IDEANOMICS, INC. - Quarter Report: 2008 September (Form 10-Q)

Unassociated Document

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

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

For the transition period from _______________ to ______________

Commission file number: 000-19644

CHINA BROADBAND, INC.

(Exact name of small business issuer as specified in its charter)

Nevada		20-1778374
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1900 Ninth Street, 3rd Floor Boulder, Colorado 80302		(303) 449-7733
(Address of principal executive offices)		(Issuer’s telephone number)

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 shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

As of November 18, 2008, the issuer had 50,500,398 shares of Common Stock issued and outstanding.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company:

Large accelerated filer o	Accelerated filer o

Non-accelerated filer o	Smaller reporting company x

CHINA BROADBAND, INC.

September 30, 2008 FORM 10-Q QUARTERLY REPORT

INDEX

	Page
PART I - FINANCIAL INFORMATION	F-1

Item 1. - Financial Statements.	F-1

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

Consolidated Statements of Operations for the Nine Months and Three Months Ended September 30, 2008 and 2007 (unaudited)	F-2

Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2008 and 2007 (unaudited)	F-3

Notes to Unaudited Consolidated Financial Statements	F-4

Item 2 - Management's Discussion and Analysis or Plan of Operation.	1

Item 3 - Quantitative and Qualitative Disclosures About Market Risk.	13

Item 4 - Controls and Procedures.	13

PART II - OTHER INFORMATION	14

Item 1 - Legal Proceedings.	14

Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds.	14

Item 3 - Defaults Upon Senior Securities.	14

Item 4 - Submission of Matters to a Vote of Security Holders.	14

Item 5 - Other Information.	14

Item 6 - Exhibits.	14

Forward Looking Statements

This Quarterly Report on Form 10-Q and other reports filed by China Broadband, Inc. (the “company” ,“we”, “us” or “our”) contains or may contain forward looking statements and information that are based upon beliefs of, and information currently available to, the management of the company as well as estimates and assumptions made by its management. When used in the filings, the words “may”, “will”, “should”, “estimates”, “anticipate”, “believe”, “estimate”, “expect”, “future”, “intend”, “plan” or the negative of these terms and similar expressions as they relate to the company or its management, identify forward looking statements. Such statements reflect the current view of the company with respect to future events and are subject to risks, uncertainties, assumptions and other factors relating to the company. Such forward-looking statements include statements regarding, among other things:

our ability to satisfy our obligations under our agreements with respect to our 2007 acquisition of the cable broadband business of Jinan Guangdian Jiahe Digital Television Co., Ltd. located in mainland People’s Republic of China (the “PRC” or “China”),

our ability to satisfy our obligations under our agreements relating to the recent acquisition of Shandong Radio & Broadcasting Newspaper Group in the PRC, which include, among other things, our requirement to make additional payments if its performance goals are met,

our anticipated needs for working capital and our difficulty in raising additional capital given the current credit crises and the current economic environment,

a complex and changing regulatory environment in the PRC that limits our ability to pay dividends, currently permits only partial foreign ownership of certain PRC based businesses and that requires us to negotiate, acquire and maintain separate government licenses to operate each internet business that we would like to acquire (or any other business we would like to acquire in the PRC),

our ability to obtain PRC government consent to introduce certain new services to existing or new customers,

our ability to implement complex operating and revenue sharing arrangements that will enable us to consolidate our financial statements with our partially owned PRC based business or joint ventures, and to modify and adapt these business arrangements from time to time to satisfy United States accounting rules,

our ability to enter into agreements with and to consummate acquisitions of businesses in the PRC in the Shandong region and elsewhere,

socio-economic changes in the regions in the PRC that affect consumer internet subscriptions,

the ability of the PRC government to terminate or elect to not renew any of our licenses for various reasons or to nationalize our industry, and

Although we believe that the expectations reflected in the forward looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

China Broadband, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

	September 30,			December 31,
	2008			2007
	(Unaudited)
Assets
Current assets:
Cash	$	5,131,815		$	472,670
Marketable equity securities		799,000			-
Accounts receivable		30,663			136,655
Inventory		881,973			642,313
Prepaid expenses		5,252			14,781
Other current assets		49,713			73,947

Total current assets		6,898,416			1,340,366

Property and equipment, net		9,807,915			10,333,105
Intangible assets		2,996,708			1,981,307
Other assets		1,092,195			-

Total assets	$	20,795,234		$	13,654,778

Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable	$	1,035,519		$	835,257
Accrued expenses		573,004			554,073
Deferred revenue		1,351,137			1,252,313
Payable to Jinan Parent		3,548,932			3,308,443
Other current liabilities		26,732			25,905

Total current liabilities		6,535,324			5,975,991

Convertible notes payable		4,539,277			-
Deferred tax liability		347,373			366,672

Total liabilities		11,421,974			6,342,663

Minority interest in operating subsidiaries		5,968,322			4,879,802

Common shares to be issued		-			410,053

Commitments and contingencies

Shareholders' equity:
Preferred stock $.001 par value; 5,000,000 shares authorized, no shares issued and outstanding		-			-
Common stock $.001 par value; 95,000,000 shares authorized, 50,500,398 and 50,048,000 issued and outstanding		50,501			50,048
Additional paid-in capital		13,271,969			10,485,874
Accumulated deficit		(9,333,390	)		(8,845,426	)
Accumulated other comprehensive income (loss)		(584,142	)		331,764

Total shareholders' equity		3,404,938			2,022,260

Total liabilities and shareholders' equity	$	20,795,234		$	13,654,778

See notes to consolidated financial statements.

F-1

China Broadband, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,			September 30,			September 30,			September 30,
	2008			2007			2008			2007

Revenue	$	1,880,806		$	1,051,883		$	3,937,439		$	1,769,938

Cost of revenue		949,299			606,880			1,845,354			1,007,252

Gross profit		931,507			445,003			2,092,085			762,686

Selling, general and administrative expenses		582,085			275,020			1,393,999			700,581
Professional Fees		141,785			123,031			447,201			496,396
Depreciation and amortization		768,951			555,522			2,210,481			1,076,551

Loss from operations		(561,314	)		(508,570	)		(1,959,596	)		(1,510,842	)

Interest and other income (expense):
Settlement gain		-			-			1,300,692			-
Interest expense		(89,333	)		(123	)		(256,776	)		(4,534	)
Interest income		16,300			4,726			35,426			9,912
Gain on sale of securities		-			-			17,498			-
Other		349			(158,057	)		(12,779	)		(158,057	)


Loss before minority interest		(633,998	)		(662,024	)		(875,535	)		(1,663,521	)

Minority interest loss in operating subsidiaries		80,734			122,766			368,272			272,598

Loss before income taxes		(553,264	)		(539,258	)		(507,263	)		(1,390,923	)

Income tax benefit		(6,433	)		-			(19,299	)		-

Net Loss	$	(546,831	)	$	(539,258	)	$	(487,964	)	$	(1,390,923	)


Net loss per share:
Basic	$	(0.01	)	$	(0.01	)	$	(0.01	)	$	(0.03	)
Diluted	$	(0.01	)	$	(0.01	)	$	(0.01	)	$	(0.03	)

Weighted average shares outstanding
Basic		50,416,266			50,058,960			50,262,731			45,314,464
Diluted		50,416,266			50,058,960			50,262,731			45,314,464

See notes to consolidated financial statements.

F-2

China Broadband, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended
	September 30,			September 30,
	2008			2007
Cash flows from operating activities:
Net loss	$	(487,964	)	$	(1,390,923	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock compensation expense		218,137			208,699
Gain on settlement agreement		(1,300,692	)		-
Gain on sale of marketable equity securities		(17,498	)		-
Depreciation and amortization		2,210,481			1,076,551
Minority interest		(368,272	)		(272,598	)
Deferred income tax (benefit)		(19,299	)		-
Change in assets and liabilities, net of effects of Jinan Broadband and Shandong Newspaper acquisitions:
Accounts receivable		105,992			397,587
Inventory		(239,660	)		428,816
Prepaid expenses and other assets		33,763			(83,396	)
Accounts payable and accrued expenses		431,247			84,422
Deferred revenue		98,824			252,351
Other		(359,632	)		(5,440	)
Net cash provided by operating activities		305,427			696,069

Cash flows from investing activities:
Proceeds from sale of marketable equity securities		339,998			-
Acquisition of property and equipment		(1,450,363	)		(1,613,352	)
Net cash used in investing activities		(1,110,365	)		(1,613,352	)

Cash flows from financing activities:
Proceeds from issuance of convertible notes payable		4,850,000			-
Proceeds from private placement offering		-			4,000,000
Issuance costs associated with private placement and convertible notes		(104,500	)		(420,500	)
Payable to Jinan Parent		240,489			(1,247,865	)
Net cash provided by financing activities		4,985,989			2,331,635

Effect of exchange rates changes on cash		478,094			164,437

Net increase in cash		4,659,145			1,578,789
Cash at beginning of period		472,670			103,170

Cash at end of period	$	5,131,815		$	1,681,959

Supplemental Cash Flow Information:
Cash paid for interest	$	-		$	10,490
Notes payable converted to common stock	$	-		$	325,000
Shares issued as a penalty for non-registration of 7% Convertible Notes	$	422,178		$	-
Shares issued in lieu of cash for interest expense for January 2008 Convertible Notes	$	183,598		$	-

Acquisition of Shandong Newspaper:
Fair value of assets acquired	$	364,198		$	-
Liabilities assumed	$	-		$	-
Consideration paid:
Cash paid	$	1,311,113		$	-
Cash amount owed	$	145,679		$	-
Minority interest	$	1,456,792		$	-

Acquisition of Jinan Broadband:
Fair value of assets acquired	$	-		$	11,497,317
Liabilities assumed	$	-		$	2,188,360
Consideration paid:
Cash paid	$	-		$	2,572,125
Cash amount owed	$	-		$	3,055,000
Minority interest	$	-		$	5,319,524

Convertible Note Issuance
Proceeds received from issuance of Convertible Notes	$	4,850,000		$	-
Debt issuance costs converted to Convertible Notes	$	121,250		$	-
Debt issuance costs not converted to Convertible Notes	$	226,835		$	-

See notes to consolidated financial statements.

