IDEANOMICS, INC. - Quarter Report: 2008 June (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:		June 30, 2008
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from _______________ to ______________
	Commission file number:	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 August 12, 2008, the issuer had 50,415,341 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.

JUNE 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 June 30, 2008 (unaudited) and December 31, 2007	F-1

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

Consolidated Statements of Cash Flows for the Six Months Ended June 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.	1-12

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

Item 4 - Controls and Procedures.	13-14

PART II - OTHER INFORMATION	15

Item 1 - Legal Proceedings.	15

Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds.	15

Item 3 - Defaults Upon Senior Securities.	15

Item 4 - Submission of Matters to a Vote of Security Holders.	15

Item 5 - Other Information.	15

Item 6 - Exhibits.	15

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 Jian Guangdian Jiahe Digital Television Co., Ltd. located in mainland People’s Republic of China (the “PRC” or “China”),

our ability to complete our payments relating to the recent acquisition of Shandong Radio & Broadcasting Newspaper Group in the PRC if its performance goals are met,

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

our anticipated needs for working capital.

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

	June 30,			December 31,
	2008			2007
	(Unaudited)
Assets
Current assets:
Cash	$	4,061,482		$	472,670
Marketable equity securities, available for sale, at fair value		2,363,000			-
Accounts receivable		82,370			136,655
Inventory		748,613			642,313
Prepaid expenses		1,721			14,781
Other current assets		98,415			73,947

Total current assets		7,355,601			1,340,366

Property and equipment, net		10,101,108			10,333,105
Intangible asset		1,929,845			1,981,307
Other assets		1,859,448			-

Total assets	$	21,246,002		$	13,654,778

Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable	$	861,942		$	835,257
Accrued expenses		636,704			554,073
Deferred revenue		1,362,923			1,252,313
Payable to Jinan Parent		3,540,307			3,308,443
Other current liabilities		25,156			25,905

Total current liabilities		6,427,032			5,975,991

Convertible notes payable		4,513,850			-
Deferred tax liability		353,806			366,672

Total liabilities		11,294,688			6,342,663

Minority interest in Jinan Broadband		4,592,266			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, 50,331,213 and 50,048,000 issued and outstanding		50,331			50,048
Additional paid-in capital		13,145,252			10,485,874
Accumulated deficit		(8,786,559	)		(8,845,426	)
Accumulated other comprehensive income		950,024			331,764

Total shareholders' equity		5,359,048			2,022,260

Total liabilities and shareholders' equity	$	21,246,002		$	13,654,778

See notes to consolidated financial statements.

F-1

China Broadband, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,			June 30,			June 30,			June 30,
	2008			2007			2008			2007

Revenue	$	1,053,367		$	718,055		$	2,056,633		$	718,055

Cost of revenue		543,857			400,372			896,055			400,372

Gross profit		509,510			317,683			1,160,578			317,683

Selling, general and administrative expenses		310,808			260,857			811,914			425,561
Professional Fees		168,163			233,365			305,416			373,365
Depreciation and amortization		694,075			521,029			1,441,530			521,029

Loss from operations		(663,536	)		(697,568	)		(1,398,282	)		(1,002,272	)

Interest and other income (expense):
Settlement gain		1,300,692			-			1,300,692			-
Interest expense		(64,049	)		(135	)		(120,183	)		(4,362	)
Interest income		3,535			5,137			19,126			5,137
Gain on sale of securities		17,498			-			17,498			-
Other		(24,463	)		-			(60,388	)		-


Income (loss) before minority interest		569,677			(692,566	)		(241,537	)		(1,001,497	)

Minority interest loss in Jinan Broadband		119,476			149,832			287,538			149,832

Income (loss) before income taxes		689,153			(542,734	)		46,001			(851,665	)

Income tax benefit		(6,433	)		-			(12,866	)		-

Net income (loss)	$	695,586		$	(542,734	)	$	58,867		$	(851,665	)


Net income (loss) per share:
Basic	$	0.01		$	(0.01	)	$	0.00		$	(0.02	)
Diluted	$	0.01		$	(0.01	)	$	0.00		$	(0.02	)

Weighted average shares outstanding
Basic		50,297,145			49,694,044			50,185,120			42,902,897
Diluted		60,635,811			49,694,044			63,114,715			42,902,897

See notes to consolidated financial statements.

