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 September 30, 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 has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).  Yes o    No x
 
 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 oNon-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: 64,433,033 shares as of November 20,
2009.
   
 TABLE OF CONTENTS
   QUARTERLY
REPORT ON FORM 10-Q
 OF
CHINA BROADBAND, INC.
 FOR
THE PERIOD ENDED SEPTEMBER 30, 2009
 
 TABLE OF CONTENTS
  PART I
      –FINANCIAL
      INFORMATIONItem 1.
                
                Financial Statements
                F-1
      - F-11Item 2.
                
                Management’s Discussion and Analysis of Financial Condition
      and Results of Operations
                1Item 3.
                
                Quantitative and Qualitative Disclosures About Market
      Risk
                11Item 4.
                
                Controls and Procedures
                11PART II
      –OTHER
      INFORMATIONItem 1.
                
                Legal Proceedings
                12Item 1A.
                
                Risk Factors
                12Item 2.
                
                Unregistered Sales of Equity Securities and Use of
      Proceeds
                12Item 3.
                
                Defaults Upon Senior Securities
                12Item 4.
                
                Submission of Matters to a Vote of Security
      Holders
                12Item 5.
                
                Other Information
                12Item 6.
                
                Exhibits
                12Signatures
                13
 
 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, 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” and, each
of their respective subsidiary businesses in the PRC.
  TABLE OF CONTENTS
 
 PART I — FINANCIAL INFORMATION
  Item 1. Financial Statements.
  China
Broadband, Inc. and Subsidiaries
 CONSOLIDATED
BALANCE SHEETS
  September 30,
                      
                      
                      December 31,2009
                      
                      
                      2008(Unaudited)ASSETSCurrent
      assets:Cash
      and cash equivalents
                      
                      $
                      1,941,266
                      
                      
                      $
                      4,425,529Marketable
      equity securities
                      
                      
                      67,608
                      
                      
                      
                      254,496Accounts
      receivable
                      
                      
                      168,710
                      
                      
                      
                      136,709Inventory
                      
                      
                      778,674
                      
                      
                      
                      877,309Prepaid
      expense
                      
                      
                      118,144
                      
                      
                      
                      46,380Loan
      receivable
                      
                      
                      280,033
                      
                      
                      
                      -Amounts
      due from shareholders
                      
                      
                      634,687
                      
                      
                      
                      -Other
      current assets
                      
                      
                      68,509
                      
                      
                      
                      153,277Total
      current assets
                      
                      
                      4,057,631
                      
                      
                      
                      5,893,700Property
      and equipment, net
                      
                      
                      7,782,344
                      
                      
                      
                      9,299,473Intangible
      assets, net
                      
                      
                      5,949,610
                      
                      
                      
                      4,218,758Other
      assets
                      
                      
                      355,093
                      
                      
                      
                      692,911Total
      assets
                      
                      $
                      18,144,678
                      
                      
                      $
                      20,104,842LIABILITIES AND EQUITYCurrent
      liabilities:Accounts
      payable
                      
                      $
                      1,250,452
                      
                      
                      $
                      1,237,251Accrued
      expenses
                      
                      
                      1,562,637
                      
                      
                      
                      936,134Deferred
      revenue
                      
                      
                      1,646,868
                      
                      
                      
                      1,382,103Convertible
      notes payable
                      
                      
                      304,853
                      
                      
                      
                      -Loan
      payable
                      
                      
                      398,937
                      
                      
                      
                      -Payable
      to Shandong Media
                      
                      
                      145,679
                      
                      
                      
                      145,679Payable
      to Jinan Parent
                      
                      
                      152,259
                      
                      
                      
                      2,795,472Other
      current liabilities
                      
                      
                      130,192
                      
                      
                      
                      72,013Total
      current liabilities
                      
                      
                      5,591,877
                      
                      
                      
                      6,568,652Convertible
      notes payable
                      
                      
                      4,639,879
                      
                      
                      
                      4,564,427Deferred
      tax liability
                      
                      
                      746,577
                      
                      
                      
                      790,617Total
      liabilities
                      
                      
                      10,978,333
                      
                      
                      
                      11,923,696Committments
      and ContingenciesShareholders'
      equityPreferred
      stock, $.001 par value; 5,000,000 shares authorized, no shares issued and
      outstanding
                      
                      
                      -
                      
                      
                      
                      -Common
      stock, $.001 par value; 95,000,000 shares authorized, 64,433,033 and
      50,585,455 issued and outstanding
                      
                      
                      64,434
                      
                      
                      
                      50,586Additional
      paid-in capital
                      
                      
                      15,574,274
                      
                      
                      
                      13,372,358Accumulated
      deficit
                      
                      
                      (14,742,111
                      )
                      
                      
                      (12,200,287
                      )Accumulated
      other comprehensive income
                      
                      
                      351,428
                      
                      
                      
                      320,858Total
      shareholders' equity
                      
                      
                      1,248,025
                      
                      
                      
                      1,543,515Noncontrolling
      interests
                      
                      
                      5,918,319
                      
                      
                      
                      6,637,631Total
      equity
                      
                      
                      7,166,344
                      
                      
                      
                      8,181,146Total
      liabilities and equity
                      
                      $
                      18,144,678
                      
                      
                      $
                      20,104,842
 
 See notes
to consolidated financial statements.
  F-1
 TABLE OF CONTENTS
 
 China
Broadband, Inc. and Subsidiaries
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 (Unaudited)
  Three Months Ended
                  
                  
                  Nine Months EndedSeptember 30,
                  
                  
                  September 30,
                  
                  
                  September 30,
                  
                  
                  September 30,2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008Revenue
                  
                  $
                  2,106,454
                  
                  
                  $
                  1,880,806
                  
                  
                  $
                  6,045,381
                  
                  
                  $
                  3,937,439Cost
      of revenue
                  
                  
                  1,541,084
                  
                  
                  
                  949,299
                  
                  
                  
                  3,817,881
                  
                  
                  
                  1,845,354Gross
      profit
                  
                  
                  565,370
                  
                  
                  
                  931,507
                  
                  
                  
                  2,227,500
                  
                  
                  
                  2,092,085Selling,
      general and adminstrative expenses
                  
                  
                  800,198
                  
                  
                  
                  582,085
                  
                  
                  
                  2,259,003
                  
                  
                  
                  1,393,999Professional
      fees
                  
                  
                  154,350
                  
                  
                  
                  141,785
                  
                  
                  
                  454,390
                  
                  
                  
                  447,201Depreciation
      and amortization
                  
                  
                  854,218
                  
                  
                  
                  768,951
                  
                  
                  
                  2,527,268
                  
                  
                  
                  2,210,481Loss
      from operations
                  
                  
                  (1,243,396
                  )
                  
                  
                  (561,314
                  )
                  
                  
                  (3,013,161
                  )
                  
                  
                  (1,959,596
                  )Interest
      & other income / (expense)Settlement
      gain
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1,300,692Interest
      income
                  
                  
                  721
                  
                  
                  
                  16,300
                  
                  
                  
                  6,105
                  
                  
                  
                  35,426Interest
      expense
                  
                  
                  (93,085
                  )
                  
                  
                  (89,333
                  )
                  
                  
                  (270,133
                  )
                  
                  
                  (256,776
                  )Gain
      (loss) on sale of securities
                  
                  
                  15,807
                  
                  
                  
                  -
                  
                  
                  
                  (14,828
                  )
                  
                  
                  17,498Other
                  
                  
                  (12,883
                  )
                  
                  
                  349
                  
                  
                  
                  (13,159
                  )
                  
                  
                  (12,779
                  )Loss
      before income tax
                  
                  
                  (1,332,836
                  )
                  
                  
                  (633,998
                  )
                  
                  
                  (3,305,176
                  )
                  
                  
                  (875,535
                  )Income
      tax benefit
                  
                  
                  14,680
                  
                  
                  
                  6,433
                  
                  
                  
                  44,040
                  
                  
                  
                  19,299Net
      loss
                  
                  
                  (1,318,156
                  )
                  
                  
                  (627,565
                  )
                  
                  
                  (3,261,136
                  )
                  
                  
                  (856,236
                  )Net
      loss attributable to noncontrolling interests
                  
                  
                  (335,066
                  )
                  
                  
                  (80,734
                  )
                  
                  
                  (719,312
                  )
                  
                  
                  (368,272
                  )Net
      loss attributable to shareholders
                  
                  $
                  (983,090
                  )
                  
                  $
                  (546,831
                  )
                  
                  $
                  (2,541,824
                  )
                  
                  $
                  (487,964
                  )Net
      loss per shareBasic
                  
                  $
                  (0.02
                  )
                  
                  $
                  (0.01
                  )
                  
                  $
                  (0.04
                  )
                  
                  $
                  (0.01
                  )Diluted
                  
                  $
                  (0.02
                  )
                  
                  $
                  (0.01
                  )
                  
                  $
                  (0.04
                  )
                  
                  $
                  (0.01
                  )Weighted
      average shares outstandingBasic
                  
                  
                  64,104,665
                  
                  
                  
                  50,416,266
                  
                  
                  
                  58,951,679
                  
                  
                  
                  50,262,731Diluted
                  
                  
                  64,104,665
                  
                  
                  
                  50,416,266
                  
                  
                  
                  58,951,679
                  
                  
                  
                  50,262,731
 
 See notes
to consolidated financial statements.
  F-2
 TABLE OF CONTENTS
 
 China
Broadband, Inc. and Subsidiaries
 CONSOLIDATED
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
 for
the Nine Months Ended September 30, 2009
 (Unaudited)
 
 AccumulatedAdditional
                          
                          
                          
                          
                          
