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EXCEL - IDEA: XBRL DOCUMENT - China Teletech Holding IncFinancial_Report.xls

 UNITED STATES 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

FORM 10-K

 

(Mark One)

 

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended December 31, 2013

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ___________ to ___________

 

Commission file number: 333-130937

 

CHINA TELETECH HOLDING, INC.

(Exact name of registrant as specified in its charter)

 

Florida 59-3565377
State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization  
   
c/o Corporation Service Company
1201 Hays Street  
Tallahassee, FL 32301
(Address of principal executive offices) (Zip Code)

 

 Registrant's telephone number, including area code (850) 521-1000

 

Securities registered under Section 12(b) of the Act: None

 

Securities registered under Section 12(g) of the Act: None

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.   

 

Yes ¨    No x

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    

 

Yes ¨    No x

 

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 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K ( 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference Part III of this Form 10-K or any amendment to this Form 10-K.  

 

¨

 

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 ¨   Accelerated filer ¨
         
Non-accelerated filer ¨   Smaller reporting company x
         
 (Do not check if a smaller reporting company)        

  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

 

Yes o   No x

 

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant's most recently completed second fiscal quarter, June 30, 2013: $615,152.

 

As of April 18, 2014, the registrant had 91,813,776 shares of its common stock outstanding.

 

Documents Incorporated by Reference: None.

 

 

 
 

 

TABLE OF CONTENTS

        Page
PART I
Item 1.   Business.   1
Item 1A.   Risk Factors.   6
Item 1B.   Unresolved Staff Comments   6
Item 2.   Properties.   6
Item 3.   Legal Proceedings.   6
Item 4.   Mine Safety Disclosures.   6
         
PART II
Item 5.   Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.   7
Item 6.   Selected Financial Data.   7
Item 7.   Management's Discussion and Analysis of Financial Condition and Results of Operations.   8
Item 7A.   Quantitative and Qualitative Disclosures About Market Risk.   10
Item 8.   Financial Statements and Supplementary Data.   10
Item 9.   Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.   35
Item 9A.   Controls and Procedures.   35
Item 9B.    Other Information.   36
PART III
Item 10.   Directors, Executive Officers and Corporate Governance.   37
Item 11.   Executive Compensation.   39
Item 12.   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.   40
Item 13.   Certain Relationships and Related Transactions, and Director Independence.   40
Item 14.   Principal Accounting Fees and Services.   41
         
PART IV
Item 15.   Exhibits, Financial Statement Schedules.   43
SIGNATURES   45

 

 
 

 

PART I

 

Item 1. Business.

 

Overview

 

China Teletech Holding, Inc. ("we" or the "Company") is a distributor of pre-paid calling card and integrated mobile phone handsets and a provider of mobile handset value-added services.  We are an independent qualified corporation that serves as one of principal distributors of China Telecom, China Unicom, and China Mobile products in Guangzhou City.   We have cooperative distribution relationships with Panasonic, Motorola, LG, GE, Bird, Samsung corporations for their mobile handsets.  We are also developing an on-line refill platform with China Mobile to develop our on-line business in the Guangdong Province. 

 

Corporate History and Structure

 

We were incorporated as Avalon Development Enterprises, Inc. on March 29, 1999, under the laws of the State of Florida.  From inception until January 2007, we engaged in the business of acquiring commercial property and expanding into building cleaning, maintenance services, and equipment leasing as supporting ancillary services and sources of revenue.  On January 10, 2007, the Company, Global Telecom Holdings, Ltd., a British Virgin Islands company ("GTHL"), and the shareholders of GTHL, entered into a share exchange agreement, pursuant to which the Company issued 39,817,500 shares of its restricted common stock to the shareholders of GTHL in exchange for all of the issued and outstanding capital stock of GTHL.  Following the transaction on March 27, 2007, GTHL became our wholly-owned subsidiary and we changed our name to Guangzhou Global Telecom Holdings, Inc. and succeeded to the business of GTHL. 

 

In 2007, we established four subsidiaries; namely, Zhengzhou Global Telecom Equipment Limited ("ZGTE"), Macau Global Telecom Company Limited ("MGT"), Huantong Telecom Hongkong Holding Limited ("HTHKH"), and Huantong Telecom Singapore Company PTE Limited ("HTS") with capital of RMB 500,000, Macau Dollar 300,000, Hong Kong Dollar 100 and Singapore Dollar 200,000, respectively. Simultaneously, we established a subsidiary; namely, Guangzhou Huantong Telecom Technology and Consultant Services, Ltd ("GHTTCS") with capital of RMB 8,155,730. Pursuant to a Stock Purchase Agreement dated April 9, 2008 and July 29, 2008, respectively, the Company acquired 50% of the issued and outstanding shares in the capital of Beijing Lihe Jiahua Technology and Trading Company Ltd ("BLJ") and 51% of the issued and outstanding shares in Guangzhou Renwoxing Telecom Co., Ltd. ("GRT"), a limited liability company incorporated in China. Pursuant to the terms of the Stock Purchase Agreements, the Shareholders agreed to sell and transfer the proportion of the shares to the Company for a purchase consideration of US$300,000 and US$291,833 respectively.

 

In 2009 and 2010, the Company disposed of its subsidiaries CHTTCS, ZGTE, MGT and BLJ due to their loss operations. HTHKH and HTS were not able to start its operation since its inception, so the Company deregistered them in 2010.

 

Financing

 

On July 31, 2007 and January 1, 2008, the Company completed two financing transactions with several investors (the "Holders") issuing $2,000,000 and $1,000,000, respectively, Fixed Rate Convertible Debenture due in 2009 and a stock purchase warrant to purchase an aggregate of 2,090,592 shares of the Company common stock, subject to adjustments for stock splits or reorganizations as set forth in the warrant, that will expire in 2012 (the "Warrants").

 

The Debentures were subscribed at a price equal to 87.5% of their principal amount, which is the issue price of $3,428,571 less a 12.5% discount. The Debentures were issued pursuant to, and are subject to the terms and conditions of, a trust deed dated July 31, 2007 (the "Trust Deed").

 

Interest Rate. The Debenture bears interest at the rate of 8% per annum of the principal amount of the Debentures.
Conversion. Each Debenture is convertible at the option of the holder at any time after July 31, 2007 up to July 31, 2009, into shares of our common stock at a fixed conversion price of $0.82 per share.

 

On July 31, 2007, the Company also entered into a registration rights agreement with the Holders pursuant to which the Company agreed to include the Debenture, the Warrants, and the shares of common stock underlying the Debenture and Warrants in a pre-effective amendment to a registration statement that the Company have on file with the SEC. The Company intended to have the registration statement cover the resale of the Debenture, the Warrants, and the shares of common stock underlying the Debenture and Warrants.

 

1
 

 

On November 3, 2008, due to market conditions, the Company re-negotiated the terms of the Debentures and Warrants, and entered into a modification agreement (the "Amendment Agreement") with the Holders. Pursuant to the Amendment Agreement, the Company agreed to completely remove the monthly interest payment of the Debentures and Increase the annual interest rate to 18%. Therefore, as described in the Schedule A of the Amendment Agreement, the Company agreed to pay an aggregate of $2,151,110.85 and $1,485,714.10 to the Holders that are due on July 31, 2009 and February 21, 2010, respectively. The Company acknowledged that the conversion price of the Debentures on the conversion date shall be equal to the lesser of (a) $0.015 (subject to adjustment), and (b) 80% of the lowest closing bid price during the 20 Trading Days immediately prior to the applicable conversion date (subject to adjustment).

 

The Amendment Agreement further modified the terms of the transaction by reducing the exercise price of the Warrants to $0.015 (subject to further adjustment), and therefore the number of shares underlying Warrants issued to the Holders will be increased to an aggregate of 156,097,534 shares as described in Schedule B of the Amendment Agreement.

 

The Company further amended the Articles of Incorporation to increase the number of authorized shares of common stock to 1,000,000,000.

 

On December 29, 2009, the Company entered into a Settlement Agreement with the Holders. Pursuant to the Settlement Agreement, the Company would make a total payment of $1,300,000 to the Holders no later than January 21, 2010. The Convertible Debentures would be deemed satisfied and all outstanding Warrants held by the Holders would be cancelled. In addition, the Holders agreed to cancel all of the Company shares held by them at such time as the payment has been made. However, the Company never paid the sum of $1,300,000 to the Holders.

 

In May 2010, the Holders commenced an action against the Company in the Supreme Court of the State of New York in order to recover the outstanding amount of $1,300,000 under the Settlement Agreement. 

 

On April 29, 2011, a judgment in the amount of $1,415,306.16 in favor of the Holders and against the Company was entered on August 5, 2011 in the Supreme Court of the State of New York, New York County.

 

On November 28, 2011, the Company and the Holders entered into a Settlement and Amendment Agreement. As partial consideration for the agreements of the Holders, upon execution of the Agreement, the Company shall pay the Holders, in the aggregate, the sum of $50,000. Within 20 business days of the execution of the Agreement, the Company shall pay the Holders, in the aggregate, the additional sum of $105,000, including $5,000 for the Holder's legal fees and expenses as described in Section 10(d) herein. Promptly following the payment of an aggregate of $155,000 by the Company, the Holders agreed to surrender their respective Warrants and Restricted Shares to the Company's counsel for cancellation. Following the payment of an aggregate of $155,000 by the Company, the Holders should promptly file a satisfaction of judgment with the Supreme Court of the State of New York, New York County.

 

The Company paid $155,000 to the Holder and the satisfaction of judgment was filed on January 17, 2012 with the Supreme Court of the State of New York, New York County.

 

The amendments to the original debenture agreement are as follows:

 

(a)The date included in the definition of "Maturity Date" in the second paragraph of the Debentures is hereby amended to read: November 23, 2013.

 

(b)Section 4(b) of the Debentures is hereby amended to read as follows: "Conversion Price."  The conversion price in effect on any Conversion Date shall be equal to the lesser of (i) $.10 (the "Set Price") and (ii) 90% of the average of the VWAPs for the 5 Trading Days immediately prior to the applicable Conversion Date (such lower price, as subject to adjustment herein, the "Conversion Price").

 

(c)For purposes of Sections 5(a), 5(b), 5(c) and 5(d) of the Debentures, the term "Conversion Price" shall be deemed to be the "Set Price".

 

(d)Reduction in Principal Amount of Debentures.  Subject to the terms and conditions hereunder, the Holders and the Company hereby agree that the principal amount outstanding under the Debentures shall be reduced to, in the aggregate, $1,300,000.

 

2
 

 

(e)Daily Trading Volume of the Conversion Shares.  On any given Trading Day, the Holder agreed not to sell in open market transactions more than such number of Conversion Shares equal to the greater of (i) 20% of the trading volume on that day, or (ii) 20% of the daily average trading volume over the prior 5 trading days, however, provided that, in either case, the minimum daily trading volume shall be no less than 500,000 shares, subject to adjustment for reverse and forward stock splits and the like.

 

(f)Mandatory Conversion. The Company should have the right to force the Holders to convert the Debenture into Common Stock at such time that the VWAP of the Company's Common Stock is no less than $1.00 per share (subject to adjustment for reverse and forward stock splits and the like) for a period of ten (10) consecutive trading days (the "Mandatory Conversion"); provided, however, during such 10 consecutive trading day period, the Equity Conditions (as defined in the original Debentures (prior to the Amended and Restated Debentures) have been met by the Company  Holders may deliver to the Company at its executive office, or to the Company's transfer agent, as applicable, the Amended and Restated Debenture (as defined in Section 9(c)) so converted. As promptly as practicable thereafter, the Company should issue, or cause its transfer agent to issue and deliver to such holder a certificate or certificates for the number of shares of Common Stock to which such holder is entitled.

