<R>^{* represents less that 1.0%.}</R>

DESCRIPTION OF COMMON STOCK

We are authorized to issue 500,000,000 shares of Class A voting common stock, with a par value of $0.001, 500,000,000 shares of Class B non-voting common stock, with a par value of $0.001, and 100,000,000 shares of preferred stock, with a par value of $0.001. As at <R>October 15</R>, 2004 we had <R>39,530,968</R> shares of Class A common stock, no shares of Class B common stock and no preferred stock issued and outstanding. The Class A common stock carries no pre-emptive, conversion or subscription rights and is not redeemable. In addition, each share of Class A common stock is entitled to one vote on all matters submitted to a vote of stockholders. On matters submitted to a shareholder vote, a majority vote of stockholders is required to be actionable. Cumulative voting in the election of directors is denied. All shares of Class A common stock are entitled to participate equally in dividends and rank equally upon liquidation. All shares of Class A common stock when issued are fully paid and non-assessable.

Each stockholder is entitled to receive the dividends as may be declared by our board of directors out of funds legally available for dividends and, in the event of liquidation, to share pro rata in any distribution of our assets after payment of liabilities. Our board of directors is not obligated to declare a dividend. Any future dividends will be subject to the discretion of our board of directors and will depend upon, among other things, future earnings, the operating and financial condition of our company, its capital requirements, general business conditions and other pertinent factors. It is not anticipated that dividends will be paid in the foreseeable future.

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CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE

On November 5, 2003, we engaged the firm of BDO Dunwoody LLP to audit our financial statements for the fiscal years ended December 31, 2003 and 2002. There has been no change in the accountants and no disagreements with BDO Dunwoody LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope procedure.

Prior to <R>engaging</R> BDO Dunwoody LLP <R>on November 5, 2003, our company did not have an independent accountant, nor did our company retain any independent accountants</R> regarding the application of accounting principles to any specific completed or contemplated transactions or the type of audit opinion that might be rendered on our financial statements.

INTEREST OF NAMED EXPERTS AND COUNSEL

No expert or counsel named in this prospectus as having prepared or certified any part of this prospectus or having given an opinion upon the validity of the securities being registered or upon other legal matters in connection with the registration or offering of the Class A common stock was employed on a contingency basis or had, or is to receive, in connection with the offering, a substantial interest, directly or indirectly, in the registrant or any of its parents or subsidiaries. Nor was any such person connected with the registrant or any of its parents, subsidiaries as a promoter, managing or principal underwriter, voting trustee, director, officer or employee.

EXPERTS

The consolidated financial statements of Asia Broadband, Inc. included in this registration statement have been audited by BDO Dunwoody LLP, independent chartered accountants, to the extent and for the periods set forth in their report (which contains an explanatory paragraph regarding our company's ability to continue as a going concern) appearing elsewhere in the registration statement, and are included in reliance upon such report given upon the authority of said firm as experts in auditing and accounting. We did not engage any independent accounting firm prior to November 5, 2003.

DISCLOSURE OF SEC POSITION OF
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

Nevada corporation law provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys' fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.

Nevada corporation law also provides that to the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding, or in defense of any claim, issue or matter therein, the corporation shall indemnify him against expenses, including attorneys' fees, actually and reasonably incurred by him in connection with the defense.

Our Bylaws require us to indemnify any present and former directors, officers, employees, fiduciaries, agents, partners, trustees and each person who serves in any such capacities at our request against all costs, expenses, judgments, penalties, fines, liabilities and all amounts paid in settlement reasonably incurred by such persons in connection with any threatened, pending or completed action, action, suit or proceeding brought against such person by reason of the fact that such person was a director, officer, employee, fiduciary, agent, partner or trustees of our

26

company. We will only indemnify such persons if one of the groups set out below determines that such person has conduct themself in good faith and that such person:

The determination to indemnify any such person must be made:

We will not indemnify a director adjudged liable to our corporation or adjudged liable on the basis that personal benefit was improperly received by such director. Our indemnification is limited to reasonable expenses incurred in connection with any proceeding.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of our company under Nevada law or otherwise, our company has been advised that the opinion of the Securities and Exchange Commission is that such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable.

DESCRIPTION OF PROPERTY

We have two executive and head offices which are located at Suite 2000, 1066 West Hastings Street, Vancouver, British Columbia, Canada V6E 3X1 and Suite 130 - 10 Glen Lake Parkway, Atlanta, GA, USA 30328.

Our Vancouver offices are within an executive suite area of approximately 6,000 square feet. We maintain a duplicate set of corporate files in this location in a secured facility and have a dedicated executive suite including full use of shared administration, conference room facilities, administration, equipment and telecommunication network facilities. Our usage of the facilities is leased on a month-to-month basis from Oceanic Business Centre Inc., a party unrelated to our company, at a rate of $550 per month with an obligation of less than two months. Oceanic provides us with an office, a receptionist, photocopying facilities, mail and facsimile services and access to a boardroom. Our telephone number at our Vancouver office is 604.606.9066.

Our Atlanta offices are within an executive suite area of approximately 4,000 square feet. We maintain our corporate files in this location in a secured facility and have an executive suite including full use of shared administration, conference room facilities, administration equipment and telecommunication network facilities. Our usage of the facilities is leased on a month-to-month basis for a six month term ending November 30, 2004 from the Intelligent Office, a party unrelated to our company, at a rate of $990 per month. Our telephone number at our Atlantic office is 678.222.3456.

27

We also maintain an office with specialized multimedia content analysis and network facility capabilities located at Whistlers Hollow, The Friary, Freshford, Bath, United Kingdom BA2 7UE. This two floor office space combined is 1,200 square feet and includes office area, networking equipment area, office theatre with specialized acoustics, a theatre display screen and conference space. We lease this space and facilities on a month-to-month basis from Alexa Holdings Limited, a company controlled by Graham Brant, one of our directors and officers, at a rate of $1,660 per month with an obligation of one month. Our telephone number at our Bath office is 44.1225.721400.

Our subsidiary, Shanghai Broadband Network, Inc., is located at Suite 1212, Tomson Commercial Building, 710 Dong Fang Road, Pudong, Shanghai, People's Republic of China, P.O. 200122. This space is approximately 4,800 square feet in size and is located in the central commercial district of Pudong. The office space is leased on an annual basis from Xuetu Lu, a party unrelated to our company, for $44,000. The term of the lease expires on January 20, 2006. Our telephone number at our China office is 86.21.583.39090.

DESCRIPTION OF BUSINESS

<R></R>

<R>Development of Our Business</R>

We were incorporated on January 24, 1996 under the laws of the State of Nevada under the name of Gemini Marketing, Inc. On March 19, 1999 we changed our name from Gemini Marketing, Inc. to Merendon International, Inc. On July 27, 2000 we changed our name from Merendon International, Inc. to China Broadband Network, Inc. and on December 20, 2000 changed our name from China Broadband Network, Inc. to Asia Broadband, Inc. We were extra-provincially registered in British Columbia, Canada on January 12, 2004. Our principal executive offices in Canada are located at 2000 - 1066 West Hastings Street, Vancouver, British Columbia, Canada V6E 3X1. Our telephone number at our Vancouver office is 604.606.9066. Our principal executive offices in the United States are located at Suite 130 - 10 Glen Lake Parkway, Atlanta, Georgia, United States 30328. Our telephone number at our United States office is 678.222.3456.

<R> The business of Gemini Marketing and Merendon International was to identify and locate businesses in China which required assistance in the marketing of their products and services within and outside of China. During 2001, we changed our business plan to focus on the development of educational programs which could be delivered over the Internet. In August 2002, our company entered into an agreement with Q Group PLC, a United Kingdom company, to utilize Q Group's language instruction solutions and multimedia theme based educational content as the major source for our company's Internet based English programs. From the first months of 2003, our company has focussed on the re-design, translation and marketing of Q Group's content to serve China's local market. In November 2003, our company entered into our agreements with Fudan University and Shanghai Telecom to develop and market our programs under the Fudan New English Online program. </R>

We have one subsidiary, Shanghai Broadband Network, Inc., a corporation formed under the laws of the People's Republic of China on September 26, 2000, which operates under the name Shanghai Zhong Kuan Xin Xi Wang Luo You Xian Gong Si. We currently own 95.84% of Shanghai Broadband Network, Inc. with the remaining interests owned as follows: 2.08% by Shanghai Infoservice Tower Enterprise Development Ltd. and 2.08% by The Technical Center of the Shanghai Information Authority. This percentage ownership allocation changed from our previous share of 92.86%, and 3.57% for each of the two minority shareholders, as a result of our investment of $1,003,846 on May 2, 2004. <R>Our company's operations in China are carried out through our subsidiary, </R>Shanghai Broadband Network<R>, Inc. whose</R> principal office is located at Suite 1212, Tomson Commercial Building, 710 Dong

28

Fang Road, Pudong, Shanghai, People's Republic of China, P.O. 200122. <R>The management of Shanghai Broadband Network, Inc. is the same as our company and our company controls the daily operation and business direction of Shanghai Broadband Network, Inc. </R>

In 2000, we acquired a 70% interest in a feasibility study and business plan, which forms the basis of the collaborative agreement between Shanghai Infoservice Tower Enterprise Development Ltd. and Multicyber, Inc., a company which was, at the time, controlled by the then President of our company (who currently is the CEO of our company) for the payment of $100,000 in cash to Multicyber, Inc. The transaction was recorded as a pre-operational business development expense in the year ended December 31, 2000. Subsequently, our company, Shanghai Infoservice and The Technical Center of Shanghai Innovation Authority incorporated Shanghai Broadband Network, Inc. on September 26, 2000, with an initial registered capital of $1 million, to participate in a joint venture project to develop and distribute <R>Internet</R> broadband network products and services. Pursuant to the collaborative agreement between our company, Shanghai Infoservice and The Technical Center, we initially owned a 75% interest in Shanghai Broadband Network, Inc. with the remaining 25% interest being owned by the other partners. In exchange for its 75% interest in Shanghai Broadband Network, Inc., we contributed $750,000 in cash to the subsidiary and in exchange for their respective share of the 25% interest in Shanghai Broadband Network, Inc., Shanghai Infoservice and The Technical Center transferred the right to use the broadband network resources in Shanghai <R>for 20 years</R> valued at $250,000 (being the value agreed by both parties) into Shanghai Broadband Network, Inc. and the amount is recorded as an intangible asset on the consolidated balance sheet. All three parties also agreed to establish a board of directors with five members and, pursuant to a supplementary agreement between our company, Shanghai Infoservice and The Technical Center, we have complete control in the management and operation of Shanghai Broadband Network, Inc., including the appointment of members of the board of directors. Shanghai Infoservice and The Technical Center will participate ratably in the profits and losses of Shanghai Broadband Network, Inc. to the extent of their respective capital, and are only entitled to Shanghai Broadband Network, Inc.'s dividend distribution; they are not liable for debt incurred by Shanghai Broadband Network, Inc. In the event that Shanghai Broadband Network, Inc. is dissolved, Shanghai Infoservice and The Technical Center will not be liable for any debt payable after the dissolution.

The Technical Center of the Shanghai Information Authority is a Shanghai municipal government organization in charge of the development of the broadband infrastructure in the city of Shanghai. The Shanghai Infoservice Tower Enterprise Development Ltd. is a local Shanghai company with interests in a Internet data centre and who holds an education licence.

