- Quarterly Report (10-Q)

U. S. Securities and Exchange Commission

Washington, D. C. 20549

FORM 10-Q

[X]	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended March 31, 2009

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

For the transition period from _____ to _____

Commission File No. 0-25707

SMOOTH GLOBAL (CHINA) HOLDINGS, INC.

(Exact Name of Registrant as Specified in its Charter)

Nevada	91-1948355
(State or Other Jurisdiction of	(I.R.S. Employer I.D. No.)
incorporation or organization)

Room 618, +17 Anyuan Road, Chaoyang District, Beijing, P.R. China 100029

(Address of Principal Executive Offices)

Issuer's Telephone Number: 86-10-6498-7788

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.) Yes No __

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One)

Large accelerated filer Accelerated filer Non-accelerated filer Small reporting company X

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

APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of the latest practicable date:

May 4, 2009

Common Stock: 38,381,375 shares

SMOOTH GLOBAL (CHINA) HOLDINGS, INC. AND SUBSIDIARIES




INDEX



	PAGE

CONSOLIDATED BALANCE SHEETS	2

CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME	3

CONSOLIDATED STATEMENTS OF CASH FLOWS	4

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	5-29

SMOOTH GLOBAL (CHINA) HOLDINGS, INC. AND SUBSIDIARIES


CONSOLIDATED BALANCE SHEETS


	March 31,			December 31,
	2009			2008
	(unaudited)
ASSETS

Current Assets:
Cash and cash equivalents	$	46,366		$	33,415
Prepaid expense (Note 6)		359,277			374,597

Total current assets		405,643			408,012

Property, Plant, and Equipment, net (Note 7)		195,451			215,515

Long-term Investment (Note 9)		233,727			233,434

Contract Security Deposit (Note 8)		89,226			89,114

Total Assets	$	924,047		$	946,075

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
Accrued expenses (Note 10)		41,971			53,667
Taxes payable		1,230			34
Deferred revenue (Note 11)		1,242			1,679
Agreement security deposit (Note 12)		321,374			320,971
Due to officers (Note 13)		26,137			-
Total Current Liabilities		391,954			376,351

Commitments and Contingencies (Note 17)		-			-

Stockholders' Equity:
Common stock, $0.001 par value, 200,000,000 shares authorized; 38,381,375 shares issued and outstanding as of March 31, 2009 and December 31, 2008		38,381			38,381
Additional paid-in capital		799,255			799,255
Unamortized contractual services costs		(18,333	)		(29,333	)
Statutory reserves		236,875			236,875
Retained earnings		(703,100	)		(653,811	)
Accumulated other comprehensive income		179,015			178,357
Stockholders' Equity		532,093			569,724

Total Liabilities and Stockholders' Equity	$	924,047		$	946,075

See Notes to Consolidated Financial Statements

SMOOTH GLOBAL (CHINA) HOLDINGS, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME


		For the Three Months Ended
		March 31,
		2009			2008
		(unaudited)			(unaudited)
Revenues
(a) GRT public telephone service		$	1,127		$	5,144
(b) GRT network solution			-			-
(c) GRT VoIP call time distribution			22,131			88,950
(d) GRT sales of call forwarding cards			-			1,062
(e) Franchise Fees-GRT			-			-
	Total Revenue		23,258			95,156

Costs of Revenue
(a) GRT public telephone service			1,217			8,386
(b) GRT network solution			-			-
(c) GRT VoIP call time distribution			14,571			74,078
(d) GRT sales of call forwarding cards			-			1,576
(e) Franchise Fees-GRT			-			-
	Total Costs of Revenue		15,788			84,040

Gross Profit			7,470			11,116

Operating Expenses
Compensation to CEO			-			44,028
Payroll and employee benefit			7,768			12,995
Depreciation expenses			21,656			19,326
Office expenses			11,126			6,953
Repair and maintenance			-			518
Professional fees			5,048			4,000
Consultant fees (Note 14)			11,000			148,882
Travel and entertainment			181			20,654
Other general and administrative expenses			-			283
Total Operating Expenses			56,779			257,639

Income (Loss) from Operation			(49,309	)		(246,523	)

Other Income
Interest income			20			197
Total other income			20			197

Income (Loss) before provision for Income Tax			(49,289	)		(246,326	)

Provision for Income Tax			-			-

Income (Loss) from Continuing Operations			(49,289	)		(246,326	)

Loss from Discontinued Operations-- VoIP Call Time Distribution of QTC			-			(5,280	)

Net Income			(49,289	)		(251,606	)

Other Comprehensive Income (Loss)
Effects of Foreign Currency Conversion			658			62,033

Comprehensive Income (Loss)		$	(48,631	)	$	(189,573	)

Basic and fully diluted earnings (loss) per share		$	(0.00	)	$	(0.00	)

Weighted average shares outstanding			38,381,375			38,381,375

See Notes to Consolidated Financial Statements

SMOOTH GLOBAL (CHINA) HOLDINGS, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CASH FLOWS


	For the Three Months Ended
	March 31,
	2009			2008
	(unaudited)			(unaudited)
Operating Activities

Net income (loss)	$	(49,289	)	$	(251,606	)
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:
Depreciation		21,656			19,326
Deferred consultant compensation		11,000			107,690
Changes in operating assets and liabilities:
(Increase)/Decrease in accounts receivable		-			(4,659	)
(Increase)/Decrease in purchased SIM cards		-			403
(Increase)/Decrease in prepaid expenses		15,788			(262,401	)
Increase/(Decrease) in accounts payable and accrued expenses		(3,217	)		(24,047	)
Increase/(Decrease) in deferred revenue		(439	)		300
Increase/(Decrease) in taxes payable		1,196			(293	)
Net cash provided (used) by operating activities		(3,305	)		(415,287	)

Investing Activities

Investment in subsidiary		-			(61,212	)
Purchase of fixed assets		(1,329	)		-
Net cash (used) by investing activities		(1,329	)		(61,212	)

Financing Activities

Loans from shareholders		17,529			-
Net cash provided (used) by financing activities		17,529			-

Increase (decrease) in cash		12,895			(476,499	)
Effects of exchange rates on cash		56			52,237
Cash at beginning of the period		33,415			521,016
Cash at end of the period	$	46,366		$	96,754

Supplemental Disclosures of Cash Flow Information:
Cash paid (received) during year for:
Interest	$	-		$	-
Income taxes	$	-		$	-

See Notes to Consolidated Financial Statements

SMOOTH GLOBAL (CHINA) HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	Note 1-	BASIS OF PRESENTATION

		The consolidated financial statements of Smooth Global (China) Holdings, Inc. and subsidiaries ( the "Company"), included herein were prepared, without audit, pursuant to rules and regulations of the Securities and Exchange Commission. In management's opinion, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. Because certain information and notes normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America were condensed or omitted pursuant to such rules and regulations, these financial statements should be read in conjunction with the financial statements and notes thereto included in the audited financial statements of the Company as included in the Company's Form 10-K for the year ended December 31, 2008.


	Note 2-	ORGANIZATION AND OPERATIONS

		Organization and Business Background

		The Bralorne Mining Company ("Bralorne") was incorporated under the laws of the State of Nevada on December 2, 1998 with authorized common stock of 200,000,000 shares at $0.001 par value. Currently, the Company principally engages in the business to provide telecommunication services in the People's Republic of China ("PRC'), through its wholly-owned subsidiaries, Gold Profit (Asia) Group Limited ("Gold Profit") and Smooth Global Services Limited ("Smooth Global"). On July 31, 2007, Bralorne changes its name to Smooth Global (China) Holdings, Inc. ("Smooth Global (China)" or the "Company").

		On November 2, 2006, Bralorne entered into an Share Exchange Agreement (“the Agreement") with the sole shareholder of Gold Profit to exchange 1,333,334 shares (40,000,000 shares prior to reverse stock split on July 31, 2007) of common stock of Bralorne for 100% of the outstanding stock of Gold Profit. Upon the execution of the Agreement, Gold Profit became a wholly-owned subsidiary of Bralorne.

		Gold Profit was incorporated as a limited liability company in the British Virgin Islands (“BVI”) under the BVI Business Companies Act on July 28, 2006, for the purpose of seeking and consummating a merger or acquisition with a business entity organized as a private corporation, partnership, or sole proprietorship as defined by Statement of Financial Accounting Standards (SFAS) No. 7 “Accounting and Reporting by Development Stage Enterprises”.