F-3

China Broadband, Inc. and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

1. Basis of Presentation

China Broadband, Inc., a Nevada corporation and its subsidiaries (“China Broadband”, “we,” “us,” or “the Company”) owns and operates, through its indirect subsidiaries in the People’s Republic of China (“PRC” or “China”), a cable broadband business based in the Jinan region of China and, effective as of July 1, 2008 a television programming guide publication business joint venture in the Shandong Province of China (see Note 3 below). The principal activities of the Company are to provide cable and wireless broadband services, principally internet services, Internet Protocol Point wholesale services, related network equipment rental and sales, and fiber network construction and maintenance through its Jinan Broadband subsidiary. In addition, beginning July 2008 and as a result of our recently acquired Shandong Newspaper subsidiary, we provide a print based media and television programming guide business. See Note 3 below. The Company operates in the media segment.

The unaudited consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. These unaudited consolidated financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company's latest Annual Report on Form 10-KSB, as amended. The accompanying consolidated balance sheet as of December 31, 2007 has been derived from the audited balance sheet as of that date included in the Form 10-KSB, as amended. In the opinion of management, this financial information reflects all adjustments necessary to present fairly the results for the interim periods. The results of operations for the three and nine months ended September 30, 2008 are not necessarily indicative of the results to be expected for the year ending December 31, 2008 or any other subsequent period.

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

These unaudited financial statements have been prepared assuming that the Company will continue as a going concern and, accordingly, do not include any adjustments that might result from the outcome of this uncertainty. The Company’s independent registered public accounting firm’s report on the financial statements included in the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2007, contained an explanatory paragraph regarding the Company’s ability to continue as a going concern.

2. Settlement Agreement and Convertible Note and Warrant Financing

On January 11, 2008, the Company entered into a Settlement Agreement (the “Settlement Agreement”) by and among the Company and its subsidiaries, Stephen P. Cherner, Maxim Financial Corporation, Mark L. Baum, BCGU, LLC, Mark I. Lev, Wellfleet Partners, Inc., Yue Pu, Clive Ng, Chardan Capital Markets, LLC (“Chardan Capital”), Jaguar Acquisition Corporation (“Jaguar”), and China Cablecom Holdings, Ltd (“Cablecom Holdings”), pursuant to which the parties released certain potential claims against one another, as more fully set forth in this Note 2 below.

Simultaneously, the Company consummated a private convertible note and warrant financing with gross proceeds of $4,850,000 (the “January 2008 Financing”), through Chardan Capital acting as Placement Agent and appointed three additional directors to the Company. The following is a summary only of the material terms of the Settlement Agreement, Employment Agreement Amendments and the January 2008 Financing related agreements (including the note purchase agreement, the form of notes and form of warrants) which were filed as exhibits to our Current Report on Form 8-K dated January 11, 2008.

F-4

Settlement Agreement

The Settlement Agreement was negotiated by the Company, its advisors and management and certain shareholders, for purposes of facilitating the Company’s business plan and expediting and facilitating the Company’s financing activities and avoiding disputes between management and certain investors and consultants concerning possible claims that such investors suggested might be brought against these principals for their activities in forming and operating China Cablecom and its entry into a merger with a subsidiary of Jaguar as being violative of their employment agreements with the Company. The Settlement Agreement provided, subject to the terms thereof, for general mutual releases of all executives and management and their affiliated entities and also provided for the modification of employment agreements of both, Mr. Clive Ng, our Chairman and Mr. Yue Pu, our Vice Chairman and former Chief Financial Officer. The Settlement Agreement also called for the transfer of certain securities by Mr. Ng to the Company and to certain of the Company’s shareholders and consultants, as elaborated further herein in exchange for releases in favor of the Company and management and their affiliates.

Among other provisions, pursuant to the Settlement Agreement:

Clive Ng transferred 390,000 shares of common stock of Cablecom Holdings (the “Cablecom Holdings Shares”) to the Company. The Cablecom Holdings Shares were transferred by Mr. Ng on an “as is basis”, except that such shares would have the same lock-up restrictions, registration or other rights, privileges or benefits as Mr. Ng has for all other shares to be issued to him by Cablecom Holdings. The 390,000 Cablecom Holdings Shares were issued to the Company in April 2008 upon satisfaction of certain conditions in the Settlement Agreement, including, receipt of releases from certain parties listed therein and the shares have been registered for re-sale by Cablecom Holdings, subject to a lock up agreement. 50,000 Cablecom Holdings Shares were sold in June 2008 for gross proceeds of approximately $340,000.

The Company and each of Messrs. Ng and Pu, have agreed to modifications to the employment agreements of such persons (the “Employment Agreement Amendments”), reducing their time commitments to the Company and its subsidiary and providing that once replacement executive officers have been hired (and in the case of Mr. Ng, assuming Mr. Pu continues in his role as chief financial officer, eliminating his executive duties and he will only continue as the Chairman and a director of the Company), requiring in the case of Mr. Ng that he be subject to an ongoing obligation to offer acquisition candidates in the stand-alone, independent broadband business to China Broadband in the future (and recognizing that acquisition candidates involving acting as a joint venture provider of integrated cable television services in the People’s Republic of China and related activities, but which does not include the provision of Stand-Alone Broadband Services are the business of China Cablecom) and allowing them to continue to be involved with certain other activities and to continue in their executive capacities with Cablecom Holdings or its successor. In addition, Mr. Ng waived his right to receive all accrued salary previously owed to him through January 11, 2008.

Mr. Ng assigned 7,017,814 shares of Common Stock owned beneficially by him to the investors (other than Chardan Capital which did not receive shares from Mr. Ng) in the private January 2008 Financing as described below, thereby facilitating the January 2008 Financing while avoiding additional dilution to the Company’s current stock and warrant holders.

Mr. Ng transferred to certain private investors who acquired shares directly from him in July of 2007, an aggregate of 566,790 shares of Common Stock owned beneficially by him, in exchange for releases from such persons.

Chardan Capital, a party to the Settlement Agreement, completed the January 2008 Financing as placement agent, concurrently upon execution by all related parties of the Settlement Agreement.

Mr. David Zale, Mr. Jonas Grossman and Mr. James Cassano were appointed as directors joining Messrs. Yue Pu and Clive Ng on the board.

F-5

The Company agreed to extend the expiration dates of 4,000,000 warrants to purchase our common stock at an exercise price of $2.00 per share, issued to certain private placement investors (“Investor Warrants”) in the Company’s private placement of common stock and warrants in 2007, from March of 2009, through January 11, 2013, upon receipt of releases from holders of the Investor Warrants. All releases were obtained as of May 2, 2008, resulting in the modification of all of the Investor Warrants.

The Company has offered to BCGU, LLC, WestPark Capital, Inc., Maxim Financial Corporation, who were issued 500,000, 640,000 and 3,974,800 warrants exercisable at $.60 per share in January of 2007, respectively, the right, at their discretion, to extend the exercisability period of their respective warrants through January 11, 2013 or, in the alternative, the right to receive a scrip right to execute the unexercised portion of their warrants, at any time between the time of expiration date of their unexercised warrants and continuing through January 11, 2013.

The following table provides the components of the net gain the Company recognized as a result of the Settlement Agreement during the nine months ended September 30, 2008 which is recorded in “Interest and other income (expense)” in the accompanying Statement of Operations:

Fair value of Cablecom Holdings Shares	$	2,515,500
Waiver of accrued compensation		212,054
Warrant extensions		(1,426,862	)

Net Gain	$	1,300,692

Simultaneous Closing of $4,971,250 Convertible Note and Warrant Financing, issuance of Shares and Warrants; January 2008 Financing

On January 11, 2008, simultaneously with the entry into the Settlement Agreement, we entered into and consummated a subscription agreement (the “Subscription Agreement”) with ten accredited investors (inclusive of Chardan Capital) with respect to the issuance of an aggregate of $4,971,250 principal amount of convertible notes (“Notes”) due January 11, 2013, and Class A Warrants to purchase an aggregate of 6,628,333 shares of common stock of the Company at $.60 per share expiring on June 11, 2013 (the “January 2008 Financing”).

