Ceetop Inc. - FORM 10-Q - May 15, 2013

Attached files

file filename
EXCEL - IDEA: XBRL DOCUMENT - Ceetop Inc.Financial_Report.xls
EX-32.1 - CERTIFICATION - Ceetop Inc.f10q0313ex32i_chinaceetop.htm
EX-31.1 - CERTIFICATION - Ceetop Inc.f10q0313ex31i_chinaceetop.htm
EX-31.2 - CERTIFICATION - Ceetop Inc.f10q0313ex31ii_chinaceetop.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC  20549
 
FORM 10-Q
 
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
For the Quarterly Period ended March 31, 2013
 
Commission File Number     000-32629
 
China Ceetop.com, Inc.
(Exact name of registrant as specified in charter)
 
Oregon
  
98-0408707
(State or other jurisdiction of
incorporation or organization)
  
(I.R.S. Employer Identification No.)
 
A2803, Lianhe Guangchang, 5022 Binhe Dadao, Futian District, Shenzhen, China
  
518026
(Address of principal executive offices)
  
(Zip Code)
 
(86-755) 3336-6628
Registrant’s telephone number, including area code
 
 
 
 
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x     No o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.       Yes x     No o
 
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.
 
Large accelerated filer
 o
Accelerated Filer        
 o
       
Non-accelerated filer 
 o
Smaller Reporting Company
 x
       
(Do not check if smaller reporting company)
    
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o     No x
 
Indicate the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: As of May 13, 2013 the Company had outstanding 16,806,631 shares of its common stock, par value $0.001.
 
 
 
 
 
Special Note Regarding Forward-Looking Statements
 
This Quarterly Report on Form 10-Q, including "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 2 of Part I of this report include forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by forward-looking statements.
 
In some cases, you can identify forward-looking statements by terminology such as "may," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "proposed," "intended," or "continue" or the negative of these terms or other comparable terminology. You should read statements that contain these words carefully, because they discuss our expectations about our future operating results or our future financial condition or state other "forward-looking" information. There may be events in the future that we are not able to accurately predict or control. Before you invest in our securities, you should be aware that the occurrence of any of the events described in this Quarterly Report could substantially harm our business, results of operations and financial condition, and that upon the occurrence of any of these events, the trading price of our securities could decline and you could lose all or part of your investment. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, growth rates, levels of activity, performance or achievements. We are under no duty to update any of the forward-looking statements after the date of this Quarterly Report to conform these statements to actual results.
 
 
 
 
 
TABLE OF CONTENTS
 
PART I – FINANCIAL INFORMATION  
   
Item 1.  Financial Statements
  
   
Consolidated Balance Sheets (unaudited and audited)
F-2
   
Consolidated Statements of Income and Comprehensive Income (unaudited)
F-3
   
Consolidated Statements of Cash Flows (unaudited)
F-4
   
Consolidated Statements of Stockholders’  Equity (unaudited)
F-5
   
Notes to Consolidated Financial Statements (unaudited)
F-6 - F-17
   
Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations
1
   
Item 3.  Quantitative and Qualitative Disclosures about Market Risk
7
   
Item 4.  Controls and Procedures
7
   
PART II – OTHER INFORMATION
  
   
Item 1.  Legal Proceedings
8
   
Item 1A.  Risk Factors
8
   
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds
8
   
Item 3.  Defaults Upon Senior Securities
8
   
Item 4.  Mine Safety Disclosures
8
   
Item 5.  Other Information
8
   
Item 6.  Exhibits
8
   
Signatures
9
 
 
 
 
 
CHINA CEETOP.COM, INC.

CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2013
 
 
 
 
 
TABLE OF CONTENTS
 
Consolidated Balance Sheets (unaudited and audited)
F-2
   
Consolidated Statements of Income and Comprehensive Income (unaudited)
F-3
   
Consolidated Statements of Cash Flows (unaudited)
F-4
   
Consolidated Statements of Stockholders’ Equity (unaudited)
F-5
   
Notes to Consolidated Financial Statements (unaudited)
F-6 - F-17
 
 
 
 
 
CHINA CEETOP.COM, INC.
CONSOLIDATED BALANCE SHEETS
 
       
March 31,
    
December 31,
  
   
Notes
  
2013
    
2012
  
       
(Unaudited)
    
(Audited)
  
                 
ASSETS
                
                 
Current Assets
                
                 
Cash and cash equivalents
      
$
57,446
    
$
71,608
  
Accounts receivable, net of provision of $234,635 (2012 : $179,867)
  
3
    
232,233
      
285,184
  
Deposits and other receivables
        
92,366
      
172,514
  
Prepayments
        
1,593
      
6,495
  
Total Current Assets
        
383,638
      
535,801
  
                     
                     
Property and equipment, net of accumulated depreciation of $256,751 (2012 : $248,335)
  
3
    
10,632
      
17,828
  
Total Assets
      
$
394,270
    
$ 
553,629
  
                     
LIABILITIES AND STOCKHOLDERS' EQUITY
                    
                     
Current and Total Liabilities
                    
                     
Accrued expenses and other payable
      
$
671,779
    
$
697,546
  
                     
Total Current and Total Liabilities
        
671,779
      
697,546
  
                     
Stockholders' Equity
                    
                     
Common stock, USD0.001 par value, 100,000,000 shares authorized, 16,802,631 and 16,790,631 shares issued and outstanding at March 31, 2013 and December 31, 2012 respectively
  
5
    
16,802
      
16,790
  
Preferred stock, USD0.001 par value
  
5
    
-
      
-
  
Additional paid-in capital
  
6
    
5,836,641
      
5,836,413
  
Common stock issued for prepaid service
  
7
    
(318,907
)
    
(394,664
)
Statutory reserve
  
8
    
-
      
-
  
Accumulated other comprehensive income
  
9
    
116,760
      
116,580
  
Accumulated deficit
        
(5,928,805
)
    
(5,719,036
)
 Stockholders' Equity
        
(277,509) 
      
(143,917 
)
                     
Total Liabilities and Stockholders' Equity
      
$
394,270
    
 $
553,629
  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
F-2
 
 
CHINA CEETOP.COM, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2013 AND 2012
(UNAUDITED)
 
   
2013
    
2012
  
             
Sales
  
$
-
    
$
1,310,025
  
                 
Cost of sales
    
-
      
(1,245,938
)
                 
Gross profit
    
-
      
64,087
  
                 
Stock based compensation
    
(75,997
)
    
(81,189
)
                 
Selling, general and administrative expenses
    
(133,774
)
    
(221,362
)
                 
(Loss) from operations
    
(209,771
)
    
(238,464)
  
                 
Other Income
                
Interest income
    
2
      
165
  
                 
Total other income
    
2
      
165
  
                 
Net (loss)
  
$
(209,769
)
  
$
(238,299
)
                 
Weighted average shares (including common shares and non-convertible preferred shares) outstanding
                
Basic - note 3)
    
16,802,052
      
35,839,109
  
Diluted - note 3)
    
16,802,052
      
35,839,109
  
                 
Net (loss) per share (include common shares and non-convertible preferred shares)
                
Basic - note 3)
  