 

In additional to the amendment to the Debenture, the Company also agreed to become current with all obligations under the Exchange Act, and shall, at all times thereafter, remain current in accordance with the rules and regulations of the Commission and its obligations under the Exchange Act. On or before the earlier of (i) December 15, 2011 or (ii) the 30th calendar day following the date the Company becomes current in its filing obligations under the Exchange Act, the Company shall hire an investor relations firm, specializing in small-cap and micro-cap public companies, with a term of engagement of not less than 12 months. On or before January 31, 2012 (subject to SEC or any other regulatory approval), the Company should have consummated a merger transaction (the "Merger") whereby the business of target is acquired by the Company. In addition, as a part of the Merger, the target and its direct and indirect subsidiaries, if any, should deliver each Holder a guarantee and should comply with all terms and conditions of certain Security Agreement, including, without limitation, the granting of a first priority lien in their respective assets to the Holders.

 

Upon compliance with the terms, conditions, and covenants in the Settlement and Amendment Agreement, the Holders agreed to promptly file a satisfaction of judgment with the Supreme Court of the State of New York.  Such filing was expressly conditioned upon the Company's performance of such terms, conditions, and covenants.  There should be no settlement of the litigation until such time as the Company complied with all of the terms, conditions, and covenants of the Settlement and Amendment Agreement.  

 

Reverse Split and Name Change

 

On December 9, 2011, the Board and the shareholders representing more than 50% of the Company's common stock approved a 1-10 reverse split. The forward split was declared effective by FINRA as of February 16, 2012.

 

On March 2, 2012, the Board and the shareholders representing more than 50% of the Company's common stock approved a change in the Company's name. On March 8, 2012, we filed an Articles of Amendment to our Articles of Incorporation (the "Amendment") to change the corporate name from "Guangzhou Global Telecom, Inc." to "China Teletech Holding, Inc." The Amendment was effective as of March 8, 2012. In connection with the name change, we have applied for a new trading symbol "CNCT" for the Company's common stock, which is quoted on the OTCQB. Both the name change and symbol change have been approved by FINRA and became effective as of March 20, 2012.

 

Acquisition of China Teletech Limited

 

On March 30, 2012, the Company completed a share exchange transaction with China Teletech Limited, a British Virgin Islands corporation ("CTL"), by entering into a share exchange agreement with CTL and the former shareholders of CTL, dated March 30, 2012.

 

CTL is a British Virgin Islands Company, incorporated on January 30, 2008 under the British Virgin Islands Business Act 2004.  Its primary business operations were concluded through two wholly owned subsidiaries located in China, namely, (a) Shenzhen Rongxin Investment Co., Ltd. ("Shenzhen Rongxin") and (b) Guangzhou Rongxin Science and Technology Limited ("Guangzhou Rongxin").

 

Pursuant to the agreement, we acquired all the outstanding capital stock of CTL from the former shareholders of CTL in exchange for the issuance of 40,000,000 shares of our common stock. The shares issued to the former shareholders of CTL constituted approximately 68.34% of our issued and outstanding shares of common stock as of an immediately after the commutation of the share exchange transaction. As a result of the share exchange, CTL became our wholly owned subsidiary and Dong Liu and Yuan Zhao, the former shareholders of CTL, became our principal shareholders.

 

3
 

 

In connection with the share exchange, Yankuan Li resigned as our Chief Financial Officer, Secretary and Chairman of the Board of Directors, effective as of March 30, 2012. Also effective upon closing of the share exchange, Dong Liu, Yuan Zhao, Yau Kwong Lee and Kwok Ming Wai Andrew were appointed as our directors. Ms. Yankuan Li remained President, Chief Executive Officer and a member of the board of directors of the Company. As of result of the merger, the Company believed that it could enjoy a greater management and capital resources and have a greater network and business opportunities. The Company expected to be able to expand its telecommunications business in Guangzhou and Shenzhen cities in China.

 

Sale of the Company's Wholly-Owned Subsidiary, Guangzhou Global Telecommunication Company Limited

 

On June 30, 2012, we entered into a Sales and Purchase Agreement with Mr. Zhu Sui Hui ("Mr. Hui ") pursuant to which we sold all the capital stock of Guangzhou Global Telecommunication Company Limited ("GGT"), our wholly-owned subsidiary, to Mr. Hui for RMB 5,000, or approximately $800. Both parties agreed unconditionally to waive the current accounts payable or receivable balances between the Company (and its subsidiaries) and Guangzhou Global Telecommunication Company Limited. GGT was engaged in the trading and distribution of cellular phones and accessories, prepaid calling cards, and rechargeable store-value cards.

 

Subsidiaries

 

We currently operate our business through our subsidiary Guangzhou Rongxin Technology Co., Ltd.(“Guangzhou Rongxin”) in China:

 

Guangzhou Rongxin Technology Co., Ltd.

 

Guangzhou Rongxin is located at Renwoxing Center, 139 Ying Yuan Road, Yue Xiu District, Guangzhou, China.  It is principally engaged in the trading and distribution of rechargeable phone cards in Guangzhou City, China. As of the date of this Annual Report, Guangzhou Rongxin is in the process of voluntary dissolution.

 

Shenzhen Rongxin Investment Co., Ltd.

 

Shenzhen Rongxin is located at Room A, 20/F., International Trade Residential And Commercial Building, No. 3009 Nan Hu Road, Shenzhen, Guangdong, China.  Its primary business is the wholesale and distribution of mineral water (Tibet Glacial 5100 Spring Water) as well as trading of wine in China. On September 30, 2012, the Company's subsidiary, China Teletech Limited, entered into an agreement with a related party - Mr. Liu Yong, brother of Mr. Liu Dong, to dispose of the variable interest entity Shenzhen Rongxin Investment Co., Ltd. for a cash consideration of US$1,579.

 

Our Strategies

 

We devote significant resources to identifying and developing new software and value-added services through an expanded network of regional and neighborhood service centers.  We plan to develop our distribution operations and to introduce current, new and innovative software and services through possible expanded network of regional and neighborhood services centers and business partners.

 

We expanded our services by building an Air-Refill Platform with China Mobile in 2011.  Air-Refill Platform is an on-line refill platform for mobile phone users to refill their rechargeable phone cards.  We invested on two sets of machines and software developments for the Air-Refill Platform.  They are under pilot test-run since the fourth quarter of 2011 for Guangzhou City and Guangdong Province.  They launched in the second quarter of 2012.  The on-line platform generates sales with lower costs and higher profit margin, compared to retail shops.  This new sales channel can allow us to make direct sales and cross-sales of additional value-added services and add-on products to our customers in the future.

 

As a result of the merger with CTL, we have management with more experience, capital resources and a greater network that facilitates more business opportunities.  This enables the Company to further expand its Air-Refill Platform business from Guangdong provinces to other provinces of China.  As of the date of this Annual Report, we have launched our business in Beijing, and we plan to expand the business to other major cities in China such as Zhuhai, Wuhan, Zhengzhou, Shanghai. We will also identify and acquire several investment projects of high technology and telecommunications in China for our corporation growth in future.

 

4
 

 

Distributions

 

We currently serve as a distributor of pre-paid phone calling cards, mobiles and integrated mobile handsets and related communication equipment and a provider of mobile value-added services in Guangzhou City of China.

 

Guangzhou Rongxin has an established distribution network with mobile phone distributors, wholesalers and retail outlets in Guangzhou city.  We anticipate that on-line sales from our Air-Refill Platform will become the significant sales channel of our rechargeable phone cards businesses in future.  We expect Guangzhou Rongxin will develop other value-added services through the Air-Refill Platform in the future.

 

Revenue Sources

 

As of December 31, 2013, our revenue soley came from our only operating subsidiary Guangzhou Rongxin.  

 

As mentioned above, we are developing Air-Refill Platform with China Mobile for our customers.  During the product and value-added services development phase, our product lines and production levels will be kept at current size.  

 

Marketing

 

Our strategy is a natural follow on to our existing telephone distribution operation in China.  We are building strong customer relationships in the local communities we serve and anticipate that we can generate more sales from these existing loyal customers by word of mouth and public advertisements.

 

We anticipate that the on-line platform can distribute current products and provide mobile phone value added services in the future.  Marketing strategies will be planned and enacted accordingly based on the development of the Air-Refill Platform business (including direct selling and related cross-selling businesses) and acquisition and operation of the acquired investment projects in the future.

 

We plan to build up and maintain "China Teletech" as a high-quality brand name.  We expect that our promotion of the "China Teletech" name can increase the sales and growth of our business, as well as increase our corporate value.

 

Competition China is the world's largest mobile telecommunications market. According to updated statistics from Ministry of Industry and Information Technology of China, there were about 1.1 billion mobile cellular users in China as of December 2012.  This represented about 85 percent of the population of 1.3 billion people in China.

 

As the Chinese population becomes saturated with multiple mobile handsets per person, demand will still exist for upgrade or replacement platforms and value-added services.  One of the important value-added services is on-line add-value services for mobile users and some major distributors are developing, testing and upgrading of their own platforms.

 

Our strategy strives to be one of principal distributors and service providers for mobile users in Guangdong Province.  The Company will continue in developing and upgrading its on-line platform for providing mobile phone value- added services and distributing current and new and innovative products to our customers.

 

The Company’s major competitors are Shenzhen Yuelong Electronic Technology Co., Ltd. and SinoCom Software Group Limited.

 

Intellectual Property

 

We do not own any intellectual property.

 

5
 

 

Government Approval and Regulation

 

We do not need government approval for our principal products or services.

 

Employees

 

As of April 15, 2014, we have 17 full-time employees.

 

Item 1A. Risk Factors.

 

Not applicable because we are a smaller reporting company.

 

Item 1B. Unresolved Staff Comments.

 

Not applicable because we are a smaller reporting company.

 

Item 2. Properties.

 

Guangzhou Rongxin is located at Unit 303F, Zhongyi Building, Jiefang Road Central, Guangzhou, China.  Guangzhou Rongxin pays office rentals of USD7,475 in 2013. The lease term is from May 20, 2013 to May 19, 2014 and monthly rental is approximately USD$ 623 (RMB3,800).

 

GGT is located at Room 904, lobby-C, Shengyueju, No.149, Fengyuan Road. Liwan District Guangzhou, China. The lease term is from June 2012 to June 2014 free of any rental charges.

 

LASER is located at East 3rd floor, Building M7, No.1, Jiuxianqiao East Road, Chaoyang District, Beijing, China. The lease term is from June 5, 2014 to June 4, 2018. The rate is RMB 300,000 per year.

 

Item 3. Legal Proceedings.

 

We have not been involved in any material legal proceedings, other than the ordinary litigation incidental to our business.

 

There are no proceedings in which any of our directors, officers or any of their respective affiliates, or any beneficial stockholder of more than five percent of our voting securities, is an adverse party or has a material interest adverse to our interest.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

6
 

 

PART II

 

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

 

Market Information

 

Our common stock trades on the OTCQB under the symbol "CNCT". The OTCQB is a quotation service that displays real-time quotes, last-sale prices, and volume information in over-the-counter ("OTC") equity securities. An OTCQB equity security generally is any equity that is not listed or traded on a national securities exchange.

 

Price Range of Common Stock

 

The following table shows, for the periods indicated, the high and low bid prices per share of our common stock as reported by the OTCQB quotation service. These bid prices represent prices quoted by broker-dealers on the OTCQB quotation service. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commissions, and may not represent actual transactions.