F-2

China Broadband, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended
	June 30,			June 30,
	2008			2007
Cash flows from operating activities:
Net income (loss)	$	58,867		$	(851,665	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock compensation expense		91,250			50,748
Gain on settlement agreement		(1,300,692	)		-
Gain on sale of marketable equity securities		(17,498	)		-
Depreciation and amortization		1,441,530			521,029
Minority interest		(287,536	)		(149,832	)
Deferred income tax (benefit)		(12,866	)		-
Change in assets and liabilities, net of effects of Jinan Broadband acquisition:
Accounts receivable		54,285			(111,764	)
Inventory		(106,300	)		(167,419	)
Prepaid expenses and other assets		(11,408	)		(101,328	)
Accounts payable and accrued expenses		321,370			(195,909	)
Deferred revenue		110,610			168,147
Other		46,512			33,309
Net cash provided by (used in) operating activities		388,124			(804,684	)

Cash flows from investing activities:
Investment in Jinan Broadband		-			-
Investment deposit in Shandong Newspaper		(1,449,248	)		-
Proceeds from sale of marketable equity securities		339,998			-
Acquisition of property and equipment		(1,115,686	)		(175,611	)
Net cash used in investing activities		(2,224,936	)		(175,611	)

Cash flows from financing activities:
Proceeds from issuance of convertible notes payable		4,850,000			-
Proceeds from issuance of common stock		-			-
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		231,864			(651,470	)
Net cash provided by financing activities		4,977,364			2,928,030

Effect of exchange rates changes on cash		448,260			128,734

Net increase in cash		3,588,812			2,076,469
Cash at beginning of period		472,670			103,170

Cash at end of period	$	4,061,482		$	2,179,639


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	$	56,711		$	-

Acquisition of Jinan Broadband:
Fair value of assets acquired	$	-		$	11,497,317
Liabilities assumed	$	-		$	2,186,360
Consideration paid:
Cash paid	$	-		$	2,572,125
Cash amount owed	$	-		$	3,055,000
Minority interest	$	-		$	5,319,524

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 subsidiary 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 August 1, 2008 (after the end of the quarter covered by this report), a television programming guide publication business joint venture in the Shandong Province of China (see Note 3 below). Through June 30, 2008, 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. In addition, during this period, the Company, through a PRC based subsidiary joint venture, acquired a Shandong based print media and television programming guide business as provided in Note 3 below.

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/A. The accompanying consolidated balance sheet as of December 31, 2007 has been derived from the audited balance as of that date included in the Form 10-KSB/A. 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 six months ended June 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.

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.

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.

F-4

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.

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 China Broadband and 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, our placement agent for the January 2008 Financing and a party to the Settlement Agreement, completed the January 2008 Financing 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.

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.

F-5

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 details of the net gain the Company recognized as a result of the Settlement Agreement during the quarter ended June 30, 2008 which is recorded in “Interest and other income (expense)” in the accompanying Statement of Operations:

Receipt 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 three months and six months ended June 30, 2008, the Company incurred approximately $64,000 and $120,000, respectively, in interest expense related to these Notes. Accrued interest on the Notes of approximately $64,000 at June 30, 2008 is included in accrued expenses in the consolidated balance sheet. 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.

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 2.5% based on the total amount sold to investors, or $121,250 based on $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 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 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 from of approximately $1.4 million (based on prevailing exchange rates at the time for 10 million RMB) which would be contributed to Shandong Media as working and acquisition capital. The Company has paid approximately $1,400,000 towards the initial consideration which is classified within “Other Assets” in the consolidated balance sheet as of June 30, 2008.

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 $757,757 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 $2.2 Million and $4.5 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 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 $757,575 presuming current exchange rates are in effect at such time).

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.

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 August 2008. The results of the Shandong Newspaper Business will be consolidated with the Company’s consolidated financial statements as of August 1, 2008.

4. Convertible Notes

On January 11, 2008, as described in Note 2 above, 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 six months ended June 30, 2008 the Company incurred $64,000 and $120,000, 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 in May 2008, with the consent of the Note holders, 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. No assurance can be made that these holders will be willing to accept stock in lieu of cash payments for interest in future payments.

F-8

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 June 30, 2008 the Company recorded and unrealized gain of $170,000 in accumulated other comprehensive income as a component of shareholders’ equity on the balance sheet related 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. 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 June 30, 2008, no write down was required to record other than temporary impairment of securities.