The gross proceeds of the offering were $4,850,000. Chardan Capital applied its 2.5% cash commission ($121,250) towards a subscription for Notes and Class A Warrants resulting in the issuance of an aggregate of $4,971,250 principal amount of Notes. Interest on the Notes compounds monthly at the annual rate of five percent (5%) with the maturity date on January 11, 2013, if not paid earlier. Each holder of a Note can convert all or any portion of the then aggregate outstanding principal amount of the Note, together with interest, into shares of Common Stock at a conversion price of $0.75 per share (6,628,333 shares as of the issuance date). The Notes have “full ratchet” anti dilution protection for the first three years, pursuant to which the conversion price of the Notes will be adjusted downward in the event of the issuance by the Company of common stock or rights to acquire common stock at prices below $.75 per share (or below such other conversion price of the Notes as is then in effect) to such lower price. Thereafter and until repaid, the Notes provide only for weighted average anti-dilution price protection adjustment. In addition, the Notes are subject to certain customary anti-dilution protections for stock splits, combinations or similar transactions of the Company.

During the nine months ended September 30, 2008, the Company incurred $184,000 in interest expense related to these Notes. With the consent of the Note holders, in May 2008 the Company issued 75,614 shares to the Note holders in lieu of cash of approximately $56,000 for interest accrued through March 31, 2008. In July 2008 the Company issued an additional 84,128 shares to the Note holders in lieu of cash of approximately $64,000 for interest accrued through June 30, 2008 and on September 30, 2008 the Company issued an additional 85,057 shares to the Note holders in lieu of cash of approximately $64,000 for interest accrued through September 30, 2008.

F-6

Placement Agent Fee to Chardan Capital Markets, LLC

In connection with their engagement as a placement agent, Chardan Capital has been compensated a $10,000 due diligence fee and reimbursement of legal and other expenses, and a cash placement agent fee of $121,250 (based on 2.5% of $4,850,000 of principal amount of Notes issued to other investors), which fee has, pursuant to the terms of their engagement agreement, been applied to their investment in a $121,250 Note and 161,667 Class A Warrants at the same terms as all other investors in the offering and whose value is included and discount applied in the same manner as the Class A Warrants. In addition, Chardan Capital was compensated warrants to acquire 1,131,667 shares of the Company’s common stock at an exercise price of $.50 per share exercisable commencing January 11, 2008 and expiring on June 11, 2013 (the “Broker Warrants”). The Broker Warrants are identical to the Class A Warrants in all other material respects. The Company recognized the fair value of the Broker Warrants of $226,835 as debt issuance costs and is amortizing such value over the five year life of the Convertible Notes.

Assignment By Clive Ng of Shares to Investors

To incentivize the investors in the January 2008 Financing and facilitate such financing, and as contemplated under the terms of the Settlement Agreement, Mr. Clive Ng, our Chairman and Majority Shareholder, assigned an aggregate of 7,017,814 shares of Common Stock beneficially owned by him to the January 2008 Financing investors (other than Chardan Capital), at a nominal purchase price of $.01 per share.

Release of Lock - Up Agreements

Prior to the assignment of the above shares to the January 2008 Financing investors, the Company, 88 Holdings, Inc., China Broadband Partners, Ltd., BCGU, LLC, MVR Investments, LLC, Stephen P. Cherner and WestPark Capital, Inc. were each shareholder parties to a Lock-Up Agreement dated as of January 23, 2007 (the “Lock-Up Agreement”). The Lock-Up Agreement provided that each such shareholder shall only be permitted to sell 5% of the shares originally issued to them as scheduled in the Lock-Up Agreement, during any 30 day period and, that the Company’s management may review the lock up provisions and increase the number of shares that may be sold provided that, among other conditions, such modification is made pari pasu among all shareholders subject to the Lock-Up Agreement based on their share ownership. As a condition subsequent to the January 2008 Financing requested by Chardan Capital, and to remove any contractual restrictions relating to the 7,017,084 shares of Common Stock assigned by Mr. Ng to the Note investors to facilitate the financing, the Company and each of the shareholder parties to the Lock-Up Agreement agreed to the termination of this Lock-Up Agreement for all parties effective as of January 13, 2008.

Appointment of Additional Members to Board of Directors

Simultaneously with the closing of the January 2008 Financing, and entry into the Settlement Agreement, Messrs. David Zale, James Cassano and Jonas Grossman were appointed as directors of the Company, joining Messrs. Clive Ng and Yue Pu. Prior to the appointment of Messrs. Zale, Cassano and Grossman, such persons had no affiliations or business relationship with the Company, except that Mr. Grossman was and continues to be, a partner and officer of Chardan Capital.

3. Shandong Newspaper Cooperation Agreement

On March 7, 2008, through our indirect WFOE subsidiary in the PRC, we entered into a Cooperation Agreement (the "Shandong Newspaper Cooperation Agreement") by and among, Shandong Broadcast & TV Weekly Press and Modern Movie & TV Biweekly Press, each PRC companies (collectively "Shandong Newspaper"). The Shandong Newspaper Cooperation Agreement provided for, among other terms, the creation of a joint venture entity in the PRC, Shandong Lushi Media Co., Ltd. ("Shandong Media") that would acquire and operate Shandong Newspaper's television program guide, newspaper and magazine publishing business in the Shandong region of the PRC (the "Shandong Newspaper Business") which businesses were previously owned and operated by the Shandong Newspaper entities pursuant to exclusive licenses.

F-7

Under the terms of the Shandong Newspaper Cooperation Agreement and related transaction documents, the Shandong Newspaper entities mentioned above will contribute their entire Shandong Newspaper businesses and transfer certain employees, to Shandong Media in exchange for a 50% ownership interest in Shandong Media, with the other 50% of Shandong Media to be owned by our PRC based operating subsidiary. In exchange therefore, the Cooperation Agreement provides for total initial consideration by us of approximately $1.4 million (based on prevailing exchange rates at the time for 10 million RMB) of which we contributed $1.3 million to date and will contribute an additional $100,000 to Shandong Media as working and acquisition capital. The Shandong Newspaper entities contributed approximately $92,000 of property and equipment, $44,000 of other tangible assets and will contribute an additional $229,000 of cash. This resulted in an intangible asset of approximately $1,092,000 which is recorded as “Intangible assets” in the accompanying September 30, 2008 balance sheet.

In addition to the initial purchase price of $1.4 million, the Shandong Newspaper Cooperation Agreement provides for additional consideration of between 5 million RMB and 20 million RMB (approximately $732,000 and $3,000,000 based on current exchange rates), to be paid as a capital contribution to Shandong Media in the event that certain performance thresholds are met, for a total purchase price of between $2.1 and $4.4 million based on current exchange rates.

Specifically, in the event that audited annual net profits during the first fiscal year (i.e. calendar 2009) after closing of the transaction relating to the Shandong Newspaper Cooperation Agreement:

equals or exceeds 16 million RMB, then we will be required to contribute an additional 20 million RMB (or, approximately $3,000,000 presuming current exchange rates are in effect at such time) to the Shandong Media joint venture;

equals or exceeds 4 million RMB but less than 16 million RMB, then we will be required to contribute 125% of such net profits to the Shandong Media joint venture, and

is less then 4 million RMB, then we will be required to contribute only an additional 5 million RMB (approximately US $732,000 presuming current exchange rates are in effect at such time).

The Shandong Newspaper Cooperation Agreement resulted in the creation of a Variable Interest Entity (“VIE”) as defined under Financial Accounting Standards Board (“FASB”) Interpretation No. 46R, Consolidation of Variable Interest Entities (“FIN-46R”). The intended result of the contractual arrangements is that, as of September 30, 2008 the economic risks and benefits of the Shandong Newspaper Business operations are being primarily borne by the Company. The Company has contributed more capital to date and may be required to make further capital contributions if Shandong Newspaper meets certain performance targets. The contractual arrangements in addition to the service agreements the Company has with the Shandong Newspaper parent companies, provide under the relevant principles of United States Generally Accepted Accounting Principles (“US GAAP”) for the consolidation of the results of operations of Shandong Newspaper, with 50% of the Shandong Newspaper net income included in the accompanying financial statements of the Company.

Additional Terms of Shandong Newspaper Cooperation Agreement

The Shandong Newspaper Cooperation Agreement also provides that these businesses will be operated primarily by employees contracted to Shandong Media through secondment by the respective Shandong Newspaper entities.

In addition, the Shandong Newspaper entities entered into an Exclusive Advertising Agency Agreement and an Exclusive Consulting Services Agreement with Shandong Media which require that the Shandong Newspaper entities shall appoint Shandong Media as its exclusive advertising agent and provider of technical and management support for a fee.

F-8

The Company closed this transaction during the second quarter of 2008 with it becoming effective upon the creation of the joint venture entity subsequently created and becoming operational in July 2008. The results of the Shandong Newspaper Business have been consolidated with the Company’s consolidated financial statements as of July 1, 2008.