$
(0.0125
)
  
$
(0.0066
)
Diluted - note 3)
  
$
(0.0125
)
  
$
(0.0066
)
                 
Net (loss)
  
$
(209,769
)
  
$
 (238,299
)
Other comprehensive income
                
Gain on foreign currency translation
    
180
      
6,952
  
                 
Comprehensive (loss)
  
$
(209,589
)
  
$
(231,347
)
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
F-3
 
 
CHINA CEETOP.COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2013 AND 2012
(UNAUDITED)
 
   
2013
    
2012
  
             
CASH FLOWS FROM OPERATING ACTIVITIES
            
             
Net loss
  
$
(209,769
)
  
$
(238,299
)
Adjustments to reconcile net loss to net cash (used in) operating activities :
                
Depreciation
    
7,235
      
9,509
  
Share-based payment expense
    
75,997
      
81,189
  
Provision for doubtful accounts
    
54,065
      
-
  
Changes in operating assets and liabilities :
                
Accounts receivable
    
(1,817
)
    
(134,035
)
Other receivable, deposits and prepayment
    
85,050
      
(368,245
)
Inventories
    
-
      
(65,071
)
Accounts payable
    
-
      
169,615
  
Accrued expense and other payable
    
(25,767
)
    
(54,628
)
                 
Net cash used in operating activities
    
(15,006
)
    
(599,965
)
                 
Effect of exchange rate changes on cash and cash equivalents
    
844
      
6,548
  
                 
Net decrease in cash and cash equivalents
    
(14,162
)
    
(593,417
)
                 
Cash and cash equivalents, beginning balance
    
71,608
      
855,713
  
                 
Cash and cash equivalents, ending balance
  
$
57,446
    
$
262,296
  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
F-4
 
 
CHINA CEETOP. COM, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
 
                                 
Common
                    
   
Common Stock
    
Preferred Stock
    
Additional
    
stock issued
    
Other
          
Total
  
   
Stock
          
Stock
          
paid-in
    
for prepaid
    
comprehensive
    
(Accumulated
    
stockholders
  
   
outstanding
    
Amount
    
outstanding
    
Amount
    
capital
    
service
    
income
    
loss)
    
equity
  
                                                       
Balance at January 1, 2012
    
32,281,063
    
$
32,281
      
3,558,046
    
$
3,558
    
$
5,815,844
    
$
(702,743
)
  
$
108,193
    
$
(4,325,648
)
  
$
931,485
  
                                                                         
Foreign currency translation
                                                                        
adjustments - note 9)
    
-
      
-
      
-
      
-
      
-
      
-
      
8,387
      
-
      
8,387
  
                                                                         
Record of common stock for
                                                                        
prepaid service - note 7)
    
-
      
-
      
-
      
-
      
-
      
308,079
      
-
      
-
      
308,079
  
                                                                         
Issuance of common stock for
                                                                        
Legal adviser - notes 5, 7)
    
40,000
      
40
      
-
      
-
      
760
      
-
      
-
      
-
      
800
  
                                                                         
Issuance of common stock for
                                                                        
consultancy service - notes 5, 7)
    
9,000
      
9
      
-
      
-
      
711
      
-
      
-
      
-
      
720
  
                                                                         
Cancellation of shares – note 5)
    
(15,540,011
)
    
(15,540
)
    
(3,558,046
)
    
(3,558
)
    
19,098
      
-
      
-
      
-
      
-
  
                                                                         
(Loss) for the year ended
                                                                        
December 31, 2012
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
(1,393,388
)
    
(1,393,388
)
                                                                         
Balance at December 31, 2012
    
16,790,052
    
$
16,790
      
-
    
$
-
    
$
5,836,413
    
$
(394,664
)
  
$
116,580
    
$
(5,719,036
)
    
(143,917
)
                                                                         
Foreign currency translation
                                                                        
adjustments - note 9)
    
-
      
-
      
-
      
-
      
-
              
180
      
-
      
180
  
                                                                         
Record of common stock for
                                                                        
prepaid service - note 7)
    
-
      
-
      
-
      
-
      
-
      
75,757
      
-
      
-
      
75,757
  
                                                                         
Issuance of common stock for
                                                                        
Legal adviser - notes 5, 7)
    
12,000
      
12
      
-
      
-
      
228
      
-
      
-
      
-
      
240
  
                                                                         
(Loss) for the three months ended
                                                                        
March 31, 2013
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
(209,769
)
    
(209,769
)
                                                                         
Balance at March 31, 2013
    
16,802,052
    
$
16,802
      
-
    
$
-
    
$
5,836,641
    
$
(318,907
)
  
$
116,760
    
$
(5,928,805
)
  
$
(277,509
)
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
F-5
 
 
CHINA CEETOP.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2013
(UNAUDITED)

Note 1 – ORGANIZATION

China Ceetop.com, Inc. (the “Company” or “China Ceetop”) was incorporated in Oregon on February 18, 2003 under the name of GL Gold Inc.  On June 6, 2003 the Company filed an amendment with the State of Oregon changing its name to Oregon Gold, Inc.  On January 7, 2011 Oregon Gold Inc. changed its name to China Ceetop.com, Inc..

Surry Holdings Limited (“Surry”) was incorporated in the British Virgin Islands on September 18, 2009.  Surry holds 100% of Westow Technology Limited (“Westow”), a company incorporated in the British Virgin Islands, which in turn holds 100% of Shenzhen Ceetop Network Technology Co., Limited ("SZ Ceetop"), a company incorporated in Shenzhen, Peoples’ Republic of China ("PRC") and ultimately holds 100% of Hangzhou Ceetop Network Technology Co., Limited ("HZ Ceetop"), a company incorporated in Hangzhou, PRC.

Pursuant to a series of transactions completed in September, 2009, Surry became the holding company of Westow, SZ Ceetop and HZ Ceetop ("Group Reorganization").

Since Surry, Westow, SZ Ceetop and HZ Ceetop were under common control of a controlling party both before and after the completion of the Group Reorganization, the Group Reorganization has been accounted for using merger accounting.  The consolidated financial statements have been prepared on the basis as if Surry had always been the holding company of Westow, SZ Ceetop and HZ Ceetop and this group structure had been in existence throughout the three months ended March 31, 2013 and year ended December 31, 2012 as defined by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810, “Consolidation”.

On January 27, 2011, the Company became the holding company of Surry through a reverse acquisition.  The Company acquired all of the issued and outstanding capital stock of Surry pursuant to the share exchange agreement dated December 30, 2010 by and among Surry, the Company and the shareholders of the Company (the “Share Exchange Agreement”).  At the same time, the Company effected a reverse stock split such that the number of all existing issued shares were reduced from 19,900,100 to 866,636 on a 23 to 1 basis.  Pursuant to the Share Exchange Agreement, the Company acquired 100% of the capital stock and ownership interests of Surry in exchange for 28,496,427 newly-issued shares of the Company’s common stock and 3,558,046 newly issued shares of the Company’s series A preferred stock.