Assets measured at fair value on a recurring basis

On January 1, 2008, the Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 provides a single definition of fair value and a common framework for measuring fair value as well as new disclosure requirements for fair value measurements used in financial statements. Under SFAS 157, fair value is determined based upon the exit price that would be received by a company to sell an asset or paid a company to transfer a liability in an orderly transaction between market participants, exclusive of any transaction costs. Fair value measurements are determined by either the principal market or the most advantageous market. The principal market is the market with the greatest level of activity and volume for the asset or liability. Absent a principal market to measure fair value, the Company has used the most advantageous market, which is the market where the Company would receive the highest selling price for the asset or pay the lowest price to settle the liability, after considering transaction costs. However, when using the most advantageous market, transactions costs are only considered to determine which market is the most advantageous and these costs are then excluded when applying a fair value measurement. The adoption of SFAS 157 did not have a material effect on the Company’s financial position, results of operations or cash flows.

SFAS 157 creates a three-level hierarchy to prioritize the inputs used in the valuation techniques to derive fair values. The basis for fair value measurements for each level within the hierarchy is described below, with Level 1 having the highest priority and Level 3 having the lowest.

Level 1: Quoted prices in active markets for identical assets or liabilities.

Level 2: Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets.

Level 3: Valuations derived from valuation techniques in which one or more significant inputs are unobservable.

F-9

Following are the major categories of assets measured at fair value on a recurring basis during the six months ended June 30, 2008 using quoted prices in active markets for identical assets (Level 1); significant other observable inputs (Level 2); and significant unobservable inputs (Level 3):

	Level 1		Level 2		Level 3		Total
Cash equivalents	$	4,061,482	$	-	$	-	$	4,061,482
Marketable equity securities		2,363,000		-		-		2,363,000
	$	6,424,482	$	-	$	-	$	6,424,482

The Company’s investments in cash equivalents consist of short-term (less than 90 days) investments in checking, savings and bank money market funds and are priced at fair value and actively traded, thus recorded in Level 1 above.

The Company’s investments in short-term marketable equity securities are exposed to price fluctuations. The fair value measurements for short-term marketable equity securities are based upon the quoted price in active markets multiplied by the number of shares owned exclusive of any transaction costs and without any adjustments to reflect discounts that may be applied to selling a large block of the securities at one time. The Company does not believe that the changes in fair value of these assets will materially differ from the amount that could be realized upon settlement or that the changes in fair value will have a material effect on the Company’s results of operations or financial position. However, the ultimate amount that could be realized upon sale or settlement is dependent on several factors including external market conditions, the terms and conditions of a sale agreement, the counterparty to a sale agreement, the investment’s liquidity in capital markets and the length of time to liquidate an equity investment.

6. Net Income (Loss) Per Share

Basic net income (loss) per share has been computed by dividing the net income (loss) by the weighted average number of common shares outstanding. Diluted net income (loss) per share has been computed by dividing the net income (loss) by the weighted average number of common shares outstanding assuming exercise of dilutive warrants, options and convertible notes, 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.

The following table sets forth the computation of basic earnings per share:

	Three Months Ended					Six Months Ended
	June 30,		June 30,			June 30,		June 30,
	2008		2007			2008		2007

Numerator:
Net income (loss)	$	695,586	$	(542,734	)	$	58,867	$	(851,665	)

Denominator:
Weighted average common
shares outstanding		50,297,145		49,694,044			50,185,120		42,902,897

Basic earnings (loss) per share	$	0.01	$	(0.01	)	$	0.00	$	(0.02	)

F-10

The following table sets forth the computation of diluted earnings per share:

	Three Months Ended					Six Months Ended
	June 30,		June 30,			June 30,		June 30,
	2008		2007			2008		2007

Numerator:
Net income (loss)	$	695,586	$	(542,734	)	$	58,867	$	(851,665	)
Add: Convertible Note Interest		63,673		-			119,807		-

	$	759,259	$	(542,734	)	$	178,674	$	(851,665	)

Denominator:
Weighted average common shares outstanding - Basic		50,297,145		49,694,044			50,185,120		42,902,897

Incremental shares from assumed conversion of stock options, warrants and convertible note		10,338,666		-			12,929,595		-

Weighted average common shares outstanding - Diluted		60,635,811		49,694,044			63,114,715		42,902,897

Diluted earnings (loss) per share	$	0.01	$	(0.01	)	$	0.00	$	(0.02	)

The computation of diluted earnings (loss) per share for the three and six months ended June 30, 2008 excluded the 4,000,000 warrants issued in the 2007 Private Placement as their inclusion would have been antidilutive.

