INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements. These statements relate to future events or our future financial performance. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential" or "continue," the negative of such terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no duty to update any of the forward-looking statements after the date of this report to conform such statements to actual results or to changes in our expectations.

Readers are also urged to carefully review and consider the various disclosures made by us which attempt to advise interested parties of the factors which affect our business, including without limitation the disclosures made in PART I. ITEM 1A:. Risk Factors and PART II. ITEM 6 "Management's Discussion and Analysis or Plan of Operatio n" included herein.

 

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PART I.

 

Effective July 17, 2006, the Company relocated its headquarters from 834 S. Broadway, 5th Floor, Los Angeles, California to 1601-1604 CRE Centre 889 Cheung Sha Wan Road, Kowloon, Hong Kong.

During March 2004, we formed, a wholly-owned subsidiary, Sino Trade, under the laws of Hong Kong. The original purpose of Sino Trade was to provide additional support to our business-to-business trade operations in China and the United States. Today all of our media and advertising business is conducted through Sino Trade and its subsidiaries.

On November 10, 2006, we formed Idea Asia, which is a wholly-owned subsidiary of Sino Trade, under the laws of Hong Kong.  The purpose of Idea Asia is to acquire and operate entertainment related businesses.

On November 27, 2006 we formed CMP, which is a sixty percent (60%) owned subsidiary of Idea Asia, under the laws of Hong Kong.  The purpose of CMP is to acquire the rights to a specific entertainment property, namely the globally successful Who Wants To Be A Millionaire? TV show, and produce and broadcast the show in the PRC.

On September 29, 2007 CMP, subsidiary of AAGH, broadcast the first ever airing of the globally successful Who Wants To Be A Millionaire? TV show produced specifically for mainland China.

On October 29, 2008, the Company accepted the resignation of Michael Mak as the Company’s Chief Executive Officer, Chief Financial Officer and as a Director, prior to the acceptance of Mr. Mak’s resignation, the Board of Directors appointed John Leper, Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer. The Board also appointed Hin Lee Kwong as Secretary and as a Director of the Board.  John Leper, 53, has been the Company’s Secretary, a member of the Board of Directors and Vice President contributing in the areas of marketing, business development, corporate planning and strategy since 2004. From May 2001 to September 2003, Mr. Leper served as the Chief Marketing Officer and Strategist for Stanford International Holding Corporation. Hin Lee Kwong, 50, has served as a Director of the Company’s wholly-owned subsidiary Sino Trade-Intelligent Development Corp. Ltd. (“Sino Trade”). Since joining Sino Trade, Mr. Kwong has been responsible for the overall strategy and administrative affairs of the subsidiary.

On November 17, 2008, Mr. Mak notified the Board of Directors that he was surrendering 150,000 shares of Series A Stock back to the Company for cancellation. The Board of Directors approved the surrendering of the 150,000 shares of the Series A Stock. After the return of the 150,000 shares of the Series A Stock, Mr. Mak still controls 250,000 shares of the Series A Stock. The Company contacted its transfer agent to cancel the 150,000 shares of the Series A Stock. Prior to these activities, on August 18, 2006 the Company entered into an Employment Agreement with Mr. Mak. As part of his compensation, Mr. Mak received 500,000 shares of the Company’s Series A Convertible Preferred Stock (“Series A Stock”).  Then on October 9, 2007, Mr. Mak converted 100,000 shares of his Series A Stock into 20,000,000 144 Restricted shares of the Company’s Common Stock. This left Mr. Mak, at that time, with 400,000 shares of the Series A Stock.

In March of 2009 Sino Trade entered into talks with a US based company regarding the potential acquisition of its wholly-owned subsidiary Idea Asia.

Currently

2008

In 2008, our revenues declined by 53.4% from $10,664,613 in 2007 to $4,968,145 in 2008 primarily resulting from decreased advertising sales due to global economic downturn in the last quarter of 2008.

During the first three quarters of the year the Company saw a very strong growth in Media and Advertising sales from our Sino Trade subsidiary.  However near the end of 2008 and beginning of 2009 Sino Trade began feeling the effects of the global financial turndown. Sino Trade focuses exclusively on selling business-to-business advertising to small manufactures in China. The financial meltdown during the fourth quarter of 2008 harshly impacted Sino Trade’s core client base of small and medium sized manufacturers located in China who engage in manufacturing and exporting products to the United States. This segment of manufacturers in China simultaneously experienced severe cut-backs on bank facilities and a severe drop in export demand. The segment saw numerous factory closings and cutbacks at the end of year 2008, particularly in Southern China – the location of much of Sino Trade’s key client base. The adverse financial effect on the core customer group was far worse than Sino Trade originally anticipated. The full effect was not fully realized until the first quarter of 2009 when it became more apparent to Sino Trade management that many of its customers may not recover from the recent global financial crisis soon if at all. As a result, this adverse impact on the Sino Trade core customer base cast doubt on a considerable portion of sales the Company recorded in the three-month period ended September 30, 2008 as management cannot be certain of when or what portion of Sino Trade’s account receivables can be fully collected.

 

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CouponsRewardSavings.com (Inactive) was established in 2003 and was the original business in our media and advertising distribution network. This website attracted visitors with discounts, free gifts and other promotions. Revenues were generated by charging advertisers each time a visitor opted to receive information (usually an online coupon or special offer) from that advertiser. More2Save.com (Inactive) is an online coupon portal that offers shoppers coupons, rewards and savings. Revenues were generated by charging advertisers to post coupons on the website. RateandSave.com (Inactive) is a consumer-shopping portal that helps consumers find the best prices on products they are seeking. Revenues were generated from advertisers via a cost-per-click bidding model. BonusChina.com (Planned/not active) will be an online portal and will provide entertainment, information and services to the consumer market in China.. We intend to generate revenue by selling advertising space and services to consumers and advertisers. These four Business-to-Consumer businesses will remain inactive until management determines that adequate resources are available to implement and operate any of them profitably.

Infrastructure

Our wholly-owned subsidiary, Sino Trade provides the infrastructure to operate our media and advertising business in Hong Kong and China. Through Sino Trade, we coordinate two offices in mainland China and one office in Hong Kong. Our offices in mainland China are located in Guangdong and Shanghai. Our office in Hong Kong serves as our China communications hub. Wah Mau, a wholly-owned subsidiary of Sino Trade, provides support for our operations specifically in mainland China and helps generate sales of our media and advertising products and services. Through Sino Trade and Wah Mau we have established a network of advertising agency partners in China who sell our business-to-business media and advertising products and services.