<R> We currently provide four different programs, three of which are focused on teaching English in the People's Republic of China. As at June 30, 2004 we have only generated nominal revenues from our programs. The other program is focused on teaching international business in English and Chinese. We maintain websites at www.asiabband.com, www.asiabroadbandinc.com, www.sh-elearning.com, www.ie21.com, www.ie21.com.cn, www.shanghaibroadband.com and www.eyakids.com. Information contained on our website does not form part of this prospectus. </R>

Our company designs and provides educational programs delivered in a variety of ways: (a) in a purely online format through the computer and/or over the Internet; (b) as blended learning programs with a portion of the program taught in a training centre and a portion delivered on a computer or over the Internet (which the student can complete at the training centre or at home); and (c) in a classroom campus setting which combines traditional classroom sessions with onsite workshops where a portion of the program is delivered on a computer in the onsite workshop. We currently provide four different content programs, three of which are focused on teaching English in China. The other program is focused on teaching international business in English and Chinese in China.

Our educational programs currently include:

- Fudan New English

- IE21 English

- Fudan International Business Diploma

- GE300 Government English Learning Program

Through various partnership agreements with content providers including Q Group, the Open Learning Foundation and Shanghai General Foreign Language Testing Center, we have incorporated some of the English language content into our programs. <R></R>Open Learning Foundation is a consortium of UK based universities which have designed and produced business content.

The Shanghai General Foreign Language Testing Center is a department operating under the <R>Shanghai Foreign Language University, which is the </R>second largest foreign language university in China<R></R>. We have a joint venture collaborative arrangement with the Testing <R>Center</R> department<R></R>. This department is the government authorized center established to provide English language testing for various <R></R>markets <R>including</R> government civil servants. Pursuant to this arrangement, we <R></R>agreed to work with the Testing Center department to establish a learning and testing center to prepare employees of the Shanghai Municipal Government for the GE 300 Government English Test discussed below. We <R></R>agreed to supply the online and paper teaching materials and the <R>Testing</R> Center has agreed to provide the physical facilities, the teaching staff and conduct a review of the teaching materials. Under the arrangement, we agreed that we will retain 75% and the Testing Center will retain 25% of any profit generated from the operation of this learning center. <R>Since the Shanghai Municipal Government has decided to discontinue this program for its civil servants, </R> we have not earned any revenue from this operation <R>to date and the Testing Center has not begun using the online and paper teaching materials. We have however agreed with the Testing Center to convert the GE300 program to a general English program for sale to the general public. We anticipate this program to be completed by the end of the first fiscal quarter in 2005. </R>

<R></R> The Q Group has invested to produce a multi-tiered English language multimedia learning system. Pursuant to <R>its</R> agreement <R>with Q Group</R>, we shared the ownership of the license for the "bilingual Internet enabled" version called Quartet Chinese English Online with the Q Group in exchange for our participation in the development and marketing of our system. <R>We used the Quartet Chinese English Online program as the source upon which we have developed our English programs, Fudan New English and IE21 English. We do not independently market the Quartet Chinese English program. Prior to our new agreement with the Q Group in May, 2004, we had agreed to pay a royalty of $20 for each student who enrolled in our Fudan New English program. </R> On May 20, 2004, we entered into an agreement with Q Group Plc whereby in consideration of us paying Q Group $250,000 ($150,000 before May 30, 2004, and $50,000 before each of May 30, 2005 and 2006), Q Group granted us a perpetual license to use Q Group's <R>Quartet</R> Chinese English <R>Online program and other related</R> content in our product lines, <R>Fudan New English and IE21 English and in any of our other current and future products. </R> As part of the agreement, we agreed to reduce the use of Q Group's <R>Quartet Chinese English Online program</R> content such that it will represent not more than 50% of the content in our product lines, Fudan New English, IE21 English and any other future programs we develop, after June 30, 2006. The Q Group also agreed that they would not license their Quartet Chinese English Online program content to parties in the government public educational sectors before June 30, 2006 in Shanghai, Jiangsu province and Zhejiang province and that we would have an exclusive license expiring on June 30, 2006 (except for the Jiangsu and Zhejiang provinces which will expire on June 30, 2005). We have agreed not to establish a Fudan New English training <R>center</R> and not to directly advertise Fudan New English in the Guangdong province before June 30, 2005.

30

In China, we have partnered the Fudan University in order to receive accreditation for two of our educational programs, Fudan New English and Fudan International Business Diploma. Students who successfully complete either of these programs will receive a certificate from the Fudan University. Fudan University is an established and recognized top tier university in China for comprehensive and business studies. This university is our partner for jointly offering and delivering the Fudan New English and Fudan International Business programs.

<R> Our company has entered into partnership agreements with the Fudan University and the Shanghai Foreign Language Institute and Open Learning Foundation. Through such agreements, our company shares co-branding trademark rights to Fudan New English, Fudan International Business and Interactive GE300. Through these trademark rights, our company is able to capitalize on the association that the word "Fudan" has with Fudan University. Fudan University is a large and well recognized and respected university in China. The Fudan University is a widely recognized university within the academic and university sectors. By being able to brand our program with the Fudan name, we believe that it will add immediate credibility to our program and allow it to be more recognizable by potential customers in China. </R>

One of the problems in teaching foreign languages is the rate at which students progress in learning the foreign language. Some students learn quicker than other students. Other problems include the lack of experienced teachers and high quality educational material. By combining traditional classroom teaching methods with modern computerized and Internet based content, we believe that we have developed a system that addresses these two problems.

Modern computers with multimedia capabilities combined with high-speed networks including the Internet can deliver educational content to a larger number of students. Students can opt for technology-driven teaching that is completely online (computer and/or Internet based), or they can select a combination of live classroom teaching and computer and/or Internet teaching.

Programs using multimedia effects produce an exciting learning experience using linguistically and academically approved English language, colorful and varying visual and auditory special effects, integrated tests, quizzes and numerous options for the student to learn in various ways.

English language training is becoming an increasingly important part of the traditional school curriculum in China. The preschools and primary schools have both started implementing English language teaching. However, the school system in China is finding it difficult to identify and hire enough qualified teachers to satisfy growing demand for English language teaching. In addition, the school system needs to identify innovative ways of motivating students to actively start learning English at a young age.

Our E-Ya Kids English program is designed to strengthen the English preschool and primary school curriculum by providing pedagogic and entertainment based interactive multi media content that inspires young children to study and learn English. Our E-Ya Kids English program assists in motivating students while supporting and strengthening the teacher's knowledge. A critical component in our program is that it has been developed with a training structure that is integrated with the existing preschool primary schools official English language curriculum. The program is integrated in the core curriculum and used as supplementary teaching material.

Our E-Ya Kids English program includes 103 multimedia activities. Activities are divided in 14 theme based units with 5 to 6 training activities in each unit. In addition to the theme based units the product includes game based learning activities such as memory and crossword games, stories with short cartoon movies, word learning activities and test activities.

31

This program is a computer and classroom based learning program designed to teach English to children aged 5 to 12. The children work with this interactive software program, <R>accessed through the Internet over the company's website, </R> to learn English in a classroom setting while being guided by their teachers. Paper manuals are provided for both the students and the teachers.

We have been focussed on marketing our program to the various school districts authorities in China. By targeting our sales efforts on the district school authorities, a large number of schools can be accessed through the same channel. Initial trials have been carried out in cooperation with the Pudong, Shanghai Education Information Center in 14 schools representing 10,000 students in the Pudong district of Shanghai. The Pudong school district is one of the largest school districts in the 15 districts of Shanghai. In this district there are approximately 250,000 students in 120 elementary schools and 115 combined total of middle and high schools. The district is a leading district for bilingual teaching in Shanghai. The Pudong District also has the technology required to operate our program as currently approximately 150 of the schools in Pudong have high speed Internet connections both utilizing the networks operated by the Shanghai government and by China Telecom respectively. <R>Once the program has been approved by the school district and the school elects to license the program from our company, we will deliver our program through our classroom campus setting. In addition, students can access additional educational material and games by accessing our Internet website. </R>

After testing the programs the Pudong Education Authority approved our program so that individual schools in the district will be allowed to use our program as part of the school's official curriculum material.

We intend to charge each of the schools an annual, two year or three year license/membership fee for our program. We will also encourage each of the students to supplement their school learning materials with access to our Internet based website which contains additional other education material and games. Students will <R>be charged for accessing our website. Students will be able to purchase access to our website on a prepaid basis directly from our company over our website, by contacting us by telephone or from other distributors of our prepaid cards, like Chinakids as discussed below. Access to our website will cost $2 per month or $18 per year. Students will also be able to purchase from our company over our website</R> a complete a 3-in-1 package to support their children's educational development, which includes written materials, a compact disc and access to our Internet based website. <R>The 3-in-1 package will cost $120. </R>

Once the program has been approved by the school district and schools license the program, we will deliver this program <R>as described above</R>. The price for site licenses vary per license depending on the length of term of the license and the volume of site licenses sold. For example, each school in a district will pay the following amounts depending on the number of users:

On May 30, 2004, we entered into an agreement with the Shanghai Pudong Education Information Center. Under this agreement, we have agreed to supply our E-Ya Kids program to schools in this school district at a price of $3,630 (30,000 RMB) for two years (if prepaid in one lump sum) or at a price of $12 (100 RMB) per month for each

32

class. We have agreed to allocate 10% of our total revenues generated from this contract and reinvest them in the next version of the program to ensure that the program is continually updated for the students of this school district. The 10% revenue will be recorded against the research and development costs for the next version of this program. The school district has agreed to expend $48,400 (400,000 RMB) as basic access fee for the introduction of our software in the schools in the district. In the event that the sales within Pudong New Area exceed $48,400 (400,000 RMB) in the first year, we will return 50% of the basic access fee to the Shanghai Pudong Education Information Center.

<R></R> We no longer have any obligation to share any of the revenue generated from the program as we have purchased the intellectual property from the Q Group. In addition, we continue to add content from internal resources and experts in this field.

To June 30, 2004, we have recognized a nominal portion of the basic access fees from the sale of our E-Ya Kids English program to the Pudong District Government in China. Our first sales were generated during the quarter ended June 30, 2004, following a rigorous nine-month product development and approval process. As a result of having obtained such product approval, any primary school in the District may purchase our E-Ya Kids program.

<R>On September 27, 2004, we entered into a sales and distribution agreement with Chinakids Network Information Co., Ltd. Pursuant to the agreement, Chinakids will include access to our Internet based website, www.eyakids.com, with Chinakids' prepaid "Kids Card" product line. The prepaid Kids Card product line is distributed nationwide and provides Internet access to various online educational programs, which will include our E-Ya Kids program. Chinakids has a retail distribution network focussed on the children's market, offering products through their website and retail outlets. Chinakids has agreed to distribute a minimum of 50,000 pre-paid cards by which users will be permitted to access our website for a one month period. We will charge Chinakids $1.21 (10 RMB) for each such pre-paid card. Chinakids has agreed to include a link to our website on the home page of its website and to market our program along with their programs to elementary schools. We have agreed to pay them $3,025 (25,000 RMB) for such marketing services and if sales of pre-paid cards with access to our website exceed $36,300 (300,000 RMB) to pay Chinakids an additional $3,025 (25,000 RMB). </R>

- Overview

The program for our Fudan New English and IE21 branded products was launched in November 2003. Originated by Q Group Plc., our program is based on the Quartet Chinese English Online product, an integrated English as a second language (ESL) learning system including student textbook, teacher's guide and multimedia learning materials. A key feature of our program is its integration of traditional classroom teaching methods with computer and/or Internet educational content and teaching. We worked in partnership with Fudan University on adapting the former Quartet Chinese English Online product for the Fudan New English platform. We spent significant time in translating the text and localizing the content to meet the demands of students in China.

