IDEANOMICS, INC. - Quarter Report: 2009 March (Form 10-Q)

Unassociated Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

	For the quarterly period ended March 31, 2009

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 registrant as specified in its charter)

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

1900 Ninth Street, 3rd Floor

Boulder, Colorado 80302

(Address of principal executive offices)

(303) 449-7733

(Registrant's telephone number, including area code)

(Former name, former address and former fiscal year if changed since last report)

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

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

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o	Smaller reporting company x

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

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 61,923,208 shares as of May 15, 2009.

QUARTERLY REPORT ON FORM 10-Q

OF CHINA BROADBAND, INC.

FOR THE PERIOD ENDED MARCH 31, 2009

TABLE OF CONTENTS

PART I	-	FINANCIAL INFORMATION	3

Item 1.		Financial Statements	3
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	9
Item 3		Quantitative and Qualitative Disclosures About Market Risk	16
Item 4.		Controls and Procedures	16

PART II	-	OTHER INFORMATION	17

Item 1.		Legal Proceedings	17
Item 1A.		Risk Factors	17
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	17
Item 3.		Defaults Upon Senior Securities	17
Item 4.		Submission of Matters to a Vote of Security Holders	17
Item 5.		Other Information	17
Item 6.		Exhibits	17
Signatures			19

Cautionary Note Regarding Forward Looking Statements

This Form 10-Q contains “forward-looking” statements that involve risks and uncertainties. You can identify these statements by the use of forward-looking words such as "may", "will", "expect", "anticipate", "estimate", "believe", "continue", or other similar words. You should read statements that contain these words carefully because they discuss our future expectations, contain projections of our future results of operations or financial condition or state other "forward-looking" information. We believe that it is important to communicate our future expectations to our investors. However, these forward-looking statements are not guarantees of future performance and actual results may differ materially from the expectations that are expressed, implied or forecasted in any such forward-looking statements. There may be events in the future that we are unable to accurately predict or control, including weather conditions and other natural disasters which may affect demand for our products, and the product–development and marketing efforts of our competitors. Examples of these events are more fully described in the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2008 under Part I. Item 1A. Risk Factors.

Unless required by law, the Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. However, readers should carefully review the reports and documents the Company files from time to time with the SEC, particularly its Quarterly Reports on Form 10-Q, Annual Report on Form 10-K , Current Reports on Form 8-K and all amendments to those reports.

References

References to the “PRC” or “China” are to the People’s Republic of China. Unless otherwise noted, all currency figures are in U.S. dollars. All references to U.S. dollar amounts herein which relate to operations or revenues from the PRC have been converted into U.S. dollars based on the applicable exchange rates.

References to "yuan" or "RMB" are to the Chinese yuan, which is also known as the renminbi. Unless otherwise specified, the words “Company,” “we,” “us,” and “our,” refer collectively to China Broadband, Inc., its wholly owned subsidiary in the Cayman Islands, China Broadband Cayman, Ltd., and Beijing China Broadband Network Technology, a wholly foreign owned entity formed under the laws of the PRC, which is commonly referred to herein as our Wholly Foreign Owned Entity “WFOE”.

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

China Broadband, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

	March 31,			December 31,
	2009			2008
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	3,798,798		$	4,425,529
Marketable equity securities		94,125			254,496
Accounts receivable		192,480			136,709
Inventory		836,827			877,309
Prepaid expense		54,782			46,380
Other current assets		190,927			153,277
Total current assets		5,167,939			5,893,700

Property and equipment, net		8,777,472			9,299,473
Intangible assets, net		4,160,036			4,218,758
Other assets		1,254,411			692,911
Total assets	$	19,359,858		$	20,104,842

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	1,004,576		$	1,237,251
Accrued expenses		1,341,688			936,134
Deferred revenue		1,410,863			1,382,103
Payable to Shandong Media		145,679			145,679
Payable to Jinan Parent		2,798,984			2,795,472
Other current liabilities		72,718			72,013
Total current liabilities		6,774,508			6,568,652

Convertible notes payable		4,589,302			4,564,427
Deferred tax liability		775,937			790,617
Total liabilities		12,139,747			11,923,696

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, 50,668,310 and 50,585,455 issued and outstanding		50,669			50,586
Additional paid-in capital		13,449,731			13,372,358
Accumulated deficit		(12,928,828	)		(12,200,287	)
Accumulated other comprehensive income		256,497			320,858
Total shareholders' equity		828,069			1,543,515
Noncontrolling interests		6,392,042			6,637,631

Total equity		7,220,111			8,181,146

Total liabilities and equity	$	19,359,858		$	20,104,842

See notes to consolidated financial statements.

China Broadband, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended
	March 31,			March 31,
	2009			2008

Revenue	$	1,949,410		$	1,003,266
Cost of revenue		1,173,881			352,198
Gross profit		775,529			651,068

Selling, general and adminstrative expenses		717,928			520,934
Professional fees		110,496			137,253
Depreciation and amortization		831,307			727,627

Loss from operations		(884,202	)		(734,746	)

Interest & other income / (expense)
Interest income		3,458			15,592
Interest expense		(87,384	)		(78,542	)
Loss on sale of securities		(20,352	)		-
Other		(329	)		(13,519	)

Loss before income tax		(988,809	)		(811,215	)

Income tax benefit		14,680			6,433

Net loss		(974,129	)		(804,782	)

Net loss attributable to noncontrolling interests		(245,589	)		(168,062	)

Net loss attributable to shareholders	$	(728,540	)	$	(636,720	)

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

Weighted average shares outstanding
Basic		50,586,376			50,073,094
Diluted		50,586,376			50,073,094

See notes to consolidated financial statements.