4. Convertible Notes

As described in Note 2 above, on January 11, 2008 the Company entered into and consummated the Subscription Agreement with ten accredited investors with respect to the issuance of an aggregate of $4,971,250 principal amount of Notes due January 11, 2013, and Class A Warrants to purchase an aggregate of 6,628,333 shares of common stock of the Company at $.60 per share expiring on June 11, 2013. During the three and nine months ended September 30, 2008 the Company incurred $64,000 and $184,000, respectively, in interest expense related to these Notes. Based on a predetermined presumed value of $.75 per share as set forth in the Subscription Agreement and related documents during the nine months ended September 30, 2008, with the consent of the Note holders, the Company issued 244,799 shares to the Note holders in lieu of cash of approximately $184,000 for interest accrued through September 30, 2008. No assurance can be made that these holders will be willing to accept stock in lieu of cash payments for interest in future payments.

5. Marketable Equity Securities

The Company holds investments in certain “available-for-sale” marketable equity securities all of which consist of the Cablecom Holdings Shares. Available-for-sale securities are carried at estimated fair value, based on available information. As of September 30, 2008 the Company recorded an unrealized loss of $1,564,000 in accumulated other comprehensive income (loss) as a component of shareholders’ equity on the balance sheet related to its available for sale marketable equity securities.

During June 2008, the Company sold 50,000 Cablecom Holdings Shares for gross proceeds of approximately $340,000 leaving the Company with 340,000 Cablecom Holdings Shares. As a result of this sale, the Company recognized a gain from the sale of these securities of approximately $18,000.

The Company periodically reviews available for sale securities for impairment that is other than temporary. At September 30, 2008, no write down was required to record other than temporary impairment of securities.

6. Net Loss Per Share

Basic and Diluted net loss per share have been computed by dividing the net loss by the weighted average number of common shares outstanding. The assumed exercise of dilutive warrants, less the number of treasury shares assumed to be purchased from the proceeds of such exercises using the average market price of the Company’s common stock during each respective period, have been excluded from the calculation of diluted net loss per share as their effect would be antidilutive.

F-9

7. Accumulated Other Comprehensive Loss

Comprehensive loss for the three and nine months ended September 30, 2008 and 2007 is as follows:

	Three Months Ended September 30,
	2008			2007
	(Unaudited)			(Unaudited)

Net loss	$	(546,831	)	$	(539,258	)
Other comprehensive income (loss):
Unrealized loss on marketable equity securities		(1,564,000	)		-
Currency translation adjustment		29,834			35,703

Comprehensive loss	$	(2,080,997	)	$	(503,555	)

	Nine Months Ended September 30,
	2008			2007
	(Unaudited)			(Unaudited)

Net loss	$	(487,964	)	$	(1,390,923	)
Other comprehensive income (loss):
Unrealized loss on marketable equity securities		(1,394,000	)		-
Currency translation adjustment		478,094			185,231

Comprehensive loss	$	(1,403,870	)	$	(1,205,692	)

Changes in the components of Accumulated Other Comprehensive Income are attributable to the currency translation adjustment from the Renminbi to the US dollar and the unrealized loss on marketable equity securities. For the nine months ended September 30, 2008, the changes in Accumulated Other Comprehensive Loss are as follows:

	Accumulated Other
	Comprehensive
	Income (Loss)

BALANCE, December 31, 2007	$	331,764
Change for the nine months ended September 30, 2008		(915,906	)

BALANCE, September 30, 2008	$	(584,142	)

8. Stock Based Compensation

The following table provides the details of the total stock based compensation during the nine months ended September 30, 2008 and 2007:

	2008		2007

Stock issued for consulting services	$	-	$	208,699
Stock option amortization		8,216		-
Warrant amortization		14,198		-
Stock issued in lieu of interest		183,598		-
Stock issued as non registration penalty		12,125		-

	$	218,137	$	208,699

F-10

The Company accounts for its stock option awards pursuant to the provisions of SFAS 123(R) and recorded a charge of $0 and $8,216 during the three months and nine months ended September 30, 2008, respectively, in connection with the issuance of stock options to employees. During 2007 no options were outstanding and company incurred no charges during the three and nine months ended September 30, 2007.

The fair value of each option award is estimated on the date of grant using the Black-Scholes option valuation model. The Company recognizes the fair value of each option as compensation expense ratably using the straight-line attribution method over the service period, which is generally the vesting period. The Black-Scholes model incorporates the following assumptions:

Expected volatility - the Company estimates the volatility of common stock at the date of grant using historical volatility.

Expected term - the Company estimates the expected term of options granted based on a combination of vesting schedules, term of the option and historical experience.

Risk-free interest rate - the Company estimates the risk-free interest rate using the U.S. Treasury yield curve for periods equal to the expected term of the options in effect at the time of grant.

Dividends - the Company uses an expected dividend yield of zero. The Company intends to retain any earnings to fund future operations and, therefore, does not anticipate paying any cash dividends in the foreseeable future.

The following table outlines the variables used in the Black-Scholes option-pricing model.

	2008

Risk free interest rate		3.53	%
Volatility		188.76	%
Dividend yield		-	%
Expected option life		4 years

As of September 30, 2008, the Company had total unrecognized compensation expense related to options granted to employees of $24,648, which will be recognized over a remaining average period of 3.50 years.

Effective as of the March 13, 2008, the board of directors of the company approved the China Broadband, Inc. 2008 Stock Incentive Plan (the “Plan”), pursuant to which options or other similar securities may be granted. Qualified or Non-qualified Options to purchase up to 2,500,000 shares of the Company’s common stock may be issued under the Plan. The Plan may also be administered by an independent committee of the board of directors. 100,000 options have been issued under the plan.

F-11

A summary of option activity under the Plan as of September 30, 2008, and changes during the period then ended, is presented below:

	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term

Options outstanding at January 1, 2008		-	$	-		-
Options granted		100,000		1.00		9.75
Options exercised		-		-		-
Options terminated and expired		-		-		-
Options outstanding at September 30, 2008		100,000	$	1.00		9.75

Options exercisable at September 30, 2008		25,000	$	1.00		9.75

In connection with the Company’s Share Exchange, capital raising efforts in 2007 and the Company’s January 2008 Financing of Convertible Notes and Class A Warrants described in Note 1 above, the Company has issued warrants to investors and service providers to purchase shares of the Company at a fixed exercise price and for a specified period of time. The following table outlines the warrants outstanding as of September 30, 2008:

	Number of
	Warrants		Exercise		Expiration
Name	Issued		Price		Date

Maxim Financial Corporation		3,974,800	$	0.60		1/11/2013
WestPark Capital, Inc.		640,000	$	0.60		1/11/2013
BCGU LLC		500,000	$	0.60		1/11/2013
2007 Private Placement Investor Warrants		4,000,000	$	2.00		1/11/2013
January 2008 Financing Class A Warrants		6,628,333	$	0.60		1/11/2013
Chardan Capital Broker Warrants		1,131,667	$	0.50		6/11/2013
Other Warrants		67,500	$	0.60		3/13/2013

		16,942,300

On January 11, 2008, as part of the Settlement Agreement described above, the Company agreed to extend the expiration date of the Maxim Financial Corporation, WestPark Capital, BCGU and the 2007 Private Placement Investor warrants issued in 2007 until January 11, 2013. As described in Note 2 the Company recorded an expense of $1,426,862 during the nine months ended September 30, 2008 as a result of the extension of these warrants.

On January 11, 2008 the Company issued warrants in connection with the January 2008 Financing of Notes and Class A Warrants to ten accredited investors and Chardan Capital as broker. The Company recorded the value of the Class A Warrants of $504,661 as a discount to the Notes issued therewith and is amortizing this discount over the five year life of the Notes.

F-12

On January 11, 2008 the Company issued the 1,131,667 Broker Warrants expiring June 11, 2013 (see Note 1 above) in connection with the January 2008 Financing to Chardan Capital as broker. The Company is recognizing the value of the Broker Warrants of $226,835 as debt issuance costs and in expensing the value over the five year life of the Convertible Notes.

Pursuant to an agreement entered into in April 2007, the Company also issued warrants to a consultant for services provided on March 13, 2008, exercisable at $.60 per share. The Company incurred an expense of $14,198 during the nine months ended September 30, 2008 related to the issuance of these warrants and had total unrecognized compensation expense related to these warrants of $7,099, which will be recognized in April 2009.

9. Intangible Asset

In July 2001, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”). SFAS No. 142 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead be tested for impairment at least annually. This pronouncement also requires that intangible assets with estimable useful lives be amortized over their respective estimated useful lives and reviewed for impairment in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.”

In accordance with SFAS No. 142, goodwill is allocated to reporting units, which are either the operating segment or one reporting level below the operating segment. We have determined that our reporting unit for purposes of applying the provisions of SFAS No. 142 is our operating subsidiary Jinan Broadband.