The program was developed through a partnership between our company, Shanghai Online Education Center of Shanghai Telecom and the Fudan University School of Network Education. It contains approximately 750 hours of interactive and multimedia self-learning software, 64 units of intensive online teaching video lectures, e-magazines and interactive classrooms that can be delivered to students in a classroom setting, over the Internet or across private networks. Fudan University has extensively reviewed the content of our program and partnered with us to facilitate delivery of this product to students in a classroom setting.

There are four levels to the program, delivered in four large modules: Foundation, Improve, Advanced and Professional. The content is a comprehensive and internationally unified platform divided into a wide variety of subject matter, including social communications skills, business customs, geography, history and travel. Each of the four modules is 45 to 51 hours in length, and is divided into four session periods. Each session period is 15 to 17

33

weeks in duration. We continue to enhance the platform by producing additional content from our resources and experts in this field in both written and video formats.

The program is delivered in three different formats as follows:

The student textbooks present a wide range of content covering various aspects of human society and feature exercises with incremental difficulty on English grammar, reading and writing. The online learning materials are designed to be used in conjunction with the student textbooks in a complementary manner to provide students with an enjoyable learning experience. The teachers' guide enables teachers to prepare the class with the minimum time and monitor students' learning process via the management software.

The intended market for this product are post-secondary school students and other adults who wish to learn the English language. We intend to market the product to college and university students, corporations who wish to provide English learning to their employees and educational institutions who wish to use our program to teach English at their educational institutions.

This program is capable of being delivered to businesses or groups over private computer networks like a company's intranet, through satellite or by supportive compact disc, provided that such businesses or groups have a connection to the Internet. The program can be delivered to a individual users of the business or group or projected onto a large display. Students also have the option of taking the program completely over the Internet. We can deliver this program anywhere in China, provided that the user has a connection to the Internet. For those users who do not have high speed access to the Internet, we provide a compact disc containing encrypted forms of the largest files. Students who purchase the online program receive a student card which will entitle them to access some of the materials over a narrowband Internet connection.

The online version of the Fudan New English program will be marketed over the <R>Internet</R> through banner advertising by China Telecom. We also intend to market this program by placing advertisements in newspapers and brochures. Fudan University will market this program by circulating brochures to its students and by printing an advertisement in its course calendar. The franchisees who operate the training centers will conduct their own marketing to recruit students for the program. We will market the program to businesses and other groups who may want to use the program for their companies.

- Training Centers

The classroom sessions are taught through training centers operated by franchisees of our company. We provide the classroom courseware materials including student textbooks, teacher manuals and the software program with various access methods; the franchisee provides the classroom infrastructure, computers and teachers. We also provide extensive training and support to the teachers at the training centers.

Since the program is marketed under the Fudan New English and our IE21 brand names the training centers are differentiated on this basis as well. At Fudan New English branded training centers, the parties involved in executing the program are the training center, Fudan University, China Telecom and our subsidiary. In contrast, at IE21 branded training centers, the program is executed by the training center and our subsidiary.

Fudan New English branded training centers are further differentiated from IE21 training centers by strict guidelines imposed by Fudan University on academic quality control, program pedagogy and branding. Upon

34

completion of the program in a Fudan New English training center, Fudan University will issue a "Fudan New English Certificate" to the student. In contrast, no certificate is issued to students who complete the program online or at a IE21 training center, since our online program and IE21 training centers are not subject to academic accreditation by Fudan University.

Program sales, revenue collection, program feedback analysis, program upgrades and management are all the responsibility of our company, except for Fudan New English accreditation and testing which is the responsibility of Fudan University School of Network Education. Fudan University manages accreditation and collects a small test fee directly.

Currently, there are three franchise training centers running the Fudan New English program in Shanghai. In May 2004, we opened our own training center facility adjacent to our offices in Shanghai. This center offers training programs for individual students, training for channel partners and business monitoring of program performance, market surveys and program development. The center operates both IE21 English and Fudan New English branded programs. In June 2004, we entered into a franchise agreement with Shanghai Jiaoda Withub Training Center, who will operate an IE21 branded training center. This franchisee has agreed to pay $3,630 (30,000 RMB) as the initial fee. The training center will pay us $100 (830 RMB) for each student who enrolls in the blended program and $82 (680 RMB) for each student per program level who enrolls in the online only program.

- Franchise fees

Any franchisee who operates a Fudan New English or IE21 branded training center must pay a fixed fee for the right to use our program and for teaching support. Franchise fees generated by Fudan New English branded training centers will be shared equally between Fudan University and our company. In contrast, Fudan University is not entitled to any share of franchise fees generated from our online program or at IE21 branded training centers.

To June 30, 2004, we have not received any franchise fees from any training centers.

Website infrastructure and support

Shanghai Telecom, a department of China Telecom, provides all website infrastructure and support. In addition Shanghai Telecom provides access to its on line marketing channels at no incremental cost. Shanghai Telecom also provides other channels of marketing such as advertising on monthly telephone service bills, posters in telecom retail service and billing centers and connection to other market segments via China Telecom's infrastructure of various Internet portals. The training centers utilize their existing channels and various forms of advertising to market the program, and may include value added services to increase their own sales.

- Program fees

Students buy the blended classroom and online program directly from the appropriate training centre. As discussed above, the program has four levels regardless of branding either as a Fudan New English or IE21 English program. The program fees payable by each student vary from $70 for beginner and improved level programs, to $90 for each of the advanced and professional level programs.

For our internal purposes, the total program fee is split into two parts: one part representing the online service and one part representing the classroom based teaching service. Pursuant to our agreement with Fudan University, for each Fudan New English training center Fudan University receives 10% of the online service fees and we receive 70% of the online service fees. <R></R>Pursuant to our agreement with Shanghai Telecom, Shanghai Telecom receives 20% of the online service fees in return for marketing our <R>Fudan New English</R> program and the provision of all data center infrastructure, where our website is currently hosted. <R>Fudan University receives 15% of the classroom teaching fees and the training center receives 85% of the classroom teaching fees. Our company does not receive any portion of the classroom teaching fees for the Fudan New English program. </R> All these agreements were reached in 2003 and are for a period of five years.

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For each IE21 branded training center, the training center will receive 100% of the classroom fees and we will receive 100% of the online service fees. <R>Shanghai Telecom does not receive any of the fees for any of the IE21 branded programs. </R>

- Online delivery

The online program is presently available in a combination of self learning and pre-recorded studio sessions. Later this year, live broadcast sessions will be available as an enhanced program. Students buy the online access time from our IE21 website using transactional based systems from China Pay, prepaid educational cards or fees paid during registration. We have only recently launched this program in 2004.

- New corporate accounts

To June 30, 2004, we have received nominal fees from this program. We have recently commenced marketing mainly our IE21 program to multinational corporations for their internal training centers. We have been focusing on foreign companies in Shanghai, but have begun to implement marketing efforts in Beijing since many enterprises are headquartered there. As disclosed below, we have recently signed on three corporate licensees of our IE21 English program and a fourth multinational corporation has authorized its employees to purchase the IE21 English program from us directly. We experienced some delays in entering this market as a result of requests by prospective corporate customers to enhance our IE21 platform by adding content in Business Writing and Business Communication skills. We are continuing to fine tune and enhance the overall platform to meet the special requirements of this market. <R>We are not required to share any of the revenues generated from these corporate accounts. </R>

On June 30, 2004, we entered into an agreement with Boehringer Ingelheim Shanghai Pharmaceuticals Co. Ltd. whereby Boehringer has purchased a one-year license to use our IE21 English program for its employees. Boehringer has agreed to pay $3,000 for the license and $200 for each user of the program.

On August 2, 2004, we entered into an agreement with Molex Incorporated whereby Molex has purchased a one-year license to use our IE21 English program for its employees. Molex has agreed to pay $13,040 for the license.

On August 2, 2004, we also entered into an agreement with GEA Technology Equipment (Shanghai) Co. Ltd. whereby GEA has purchased a one-year license to use our IE21 English program for its employees. GEA will pay $98 per user and $2,900 for 30 hours of classroom instruction.

During the second quarter of our fiscal year 2004, we introduced our IE21 English program to Intel Nutrition Dairy Product Ltd. which is internationally known as Dumex. Dumex has authorized its employees to purchase the program directly from us. As of July 15, 2004, we have sold 23 IE21 English programs to Dumex employees.

On August 18, 2004, we also entered into a cooperation agreement with Shanghai NZA Education Management Consultation Cooperation, a company providing professional education consultation and services in China, whereby Shanghai NZA has licensed our IE21 English program for a period of one year commencing on September 1, 2004. Shanghai NZA will offer our IE21 English program to college students, and has undertaken to develop a minimum of 2,500 course subscribers for the program during the term of the agreement. We will make the IE21 online course and text books available to Shanghai NZA at a discounted prices of, respectively, 250 RMB (approximately $30.00) and 90 RMB (approximately $11.00) per subscriber for the first 2,500 subscribers, and at discounted prices of, respectively, 200 RMB (approximately $24.00) and 90 RMB (approximately $11.00) for the next 2,500 subscribers, if any. The subscriber fees are payable within 30 days of the start date of the subscriber's course. A 10,000 RMB (approximately $1,208.00) deposit was paid by Shanghai NZA on September 1, 2004 for application against subscriber fees as and when they are incurred by Shanghai NZA. If Shanghai NZA has not developed the minimum 2,500 subscribers by the end of the term of the agreement, it will be required to purchase the balance of the minimum 2,500 course subscriptions remaining unsold, with payment to be made within 30 days following the term of the agreement. Accordingly, if the minimum 2,500 course subscriptions are sold through or to Shanghai NZA, the aggregate purchase price will be 850,000 RMB (approximately $102,500).

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<R>- New Program Content

On October 10, 2004, we entered into an agreement with reallyenglish.com, Ltd. which will allow us to adapt reallyenglish's business writing skills program for our China market and integrate it into our IE21 English programs. The combined product will be released under the brand name "IE21 English and Business Writing, powered by reallyenglish". We will share any revenues generated from the sale of this program on an equal basis. </R>

Our Fudan New English program formerly included interactive and user friendly pronunciation lessons supported with bilingual instructions. The pronunciation program included listening exercises, pictorial instructions and sound analysis of pronunciation, comparative words, sentences, examples, exercises, speak articulation, intonation, timing/stress and other important capabilities.

As of July, 2004, we have discontinued the sale of this program either alone or as a part of the Fudan New English program.

Foreign companies currently employ almost 1.3 million people only in Shanghai. Foreign and multinational employers usually require their employees to be able to speak the English language and to have a basic understanding of international business practices especially with the increased exposure to foreign companies in China.