		On September 8, 2006, Gold Profit entered into a Share Purchase Agreement with all the shareholders of Beijing Quan Tong Chang Information Service Limited a/k/a Beijing Smooth Global Information Services Ltd. (”QTC') to acquire 100% of QTC's registered capital for RMB500,000 (equivalent to US$60,386). Upon completion of this transaction, QTC became a wholly-owned subsidiary of Gold Profit.

		Under the Company Law of PRC, QTC was incorporated in Beijing City, PRC on August 2, 2003 with a registered capital of RMB500,000 (equivalent to US$60,386). QTC is engaged in the business of providing telecommunication services in PRC.

SMOOTH GLOBAL (CHINA) HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	Note 2-	ORGANIZATION AND OPERATIONS (continued)

		Organization and Business Background (continued)

		On October 24, 2007 Smooth Global (China) completed the acquisition of all the registered capital stock of Smooth Global. In exchange for the capital stock of Smooth Global, Smooth Global (China) issued 33,000,000 shares of its common stock to the prior owners of Smooth Global. The prior registered owners were Christina Nelson and Shannon Lee Alsop. They held the shares, however, as nominees for nine residents of PRC. Accordingly, upon closing of the acquisition, Ms. Nelson and Ms. Alsop assigned the 33,000,000 shares to those nine beneficiaries. 20,000,000 of the shares were assigned to Ms. Zheng Shuying. Ms. Zheng is the Chief Executive Officer of Smooth Global (China). Also, Smooth Global became a wholly-owned subsidiary of Smooth Global (China) upon completion of the acquisition.

		Smooth Global was incorporated on January 25, 2006 in the British Virgin Island ("BVI") under the BVI Business Companies Act, 2004, as a BVI Business Company. The Company was formed for the purpose of seeking and consummating a merger or acquisition with a business entity organized as a private corporation, partnership, or sole proprietorship as defined by Statement of Financial Accounting Standards (SFAS) No. 7.

		On June 28, 2007, Smooth Global established a wholly owned subsidiary, Smooth Global (Beijing) Telecom Science Limited ("Beijing Telecom") in the Beijing City, PRC. Beijing Telecom was incorporated under the Company Law of PRC as a limited liability company with registered capital of $100,000. Beijing Telecom was formed for the purpose of seeking and consummating a merger or acquisition with a business entity organized in PRC and engaged in the business of providing telecommunication services.

		On September 20, 2007, Ms. Yianfang Jin and Ms. Yianxia Wang (collectively the "Trustees"), both of whom are citizens of PRC and totally own a 100% equity ownership interest in Beijing GRT Information Services Limited ( "GRT" ), executed Trust and Indemnity Agreements ("Agreements") with Beijing Telecom, pursuant to which the Trustees assigned to Beijing Telecom all of the beneficial interest in the Trustee's equity ownership interest in GRT. The Agreements provided for effective control of GRT to be transferred to Beijing Telecom at September 20, 2007.

		Through the Agreements described in the preceding paragraph Beijing Telecom is deemed a 100% beneficiary of GRT resulting in GRT being deemed a subsidiary of Beijing Telecom under the requirements of Financial Interpretation 46 (Revised) "Consolidation of Variable Interest Entities" issued by the Financial Accounting Standards Board ("FASB"). Accordingly, the consolidated financial statements of Smooth Global and its wholly owned subsidiary, Beijing Telecom, will be prepared by including the financial statements of GRT through September 20, 2007 and thereafter.

SMOOTH GLOBAL (CHINA) HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	Note 2-	ORGANIZATION AND OPERATIONS (continued)

		Organization and Business Background (continued)

		GRT and QTC are the two of these affiliated companies that are engaged in business operations. Smooth Global (China), Gold Profit, Smooth Global, and Beijing Telecom are all holding companies, whose business is to hold an equity ownership interest in QTC and a beneficial interest in GRT. All these affiliated companies are hereafter referred to as the "Company", whose structure is outlined as following:



		Reverse Merger Accounting

		The merger of Smooth Global (China) with Smooth Global results in a capital transaction accounted for as a reverse merger. The transaction was treated for accounting purposes as a recapitalization of the accounting acquirer (Smooth Global) and a reorganization of the accounting acquiree (Smooth Global (China)). Accordingly, the historical consolidated financial statements presented prior to the merger are the historical consolidated financial statements of Smooth Global, which includes Smooth Global's wholly-owned subsidiary, Beijing Telecom, and its variable interest entity, GRT. The consolidated financial statements presented post to the merger are the consolidated financial statements of Smooth Global (China) and its subsidiaries and variable interest entity, which include GRT, and QTC from the acquisition date, October 24, 2007.

SMOOTH GLOBAL (CHINA) HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	Note 2-	ORGANIZATION AND OPERATIONS (continued)

		Business Operations

		(a) GRT Public Telephone Service

		GRT provides public phone users with access to the network of China Unicom (Beijing) Limited (“CUBJ”) F/K/A China United Telecommunications (Beijing) Corporation Limited, via paid phones installed in outlets located in universities, convenience shops and street corners. These outlets are managed but not necessary owned by GRT. GRT signed non-exclusive distribution agreement with CUBJ to distribute its traditional fixed line call time in Beijing City, PRC.

		CUBJ is a subsidiary of China Unicom (Hong Kong) Limited ("CUHK") F/A/K China United Telecommunications Corporation Limited. On January 6, 2009, China United Telecommunications Corporation Limited merged with China Netcom (Group) Corporation Limited and changed its name to China Unicom (Hong Kong) Limited. CUHK is one of the largest telecommunications carriers in PRC.

		(b) GRT Network Solution

		GRT provides computer networking and telephone solutions to its customers, mainly the commercial buildings located in PRC, including design and implementation of network system, and purchasing and installation of hardware and software.

		(c) GRT VoIP Call Time Distribution

		Beginning from January 2008, GRT provides enterprise phone users and public phone users with access to the network of China Unicom (Shaoxing) Limited (“CUSX”) F/K/A China Netcom (Shaoxing) Corporation Limited and China Unicom (Shanghai) Limited (“CUSH”) F/A/K China Netcom (Shanghai) Corporation Limited, via phones connected to GRT's telecommunication server. Both CUSX and CUGD are subsidiaries of China Unicom (Hong Kong) Limited F/A/K China Netcom (Group) Company Limited. GRT signed non-exclusive distribution agreement with CUSX and CUGD to distribute their Voice Over Internet Protocol (“VoIP”) call time in the PRC.

		(d) GRT International Call Forwarding Service

		GRT provides China mobile phone users with international call forwarding service, which resembles the function of international roaming services. GRT provides subscribers with SIM cards of the destination country or region with predefined call forwarding time. The subscribers forward their mobile phone calls to a specified GRT number and instruct GRT to further forward the calls to a telephone number in their destination country or region. This enables the mobile phone user to receive local calls for a competitive tariff rate when they are traveling abroad.

		Discontinued Operation

		QTC provided enterprise phone users and public phone users with access to the network of CUSX and China Unicom (Guangdong) Limited (“CUGD”) F/A/K China Netcom (Guangdong) Corporation Limited via phones connected to QTC's telecommunication server. On August 20, 2008, QTC's board of directors decided to terminate this operation and disposed of the relevant equipment. QTC totally disposed of 65 pieces of equipments with a carrying value of $61,929 (RMB 424,475), of which 59 pieces of equipment with a carrying value of $42,312 (RMB 290,017) were sold to a third party for $7,295 (RMB 50,000. 00), resulting in a loss of $34,474 (RMB 240,017), and 6 pieces of equipment with carrying value of $19,617 (RMB 134,458) were transferred to GRT to satisfy a "due to GRT" of $11,671 (RMB 80,000.00). No loss was recognized for this transfer due to the elimination of intercompany transactions in consolidation.

