ZZLL INFORMATION TECHNOLOGY, INC - Quarter Report: 2010 March (Form 10-Q)

U.S. 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, 2010

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

For the transition period from ______________________ to ______________________

Commission File No. 333-134991

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

Nevada		20-3486523
(State or other jurisdiction of incorporation or formation)		(I.R.S. employer identification number)

A-B 8/F Hart Avenue Tsimshatsui

Kowloon, Hong Kong  N/A

(Address of principal executive offices) (Zip Code)

Registrant's telephone number: (852) 2815-1355
_______________________________________________

Securities registered under Section 12(b) of the Exchange Act:

None.

Securities registered under Section 12(g) of the Exchange Act:

Common Stock, $.001 par value per share

(Title of Class)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

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

State the number of shares outstanding of each of the issuer's classes of common equity, as of May 14, 2010: 21,400,000 shares of common stock.

Transitional Small Business Disclosure Format (check one):  Yes [ ] No [X]

BAOSHINN CORPORATION

UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS INDEX

PART I – FINANCIAL INFORMATION:

Item 1. Financial Statements (Unaudited)

3

Unaudited Condensed Consolidated Statement of Operations (unaudited) for the three months ended March 31, 2010 and

March 31, 2009

6

Unaudited Condensed Consolidated Statement of Financial Position at March 31, 2010 and March 31, 2009

7

Consolidated Statement of Cash Flows for the three months ended March 31, 2010 and March 31, 2009

8

Notes to Consolidated Interim Financial Statements

9-28

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

29

Item 3. Quantitative and Qualitative Disclosure About Market Risks

42

Item 4T. Controls and Procedures

42

PART II – OTHER INFORMATION:

Item 1. Legal Proceedings

42

Item 1A. Risk Factors

42

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

42

Item 3. Defaults Upon Senior Securities

42

Item 4. Submission of Matters to a Vote of Security

42

Item 5. Other Information

43

Item 6. Exhibits

43

Signatures

43

{A0060487.DOC}

2

PART I – FINANCIAL INFORMATION

Item 1.

Financial Statements

Baoshinn Corporation

Unaudited

Condensed Consolidated Financial Statements

For the Three months ended March 31, 2010 and 2009

(Stated in US Dollars)

3

These financial statements have been prepared by Baoshinn Corporation (the “Company”) without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed and omitted in accordance with such SEC rules and regulations. In the opinion of management, the accompanying statements contain all adjustments necessary to present fairly the financial position of the Company as of March 31, 2010, and its results of operations, stockholders’ equity, and its cash flows for the three months ended March 31, 2010. The results for these interim periods are not necessarily indicative of the results for the entire year. It is suggested that the accompanying financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K.

4

BAOSHINN CORPORATION

UNAUDITED CONDENSED CONSOLIDATED INCOME STATEMENT

(Stated in US Dollars)

	For 3 Months Ended March 31 Unaudited
	2010	2009
	$	$
Retail and Corporate revenue	6,864,152	6,320,521
Commission from travel booking services	34,268	70,339
Incentive commissions	71,922	64,706
Net sales	6,970,342	6,455,566
Cost of sales	(6,583,063)	(6,125,888)
Gross profit	387,279	329,678
Other operating income – Note 5	8,154	12,504
Depreciation	(6,799)	(7,403)
Administrative and other operating expenses	(305,979)	(334,850)
Profit/(Loss) from operations	82,655	(71)
Other non-operating income - Note 6	123	644
Interest expenses – Note 7	(92)	(58)
Profit before income taxes	82,686	515
Income taxes - Note 8	-	-
Net Profit	82,686	515
Non-controlling interest	(21,027)	901
Net Profit attributable to the Company	61,659	1,416
Earning per share of common stock – Note 4
- Basic	0.29 cents	0.01 cents
- Diluted	0.28 cents	0.01 cents
Weighted average number of common stock – Note 4
- Basic	21,400,000	21,400,000
- Diluted	21,649,467	21,550,100

See notes to unaudited condensed consolidated financial statements

5

BAOSHINN CORPORATION

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET

(Stated in US Dollars)

See notes to unaudited condensed consolidated financial statement

6

BAOSHINN CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Stated in US Dollars)

	For 3 months Ended March 31 unaudited
	2010			2009
	$			$
Cash flows from operating activities
Net Profit/(loss)	61,659			1,416
Adjustments to reconcile net loss to net cash flows
provided by operating activities :
Depreciation	6,799			7,403
Non-controlling interest	21,027			(901)
Changes in operating assets and liabilities :
Accounts receivable	(361,463)			(522,856)
Deposits, prepaid expenses and other receivables	48,648			(106,011)
Accounts payable	392,255			427,215
Other payables and accrued liabilities	(4,642)			75,793
Net cash flows provided by/(used in) operating activities	164,283			(117,941)
Cash flows from investing activity
Acquisition of plant and equipment	-			-
Net cash flows used in investing activity	-			-
Cash flows from financing activities
Amounts due from related parties	-			10,691
Amounts due to related parties	(113,453)			(2,838)
Net cash flows (used in)/provided by financing activities	(113,453)			7,853
Net increase/(decrease) in cash and cash equivalents	50,830			(110,088)
Effect of foreign currency translation on cash and cash equivalents	(882)			2
Cash and cash equivalents - beginning of period	260,155			217,453
Cash and cash equivalents - end of period	310,103			107,367
Supplemental disclosures for cash flow information :
Cash paid for :
Interest	92			58
Income taxes	-			-

7

BAOSHINN CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

1.

Corporation information

Baoshinn Corporation (the “Company”) was incorporated under the laws of the State of Nevada on September 9, 2005, under the name of JML Holdings, Inc. During the year ended March 31, 2008, the Group issued 2,400,000 restricted common shares of $0.001 per share at a value of $0.3 per share with a net proceeds of approximately $624,000 and redeemed 2,500,000 restricted common shares and these shares are classified as not issued and outstanding.

On February 20, 2008, BSIE incorporated a wholly owned subsidiary, Bao Shinn (China) Express Limited (“BSCE”) of 1,000,000 ordinary shares at $0.128 per share. On October 2009, BSCE was deregistered.

On July 16, 2008, Bao Shinn Holidays Limited (“BSHL”) was incorporated with 3,000,000 ordinary shares issued and paid at $0.128 per share. BSIE owns 55% of BSHL.

8

BAOSHINN CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

2.

