U.S. SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2009 [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from ______________________ to ______________________ Commission File No. 333-134991 BAOSHINN CORPORATION(Exact name of small business issuer as specified in its charter) Nevada20-3486523(State or other jurisdiction of incorporation or formation)(I.R.S. employer identification number)  A-B 8/F Hart Avenue Tsimshatsui Kowloon, Hong Kong  N/A (Address of principal executive offices) (Zip Code) Registrant's telephone number: (852) 2815-1355_______________________________________________ Securities registered under Section 12(b) of the Exchange Act: None.  Securities registered under Section 12(g) of the Exchange Act: Common Stock, $.001 par value per share (Title of Class)  Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X] State the number of shares outstanding of each of the issuer's classes of common equity, as of September 30, 2008: 21,400,000 shares of common stock. Transitional Small Business Disclosure Format (check one):  Yes [ ] No [X]


BAOSHINN CORPORATION
UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS INDEX  PART I  FINANCIAL INFORMATION:  Item 1. Financial Statements (Unaudited) 3  Condensed Consolidated Statement of Operations (unaudited) for the three months ended March 31, 2009 and March 31, 2008 5  Unaudited Condensed Consolidated Statement of Financial Position at March 31, 2009 and December 31, 2008 6  Consolidated Statement of Cash Flows for the three months ended March 31, 2009 and March 31, 2008 7  Notes to Consolidated Interim Financial Statements 8-25  Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 26  Item 3. Quantitative and Qualitative Disclosure About Market Risks 34  Item 4T. Controls and Procedures 34  PART II  OTHER INFORMATION:  Item 1. Legal Proceedings 35  Item 1A. Risk Factors 35  Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 35  Item 3. Defaults Upon Senior Securities 35  Item 4. Submission of Matters to a Vote of Security 35  Item 5. Other Information 35  Item 6. Exhibits 36  Signatures 36  2


PART I  FINANCIAL INFORMATION Item 1. Financial Statements       Baoshinn Corporation Unaudited Condensed Consolidated Financial Statements For the Three Months Ended March 31, 2009 and 2008 (Stated in US Dollars)             3


These financial statements have been prepared by Baoshinn Corporation (the Company) without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed and omitted in accordance with such SEC rules and regulations. In the opinion of management, the accompanying statements contain all adjustments necessary to present fairly the financial position of the Company as of March 31, 2009, and its results of operations, stockholders equity, and its cash flows for the three months ended March 31, 2009. The results for these interim periods are not necessarily indicative of the results for the entire year. It is suggested that the accompanying financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the companys Annual Report on Form 10-K.


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BAOSHINN CORPORATION UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Stated in US Dollars)     Three Months ended March 31,20092008$$Retail and Corporate revenue6,320,5218,755,141Commission from travel booking services70,33920,233Incentive commissions64,706104,060Net sales6,455,5668,879,434Cost of sales(6,125,888)(8,530,701)Gross profit329,678348,733Other operating income  Note 512,50416,080Depreciation(7,403)(11,349)Administrative and other operating expenses(334,850)(506,542)Loss from operations(71)(153,078)Other non-operating income - Note 66446,021Interest expenses  Note 7(58)(369)Profit/(Loss) before taxes515(147,426)Income taxes - Note 8--Net profit/(loss)515(147,426)Non-controlling interest901-Net profit/(loss) attributable to the Company1,416(147,426)Earnings per share of common stock  Note 4- Basic0.01 cents(0.65)cents- Diluted0.01 cents(0.65)centsWeighted average number of common stock  Note 4- Basic21,400,00022,650,000- Diluted21,400,00022,650,000      See notes to consolidated financial statements


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BAOSHINN CORPORATION UNAUDITED CONDENSED CONSOLIDATED FINANCIAL POSITION (Stated in US Dollars)  At Mar 31,At Dec 3120092008audited$$ASSETSCurrent AssetsCash and cash equivalents107,367217,453Accounts receivable1,423,485900,629Amount due from a related party  Note 12-10,691Deposits, prepaid expenses and other
receivables  Note 91,046,248940,238Total Current Assets2,577,1002,069,011Plant and equipment  Note 1072,68880,091TOTAL ASSETS2,649,7882,149,102LIABILITIES AND STOCKHOLDERS EQUITYLIABILITIESCurrent LiabilitiesAccounts payable1,530,6051,103,390Other payables and accrued liabilities  Note 11352,394276,601Amounts due to related parties  Note 12-2,838Total Current Liabilities1,882,9991,382,829TOTAL LIABILITIES1,882,9991,382,829COMMITMENTS AND CONTINGENCIES  Note 16STOCKHOLDERS EQUITYCommon stockPar value : 2009  US$0.001Authorized: 2009  200,000,000 sharesIssued and outstanding: 2009  21,400,000 shares21,40021,400Additional paid-in capital1,766,7631,766,763Accumulated other comprehensive income4,4484,448Accumulated deficit(1,196,914)(1,198,331)TOTAL STOCKHOLDERS EQUITY OF THE COMPANY595,697594,280NON-CONTROLLING INTERESTS171,092171,993TOTAL STOCKHOLDERS EQUITY766,789766,273TOTAL LIABILITIES AND STOCKHOLDERS EQUITY2,649,7882,149,102 See notes to condensed consolidated financial statement


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BAOSHINN CORPORATION  UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Stated in US Dollars)   Three months ended March 31,20092008$$Cash flows from operating activitiesNet profit/(loss)515(147,426)Adjustments to reconcile net loss to net cash flowsprovided by operating activities :Depreciation7,40214,855Stock based compensation-22,800Changes in operating assets and liabilities :Accounts receivable(522,856)(132,633)Deposits, prepaid expenses and other receivables(106,011)110,575Accounts payable427,215215,387Other payables and accrued liabilities75,79370,586Net cash flows (used in)/provided by operating activities(117,942)154,144Cash flows from investing activityAcquisition of plant and equipment-(6,046)Net cash flows used in investing activity-(6,046)Cash flows from financing activitiesAmounts due from related parties10,691(3,596)Amounts due to related parties(2,838)(102,585)Net cash flows provided by/(used in) financing activities7,853(106,181)Net (decrease)/increase in cash and cash equivalents(110,089)41,917Effect of foreign currency translation on cash and cash equivalents31,325Cash and cash equivalents - beginning of period217,453220,116Cash and cash equivalents - end of period107,367243,358Supplemental disclosures for cash flow information :Cash paid for :Interest58369Income taxes--          See notes to condensed consolidated financial statement