On an annual basis, we test goodwill and other indefinite life intangible assets for impairment. To determine the fair value of these intangible assets, there are many assumptions and estimates used that directly impact the results of the testing. In making these assumptions and estimates, we will use set criteria that are reviewed and approved by various levels of management, and we will estimate the fair value of our reporting units by using discounted cash flow analyses.

As of September 30, 2008 we had no goodwill and our intangible assets relate to the excess purchase price associated with the service agreement resulting from our Jinan Broadband and Shandong Newspaper acquisitions. At September 30, 2008 the company has recorded intangible assets of approximately $2,997,000 of which $1,904,000 relates to our acquisition of Jinan Broadband and $1,093,000 relates to our acquisition of Shandong Newspaper. In accordance with SFAS No. 142, the Company is amortizing the Jinan service agreement over the 20 year term of the agreement, resulting in a recorded amortization expense of approximately $26,000 and $77,000 during the three and nine months ended September 30, 2008, respectively. As of September 30, 2008, the company has not finalized its determination of the fair value of its recent acquisition of Shandong Newspaper and therefore has not recorded any amortization regarding this acquisition during the three months ended September 30, 2008.

10. Income Taxes

In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109 (FIN 48). FIN 48 is intended to clarify the accounting for uncertainty in income taxes recognized in a company’s financial statements and prescribes the recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

Under FIN 48, evaluation of a tax position is a two-step process. The first step is to determine whether it is more-likely-than-not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigation based on the technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefit to be recognized in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement.

F-13

Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent period in which the threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not criteria should be de-recognized in the first subsequent financial reporting period in which the threshold is no longer met.

The adoption of FIN 48 during the year ended December 31, 2007 did not have a material effect on the Company’s financial position

The Company is subject to a 5% business tax on the business income of our Jinan Broadband subsidiary.

Deferred taxes are recognized for the future tax consequences attributable to temporary differences between the carrying amounts of assets and liabilities for financial statement purposes and income tax purposes using enacted rates expected to be in effect when such amounts are realized or settled. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date.

[Continued on Following Page]

F-14

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

The following discussion and analysis should be read in conjunction with our unaudited financial statements and related notes included in this report and the “Forward Looking Statements” in the beginning of this report and the “Risk Factors” set forth in our Annual Report on Form 10-KSB for the year ended December 31, 2007 and our Current Reports on Form 8-K filed with the SEC, each as amended. The statements contained in this report that are not historic in nature, particularly those that utilize terminology such as “may,” “will,” “should,” “expects,” “anticipates,” “estimates,” “believes,” or “plans” or comparable terminology are forward-looking statements based on current expectations and assumptions. These statements are based on current information available to management.

Various risks and uncertainties could cause actual results to differ materially from those expressed in forward-looking statements. Factors that could cause actual results to differ from expectations include, but are not limited to, those set forth under the sections “Forward Looking Statements” in the forepart of this report and “Risk Factors” set forth in our Annual Report on Form 10-KSB, as amended, for the year ended December 31, 2007 and our Current Reports on Form 8-K, all of which should be read together.

Background

We own and operate, through our indirect subsidiaries in the People’s Republic of China (“PRC”), a cable broadband business based in the Jinan region of China and a television programming guide publication business joint venture in the Shandong Province of China (see below and Note 3 to Financial Statements above). Our principal activity is providing cable and wireless broadband and print based media and television programming guide services. We operate in the media segment. All references to dollar amounts herein which relate to operations or revenues from the PRC are converted to reflect RMB exchange rates to the US dollar.

Settlement Agreement

The following table provides the details of the net gain the Company recognized as a result of the Settlement Agreement during the nine months ended September 30, 2008 which is recorded in “Interest and other income (expense)” in the accompanying Statement of Operations:

Fair value of Cablecom Holdings Shares	$	2,515,500
Waiver of accrued compensation		212,054
Warrant extensions		(1,426,862	)

Net Gain	$	1,300,692

Issuance of Share in Lieu of Cash Interest Payments on Convertible Notes

During the three months and nine months ended September 30, 2008, the Company incurred approximately $64,000 and $184,000, respectively, in interest expense related to the $4,971,250 of Convertible Promissory Notes Issued January 11, 2008 (the “Notes”). The Notes provided that interest thereon could be paid by issuance of shares of Common Stock at a value of 1 share for each $.75 of interest being paid. With the consent of the Note holders, during the nine months ended September 30, 2008 the Company issued 244,799 shares to the Note holders in lieu of cash of approximately $184,000 for interest accrued through September 30, 2008.

Results of Operations

The following table presents the increases (decreases) in each major statement of operations category for the three months and nine months ended September 30, 2008 as compared to the three months and nine months ended September 30, 2007, respectively. The following discussion of “Results of Operations” references these increases (decreases).

	Increase (Decrease) in Consolidated						Increase (Decrease) in Consolidated
	Statements of Operations Categories						Statements of Operations Categories
	For the Three Months Ended						For the Nine Months Ended
	September 30, 2008 vs. 2007						September 30, 2008 vs. 2007
	Amount ($)			%			Amount ($)			%

Revenue	$	828,923			79	%	$	2,167,501			122	%

Cost of revenue		342,419			56	%		838,102			83	%

Gross profit		486,504			109	%		1,329,399			174	%

Selling, general and administrative		307,065			112	%		693,418			99	%

Professional fees		18,754			15	%		(49,195	)		-10	%

Depreciation and amortization		213,429			38	%		1,133,930			105	%

Loss from operations		(52,744	)		10	%		(448,754	)		30	%

Interest and other income (expense), net		80,770			-53	%		1,236,740			-810	%

Income before minority interest		28,026			-4	%		787,986			-47	%

Minority interest loss in operating subsidiaries		(42,032	)		-34	%		95,674			35	%

Income (loss) before income taxes		(14,006	)		3	%		883,660			-64	%

Income tax benefit		(6,433	)		-			(19,299	)		-

Net income (loss)	$	(7,573	)		1	%	$	902,959			-65	%

The Company was a development stage company with no business operations during the first three months 2007. Effective January 23, 2007 we acquired China Broadband, Ltd. (“China Broadband Cayman”) and its operations which was already a party to a Cooperation Agreement to acquire PRC based Jinan Broadband. Effective April 1, 2007, China Broadband Cayman and our WFOE completed the acquisition of the Jinan Broadband subsidiary.

During the first three months of 2007 Jinan Broadband did not operate as its own separate entity and constituted assets within a business division that was separated out immediately prior to our acquisition. Accordingly, Jinan Broadband results for the first three months of 2007 are not included for comparative purposes as management believes that they are not meaningful.

During 2007 and the first six months of 2008 Shandong Newspaper did not operate as its own separate entity and constituted assets within a business division that was separated out immediately prior to our acquisition of it. Accordingly, Shandong Newspaper results for 2007 and the first six months of 2008 are not included for comparative purposes as management believes that they are not meaningful.

Our revenues are principally based on the number of paying cable broadband internet customers in the Shandong province of China and the number of subscribers to our print media and television programming guide services. As of September 30, 2008 Jinan Broadband had approximately 59,000 active paying subscribers for its services in this region as compared to 58,000 and 45,000 at December 31, 2007 and 2006, respectively. The increase is a result of internal growth by Jinan Broadband after we acquired it. As of September 30, 2008 our Shandong Newspaper business had a readership base of approximately 240,000 people.

Our gross revenues are dependent on several factors:

the amount that we are permitted to charge for cable broadband internet services in the regions we operate in,

the number of subscribers we have in each region,

advertising revenues, and

other revenues from other permitted value added services that we perform.

We intend to develop our business by growing internally to increase the subscribers for our services in the regions we operate, acquiring other complimentary media assets in the region and by acquiring licenses to operate the cable broadband business in other regions.

Our cost of revenue consists primarily of the costs of products or services sold to customers and personnel and other direct costs associated with providing technical services. In the future, we may expand or alter our pricing structures and policies. These changes would negatively reduce our gross margins. We may also offer cross promotional discounts with other assets that we acquire in order to grow overall company revenue to draw attention to our other product offerings. In addition to pricing strategy, our gross margins will fluctuate based on other factors, including:

the cost of our products, including the extent of purchase volume discounts we are able to obtain from our suppliers;

promotions or special offers that we offer to attract new customers; and

the mix of products within each brand category that our customers purchase.

Our selling, general and administrative expenses consist of personnel costs including taxes and benefits, rent and utilities, contract labor, insurance, marketing, telecommunication and Internet costs, and other administrative expenses. We expect selling, general and administrative expenses to increase as we grow our business.

Three Months Ended September 30, 2008 Compared to the Three Months Ended September 30, 2007

Revenues

Revenue for the three months ended September 30, 2008 was approximately $1,881,000 as compared to approximately $1,052,000 for the three months ended September 30, 2007 and increase of approximately $829,000 or 79%. The increase in revenue is primarily attributable to our acquisition of Shandong Newspaper which provided us with approximately $720,000 of revenue during the period. In addition, the number of paying subscribers for our Jinan Broadband business increased during the three months ended September 30, 2008 as compared to the number of paying subscribers during the three months ended September 30, 2007. Revenue consisted of sales to our PRC based Internet consumers, cable modem consumers, business customers, print media customers and other internet, cable, television and programming guide services. We expect that our revenues will increase as we continue to grow our business.