 

   High   Low 
Fiscal Year 2012          
First quarter ended March 31, 2012  $0.15   $0.01 
Second quarter ended June 30, 2012  $0.15   $0.02 
Third quarter ended September 30, 2012  $0.08   $0.02 
Fourth quarter ended December 31, 2012  $0.08   $0.005 
Fiscal Year 2013          
First quarter ended March 31, 2013  $0.01   $0.47 
Second quarter ended June 30, 20113  $0.01   $0.07 
Third quarter ended September 30, 2013  $0.01   $0.06 
Fourth quarter ended December 31, 2013  $0.01   $0.02 

 

Approximate Number of Equity Security Holders

 

As of April 15 , 2014 there were approximately 70 stockholders of record.

 

Dividends

 

Holders of our common stock are entitled to receive dividends if, as and when declared by the Board of Directors out of funds legally available therefore. We have never declared or paid any dividends on our common stock. We intend to retain any future earnings for use in the operation and expansion of our business. Consequently, we do not anticipate paying any cash dividends on our common stock to our stockholders for the foreseeable future.

 

Securities Authorized for Issuance under Equity Compensation Plans

 

We do not have in effect any compensation plans under which our equity securities are authorized for issuance.  

 

Item 6. Selected Financial Data.

 

Not applicable because we are a smaller reporting company.

 

7
 

 

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

 

The following discussion and analysis of the results of operations and financial condition of the Company for the years December 31, 2013 and 2012 shall be read in conjunction with its financial statements and notes. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results of the timing of events could differ materially from those projected in these forward-looking statements as a result of a number of factors, including those set forth under the Risk Factors, Special Note Regarding Forward-Looking Statements and Business sections in our Form 10-K for the year ended December 31, 2012. We use words such as "anticipate," "estimate," "plan," "project," "continuing," "ongoing," "expect," "believe," "intend," "may," "will," "should," "could," and similar expressions to identify forward-looking statements.

 

Company Overview

 

We are a national distributor of prepaid calling cards and integrated mobile phone handsets and a provider of mobile handset value-added services. We are an independent qualified corporation that serves as one of the principal distributors of China Telecom, China Unicom, and China Mobile products in Guangzhou City. We maintain and operate the largest prepaid calling card sales and distribution center in Guangzhou City. We are developing an online add-value platform with China Mobile to develop our online business. We have distribution relationships with mobile phone corporations such as Samsung and Panasonic. After the merger with China Teletech Limited Group on March 30, 2012, we started a new distribution business of mineral water and Chinese wine.

 

On June 30, 2012, the Company strategically sold its wholly-owned subsidiary, Guangzhou Global Telecommunication Company Limited ("GGT"), to a third party. GGT was engaged in the trading and distribution of cellular phones and accessories, prepaid calling cards, and rechargeable store-value cards.

 

Since September 24, 2012, the Company distributes prepaid calling cards through magazine stalls in Guangzhou City. We started this new segment with 107 magazine stalls and anticipate that the total number of stalls will increase to 300 by the middle of fiscal 2013.

 

8
 

 

In March 2014, the Company signed the agreement with Beijing Toplaser Technology, Ltd. (LASER). The Company issued 10,000,000 shares of common stock to acquire 100% equity of LASER. After the acquisition, LASER will be the Company’s subsidiary and such acquisition is subject to the Company’s due diligence in the meantime.

 

Going Concern

 

The yearly consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the discharge of liabilities in the normal course of business for the foreseeable future.

 

As of December 31, 2013, the Company has an accumulated loss of $6,388,100 due to the fact that the Company incurred losses over the past several years. It affected the Company's ability to pay PRC government tax and Debentures.

 

However, as the Company fulfilled the required obligations of a settlement agreement dated November 28, 2011 with holders of the Convertible Debenture, the principle amount was reduced from $2,866,323 to $1,300,000 and it became a non-current liability. In addition, the Company disposed of subsidiaries, GGT and Shenzhen Rongxin on June 30 and September 30, 2012 respectively.

 

Results of Operations

 

Results of Operation for the year ended December 31, 2013 compared with the year ended December 31, 2012

 

Total Revenue

 

During the year ended December 31, 2013, we generated $30,879,609 in revenue, as compared to $26,620,278 for the year ended December 31, 2012, representing an increase of $4,259,331 or approximately 16.0%. The higher sales amount for the year ended December 31, 2013 was mainly because a major supplier of store-value cards temporarily ceased its business with us in the first quarter of 2012 for its internal system upgrade in order to serve a greater customer base from the Guangzhou City extended to the Guangdong Province.   The supplier re-started its business with us in 2013 and our sales increase for the year ended December 31, 2013.

 

Gross Profit

 

The gross profit was $462,538 for the year ended December 31, 2013, as compared to $731,071 for the year ended December 31, 2012, representing $268,533, or 36.7% decrease. The gross profit margin decreased from 2.75% to 1.50%. The decrease in gross profits margin was mainly due to the higher increase of cost of sales than the increase of revenue.

 

Special gains

 

In the year of 2012, there were a gain on forgiveness of long term debt $1,566,323 and a gain from disposal of subsidiaries -GGT and Shenzhen Rongxin of amount $466,555.

 

Expenses

 

Our general and administrative expenses ("G&A expenses") were $1,213,632 during the year ended December 31, 2013, as compared to $1,273,089 during the year ended December 31, 2012, representing an decrease of $59,457, or 4.7%. The decrease in G&A expenses was mainly due to the decrease of stock compensation.

 

9
 

 

Net Income

 

Net loss of $1,498,888 was recorded during the year ended December 31, 2013 as compared to net income of $1,540,625 during the year ended December 31, 2012. The decrease was mainly due to the gain from disposal of a subsidiary and the gain on forgiveness of long term debt in nine months ended September 30, 2012 and loss from disposal of a subsidiary and provision of subscription receivable for the year ended December 31, 2013.

 

Liquidity and Capital Resources

 

Cash used in operating activities was $914,788 during the year ended December 31, 2013, as compared to cash provided by operating activities was 982,160 during the year ended December 31, 2012. Cash used in operating activities for the year ended December 31, 2013 was mainly resulted from net loss attributable to the Company $1,342,090, added adjustments of non-cash expense item stock compensation $102,000, net decrease in current liabilities (accrued liabilities and other payables) $563,568, netting off by net decrease in current assets (other receivables, amounts due from a related party, purchase deposit and inventories) $648,041 and plus adjustments of loss on disposal of a subsidiary $52,292 and loss on stock issuance $800,000. Cash provided by operating activities during year 2012 was mainly resulted from net income attributable to the Company $1,502,169, added adjustments of non-cash expense item stock compensation $529,789, decrease in current assets (other receivables, amounts due from related parties, purchase deposit, inventories and tax payables) $1,096,350, netting off by adjustments of gain on disposal of a subsidiary $466,555 and gain on forgiveness of long-term debt $1,566,323.

 

Cash flows provided by investing activities were $233,267 for the year ended December 31, 2013, as compared to $419,340 provided by the year 2012. Cash provided by investing activities during the year 2013 was resulted from net cash inflow from sales of short-term investment 230,984.  Cash provided by investing activities during the year 2012 was resulted from net cash inflow from purchase of a subsidiary in the merger $1,783,812 and disposal for short-term investment $201,229, netting off by payments for deposits $17,569 and cash outflow of disposal of subsidiaries $1,548,132. 

 

Cash used in financing activities was $613,867 for the fiscal year ended December 31, 2013 as compared to cash flows used in financing activities was $193,949 for the fiscal year ended December 31, 2012.  Cash used in financing activities in the year 2013 was resulted from a short term loan granted to Ms. Yankuan Li, our President and CEO, and dividends paid to minority interests of subsidiaries. Cash used in financing activities in the year 2012 was resulted from dividends paid to minority interests of subsidiaries.

 

Critical Accounting Policies

 

Our significant accounting policies are summarized in Notes 2 of our financial statements included in this quarter report on Form 10-K for the year ended December 31, 2013. Our financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States ("GAAP"). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenues and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.

 

Recent Accounting Pronouncements

 

Please refer to Note (v) to Consolidated Financial Statements for the years ended December 31, 2013 and 2012.

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as "special purpose entities" (SPEs).

 

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

 

Not applicable because we are a smaller reporting company.

 

Item 8. Financial Statements and Supplementary Data.

 

10
 

 

 

China Teletech Holding, Inc.

 

Audited Consolidated Financial Statements

 

December 31, 2013 and 2012

 

(Stated in US Dollars)

 

11
 

 

China Teletech Holding, Inc.

 

Contents Pages
   
Report of Independent Registered Public Accounting Firm 1
   
Consolidated Balance Sheets 2 – 3
   
Consolidated Statements of Income 4
   
Consolidated Statements of Changes in Stockholders’ Equity 5
   
Consolidated Statements of Cash Flows 6
   
Notes to Consolidated Financial Statements 7– 22

 

12
 

  

Board of Directors and Stockholders

China Teletech Holding, Inc.

 

Report of Independent Registered Public Accounting Firm

 

We have audited the accompanying consolidated balance sheets of China Teletech Holding, Inc as of December 31, 2013 and 2012, and the related consolidated statements of income, stockholders' equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of China Teletech Holding, Inc. as of December 31, 2013 and 2012, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 12 to the consolidated financial statements, the Company has incurred substantial losses which raise substantial doubt about its ability to continue as a going concern. These consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

San Mateo, California WWC, P.C.
March 27, 2014 Certified Public Accountants

 

13
 

  

China Teletech Holding, Inc.

Consolidated Balance Sheets

As of December 31, 2013 and 2012

(Stated in US Dollars)

 

      12/31/2013   12/31/2012 
   Note        
ASSETS             
              
Current Assets             
Cash and cash equivalents     $517   $1,270,035 
Short-term investment      -    395,813 
Other receivables  4   606,970    6,122 
Due from related parties  5   468,488    216,167 
Prepaid expenses      -    92,264 
Inventories      -    101,363 
Total Current Assets      1,075,975    2,081,764 
              
Non-Current Assets             
Other non-current assets      77,999    79,873 
Total Non-Current Assets      77,999    79,873 
              
TOTAL ASSETS     $1,153,974   $2,161,637 
              
LIABILITIES & STOCKHOLDERS' EQUITY             
              
Current Liabilities             
Taxes payable  6  $-   $248,511 
Due to related parties  5   234,711    357,031 
Accrued liabilities and other payables      58,450    58,620 
Convertible debenture - current portion  7   1,300,000    - 
Total Current Liabilities      1,593,161    664,162 
              
Non-Current Liabilities             
Convertible debenture –non-current portion  7   -    1,300,000 
Total Non-Current Liabilities      -    1,300,000 
              
TOTAL LIABILITIES     $1,593,161   $1,964,162 

 

See Notes to Consolidated Financial Statements and Accountants’ Report

 

14
 

 

China Teletech Holding, Inc.

Consolidated Balance Sheets

As of December 31, 2013 and 2012

(Stated in US Dollars)

 

      12/31/2013   12/31/2012 
STOCKHOLDERS' EQUITY             
Common stock US$0.01 par value; 1,000,000,000 authorized, 97,813,776 and 62,813,776 shares issued and outstanding at December 31, 2013 and 2012, respectively.  8  $978,138   $628,138 
Additional Paid in capital      5,835,805    4,820,347 
Accumulated Other Comprehensive Loss      (401,572)   (343,198)
Retained Deficit      (6,851,558)   (5,046,010)
Non controlling interest      -    138,198 
TOTAL STOCKHOLDERS' EQUITY     $(439,187)  $197,475 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY     $1,153,974   $2,161,637 

 

See Notes to Consolidated Financial Statements and Accountants’ Report

 

15
 

  

China Teletech Holding, Inc.