7. Accumulated Other Comprehensive Income

Comprehensive income (loss) for the three and six months ended June 30, 2008 and 2007 is as follows:

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

Net income (loss)	$	695,586	$	(542,734	)
Other comprehensive income:
Unrealized gain on marketable equity securities		170,000		-
Currency translation adjustment		313,022		149,528

Comprehensive income (loss)	$	1,178,608	$	(393,206	)

	Six Months Ended June 30,
	2008		2007
	(Unaudited)		(Unaudited)

Net income (loss)	$	58,867	$	(851,665	)
Other comprehensive income:
Unrealized gain on marketable equity securities		170,000		-
Currency translation adjustment		448,260		149,528

Comprehensive income (loss)	$	677,127	$	(702,137	)

F-11

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 gain on marketable equity securities. For the six months ended June 30, 2008, the changes in Accumulated Other Comprehensive Income (Loss) are as follows:

	Accumulated Other
	Comprehensive
	Income (Loss)

BALANCE, December 31, 2007	$	331,764
Change for the six months ended June 30, 2008, net of taxes		618,260

BALANCE, June 30, 2008	$	950,024

8. Stock Based Compensation

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 six months ended June 30, 2008, respectively, in connection with the issuance of stock options to employees.

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 June 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 3.75 years.

F-12

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.

A summary of option activity under the Plan as of June 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 June 30, 2008		100,000	$	1.00		9.75

Options exercisable at June 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 June 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 quarter ended June 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-13

On January 11, 2008 the Company issued Broker Warrants expiring June 11, 2013 (see Note 1 above) in connection with the January 2008 Financing of Notes and Class A Warrants 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 six months ended June 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.

The following table provides the details of the total stock based compensation during the six months ended June 30, 2008:

Stock option expense	$	8,216
Warrant expense		14,198
Stock issued in lieu of interest		56,711
Stock issued as non registration penalty		12,125


Total stock compensation expense	$	91,250

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 June 30, 2008 our only intangible asset relates to the purchase price associated with the service agreement resulting from our Jinan Broadband subsidiary acquisition. In accordance with SFAS No. 142, the Company is amortizing this service agreement over the 20 year term of this agreement, resulting in a recorded amortization expense of approximately $26,000 and $51,000 during the three and six months ended June 30, 2008, respectively.

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.

F-14

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.

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.

[RL NOTE- if there is any change in the way we are accounting for things this quarter, for example, how we now amortize prepaids that should be indicated and the result of the same should be indicated. Even if we do not have a material change in the numbers, since this is a material change in our methodologies, it could be material and should be noted separately. Same with any other changes that we may have been implementing as a result of the SEC LETTERS]

F-15

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 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 subsidiary in the People’s Republic of China (“PRC”), a cable broadband business based in the Jinan region of China and, effective August 1, 2008, acquired a television programming guide publication business joint venture in the Shandong Province of China (see below and Note 3 to Financial Statements above). Currently, our principal activity is providing 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. We operate in a single segment.

Settlement Agreement

Receipt 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 six months ended June 30, 2008, the Company incurred approximately $64,000 and $120,000, 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. Accrued interest on the Notes of approximately $64,000 at June 30, 2008 is included in accrued expenses in the consolidated balance sheet. 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.

Results of Operations

The following table presents the increases (decreases) in each major statement of operations category for the three months and six months ended June 30, 2008 as compared to the three months and six months ended June 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 Six Months Ended
	June 30, 2008 vs. 2007						June 30, 2008 vs. 2007
	Amount ($)			%			Amount ($)			%

Revenue	$	335,312			47	%	$	1,338,578			186	%

Cost of revenue		143,485			36	%		495,683			124	%

Gross profit		191,827			60	%		842,895			265	%

Selling, general and administrative		30,123			12	%		386,353			91	%
Professional fees		(65,202	)		-28	%		(67,949	)		-18	%
Depreciation and amortization		192,874			37	%		920,501			177	%


Loss from operations		34,032			-5	%		(396,010	)		40	%

Interest and other income (expense), net		1,228,211			24554	%		1,155,970			149157	%

Income before minority interest		1,262,243			-182	%		759,960			-76	%

Minority interest loss in Jinan Broadband		(30,356	)		-20	%		137,706			92	%

Income before income taxes		1,231,887			-227	%		897,666			-105	%

Income tax benefit		(6,433	)		-			(12,866	)		-

Net income	$	1,238,320			-228	%	$	910,532			-107	%

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.