SMOOTH GLOBAL (CHINA) HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	Note 2-	ORGANIZATION AND OPERATIONS (continued)

		Discontinued Operation (continued)

		Losses from discontinued operation consist of the following:

	For The Three Months Ended
	March 31,
	2009		2008
	(unaudited)		(unaudited)
Losses from discontinued operation
Revenue from discontinued operation-
QTC VoIP call time distribution	$	-	$	2,977
Costs of revenue from discontinued operation-
QTC VoIP call time distribution		-		(8,257	)
Losses from discontinued operation		-		(5,280	)
Loss of disposal of fixed assets		-		-
Income taxes		-		-
Losses on discontinued operation	$	-	$	(10,560	)

Assets to be disposed consist of the following:
	March 31,		December 31,
	2009		2008
	(unaudited)
Cost of fixed assets to be disposed of	$	-	$	190,437
Accumulated depreciation of fixed assets to be disposed of		-		(104,950	)
	$	-	$	85,487

	Note 3-	GOING CONCERN

		As reflected in the accompanying consolidated financial statements, the Company incurred a loss of $1,155,287 in the year ended December 31, 2008. This amount is significant compared with the Company's shareholders' equity. Additionally, the Company continued to incurred a loss of $49,289 for the three months ended March 31, 2009. These factors raise substantial doubt about the Company's ability to continue as a going concern. In view of the matters described above, recoverability of a major portion of the recorded asset amounts shown in the accompanying consolidated balance sheets is dependent upon continued operations of the Company, which in turn is dependent upon the Company's ability to raise additional capital, obtain financing and succeed in its future operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

		Management has taken the steps to revise its operating and financial requirements, which it believes are sufficient to provide the Company with the ability to continue as a going concern. The Company is actively pursuing additional funding and a potential merger or acquisition candidate and strategic partners, which would enhance stockholders' investment. The Company is also developing new business lines, including new telecommunication equipment and telecommunication services. Management believes that these actions will allow the Company to continue operations through the next fiscal year.

SMOOTH GLOBAL (CHINA) HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	Note 4-	Control by Principal Stockholders

		The chief executive officer owns beneficially and in the aggregate, the majority of the voting power of the Company. Accordingly, the chief executive officer has the ability to control the approval of most corporate actions, including approving significant expenses, increasing the authorized capital stock and the dissolution, merger or sale of the Company's assets.

	Note 5-	SIGNIFICANT ACCOUNTING POLICIES

		Basis of Consolidation

		The consolidated financial statements include the accounts of the Company and all its majority-owned subsidiaries which require consolidation. Inter-company transactions have been eliminated in consolidation.

		The consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America ("US GAAP"). This basis of accounting differs from that used in the statutory accounts of the Company, which are prepared in accordance with the "Accounting Principles of China " ("PRC GAAP"). Certain accounting principles, which are stipulated by US GAAP, are not applicable in the PRC GAAP. The difference between PRC GAAP accounts of the Company and its US GAAP financial statements is immaterial.

		Use of Estimates

		The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. In preparing these financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheets and revenues and expenses during the years reported. Actual results may differ from these estimates.

		Revenue Recognition

		The Company recognizes its revenues net of sales taxes and sales-related taxes. In accordance with the SEC’s Staff Accounting Bulletin No. 104, Revenue Recognition , the Company recognizes revenue when persuasive evidence of an arrangement exists, transfer of title and the risks and rewards of ownership have occurred or services have been rendered and accepted, the selling price is fixed or determinable and collectability is reasonably assured.

SMOOTH GLOBAL (CHINA) HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	Note 5-	SIGNIFICANT ACCOUNTING POLICIES (continued)

		Revenue Recognition (continued)

		(a) GRT Public Telephone Service

		GRT sets up outlets through CUBJ's network to provide public telephone service to end users. GRT buys call time from CUBJ in advance and then distribute to end users via these outlets. GRT recognizes revenue when the tariff is collected after an end user places a telephone call. GRT records revenue from outlets after netting outlets' operating expenses since such expenses are instable.

		Pursuant to the distribution agreement with CUBJ, GRT is entitled to refund a certain percentage of call time cost and the percentage varies based on the volume of call time which GRT distributes monthly. GRT records these refunds as revenue because GRT has to issue sales invoices to CUBJ for the refunds.

		( b ) GRT Network Solution

		GRT provides network solution to enterprise customers, including design and implementation of internet and telephone network. The contracts are accounted for as one unit of accounting as the criteria for separation are not met, and revenue for billed amounts is recognized when customer’s acceptance is obtained provided that no significant obligations remain.

		(c) GRT VoIP Call Time Distribution

		Beginning from January 2008, GRT contracted with CUSX and CUSH for the distribution of their VoIP call time. VoIP call time distribution revenue is generally recognized when the end user makes a call through the phone connected to GRT's telecommunication server.

		Pursuant to the contracts with CUSX and CUSH, GRT pays tariff to the telecommunication carriers in advance and connects its telecommunication server to the carriers' network. Then, GRT distributes the VoIP call time to its customers who connect their phones to GRT’s server. The customers also pay tariff to GRT in advance. Monthly, the telecommunication carriers bill GRT for the VoIP call time that it distributes. In turn, GRT bills its customers for the VoIP call time which the customers consume, based on the records provided by its own server.

		(d) International Call Forwarding Service

		GRT purchases a foreign SIM card and then attaches it with a specified phone number, which GRT bought from CUSH. When a mobile phone call is forwarded to that particular phone number, GRT will further forward the call to the related SIM card, via the network of either CUSH or CUSX. GRT signed non-exclusive agreements with CUSH and CUSX to forward phone calls via their network.

SMOOTH GLOBAL (CHINA) HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	Note 5-	SIGNIFICANT ACCOUNTING POLICIES (continued)

		Revenue Recognition (continued)

		(d) International Call Forwarding Service (continued)

		GRT sells SIM cards either directly to end users or via its franchised distributors, who signed non-exclusive Distribution Agreements with GRT to distribute its SIM cards.

		(1) When GRT sells SIM cards directly to end users, it recognizes revenue when the SIM cards are expired as indicated in the description printed on the envelop containing the SIM card.

		(2) When GRT sells SIM cards to its franchised distributors, it recognizes revenue when the SIM cards are delivered to the distributors and the payments have been received, at which time Management believes the sales transactions have been completed pursuant to the Distribution Agreements.

		(e) Franchise Fees from Franchised Distributers

		GRT recognizes revenue from franchise fees and training fees when the Management believes that all material services and conditions applicable to the sale have been substantially performed pursuant to the Distribution Agreements. The Management believes that substantial performance under FASB 45, Accounting for Franchise Fee Revenue , is indicated by: (1) absence of intent to refund cash received; (2) performance of substantially all initial services; and (3) nonexistence of other material conditions related to performance.

		Revenue that GRT recognized from franchise fees and training fees was $0 and $0 for the three months ended March 31, 2009 and 2008, respectively.

		Revenue from discontinued operation-QTC VoIP call time distribution

		Before QTC terminated its operation of VoIP call time distribution on August 20, 2008, QTC contracted with CUSX and CUGD for the distribution of their VoIP call time. VoIP call time distribution revenue is generally recognized when the end user makes a call through the phone connected to QTC's telecommunication server.

		Pursuant to the contracts with CUSX and CUGD, QTC pays tariff to the telecommunication carriers in advance and connects its telecommunication server to the carriers' network. Then, QTC distributes the VoIP call time to its customers who connect their phones to QTC’s server. The customers also pay tariff to QTC in advance. Monthly, the telecommunication carriers bill QTC for the VoIP call time that it distributes. In turn, QTC bills its customers for the VoIP call time which the customers consume, based on the records provided by its own server.

SMOOTH GLOBAL (CHINA) HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	Note 5-	SIGNIFICANT ACCOUNTING POLICIES (continued)

		Cost of Revenue

		(a) GRT Public Telephone Service

		Costs of public telephone service mainly include costs to buy call time from CUBJ.

		( b ) GRT Network Solution

		Costs of network solution principally include materials and equipment particularly purchased for the projects, and the labor that GRT assigns to the projects. Because these employees also work on the maintenance function in the day-to-day operation and it is difficult to distinguish their working hours between network projects and maintenance function, and the amount is immaterial, these labor costs are included in the general and administrative expenses.

		(c) GRT VoIP Call Time Distribution

		Costs of VoIP call time distribution principally include the costs of VoIP call time purchased from CUSX and CUSH.

		(d) International Call Forwarding Service

		Costs of international call forwarding services principally include the costs to purchase SIM cards, the costs of telephone number, and the call forwarding fees charged by the telecommunication carriers.

		(e) Franchise Fees from Franchised Distributers

		Costs of franchise fees principally include the costs to prepare the distribution agreements, which amount is immaterial and included in the general and administrative expenses.

		Cost of revenue from discontinued operation-QTC VoIP call time distribution

		Costs of QTC VoIP call time distribution principally include the costs of VoIP call time purchased from CUSX and CUGD.

SMOOTH GLOBAL (CHINA) HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	Note 5-	SIGNIFICANT ACCOUNTING POLICIES (continued)

		Cash and Cash Equivalents

		Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments.

		Accounts Receivable

		Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Management’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. The Company determines the allowance based on historical write-off experience. The Company reviews its allowance for doubtful accounts on a regular basis. Past due balances over 90 days and over a specified amount are reviewed individually for collectability. All other balances are reviewed on a pooled basis by industry. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. If actual collections experience changes, revisions to the allowance may be required.