Consolidated Statements of Income

For The Years Ended December 31, 2013 and 2012

(Stated in US Dollars)

 

   Note    
      12/31/2013   12/31/2012 
Sales     $30,879,609   $26,620,278 
Cost of sales      30,417,071    25,889,207 
Gross profit      462,538    731,071 
              
Operating expenses      -    4,646 
Administrative and general expenses      1,677,090    1,273,089 
Total operating expense      1,677,090    1,277,735 
              
Income (Loss) from Operations      (1,214,552)   (546,664)
              
Gain on disposal of a subsidiary      52,292    466,555 
Other income      -    152,293 
Interest income      14    65 
Other expenses  10   (800,000)   (533)
Interest expense      (16)   (327)
Income before taxation      (1,962,262)   71,389 
Income tax      84    17,847 
Net Income (Loss)     $(1,962,346)  $53,542 
Extra-Ordinary Gain on Forgiveness of Debt, Net of Tax  7   -    1,487,083 
Net Earnings After Tax      (1,962,346)   1,540,625 
              
Other comprehensive income:             
Foreign currency translation change      (58,374)   (375,429)
Comprehensive income (loss):      (2,020,720)   1,165,196 
              
Net income attributable to:             
- Non controlling interest     $(156,798)  $38,456 
-the Company      (1,805,548)   1,502,169 
      $(1,962,346)  $1,540,625 
             
Earnings (Loss) Per Share             
Basic     $(0.02)  $0.02 
Diluted     $(0.02)  $0.02 
              
Weighted Average Shares Outstanding             
-Basic (adjusted for 1 for 10 reverse stock split)      97,813,776    72,571,557 
-Diluted (adjusted for 1 for 10 reverse stock split)      97,813,776    72,571,557 

 

See Notes to Consolidated Financial Statements and Accountants’ Report

 

16
 

 

China Teletech Holding, Inc.

Consolidated Statements of Changes in Stockholders’ Equity

As of December 31 2013 and 2012

(Stated in US Dollars)

 

               Accumulated             
           Additional   Other       Non-     
   Total Number   Common   Paid in   Comprehensive   Retained   Controlling     
   of Shares   Stock   Capital   Income (Loss)   Deficit   Interest   Total 
Balance, January 1, 2012   185,283,627   $1,852,836   $1,684,019   $32,231   $(6,548,179)  $293,691    (2,685,402)
Reserve common stock split – 1 for 10   (166,754,990)   (1,667,550)   1,667,550    -    -    -    - 
Value of stock to acquire China Teletech Limited   40,000,000    400,000    1,014,545    -    -    -    1,414,545 
Issuance of share based compensation   7,555,577    75,556    454,233    -    -    -    529,789 
Cancellation of shares issued   (3,270,438)   (32,704)   -    -    -    -    (32,704)
Net Income   -    -    -    -    1,502,169    -    1,502,169 
Dividends paid to minority interest   -    -    -    -    -    (193,949)   (193,949)
Non controlling interest   -    -    -    -    -    38,456    38,456 
Foreign Currency Translation   -    -    -    (375,429)   -    -    (375,429)
Balance at December 31, 2012   62,813,776   $628,138   $4,820,347   $(343,198)  $(5,046,010)  $138,198   $197,475 
                                    
Balance, January 1, 2013   62,813,776   $628,138   $4,820,347   $(343,198)  $(5,046,010)  $138,198   $197,475 
Issuance of  common stock   28,000,000    280,000    520,000    -    -    -    800,000 
Issuance of share based compensation   7,000,000    70,000    32,000    -    -    -    102,000 
Additional paid in capital             463,458    -    -    -    463,458 
Net Loss   -    -    -    -    (1,805,548)   -    (1,805,548)
Dividends paid to non controlling interest   -    -    -    -    -    (150,409)   (150,409)
Non controlling interest   -    -    -    -    -    (156,798)   (156,798)
Disposal of subsidiaries   -    -    -    -    -    169,009    169,009 
Foreign Currency Translation   -    -    -    (58,374)   -    -    (58,374)
Balance at December 31, 2013   97,813,776   $978,138   $5,835,805   $(401,572)  $(6,851,558)  $-   $(439,187)

 

See Notes to Consolidated Financial Statements and Accountants’ Report

 

17
 

 

China Teletech Holding, Inc.

Consolidated Statements of Cash Flows

For The Years Ended December 31 2013 and 2012

(Stated in US Dollars)

 

   12/31/2013   12/31/2012 
Cash flow from operating activities          
Net Income (Loss)  $(1,805,548)  $1,502,169 
           
Non-controlling interest   (156,798)   38,456 
Ordinary gain on bargain   -    (119,022)
Gain on disposal of subsidiary – Guangzhou Rongxin   (275,102)   - 
Gain on disposal of subsidiary – China Teletech Limited   (134,416)   - 
Loss on disposal of subsidiary – Guangzhou Renwoxing Telecom Co., Limited   357,226    - 
Gain on disposal of subsidiary – GGT   -    (1,371,596)
Loss on disposal of subsidiary- Shenzhen Rongxin   -    905,041 
Gain on forgiveness of long term debt   -    (1,566,323)
Stock compensation   102,000    529,789 
Loss on stock issuance   800,000    - 
Gain on stock cancellation   -    (32,704)
Loss on disposal of property, plant and equipment   -    - 
Decrease/(Increase) in other receivables   (288,306)   197,431 
Decrease/(Increase) in amount due from related parties   (908,904)   47,282 
Decrease/(Increase) in prepaid expenses   85,711    43,655 
Decrease/(Increase) in purchase deposit   (258)   158,649 
Decrease/(Increase) in inventories   101,363    405,204 
Increase/(Decrease) in tax payables   (125,841)   101,957 
Increase/(Decrease) in accrued liabilities and other payables   14,721    133,416 
Increase/(Decrease) in amount due to related parties   260,075    - 
Increase/(decrease) in VAT payable   132,373    8,756 
           
Net cash provided by(used in) operating activities   (1,841,704)   982,160 
           
Cash flows from investing activities          
Net cash inflow from purchase of a subsidiary   -    1,783,812 
Net cash inflow from disposal of a subsidiary - Guangzhou Renwoxing Telecom Co., Limited   3,227    - 
Net cash outflow from disposal of a subsidiary - Guangzhou Rongxin   (2,797)   - 
Net cash outflow from disposal of a subsidiary – China Teletech Limited   (20)   - 
Net cash inflow from disposal of a subsidiary- GGT   -    569 
Net cash outflow from disposal of a subsidiary - Shenzhen Rongxin   -    (1,548,701)
Sale of equipment   -    - 
Payments for deposits   1,873    (17,569)
Sales of short-term investment   230,984    201,229 
           
Net cash provided by (used in) investing activities  $233,267   $419,340 
           
Cash flows from financing activities          
Inflows of additional paid in capital   463,458      
Dividend paid to non-controlling interests of subsidiaries   (150,409)   (193,949)
           
Net cash provided by (used in) financing activities   313,049    (193,949)
           
Net Increase(Decrease) in Cash & Cash Equivalents   (1,295,388)   1,207,551 
           
Effect of Currency Translation   25,870    (6,786)
           
Cash & Cash Equivalents at Beginning of Year   1,270,035    69,270 
           
Cash & Cash Equivalents at End of Year  $517   $1,270,035 

 

See Notes to Consolidated Financial Statements and Accountants’ Report

 

18
 

 

 

China Teletech Holding, Inc.

Notes to Consolidated Financial Statements

As of December 31, 2013 and 2012

 

1.ORGANIZATION AND PRINCIPAL ACTIVITIES

 

China Teletech Holding, Inc (the “Company”) formerly known as Avalon Development Enterprise, Inc. was incorporated in the State of Florida, United States (an OTCBB Company) on March 29, 1999.

 

On March 27, 2007, the Company underwent a reverse-merger with Global Telecom Holdings Limited (GTHL, a British Virgin Islands (BVI) Company incorporated on April 1, 2004 under the British Virgin Islands International Business Companies Act (CAP. 291)) and its wholly-owned subsidiary Guangzhou Global Telecommunication Company Limited (GGT, established on December 4, 2004 in PRC with a registered and paid-up capital of RMB 3,030,000 (approximate $375,307)) involving an exchange of shares whereby the Company issued an aggregate of 39,817,500 shares of common stock in exchange for all of the issued and outstanding shares of GTHL. In connection with the reverse merger, the Company issued 200,000 shares of common stock to Zenith Capital Management LLC in April 2007 at a price of $2.50 per share.

 

Pursuant to a Stock Purchase Agreement dated July 29, 2008, the Company acquired 51% of the issued and outstanding shares in Guangzhou Renwoxing Telecom (“GRT”), a limited liability company incorporated in China. Pursuant to the terms of the Stock Purchase Agreements, the Shareholders agreed to sell and transfer the proportion of the shares to the Company for a purchase consideration of US$291,833.

 

On March 2, 2012, pursuant to a board of resolution passed during the special meeting of the Company, the name of the Company was changed from Guangzhou Global Telecom, Inc. to China Teletech Holding, Inc. On March 20, 2012, the name change was effective and approved by FINRA.

 

On March 30, 2012, the Company completed a share exchange transaction with China Teletech Limited, a British Virgin Islands corporation (“CTL”), by entering into a share exchange agreement (the “Agreement”) with CTL and the former shareholders of CTL. Pursuant to the Agreement, the Company acquired all the outstanding capital stock of CTL from the former shareholders of CTL in exchange for the issuance of 40,000,000 shares of our common stock (the “Share Exchange”). The shares issued to the former shareholders of CTL constituted approximately 68.34% of the Company’s issued and outstanding shares of common stock as of and immediately after the commutation of the Share Exchange. As a result of the Share Exchange, CTL became the Company’s wholly owned subsidiary and Mr. Dong Liu and Mr. Yuan Zhao, the former shareholders of CTL, became our principal shareholders. 

 

In connection with the share exchange agreement, Miss. Yankuan Li resigned as the Company’s Chairman, but remained as a member of the Board of Directors of the Company.  Mr. Dong Liu was appointed as the Company’s Chairman Mr. Yuan Zhao, Mr. Yau Kwong Lee and Mr. Kwok Ming Wai Andrew were appointed as the Company’s members of the Board of Directors.

 

19
 

 

China Teletech Holding, Inc.

Notes to Consolidated Financial Statements

As of December 31, 2013 and 2012

 

CTL was formed for the purpose of providing a group structure to enhance the viable capacity as discussed below of its two variable interest entities located in the People’s Republic of China (“PRC”); namely, (a) Shenzhen Rongxin Investment Co., Ltd. (“Shenzhen Rongxin”) and (b) Guangzhou Rongxin Science and Technology Limited (“Guangzhou Rongxin”).

 

On June 30, 2012, the Company’s subsidiary, Global Telecom Holdings Limited, entered into an agreement with an independent third party to dispose of its wholly-owned subsidiary Guangzhou Global Telecommunication Company Limited for a cash consideration of US$644.

 

On September 30, 2012, the Company’s subsidiary, China Teletech Limited, entered into an agreement with a related party – Liu Yong, brother of Mr. Liu Dong, to dispose of the variable interest entity Shenzhen Rongxin Investment Co., Ltd. for a cash consideration of US$1,579.

 

On January 24, 2013, Kwok Ming Wai Andrew notified the Company that he would resign from his position as Chief Financial Officer, Secretary, and as a member of the board of directors of the Company (the "Board"), effective February 1, 2013. On March 26, 2013, the Board unanimously appointed Jane Yu as Chief Financial Officer and Secretary of the Company, effective March 5, 2013.  Ms. Yu will hold office until the next annual general meeting of our shareholders or until removed from office in accordance with the Company's bylaws

 

The Company, through its subsidiaries, is principally engaged in the distribution and trading of rechargeable phone cards, cellular phones and accessories within cities in PRC. Customers of the Company include wholesalers, retailers, and final users.