                          OtherCommon
                          
                          
                          Par
                          
                          
                          Paid-in
                          
                          
                          Accumulated
                          
                          
                          Comprehensive
                          
                          
                          
                          
                          
                          ComprehensiveShares
                          
                          
                          Value
                          
                          
                          Capital
                          
                          
                          Deficit
                          
                          
                          Income(loss)
                          
                          
                          Total
                          
                          
                          LossBalance
      December 31, 2008
                          
                          
                          50,585,455
                          
                          
                          $
                          50,586
                          
                          
                          $
                          13,372,358
                          
                          
                          $
                          (12,200,287
                          )
                          
                          $
                          320,858
                          
                          
                          $
                          1,543,515Shares
      issued in lieu of convertiblenote
      interest
                          
                          
                          592,680
                          
                          
                          
                          593
                          
                          
                          
                          193,281
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          193,874Stock
      option expense
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          33,655
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          33,655Shares
      issued for AdNet acquisition
                          
                          
                          11,254,898
                          
                          
                          
                          11,255
                          
                          
                          
                          1,676,980
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          1,688,235Shares
      issued for cash
                          
                          
                          2,000,000
                          
                          
                          
                          2,000
                          
                          
                          
                          298,000
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          300,000Comprehensive
      loss:Net
      loss
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (2,541,824
                          )
                          
                          
                          -
                          
                          
                          
                          (2,541,824
                          )
                          
                          $
                          (2,541,824
                          )Foreign
      currency translation adjustments
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          28,128
                          
                          
                          
                          28,128
                          
                          
                          
                          28,128Unrealized
      loss on marketable equity securities
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          2,442
                          
                          
                          
                          2,442
                          
                          
                          
                          2,442Balance
      September 30, 2009
                          
                          
                          64,433,033
                          
                          
                          $
                          64,434
                          
                          
                          $
                          15,574,274
                          
                          
                          $
                          (14,742,111
                          )
                          
                          $
                          351,428
                          
                          
                          $
                          1,248,025
                          
                          
                          $
                          (2,511,254
                          )
 
 See notes
to consolidated financial statements.
  F-3
 TABLE OF CONTENTS
 
 China
Broadband, Inc. and Subsidiaries
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 (Unaudited)
 
 Nine
      Months EndedSeptember
      30,
                                      
                                      
                                      September
      30,2009
                                      
                                      
                                      2008Cash
      flows from operatingNet
      loss
                                      
                                      $
                                      (3,261,136
                                      )
                                      
                                      $
                                      (856,236
                                      )Adjustments
      to reconcile net loss to net cash provided by operating
      activitiesStock
      compensation expense
                                      
                                      
                                      227,528
                                      
                                      
                                      
                                      218,137Depreciation
      and amortization
                                      
                                      
                                      2,325,238
                                      
                                      
                                      
                                      2,210,481Noncash
      interest expense
                                      
                                      
                                      75,452
                                      
                                      
                                      
                                      72,688Deferred
      income tax
                                      
                                      
                                      (44,040
                                      )
                                      
                                      
                                      (19,299
                                      )Loss
      (gain) on sale of marketable equity securities
                                      
                                      
                                      14,828
                                      
                                      
                                      
                                      (17,498
                                      )Settlement
      gain
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (1,300,692
                                      )Change
      in assets and liabilities, net of amounts assumed in AdNet
      acquisition:Accounts
      receivable
                                      
                                      
                                      (32,000
                                      )
                                      
                                      
                                      105,992Inventory
                                      
                                      
                                      98,635
                                      
                                      
                                      
                                      (239,660
                                      )Prepaid
      expenses and other assets
                                      
                                      
                                      (62,192
                                      )
                                      
                                      
                                      33,763Accounts
      payable and accrued expenses
                                      
                                      
                                      834,550
                                      
                                      
                                      
                                      431,247Deferred
      revenue
                                      
                                      
                                      264,765
                                      
                                      
                                      
                                      98,824Other
                                      
                                      
                                      (9
                                      )
                                      
                                      
                                      (73,580
                                      )Net
      cash provided by operating activities
                                      
                                      
                                      441,619
                                      
                                      
                                      
                                      664,167Cash
      flows from investing activities:Cash
      acquired in AdNet acquisition
                                      
                                      
                                      17,568
                                      
                                      
                                      
                                      -Proceeds
      from sale of marketable equity securities
                                      
                                      
                                      174,513
                                      
                                      
                                      
                                      339,998Acquisition
      of property and equipment
                                      
                                      
                                      (554,727
                                      )
                                      
                                      
                                      (1,566,948
                                      )Loan
      to Shandong Media shareholder
                                      
                                      
                                      (553,004
                                      )
                                      
                                      
                                      (242,155
                                      )Net
      cash used in investing activities
                                      
                                      
                                      (915,650
                                      )
                                      
                                      
                                      (1,469,105
                                      )Cash
      flows from financing activitiesProceeds
      from sale of equity securities
                                      
                                      
                                      300,000
                                      
                                      
                                      
                                      -Proceeds
      from issuance of convertible notes payable
                                      
                                      
                                      304,853
                                      
                                      
                                      
                                      4,850,000Issuance
      costs associated with private placement and convertible
    notes
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (104,500
                                      )Receipts
      from (payments to) Jinan Parent
                                      
                                      
                                      (2,643,213
                                      )
                                      
                                      
                                      240,489Net
      cash (used in) provided by financing activities
                                      
                                      
                                      (2,038,360
                                      )
                                      
                                      
                                      4,985,989Effect
      of exchange rate changes on cash
                                      
                                      
                                      28,128
                                      
                                      
                                      
                                      478,094Net
      increase (decrease) in cash and cash equivalents
                                      
                                      
                                      (2,484,263
                                      )
                                      
                                      
                                      4,659,145Cash
      and cash equivalents at beginning of period
                                      
                                      
                                      4,425,529
                                      
                                      
                                      
                                      472,670Cash
      and cash equivalents at end of period
                                      
                                      $
                                      1,941,266
                                      
                                      
                                      $
                                      5,131,815Supplemental Cash Flow
      Information:Value
      assigned to shares issued as penalty for non-registration of 7%
      convertible notes
                                      
                                      $
                                      -
                                      
                                      
                                      $
                                      12,125Value
      assigned to shares issued in lieu of cash for interest
    expense
                                      
                                      $
                                      193,873
                                      
                                      
                                      $
                                      183,598Acquisition of AdNet MediaFair
      value of assets acquired
                                      
                                      $
                                      43,489
                                      
                                      
                                      $
                                      -Liabilities
      assumed
                                      
                                      $
                                      262,273
                                      
                                      
                                      $
                                      -Consideration
      paid:  issuance of 11,254,898 shares of common
    stock
                                      
                                      $
                                      1,688,235
                                      
                                      
                                      $
                                      -Convertible Note IssuanceConvertible
      notes issued in lieu of debt issuance costs
                                      
                                      $
                                      -
                                      
                                      
                                      $
                                      121,250
 
 See notes
to consolidated financial statements.
  F-4
 TABLE OF CONTENTS
  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 in the media segment through its subsidiaries in the
People’s Republic of China (“PRC” or “China”) (i) a cable broadband business
(Jinan Broadband), (ii) a print based media and television programming guide
publication (Shandong Newspaper) and (iii) a provider of multimedia advertising
content to internet cafés (AdNet Media).
 
 (i)
              The
      principal activities of the Company are to provide cable and wireless
      broadband services, principally internet services, Internet Protocol Point
      wholesale services, related network equipment rental and sales, and fiber
      network construction and maintenance through its Jinan Broadband
      subsidiary based in the Jinan region of
China.
 
 (ii)
              We
      operate a print based media and television programming guide publication
      business through our Shandong Newspaper joint venture based in the
      Shandong Province of China, effective as of July 1, 2008.  The
      results of which are included in our financial statements as of July
      2008.
 
 (iii)
              We
      operate a business whose primary focus is the delivery of multimedia
      advertising content to internet cafés in the PRC, effective as of April 7,
      2009, the results of which are included in our financial statements
      as of April 2009.
 
 The
accompanying unaudited interim 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 on a
basis consistent with those reflected in our fiscal 2008 Annual Report on Form
10-K/A, filed with the Securities and Exchange Commission, but does not include
all the disclosures required by generally accepted accounting principles. 
These interim financial statements are unaudited and, in the opinion of
management, include all adjustments, consisting of normal recurring adjustments
and accruals, which are necessary for a fair presentation of results for the
respective interim periods presented.  The results of operations for the
interim periods are not necessarily indicative of the results that may be
expected for the full year or for any future period.
 
 The
financial statements of the Company were filed with the Securities and Exchange
Commission on November 23, 2009. We have evaluated subsequent events up to the
time of the filing.
 
 2.           Accounting
Policy Changes
 
 The
Financial Accounting Standards Board (FASB) issued FASB Accounting Standards
Codification (ASC) effective for financial statements issued for interim and
annual periods ending after September 15, 2009.  The ASC is an
aggregation of previously issued authoritative U.S. generally accepted
accounting principles (GAAP) in one comprehensive set of guidance organized by
subject area.  In accordance with the ASC, references to previously
issued accounting standards have been replaced by ASC
references.  Subsequent revisions to GAAP will be incorporated into
the ASC through Accounting Standards Updates (ASU).
 
 On
January 1, 2009, the Company adopted ASC 805, Business Combinations, and
ASC 810, Consolidation.  ASC
805 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.
 