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BAOSHINN CORPORATION  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Stated in US Dollars)  1. Corporation information Baoshinn Corporation (the Company) was incorporated under the laws of the State of Nevada on September 9, 2005, under the name of JML Holdings, Inc.  The Company was formed as a "blind pool" or "blank check" company whose business plan was to seek to acquire a business opportunity through completion of a merger, exchange of stock, or other similar type of transaction.  During the fiscal year ended March 31, 2006, the Company issued 5,000,000 restricted common shares at $0.01 per share for total cash consideration of $50,000.  On March 31, 2006, the Company consummated a merger (the merger) with Bao Shinn International Express Limited (BSIE), a privately-held Hong Kong corporation, by issuing 16,500,000 shares in the share exchange transaction for 100% of the issued and outstanding shares of BSIE common stock.  As a result of the share exchange transaction, BSIE became our wholly-owned subsidiary. During the year ended March 31, 2008, the Company issued 2,400,000 restricted common shares of $0.001 per share at a value of $0.3 per share with a net proceeds of approximately $624,000 and redeemed 2,500,000 restricted common shares and these shares are classified as not issued and outstanding. The former stockholders of BSIE acquired 76.74% of the Companys issued and outstanding common stock as a result of completion of the share exchange transaction.  Therefore, although BSIE became the Companys wholly-owned subsidiary, the transaction was accounted for as a recapitalization of the Company, whereby BSIE is deemed to be the accounting acquirer and is deemed to have adopted the Companys capital structure.  Since the Merger was accounted for as a reverse acquisition, the accompanying consolidated financial statements reflect the historical financial statements of BSIE, the accounting acquirer, as adjusted for the effects of the exchange of shares on its equity accounts, the inclusion of net liabilities of the accounting subsidiary as of the date of the merger on their historical basis and the inclusion of the accounting subsidiarys results of operations from that date. Although the Company is the legal acquirer, BSIE will be treated as having acquired the Company for accounting purposes and all of the operations reported represent the historical financial statements of BSIE. On February 20, 2008, BSIE incorporated a wholly owned subsidiary, Bao Shinn (China) Express Limited (BSCE) of 1,000,000 ordinary shares at $0.128 per share. On July 16, 2008,Bao Shinn Holidays Limited (BSHL) was incorporated with 3,000,000 ordinary shares issued and paid at $0.128 per share.BSIE owns 55% of BSHL.


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BAOSHINN CORPORATION  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Stated in US Dollars)   2. Description of business (Continued)  Bao Shinn International Express Limited (BSIE), a wholly owned subsidiary of the Company, offers extended travel services primarily focused on wholesale businesses and corporate clients. BSIE is a ticket consolidator of major international airlines including Thai Airways, Eva Airways, Dragon Air, Air China, China Southern Airlines and China Eastern Airlines that provides travel services such as ticketing, hotel and accommodation arrangements, tour packages, incentive tours and group sightseeing services.  However, the Group relies on the shareholder, Bao Shinn Express Company Limited, which is the member of International Air Transport Association to supply air tickets and tour packages from different airlines companies.  BSCE offered extended travel services primarily focused on wholesale businesses and corporate clients in the Mainland China. Due to changing market conditions and economic environment, BSCE has ceased operation on December 31, 2008 and applied for deregistration.  BSHL offers extended travel services primarily focused on corporate client in Hong Kong and the Mainland China.   3. Going concern  These financial statements have been prepared in accordance with generally accepted principles in the United States applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Group has generated recurring losses resulting in an accumulated deficit. The Group requires additional funds to maintain its operations.  Management has reviewed its operations for the past few years and the current travel industry market conditions. Based on the review the Group plans to take the following actions to improve its performance and to continue as a going concern.  Staff Redundancy  - The Group plans to flatten our organization structure by cutting senior management staff reducing staff redundancy and decentralizing its operations. Meanwhile, supporting and administration staff has also been cut to keep our back office costs down. The Companys total staff was reduced from 48 in May 2008 (highest) to 38 in September 2008. In September 2008, 5 of the 38 staff are non-operational staff (management and back office), the remaining 33 are operational, plus the sales and marketing staff. In comparison to May, 2008, nine (9) of the 48 staff were non-operational staff and 39 were operational, plus the sales and marketing staff.  - As a result of staff cuts, the Company has been able downsize its office space. Office rental has been decreased from $11,860 per month to $7,976 in September 2008, representing a 32.7% decrease in office rental.


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BAOSHINN CORPORATION  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Stated in US Dollars)   3. Going concern (Continued)  Operations decentralized  - Effective from September, 2008, management decided to decentralize operations in its main wholesale business division and corporate division. Business decisions will be made on a lower level within the business division instead of through a senior management team. Management expects the decentralization will improve flexibility and speed up the Companys response time to market changes. Each business division head will have more discretion to make business decisions, and at the same time each division head will be more accountable for their performance.  - With the senior management teams functions being shifted to lower organization levels, the Companys management fee has also been decreased significantly. The Company decreased its monthly management fee from $11,538 in April 2008 (highest) to $3,205 in September 2008.  Business Strategy  - As a result of increased fuel prices, airlines have become increasingly competitive in Hong Kong. Hong Kong is an international hub for long haul flights as well as short distance destinations. Popular travel destinations are becoming less profitable, because more airlines are competing for the same route. The Company, as a travel agency, is dependent on airline commissions and market conditions for ticket prices. The more competition, the less profit it can retain.  - The Company has reviewed the market conditions, and decided to change its strategy by dealing with new emerging airlines with new destinations. The Company has recently developed a close relationship with Hong Kong Airlines which is primarily focused on Mainland China travel destinations. As the Hong Kong Airbus travel agency, the Company has less competition and is able to maintain a more stable profit margin.  Management believes that actions presently taken to revise the Groups operating and financial requirements provide the opportunity for the Group to continue as a going concern. The Companys shareholders agreed to provide continuing financial supports to the Company in terms of a temporary loan. The agreements for continuing financial support are verbal.  4. Summary of significant accounting policies  Basis of presentation and consolidation  The accompanying consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America.  The consolidated financial statements include the accounts of the Company and its subsidiaries.  All significant inter-company accounts and transactions have been eliminated in consolidation.


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BAOSHINN CORPORATION  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Stated in US Dollars)   4. Summary of significant accounting policies (Continued)  Basis of presentation and consolidation (Continued)  The results of subsidiaries acquired or disposed of during the years are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal.  The Company also evaluates consolidation of entities under Financial Accounting Standards Board (FASB) Interpretation No.46, Consolidation of Variable Interest Entities (FIN 46). FIN 46 requires management to evaluate whether an entity or interest is a variable interest entity and whether the Company is the primary beneficiary. Consolidation is required if both of these criteria are met. The Company does not have any variable interest entities requiring consolidation.  Use of estimates  In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements, as well as the reported amounts of revenues and expenses during the reporting year.  These accounts and estimates include, but are not limited to, the valuation of accounts receivable, deferred income taxes and the estimation on useful lives of plant and equipment.  Actual results could differ from those estimates.  Concentrations of credit risk  Financial instruments that potentially subject the Group to significant concentrations of credit risk consist principally of accounts receivable.  In respect of accounts receivable, the Group extends credit based on an evaluation of the customers financial condition, generally without requiring collateral or other security.  In order to minimize the credit risk, the management of the Group has delegated a team responsibility for determination of credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts.  Further, the Group reviews the recoverable amount of each individual trade debt at each balance sheet date to ensure that adequate impairment losses are made for irrecoverable amounts.  In this regard, the directors of the Group consider that the Groups credit risk is significantly reduced.  Concentrations of supplier risk  The Group relies on Thai Airways as its major supplier of air tickets and tour packages. If this supplier became unwilling to cooperate with the Group, the Group would have to find alternative resources, which could materially affect the Groups ability to generate revenue and profitability.