We license <R>the International Business Diploma</R> program on a non-exclusive basis from the Open Learning Foundation for a three year term. <R>This program includes classroom instruction and materials and includes eighteen modules, each module of which contains twenty-five detailed curriculum lessons. </R> We have the ability to customize this program as we see fit for each particular application. We pay a yearly license fee of $5,750 (3,000 pounds) per year for use of this program, and Fudan University paid a channel member license fee of $5,750 upon launch of the program. If we use this program in connection with a partner, other than Fudan University, then we have to pay an additional channel member license fee of approximately $5,750 per partner. We do not pay the Open Learning Foundation any part of gross revenues generated from this program. We intend to establish learning centers where we can deliver this program in China.

Our Fudan International Business Diploma program is focussed on providing basic knowledge in international business and teaching the English language. The test pilot of this program was launched as a purely classroom based bilingual course in May 2003. Currently, no part of this program is provided through a computer program or over the Internet. <R>We have translated six of the eighteen modules for use in our Fudan International Business Diploma Program. </R> Translation of the program into Chinese and independent Chinese content development was carried out by top level linguistic professionals from Fudan University. Course material was developed by the Open Learning Foundation. The program is accredited by the Fudan University and the Open Learning Foundation. Upon successful completion, students will receive a certificate from the Fudan University.

The program offers English-Chinese bilingual teaching of international business, including an introduction to western business theory and practice, practical business skills, basic marketing, international business strategy, principals of human resource management and international business decision analysis.

The next step in the development of our Fudan International Business Diploma program is to develop a blended learning <R>program</R> combining <R>classroom based</R> training with <R>online programming including pre-recorded and live video cast</R> training. We are currently testing the live broadcast capability and once this testing is completed, we anticipate that we will launch this program late in fiscal

37

2004. <R>Our company intends to launch the program through our subsidiary's own training center. We will be marketing this program by telephone and direct sales. Fudan University has also included the program in its course calendar. After we have launched this program in our own training center, we intend to begin marketing this program so that we can establish other training centers operated by third parties. </R>

The price for this program in its current format is $1,084 <R>per student</R> for a six module multi-chapter program. The program provides a strong foundation of integrated learning of business and English which was based on a UK university recognized Bachelors of Administration program. Prior to the commencement of each module and industry guest speaker launches each module followed by theory taught by top quality academic professionals from Fudan University. We were able to sell out one class of this program on a test basis without market advertising.

If we provide this program in connection with a partner, like Fudan University, we will pay 35% of the gross revenues to the partner.

To <R>date, </R> we have not generated any revenue from the sale of this program.

The program contains simple content of 300 English sentences which was developed in partnership with the central Shanghai Government's personnel bureau which <R>had</R> introduced mandatory English testing for all government employees located in Shanghai. The program <R>was originally created by Shanghai General Foreign Language Testing Office and was in the form of a paper text manual. We worked with the Testing Center to jointly enhance the content and size of the program and created an Internet based version of this program. </R>

<R> Since the Shanghai Municipal Government has decided to discontinue this program for its civil servants, we have not earned any revenues to date and the Testing Center has not begun using the online and paper teaching materials. We have however agreed with the Testing Center that we will work together to convert the GE 300 program to a general English program for sale to the general public. We anticipate this program to be completed by the end of the first fiscal quarter in 2005.

Any future revenues generated by this program will be split equally between us and the Testing Center. The Testing Center has agreed to pay for all advertising costs and costs associated with establishing the facilities necessary to establish and market this program. The Testing Center has also agreed to market this program to its current customers. </R>

To <R>date, </R> we have not generated any revenue from the sale of this program.

We are currently developing a new classroom and Internet based learning program that will teach science content to children aged 5 to 14 for primary and middle school market and applications within the high school market. We expect that this program will be completed in the first quarter of 2005.

We are planning to migrate the GE300 program to a mobile application and to target this program for sale to the general public.

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As part of our pre-recorded learning sessions within the Fudan New English program we will continue to produce 45 minutes to 1 hour learning sessions in the studio production facilities provided under our partnership arrangement with Fudan University. In addition, we have access to a second studio production facility provided by our partnership with China Telecom.

International demand for English language instruction is growing rapidly. English is the dominant language of international business, medicine, diplomacy, academics, and technology. With the trend toward globalization accelerating, our company believes that demand for English instruction will increase at an even greater rate.

Our management believes that proficiency in English and western business education is becoming a goal of many Chinese people who want to work with or for foreign or multinational companies in or outside of China.

Economic development, urbanization and internationalization contribute to higher demand for education. Our company's management believes that Chinese families show a stronger interest in investing in their children's education compared to other countries that have high levels of public spending on education. For example, the Shanghai Statistics Bureau has stated that the average spending on education has increased by 21.6% compared to five years ago.

China is constrained by the shortage of teaching facilities and professional teachers. Therefore, only a limited market is being serviced by enhanced international educational content providers. Secondly, this content is offered via the traditional methods of offering such as sending Chinese students abroad to higher priced foreign institutions and/or receiving partial foreign education programs in China in traditional classroom settings without campus multimedia and computer network teaching methods. This existing delivery of international academic educational content is currently targeted to niche markets and is unaffordable to a significant majority of the population.

As a result, our focus is on providing academic quality international educational content. Our team members are experienced in understanding how to successfully convert "raw content" which can be understood as content ready for market by the international content partner, but in all cases requires limited or extensive modifications in order to conform to the local domestic requirements. Our company is experienced as it has converted or modified several learning programs for the Chinese market. We refer to this detailed area of expertise as educational content aggregation and localization. In this process of localization, we are involved with enhancing the educational content under strict quality assurance processes as we customize the content to meet the specific needs and applications of our client's target market(s).

Our websites are hosted by a server which is contained with the offices of China Telecom. Our telecom partnership provides equipment and network capabilities without Shanghai Broadband Network<R>, Inc. </R> needing to make a capital equipment investment. This dependency on network capabilities is reduced since Shanghai Broadband Network<R>, Inc.'s</R> strategic shareholding partners have network provider access capabilities and licenses to provide similar services.

We share studio production facilities within Fudan University for the production of pre-recorded sessions, however, recently we have enabled enhanced features in our online programs which will allow us to sell live interactive learning sessions from our studio access to training centers, corporate training centers, schools and directly to the any location with Internet access.

Our target customers and sales channel partners for our educational programs are universities, colleges, municipal, school districts (encompassing kindergarten, primary and second schools), government, multinational

39

businesses and publishing organizations. In addition, we sell our branded programs directly to the end user. End users have the choice of self learning with pre-recorded sessions and will have the choice of interacting with peers and academic professionals by way of our live interactive learning programs. Support for students are provided though online educational services and from one of the channel partners.

We intend to sell our products and services using direct and indirect sales channels and various marketing methods. We are primarily focused on the development of distribution channels in China, including the development of franchised and affiliated training centers for our IE21 branded programs, and the development of the Fudan New English and Fudan International Business Diploma programs. Initial development will focus on the geographical areas where Fudan University has a strong brand name. We will also seek other entities to partner with us in the delivery of our IE21 programs, preferably with strong brand recognition in other areas of China to permit joint branding. <R>We have identified such entities to include educational institutions, commercial training centers and the regional department of Shanghai Telecom. </R>

We have established three Fudan New English training centers in Shanghai and are planning on establishing training centers in Beijing, Jingsu, Zhejang and Chongqing. For the online Fudan New English program, initial marketing will be conducted through our partnership with Shanghai Telecom, who will actively market our programs to its current Internet subscribers.

In addition, this program platform is available online to the retail student market. Our marketing team plans to reach this market via <R>telephone and direct sales</R> and other marketing initiatives, <R>including entering into agreements with third parties like SINA Corporation and Shanghai NZA Education Management Consultation Corporation and advertising in local newspapers. </R> Channel partner sales and additional strategic marketing programs are targeted for launch in September, 2004.

We have identified three basic business models: (a) franchises, (b) courseware authorization departments and (c) agency sales. Target franchise customers are the training centers, individuals and companies that would like to use either the Fudan New English or IE21 branded programs. Prospective courseware authorization department customers include departments of large nationwide corporate enterprises which must manage their own local corporate training centers. Generally, these two groups of prospective customers have their own training centers or are planning on establishing training facilities. In contrast, agency sales customers include enterprises that do not maintain any training centers, but instead would like to purchase prepaid cards for distribution to end users of the program. <R>Our company presently offers for sale serial numbered prepaid cards which grant the holder time credits to utilize our services on our www.ie21.com and www.ie21.com.cn websites. We presently have one denomination of prepaid card, but we intend to increase the options for our customers in regards to the amount of time credits available. In addition, our users may purchase IE21 programs using a debit or credit card which is offered by us through our service agreement with ChinaPay. ChinaPay is a company authorized to carry out debit and credit card transactions. This method of payment, however, is less common due to the lack of use of debit and credit cards at present in China. </R>

We also intend to market our programs by advertising in newspapers, printing and distributing brochures, attending and conducting conferences and trade shows and advertising on the Internet. Our employees will market our various products by contacting potential customers by telephone, email and regular mail. Brochures and other written materials will also be distributed by China Telecom, Fudan University and by our franchised and affiliated training centers. For example, China Telecom posts banner advertisements on their and other websites, prints advertisements on their bills to their customers and displays posters in their retail outlets. Fudan University displays posters, circulates brochures and includes an advertisement in their course calendar. The training centers display posters and circulate brochures.

For our E-Ya Kids, we have been focused on marketing our programs to the various school district authorities in China. By targeting our sales efforts on the district school authorities, we can access a larger number of schools through the school district. Once we have obtained the approval of a school district, we intend to market

40

our products to each of the individual schools in that school district. Our employees contact the school districts and schools directly in person and by telephone in an effort to sell our E-Ya Kids program.

On May 21, 2004, our subsidiary, Shanghai Broadband Network<R>, Inc. </R> expanded its distribution channels for delivering its Fudan New English program throughout China <R>by entering</R> into an agreement with the Educational Channel of SINA Corporation, <R>Beijing SINA Internet Information Service Co. Ltd. By placing a link on SINA's various websites, SINA offers</R> its users direct access to part of our online <R>Fudan New</R> English training <R>program</R>. SINA's brand name "Sina.com" is a recognized Internet brand name in China and its educational channel website and <R>provides</R> us with another distribution and marketing channel throughout China. <R></R> <R>In exchange for promoting our Fudan New English program, we have agreed not to enter into a similar relationship with several of SINA's competitors including Sohu.com, Netease.com and Tom.com. There is no sharing of fees with SINA. </R>

The market for English language learning is highly competitive. The English as a second language market is a large, fragmented market that has attracted hundreds of different companies, with no real dominant player. We face competition from companies that sell traditional classroom products and services, including, classroom instruction, books, audiotapes, etc., and from companies that sell computer software. There is growing momentum for using computers in place of or in conjunction with traditional classroom products and services and we expect that trend to continue. With regards to blended learning, we will face competition from existing market players. We will also have to look out for new entrants from companies who produce software or online based educational content. Our management has determined that there are several companies providing similar products and services in China.