 

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

(a)Method of Accounting

 

The Company maintains its general ledger and journals with the accrual method of accounting for financial reporting purposes. The financial statements and notes are representations of management. Accounting policies adopted by the Company conform to generally accepted accounting principles in the United States of America and have been consistently applied in the presentation of financial statements.

 

(b)Consolidation

 

The consolidated financial statements include the accounts of China Teletech Holdings, Inc. and five wholly and partially owned subsidiaries. The consolidated financial statements were compiled in accordance with generally accepted accounting principles of the United States of America. All significant inter-company accounts and transactions have been eliminated in consolidation.

 

20
 

 

China Teletech Holding, Inc.

Notes to Consolidated Financial Statements

As of December 31, 2013 and 2012

 

The company owned the following subsidiaries since the reserve-merger and soon thereafter. As of December 31, 2013, detailed identities of the consolidating subsidiaries are as follows:-

 

Name of Company  Place of
Incorporation
  Attributable
Equity Interest %
   Registered
Capital
 
            
Global Telecom Holdings, Ltd.  BVI   100%  HKD7,800 
China Teletech Limited  BVI   100%  USD10 
Guangzhou Rongxin Science and Technology Limited  PRC   100%  HK1,200,000 

 

(c)Economic and Political Risks

 

The Company’s operations in the PRC are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic, legal environment and foreign currency exchange. The Company’s results may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, restriction on international remittances, and rates and methods of taxation, among other things.

 

(d)Use of Estimates

 

Our discussion and analysis is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements, as well as the reported amounts of revenues and expenses during the reporting years. These accounts and estimates include, but are not limited to, the estimation on useful lives of property, plant and equipment. Actual results could differ from those estimates.

 

(e)Cash and Cash Equivalents

 

The Company considers all cash and other highly liquid investments with initial maturities of three months or less to be cash equivalents.

 

(f)Accounts Receivable

 

Accounts receivable are recognized and carried at the original invoice amount less allowance for any uncollectible amounts. An allowance for doubtful accounts is made when recovery of the full amount is doubtful.

 

21
 

 

China Teletech Holding, Inc.

Notes to Consolidated Financial Statements

As of December 31, 2013 and 2012

 

(g)Inventories

 

Inventories are stated at the lower of cost or market value. Cost is computed using the first-in, first-out method and includes all costs of purchase and other costs incurred in bringing the inventories to their present location and condition. Market value is determined by reference to the sales proceeds of items sold in the ordinary course of business or estimates based on prevailing market conditions. The inventories are telecommunication products such as mobile phone, rechargeable phone cards, smart chips, and interactive voice response cards.

 

(h)Accounting for Impairment of Long-Lived Assets

 

The Company adopted Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Live Assets” (“SFAS 144”), which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. The Company periodically evaluates the carrying value of long-lived assets to be held and used in accordance with SFAS 144. SFAS 144 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.

 

The long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of assets may not be recoverable. It is reasonably possible that these assets could become impaired as a result of technology or other industry changes. Recoverability of assets to be held and used is by comparing the carrying amount of an asset to future net undiscounted cash flows to be generated by the assets.

 

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. During the reporting periods, there was no impairment loss.

 

(i)Revenue Recognition

 

Revenue from the sale of the products is recognized on the transfer of risks and rewards of ownership, which generally coincides with the time when the goods are delivered to customers and the title has passed.

 

(j)Cost of Sales

 

The Company’s cost of sales is comprised mainly of cost of goods sold.

 

22
 

 

China Teletech Holding, Inc.

Notes to Consolidated Financial Statements

As of December 31, 2013 and 2012

 

(k)Selling Expenses

 

Selling expenses are comprised of salaries for the sales force, client entertainment, commissions, advertising, and travel and lodging expenses.

 

(l)General & Administrative Expenses

 

General and administrative expenses include executive compensation, general overhead such as the finance department and administrative staff, depreciation, office rental and utilities.

 

(m)Advertising

 

The Company expensed all advertising costs as incurred.

 

(n)Foreign Currency Translation

 

The Company maintains its financial statements in the functional currency, which is the Renminbi (RMB). Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at rates of exchange prevailing at the balance sheet dates. Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchanges rates prevailing at the dates of the transaction. Exchange gains or losses arising from foreign currency transactions are included in the determination of net income for the respective periods.

 

For financial reporting purposes, the financial statements of the Company, which are prepared using the functional currency, have been translated into United States dollars. Assets and liabilities are translated at the exchange rates at the balance sheet dates and revenue and expenses are translated at the average exchange rates and stockholders’ equity is translated at historical exchange rates. Translation adjustments are not included in determining net income but are included in foreign exchange adjustment to other comprehensive income, a component of stockholders’ equity.

 

Exchange Rates  12/31/2013   12/31/2012 
Year end RMB : US$ exchange rate   6.1140    6.3161 
Average year RMB : US$ exchange rate   6.1982    6.3198 
           
Year end HKD : US$ exchange rate   7.7548    7.7519 
Average year HKD : US$ exchange rate   7.7569    7.7575 

 

RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into US$ at the rates used in translation.

 

23
 

 

China Teletech Holding, Inc.

Notes to Consolidated Financial Statements

As of December 31, 2013 and 2012

 

(o)Income Taxes

 

The Company uses the accrual method of accounting to determine and report its taxable reduction of income taxes for the year in which they are available. The Company has implemented Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes. Income tax liabilities computed according to the United States, People’s Republic of China (PRC), and British Virgin Islands (BVI) tax laws are provided for the tax effects of transactions reported in the financial statements and consists of taxes currently due plus deferred taxes related primarily to differences between the basis of fixed assets and intangible assets for financial and tax reporting. The deferred tax assets and liabilities represent the future tax return consequences of those differences, which will be either taxable or deductible when the assets and liabilities are recovered or settled. Deferred taxes also are recognized for operating losses that are available to offset future income taxes. A valuation allowance is created to evaluate deferred tax assets if it is more likely than not that these items will either expire before the Company is able to realize that tax benefit, or that future realization is uncertain.

 

In respect of the Company’s subsidiaries domiciled and operated in China, the taxation of these entities are summarized below:

 

·GRT and Guangzhou Rongxin are located in the PRC and GTHL and CTL are located in the British Virgin Islands; all of these entities are subject to the relevant tax laws and regulations of the PRC and British Virgin Islands in which the related entity domiciled. The maximum tax rates of the subsidiaries pursuant to the countries in which they domicile are: -

 

Subsidiary  Country of Domicile  Income Tax Rate 
GRT and Guangzhou Rongxin  PRC   25.0%
GTHL and CTL  British Virgin Islands   0.00%

 

·Effective January 1, 2008, PRC government implements a new 25% tax rate for all enterprises regardless of whether domestic or foreign enterprise thereby eliminating any tax holiday which is defined as "two-year exemption followed by three-year half exemption" hitherto enjoyed by tax payers. As a result of the new tax law of a standard 25% tax rate, tax holidays terminated as of December 31, 2007. However, PRC government has established a set of transition rules to allow enterprises already started tax holidays before January 1, 2008, to continue enjoying the tax holidays until being fully utilized.

 

·Since China Teletech Holding, Inc. is primarily a holding company without any business activities in the United States. The Company shall not be subject to United States income tax for the year ended December 31, 2013 and 2012.

 

24
 

 

China Teletech Holding, Inc.

Notes to Consolidated Financial Statements

As of December 31, 2013 and 2012

 

(p)Statutory Reserve

 

Statutory reserve refers to the amount appropriated from the net income in accordance with PRC laws or regulations, which can be used to recover losses and increase capital, as approved, and, are to be used to expand production or operations. PRC laws prescribe that an enterprise operating at a profit, must appropriate, on an annual basis, from its earnings, an amount to the statutory reserve to be used for future company development. Such an appropriation is made until the reserve reaches a maximum equalling 50% of the enterprise’s registered capital.

 

(r)Fair Value of Financial Instruments

 

For certain of the Company’s financial instruments, including cash and equivalents, accounts and other receivables, accounts and other payables, accrued liabilities and short-term debt, the carrying amounts approximate their fair values due to their short maturities. ASC Topic 820, “Fair Value Measurements and Disclosures,” requires disclosure of the fair value of financial instruments held by the Company. ASC Topic 825, “Financial Instruments,” defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:

 

·Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.
·Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
·Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.

 

The Company analyzes all financial instruments with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities from Equity,” and ASC 815.

 

As of December 31, 2013 and 2012, the Company did not identify any assets and liabilities that were required to be presented on the balance sheet at fair value.

 

(s)Other Comprehensive Income (Loss)

 

The Company’s functional currency is the Renminbi (“RMB”). For financial reporting purposes, RMB were translated into United States Dollars ("USD" or “$”) as the reporting currency. Assets and liabilities are translated at the exchange rate in effect at the balance sheet date. Revenues and expenses are translated at the average rate of exchange prevailing during the reporting period. Translation adjustments arising from the use of different exchange rates from period to period are included as a component of stockholders' equity as "Accumulated other comprehensive income".

 

25
 

 

China Teletech Holding, Inc.

Notes to Consolidated Financial Statements

As of December 31, 2013 and 2012

 

Gains and losses resulting from foreign currency transactions are included in income. There has been no significant fluctuation in exchange rate for the conversion of RMB to USD after the balance sheet date.

 

The Company uses FASB ASC Topic 220, “Reporting Comprehensive Income”. Comprehensive income is comprised of net income and all changes to the statements of stockholders’ equity, except the changes in paid-in capital and distributions to stockholders due to investments by stockholders. Comprehensive income for the three-month periods ended December 31, 2013 and 2012 included net income and foreign currency translation adjustments.

 

(t)Goodwill

 

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable assets acquired in a business combination. In accordance with Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets", goodwill is no longer subject to amortization. Rather, goodwill is subject to at least an annual assessment for impairment, applying a fair-value based test. Fair value is generally determined using a discounted cash flow analysis.

 

(u)Segment Reporting

 

FASB ASC Topic 280, "Disclosures about Segments of an Enterprise and Related Information" requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company's management organizes segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manners in which management disaggregates a company.

 

(v)Recent Accounting Pronouncements

 

In January 2013, the FASB issued ASU No. 2013-01, “Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities” (“ASU 2013-01”).The Update clarifies that ordinary trade receivables and receivables are not in the scope of Accounting Standards Update No. 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. Specifically, Update 2011-11 applies only to derivatives, repurchase agreements and reverse purchase agreements, and securities borrowing and securities lending transactions that are either offset in accordance with specific criteria contained in FASB Accounting Standards Codification® or subject to a master netting arrangement or similar agreement. The amendments in this Update are effective for fiscal years, and interim periods within those years, beginning on or after January 1, 2013. Management does not expect the adoption of this standard has a significant effect on the Company’s consolidated financial position or results of operations.

 

26
 

 

China Teletech Holding, Inc.

Notes to Consolidated Financial Statements

As of December 31, 2013 and 2012

 

In February 2013, the FASB issued ASU No. 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income” (“ASU 2013-02”). The amendments require an organization to:

 

a) Present (either on the face of the statement where net income is presented or in the notes) the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income–but only if the item reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period.

 

b) Cross-reference to other disclosures currently required under U.S. GAAP for other reclassification items (that are not required under U.S. GAAP) to be reclassified directly to net income in their entirety in the same reporting period. This would be the case when a portion of the amount reclassified out of accumulated other comprehensive income is initially transferred to a balance sheet account (e.g., inventory for pension-related amounts) instead of directly to income or expense.

