UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-K





(Mark
One)




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




For
the fiscal year ended December 31, 2008




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




For the
transition period from ___________ to ___________




Commission
File No. 333-130937




GUANGZHOU
GLOBAL TELECOM, INC.


(Name
of small business issuer in its charter)




Florida
                59-3565377(State
      or other jurisdiction of
                  incorporation
      or organization)
                (IRS
      Employer Identification No.)Room
      03/04, 16/F, Jinke Building,
                  No.17/19,
      Guangwei Road
                  Guangzhou,
      PRC
                510180(Address
      of principal executive offices)
                (Zip
      Code)




(86)
20-8317-2821


(Registrant’s
telephone number, including area code)




Securities
      registered under Section 12(b) of the Exchange Act:Title
      of each class registered:
              Name
      of each exchange on which registered:None
              NoneSecurities
      registered under Section 12(g) of the Exchange Act:Common
      Stock, par value $0.001
                (Title
      of class)




Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.       
Yes o    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 o     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 x No o




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.   x





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




Large
      accelerated filer
            o
            
            Accelerated
      filer
            oNon-accelerated
      filer
              (Do
      not check if a smaller reporting company)
            o
            
            Smaller
      reporting company
            x




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





The
aggregate market value of the registrant’s voting common stock held by
non-affiliates as of March 26, 2009 based upon the closing price reported for
such date on the OTC Bulletin Board was US $555,706.23.


As of
March 27, 2009, the registrant had 77,339,071 shares of its common stock
outstanding.





Documents Incorporated by
Reference: None.









TABLE
OF CONTENTS





PAGEPART
      I
                      
                      1ITEM
      1.
                      
                      Business
                      
                      4ITEM
      1A.
                      
                      Risk Factors
                      
                      4ITEM
      2.
                      
                      Properties
                      
                      4ITEM
      3.
                      
                      Legal Proceedings
                      
                      4ITEM
      4.
                      
                      Submission of Matters to a Vote of
      Security Holders
                      
                      4PART
      IIITEM
      5.
                      
                      Market for Registrant’s Common
      Equity, Related Stockholder Matters and Issuer Purchases of Equity
      Securities
                      
                      4ITEM
      6.
                      
                      Selected Financial
      Data
                      
                      6ITEM
      7.
                      
                      Management’s Discussion
      and Analysis ofFinancial Condition
      and Results of Operation
                      
                      6ITEM
      7A.
                      
                      Quantitative and Qualitative
      Disclosures About Market Risk
                      
                      8ITEM
      8.
                      
                      Financial Statements and
      Supplementary Data
                      
                      FITEM
      9.
                      
                      Changes in and Disagreements with
      Accountants on Accounting and Financial
    Disclosure
                      
                      10ITEM
      9A(T).
                      
                      Controls and
      Procedures
                      
                      10PART
      IIIITEM
      10.
                      
                      Directors, Executive Officers and
      Corporate Governance
                      
                      10ITEM
      11.
                      
                      Executive
      Compensation
                      
                      11ITEM
      12.
                      
                      Security Ownershipof Certain Beneficial Owners and Management and
      Related Stockholder Matters
                      
                      13ITEM
      13.
                      
                      Certain Relationships and Related
      Transactions, andDirector
      Independence
                      
                      13ITEM
      14.
                      
                      Principal Accounting Fees and
      Services
                      
                      14PART
      IVITEM
      15.
                      
                      Exhibits, Financial Statement
      Schedules
                      
                      15SIGNATURES











PART
I







ITEM
1.            BUSINESS




General





We were
incorporated as Avalon Development Enterprises, Inc. (“Avalon”) on March 29,
1999, under the laws of the State of Florida. From inception, we engaged in the
acquisition of commercial property and expanded into building cleaning,
maintenance services, and equipment leasing as supporting ancillary services and
sources of revenue.  On January 10, 2007, Avalon, Global Telecom Holdings,
Ltd., a British Virgin Islands Corporation (“GTHL”), and the shareholders of
GTHL, entered into a Share Exchange Agreement. Pursuant to that Agreement, 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 common shares of GTHL common stock. Pursuant to this
transaction, on March 27, 2007, GTHL became a wholly-owned subsidiary of
Avalon, and the Company changed its name to Guangzhou Global Telecom Holdings,
Inc. and succeeded to the business of GTHL.   Now we are a
nationally integrated mobile phone handset and pre-paid calling card distributor
and provider of mobile handset value-added services. Future products and
services include the GTL Lineless Messaging Service and retail sales and
customer service operations. We are an independent qualified corporation that
serves as a principle distribution agent for China Telecom, China Unicom, and
China Mobile. We also maintain and operate the largest prepaid mobile phone card
sales and distribution center in Guangdong Province and maintain cooperative
distribution relationships with VK, Panasonic, Motorola, LG, GE and Bird
corporations, among others.





On
February 14, 2008, Huantong Telecom Singapor Company Pte. Ltd. (“Huantong”), our
wholly-owned subsidiary, entered into a share transfer agreement with TCAM
Technology Pte.  Ltd. (“TCAM”) whereby Huantong agreed to purchase 30%
of the total authorized shares of TCAM for the purchase amount of S$200,000 and
3.5 million shares of Guangzhou Global Telecom, Inc. common
stock.





On July
29, 2008, GTHL completed the acquisition of Guangzhou Renwoxing Telecom (“GRT”),
a company incorporated under the laws of the People’s Republic of China, in
accordance with a share transfer agreement among the Company, GTHL and
GRT.  Pursuant to the terms of the agreement, we issued 9,727,769 shares of
common stock to certain assigners designated by GRT for 51% equity interest of
GRT from Mr. Li Hanguang, a shareholder of GRT.  As a result, GRT
became a subsidiary of the Company, and we became the majority
shareholder of GRT.




Overview





We are a
nationally integrated mobile phone handset and pre-paid calling card distributor
and provider of mobile handset value-added services. Future products and
services include the GTL Lineless Messaging Service and retail sales and
customer service operations. We are an independent qualified corporation that
serves as a principle distribution agent for China Telecom, China Unicom, and
China Mobile. We also maintain and operate the largest prepaid mobile phone card
sales and distribution center in Guangdong Province and maintain cooperative
distribution relationships with VK, Panasonic, Motorola, LG, GE and Bird
corporations, among others.




Development





Development
activities are a fundamental building block to our future financial success. We
will devote significant resources to identifying and developing new software and
value-added services through an expanded network of regional and neighborhood
service centers, shops and via a virtual store. We plan to continue our
distribution operations and to introduce current products and new and innovative
software and services through an expanded network of regional and neighborhood
retail service centers and shops. This new sales channel will allow us to sell
direct to the consumer and to cross-sell additional value-added services and
add-on products. We anticipate building strong customer relationships in the
local communities that are served in order to take advantage of future sales
from existing loyal customers and through word of mouth advertisement. Selling
products and value-added services via a retail presence allows us to become part
of the community and to enter into exclusive contracts directly with the
individual consumer.




Financing





Based on
rapid current and anticipated future growth in the mobile phone and mobile phone
parts supply and distribution markets and ever increasing demand for mobile
consumer telecommunications devices, we are seeking a capital investment partner
to fund expansion of our sales, distribution, and post-sale customer support in
addition to the development of new business units and operations




1




Production





In
addition to existing hardware distribution and sales partnerships, we are
expanding our services, building a retail presence and developing e-commerce
business units in order to build and maintain a high-quality brand and service
reputation. We currently serve as a nationally integrated mobile phone handset
and pre-paid calling card distributor and provider of mobile handset value-added
services. Future products and services include Lineless Messaging Service
(“LMS”) and retail sales and customer service operations.




Revenue
Sources





We
currently earn approximately USD $13 million in annual sales. As a handset and
pre-paid calling card distributor, GTL faces significant competition from other
vertically integrated product and service providers. In order to compete, GTL
plans to continue its distribution operations and to introduce current products
and new and innovative software and services through an expanded network of
regional and neighborhood retail service centers and shops. This new sales
channel will allow us to sell direct to the consumer and to cross-sell
additional value-added services and add-on products. We anticipate building
strong customer relationships in the local communities that are served in order
to take advantage of future sales from existing loyal customers and through word
of mouth advertisement. Selling products and value-added services via a retail
presence allows the Company to become a part of the community and to enter into
exclusive contracts directly with the individual consumer.




Our
fundamental operating cycle will change over the next 20-30 months as a growing
percentage of revenue is derived from web delivered software and associated
service and product support. Revenue from current operations, as well as new
investment, will fund the expansion of software design and development functions
within the company responsible for the design, deployment, quality assurance,
and consumer support of LMSTM and
associated services.





During
the expansion / product introduction phase, retail outlets and product lines
will be kept at current size and production levels to focus on development and
deployment of LMS. As the margins for LMS exceed those of our traditional
distribution business, potential losses from lack of distribution expansion will
be offset by gains in market penetration of the instant messaging
markets.




Aside
from existing in-house prototype development of future products, We have not yet
decided on any specific internal and/or outsourced contractor solutions to
produce, deploy, and support LMS and associated services.




The distribution channels associated with these revenue streams are discussed in
greater detail below:




Direct-support
distribution & service network


Using
current distribution agent relationships with network service providers and
handset manufacturers, we will open multi-functional distribution and post-sale
retailer support service centers in five Chinese provinces over a 12 month
period. These service centers will be strategically located in areas which will
improve relationships with existing distribution & retail partners while
increasing margins through increased cost-efficiency. The first service centers
will be located in Beijing and Guangzhou, PRC. These centers will serve as
management control centers for future retail and wholesale
activities.





Specialty
shop expansion


Using the
five regional multi-functional service centers as local management headquarters,
we will establish up to 20 regional specialty shops that will be responsible for
the direct interface with manufacturers and functionalization of OEM handsets
for retail partner distribution.