China Broadband, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three Months Ended
	March 31,			March 31,
	2009			2008
Cash flows from operating
Net loss	$	(974,129	)	$	(804,782	)
Adjustments to reconcile net loss to net cash provided by operating activities
Stock compensation expense		77,456			34,539
Depreciation and amortization		831,307			727,627
Noncash interest expense		24,875			22,111
Deferred income tax		(14,680	)		(6,433	)
Loss on sale of marketable equity securities		20,353			-
Change in assets and liabilities,
Accounts receivable		(55,771	)		38,035
Inventory		40,482			(54,872	)
Prepaid expenses and other assets		(46,052	)		42,036
Accounts payable and accrued expenses		173,586			45,185
Deferred revenue		28,760			108,678
Other		-			103,496
Net cash provided by operating activities		106,187			255,620

Cash flows from investing activities:
Investment in Shandong Newspaper		-			(300,000	)
Proceeds from sale of marketable equity securities		54,858			-
Acquisition of property and equipment		(227,430	)		(739,544	)
Loan to Shandong Media shareholder		(584,654	)		-
Net cash used in investing activities		(757,226	)		(1,039,544	)

Cash flows from financing activities
Proceeds from issuance of convertible notes payable		-			4,850,000
Issuance costs associated with private placement and convertible notes		-			(104,500	)
Payable to Jinan Parent		3,512			147,368
Net cash provided by financing activities		3,512			4,892,868

Effect of exchange rate changes on cash		20,796			135,238

Net increase (decrease) in cash and cash equivalents		(626,731	)		4,244,182
Cash and cash equivalents at beginning of period		4,425,529			472,670

Cash and cash equivalents at end of period	$	3,798,798		$	4,716,852


Supplemental Cash Flow Information:

Value assigned to shares issued as penalty for non-registration of 7%
convertible notes	$	-		$	12,125
Value assigned to shares issued in lieu of cash for interest expense	$	62,141		$	56,133

Acquisition of Jinan Broadband
Consideration paid:
Cash paid	$	-		$	3,200,000
Cash amount owed	$	-		$	-
Noncontrolling interest	$	4,194,740		$	4,711,741

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

See notes to consolidated financial statements.

CHINA BROADBAND, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

China Broadband, Inc., a Nevada corporation (“China Broadband”, “we,” “us,” or “the Company”) owns and operates, through its subsidiaries in the People’s Republic of China (“PRC” or “China”), a cable broadband business based in the Jinan region of China and, effective as of July 1, 2008 a television programming guide publication business joint venture in the Shandong Province of China. The principal activities of the Company are to provide cable and wireless broadband services, principally internet services, Internet Protocol Point wholesale services, related network equipment rental and sales, and fiber network construction and maintenance through its indirect Jinan Broadband subsidiary. We also operate a print based media and television programming guide business through our Shandong Newspaper joint venture, the results of which are included in our financial statements as of July 2008. In April 2009, we entered into a letter of intent to acquire Wanshi Wangjing Media Technologies (Beijing) Co., Ltd., (a/k/a AdNet Media Technologies (Beijing) Co., Ltd.) ( “AdNet”), whose primary business is the delivery of multimedia advertising content to internet cafés in the PRC. The Company operates in the media segment.

The accompanying unaudited consolidated financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America for interim financial reporting. These interim financial statements are unaudited and, in the opinion of management, include all adjustments, consisting of normal recurring adjustments and accruals, necessary for a fair presentation of the balance sheet, statements of operations, changes in equity and cash flows for the periods presented. The results of operations for the interim period are not necessarily indicative of the results that may be expected for the full year or for any future period.

2. Accounting Policy Changes

On January 1, 2009, the Company adopted 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. Further, it requires transaction costs to be expensed. These costs were previously treated as costs of the acquisition.

SFAS No. 160 requires us to classify noncontrolling interests in a subsidiary as part of consolidated net income and to include the accumulated amount of noncontrolling interests as part of total equity. The net loss amounts we have previously reported are now presented as “Net loss attributable to shareholders”. The calculation of earnings per share will continue to be based on income amounts attributable only to shareholders. Similarly, in our presentation of total equity we distinguish between equity amounts attributable to shareholders and amounts attributable to the noncontrolling interests (previously classified as minority interest outside of shareholders’ equity).

3. Going Concern and Management’s Plans

The unaudited consolidated financial statements have been prepared assuming that the Company will continue as a going concern and, accordingly, do not include any adjustments that might result from the outcome of this uncertainty. The Company's independent registered public accounting firm's report of the financial statements included for the year ended December 31, 2008, contained an explanatory paragraph regarding the Company's ability to continue as a going concern.

Management plans to raise additional funds through debt or equity offerings or to merge with or acquire other companies. Management has yet to decide what type of offering the Company will use, how much capital the Company will raise and which company it will merge with or acquire. There is no guarantee that the Company will be able to raise any capital through any type of offerings or merge with or acquire any other companies.