Prior to the acquisition of the Surry, the Company was a non-operating public shell.  Pursuant to Securities and Exchange Commission (“SEC”) rules, the merger or acquisition of a private operating company into a non-operating public shell with nominal net assets is considered as a capital transaction, rather than a business combination.  Accordingly, for accounting and financial reporting purposes, the transaction was treated as a reverse acquisition, wherein Surry is considered the acquirer.  The assets and liabilities of Surry have been brought forward at their book value and no goodwill has been recognized.  The historical financial statements prior to January 27, 2011 are those of Surry.

The Company operates in a single reportable segment, the principal activities of the Company were engaged in the provision of an online platform for distribution of 3C products (computers/communications/consumer electronics) in the PRC by way of a website named www.ceetop.com mainly through its wholly owned legal subsidiaries HZ Ceetop and SZ Ceetop.

The Company is in the transition from online retail sales to focus more on sales to a relatively smaller number of distributors due to high competition in online shopping.  Through the stimulation of labor specialization, the original competition between products or companies has turned into the competition between supply chains. Each supply chain is a consolidation of companies to provide the final products. The company is now focusing on B2B supply chain service.

These Consolidated Financial Statements present the Company and its subsidiaries on a historical basis.
 
 
F-6
 
 
CHINA CEETOP.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2013
(UNAUDITED)

Note 2 - GOING CONCERN

The accompanying Consolidated Financial Statements have been prepared assuming the Company will continue as a going concern.  As shown in the accompanying Consolidated Financial Statements, the Company incurred net losses of $209,769 and $238,299 for the three months ended March 31, 2013 and 2012 respectively, has accumulated deficit of $5,928,805 and has net deficiency in assets of $277,509 respectively at March 31, 2013.  Although as mentioned in Note 6 “Additional Paid in Capital”, a  former preferred stock shareholder of the Company has undertaken to inject funds in the amount of RMB10,000,000 (equivalent to $1,547,000) to HZ Ceetop as its working capital on or before December 31, 2011.  However, up to March 31, 2013, only RMB2,000,000 (equivalent to $312,412) was injected by that major shareholder and at the same time of injection was waived for repayment by that shareholder so that the amount $312,412 was credited to additional paid in capital.  Management is unable and in particular following returning and cancellation of all preferred stock for no consideration on September 5, 2012 (note 6) to ascertain when the balance of RMB8,000,000 (equivalent to $1,234,588) would be injected to the Company.  During the three months ended March 31, 2013, the cash and bank balances were decreased from $71,608 to $57,446, resulting in the drop of liquidity ratio of the Company to 0.57 at March 31, 2013.  These factors create an uncertainty about the Company’s ability to continue as a going concern.  In this regard, management is proposing to raise any necessary additional funds not provided by operations through loans or through additional sales of common stock.  During the year ended December 31, 2012, a verbal agreement was reached by the Government of Guiyang (the “Government”) and the Company.  Under the terms of agreement, the Government will provide subsidies to the Company amounting to RMB10,000,000 in three consecutive years to encourage the Company establish the business in the city in order to enhance the economic development of the city.  With respect to the verbal agreement, management considers that the main terms of the agreement have been agreed and the remaining details are still in the process of negotiation.  Management is confident that the agreement will be finalized and executed in the near future.  During the negotiation in three months ended March 31, 2013 between both parties, the Company did not generate any sales pending the finalization of the agreement.  There is no guarantee this agreement will come to fruition and even if it does that the Company will receive these funds or the timing thereof.  The Consolidated Financial Statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Note 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

These Unaudited Consolidated Financial Statements were prepared by the Company pursuant to the rules and regulations of the SEC.  The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments) that are, in the opinion of management, necessary to present fairly the operating results for the respective periods.  Certain information and footnote disclosures normally present in Annual Consolidated Financial Statements prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) were omitted pursuant to such rules and regulations.  These Unaudited Consolidated Financial Statements should be read in conjunction with the Audited Consolidated Financial Statements and footnotes for the year ended December 31, 2012.  The results for three months ended March 31, 2013, are not necessary indicative of the results to be expected for the full year ending December 31, 2013.

Basis of Presentation

The accompanying Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).  The Company adopted the new accounting guidance (“Codification”) on July 1, 2009.  For the three months ended March 31, 2013, all reference for periods subsequent to July 1, 2009 are based on the codification.  The Company's functional currency is the Chinese Renminbi; however the accompanying consolidated financial statements have been translated and presented in the United States Dollars (“USD”).
 
 
F-7
 
 
CHINA CEETOP.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2013
(UNAUDITED)

Note 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Principles of Consolidation

The Consolidated Financial Statements incorporate the financial statement items of the combining entities or businesses in which the common control combination occurs as if they had been combined from the date when the combining entities or businesses first came under the control of the controlling party.

The net assets of the combining entities or businesses are combined using the existing book values from the controlling parties’ perspective.  No amount is recognized in respect of goodwill or excess of acquirer’s interest in the net fair value of acquiree’s identifiable assets, liabilities and contingent liabilities over cost at the time of common control combination, to the extent of the continuation of the controlling party’s interest.

The Consolidated Statements of Income and Comprehensive Income include the results of each of the combining entities or businesses from the earliest date presented or since the date when the combining entities or businesses first came under common control, where this is a shorter period.

A business combination involving entities or businesses under common control is a business combination in which all of the combining entities or businesses are ultimately controlled by the same party or parties both before and after the business combination, and that control is not transitory.  Such business combinations are referred to as common control combinations which is in line with U.S. GAAP.

Translation Adjustment

As of March 31, 2013 and December 31, 2012, the accounts of the Company were maintained, and its financial statements were expressed, in RMB.  Such financial statements were translated into USD in accordance with the Foreign Currency Matters Topic of the Codification, with the RMB as the functional currency.  According to the Codification, all assets and liabilities were translated at the current exchange rate, stockholders’ equity are translated at the historical rates and income statement items are  translated at the average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income in accordance with the Comprehensive Income Topic of the Codification, as a component of shareholders’ equity.  Transaction gains and losses are reflected in the income statement.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Comprehensive Income

The Company uses SFAS 130 “Reporting Comprehensive Income” (codified in FASB ASC Topic 220).  Comprehensive income is comprised of net income and all changes to the statements of stockholders’ equity, except those due to investments by stockholders, changes in paid-in capital and distributions to stockholders. Comprehensive income for the three months ended March 31, 2013 and 2012 included net income and foreign currency translation adjustments. 
 
 
F-8
 
 
CHINA CEETOP.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2013
(UNAUDITED)

Note 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Risks and Uncertainties

The Company’s operations are carried out in the PRC.  Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC, and by the general state of the PRC’s economy.  The Company’s business may be influenced by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.

The Company is subject to substantial risks from, among other things, intense competition associated with the industry in general, other risks associated with financing, liquidity requirements, rapidly changing customer requirements, limited operating history, foreign currency exchange rates and the volatility of public markets.

Contingencies

Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur.  The Company’s management and legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment.  In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought.  There were no contingencies of this type as of March 31, 2013 and December 31, 2012.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements.  If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material would be disclosed.  There were no contingencies of this type as of March 31, 2013 and December 31, 2012.

Loss contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed.