		Concentrations of Credit Risk

		Financial instruments that subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents. The Company maintains its cash and cash equivalents with high-quality institutions. While deposits held with banks are not insurance in PRC, these deposits generally may be redeemed upon demand and therefore bear minimal risk.

		Fair Value of Financial Instruments

		The carrying value of the Company’s financial instruments, which include cash and cash equivalents, accounts receivables and payables, and amounts due from/to shareholders, approximate fair value due to the short maturities of those instruments.

		Impairment of Long-life Assets

		Long-lived assets and certain identifiable intangibles are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

SMOOTH GLOBAL (CHINA) HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	Note 5-	SIGNIFICANT ACCOUNTING POLICIES (continued)

		Property and Equipment

		Plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated on the straight-line basis over the following expected useful lives from the date on which they become fully operational and after taking into account their estimated residual values:

	Depreciable	Residual
	Life	Value

Network and office equipment	5 years	4%
Leasehold Improvements	5 years (Lease duration)

		Expenditure for maintenance and repairs is expended as incurred.

		Deferred Revenue

		Payments received prior to satisfying the Company’s revenue recognition criteria are recorded as deferred revenue.

		Research and Development Costs

		Research and development costs are expensed when incurred. Research and development costs were immaterial for the three months ended March 31, 2009 and 2008, respectively.

		Advertising Costs

		The Company expenses advertising costs as incurred in accordance with the American Institute of Certified Public Accountants (“AICPA”) Statement of Position 93-7, “Reporting for Advertising Costs”. Advertising expenses were immaterial for the three months ended March 31, 2009 and 2008, respectively.

		Foreign Currencies Translation

		The functional currency of the Company is Renminbi (“RMB”). Transactions denominated in currencies other than RMB are translated into RMB at the exchange rates quoted by the People’s Bank of China (“PBOC”) prevailing at the date of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated into RMB using the applicable exchange rates quoted by the PBOC at the balance sheet dates. Exchange differences are included in the statements of changes in shareholders' equity. Gain and losses resulting from foreign currency transactions are included in operations.

SMOOTH GLOBAL (CHINA) HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	Note 5-	SIGNIFICANT ACCOUNTING POLICIES (continued)

		Foreign Currencies Translation (continued)

		The Company’s financial statements are translated into the reporting currency, the United States Dollar (“US$”), using exchange rates in effect at each year end for assets and liabilities and average exchange rates during each reporting year for the consolidated statements of operations. Contributed capital accounts are translated using the historical rate of exchange when capital is injected. Translation adjustments resulting from translation of these consolidated financial statements are reflected as accumulated other comprehensive income in the shareholders’ equity.

		Translation adjustments resulting from this process are included in accumulated other comprehensive income (loss) in the consolidated statement of changes in shareholders’ equity and amounted to 179,015 as of March 31, 2009, and $178,357 as of December 31, 2008. The balance sheet amounts with the exception of equity at March 31, 2009 were translated at 6.84 RMB to $1.00 USD as compared to 6.85 RMB at December 31, 2008. The equity accounts were stated at their historical rate. The average translation rates applied to income statement accounts for the three months ended March 31, 2009 and 2008 were 6.85 RMB and 7.15 RMB, respectively.

		Statement of Cash Flows

		In accordance with SFAS No. 95, “Statement of Cash Flows,” cash flows from the Company’s operations are calculated based upon the functional currency. As a result, amounts related to assets and liabilities reported on the statement of cash flows may not necessarily agree with changes in the corresponding balances on the balance sheet.

		Segment Reporting

		SFAS No. 131 “Disclosures about Segments of an Enterprise and Related Information” establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organization structure as well as information about geographical areas, business segments and major customers in financial statements. The Company operates in five principal business segments.

		Related Parties

		For the purposes of these financial statements, parties are considered to be related to the Company if the Company has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Company and the party are subject to common control or common significant influence. Related parties may be individuals or other entities.

SMOOTH GLOBAL (CHINA) HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	Note 5-	SIGNIFICANT ACCOUNTING POLICIES (continued)

		Statutory Reserves

		Pursuant to the applicable laws in PRC, PRC entities are required to make appropriations to three non-distributable reserve funds, the statutory surplus reserve, statutory public welfare fund, and discretionary surplus reserve, based on after-tax net earnings as determined in accordance with the PRC GAAP, after offsetting any prior years’ losses. Appropriation to the statutory surplus reserve should be at least 10% of the after-tax net earnings until the reserve is equal to 50% of the Company's registered capital. Appropriation to the statutory public welfare fund is 5% to 10% of the after-tax net earnings. The statutory public welfare fund is established for the purpose of providing employee facilities and other collective benefits to the employees and is non-distributable other than in liquidation. No appropriations to the discretionary surplus reserve are made at the discretion of the Board of Directors.

		The Company makes appropriations to these three reserve funds at the fiscal year end pursuit to PRC GAAP. Accordingly, the Company made no appropriations for the three months ended March 31, 2009 and 2008, respectively.

		Income Taxes

		The Company accounts for income taxes in interim periods as required by Accounting Principles Board Opinion No. 28 "Interim Financial Reporting" and as interpreted by FASB Interpretation No. 18, "Accounting for Income Taxes in Interim Periods". The Company has determined an estimated annual effect tax rate. The rate will be revised, if necessary, as of the end of each successive interim period during the Company's fiscal year to its best current estimate.

		The estimated annual effective tax rate is applied to the year-to-date ordinary income (or loss) at the end of the interim period.

		Comprehensive Income

		Statement of Financial Accounting Standards (SFAS) No. 130, “Reporting Comprehensive Income,” establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income as defined includes all changes in equity during a period from non-owner sources. Accumulated comprehensive income, as presented in the accompanying statement of changes in shareholders' equity consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense or benefit.

SMOOTH GLOBAL (CHINA) HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	Note 5-	SIGNIFICANT ACCOUNTING POLICIES (continued)

		Earnings (Loss) Per Share

		The Company reports earnings per share in accordance with the provisions of SFAS No. 128, “Earnings Per Share.” SFAS No. 128 requires presentation of basic and diluted earnings per share in conjunction with the disclosure of the methodology used in computing such earnings per share. Basic earnings (loss) per share is computed by dividing income (loss) available to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. There are no potentially dilutive securities outstanding (options and warrants) for the three months ended March 31, 2009 and 2008, respectively.

		Fair Value of Measurements

		The Company adopted Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“SFAS 157”), effective January 1, 2008. The provisions of SFAS 157 are to be applied prospectively.

		SFAS 157 clarifies that fair value is an estimate of the exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants (i.e., the exit price at the measurement date). Under SFAS 157, fair value measurements are not adjusted for transaction cost. SFAS 157 provides for use of a fair value hierarchy that prioritizes inputs to valuation techniques used to measure fair value into three levels:

		Level 1:	Unadjusted quoted prices in active markets for identical assets or liabilities.

		Level 2:	Input other than quoted market prices that are observable, either directly or indirectly, and reasonably available. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the Company.

		Level 3:	Unobservable inputs. Unobservable inputs reflect the assumptions that the Company develops based on available information about what market participants would use in valuing the asset or liability.

		An asset or liability’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Availability of observable inputs can vary and is affected by a variety of factors. The Company uses judgment in determining fair value of assets and liabilities and Level 3 assets and liabilities involve greater judgment than Level 1 and Level 2 assets or liabilities.

SMOOTH GLOBAL (CHINA) HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	Note 5-	SIGNIFICANT ACCOUNTING POLICIES (continued)

		Adoption of FIN 48

		Effective January 1, 2007, the Company adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes.” FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on de-recognition of tax benefits, classification on the balance sheet, interest and penalties, accounting in interim periods, disclosure, and transition. In accordance with FIN 48, the Company performed a self-assessment and concluded that there were no significant uncertain tax positions requiring recognition in its financial statements.

		Adoption of SFAS No. 157

		In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 157, "Fair Value Measurements". SFAS No. 157 defines fair value, establishes a framework and gives guidance regarding the methods used for measuring fair value, and expands disclosures about fair value measurements. In February 2008, the FASB issued FASB Staff Position 157-1, "Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13" ("FSP 157-1") and FASB Staff Position 157-2, "Effective Date of FASB Statement No. 157" ("FSP 157-2"). FSP 157-1 amends SFAS No. 157 to remove certain leasing transactions from its scope. FSP 157-2 delays the effective date of SFAS No. 157 for all non-financial assets and non-financial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), until fiscal years beginning after November 15, 2008. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company adopted SFAS No. 157 effective January 1, 2008 for all financial assets and liabilities as required, and effective January 1, 2009 for all non-financial assets and non-financial liabilities as allowed by FSP FAS 157-2. The adoption of SFAS No. 157 did not have a material impact on the Company’s financial position and results of operations.