Gross Profit

Gross profit for the three months ended September 30, 2008 was approximately $932,000 as compared to $445,000 for the three months ended September 30, 2007, an increase of approximately $487,000 or 109%. Gross profit as a percentage of revenue was 49.5% for the three months ended September 30, 2008 as compared to 42.3% for the three months ended September 30, 2007.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the three months ended September 30, 2008 increased approximately $307,000 to $582,000 as compared to $275,000 for the three months ended September 30, 2007. The significant components of selling, general and administrative expenses during the 2008 period included salaries (including salaries to US personnel) and personnel costs of approximately $311,000 and rent expense of approximately $46,000. During the 2007 period the significant components of selling general and administrative expenses included salaries and personnel costs of approximately $130,000. We expect that our selling, general and administrative expenses will increase as we continue to grow our business by adding new subscribers.

Professional Fees

Professional fees for the three months ended September 30, 2008 increased by approximately $19,000 to $142,000 as compared to $123,000 for the three months ended September 30, 2008. Professional fees during the 2008 period included legal costs of approximately $35,000, accounting fees of approximately $82,000 and consultant costs of approximately $25,000. Professional fees during the 2007 period included legal costs of approximately $41,000, accounting fees of approximately $49,000 and consultant costs of approximately $33,000. We expect our costs for professional services to remain significant.

Depreciation and Amortization

Depreciation and amortization expense for the three months ended September 30, 2008 was approximately $769,000 as compared to $556,000 for the three months ended September 30, 2007. Depreciation and amortization expense during the 2008 period includes depreciation expense of $720,000 on our property, plant and equipment, $26,000 of amortization expense related to our service contract and $23,000 related to the amortization of debt issuance costs associated with the Convertible Note . Depreciation expense during the 2007 period primarily relates to the depreciation expense of $556,000 on our property, plant and equipment in the PRC.

Interest and Other Income (Expense)

We recorded net interest expense of approximately $73,000, in interest and other income (expense) during the three months ended September 30, 2008. This amount consisted primarily of interest expense related to the 5% Convertible Notes issued on January 11, 2008 in the amount of $64,000 and $25,000 of amortization expense related to the quarterly amortization of the Class A Warrant discount applied to the Convertible Notes. These amounts were partially offset by $16,000 of interest income earned on our cash balances. During the three months ended September 30, 2007 we recorded a net loss amount of approximately $153,000. This amount consisted primarily of the expense related to our requirement to issue new shares in the amount of $158,000, as a result of our not registering the 1,300,000 shares issued upon the conversion of our 7% Convertible Promissory Notes in the time frame required. This amount was partially offset by interest income earned on our cash balances.

We expect to continue to incur interest expenses in connection with our issuance of our $4,971,250 principal amount of Notes issued in January 2008, which compounds monthly at the annual rate of five percent (5%) with the maturity date on January 11, 2013.

Minority Interest

49% of the operating loss of our Jinan Broadband subsidiary is allocated to Jinan Parent and 50% of the operating loss of our Shandong Newspaper subsidiary is allocated to the our Shandong Newspaper joint venture partner. During the three months ended September 30, 2008 and 2007, $81,000 and $123,000, respectively, of our operating losses were allocated to these entities.

Income Tax Benefit

Our income tax benefit was $6,000 and $0, respectively, for the three months ended September 30, 2008 and 2007.

Nine Months Ended September 30, 2008 Compared to the Nine Months Ended September 30, 2007

Revenues

Revenue for the nine months ended September 30, 2008 was approximately $3,937,000 as compared to approximately $1,770,000 for the nine months ended September 30, 2007 an increase of approximately $2,168,000 or 122%. The increase in revenue is attributable to (i) our acquisition of Shandong Newspaper that provided us with approximately $720,000 of revenue during the period; (ii) the inclusion of our Jinan Broadband’s operations for a full nine months in the 2008 period as compared to only six months of operations in the 2007 period; and (iii) the increased number of paying subscribers during the nine months ended September 30, 2008 as compared to the nine months ended September 30, 2007. Revenue consisted of sales to our PRC based Internet consumers, cable modem consumers, business customers, print media customers and other internet, cable, television and programming guide services. We expect that our revenues will increase as we continue to grow our business.

Gross Profit

Gross profit for the nine months ended September 30, 2008 was approximately $2,092,000 as compared to $763,000 for the nine months ended September 30, 2007, an increase of approximately $1,329,000 or 174%, which increase was due primarily to the Shandong Newspaper acquiisition. Gross profit as a percentage of revenue was 53.1% for the nine months ended September 30, 2008 as compared to 43.1% for the nine months ended September 30, 2007.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the nine months ended September 30, 2008 increased approximately $693,000 to $1,394,000 as compared to $701,000 for the nine months ended September 30, 2007. The increase is primarily attributable our acquisition of Shandong Newspaper during the period and to our inclusion of operations at Jinan Broadband for a full nine months in the 2008 period as compared to only six months of operations in the 2007 period. The significant components of selling, general and administrative expenses during the 2008 period included salaries and personnel costs of approximately $803,000, network connection costs of $93,000 and rent expense of approximately $58,000. During the 2007 period the significant components of selling general and administrative expenses included salaries and personnel costs of approximately $277,000, network connection costs of $40,000, rent expense of $36,000 and travel expense of $100,000. We expect that our selling, general and administrative expenses will increase as we continue to grow our business.

Professional Fees

Professional fees for the nine months ended September 30, 2008 decreased by approximately $49,000 to $447,000 as compared to $496,000 for the nine months ended September 30, 2008. Professional fees during the 2008 period included legal costs of approximately $161,000, accounting fees of approximately $197,000 and consultant costs of approximately $75,000. Professional fees during the 2007 period included legal costs of approximately $114,000, accounting fees of approximately $193,000 and consultant costs of approximately $189,000. The increased professional fees in the 2007 period related to the professional costs associated with the share exchange and the acquisition of Jinan Broadband. We expect our costs for professional services to remain significant.

Depreciation and Amortization

Depreciation and amortization expense for the nine months ended September 30, 2008 was approximately $2,210,000 as compared to $1,077,000 for the nine months ended September 30, 2007. The increase is primarily attributable our acquisition of Shandong Newspaper during the period and to our inclusion of operations at Jinan Broadband for a full nine months in the 2008 period as compared to only six months of operations in the 2007 period. Depreciation and amortization expense during the 2008 period includes depreciation expense of $2,068,000 on our property, plant and equipment, $77,000 of amortization expense related to our service contract and $66,000 related to the amortization of debt issuance costs associated with the Convertible Note . Depreciation expense during the 2007 period primarily relates to the depreciation expense of $1,077,000 on our property, plant and equipment.

Interest and Other Income (Expense)

We recorded a net income amount of approximately $1,084,000, in interest and other income (expense) during the nine months ended September 30, 2008. This amount consisted primarily of the net gain on the Settlement Agreement in the amount of approximately $1,301,000, the gain on the sale of marketable equity securities in the amount of $17,000, interest expense related to the 5% Convertible Notes issued on January 11, 2008 in the amount of $184,000, the expense related to our requirement to issue new shares in the amount of $12,000, as a result of our not registering the 1,300,000 shares issued upon the conversion of our 7% Convertible Promissory Notes issued by China Broadband Cayman in 2006 and assumed by the Company upon the purchase of China Broadband Cayman in the time frame required and $72,000 of amortization expense related to the quarterly amortization of the Class A Warrant discount applied to the Convertible Notes. These amounts were partially offset by $35,000 of interest income earned on our cash balances.

During the nine months ended September 30, 2007 we recorded a net loss amount of approximately $153,000 in interest and other income (expense), net which consisted of the expense related to our requirement to issue new shares in the amount of $158,000, as a result of our not registering the 1,300,000 shares issued upon the conversion of our 7% Convertible Promissory Notes in the time frame required, partially offset by $5,000 in interest income earned on our cash balances.

Minority Interest

49% of the operating loss of our Jinan Broadband subsidiary is allocated to Jinan Parent and 50% of the operating loss of our Shandong Newspaper subsidiary is allocated to the our Shandong Newspaper joint venture partner. During the nine months ended September 30, 2008 and 2007 $368,000 and $273,000, respectively, of our operating losses were allocated to these entities.

Income Tax Benefit

Our income tax benefit was $19,000 and $0, respectively, for the nine months ended September 30, 2008 and 2007.

Liquidity and Capital Resources

As of September 30, 2008 we had $5,132,000 of cash on hand and working capital of $363,000. As of September 30, 2008, we had total current liabilities of $6,535,000.