Cash and Cash Equivalents

Cash and cash equivalents include cash in hand and cash in time deposits, certificates of deposit and all highly liquid debt instruments with original maturities of three months or less.

Accounts Receivable

The Company maintains reserves for potential credit losses on accounts receivable.   Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves.  Reserves are recorded based on the Company’s historical collation history.  Allowances for doubtful accounts as of March 31, 2013 and December 31, 2012 were $234,635 and $179,867 respectively.
 
 
F-9
 
 
CHINA CEETOP.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2013
(UNAUDITED)

Note 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals and betterments are capitalized. When property, plant and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of property, plant and equipment is provided using the straight-line method for substantially all assets with estimated lives of:

Office equipment
3 - 5 years

As of March 31, 2013 and December 31, 2012 Property, Plant & Equipment consist of the following:

   
03/31/2013
    
12/31/2012
  
             
Office equipment
    
267,203
      
266,163
  
Accumulated depreciation
    
(256,571
)
    
(248,335
)
                 
   
$
10,632
    
$
17,828
  

Depreciation expense for the three months ended March 31, 2013 and 2012 was $7,235 and $9,509, respectively.

Long-Lived Assets

The Property, Plant and Equipment Topic of the Codification addresses financial accounting and reporting for the impairment or disposal of long-lived assets and supersedes previous accounting guidance, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,” and “Reporting the Results of Operations for a Disposal of a Segment of a Business”.  The Company periodically evaluates the carrying value of long-lived assets to be held and used, which requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets carrying amounts.  In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the long-lived assets.  Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair market values are reduced for the cost of disposal.  Based on its review, the Company believes that, as of March 31, 2013 and December 31, 2012, there were no impairments of its long-lived assets.

Fair Value of Financial Instruments

The Financial Instrument Topic of the Codification requires that the Company disclose estimated fair values of financial instruments.  The carrying amounts reported in the balance sheets for current assets and current liabilities qualifying as financial instruments are a reasonable estimate of fair value.

Revenue Recognition

The Company’s revenue recognition policies are in compliance with SEC Staff Accounting bulletin (“SAB”) 104 (codified in FASB ASC Topic 605).  Sales revenue is recognized at the completion of delivery to customers when a formal arrangement exists, the price is fixed or determinable, no other significant obligations of the Company exist and collectability is reasonably assured at the date of completion of delivery.  Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue.
 
 
F-10
 
 
CHINA CEETOP.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2013
(UNAUDITED)

Note 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Shipping and Handling costs

Shipping and handling costs consist primarily of freight charges and packaging charges for delivery of goods to the customers and are included in selling, general and administrative expenses.  The Company expenses all shipping and handling costs when they are incurred.  For the three months ended March 31, 2013 and 2012, the Company incurred freight charges of $Nil and $1,320 respectively and the Company did not incur any packaging charges.

Income Taxes

The Company utilizes the accounting standards (“SFAS”) No. 109, “Accounting for Income Taxes,” codified in Financial Accounting Standard Board Accounting Standards Codification (“ASC”) Topic 740 which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns.  Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income.  Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

The Company adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, (“FIN 48”), codified in FASB ASC Topic 740.  When tax returns are filed, it is likely that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained.  The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any.  Tax positions taken are not offset or aggregated with other positions.  Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority.  The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest associated with unrecognized tax benefits are classified as interest expense and penalties are classified in selling, general and administrative expenses in the statements of income.  The adoption of FIN 48 did not have a material impact on the Company’s financial statements.  At March 31, 2013 and December 31, 2012, the Company did not take any uncertain positions that would necessitate recording a tax related liability.

Statement of Cash Flows

In accordance with SFAS 95 “Statement of Cash Flows”, codified in FASB ASC Topic 230, cash flows from the Company’s operations are based upon the local currencies.  As a result, amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheet.
 
 
F-11
 
 
CHINA CEETOP.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2013
(UNAUDITED)

Note 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Basic and Diluted Earnings per Share

Earnings per share are calculated in accordance with FASB ASC Topic 260, “Earnings per Share”.  Basic earnings per share is based upon the weighted average number of common shares and preferred shares outstanding.  Preferred shares are included in the denominator of basic earnings per share because preferred shares participate with common shares in the earnings and dividends of the Company on a one-for-one basis. Diluted earnings per share is based on the assumption that all dilutive convertible shares and stock options were converted or exercised.  Dilution is computed by applying the treasury stock method.  Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period.

Share-Based payment

Share-based payment is accounted for based on the FASB Statement No. 123R, “Share-Based Payment, an Amendment of FASB Statement No. 123” (“FAS No. 123R”) and Emerging Issue Task Force 96-18, “Accounting for Equity Instruments that are Issued to Other than Employees for Acquiring, or in Conjunction with Selling, Goods or Services” (“EITF 96-18”) and Emerging Issue Task Force 00-18 “Accounting Recognition for Certain Transactions involving Equity Instruments Granted to Other Than Employees” (“EITF 00-18”) (codified in FASB ASC Topic 505-50).  The Company recognized in the Consolidated Statements of Income and Comprehensive Income the fair value of shares, stock options and other equity-based compensation issued to non-employees when the service provided by non-employees is completed, or the date when the shares were issued (provided that the shares issued are fully vested and not subject to forfeiture) with the prepaid services presented as contra equity.  This is in accordance with the consensus reached in EITF 00-18 that in the event that a note or receivable is acquired in exchange for the fully vested, non-forfeitable equity instruments, the note or receivable should be displayed as contra-equity by the granter.  The Company, as granter, interprets that the term “receivable” also embraces prepaid service fees. For employees, the Company recognized in the Consolidated Statements of Income and Comprehensive Income the grant date fair value of the shares, stock options and other equity-based compensation over the requisite service period.  In respect of the service agreement the Company entered into with a service provider for provision of investor relations and financial media service, the service provider is compensated for 9,000 common shares of the Company no later than the 5th day of and for each month over the period of the agreement.  In accordance with the consensus reached in EITF 96-18, the Company recognized in the Consolidated Statement of Income and Comprehensive Income the fair value of each 9,000 common shares issued to the service provider each month as share based payment on the same basis in the same period and in the same manner as if the Company had paid cash for the service rendered by the service provider instead of paying with equity instruments (common shares) of the Company in each month and that the measurement date of the fair value of each 9,000 common shares issued to the service provider will be the issue date which is before the 5th day of each month.  However, both parties signed an early termination agreement on August 14, 2012 agreeing that the effective date of termination of the agreement was February 01, 2012.  The Company recognized the stock based compensation expense amounted to $720 for this service which was based on stock price measured at fair market value at the date of allotment of shares on August 23, 2012 (9,000 common shares at $0.08 per share). On December 17, 2012, the Company recognized stock based compensation expense amounted to $800 for the legal advice performed by the Company’s legal adviser Mr. Jeffrey Stein which was based on stock price measured at fair market value at the date of allotment of shares (40,000 common shares at $0.02 per share).  On January 1, 2013, the Company recognized stock based compensation expense amounted to $240 for the legal advice performed by the Company’s legal adviser Mr. Jeffrey Stein which was based on stock price measured at fair market value at the date of allotment of shares (12,000 common shares at $0.02 per share).
 