These
shops will add value through improved quality assurance, reduced product
development cycle times, and greater control over handset acquisition and
distribution systems. These shops will perform on-site troubleshooting and
engineering design to solve supply-side function and quality problems at a
minimal overall cost. It is estimated that it will take up to 18 months to
establish and staff these 20 regional specialty shops.




Integration
of service center & specialty shop network


Once
established, the 25 regional service centers and specialty shops will serve as
the foundation for our future wholesale and direct-to-consumer retail
operations. This newly expanded China-wide presence will place us in close
proximity not only with its entire potential domestic market and international
retail partners, but also in close geographic range of peers and other
emerging competitive threats.





Development
of GTL lineless messaging system


Once our
initial expansion is complete, it will be prepared to launch a proprietary
enhanced instant messaging service software application in concert with its
mobile phone distribution agreements. Our lineless messaging system (LMSTM) will
primarily serve as an intra-corporate communications system that will enable a
company to instantly disseminate routine or time-sensitive information to some
or all of its employees. Messages may also be sent to a particular subset of the
organization based on the employee’s role in the company or for as something as
personal as a “happy birthday” message. This system will replace a large portion
of an organization’s communication overhead traditionally fulfilled by email or
courier messages.




2




In
addition to dissemination of information, LMSTM will
facilitate critical company management functions such as meeting reminders,
location changes, field reports, etc. This more intuitive and rapid
communication protocol will occur through a device that virtually all people
already own and carry with them everywhere - their mobile phone. The ability for
an organization to communicate more efficiently without additional hardware
requirements will give any organization an instant competitive operational
advantage. With sufficient and prompt capital investment, initial deployment of
LMSTMshould
occur by mid to late 2007 throughout China with expansion worldwide soon
after.





Overview
of LMSTM


For most
messaging service providers, message entry requires accessing the Internet
through the line entry of a special service number. GTL LMS does not require
discrete text messaging numbers as in the current and traditional ways of
transmitting a message through the Internet, but instead sends messages directly
by way of PHS/GSM/CDMA mobile web transmission protocols. Using the unique
hardware address of each mobile device, LMSTM doesn’t
need any special messaging service numbers or an operator to transfer the
message - thus the name: lineless messaging service.





LMS is a
complex software application which is deployed by itself on PCs, mobile
computers, and mobile telephony. It can be used to build unattached messages and
enter the LMS network at any point and reach any properly configured subscriber
device.




Marketing




Our new
strategy is a natural follow on to our existing telephone distribution
operation, which is becoming the largest distribution agreement inside and
outside China. We anticipate opening fixed and virtual retail outlets in order
to continue distributing current products, consumer electronic products and
mobile phone value added services.





In line
with the development of mobile communication standards and increasing consumer
demand for non-voice communications, network added service will be the new
development of mobile communication. GTL is currently seeking and offering
globally innovative techniques, products and services to include the following
mobile functions:




Ø
            Color-messageØ
            Drawing
      and ringØ
            Chord
      ringØ
            Staying
      color picture





Ø
            WAPØ
            Note
      gamesØ
            Treasure
      boxØ
            IVR
      chatting





We use
our relationships within the distribution network to develop and offer
value-added services and connected mobile handset services. After entry into a
region, we will consult strategies used by existing and successful operations
such as Virgin’s entry into England and America. GTL will penetrate the market
in key cities and regions such as Beijing, Shanghai and Wuhan first. GTL aims to
become the handset service distributor of China Mobile or China Unicom, by
segmenting the market (for example, developing special communicated brands for
young women) and through a demographically segmented, distributed cost model.
Using resources from partners higher in the value chain and close agreements
with other services, we will realize maximal profit via bundling communication,
handset and value-added services within the networks.




Competition




China has
become the world’s largest mobile telecommunications market. By the end of 2006,
nearly 500 million Chinese citizens used mobile phones. This represents 37
percent of the population. In 2006 alone, more than 48 million people purchased
their first mobile phones and projections indicate another 50 million more first
time users will purchase in 2007. By 2010, almost half of China’s 1.3 billion
people will be using mobile phones. As the Chinese population becomes saturated
with multiple mobile handsets per person, demand will still exist for upgraded
replacement platforms and value-added services. Customer’s value-added services
will operate on an exclusive basis with our company.





Our
new strategy is a natural follow on to its existing telephone distribution
operation, which is becoming the largest distribution agreement inside and
outside China. GTL anticipates opening fixed and virtual retail outlets in order
to continue distributing current products, consumer electronic products and
mobile phone value added services.





3




Intellectual
Property





We do not own any intellectual property.





Government Approval and
Regulation




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





Employees




As of March 27, 2009, the Company has 65 employees.





ITEM
1A.         RISK
FACTORS





Not
applicable because we are a smaller reporting company.





ITEM
2.           PROPERTIES





The
Company’s corporate office is located at Room 03/04, 16/F, Jinke Building,
No.17/19, Guangwei Road , GuangZhou, PRC 510180.





ITEM
3.            LEGAL PROCEEDINGS





There are
no pending legal proceedings to which the Company is a party or in which any
director, officer or affiliate of the Company, any owner of record or
beneficially of more than 5% of any class of voting securities of the Company,
or security holder is a party adverse to the Company or has a material interest
adverse to the Company. The Company’s property is not the subject of any pending
legal proceedings.





ITEM
4.            SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS





On
December 17, 2008, we submitted an Information Statement on Schedule 14C to
amend our Article of Incorporation to increase the authorized shares of the
Company. Article III of the Company's Articles of Incorporation currently
is as follows:





“The
total authorized capital stock of the corporation shall be Seventy-Five million
(75,000,000) shares of $.01 par value common stock, allot any part of which
capital stock may be paid for in cash, in property or in labor and services at a
fair valuation to be fixed by the Board of Directors. Such stock may be issued
from time to time without any action by the stockholders for such consideration
as may be fixed from time to time by the Board of Directors, and shares so
issued, the full consideration for which has been paid or delivered shall be
deemed the fully paid up stock, and the holder of such shares shall not be
liable for any further payment thereof. Each share of stock shall have voting
privileges and will be eligible for dividends.”





PART
II





ITEM
5.        MARKET FOR REGISTRANTS
COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES





Market
Information





Our
common stock has traded on the OTC Bulletin Board system under the symbol “GZGT”
since May 15, 2007.   There is a limited trading market for our
Common Stock. The following table sets forth the range of high and low bid
quotations for each quarter within the last fiscal year. These quotations as
reported by the OTCBB reflect inter-dealer prices without retail mark-up,
mark-down, or commissions and may not necessarily represent actual
transactions.




4




High
                      
                      
                      
                      Low2007May
      15, 2007 to June 30, 2007
                      
                      $
                      2.95
                      
                      
                      $
                      0.70Third
      Quarter
                      
                      $
                      1.28
                      
                      
                      $
                      0.66Fourth
      quarter
                      
                      $
                      1.08
                      
                      
                      $
                      0.252008First
      Quarter
                      
                      
                      0.32
                      
                      
                      
                      0.21Second
      Quarter
                      
                      
                      0.24
                      
                      
                      
                      0.04Third
      Quarter
                      
                      
                      0.06
                      
                      
                      
                      0.02Fourth
      Quarter
                      
                      
                      0.03
                      
                      
                      
                      0.012009January
      1, 2009 to March 27, 2009
                      
                      
                      0.02
                      
                      
                      
                      0.01




The
source of these high and low prices was the OTC Bulletin Board. These quotations
reflect inter-dealer prices, without retail mark-up, markdown or commissions and
may not represent actual transactions. The high and low prices listed have been
rounded up to the next highest two decimal places.




The
market price of our common stock is subject to significant fluctuations in
response to variations in our quarterly operating results, general trends in the
market, and other factors, over many of which we have little or no control. In
addition, broad market fluctuations, as well as general economic, business and
political conditions, may adversely affect the market for our common stock,
regardless of our actual or projected performance.





Holders





As of
March 27, 2009, in accordance with our transfer agent records, we had 38
recordholders of our 37,260,609 shares of Common Stock.





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.





Recent Sales of Unregistered
Securities





On
February 14, 2008, we issued 3.5 million shares of our common stock to TCAM in
accordance with the share transfer agreement between Huantong and TCAM whereby
Huantong agreed to purchase 30% of the total authorized shares of TCAM for the
purchase amount of S$200,000.





On July
29, 2008, we issued 9,727,769 shares of common stock to certain assigners
designated by GRT for 51% equity interest of GRT from Mr. Li Hanguang, a
shareholder of GRT, in accordance with the share transfer agreement among the
Company, GTHL and GRT.  As a result, GRT became our
subsidiary.




On July
31, 2007, we entered into a Securities Purchase Agreement (the “Securities
Purchase Agreement”) with the following three investors: Enable Growth Partners
LP, Pierce Diversified Strategy Master Fund LLC, and Enable Opportunity Partners
LP (collectively, the “Holders").  The aggregate purchase price was
$3,000,000, and the investment was as follows:




* Senior
Secured Convertible Debentures (the “Debentures”) for up to $3,428,571, with an
annual interest rate of 8%.  The Debentures will be convertible at the
option of the holder at any time into shares of common stock, at an initial
conversion price equal to $.82.




* Common
Stock Purchase Warrants (the “Warrants”) to purchase 2,090,592 shares of the
Company’s common stock at a price of $1.12 per share, subject to adjustment,
exercisable for a period of five years.




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, 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.





5




ITEM
6.            SELECTED FIANANCIAL DATA




Not
Applicable because we are a smaller reporting company.





ITEM
7.           MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS.





The
following discussion should be read in conjunction with the Consolidated
Financial Statements and Notes thereto appearing elsewhere in this Form 10-K.
The following discussion contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934 relating to future events or our future performance. Actual
results may materially differ from those projected in the forward-looking
statements as a result of certain risks and uncertainties set forth in this
prospectus. Although management believes that the assumptions made and
expectations reflected in the forward-looking statements are reasonable, there
is no assurance that the underlying assumptions will, in fact, prove to be
correct or that actual results will not be different from expectations expressed
in this report.