4. Convertible Notes

On January 11, 2008 the Company entered into and consummated the Subscription Agreement with ten accredited investors with respect to the issuance of an aggregate of $4,971,250 principal amount of Notes due January 11, 2013, and Class A Warrants to purchase an aggregate of 6,628,333 shares of common stock of the Company at $.60 per share expiring on June 11, 2013. During the three months ended March 31, 2009 and 2008, the Company incurred $87,000 and $78,000 in interest expense related to these Notes and Warrants, respectively.

Based on a predetermined presumed value of $.75 per share as set forth in the Subscription Agreement and related documents during 2008, with the consent of the Note holders, the Company issued 82,854 and 75,614 shares to the Note holders in lieu of cash of approximately $62,000 and $57,000 for interest in the three month periods ended March 31, 2009 and 2008, respectively. No assurance can be made that these holders will be willing to accept stock in lieu of cash payments for interest in future payments.

5 Marketable Equity Securities

The Company holds investments in certain “available-for-sale” marketable equity securities all of which consist of common stock of China Cablecom Holdings Ltd. (the “Cablecom Shares”). The Cablecom Shares are classified as available-for-sale securities and are carried at estimated fair value, based on available information.

During the three months ended March 31, 2009, the Company sold 94,014 of its Cablecom Shares on the open market and received net proceeds of $55,000 and recorded a net loss on the sales of approximately $20,000.

As a result of a significant decline in the price of the Cablecom Shares, we recorded an unrealized loss of approximately $85,000 on these shares through other comprehensive income (loss) for the period ended March 31, 2009. The fair value of the remaining 224,106 Cablecom Shares at March 31, 2009 approximates $94,000.

6. Accumulated Other Comprehensive Income

Comprehensive loss for the periods ending March 31, 2009 and 2008 is as follows:

	Three Months Ended March 31,
	2009			2008
	(Unaudited)			(Unaudited)
Net loss attributable to shareholders	$	(729,000	)	$	(637,000	)
Other comprehensive loss:
Currency translation adjustment		21,000			135,000
Unrealized loss on marketable equity securities		(85,000	)
Comprehensive loss	$	(793,000	)	$	(502,000	)

Changes in the components of Accumulated Other Comprehensive Income are attributable to the currency translation adjustment from the Renminbi to the US dollar and the unrealized loss on marketable equity securities. For the three months ended March 31, 2009, the change in Accumulated Other Comprehensive Income is as follows:

	Accumulated
	Other
	Comprehensive
	Income (Loss)
Balance, December 31, 2008		321,000
Change for the three months ended March 31, 2009, net of taxes		(64,000	)
Balance, March 31, 2009	$	257,000

7. Stock Based Compensation

In March 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. Through March 31, 2009, 250,000 options have been issued under the plan.

The following table provides the details of the total stock based compensation during the three month periods ended March 31, 2009 and 2008:

	Three Months Ended
	March 31,		March 31,
	2009		2008
Stock option amortization	$	8,000	$	8,000
Warrant amortization		7,000		14,000
Stock issued in lieu of interest		62,000		56,000
Stock issued as non registration penalty		-		12,000
	$	77,000	$	90,000

The Company accounts for its stock option awards pursuant to the provisions of SFAS 123(R) and recorded a charge of $8,000 and $8,000 during the three month periods ending March 31, 2009 and 2008, respectively in connection with the issuance of stock options.

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 for options issued in 2008.

	2008

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

There were no stock options issued during the three month period ending March 31, 2009. As of March 31, 2009, there were 125,000 options exercisable at a weighted average exercise price of $0.67 with a weighted average remaining life of 6.6 years.

As of March 31, 2009 the Company had total unrecognized compensation expense related to options granted of $53,000 which will be recognized over a remaining service period of 2 years.

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, the Company issued warrants to investors and service providers to purchase common stock of the Company at a fixed exercise price and for a specified period of time. The following table outlines the warrants outstanding as of March 31, 2009:

	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 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.

On January 11, 2008 the Company issued the 1,131,667 Broker Warrants expiring June 11, 2013 in connection with the January 2008 Financing to Chardan Capital as broker. The Company is recognizing the value of the Broker Warrants of $226,835 as debt issuance costs and is 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 2008 related to the issuance of these warrants and had total unrecognized compensation expense related to these warrants of $7,099, which was recognized in March 2009.

8. Income Taxes

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

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

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.

At March 31, 2009, Company’s management considered that the Company had no uncertain tax positions that affected its consolidated financial position and results of operations or cash flow, and will continue to evaluate for the uncertain position in future. There are no estimated interest costs and penalties provided in the Company’s financial statements for the three months ended March 31, 2009.

The Company is subject to a 5% business tax on the business income of our Jinan Broadband subsidiary and Shandong Media joint venture.

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.

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

The following is a discussion and analysis of our results of operations and should be read in conjunction with our consolidated financial statements and related notes for the quarter ended March 31, 2009 contained in this Form 10-Q.

Overview

We operate, through our indirect subsidiaries in the PRC, a cable broadband business based in the Jinan region of China (“Jinan Broadband”) and a television programming guide publication business joint venture (“Shandong Media”) in the Shandong Province of China. Accordingly, our principal activities are providing cable and wireless broadband and print based media and television programming guide services in the PRC. In addition, we recently acquired an internet café content provider and advertising business in the PRC (AdNet) (See “Recent Developments” below). We operate in the media segment.