Description of business

Bao Shinn International Express Limited (“BSIE”), a wholly owned subsidiary of the Group, offers extended travel services primarily focused on wholesale businesses and corporate clients. BSIE is a ticket consolidator of major international airlines including Thai Airways, Eva Airways, Dragon Air, Air China, China Southern Airlines and China Eastern Airlines that provides travel services such as ticketing, hotel and accommodation arrangements, tour packages, incentive tours and group sightseeing services.

However, the Group relies on the shareholder, Bao Shinn Express Company Limited, which is the member of International Air Transport Association to supply air tickets and tour packages from different airlines companies.

BSCE offers extended travel services primarily focused on wholesale businesses and corporate clients in the Mainland China.

BSHL offers extended travel services primarily focused on corporate client in Hong Kong and the Mainland China.

3.

Going concern

These financial statements have been prepared in accordance with generally accepted principles in the United States applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Group has generated recurring losses resulting in an accumulated deficit. The Group requires additional funds to maintain its operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Management believes that actions presently taken to revise the Group’s operating and financial requirements provide the opportunity for the Group to continue as a going concern. The Company’s shareholders agreed to provide continuing financial supports to the Company in terms of a temporary loan. The agreements for continuing financial support are verbal.

9

BAOSHINN CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

4.

Summary of significant accounting policies

Basis of presentation and consolidation

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

On June 29, 2009, the Financial Accounting Standards Board (FASB) established the FASB Accounting Standards Codification (Codification) as the single source of authoritative US generally accepted accounting principles (GAAP) for all non governmental entities Rules and interpretive releases of the Securities and Exchange Commission (SEC) and also sources of authoritative US GAAP for SEC registrants. The Codification does not change US GAAP but takes previously issued FASB standards and other U.S. GAAP authoritative pronouncements, changes the way the standards are referred to, and includes them in specific topic arrears. The Codification is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The adoption of the Codification did not have any impact on the Group’s financial statements.

The consolidated financial statements include the accounts of the Group and its subsidiaries.  All significant inter-company accounts and transactions have been eliminated in consolidation.

The results of subsidiaries acquired or disposed of during the years are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal.

10

BAOSHINN CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

4.

  Summary of significant accounting policies (Continued)

Use of estimates

In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements, as well as the reported amounts of revenues and expenses during the reporting year.  These accounts and estimates include, but are not limited to, the valuation of accounts receivable, deferred income taxes and the estimation on useful lives of plant and equipment.  Actual results could differ from those estimates.

Concentrations of credit risk

Financial instruments that potentially subject the Group to significant concentrations of credit risk consist principally of accounts receivable.  In respect of accounts receivable, the Group extends credit based on an evaluation of the customer’s financial condition, generally without requiring collateral or other security.  In order to minimize the credit risk, the management of the Group has delegated a team responsibility for determination of credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts.  Further, the Group reviews the recoverable amount of each individual trade debt at each balance sheet date to ensure that adequate impairment losses are made for irrecoverable amounts.  In this regard, the directors of the Group consider that the Group’s credit risk is significantly reduced.  

Concentrations of supplier risk

The Group relies on Thai Airways as its major supplier of air tickets and tour packages. If this supplier became unwilling to cooperate with the Group, the Group would have to find alternative resources, which could materially affect the Group’s ability to generate revenue and profitability.

11

BAOSHINN CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

4.  

Summary of significant accounting policies (Continued)

Cash and cash equivalents

Cash and cash equivalents include all cash, deposits in banks and other highly liquid investments with initial maturities of three months or less.

The group does not have any other liquid investments other than cash as at March 31, 2010.

Accounts receivable

Accounts receivable are stated at original amount less allowance made for doubtful receivables, if any, based on a review of all outstanding amounts at the year end.  An allowance is also made when there is objective evidence that the Group will not be able to collect all amounts due according to original terms of receivables.  Bad debts are written off when identified.  The Group extends unsecured credit to customers in the normal course of business and believes all accounts receivable in excess of the allowances for doubtful receivables to be fully collectible.  The Group does not accrue interest on trade accounts receivable.

 

The Group has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis credit evaluations are preferred on all customers requiring credit over a certain amount.

During the reporting 3 months ended March 31, 2010 and 2009, the Group did not experience any bad debts and accordingly, did not make any allowance for doubtful debts.

Plant and equipment

Plant and equipment are stated at cost less accumulated depreciation.  Cost represents the purchase price of the asset and other costs incurred to bring the asset into its existing use.  Maintenance, repairs and betterments, including replacement of minor items, are charged to expense; major additions to physical properties are capitalized.

Depreciation of plant and equipment is provided using the straight-line method over their estimated useful lives at the following annual rates:

Furniture and fixtures

20%

Office equipment

20%

Property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of are separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated.

12

BAOSHINN CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

4.

Summary of significant accounting policies (Continued)

Revenue recognition

 

The Group recognizes revenue when it is earned and realizable based on the following criteria: persuasive evidence that an arrangement exists, services have been rendered, the price is fixed or determinable and  collectability is reasonably assured.

The Group also evaluates the presentation of revenue on a gross versus a net basis through application of Emerging Issues Task Force No. (“EITF”) 99-19, Reporting Revenue Gross as a Principal versus Net as an Agent. The consensus of this literature is that the presentation of revenue as “the gross amount billed to a customer because it has earned revenue from the sale of goods or services or the net amount retained (that is, the amount billed to a customer less the amount paid to a supplier) because it has earned a commission or fee” is a matter of judgment that depends on the relevant facts and circumstances. In making an evaluation of this issue, some of the factors that should be considered are: whether the Group is the primary obligor in the arrangement (strong indicator); whether it has general inventory risk (before customer order is placed or upon customer return) (strong indicator); and whether we have latitude in establishing price. The guidance clearly indicates that the evaluations of these factors, which at times can be contradictory, are subject to significant judgment and subjectivity. If the conclusion drawn is that the Group performs as an agent or a broker without assuming the risks and rewards of ownership of goods, revenue should be reported on a net basis.

The Group has the following three types of revenues:

-

Retail and corporate travel service revenues,

-

Referral fee for travel booking services, and

-

Incentive commission from travel suppliers.

Retail and corporate travel service revenues

Revenues from retail and corporate travel services are recognized when the travel service provided by the Group is completely delivered.  The Group presents revenue from such transactions on a gross basis in the consolidated statements of operations, as the Group acts as a principal, assumes inventory and credit risks, and has primary obligations to the airlines or hotels for cancelled air tickets, packaged tour products or hotel reservations.  The Group also has latitude in determining the ticket prices.  The Group changes the product by combining air ticket and hotel accommodations with local car transportation and other ancillary services to make it a holiday package or business travel solution for customers.

13

BAOSHINN CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

4.

