of incorporation does not contain any specific provisions that eliminate the liability of our directors for monetary damages to our company and stockholders, but we are prepared to give such indemnification to our directors and officers to the extent provided by Delaware law. We may also have contractual indemnification obligations under our employment agreements with our officers. The foregoing indemnification obligations could result in our company incurring substantial expenditures to cover the cost of settlement or damage awards against directors and officers, which we may be unable to recoup. These provisions and resultant costs may also discourage our company from bringing a lawsuit against directors and officers for breaches of their fiduciary duties, and may similarly discourage the filing of derivative litigation by our stockholders against our directors and officers even though such actions, if successful, might otherwise benefit our company and stockholders.

Legislative actions, higher insurance costs and potential new accounting pronouncements may impact our future financial position and results of operations.

There have been regulatory changes, including the Sarbanes-Oxley Act of 2002, and there may potentially be new accounting pronouncements or additional regulatory rulings that will have an impact on our future financial position and results of operations. The Sarbanes-Oxley Act of 2002 and other rule changes as well as proposed legislative initiatives following the Enron bankruptcy are likely to increase general and administrative costs and expenses. In addition, insurers are likely to increase premiums as a result of high claims rates over the past several years, which we expect will increase our premiums for insurance policies. Further, there could be changes in certain accounting rules. These and other potential changes could materially increase the expenses we report under generally accepted accounting principles, and adversely affect our operating results.

Past activities of the company and our affiliates may lead to future liability for us.

Prior to our entry into the Agreement and Plan of Share Exchange (“Share Exchange Agreement”) on June 22, 2006, the Horizon Group was engaged in the Company’s operations. Although for a period of two years after the Closing Date the major shareholders of the Horizon Group will indemnify the Company against any loss, liability, claim, damage, or expense arising out of or based on any breach of or inaccuracy in any of their representations and warranties made in the Share Exchange Agreement, any liabilities relating to such prior business against which the Company is not completely indemnified may have a material adverse effect on the Company.

We may need additional capital, and the sale of additional shares or other equity securities could result in additional dilution to our shareholders.

We believe that our current cash and cash equivalents, anticipated cash flow from operations and the net proceeds from this offering will be sufficient to meet our anticipated cash needs for the near future. We may, however, require additional cash resources due to changed business conditions or other future developments, including any investments or acquisitions we may decide to pursue. If our resources are insufficient to satisfy our cash requirements, we may seek to sell additional equity or debt securities or obtain a credit facility. The sale of additional equity securities could result in additional dilution to our shareholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all.

You may face difficulties in protecting your interests, and your ability to protect your rights through the U.S. federal courts may be limited because our subsidiaries are incorporated in non-U.S. jurisdictions, we conduct substantially all of our operations in Hong Kong, and all of our officers reside outside the United States.

Although we are incorporated in Delaware, we conduct substantially all of our operations in China through our wholly owned subsidiaries in Hong Kong. All of our officers reside outside the United States and some or all of the assets of those persons are located outside of the United States. As a result, it may be difficult or impossible for you to bring an action against us or against these individuals in Hong Kong in the event that you believe that your rights have been violated under U.S. securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of Hong Kong may render you unable to enforce a judgment against our assets or the assets of our directors and officers.

As a result of all of the above, our public shareholders may have more difficulty in protecting their interests through actions against our management, directors or major stockholders than would shareholders of a corporation doing business entirely within the United States.

If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud.

We will be subject to reporting obligations under the U.S. securities laws. The Securities and Exchange Commission, as required by Section 404 of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”), adopted rules requiring every public company to include a management report on such company’s internal controls over financial reporting in its annual report, which contains management’s assessment of the effectiveness of the company’s internal controls over financial reporting. In addition, an independent registered public accounting firm must attest to and report on management’s assessment of the effectiveness of the company’s internal controls over financial reporting. These requirements will first apply to our annual report on Form 10-K for the fiscal year ending December 31, 2007. Our management may conclude that our internal controls over our financial reporting are not effective. Moreover, even if our management concludes that our internal controls over financial reporting are effective, our independent registered public accounting firm may still decline to attest to our management’s assessment or may issue a report that is qualified if it is not satisfied with our controls or the level at which our controls are documented, designed, operated, or reviewed, or if it interprets the relevant requirements differently from us. Our reporting obligations as a public company will place a significant strain on our management, operational, and financial resources and systems for the foreseeable future. Effective internal controls, particularly those related to revenue recognition, are necessary for us to produce reliable financial reports and are important to help prevent fraud. As a result, our failure to achieve and maintain effective internal controls over financial reporting could result in the loss of investor confidence in the reliability of our financial statements, which in turn could harm our business and negatively impact the trading price of our stock. Furthermore, we anticipate that we will incur considerable costs and use significant management time and other resources in an effort to comply with Section 404 and other requirements of the Sarbanes-Oxley Act.

We will incur increased costs as a result of being a public company.

As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act, as well as new rules subsequently implemented by the SEC, have required changes in corporate governance practices of public companies. We expect these new rules and regulations to increase our legal, accounting and financial compliance costs and to make certain corporate activities more time-consuming and costly. In addition, we will incur additional costs associated with our public company reporting requirements. We are currently evaluating and monitoring developments with respect to these new rules, and we cannot predict or estimate the amount of additional costs we may incur, or the timing of such costs.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

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

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

The following exhibits are included in this report or incorporated by reference into this report:

Exhibit Number		Description
31.1		Rule 13a-14(a) / 15d-14(a)(4) Certification by the Company’s Chief Executive Officer. (Filed herewith.)

31.2		Rule 13a-14(a) / 15d-14(a)(4) Certification by the Company’s Chief Financial Officer. (Filed herewith.)

32.1		Section 1350 Certification by the Company’s Chief Executive Officer. (Filed herewith.)

32.2		Section 1350 Certification by the Company’s Chief Financial Officer. (Filed herewith.)

10.20		Management Service Agreement dated October 28, 2008 by and between Allied Fine Development Limited and Best Paramount Industrial Limited (1).

10.21		Management Service Agreement dated October 28, 2008 by and between Manigood International Industry Limited and Best Paramount Industrial Limited (1).

10.22		Management Service Agreement dated October 28, 2008 by and between Profits Dreams Development Limited and Best Paramount Industrial Limited (1).

	(1)	Filed as an exhibit to the Company's Form 8-K, as filed with the Securities and Exchange Commission on November 3, 2008, and incorporated herein by reference.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	ASIAMART, INC.


Dated: November 19, 2008	By:	/s/ Alex Yue
		Alex Yue

		President and Chief Executive Officer

		(Principal Executive Officer)


Dated: November 19, 2008	By:	/s/ Kwan Pui Wong
		Kwan Pui Wong

		Chief Financial Officer

		(Principal Financial and Accounting Officer)

ASIAMART, INC. 10-Q