BUSINESS
OVERVIEW





We were
incorporated as Avalon Development Enterprises, Inc. (“Avalon”) on March 29,
1999, under the laws of the State of Florida. From inception, we engaged in the
acquisition of commercial property and expanded into building cleaning,
maintenance services, and equipment leasing as supporting ancillary services and
sources of revenue.  On January 10, 2007, Avalon, Global Telecom Holdings,
Ltd., a British Virgin Islands Corporation (“GTHL”), and the shareholders of
GTHL, entered into a Share Exchange Agreement. Pursuant to that Agreement, 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 common shares of GTHL common stock. Pursuant to this
transaction, on March 27, 2007, GTHL became a wholly-owned subsidiary of
Avalon, and the Company changed its name to Guangzhou Global Telecom Holdings,
Inc. and succeeded to the business of GTHL.   Now we are a
nationally integrated mobile phone handset and pre-paid calling card distributor
and provider of mobile handset value-added services. Future products and
services include the GTL Lineless Messaging Service and retail sales and
customer service operations. We are an independent qualified corporation that
serves as a principle distribution agent for China Telecom, China Unicom, and
China Mobile. We also maintain and operate the largest prepaid mobile phone card
sales and distribution center in Guangdong Province and maintain cooperative
distribution relationships with VK, Panasonic, Motorola, LG, GE and Bird
corporations, among others.




RESULTS OF OPERATIONS FOR
THE YEAR ENDED DECEMBER 31, 2008 COMPARE TO THE YEAR ENDED DECEMBER 31,
2007




The
following table presents the statement of operations for the year ended December
31, 2008 as compared to the comparable period of the year ended December 31,
2007. The discussion following the table is based on these results.





Note
                      
                      12/31/2008
                      
                      
                      12/31/2007Sales
                      
                      
                      $
                      44,810,929
                      
                      
                      $
                      21,453,232Cost
      of sales
                      
                      
                      
                      41,299,901
                      
                      
                      
                      20,203,298Gross
      profit
                      
                      
                      
                      3,511,028
                      
                      
                      
                      1,249,934Operating
      expenseSelling
      expenses
                      
                      
                      
                      361,236
                      
                      
                      
                      166,399Administrative
      and general expenses
                      
                      
                      
                      1,584,197
                      
                      
                      
                      1,381,952Total
      operating expense
                      
                      
                      
                      1,945,433
                      
                      
                      
                      1,548,351Operating
      income / (loss)
                      
                      
                      
                      1,565,595
                      
                      
                      
                      (298,417
                      )Other
      income
                      
                      
                      
                      3,398
                      
                      
                      
                      -Interest
      income
                      
                      
                      
                      32,159
                      
                      
                      
                      2,529Other
      expenses
                      
                      
                      
                      (3,055
                      )
                      
                      
                      (544,618
                      )Interest
      expenses
                      
                      
                      
                      (1,065,222
                      )
                      
                      
                      -Total
      other income/(expense)
                      
                      
                      
                      (1,032,720
                      )
                      
                      
                      (542,089
                      )Income/(loss)
      before tax
                      
                      
                      
                      532,875
                      
                      
                      
                      (840,506
                      )Income
      tax
                      
                      
                      
                      (411,671
                      )
                      
                      
                      (143,983
                      )Minority
      Interest
                      
                      
                      
                      (404,794
                      )
                      
                      
                      -Net
      Income/(Loss)
                      
                      
                      $
                      (283,590
                      )
                      
                      $
                      (984,489
                      )Earnings
      Per ShareBasic
                      
                      
                      $
                      (0.0046
                      )
                      
                      $
                      (0.0185
                      )Diluted
                      
                      
                      $
                      (0.0046
                      )
                      
                      $
                      (0.0141
                      )Weighted
      Average Shares OutstandingBasic
                      
                      
                      
                      61,342,162
                      
                      
                      
                      53,080,000Diluted
                      
                      
                      
                      61,342,162
                      
                      
                      
                      58,048,048




Accumulated Comprehensive
      IncomeComprehensive Income
                                
                                12/31/2007
                                
                                
                                12/31/2008
                                
                                
                                TotalNet
      Income
                                
                                
                                (984,489
                                )
                                
                                
                                (283,590
                                )
                                
                                
                                (1,268,079
                                )Other Comprehensive
      IncomeForeign
      Currency Translation Adjustment
                                
                                
                                (5,563
                                )
                                
                                
                                (222,946
                                )
                                
                                
                                (228,509
                                )(990,052
                                )
                                
                                
                                (506,536
                                )
                                
                                
                                (1,496,588
                                )






6




Results
of Operation for the Fiscal year ended December 31, 2008 compared with fiscal
year ended December 31, 2007




Total
Revenue




During
fiscal year ended December 31, 2008, we earned $44,810,929 in revenues as
compared to $21,453,232 during the fiscal year ended in 2007, representing an
increase of $23,387,697 or approximately 109%.  Renwoxing and Beijing Lihe,
our new acquired two subsidiaries, contributed $10,541,150
revenue.  In addition, Zhenzhou Branch, Zhenzhou Equipment and Beijing
Branch were new set up in middle of 2007, while these subsidiaries or branches
contributed full year’s operation result in 2008.  As a result, the
revenue increase is mainly resulted from our geography expansion.





Gross
Profit




The gross
profit decreased to $3,511,028 during the fiscal year ended December 31, 2008
from $1,249,934 in the same period of 2007, representing $2,261,094 or 181%
increase.   The increase of gross profit is mainly due to the increase
of sales.  In addition, our gross margin increased from 5.8% to
7.8%.  The increase of gross margin contributed to the reasons as
follows: (1) our equipment sales generate 11% margin in 2008, while it is 8.6%
in 2007 and its revenue in 2008 is 4.8 times of that in 2007; (2) our new
acquired Beijing Lihe subsidiary generated gross profit of $586,334 with 10%
gross margin.





Expenses




Our
selling, general and administrative expenses (“SG&A expenses”) were
$1,945,433 during the fiscal year ended December 31, 2008 as compared to
$1,548,351 for the fiscal year ended in 2007, representing an increase of
$397,082 or approximately 20%.   The increase of SG&A expenses are
mainly due to the expansion of operating locations.  For example, our
new acquired two subsidiaries incurred SG&A expenses of $65,184 during
2008.   The increase of SG&A expenses are also due to a
special bonus to employees of $362,001 incurred in 2008 for their great
efforts.




Other
expenses were $1,032,720 during the year ended December 31, 2008, mainly
representing interest expenses of $1,065,222, which includes $776,744
restructuring expenses.  While other expenses of $542,089 during the
year ended December 31, 2007 mainly consist of one-off financing expenses of
$544,618.





Minority
interest were $404,794 during the year ended December 31, 2008, which resulted
from the minority interest generated from Beijing Lihe and Renwoxing, our new
acquired 50% and 51% subsidiaries respectively.





Net
loss





Net loss
recorded $283,590 during the fiscal year ended December 31, 2008, as compared to
a net profit of $984,489 during the fiscal year ended December 31,
2007.  The decrease of net loss is mainly due to increase of gross
profit.




Liquidity and Capital
Resources




Cash used
in operating activities were $­­­­­526,814 during the fiscal
year ended December 31, 2008 as compared to cash used in operating activities of
$2,876,970 for the year ended December 31, 2007.   Cash used from
operating activities during year 2008 was mainly resulted from net loss of
$283,590, increase of receivables of $404,619, increase of purchase deposits of
$1,203,294 and increase in inventory of $419,120, netting off depreciation and
minority interest of $907,040, increase in different liabilities of
$726,163.  The increase of operating assets and liabilities are mainly
due to our increasing revenue and operating size.





Cash
flows used in investing activities were $404,406 for the fiscal year ended
December 31, 2008 as compared to $565,936 used for the fiscal year ended
December 31, 2007.   Cash provided from investing activities during
year 2008 was resulted from proceeds from repayment of note receivable and
repayment from business development of $31,751 and $192,329 respectively, by
netting of acquisition of property and equipment and intangible assets of
$586,884, and $41,602 respectively.  Such increment of fixed assets
and intangible assets are in line with our business expansion
speed.




Cash
flows provided by financing activities were $2,554,098 during the fiscal year
ended December 31, 2008 compared to $2,502,088 used in financing activities for
the fiscal year ended in 2007.   Cash provided by the financing
activities was mainly due to the proceeds from issuance of stock and issuance of
convertible debt.





Critical Accounting
Policies




Our
significant accounting policies are summarized in Notes 2 of our financial
statements included in this annual report on Form 10-K for the year ended
December 31, 2008. 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.




7




Recent Accounting
Pronouncements
  In
December 2007, the Financial Accounting Standards Board (FASB) issued SFAS No.
160, “Noncontrolling Interests
in Consolidated Financial Statements – an amendment of ARB No.
51”.  This statement improves the relevance, comparability, and
transparency of the financial information that a reporting entity provides in
its consolidated financial statements by establishing accounting and reporting
standards that require; the ownership interests in subsidiaries held by parties
other than the parent and the amount of consolidated net income attributable to
the parent and to the noncontrolling interest be clearly identified and
presented on the face of the consolidated statement of income, changes in a
parent’s ownership interest while the parent retains its controlling financial
interest in its subsidiary be accounted for consistently, when a subsidiary is
deconsolidated, any retained noncontrolling equity investment in the former
subsidiary be initially measured at fair value, entities provide sufficient
disclosures that clearly identify and distinguish between the interests of the
parent and the interests of the noncontrolling owners.  SFAS No. 160
affects those entities that have an outstanding noncontrolling interest in one
or more subsidiaries or that deconsolidate a subsidiary.  SFAS No. 160
is effective for fiscal years, and interim periods within those fiscal years,
beginning on or after December 15, 2008. Early adoption is prohibited. The
adoption of this statement is not expected to have a material effect on the
Company's financial statements.