Summary of significant accounting policies (Continued)

Revenue recognition (Continued)

Referral fee for travel booking services

The Group receives referral fee from travel product providers for booking travel services through the Group. The itinerary and product price are generally fixed by the travel product providers and the Group books the travel services on behalf of the customers.  Referral fees from travel booking services rendered are recognized as commissions after the services are rendered and collections are reasonably assured.  The Group presents revenues from such transactions on a net basis in the consolidated statements of operations, as the Group acts as an agent, does not assume any inventory and credit risks, has no obligations for cancelled airline or hotel ticket reservations, and does not have latitude in determining the service prices.

Incentive commission from travel suppliers

The Group earns an incentive commission from many travel suppliers. Contracts with certain travel suppliers contain discretionary escalating commissions that are paid to the Group subject to achieving specific performance targets.  Such discretionary escalating commissions are recognized on an accrual basis because such commissions are usually paid in arrears and the Group can reasonably estimate such commissions.  The Group presents revenues from such transactions on a net basis in the statements of operations, as the Group acts as an agent, does not assume any inventory risk, and has no obligations for cancelled airline ticket reservations.

Advertising expenses

Advertising expenses are charged to expense as incurred.

3 months ended 31/03

2010

2009

$

$

63

497

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

The FASB issued Accounting Standard Codification Topic 740 (ASC 740) “Income Taxes”. ASC 740 clarifies the accounting for uncertainty in tax positions. This requires that an entity recognized in the consolidated financial statements the impact of a tax position, if that position is more likely than not of being sustained upon examination, based on the technical merits of the position. The adoption of ASC 740 did not have any impact on the Group’s results of operations or financial condition for the year ended 31 December, 2009.  As of the date of the adoption of ASC 740, the Group has no material unrecognized tax benefit which would favorably affect the effective income tax rate in future periods.  The Group has elected to classify interest and penalties related to unrecognized tax benefits, if and when required, as part of income tax expense in the consolidated statements of operations.

14

BAOSHINN CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

3.

Summary of significant accounting policies (Continued)

Comprehensive income

Other comprehensive income refers to revenues, expenses, gains and losses that under U.S. GAAP are included in comprehensive income but are excluded from net income as these amounts are recorded as a component of stockholders’ equity.  The Company’s other comprehensive income represented foreign currency translation adjustments.

Foreign currency translation

The functional currency of the Group is Hong Kong dollars (“HK$”).  The Group maintains its financial statements in the functional currency.  Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at rates of exchange prevailing at the balance sheet dates.  Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchanges rates prevailing at the dates of the transaction.  Exchange gains or losses arising from foreign currency transactions are included in the determination of net income for the respective periods.

15

BAOSHINN CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

4.      Summary of significant accounting policies (Continued)

Foreign currency translation (Continued)

For financial reporting purposes, the financial statements of the Group which are prepared using the functional currency have been translated into United States dollars.  Assets and liabilities are translated at the exchange rates at the balance sheet dates and revenue and expenses are translated at the average exchange rates and stockholders’ equity is translated at historical exchange rates.  Any translation adjustments resulting are not included in determining net income but are included in foreign exchange adjustment to other comprehensive income, a component of stockholders’ equity.

Three months Ended

March 31,

2010

2009

Quarter end HK$:  US$ exchange rate

7.765

7.751

Average quarterly HK$:  US$ exchange rate

7.762

7.752

Fair value of financial instruments

The carrying values of the Group’s financial instruments, including cash and cash equivalents, trade and other receivables, deposits, trade and other payables approximate their fair values due to the short-term maturity of such instruments. The carrying amounts of borrowings approximate their fair values because the applicable interest rates approximate current market rates.

Basic and diluted earnings per share

The Group computes earnings per share (“EPS’) in accordance with FASB Accounting Standard Codification Topic 260 (ASC 260) “Earnings Per Share”, and SEC Staff Accounting Bulletin No. 98 (“SAB 98”). ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as the income or loss available to common shareholders divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., convertible securities, options, and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.

The calculation of diluted weighted average common shares outstanding for the year ended 31 December 2009 is based on the estimate fair value of the Group’s common stock during such periods applied to options using the treasury stock method to determine if they are dilutive.

16

BAOSHINN CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

4.     Summary of significant accounting policies (Continued)

The following tables are a reconciliation of the weighted average shares used in the computation of basic and diluted earnings per share for the periods presented:

3 months ended

March 31

2010

2009

$

$

Numerator for basic and diluted earnings

per share:

Net Profit/(loss)

      61,659

           1,416

Denominator:

Basic weighted average shares

21,400,000

21,400,000

Effect of dilutive securities

     249,467

     150,100

Diluted weighted average sahres1

21,649,467

21,550,100

Basic earnings/(loss) per share:

0.29 cents

0.01 cents

Diluted earnings/(loss) per share:

0.28 cents

0.01 cents

Stock-Based Compensation

Effective January 1, 2006, the Group adopted Statements of Financial Accounting Standards (“SFAS”) No. 123R, Share-Based Payment (“SFAS No. 123R”). Under SFAS No. 123R, the Group measures the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award and recognizes the costs over the period the employee is required to provide service in exchange for the award, which generally is the vesting period.

During the quarter ended March 31, 2010 and 2009, the Company did not record stock-based compensation.

17

BAOSHINN CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

4.     Summary of significant accounting policies (Continued)

Related parties transactions

A related party is generally defined as (i) any person that holds 10% or more of the Group’s securities and their immediate families, (ii) the Group’s management, (iii) someone that directly or indirectly controls, is controlled by or is under common control with the Group, or (iv) anyone who can significantly influence the financial and operating decisions of the Group. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties.

Commitments and contingencies

Liabilities for loss contingencies arising from claims, assessments, litigation, fines and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.

Recently issued accounting pronouncements

In December 2007, ASC 810, Consolidation (“ASC 810”) includes new guidance issued by the FASB governing the accounting for and reporting of noncontrolling interests (previously referred to as minority interests). This guidance established reporting requirements which include, among other things, that noncontrolling interests be reflected as a separate component of equity, not as a liability. It also requires that the interests of the parent and the noncontrolling interest be clearly identifiable. Additionally, increases and decreases in a parent’s ownership interest that leave control intact shall be reflected as equity transactions, rather than step acquisitions or dilution gains or losses. This guidance also requires changes to the presentation of information in the financial statements and provides for additional disclosure requirements. ASC 810 was effective for fiscal years beginning on or after December 15, 2008. The Group implemented this guidance as of January 1, 2009. The effect of implementing this guidance was not material to the Group’s financial position or results of operations.