		On October 10, 2008, the FASB issued FSP FAS 157-3, “Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active.” The FSP clarifies the application of FASB Statement No. 157, “Fair Value Measurements,” in a market that is not active and provides an example to illustrate key considerations in determining the fair value of a financial asset when the market for that financial asset is not active. The FSP is effective immediately, and includes prior period financial statements that have not yet been issued.

SMOOTH GLOBAL (CHINA) HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	Note 5-	SIGNIFICANT ACCOUNTING POLICIES (continued)

		Adoption of SFAS No. 159

		In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities — Including an Amendment of FASB Statement No. 115”, which is effective for fiscal years beginning after November 15, 2007. SFAS No. 159 is an elective standard which permits an entity to choose to measure many financial instruments and certain other items at fair value at specified election dates. Subsequent unrealized gains and losses on items for which the fair value option has been elected will be reported in earnings. The Company did not elect the fair value option for any assets or liabilities that were not previously carried at fair value. Accordingly, the adoption of SFAS 159 did not have a material impact on the Company’s financial position and results of operations.

		Adoption of SFAS No. 160 and SFAS 141R

		In December 2007, the FASB issued Statements of Financial Accounting Standards No. 141 (revised 2007), “Business Combinations” (“SFAS 141R”) and No. 160, “Noncontrolling Interests in Consolidated Financial Statements – an amendment to ARB No. 51” (“SFAS 160”). Both SFAS 141R and SFAS 160 are to be adopted effective January 1, 2009. SFAS 141R requires the application of several new or modified accounting concepts that, due to their complexity, could introduce a degree of volatility in periods subsequent to a material business combination. SFAS 141R requires that all business combinations result in assets and liabilities acquired being recorded at their fair value, with limited exceptions. Other areas related to business combinations that will require changes from current GAAP include: contingent consideration, acquisition costs, contingencies, restructuring costs, in process research and development and income taxes, among others. SFAS 160 will primarily impact the presentation of minority or noncontrolling interests within the Balance Sheet and Statement of Operations as well as the accounting for transactions with noncontrolling interest holders. The Company adopted SFAS No. 141 (revised 2007) and SFAS No. 160 on January 1, 2009. There was no material impact on the Company’s financial position and results of operations upon adoption, and their effects on future periods will depend on the nature and significance of business combinations subject to these statements.

		Adoption of SFAS No. 161

		In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Hedging Instruments and Hedging Activities – an amendment of FASB Statement No. 133” (“SFAS 161”). SFAS 161, which is effective January 1, 2009, requires enhanced qualitative and quantitative disclosures with respect to derivatives and hedging activities. The adoption of SFAS No. 161 did not have a material effect on the Company’s financial position and results of operations.

SMOOTH GLOBAL (CHINA) HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	Note 5-	SIGNIFICANT ACCOUNTING POLICIES (continued)

		Adoption of FSP FAS 142-3

		In April 2008, the FASB issued Staff Position FAS 142-3, Determination of the Useful Life of Intangible Assets (“FSP FAS 142-3”) which amends the factors an entity should consider in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FAS No. 142, Goodwill and Other Intangible Assets (“FAS No. 142”). FSP FAS 142-3 applies to intangible assets that are acquired individually or with a group of assets and intangible assets acquired in both business combinations and asset acquisitions. It removes a provision under FAS No. 142, requiring an entity to consider whether a contractual renewal or extension clause can be accomplished without substantial cost or material modifications of the existing terms and conditions associated with the asset. Instead, FSP FAS 142-3 requires that an entity consider its own experience in renewing similar arrangements. An entity would consider market participant assumptions regarding renewal if no such relevant experience exists. FSP FAS 142-3 is effective for year ends beginning after December 15, 2008 with early adoption prohibited. The adoption of FSP FAS 142-3 did not have a material effect on the Company’s financial position and results of operations.

		Adoption of FSP No. EITF 03-6-1

		In June 2008, the Financial Accounting Standards Board (“FASB”) issued FSP No. EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities (“FSP EITF 03-6-1”). FSP EITF 03-6-1 concludes that unvested share-based payment awards that contain rights to receive non-forfeitable dividends or dividend equivalents are participating securities, and thus, should be included in the two-class method of computing earnings per share (“EPS”). FSP EITF 03-6-1 is effective for fiscal years beginning after December 15, 2008, and interim periods within those years. Early application of EITF 03-6-1 is prohibited. It also requires that all prior-period EPS data be adjusted retrospectively. The adoption of FSP No. EITF 03-6-1 did not have a material effect on the Company’s financial position and results of operations.

		Recent Accounting Pronouncements

		In May 2008, the FASB issued SFAS No. 162 “The Hierarchy of Generally Accepted Accounting Principles”. SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (GAAP) in the United States (the GAAP hierarchy). The guidance will become effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles”. The Company is currently evaluating the impact of adopting SFAS 162 on its financial statements.

SMOOTH GLOBAL (CHINA) HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	Note 5-	SIGNIFICANT ACCOUNTING POLICIES (continued)

		Recent Accounting Pronouncements (continued)

		In April 2009, the FASB issued FSP FAS 141(R)-1, “Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies.” This FSP requires that assets acquired and liabilities assumed in a business combination that arise from contingencies be recognized at fair value if fair value can be reasonably estimated. If fair value cannot be reasonably estimated, the asset or liability would generally be recognized in accordance with SFAS No. 5, “Accounting for Contingencies” and FASB Interpretation No. 14, “Reasonable Estimation of the Amount of a Loss”. Further, the FASB removed the subsequent accounting guidance for assets and liabilities arising from contingencies from SFAS No. 141(R). The requirements of this FSP carry forward without significant revision the guidance on contingencies of SFAS No. 141, “Business Combinations”, which was superseded by SFAS No. 141(R). The FSP also eliminates the requirement to disclose an estimate of the range of possible outcomes of recognized contingencies at the acquisition date. For unrecognized contingencies, the FASB requires that entities include only the disclosures required by SFAS No. 5. This FSP was adopted effective January 1, 2009. There was no impact upon adoption, and its effects on future periods will depend on the nature and significance of business combinations subject to this statement.

		In April 2009, the Financial Accounting Standards Board (FASB) issued FASB Staff Position (FSP) Financial Accounting Standard (FAS) 157-4 “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly”. Based on the guidance, if an entity determines that the level of activity for an asset or liability has significantly decreased and that a transaction is not orderly, further analysis of transactions or quoted prices is needed, and a significant adjustment to the transaction or quoted prices may be necessary to estimate fair value in accordance with Statement of Financial Accounting Standards (SFAS) No. 157 “Fair Value Measurements”. This FSP is to be applied prospectively and is effective for interim and annual periods ending after June 15, 2009 with early adoption permitted for periods ending after March 15, 2009. The Company will adopt this FSP for its quarter ending June 30, 2009. The Management does not expect that the adoption of this FSP would have a material effect on the Company’s financial position and results of operations.

		In April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2 “Recognition and Presentation of Other-Than-Temporary Impairments”. The guidance applies to investments in debt securities for which other-than-temporary impairments may be recorded. If an entity’s management asserts that it does not have the intent to sell a debt security and it is more likely than not that it will not have to sell the security before recovery of its cost basis, then an entity may separate other-than-temporary impairments into two components: 1) the amount related to credit losses (recorded in earnings), and 2) all other amounts (recorded in other comprehensive income). This FSP is to be applied prospectively and is effective for interim and annual periods ending after June 15, 2009 with early adoption permitted for periods ending after March 15, 2009. The Company will adopt this FSP for its quarter ending June 30, 2009. The Management does not expect that the adoption of this FSP would have a material effect on the Company’s financial position and results of operations.

SMOOTH GLOBAL (CHINA) HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	Note 5-	SIGNIFICANT ACCOUNTING POLICIES (continued)

		Recent Accounting Pronouncements (continued)

		In April 2009, the FASB issued FSP FAS 107-1 and Accounting Principles Board (APB) 28-1 “Interim Disclosures about Fair Value of Financial Instruments”. The FSP amends SFAS No. 107 “Disclosures about Fair Value of Financial Instruments” to require an entity to provide disclosures about fair value of financial instruments in interim financial information. This FSP is to be applied prospectively and is effective for interim and annual periods ending after June 15, 2009 with early adoption permitted for periods ending after March 15, 2009. The Company will adopt this FSP for its quarter ending June 30, 2009. The Management does not expect that the adoption of this FSP would have a material effect on the Company’s financial position and results of operations.