Our competitive position utilizes strength in partnership brand recognition and joint ownership in branded programs. We jointly own the intellectual property for the Quartet Chinese English Online Internet version used in our Fudan New English program. We have entered into key agreements or developed relationships with key universities, testing offices and centers and online education content providers. We also have an exclusive agreement with the Open Learning Foundation for the international business studies content delivery in China. We also have an exclusive agreement with Computerized English Learning for integration and distribution of online formatted pronunciation programs in China.

Our company's primary methods of competition include our different formats for delivering our programs to our users. We deliver our products completely online or in a blended classroom and online training format. These formats allow us to provide a multimedia experience to our users. For example, our E-Ya Kids program uses interactive games and puzzles to stimulate learning. The variety of our learning programs also provides us with an advantage. For example, we have customized programs for kids, students and adults, government employees and persons wanting to learn about international business.

With the exception of Global English, who provides an online English program, we are not aware of any other competitors who provide English learning in a number of formats which are customized to a particular group of users.

Since we have generated nominal revenues to date, we are not dependent on one or a few major customers. Since we anticipate selling our products and services through a variety of sales channels and partnerships, we do not anticipate that our revenues will be dependent on one or a few major customers.

Our company employs nine consultants, six of which are full-time and three of which are part-time. Our consultants are responsible for our company's management, accounting and finance, operations, marketing. business / technical development and administration.

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Our subsidiary, Shanghai Broadband Network<R>, Inc. </R>, employs 42 full time employees. There are employees in accounting, employees in administration and human resources, in educational content program development and management, employees in sales and marketing and employees in software, Internet technology and system engineering and production and customer service.

We own co-branding trademark rights to Fudan New English, Fudan International Business and Interactive GE 300 with Shanghai Foreign Language University Test Centers.

The Q Group has invested to produce a top quality multi-tiered English language multimedia learning system. We have joint ownership of the intellectual property rights for the "bilingual Internet enabled" version called Quartet Chinese English Online.

We have also registered the following domain names: www.asiabband.com, www.asiabroadbandinc.com, www.sh-elearning.com, www.ie21.com, www.ie21.com.cn and www.shanghaibroadband.com.

We are not aware that our services or proprietary rights infringe the proprietary rights of third parties. However, from time to time, we may receive notices from third parties asserting that we have infringed their trademarks, copyrights or other intellectual property rights. In addition, we may initiate claims or litigation against third parties for infringement of our proprietary rights or to establish the validity of our proprietary rights. Any such claims could be time-consuming, result in costly litigation, cause service stoppages or lead us to enter into royalty or licensing agreements rather than disputing the merits of such claims. An adverse outcome in litigation or similar proceedings could subject us to significant liabilities to third parties, require expenditure of significant resources to develop non-infringing technology, require disputed rights to be licensed from others, or require us to cease the marketing or use of our website, any of which could have a material adverse effect on our business, operating results and financial condition.

We spent $97,020 on research and development in the year ended December 31, 2003, compared with $22,120 in the year ended December 31, 2002. We expended the funds on developing and localizing the educational content in our current programs for use in China.

We are not currently subject to direct regulation by any governmental agency, other than regulations applicable to businesses generally. We do not require any governmental approval for our products and services except if the programs or services are to be provided to a government department, school or academic institution. For example, we require approval from the various school districts in China in order that schools can use our E-Ya Kids English program. However, it is possible that a number of laws and regulations may be adopted with respect to the Internet and e-commerce, covering issues such as user privacy, pricing and characteristics and quality of products and services. We cannot predict the impact, if any, that future regulation or regulatory changes may have on its business.

As a result of maintaining an executive office in Vancouver, British Columbia, Canada, we are required to register as an extra-provincial corporation in British Columbia, as we are deemed to be carrying on business in British Columbia under the British Columbia Business Corporations Act. In order to carry on business in British Columbia, Canada, a corporation incorporated in a jurisdiction other than British Columbia must extra-provincially register in British Columbia. Registering as an extra-provincial corporation in British Columbia does not effect our shareholders in any adverse manner and allows us to carry on business in British Columbia.

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MANAGEMENT'S DISCUSSION AND ANALYSIS

The following discussion should be read in conjunction with our consolidated audited financial statements and the related notes that appear elsewhere in this registration statement. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this registration statement, particularly in the section entitled "Risk Factors" beginning on page 6 of this registration statement.

Our consolidated audited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.

We are still a development stage company and consequently our focus has been on the identification of market needs, the development of products to meet these needs, and the branding of our company and our products. While we anticipate that growth in revenues will assist us in attracting additional financing to allow us to add the needed resources in order to further support the growth of our operations, there are no assurances that our estimated revenue growth can be achieved, or that we will be able to attract additional financing on acceptable terms, if at all. Should we be unable to achieve the anticipated revenue growth or to attract additional financing on acceptable terms, our business and future success may be adversely affected.

We incurred a net loss of $2,043,992 for the six-month period ended June 30, 2004 compared to a net loss of $366,334 for the comparative period in 2003. The loss is a result of the factors discussed below.

In the second quarter of 2004, we only recently commenced revenue-generating activity, earning a nominal amount of revenue from the sale of our programs.

Total operating expenses for the six-month period ended June 30, 2004 were $2,015,646 compared to total operating expenses of $389,134 for the comparative period in 2003, an increase of $1,626,512 . The principal components of the increase in our expenses included executive management fees, general and administrative expenses, professional fees, research and development and stock based compensation in respect of stock options granted to consultants, directors and officers during the first three months of our 2004 fiscal year.

Executive management fees were $182,502 for the six-month period ended June 30, 2004 compared to $161,665 for the six-month period ended June 30, 2003. The increase of $20,837 was due to increases in compensation to our executive management and officers as agreed upon in new agreements effective January 2004. As our business develops, we have entered into new consulting agreements with our executive management and officers to adjust their compensation to reflect the increase in business activities and their additional responsibilities.

General and administrative expenses were $356,369 for the six-month period ended June 30, 2004 compared to $162,173 for the six-month period ended June 30, 2003. The increase of $194,196 was due to the fact that we were more active in the first half of 2004 compared to 2003, especially in China with the launching and marketing of new programs as well as negotiating with new partners and opening of training centers. As a result, we

43

have increased the number of employees employed by our company which has led to increased corporate infrastructure costs. General and administrative costs consisted primarily of our general corporate expenses, such as sales and marketing, salaries and benefits, rent and insurance.

Professional fees were $62,447 for the six-month period ended June 30, 2004 compared to $12,477 for the six-month period ended June 30, 2003. The increase of $49,970 was due to the increased costs associated with the filing of this registration statement and other matters stemming from our registration.

Professional fees incurred during the period included legal and accounting expenses incurred in connection with the filing of this registration statement as well as general assistance with regulatory compliance matters and general corporate matters during the period.

Research and development was $118,905 for the six-month period ended June 30, 2004 compared to $22,923 for the six-month period ended June 30, 2003. The increase of $95,982 was due to an increased number of new programs under development. As well, we have completed the development and launched several programs during 2003 and 2004 which require additional and continuing support to operate and maintain. Research and development costs consist of salaries and costs directly associated with research and development projects. No research expenditures met the criteria for capitalization through the first half of 2004.

Stock based compensation was $1,239,137 for the six-month period ended June 30, 2004 compared to $nil for the six-month period ended June 30, 2003. The 2004 stock compensation charge was primarily due to the grant of 2,095,000 options in the quarter ended March 31, 2004 to consultants and officers. Such compensation was calculated using the fair value based method using the Black Scholes option pricing model which uses estimates and assumptions concerning, among other things, the expected lives of the options and the expected volatility of the underlying common shares.

We incurred other expenses (net) of $58,098 in the six-month period ended June 30, 2004 compared to $4,177 for the six-month period ended June 30, 2003. The increase in other expenses is primarily the accrued interest and amortization of the debt discount of $66,596 associated with the convertible notes issued during the period.

The proceeds from the sale of the 1,145,000 units in the first quarter of 2004 were allocated between the various equity and debt instruments based on their relative fair values. The difference between the allocated fair value and the face value of the convertible debenture was recorded as a debt discount. No beneficial conversion feature was recorded as the fair value of the common stock on the commitment date was less than the proceeds allocated to the convertible instruments. The debt discount is amortized to interest expense over the term of the related debt. Upon conversion of the underlying debt into common stock, a pro rata share of the unamortized debt discount will be recorded as interest expense.

We incurred a net loss of $2,053,220 for the year ended December 31, 2003 compared to a net loss of $813,218 for the comparative period in 2002. The loss is a result of the factors discussed below.

We did not recognize any sales during the years ended December 31, 2003 or 2002.

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Total operating expenses for the year ended December 31, 2003 were $2,056,009 compared to total operating expenses of $904,360 for the comparative period in 2002, an increase of $1,151,649. The principal reasons for the increase in our expenses consist of increases in reported expenses for executive management fees, general and administrative expenses, professional fees, research and development expenses and stock based compensation.

Executive management fees were $658,971 for the year ended December 31, 2003 compared to $289,996 for the year ended December 31, 2002. The increase of $368,975 in compensation for executive management was mainly due to the increase in the number of officers and fees paid to each officer as a result of increased business activities and their responsibilities in 2003. During the year ended December 31, 2003, we also accrued $302,500 as executive management fees payable to the Chairman and Chief Executive Officer of our company as compensation for past service. We plan to settle this amount with the issuance of shares in 2004.

General and administrative expenses were $412,431 for the year ended December 31, 2003 compared to $381,146 for the year ended December 31, 2002. The increase of $31,285 was due to the increase in the overall level of business activity and number of employees hired, which has also led to increased corporate infrastructure costs. General and administrative costs consisted primarily of our general corporate expenses, such as sales and marketing, salaries and benefits, rent, professional fees and insurance.

Professional fees were $112,218 for the year ended December 31, 2003 compared to $36,285 for the year ended December 31, 2002. The increase of $75,933 was due to a general increase in overall corporate activities as well as the increased costs associated with the filing (including the audit of both 2003 and 2002 as our financial statements had not previously been audited) of this registration statement and other regulatory requirements. Professional fees incurred during the period included legal and accounting expenses incurred in connection with the filing of this registration statement as well as general assistance with regulatory compliance matters and general corporate matters during the period.

Research and development was $97,020 for the year ended December 31, 2003 compared to $22,120 for the year ended December 31, 2002. The increase of $74,900 was mainly due to the commencement of the development of new programs and increased activities in regular maintenance and support of existing programs. Research and development costs consist of salaries and costs directly associated with research and development projects.

Stock based compensation increased from $79,912 for the year ended December 31, 2002 to $689,744 in the year ended December 31, 2003. The increase was mainly due to the issuance of an aggregate of 6,300,000 shares to a consultant for services (valued using the quoted market price of $0.055 per share) and compensation expense recognized in connection with the 4,000,000 options granted during 2003 to non-employees. Such compensation was calculated using the fair value based method using the Black Scholes option pricing model which uses estimates and assumptions concerning, among other things, the expected lives of the options and the expected volatility of the underlying common shares.

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We incurred other expenses (net) of $46,140 in the year ended December 31, 2003 compared to net other income of $29,371 for the year ended December 31, 2002. The increase in net other expense of $75,511 is primarily attributable to a decrease in interest income (due to declining cash balances and interest rates) of $34,276 and a loss on settlement of management fees payable of $39,508 in 2003.