To address the TV media opportunity in China, our Sino Trade subsidiary created the wholly-owned subsidiary Idea Asia to hold entertainment related businesses. Idea Asia created CMP of which Idea Asia owns 60%. On December 18, 2006, CMP entered into an agreement to acquire the rights from UK based Celador International Limited (now part of 2waytraffic) to broadcast in China the global quiz show phenomenon Who Wants To Be A Millionaire? . The remaining 40% of CMP is owned by Kolmanski International Limited and Region Giants Limited. CMP entered into an agreement with China advertising media sales agency Zixunmedia in November of 2006. Pursuant to PRC regulations, only a licensed advertising agency can sell advertising and collect payments for advertising sales in China. CMP discontinued production and distribution of Who Wants To Be A Millionaire? in   March 2008.

Sales and Marketing Plan

Our business-to-business media & advertising products and services have been sold through a combination of minimal in-house sales personnel and a network of outside advertising agencies located throughout China and Hong Kong. Given the recent downturn Sino Trade was forced to discontinue its in-house sales personnel. Our sales efforts were supplemented with 16 tradeshow exhibits in 2008.

Our Competitors

Our Sino Trade business including TradeDragon.com and our international trade publications competes with Alibaba.com (a global trade portal and provider of online marketing services for importers and exporters) and GlobalSources.com (a business-to-business media company that facilitates global trade, focusing on the China market-NASDAQ: GSOL). We compete with a variety of companies, some of which are bigger and better capitalized, whose products or services are similar to ours. As such, we may be at a competitive disadvantage to companies that have greater financial resources, more advanced technology, greater experience or offer lower cost products or services than ours.

Employees

As of December 31, 2008, we employed approximately 12 full-time employees. The Company does not have any collective bargaining agreements with its employees and we consider our employee relations to be good.

Privacy Protection

Regarding our Internet related businesses we believe that protecting an individual’s privacy is of paramount importance. We will always do our best to adhere to best practices regarding matters concerning privacy and security.

 

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Website Access to our SEC Reports

Our Internet website address is www.asiaglobalholdings.com. Through our Internet website, we will make available, free of charge, the following reports as soon as reasonably practicable after electronically filing them with, or furnishing them to, the SEC: our Annual Reports on Form 10-K; our Quarterly Reports on Form 10-Q; our Current Reports on Form 8-K; and amendments to those reports filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Our Proxy Statements for our Annual Stockholder Meetings are also available through our Internet website. Our Internet website and the information contained therein or connected thereto are not intended to be incorporated into this Annual Report on Form 10-K.

The public may also read and copy any materials filed with the SEC at the SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549, or through the SEC website at www.sec.gov. The Public Reference Room may be contact at (800) SEC-0330. You may also access our other reports via that link to the SEC website.

 

o operations in foreign countries with higher tax rates than the United States;

o the inability to utilize certain foreign tax credits; and

o the inability to utilize some or all of our losses generated in one or more foreign countries;

o general import/export restrictions relating to encryption technology and/or privacy matters;

o difficulties and costs of staffing and managing foreign operations;

o local law requirements governing employment contracts, which may impose, among other things, minimum notice periods and minimum severance payments for involuntary terminations;

o political and economic instability;

o fluctuations in currency exchange rates; and

o seasonal reductions in business activity during the summer months in Europe and certain other parts of the world.

Any or all of these risks could affect our business outside of the United States and negatively impact our results of operations.

Our future revenues and results of operations may be difficult to forecast and results in prior periods may no be indicative of future results.

At times in the past and in certain segments, our revenues have fluctuated on a quarterly and annual basis as well as grown significantly and has decreased significantly. Accurate predictions of future revenues are difficult because of the rapid changes in the markets in which we operate.

Our results of operations have fluctuated and may continue to fluctuate significantly in the future as a result of a variety of factors, many of which are beyond our control. These factors include:

o the addition of new clients or the loss of existing clients;

o changes in fees paid by advertisers or other clients;

o changes in the amount of royalties payable by us to owners of websites or the imposition of new charges or fees by website owners;

o the demand by advertisers and web-publishers for our advertising solutions;

o the introduction of new Internet marketing services by us or our competitors;

o variations in the levels of capital or operating expenditures and other costs relating to the maintenance or expansion of our operations, including personnel costs;

o seasonality;

o changes in results of operations brought about by newly acquired businesses or new joint ventures, which may be exceedingly difficult to predict due to management's lack of history with such businesses or joint ventures;

o changes in governmental regulation of the Internet; and

o general economic conditions.

Our future revenues and results of operations may be difficult to forecast due to the above factors and the time we may need to adequately respond to any changes in them. Our profit margins may suffer if we are unable to pass some of the costs on to our customers. In addition, our expense levels are based in large part on our investment plans and estimates of future revenues. Any increased expenses may precede or may not be followed by increased revenues, as we may be unable to, or may elect not to, adjust spending in a timely manner to compensate for any unexpected revenue shortfall. As a result, we believe that period-to-period and year-to-year comparisons of our results of operations may not be meaningful.

 

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Changes in general economic conditions could have a material impact on our business.

Our results of operations could be impacted by changes in overall economic conditions that impact consumer spending within China and the United States. Future economic conditions affecting disposable income such as employment levels, consumer confidence, business conditions, stock market volatility, weather conditions, acts of terrorism, threats of war, and interest and tax rates could reduce consumer spending or cause consumers to shift their spending away from our products. If the economic conditions and performance of the retail and media environment worsen, we may experience material adverse impacts on our business, operating results and financial condition.

Acquisitions may harm our financial results.

Acquisitions have been part of our growth and may continue to be part of our growth in the future. Our acquisitions may be of entire companies, certain assets of companies, controlling interests in companies or of minority interests in companies where we intend to invest as part of a strategic alliance. If we are not successful in integrating companies that we acquire or are not able to generate adequate sales from the acquired entities, our business could be materially and adversely affected.

Disputes concerning media content and intellectual property may adversely affect us.

Most of our media content is subject to arrangements with third parties pursuant to which we have licensed certain rights to use and distribute media content owned by third parties or have licensed to third parties certain rights to use and distribute media content that we own. In addition, we have a number of agreements with third parties concerning the use of our media content and intellectual property, including agreements regarding royalties, distribution, duplication, etc. Allegations that we do not have rights to use media content and other disputes arising from such arrangements can be costly and may have a material adverse impact on our results.

Third parties that are engaged by the Company may have legal action brought against them which could adversely affect us or may result in legal action against the Company.

We work with several third parties in our TV Entertainment and Media & Advertising segments.  Such agreements could result in legal action being brought against a third party which we have no control over and could result in the Company being brought into such legal action.  Such litigation may impose a heavy financial burden on the Company.

Television production budgets may increase, and television production spending may exceed such budgets.