 

The amendments are effective for reporting periods beginning after December 15, 2012, for public companies. Management does not expect the adoption of this standard has a significant effect on the Company’s consolidated financial position or results of operations.

 

In February 2013, the FASB issued ASU No. 2013-03, “Clarifying the Scope and Applicability of a Particular Disclosure to Nonpublic Entities” (“ASU 2013-03”). The amendment clarifies that the requirement to disclose the level of the fair value hierarchy within which the fair value measurements are categorized in their entirety (as Level 1, Level 2, or Level 3) does not apply to private companies and nonpublic not-for-profits for items that are not measured at fair value in the statement of financial position, but for which fair value is disclosed. The amendments are effective upon issuance. Management does not expect the adoption of this standard has a significant effect on the Company’s consolidated financial position or results of operations.

 

In February 2013, the FASB issued ASU No. 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income” (“ASU 2013-02”). The amendments require an organization to:

 

a) Present (either on the face of the statement where net income is presented or in the notes) the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income–but only if the item reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period.

 

b) Cross-reference to other disclosures currently required under U.S. GAAP for other reclassification items (that are not required under U.S. GAAP) to be reclassified directly to net income in their entirety in the same reporting period. This would be the case when a portion of the amount reclassified out of accumulated other comprehensive income is initially transferred to a balance sheet account (e.g., inventory for pension-related amounts) instead of directly to income or expense.

 

27
 

 

China Teletech Holding, Inc.

Notes to Consolidated Financial Statements

As of December 31, 2013 and 2012

 

The amendments are effective for reporting periods beginning after December 15, 2012, for public companies. Management does not expect the adoption of this standard has a significant effect on the Company’s consolidated financial position or results of operations.

 

In February 2013, the FASB issued ASU No. 2013-03, “Clarifying the Scope and Applicability of a Particular Disclosure to Nonpublic Entities” (“ASU 2013-03”). The amendment clarifies that the requirement to disclose the level of the fair value hierarchy within which the fair value measurements are categorized in their entirety (as Level 1, Level 2, or Level 3) does not apply to private companies and nonpublic not-for-profits for items that are not measured at fair value in the statement of financial position, but for which fair value is disclosed. The amendments are effective upon issuance. Management does not expect the adoption of this standard has a significant effect on the Company’s consolidated financial position or results of operations.

 

3.CONCENTRATION

 

A substantial portion of the Company and the Company’s subsidiaries’ business operations depend on mobile telecommunications in PRC; any loss or deterioration of such relationship may result in severe disruption to the business operations impacting the Company's revenue. The Company and the Company’s subsidiaries rely entirely on the networks and gateways of these phone operators to provide its services. The Company and the Company’s subsidiaries’ agreements with these operators are generally for a short period of one year and generally do not have automatic renewal provision. If these providers are unwilling to continue business with the Company and the Company’s subsidiaries, the Company and the Company’s subsidiaries' ability to conduct its existing business would be adversely affected.

 

4.OTHER RECEIVABLES

 

Other receivables as of December 31, 2012 pertained to the Company voluntarily extending financing to business associates for purchase of merchandise in return for 60% of gross profit in those transactions, in lieu of interest, as well as loans to third parties with no interest, security and specific terms of repayment.

 

   As of 12/31/2013   As of 12/31/2012 
Type of Account          
Trade financing to business associates  $606,970   $6,122 
Allowance for bad debt   -    - 
Other receivable, net   606,970    6,122 

 

28
 

 

China Teletech Holding, Inc.

Notes to Consolidated Financial Statements

As of December 31, 2013 and 2012

 

5.DUE FROM/TO RELATED PARTIES

 

The following table presents the balances the Company due to and from related parties.

 

   As of 12/31/2013   As of 12/31/2012 
Due from related parties  $468,488   $216,167 
Due to related parties   (234,711)   (357,031)
Net due from (due to)   233,777    (140,864)

 

Amounts owing to the Company’s related parties are non-interest-bearing and payable on demand.

 

6.TAXES Payable

 

Taxes payable consisted of the following as of December 31, 2013 and 2012:

 

   As of 12/31/2013   As of 12/31/2011 
         
Value added tax payable  $-   $86 
Corporate income tax payable   -    214,948 
Business tax payable   -    33,475 
Others   -    2 
   $-   $248,511 

 

7.CONVERTIBLE BONDS AND BOND WARRANTS

 

On July 31, 2007 and January 1, 2008, the Company completed two financing transactions with several investors (the “Subscriber”) issuing $2,000,000and $1,000,000, respectively, Fixed Rate Convertible Debenture due in 2009 and a stock purchase warrant to purchase an aggregate of 2,090,592 shares of the Company common stock, subject to adjustments for stock splits or reorganizations as set forth in the warrant, that will expire in 2012 (the “Warrants”).

 

The Debentures were subscribed at a price equal to 87.5% of their principal amount, which is the issue price of $3,428,571 less a 12.5% discount. The Debentures were issued pursuant to, and are subject to the terms and conditions of, a trust deed dated July31, 2007 (the “Trust Deed”).

 

·Interest Rate. The Debenture bears interest at the rate of 8% per annum of the principal amount of the Debentures.
·Conversion. Each Debenture is convertible at the option of the holder at any time after July31, 2007 up to July31, 2009, into shares of our common stock at a fixed conversion price of $0.82 per share.

 

29
 

 

China Teletech Holding, Inc.

Notes to Consolidated Financial Statements

As of December 31, 2013 and 2012

 

On July 31, 2007, the Company also entered into a registration rights agreement with the Subscriber pursuant to which the Company agreed to include the Debenture, the Warrants, and the shares of common stock underlying the Debenture and Warrants in a pre-effective amendment to a registration statement that the Company have on file with the SEC. The Company intends to have the registration statement cover the resale of the Debenture, the Warrants, and the shares of common stock underlying the Debenture and Warrants.

 

At July 31, 2007 and January 1, 2008, the dates of issuance, the Company determined the fair value of the Debenture to be $2,000,000 and $1,000,000, respectively. The values of the warrants and the beneficial conversion feature as at December 31, 2007 and 2008 determined under the Black-Scholes valuation method were immaterial. Accordingly, the interest discount on the warrants and beneficial conversion feature were recorded, and are being amortized by the straight-line method over 5 years and 2 years respectively.

 

On November 3, 2008, due to market conditions, the Company re-negotiated the terms of the Debentures and Warrants, and entered into a modification agreement (the “Amendment Agreement”) with the Holders. Pursuant to the Amendment Agreement, the Company agreed to completely remove the monthly interest payment of the Debentures and Increase the annual interest rate to 18%. Therefore, as described in the Schedule A of the Amendment Agreement, the Company will pay an aggregate of $2,151,110.85 and $1,485,714.10 to the Holders that are due on July 31, 2009 and February 21, 2010, respectively.  The Company acknowledged that the conversion price of the Debentures on the conversion date shall be equal to the lesser of (a) $0.015 (subject to adjustment), and (b) 80% of the lowest closing bid price during the 20 Trading Days immediately prior to the applicable conversion date (subject to adjustment).

 

The Amendment Agreement further modified the terms of the transaction by reducing the exercise price of the Warrants to $0.015 (subject to further adjustment), and therefore the number of shares underlying Warrants issued to the Holders will be increased to an aggregate of 156,097,534 shares as described in Schedule B of the Amendment Agreement.

 

The Company further amended the Articles of Incorporation to increase the number of authorized shares of common stock to 1,000,000,000.

 

On December 29, 2009, the Company entered into a Settlement Agreement with the Holders. Pursuant to the Settlement Agreement, the Company would make a total payment of $1,300,000 to the Holders no later than January 21, 2010. The Convertible Debentures would be deemed satisfied and all outstanding Warrants held by the Holders would be cancelled. In addition, the Holders agreed to cancel all of the Company shares held by them at such time as the payment has been made.

 

In May 2010, the Holders commenced an action against the Company in the Supreme Court of the State of New York in order to recover the outstanding amount of $1,300,000 under the Settlement Agreement. The outcome and estimated loss from this lawsuit cannot be determined at this time.

 

30
 

 

China Teletech Holding, Inc.

Notes to Consolidated Financial Statements

As of December 31, 2013 and 2012

 

On November 28, 2011, the Company entered into a Settlement and Amendment Agreement with holders of its convertible debentures, warrants and restricted shares (the “Holders”). The parties in this Settlement and Amendment Agreement agreed: i) principal amount of the debentures will be reduced from $3 million to $1.3 million; ii) the Holders will surrender common stock purchase warrants to purchase a total of 156,097,534 shares of the Company’s common stock, and surrender 32,704,376 restricted shares of the Company, in exchange for settlement payments in the sum of $155,000. The Company has paid a total of $155,000 in settlement payments to the Holders. Therefore, the Company will pay an aggregate of $1.3 million to the Holders that are due on November 28, 2014. The Company acknowledged that the conversion price of $1.3 million Fixed Rate Convertible Debenture on the conversion date shall be equal to the lesser of (a) $0.10 (the Set Price) and (b) 90% of the average of the VWAPs for the five trading days immediately prior to the applicable conversion date (such lower price, as subject to adjustment herein, the Conversion Price). The values of the beneficial conversion feature under the Black-Scholes valuation method were immaterial.

 

Extra-Ordinary Gain resulted from this Settlement and Amendment Agreement amounted to $1,566,323 (net of tax to $1,487,083) has been reflected in the accompanying income statement for the year ended December 31, 2012.

 

Because of the fact that the $1.3 million Fixed Rate Convertible Debenture contains separate securities and yet merged into one package, the Debenture security must identify its constituents and establish the individual value as determined by the Issuer as follows: -

 

(1)  Convertible Debenture (after two rounds)  $1,300,000 
(2)  Discount   - 
(3)  Warrant   - 
(4)  Beneficial Conversion Feature   - 

 

The Convertible Debentures Payable, net consisted of the following: -

 

   12/31/2013   12/31/2012 
         
Convertible Debenture - Principal and interest          
Balance as at beginning of period  $1,300,000   $2,866,323 
Addition   -    - 
Redemption   -    - 
Interest charged for the current year   -    - 
Repayment of interest in current year   -    - 
Forgiveness of debt (as addressed above)   -    (1,566,323)
Balance as at end of year  $1,300,000   $1,300,000 
           
Less: Interest discount – Beneficial conversion feature          
Balance as at beginning of year  $-   $- 
Addition   -    - 
Amortization   -    - 
Balance as at end of year   -    - 
           
Less: Interest Discount – Warrant          
Balance as at beginning of year   -    - 
Addition   -    - 
Amortization   -    - 
Balance as at end of year   -    - 
Convertible Debenture, net  $1,300,000   $1,300,000 

 

31
 

 

China Teletech Holding, Inc.

Notes to Consolidated Financial Statements

As of December 31, 2013 and 2012

 

The Convertible Debenture was classified as current and non-current as follows:

 

   12/31/2013   12/31/2012 
         
Current portion  $1,300,000   $- 
Non - current portion   -    1,300,000 
   $1,300,000   $1,300,000 

 

8.SHAREHOLDERS’ EQUITY

 

Common stock

 

The Company is authorized by its Memorandum of Association (i.e. equivalent to Articles of Incorporation) to issue a total of 1,000,000,000 shares at a par value of US$0.01 of which 97,813,776 and 62,813,776 shares have been issued and outstanding as of September 30, 2013 and December 31, 2012, respectively.

 

During the nine-month period ended September 30,2013, the Company issued approximately 7,000,000 and 28,000,000 shares of common stock for stock compensation and for receivables in cash to provide additional working capital to the Company respectively.