18

BAOSHINN CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

4.     Summary of significant accounting policies (Continued)

Recently issued accounting pronouncements (Continued)

In December 2007, ASC 805, Business Combinations (“ASC 805”) contains guidance that was issued by the FASB. It requires the acquiring entity in a business combination to recognize all assets acquired and liabilities assumed in a transaction at the acquisition-date fair value, with certain exceptions. Additionally, the guidance requires changes to the accounting treatment of acquisition related items, including, among other items, transaction costs, contingent consideration, restructuring costs, indemnification assets and tax benefits. ASC 805 also provides for a substantial number of new disclosure requirements. ASC 805 also contains guidance that was formerly issued as FSP FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies which was intended to provide additional guidance clarifying application issues regarding initial recognition and measurement, subsequent measurement and accounting, and disclosure of assets and liabilities arising from contingencies in a business combination. ASC 805 was effective for business combinations initiated on or after the first annual reporting period beginning after December 15, 2008. The Group implemented this guidance effective January 1, 2009. Implementing this guidance did not have an effect on the Group’s financial position or results of operations; however it will likely have an impact on the Group’s accounting for future business combinations, but the effect is dependent upon acquisitions, if any, that are made in the future.

In March 2008, the FASB issued ASC 815 (SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133) to amend and expand the disclosures about derivatives and hedging activities. The standard requires enhanced qualitative disclosures about an entity’s objectives and strategies for using derivatives, and tabular quantitative disclosures about the fair value of derivative instruments and gains and losses on derivatives during the reporting period. This standard is effective for both fiscal years and interim periods that begin after November 15, 2008. The adoption of this standard on December 29, 2008, the beginning of the Group’s fiscal year, did not have a material impact on its audited condensed consolidated financial statements.

In April 2009, the FASB issued ASC805-20-35. ASC805-20-35 amends the provisions for the initial recognition and measurement, subsequent measurement and accounting, and disclosures for assets and liabilities arising from contingencies in business combinations. ASC805-20-35 eliminates the distinction between contractual and non-contractual contingencies, including the initial recognition and measurement criteria and instead carries forward most of the provisions in ASC805 for acquired contingencies. ASC805-20-351 is effective for contingent assets and contingent liabilities acquired in business combinations for which the acquisition date is on or after the first annual reporting period beginning on or after December 15, 2008. We do not expect ASC805-20-35 to have any impact on the Group’s consolidated results of operations and financial condition.

In May 2009, ASC 855, Subsequent Events (“ASC 855”) includes guidance that was issued by the FASB, and is consistent with current auditing standards in defining a subsequent event. Additionally, the guidance provides for disclosure regarding the existence and timing of a company’s evaluation of its subsequent events. ASC 855 defines two types of subsequent events, “recognized” and “non-recognized”. Recognized subsequent events provide additional evidence about conditions that existed at the date of the balance sheet and are required to be reflected in the financial statements. Non-recognized subsequent events provide evidence about conditions that did not exist at the date of the balance sheet but arose after that date and, therefore; are not required to be reflected in the financial statements. However, certain non-recognized subsequent events may require disclosure to prevent the financial statements from being misleading. This guidance was effective prospectively for interim or annual financial periods ending after June 15, 2009. The Group implemented the guidance included in ASC 855 as of April 1, 2009. The effect of implementing this guidance was not material to the Group’s financial position or results of operations.

19

BAOSHINN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

4.     Summary of significant accounting policies (Continued)

Recently issued accounting pronouncements (Continued)

In August 2009, the FASB issued Accounting Standards Update (“ASU”) 2009-05, which amends ASC Topic 820, Measuring Liabilities at Fair Value, which provides additional guidance on the measurement of liabilities at fair value. These amended standards clarify that in circumstances in which a quoted price in an active market for the identical liability is not available, we are required to use the quoted price of the identical liability when traded as an asset, quoted prices for similar liabilities, or quoted prices for similar liabilities when traded as assets. If these quoted prices are not available, we are required to use another valuation technique, such as an income approach or a market approach. These amended standards are effective for us beginning in the fourth quarter of fiscal year 2009. There was no material impact upon the adoption of this standard on the Group’s consolidated financial statements.

In September 2009, the FASB issued ASU 2009-06, Income Taxes (Topic 740), ”Implementation Guidance on Accounting for Uncertainty in Income Taxes and Disclosure Amendments for Nonpublic Entities”, which provides implementation guidance on accounting for uncertainty in income taxes, as well as eliminates certain disclosure requirements for nonpublic entities.  For entities that are currently applying the standards for accounting for uncertainty in income taxes, this update shall be effective for interim and annual periods ending after September 15, 2009. For those entities that have deferred the application of accounting for uncertainty in income taxes in accordance with paragraph 740-10-65-1(e), this update shall be effective upon adoption of those standards. The adoption of this standard is not expected to have an impact on the Group’s consolidated financial position and results of operations since this accounting standard update provides only implementation and disclosure amendments.  

In September 2009, the FASB has published ASU 2009-12, “Fair Value Measurements and Disclosures (Topic 820) - Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)”. This ASU amends Subtopic 820-10, “Fair Value Measurements and Disclosures – Overall”, to permit a reporting entity to measure the fair value of certain investments on the basis of the net asset value per share of the investment (or its equivalent). This ASU also requires new disclosures, by major category of investments including the attributes of investments within the scope of this amendment to the Codification. The guidance in this update is effective for interim and annual periods ending after December 15, 2009. Early application is permitted. The Group is in the process of evaluating the impact of this standard on its consolidated financial position and results of operations.

In October 2009, the FASB has published ASU 2009-13, “Revenue Recognition (Topic 605)-Multiple Deliverable Revenue Arrangements”, which addresses the accounting for multiple-deliverable arrangements to enable vendors to account for products or services (deliverables) separately rather than as a combined unit. Specifically, this guidance amends the criteria in Subtopic 605-25, “Revenue Recognition-Multiple-Element Arrangements”, for separating consideration in multiple-deliverable arrangements. This guidance establishes a selling price hierarchy for determining the selling price of a deliverable, which is based on: (a) vendor-specific objective evidence; (b) third-party evidence; or (c) estimates. This guidance also eliminates the residual method of allocation and requires that arrangement consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method and also requires expanded disclosures. The guidance in this update is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Group’s consolidated financial position and results of operations.