In November 2003, we entered into settlement agreements with two former directors to reduce the amount of management fees payable to them. The former directors agreed to settle the payable amount of $91,261 with a cash payment of 40% of the payable amount totaling $36,504 and the issuance of an aggregate of 1,178,300 shares of common stock. The cash payment of the settlement consists of an immediate cash payment of 50% of the reduced amount owed and the remaining 50% to be paid out over the next 18 months. The fair value of the 1,178,300 common shares issued for the settlement was $94,264 based on the trading price of our common stock on the date of the settlement agreement.

As of December 31, 2003, we had cash on hand of $897,190, and as of June 30, 2004, we had cash on hand of $2,168,407. As at June 30, 2004, we had only recently commenced generating revenue from sales of our programs.

Our ongoing operating expenses and working capital requirements for the next twelve months to September 30, 2005 are broken down as follows:

These estimates do not include any potential capital requirements that may be needed should we identify any products or business acquisitions that may add value to our current product and service offerings.

To date we have had negative cash flows from operations and we have been dependent on sales of our equity securities and debt financing to meet our cash requirements. We incurred a loss of $2,043,992 for the six-month period ended June 30, 2004, and losses of $2,053,220 and $813,218 for the years ended December 31, 2003 and 2002, respectively. As of June 30, 2004 and December 31, 2003, we had working capital of $1,705,845 and $328,850 respectively. As indicated above, our estimated working capital requirements and projected operating expenses to September 30, 2005 total $2,669,958. In the first quarter of 2004, we completed private placements for aggregate gross proceeds of $2,290,000. We intend to fulfill any additional cash requirement through the sale of our securities in the event that we do not receive sufficient revenue to satisfy our cash requirements to September 30, 2005. <R></R><R>We</R> believe that our existing capital and our

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projected cash flow for the balance of 2004 and 2005 should satisfy our cash requirements to September 30, 2005. <R>While our assumptions are based on the best estimates available, however, given that we have no history of profitability, there is no assurance that actual cash requirements will not exceed our estimates. </R>

<R> We believe that our company will have access to several financing alternatives, should our company be placed in a situation that requires additional funds. To date, we have been able to raise funds through the sale of our shares of common stock and by selling convertible debt. Most of our investors to date have been current shareholders or contacts of our directors and officers. We believe that we would be able to raise more funds, if necessary, from our current shareholders and from other contacts of our directors and officers. However there is no assurance that we will be able to raise further financing in the future. </R>

We identify and evaluate our target markets based on an analysis of end-user needs, competitive analysis, compatibility of the target markets with our market entry strategies, the existence of government or other organisations who control or otherwise play key strategic roles in such target markets, as well as the potential implications of our involvement in the target market from the point of view of Chinese domestic politics. We anticipate that our ability to penetrate such new target markets is enhanced by the fact that our comprehensive E-Ya Kids English and IE21 English product platforms are flexible enough to permit content customisation and product enhancement on a module-by-module basis. Our approach has been demonstrated in the Pudong district of Shanghai, where we have been collaborating closely with Pudong Education Information Center to introduce our E-Ya Kids programs into selected primary schools. Our experience in Pudong district has demonstrated that our own market research and market testing efforts can be augmented with detailed collaborative work with local authorities to accelerate customisation of our programs to meet specific market needs.

Given that our E-Ya Kids English and IE21 English products have been rolled out for commercialization, and given our recent experience in customizing the products for a defined target market, we believe that we will be well-positioned to enter our initial target markets and realize sufficient additional contracts in the near term to meet our projected cash flow targets through September 30, 2005. However, our cash flow projections are subject to numerous contingencies and risk factors beyond our control, including market acceptance of our products, competition from well-funded competitors, and our ability to manage our expected growth. If our cash flow projections are not realized, we will require additional monies during fiscal 2004 and 2005 to execute on our business plan.

There are no assurances that we will be able to obtain further funds of such funds required for our continued operations. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, we will not be able to meet our other obligations as they become due.

Due to the uncertainty of our ability to meet our current operating and capital expenses, in their report on the annual consolidated financial statements for the years ended December 31, 2003 and 2002, our independent auditors included an explanatory paragraph regarding concerns about our ability to continue as a going concern. Our consolidated financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.

There is substantial doubt about our ability to continue as a going concern as the continuation of our business is dependent upon obtaining further long-term financing, successful and sufficient market acceptance of our current program offerings and any new program offerings that we may introduce, the continuing successful development of our program offerings and related technologies, and, finally, achieving a profitable level of operations. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.

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We estimate that we will require $357,093 to promote the sale of our products to September 30, 2005. We will continue to focus on the development of distribution channels in China, including the development of franchised and affiliated training centers for our Fudan New English and Fudan International Business Diploma programs and obtaining the approval of school districts for our E-Ya Kids program. Initial development will focus on the geographical areas where Fudan University has a strong brand name. We have established three Fudan New English training centers in Shanghai, and then development will focus on establishing training centers in Beijing, Jingsu, Zhejang and Chongqing. For the online Fudan New English program, initial marketing will be conducted through our partnership with Shanghai Telecom, who will actively market our programs to its current Internet subscribers.

In 2004, we began to develop the markets in Beijing, Jingsu, Zhejang and Chongqing. For the online Fudan New English program, initial marketing is conducted through our partnership with Shanghai Telecom and SINA.com who is actively marketing our programs to its current Internet subscribers. We estimate that we will establish six E-Ya centers in the Pudong and the Puxi districts in Shanghai for the primary and kindergarten students by late December 2004. For the remainder of 2004 and in early 2005, we plan to introduce the programs to other schools in the Pudong and Puxi districts of Shanghai and expand to other provinces outside of Shanghai.

Our selling and marketing expenses will include salaries, commissions and related expenses for our sales personnel in China, advertising in newspapers, printing of brochures, attending and conducting conferences and trade shows and Internet advertising. This estimate also includes amounts that we pay to others to conduct advertising on our behalf, including China Telecom, Fudan University and the training centers. China Telecom posts banner advertisements on their and other websites, prints advertisements on their bills to their customers and displays posters in their retail centers. Fudan University displays posters, circulates brochures and includes an advertisement in their course calendar. The training centers display posters and circulates brochures. In the first quarter of 2004, we opened our own training center adjacent to our subsidiary's office in Shanghai to conduct sales training for channel partners, retail students, and to conduct program market surveys.

We estimate that we will require $1,017,330 for various general and administrative expenses including general office expenses, travel expenses, telephone and communication expenses, office rent expenses, directors and officers insurance, legal expenses, accounting and auditing expenses, investor relations, and expenses related to permits, licenses, trademarks, domain names and taxes.

We estimate that we will require $109,875 for improvements and upgrades to our various programs through to September 30, 2005, including the conversion of the E-Ya Kids Program to an online program and for further development on the Fudan International Business program. We are also planning on producing a science based program for children. Accordingly, we have been attempting to negotiate an agreement with Emmersive Education for the delivery of science subjects and math content. The nature of science subjects makes them very suitable for bilingual teaching and localization efforts are limited to simple vocabulary translation. Emmersive Education will also provide a French language learning program that will be localized for the Chinese language learning market. The product is a good complement to our current product portfolio since it is targeted at students aged between 12 and 18 years as it is intended to fill the gap between the E-Ya Kids English and the Fudan New English program.

We estimate that, through September 30, 2005, we will require $197,775 to purchase SDK licenses (Q Group and others), computers, computer servers and network equipment for our ongoing business. Included in this estimate are costs of software that we require for our internal operations, including a computer network to link our employees and offices, order processing, bill processing and other administrative software for our business.

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We estimate that, through September 30, 2005, we will require $774,288 for salaries for the officers and employees of our company in order to implement our business plans. With the ramp up of our business, we will be required to increase our professional, technical and administrative personnel in Canada, the United States, the United Kingdom and China. We anticipate that most of this increase will be in Canada and the United States. We will be seeking to hire a full time Chief Financial Officer for our company.

We estimate that, through September 30, 2005, we will require $213,597 for working capital purposes which will include investor relations, acquisitions of content for our programs, as well as capital requirements for the preparation of a study on methods to penetrate the into the education entertainment markets.

Milestones for the IE21 Interactive English and Fudan New English Programs

As discussed above under the heading, "Our Current Programs - Fudan New English and IE21 English," there are three franchise training centers now running the Fudan New English program in Shanghai. In May 2004, we opened our own training center facility adjacent to our offices in Shanghai which offers training programs for individual students, training for channel partners and business monitoring of program performance, market surveys and program development. In June 2004, we entered into a franchise agreement with Shanghai Jiaoda Withub Training Center, who will operate an IE21 branded training center.

In addition to marketing the Fudan New English and IE21 brands to post-secondary school students and other adults interested in learning English, we are marketing the program to multinational corporations for their internal training centers. We have been focusing on foreign companies in Shanghai, but have commenced marketing programs in Beijing since many enterprises are headquartered there. As discussed above under the heading, "Our Current Programs - Fudan New English and IE21 English, we have recently signed on three corporate licensees of our IE21 English program and a fourth multinational corporation has authorized its employees to purchase the IE21 English program from us directly.

In the remainder of the year we are targeting the following six groups of customers:

We are also planning to target the retail student market for our online program. Channel partner sales and additional strategic marketing programs are targeted for launch in October 2004.

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Currently, we are collaborating with Pudong Education Information Center to introduce our E-Ya Kids programs into selected primary schools in the district. Additional products such as the E Ya Prepaid educational card was designed and completed in the second quarter of 2004 for this market and similarly for other target districts.

We are targeting six E-Ya centers to be established in the Pudong district primary and kindergarten schools by mid September 2004 and the Puxi District area of Shanghai. In October 2004, we expect to achieve revenues from channel partner sales currently in development. In November 2004, we anticipate that additional schools will begin introducing the approved E-Ya Kids program in the district of Pudong, additional schools in Puxi, deployment in Chongqing and other areas outside Shanghai.

We plan to continue to target other districts in and outside Shanghai. Our target customers are the district primary schools, government district kindergarten schools, private primary and kindergarten schools. An additional revenue milestone will be successful targeting of program courseware sales and network access products and services to training centers in Shanghai in the third and fourth quarters of 2004.

A potential source of new revenue from the E-Ya Kids program will be from the recently completed 3 in 1 package product. This product will be sold in the bookstore and publishing company channels. In September 2004 we are planning to launch a model E-Ya Shoppe showcase in Scholar Bookstore in Xujiahui and Shanghai Book City. Additional marketing programs underway include advertising in Children's Daily and school based demo classes for the kids and parents hosted by the schools.

We are presently adding additional sales personnel for the E-Ya Kids products and services. The present team includes resources in marketing, sales, product development, academic training consultants, telesales, technical and customer support.

Our selling and marketing expenses will include salaries, commissions and related expenses for our sales personnel in China, advertising in newspapers, printing of brochures, attending and conducting conferences and trade shows and Internet advertising. This estimate also includes amounts that we pay to others to conduct advertising on our behalf, including China Telecom, Fudan University and the training centers. China Telecom posts banner advertisements on their and other websites, prints advertisements on their bills to their customers and displays posters in their retail centers. Fudan University displays posters, circulates brochures and includes an advertisement in their course calendar. The training centers display posters and circulates brochures and advertises in local newspapers targeting an existing and new customer base.