In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative
Instruments and Hedging Activities, an amendment of FASB Statement No. 133”
(SFAS 161). This statement is intended to improve transparency in financial
reporting by requiring enhanced disclosures of an entity’s derivative
instruments and hedging activities and their effects on the entity’s financial
position, financial performance, and cash flows. SFAS 161 applies to all
derivative instruments within the scope of SFAS 133, “Accounting for Derivative
Instruments and Hedging Activities” (SFAS 133) as well as related hedged items,
bifurcated derivatives, and nonderivative instruments that are designated and
qualify as hedging instruments. Entities with instruments subject to SFAS 161
must provide more robust qualitative disclosures and expanded quantitative
disclosures. SFAS 161 is effective prospectively for financial statements issued
for fiscal years and interim periods beginning after November 15, 2008,
with early application permitted. We are currently evaluating the disclosure
implications of this statement.





In
April 2008, the FASB issued FASB Staff Position (“FSP”) SFAS No. 142-3, “Determination of the Useful Life of
Intangible Assets”. This FSP amends the factors that should be considered
in developing renewal or extension assumptions used to determine the useful life
of a recognized intangible asset under FASB Statement No. 142, “Goodwill and Other Intangible
Assets”(“SFAS 142”). The intent of this FSP is to improve the
consistency between the useful life of a recognized intangible asset under
SFAS 142 and the period of expected cash flows used to measure the fair
value of the asset under SFAS 141R, and other GAAP. This FSP is effective for
financial statements issued for fiscal years beginning after December 15,
2008, and interim periods within those fiscal years. Early adoption is
prohibited. The Company is currently evaluating the impact of SFAS FSP 142-3,
but does not expect the adoption of this pronouncement will have a material
impact on its financial position, results of operations or cash
flows.





In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles” (SFAS 162”).  SFAS 162 identifies the sources
of accounting principles and the framework for selecting principles to be used
in the preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles in the
United States.  This statement shall be effective 60 days following the
SEC’s approval of the Public Company Accounting Oversight Board’s amendments to
AU section 411, The Meaning of Present Fairly in Conformity with Generally
Accepted Accounting Principles.  The Company is currently evaluating
the impact of SFAS 162, but does not expect the adoption of this pronouncement
will have a material impact on its financial position, results
of operations or cash flows.




In May
2008, the FASB issued SFAS No. 163, “Accounting for Financial Guarantee
Insurance Contracts-an interpretation of FASB Statement No. 60.” Diversity
exists in practice in accounting for financial guarantee insurance contracts by
insurance enterprises under FASB Statement No. 60, Accounting and Reporting by
Insurance Enterprises. This results in inconsistencies in the recognition and
measurement of claim liabilities. This Statement requires that an insurance
enterprise recognize a claim liability prior to an event of default (insured
event) when there is evidence that credit deterioration has occurred in an
insured financial obligation. This Statement requires expanded disclosures about
financial guarantee insurance contracts. The accounting and disclosure
requirements of the Statement will improve the quality of information provided
to users of financial statements. The adoption of FASB 163 is not expected to
have a material impact on the Company’s financial position.





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.        QUANTITIATIVE AND
QUALITATIVE DISCLOUSURES ABOUT MARKET RISK





Not
applicable because we are a smaller reporting company.




8




ITEM
8.            FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.


Guangzhou
Global Telecom, Inc.
 
 Audited
Consolidated Financial Statements
 
 December
31, 2008 and 2007
 
 (Stated
in US Dollars)
 
 
 
 
 
 
 
 
 
 Guangzhou
Global Telecom, Inc.
 
 
 
 Contents
                      PagesReport
      of Independent Registered Public Accounting Firm
                      F-1Consolidated
      Balance
      Sheets
                      F-2
      – F-3Consolidated
      Statements of Income
                      F-4Consolidated
      Statements of Changes in Stockholders’ Equity
                      F-5Consolidated
      Statements of Cash Flows
                      F-6
      – F-7Notes
      to Consolidated Financial Statements
                      F-8
      – F-25
 
 
 
 
 
 
 
  
 To:  The
Board of Directors and Stockholders of
 Guangzhou
Global Telecom, Inc.
 
 
 
 Report of Independent
Registered Public Accounting Firm
 
  
 We have
audited the accompanying consolidated balance sheets of Guangzhou Global
Telecom, Inc. as of December 31, 2008 and 2007, 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 Guangzhou Global Telecom, Inc. as
of December 31, 2008 and 2007, and the results of its operations and its cash
flows for each of the years then ended in conformity with accounting principles
generally accepted in the United States of America.
 
 
 
 
 
  South San
Francisco,
California                                                                                                           Samuel
H. Wong & Co., LLP
 January
23,
2008                                                                                                               
Certified Public Accountants
  F-1
 Guangzhou
Global Telecom, Inc
 Consolidated
Balance Sheets
 At
December 31, 2008 and 2007
 (Stated
in US Dollars)
  ASSETS
                                                                  
                                                                  Note
                                                                  
                                                                  
                                                                  12/31/2008
                                                                  
                                                                  
                                                                  12/31/2007Current
      AssetsCash
      and cash equivalent
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  $
                                                                  1,628,134
                                                                  
                                                                  
                                                                  $
                                                                  228,202Other
      receivable
                                                                  
                                                                  
                                                                  4
                                                                  
                                                                  
                                                                  
                                                                  920,481
                                                                  
                                                                  
                                                                  
                                                                  515,862Notes
      receivable
                                                                  
                                                                  
                                                                  5
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  31,751Due
      from related party
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  32,560Due
      from shareholder
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  118,047Purchase
      deposits
                                                                  
                                                                  
                                                                  7
                                                                  
                                                                  
                                                                  
                                                                  3,583,669
                                                                  
                                                                  
                                                                  
                                                                  2,380,375Advance
      for business development
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  192,329Inventory
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  849,518
                                                                  
                                                                  
                                                                  
                                                                  430,398Total
      Current Assets
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  6,981,802
                                                                  
                                                                  
                                                                  
                                                                  3,929,524Non-Current
      AssetsProperty,
      plant & equipment, net
                                                                  
                                                                  
                                                                  8
                                                                  
                                                                  
                                                                  
                                                                  624,030
                                                                  
                                                                  
                                                                  
                                                                  168,679Goodwill
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  215,560
                                                                  
                                                                  
                                                                  
                                                                  173,958Total
      Non-Current Assets
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  839,590
                                                                  
                                                                  
                                                                  
                                                                  342,637TOTAL
      ASSETS
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  $
                                                                  7,821,392
                                                                  
                                                                  
                                                                  $
                                                                  4,272,161LIABILITIES
      & STOCKHOLDERS' EQUITYCurrent
      LiabilitiesTaxes
      payable
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  $
                                                                  273,929
                                                                  
                                                                  
                                                                  $
                                                                  60,535VAT
      payable
                                                                  
                                                                  
                                                                  9
                                                                  
                                                                  
                                                                  
                                                                  1,396,460
                                                                  
                                                                  
                                                                  
                                                                  1,310,395Income
      tax payable
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  421,758
                                                                  
                                                                  
                                                                  
                                                                  200,961Due
      to shareholder
                                                                  
                                                                  
                                                                  6
                                                                  
                                                                  
                                                                  
                                                                  44,698
                                                                  
                                                                  
                                                                  
                                                                  -Accrued
      liabilities and other payable
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  420,535
                                                                  
                                                                  
                                                                  
                                                                  259,326Convertible
      debenture - current portion
                                                                  
                                                                  
                                                                  11
                                                                  
                                                                  
                                                                  
                                                                  1,943,037
                                                                  
                                                                  
                                                                  
                                                                  1,373,560Total
      Current Liabilities
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  4,500,416
                                                                  
                                                                  
                                                                  
                                                                  3,204,777Non-Current
      LiabilitiesConvertible
      debenture – non-current portion
                                                                  
                                                                  
                                                                  11
                                                                  
                                                                  
                                                                  
                                                                  1,485,714
                                                                  
                                                                  
                                                                  
                                                                  749,175Interest
      discount - share purchase warrant
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -Total
      Non-Current Liabilities
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  1,485,714
                                                                  
                                                                  
                                                                  
                                                                  749,175TOTAL
      LIABILITIES
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  $
                                                                  5,986,130
                                                                  
                                                                  
                                                                  $
                                                                  3,953,952Minority
      interest
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  775,507
                                                                  
                                                                  
                                                                  
                                                                  -
 
 See Notes
to Financial Statements and Accountants’ Report
 
 F-2
 
 Guangzhou
Global Telecom, Inc
 Consolidated
Balance Sheets
 At
December 31, 2008 and 2007
 (Stated
in US Dollars)
  
 12/31/2008
                                            
                                            
                                            12/31/2007STOCKHOLDERS' EQUITYCommon
      Stock US$0.01 par value; 1,000,000,000authorized,
      74,839,071 and 53,170,000 issuedand
      outstanding as of December 31, 2008and
      December 31, 2007, respectively
                                            
                                            $
                                            748,391
                                            
                                            
                                            $
                                            531,700Additional
      paid in capital
                                            
                                            
                                            1,439,607
                                            
                                            
                                            
                                            408,216Other
      comprehensive income
                                            
                                            
                                            (202,845
                                            )
                                            
                                            
                                            20,101Retained
      earnings
                                            
                                            
                                            (925,398
                                            )
                                            
                                            
                                            (641,808
                                            )TOTAL
      STOCKHOLDERS' EQUITY
                                            
                                            $
                                            1,059,755
                                            
                                            
                                            $
                                            318,209TOTAL
      LIABILITIES ANDSTOCKHOLDERS'
      EUITY
                                            
                                            $
                                            7,821,392
                                            
                                            
                                            $
                                            4,272,161
 
 See Notes
to Financial Statements and Accountants’ Report
 F-3
  Guangzhou
Global Telecom, Inc
 Consolidated
Statements of Income
 For
the years ended December 31, 2008 and 2007
 (Stated
in US Dollars)
 