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BAOSHINN CORPORATION  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Stated in US Dollars)   4. Summary of significant accounting policies (Continued)  Cash and cash equivalents  Cash and cash equivalents include all cash, deposits in banks and other highly liquid investments with initial maturities of three months or less.  Accounts receivable  Accounts receivable are stated at original amount less allowance made for doubtful receivables, if any, based on a review of all outstanding amounts at the year end.  An allowance is also made when there is objective evidence that the Group will not be able to collect all amounts due according to original terms of receivables.  Bad debts are written off when identified.  The Group extends unsecured credit to customers in the normal course of business and believes all accounts receivable in excess of the allowances for doubtful receivables to be fully collectible.  The Group does not accrue interest on trade accounts receivable.  The Group has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis credit evaluations are preferred on all customers requiring credit over a certain amount.  During the reporting period ended March 31, 2009 and 2008, the Group did not experience any bad debts and accordingly, did not make any allowance for doubtful debts.  Plant and equipment  Plant and equipment are stated at cost less accumulated depreciation.  Cost represents the purchase price of the asset and other costs incurred to bring the asset into its existing use.  Maintenance, repairs and betterments, including replacement of minor items, are charged to expense; major additions to physical properties are capitalized.  Depreciation of plant and equipment is provided using the straight-line method over their estimated useful lives at the following annual rates :-  Furniture and fixtures20%Office equipment20%  Property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of are separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated.


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BAOSHINN CORPORATION  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Stated in US Dollars)   4. Summary of significant accounting policies (Continued)  Revenue recognition  The Group recognizes revenue when it is earned and realizable based on the following criteria: persuasive evidence that an arrangement exists, services have been rendered, the price is fixed or determinable and collectibility is reasonably assured.  The Group also evaluates the presentation of revenue on a gross versus a net basis through application of Emerging Issues Task Force No. (EITF) 99-19, Reporting Revenue Gross as a Principal versus Net as an Agent. The consensus of this literature is that the presentation of revenue as the gross amount billed to a customer because it has earned revenue from the sale of goods or services or the net amount retained (that is, the amount billed to a customer less the amount paid to a supplier) because it has earned a commission or fee is a matter of judgment that depends on the relevant facts and circumstances. In making an evaluation of this issue, some of the factors that should be considered are: whether the Group is the primary obligor in the arrangement (strong indicator); whether it has general inventory risk (before customer order is placed or upon customer return) (strong indicator); and whether we have latitude in establishing price. The guidance clearly indicates that the evaluations of these factors, which at times can be contradictory, are subject to significant judgment and subjectivity. If the conclusion drawn is that the Group performs as an agent or a broker without assuming the risks and rewards of ownership of goods, revenue should be reported on a net basis.  The Group has the following three types of revenues: - Retail and corporate travel service revenues, - Referral fee for travel booking services, and - Incentive commission from travel suppliers.  Retail and corporate travel service revenues  Revenues from retail and corporate travel services are recognized when the travel service provided by the Group is completely delivered.  The Group presents revenue from such transactions on a gross basis in the consolidated statements of operations, as the Group acts as a principal, assumes inventory and credit risks, and has primary obligations to the airlines or hotels for cancelled air tickets, packaged tour products or hotel reservations.  The Group also has latitude in determining the ticket prices.  The Group changes the product by combining air ticket and hotel accommodations with local car transportation and other ancillary services to make it a holiday package or business travel solution for customers.


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BAOSHINN CORPORATION  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Stated in US Dollars)   4. Summary of significant accounting policies (Continued)  Revenue recognition(Continued)  Referral fee for travel booking services  The Group receives referral fee from travel product providers for booking travel services through the Group. The itinerary and product price are generally fixed by the travel product providers and the Group books the travel services on behalf of the customers.  Referral fees from travel booking services rendered are recognized as commissions after the services are rendered and collections are reasonably assured.  The Group presents revenues from such transactions on a net basis in the consolidated statements of operations, as the Group acts as an agent, does not assume any inventory and credit risks, has no obligations for cancelled airline or hotel ticket reservations, and does not have latitude in determining the service prices.  Incentive commission from travel suppliers  The Group earns an incentive commission from many travel suppliers. Contracts with certain travel suppliers contain discretionary escalating commissions that are paid to the Group subject to achieving specific performance targets.  Such discretionary escalating commissions are recognized on an accrual basis because such commissions are usually paid in arrears and the Group can reasonably estimate such commissions.  The Group presents revenues from such transactions on a net basis in the statements of operations, as the Group acts as an agent, does not assume any inventory risk, and has no obligations for cancelled airline ticket reservations.  Advertising expenses  Advertising expenses are charged to expense as incurred.  3 months ended March 31 2009 2008 $ $ 497 449  Income Taxes  Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.


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BAOSHINN CORPORATION  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Stated in US Dollars)  4. Summary of significant accounting policies (Continued)   Income Taxes (Continued)  In June 2006, the FASB issued FASB interpretation No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of Statement of Financial Accounting Standards No. 109 (FIN 48). FIN 48 clarifies the accounting for uncertainty in tax positions. This interpretation requires that an entity recognized in the consolidated financial statements the impact of a tax position, if that position is more likely than not of being sustained upon examination, based on the technical merits of the position. The adoption of FIN 48 did not have any impact on the Groups results of operations or financial condition for the quarter ended March 31, 2009.  As of the date of the adoption of FIN 48, the Group has no material unrecognized tax benefit which would favorably affect the effective income tax rate in future periods.  The Group has elected to classify interest and penalties related to unrecognized tax benefits, if and when required, as part of income tax expense in the consolidated statements of operations.  Comprehensive income  Other comprehensive income refers to revenues, expenses, gains and losses that under U.S. GAAP are included in comprehensive income but are excluded from net income as these amounts are recorded as a component of stockholders equity.  The Companys other comprehensive income represented foreign currency translation adjustments.  Foreign currency translation  The functional currency of the Group is Hong Kong dollars (HK$).  The Group maintains its financial statements in the functional currency.  Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at rates of exchange prevailing at the balance sheet dates.  Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchanges rates prevailing at the dates of the transaction.  Exchange gains or losses arising from foreign currency transactions are included in the determination of net income for the respective periods.