Our future television budgets may continue to increase due to factors including, but not limited to, (1) escalation in compensation rates of people required to work on our current projects, (2) number of personnel required to work on our current projects, (3) equipment needs, (4) the enhancement of existing, or the development of new, proprietary technology and (5) the expansion of our facilities to accommodate the growth of the television and media segment. Under the Format Option Agreement for Singing Bee , we will finance the budget for production and sale of the show. Due to production exigencies, which are often difficult to predict, it is not uncommon for television production spending to exceed television production budgets, and our current projects may not be completed within the budgeted amounts. In addition, when production of each film is completed, we may incur significant carrying costs associated with transitioning personnel on creative and development teams from one project to another. These carrying costs increase overall production budgets and could have a material adverse effect on our results of operations and financial condition.

We have an obligation to finance production costs.

We financed the production of Who Wants to Be A Millionaire?, and we may partially or fully finance other productions or products to be developed. If our television and related products do not generate proceeds sufficient to more than offset our share of the production costs, our business, operating results and financial condition will be materially adversely affected.

In order for our television and related products to be successful, we must develop appealing creative content.

The success of each television production developed and produced by us depends in large part upon our ability to develop and produce engaging content and formats that will appeal to a broad audience. Traditionally, this process has been extremely difficult. While we have enjoyed success with our television productions, there can be no assurance that similar levels of success will be achieved by our subsequent productions   and our other future projects.

 

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Work stoppages could adversely impact our operations.

Although none of our employees are represented by a labor union, it is common for television directors, producers, production staff and actors at television production companies to belong to a union. There can be no assurance that our employees will not join or form a labor union or that we, for certain purposes, will not be required to become a union signatory. We may be directly or indirectly dependent upon certain union members, and work stoppages or strikes organized by such unions could have a material adverse impact on our business, financial condition or results of operations. If a work stoppage occurs, it could delay the completion of our television productions and have a material adverse effect on our business operating results or financial condition.

If we lost any key personnel, our business will be adversely affected.

Our success depends, to a significant extent, upon our senior management and key sales and technical personnel, particularly our Chief Executive Officer, who is also our interim Chief Financial Officer. The competition for experienced and talented executives, senior managers and technical and sales personnel has become intense in our industry. The loss of the services of one or more of these persons, other similarly positioned members of management or other key personnel could materially and adversely affect our ability to develop our business.

In order to continue to operate efficiently and to grow our business, we will need to attract and retain qualified personnel and manage our costs, which we may be unable to do.

Our success depends on our ability to attract and retain qualified technical, sales and marketing, customer support, financial and accounting, and managerial personnel. We may expand our total workforce and will need to continue to attract qualified personnel in order to grow our business successfully. Additionally, as our business has escalated, we have increased our reliance on contractors and outside firms for development. We may not be able to attract, integrate and retain the numbers and types of candidates that we desire, and we may not be able to retain our contractors and outside firms and may not be able to replace them. Even if we are successful in attracting new staff, we may not be able to increase revenue quickly enough to offset the costs of the additional personnel. Any of these contingencies could cause our business to suffer.

We have experienced in the past, and may continue to experience in the future, particular difficulty in hiring and retaining qualified staff. Competition for staff is very high, and training is difficult because the required skill set is complex and there is no industry standard. If we are unable to attract, train and retain qualified search staff, we may not remain competitive and could lose business and our customers, which could have an adverse effect on revenue.

Our operations are vulnerable to natural disasters and other events, including terrorist attacks, because we have limited backup systems.

We have limited backup systems and have experienced system failures and electrical outages from time to time in the past, which have disrupted our operations. We have a limited disaster recovery plan in the event of damage from fire, floods, typhoons, earthquakes, power loss, telecommunications failures, break-ins and similar events. Our operations are dependent on our ability to protect our computer systems against these unexpected adverse events. If any of the foregoing occurs, we may experience a complete system shutdown. Any business interruption insurance that we carry is unlikely to be sufficient to compensate us for loss of business in the event of a significant catastrophe.

In addition, interruptions in our services could result from the failure of our telecommunications providers to provide the necessary data communications capacity in the time frame we require. Our TradeDragon technology resides on computer systems located in our data centers housed by us in Hong Kong. These systems' continuing and uninterrupted performance is critical to our success, as a substantial portion of the revenue depend on the continuing availability of these systems. Despite precautions that we have taken, unanticipated problems affecting our systems have from time to time in the past caused, and in the future could cause, interruptions in the delivery of our solutions. Our business, results of operations and financial condition could be materially and adversely affected by any damage or failure that interrupts or delays our operations. To improve the performance and to prevent disruption of our services, we may have to make substantial investments to deploy additional servers or one or more copies of our Web sites to mirror our online resources. Although we believe we carry property insurance with adequate coverage limits, our coverage may not be adequate to compensate us for all losses, particularly with respect to loss of business and reputation that may occur.

In addition, terrorist acts or acts of war may cause damage to our employees, facilities, clients, our clients' customers and vendors, which could significantly impact our revenues, costs and expenses and financial position. The potential for future terrorist attacks, the national and international responses to terrorist attacks or perceived threats to national security, and other acts of war or hostility have created many economic and political uncertainties that could adversely affect our business and results of operations in ways that cannot be presently predicted. We are predominantly uninsured for losses and interruptions caused by terrorist acts and acts of war.

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Our network operations may be vulnerable to hacking, viruses and other disruptions, which may make our products and services less attractive and reliable.

Internet usage could decline if any well-publicized compromise of security occurs. "Hacking" involves efforts to gain unauthorized access to information or systems or to cause intentional malfunctions or loss or corruption of data, software, hardware or other computer equipment. Hackers have made many attempts to breach the security of our network operations, with minimal disruption to date. If hackers are successful in the future, they could misappropriate proprietary information, which could lead to litigation against us, or cause substantial disruptions in our service. We may be required to expend capital and other resources to protect our Web site against hackers. Any measures we may take may not be effective. In addition, the inadvertent transmission of computer viruses could expose us to a material risk of loss or litigation and possible liability, as well as materially damage our reputation and decrease our user traffic.

We depend on proprietary rights and we face the risk of infringement.

Our success and ability to compete are substantially dependent on our internally developed technologies and trademarks, which we protect through a combination of copyright, trade secret and trademark law. Patent applications and trademark applications we submit may not be approved. Even if they are approved, such patents or trademarks may be successfully challenged by others or invalidated. If our trademark registrations are not approved because third parties own such trademarks, our use of such trademarks will be restricted unless we enter into arrangements with such third parties that may be unavailable on commercially reasonable terms.