Marketing, International Business Strategy, Principals of HRM and International Business Decision Analysis. The program will be enhanced with interactive features currently being tested and developed for improvement. Other branding strategies are being analyzed for program content and curriculum migration for students. This program is targeted for launch in the fourth quarter of 2004.

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provide students with direct access to UK based business tutors over the <R>Internet</R>. The program content will consist of Online courseware from IE21 Interactive English and Bilingual 6 Module Business Diploma program. We expect that the program will offer Web-based tutoring and diploma certification from a UK university.

NEW ACCOUNTING PRONOUNCEMENTS

In January 2003, the Financing Accounting Standards Board ("FASB") issued Financial Interpretation Note ("FIN") No. 46, "Consolidation of Variable Interest Entities, an Interpretation of ARB 51." The primary objectives of FIN No. 46 are to provide guidance on the identification of entities for which control is achieved through means other than voting rights (variable interest entities or "VIEs") and how to determine when and which business enterprise should consolidate the VIE. This new model for consolidation applies to an entity for which either: (1) the equity investors do not have a controlling financial interest; or (2) the equity investment at risk is insufficient to finance that entity's activities without receiving additional subordinated financial support from other parties. In addition, FIN No. 46 requires that both the primary beneficiary and all other enterprises with a significant variable interest in a VIE make additional disclosures. As amended in December 2003, the effective dates of FIN No. 46 for public entities that are small business issuers, as defined ("SBIs"), are as follows: (a) For interests in special-purpose entities: periods ended after December 15, 2003; (b) For all VIEs created before January 31, 2003: periods ending after December 15, 2004; and (c) For all VIEs created after January 31, 2003, FIN 46 is applicable immediately. The December 2003 amendment of FIN No. 46 also includes transition provisions that govern how an SBI which previously adopted the pronouncement (as it was originally issued) must account for consolidated VIEs.

The implementation of this new standard is not expected to have a material effect on our financial statements.

On May 15, 2003, the FASB issued Statement of Financial Accounting Standard ("SFAS") No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity". SFAS No. 150 changes the accounting for certain financial instruments that, under previous guidance, could be classified as equity or "mezzanine" equity, by now requiring those instruments to be classified as liabilities (or assets in some circumstances) in the statement of financial position. Further, SFAS No. 150 requires disclosure regarding the terms of those instruments and settlement alternatives. SFAS No. 150 affects an entity's classification of the following freestanding instruments: a) Mandatory redeemable instruments b) Financial instruments to repurchase an entity's own equity instruments c) Financial instruments embodying obligations that the issuer must or could choose to settle by issuing a variable number of its shares or other equity instruments based solely on (i) a fixed monetary amount known at inception or (ii) something other than changes in its own equity instruments d) SFAS No. 150 does not apply to features embedded in a financial instrument that is not a derivative in its entirety. The guidance in SFAS No. 150 is generally effective for all financial instruments entered into or modified after May 31, 2003, and is otherwise effective at the beginning of the first interim period beginning after June 15, 2003.

The implementation of this new standard did not have a material effect on our financial statements.

OFF-BALANCE SHEET ARRANGEMENTS

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditure, or capital resources that are material to stockholders.

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APPLICATION OF CRITICAL ACCOUNTING POLICIES

Our consolidated financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles used in the United States. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management's application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our consolidated financial statements is critical to an understanding of our financials.

To June 30, 2004, we have only generated nominal revenue. We follow the provisions of Staff Accounting Bulletin ("SAB") No. 101 "Revenue Recognition" and EITF 00-21 "Accounting for Revenue Arrangements with Multiple Deliverables" for accounting and recognizing revenue. In accordance with SAB No. 101, revenue from the sale of programs and supplemental learning materials will be recognized upon delivery of the product when persuasive evidence of an arrangement exists, the price is fixed or determinable and collection is probable. If collectibility is not considered probable, revenue will be recognized when the fee is collected. In an arrangement with multiple deliverables, we will assess if the delivered item(s) constitute separate units of accounting in accordance with the following criteria: The deliverable item(s) has value to the customer on a standalone basis, there is objective and reliable evidence of the fair value of the undelivered item, and whether the delivery arrangement is considered probable and substantially in the control of the vendor.

Revenue from enrolment in the educational programs will be deferred and recognized as the programs are delivered and services are provided. Revenue from basic access fees will be deferred and recognized over the term of the service period and when the refundable period has expired. Annual licensing fees from registered schools will be recognized over the term of the license. The portion of the program revenue allocated to the sales of supplemental learning materials and the revenue from independent sales of these materials will be recognized as the products are delivered and the refundable period has expired.

We apply the recommendations of SFAS 144, Accounting for the Impairment of Disposal of Long-Lived Assets. SFAS 144 requires that companies (1) recognize an impairment loss only if the carrying amount of a long-lived asset is not recoverable based on its undiscounted cash flows and (2) measure an impairment loss as the difference between the carrying value and fair value of the asset. We believe that there was no impairment of our property and equipment and intangible assets as at December 31, 2003 and 2002.

We review the carrying amount of long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The recognition of impairment of long-lived assets will be required in the event that the net book value of such assets exceeds the estimated future undiscounted cash flows attributable to such assets or the business to which such assets relate. <R>Based on our analysis, we</R> believe that there was no impairment of our property and equipment and intangible assets as at June 30, 2004, December 31, 2003 and 2002. <R>While our assumptions are based on the best estimates available, however, given that we have no history of profitability, there is no assurance that our estimates will reflect the actual future cash flows. We will revise our assumptions and reassess our long-lived assets for impairment when future events or changes in circumstances indicate that carrying amount may not be recoverable. </R>

In accordance with the provisions of SFAS No. 142, our management reviews the carrying value of its goodwill on a quarterly basis for indicators of impairment in value. The fair value of the reporting unit is compared to the carrying value in order to determine if impairment exists. Adjustments to reflect impairment in value, if necessary, are recorded to the extent the fair value of the reporting unit exceeds the carrying value of its goodwill and in the period in which the determination of impairment was made. No goodwill impairment was recognized as at December 31, 2003.

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Other than as listed below, we have not been a party to any transaction, proposed transaction, or series of transactions in which the amount involved exceeds $60,000, and in which, to our knowledge, any of our directors, officers, five percent beneficial security holder, or any member of the immediate family of the foregoing persons has had or will have a direct or indirect material interest.

On March 27, 2000, we entered into a letter of agreement with Multicyber <R>Internet</R> Inc., a Vancouver, Canada, based Internet company which is controlled by Mr. Zhang, our <R>Chairman and Chief Executive Officer (the then President of our company at the time) </R>. Pursuant to the agreement<R>,</R> we acquired the rights to Multicyber's 70% interest of the proposed project in Shanghai Broadband Network Information Joint Venture Chinese Subsidiary <R>from Multicyber Internet Inc. </R>, together with <R>a</R> related project feasibility study. For the assignment to the feasibility study and joint venture project, Multicyber <R>Internet Inc. </R> received <R>a</R> payment of $100,000 in cash.

On January 29, 2000, we issued to Mr. Zhang 2,500,000 shares of our Class A common stock, at a deemed price of $0.001 per share, in consideration of pre-operational services provided to our company. The services were recognized in our consolidated financial statements at a cost of $2,500,000 based on the offering price of the underlying common stock in a private placement completed subsequently in June 2000.

On August 25, 2003, we purchased from Shanghai Infoservice Tower Enterprise Development Ltd. an additional 15% of the shares of our subsidiary, Shanghai Broadband Network, <R>Inc. </R> for $150,000. Subsequent to this purchase, we invested a further $400,000 into our subsidiary. As a result of the acquisition and the investment, we increased our ownership in our subsidiary to 92.86% of the issued and outstanding shares.

In addition, we incurred $18,000 (2002 - $Nil) in director fees payable to all of the directors. As at December 31, 2003, $7,500 (2002 - $Nil) of the director fees was outstanding and included in amounts due to related parties.

On December 23, 2002, we issued 1,000,000 shares of our Class A common stock, at a price of $0.25 per share, to Graham Brant, a director of our company, in a private placement transaction. In connection with the private placement, we paid a stockholder $12,500 as a finder's fee.

On July 7, 2003, we issued 100,000 shares of our Class A common stock, at a price of $0.055 per share, to Mark X. Shao, a director of our company, in consideration of services that he provided to our company.

On July 7, 2003, we issued 300,000 shares of our Class A common stock, at a price of $0.055 per share, to Xinmin Gao, a director of our company, in consideration of services that he provided to our company.

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On July 7, 2003, we agreed to issue 1,800,000 shares of our Class A common stock, at a price of $0.055 per share, to Graham Brant, our President and director, in consideration of past services that he provided to our company. The shares were issued to Church Street Limited, a company managed by independent trustees of Merrill Lynch over which Graham Brant exercises dispositive and investment power. The shares were issued on September 12, 2003.

On July 7, 2003, we issued 3,650,000 shares of our Class A common stock, at a price of $0.055 per share, to Charles Demicher, our Vice Chairman, Chief Operating Officer and director, in consideration of past services that he provided to our company. The shares were issued to World Capital Management, LLC, a company controlled by Charles Demicher.

On July 7, 2003, we issued 300,000 shares of our Class A common stock, at a price of $0.055 per share, to Wen Chao Tu, a director of our company, in consideration of services that he provided to our company.

On July 7, 2003, we issued 150,000 shares of our Class A common stock, at a price of $0.055 per share, to Li Jian Hau, a director of our subsidiary company, in consideration of services that he provided to our company.

Compensation expense recognized in our 2003 financial statements in respect of the July 7, 2003 issuances to related parties was $346,500, based on the quoted market value of our common stock on the agreement dates.

As of March 10, 2004, we agreed to pay an annual consulting fee of $120,000 to Mr. Demicher's nominee company, CHD Holdings, LLC for consulting services provided to our company by Charles Demicher. For the year ended December 31, 2003, we rendered $106,667 and there are outstanding fees of $27,625 for consulting services provided to our company. The term of the consulting agreement is for a five-year period commencing on July 7, 2003, renewable for another five-year period with the consent of the parties. In the agreement, we agreed to pay an annual salary of $120,000. During the year ended December 31, 2003, we granted 1,250,000 options to purchase shares of our Class A common stock and issued 3,650,000 shares of our Class A common stock. If we terminate this agreement, then Mr. Demicher is entitled to 24 months salary, his options will vest immediately, 5,000,000 shares of our Class A common shares will be issued and health and dental benefits will continue for one year. If there is a change of control, then Mr. Demicher will receive 5,000,000 shares of our Class A common stock and director's fees for 24 months. Our company considers the compensation paid under this agreement to be fair and competitive as our company would have to pay similar amounts to an unaffiliated third party to provide such services.

We pay an annual consulting fee of $20,000 to Mr. Wen Chao Tu, a director of our company, for his services and performance to our company and our subsidiary. This contract was terminated on July 7, 2003. For the year ended December 31, 2003, we paid $10,000 and there are outstanding fees of $34,355 for consulting services provided to our company.