Recent Developments

Completion of Acquisition of AdNet

Effective as of April 7, 2009, China Broadband, through its wholly owned subsidiary China Broadband, Ltd., a Cayman Islands company (“China Broadband Cayman”) completed the acquisition (the “Adnet Acquisition”) of Wanshi Wangjing Media Technologies (Beijing) Co., Ltd., a/k/a Adnet Media Technologies (Beijing) Co., Ltd., a recently organized PRC based company (“AdNet”) pursuant to a Share Issuance Agreement (the “AdNet Agreement”) between the Company, China Broadband Cayman, AdNet and its 10 shareholders (inclusive of its two executives, Priscilla Lu and Mr. Wang Yingqi nee Michael Wang).

Issuance of Restricted Shares to AdNet Shareholders

Pursuant to the terms of the AdNet Agreement, among other provisions, China Broadband issued 11,254,898 shares of its common stock, par value, $.001 per share (the “Broadband Shares”) to the AdNet shareholders, in exchange for 100% of the equity ownership of AdNet (the “AdNet Shares”) and consideration of $100,000. The acquisition of AdNet resulted in the ownership by AdNet shareholders of 15% of China Broadband’s common stock on a fully diluted basis (exclusive of certain notes and warrants).

In addition, in the event that China Broadband becomes delinquent with its reporting obligations pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), such that the former AdNet shareholders are not able to sell their Broadband Shares under the exemptions provided under the Securities Act of 1933, as amended (the “Act”) for greater than 30 days, then China Broadband will be required to issue 67,777 Additional Shares to the AdNet shareholders for each 30 day period that the delinquency is not cured, up to an aggregate maximum of 677,777 Additional Shares.

As part of the terms of the AdNet Acquisition, and to facilitate our subsidiary’s ownership and control over AdNet under PRC law, we loaned AdNet $100,000 pursuant to a Loan Agreement and Equity Option Agreement. All of the shares of AdNet are held by a trustee appointed by the Company to act as directed by the Company. No assurance can be made that the combined companies will be successful or will have sufficient capital to grow. The foregoing description is a summary only of the Share Issuance Agreement between China Broadband, Inc., China Broadband, Ltd., Waanshi Wangjing Media Technologies (Beijing) Co., Ltd. and its shareholders, dated as of April 7, 2009 (“AdNet Agreement”) and is qualified in its entirety by reference to the full AdNet Agreement.

AdNet holds an Internet Content Provider (“ICP”) license and is in the business of providing delivery of multimedia advertising content to internet cafés in China. AdNet currently services over 2,000 cafés and currently operates and is licensed to operate in 28 provinces in the PRC. AdNet maintains servers in five data centers located in the Chinese cities of Wuhan, Wenzhou, Yantai, Yunan, with a master distribution server in Tongshan. Partnering with a local advertisement agency, AdNet provides a network for tens of thousands of daily video advertisement insertions to entertainment content traffic (movies, music, video, and games).

Results of Operations

China Broadband’s operating results reflect the operating results of its indirect subsidiary, Jinan Broadband, and of the Shandong Media joint venture. Through WFOE, we acquired a 51% interest in Jinan Broadband effective April 1, 2007, and a 50% interest in the Shandong Media joint venture effective July 1, 2008.

The following table presents for the periods indicated the results of the Company’s operations.

	3 Months Ended						Amount			%
	March 31,			March 31,			Increase /			Increase /
	2009			2008			(Decrease)			(Decrease)

Revenue	$	1,949,000		$	1,003,000		$	946,000			94	%
Cost of revenue		1,174,000			352,000			822,000			234	%
Gross profit		775,000			651,000			124,000			19	%

Selling, general and adminstrative expenses		718,000			521,000			197,000			38	%
Professional fees		111,000			137,000			(26,000	)		-19	%
Depreciation and amortization		831,000			728,000			103,000			14	%

Loss from operations		(885,000	)		(735,000	)		(150,000	)		20	%

Interest & other income / (expense)		(105,000	)		(76,000	)		(29,000	)		38	%

Loss before income tax		(990,000	)		(811,000	)		(179,000	)		22	%

Income tax benefit		15,000			6,000			9,000			150	%

Net loss		(975,000	)		(805,000	)		(170,000	)		21	%

Net loss attributable to noncontrolling interests		(246,000	)		(168,000	)		(78,000	)		46	%

Net loss attributable to shareholders	$	(729,000	)	$	(637,000	)	$	(92,000	)		14	%

Comparison of Three Months Ended March 31, 2009 and 2008

Revenues

Revenues for the three months ended March 31, 2009 totaled $1,949,000, as compared to $1,003,000 for the three months ended March 31, 2008. The increase in revenue of approximately $946,000, or 94%, is primarily attributable to the inclusion in our operating results of our Shandong Media joint venture entered into mid 2008.

Our revenues are generated by our operating companies in the PRC. Our revenues for the quarters ended March 31, 2009 and 2008 are exclusive of the Adnet acquisition.

Jinan Broadband’s revenue consists primarily of sales to our PRC based Internet consumers, cable modem consumers, business customers and other internet and cable services of $1,085,000, an increase of $82,000, or 8% as compared to revenues of $1,003,000 for the first quarter of 2008. The increase is attributable to increases in our internet sales and network leasing sales.