We generally enter into confidentiality or license agreements with our employees, consultants and corporate partners, and generally control access to and distribution of our technologies, documentation and other proprietary information. Despite our efforts to protect our proprietary rights from unauthorized use or disclosure, parties may attempt to disclose, obtain or use our solutions or technologies. The steps we have taken may not prevent misappropriation of our solutions or technologies, particularly in many foreign countries in which we operate, where laws or law enforcement practices may not protect our proprietary rights as fully as in the United States.

We have, from time to time, been, and may in the future be, subject to claims of alleged infringement of the trademarks and other intellectual property rights of third parties by us or by customers who employ our advertising solutions. We may be required, or may elect, to indemnify these parties against such claims. Such claims and any resultant litigation could subject us to significant liability for damages and could result in the invalidation of our proprietary rights. In addition, even if we prevail, such litigation could be time-consuming and expensive to defend, and could result in the diversion of our time and attention, any of which could materially and adversely affect our business, results of operations and financial condition. Any claims or litigation from third parties may also result in limitations on our ability to use the trademarks and other intellectual property subject to such claims or litigation unless we enter into arrangements with the third parties responsible for such claims or litigation, which may be unavailable on commercially reasonable terms, if at all.

Future currency fluctuations and restrictions on currency exchange may adversely affect our business, including limiting our ability to convert Chinese renminbi into foreign currencies and, if Chinese renminbi were to decline in value, reducing our revenues in U.S. dollar terms.

Our reporting currency is the U.S. dollar and our operations in China and Hong Kong use their respective local currencies as their functional currencies. The majority of our revenues derived and expenses incurred are in currencies other than the U.S. dollar. We are subject to the effects of exchange rate fluctuations with respect to any of these currencies. We can offer no assurance that these will be stable against the U.S. dollar or any other foreign currency.

The income statements of our international operations are translated into U.S. dollars at the average exchange rates in each applicable period. To the extent the U.S. dollar strengthens against foreign currencies, the translation of these foreign currencies denominated transactions results in reduced revenues, operating expenses and net income for our international operations. Similarly, to the extent the U.S. dollar weakens against foreign currencies, the translation of these foreign currency denominated transactions results in increased revenues, operating expenses and net income for our international operations. We are also exposed to foreign exchange rate fluctuations as we convert the financial statements of our foreign subsidiaries into U.S. dollars in consolidation. If there is a change in foreign currency exchange rates, the conversion of the foreign subsidiaries' financial statements into U.S. dollars will lead to a translation gain or loss which is recorded as a component of other comprehensive income. In addition, we have certain assets and liabilities that are denominated in currencies other than the relevant entity's functional currency. Changes in the functional currency value of these assets and liabilities create fluctuations that will lead to a transaction gain or loss. We have not entered into agreements or purchased instruments to hedge our exchange rate risks, although we may do so in the future. The availability and effectiveness of any hedging transactions may be limited and we may not be able to successfully hedge our exchange rate risks.

 

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Changes to existing accounting pronouncements, including SFAS 123R, or taxation rules or practices may adversely affect our reported results of operations or how we conduct our business.

A change in accounting pronouncements or taxation rules or practices can have a significant effect on our reported results and may even affect our reporting of transactions completed before the change is effective. Pursuant to SEC rules, we are required to implement the Statement of Financial Accounting Standards No. 123 (revised 2004), "Share-Based Payment" ("SFAS 123R") starting in the first quarter of 2006. SFAS 123R requires us to measure compensation costs for all share-based compensation (including stock options and our employee stock purchase plan, as currently constructed) at fair value and take compensation charges equal to that value. The method that we use to determine the fair value of stock options is based upon, among other things, the volatility of our ordinary shares. The price of our ordinary shares has historically been volatile. Therefore, the requirement to measure compensation costs for all share-based compensation under SFAS 123R could negatively affect our profitability and the trading price of our ordinary shares. SFAS 123R and the impact of expensing on our reported results could also limit our ability to continue to use stock options as an incentive and retention tool, which could, in turn, hurt our ability to recruit employees and retain existing employees. Other new accounting pronouncements or taxation rules and varying interpretations of accounting pronouncements or taxation practice have occurred and may occur in the future. This change to existing rules, future changes, if any, or the questioning of current practices may adversely affect our reported financial results or the way we conduct our business.

While we believe that we currently have adequate internal control procedures in place, we are still exposed to potential risks from recent legislation requiring companies to evaluate controls under Section 404 of the Sarbanes-Oxley Act of 2002.

While we believe that we currently have adequate internal control procedures in place, we are still exposed to potential risks from recent legislation requiring companies to evaluate controls under Section 404 of the Sarbanes-Oxley Act of 2002. Under the supervision and with the participation of our management, we have evaluated our internal controls systems in order to allow management to report on our internal controls, as required by Section 404 of the Sarbanes-Oxley Act. We have performed the system and process evaluation and testing required in an effort to comply with the management certification requirements of Section 404. As a result, we have incurred additional expenses and a diversion of management's time. If we are not able to continue to meet the requirements of Section 404 in a timely manner or with adequate compliance, we might be subject to sanctions or investigation by regulatory authorities, such as the SEC or the Nasdaq National Market. Any such action could adversely affect our financial results and the market price of our ordinary shares.

Our stock price has been historically volatile and may continue to be volatile, which may make it more difficult for you to resell shares when you want at prices you find attractive.

The trading price of our ordinary shares has been and may continue to be subject to considerable daily fluctuations. During the twelve months ended December 31, 2008, the closing sale prices of our ordinary shares on the Over-the-Counter Bulletin Board ranged from $0.018 to $0.143 per share and the closing sale price on April 14, 2009 was $0.014 per share. Our stock price may fluctuate in response to a number of events and factors, such as quarterly variations in operating results, announcements of technological innovations or new products and media properties by us or our competitors, changes in financial estimates and recommendations by securities analysts, the operating and stock price performance of other companies that investors may deem comparable, new governmental restrictions or regulations and news reports relating to trends in our markets. In addition, the stock market in general, and the market prices for China-related and Internet-related companies in particular, have experienced extreme volatility that often has been unrelated to the operating performance of such companies. These broad market and industry fluctuations may adversely affect the price of our ordinary shares, regardless of our operating performance.

We may be classified as a passive foreign investment company, which could result in adverse U.S. tax consequences to U.S. investors.