20

BAOSHINN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

4.     Summary of significant accounting policies (Continued)

Recently issued accounting pronouncements (Continued)

ASC 105, Generally Accepted Accounting Principles (“ASC 105”), reorganized by topic existing accounting and reporting guidance issued by the Financial Accounting Standards Board (“FASB”) into a single source of authoritative generally accepted accounting principles (“GAAP”) to be applied by nongovernmental entities. All guidance contained in the Accounting Standards Codification (“ASC”) carries an equal level of authority. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. Accordingly, all other accounting literature will be deemed “non-authoritative”. ASC 105 is effective on a prospective basis for financial statements issued for interim and annual periods ending after September 15, 2009. The Group has implemented the guidance included in ASC 105 as of July 1, 2009. The implementation of this guidance changed the Group’s references to GAAP authoritative guidance but did not impact the Group’s financial position or results of operations.

In January 2010, the FASB issued Accounting Standards Update No. 2010-06 (ASU 2010-06), Fair Value Measurements and Disclosures which amends ASC Topic 820, adding new requirements for disclosures for Levels 1 and 2, separate disclosures of purchases, sales, issuances, and settlements relating to Level 3 measurements and clarification of existing fair value disclosures.  ASU 2010-06 is effective for interim and annual periods beginning after December 15, 2009, except for the requirement to provide Level 3 activity of purchases, sales, issuances, and settlements on a gross basis, which will be effective for fiscal years beginning after December 15, 2010 (the Group’s fiscal year 2012); early adoption is permitted.  The Group is currently evaluating the impact of adopting ASU 2009-14 on its financial statements.

21

BAOSHINN CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

5.

Other operating income

		3 months Ended March 31
		2010		2009
		$		$
	GDS commission income	-		208
	Management service income	8,154		12,296
		8,154		12,504

6.

Other non-operating income

		3 months Ended March 31
		2010		2009
		$		$
	Gain on exchange	114		388
	Interest income	9		256
		123		644

7.

Interest expenses

		3 months Ended March 31
		2010		2009
		$		$
	Interest expense	92		58

22

BAOSHINN CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

8.

Income taxes

The Company was subject to Hong Kong profits or income tax at 16.5% for the quarter ended March 31, 2010 and 2009.

No provision for Hong Kong profits tax has been made for the period.

Deferred taxes are determined based on the temporary differences between the financial statement and income tax bases of assets and liabilities as measured by the enacted tax rates which will be in effect when these differences reverse. The Group follows FASB Accounting Standard Codification Topic 740- (ASC 740) “Income taxes”, ASC 740 and requires a valuation allowance, if any, to reduce the deferred tax assets reported if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

9.

Deposits, prepaid expenses and other receivables

At Sept 30

At Dec 31

2009

2009

(unaudited)

(audited)

$

$

Security deposits to suppliers [1]

674,664

691,505

Prepayments and other receivables

  46,596

  76,231

Utility, rental and other deposits

  30,574

  32,746

751,834

800,482

^[1] Represents a deposit with the airline companies to allow the Group to issue an agreed upon amount of air   tickets per month.

23

BAOSHINN CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

10.     Plant and equipment

				At Mar 31,		At Dec 31
				2010		2009
				(unaudited)		(audited)
				$		$
	Cost
	Furniture and fixtures			47,879		47,934
	Office equipment			99,807		99,922
				147,686		147,856
	Accumulated depreciation
	Furniture and fixtures			23,531		21,264
	Office equipment			78,582		74,162
				102,113		95,426
	Net
	Furniture and fixtures			24,348		26,670
	Office equipment			21,225		25,760
				45,573		52,430

Depreciation expenses for the 3 months ended March 31, 2010 are $6,799 (3 months ended March 31, 2009: $7,403).

11.

Other payables and accrued liabilities

				At Mar 31		At Dec 31
				2010		2009
				(unaudited)		(audited)
				$		$
	Sale deposits received			81,372		102,359
	Accrued expenses			65,322		133,404
	Other payables			116,230		31,803
				262,924		267,566

24

BAOSHINN CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

12.

Amounts due from/(to) related parties

Amounts due from/(to) related parties for working capital are as follows:

				At Mar 31,		At Dec 31,
				2010		2009
				(unaudited)		(audited)
				$		$
	Amount due from shareholder			86,929		87,029
	Amounts due to shareholders			-		113,553

The amount due from shareholder is temporary advance, interest free, unsecured and due on demand.

The amounts due to shareholders, represent advances from certain shareholders of the Company, are interest-bearing at the rate of 5.5% (2009: 5.5%) per annum, unsecured and have no fixed repayment terms.

13.

Stock options

The Company has stock options plans that allow it to grant options to its key employees. Over the course of employment, the Company issues vested or non-vested stock options to an employee which is struck at US$0.35 per share. The exercise period of the options commenced on March 31, 2008 and will expire on March 31, 2011.

The fair value of these options at the date of grant was estimated to be $0.1533 and $0.1125 for vested and non-vested options per unit respectively using the Black-Scholes option pricing model with the following weighted average assumptions: expected life of three years; risk-free interest rate of 3.07%; expected dividend yield of 0% and an expected volatility of 47.77%. The stock-based compensation expense recorded in the quarter ended March 31, 2010 and 2009 were zero.

25

BAOSHINN CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

13.

Stock options (Continued)

							Weighted
					Weighted		average
			Number of		average		remaining
			options		exercise price		life
					$		(year)
	Exercisable as of January 1, 2010		230,000		0.35		1.25
	Exercisable during the quarter		100,000		0.35
	Exercisable as of March 31, 2010		330,000		0.35		1.00

The total intrinsic value during the quarter ended March 31, 2010 and 2009 were $0 as no options were exercised during the respective period.

14.

Concentration of credit

A substantial percentage of the Group’s sales are made to the following customers. Details of the customers accounting for 10% or more of total net revenue are as follows:

March 31

December 31

Unaudited

Audited

2010

2009

Travel Expert Limited (a Hong Kong

15%

11%

Incorporated travel agent)

Details of the accounts receivable from the one customer with the largest receivable balances at March 31, 2010 and December 31, 2009 are as follows:

Percentage of account receivable

March 31, 2010

December 31, 2009

Travel Expert Limited (a Hong Kong

20%

17%

26

BAOSHINN CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

15.

Pension plans

The Group participates in a defined contribution pension scheme under the Mandatory Provident Fund Schemes Ordinance “MPF Scheme” for all its eligible employees in Hong Kong.

The MPF Scheme is available to all employees aged 18 to 64 with at least 60 days of service in the employment in Hong Kong.  Contributions are made by the Group’s subsidiary operating in Hong Kong at 5% of the participants’ relevant income with a ceiling of HK$20,000.  The participants are entitled to 100% of the Group’s contributions together with accrued returns irrespective of their length of service with the Group, but the benefits are required by law to be preserved until the retirement age of 65.  The only obligation of the Group with respect to MPF Scheme is to make the required contributions under the plan.