Our revenues are principally based on the number of paying cable broadband internet customers in the Shandong province of China. As of June 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 increased efforts on internal growth by Jinan Broadband after our acquisition of them.

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

Revenues

Revenue for the three months ended June 30, 2008 was approximately $1,053,000 as compared to approximately $718,000 for the three months ended June 30, 2007 and increase of approximately $335,000 or 47%. The increase in revenue is primarily attributable to the increased number of paying subscribers during the three months ended June 30, 2008 of 59,000 as compared to the 45,000 paying subscribers during the three months ended June 30, 2007. Revenue consisted of sales to our PRC based Internet consumers, cable modem consumers, business customers and other internet and cable services. We expect that our revenues will increase as we continue to grow our business and add new regions.

Gross Profit

Gross profit for the three months ended June 30, 2008 was approximately $510,000 as compared to $318,000 for the three months ended June 30, 2007, an increase of approximately $192,000 or 60%. Gross profit as a percentage of revenue was 48.4% for the three months ended June 30, 2008 as compared to 44.2% for the three months ended June 30, 2007.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the three months ended June 30, 2008 increased approximately $30,000 to $291,000 as compared to $261,000 for the three months ended June 30, 2007. Selling, general and administrative expenses during the 2008 period included salaries and personnel costs of approximately $184,000 and insurance costs of approximately $22,000. During the 2007 period selling general and administrative expenses included salaries and personnel costs of approximately $103,000 and sales, marketing and promotional expenses of approximately $56,000. We expect that our selling, general and administrative expenses will increase as we continue to grow our business and add new regions.

Professional Fees

Professional fees for the three months ended June 30, 2008 decreased by approximately $65,000 to $168,000 as compared to $233,000 for the three months ended June 30, 2008. Professional fees during the 2008 period included legal costs of approximately $89,000, accounting fees of approximately $63,000 and consultant costs of approximately $16,000. Professional fees during the 2007 period included legal costs of approximately $71,000, accounting fees of approximately $130,000 and consultant costs of approximately $33,000. The increased professional fees in the 2007 period related to the professional costs associated with the acquisition of Jinan Broadband. We expect our costs for professional services to remain significant as we continue to acquire new entities and implement our growth strategy as set forth.

Depreciation and Amortization

Depreciation and amortization expense for the three months ended June 30, 2008 was approximately $714,000 as compared to $521,000 for the three months ended June 30, 2007. Depreciation and amortization expense during the 2008 period includes depreciation expense of $646,000 on the property, plant and equipment at our Jinan broadband subsidiary, $26,000 of amortization expense related to our service contract and $42,000 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 $521,000 on the property, plant and equipment at our Jinan broadband subsidiary.

Interest and Other Income (Expense)

We recorded a net income amount of approximately $1,233,000, in interest and other income (expense) during the three months ended June 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 $64,000 and $24,000 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 $3,000 of interest income earned on our cash balances. During the three months ended June 30, 2007 we recorded a net income amount of approximately $5,000 on our cash balances, in interest and other income (expense), net.

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. During the three months ended June 30, 2008 and 2007 $119,000 and $150,000, respectively, of our operating losses were allocated to Jinan Parent.

Income Tax Benefit

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

Six Months Ended June 30, 2008 Compared to the Six Months Ended June 30, 2007

Revenues

Revenue for the six months ended June 30, 2008 was approximately $2,057,000 as compared to approximately $718,000 for the six months ended June 30, 2007 and increase of approximately $1,339,000 or 186%. The increase in revenue is primarily attributable to our having operations for a full six months in the 2008 period as compared to only three months of operations in the 2007 period as well as the increased number of paying subscribers during the six months ended June 30, 2008 of 59,000 as compared to the 45,000 paying subscribers during the six months ended June 30, 2007. Revenue consisted of sales to our PRC based Internet consumers, cable modem consumers, business customers and other internet and cable services. We expect that our revenues will increase as we continue to grow our business and add new regions.