 ASC 810
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 continues 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 on the
financial statements as of and for the year ended December 31, 2008, contained
an explanatory paragraph regarding the Company's ability to continue as a going
concern.
  F-5
 TABLE OF CONTENTS
  By July
of 2009,  the Company completed (i) a private financing of 5%
Convertible Promissory Notes for gross proceeds of approximately $305,000 and
(ii) a private financing of 2,000,000 shares of restricted Common Stock, par
value $.001 of the Company (the “Common Stock”), at a purchase price of $.15 per
share, for aggregate gross proceeds of $300,000.  See financial
statement note 5 below for a description of these transactions.  As
part of the Convertible Note financing we were required to reduce the conversion
price of existing notes held by the investors.
 
 Management
plans to continue its efforts to raise additional funds through debt or equity
offerings.  The Company continues to evaluate 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.           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, Ms. Priscilla Lu and Mr. Wang Yingqinee Michael Wang).
 
 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 cash 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).  The Company has recorded a
$1,900,000 intangible asset related to the acquisition.  The Company
expects to complete its valuation of the assets acquired (principally the
license arrangements and proprietary technology) in the acquisition in the near
term.  Upon completion of the valuation, fair values are expected
to be assigned to the definite live intangibles acquired.
 
 The AdNet
Agreement provides for, among other provisions, that 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/nominee appointed by the Company to act as
directed by the Company pending an exercise or conversion under the Equity
Option 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 39,000 cafés 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).
 
 5.           Private
Financings, June 2009
 
 Issuance of Convertible Notes, June
2009
 
 During
the nine months ended September 30, 2009, the Company completed a private
financing of 5% Convertible Promissory Notes (the “Notes”) for gross proceeds of
approximately $305,000 (the “Note Offering”).  The Note Offering was
pursuant to a Note Purchase Agreement (the “Note Purchase Agreement”) with nine
persons who were existing holders (the “Note Investors”) of Convertible
Promissory Notes issued in January of 2008 (the “January 2008 Notes”), pursuant
to which the Company issued approximately $305,000 principal amount of Notes to
the Note Investors at face value.  The Notes accrue interest at 5% per
year payable quarterly in cash or stock, are initially convertible at $.20 per
share, and become due and payable in full on May 27, 2010.  The
Company did not pay any placement agent or similar fees in connection with the
Note Offering.
 
 Equity
Financing; Issuance of Common Stock
 
 During
the nine months ended September 30, 2009 and pursuant to a Securities Purchase
Agreement with three investors, the Company completed a private financing of
2,000,000 shares of restricted Common Stock, par value $.001 of the Company (the
“Common Stock”), at a purchase price of $.15 per share, for aggregate gross
proceeds of $300,000 (the “Equity Financing”).  The company did not
pay any placement agent or similar fees in connection with such
financing.
  F-6
 TABLE OF CONTENTS
  Waiver
Letters
 
 In
connection with the Note Offering and the Equity Financing, the Company entered
into a waiver letter (the “Waiver Letter”) with all the holders of January 2008
Notes (“Existing Note Holders”), pursuant to which, among other things, the
conversion price of the January 2008 Notes were reduced from $.75 per share to
(i) $.20 per share (i.e. the same conversion price as the Notes in the Note
Offering) for the Existing Note Holders that invested in the Notes (i.e. the
Note Investors), and (ii) $.25 per share for those Existing Note Holders that
did not reinvest in the new notes.  All of the Existing Note Holders
waived certain anti dilution adjustments in respect of the contemplated Equity
Financing or in respect of their Warrants which were issued to them in
connection with the January 2008 Notes, which warrants remain exercisable at
$.60 per share.
 
 The
Company also agreed, pursuant to the Waiver Letter, that if it raises capital in
excess of $10,000,000 and up to $20,000,000 it will repay the January 2008
Notes, on a pari pasu
basis based on principal amount outstanding, a minimum of 12.5% of the net
proceeds raised and, that if it is successful in raising over $20,000,000, it
will repay the January 2008 Notes, on a pari pasu basis based on
principal, a minimum aggregate of 15.0% of the net proceeds raised, until repaid
in full.
  6.           Convertible Notes, January
2008
  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 January 2008 Notes  due
January 11, 2013, and Class A Warrants to purchase an aggregate of 6,628,333
shares of common stock of the Company at $.60 per share expiring on June 11,
2013. The conversion price of these January 2008 Notes was originally $.75 per
share and, in June of 2009 in connection with a subsequent financing with these
investors, reduced to $.20 per share (see “Private Financings; June 2009 –
Waiver Letters” above).
 
 7.           Settlement
Agreement
 
 On
January 11, 2008, simultaneously with the closing of the convertible January
2008  Notes described above in Note 6, the Company entered into a
Settlement Agreement (“Settlement Agreement”) which was negotiated by the
Company, its advisors and management and certain shareholders, for purposes of
facilitating the Company’s business plan and expediting and facilitating the
Company’s financing activities and avoiding disputes between management and
certain investors and consultants concerning possible claims that such investors
suggested might be brought against these principals for their activities in
forming and operating China Cablecom and its entry into a merger agreement as
being violative of their employment agreements with the Company.  The
Settlement Agreement provided, subject to the terms thereof, for general mutual
releases of all executives and management and their affiliated entities and also
provided for the modification of employment agreements of both, Mr. Clive Ng,
our Chairman and Mr. Yue Pu, our Vice Chairman and former Chief Financial
Officer.  The Settlement Agreement also required the transfer of
390,000 Cablecom Holding shares held by Mr. Ng to the Company and to certain of
the Company’s shareholders and consultants in exchange for releases in favor of
the Company and management and their affiliates.
 
 The
following represents the details of the net gain the Company recognized as a
result of the Settlement Agreement during the nine month period ending September
30, 2008 which is classified within  “Interest and other income
(expense)” in the accompaning Statement of Operations:
 
 Fair
      value of Cablecom Holding Shares received
                    
                    $
                    2,515,500Waiver
      of accrued compensation
                    
                    
                    212,054Warrant
      extensions
                    
                    
                    (1,426,862
                    )Net
      gain
                    
                    $
                    1,300,692
 
 8.           Interest
Expense and Share Issuance
 
 In
connection with the Convertible Notes issued in January 2008 and June 2009 as
described above in Notes 5 and 6, during the three months ended September 30,
2009 and 2008 the Company incurred $93,000 and $89,000 in interest expense
related to these Notes and Warrants, respectively.  During the nine
months ended September 30, 2009 and 2008 the Company incurred $269,000 and
$256,000 in interest expense related to these Notes and Warrants,
respectively.
  F-7
 TABLE OF CONTENTS
 
 As set
forth in the related documents and with the consent of the Note holders, the
Company issued 592,677 and 244,799 shares to the Note holders in lieu of cash of
approximately $194,000 and $184,000 for interest in the nine month periods ended
September 30, 2009 and 2008, respectively.
 
 9.           Fair
Value Measurements
 
 Accounting
standards require the categorization of financial assets and liabilities, based
on the inputs to the valuation technique, into a three-level fair value
hierarchy. The various levels of the fair value hierarchy are described as
follows:
 
 ·
              Level 1 —
      Financial assets and liabilities whose values are based on unadjusted
      quoted market prices for identical assets and liabilities in an active
      market that we have the ability to
access.
 ·
              Level 2 —
      Financial assets and liabilities whose values are based on quoted prices
      in markets that are not active or model inputs that are observable for
      substantially the full term of the asset or
  liability
 ·
              Level 3 —
      Financial assets and liabilities whose values are based on prices or
      valuation techniques that require inputs that are both unobservable and
      significant to the overall fair value
  measurement.
 
 Accounting
standards require the use of observable market data, when available, in making
fair value measurements. When inputs used to measure fair value fall within
different levels of the hierarchy, the level within which the fair value
measurement is categorized is based on the lowest level input that is
significant to the fair value measurement.
 
 The
following table presents the fair value hierarchy for those assets measured at
fair value on a recurring basis as of September 30, 2009:
 
 Fair Value Measurements(Unaudited)
                    
                    Level 1
                    
                    
                    Level 2
                    
                    
                    Level 3AssetsAvailable-for-sale
      securities
                    
                    $
                    67,608
                    
                    
                    $
                    -
                    
                    
                    $
                    -
 The
carrying value of the available-for-sale securities at September 30, 2009 was
$67,608.
  10.         Related
Party Transactions
 
 Loan
Receivable
 
 During
2009, the Company advanced an aggregate of approximately $280,000 in the
form of a loan to Music Magazine to fund its operations. The loan is unsecured,
interest free and has no fixed repayment terms.  Music Magazine is
related through Modern Movie Times Magazine.
 
 Amounts
due from Shareholders
 
 Amounts
due from shareholders include $91,000 advanced to Shandong Broadcast & TV
Weekly Press and $543,000 advanced to Modern Movie & TV Biweekly
Press. Both companies are our partners in our Shandong Media joint venture
company.  The amount due from Shandong Broadcast & TV Weekly Press
is unsecured, interest free and has no fixed repayment terms.  The
amount due from Modern Movie & TV Biweekly Press is unsecured, interest free
and is due on December 31, 2009 (previously June 30, 2009).  During
the period ended September 30, 2009, the Company advanced approximately $553,000
to the shareholders.
 
 Payable
to Jinan Parent
 
 During
the nine months ended September 30, 2009, Jinan Broadband paid $2,643,000 to
Jinan Parent.  At September 30, 2009,  $152,000 remains due
to Jinan Parent.  The advance is unsecured, interest free and has no
fixed repayment terms.
 
 11.         Variable
Interest Entities
 
 Financial
accounting standards require the “primary beneficiary” of a VIE to include the
VIE’s assets, liabilities and operating results in its consolidated financial
statements.   In general, a VIE is a corporation, partnership,
limited-liability company, trust or any other legal structure used to conduct
activities or hold assets that either (a) has an insufficient amount of equity
to carry out its principal activities without additional subordinated financial
support, (b) has a group of equity owners that are unable to make significant
decisions about its activities, or (c) has a group of equity owners that do not
have the obligation to absorb losses or the right to receive returns generated
by its operations.
 