Based upon the nature of our income and assets, we may be classified as a passive foreign investment company, or PFIC, by the United States Internal Revenue Service for U.S. federal income tax purposes. This characterization could result in adverse U.S. tax consequences to you. For example, if we are a PFIC, our U.S. investors will become subject to increased tax liabilities under U.S. tax laws and regulations and will become subject to more burdensome reporting requirements. The determination of whether or not we are a PFIC is made on an annual basis, and those determinations depend on the composition of our income and assets, including goodwill, from time to time. Although in the past we have operated our business and in the future we intend to operate our business so as to minimize the risk of PFIC treatment, you should be aware that certain factors that could affect our classification as PFIC are out of our control. For example, the calculation of assets for purposes of the PFIC rules depends in large part upon the amount of our goodwill, which in turn is based, in part, on the then market value of our shares, which is subject to change. Similarly, the composition of our income and assets is affected by the extent to which we spend the cash we have raised on acquisitions and capital expenditures. In addition, the relevant authorities in this area are not clear and so we operate with less than clear guidance in our effort to minimize the risk of PFIC treatment. Therefore, we cannot be sure whether we are not and will not be a PFIC for the current or any future taxable year. In the event we are determined to be a PFIC, our stock may become less attractive to U.S. investors, thus negatively impacting the price of our stock.

 

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We have a single shareholder who can substantially influence the outcome of all matters voted upon by our shareholders and whose interests may not be aligned with yours.

Our former Chief Executive Officer, Michael Mak, beneficially holds the majority shareholder vote. As a result, Mr. Mak is able to substantially influence all matters requiring the approval of our shareholders, including the election of directors and the approval of significant corporate transactions such as acquisitions. This concentration of ownership could delay, defer or prevent a change in control or otherwise impede a merger or other business combination that the Board of Directors or other shareholders may view favorably.

We must rely on the Chinese government to develop China's Internet infrastructure and, if it does not develop this infrastructure, our ability to grow our business could be hindered.

The Chinese government's interconnecting, national networks connect to the Internet through government-owned international gateways, which are the only channels through which a domestic Chinese user can connect to the international Internet network. We rely on this backbone and China Telecom and China Netcom to provide data communications capacity primarily through local telecommunications lines. Although the Chinese government has announced plans to aggressively develop the national information infrastructure, we cannot assure you that this infrastructure will be developed. In addition, we have no guarantee that we will have access to alternative networks and services in the event of any disruption or failure. If the necessary infrastructure standards or protocols or complementary products, services or facilities are not developed by the Chinese government, the growth of our business could be hindered.

We may be adversely affected by complexity, uncertainties and changes in PRC regulation of Internet business and companies, including limitations on our ability to own key assets such as our website.

The Chinese government heavily regulates its Internet sector including the legality of foreign investment in the Chinese Internet sector, the existence and enforcement of content restrictions on the Internet and the licensing and permit requirements for companies in the Internet industry. Because these laws, regulations and legal requirements with regard to the Internet are relatively new and evolving, their interpretation and enforcement involve significant uncertainty. In addition, the Chinese legal system is a civil law system in which decided legal cases may be cited for reference but have little precedential value. As a result, in many cases it is difficult to determine what actions or omissions may result in liability. Issues, risks and uncertainties relating to China's government regulation of the Chinese Internet sector include the following:

o

We only have contractual control over our website in China; we do not own it due to the restriction of foreign investment in businesses providing value-added telecommunication services, including computer information services, online promotional advertising or electronic mail box services.

 

o

In addition, uncertainties relating to the regulation of the Internet business in China, including evolving licensing practices, give rise to the risk that permits, licenses or operations at some of our companies may be subject to challenge, which may be disruptive to our business, or subject us to sanctions, requirements to increase capital or other conditions or enforcement, or compromise enforceability of related contractual arrangements, or have other harmful effects on us.

 

o

On December 11, 2001, the day China formally joined the World Trade Organization, the PRC State Council promulgated the FITE Regulations, which became effective on January 1, 2002. The FITE Regulations stipulate that the foreign party to a foreign-invested telecommunications enterprise can hold an equity share in such foreign-invested telecommunications enterprise that provides basic telecom services or value-added telecom services, ultimately not to exceed 49% or 50%, respectively. The Administrative Measures for Telecommunications Business Operating License were promulgated by the Chinese Ministry of Information Industry (MII) on December 26, 2001 and came into effect on January 14, 2002 to supplement the FITE Regulations. However, there are still uncertainties regarding the interpretation and application of the FITE Regulations.

 

o

The numerous and often vague restrictions on acceptable content in China subject us to potential civil and criminal liability, temporary blockage of our website or complete cessation of our website. For example, the State Secrecy Bureau, which is directly responsible for the protection of state secrets of all Chinese government and Chinese Communist Party organizations, is authorized to block any website it deems to be leaking state secrets or failing to meet the relevant regulations relating to the protection of state secrets in the distribution of online information.

 

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o

Because the definition and interpretation of prohibited content are in many cases vague and subjective, it is not always possible to determine or predict what and how content might be prohibited under existing restrictions or restrictions that might be imposed in the future. For example, in January 2005, the Chinese State Administration of Radio, Film & Television ("SARFT"), which regulates radio and television stations in China, issued a notice prohibiting commercials for value-added services related to "fortune-telling" from airing on radio and television stations, effective in February 2005. This notice could also lead to further actions by other Chinese government authorities to prohibit the sale of such fortune-telling related value-added services, which could have a material adverse effect on our financial position, results of operations, or cash flows. SARFT or other Chinese government authorities may prohibit the marketing of other advertising services via a channel we depend on to generate revenues, which could also have a material adverse effect on our financial position, results of operations or cash flows.

 

o

Certain Chinese governmental authorities have stated publicly that they are in the process of preparing new laws and regulations that will govern Internet activities. The areas of regulation currently include online advertising, online news reporting, online publishing, and the provision of industry-specific (e.g., drug-related) information over the Internet. Other aspects of our online operations may be subject to regulation in the future. Our operations may not be consistent with these new regulations when they are put into effect and, as a result, we could be subject to severe penalties as discussed above.

 

o

The governing body of China's mobile industry, from time to time issues policies that regulate the business practices relating to advertising. We cannot predict the timing or substance of such regulations. Such regulations may have a negative impact on our business.

The interpretation and application of existing Chinese laws, regulations and policies, the stated positions of the MII and possible new laws, regulations or policies have created substantial uncertainties regarding the legality of existing and future foreign investments in, and the businesses and activities of, Internet businesses in China, including our business.

We may be exposed to infringement claims by third parties, which, if successful, could cause us to pay significant damage awards.

Third parties may initiate litigation against us alleging infringement of their proprietary rights. In the event of a successful claim of infringement and our failure or inability to develop non-infringing technology or license the infringed or similar technology on a timely basis, our business could be harmed. In addition, even if we are able to license the infringed or similar technology, license fees could be substantial and may adversely affect our results of operations.

Our failure to compete successfully may hinder our growth.