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BAOSHINN CORPORATION  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Stated in US Dollars)   4. Summary of significant accounting policies (Continued)  Foreign currency translation (Continued)  For financial reporting purposes, the financial statements of the Group which are prepared using the functional currency have been translated into United States dollars.  Assets and liabilities are translated at the exchange rates at the balance sheet dates and revenue and expenses are translated at the average exchange rates and stockholders equity is translated at historical exchange rates.  Any translation adjustments resulting are not included in determining net income but are included in foreign exchange adjustment to other comprehensive income, a component of stockholders equity.  Three months ended March 31,20092008Quarter end HK$ : US$ exchange rate7.75107.7860Average quarterly HK$ : US$ exchange rate7.75237.7951  Fair value of financial instruments  The carrying values of the Groups financial instruments, including cash and cash equivalents, trade and other receivables, deposits, trade and other payables approximate their fair values due to the short-term maturity of such instruments. The carrying amounts of borrowings approximate their fair values because the applicable interest rates approximate current market rates.  Basic and diluted earnings per share  The Company computes earnings per share (EPS) in accordance with Statement of Financial Accounting Standards No. 128, Earnings per Share (SFAS No. 128), and SEC Staff Accounting Bulletin No. 98 (SAB 98). SFAS No. 128 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as the income or loss available to common shareholders divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., convertible securities, options, and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. The calculation of diluted weighted average common shares outstanding for the quarter ended March 31, 2009 and 2008 is based on the estimate fair value of the Companys common stock during such periods applied to options using the treasury stock method to determine if they are dilutive.


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BAOSHINN CORPORATION  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Stated in US Dollars)  4. Summary of significant accounting policies (Continued) The following tables are a reconciliation of the weighted average shares used in the computation of basic and diluted earnings per share for the periods presented:  Three months ended
March 31,20092008(unaudited)(unaudited)$$Numerator for basic and diluted
earnings per share:Net profit/(loss)1,416(147,426)Denominator:Basic weighted average shares21,400,00022,650,000Effect of dilutive securities--Diluted weighted average shares121,400,00022,650,000Basic earnings/(loss) per share:0.01cents(0.65)centsDiluted earnings/(loss) per share:0.01cents(0.65)cents  1 Due to the net loss in the quarter ended March 31 of 2008, diluted shares used in the diluted EPS calculation represent basic shares for the period ended March 31 of 2008. Using actual diluted shares would result in anti-dilution. There were no anti-dilutive shares for the quarter ended March 31 2008, respectively.  Stock-Based Compensation  The Company uses the fair value method for stock-based compensation granted to employees of the Company. The fair value of stock options is determined by the Black-Scholes Option Pricing Model with assumptions for risk-free interest rates, dividend yields, volatility factors of the expected market price of the Companys common shares and an expected life of the options.  During the quarter ended March 31, 2009, the Company did not record stock-based compensation. (quarter ended March 31, 2008: $22,800)


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BAOSHINN CORPORATION  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Stated in US Dollars)   4. Summary of significant accounting policies (Continued)   Related parties transactions  A related party is generally defined as (i) any person that holds 10% or more of the Companys securities and their immediate families, (ii) the Groups management, (iii) someone that directly or indirectly controls, is controlled by or is under common control with the Group, or (iv) anyone who can significantly influence the financial and operating decisions of the Group. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties.  Recently issued accounting pronouncements  In December 2007, the FASB issued SFAS No. 141(R), Business Combinations and SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements  an amendment to ARB No. 51. SFAS No. 141(R) and SFAS No. 160 require most identifiable assets, liabilities, noncontrolling interests and goodwill acquired in a business combination to be recorded at full fair value and require noncontrolling interests (previously referred to as minority interests) to be reported as a component of equity, which changes the accounting for transactions with noncontrolling interest holders. SFAAS No. 141(R) was effective for business combinations closing after January 1, 2009. Effectively January 1, 2009, the Group adopted the provisions of SFAS No. 141(R) without a material impact to the unaudited condensed consolidated financial statements. The adoption of SFAS No. 160 did not have a material impact on the Companys unaudited consolidated financial statements other than reclassifying the non-controlling interest into equities for all periods presented.  In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities, which requires enhanced disclosures about an entitys derivative and hedging activities. This Statement is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. Since SFAS No. 161 only provides for additional disclosure requirements, management assessed that there will no impact on the results of operations and financial position. The implementation of SFAS No. 161 did not have a material impact on the unaudited condensed consolidated financial statements.


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BAOSHINN CORPORATION  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Stated in US Dollars)    5. Other operating income   Three months ended March 31,20092008(unaudited)(unaudited)$$GDS commission income2081,650Management service income12,29614,43012,50416,080   6. Other non-operating income   Three months ended March 31,20092008(unaudited)(unaudited)$$Gain on exchange388974Interest income256-Sundry income-5,0476446,021   7. Interest expenses   Three months ended March 3120092008(unaudited)(unaudited)$$Interest expense58369


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BAOSHINN CORPORATION  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Stated in US Dollars)    8. Income taxes  The subsidiaries of the Company was subject to Hong Kong profits or income tax at 16.5% (2008: 17.5%) for the quarter ended March 31, 2009 and 2008.  No provision for Hong Kong profits tax has been made for any of the year presented as the Group does not have any assessable profits during the period.  Deferred taxes are determined based on the temporary differences between the financial statement and income tax bases of assets and liabilities as measured by the enacted tax rates which will be in effect when these differences reverse. The Group follows Statement of Financial Accounting Standards Number 109 (SFAS 109), Accounting for Income Taxes. SFAS No.109 and requires a valuation allowance, if any, to reduce the deferred tax assets reported if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized, and therefore, a full valuation allowance has been provided as of March 31, 2009 and March 31, 2008.   9. Deposits, prepaid expenses and other receivables  At Mar 31,At Dec 31,20092008(unaudited)(audited)$$Security deposits to suppliers[1]882,130772,247Prepayments and other receivables131,351130,100Utility, rental and other deposits32,76737,8911,046,248940,238  [1]Represents a deposit with the airline companies to allow the Group to issue an agreed upon amount of air tickets per month.


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BAOSHINN CORPORATION  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Stated in US Dollars)   10. Plant and equipment  At Mar 31,At Dec 31,20092008(unaudited)(audited)$$CostFurniture and fixtures53,39253,392Office equipment106,599106,599159,991159,991Accumulated depreciationFurniture and fixtures20,02917,462Office equipment67,27462,43887,30379,900NetFurniture and fixtures33,36335,930Office equipment39,31744,16172,68880,091  Depreciation expenses for the quarter ended March 31, 2009 are $7,403 (3 months ended March 31, 2008: $11,349).   11. Other payables and accrued liabilities  At Mar 31,At Dec 31,20092008(unaudited)(audited)$$Sale deposits received167,53588,327Accrued expenses137,683154,961Other payables47,17633,313352,394276,601


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BAOSHINN CORPORATION  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Stated in US Dollars)   12. Amounts due from/(to) related parties  Amounts due from/(to) related parties for working capital are as follows:  At Mar 31,At Dec 31,20092008(unaudited)(audited)$$Amount due from a shareholder-10,691Amounts due to shareholders-2,838  The amount due from a shareholder is temporary advance, interest free, unsecured and due on demand.  The amounts due to shareholders, represent advances from certain shareholders of the Company, are interest-bearing at the rate of 10% per annum, unsecured and have no fixed repayment terms.  13. Stock options  The Company has stock option plans that allow it to grant options to its key employees. Over the course of employment, the Company issues vested or non-vested stock options to an employee which is struck at US$0.35 per share. The exercise period of the options commenced on March 31, 2008 and will expire on March 31, 2011.  The fair value of these options at the date of grant was estimated to be $0.1533 and $0.1125 for vested and non-vested options per unit respectively using the Black-Scholes option pricing model with the following weighted average assumptions: expected life of three years; risk-free interest rate of 3.07%; expected dividend yield of 0% and an expected volatility of 47.77%. The stock-based compensation expense recorded in the quarter ended March 31, 2009 and 2008 were nil and $22,800, respectively, which was charged to the consolidated statements of operations and credited to contributed surplus.