 Note
                        
                        12/31/2008
                        
                        
                        12/31/2007Sales
                        
                        
                        $
                        44,810,929
                        
                        
                        $
                        21,453,232Cost
      of sales
                        
                        
                        
                        41,299,901
                        
                        
                        
                        20,203,298Gross
      profit
                        
                        
                        
                        3,511,028
                        
                        
                        
                        1,249,934Operating
      expenseSelling
      expenses
                        
                        
                        
                        361,236
                        
                        
                        
                        166,399Administrative
      and general expenses
                        
                        
                        
                        1,584,197
                        
                        
                        
                        1,381,952Total
      operating expense
                        
                        
                        
                        1,945,433
                        
                        
                        
                        1,548,351Operating
      income / (loss)
                        
                        
                        
                        1,565,595
                        
                        
                        
                        (298,417
                        )Other
      income
                        
                        
                        
                        3,398
                        
                        
                        
                        -Interest
      income
                        
                        
                        
                        32,159
                        
                        
                        
                        2,529Other
      expenses
                        
                        
                        
                        (3,055
                        )
                        
                        
                        (544,618
                        )Interest
      expenses
                        
                        
                        
                        (1,065,222
                        )
                        
                        
                        -Total
      other income/(expense)
                        
                        
                        
                        (1,032,720
                        )
                        
                        
                        (542,089
                        )Income/(loss)
      before tax
                        
                        
                        
                        532,875
                        
                        
                        
                        (840,506
                        )Income
      tax
                        
                        
                        
                        (411,671
                        )
                        
                        
                        (143,983
                        )Minority
      Interest
                        
                        
                        
                        (404,794
                        )
                        
                        
                        -Net
      Income/(Loss)
                        
                        
                        $
                        (283,590
                        )
                        
                        $
                        (984,489
                        )Earnings
      Per ShareBasic
                        
                        
                        $
                        (0.0046
                        )
                        
                        $
                        (0.0185
                        )Diluted
                        
                        
                        $
                        (0.0046
                        )
                        
                        $
                        (0.0141
                        )Weighted
      Average Shares OutstandingBasic
                        
                        
                        
                        61,342,162
                        
                        
                        
                        53,080,000Diluted
                        
                        
                        
                        61,342,162
                        
                        
                        
                        58,048,048
 
 Accumulated Comprehensive
      IncomeComprehensive Income
                        
                        12/31/2007
                        
                        
                        12/31/2008
                        
                        
                        TotalNet
      Income
                        
                        
                        (984,489
                        )
                        
                        
                        (283,590
                        )
                        
                        
                        (1,268,079
                        )Other Comprehensive IncomeForeign
      Currency Translation Adjustment
                        
                        
                        (5,563
                        )
                        
                        
                        (222,946
                        )
                        
                        
                        (228,509
                        )(990,052
                        )
                        
                        
                        (506,536
                        )
                        
                        
                        (1,496,588
                        )
   
 F-4
  Guangzhou
Global Telecom, Inc
 Consolidated
Statements of Changes in Stockholders’ Equity
 For
the years ended December 31, 2008 and 2007
 (Stated
in US Dollars)
 
 Additional
                              
                              OtherTotal
      number
                              Common
                              paid
      in
                              Subscription
                              comprehensive
                              Retainedof share
                              stock
                              capital
                              receivable
                              income
                              earnings
                              TotalBalance,
      January 1, 2007
                              52,890,000
                              528,900
                              -
                              (86,384)
                              25,664
                              342,681
                              810,861Issuance
      of new share
                              280,000
                              2,800
                              408,216
                              86,384
                              -
                              -
                              497,400Net
      income/(loss)
                              -
                              -
                              -
                              -
                              -
                              (984,489)
                              (984,489)Foreign
      currency translation
                              -
                              -
                              -
                              -
                              (5,563)
                              -
                              (5,563)Balance,
      December 31, 2007
                              53,170,000
                              531,700
                              408,216
                              -
                              20,101
                              (641,808)
                              318,209Balance,
      January 1, 2008
                              53,170,000
                              531,700
                              408,216
                              -
                              20,101
                              (641,808)
                              318,209Conversion
      of bond debenture to common stock
                              7,941,302
                              79,413
                              541,836
                              -
                              -
                              -
                              621,249Issuance
      of common stock to acquire BJ Lihe
                              1,500,000
                              15,000
                              285,000
                              -
                              -
                              -
                              300,000Issuance
      of common stock to acquire Renwoxing
                              9,727,769
                              97,278
                              194,555
                              -
                              -
                              -
                              291,833Issuance
      of common stock in relation to management compensation
                              2,500,000
                              25,000
                              10,000
                              -
                              -
                              -
                              35,000Net
      income/(loss)
                              -
                              -
                              -
                              -
                              -
                              (283,590)
                              (283,590)Foreign
      currency translation
                              -
                              -
                              -
                              -
                              (222,946)
                              -
                              (222,946)Balance,
      December 31, 2008
                              74,839,071
                              748,391
                              1,439,607
                              -
                              (202,845)
                              (925,398)
                              1,059,755
 
  F-5
 
 Guangzhou
Global Telecom, Inc
 Consolidated
Statements of Cash Flows
 For
the years ended December 31, 2008 and 2007
 (Stated
in US Dollars)
 12/31/2008
                                
                                
                                12/31/2007Cash
      Flow from Operating ActivitiesCash
      received from customers
                                
                                $
                                44,438,871
                                
                                
                                $
                                21,522,028Cash
      paid to suppliers
                                
                                
                                (42,786,815
                                )
                                
                                
                                (24,401,527
                                )Cash
      paid for selling and G&A expenses
                                
                                
                                (1,945,433
                                )
                                
                                
                                -Cash
      received from other income
                                
                                
                                186,822
                                
                                
                                
                                -Cash
      paid to director
                                
                                
                                162,745
                                
                                
                                
                                -Cash
      paid for other expense
                                
                                
                                (29,238
                                )
                                
                                
                                -Interest
      received
                                
                                
                                32,159
                                
                                
                                
                                2,529Interest
      paid
                                
                                
                                (1,065,222
                                )
                                
                                
                                -Minority
      interest
                                
                                
                                370,713
                                
                                
                                
                                -Tax
      paid
                                
                                
                                108,584
                                
                                
                                
                                -Cash
      Sourced from/(Used in) Operating Activities
                                
                                
                                (526,814
                                )
                                
                                
                                (2,876,970
                                )Cash
      Flow from Investing ActivitiesAdvance
      from Related Party
                                
                                
                                -
                                
                                
                                
                                226,871Proceeds
      from notes receivable
                                
                                
                                31,751
                                
                                
                                
                                311,392Advance/(repayment)
      for business development
                                
                                
                                192,329
                                
                                
                                
                                (192,798
                                )Purchase
      of property, plant & equipment
                                
                                
                                (586,884
                                )
                                
                                
                                (105,571
                                )Purchase
      of intangible assets
                                
                                
                                (41,602
                                )
                                
                                
                                (173,958
                                )Advance
      from Acquisition receivable
                                
                                
                                -
                                
                                
                                
                                500,000Cash
      Sourced from/(Used in) Investing Activities
                                
                                
                                (404,406
                                )
                                
                                
                                565,936Cash
      Flow from Financing ActivitiesPrivate
      investor's deposit for purchase of common stock
                                
                                
                                1,031,391
                                
                                
                                
                                -Issuance
      of common stock
                                
                                
                                216,691
                                
                                
                                
                                497,400Proceed
      from notes
                                
                                
                                1,306,016
                                
                                
                                
                                -Repayment
      of loan from shareholder
                                
                                
                                -
                                
                                
                                
                                (118,047
                                )Cash
      received from issuance of convertible debenture
                                
                                
                                -
                                
                                
                                
                                2,122,735Cash
      Sourced from/(Used in) Financing Activities
                                
                                
                                2,554,098
                                
                                
                                
                                2,502,088Net
      Increase/(Decrease) in Cash & Cash Equivalents
                                
                                
                                1,622,878
                                
                                
                                
                                191,054Effect
      of Currency Translation
                                
                                
                                (222,946
                                )
                                
                                
                                -Cash
      & Cash Equivalent at the Beginning of Year
                                
                                
                                228,202
                                
                                
                                
                                37,148Cash
      & Cash Equivalent at the End of Year
                                
                                $
                                1,628,134
                                
                                
                                $
                                228,202
    F-6
 Guangzhou
Global Telecom, Inc.
 Reconciliation
of Net Income to Cash Flow Used in Operating Activities
 For
the years ended December 31, 2008 and 2007
 (Stated
in US Dollars)
 12/31/2008
                  
                  
                  12/31/ 2007Net
      (loss)/income
                  
                  $
                  (283,590
                  )
                  
                  $
                  (984,489
                  )Adjustments
      to reconcile net (loss)/income tonet
      cash provided by cash activitiesMinority
      interest
                  
                  
                  775,507
                  
                  
                  
                  -Depreciation
                  
                  
                  131,533
                  
                  
                  
                  46,460Decrease/(increase)
      in other receivable
                  
                  
                  (404,619
                  )
                  
                  
                  (1,889,945
                  )Decrease/(increase)
      in due from director
                  
                  
                  118,047
                  
                  
                  
                  -Decrease/(increase)
      in purchase deposit
                  
                  
                  (1,203,294
                  )
                  
                  
                  -Decrease/(increase)
      in related party
                  
                  
                  32,560
                  
                  
                  
                  -Decrease/(increase)
      in inventory
                  
                  
                  (419,120
                  )
                  
                  
                  (421,436
                  )Decrease/(increase)
      in rental deposit
                  
                  
                  -
                  
                  
                  
                  -Increase/(decrease)
      in tax payable
                  
                  
                  213,394
                  
                  
                  
                  44,642Increase/(decrease)
      in accrued liabilities and other payable
                  
                  
                  205,907
                  
                  
                  
                  (235,320
                  )Increase/(decrease)
      in VAT payable
                  
                  
                  86,065
                  
                  
                  
                  410,879Increase/(decrease)
      in income tax payable
                  
                  
                  220,797
                  
                  
                  
                  152,239Total
      of all adjustments
                  
                  
                  (243,224
                  )
                  
                  
                  (1,892,481
                  )Net
      Cash Provided by (Used in)/Sourced from Operating
    Activities
                  
                  $
                  (526,814
                  )
                  
                  $
                  (2,876,970
                  )
    
 F-7




Guangzhou
Global Telecom, Inc.
 Notes
to Consolidated Financial Statements
 For
the years ended December 31, 2008 and 2007




1. ORGANIZATION
AND PRINCIPAL ACTIVITIES




Guangzhou
Global Telecom, Inc. (the Company) formerly 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 Holding
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.