The markets for Internet advertising and related products and services are intensely competitive and such competition is expected to increase. Our failure to compete successfully may hinder our growth. We believe that our ability to compete depends upon many factors both within and beyond our control, including:

o

the development of new online advertising media and methods;

 

o

the timing and market acceptance of new products and enhancements of existing services developed by us and our competitors;

 

o

the ability to attract and retain qualified personnel;

 

o

changing demands regarding customer service and support;

 

o

shifts in sales and marketing efforts by us and our competitors; and

 

o

the ease of use, performance, price and reliability of our services and products.

 

Some of our competitors have longer operating histories, greater name recognition, larger customer bases and significantly greater financial, technical and marketing resources than ours. In addition, current and potential competitors have established or may establish cooperative relationships among themselves or with third parties to increase the ability of their products or services to address the needs of our prospective clients. In addition, most online advertising companies are seeking to broaden their business models, so that companies that do not currently compete directly with us may decide to compete more directly with us in the future. We may be unable to compete successfully against current or future competitors.

 

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Changes in laws and standards relating to data collection and use practices and the privacy of internet users, or related litigation, could harm our business.

The U.S. federal and various state governments have recently proposed limitations on the collection and use of information regarding Internet users. In 2004 and 2005, the U.S. Congress proposed several new pieces of legislation that would limit the use of technologies deemed to be "spyware", which some bills have defined to include cookies, Web beacons and javascript, which are required by our products and services. The effectiveness of our advertising products and services could be significantly limited by federal and state regulations limiting the collection or use of information regarding Internet users. Since many of the proposed federal and state laws or regulations are being developed, we cannot yet determine the impact these regulations may have on our business. In addition, growing public concern about privacy and the collection, distribution and use of personal information has led to self-regulation of these practices by the Internet advertising and direct marketing industry, and to increased federal and state regulation. Lastly, a number of civil actions have been brought by federal and state authorities against companies alleged to have distributed "spyware" without the proper consent of users. The Network Advertising Initiative has developed self-regulatory principles for online preference marketing. We are also subject to various federal and state regulations concerning the collection, distribution and use of personal information. These laws include the Children's Online Privacy Protection Act and state laws that limit or preclude the use of voter registration and drivers license information, as well as other laws that govern the collection and use of consumer credit information. While we monitor legislative initiatives, in the event that more onerous federal or state laws or regulations are enacted or applied to us or to our clients, our business, financial condition and results of operations could be materially and adversely affected.

Privacy concerns may prevent us from collecting user data.

Growing concerns about the use of cookies and data collection may limit our ability to develop user profiles. Web sites typically place small files of information, commonly known as "cookies," on a user's hard drive, generally without the user's knowledge or consent. Cookie information is passed to the Web site through the Internet user's browser software. Our software technology enables the use of cookies and other non-personally-identifying information to deliver targeted advertising and to limit the frequency with which an advertisement is shown to a user. Most currently available Internet browsers allow users to modify their browser settings to prevent cookies from being stored on their hard drive, and Microsoft Corporation changed the design and instrumentation of its Web browser to give users the option to accept or reject third-party cookies. A small minority of users are currently choosing to prevent certain cookies. Users can also delete cookies from their hard drive or modify them at any time. Some Internet commentators and privacy advocates have suggested limiting or eliminating the use of cookies. Any reduction or limitation in the use of cookies or increase in the number of users blocking cookies could limit the effectiveness of our sales and marketing efforts and impair our profiling and targeting capabilities. Such changes also could adversely affect our ability to determine the reach of advertising campaigns sold and delivered by us and the frequency with which users of sites see the same advertisement.

If the use or effectiveness of cookies is limited, we would likely have to switch to other technology that would allow us to gather demographic and behavioral information. While such technology currently exists, it is substantially less effective than cookies. Replacement of cookies could require significant engineering time and resources, might not be completed in time to avoid negative consequences to our business, financial condition or results of operations, and might not be commercially feasible.

We face risks associated with technological changes.

The Internet and Internet advertising markets are characterized by rapidly changing technologies, evolving industry standards, frequent new product and service introductions and changing customer demands. Our future success will depend on our ability to adapt to rapidly changing technologies and to enhance existing solutions and develop and introduce a variety of new solutions to address our customers' changing demands. We may experience difficulties that could delay or prevent the successful design, development, introduction or marketing of our services. In addition, our new services or enhancements must meet the requirements of our current and prospective customers and must achieve significant market acceptance. Material delays in introducing new services and enhancements may cause customers to forego purchases of our services and purchase those of our competitors.

 

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Item 1B. Unresolved Staff Comments

Not applicable.

 

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Overview and Future Plan of Operations

In 2008 the Company generated all its revenue from the media and advertising business. In March 2008 the Company discontinued production of the Who Wants To Be A Millionaire? TV show and has largely scaled down its TV entertainment business.  In 2008 revenue declined by 53.4% from $10,664,613 in 2007 to $4,968,145 in 2008 primarily resulting from decreased advertising sales due to the global economic downturn starting from the fourth quarter of 2008. The Company experienced a loss of $3,217,339.

Going Forward

With regard to our Media & Advertising business going forward, we plan to continue to work with our existing customer base to see them through the prevailing economic conditions and we intend to seek new customers to help offset the soft positions we are experiencing as a result of our existing customers’ currently soft market.  Regarding our TV entertainment business in March of 2009 we entered into discussions related to investment in or the acquisition of Idea Asia.

Results of Operations for the Twelve Months Ended December 31, 2008 and December 31, 2007

During the twelve months ended December 31, 2008, we experienced a net loss of $3,217,339 attributable primarily to a significant decrease in revenue. During this period we generated all of our revenues from our media & advertising business.

Revenue

In 2008, our revenues declined by 53.4% from $10,664,613 in 2007 to $4,968,145 in 2008 primarily resulting from decreased advertising sales due to global economic downturn starting from the fourth quarter of 2008.

Cost of Sales

Cost of sales were $4,107,219 representing 82.7% of our total revenue of $4,968,145 for the twelve month period ended December 31, 2008 as compared to $3,495,128, also 32.8% of total revenue of $10,664,613 for the twelve month period ended December 31, 2007. The increase in cost of sales as a percentage of total revenue is attributed to a significant decrease in revenue returned against comparable selling efforts.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased $4,655,640 to $4,390,618 for the twelve month period ended December 31, 2008 as compared to $9,046,258 for the twelve month period ended December 31, 2007. The decrease in expenses during the twelve month period ended December 31, 2008 was primarily attributable to a reduction in consulting in professional fees of $5,312,222.

Depreciation, Amortization of Intangible Assets, and Impairment Loss of Property, Plant and Equipment

In 2008 we experienced non-cash expenditures of $210,359 from depreciation of fixed assets and amortization as compared to $195,960 in 2007, an increase of 7%. Also we made an impairment loss on long live assets including equipments, customer list and database of $761,062 after the impairment test under SFAS No. 142.