 Our
consolidated VIEs were recorded at fair value on the date we became the primary
beneficiary.  Our VIEs at September 30, 2009 include Jinan Broadband
and Shandong Newspaper.
 F-8
 TABLE OF CONTENTS
  12.         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 September 30, 2009, 317,500 options
have been issued under the plan.
 
 The
following table provides the details of the total stock based compensation for
the three and nine months ended September 30, 2009 and 2008:
  Three Months Ended
                    
                    
                    Nine Months EndedSeptember 30,
                    
                    
                    September 30,
                    
                    
                    September 30,
                    
                    
                    September 30,2009
                    
                    
                    2008
                    
                    
                    2009
                    
                    
                    2008Stock
      option amortization
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    33,656
                    
                    
                    $
                    22,414Stock
      issued as non registration penalty
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    12,000$
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    33,656
                    
                    
                    $
                    34,414
 
 The
Company accounts for its stock option awards pursuant to the provisions of ASC
718, Stock
Compensation.
 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.
  There
were no stock options issued during the nine month period ending September 30,
2009.  As of September 30, 2009, there were 317,500 options
outstanding with 162,500 options exercisable at a weighted average exercise
price of $0.62 with a weighted average remaining life of 6.1 years.
 
 As of
September 30, 2009 the Company had total unrecognized compensation expense
related to options granted of $35,000 which will be recognized over a remaining
service period of 2 years.
 
 13.         Warrants
 
 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 September 30, 2009:
  Number ofWarrants
                    
                    
                    Exercise
                    
                    ExpirationName
                    
                    Issued
                    
                    
                    Price
                    
                    DateShare
      Exchange Consulting Warrants
                    
                    
                    4,474,800
                    
                    
                    $
                    0.60
                    
                    1/11/20132007
      Private Placement Broker Warrants
                    
                    
                    640,000
                    
                    
                    $
                    0.60
                    
                    1/11/20132007
      Private Placement Investor Warrants
                    
                    
                    4,000,000
                    
                    
                    $
                    2.00
                    
                    1/11/2013January
      2008 Financing Class A Warrants
                    
                    
                    6,628,333
                    
                    
                    $
                    0.60
                    
                    6/11/2013January
      2008 Financing Broker Warrants
                    
                    
                    1,131,667
                    
                    
                    $
                    0.50
                    
                    6/11/201316,874,800
  F-9
 TABLE OF CONTENTS
 
 14.         Income Taxes
 
 In June
2006, the FASB issued ASC 740,Income Taxes.  ASC 740 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.  ASC 740 also provides guidance
on de-recognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition.
 
 Under ASC
740, 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
September 30, 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 nine months
ended September 30, 2009.
 
 The
Company is subject to a 5% business tax on the business income of our operating
companies located in China.
 
 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. The
income tax benefit for the three and nine month periods ended September 30, 2009
and 2008 results from changes in calculated deferred taxes, in particular
liabilities associated with intangible assets. Deferred tax assets associated
with net operating losses have a full valuation allowance recorded against
them.
 
 15.         Reclassifications
 
 Certain
prior year information has been reclassified to be comparable with the current
year presentation, principally due to the adoption of ASC 810, Consolidation.
 
 16.         Recent
Accounting Pronouncements
 
 In July
2009, the FASB issued the Accounting Standards Codification (“Codification”),
which became the single source of authoritative generally accepted accounting
principles (GAAP) in the United States, other than rules and interpretive
releases issued by the Securities and Exchange Commission (SEC).  The
Codification is a reorganization of current GAAP into a topical format that
eliminates the current GAAP hierarchy and instead establishes two levels of
guidance – authoritative and non-authoritative.  All
non-grandfathered, non-SEC accounting literature that is not included in the
Codification will become non-authoritative.  All references to
authoritative accounting literature in our financial statements are referenced
in accordance with the Codification.  There were no changes to the
content of our financial statements or disclosures as a result of implementing
the Codification.
 
 In
October 2009, the FASB issued amendments to the criteria for separating
consideration in multiple-deliverable arrangements.  These amendments
will establish a selling price hierarchy for determining the selling price of a
deliverable.  The amendments will require that a vendor determine its
best estimate of selling price in a manner that is consistent with that used to
determine the price to sell the deliverable on a standalone
basis.  These amendments will eliminate the residual method of
allocation and require that arrangement consideration be allocated at the
inception of the arrangement to all deliverables using the relative selling
price method.  These amendments will expand disclosures related to
vendor’s multiple-deliverable revenue arrangements.  These amendments
will be effective for arrangements entered into after January 1,
2011.  We are currently evaluating the impact these amendments will
have on our consolidated financial statements and disclosures.
  F-10
 TABLE OF CONTENTS
  17.
Goodwill and Other Intangible Assets
  Goodwill
and intangible assets with indefinite useful lives are not amortized, but are
tested for impairment at least annually. Goodwill represents the excess of the
purchase price over the fair value of the net tangible and identifiable
intangible assets acquired in each business combination.
  Determining
the fair value of a reporting unit requires the use of significant estimates and
assumptions, including revenue growth rates, discount rates and future market
conditions, among others. Goodwill and other long-lived assets are reviewed for
impairment whenever events, such as significant changes in the business climate,
changes in product and service offerings, or other circumstances indicate that
the carrying amount may not be recoverable.
  The
Company continues to amortize its service agreement, publication rights,
operating permits and customer relationships that have finite lives. Intangibles
acquired in the AdNet acquisition will be amortized over the estimated useful
lives of the assets acquired upon finalization of the valuation of such
assets.
  Estimated
amortization expense of intangibles for the years ending December 31, 2009
through 2013 is as follows:
  Year
                
                Annual
      Amortization2009
      (three months)
                
                $
                59,0002010
                
                
                235,0002011
                
                
                235,0002012
                
                
                235,0002013
                
                
                235,000
   Note
18 – Net Loss Per Common Share
  Basic net
loss per common share is calculated by dividing the net loss by the weighted
average number of outstanding common shares during the period. Diluted net loss
per common share includes the weighted average dilutive effect of stock options
and warrants.
  Potential
common shares outstanding as of September 30, 2009 and 2008:
  Warrants
                
                
                16,874,800Options
                
                
                327,500
  For each
of the three months and none month periods ended September 30, 2009 and 2008,
the number of securities not included in the diluted EPS because the effect
would have been anti-dilutive was 17,202,300.
  Note
19 – Comprehensive Income/(Loss)
  Comprehensive
income/(loss) consists of the following:
  Three
      Months Ended
                  
                  
                  Nine
      Months EndedSeptember
      30,
                  
                  
                  September
      30,2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008Net
      loss attributable to shareholders
                  
                  $
                  (983,090
                  )
                  
                  $
                  (546,831
                  )
                  
                  $
                  (2,541,824
                  )
                  
                  $
                  (487,964
                  )Other
      comprehensive income:Foreign
      currency translation adjustments
                  
                  
                  6,407
                  
                  
                  
                  29,831
                  
                  
                  
                  28,128
                  
                  
                  
                  478,096Unrealized
      gain (loss) on available-for-salesecurities
                  
                  
                  38,735
                  
                  
                  
                  (1,564,000
                  )
                  
                  
                  2,442
                  
                  
                  
                  (1,394,000
                  )Comprehensive
      loss
                  
                  $
                  (937,948
                  )
                  
                  $
                  (2,081,000
                  )
                  
                  $
                  (2,511,254
                  )
                  
                  $
                  (1,403,868
                  )
  F-11
 TABLE OF CONTENTS
  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 nine months ended September 30, 2009 contained in this Form
10-Q.  The following is also necessarily subject to, and we
incorporate herein, the forward looking statements disclosure provided in the
forepart to this Form 10-Q as well as Risk Factors discussed
therein  as can be found in our Form 10-K/A for the year ended
December 31, 2008, all of which should be considered. These forward looking
statements are afforded the safe harbor protections of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended.
 
 Overview
 
 We operate in the media segment,
through our VIE 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 April 2009 we acquired an
internet café content provider and advertising business in the PRC (AdNet Media)
(See “Recent Developments” below).
 
 Recent
Developments
 
 As
described below, during the nine months ended September 30, 2009 we completed
(i) a private financing of 5% Convertible Promissory Notes (the “Notes”) for
gross proceeds of $304,902 (the “Note Offering”) and (ii) a private financing of
2,000,000 shares of restricted Common Stock, par value $.001 of the Company (the
“Common Stock”), at a purchase price of $.15 per share, for aggregate proceeds
of $300,000 (the “Equity Financing”) and simultaneously entered into a waiver
letter agreement with certain note-holders as more fully described
below.  See “Private Financings” in this section
below.   In April of 2007, we also completed our acquisition,
through our wholly owned subsidiary, of AdNet Medeia Technologies(Beijing) Co.,
Ltd., a PRC based company providing advertising marketing to internet café users
in the PRC.
 
 Laketune
 
 China Broadband, Inc.,
through its wholly owned subsidiary, China Broadband, Ltd., entered into a non
binding memorandum of understanding to acquire 51% of Laketune Technologies, a
joint venture partnership company with the State Administration of Radio Film
& Television (SARFT) entity WASU (Hangzhou Digital) in the People’s Republic
of China (the “PRC”).  The completion of this joint venture is subject
to a number of conditions.  In connection therewith, the Company
distributed an information research sheet relating to the Company’s businesses
and the broadband business in the PRC which generally contains certain research
and information relating to the broadband business in the PRC (the “Information
Sheet”).  A copy of this Information Sheet can be found in the
Company’s Current Report on Form 8-K filed on June 26, 2009.
 