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BAOSHINN CORPORATION  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Stated in US Dollars)   13. Stock options (Continued)  A summary of stock options activity is as follows:  WeightedWeightedaverageNumber ofaverageremainingoptionsexercise pricelife$(year)Exercisable as of January 1, 2009155,0000.352.25Exercisable as of March 31, 2009155,0000.352  The total intrinsic value during the quarter ended March 31, 2009 and 2008 were $nil as no options were exercised during the respective period.  14. Concentration of credit  A substantial percentage of the Group's sales are made to the following customers. Details of the customers accounting for 10% or more of total net revenue are as follows:  Three months period ended March 31,(unaudited)20092008Travel Expert Limited (a Hong Kong incorporated travel agent)11%13%  Details of the accounts receivable from the one customer with the largest receivable balances at March 31, 2009 and December 31, 2008 are as follows:  Percentage of account receivableMarch 31, 2009December 31, 2008(unaudited)(audited)Travel Expert Limited (a Hong Kong incorporated travel agent)10%17%


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BAOSHINN CORPORATION  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Stated in US Dollars)   15. Pension plans  The Group participates in a defined contribution pension scheme under the Mandatory Provident Fund Schemes Ordinance MPF Scheme for all its eligible employees in Hong Kong.  The MPF Scheme is available to all employees aged 18 to 64 with at least 60 days of service in the employment in Hong Kong.  Contributions are made by the Groups subsidiary operating in Hong Kong at 5% of the participants relevant income with a ceiling of HK$20,000.  The participants are entitled to 100% of the Groups contributions together with accrued returns irrespective of their length of service with the Group, but the benefits are required by law to be preserved until the retirement age of 65.  The only obligation of the Group with respect to MPF Scheme is to make the required contributions under the plan.  The assets of the schemes are controlled by trustees and held separately from those of the Group.  Total pension cost was $10,027 during quarter ended March 31, 2009 (quarter ended March 31, 2008: $11,651.)  16. Commitments and contingencies  Operating leases commitments  The Group leases office premises under various non-cancelable operating lease agreements that expire at various dates through years 2010 to 2011, with an option to renew the lease.  All leases are on a fixed repayment basis.  None of the leases includes contingent rentals.  Minimum future commitments under these agreements payable as of March 31, 2009 are as follows:  March 31$201086,016201119,936105,952  Rental expenses for the quarter ended March 31, 2009 were $23,689 (quarter ended March 31, 2008: $29,991).  17. Related party transactions  In the ordinary course of business, BSIE, our wholly-owned subsidiary, purchases and sells air tickets and tour packages from/to Bao Shinn Express Company Limited (BSEL). BSEL holds 38.6% of Baoshinn Corporations outstanding common stock.  The consolidated income statement for the periods presented includes the following related party transactions:


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BAOSHINN CORPORATION  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Stated in US Dollars)   17. Related party transactions (Continued)  Related partyNature of relationship and controlDescription of transactionsThree Months ended March 31,20092008(unaudited)(unaudited)$$Bao Shinn Express Company LimitedShareholder
38.6%Sales of air tickets and tour packages(37,173)(72,636)Management service income(12,295)(14,432)Purchase of air tickets and tour packages5,38842,183Rent paid-385   18. Segment Information  SFAS No.131, Disclosures about Segments of an Enterprise and Related Information, establishes standards for reporting information about operating segments in financial statements. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance.  For management purposes, the Group is regarded as a single segment, being engaged in the provision of travel agent services. These principal activities and geographical market are substantially based in Hong Kong and the Mainland China. Accordingly, no geographical segment information is presented.