 

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Net Income/Loss

Net loss for 2008 was $3,217,339 compared to net loss of $5,908,545 in 2007. Loss is primarily attributed to significant decrease in revenue in 2008.

Trends, Events, and Uncertainties

Demand for our services and products will be dependent on, among other things, market acceptance of our concept and general economic conditions, which are cyclical in nature. Our business operations may be adversely affected by our competitors and prolonged recessionary periods. We are in the process of seeking additional financing to accelerate our business plan. There is no assurance additional financing will be available, or if available, that it will be available on reasonable terms. Even if we do obtain such financing, there is no assurance that we will be able to generate profitable operations.

Liquidity and Capital Resources for the Twelve Month Period Ended December 31, 2008 and 2007

Cash flows from operating activities

We experienced positive cash flows provided by operations in the amount of $260,911 for the twelve month period ended December 31, 2008, primarily due to net loss from continuing operations of $2,958,953 offset by non-cash items of impairment charges of $766,217, decrease in accounts receivable of $2,875,582 and decrease in income tax payable of $424,016.

For the twelve month period ended December 31, 2007 we experienced positive cash flows provided by operations in the amount of $3,071,989, primarily due to net loss from operations of $2,746,625 offset by non-cash charges such as depreciation and amortization of $195,960, common stock issued for services of $5,293,825, stock-based compensation to an executive of $260,877 and changes in operating assets such as an increase in accounts receivable of $484,079 coupled with decrease in our accounts payable and accrued expenses of $359,686.

Net cash used in discontinued operations was $187,574 for the twelve month period ended December 31, 2008, while net cash used in discontinued operations was $1,446,039 for the twelve month period ended December 31, 2007.

Cash flows from investing activities

Net cash flows used in investing activities for 2008 was $314,200 primarily representing the expenditure on intangible assets of $585,076.

For 2007 net cash flows used in investing activities was $1,030,407 primarily representing the purchase of property, plant and equipment in the amount of $889,542.

Cash flows from financing activities

Net cash flows used in financing activities for 2008 was $589,350 representing the repayments of secured bank loan of $847,953 partially offset by repayment from related parties of $394,897.

For 2007 net cash flows provided by financing activities was $1,437,008 representing repayment from related parties of $562,074 and net funds advanced under banking agreements of $737,456.

Liquidity

Our growth plans may require additional funding from outside sources. We intend to pursue discussions with existing shareholders, third party financing sources and potential lenders to ensure access to funds as required. Our future liquidity will depend on our revenue growth and our ability to sell our products and services at positive gross margins and control our operating expenses. Over the coming twelve months, we expect to spend approximately $500,000 for operating expenses. These capital needs must be met from external sources of financing.

The accompanying consolidated financial statements contemplate continuation of the Company as a going concern. Due to the Company’s current year net loss of approximately $3,217,339 substantial doubt to continue as a going concern is raised and realization of a major portion of the assets in the accompanying consolidated balance sheet is dependent upon the continued operations of the Company, which in turn is dependent upon the Company's ability to meet its financing requirements and the success of its future operations.

 

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Management believes the Company has the ability to continue as a going concern only if it can meet its financing requirements through external sources of financing. Management plans to continue reviewing all aspects of its business and make adjustments as needed to those considered unprofitable. The Company must meet its financing requirements through external sources of financing or the Company cannot continue to operate as a going concern. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amount and classification of liabilities or any other adjustment that might be necessary should the Company be unable to continue as a going concern.

On a long-term basis, our liquidity will be dependent on establishing profitable operations, receipt of revenues, additional infusions of capital and additional financing. If necessary, we may raise capital through an equity or debt offering. The funds raised from this offering will be used to develop and execute our business plan. However, there can be no assurance that we will be able to obtain additional equity or debt financing in the future, if at all. If we are unable to raise additional capital, our growth potential will be adversely affected.

Critical Accounting Policies

The financial statements are prepared in accordance with accounting principles generally accepted in the U.S., which requires us to make estimates and assumptions in certain circumstances that affect amounts reported in the accompanying financial statements and related footnotes. In preparing these financial statements, management has made its best estimates and judgments of certain amounts included in the financial statements, giving due consideration to materiality. We do not believe there is a great likelihood that materially different amounts would be reported related to the accounting policies described below. However, application of these accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates.

Revenue recognition

In accordance with the SEC’s Staff Accounting Bulletin No. 104, “Revenue Recognition”, the Company recognizes revenue when persuasive evidence of an arrangement exists, transfer of title has occurred or services have been rendered, the selling price is fixed or determinable and collectibility is reasonably assured.

Accounts receivable and provision for bad debts

Accounts receivable, net of provision for bad debts, are presented at net realizable value. The Company periodically records a provision for bad debts based on management’s judgment resulting from an evaluation of the collectibility of accounts receivable by assessing, among other factors, our customer’s willingness or ability to pay, repayment history, general economic conditions, and the ongoing relationship with our customers. The total amount of this provision is determined by first identifying the receivables of customers that are considered to be a higher credit risk based on their current overdue accounts, difficulties in collecting from these customers in the past, and their overall financial condition. For each of these customers, the Company estimates the extent to which the customer will be able to meet its financial obligations and records a provision that reduces our trade receivable for that customer to the amount that is reasonably believed will be collected. Additional provisions may be required in the future if the financial condition of our customers or general economic conditions deteriorate, thereby reducing net earnings.

Impairment of long-lived assets

We review property, plant and equipment and puchased intangible assets for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. Our asset impairment review assesses the fair value of the assets based on the future cash flows the assets are expected to generate. An impairment loss is recognized when estimated undiscounted future cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset (if any) are less than the carrying value of the asset. When an impairment is identified, the carrying amount of the asset is reduced to its estimated fair value. Deterioration of our business in a geographic region or within a business segment in the future could also lead to impairment adjustments as such issues are identified. The accounting effect of an impairment loss would be a charge to earnings, thereby reducing our net earnings.

 

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Accounting for stock-based compensation

The Company adopted SFAS No. 123  (revised  2004), "Share-Based  Payment" ("SFAS  123(R)"), on January 1, 2006, which requires the measurement and recognition of compensation  expense for all share-based awards made to employees and directors, including employee stock options and shares issued through its employee stock purchase plan, based on estimated fair values. Prior to the adoption of SFAS 123(R), the Company accounted for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board ("APB") Opinion No.25, "Accounting for Stock Issued to Employees." Under the intrinsic value method that was used to account for stock-based awards prior to January 1, 2006, which had been allowed under the original provisions of SFAS 123, compensation expense was recorded on the date of grant if the current market price of the underlying stock exceeded the exercise price. Any compensation expense was recorded on a straight-line basis over the vesting period of the grant. The adoption of this standard had a significant impact to the Company's accompanying consolidated financial statements since the Company entered into an employment agreement included stock-based compensation awards with its President, Michael Mak, who is also the Company’s Chief Executive Officer and interim Chief Financial Officer, on August 18, 2006. Except for the above, the adoption of this standard had no impact to the Company’s financial position, results of operations or cash flows as the Company's previous stock-based compensation awards expired prior to January 1, 2006, and there have been no grants during the current year. The accounting effect of recording compensation expense is a charge to earnings, thereby reducing our net earnings.