Shandong Media’s revenue consists primarily of sales of publications and advertising revenues. For the three months ended March 31, 2009, revenues from the Shandong Media joint venture totaled $864,000. By comparison, Shandong Media’s revenues were not included in our operating results during the first quarter of 2008 (For a description of the Shandong Media joint venture, see “Shandong Media Joint Venture and Shandong Newspaper Cooperation Agreement”, below).

Gross Profit

Our gross profit for the three months ended March 31, 2009 was $775,000, as compared to $651,000 for the three months ended March 31, 2008. The increase in gross profit of approximately $124,000, or 19%, includes $303,000 from our Shandong Media joint venture offset by a $179,000 decrease attributable to our Jinan Broadband operations. The decrease in gross profit attributable to Jinan Broadband was primarily due to increased costs of revenue, particularly costs of telecom bandwidth.

Gross profit as a percentage of revenue was 40% for the three months ended March 31, 2009, as compared to 65% for the three months ended March 31, 2008.

Selling, General and Administrative Expenses

Our selling, general and administrative expenses for the three months ended March 31, 2009 increased approximately $197,000 to $718,000, as compared to $521,000 for the three months ended March 31, 2008. The increase is primarily attributable to the inclusion of our Shandong Media joint venture entered into mid 2008.

Salaries and personnel costs are the major component of selling, general and administrative expenses. During the first quarter of 2009, salaries and personnel costs accounted for 60% of our selling, general and administrative expenses. For the three months ended March 31, 2009, salaries and personnel costs totaled $430,000, an increase of $128,000 or 43% as compared to $302,000 for the first quarter of 2008. The increase in salaries and personnel costs is primarily attributable to the inclusion of our Shandong Media joint venture entered into mid 2008.

We expect our selling, general and administrative expenses will increase as we continue to grow our business.

Professional Fees

The following is a list of our professional fees accrued for the three months ended March 31, 2009 and 2008.

	2009		2008
Accounting	$	65,000	$	53,000
Consulting	$	11,000	$	47,000
Legal	$	34,000	$	37,000
Total	$	111,000	$	137,000

The professional fees are generally related to public company reporting and governance expenses as well as costs related to our acquisitions.

We expect our costs for professional services for public company reporting and corporate governance expenses to remain significant, but to decrease as a percentage of our overall revenues if we continue to acquire new entities and enter into strategic partnerships.

Depreciation and Amortization

	2009		2008
Depreciation:	$	749,000	$	702,000
Amortization:	$	82,000	$	26,000
Total	$	831,000	$	728,000

Depreciation expense during 2009 relates to the depreciation on the approximately $14.2 million of property, plant and equipment, at our Jinan Broadband subsidiary.

The increase in amortization of $56,000 is primarily attributable to the amortization related to our Shandong Media intangible assets acquired in 2008.

Interest and Other Income (Expense), net

Interest and other income (expense), net, of approximately $105,000 during the three months ended March 31, 2009 consisted primarily of:

interest expense related to the 5% Convertible Notes and Warrants issued on January 11, 2008 in the amount of approximately $87,000,

the loss on the sale of marketable equity securities in the amount of $20,000.

We expect to continue to incur interest expense in connection with the 5% Convertible Notes issued in January 2008. Interest on the Notes compounds monthly at the annual rate of five percent (5%). The Notes mature on January 11, 2013. The outstanding principal amount of the Notes as of March 31, 2009 was $4,971,250.

Net Loss Attributable to Noncontrolling Interest

49% of the operating loss of our Jinan Broadband subsidiary is allocated to Jinan Parent, the 49% co-owner of this business. During the three months ended March 31, 2009, $225,000 of our operating losses from Jinan Broadband was allocated to Jinan Parent, as compared to $168,000 during the first quarter of 2008.

50% of the operating loss of our Shandong Media joint venture is allocated to our 50% Shandong Newspaper joint venture partner. During the three months ended March 31, 2009, $21,000 of our operating loss from Shandong Media was allocated to Shandong Newspaper. We consolidated the results of Shandong Media effective July 1, 2008. Accordingly, there was no allocation for the three months ended March 31, 2008.

Net Loss Attributable to Shareholders

Net loss attributable to shareholders for the three months ended March 31, 2009 was $729,000, an increase of $92,000, or 14%, as compared to $637,000 for the three months ended March 31, 2008. The increase in net loss attributable to shareholders is due to:

(i) an increase in the net loss of Jinan Broadband attributable to us, which increased by $40,000 as compared to the first quarter of 2008,

(ii) the increase in net loss attributable to shareholders is also due to a net loss of $21,000 from the Shandong Media joint venture,

(iii) in addition, the increase in net loss attributable to shareholders is due to a $31,000 net loss at the holding company level, as compared to the first quarter of 2008.

The following table breaks down the results of operations for the three months ended March 31, 2009 and 2008 between our operating companies and our non-operating companies.

The operating companies include Jinan Broadband and Shandong Media

2009 includes operations of our Shandong Media company as compared to no inclusion in 2008.