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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. CAUTIONARY STATEMENT FOR FORWARD-LOOKING STATEMENTS This discussion and analysis of our financial condition and results of operations includes "forward-looking" statements that reflect our current views with respect to future events and financial performance. We use words such as "expect," "anticipate," "believe," and "intend" and similar expressions to identify forward-looking statements. You should be aware that actual results may differ materially from our expressed expectations because of risks and uncertainties inherent in future events and you should not rely unduly on these forward looking statements. We disclaim any obligation to publicly update these statements, or disclose any difference between its actual results and those reflected in these statements. Reference in the following discussion to "our", "us" and "we" refer to the operations of Baoshinn Corporation and its subsidiaries ("the company"), except where the context otherwise indicates or requires. The following discussion of our financial condition and results of operations should be read in conjunction with the audited financial statements and the notes to the audited financial statements included in this annual report. This discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results may differ materially from those anticipated in these forward-looking statements. Change in fiscal year end On March 25, 2008, the Company changed its fiscal year end from March 31 to December 31. The current period financial statements cover a three month period from January 1, 2009 to March 31, 2009. Results of operations for the 3 months ended March 31, 2009 compared to 3 months ended March 31, 2008. Going Concern The accompanying consolidated financial statements have been prepared assuming that we will continue as a going concern. We have made a net profit of $1,416 for the three months ended March 31, 2009 and a net loss since inception of $1,196,914. On March 31, 2009 we had cash on hand of $107,367. These circumstances raise substantial doubt about our ability to continue as a going concern. These doubts were outlined in our independent auditor's report on our consolidated financial statements for the nine months ended December 31, 2008, which are included in annual report on Form 10-K. Although our consolidated financial statements raise substantial doubt about our ability to continue as a going concern, they do not include any adjustments relating to recoverability and classification of recorded assets, or the amounts or classifications of liabilities that might be necessary in the event we cannot continue as a going concern. The Company's shareholders have verbally agreed to provide continuing financial support to the Company for future losses it may incur. In this difficult and challenging time, it is our intention to focus first on the things that we can directly control, such as costs. It is our intention to eliminate inefficiencies in operations to mitigate losses and to improve our chances for profitability. At the same time, we are also working on new routes to generate additional revenues, without increasing our need for additional cash. We hope to generate a new segment of revenue flow, along with new routes by working with local carriers on short haul flights. Management has reviewed its operations for the past few years and the current travel industry market conditions. Based on that review we plan to take the following actions to improve our performance and to continue as a going concern.  26    Staff Redundancy The Group plans to flatten organization structure by cutting senior management staff reducing staff redundancy and decentralizing its operations. Meanwhile, support and administration staffing has also been cut to keep back office costs down. Our total staff was reduced from 48 in May 2008 (highest) to 38 in September 2008. In September 2008, five of the 38 staff members are non-operational staff (management and back office), the remaining 33 are operational, plus the sales and marketing staff. In comparison to May, 2008, nine (9) of the 48 staff were non-operational and 39 were operational, plus the sales marketing staff. As a result of staff cuts, the Company has been able to downsize its office space. Office rental was reduced from $11,860 per month to $7,976 in September 2008, representing a 32.7% decrease in office rental expense. Operations decentralized Effective from September, 2008, management decided to decentralize operations in its main wholesale business division and corporate division. Business decisions will be made on a lower level within the business division instead of through a senior management team. Management expects the decentralization will improve flexibility and speed up the Company's response time to market changes. Each business division head will have more discretion to make business decisions, and at the same time each division head will be more accountable for their performance. With the senior management team's functions being shifted to lower organization levels, the Company's management fee has also been decreased significantly. The Company decreased its monthly management fee from $11,538 in April 2008 (highest) to $3,205 in September 2008. Business Strategy As a result of increased fuel prices, airlines have become increasingly competitive in Hong Kong. Hong Kong is an international hub for long haul flights as well as short distance destinations. Popular travel destinations are becoming less profitable, because more airlines are competing for the same route. The Company, as a travel agency, is dependent on airline commissions and market conditions for ticket prices. The more competition, the less profit it can earn. The Company has reviewed the market conditions, and decided to change its strategy by dealing with new emerging airlines with new destinations. The Company has recently developed a close relationship with Hong Kong Airlines which is primarily focused on Mainland China travel destinations. As the Hong Kong Airbus travel agency, the Company has less competition and is able to maintain a more stable profit margin. Management believes that actions presently taken to revise the Company's operating and financial requirements provide the opportunity for the Company to continue as a going concern. The Company's shareholders have agreed to provide continuing financial supports to the Company in terms of a temporary loan. The agreements for continuing financial support are verbal.  Revenues For the three months ended March 31, 2009, the Company has experienced decrease in sales revenues due to the global economic contraction, although the Company was recognized by Eva Airline as its top selling agent in Hong Kong. Eva Airlines operates both short haul routes within South East Asia and long haul routes including North America and Europe. The company has also been appointed as a first tier agent for two additional airlines, HongKong Airlines & HongKong Express. Hong Kong Airlines mainly operates flights originating from Hong Kong to destinations in Asian cities, including Bangkok, Kuala Lumpur, Manila, and major cities in Japan. HongKong express mainly operates flights originating from Hong Kong to mainland China's second tier cities, including Changsha, Fuzhou, Hangzhou, Hefei, Guiyang etc.  27    Our revenue decreased $2,423,868 or 27.3% from $8,879,434 for the three months ended March 31, 2008 to $6,455,566 for the three months ended March 31, 2009. The decrease is mainly due to the downturn of global economy. We generate our revenues primarily from retail and corporate business. For the three months ended March 31, 2009, we derived 97.9%, 1% and 1.1% of our revenues from our retail & corporate clients, commission from travel booking services and airline incentive commissions respectively. For the three months ended March 31, 2008, we derived 98.6%, 0.2% and 1.2% of our revenues from our retail & corporate clients, commission from travel booking services and airline incentive commissions respectively. The table below sets forth the revenues from our principal lines of business for the periods indicated. 3 Months ended March 31, 20093 months ended March 31, 2008$$Retail and Corporate revenue6,320,5218,755,141Commission from travel booking services70,33920,233Incentive commissions64,706104,060Total revenue6,455,5668,879,434 Retail and Corporate Revenue Revenues from retail and corporate travel services are recognized when the travel service provided by the Company is completely delivered. The Company presents revenue from such transactions on a gross basis in the consolidated statements of operations, as the Company acts as a principal, assumes inventory and credit risks, and has the primary obligation to the airlines or hotels for cancelled air tickets, packaged tour products or hotel reservations. The Company also has latitude in determining the service prices. The Company changes the product by combining air ticket and hotel accommodations with local car transportation and other ancillary services to make it a holiday package or business travel solution for customers. Referral fees for travel booking services We receive referral fees from travel product providers for booking travel services. The itinerary and product price are generally fixed by the travel product providers and we book the travel services on behalf of the customers. Referral fees from travel booking services rendered are recognized as commissions after the services are rendered and collections are reasonably assured. We present revenues from such transactions on a net basis in the consolidated statements of operations, as we act as an agent, we do not assume any inventory and credit risks, we have no obligations for cancelled airline or hotel ticket reservations, and do not have latitude in determining the service prices. Incentive commission from travel suppliers We earn an incentive commission from many travel suppliers. Contracts with certain travel suppliers contain discretionary escalating commissions that are paid to us subject to achieving specific performance targets. Such discretionary escalating commissions are recognized on an accrual basis because such commissions are usually paid in arrears and we can reasonably estimate such commissions. Our statement of operations presents revenues from such transactions on a net basis, because we act as an agent, we do not assume any inventory risk, and we have no obligation for cancelled airline tickets. Cost of Sales Costs of sales are costs directly attributable to rendering our revenues, which consist primarily of payments for travel costs to airlines and suppliers. Cost of revenues accounted for 94.9% of our revenue in the three months ended March 31, 2009 and 96.1% of our revenues in the three months ended March 31, 2008. The table below sets forth the cost of sales for the periods indicated.  