 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, Ms. Priscilla Lu
and Mr. Wang Yingqi nee Michael Wang).  As part of the acquisition,
and, among other provisions, Ms. Priscilla Lu was appointed to the China
Broadband board of directors.
 
 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 39,000 cafés 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 our VIE
subsidiary, Jinan Broadband, our Shandong Media joint venture and our recently
acquired business of AdNet Media. Through WFOE, we acquired a 51% interest in
Jinan Broadband effective April 1, 2007, a 50% interest in the Shandong
Media joint venture effective July 1, 2008 and 100% interest in AdNet Media
effective April 7, 2009.
  1
 TABLE OF CONTENTS
 
 The following table presents for the
periods indicated the results of the Company’s operations.
 
 3 Months Ended
                        
                        
                        Amount
                        
                        
                        %September 30,
                        
                        
                        September 30,
                        
                        
                        Increase /
                        
                        
                        Increase /2009
                        
                        
                        2008
                        
                        
                        (Decrease)
                        
                        
                        (Decrease)Revenue
                        
                        $
                        2,106,000
                        
                        
                        $
                        1,881,000
                        
                        
                        $
                        225,000
                        
                        
                        
                        12
                        %Cost
      of revenue
                        
                        
                        1,541,000
                        
                        
                        
                        949,000
                        
                        
                        
                        592,000
                        
                        
                        
                        62
                        %Gross
      profit
                        
                        
                        565,000
                        
                        
                        
                        932,000
                        
                        
                        
                        (367,000
                        )
                        
                        
                        -39
                        %Selling,
      general and adminstrative expenses
                        
                        
                        800,000
                        
                        
                        
                        582,000
                        
                        
                        
                        218,000
                        
                        
                        
                        37
                        %Professional
      fees
                        
                        
                        155,000
                        
                        
                        
                        142,000
                        
                        
                        
                        13,000
                        
                        
                        
                        9
                        %Depreciation
      and amortization
                        
                        
                        854,000
                        
                        
                        
                        769,000
                        
                        
                        
                        85,000
                        
                        
                        
                        11
                        %Loss
      from operations
                        
                        
                        (1,244,000
                        )
                        
                        
                        (561,000
                        )
                        
                        
                        (683,000
                        )
                        
                        
                        122
                        %Interest
      & other income / (expense)Interest
      income
                        
                        
                        1,000
                        
                        
                        
                        16,000
                        
                        
                        
                        (15,000
                        )
                        
                        
                        -94
                        %Interest
      expense
                        
                        
                        (93,000
                        )
                        
                        
                        (89,000
                        )
                        
                        
                        (4,000
                        )
                        
                        
                        4
                        %Gain
      on sale of securities
                        
                        
                        16,000
                        
                        
                        
                        -
                        
                        
                        
                        16,000
                        
                        
                        
                        -Other
                        
                        
                        (13,000
                        )
                        
                        
                        -
                        
                        
                        
                        (13,000
                        )
                        
                        
                        -Net
      loss before income tax
                        
                        
                        (1,333,000
                        )
                        
                        
                        (634,000
                        )
                        
                        
                        (699,000
                        )
                        
                        
                        110
                        %Income
      tax benefit
                        
                        
                        15,000
                        
                        
                        
                        6,000
                        
                        
                        
                        9,000
                        
                        
                        
                        150
                        %Net
      loss
                        
                        
                        (1,318,000
                        )
                        
                        
                        (628,000
                        )
                        
                        
                        (690,000
                        )
                        
                        
                        110
                        %Net
      loss attributable to noncontrolling interests
                        
                        
                        (335,000
                        )
                        
                        
                        (81,000
                        )
                        
                        
                        (254,000
                        )
                        
                        
                        314
                        %Net
      loss attributable to shareholders
                        
                        $
                        (983,000
                        )
                        
                        $
                        (547,000
                        )
                        
                        $
                        (436,000
                        )
                        
                        
                        80
                        %
  2
 TABLE OF CONTENTS





9 Months Ended
                      
                      
                      Amount
                      
                      
                      %September
      30,
                      
                      
                      September
      30,
                      
                      
                      Increase
      /
                      
                      
                      Increase
      /2009
                      
                      
                      2008
                      
                      
                      (Decrease)
                      
                      
                      (Decrease)Revenue
                      
                      $
                      6,045,000
                      
                      
                      $
                      3,937,000
                      
                      
                      $
                      2,108,000
                      
                      
                      
                      54
                      %Cost
      of revenue
                      
                      
                      3,818,000
                      
                      
                      
                      1,845,000
                      
                      
                      
                      1,973,000
                      
                      
                      
                      107
                      %Gross
      profit
                      
                      
                      2,227,000
                      
                      
                      
                      2,092,000
                      
                      
                      
                      135,000
                      
                      
                      
                      6
                      %Selling,
      general and adminstrative expenses
                      
                      
                      2,259,000
                      
                      
                      
                      1,394,000
                      
                      
                      
                      865,000
                      
                      
                      
                      62
                      %Professional
      fees
                      
                      
                      454,000
                      
                      
                      
                      447,000
                      
                      
                      
                      7,000
                      
                      
                      
                      2
                      %Depreciation
      and amortization
                      
                      
                      2,527,000
                      
                      
                      
                      2,210,000
                      
                      
                      
                      317,000
                      
                      
                      
                      14
                      %Loss
      from operations
                      
                      
                      (3,013,000
                      )
                      
                      
                      (1,959,000
                      )
                      
                      
                      (1,054,000
                      )
                      
                      
                      54
                      %Interest
      & other income / (expense)Settlement
      gain
                      
                      
                      -
                      
                      
                      
                      1,301,000
                      
                      
                      
                      (1,301,000
                      )
                      
                      
                      -100
                      %Interest
      income
                      
                      
                      6,000
                      
                      
                      
                      35,000
                      
                      
                      
                      (29,000
                      )
                      
                      
                      -83
                      %Interest
      expense
                      
                      
                      (270,000
                      )
                      
                      
                      (257,000
                      )
                      
                      
                      (13,000
                      )
                      
                      
                      5
                      %(Loss)
      gain on sale of securities
                      
                      
                      (15,000
                      )
                      
                      
                      17,000
                      
                      
                      
                      (32,000
                      )
                      
                      
                      -188
                      %Other
                      
                      
                      (13,000
                      )
                      
                      
                      (13,000
                      )
                      
                      
                      -
                      
                      
                      
                      0
                      %Net
      loss before income tax
                      
                      
                      (3,305,000
                      )
                      
                      
                      (876,000
                      )
                      
                      
                      (2,429,000
                      )
                      
                      
                      277
                      %Income
      tax benefit
                      
                      
                      44,000
                      
                      
                      
                      19,000
                      
                      
                      
                      25,000
                      
                      
                      
                      132
                      %Net
      loss
                      
                      
                      (3,261,000
                      )
                      
                      
                      (857,000
                      )
                      
                      
                      (2,404,000
                      )
                      
                      
                      281
                      %Net
      loss attributable to noncontrolling interests
                      
                      
                      (719,000
                      )
                      
                      
                      (368,000
                      )
                      
                      
                      (351,000
                      )
                      
                      
                      95
                      %Net
      loss attributable to shareholders
                      
                      $
                      (2,542,000
                      )
                      
                      $
                      (489,000
                      )
                      
                      $
                      (2,053,000
                      )
                      
                      
                      420
                      %





Comparison of Three Months
Ended September 30, 2009 and 2008





Revenues





Our
revenues are generated by our operating companies in the PRC.





Revenues for the three months ended
September 30, 2009 totaled $2,106,000, as compared to $1,881,000 for the three
months ended September 30, 2008, an increase in revenue of approximately
$225,000, or 12%.





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 $1,170,000, an increase of $9,000, or 1% as compared to
revenues of $1,161,000 for the three months ended 2008.





Shandong
Media’s revenue consists primarily of sales of publications and advertising
revenues of $934,000, an increase of $214,000 or 30% as compared to revenues of
$720,000 for the three months ended 2008.  The increase is primarily
attributable to increases in advertising revenues.  (For a description
of the Shandong Media joint venture, see “Shandong Media Joint Venture and
Shandong Newspaper Cooperation Agreement”, below).





AdNet
Media is an early stage company that started operations during the first quarter
of 2009.  AdNet Media’s revenue is expected to consist primarily of
advertising revenue and video service fees.  Advertising revenues will
be generated from advertisers who participate in an ad platform developed by
AdNet which is accessed through internet cafés.  Video service fees
are expected to be generated from the internet café or agent who uses our online
video services which includes movies, music, videos and games.  For
the three months ended September 30, 2009, revenues totaled
$2,000.  AdNet Media’s revenues were not included in our operating
results during the third quarter of 2008 (For a description of the AdNet Media
acquisition, see “Completion
of Acquisition of AdNet”, above).


3
 TABLE OF CONTENTS


Gross
Profit





Our gross profit for the three months
ended September 30, 2009 was $565,000, as compared to $932,000 for the three
months ended September 30, 2008.The decrease in
gross profit of approximately $367,000 or 39% is primarily comprised of $415,000
decrease from our Jinan Broadband operations offset by $52,000 increase from our
Shandong Media operations.  The decrease in gross profit attributable
to Jinan Broadband was primarily due to increases in cable network connection
costs, telecom bandwith costs and charges associated with the write down of
switches and other consumer related parts held in inventory.





Gross profit as a percentage of revenue
was 27% for the three months ended September 30, 2009, as compared to 50% for
the three months ended September 30, 2008.