The assets of the schemes are controlled by trustees and held separately from those of the Group.  Total pension cost was $7,976 during 3 months ended March 31, 2010 (3 months ended March 31, 2009: $10,027.)

16.

Commitments and contingencies

Operating leases commitments

The Group leases office premises under various non-cancelable operating lease agreements that expire at various dates through years 2010 to 2011, with an option to renew the lease.  All leases are on a fixed repayment basis.  None of the leases includes contingent rentals.  Minimum future commitments under these agreements payable as of March 31, 2010 are as follows:-

March 31

$

2010

47,833

2011

37,228

85,061

Rental expenses for the 3 months ended March 31, 2010 were $24,241 (3 months ended March 31, 2009: $23,689).

17.

Related party transactions

In the ordinary course of business, BSIE, our wholly-owned subsidiary, purchases and sells air tickets and tour packages from/to Bao Shinn Express Company Limited (“BSEL”). BSEL holds 38.6% of Baoshinn Corporation’s outstanding common stock.  The consolidated income statement for the periods presented includes the following related party transactions:

27

BAOSHINN CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

17.

Related party transactions (Continued)

Related party	Nature of relationship and control	Description of transactions	3 Months Ended March 31
			2010	2009
			(unaudited)	(unaudited)
			$	$
Bao Shinn Express Company Limited	Shareholder 38.6%	Sales of air tickets and tour packages	(69,862)	(37,173)
		Management service income	(8,154)	(12,295)
		Purchase of air tickets and tour packages	9,287	5,388
		Interest paid	18	-

18.

Segment Information

SFAS No.131, Disclosures about Segments of an Enterprise and Related Information, establishes standards for reporting information about operating segments in financial statements. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance.

For management purposes, the Group is regarded as a single segment, being engaged in the provision of travel agent services. These principal activities and geographical market are substantially based in Hong Kong and the Mainland China. Accordingly, no geographical segment information is presented.

28

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

CAUTIONARY STATEMENT FOR FORWARD-LOOKING STATEMENTS

This discussion and analysis of our financial condition and results of operations includes “forward-looking” statements that reflect our current views with respect to future events and financial performance. We use words such as “expect,” “anticipate,” “believe,” and “intend” and similar expressions to identify forward-looking statements. You should be aware that actual results may differ materially from our expressed expectations because of risks and uncertainties inherent in future events and you should not rely unduly on these forward looking statements. We disclaim any obligation to publicly update these statements, or disclose any difference between its actual results and those reflected in these statements. Reference in the following discussion to “our”, “us” and “we” refer to the operations of Baoshinn Corporation and its subsidiaries (“the Company”), except where the context otherwise indicates or requires.

The following discussion of our financial condition and results of operations should be read in conjunction with the audited financial statements and the notes to the audited financial statements included in this annual report. This discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results may differ materially from those anticipated in these forward-looking statements.

Results of operations for the three months ended March 31, 2010 compared to three months ended March 31, 2009

	Three months ended		Three months ended
	March 31, 2010		March 31, 2009
	(unaudited)		(unaudited)
	$		$
Retail and Corporate revenue	6,864,152		6,320,521
Commission from travel booking services	34,268		70,339
Incentive commissions	71,922		64,706
	6,970,342		6,455,566
Cost of sales	6,583,063		6,125,888
Gross profit	387,279		329,678
Other operating income	8,154		12,504
Depreciation	(6,799)		(7,403)
Administrative and other operation expenses	(305,979)		(334,850)
Income/(Loss) from operations	82,655		(71)
Other non-operating income	123		644
Interest expenses	(92)		(58)
Loss before income tax	82,686		515
Income tax	-		-
Minority interest	(21,027)		901
Net Income from continuing operations	61,659		1,416

29

Going Concern

The accompanying consolidated financial statements have been prepared assuming that we will continue as a going concern. We had a net income of $61,159 for the three months ended March 31, 2010 and a net loss since inception of $1,131,513. On March 31, 2010 we had cash on hand of $310,103. These circumstances raise substantial doubt about our ability to continue as a going concern. These doubts were outlined in our independent auditor’s report on our consolidated financial statements for the year ended December 31, 2009, which are included in this quarterly report on Form 10-Q. Although our consolidated financial statements raise substantial doubt about our ability to continue as a going concern, they do not include any adjustments relating to recoverability and classification of recorded assets, or the amounts or classifications of liabilities that might be necessary in the event we cannot continue as a going concern. The Company’s shareholders have verbally agreed to provide continuing financial support to the Company for future losses it may incur.

Revenues

For the three months ended March 31, 2010, the Company has experienced an increase in sales revenues, the Company was recognized by Eva Airline as its top selling agent in Hong Kong. Eva Airlines operates both short haul routes within South East Asia and long haul routes including North America and Europe. The company has also been appointed as a first tier agent for two additional airlines, i.e., HongKong Airlines & HongKong Express. Hong Kong Airlines mainly operates flights originating from Hong Kong to destinations in Asian cities, including Bangkok, Kuala Lumpur, Manila, and major cities in Japan. HongKong express mainly operates flights originating from Hong Kong to mainland China‘s second tier cities, including Changsha, Fuzhou, Hangzhou, Hefei, Guiyang etc.

Our revenue for the three months ended March 31, 2010 was $6,970,342, compared to $6,455,566 in the three months ended March 31, 2009. We generate our revenues primarily from retail and corporate business. For the three months ended March 31, 2010, we derived 98.5%, 0.5% and 1% of our revenues from our retail & corporate clients, commissions from travel booking services and airline incentive commissions respectively.

The table below sets forth the revenues from our principal lines of business for the periods indicated.

Retail and Corporate Revenue

Revenues from retail and corporate travel services are recognized when the travel service provided by the Company is completely delivered. The Company presents revenue from such transactions on a gross basis in the consolidated statements of operations, as the Company acts as a principal, assumes inventory and credit risks, and has the primary obligation to the airlines or hotels for cancelled air tickets, packaged tour products or hotel reservations. The Company also has latitude in determining the service prices. The Company changes the product by combining air ticket and hotel accommodations with local car transportation and other ancillary services to make it a holiday package or business travel solution for customers.

Referral fees for travel booking services

We receive referral fees from travel product providers for booking travel services. The itinerary and product price

30

are generally fixed by the travel product providers and we book the travel services on behalf of the customers. Referral fees from travel booking services rendered are recognized as commissions after the services are rendered and collections are reasonably assured. We present revenues from such transactions on a net basis in the consolidated statements of operations, as we act as an agent, we do not assume any inventory and credit risks, we have no obligations for cancelled airline or hotel ticket reservations, and do not have latitude in determining the service prices.