 

Common stock reverse stock split

 

On December 9, 2011, the Company’s shareholders jointly agreed to a 10 to 1 reverse stock split (the “Reverse Split”) on its issued and outstanding common stock, having a par value of $0.01 per share. On February 16, 2012, the Reverse Split was effective and approved by the Financial Industry Regulatory Authority (FINRA).

 

Cancellation of shares issued

 

32
 

 

China Teletech Holding, Inc.

Notes to Consolidated Financial Statements

As of December 31, 2013 and 2012

 

On September 4, 2012, holders of its convertible debentures, warrants and restricted shares surrendered 3,270,438 restricted shares of the Company.

 

9.SUBSCRIPTION RECEIVABLE AND OTHER EXPENSES

 

The Company issued 1,000,000 shares, 5,000,000 shares, 6,000,000 shares and 6,000,000 shares of common stock to Appinero LLC, Chunling Au, IT Appraiser Corp. and for these Surf Financial Group LLC in March 2013 respectively for the cancellation and purchase of debt. Since the Company hasn't received payment for these issuances, the Company recorded them as subscription receivables. The Company authorized Mr. Hinman Au to collect the subscription receivable and he signed the Letter of Commitment to the Company to guarantee the collection. In the third quarter of 2013, due to the long aging of the subscription receivable, Ms. Li Yankuan, tried several times to get payment from Mr. Himnan Au but failed. As of September 30, 2013, the Company undertook an impairment test for subscription receivable and recorded impairment of subscription receivable of $800,000 and recorded such transaction as “Other Expenses” in the Income Statement. The Company will keep pursuing collection of the subscription receivable from Mr. Hinman Au and expects that legal action will be taken if Mr. Hinman Au still does not settle the payment in the fourth quarter of 2013.

 

10.RELATED PARTY TRANSACTION

 

In addition to the transactions and balances disclosed elsewhere in these financial statements, the Company entered into the following material related party transactions.

 

As of December 31, 2013 the Company advanced to Ms. Li Yankuan an amount of $463,458 for a period of 6 months free of interest to finance her contribution of Additional paid-in Capital.

 

The salary paid to Ms. Li Yankuan, member of board of directors, for employee services is $ 112,130 for the year ended December 31 2013.

 

The salary paid to Mr. Zhao Yuan, member of board of directors, for employee services is $ 89,704 for the year ended December 31 2013.

 

The salary paid to Ms. Li Jiewen, daughter of Ms. Li Yankuan, for employee services and stock compensation is $ 16,617 and 36,000 respectively for the year ended December 31 2013.

 

The salary paid to Ms. Jane Yu, Chief Financial Officer and Secretary, for employee services is $ 19,361 for the year ended December 31 2013.

 

11.DISPOSAL OF SUBSIDIARIES

 

On June 30, 2012, the Company’s subsidiary, Global Telecom Holdings Limited, entered into an agreement with an independent third party to dispose of its wholly-owned subsidiary Guangzhou Global Telecommunication Company Limited for a cash consideration of US$644.

 

33
 

 

China Teletech Holding, Inc.

Notes to Consolidated Financial Statements

As of December 31, 2013 and 2012

 

On September 30, 2012, the Company’s subsidiary, China Teletech Limited, entered into an agreement with a related party – Mr. Liu Yong, brother of Mr. Liu Dong, to dispose of the variable interest entity Shenzhen Rongxin Investment Co., Ltd. for a cash consideration of US$1,579.

 

On June 30, 2013, the Company’s subsidiary, Global Telecom Holdings Limited, entered into an agreement with an independent third party to dispose of its 51% owned subsidiary Guangzhou Renwoxing Telecom Co., Limited for a cash consideration of US$3,232.

 

On December 30 2013, the Company deregistered of its subsidiary, Guangzhou Rongxin due to the loss operations.

 

On December 31 2013, the Company deregistered of its subsidiary, China Teletech Limited due to the loss operations.

 

12.GOING CONCERN UNCERTAINTIES

 

These consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the discharge of liabilities in the normal course of business for the foreseeable future.

 

As of December 31, 2013, the Company has an accumulated deficit of $6,851,557 due to the fact that the Company continued to incur losses over the past several years.

 

As a result, these consolidation financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of the Company’s ability to continue as a going concern.

 

13.SUBSEQUENT EVENTS

 

On December 31, 2013, the Company entered into a Letter Agreement with holders of its convertible debentures, warrants and restricted shares (the “Holders”) as the Holders have received no settlement payment from the Company. In lieu of the cash consideration of the settlement payment, the Company agrees to pay the Holders any amount of cash equal to $ 50,000 and 4,600,000 common shares, which shall be evidenced by a certificate bearing a customary securities act legend, in exchange for the cancellation of an aggregate amount of 1,300,000.

 

On January 6, 2014, the Company issues the 4,600,000 shares of the Company’s common stock to the Holders. On January 15, 2014, the sum of $50,000 was paid to the Holders.

 

The convertible bonds and bond warrants on Note 8 shall be deemed null and void and of no further force or effect upon satisfaction of the obligations of the Company under the Letter Agreement.

 

34
 

 

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

 

None

 

Item 9A. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 ("Exchange Act"), the Company carried out an evaluation, with the participation of the Company's management, including the Company's Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO") (the Company's principal financial and accounting officer), of the effectiveness of the Company's disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company's CEO and CFO concluded that the Company's disclosure controls and procedures are not effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to the Company's management, including the Company's CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure. 

 

Management's Annual Report on Internal Control over Financial Reporting.

 

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting for the Company.  Our internal control system was designed to, in general, provide reasonable assurance to the Company's management and board regarding the preparation and fair presentation of published financial statements, but because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Our management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2012.  The framework used by management in making that assessment was the criteria set forth in the document entitled " Internal Control - Integrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission. Although our CFO is a part-time employee, and we do not have audit committee, our CFO has appropriate knowledge and experience. Our management have evaluated the effectiveness of the design and operation of the Company's disclosure controls and procedures as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) as of December 31, 2013, and based on this evaluation, our management concluded the Company's disclosure controls and procedures were not effective to ensure that material information is recorded, processed, summarized and reported by management of the Company on a timely basis in order to comply with the Company's disclosure obligations under the Exchange Act and the rules and regulations promulgated thereunder.

 

This annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this annual report.

 

Changes in Internal Control over Financial Reporting

 

No change in our system of internal control over financial reporting occurred during fourth quarter of the fiscal year ended December 31, 2013 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

35
 

 

Item 9B. Other Information.

 

Issuance of Shares

 

The Company's common stock issued in 2013 were summarized as follows:

 

           Issue    
           Value    
       Number of   Per    
Name of Shareholder  Date   Shares   Share   Reason for Issuance
                
Fuochun Fu   January 11, 2013    500,000   $0.03   Employee shares
Dang R Daher & Kerry L Daher JT Ten   January 11, 2013    50        Transfer from shares issued on 6/12/2007
Yi Deng   January 11, 2013    500,000   $0.03   Employee shares
Jiancheng Li   January 16, 2013    440,000   $0.06   Transfer from multiple shareholders
Fungching Wong   January 16, 2013    300,000   $0.06   Transfer from multiple shareholders
Appinero LLC   March 20, 2013    1,000,000   $0.001   Cancellation of debt
Chungling Au   March 20, 2013    5,000,000   $0.001   Cancellation of debt
IT Appraiser Corp.   March 20, 2013    6,000,000   $0.001   Purchase of debt
Surf Financial Group LLC   March 20, 2013    6,000,000   $0.001   Purchase of debt
Yankuan Li   March 27, 2013    10,000,000   $0.03   Employee shares
Chang Bin Che   September 18, 2013    1,000,000   $0.0128   Employee shares
Jiewen Li   September 18, 2013    3,000,000   $0.0128   Employee shares
Nan Ye   September 18, 2013    1,000,000   $0.0128   Employee shares
Wenwu Chen   September 18, 2013    1,000,000   $0.0128   Employee shares
Total        35,740,050         

 

36
 

 

PART III

 

Item 10. Directors, Executive Officers and Corporate Governance.

 

Our executive officers and directors and their ages as of the date of this report are as follows:

 

Name   Age   Position   Position Since
             
Yankuan Li   54   President, Chief Executive Officer and Director   January 2007
Dong Liu   42   Chairman   March 2012
Yuan Zhao   32   Director   March 2012
Jane Yu   41   Chief Financial Officer and Secretary   March 2013

 

Yankuan Li was appointed as our President, Chief Executive Officer and Director since January 2007. She was appointed as our chief financial officer on April 15, 2010 and then subsequently resigned on March 30, 2012. She has been the Chairman of GGT since 2005. From 2004-2005, she was the General Manager of Guangzhou YueShen TaiYang Technology Ltd., a subsidiary of Pacificnet Inc. (Nasdaq: PACT). From 2003-2004, she was Managing Director of the phone card division of Guangzhou Trading Center of Renwoxing, responsible for phone cards. From 2000-2003, she was Department Manager of the Industrial and Commercial Bank of China Guangzhou Branch. Ms. Li holds a bachelor degree in Business Management of Beijing United University in 1998.

 

Dong Liu was appointed as our Chairman of the Board of Directors on March 30, 2012. Mr. Liu was the Director and General Manager of Shenzhen Rongxin Investment Company Limited, a company mainly engaged in the wholesale and distribution of mineral water and trading of wine in China since 2009.  Mr. Liu had previously worked for China's state-owned enterprises in Hainan Province and Shenzhen for more than 10 years and participated in business development of many government- sponsored projects of various industries.

 

Yuan Zhao was appointed as our Director on March 30, 2012. Mr. Zhao was the Director of Guangzhou Rongxin Science and Technology Limited, a company mainly engaged in distribution of rechargeable phone cards and prepaid subway tickets in Guangzhou City, China since 2010.  Previously, Mr. Zhao studied BBA in Singapore.  He was a business consultant for a Singapore investment company, Huantong Singapore Co. Ltd.

 

Jane Yu, was appointed our Chief Financial Officer and Secretary as of March 5, 2013. She has been a manager in the auditing department of Shanghai KRC Business Consulting Co., Ltd. and Shanghai KRC Certified Public Accountant Co., Ltd. since December 2007. From December 2004 to November 2007, Ms. Yu worked as the Project Manager at Wanlong Certified Public Accountants Co., Ltd. From October 1999 to October 2004, Ms. Yu was an accountant at Rheinland (Shanghai) Co., Ltd. Prior to 1999, Ms. Yu worked for Bartech Data Information Co., Ltd, CITIC Bank and Hong Kong Dao Heng Bank Group Ltd. as an executive assistant, bank teller, and accountant, respectively. Ms. Yu is a Certified Public Accountant and is familiar with U.S. GAAP, IFRS, and PRC GAAP.

 

37
 

 

Committees and Meetings

 

We do not have a standing audit committee of the Board of Directors. We do not have a financial expert serving on the Board of Directors or employed as an officer based on management's belief that the cost of obtaining the services of a person who meets the criteria for a financial expert under Item 407(d) of Regulation S-K is beyond its limited financial resources and the financial skills of such an expert are simply not required or necessary for us to maintain effective internal controls and procedures for financial reporting in light of the limited scope and simplicity of accounting issues raised in its financial statements at this stage of its development.

 

Family Relationships

 

Mr. Yuan Zhao is the son-in-law of Ms. Yankuan Li, our president and chief executive officer.

 

Involvement in Certain Legal Proceedings

 

To the best of our knowledge, none of our directors or executive officers has, during the past ten years:

 

been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time;
been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity;
been found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

 

Except as set forth in our discussion below in "Certain Relationships and Related Transactions," none of our directors or executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the Commission.

 

Term of Office

 

Our directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board.