Selling,
General and Administrative Expenses





Our
selling, general and administrative expenses for the three months ended
September 30, 2009 increased approximately $218,000 to $800,000, as compared to
$582,000 for the three months ended September 30, 2008.  The increase
is primarily attributable to the inclusion of our AdNet Media acquisition in
April 2009 along with increased personnel and marketing expenses at our Shandong
Media company.





Salaries and personnel costs are the
major component of selling, general and administrative expenses.  For
the three months ended September 30, 2009, salaries and personnel costs
accounted for 60% of our selling, general and administrative
expenses.  During the 2009 period, salaries and personnel costs
totaled $459,000, an increase of $148,000 or 57% as compared to $311,000 for the
2008 period.  The increase in salaries and personnel costs is
primarily attributable to the inclusion of our AdNet Media acquisition in April
2009 along with increased personnel costs at our Shandong Media
company.





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





Professional
Fees





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
                  
                  
                  2008Depreciation
                  
                  $
                  772,000
                  
                  
                  $
                  720,000Amortization
                  
                  
                  82,000
                  
                  
                  
                  49,000Total
                  
                  $
                  854,000
                  
                  
                  $
                  769,000





Depreciation expense during 2009
relates to the depreciation on the approximately $14.7 million of property,
plant and equipment, at our Jinan Broadband subsidiary.  The increase
in amortization of $33,000 is primarily attributable to the amortization related
to our Shandong Media intangible assets acquired in 2008.





Interest
Expense





Interest
expense of $93,000 for the three months ended September 30, 2009 relates to the
5% Convertible Notes and Warrants issued in January 2008 and June
2009.  For the 2008 period, interest expense was
$89,000.  Interest expense includes amortization of the original
issued discount on the notes allocated to the warrants issued in the
financing.





We expect our interest expense to
increase due to additional convertible notes issued in June 2009 for
approximately $305,000.  Interest on the Notes compounds monthly at
the annual rate of five percent (5%).  The June 2009 Notes mature on
May 27, 2010.  The outstanding principal amount on the June 2009 Notes
as of September 30, 2009 approximates $305,000.  The January 2008
Notes mature on January 11, 2013.  The outstanding principal amount of
the January 2008 Notes as of September 30, 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 September 30, 2009, $304,000
of our operating loss from Jinan Broadband was allocated to Jinan Parent, as
compared to $69,000 during the third quarter of 2008.





50% of the operating profit and loss of
our Shandong Media joint venture is allocated to our 50% Shandong Newspaper
joint venture partner.  During the three months ended September 30,
2009, $31,000 of our operating profit from Shandong Media was allocated to
Shandong Newspaper, as compared to $12,000 of our operating loss during the
third quarter of 2008.


4
 TABLE OF CONTENTS


Net
Loss Attributable to Shareholders





Net loss
attributable to shareholders for the three months ended September 30, 2009 was
$983,000 as compared to $547,000 for the 2008 period, an increase of $436,000,
or 80%.





The following table breaks down the
results of operations for the three months ended September 30, 2009 and 2008
between our operating companies and our non-operating
companies.





Ø
            The
      operating companies include Jinan Broadband, Shandong Media and AdNet
      Media.


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





3
      Months Ended
                        
                        
                        3
      Months EndedSeptember
      30, 2009
                        
                        
                        September
      30, 2008% of
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        % ofTotal
                        
                        
                        Non-
                        
                        
                        
                        
                        
                        
                        
                        
                        Total
                        
                        
                        Non-Operating
                        
                        
                        Revenue
                        
                        
                        Operating
                        
                        
                        Total
                        
                        
                        Operating
                        
                        
                        Revenue
                        
                        
                        Operating
                        
                        
                        TotalRevenue
                        
                        $
                        2,106,000
                        
                        
                        
                        
                        
                        $
                        -
                        
                        
                        $
                        2,106,000
                        
                        
                        $
                        1,881,000
                        
                        
                        
                        
                        
                        $
                        -
                        
                        
                        $
                        1,881,000Cost
      of revenue
                        
                        
                        1,541,000
                        
                        
                        
                        
                        
                        
                        -
                        
                        
                        
                        1,541,000
                        
                        
                        
                        949,000
                        
                        
                        
                        
                        
                        
                        -
                        
                        
                        
                        949,000Gross
      profit
                        
                        
                        565,000
                        
                        
                        
                        27
                        %
                        
                        
                        -
                        
                        
                        
                        565,000
                        
                        
                        
                        932,000
                        
                        
                        
                        50
                        %
                        
                        
                        -
                        
                        
                        
                        932,000Selling,
      general and adminstrative expenses
                        
                        
                        579,000
                        
                        
                        
                        27
                        %
                        
                        
                        221,000
                        
                        
                        
                        800,000
                        
                        
                        
                        381,000
                        
                        
                        
                        20
                        %
                        
                        
                        201,000
                        
                        
                        
                        582,000Professional
      fees
                        
                        
                        23,000
                        
                        
                        
                        1
                        %
                        
                        
                        132,000
                        
                        
                        
                        155,000
                        
                        
                        
                        9,000
                        
                        
                        
                        0
                        %
                        
                        
                        133,000
                        
                        
                        
                        142,000Depreciation
      and amortization
                        
                        
                        772,000
                        
                        
                        
                        37
                        %
                        
                        
                        82,000
                        
                        
                        
                        854,000
                        
                        
                        
                        720,000
                        
                        
                        
                        38
                        %
                        
                        
                        49,000
                        
                        
                        
                        769,000Loss
      from operations
                        
                        
                        (809,000
                        )
                        
                        
                        
                        
                        
                        
                        (435,000
                        )
                        
                        
                        (1,244,000
                        )
                        
                        
                        (178,000
                        )
                        
                        
                        -9
                        %
                        
                        
                        (383,000
                        )
                        
                        
                        (561,000
                        )Interest
      & other income / (expense)Interest
      income
                        
                        
                        1,000
                        
                        
                        
                        
                        
                        
                        
                        -
                        
                        
                        
                        1,000
                        
                        
                        
                        15,000
                        
                        
                        
                        
                        
                        
                        
                        1,000
                        
                        
                        
                        16,000Interest
      expense
                        
                        
                        -
                        
                        
                        
                        
                        
                        
                        
                        (93,000
                        )
                        
                        
                        (93,000
                        )
                        
                        
                        -
                        
                        
                        
                        
                        
                        
                        
                        (89,000
                        )
                        
                        
                        (89,000
                        )Gain
      on sale of securities
                        
                        
                        -
                        
                        
                        
                        
                        
                        
                        
                        16,000
                        
                        
                        
                        16,000
                        
                        
                        
                        -
                        
                        
                        
                        
                        
                        
                        
                        -
                        
                        
                        
                        -Other
                        
                        
                        (13,000
                        )
                        
                        
                        
                        
                        
                        
                        -
                        
                        
                        
                        (13,000
                        )
                        
                        
                        -
                        
                        
                        
                        
                        
                        
                        
                        -
                        
                        
                        
                        -Loss
      before income tax
                        
                        
                        (821,000
                        )
                        
                        
                        
                        
                        
                        
                        (512,000
                        )
                        
                        
                        (1,333,000
                        )
                        
                        
                        (163,000
                        )
                        
                        
                        
                        
                        
                        
                        (471,000
                        )
                        
                        
                        (634,000
                        )Income
      tax benefit
                        
                        
                        -
                        
                        
                        
                        
                        
                        
                        
                        15,000
                        
                        
                        
                        15,000
                        
                        
                        
                        -
                        
                        
                        
                        
                        
                        
                        
                        6,000
                        
                        
                        
                        6,000Net
      loss
                        
                        
                        (821,000
                        )
                        
                        
                        
                        
                        
                        
                        (497,000
                        )
                        
                        
                        (1,318,000
                        )
                        
                        
                        (163,000
                        )
                        
                        
                        
                        
                        
                        
                        (465,000
                        )
                        
                        
                        (628,000
                        )Net
      loss attributable to noncontrolling interest
                        
                        
                        (335,000
                        )
                        
                        
                        
                        
                        
                        
                        -
                        
                        
                        
                        (335,000
                        )
                        
                        
                        (81,000
                        )
                        
                        
                        
                        
                        
                        
                        -
                        
                        
                        
                        (81,000
                        )Net
      loss attributable to shareholders
                        
                        $
                        (486,000
                        )
                        
                        
                        
                        
                        
                        $
                        (497,000
                        )
                        
                        $
                        (983,000
                        )
                        
                        $
                        (82,000
                        )
                        
                        
                        
                        
                        
                        $
                        (465,000
                        )
                        
                        $
                        (547,000
                        )





Comparison of Nine Months
Ended September 30, 2009 and 2008





Revenues





Our
revenues are generated by our operating companies in the PRC.  Our
revenues for the nine months ended September 30, 2009 include revenues primarily
from our Jinan Broadband and Shandong Media companies while the revenues for the
nine months ended September 30, 2008 includes revenues from Jinan Broadband and
from Shandong Media from July 1, 2008.





Revenues for the nine months ended
September 30, 2009 totaled $6,045,000, as compared to $3,937,000 for the nine
months ended September 30, 2008.  The increase in revenue of
approximately $2,108,000, or 54% is primarily attributable to including a full
nine months of revenues from our Shandong Media joint venture while the 2008
period includes only three months of operating results.





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 $3,393,000, an increase of $175,000, or 6% as compared to
revenues of $3,218,000 for the nine months ended 2008. The increase is
attributable to increases in our network leasing sales and value-added
services.