In 2007,
the Company established 4 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, the Company newly 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 (“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.





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 embrace 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.




F-8


Guangzhou
Global Telecom, Inc.
 Notes
to Consolidated Financial Statements
 For
the years ended December 31, 2008 and 2007






(b)
            Consolidation





The
consolidated financial statements include the accounts of Guangzhou Global
Telecom, Inc. and eight 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.





The
company owned the following subsidiaries since the reserve-merger and soon
thereafter. As of December 31, 2008, detailed identities of the consolidating
subsidiaries are as follows:-





Name of Company
                                                Place of Incorporation
                                                Attributable
                                                  Equity Interest %
                                                Registered CapitalGlobal
      Telecom Holding, Ltd.
                                                BVI
                                                100
                                                HKD
      7,800Huantong
      Telecom Hong Kong Holding, Ltd.
                                                Hong
      Kong SAR
                                                100
                                                HKD
      100Guangzhou
      Global Telecommunication Co., Ltd.
                                                PRC
                                                100
                                                RMB
      3,030,000Zhengzhou
      Global Telecom Equipment, Ltd.
                                                PRC
                                                100
                                                RMB
      500,000Guangzhou
      Huantong Telecom Technology and Consultant Services, Ltd.
                                                PRC
                                                100RMB
      8,155,730Beijing
      Lihe Jiahua Technology and Trading Co., Ltd.
                                                PRC
                                                50
                                                RMB
      500,000Guangzhou
      Renwoxing Telecom Co., Ltd.
                                                PRC
                                                51
                                                RMB
      3,010,000Macau
      Global Telecom Co., Ltd.
                                                Macau
      SAR
                                                100
                                                MOP
      300,000Huantong
      Telecom Singapore Co. PTE, Ltd.
                                                Singapore
                                                100
                                                SGD
      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.





F-9


Guangzhou
Global Telecom, Inc.
 Notes
to Consolidated Financial Statements
 For
the years ended December 31, 2008 and 2007





(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 – Trade





Trade
receivables 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.





(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 chip, and interactive voice response
cards.





(h)
            Property,
      Plant, and Equipment





Property,
plant and equipment are carried at cost net of accumulated depreciation.
Depreciation is provided over their estimated useful lives, using the


straight-line
method with no salvage value.  Estimated useful lives of the property,
plant and equipment are as follows:




Building
                                20
      yearsEquipment
                                5
      yearsFurniture
      and
      Fixtures
                                5
      yearsLeasehold
      Improvement
                                5
      yearsMotor
      Vehicles
                                3
      years


F-10


Guangzhou
Global Telecom, Inc.
 Notes
to Consolidated Financial Statements
 For
the years ended December 31, 2008 and 2007


(i)
            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.
Determination of 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.





(j)
            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.





(k)
            Cost
      of Sales





The
Company’s cost of sales is comprised of raw materials, factory worker salaries
and related benefits, machinery supplies, maintenance supplies, depreciation,
utilities, inbound freight, purchasing and receiving costs, inspection and
warehousing costs.





(l)
            Selling
      Expense





Selling
expenses are comprised of outbound freight, salary for the sales force, client
entertainment, commissions, depreciation, advertising, and travel and lodging
expenses.





(m)
            General
      & Administrative Expense





General
and administrative expenses include outside consulting services, research &
development, executive compensation, quality control, and general overhead such
as the finance department, administrative staff, and depreciation and
amortization expense.




F-11




Guangzhou
Global Telecom, Inc.
 Notes
to Consolidated Financial Statements
 For
the years ended December 31, 2008 and 2007






(n)
            Advertising





The
Company expensed all advertising costs as incurred.





(o)
            Research
      and Development





All
research and development costs are expensed as incurred.





(p)
            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
                  12/31/2008
                  12/31/2007Period
      end RMB : US$ exchange rate
                  6.8542
                  7.3141Average
      period RMB : US$ exchange rate
                  6.9623
                  7.6172Period
      end HKD : US$ exchange rate
                  7.7507
                  7.8049Average
      period HKD : US$ exchange rate
                  7.7874
                  7.8026Period
      end MOP : US$ exchange rate
                  8.1823
                  8.1594Average
      period MOP : US$ exchange rate
                  8.1657
                  8.2166Period
      end SGD : US$ exchange rate
                  1.4426
                  1.4467Average
      period SGD : US$ exchange rate
                  1.4156
                  1.5072





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.





F-12




Guangzhou
Global Telecom, Inc.


Notes
to Consolidated Financial Statements


For
the years ended December 31, 2008 and 2007







(q)
            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, Singapore, People’s Republic of China (PRC), Macau SAR, and
Hong Kong SAR 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,
Singapore, Macau and Hong Kong, the taxation of these entities are summarized
below:





·
            GGT,
      ZGTG, BLJ and GRT are located in the PRC, and GTHL is located in the
      British Virgin Islands, HTHKN is in Hong Kong, MGT is in Macau SAR, and
      HTS is in Singapore; all of these entities are subject to the relevant tax
      laws and regulations of the PRC, Hong Kong SAR, Macau SAR, British Virgin
      Islands, and Singapore 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 RateGGT,
      ZGTG, BLJ and GRT
                PRC
                25.0%HTHKN
                Hong
      Kong SAR
                17.5%MGT
                Macau
      SAR
                12.0%GTHL
                British
      Virgin Islands
                0.00%HTS
                Singapore
                18.0%





·
            Effective
      January 1, 2008, PRC government implements a new 25% tax rate across the
      board for all enterprises regardless of whether domestic or foreign
      enterprise without 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 15% 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.





·
            The
      Company is subject to United States Tax according to Internal Revenue Code
      Sections 951 and 957. Corporate income tax is imposed on progressive rates
      in the range of: -




F-13




Guangzhou
Global Telecom, Inc.


Notes
to Consolidated Financial Statements


For
the years ended December 31, 2008 and 2007






Taxable
      IncomeRate
                    Over
                    But Not Over
                    Of Amount Over15%
                    0
                    50,000
                    025%
                    50,000
                    75,000
                    50,00034%
                    75,000
                    100,000
                    75,00039%
                    100,000
                    335,000
                    100,00034%
                    335,000
                    10,000,000
                    335,00035%
                    10,000,000
                    15,000,000
                    10,000,00038%
                    15,000,000
                    18,333,333
                    15,000,00035%
                    18,333,333
                    -
                    -








Based on
the consolidated net income for the year ended December 31, 2008, the Company
shall not be subject to income tax.





(r)
            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.





However,
since GGT being an operating company in PRC does not itself have any foreign
shareholders and that the Memorandum and Articles do not provide for such
appropriation, the Company is therefore not required to fund the Statutory
Reserve.





(s)
            Other
      Comprehensive Income





Comprehensive
income is defined to include all changes in equity except those resulting from
investments by owners and distributions to owners. Among other disclosures, all
items that are required to be recognized under current accounting standards, as
components of comprehensive income are required to be reported in a financial
statement that is presented with the same prominence as other financial
statements. The Company’s current component of other comprehensive income is the
foreign currency translation adjustment.




F-14


Guangzhou
Global Telecom, Inc.
 Notes
to Consolidated Financial Statements
 For
the years ended December 31, 2008 and 2007


(t)
            Accounting
      for Derivative instruments





The
Company designates its derivatives based upon the criteria established by SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities, which
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. SFAS 133, as amended by SFAS 138 and SFAS 149, requires that
an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. The
accounting for the changes in the fair value of the derivative depends on the
intended use of the derivative and the resulting designation. For a derivative
designated as a fair value hedge, the gain or loss is recognized in earnings in
the period of change together with the offsetting loss or gain on the hedged
item due to the risk being hedged. For a derivative designated as a cash flow
hedge, the effective portion of the derivative's gain or loss is initially
reported as a component of accumulated other comprehensive income (loss) and is
subsequently reclassified to earnings when the hedge exposure affects earnings.
The ineffective portion of the hedge is reported in earnings immediately. For a
derivative that does not qualify as a fair value hedge or cash flow hedge, the
change in fair value is recognized in net income in the current period. It is
the Company's policy to classify all of its derivative instruments for cash flow
purposes as operating activities.





(u)
            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.





(v)
            Recent
      Accounting Pronouncements





In March
2008, the FASB issued SFAS No. 161, "Disclosures about Derivative
Instruments and Hedging Activities, an amendment of FASB Statement No. 133"
("SFAS 161"). SFAS 161 applies to all derivative instruments and
related hedged items accounted for under SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS 133"). SFAS 161
requires entities to provide greater transparency about (a) how and why an
entity uses derivative instruments, (b) how derivative instruments and
related hedged items are accounted for under SFAS 133 and its related
interpretations, and (c) how derivative instruments and related hedged
items affect an entity's financial position, results of operations and cash
flows. SFAS 161 is effective for financial statements issued for fiscal
years and interim periods beginning after November 15, 2008.