	3 Months Ended March 31, 2009												3 Months Ended March 31, 2008
				% of												% of
				Total			Non-									Total			Non-
	Operating			Revenue			Operating			Total			Operating			Revenue			Operating			Total


Revenue	$	1,949,000					$	-		$	1,949,000		$	1,003,000					$	-		$	1,003,000
Cost of revenue		1,174,000						-			1,174,000			352,000						-			352,000
Gross profit		775,000			40	%		-			775,000			651,000			65	%		-			651,000

Selling, general and adminstrative expenses		525,000			27	%		193,000			718,000			311,000			31	%		209,000			520,000
Professional fees		4,000			0	%		107,000			111,000			-			0	%		137,000			137,000
Depreciation and amortization		750,000			38	%		81,000			831,000			702,000			70	%		26,000			728,000

Loss from operations		(504,000	)		-11	%		(381,000	)		(885,000	)		(362,000	)		-36	%		(372,000	)		(734,000	)

Interest & other income / (expense)
Interest income / (expense), net		3,000						(87,000	)		(84,000	)		1,000						(64,000	)		(63,000	)
Loss on sale of securities		-						(20,000	)		(20,000	)		-						-			-
Other		-						-			-			(2,000	)					(12,000	)		(14,000	)

Loss before income tax		(501,000	)					(488,000	)		(989,000	)		(363,000	)					(448,000	)		(811,000	)

Income tax benefit		-						15,000			15,000			-						6,000			6,000

Net loss		(501,000	)					(473,000	)		(974,000	)		(363,000	)					(442,000	)		(805,000	)

Net loss attributable to noncontrolling interest		(245,000	)					-			(245,000	)		(168,000	)								(168,000	)

Net loss attributable to shareholders	$	(256,000	)				$	(473,000	)	$	(729,000	)	$	(195,000	)				$	(442,000	)	$	(637,000	)

Liquidity and Capital Resources

As of March 31, 2009 we had $3,799,000 of cash on hand and a working capital deficit of $1,607,000. As of March 31, 2009, we had total current liabilities of $6,775,000. Given our current commitments and working capital, we cannot support our operations for the next 12 months without additional capital (See “Need for Additional Capital”, below).

2008 Convertible Note Financing

On January 11, 2008 we entered into 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.

During the three months ended March 31, 2009 the Company incurred $87,000 in interest expense related to these notes and warrants. Based on a predetermined presumed value of $.75 per share as set forth in the Subscription Agreement and related documents with the consent of the Note holders, the Company issued 82,854 shares to the Note holders in lieu of cash of approximately $62,000 for interest accrued. Additional interest expense of $25,000 was recorded for the warrants.

Settlement Agreement

In April 2008, we received 390,000 shares of Cablecom Holdings, Ltd. (the “Cablecom Holdings Shares”) from Mr. Clive Ng, the Chairman of our board of directors, in April 2008, pursuant to a 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., Pu Yue, Clive Ng, Chardan Capital Markets, LLC, Jaguar Acquisition Corporation, and China Cablecom Holdings, Ltd (“Cablecom Holdings”). The value of the Cablecom Holdings shares has since declined substantially, and may continue to fluctuate and decline further. During the first quarter of 2009, we sold 94,014 of the Cablecom Holdings shares for total net proceeds of $55,000 and recorded a net loss on the sales of approximately $20,000. As of March 31, 2009, we have 224,106 shares remaining.

As a result of a significant decline in the price of the Cablecom Holdings Shares we recorded an unrealized loss of approximately $85,000 on these shares through other comprehensive income (loss) for the period ended March 31, 2009. The fair value of the remaining 224,106 Cablecom shares at March 31, 2009 approximates $94,000.

Cash Flows

The following sets forth a summary of the Company’s cash flows for the three months ended March 31, 2009 and 2008:

	Three Months Ended
	March 31,			March 31,
	2009			2008
Net cash provided by operating activities	$	106,000		$	256,000
Net cash used in investing activities	$	(757,000	)	$	(1,040,000	)
Net cash provided by financing activities	$	4,000		$	4,893,000
Effect of exchange rate changes on cash	$	21,000		$	135,000

Operating activities for the three months ended March 31, 2009 and 2008, after adding back non-cash items, used cash of approximately $35,000 and $49,000, respectively. During such period other changes in working capital provided cash of approximately $141,000 and $305,000, respectively, resulting in cash being provided by operating activities of $106,000 and $256,000, respectively.

Investing activities for the three months ended March 31, 2009 and 2008 used cash of $757,000 and $1,040,000, respectively. For 2009, this amount consisted of proceeds of $55,000 from the sale of our Cablecom Shares, offset by (i) $227,000 for additions to property and equipment and (ii) $585,000 loan to our Shandong Media shareholder. For 2008 this amount consisted of additions to property and equipment in the amount of $740,000 and the down payment for the acquisition of Shandong Newspaper in the amount of $300,000.

Financing activities for the three months ended March 31, 2009 and 2008 provided cash of $4,000 and $4,893,000, respectively. For 2009, the $4,000 was solely due from an increase in the payable to Jinan Parent. The advance from Jinan Parent is unsecured, interest free and has no fixed repayment terms. For 2008, this amount consisted of proceeds from the issuance of 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 $147,000.

Foreign Currency Translation

Our WOFE, Jinan Broadband subsidiary and Shandong Media joint venture 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 favorable effect of exchange rates on cash between the Chinese Yuan and the United States dollar, provided cash of $21,000 and $135,000 during the three months ended March 31, 2009 and 2008, respectively.