Incentive commission from travel suppliers

We earn an incentive commission from many travel suppliers. Contracts with certain travel suppliers contain discretionary escalating commissions that are paid to us subject to achieving specific performance targets. Such discretionary escalating commissions are recognized on an accrual basis because such commissions are usually paid in arrears and we can reasonably estimate such commissions. Our statement of operations presents revenues from such transactions on a net basis, because we act as an agent, we do not assume any inventory risk, and we have no obligation for cancelled airline tickets.

Cost of Sales

Costs of sales are costs directly attributable to rendering our revenues, which consist primarily of payments for travel costs to airlines and suppliers. Cost of revenues accounted for 94.4% of our revenue in the three months ended March 31, 2010 and 94.9% of our revenues in the three months ended March 31, 2009.

The table below sets forth the cost of sales for the periods indicated.

	Three months ended March 31, 2010		Three months ended March 31, 2009
	Unaudited			Unaudited
	$			$
Total revenue	6,970,342				6,455,566
Cost of sales	(6,583,063)				(6,125,888)
Gross profit	387,279				329,678

Gross Profit and Gross Profit Margin

Our gross profit for the three months ended March 31, 2010 was $387,279, compared to $329,678 in the three months ended March 31, 2009. The gross profit margin rate increased from 5.1% for the three months ended March 31, 2009 to 5.6% for the three months ended March 31, 2010. The increasing in gross profit margin rate shows the positive affect of our business strategy. The Company has reviewed the market conditions, and decided to change its strategy by dealing with new emerging airlines with new destinations. The Company has recently developed a close relationship with Hong Kong Airlines which is primarily focused on travel destinations in Mainland China. As the Hong Kong Airbus travel agency, the Company has less competition and is able to maintain a more stable profit margin.

Operating Expenses

Overview

Total operating expenses for the three months ended March 31, 2010 were $305,979 or 4.39% of revenues, while the operating expenses for three months ended March 31, 2009 were $334,850 or 5.19% of revenues. The decreases in dollar amount are mainly attributable to our cost saving strategy, which significantly reduced salaries, commission, allowance compare to the same period last year.

31

Salaries, Commissions and Allowances

Salaries, Commissions and Allowances has decreased from $227,089 for the three months ended March 31, 2009 to $182,024 for the three months ended March 31, 2010, the Group has flattened organization structure by cutting senior management staff reducing staff redundancy and decentralizing its operations. Meanwhile, support and administration staffing has also been cut to keep back office costs down.

Legal and Professional Fees

Legal and professional fees for the three months ended March 31, 2010 were $9,662 or 0.13% of revenues, while the legal and professional fees for three months ended March 31, 2009 were $10,339 or 0.16% of revenues. Legal and professional fees in the current period were consistent to the same period last year.

Office Rental

Office rental for the three months ended March 31, 2010 was $24,241 or 0.36% of revenues, while the Office rental for three months ended March 31, 2009 was $23,689 or 0.37% of revenues.  Office rental expenses in the current period were consistent to the same period last year.

Other General and Administration Expenses

Other expenses for the three months ended March 31, 2010 were $90,052 or 1.29% of revenues, while the other expenses for three months ended March 31, 2009 were $73,733 or 1.14% of revenues. The expenses in the current period were consistent to the same period last year.

Other operating income

		Three months ended		Three months ended
		March 31, 2010		March 31, 2009
		Unaudited		Unaudited
		$		$
Commission income		-		208
Management service income		8,154		12,296
		8,154		12,504

32

Commission Income

Commission income for the three months ended March 31, 2010 were $0 compared to $208 for three months ended March 31, 2009. During the three months ended March 31, 2010, we increased the number of tickets booked through a lower percentage commission booking system, which resulted in a lower amount of commissions.

Commission income is received by the Company from the Global Distribution Systems Supplier (GDS), which is the booking system that links airlines, IATA and travel agencies. GDS acts as an information medium between the Airlines and Travel agencies. Travel consultants check seat availability and fare conditions, and make reservations through GDS. GDS also links Airline and Travel Agencies through IATA’s Bill and Settling Plans (BSP). Once the ticket is issued from IATA through the GDS system, travel agencies will settle the payment with airlines through IATA‘s fortnightly BSP Payment.

Each GDS system has a different layout, and different user manual and command. Airlines can choose to link with one or a few GDS. The Company currently has 4 GDS‘s installed; they are “Amadeus”, “Worldspan”, “Travelsky” and “Abacus”. A GDS will normally provide equipment and install their system onsite for a travel agency. The travel agency must generally sign an agreement with each GDS supplier which details the usage and reward scheme. Some GDS suppliers require travel agencies to maintain a minimum usage volume, otherwise the travel agency will have to pay fees for the equipment. GDS suppliers also encourage travel agencies to book tickets through their system by rewarding travel agencies on the number of tickets booked in a certain period of time.

The Company encourages its consultants to use the GDS that has the best compensation structure, however, a balance between operational efficiency is also considered. Some airlines are more user friendly with a specific GDS, also with each travel consultancy’s experience with different systems, the Company leaves it to the consultant’s discretion to choose the GDS it uses.

Management Service Income

Management service income represents compensation from a related party, Bao Shinn Express Company Limited (“BSEL”). BSEL currently holds 38.55% of the Company’s outstanding common stock. The Company has provided management services to BSEL on business operations and general travel industry knowledge. Management service income from BSEL was $8,154 in the three months ended March 31, 2010, compared to $12,296 in the three months ended March 31, 2009.

The Company recognizes the management service as “other operating income”, as the Company’s management team is part of its operation team. Accordingly, the revenue generated by the management team is considered part of the Company’s operations.

Other non-operating income

	Three months ended		Three months ended
	March 31, 2010		March 31, 2009
	Unaudited		Unaudited
	$		$
Gain on exchange	114		388
Interest income	9		256
	123		644

Exchange Gain

The exchange gain was $114 for the three months ended March 31, 2010 compared to $388 in the three months ended March 31, 2009. This was attributable to a more stable rate of the Hong Kong Dollar against foreign currencies, including the U.S. Dollar, RMB and the Thai Baht for the three months ended March 31, 2010.

33

The Company pays overseas suppliers in their currency, and charges its customers in HK dollars, with the exchange rate determined at the point of invoicing. Because of the timing difference between payments and receipts, the Company incurs exchange differences in transactions with overseas suppliers. The Company recognizes the gain or loss as “non-operational income or expense”, as this is not from operations.