	Note 6-	PREPAID EXPENSES

		Prepaid expenses consists of the following:

	March 31,		December 31,
	2009		2008
	(unaudited)

Prepaid telephone number usage fees	$	27,643	$	28,823
Advance to telecommunication carriers		29,251		43,769
Advance to purchase equipment *		302,383		302,005
	$	359,277	$	374,597

* Advance to purchase equipment represents cash payments to three venders to purchase telecommunication equipments which will be used in the Company's new business lines. These equipments must go through testing before they can be put into service. These payments represent partial of the purchase price and Management believes that the amount paid approximates the fair value based on the progress of the testing.

SMOOTH GLOBAL (CHINA) HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	Note 7-	PROPERTY AND EQUIPMENT, NET

		The following is a summary of property, plant and equipment-at cost, less accumulated depreciation:

	March 31,			December 31,
	2009			2008
	(unaudited)

Network and office equipment	$	123,139		$	121,660
Leasehold Improvements		325,010			324,603
		448,149			446,263

Less: Accumulated depreciation		(252,698	)		(230,748	)


Total	$	195,451		$	215,515

Depreciation expense charged to operations was $21,656 and $19,326 for the three months ended March 31, 2009 and 2008, respectively.

	Note 8-	CONTRACT SECURITY DEPOSIT

		Contract security deposit consists of the following:

	March 31,		December 31,
	2009		2008
	(unaudited)
Security deposit for GRT's
public phone distribution contract with CUBJ	$	1,578	$	1,576
Security deposit for GRT and Beijing Telecom'
Trust and Indemnity Agreement with Ms. Yianfang Jin *		87,648		87,538
	$	89,226	$	89,114

*On September 20, 2007, Ms. Yianfang Jin who owns a 98% equity ownership interest in GRT executed a Trust and Indemnity Agreements, pursuant to which Ms. Jin assigned to Beijing Telecom all of the beneficial interest in her equity ownership interest in GRT, as more fully disclosed in Note 2.

SMOOTH GLOBAL (CHINA) HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	Note 9-	LONG-TERM INVESTMENT

		Long-term investment consists of the following:

	March 31,					December 31,
	2009					2008
	(unaudited)

			Equity					Equity
			Ownership					Ownership
Description	Amount		Percentage			Amount		Percentage

Joint-venture with
Beijing Zhongheng Technology Co., Inc.		233,727		10	%		233,434		10	%
	$	233,727				$	233,434

	Joint-venture with Beijing Zhongheng Technology Co., Inc.

	On October 9, 2008, GRT executed an agreement with Beijing Zhongheng Technology Co., Inc., pursuant to which, GRT agreed to invest $233,434 (RMB 1,600,000), and Beijing Zhongheng Technology agreed to invest $350,151 (RMB 2,400,000), totaling $584,855 (RMB 4,000,000) to establish a join-venture to sell international call-forwarding cards. On October 21, 2008, GRT wired $233,434 (RMB 1,600,000) to Beijing Zhongheng Technology Co., Inc.

	On November 25, 2008, the parties amended the agreement, pursuant to which both parties agreed that Beijing Zhongheng Technology Co., Inc. will increase its investment to $2,100,960 (RMB 14,400,000). Accordingly, Beijing Zhongheng Technology Co., Inc. owns 90% equity ownership interest of the joint-venture and GRT owns the rest 10% equity ownership interest. As the project is currently ongoing, the Management believes the amount invested approximates the fair value and uses the cost method to record this transaction.

SMOOTH GLOBAL (CHINA) HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	Note 10-	ACCRUED EXPENSES

		Accrued expenses consists of the following:

	March 31,		December 31,
	2009		2008
	(unaudited)

Employee benefit payable *	$	17,577	$	17,546
Accrued professional fees		24,394		36,121
	$	41,971	$	53,667

* Employee benefit payable was mainly carried forward from QTC.

	Note 11-	DEFERRED REVENUE

		Deferred revenue consists of the following:

	March 31,		December 31,
	2009		2008
	(unaudited)

Advance from VoIP customers	$	1,242	$	1,679
	$	1,242	$	1,679


	Note 12-	AGREEMENT SECURITY DEPOSIT

		Agreement security deposit consists of the following:

	March 31,		December 31,
	2009		2008
	(unaudited)

Security deposit for the Business Transfer Agreement	$	321,374	$	320,971
	$	321,374	$	320,971

On October 18, 2008, GRT signed a “"Business Transfer Agreement" with Shanghai Zhen Guang Travel Agent and Shanghai North Travel Agent, pursuant to which, Shanghai Zhen Guang Travel Agent and Shanghai North Travel Agent agreed to acquire GRT’s call-forwarding operation in Shanghai area for $511,098 (RMB 3,500,000). On November 30, 2008, the parties agreed to increase the sales price to $729,480 (RMB 5,000,000) and the deal will be closed in December 2009. On October 21, 2008, GRT received $291,792 (RMB 2,000,000) from Shanghai Zhen Guang Travel Agent, and $29,179 (RMB 200,000) from Shanghai North Travel Agent as security deposit for the agreement.

SMOOTH GLOBAL (CHINA) HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	Note 13-	DUE TO OFFICERS

		Due to officers consists of the following:

		March 31,		December 31,
		2009		2008
		(unaudited)

(1)	Due to Ms. Shuying Zheng	$	17,592	$	-
(2)	GRT Office rent due to Mr. Guoqing Xu		4,163		-
(3)	QTC Office rent due to Ms. Shuying Zheng		4,382		-
		$	26,137	$	-

	(1)	Due to Ms. Shuying Zheng

		Due to Ms. Shuying Zheng, CEO of the Company, represents loans from Ms. Zheng to finance the Company's operations due to lack of cash resources. These loans are unsecured, non-interest bearing and have no fixed terms of repayment, therefore, deemed payable on demand. Cash flows from these activities are classified as cash flows from financing activities.

	(2)	GRT Lease

		GRT rents office premise at the market rate from Mr. Guoqing Xu, President of QTC. The lease is non-cancelable and will expire in June 2010. Rent expense amounted to $4,163 and $1,677 for the three months ended March 31, 2009 and 2008, respectively. As of March 31, 2009, there was an outstanding balance of $4,163 due to Mr. Xu.

	(3)	QTC Lease

		QTC rents office premise at the market rate from Ms. Shuying Zheng, CEO. The lease is non-cancelable and will expire in June 2010. Rent expense amounted to $4,382 and $4,193 for the three months ended March 31, 2009 and 2008, respectively. As of March 31, 2009, there was an outstanding balance of $4,382 due to Ms. Zheng.

	For the Three Months Ended
	March 31,
	2009		2008
	(unaudited)		(unaudited)

Acquisition consultancy fees	$	-	$	33,000
Amortization of costs of common stock issued for
compensation of consultant services		11,000		107,690
Other consultancy fees		-		8,192
	$	11,000	$	148,882

SMOOTH GLOBAL (CHINA) HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	Note 15-	SEGMENT REPORTING

		GRT Operation

		For the three months ended March 31, 2009 and 2008, GRT operates in four reportable business segments that are determined based upon differences in products and services. GRT does not allocate any operating expenses or assets to its four business segments as management does not use this information to measure the performance of the operating segments. Certain costs of revenues are shared between business segments. Also, no measures of assets by segment are reported and used by the chief operating decision maker. Hence, GRT has not made disclosure of total assets by reportable segments.

		Summarized information by business segment for the three months ended March 31, 2009 and 2008 is as follows:

	For the Three Months Ended
	March 31,
	2009			2008
REVENUE
GRT public telephone service	$	1,127		$	5,144
GRT network solution		-			-
GRT VoIP call time distribution		22,131			88,950
GRT sales of call forwarding cards		-			1,062

COST OF SALES
GRT public telephone service	$	1,217		$	8,386
GRT network solution		-			-
GRT VoIP call time distribution		14,571			74,078
GRT sales of call forwarding cards		-			1,576

GROSS PROFITS
GRT public telephone service	$	(90	)	$	(3,242	)
GRT network solution		-			-
GRT VoIP call time distribution		7,560			14,872
GRT sales of call forwarding cards		-			(514	)

TOTAL ASSETS OF GRT	$	710,821		$	848,795

SMOOTH GLOBAL (CHINA) HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	Note 16-	CONCENTRATIONS AND RISKS

		Major Suppliers

		GRT signed non-exclusive agreements with CUSH and CUSX to facilitate the international call forwarding business and to distribute VoIP call time purchased from the carriers. If the strategic relationship with either CUSH and CUSX is terminated or scaled-back, or if CUSH and CUSX alter the co-operative arrangements, GRT’s revenue from international call forwarding service and VoIP call time distribution might be adversely affected.