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





F-15


Guangzhou
Global Telecom, Inc.
 Notes
to Consolidated Financial Statements
 For
the years ended December 31, 2008 and 2007






In May
2008, the FASB issued FSP Accounting Principles Board ("APB") 14-1 "Accounting
for Convertible Debt Instruments That May Be Settled in Cash upon Conversion
(Including Partial Cash Settlement)" ("FSP APB 14-1"). FSP APB 14-1
requires the issuer of certain convertible debt instruments that may be settled
in cash (or other assets) on conversion to separately account for the liability
(debt) and equity (conversion option) components of the instrument in a manner
that reflects the issuer's non-convertible debt borrowing rate. FSP
APB 14-1 is effective for fiscal years beginning after December 15,
2008 on a retroactive basis.





In
September 2008, FASB issued FSP No. 133-1 and FIN 45-4, “Disclosures about
Credit Derivatives and Certain Guarantees”, an amendment of FASB Statement No.
133 and FASB Interpretation No. 45; and Clarification of the Effective Date of
FASB Statement No. 161. This FSP is intended to improve disclosures about credit
derivatives by requiring more information about the potential adverse effects of
changes in credit risk on the financial position, financial performance, and
cash flows of the sellers of credit derivatives.  The provisions of
the FSP that amend Statement 133 and FIN 45 are effective for reporting periods
(annual or interim) ending after November 15, 2008.





This FSP
amends FASB Statement No. 133, Accounting for Derivative
Instruments and Hedging Activities, to require disclosures by sellers of
credit derivatives, including credit derivatives embedded in hybrid instruments.
This FSP also amends FASB Interpretation (FIN) No. 45, Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness to Others, to require an additional disclosure about the
current status of the payment/performance risk of a guarantee. The provisions of
the FSP that amend Statement 133 and FIN 45 are effective for reporting periods
(annual or interim) ending after November 15, 2008.





Finally,
this FSP clarifies the effective date in FASB Statement No. 161, Disclosures about Derivative
Instruments and Hedging Activities. The disclosures required by Statement
161 should be provided for any reporting period (annual or quarterly interim)
beginning after November 15, 2008. For example, an entity with a March 31 fiscal
year-end should provide the disclosures for its fourth quarter interim period
ending March 31, 2009, in its 2009 annual financial statements. This
clarification of the effective date of Statement 161 is effective upon issuance
of the FSP.





The
Company is currently evaluating the potential impact, if any, of the adoption of
the above recent accounting pronouncements on its consolidated results of
operations and financial condition.








F-16





Guangzhou
Global Telecom, Inc.
 Notes
to Consolidated Financial Statements
 For
the years ended December 31, 2008 and 2007







3.
            CONCENTRATION





A
substantial portion of GGT’s 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. GGT relies entirely on the networks and gateways of these phone
operators to provide its services. The Company's 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, the Company's ability to conduct its existing business would be
adversely affected.




4.
            OTHER
      RECEIVABLE





Other
Receivable at December 31, 2008 and 2007 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.





Type of Account
                            
                            12/31/2008
                            
                            
                            12/31/2007Trade
      financing to business associates
                            
                            $
                            920,481
                            
                            
                            $
                            515,862




5.
            NOTE
      RECEIVABLE





Note
receivable at December 31, 2008 and 2007 pertained to the Company’s financing of
two unrelated business associates without collateral on the following
terms:





Borrower
                                    Terms
                                    
                                    Interest
                                    
                                    
                                    12/31/2008
                                    
                                    
                                    12/31/2007Kit
      Yeung Twilight
                                      Telecommunication
      & Cable Factory
                                    On
      Demand
                                    
                                    
                                    12%
                                    
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    31,751$
                                    -
                                    
                                    
                                    $
                                    31,751





6.
            DUE
      FROM / TO SHAREHOLDER





The
following table presents the balances the Company owed to
shareholders.





12/31/2008
                          
                          
                          12/31/2007Due
      from Li Yan Kuan
                          
                          $
                          -
                          
                          
                          $
                          123,024Due
      to other shareholder
                          
                          
                          (44,698
                          )
                          
                          
                          (4,977
                          )$
                          (44,698
                          )
                          
                          $
                          118,047




F-17




Guangzhou
Global Telecom, Inc.
 Notes
to Consolidated Financial Statements
 For
the years ended December 31, 2008 and 2007






Due from Li Yan
Kuan





The
amount due from Li Yan Kuan was non-interest-bearing and, receivable on
demand.  There is no impact to the statement of operations as a result
of the receivable from the shareholder.





Due to
shareholder





Payables
owed to the Company’s shareholders are non-interest-bearing and, payable on
demand.  There is no impact to the statement of operations as a result
of the payables to the shareholder.




7.
            PURCHASE
      DEPOSITS





Purchase
Deposits of $3,583,669 and $2,380,375 at December 31, 2008 and 2007
respectively, consisted of advances to suppliers for the purchase of
inventories, and prepayments for general operating costs.




8.
            PROPERTY,
      PLANT, AND EQUIPMENT





Property,
plant, and equipment consist of the following as of December 31, 2008 and 2007:
-





12/31/2008Category of Asset
                                      
                                      Cost
                                      
                                      
                                      Accumulated Depreciation
                                      
                                      
                                      NetEquipment
                                      
                                      
                                      179,176
                                      
                                      
                                      
                                      89,244
                                      
                                      
                                      
                                      89,932Furniture
      & Fixtures
                                      
                                      
                                      34,380
                                      
                                      
                                      
                                      27,417
                                      
                                      
                                      
                                      6,963Motor
      Vehicles
                                      
                                      
                                      147,757
                                      
                                      
                                      
                                      92,758
                                      
                                      
                                      
                                      54,999Building
                                      
                                      
                                      490,843
                                      
                                      
                                      
                                      18,707
                                      
                                      
                                      
                                      472,136Total
                                      
                                      
                                      852,156
                                      
                                      
                                      
                                      228,126
                                      
                                      
                                      
                                      624,030






12/31/2007Category of Asset
                                    
                                    Cost
                                    
                                    
                                    Accumulated Depreciation
                                    
                                    
                                    NetEquipment
                                    
                                    
                                    30,839
                                    
                                    
                                    
                                    1,105
                                    
                                    
                                    
                                    29,734Furniture
      & Fixtures
                                    
                                    
                                    16,734
                                    
                                    
                                    
                                    5,687
                                    
                                    
                                    
                                    11,047Leasehold
      Improvement
                                    
                                    
                                    125,991
                                    
                                    
                                    
                                    68,350
                                    
                                    
                                    
                                    57,641Motor
      Vehicles
                                    
                                    
                                    91,708
                                    
                                    
                                    
                                    21,451
                                    
                                    
                                    
                                    70,257265,272
                                    
                                    
                                    
                                    96,593
                                    
                                    
                                    
                                    168,679





The
depreciation expenses were $ 131,533 and $6,239 for the years ended December 31,
2008 and 2007, respectively.





F-18


Guangzhou
Global Telecom, Inc.
 Notes
to Consolidated Financial Statements
 For
the years ended December 31, 2008 and 2007




9. VAT PAYABLE





The
Company has been collecting from its customers Value Added Tax (VAT), on behalf
of the government. The Company was granted by the government to pay the balance
dues under installments up to the end of 2008. The reason of this special
arrangement is that the government may waive past due VAT after decision has
been made in accordance with regulations for technology zone on tax-exemption
matter. However, the Company has not received the approval notice from the
government at December 31, 2008.  Thus, the VAT payable as of December
31, 2008 included the past due VAT possibly to be waived.




10.  LEASE
COMMITMENTS





The
Company leases office space and retail stores under operating leases with
non-cancelable terms of less than a year at fixed monthly rent. None of the
leases included contingent rentals. Lease expense charged to operations for the
years ended December 31, 2008 and 2007 amounted to $ 199,718 and $143,772,
respectively. Future minimum lease payments under non-cancelable operating
leases until termination of the leases amounted to $91,900 distributed
as:





Fiscal Year
                        
                        Minimum Lease
      Payments2009
                        
                        $
                        91,5482010
                        
                        
                        352Total
                        
                        $
                        91,900




11.  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 $2,000,000 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.





F-19


Guangzhou
Global Telecom, Inc.
 Notes
to Consolidated Financial Statements
 For
the years ended December 31, 2008 and 2007






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.





Because
of the fact that the Fixed Rate Convertible Debenture contain three 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)
                  
                  $
                  3,428,571(2
                  )
                  Discount
                  
                  $
                  428,571(3
                  )
                  Warrant
                  
                  $
                  -(4
                  )
                  Beneficial
      Conversion Feature
                  
                  $
                  -





The above
item (2) is to be amortized to interest expense over the term of the Debenture
by the effective interest method.





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





12/31/2008
                                        
                                        
                                        12/31/2007Convertible Debenture - Principal and
      interestBalance
      as at beginning of year
                                        
                                        $
                                        2,122,735
                                        
                                        
                                        $
                                        -Addition
                                        
                                        
                                        1,000,000
                                        
                                        
                                        
                                        2,000,000Redemption
                                        
                                        
                                        (507,936
                                        )
                                        
                                        
                                        -Interest charged for the current year
                                        
                                        
                                        400,188
                                        
                                        
                                        
                                        168,448Repayment of interest in current year
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (45,713
                                        )Restructure cost
                                        
                                        
                                        413,764Balance
      as at end of year
                                        
                                        
                                        3,428,751
                                        
                                        
                                        
                                        2,122,735Less:
      Interest discount–Beneficial conversion
    featureBalance
      as at beginning of year
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        -Addition
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -Amortization
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -Balance
      as at end of year
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        -Less: Interest Discount–WarrantBalance
      as at beginning of year
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        -Addition
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -Amortization
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -Balance
      as at end of year
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        -Convertible
      Debenture, net
                                        
                                        $
                                        3,428,751
                                        
                                        
                                        $
                                        2,122,735





F-20
 
 Guangzhou
Global Telecom, Inc.
 Notes
to Consolidated Financial Statements
 For
the years ended December 31, 2008 and 2007
  The Convertible Debenture
was classified as current and non-current as follows:


12/31/2008
                    
                    
                    12/31/2007Non-current
      portion
                    
                    $
                    1,943,037
                    
                    
                    $
                    749,175Current
      Portion
                    
                    
                    1,485,714
                    
                    
                    
                    1,373,560$
                    3,428,751
                    
                    
                    $
                    2,122,735




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 Article of Association to increase the number of
authorized shares of common stock to 1,000,000,000.