As of March 10, 2004, we agreed to pay an annual consulting fee of $125,000 to Golden Promise Business and Investment Inc., a company owned by Yuguo Zhang , for consulting services provided by Yuguo Zhang. For the year ended December 31, 2003, we paid $114,167 and there are outstanding fees of $73,638 for consulting services provided to our company. The term of the consulting agreement is for a five-year period commencing on July 7, 2003, renewable for another five-year period with the consent of the parties. In the agreement, we agreed to pay an annual salary of $125,000. During the year ended December 31, 2003, we granted 1,250,000 options to purchase shares of our Class A common stock and agreed to issue 5,500,000 shares of our Class A common stock. If we terminate this agreement, then Mr. Zhang is entitled to 24 months salary, his options will vest immediately, 5,000,000 shares of our Class A common shares will be issued and health and dental benefits will continue for one year. If there is a change of control, then Mr. Zhang will receive 5,000,000 shares of our Class A common stock and director's fees for 24 months. Our company considers the compensation paid under this agreement to be fair and competitive as our company would have to pay similar amounts to an unaffiliated third party to provide such services.

As of March 10, 2004, we agreed to pay an annual consulting fee of $120,000 to Alexa Holdings Limited, a company owned by Graham Brant, for consulting services provided by Mr. Brant. For the year ended December 31, 2003, we paid $92,500 and there are outstanding fees of $nil for consulting services provided to our company. The term of the consulting agreement is for a three-year period commencing on July 7, 2003, renewable for another five-year period with the consent of the parties. In the agreement we agreed to pay an annual salary of $120,000. During the year ended December 31, 2003, we granted 1,250,000 options to purchase shares of our Class A common stock and issued 1,800,000 shares of our Class A common stock. If we terminate this agreement, then Mr. Brant is entitled to 24 months salary, his options will vest immediately, 5,000,000 shares of our Class A common stock will be issued and health and dental benefits will continue for one year. If there is a change of control, then Mr. Brant will receive 5,000,000 shares of our Class A common stock and director's fees for 24 months. Our company considers the compensation paid under this agreement to be fair and competitive as our company would have to pay similar amounts to an unaffiliated third party to provide such services.

We rent office space in the United Kingdom from Alexa Holdings Limited, a company owned and controlled by Graham Brant, one of our directors and officers. We rent the office on a month to month basis for approximately $1,660 per month.

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On July 7, 2003, we agreed to issue 1,000,000 shares of our Class A common stock, at a deemed price of $0.055 per share, to Seabas Investment Limited, a nominee company of Desmond McVeigh, a former director and officer of our company. Mr. McVeigh provided consulting services to our company from 2001 to 2003. As at November 29, 2003, there were outstanding fees of $74,916 owed to Mr. McVeigh for consulting services rendered to our company which we settled pursuant to a Settlement Agreement, dated November 28, 2003, pursuant to which we agreed to pay $14,983 before December 5, 2003, pay approximately $832 per month over 18 months beginning on January 25, 2004 and issued the above-mentioned 1,000,000 shares of our Class A common stock valued at $0.08 per share based on the trading price on the date of the settlement agreement.

We entered into Settlement Agreement, dated November 23, 2003, with Tom Allen, a former director and officer of our company. There were also outstanding fees of $16,344 owed to Mr. Allen for consulting services rendered to our company. Pursuant to the Settlement Agreement, we agreed to pay $3,268 before November 30, 2003 and pay approximately $182 per month over 18 months beginning on January 25, 2004. During the year ended December 31, 2003, we also issued 178,500 shares of our Class A common stock, at a deemed price of $0.055 per share which were valued at $0.08 per share based on the trading price of our Class A common stock on the date of the settlement agreement, to Inter-Canadian Capital Strategies Inc., a nominee company of Tom Allen.

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our Class A common stock is presently not traded on any public market or securities exchange and we have not applied for listing or quotation on any public market. Our Class A common stock is quoted on Pink Sheets LLC under the symbol "ASAB." The following quotations obtained from Canada Stockwatch reflect the highs and low bids for our Class A common stock based on inter-dealer prices, without retail mark-up, mark-down or commission an may not represent actual transactions.

The high and low bid prices of our Class A common stock for the periods indicated below are as follows:

Our common shares are issued in registered form. Computershare Trust Company of Canada, of 4th Floor, 510 Burrard Street, Vancouver, British Columbia, Canada V6C 3B9 (Telephone: 604.661.9400), Facsimile: 604.661.9401 is the registrar and transfer agent for our common shares.

On <R>October 15, </R> 2004, the shareholders' list of our common shares showed 60 registered shareholders and <R>39,530,968 shares outstanding. We have issued options to acquire an aggregate of 8,075,000 Class A common shares, warrants to purchase an aggregate of 2,290,000 Class A common shares and convertible debentures convertible into an aggregate of 1,812,500 common shares.

A total of 37,140,968 shares of our Class A common stock are available for resale to the public in accordance with Rule 144 of the Act. This amount includes the 6,332,667 shares we are registering for the benefit of our selling shareholders. In general, under Rule 144 as currently in effect, a person who has beneficially owned

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shares of a company's common stock for at least one year is entitled to sell within any three month period a number of shares that does not exceed the greater of:

Sales under Rule 144 are also subject to manner of sale provisions and notice requirements and to the availability of current public information about the company.

Under Rule 144(k), a person who is not one of the company's affiliates at any time during the three months preceding a sale, and who has beneficially owned the shares proposed to be sold for at least two years, is entitled to sell shares without complying with the manner of sale, public information, volume limitation or notice provisions of Rule 144. </R>

We have not declared any dividends on our Class A common stock since the inception of our company on January 24, 1996. There is no restriction in our Articles of Incorporation and Bylaws that will limit our ability to pay dividends on our Class A common stock. However, we do not anticipate declaring and paying dividends to our shareholders in the near future.

Shares of our Class A common stock are subject to rules adopted by the Securities and Exchange Commission that regulate broker-dealer practices in connection with transactions in "penny stocks". "Penny stock" is defined to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. If we establish a trading market for our Class A common stock, our Class A common stock will most likely be covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and "accredited investors." The term "accredited investor" refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer's account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer's confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities.

Effective July 7, 2003, we adopted the 2003 Stock Option Plan for directors and consultants of our company and its subsidiaries. The maximum number of common shares to be issued under the 2003 Stock Option Plan initially is 5,000,000 shares of Class A common stock. Under the 2003 Stock Option Plan, stock options are granted at the discretion of our board of directors. Options granted must be exercised no later than ten years after the date of the grant or such lesser periods as any applicable regulations may require, unless otherwise specified. Unless otherwise specified, options granted vest at the rate of not less than 33% every six months until they are fully vested on the date which is no later than 18 months after the date of grant. As at December 31, 2003, 3,750,000 options were granted under the 2003 Stock Option Plan.

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Effective July 7, 2003, we adopted the 2003 Employee Stock Option Plan for officers and key employees of our company and its subsidiaries. The maximum number of common shares to be issued under the 2003 Employee Stock Option Plan initially is 1,000,000 shares of Class A common stock. Under the 2003 Employee Stock Option Plan, stock options are granted at the discretion of our board of directors provided that the aggregate fair value of the common stock granted to any officers or employees during any calendar year shall not exceed $100,000. Options granted must be exercised no later than ten years after the date of the grant or such lesser periods as any applicable regulations may require, unless otherwise specified. Unless otherwise specified, options granted vest at the rate of not less than 30% the 12 months from the date of grant, 30% after 24 months from the date of grant and 40% after the 36 months from the date of grant. The exercise price of the options under the 2003 Employee Stock Option Plan shall be determined by our board of directors but shall not be less than the fair market value of our company's common stock on the grant date. (In the case of options granted to a holder of more than 10% of our company's Class A common stock, the option price must not be less than 110% of the market value of the Class A common stock on the grant date.) As at December 31, 2003, no options were granted under the 2003 Employee Stock Option Plan.

Effective April 23, 2001, our board of directors approved the 2001 Stock Option Plan and the 2001 Employee Stock Option Plan for directors, consultants and employees of our company and its subsidiaries. The maximum number of common shares to be issued under the 2001 Stock Option Plan and the 2001 Employee Stock Option Plan initially are 5,000,000 shares of Class A common stock and 1,000,000 shares respectively. Both of these plans have the same terms as the 2003 Stock Option Plan and the 2003 Employee Stock Option Plan except that the exercise price for options granted under the 2001 Stock Option Plan shall not be less than 85% of the fair market value of our company's Class A common stock on the grant date. As at December 31, 2003, 2,250,000 options were granted under the 2001 Stock Option Plan and no options granted under the 2001 Employee Stock Option Plan.

On January 5, 2004, we granted an aggregate of 1,075,000 options to purchase shares of our Class A common stock to five of our company's directors and/or officers. The options vest as to one-third every six months commencing on July 5, 2004 at an exercise price of $0.20 per share. The options expire on January 5, 2014. We issued the options to these directors and/or officers, all of whom were accredited investors, relying on Rule 506 of Regulation D, Section 4(6) and/or Section 4(2) of the Securities Act of 1933.

On January 5, 2004, we granted an aggregate of 640,000 options to purchase shares of our Class A common stock to 28 of our company's employees. The options vest as to one-third every twelve months commencing on January 5, 2005 at an exercise price of $0.20 per share. The options expire on January 5, 2014. We issued the options to 25 of these employees, who are not U.S. persons (as that term is defined in Regulation S of the Securities Act of 1933), in an offshore transaction relying on Regulation S and/or Section 4(2) of the Securities Act of 1933 and to one employee relying on Section 4(2) of the Securities Act of 1933.

On February 2, 2004, we granted an aggregate of 80,000 options to purchase shares of our Class A common stock to four of our company's employees. The options vest as to one third every twelve months commencing on February 2, 2004 at an exercise price of $0.27 per share (as to 40,000 options), $0.30 per share (as to 30,000 options) and $0.33 per share (as to 10,000 options). The options expire on February 2, 2014. We issued the options to the employees who are not U.S. persons (as that term is defined in Regulation S of the Securities Act of 1933), in an offshore transaction relying on Regulation S and/or Section 4(2) of the Securities Act of 1933

On February 11, 2004, we granted an aggregate of 300,000 options to purchase shares of our Class A common stock to one of our company's consultants. The options vest as to one-third every six months commencing on August 11, 2004 at an exercise price of $0.20 per share. The options expire on February 11, 2014. We issued the options to this consultant, who is not a U.S. person (as that term is defined in Regulation S of the Securities Act of 1933), in an offshore transaction relying on Regulation S and/or Section 4(2) of the Securities Act of 1933.

EXECUTIVE COMPENSATION

Particulars of compensation awarded to, earned by or paid to:

(a) our chief executive officer;

(b) each of our four most highly compensated executive officers who were serving as executive officers at the end of the most recently completed fiscal year and whose total salary and bonus exceeds $100,000 per year; or

(c) any additional individuals for whom disclosure would have been provided under (b) but for the fact that the individual was not serving as an executive officer of our company at the end of the most recently completed fiscal year;

(the "Named Executive Officers") are set out in the summary compensation table below.

During the year ended December 31, 2003, three individuals served as executive officers of our company: Mr. Yuguo Zhang, Mr. Desmond McVeigh and Mr. Charles Demicher. No other persons served as executive officers during the year ended December 31, 2003 and therefore Mr. Zhang and Mr. McVeigh are considered to be "Named Executive Officers". None of our other officers or those of any of our subsidiaries earned greater than $100,000 in total salary and bonus during 2002, 2001 or 2000.

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