	Note 17-	COMMITMENTS AND CONTINGENCIES

		PRC's political and economic system

		The Company faces a number of risks and challenges not typically associated with companies in North America and Western Europe, since its assets exist solely in the PRC, and its revenues are derived from its operations therein. The PRC is a developing country with an early stage market economic system, overshadowed by the state. Its political and economic systems are very different from the more developed countries and are in a state of change. The PRC also faces many social, economic and political challenges that may produce major shocks and instabilities and even crises, in both its domestic arena and in its relationships with other countries, including the United States. Such shocks, instabilities and crises may in turn significantly and negatively affect the Company's performance.

		Governmental control of currency conversion

		The PRC government imposes controls on the convertibility of Renminbi into foreign currencies and, in certain cases, the remittance of currency out of the PRC. The Company receives all of its revenues in Renminbi, which is currently not a freely convertible currency. Shortages in the availability of foreign currency may restrict the Company’s ability to remit sufficient foreign currency to satisfy foreign currency denominated obligations. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and expenditures from the transaction, can be made in foreign currencies without prior approval from the PRC State Administration of Foreign Exchange by complying with certain procedural requirements. However, approval from appropriate governmental authorities is required where Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of bank loans denominated in foreign currencies.

		The PRC government may also at its discretion restrict access in the future to foreign currencies for current account transactions. If the foreign exchange control system prevents the Company from obtaining sufficient foreign currency to satisfy its currency demands, the Company may not be able to pay certain of its expenses as they come due.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations

On October 24, 2007 we acquired beneficial ownership of Beijing GRT Information Services Limited (“Beijing GRT”). Because we issued approximately 86% of our equity in exchange for ownership of Beijing GRT and because the assets of Beijing GRT substantially exceeded our assets before the acquisition, we have classified the acquisition as a reverse merger for accounting purposes.

In August 2008 we decided to terminate the operations of Beijing QTC. Beijing QTC had been primarily involved in the business of operating public payphones, but also generated revenue by marketing internet phone systems. We chose to replace Beijing QTC as the focus of our operations in 2008 because we saw that business waning . The primary reasons for the reduction were:

The tariffs on mobile phone calls in China have fallen by approximately 80% in the past two years. As a result, the use of cell phones has increased dramatically, with a concomitant slackening of demand for our payphone services. When we initiated our business, the average cell phone tariff was five times the tariff on a call from our payphones. Now the difference is insignificant.

Ø	In January 2007 China Netcom (Beijing) Corporation Limited cancelled the contract under which we distributed its fixed line call times. This contract had generated $57,329 in revenue for us in the first nine months of 2006.

The other business of Beijing QTC had been its distribution of internet VoIP phone systems. In August 2008 management of Beijing QTC decided to terminate that business as well due to languishing revenue. As a result, the revenue and expenses of Beijing QTC for the three months ended March 31, 2008 are summarized as “Loss from Discontinued Operations – VoIP Call Time Distribution of QTC” on our Consolidated Statements of Operations and Other Comprehensive Income.

The acquisition of Beijing GRT provided the Company with a brief period of profitability in 2007. During 2007 we recorded $1,914,609 in revenue, most of which was recorded in the 4 th quarter and most of which was attributable to the international call forwarding business of Beijing GRT: $1,196,996 from our sale of SIM cards and an additional $527,753 in fees paid by our franchisees. Beijing GRT achieved the above success in operating the call forwarding business in Shanghai area only, which signifies the market potential to develop this business nationwide in China.

In 2008, our Management made the decision to relocate our call forwarding business from the Shanghai area to Beijing. As a result, we realized no revenue from the sale of call forwarding cards, nor did we receive revenue from the sale of franchises during the first three months of 2009, compared to revenue of $1,062 from the sale of call forwarding cards during the first quarter of 2008.

As a result of the above business relocation decision, our management decided to sell the Shanghai operations of our call forwarding business. On October 18, 2008, GRT signed a “Business Transfer Agreement” with Shanghai Zhen Guang Travel Agent and Shanghai North Travel Agent, pursuant to which Shanghai Zhen Guang Travel Agent and Shanghai North Travel Agent agreed to acquire GRT’s call-forwarding operation in Shanghai area for $511,098 (RMB 3,500,000). On November 30, 2008 the parties agreed to increase the sales price to $729,480 (RMB 5,000,000). On October 21, 2008, GRT received $291,792 (RMB 2,000,000) from Shanghai Zhen Guang Travel Agent, and $29,179 (RMB 200,000) from Shanghai North Travel Agent as a security deposit for the agreement. The deal is expected to close at the end of 2009. The proceeds of the sale will be used to revitalize our international call forwarding business in its new Beijing location.

Our Management expects that this relocation will revitalize our company for the following reasons:

as the capital of China, Beijing attracts 80-90% of foreign tourists traveling to China, and thus has a much larger potential customer bases than Shanghai;

our executive offices and connections are based in Beijing, which would substantially reduce our operational cost and improve our profitability.

Because our international call forwarding business was dormant during the three months ended March 31, 2009, most of our revenue arose from another of our telecommunications services: VoIP call time distribution. GRT entered this business in January 2008 by contracting with China Netcom (Shaoxing) Corporation Limited and with China Netcom (Shanghai) Corporation Limited. Those two carries sell us usage units on their VoIP systems, which we in turn sell to customers who link to the systems through our servers. The sale of VoIP time yielded $22,131 in revenue during the first three months of 2009. We expect this portion of our business to remain stable in the future.

Because of the strategic change in our call forwarding business, our operating expenses were significantly greater than our revenue in the three months ended March 31, 2009. Primary among the components of operating expenses was consulting fees of $11,000 during the three months, compared to that of $148,882 during the three months ended March 31, 2009. The consulting fees resulted from four contracts that we entered in August and September 2007 with consultants who were assisting us in rebuilding our company’s business. To compensate these individuals we issued them shares of our common stock, which had a market value of $404,800. We are expensing that amount over the lives of the four contracts, which range from nine months to two years.

On the other hand, entering the first quarter of 2009, we made many efforts to reduce our operating expenses. Compared to the $44,028 compensation to our CEO during the three months ended March 31, 2008, none was paid to her during the three months ended March 31, 2009. We also reduced our expenses for payroll and employee benefit from $12,995 for the first quarter of 2008 to $7,768 for the quarter of 2009. Likewise, the travel and entertainment expenses were reduced to $181 during the first three months of 2009, a substantial decrease from $20,654 spent during the first quarter of 2008.

Due to our efforts to reduce our operating expenses in 2009, the net loss we incurred during the three months ended March 31, 2009 was reduced by 80.4% to $49,289 from $251,606 during the three months ended March 31, 2008. Based on the reasons described above, we expect our commencement of the call forwarding business in Beijing to bring our company back to profitability in the future. The losses will provide us a future tax benefit. However, because there is no certainty that we will realize taxable income in the future, we did no record any deferred tax benefit as a result of the loss.

Our business operates primarily in Chinese Renminbi, but we report our results in our SEC filings in U.S. Dollars. The conversion of our accounts from RMB to Dollars results in translation adjustments, which are reported as a middle step between net income and comprehensive income. The net income is added to the retained earnings on our balance sheet; while the translation adjustment is added to a line item on our balance sheet labeled “accumulated other comprehensive income,” since it is more reflective of changes in the relative values of U.S. and Chinese currencies than of the success of our business. In the first three months of 2009, the effect of converting our financial results to Dollars was to add $658 to our comprehensive income.

Liquidity and Capital Resources

Due to our efforts to reduce our operating expenses, our operations used only $3,305 in cash during the first three months of 2009, compared to $415,287 in cash that we used in the first three months of 2008. As a result, a loan of $17,529 by our CEO enabled us to increase our cash position by 39% to $46,366 at March 31, 2009, from $33,415 on December 31, 2008.

Establishing our several telecommunications businesses in the public consciousness will cost money. At March 31, 2009 we had only $46,366 in cash on our balance sheet. Our plan, however, is to eventually expand our operations by opening additional sales offices throughout China, and hiring additional sales personnel to staff the offices. Fulfillment of this goal, however, will depend on our ability to obtain financing.

We have little on our balance sheet that could be pledged as collateral for debt. For that reason, our ability to finance growth will necessarily involve the sale of our equity. Our ability to sell equity at an acceptable price is not assured, and to date we have no commitments for funding. So we will continue to explore opportunities for financing. The cash flow from our business is sufficient to indefinitely sustain our operations as they are currently configured. But in order to take full advantage of our market opportunity, we will require additional funds.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition or results of operations.