Gross Profit

Gross profit for the six months ended June 30, 2008 was approximately $1,161,000 as compared to $318,000 for the six months ended June 30, 2007, an increase of approximately $843,000 or 265%. Gross profit as a percentage of revenue was 56.4% for the six months ended June 30, 2008 as compared to 44.2% for the six months ended June 30, 2007.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the six months ended June 30, 2008 increased approximately $386,000 to $812,000 as compared to $426,000 for the six months ended June 30, 2007. The increase is primarily attributable to our having operations for a full six months in the 2008 period as compared to only three months of operations in the 2007 period. Selling, general and administrative expenses during the 2008 period included salaries and personnel costs of approximately $479,000, network connection costs of $93,000 and insurance costs of approximately $41,000. During the 2007 period selling general and administrative expenses included salaries and personnel costs of approximately $139,000, sales, marketing and promotional expenses of approximately $69,000 and travel expense of $86,000. We expect that our selling, general and administrative expenses will increase as we continue to grow our business and add new regions.

Professional Fees

Professional fees for the six months ended June 30, 2008 decreased by approximately $68,000 to $305,000 as compared to $373,000 for the six months ended June 30, 2008. Professional fees during the 2008 period included legal costs of approximately $126,000, accounting fees of approximately $115,000 and consultant costs of approximately $64,000. Professional fees during the 2007 period included legal costs of approximately $73,000, accounting fees of approximately $145,000 and consultant costs of approximately $156,000. 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 as we continue to acquire new entities and implement our growth strategy as set forth.

Depreciation and Amortization

Depreciation expense for the six months ended June 30, 2008 was approximately $1,442,000 as compared to $521,000 for the six months ended June 30, 2007. The increase is primarily attributable to our having operations for a full six months in the 2008 period as compared to only three months of operations in the 2007 period. Depreciation and amortization expense during the 2008 period includes depreciation expense of $1,348,000 on the property, plant and equipment at our Jinan broadband subsidiary, $51,000 of amortization expense related to our service contract and $42,000 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 $521,000 on the property, plant and equipment at our Jinan broadband subsidiary.

Interest and Other Income (Expense)

We recorded a net income amount of approximately $1,157,000, in interest and other income (expense) during the six months ended June 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 $120,000, 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 $47,000 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 $19,000 of interest income earned on our cash balances.

During the six months ended June 30, 2007 we recorded a net income amount of approximately $1,000 in interest and other income (expense), net which consisted of $5,000 in interest income earned on our cash balances offset by $4,000 of interest expense.

Minority Interest

49% of the operating loss of our Jinan Broadband subsidiary is allocated to Jinan Parent. During the six months ended June 30, 2008 and 2007 $287,000 and $150,000, respectively, of our operating losses were allocated to Jinan Parent.

Income Tax Benefit

Our income tax benefit was $13,000 and $0, respectively, for the six months ended June 30, 2008 and 2007.

Liquidity and Capital Resources

As of June 30, 2008 we had $4,061,000 of cash on hand and working capital of $929,000. As of June 30, 2008, we had total current liabilities of $6,427,000.

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 $1.2 million to fund the remaining portion of our required working capital contribution. During the three months ended June 30, 2008, the Company incurred $64,000 in interest expense related to these notes which is included in accrued expenses in the consolidated balance sheet. With the consent of the Note holders, in May 2008, the Company issued an aggregate of 75,614 shares to the Note holders in lieu of cash of approximately $56,000 for the interest accrued as of 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. 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.

Cash Flows

Operating activities for six months ended June 30, 2008 and 2007, after adding back non-cash items (used) cash of approximately $(27,000) and $(430,000), respectively. During such period other changes in working capital provided (used) cash of approximately $415,000 and $(375,000) respectively, resulting in cash being provided by (used in) operating activities of $388,000 and $(805,000), respectively.

Investing activities for six months ended June 30, 2008 and 2007 used cash of $2,225,000 and $176,000, respectively. The 2008 amounts consisted of additions to property and equipment in the amount of $1,116,000 and the down payment for the acquisition of Shandong Newspaper in the amount of $1,449,000 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 six months ended June 30, 2008 and 2007 provided cash of $4,977,000 and $2,928,000, 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 $232,000. 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 $651,000.

Our WOFE and our Jinan Broadband subsidiary, which is our only operating subsidiary as of June 30, 2008, 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 $448,000 and $129,000 during the six months ended June 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. 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 August 2008 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 to implement this business plan or, if implemented, that it will be successful.

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, anticipated 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.