28     3 months ended March 31, 20093 months ended March 31, 2008Total revenue6,455,5668,879,434Cost of sales(6,125,888)(8,530,701)Gross profit329,678348,733 Gross Profit and Gross Profit Margin Our gross profit for the three months ended March 31, 2009 was $329,678, compared to $348,733 in the three months ended March 31, 2008. Gross profit decreased $19,055 or 5.5% from $348,733 for the three months ended March 31, 2008 to $329,678 for the three months ended in March 31, 2009. The gross profit margin rate increased from 3.9% for the three months ended March 31, 2008 to 5.1% for the three months ended March 31, 2009. The increasing in profit margin rate shows the positive affect of our new business strategy. The Company has reviewed the market conditions, and decided to change its strategy by dealing with new emerging airlines with new destinations. The Company has recently developed a close relationship with Hong Kong Airlines, which is primarily focused on Mainland China travel destinations. As the Hong Kong Airbus travel agency, the Company has less competition and is able to maintain a more stable profit margin. Operating Expenses Overview Total operating expenses for the three months ended March 31, 2009 were $334,850 or 5.2% of revenues, while the operating expenses for three months ended March 31, 2008 were $506,542 or 5.7% of revenues. The decreases are mainly attributable to a cost saving strategy, which significantly reduced other salaries, commission, allowance and office rental operating expense, including entertainment, printing and communication expenses. 3 months ended March 31, 2009% of Revenue3 months ended March 31, 2008% of RevenueSalaries, commission, allowance247,0293.8%318,1813.6%Legal & Professional fees10,3390.2%16,2990.2%Office Rental23,6890.4%29,9910.3%Management fee19,9040.3%24,8820.3%Stock compensation expenses--22,8000.3%Other operating expenses33,8890.5%94,3891.0%334,8505.2%506,5425.7% Salaries, Commissions and Allowances Salary, commission and allowance for the three months ended March 31, 2009 were $247,029 or 3.8% of revenues, while the Salary, commission and allowance for three months ended March 31, 2008 were $318,181 or 3.6% of revenues.The Group has flattened organization structure by cutting senior management staff reducing staff redundancy and decentralizing its operations. Meanwhile, support and administration staffing has also been cut to keep back office costs down. Our total staff was reduced from 48 in May 2008 (highest) to 40 as at March 31, 2009.  29    Legal and Professional Fees Legal & professional fees for the three months ended March 31, 2009 were $10,339 or 0.2% of revenues, while the legal & professional fees for the three months ended March 31, 2008 were $16,299 or 0.2% of revenues. The main reason for the decrease was the lack of activities in financing and stock options granted to employees which happened in the same corresponding period in 2009. Office Rental and Building Management Fees Office rental and building management fees for the three months ended March 31, 2009 were $23,689 or 0.4% of revenues, while the Office rental and building management fees for three months ended March 31, 2008 were $29,991 or 0.3% of revenues. The decrease is mainly attributable to reduction in office space. Management Fees Management fees for the three months ended March 31, 2009 were $19,904or 0.3% of revenues, while the management fees for three months ended March 31, 2008 were $24,882or 0.3% of revenues. The management fees were paid for financial control advice, financial reporting assistance and business strategic advice. Management decided to decentralize operations in its main wholesale business division and corporate division. Business decisions will be made on a lower level within the business division instead of through a senior management team. Management expects the decentralization will improve flexibility and speed up our response time to market changes. As a result of these changes, management has been decreased substantially. Other General and Administration Expenses Other expenses for the three months ended March 31, 2009 were $33,889 or 0.5% of revenues, while other expenses for three months ended March 31, 2008 were $94,389 or 1.0% of revenues. The decrease in other expenses is a result of our cost cut strategy implemented in all business units. Stock Based Compensation  The Company has stock option plans that allow it to grant options to its key employees. Over the course of employment, the Company issues vested or non-vested stock options to an employee which is struck at US$0.35 per share. The exercise period of the options commenced on March 31, 2008 and will expire on March 31, 2011.  The fair value of these options at the date of grant was estimated to be $0.1533 and $0.1125 for vested and non-vested options per unit respectively using the Black-Scholes option pricing model with the following weighted average assumptions: expected life of three years; risk-free interest rate of 3.07%; expected dividend yield of 0% and an expected volatility of 47.77%. The stock-based compensation expense recorded in the quarter ended March 31, 2009 and 2008 were nil and $22,800, respectively, which was charged to the consolidated statements of operations and credited to contributed surplus. Other operating income 3 months ended3 months  endedMarch 31, 2009March 31, 2008$$Commission income2081,650Management service income12,29614,43012,50416,080   30    Commission Income Commission income for the three months ended March 31, 2009 were $208 compared to $1,650 for three months ended March 31, 2008. During the three months ended March 31, 2009, we increased the number of tickets booked through a lower percentage commission booking system, which resulted in a lower amount of commissions. Commission income is received by the Company from the Global Distribution Systems Supplier (GDS), which is the booking system that links airlines, IATA and travel agencies. GDS acts as an information medium between the Airlines and Travel agencies. Travel consultants check seat availability and fare conditions, and make reservations through GDS. GDS also links Airline and Travel Agencies through IATA's Bill and Settling Plans (BSP). Once the ticket is issued from IATA through the GDS system, travel agencies will settle the payment with airlines through IATA's fortnightly BSP Payment. Each GDS system has a different layout, and different user manual and command. Airlines can choose to link with one or a few GDS. The Company currently has 4 GDS's installed; they are "Amadeus", "Worldspan", "Travelsky" and "Abacus". A GDS will normally provide equipment and install their system onsite for a travel agency. The travel agency must generally sign an agreement with each GDS supplier which details the usage and reward scheme. Some GDS suppliers require travel agencies to maintain a minimum usage volume, otherwise the travel agency will have to pay fees for the equipment. GDS suppliers also encourage travel agencies to book tickets through their system by rewarding travel agencies on the number of tickets booked in a certain period of time. The Company encourages its consultants to use the GDS that has the best compensation structure, however, a balance between operational efficiency is also considered. Some airlines are more user friendly with a specific GDS, also with each travel consultancy's experience with different systems, the Company leaves it to the consultant's discretion to choose the GDS it uses. Management Service Income Management service income represents compensation from a related party, Bao Shinn Express Company Limited ("BSEL"). BSEL currently holds 38.55% of the company's outstanding common stock. The Company has provided management services to BSEL on business operations and general travel industry knowledge. Management service income from BSEL was $12,296 in the three months ended March 31, 2009, compared to $14,430 in the March months ended March 31, 2008. The Company recognizes the management service as "other operating income", as the Company's management team is part of its operation team. Accordingly, the revenue generated by the management team is considered part of the Company's operations. Other non-operating income  3 months ended March 3120092008(unaudited)(unaudited)$$Gain on exchange388974Interest income256-Sundry income-5,0476446,021   31    Gain on exchange The exchange gain was $388 for the three months ended March 31, 2009 compared to $974 in the three months ended March 31, 2008. This was attributable to the depreciation of the Hong Kong Dollar against foreign currencies including the U.S. Dollar and the Thai Baht. The Company pays overseas suppliers in their currency, and charges its customers in HK dollars, with the exchange rate determined at the point of invoicing. Because of the timing difference between payments and receipts, the Company incurs exchange differences in transactions with overseas suppliers. The Company recognizes the gain or loss as "non-operational income or expense", as this is not from operations. Interest Income Interest income was $256 for the three months ended March 31, 2009, compared to $0 for the three months ended March 31, 2008. This interest was earned from bank