 

Code of Ethics

 

We do not have a code of ethics that applies to our officers, employees and directors.

 

Corporate Governance

 

The business and affairs of the company are managed under the direction of our board. In addition to the contact information in this annual report, each stockholder will be given specific information on how he/she can direct communications to the officers and directors of the corporation at our annual stockholders meetings. All communications from stockholders are relayed to the members of the board of directors.

 

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Role in Risk Oversight

 

Our board of directors is primarily responsible for overseeing our risk management processes. The board of directors receives and reviews periodic reports from management, auditors, legal counsel, and others, as considered appropriate regarding our company's assessment of risks. The board of directors focuses on the most significant risks facing our company and our company's general risk management strategy, and also ensures that risks undertaken by our company are consistent with the board's appetite for risk. While the board oversees our company's risk management, management is responsible for day-to-day risk management processes. We believe this division of responsibilities is the most effective approach for addressing the risks facing our company and that our board leadership structure supports this approach.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

The Company does not have a class of securities registered under the Exchange Act and therefore its directors, executive officers, and any persons holding more than ten percent of the Company's common stock are not required to comply with Section 16 of the Exchange Act.

 

Item 11. Executive Compensation.

 

The following executives of the Company received compensation in the amounts set forth in the chart below for the fiscal years ended December 31, 2013 and 2012. No other item of compensation was paid to any officer or director of the Company other than reimbursement of expenses.

 

Summary
Compensation
Table Name
and
Principal
Position
  Year   Salary
($)
   Bonus
($)
   Stock
Awards
($)
   Option
Awards
($)
   Non-Equity
Incentive Plan
Compensation
($)
   Non-Qualified
Deferred
Compensation
Earnings
($)
  All
Other
Compensation
($)
   Totals
($)
Yankuan Li CEO   2013   $29,500    81,900    0    0    0   0   0   $0
and Director   2012   $0    0    0    0    0   0   0   $0

 

Outstanding Equity Awards at Fiscal Year-End Table

 

There were no outstanding equity awards for the year ended December 31, 2013.

 

Compensation of Directors

 

The Company has not compensated any of its directors for service on the Board of Directors. Management directors are not compensated for their service as directors; however they may receive compensation for their services as employees of the Company. The compensation received by our management directors is shown in the "Summary Compensation Table" above.

 

Employment Agreements

 

In connection with Ms. Yu's appointment as Chief Financial Officer and Secretary, we entered into an employment agreement (the "Agreement") with Ms. Yu to serve in those positions for a period of one year, on a part-time basis. Ms. Yu's Agreement expires on March 4, 2014 and calls for a monthly salary of RMB $5,000, or approximately $800. Additionally, the Company agreed to issue Ms. Yu 500,000 shares of the Company's common stock upon execution of the Agreement. The foregoing descriptions of the terms of the Agreement does not purport to be complete and is qualified in its entirety by reference to the provisions of such agreement filed as Exhibit 10.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on March 27, 2013.

 

We do not have any other employment agreements with our officers or directors.

 

39
 

 

Item 12. Security Ownership of Certain Beneficial Owners and Management.

 

The following table sets forth certain information regarding the ownership of our capital stock, as of April 21, 2014, for: by (i) each person known by us to be the beneficial owner of 5% or more of the outstanding common stock, (ii) each executive officer and director of the Company, and (iii) all of our executive officers and directors as a group.

 

Unless otherwise indicated, the Company believes that all persons named in the table have sole voting and investment power with respect to all shares of common stock beneficially owned by them.

 

Unless otherwise specified, the address of each of the persons set forth below is in care of the Company, Room 03/04, 16/F, Jinke Building, No.17-19, Guangwei Road, Guangzhou, China 510030.

 

Title of
Class
  Name and Address  Number of
Common Shares
Beneficially
Owned
   Percent of
Class (1)
 
   Directors and Officers          
Common Stock  Yankuan Li   12,796,021    11.7%
Common Stock  Yuan Zhao   20,943,100(2)   21.41%
Common Stock  All directors and executive officers as a group (5 persons)   33,739,121    33.11%
              
   5% Holders          
Common Stock  Chung-Ling Au
Flat GF, Villa Vocha Tower B
Happy Valley, Hong Kong
   5,000,000    5.11%
Common Stock  IT Appraiser Corp
76 Dean Street
Belize City
Belize
   6,000,000    6.13%
Common Stock  Surf Financial Group, LLP
5575 La Jolla Boulevard
La Jolla, CA 92037
   6,000,000    6.13%
Common Stock  Yau Kwong Lee   7,900,000    8.08%
Common Stock  Huijie Li   6,500,000    6.65%
Common Stock  Fung-Ching Wong   6,000,000    6.13%

 

*   less than 1%.
(1)   Based on 91,813,776 shares of common stock issued and outstanding as of April 12, 2013.
(2) Including 843,100 shares held by his wife.
(3) Ms. Yu shall receive 500,000 shares pursuant to the employment agreement with the Company.

 

Item 13. Certain Relationships and Related Transactions, and Director Independence.

 

The following table presents the balances the Company due to and from related parties.

 

   As of 12/31/2013   As of 12/31/2012 
Due from related parties  $468,488   $216,167 
Due to related parties   (234,711)   (357,031)
Net due from (due to)   233,777    (140,864)

 

Amounts owing to the Company’s related parties are non-interest-bearing and payable on demand or by June 30, 2014.

 

40
 

 

Director Independence

 

We do not have any independent directors. Because our common stock is not currently listed on a national securities exchange, we have used the definition of "independence" of The NASDAQ Stock Market to make this determination.  

 

Mr. Yuan Zhao is not considered independent because he is the son-in-law of Ms. Yankuan Li, our president and chief executive officer. Ms. Yankuan Li is not considered independent because she is also an employee of the Company. We do not currently have a separately designated audit, nominating or compensation committee.

 

Item 14. Principal Accounting Fees and Services.

 

Audit Fees

 

For the Company's fiscal years ended December 31, 2013 and 2012, we were billed approximately $54,000 and $51,000 for professional services rendered for the audit and review of our financial statements.

 

Audit Related Fees

 

There were no fees for audit related services for the years ended December 31, 2013 and 2012.

 

Tax Fees

 

For the Company's fiscal years ended December 31, 2013 and 2012, we were not billed for professional services rendered for tax compliance, tax advice, and tax planning.

 

41
 

 

All Other Fees

 

The Company did not incur any other fees related to services rendered by our principal accountant for the fiscal years ended December 31, 2013 and 2012.

 

Effective May 6, 2003, the Securities and Exchange Commission adopted rules that require that before our auditor is engaged by us to render any auditing or permitted non-audit related service, the engagement be:

 

-   approved by our audit committee; or
-   entered into pursuant to pre-approval policies and procedures established by the audit committee, provided the policies and procedures are detailed as to the particular  service,  the  audit committee is informed of each service, and such policies and procedures do not include delegation of the audit committee's responsibilities to management.

 

We do not have an audit committee.  Our entire board of directors pre-approves all services provided by our independent auditors. The pre-approval process has just been implemented in response to the new rules. Therefore, our board of directors does not have records of what percentage of the above fees was pre- approved.  However, all of the above services and fees were reviewed and approved by the entire board of directors either before or after the respective services were rendered.

 

42
 

 

PART IV

 

Item 15. Exhibits, Financial Statement Schedules.

 

(a) The following documents are filed as part of this report:

 

(1) Financial Statements and Report of Independent Registered Public Accounting Firm, which are set forth in the index to Consolidated Financial Statements on pages F-1 through F-22 of this report.

 

Report of Independent Registered Public Accounting Firm - WWC, P.C.    
Consolidated Balance Sheets    
Consolidated Statements of Operations    
Consolidated Statements of Shareholders' Equity    
Consolidated Statements of Cash Flows    
Notes to Consolidated Financial Statements    

 

(2) Financial Statement Schedule: None.

 

(3) Exhibits

 

Exhibit No.   Description
3.1   Articles of Incorporation (1)
    Amendment to Articles of Incorporation
3.2   Bylaws (1)
3.3   Certificate of Amendment to Articles of Incorporation. (9)
10.1   Securities Purchase Agreement (2)
10.2   Registration Rights Agreement (2)
10.3   Subsidiary Guarantee (2)
10.4   Security Agreement (2)
10.5   Form of Senior Secured Convertible Debenture (2)
10.6   Form of Common Stock Purchase Warrant (2)
10.7   Amendment Agreement among the Company and certain investors, dated February 21, 2008 (3)
10.8   Share Transfer Agreement between Huantong Telecom Singapore Company Pte. Ltd. and TCAM Technology Pte.  Ltd., dated February 14, 2008 (4)
10.9   Share Transfer Agreement between Global Telecom Holdings Limited and Guangzhou Renwoxing Telecom, dated July 29, 2008 (5)
10.10   Amendment Agreement between the Company and certain investors, dated November 3, 2008 (6)
10.11   Settlement Agreement, dated December 29, 2009 (7)
10.12   Settlement Agreement, dated November 28, 2011 (8)
10.13   Share Exchange Agreement, by and among the Company, CTL and the former shareholders of CTL. (9)
10.14   Employment Agreement with Ms. Yu Effective as of March 5, 2013(10)
21.1   List of Subsidiaries
31.1   Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2   Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1   Certification of Chief Executive Officer of the Company, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2   Certification of Chief Financial Officer of the Company, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*   XBRL Instance Document
101.SCH*   XBRL Taxonomy Schema
101.CAL*   XBRL Taxonomy Calculation Linkbase
101.DEF*   XBRL Taxonomy Definition Linkbase
101.LAB*   XBRL Taxonomy Label Linkbase
101.PRE*   XBRL Taxonomy Presentation Linkbase

 

43
 

 

In accordance with SEC Release 33-8238, Exhibit 32.1 and 32.2 are being furnished and not filed.

 

*  XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of this annual report or purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

(1) Incorporated by reference to Form SB-2 filed on January 6, 2006.
(2) Incorporated by reference to Form 8-K/A filed on August 8, 2007.
(3) Incorporated by reference to Form 8-K filed on February 28, 2008.
(4) Incorporated by reference to Form 8-K filed on March 11, 2008.
(5) Incorporated by reference to Form 8-K filed on July 31, 2008.
(6) Incorporated by reference to Form 8-K filed on November 5, 2008.
(7) Incorporated by reference to the Form 8-K filed on January 4, 2010.
(8) Incorporated by reference to the Form 8-K filed on December 1, 2011.
(9) Incorporated by reference to the Form 8-K filed on April 5, 2012.
(10) Incorporated by reference to the Form 8-K filed on March 27, 2013.

 

44
 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) 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.

 

  CHINA TELETECH HOLDING, INC.
     
Date: April 21, 2014 By: /s/ Yankuan Li
    Yankuan Li
    President, Chief Executive Officer and Director
    (Principal Executive Officer)
     
Date: April 21, 2014 By: /s/ Jane Yu
    Jane Yu
   

Chief Financial Officer and Secretary

    (Principal Financial and Accounting Officer)

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person on behalf of the registrant and in the capacities and on the dates indicated.

 

Name   Title   Date
         
/s/ Yankuan Li   President, Chief Executive Officer and Director    
Yankuan Li   (Principal Executive Officer)   April 21, 2014
       
/s/ Dong Liu   Chairman    
Dong Liu     April 21, 2014
         
/s/ Yuan Zhao   Director    
Yuan Zhao     April 21, 2014
         
/s/ Yau Kwong Lee   Director    
Yau Kwong Lee     April 21, 2014
         
/s/ Jane Yu   Chief Financial Officer and Secretary    
Jane Yu   (Principal Financial and Accounting Officer)   April 21, 2014

 

45