 
F-12
 
 
CHINA CEETOP.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2013
(UNAUDITED)

Note 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk are cash, accounts receivable and other receivables arising from its normal business activities. The Company places its cash in what it believes to be credit-worthy financial institutions.  At present, there is a high concentration on a few customers as more fully explained in note 11 hereof.  The Company controls credit risk related to account receivable through credit approvals, credit limits and monitoring procedures.  The Company routinely assesses the financial strength of its customers and, based upon factors surrounding the credit risk, establishes an allowance, if required, for uncollectible accounts and, as a consequence, believes that its accounts receivable credit risk exposure beyond such allowance is limited.

Recent Accounting Pronouncements

In February 2013, the FASB issued ASU No. 2013-02, which amends the authoritative accounting guidance under ASC Topic 220 “Comprehensive Income.”  The amendments do not change the current requirements for reporting net income or other comprehensive income in financial statements. However, the amendments require an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under generally accepted accounting principles in the United States of America (“GAAP”) to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under GAAP that provide additional detail about those amounts. The amendments in this update are effective prospectively for reporting periods beginning after December 15, 2013. Early adoption is permitted. Adoption of this update is not expected to have a material effect on the Company’s consolidated results of operation or financial condition.

As of March 31, 2013, there are no recently issued accounting standards not yet adopted that would have a material effect on the Company’s financial statements.

Note 4 - INCOME TAXES

The Company operates in more than one jurisdiction with the main operations conducted in PRC and no activities in the United States, with complex regulatory environments subject to different interpretations by the taxpayer and the respective governmental taxing authorities.  The Company evaluates its tax positions and establishes liabilities, if required.

Pursuant to the PRC Income Tax Laws, the Enterprise Income Tax (“EIT”) through December 31, 2007 is at a statutory rate of 33%, which is comprised of 30% national income tax and 3% local income tax.  As from January 1, 2008 onwards, the EIT is at a statutory rate of 25%.

Uncertain Tax Positions

Interest associated with unrecognized tax benefits are classified as income tax and penalties in selling, general and administrative expenses in the statements of operations.  For the three months ended March 31, 2013 and 2012, the Company had no related interest and penalties expenses. Currently, the Company is not subject to examination by major tax jurisdictions, but the tax authority in PRC has the right to examine the Company’s tax position in all past years. 

 
F-13
 
 
CHINA CEETOP.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2013
(UNAUDITED)

Note 4 - INCOME TAXES (CONTINUED)

The deferred tax asset not recognized is as follows:

   
03/31/2013
    
12/31/2012
  
             
Unused tax loss brought forward
  
$
5,208,680
    
$
4,124,891
  
Unused tax loss for the period/year
    
209,769
      
1,393,388
  
Expenses not deductible for tax (share-based payment)
    
(75,997
)
    
(309,599
)
                 
   
$
5,342,452
    
$
5,208,680
  
                 
Unrecognized deferred tax asset brought forward
    
1,032,170
      
1,031,223
  
Unrecognized deferred tax asset for the year (at PRC tax rate of 25%)
    
33,443
      
270,947
  
                 
Unrecognized deferred tax asset carried forward
  
$
1,065,613
    
$
1,302,170
  
Less : valuation allowances
    
(1,065,613
)
    
(1,302,170
)
                 
Deferred income tax benefit, net of valuation allowance
  
$
-
    
$
-
  

The Company has not recognized deferred tax asset in respect of PRC tax loss in these Consolidated Financial Statements as it is not more-likely-than-not that the future taxable profit against which loss can be utilized will be available to the entities operating in PRC.  The unrecognized tax loss as of December 31, 2012 that will be expiring in 2013, 2014, 2015, 2016 and 2017 are respectively $426,068, $648,473, $1,596,587, $1,453,763 and $1,083,789.  The unrecognized tax loss incurred for three months ended March 31, 2013 of $133,772 (on top of the amount of unrecognized tax losses to December 31, 2012) will expire in 2018.

Note 5 - COMMON STOCK AND PREFERRED STOCK

The Company is authorized to issue up to 100,000,000 shares of common stock of par value of $0.001 per share and 3,558,046 shares of Series A preferred stock of par value of $0.001 per share.  As detailed in note 1 above, on January 27, 2011, the Company effected a reverse stock split such that the number of all existing issue shares were reduced from 19,900,100 to 866,636 on a 23 to 1 basis.  At the same time, pursuant to the Share Exchange Agreement, Surry became a wholly-owned subsidiary of the Company through issuance of 28,496,427 shares of common stock of par value of $0.001 per share and 3,558,046 shares of Series A preferred stock of par value of $0.001 per share.

For accounting purpose, this transaction was treated as reverse acquisition and the Company’s equity accounts at December 31, 2010 prior to the acquisition are restated based on the ratio of the exchange of 28,496,427 shares of common stock of the Company for 44,450 shares of common stock of Surry and exchange of 3,558,046 shares of preferred stock of the Company for 5,550 shares of preferred stock of Surry.  As the par value of each capital stock of the Company and Surry are $0.001 and $1 respectively, the difference in capital of $17,946 arising from this reverse acquisition was reallocated to additional paid-in capital.

On July 12, 2011, the Company issued 2,900,000 shares of common stock to four independent parties as payments to such parties for market research and other advisory services for $899,000 (see Note 7).

On December 27, 2011 and August 23, 2012, the Company has issued common stock of 18,000 shares and 9,000 shares respectively to an independent party for settlement of services provided to the Company regarding investor relations and financial media services amounted to $4,500 and $720 (note 7) respectively.

 
F-14
 
 
CHINA CEETOP.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2013
(UNAUDITED)
 
Note 5 - COMMON STOCK AND PREFERRED STOCK - continued

On September 5, 2012, 7,423,817 shares of common stock and 3,558,046 shares of preferred stock held by six shareholders and one shareholder respectively, were returned and cancelled for no consideration.

On November 30, 2012, 8,116,194 shares of common stock held by four shareholders were returned and cancelled for no consideration.

The return and cancellation of common stock and preferred stock as set forth above on September 5, 2012 and November 30, 2012 are for the purposes of supporting the development of the Company by those major shareholders and in order to induce more potential investors to inject capital to the Company in the future, although there is no guarantee the Company will receive any such capital.

On December 17, 2012, the Company issued common stock of 40,000 shares to an independent party for settlement of services provided to the Company regarding general legal advisory services amounted to $800 (note 7) respectively.

On January 1, 2013, the Company issued common stock of 12,000 shares to an independent party for settlement of services provided to the Company regarding general legal advisory services amounted to $240 (note 7) respectively.

As of March 31, 2013, the Company has a total of 16,802,631 shares of common stock and no shares of Series A Preferred Stock outstanding.
 
Note 6 - ADDITIONAL PAID IN CAPITAL

Included in the balance of $5,836,641Additional Paid in Capital as of March 31, 2013, is $4,399,000 which arose from two waivers of amount due to shareholders which took place in December, 2009 of $1,465,000 and February, 2010 of $2,934,000.