On January 11, 2008 we entered into and consummated a subscription agreement with ten accredited investors with respect to the issuance of an aggregate of $4,971,250 principal amount of Notes due January 11, 2013, and Class A Warrants to purchase an aggregate of 6,628,333 shares of common stock of the Company at $.60 per share expiring on June 11, 2013. In March 2008, we used approximately $3.2 million of these proceeds to fund our second payment for our purchase of Jinan Broadband. In addition, in March 2008 we used $300,000 to fund our down payment under the Shandong Newspaper Cooperation Agreement to Shandong Media and in April 2008 utilized an additional $1.1 million to fund the remaining portion of our required working capital contribution for the Shandong Newspaper business. During the nine months ended September 30, 2008, the Company incurred $184,000 in interest expense related to these notes. Based on a predetermined presumed value of $.75 per share as set forth in the Subscription Agreement and related documents during the nine months ended September 30, 2008, with the consent of the Note holders, the Company issued 244,799 shares to the Note holders in lieu of cash of approximately $$184,000 for interest accrued through September 30, 2008. In addition, in April 2008 we received the 390,000 Cablecom Holdings Shares that were part of the Settlement Agreement described above and recorded a gain of $2,515,000 upon receipt of the shares. In June 2008 the Company sold 50,000 of the Cablecom Holdings Shares on the open market and received gross proceeds of $340,000 and recorded a gain on the sale of approximately $17,000. As a result of a significant decline in the price of the Cablecom Holdings Shares, and our selling restrictions under a lock up agreement relating to these shares, we recorded an unrealized loss of approximately $1.5 million on these shares through other comprehensive income (loss) for the period ended September 30, 2008. Since September 30, 2008, the price of the Cablecom shares has further declined. The fair value of the Cablecom shares at November 18, 2008 approximates $420,000.

Cash Flows

Operating activities for the nine months ended September 30, 2008 and 2007, after adding back non-cash items provided (used) cash of approximately $235,000 and $(378,000), respectively. During such period other changes in working capital provided cash of approximately $71,000 and $1,074,000 respectively, resulting in cash being provided by operating activities of $305,000 and $696,000, respectively.

Investing activities for nine months ended September 30, 2008 and 2007 used cash of $1,110,000 and $1,613,000, respectively. The 2008 amounts consisted of additions to property and equipment in the amount of $1,450,000 partially offset by the proceeds from the sale of 50,000 Cablecom Holdings Shares in the amount of $340,000. The 2007 amount consisted solely of additions to property and equipment.

Financing activities for nine months ended September 30, 2008 and 2007 provided cash of $4,986,000 and $2,332,000, respectively. For 2008, this amount consisted of proceeds from the issuance of the convertible notes of $4,850,000 partially offset by $105,000 of payments related to issuance costs associated with the convertible notes and an increase in the payable to Jinan Parent in the amount of $240,000. For 2007, this amount included proceeds from the private placement of $4,000,000 partially offset by $421,000 of payments related to issuance costs associated with the private placement offering and a decrease in the payable to Jinan Parent in the amount of $14,248,000.

Our WOFE, Jinan Broadband and Shandong Newspaper subsidiaries are located in China. All of their operations are conducted in the local currency of the Chinese Yuan also known as Renminbi or RMB. The effect of exchange rates on cash between the Chinese Yuan and the United States dollar, provided cash of $478,000 and $164,000 during the nine months ended September 30, 2008 and 2007.

Need for Additional Capital

We have raised $4.85 million (net of cost of capital and expenses) in our January 2008 Financing in order to fund our second payment for our purchase of Jinan Broadband, which payment was due in January of 2008, to acquire Shandong Newspaper and to cover the cost of interim operations. We made the second and last payment for Jinan Broadband in March of 2008 and incurred no penalty for making this payment in March.

In March 2008 we used $300,000 to fund our down payment under the Shandong Newspaper Cooperation Agreement to Shandong Media and in April 2008 utilized an additional $1.1 million to fund the remaining portion of our required working capital contribution. Additional capital will be needed to make payments to Shandong Media in the event that certain revenue thresholds are met (See “Recent Events” below). Pursuant to the Settlement Agreement, we received 390,000 shares of Cablecom Holdings Shares from Mr. Ng, in April 2008 of which 260,000 are subject to lock-up provisions that expire within the next 12 months. In June 2008 the Company sold 50,000 of the Cablecom Holdings Shares on the open market and received gross proceeds of $340,000. During the three months ended September 30, 2008 the value of the Cablecom Holding Shares decreased by approximately $1.5 million, with further declines through the date of this report, resulting in a current value for these shares of approximately $420,000. The Cablecom Holding Shares may continue to fluctuate and may decline further and are subject to a lock up agreement. Management does not believe that the Company has sufficient capital to continue its growth and acquisition strategy without raising additional capital and/or liquidating more of the Cablecom Holdings Shares.

We intend to grow primarily through marketing to increase our subscriber base and through acquisitions of China based broadband, internet and cable businesses. Our strategy also includes the purchasing of other complimentary media assets in the same regions.

Our first purchase of this nature was the completion of our acquisition of Shandong Newspaper in a Joint Venture. Shandong Newspaper’s business includes three main magazines: Shandong Broadcast & TV Weekly (Newspaper), TV Weekly Magazine and Modern Movie Times Magazine (Bi-Weekly). We intend to invest our acquisition cost in this Joint Venture to increase sales and advertising revenues of its periodicals in order to become profitable, and to cross market with our other asset, Jinan Broadband. No assurance can be made that we will be able to raise capital if and as needed.

The amount and timing of our future capital requirements will depend upon many factors, including the number and size of opportunities available to us, the level of funding received by us, future private placements of our common stock, the level of funding obtained through other financing sources, and the timing of such funding. In the event we are unable to raise additional capital we will not be able to sustain any growth or continue to operate.

Dividends

PRC regulations prevent the payment of dividends absent compliance with certain rules and obtaining appropriate government consents, which we believe will not happen in the near future, if ever. Moreover, even if we are profitable we intend to retain any future earnings to finance the expansion of our business and any necessary capital expenditures, and for general corporate purposes. Accordingly, we do not expect to declare dividends in the foreseeable future.

Financial Commitments

The Company pays approximately $55,000 (400,000 RMB) annually for rent at its facilities in Jinan, China, renewable on an annual basis. In addition the Company pays approximately $40,000 (278,000 RMB) annually for rent for its Shandong Newspaper facility.

The Company utilizes approximately 1,000 square feet of space from Maxim Financial Corporation for its corporate headquarters for a monthly rental fee of $2,000. Maxim Financial Corporation provided consulting services to the Company during the years ended December 31, 2007 and 2006 has agreed to discharge all rental costs under the terms of its consulting agreement with the Company through December 2007. In addition, Maxim Financial Corporation has agreed to defer all monthly rental payments beginning January 2008 until the Company’s next capital raise subsequent to January 2008.

Recent Events

Shandong Newspaper Cooperation Agreement

Under the terms of the Shandong Newspaper Cooperation Agreement and related transaction documents, the Shandong Newspaper entities mentioned above contributed their entire Shandong Newspaper businesses and transfered certain employees, to Shandong Media in exchange for a 50% ownership interest in Shandong Media, with the other 50% of Shandong Media to be owned by our PRC based operating subsidiary. In exchange therefore, pursuant to the Shandong Newspaper Cooperation Agreement provides we made an initial payment of approximately $1.4 million (based on prevailing exchange rates at the time for 10 million RMB) which was contributed to Shandong Media as working and acquisition capital.

In addition to the initial purchase price of $1.4 million, the Shandong Newspaper Cooperation Agreement provides for additional consideration of between 5 million RMB and 20 million RMB (approximately $732,000 and $3,000,000 based on current exchange rates), to be paid as a capital contribution to Shandong Media in the event that certain performance thresholds are met during the first 12 months of operations after closing the transaction for a total purchase price of between $2.1 Million and $4.4 based on current exchange rates.

Specifically, in the event that audited annual net profits during the first year after closing of the transaction relating to the Shandong Newspaper Cooperation Agreement:

equals or exceeds 4 million RMB but less than 16 million RMB, then we will be required to contribute 125% of such net profits to the Shandong Media joint venture, and

is less then 4 million RMB, then we will be required to contribute only an additional 5 million RMB (approximately US $732,000 presuming current exchange rates are in effect at such time).

Additional Terms of Shandong Newspaper Cooperation Agreement

The Company closed this transaction during the second quarter of 2008 with it becoming effective upon the creation of the joint venture entity which entity was created in July 2008. Accordingly, the results of the Shandong Newspaper Business have been consolidated with the Company’s consolidated financial statements as of July 1, 2008.

Critical Accounting Policies

Our discussion and analysis of financial condition and results of operations is 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 and related disclosures in conformity with accounting principles generally accepted in the United States of America requires our management to make judgments, assumptions and estimates that affect the amounts reported in the consolidated financial statements and accompanying notes. Our management evaluates its estimates on an on-going basis based on historical experience and on various other assumptions it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We acquired our Jinan Subsidiary effective April 1, 2007 and therefore our historical experience with operations in China is limited and may change in the future as we continue to operate our Jinan subsidiary. Actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting policies affect our significant judgments and estimates used in the preparation of its financial statements.

Revenue Recognition

Revenue is recorded as services are provided to customers. The Company generally recognizes all revenues in the period in which the service is rendered, provided that persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable, and collection is reasonably assured. The Company records deferred revenue for payments received from customers for the performance of future services and recognizes the associated revenue in the period that the services are performed. Provision for discounts and rebates to customers and other adjustments, if any, are provided for in the same period the related sales are recorded.