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

In late April 2008, the Company received the 390,000 Cablecom Holdings Shares from Clive Ng, in connection with the Settlement Agreement. In accordance with the terms of the Settlement Agreement, the Company was to receive the Cablecom Holdings Shares from Mr. Ng subject to any lock up or similar restriction applicable to Clive Ng. Accordingly, the Company entered into a lock up agreement with China Cablecom Holdings with respect to the Cablecom Holdings Shares, containing substantially similar lock up restrictions as in effect with Mr. Ng’s shares of China Cablecom Holdings, dated as of April 24, 2008 (the “Cablecom Lock Up Agreement”).

Pursuant to the Cablecom Lock Up Agreement, the Company has agreed that without the consent of China Cablecom Holdings, except as otherwise provided in the Lock Up Agreement (i) until the earlier of the date (the "Trade Commencement Date"), that (x) is six months after April 9, 2008 , and (y) a registration statement with respect to such Shares, shall be declared effective by the Securities and Exchange Commission (which was declared effective on May 2, 2008), the Company shall not directly or indirectly offer, sell, contract to sell, gift, exchange, assign, pledge or otherwise encumber or dispose of the Shares (or enter into any transaction which is designed to, or might reasonably be expected to, result in the disposition, (whether by actual disposition or effective economic disposition due to cash settlement or otherwise), or any affiliate of the Company other than China Cablecom Holdings, or any person in privity with the Company or any affiliate of the Company, other than China Cablecom Holdings), directly or indirectly, including the establishment or increase in a put equivalent position or liquidation or decrease in a call equivalent position within the meaning of Section 16 of the Exchange Act and the rules and regulations of the SEC promulgated thereunder (each of the foregoing referred to as a "Disposition"); (ii) for a period of 6 months after the Trade Commencement Date, not to effect a Disposition of more than 33⅓% of his Closing Shares and Escrow Shares, if any such Escrow Shares have been released as of such time and (iii) for a period of 12 months after the Trade Commencement Date not to effect a disposition of more than 66⅔% of the Shares, if any such Escrow Shares have been released as of such time.

The foregoing is a summary only of the Lock Up Agreement. A registration statement with respect to the Cablecom Holdings Shares was declared effective on May 2, 2008, however, no assurance can be made that the registration statement will remain effective for any period of time, or that the shares will be liquid at favorable prices at times that the Company desires and is able to sell such shares.

Warrant Extensions

During the second quarter of 2008, and as a result of the receipt of releases from certain holders of warrants issued in the Company’s private placement of 8,000,000 shares of common stock and 4,000,000 warrants exercisable at $2.00 per share (the “Investor Warrants”) in 2007, as contemplated by the Settlement Agreement, the Company extended the expiration dates of all 4,000,000 Investor Warrants from March of 2009, through January 11, 2013.

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. Accordingly, approximately $1,400,000 was recorded within “Other Assets” in the consolidated balance sheet as of June 30, 2008.

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 $757,575 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 August 2008. Accordingly, the results of the Shandong Newspaper Business will be consolidated with the Company’s consolidated financial statements as of August 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 Company’s Jinan Broadband subsidiary business is 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 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.

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.

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 August 7, 2008 was approximately 6.87 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 August 7, 2008, the Company had not entered into any type of hedging or interest rate swap transaction.

Item 4. 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 June 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. 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.

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financial reporting includes those policies and procedures that:

(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorization of Management; and

(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

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

Management assessed the effectiveness of the Company’s internal control over financial reporting as of June 30, 2008. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organization of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on that assessment, Management has concluded that the Company’s internal control over financial reporting was effective as of June 30, 2008. Nonetheless, because of previous late filings during the 2007 year and because of our PRC operations, management has retained a PRC based consultant to assist with financial accounting processing and reporting. In addition, as a result of managements assessment that prepaid internet services should be amortized, management has set up internal controls to record and assess prepaid internet services on an ongoing basis as well as historically.

This Form 10-Q does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this report.

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 June 30, 2008 or thereafter other than has been disclosed in Current Reports on Form 8-K.

In May 2008 the Company issued, an aggregate of 75,614 shares to the ten Note holders (all of whom are accredited investors) in lieu of interest through March 31, 2008, plus late penalty fees. In July 2008, the Company issued an aggregate of 85,333 shares to these ten Note holders, in lieu of cash interest of approximately $64,000 through June 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 June 30, 2008, to be signed on its behalf by the undersigned on August 19, 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)