Shandong
Media’s revenue consists primarily of sales of publications and advertising
revenues.  For the nine months ended September 30, 2009, revenues from
the Shandong Media joint venture totaled $2,648,000.  By comparison,
Shandong Media’s revenues of $719,000 for the nine months ended 2008 only
include three months operating results.  (For a description of the
Shandong Media joint venture, see “Shandong
Media Joint Venture andShandong
Newspaper Cooperation Agreement”,
below).




5
 TABLE OF CONTENTS


AdNet
Media is an early stage company that started operations during the first quarter
of 2009.  AdNet Media’s revenue is expected to consist primarily of
advertising revenue and video service fees.  Advertising revenues will
be generated from advertisers who participate in an ad platform developed by
AdNet which is accessed through internet cafés.  Video service fees
are expected to be generated from the internet café or agent who uses our online
video services which includes movies, music, videos and games.  For
the nine months ended September 30, 2009, revenues totaled
$5,000.  AdNet Media’s revenues were not included in our operating
results for the 2008 period.   (For a description of the AdNet
Media acquisition, see “Completion of Acquisition of
AdNet”, above).





Gross
Profit





Our gross profit for the nine months
ended September 30, 2009 was $2,227,000, as compared to $2,092,000 for the nine
months ended September 30, 2008.The increase in
gross profit of approximately $135,000, or 6%, is primarily comprised of
$513,000 decrease from our Jinan Broadband operations offset by $664,000
increase from a 9 month inclusion for 2009 compared to a 3 month inclusion for
2008 of our Shandong Media joint venture.  The decrease in gross
profit attributable to Jinan Broadband was primarily due to increased costs of
revenue, particularly costs of cable network connections costs, telecom
bandwidth costs and charges associated with the write down of switches and other
consumer related parts held in inventory.





Gross profit as a percentage of revenue
was 37% for the nine months ended September 30, 2009, as compared to 53% for the
nine months ended September 30, 2008.


.


Selling,
General and Administrative Expenses





Our
selling, general and administrative expenses for the nine months ended September
30, 2009 increased approximately $867,000 to $2,259,000, as compared to
$1,392,000 for the nine months ended September 30, 2008.  The increase
is primarily attributable to the inclusion of nine months for 2009 compared to
three months for 2008 of our Shandong Media joint venture entered into in mid
2008 and the inclusion of our AdNet Media acquisition in April
2009.





Salaries and personnel costs are the
major component of selling, general and administrative expenses.  For
the nine months ended September 30, 2009, salaries and personnel costs accounted
for 58% of our selling, general and administrative expenses.  During
the 2009 period, salaries and personnel costs totaled $1,311,000, an increase of
$507,000 or 63% as compared to $803,000 for 2008 period. The increase in
salaries and personnel costs is primarily attributable to the inclusion of our
Shandong Media joint venture entered into in mid 2008 and the inclusion of our
AdNet Media acquisition in April 2009.





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





Professional
Fees





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
                  
                  
                  2008Depreciation
                  
                  $
                  2,281,000
                  
                  
                  $
                  2,067,000Amortization
                  
                  
                  246,000
                  
                  
                  
                  143,000Total
                  
                  $
                  2,527,000
                  
                  
                  $
                  2,210,000





Depreciation expense during 2009
relates to the depreciation on the approximately $14.7 million of property,
plant and equipment, at our Jinan Broadband subsidiary.  The increase
in amortization of $103,000 is primarily attributable to the amortization
related to our Shandong Media intangible assets acquired in 2008.





Interest
Expense





Interest
expense of $270,000 for the nine months ending September 30, 2009 relates to the
5% Convertible Notes and Warrants issued in January 2008 and June
2009.  For the 2008 period, interest expense was $257,000. Interest
expense includes amortization of the original issued discount on the notes
allocated to the warrants issued in the financing.





We expect our interest expense to
increase due to additional convertible notes issued in June 2009 in the amount
of approximately $305,000.  Interest on the Notes compounds monthly at
the annual rate of five percent (5%).  The January 2008 Notes mature
on January 11, 2013.  The outstanding principal amount of the January
2008 Notes as of September 30, 2009 was $4,971,250.  The June 2009
Notes mature on May 27, 2010.  The outstanding principal amount on the
June 2009 Notes as of September 30, 2009 is approximately
$305,000.


6
 TABLE OF CONTENTS





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 nine months ended September 30, 2009, $670,000
of our operating loss from Jinan Broadband was allocated to Jinan Parent, as
compared to $356,000 during the 2008 period.





50% of the operating loss of our
Shandong Media joint venture is allocated to our 50% Shandong Newspaper joint
venture partner.  During the nine months ended September 30, 2009,
$49,000 of our operating loss from Shandong Media was allocated to Shandong
Newspaper as compared to $12,000 during the 2008 period which only included
three months.  We consolidated the results of Shandong Media effective
July 1, 2008.





Net
Income (Loss) Attributable to Shareholders





Net loss
attributable to shareholders for the nine months ended September 30, 2009 was
$2,542,000, an increase of $2,053,000 as compared to the net loss attributable
to shareholders of $489,000 for the 2008 period.  Operating results
for 2008 included a one-time net gain recognition of $1,301,000 from a
settlement agreement.





The following table breaks down the
results of operations for the nine months ended September 30, 2009 and 2008
between our operating companies and our non-operating
companies.





Ø
            The
      operating companies include Jinan Broadband, Shandong Media and AdNet
      Media.


Ø
            2009
      includes nine months of operations from our Shandong Media company and six
      months of operations from our AdNet Media company as compared to 3 months
      of operations and no operations, respectively in
  2008.





9
      Months Ended
                          
                          
                          9
      Months EndedSeptember
      30, 2009
                          
                          
                          September
      30, 2008% of
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          % ofTotal
                          
                          
                          Non-
                          
                          
                          
                          
                          
                          
                          
                          
                          Total
                          
                          
                          Non-Operating
                          
                          
                          Revenue
                          
                          
                          Operating
                          
                          
                          Total
                          
                          
                          Operating
                          
                          
                          Revenue
                          
                          
                          Operating
                          
                          
                          TotalRevenue
                          
                          $
                          6,045,000
                          
                          
                          
                          
                          
                          $
                          -
                          
                          
                          $
                          6,045,000
                          
                          
                          $
                          3,937,000
                          
                          
                          
                          
                          
                          $
                          -
                          
                          
                          $
                          3,937,000Cost
      of revenue
                          
                          
                          3,817,000
                          
                          
                          
                          
                          
                          
                          -
                          
                          
                          
                          3,817,000
                          
                          
                          
                          1,845,000
                          
                          
                          
                          
                          
                          
                          -
                          
                          
                          
                          1,845,000Gross
      profit
                          
                          
                          2,228,000
                          
                          
                          
                          37
                          %
                          
                          
                          -
                          
                          
                          
                          2,228,000
                          
                          
                          
                          2,092,000
                          
                          
                          
                          53
                          %
                          
                          
                          -
                          
                          
                          
                          2,092,000Selling,
      general and adminstrative expenses
                          
                          
                          1,635,000
                          
                          
                          
                          27
                          %
                          
                          
                          624,000
                          
                          
                          
                          2,259,000
                          
                          
                          
                          779,000
                          
                          
                          
                          20
                          %
                          
                          
                          615,000
                          
                          
                          
                          1,394,000Professional
      fees
                          
                          
                          38,000
                          
                          
                          
                          1
                          %
                          
                          
                          416,000
                          
                          
                          
                          454,000
                          
                          
                          
                          12,000
                          
                          
                          
                          0
                          %
                          
                          
                          435,000
                          
                          
                          
                          447,000Depreciation
      and amortization
                          
                          
                          2,283,000
                          
                          
                          
                          38
                          %
                          
                          
                          245,000
                          
                          
                          
                          2,528,000
                          
                          
                          
                          2,068,000
                          
                          
                          
                          53
                          %
                          
                          
                          143,000
                          
                          
                          
                          2,211,000Loss
      from operations
                          
                          
                          (1,728,000
                          )
                          
                          -29
                          %
                          
                          
                          (1,285,000
                          )
                          
                          
                          (3,013,000
                          )
                          
                          
                          (767,000
                          )
                          
                          
                          -19
                          %
                          
                          
                          (1,193,000
                          )
                          
                          
                          (1,960,000
                          )Interest
      & other income / (expense)Settlement
      gain
                          
                          
                          -
                          
                          
                          
                          
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          
                          
                          
                          
                          1,301,000
                          
                          
                          
                          1,301,000Interest
      income
                          
                          
                          6,000
                          
                          
                          
                          
                          
                          
                          
                          -
                          
                          
                          
                          6,000
                          
                          
                          
                          19,000
                          
                          
                          
                          
                          
                          
                          
                          17,000
                          
                          
                          
                          36,000Interest
      expense
                          
                          
                          (1,000
                          )
                          
                          
                          
                          
                          
                          
                          (269,000
                          )
                          
                          
                          (270,000
                          )
                          
                          
                          -
                          
                          
                          
                          
                          
                          
                          
                          (256,000
                          )
                          
                          
                          (256,000
                          )(Loss)
      gain on sale of securities
                          
                          
                          -
                          
                          
                          
                          
                          
                          
                          
                          (15,000
                          )
                          
                          
                          (15,000
                          )
                          
                          
                          -
                          
                          
                          
                          
                          
                          
                          
                          17,000
                          
                          
                          
                          17,000Other
                          
                          
                          (13,000
                          )
                          
                          
                          
                          
                          
                          
                          -
                          
                          
                          
                          (13,000
                          )
                          
                          
                          (3,000
                          )
                          
                          
                          
                          
                          
                          
                          (10,000
                          )
                          