Risk Factors that May Affect Future Results

You should carefully consider the risks described below before buying our common stock. If any of the risks described below actually occurs, that event could cause the trading price of our common stock to decline, and you could lose all or part of your investment.

Implementation of our international call forwarding business will require substantial additional capital, which may result in dilution of our existing shareholders.

In order to fully implement its business plan, Beijing GRT will require a substantial amount of additional capital. It is likely that, in order to obtain that capital, Beijing GRT will be forced to issue a large portion of its equity. That financing, if it occurs, will reduce the portion of our equity held by our existing shareholders, and may reduce the value of their shares, if the sale of equity occurs at prices lower than the current market price. On the other hand, if we are unable to obtain the necessary capital, the business will fail.

Our international call forwarding business is new and untested, so it may fail.

Our business plan relies on the success of the international call forwarding business operated by Beijing GRT. This is a relatively new business for Beijing GRT – it commenced operations in February 2007 - and international call forwarding is, in fact, a new business in China. Because we have limited historical results to consider, there may be factors we have not considered or do not foresee that may cause the business to fail.

If a major carrier undertook to compete against us in the international call forwarding business, our resources might not be sufficient to compete effectively.

There are low barriers to entry into the international call forwarding business. We have no patents on the technology, nor are there significant trade secrets to give us a privileged position in the market. Our success in this new business will depend on our marketing acumen, our good relations with the major telephone carriers, and the quality of the service we provide. If a major telecommunications carrier or other highly capitalized business entered the market, our resources might not permit us to compete effectively against the competitor’s ability to devote vast capital and human resources to the project of accumulating the relationships that will be key to success in this business.

If the major carriers reduce their roaming charges, we will lose the key competitive advantage of our international call forwarding service.

For most subscribers to a mobile phone service, the default position when they travel is to use their carrier’s roaming services – primarily because it requires no planning or effort. Our business will succeed only if we persuade mobile phone users that the substantial cost advantage of our service over the carriers’ roaming services warrants the users’ investment of time and attention to subscribing and establishing the necessary call connections. If the mobile phone carriers reduce their roaming charges in the future, our competitive advantage will be proportionately reduced. Our business will fail if the major carriers reduce their roaming charges to a point where our price advantage becomes insignificant to the average traveler.

A recession in China could significantly hinder our growth.

The success of our international call forwarding services will depend on continuation and expansion of trends in travel by the people of China developed in the past few years. Those travel habits depended, in turn, on the growth in business activity and disposable income in China during the same period. Currently, as a result of the worldwide recession, there is a downturn in business activity in China. This may reduce the market for our services. In addition, if business in China continues to wane, China itself could experience a recession. The occurrence of a recession would significantly hinder our efforts to implement our business plan.

Our business and growth will suffer if we are unable to hire and retain key personnel that are in high demand.

Our future success depends on our ability to attract and retain highly skilled marketing personnel and technicians. Qualified individuals are in high demand in China, and there are insufficient experienced personnel to fill the demand. Therefore we may not be able to successfully attract or retain the personnel we need to succeed.

We may have difficulty establishing adequate management and financial controls in China.

The People’s Republic of China has only recently begun to adopt the management and financial reporting concepts and practices that investors in the United States are familiar with. We may have difficulty in hiring and retaining employees in China who have the experience necessary to implement the kind of management and financial controls that are expected of a United States public company. If we cannot establish such controls, we may experience difficulty in collecting financial data and preparing financial statements, books of account and corporate records and instituting business practices that meet U.S. standards.

Government regulation may hinder our ability to function efficiently .

The national, provincial and local governments in the People’s Republic of China are highly bureaucratized. The day-to-day operations of our business require frequent interaction with representatives of the Chinese government institutions. The effort to obtain the registrations, licenses and permits necessary to carry out our business activities can be daunting. Significant delays can result from the need to obtain governmental approval of our activities. These delays can have an adverse effect on the profitability of our operations. In addition, compliance with regulatory requirements applicable to telecommunications services may increase the cost of our operations, which would adversely affect our profitability.

Capital outflow policies in China may hamper our ability to pay dividends to shareholders in the United States.

The People’s Republic of China has adopted currency and capital transfer regulations. These regulations require that we comply with complex regulations for the movement of capital. Although Chinese governmental policies were introduced in 1996 to allow the convertibility of RMB into foreign currency for current account items, conversion of RMB into foreign exchange for capital items, such as foreign direct investment, loans or securities, requires the approval of the State Administration of Foreign Exchange. We may be unable to obtain all of the required conversion approvals for our operations, and Chinese regulatory authorities may impose greater restrictions on the convertibility of the RMB in the future. Because most of our future revenues will be in RMB, any inability to obtain the requisite approvals or any future restrictions on currency exchanges will limit our ability to pay dividends to our shareholders.

Currency fluctuations may adversely affect our operating results.

Beijing GRT generates revenues and incurs expenses and liabilities in Renminbi, the currency of the People’s Republic of China. However, as a subsidiary of Smooth Global (China) Holdings, it will report its financial results in the United States in U.S. Dollars. As a result, our financial results will be subject to the effects of exchange rate fluctuations between these currencies. From time to time, the government of China may take action to stimulate the Chinese economy that will have the effect of reducing the value of Renminbi. In addition, international currency markets may cause significant adjustments to occur in the value of the Renminbi. Any such events that result in a devaluation of the Renminbi versus the U.S. Dollar will have an adverse effect on our reported results. We have not entered into agreements or purchased instruments to hedge our exchange rate risks.

We have limited business insurance coverage.

The insurance industry in China is still at an early stage of development. Insurance companies in China offer limited business insurance products, and do not, to our knowledge, offer business liability insurance. As a result, we do not have any business liability insurance coverage for our operations. Moreover, while business disruption insurance is available, we have determined that the risks of disruption and cost of the insurance are such that we do not require it at this time. Any business disruption, litigation or natural disaster might result in substantial costs and diversion of resources.

Smooth Global (China) Holdings is not likely to hold annual shareholder meetings in the next few years.

Management does not expect to hold annual meetings of shareholders in the next few years, due to the expense involved. The current members of the Board of Directors were appointed to that position by the previous directors. If other directors are added to the Board in the future, it is likely that the current directors will appoint them. As a result, the shareholders of Smooth Global (China) Holdings will have no effective means of exercising control over the operations of Smooth Global (China) Holdings.

Your ability to bring an action against us or against our directors, or to enforce a judgment against us or them, will be limited because we conduct all of our operations in China and because most of our management resides outside of the United States .

We conduct all of our operations in China through our wholly-owned subsidiary. All of our directors and officers reside in China and all of the assets of those Chinese residents are located outside of the United States. As a result, it may be difficult or impossible for you to bring an action against us or against these individuals in the United States in the event that you believe that your rights have been infringed under the securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the United States and of China may render you unable to enforce a judgment against our assets or the assets of our directors.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures . Our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of our disclosure controls and procedures as of March 31, 2009. Pursuant to Rule13a-15(e) promulgated by the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, “disclosure controls and procedures” means controls and other procedures that are designed to insure that information required to be disclosed by Smooth Global (China) Holdings in the reports that it files with the Securities and Exchange Commission is recorded, processed, summarized and reported within the time limits specified in the Commission’s rules. “Disclosure controls and procedures” include, without limitation, controls and procedures designed to insure that information Smooth Global (China) Holdings is required to disclose in the reports it files with the Commission is accumulated and communicated to our Chief Executive Officer and Chief Financial Officer as appropriate to allow timely decisions regarding required disclosure. Based on her evaluation, our Chief Executive Officer and Chief Financial Officer concluded that Smooth Global (China) Holdings’ system of disclosure controls and procedures was effective as of March 31, 2009 for the purposes described in this paragraph.

Changes in Internal Controls . There was no change in internal controls over financial reporting (as defined in Rule 13a-15(f) promulgated under the Securities Exchange Act or 1934) identified in connection with the evaluation described in the preceding paragraph that occurred during Smooth Global (China) Holdings’ first fiscal quarter that has materially affected or is reasonably likely to materially affect Smooth Global (China) Holdings’ internal control over financial reporting.

PART II - OTHER INFORMATION

Item 6.	Exhibits

31	Rule 13a-14(a) Certification
32	Rule 13a-14(b) Certification

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

	SMOOTH GLOBAL (CHINA) HOLDINGS, INC.

Date: May 4, 2009	By:	/s/ Zheng Shuying
		Zheng Shuying, Chief Executive Officer
		and Chief Financial Officer

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