Interest Income

Interest income was $9 for the three months ended March 31, 2010, compared to $256 for the three months ended March 31, 2009. This interest was earned from bank savings and fixed deposit accounts. The Company considers it non-operational income. The decrease in the interest income for the three months ended March 31, 2010 was mainly due to a decrease in the bank interest rate compare to the same period in 2009.

Net Income

Our net income was $61,659 for the three months ended March 31, 2010, compared to a net income of $1,416 for the three months ended March 31, 2009. The increase in net income for the three months ended March 31, 2010 compare to same period last year was mainly due to the increasing gross margin as a result of the company’s business strategy change, as well as an improvement in the general economy in the beginning of 2010 compare to the same period in 2009.

Liquidity and Capital Resources

Our primary source of capital has been from sales and issuances of equity securities. Our primary use of capital has been for the expansion and development of our business, and the associated need for increased working capital. Our working capital requirements are expected to increase in line with the growth of our business. We have no lines of credit or other bank financing arrangements. We expect that working capital requirements will be funded through a combination of our existing funds, cash flow from operations, private loans, and issuance of equity and debt securities. Additional issuances of equity and debt securities will result in dilution to our current common stockholders. The Company’s former shareholders agreed to provide continuing financial support to the Company in the form of a temporary loan. The agreements for continuing financial support are verbal. These temporary loans were unsecured with no fixed term of repayment during the three months ended March 31, 2010. Interest was paid at the rate of 5.5% per annum.

Operating Activities

Net cash provided by operating activities was $164,283 for the three months ended March 31, 2010, compared to net cash used in operating activities of $117,941 for the three months ended March 31, 2009. The cash provided during the three months ended March 31, 2010 is mainly for the working capital. Working capital increased $88,611 from $742,064 as of December 31, 2009 to $830,675 as of March 31, 2010.

Investing Activities  

For the three months ended March 31, 2010 and 2009, there were no investing activities.

Financing Activities

Net cash used in financing activities was $113,453 for the three months ended March 31, 2010, compared to $7,853 net cash provided by financing activities for the three months ended March 31, 2009. For the three months ended March 31, 2010 and 2009, there were no financing activities, the difference is mainly due to the changes in temporary advances from directors.

34

Financing Our Capital Expenditures

During the next 12 months, the Company will implement its business plan for expanding into the China market. The initial investment is expected to be approximately US$1,200,000. These funds will be used for setting up a China flagship company in Shanghai. Expenditures are expected to include obtaining travel licenses, office renovation, purchase of communication equipment, purchase of computers and office equipment. An additional investment of US$1,500,000 will be required as the working capital for the Shanghai office.

The new flagship company will be registered in Shanghai and will serve as our China headquarters. We subsequently plan to open branch offices in Beijing, Guangzhou, Chongqing and Kunming.

As a marketing tool, an “On-line travel” business team will be set up in Shanghai. The team includes the IT specialist for development of a travel booking system to China.

Off-Balance Sheet Arrangements

For the three months ended March 31, 2010, and the three months ended March 31, 2009, the Company did not engage in any off-balance sheet activities or have any relationships or arrangements with unconsolidated entities established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Further, we have not guaranteed any obligations of unconsolidated entities nor do we have any commitment or intent to provide additional funding to any such entities.

Related Party Transactions

The amounts due to related parties, represent advances from certain directors and shareholders of the Company, are interest-bearing at the rate of 5.5% (2009: 5.5%) per annum, unsecured and have no fixed repayment terms.

The amounts due from related parties, represent advances to a minority shareholder of Bao Shinn Holidays Limited (“BSHL”). This advance is temporary, it is interest free, it is unsecured and it is due on demand.

Related party	Nature of relationship and control	Description of transactions	3 Months Ended March 31
			2010	2009
			(unaudited)	(unaudited)
			$	$
Bao Shinn Express Company Limited	Shareholder 38.6%	Sales of air tickets and tour packages	(69,862)	(37,173)
		Management service income	(8,154)	(12,295)
		Purchase of air tickets and tour packages	9,287	5,388
		Interest paid	18	-

35

Item 3.

Quantitative and Qualitative Disclosure About Market Risks.

Not Applicable.

Item 4T.

Controls and Procedures.

(a)

Evaluation of disclosure controls and procedures.

As required by paragraph (b) of Rules 13a-15 or 15d-15 under the Securities Exchange Act of 1934, the Company's principal executive officer and principal financial officer have evaluated the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation these officers have concluded that as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were effective and were adequate to insure that the information required to be disclosed by the Company in reports it files or submits under the Exchange Act were recorded, processed, summarized and reported within the time period specified in the Commission's rules and forms.  It is also important to point out that all internal control systems, no matter how well designed, have inherent limitations and may not prevent or detect misstatements.  Therefore even those systems determined to be effective can only provide reasonable assurance with respect to financial reporting reliability and financial statements preparation and presentation.

(b)

Changes in internal controls.

There have been no significant changes in our internal controls or other factors that could significantly affect such controls and procedures subsequent to the date we completed our evaluation. Therefore, no corrective actions were taken.

PART II - OTHER INFORMATION

Item 1.

Legal Proceedings.

To the best knowledge of the Company’s officers and directors, the Company is currently not a party to any pending legal proceeding.

Item 1A.

Risk Factors.

There have been no material changes to the risk factors previously disclosed under item 1 of the Company’s Registration Statement on Form SB2, as filed with the United States Securities and Exchange Commission on June 14, 2006.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3.

Defaults Upon Senior Securities.

None.

Item 5.

Other Information.

None.

36

Item 6.

Exhibits.

(a)

Exhibits

*3.1

Certificate of Incorporation

*3.2

Amended and Restated Certificate of Incorporation

*3.3

By-laws

*4.0

Stock Certificate

31.1

Certification pursuant to Section 302 of Sarbanes Oxley Act of 2002

31.1

Certification pursuant to Section 302 of Sarbanes Oxley Act of 2002

32.1

Certification pursuant to Section 906 of Sarbanes Oxley Act of 2002

32.2

Certification pursuant to Section 906 of Sarbanes Oxley Act of 2002

* Filed as an exhibit to the Company's registration statement on Form SB-2, as filed with the Securities and Exchange Commission on June 14, 2006, and incorporated herein by this reference.

(b) Reports of Form 8-K

None.

SIGNATURES

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

Dated:  May 17, 2010

BAOSHINN CORPORATON

By:  /s/ Sean Webster

Name:  Sean Webster

Title: President

 

37