Accounts Receivable

Accounts receivable are recorded at the invoiced amount after deduction of trade discounts, business tax and allowances. The Company considers accounts receivable to be fully collectible; accordingly, no allowance for doubtful accounts has been established. If accounts become uncollectible, they will be charged to statements of operations when that determination is made. Collections on accounts previously written off, if any, are included in other income as received.

Inventories

Inventories, consisting of cables, fiber, connecting material, power supplies and spare parts are stated at the lower of cost or market value. Cost is determined using the first-in, first-out (FIFO) method.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Expenditures for major renewals and betterments, which extend the original estimated economic useful lives or applicable assets, are capitalized. Expenditures for normal repairs and maintenance are charged to expense as incurred. The costs and related accumulated depreciation of assets sold or retired are removed from the accounts, any gain or loss thereon is reflected in operations.

Depreciation is provided for on the straight line basis over the estimated useful lives of the respective assets over a period of five years.

Intangible Assets

We will perform indefinite life intangible asset impairment tests on an annual basis and between annual tests in certain circumstances. To determine the fair value of these intangible assets, there are many assumptions and estimates used that directly impact the results of the testing. In making these assumptions and estimates, the Company must make various assumptions regarding estimated future cash flows and other factors in determining the fair values of the respective assets. We will use set criteria that are reviewed and approved by various levels of management, and we will estimate the fair value of our reporting units by using discounted cash flow analyses. If these estimates or their related assumptions change in the future, the Company may be required to record impairment charges for these assets in future periods. Any such resulting impairment charges could be material to the Company’s results of operations.

Income taxes

Foreign Currency Translation

The businesses of the Company’s operating subsidiaries are currently conducted in and from China in Renminbi. In this report, all references to “Renminbi” and “RMB” are to the legal currency of China and all references to U.S. dollars, dollars, $ and US$ are to the legal currency of the United States. The Company makes no representation that any Renminbi or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or Renminbi, as the case may be, at any particular rate, the rates stated below, or at all. The Chinese government imposes control over its foreign currency reserves in part through direct regulation of the conversion of Renminbi into foreign exchange and through restrictions on foreign trade. The Company uses the U.S. dollar as its reporting and functional currency. Translation adjustments are reported as other comprehensive income or expenses and accumulated as other comprehensive income in the equity section of the balance sheet. Financial information is translated into U.S. dollars at prevailing or current rates respectively, except for revenues and expenses which are translated at average current rates during the reporting period. Exchange gains and losses resulting from retained profits are reported as a separate component of stockholders’ equity.

Recent Accounting Pronouncements

In April 2008, the FASB issued FASB Staff Position FAS 142-3, “Determination of the Useful Life of Intangible Assets” (“FSP FAS 142-3”). FSP FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”), and requires additional disclosures. The objective of FSP FAS 142-3 is to improve the consistency between the useful life of a recognized intangible asset under SFAS 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS No. 141 (R), “Business Combinations” (“SFAS 141(R)”), and other accounting principles generally accepted in the United States of America. FSP FAS 142-3 applies to all intangible assets, whether acquired in a business combination or otherwise and shall be effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. The guidance for determining the useful life of intangible assets shall be applied prospectively to intangible assets acquired after the effective date. The disclosure requirements apply prospectively to all intangible assets recognized as of, and subsequent to, the effective date. Early adoption is prohibited. The Company does not expect the adoption of FSP FAS 142-3 to have a material impact on its consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities ("SFAS 161"), which amends and expands the disclosure requirements of FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS 133"), with the intent to provide users of financial statements with an enhanced understanding of: (a) how and why an entity uses derivative instruments; (b) how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations; and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows. SFAS 161 requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of and gains and losses on derivative instruments and disclosures about credit-risk-related contingent features in derivative instruments. This statement applies to all entities and all derivative instruments. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company has not yet determined the effect on our consolidated financial statements, if any, upon adoption of SFAS No. 161.

In February 2008, the FASB issued FASB Staff Position No. 157-2, Effective Date of FASB Statement No. 157 ("FSP 157-2"), which delays the effective date of SFAS 157 for nonfinancial assets and nonfinancial liabilities. Therefore, the Company has delayed application of SFAS 157 to its nonfinancial assets and nonfinancial liabilities, which include assets and liabilities acquired in connection with a business combination, goodwill, intangible assets and asset retirement obligations recognized in connection with final capping, closure and post-closure landfill obligations, until January 1, 2009. The Company is currently evaluating the impact of SFAS 157 for nonfinancial assets and liabilities on the Company's financial position and results of operations.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. SFAS No. 159 permits companies to choose to measure many financial instruments and certain other items at fair value. SFAS No. 159 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The adoption of SFAS No. 159 did not have a material impact on our consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141 (R), Business Combinations, and SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements. SFAS No. 141 (R) requires an acquirer to measure the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree at their fair values on the acquisition date, with goodwill being the excess value over the net identifiable assets acquired. SFAS No. 160 clarifies that a noncontrolling interest in a subsidiary should be reported as equity in the consolidated financial statements. The calculation of earnings per share will continue to be based on income amounts attributable to the parent. SFAS No. 141 (R) and SFAS No. 160 are effective for financial statements issued for fiscal years beginning after December 15, 2008. Early adoption is prohibited. The Company has not yet determined the effect on our consolidated financial statements, if any, upon adoption of SFAS No. 141 (R) or SFAS No. 160.

Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the accompanying financial statements.

Off-Balance Sheet Arrangements

We do not have any off balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, results of operations, liquidity or capital expenditures.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

All of our foreign operations are conducted in China and the Renminbi is the national currency in which its operations are conducted. We have not utilized any derivative financial instruments or any other financial instruments, nor do we utilize any derivative commodity instruments in its operations, nor any similar market sensitive instruments.

The exchange rate between the Renminbi and the U.S. dollar is subject to the PRC foreign currency conversion policies which may change at any time. The exchange rate at November 10, 2008 was approximately 6.83 Renminbi to 1 U.S. dollar, and the exchange rate is currently permitted to float within a very limited range.

We believe that the weakening US dollar currently exposes us to significant market risk. We currently raise capital in the US to fund our acquisitions and growth in China. If the US dollar continues to weaken against the Renminbi we may be required to raise additional capital not anticipated or we may not be able to continue to operate, make required payments for agreements entered into or fund new acquisitions.

The Company primarily invests its cash in checking, bank money market and savings accounts. As of November 11, 2008, the Company had not entered into any type of hedging or interest rate swap transaction.

Item 4T. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Management has reviewed the effectiveness of our "disclosure controls and procedures" (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this report and have concluded that the disclosure controls and procedures are effective to ensure that material information relating to the Company is recorded, processed, summarized, and reported in a timely manner.

Changes in Internal Control Over Financial Reporting

During the quarter ended September 30, 2008, the Company’s management determined that it is required to amortize revenues from prepaid subscribers in our Jinan Broadband internet business, and accordingly implemented internal controls to record invoicing of prepaid internet services. Because of the foregoing and because of certain late periodic report filings in 2007, management has retained a PRC based consultant to assist with financial accounting processing and reporting. In addition, management has set up internal controls to record and assess prepaid internet services on an ongoing basis as well as historically. Other than the foregoing, there have been no changes in the Company's internal control over financial reporting during the last quarterly period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

None.

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

The Company has not made any sales of unregistered Securities during the quarter ended September 30, 2008 or thereafter other than has been disclosed in Current Reports on Form 8-K.

In July 2008 the Company issued an additional 84,128 shares to the Note holders in lieu of cash of approximately $64,000 for interest accrued through June 30, 2008 and on September 30, 2008 the Company issued an additional 85,057 shares to the Note holders in lieu of cash of approximately $64,000 for interest accrued through September 30, 2008. The Company believes that this issuance was exempt from the registration requirements of the Securities Act of 1933, as amended pursuant to Section 4(2) as this issuance of restricted shares was only made to certain accredited investors and not pursuant to an offering or other public distribution.

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.

31.1		Certification by Principal Executive Officer pursuant to Sarbanes Oxley Section 302.*
31.1		Certification by Principal Accounting Officer pursuant to Sarbanes Oxley Section 302.*
32.1		Certification by Principal Executive Officer and Principal Accounting Officer pursuant to 18 U.S.C. Section 1350.*
32.2		Certification by Principal Accounting Officer pursuant to 18 U.S.C. Section 1350.*

* Filed herewith.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the registrant has duly caused this Quarterly Report on Form 10-Q for the period ended September 30, 2008, to be signed on its behalf by the undersigned on November 18, 2008, thereunto duly authorized.

	CHINA BROADBAND, INC

	By:	/s/ Marc Urbach
		Name: Marc Urbach
		Title: President (Principal Executive Officer)

	By:	/s/ Yue Pu
		Name: Yue Pu
		Title: Vice Chairman (Principal
		Accounting Officer, Principal
		Financial Officer)