Taxes on earnings

We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. We have considered future market growth, forecasted earnings, future taxable income and the mix of earnings in the jurisdictions in which we operate in determining the need for a valuation allowance. In the event we determine that we would not be able to realize all or part of our net deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to earnings in the period such determination is made. Likewise, if we later determine that it is more likely than not that the net deferred tax assets would be realized, the previously provided valuation allowance would be reversed.

 

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Item 8. Financial Statements and Supplementary Data.

ASIA GLOBAL HOLDINGS CORP.

Consolidated Financial Statements

For The Years Ended December 31, 2008 and 2007

 

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ASIA GLOBAL HOLDINGS CORP.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

		Page
Report of Independent Registered Public Accounting Firm		F-2
Consolidated Balance Sheets		F-3
Consolidated Statements of Operations And Comprehensive Loss		F-4
Consolidated Statements of Cash Flows		F-5
Consolidated Statements of Stockholders’ (Deficit) Equity		F-6
Notes to Consolidated Financial Statements		F-7 to F-29

 

F-1

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of

Asia Global Holdings Corp.

We have audited the accompanying consolidated balance sheets of Asia Global Holdings Corp. and its subsidiaries (“the Company”) as of December 31, 2008 and 2007, and the related consolidated statements of operations and comprehensive loss, cash flows and stockholders’ (deficit) equity for the years ended December 31, 2008 and 2007. The financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits include consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2008 and 2007, and the results of operations and cash flows for the years then ended and in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has incurred substantial losses over the past years, all of which raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. These consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ ZYCPA Company Limited

ZYCPA Company Limited

(Formerly Zhong Yi (Hong Kong) C.P.A. Company Limited)

Certified Public Accountants

Hong Kong, China

April 15, 2009

 

 

F-2

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F-3

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ASIA GLOBAL HOLDINGS CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

(Currency expressed in United States Dollars (“US$”), except for number of shares)

		Years ended December 31,
		2008				2007
Revenues, net		$	4,968,145			$	10,664,613
Cost of revenue			(4,107,219	)			(3,495,128	)
Gross profit			860,926				7,169,485
Operating expenses:
Sales and marketing			2,177,927				1,423,005
Consulting and professional fee			157,991				5,470,213
Depreciation and amortization			210,359				195,960
Impairment loss on long-lived assets			761,062				690,611
Stock based compensation to executives			123,750				260,877
General and administrative			959,529				1,005,592
Total operating expenses			4,390,618				9,046,258
LOSS FROM OPERATIONS			(3,529,692	)			(1,876,773	)
Other income (expense):
Other income			12,821				149
Interest income			7,155				17,868
Interest expense			(87,677	)			(77,260	)
Total other expense			(67,701	)			(59,243	)
LOSS BEFORE INCOME TAXES			(3,597,393	)			(1,936,016	)
Income tax benefit (expense)			638,440				(810,609	)
LOSS FROM CONTINUING OPERATIONS			(2,958,953	)			(2,746,625	)
Loss from discontinued operations			(258,386	)			(3,161,920	)
NET LOSS		$	(3,217,339	)		$	(5,908,545	)
Other comprehensive (loss) income:
- Foreign currency translation (loss) gain			(13,851	)			2,741
COMPREHENSIVE LOSS		$	(3,231,190	)		$	(5,905,804	)
Per share information:
Net loss per share from continuing operation – Basic and diluted		$	(0.02	)		$	(0.03	)
Net loss per share from discontinued operation – Basic and diluted		$	(0.00	)		$	(0.03	)
Weighted average number of shares outstanding – Basic and diluted			132,000,356				93,978,667

See accompanying notes to consolidated financial statements.

 

F-4

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ASIA GLOBAL HOLDINGS CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

(Currency expressed in United States Dollars (“US$”))

		Years ended December 31,
		2008				2007
Cash flows from operating activities:
Loss from continuing operations		$	(2,958,953	)		$	(2,746,625	)
Adjustments to reconcile income (loss) from continuing operations to net cash (used in) provided by operating activities:
Depreciation and amortization			210,359				195,960
Stock-based compensation to an executive, non-cash			123,750				260,877
Common stock issued for services, non-cash			-				5,293,825
Impairment loss on long-lived assets			766,217				690,611
Change in operating assets and liabilities:
Accounts receivable, trade			2,875,582				(484,079	)
Prepayments and other current assets			(28,810	)			(35,941	)
Accounts payables and accrued liabilities			12,024				(359,686	)
Amount due to a related party			-				89,035
Deferred tax liabilities			(132,091	)			72,387
Income tax credit			(183,151	)			-
Income tax payable			(424,016	)			95,625
Net cash provided by operating activities			260,911				3,071,989
Net cash used in discontinued operations			(187,574	)			(1,446,039	)
Cash flows from investing activities:
Change in restricted cash			297,309				(140,865	)
Expenditure on intangible assets			(585,076	)			-
Purchase of property, plant and equipment			(26,433	)			(889,542	)
Net cash used in investing activities			(314,200	)			(1,030,407	)
Net cash used in discontinued operations			-				(1,173,359	)
Cash flows from financing activities:
Advances from related parties			394,897				562,074
Change in bank overdraft			(26,793	)			137,478
(Payments on) proceeds from the letters of credit			(103,878	)			221,378
Proceeds from secured bank loan			115,385				879,191
Payments on secured bank loan			(847,953	)			(601,791	)
Proceeds from capital lease			-				302,564
Payments on capital lease			(121,008	)			(63,886	)
Net cash (used in) provided by financing activities			(589,350	)			1,437,008
Net cash used in discontinued operations			(1,624	)			(37,540	)
Effect of exchange rate change on cash and cash equivalents			(14,812	)			2,741
NET CHANGE IN CASH AND CASH EQUIVALENTS			(846,649	)			824,393
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR			846,907				22,514
CASH AND CASH EQUIVALENTS, END OF YEAR		$	258			$	846,907
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes		$	100,818			$	641,797
Cash paid for interest expenses		$	87,677			$	77,306
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS:
Amounts due from minority shareholders in relation to unsettled investment cost of a subsidiary		$	-			$	820,513

See accompanying notes to consolidated financial statements.