Shandong Media Joint Venture and Shandong Newspaper Cooperation Agreement

On March 7, 2008, through our WFOE in the PRC, we entered into a Cooperation Agreement (the “Shandong Newspaper Cooperation Agreement”) by and among our WFOE subsidiary, 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 own 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.

Under the terms of the Shandong Newspaper Cooperation Agreement and related pledge and trust documents, the Shandong Newspaper entities mentioned above contributed their entire Shandong Newspaper Business and transferred certain employees, to Shandong Media in exchange for a 50% stake in Shandong Media, with the other 50% of Shandong Media to be owned by our WFOE in the PRC in the second quarter of 2008 with the joint venture becoming operational in July of 2008. In exchange therefore, the Cooperation Agreement provided for total initial consideration from us of approximately $1.5 million (approximately 10 million RMB) which was contributed to Shandong Media as working and acquisition capital. As part of the transaction, and to facilitate our subsidiary’s ownership and control over Shandong Newspaper under PRC law, through our WFOE in the PRC, we loaned Shandong Media said funds pursuant to a loan agreement and equity option agreement, and a majority of the shares of Shandong Newspaper are held by Pu Yue, our CFO, as trustee on behalf of the Company pursuant to a pledge agreement and trustee agreement. The results of the Shandong Newspaper Business have been consolidated with the Company’s consolidated financial statements as of July 1, 2008.

During 2009, we will be required to make additional payments pursuant to the Shandong Newspaper Cooperation Agreement. In addition to the initial purchase price of $1.5 million (10 million RMB), the Shandong Newspaper Cooperation Agreement provides for additional consideration of approximately US $730,000 (as adjusted for current rates as of March 2009) and US $2,900,000 (between 5 million RMB and 20 million RMB, respectively) 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.

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

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

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

is less then 4 million RMB, then we will be required to contribute only an additional 5 million RMB (approximately US $730,000 presuming current exchange rates are in effect at such time).

The Shandong Newspaper Cooperation Agreement resulted in the creation of a Variable Interest Entity (“VIE”) as defined under Financial Accounting Standards Board (“FASB”) Interpretation No. 46R, Consolidation of Variable Interest Entities (“FIN-46R”). The intended result of the contractual arrangements is that, as of December 31, 2008 the economic risks and benefits of the Shandong Newspaper Business operations are being primarily borne by the Company. The Company has contributed more capital to date and may be required to make further capital contributions if Shandong Newspaper meets certain performance targets. The contractual arrangements in addition to the service agreements the Company has with the Shandong Newspaper parent companies, provide under the relevant principles of United States Generally Accepted Accounting Principles (“US GAAP”) for the consolidation of the results of operations of Shandong Newspaper, with 50% of the Shandong Newspaper net income included in the accompanying financial statements of the Company.

Need for Additional Capital

As indicated above, management does not believe that the Company has sufficient capital to sustain its operations beyond 12 months without raising additional capital. We presently do not have any available credit, bank financing or other external sources of liquidity. Accordingly, we expect that we will require additional funding through additional equity and/or debt financings. However, there can be no assurance that any additional financing will become available to us, and if available, on terms acceptable to us.

The conversion of our outstanding notes and exercise of our outstanding warrants into shares of common stock would have a dilutive effect on our common stock, which would in turn reduce our ability to raise additional funds on favorable terms. In addition, the subsequent sale on the open market of any shares of common stock issued upon conversion of our outstanding notes and exercise of our outstanding warrants could impact our stock price which would in turn reduce our ability to raise additional funds on favorable terms.

Any financing, if available, may involve restrictive covenants that may impact our ability to conduct our business or raise additional funds on acceptable terms. If we are unable to raise additional capital when required or on acceptable terms, we may have to delay, scale back or discontinue our expansion plans.

In the event we are unable to raise additional capital we will not be able to sustain any growth or continue to operate.

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.

Through WFOE, we acquired a 51% interest in Jinan Broadband effective April 1, 2007, and a 50% interest in the Shandong Media joint venture effective July 1, 2008. Accordingly, our historical experience with operations in China is limited and may change in the future as we continue to operate the companies. 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 revenue 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 perform indefinite life intangible asset impairment tests on an annual basis and between annual tests in certain circumstances. To determine the fair value of these intangible assets, there are many assumptions and estimates used that directly impact the results of the testing. In making these assumptions and estimates, the Company must make various assumptions regarding estimated future cash flows and other factors in determining the fair values of the respective assets. We will use set criteria that are reviewed and approved by various levels of management, and we will estimate the fair value of our reporting units by using discounted cash flow analyses. If these estimates or their related assumptions change in the future, the Company may be required to record impairment charges for these assets in future periods. Any such resulting impairment charges could be material to the Company’s results of operations.

Income Taxes

Foreign Currency Translation

The businesses of the Company’s operating subsidiaries are currently conducted in and from China in Renminbi. In this report, all references to “Renminbi” and “RMB” are to the legal currency of China and all references to U.S. dollars, dollars, $ and US$ are to the legal currency of the United States. The Company makes no representation that any Renminbi or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or Renminbi, as the case may be, at any particular rate, the rates stated below, or at all. The Chinese government imposes control over its foreign currency reserves in part through direct regulation of the conversion of Renminbi into foreign exchange and through restrictions on foreign trade. The Company uses the U.S. dollar as its reporting and functional currency.