savings and fixed deposit accounts. The Company considers this non-operational income. Sundry Income Sundry income was $0 for the three months ended March 31, 2009, compared to $5,047 for the three months ended March 31, 2008. Sundry income is mainly from IATA BSP Fund reimbursement. IATA BSP Fund is a fund created when IATA collects $0.38 (HK $3.00) per air ticket from travel agencies at the time each travel agency issues an air ticket with IATA. IATA BSP Fund was established to protect airlines when travel agencies go bankrupt and are unable to meet the payment obligation to the airlines. The fund will be used to recover the debt to airlines from the bankrupted travel agency. IATA BSP Fund has a ceiling of $1.28M (HK $10M), when the ceiling is reached, IATA will reimburse the additional collections to all participating travel agencies proportionally. The Company's sundry income is the reimbursement from the IATA BSP Fund, and the amount is calculated monthly by IATA. The Company considers the income as non-operational income, as it is not part of its operation activities. Interest Expense Interest expense was $58 for the three months ended March 31, 2009, compared to $369 for the three months ended March 31, 2008. This was attributable to the fact that the outstanding principal balance on loans from former shareholders was significantly reduced. Net Profit Our net profit was $1,416 for the three months ended March 31, 2009, compared to net loss of $147,426 for the three months ended March 31, 2008. The improvement in our performance despite the downturn in global economic conditions, is mainly due to our business strategy change initiated last year. Liquidity and Capital Resources We have not generated positive cash flows from operating activities. Our primary sources of capital have been from sales and issuances of equity securities. Our primary use of capital has been for the expansion and development of our business, and the associated need for increased working capital. Our working capital requirements are expected to increase in line with the growth of our business. We have no lines of credit or other bank financing arrangements. We expect that working capital requirements will be funded through a combination of our existing funds, cash flow from operations, private loans, issuance of equity and debt securities. Additional issuances of equity and debt securities will result in dilution to our current common stockholders. The Company's former shareholders agreed to provide continuing financial support to the Company in the form of a temporary loan. The agreements for continuing financial support are verbal. There were no temporary loans outstanding from our former shareholders as  32    of March 31, 2009. These temporary loans were unsecured with no fixed term of repayment during the three months ended March 31, 2009. Interest was paid at the rate of 10% per annum. Operating Activities Net cash used in operating activities was $117,942 for the three months ended March 31, 2009, compared to net cash of $154,144 generated in operating activities for the three months ended March 31, 2008. The cash usage during the three months ended March 31, 2009 is mainly for working capital. Working capital increased $44,767 from $649,064 in the three months ended March 31, 2008 to $694,101 for the three months ended March 31, 2009. Investing Activities Net cash used in investing activities was $0 for the three months ended March 31, 2009, compare to $6,046 for the three months ended March 31, 2008. The company has no investment activity for the three month end March 31, 2009. The cash used for the three month ended March 31, 2008 was mainly for the purchase of new computer equipment and computer software for our new subsidiaries. Financing Activities Net cash provided by financing activities was $7,853 for the three months ended March 31, 2009, compare to $106,181 net cash used in financing activities for the three months ended March 31, 2008. The change is mainly due to the decrease in the amount of shareholder short term loan. In accordance with our SEC registration statement effective on April 3, 2007, the Company issued 2,400,000 common shares at a price of $0.3 per share on September 28, 2007, which raised gross proceeds of $720,000 and net proceeds of $624,000. Part of the money raised was used to repay loans from former shareholders. The Company redeemed 2,500,000 common shares for $0 on December 30, 2007 and such shares were thereafter classified as authorized, but unissued. For the three months ended March 31, 2009 there was no financing activities other than shareholder short term loan. Financing Our Capital Expenditures The Company was planning to implement its business plan for expanding into the China market. Due to the global economic down turn, the plan is on hold until we see an improvement in the business environment. The initial investment is expected to be approximately US$1,200,000. These funds will be used for setting up a China flagship company in Shanghai. Expenditures are expected to include obtaining travel licenses, office renovation, purchase of communication equipment, purchase of computers and office equipment. An additional investment of US$1,500,000 will be required as the working capital for the Shanghai office. The new flagship company will be registered in Shanghai and will serve as our China headquarters. We subsequently plan to open branch offices in Beijing, Guangzhou, Chongqing and Kunming. As a marketing tool, an "On-line travel" business team will be set up in Shanghai. The team includes the IT specialist for development of a travel booking system to China. Balance Sheet Arrangements For the three months ended March 31, 2009, and the three months ended March 31, 2008, the Company did not engage in any off-balance sheet activities or have any relationships or arrangements with unconsolidated entities established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Further, we have not guaranteed any obligations of unconsolidated entities nor do we have any commitment or intent to provide additional funding to any such entities.  33    Related Party Transactions Loans from shareholders represent temporary advances from certain present and former shareholders of the company. The loans are unsecured and have no fixed terms of repayment. Interest is charged at the rate of 10% per annum. There are no loans from shareholders outstanding as of January 31, 2008. Amounts due from/(to) related parties for working capital are as follows:  At Mar 31At Dec 31(unaudited)(audited)20092008$$Amount due from a shareholder-10,691Amounts due to shareholders-2,838  In the ordinary course of business, BSIE, our wholly-owned subsidiary, purchases and sells air tickets and tour packages from/to Bao Shinn Express Company Limited ("BSEL"). BSEL holds 38.6% of Baoshinn Corporation's outstanding common stock. The consolidated income statement for the periods presented includes the following related party transactions:   Related partyNature of relationship and controlDescription of transactions3 Months ended March 3120092008(unaudited)(unaudited)$$Bao Shinn Express Company LimitedShareholder
38.6%Sales of air tickets and tour packages(37,173)(72,636)Management service income(12,295)(14,432)Purchase of air tickets and tour packages5,38842,183Rent paid-385 Item 3. Quantitative and Qualitative Disclosure About Market Risks. Not Applicable. Item 4T. Controls and Procedures. (a) Evaluation of disclosure controls and procedures. As required by paragraph (b) of Rules 13a-15 or 15d-15 under the Securities Exchange Act of 1934, the Company's principal executive officer and principal financial officer have evaluated the Company's disclosure  34    controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation these officers have concluded that as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were effective and were adequate to insure that the information required to be disclosed by the Company in reports it files or submits under the Exchange Act were recorded, processed, summarized and reported within the time period specified in the Commission's rules and forms. (b) Changes in internal controls. There have been no significant changes in our internal controls or other factors that could significantly affect such controls and procedures subsequent to the date we completed our evaluation. Therefore, no corrective actions were taken. PART II - OTHER INFORMATION Item 1. Legal Proceedings. To the best knowledge of the Companys officers and directors, the Company is currently not a party to any pending legal proceeding. Item 1A. Risk Factors. There have been no material changes to the risk factors previously disclosed under item 1 of the Companys Registration Statement on Form SB-2 As filed with the United States Securities and Exchange Commission on June 14, 2006. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. None. Item 3. Defaults Upon Senior Securities. None. Item 4. Submission of Matters to a Vote of Security Holders. No matter was submitted during the quarter ending March 31, 2009, covered by this report to a vote of the Company's shareholders, through the solicitation of proxies or otherwise. Item 5. Other Information. None.  35





Item 6. Exhibits and Reports of Form 8-K.  (a) Exhibits *3.1 Certificate of Incorporation *3.2 Amended and Restated Certificate of Incorporation *3.3 By-laws *4.0 Stock Certificate 31.1 Certification pursuant to Section 302 of Sarbanes Oxley Act of 2002 31.1 Certification pursuant to Section 302 of Sarbanes Oxley Act of 2002 32.1 Certification pursuant to Section 906 of Sarbanes Oxley Act of 2002 32.2 Certification pursuant to Section 906 of Sarbanes Oxley Act of 2002  * Filed as an exhibit to the Company's registration statement on Form SB-2, as filed with the Securities and Exchange Commission on June 14, 2006, and incorporated herein by this reference. (b) Reports of Form 8-K None.  SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, there unto duly authorized. Dated:  May 14, 2009 BAOSHINN CORPORATON  By:  /s/ Sean Webster Name:  Sean Webster Title: President