On July 21, 2011, the Company obtained a financial undertaking from the then holder of our preferred stock, Guoxing Wang, to inject funds in the amount of RMB10,000,000 (equivalent to $1,547,000) to HZ Ceetop as its working capital on or before December 31, 2011.  That shareholder further agreed that such capital injection will be interest free and he waived his entitlement to and right for repayment to the capital injected.  On August 8, 2011, there was a capital injection of RMB2,000,000 (equivalent to $312,412) received from that shareholder and was credited to Additional Paid in Capital of the Company.  Management is unable to ascertain when the balance of RMB8,000,000 (equivalent to $1,234,588) would be injected to the Company.

On September 5, 2012, 7,423,817 shares of common stock and 3,558,046 shares of preferred stock held by six shareholders and one shareholder, respectively were returned and cancelled for no consideration, an amount of $10,982 was therefore credited to additional paid in capital on that date.

On November 30, 2012, 8,116,194 shares of common stock held by four shareholders were returned and cancelled for no consideration, an amount of $8,116 was therefore credited to additional paid in capital on that date.
 
 
F-15
 
 
CHINA CEETOP.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2013
(UNAUDITED)
 
Note 7 - SHARE BASED PAYMENTS

On July 12, 2011, the Company issued 2,900,000 shares of the Company’s common stock to Wuying Wang, Xiaoghua Jin, Lifang Yang and Qingxin Huang, four independent parties, in exchange for market research and other advisory services from them pursuant to the terms of four consultancy agreements dated May 6, 2011, June 15, 2011, April 3, 2011 and May 5, 2011 respectively (“Consultancy Agreements”) (see Note 5).  The shares were fully vested and not subject to forfeiture when issued. The fair value of the shares issued was $0.31 per share and the total fair value of the shares issued was $899,000.  The fair value of the shares issued was based on the quoted market price of the Company’s shares as of July 12, 2011. The total fair value of the shares issued are recognized as a share-based payment expense over the period from the date of the Consultancy Agreements to the consultancy services are completed.  The consultancy services are to be performed for two to three years.  For the three months ended March 31, 2013 and 2012 the Company amortized $75,757 and $76,599 as share-based payment expense respectively.  The unrecognized share-based payment expense of $318,907 as of March 31, 2013 will be amortized up to July 2014.  There is no tax benefit related to the share-based payment expense recognized.

On December 27, 2011, the Company issued 18,000 shares of the Company’s common stock to Capital Link, Inc., an independent party, in exchange for investor relations and financial media services provided by that party pursuant to the terms of service agreement dated November 9, 2011 (see Note 5).  The shares were fully vested and not subject to forfeiture when issued.  The fair value of the shares issued was $0.25 per share and total fair value of the shares issued was $4,500 and was recognized as a share-based payment expense when issued.  The fair value of the shares issued was based on the quoted market price of the Company’s shares as of December 27, 2011.  The Service Agreement was to be performed from December 1, 2011 to November 30, 2012 with a monthly retainer payable in the form of 9,000 common shares.  However, both parties signed an early termination agreement on August 14, 2012 agreeing that the effective date of termination of the agreement was February 01, 2012.  The Company recognized the stock based compensation expense amounted to $720 (As a provision of $2,250 had already been recognized in the quarter March 31, 2012, therefore a reversal of $1,530 was recognized in the quarter September 30, 2012) for this service which was based on stock price measured at fair market value at the date of allotment of shares on August 23, 2012 (9,000 common shares at $0.08 per share).

On December 17, 2012, the Company issued 40,000 shares of the Company’s common stock to the Company’s legal adviser, Mr. Jeffrey Stein for the legal advisory services performed to the Company. The fair market value of the shares issued was $0.02 per share and total fair value of the shares issued was $800 and was recognized as a share-based payment expenses when issued.

On January 1, 2013, the Company issued 12,000 shares of the Company’s common stock to the Company’s legal adviser, Mr. Jeffrey Stein for the legal advisory services performed to the Company. The fair market value of the shares issued was $0.02 per share and total fair value of the shares issued was $240 and was recognized as a share-based payment expenses when issued.

Note 8 – STATUTORY RESERVE

In accordance with the laws and regulations of the PRC, a wholly-owned Foreign Invested Enterprise’s income, after the payment of the PRC income taxes, shall be allocated to the statutory reserves.  The allocation is 10 percent of the net income and the cumulative allocations are not to exceed 50 percent of the registered capital.  However, the laws do not prohibit enterprises allocate net income to this reserve after the limit of 50 per cent of registered capital has been reached.  These reserves are not transferable to the Company in the form of cash dividends, loans or advances. These reserves are therefore not available for distribution except in liquidation. As of March 31, 2013 and December 31, 2012, the Company has not allocated to these non-distributable reserve funds due to loss sustained in the three months ended March 31, 2013 and the year ended December 31, 2012.
 
 
F-16
 
 
CHINA CEETOP.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2013
(UNAUDITED)

Note 9 – ACCUMULATED OTHER COMPREHENSIVE INCOME

Balances and movements of accumulated other comprehensive income, included in stockholders’ equity, at March 31, 2013 and December 31, 2012, are as follows:

   
Foreign Currency Translation Adjustment
    
Accumulated Other Comprehensive Income
  
             
Balance at December 31, 2011
  
$
108,193
      
108,193
  
Change for the year
    
8,387
      
8,387
  
                 
Balance at December 31, 2012
    
116,580
      
116,580
  
Change for 2013 Q1
    
180
      
180
  
                 
Balance at March 31, 2013
  
$
116,760
      
116,760
  

Note 10 - CURRENT VULNERABILITY DUE TO CERTAIN RISK FACTORS

The Company’s operations are carried out in the PRC.  Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC, by the general state of the PRC's economy.  The Company’s business may be influenced by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.

Note 11 – MAJOR CUSTOMERS AND CREDIT RISK

Two customers each accounted for 38% and 53% of accounts receivable respectively at March 31, 2013 and December 31, 2012 totaling 91%.  There was no vendor that accounted for more than 10% of accounts payable at March 31, 2013 and December 31, 2012.

There was no customer that accounted for more than 10% of sales amount for the three months ended March 31, 2013. Four customers each accounted for more than 10% of sales amount for the three months ended March 31, 2012, totaling 55%.  There was no vendor that accounted for more than 10% of purchases amount for the three months ended March 31, 2013.  Two vendors each accounted for more than 10% of purchases amount for the three months ended March 31, 2012, totaling 41% of purchases.

Note 12 - LEASES

As at March 31, 2013, the Company did not have future minimum lease payments under non-cancellable operating leases.

As at December 31, 2012, the Company had one office situated in Hangzhou, PRC.  The operating leases for this office provided for monthly rental payments of $1,557 that was expiring in June, 2014 but the operating lease was terminated by the Company during the three months ended March 31, 2013.  In respect of this lease, the Company paid rental expenses of $4,906 and $5,715 for the three months ended March 31, 2013 and 2012 respectively. A new office location has been selected and under renovation. The use of this new office is free of charge during renovation.

Note 13 - SUBSEQUENT EVENTS

For the three months ended March 31, 2013, the Company has evaluated subsequent events for potential recognition and disclosure.