                          
                          (13,000
                          )Loss
      before income tax
                          
                          
                          (1,736,000
                          )
                          
                          
                          
                          
                          
                          
                          (1,569,000
                          )
                          
                          
                          (3,305,000
                          )
                          
                          
                          (751,000
                          )
                          
                          
                          
                          
                          
                          
                          (124,000
                          )
                          
                          
                          (875,000
                          )Income
      tax benefit
                          
                          
                          -
                          
                          
                          
                          
                          
                          
                          
                          44,000
                          
                          
                          
                          44,000
                          
                          
                          
                          -
                          
                          
                          
                          
                          
                          
                          
                          19,000
                          
                          
                          
                          19,000Net
      loss
                          
                          
                          (1,736,000
                          )
                          
                          
                          
                          
                          
                          
                          (1,525,000
                          )
                          
                          
                          (3,261,000
                          )
                          
                          
                          (751,000
                          )
                          
                          
                          
                          
                          
                          
                          (105,000
                          )
                          
                          
                          (856,000
                          )Net
      loss attributable to noncontrolling interest
                          
                          
                          (719,000
                          )
                          
                          
                          
                          
                          
                          
                          -
                          
                          
                          
                          (719,000
                          )
                          
                          
                          (368,000
                          )
                          
                          
                          
                          
                          
                          
                          -
                          
                          
                          
                          (368,000
                          )Net
      loss attributable to shareholders
                          
                          $
                          (1,017,000
                          )
                          
                          
                          
                          
                          
                          $
                          (1,525,000
                          )
                          
                          $
                          (2,542,000
                          )
                          
                          $
                          (383,000
                          )
                          
                          
                          
                          
                          
                          $
                          (105,000
                          )
                          
                          $
                          (488,000
                          )





Liquidity
and Capital Resources





As of September 30, 2009 we had
$1,941,000 of cash on hand and a working capital deficit of
$1,534,000.  As of September 30, 2009, we had total current
liabilities of $5,592,000.  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).


7
 TABLE OF CONTENTS





Private
Financings, June 2009





During
the nine months ended September 30, 2009 we completed (i) a private financing of
5% Convertible Promissory Notes (the “Notes”) for gross proceeds of
approximately $305,000 (the “Note Offering”) and (ii) a private financing of
2,000,000 shares of restricted Common Stock, par value $.001 of the Company (the
“Common Stock”), at a purchase price of $.15 per share, for aggregate proceeds
of $300,000 (the “Equity Financing”).
  The Notes
accrue interest at 5% per year payable quarterly in cash or stock, are initially
convertible at $.20 per share, and become due and payable in full on May 27,
2010.  The Company did not pay any placement agent or similar fees in
connection with the Note Offering or the Equity Financing.




Waiver
Letters





In
connection with the Note Offering and the Equity Financing, the Company entered
into a waiver letter (the “Waiver Letter”) with all the holders of January 2008
Notes (“Existing Note Holders”), pursuant to which, among other things, the
conversion price of the January 2008 Notes were reduced from $.75 per share to
(i) $.20 per share (i.e. the same conversion price as the Notes in the Note
Offering) for the Existing Note Holders that invested in the Notes (i.e. the
Note Investors), and (ii) $.25 per share for those Existing Note Holders that
did not reinvest in the new notes.  All of the Existing Note Holders
waived certain anti dilution adjustments in respect of the contemplated Equity
Financing or in respect of their Warrants which were issued to them in
connection with the January 2008 Notes, which warrants remain exercisable at
$.60 per share.




The
foregoing are summaries only of the Note Offering, Waiver Letters and Equity
Financing which are filed as exhibits to our Current Report on Form 8-K,dated
June 30, 2009, the provisions of which are incorporated herein.





Loan
Receivable








Amounts
due from Shareholders





Amounts due from shareholders include
$91,000 from Shandong Broadcast & TV Weekly Press and $543,000 from Modern
Movie & TV Biweekly Press as of September 30, 2009.  Both
companies are our partners in our Shandong Media joint venture
company.  The amount due from Shandong Broadcast & TV Weekly Press
is unsecured, interest free and has no fixed repayment terms.  The
amount due from Modern Movie & TV Biweekly Press is unsecured, interest free
and the due date for repayment has been extended from June 30, 2009 to December
31, 2009.  During the period ended September 30, 2009 the company
advanced approximately $553,000 to the shareholders.


8
 TABLE OF CONTENTS





Payable
to Jinan Parent





During the nine months ended September
30, 2009, Jinan Broadband paid $2,643,000 to Jinan Parent.  The
current balance due is $152,000.  The advance is unsecured, interest
free and has no fixed repayment terms.





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.





Convertible
Notes Interest





During the nine months ended September
30, 2009 the Company incurred $269,000 in interest expense related to
the January 2008 and June 2009 financings.  Based on conversion
values the Company issued 592,577 shares to the Note holders in lieu of cash of
approximately $194,000 for interest accrued.





Cablecom
Holding Shares





In April
2008 and in connection with a settlement agreement, we received 390,000 shares
of Cablecom Holdings, Ltd. (the “Cablecom Holdings Shares”) from Mr. Clive Ng,
the Chairman of our board of directors, 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 nine months ended September
30, 2009, we sold 236,665 of the Cablecom Holdings shares for total net proceeds
of $175,000 and recorded a net loss on the sales of approximately
$15,000.  As of September 30, 2009, we hold 81,455 shares of Cablecom
Holdings.  The fair value of the remaining 81,455 Cablecom shares at
September 30, 2009 approximates $68,000.




Cash
Flows





The
following sets forth a summary of the Company’s cash flows for the nine months
ended September 30, 2009 and 2008:





Nine Months EndedSeptember
      30,
                  
                  
                  September
      30,2009
                  
                  
                  2008Net
      cash provided by operating activities
                  
                  $
                  442,000
                  
                  
                  $
                  664,000Net
      cash used in investing activities
                  
                  $
                  (916,000
                  )
                  
                  $
                  (1,469,000
                  )Net cash (used in) provided by financing
      activities
                  
                  $
                  (2,038,000
                  )
                  
                  $
                  4,986,000Effect
      of exchange rate changes on cash
                  
                  $
                  28,000
                  
                  
                  $
                  478,000





Cash provided by operating activities
for nine months ended 2009 and 2008 approximate $442,000 and $664,000,
respectively.





Investing activities for the nine
months ended September 30, 2009 and 2008 used cash of $916,000 and $1,469,000,
respectively.  For 2009, this amount consisted of (i) cash acquired in
our AdNet acquisition of $18,000 and (ii) proceeds of $174,000 from the sale of
our Cablecom Holding Shares, offset by (i) $555,000 for additions to property
and equipment and (ii) $553,000 loan to our Shandong Media
shareholder.  For 2008 this amount consisted of additions to property
and equipment in the amount of $1,567,000 and $242,000 loan to our Shandong
Media shareholder partially offset by the proceeds from the sale of Cablecom
Holding Shares in the amount of $340,000.




Financing activities for the nine
months ended September 30, 2009 and 2008 (used) provided cash of $(2,038,000)
and $4,986,000, respectively.  For 2009, the amount consisted of
proceeds from the sale of equity securities of $300,000 and proceeds from the
issuance of convertible notes of $305,000 offset by payment to Jinan Parent of
$2,643,000.  For 2008, this amount consisted of proceeds from the
issuance of convertible notes of $4,850,000, 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 $241,000.





Foreign
Currency Translation





Our WOFE,
Jinan Broadband subsidiary, Shandong Media joint venture and our AdNet Media
acquisition 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 $28,000 and $478,000
during the nine months ended September 30, 2009 and 2008,
respectively.


9
 TABLE OF CONTENTS


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.




We are required to make an additional
payment 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 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 year after closing of the transaction
relating to the Shandong Newspaper Cooperation Agreement:




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




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




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


Based on
financial performance we will be required to make the additional minimum payment
of 5 million RMB (approximately US $730,000).  The due date of the
additional payment has been extended to December 31, 2009.
  The
Shandong Newspaper Cooperation Agreement resulted in the creation of a Variable
Interest Entity (“VIE”) as defined under Financial Accounting Standards Board
(“FASB”) ASC 810, Consolidation.  The
intended result of the contractual arrangements is that, as of July 1, 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 is required to make further capital contributions
based upon 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 nor fund the required
contribution to Shandong Newspaper 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.





10
 TABLE OF CONTENTS




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 and Assumptions





There
have been no material changes to the Company’s Critical Accounting Policies
filed in the Company’s 2008 Annual Report on Form 10-K/A.





Recent
Accounting Pronouncements




Refer to
Note 16 to the financial statements for updates on recent accounting
pronouncements since the filing of our 2008 annual report on Form
10-K/A





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 4T. 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 September 30, 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 period
ended September 30, 2009 that have materially affected or are reasonably likely
to materially affect the Company’s internal controls over financial
reporting.


11
 TABLE OF CONTENTS




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.





Other
than increased risk of dilution as a result of the recent Note offering and
Waiver Letters, and general market illiquidity resulting from the economic
slowdown (as discussed above) 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.





None.




Item 3. Defaults Upon Senior Securities.





None.





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




None.




Item 5. Other Information.




None.





Item 6.
Exhibits.




EXHIBIT
INDEX




Exhibit
      No.
            
            Description31.1
            
            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.


12
 TABLE OF CONTENTS




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 November 23, 2009.





CHINA
      BROADBAND, INCBy:
                /s/ Marc UrbachName:
      Marc UrbachTitle: President (Principal
      Executive Officer)By:
                /s/ Yue PuName:
      Yue PuTitle:
      Vice Chairman (Principal Accounting Officer, Principal
                  Financial
      Officer)


13