Translation adjustments are reported as other comprehensive income or expenses and accumulated as other comprehensive income in the equity section of the balance sheet. Financial information is translated into U.S. dollars at prevailing or current rates respectively, except for revenues and expenses which are translated at average current rates during the reporting period. Exchange gains and losses resulting from retained profits are reported as a separate component of stockholders’ equity.

Recent Accounting Pronouncements

In December 2008, the FASB issued FSP FAS 132(R)-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets” (“FSP FAS 132(R)-1”). FSP FAS 132(R)-1 applies to an employer that is subject to the disclosure requirements of SFAS No. 132 (revised 2003), “Employers’ Disclosures about Pensions and Other Postretirement Benefits” (“SFAS 132R”) and amends SFAS 132R to provide guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan. The disclosures about plan assets required by FSP FAS 132(R)-1 shall be provided for fiscal years ending after December 15, 2009. Earlier application is permitted. We do not expect the adoption of FSP FAS 132(R)-1 to have a material impact on our consolidated financial statements.

In November 2008, the FASB issued EITF Issue No. 08-7, “Accounting for Defensive Intangible Assets” (“EITF 08-7”). EITF 08-7 applies to all acquired intangible assets in situations in which the acquirer does not intend to actively use the asset but intends to hold the asset to prevent its competitors from obtaining access to the asset (a defensive intangible asset). Defensive intangible assets could include assets that the acquirer will never actively use, as well as assets that will be used by the acquirer during a transition period when the intention of the acquirer is to discontinue the use of those assets. EITF 08-7 concluded that a defensive intangible asset should be accounted for as a separate unit of accounting and should be amortized over the period that the defensive intangible asset directly or indirectly contributes to the future cash flows of the entity. EITF 08-7 is effective prospectively for intangible assets acquired on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Earlier application is not permitted.

In June 2008, the FASB issued FSP EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities. This FSP provides that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. The Company does not currently have any share-based awards that would qualify as participating securities. Therefore, application of this FSP is not expected to have an effect on the Company's financial reporting.

In May 2008, the FASB issued FASB Staff Position (FSP) APB 14-1, Accounting for Convertible Debt That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement) ("FSP 14-1"). FSP 14-1 will be effective for financial statements issued for fiscal years beginning after December 15, 2008. The FSP includes guidance that convertible debt instruments that may be settled in cash upon conversion should be separated between the liability and equity components, with each component being accounted for in a manner that will reflect the entity's nonconvertible debt borrowing rate when interest costs are recognized in subsequent periods. The Company is currently assessing the potential effect of the FSP on its financial statements.

In May 2008, the FASB issued Statement of Financial Accounting Standards No. 162, The Hierarchy of Generally Accepted Accounting Principles (“FAS 162"). This Standard identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles. FAS 162 directs the hierarchy to the entity, rather than the independent auditors, as the entity is responsible for selecting accounting principles for financial statements that are presented in conformity with generally accepted accounting principles. The Standard is effective 60 days following SEC approval of the Public Company Accounting Oversight Board amendments to remove the hierarchy of generally accepted accounting principles from the auditing standards. FAS 162 is not expected to have an impact on the financial statements

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

In March 2008, the FASB issued Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities (“SFAS 161”), which is effective January 1, 2009. SFAS 161 requires enhanced disclosures about derivative instruments and hedging activities to allow for a better understanding of their effects on an entity’s financial position, financial performance, and cash flows. Among other things, SFAS 161 requires disclosures of the fair values of derivative instruments and associated gains and losses in a tabular formant. SFAS 161 is not currently applicable to the Company since the Company does not have derivative instruments or hedging activities

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.

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

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

Item 4. Controls and Procedures

a. Evaluation of Disclosure Controls and Procedures

Based on an evaluation under the supervision and with the participation of the Company's management, the Company's principal executive officer and principal financial officer have concluded that the Company's disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended ("Exchange Act") were effective as of March 31, 2009 to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms and (ii) accumulated and communicated to the Company's management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

b. Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal controls over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 under the Exchange Act that occurred during the quarter ended March 31, 2009 that have materially affected or are reasonably likely to materially affect the Company’s internal controls over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

There are no material pending legal proceedings to which we are a party or to which any of our property is subject. To the best of our knowledge, no such actions against us are contemplated or threatened.

Item 1A. Risk Factors

The discussion of our business and operations should be read together with the risk factors contained in Part I, Item 1A of our Annual Report on Form 10-K/A for the year ended December 31, 2008, which describes the various risks and uncertainties to which we are or may become subject to.

There have been no material changes to the risk factors set forth in our Annual Report on Form 10-K/A for the year ended December 31, 2008.

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

See "Issuance of Restricted Shares to AdNet Shareholders" under Item 2, above.

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.

EXHIBIT INDEX

Exhibit No.		Description
31.1		Certification by Chief Executive Officer pursuant to Sarbanes Oxley Section 302.
31.2		Certification by Chief Financial Officer pursuant to Sarbanes Oxley Section 302.
32.1		Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350.
32.2		Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350.

SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on May 20, 2009.

	CHINA BROADBAND, INC

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


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