No significant events occurred subsequent to the balance sheet date but prior to the filing of this report that would have a material impact on our consolidated financial statements.
 
 
F-17
 
 
Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.
 
Description of Business
 
Overview
 
China Ceetop.com, Inc. (the “Company”), an Oregon-registered corporation, is a leading e-commerce company. We own and operate the online platform: www.ceetop.com. The Company is in the transition from online retail sales to focus more on sales to a relatively smaller number of distributors due to high competition in online shopping.
 
The Company owns an effective solution to standardization of non-standard products and relevant data transmission. Our Company has a long history in e-commercial platform operation for the construction and operation of supply chain system between both corporations and industries. We mainly focus on providing a trading information platform for both buyers and sellers as software as a service (“SaaS”). We carry a wide range of products in assorted categories, including mainstream digital products, home appliances, kitchen appliances, personal care, and lifestyle products, etc. under well-known international and Chinese brands.
 
The Company uses supply chain management technology and internet to integrate both the upstream firms and downstream firms into a single system. This system is centralized in core manufactures, and links the raw material suppliers, retailers, logistic servers and banks together to establish an integrated, complete e-commercial supply chain system (iSCM) to serve the terminal customers. The iSCM is specialized in professional market and also can serve all industries.
 
Through the stimulation of labor specialization, the original competence between products or companies has turned into the competence between supply chains. Each supply chain is a consolidation of companies to provide the final products. The Company focuses on B2B supply chain service. Our experiences in supply chain management, advanced technology and efficient data analyzing ability can support the company’s operation in multiple selling channels and business models. iSCM system provides companies, online platforms, offline stores and logistic servers and banks with efficient and enormous  cooperation space. We were headquartered in Shenzhen, China. We also maintain an operating office located in Hangzhou, China. Subsequent to the quarter ended March 31, 2013, the headquartered has been moved to Guiyang in April 2013.
 
 
1
 
 
Organization History
 
Organizational History of China Ceetop.com, Inc
 
China Ceetop.com, Inc. was incorporated in Oregon on February 18, 2003 under the name of GL Gold Inc.  On June 6, 2003 the Company filed an amendment with the State of Oregon changing its name to Oregon Gold, Inc.  On January 7, 2011 Oregon Gold Inc. changed its name to China Ceetop.com, Inc.    On January 27, 2011, the Company became the holding company of Surry Holding Limited (“Surry”) through a reverse acquisition.  The Company acquired all of the issued and outstanding capital stock of Surry pursuant to the share exchange agreement dated December 30, 2010 by and among Surry, the Company and the shareholders of the Company (the “Share Exchange Agreement”).  At the same time, the Company effected a reverse stock split such that the number of all existing issued shares were reduced from 19,900,100 to 866,636 on a 23 to 1 basis.  Pursuant to the Share Exchange Agreement, the Company acquired 100% of the capital stock and ownership interests of Surry in exchange for 28,496,427 newly-issued shares of the Company’s common stock and 3,558,046 newly issued shares of the Company’s Series A preferred stock.
 
Organizational History of Surry
 
Surry was incorporated in the British Virgin Islands on September 18, 2009. Surry owns 100% of the outstanding securities of Westow Technology Limited (“Westow”), a company incorporated in the British Virgin Islands.  Surry’s subsidiaries are engaged in the operation of an online platform for sales of 3C products in the PRC by way of the website www.ceetop.com. Pursuant to a transaction completed on February 28, 2010, the Company holds 100% of Westow.
 
Organizational History of Westow
 
Westow was incorporated on September 7, 2009, and owns 100% of the outstanding securities of Shenzhen Ceetop Network Technology Co., Limited, a company incorporated in Shenzhen, PRC.
 
Westow entered into share-holding entrustment agreements with three individuals: Fan Zhengqiang, Jin Wanxia, and Liu Weiliang (CEO of the Company) to hold 20%, 40%, and 40%, respectively, of the equity interest of SZ Ceetop on behalf of Westow. The entrustment agreements confirm that Westow is the actual owner of SZ Ceetop. Westow enjoys the actual shareholder’s rights and has the right to obtain any benefits received by the nominal holders. Fan Zhengqiang and Jin Wanxia have no other relationship with the Company Group. No consideration was given to these individuals who held the equity of SZ Ceetop on behalf of Westow.
 
Organizational History of Shenzhen Ceetop Network Technology Co., Limited and Hangzhou Ceetop Network Technology Co.
 
HZ Ceetop Network Technology Co., Ltd. (“HZ Ceetop”) was incorporated in October 31, 2006 and Shenzhen Ceetop Network Technology Co., Limited (“SZ Ceetop”) was incorporated as a wholly foreign-owned enterprise in August, 2009 under the laws of the PRC. SZ Ceetop owns a 100% of the outstanding securities of HZ Ceetop.
 
 
2
 
 
Corporate Organization
 
 
The address for each entity is set forth below:
 
Name
Address
China Ceetop.com, Inc
A2803, Lianhe Guangchang, 5022 Binhe Dadao, Futian District, Shenzhen, China
Surry Holdings Limited
P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands
Westow Technology Limited
P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands
Shenzhen Ceetop Network Technology Co. Ltd (headquarters)
2803, Lianhe Guangchang A, 5022 Binhe Dadao, Futian District, Shenzhen, China,518033elephone: 0755-33366628
Hangzhou Ceetop Network Technology Co. Ltd
A 1028 Boke Center, 9 Xiyuan Road, West Lake District, Hangzhou, China, 310030 Telephone: +86-0571-86632800

 
3
 
 
Comparison of Three Months Ended March 31, 2013 and 2012
 
The following table sets forth the results of our operations for the three months ended March 31, 2013 and 2012 indicated in U.S. dollars and as a percentage of net sales:
 
   
Three months ended March 31
  
   
2013
    
2012
  
   
US Dollars
    
US Dollars
        
Sales, net
   $ 0     $ 1,310,025       100 %
Cost of sales
     0       (1,245,938 )     95 %
Gross  profit
     0       64,087       5 %
Selling, general and administrative expenses
     (133,774 )     (221,362 )     17 %
(Loss) from operations
     (209,771 )     (238,464 )     18 %
Net (loss)
   $ (209,769 )   $ (238,299 )     18 %

Net Sales
 
For the three months ended March 31, 2013, our net sales decreased to $0 from $1,310,025 for the three months ended March 31, 2012, representing a 100% decrease. This decrease in net sales was due to the Company’s transition of its sales from online retail sales to focus more on sales to a relatively smaller number of distributors due to high competition in online shopping.  Through the stimulation of labor specialization, the original competence between products or companies has turned into the competence between supply chains. Each supply chain is a consolidation of companies to provide the final products. The Company is now focusing on B2B supply chain service.
 
Cost of Sales
 
For the three months ended March 31, 2013 and 2012, the Company’s cost of sales were $0 and $1,245,938 respectively, a decrease of 100%.  This decrease in cost of sales was mainly due to the decrease in sales, and the transition of the Company into a new facet of business.
 
 
4
 
 
Gross Profit
 
For the three months ended March 31, 2013, our gross profit decreased to $0 from $64,087 for the three months ended March 31, 2012, representing a 100% decrease. The decrease in gross profit ratio was a result of the transition of our business.
 
Stock Based Compensation
 
The Company had stock based compensation for the three and three months ended March 31, 2013 of $75,911 and $81,189, respectively.  The compensation was issued for various consulting and professional services to the Company. See Notes to the financial statements for a thorough discussion of the issuances. 
 
Selling, General and Administrative Expenses
 
Our selling, general and administrative expenses decreased to $133,774 for the three months ended March 31, 2013 from $221,362 for the three months ended March 31, 2012, representing a 40% decrease.  The decrease was mainly due to the decrease in staff headcount and accordingly reduction in staff payroll.
 
Net loss
 
The Company’s net loss was $209,769 and $238,299, for the three months ended March 31, 2013 and 2012, respectively representing a 12% decrease.
 
Liquidity and Capital Resources
 
As of March 31, 2013 and December 31, 2012, we had cash and cash equivalents of $57,446 and $71,608, respectively, primarily consisting of cash on hand and demand deposits.  To date, we have financed our operations primarily through cash flows from operations and capital contributions by our shareholders.
 
For the year ended December 31, 2012, our independent auditors, in their report on the financial statements, have indicated that the Company has experienced recurring losses from operations and may not have enough cash and working capital to fund its operations beyond the very near term, which raises substantial doubt about our ability to continue as a going concern. Management has made a similar note in the financial statements.  As indicated herein, we have need of capital for the implementation of our business plan, and we will need additional capital for continuing our operations.  We do not have sufficient revenues to pay our expenses of operations.  Unless the Company is able to raise working capital, it is likely that the Company either will have to cease operations or substantially change its methods of operations or change its business plan.
 
 
5
 
 
Our cash flows for the three month periods are summarized as follows:
 
   
Three months ended
March 31,
  
   
2013
    
2012
  
Net cash used in operating activities
   $ (15,006 )   $ (599,965 )
Effect of exchange rate change on cash and cash equivalents
     844       6,548  
Net decrease in cash and cash equivalents
     (14,162 )       (593,417 )  
Cash and cash equivalents at beginning of period
     71,608       855,713  
Cash and cash equivalents at end of period
   $ 57,446     $ 262,296  

Operating activities
 
 Net cash used in operating activities was $15,006 for the three months ended March 31, 2013, compared to net cash used in operating activities of $599,965 for the three months ended March 31, 2012. The primary change in cash used was due to 1). decrease of sales as a result of the Company’s transition of its sales from online retail sales to focus more on sales to a relatively smaller number of distributors and B2B supply chain service; and 2).decrease of headcount and payroll.
 
Investing activities
 
No cash was used in investing activities for the three months ended March 31, 2013 or March 31, 2012.
 
Financing activities
 
No cash was provided by financing activities for the three months ended March 31, 2013 or for the three months ended March 31, 2012.
 
 
6
 
 
Although the Company incurred a loss of $209,769 and had sustained accumulated loss of $5,928,805 at March 31, 2013, the company is actively seeking financing opportunities and more focus on new facet of business to generate cash inflow.
 
Off-Balance Sheet Arrangements
 
We have never entered into any off-balance sheet arrangements and have never established any special purpose entities. We have not guaranteed any debt or commitments of other entities or entered into any options on non-financial assets.
 
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
 
As a smaller reporting company, we are not required to provide the information required by this Item.
 
ITEM 4. Controls and Procedures
 
Evaluation of Disclosure Controls and Procedures
 
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in the Company’s reports filed or submitted under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the Company’s reports filed under the Exchange Act is accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer (the “Certifying Officers”), as appropriate to allow timely decisions regarding required disclosure.
 
As required by Rules 13a-15 and 15d-15 under the Exchange Act, the Certifying Officers carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of March 31, 2013. Their evaluation was carried out with the participation of the Company’s management. Based upon their evaluation, the Certifying Officers concluded that the Company’s disclosure controls and procedures were not effective.
 
            Notwithstanding the conclusion that our internal control over financial reporting was not effective as of the end of the period covered by this report, the Chief Executive Officer and the Chief Financial Officer believe that the financial statements and other information contained in this quarterly report present fairly, in all material respects, our business, financial condition and results of operations.  Nothing has come to the attention of management that causes them to believe that any material inaccuracies or errors exist in our financial statements as of March 31, 2013.
 
 
7
 
 
Changes in Internal Control Over Financial Reporting
 
There has been no change in the Company’s internal control over financial reporting that occurred in the quarter ended March 31, 2013, that has materially affected, or is reasonably likely to affect, the Company’s internal control over financial reporting.
 
PART II – OTHER INFORMATION
 
Item 1.  Legal Proceedings
 
Neither the Company nor its property is a party to any pending legal proceeding.
 
Item 1A.  Risk Factors
 
Smaller reporting companies are not required to provide disclosure pursuant to this Item.
 
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds
 
None.
 
Item 3.  Defaults Upon Senior Securities
 
None
 
Item 4.  Mine Safety Disclosures
 
Not applicable.
 
Item 5.  Other Information
 
None
 
Item 6.  Exhibits
 
Exhibit Number
  
Name of Exhibit
31.1
  
Certification of Chief Executive Officer, pursuant to Rule 13a-14(a) of the Exchange Act, as enacted by Section 302 of the Sarbanes-Oxley Act of 2002.(1)
31.2
  
Certification of Chief Financial Officer, pursuant to Rule 13a-14(a) of the Exchange Act, as enacted by Section 302 of the Sarbanes-Oxley Act of 2002.(1)
32.1
  
Certification of Chief Executive Officer and Chief Financial Officer, pursuant to 18 United States Code Section 1350, as enacted by Section 906 of the Sarbanes-Oxley Act of 2002. (1)
101**
  
The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2013 formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Income, (iii) the Condensed Consolidated Statements of Stockholders’ Equity, (iv) the Condensed Consolidated Statements of Cash Flows and (v) the Notes to Condensed Consolidated Financial Statements, tagged as blocks of text. (2)
 
(1)   Filed herewith
 
(2)  Users of this data are advised that pursuant to Rule 406T of Regulation S-T, this XBRL information is being furnished and not filed herewith for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and Sections 11 or 12 of the Securities Act of 1933, as amended, and is not to be incorporated by reference into any filing, or part of any registration statement or prospectus, of China Ceetop.com, Inc., whether made before or after the date hereof, regardless of any general incorporation language in such filing.
 
 
8
 
 
SIGNATURES
 
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
CHINA CEETOP.COM, INC.
(Registrant)
  
       
 
By:
  /s/ Weiliang Liu  
   
Weiliang Liu
CEO, President, Secretary, and Director
  
       
Date: May 14, 2013
      
 
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
 
Signatures
  
Title
  
Date
         
/s/ Weiliang Liu
  
CEO, President, Secretary, and Director
  
May 14, 2013
Weiliang Liu
        
 
/s/ Shengming Jia
  
CFO, and Treasurer
  
May 14, 2013
Shengming Jia
        
 
 
9

Ceetop Inc. Reports

Also read