F-21





Guangzhou
Global Telecom, Inc.
 Notes
to Consolidated Financial Statements
 For
the years ended December 31, 2008 and 2007






12.
COMMON STOCK CAPITAL





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 74,839,071 and 53,170,000 shares have been issued and
outstanding as of December 31, 2008 and 2007, respectively.




The
presentation of recapitalization as of December 31, 2008 is being depicted in
the following table:





Name of Shareholders
                              
                              Number of Shares
                              
                              
                              Common Stock Capital
                              
                              
                              Additional Paid-in Capital
                              
                              
                              % of Equity HoldingsShell:
      Avalon Development of Enterprises Inc. prior to
    reverse-merger
                              
                              
                              13,072,500
                              
                              
                              
                              130,725
                              
                              
                              
                              -
                              
                              
                              
                              17.47
                              %Shareholders
      of Shell in exchange of all of GTHL shares upon
    reverse-merger
                              
                              
                              39,817,500
                              
                              
                              
                              398,175
                              
                              
                              
                              -
                              
                              
                              
                              53.20
                              %Zenith
      Capital Management LLC
                              
                              
                              200,000
                              
                              
                              
                              2,000
                              
                              
                              
                              498,000
                              
                              
                              
                              0.27
                              %Miss.
      Li Yan Kuan
                              
                              
                              80,000
                              
                              
                              
                              800
                              
                              
                              
                              61,600
                              
                              
                              
                              0.11
                              %Less: Cost of
      Issue
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              (151,384
                              )
                              
                              
                              -Beijing
      Lihe
                              
                              
                              1,500,000
                              
                              
                              
                              15,000
                              
                              
                              
                              285,000
                              
                              
                              
                              2.00
                              %Guangzhou
      Renwoxing
                              
                              
                              9,727,769
                              
                              
                              
                              97,278
                              
                              
                              
                              194,555
                              
                              
                              
                              13.00
                              %Private
      placement investors
                              
                              
                              7,941,302
                              
                              
                              
                              79,413
                              
                              
                              
                              541,836
                              
                              
                              
                              10.61
                              %Management
      / Insider
                              
                              
                              2,500,000
                              
                              
                              
                              25,000
                              
                              
                              
                              10,000
                              
                              
                              
                              3.45
                              %74,839,071
                              
                              
                              
                              748,391
                              
                              
                              
                              1,439,607
                              
                              
                              
                              100.00
                              %






F-22


Guangzhou
Global Telecom, Inc.
 Notes
to Consolidated Financial Statements
 For
the years ended December 31, 2008 and 2007




13.  ACQUISITIONS





The
Company had two acquisitions during 2008 consisting the acquisitions of (1)
Beijing Lihe Jiahua Technology and Trading Co., Ltd. (“Beijing Lihe”) and (2)
Guangzhou Renwoxing Telecom (“GRT”).




On April
7, 2008, Global Telecom Holdings. Ltd. (“GTHL”), a wholly-owned subsidiary of
Guangzhou Global Telecom, Inc. entered into a Share Transfer Agreement (the
“Agreement”) with majority shareholder of Beijing Lihe Jiahua Technology and
Trading Company Ltd. (“Beijing Lihe”), Li Han Guang, whereby the GTHL agreed to
provide 1.5 million shares of Guangzhou Global Telecom, Inc. common stock and
invest RMB 200,000 into Beijing Lihe in exchange of 50% of the total equity
interest of Beijing Lihe.




On July
29, 2008, the Company, through its wholly owned subsidiary, Global Telecom
Holdings Limited (“GTHL”), completed the acquisition of Guangzhou Renwoxing
Telecom (“GRT”), a company incorporated under the laws of the People’s Republic
of China. Pursuant to the Share Transfer Agreement (the “Agreement”) between
GTHL and GRT, the Company issued 9,727,769 shares of common stock to certain
assigners designated by GRT for 51% equity interest of GRT.




The
following tables are the condensed balance sheets of Beijing Lihe and Renwoxing
as of December 31, 2007 and July 31, 2008 respectively.





Beijing
      Lihe and RenwoxingCondensed
      Balance Sheets12/31/2007
                                          
                                          7/31/2008Assets
                                          
                                          BeijingLihe
                                          
                                          Renwoxing
                                          
                                          TotalCurrent
      AssetsCash
      and Cash Equivalent
                                          
                                          $       227,617
                                          
                                          $       
      388,805
                                          
                                          $        616,422Other
      receivables
                                          
                                          861
                                          
                                          169,315
                                          
                                          170,176Non-Current
      AssetsFixed
      Assets, net
                                          3,686
                                          
                                          64,007
                                          
                                          67,693Total
      Assets
                                          
                                          232,163
                                          
                                          622,127
                                          
                                          854,291LiabilitiesCurrent
      LiabilitiesTax
      Payable
                                          
                                          6,321
                                          
                                          2,946
                                          
                                          9,268Total
      Liabilities
                                          
                                          6,321
                                          
                                          2,946
                                          
                                          9,268Net
      Assets
                                          
                                          $       225,842
                                          
                                          $       
      619,181
                                          
                                          $        845,023








F-23


Guangzhou
Global Telecom, Inc.
 Notes
to Consolidated Financial Statements
 For
the years ended December 31, 2008 and 2007





Shares
      for Acquisition
                                  Stock
      Price
                                  Acquisition
      PriceBeijing
      Lihe
                                  1,500,000
                                  0.22
                                  328,481Renwoxing
                                  9,727,769
                                  0.03
                                  291,833Total
                                  11,227,769
                                  
                                  620,314Net
      Assets
                                  Minority
      Interest
                                  Allocation
      for AcquisitionsBeijing
      Lihe
                                  225,842
                                  112,921
                                  112,921Renwoxing
                                  619,181
                                  303,399
                                  315,782Total
                                  845,023
                                  416,320
                                  428,703Goodwill
      /(Assets
      write down)Beijing
      Lihe
                                  215,560Renwoxing
                                  (23,949)Total
                                  191,611




The
following tabulations were retroactive restatements of pro forma consolidated
balance sheets as of December 31, 2008 and 2007, and the statements of income
for the years then ended. The retroactive restatements were based on the
assumption that the acquisitions of Beijing Lihe and Renwoxing were made at the
beginning of 2007 for the purpose of trading and comparative
analysis.




Guangzhou
      Global Telecom, Inc.Pro
      forma Condensed Consolidated Balance Sheets2007
                                            
                                            2008GZ Global
                                            
                                            BeijingLihe
                                            
                                            Renwoxing
                                            
                                            Total
                                            
                                            GZ GlobalAssetsCurrent
      assets
                                            $
      3,929,524
                                            
                                            $  228,478
                                            
                                            $   558,120
                                            
                                            $4,716,122
                                            
                                            $6,981,802Non-current
      assets
                                            342,637
                                            
                                            3,686
                                            
                                            64,007
                                            
                                            410,330
                                            
                                            839,590Total
      assets
                                            4,272,161
                                            
                                            232,163
                                            
                                            622,127
                                            
                                            5,126,452
                                            
                                            7,821,392LiabilitiesCurrent
      liabilities
                                            3,204,777
                                            
                                            6,321
                                            
                                            2,946
                                            
                                            3,214,044
                                            
                                            4,500,416Non-current
      liabilities
                                            749,175
                                            
                                            -
                                            
                                            -
                                            
                                            749,175
                                            
                                            1,485,714Total
      liabilities
                                            3,953,952
                                            
                                            6,321
                                            
                                            2,946
                                            
                                            3,963,219
                                            
                                            5,986,130Minority
      interest
                                            -
                                            
                                            -
                                            
                                            -
                                            
                                            -
                                            
                                            775,507Net Assets
                                            $    318,209
                                            
                                            $  225,842
                                            
                                            $   619,181
                                            
                                            $1,163,232
                                            
                                            $1,059,755





F-24
 
 Guangzhou
Global Telecom, Inc.
 Notes
to Consolidated Financial Statements
 For
the years ended December 31, 2008 and 2007


2007
                        
                        2008GZ Global
                        
                        BeijingLihe
                        
                        Renwoxing
                        
                        Total
                        
                        GZ GlobalSales
      revenue
                        $   21,453,232
                        
                        $      1,937,539
                        
                        $      1,459,907
                        
                        $      24,850,678
                        
                        $44,810,929Cost
      of revenue
                        20,203,298
                        
                        1,735,274
                        
                        1,247,829
                        
                        23,186,401
                        
                        41,299,901Gross
      profit
                        1,249,934
                        
                        202,265
                        
                        212,078
                        
                        1,664,277
                        
                        3,511,028Operating
      expenses
                        (1,548,351)
                        
                        (18,851)
                        
                        (13,489)
                        
                        (1,580,691)
                        
                        (1,945,433)Other
      income/(expense)
                        (542,089)
                        
                        (22)
                        
                        (697)
                        
                        (542,808)
                        
                        (1,032,720)Earnings
      before tax
                        (840,506)
                        
                        183,392
                        
                        197,891
                        
                        (459,223)
                        
                        532,875Income
      tax
                        (143,983)
                        
                        
                        
                        (922)
                        
                        (144,905)
                        
                        (411,671)Minority
      Interest
                        -
                        
                        -
                        
                        -
                        
                        -
                        
                        (404,794)Net
      income
                        $      (984,489)
                        
                        $         183,392
                        
                        $         196,970
                        
                        $        (604,127)
                        
                        $
      (283,590)












F-25




ITEM 9.        
  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE





Our
accountant is Samuel H. Wong & Co. LLP, a certified public accountant. We do
not presently intend to change accountant. At no time have there been any
disagreements with such accountants regarding any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure.




ITEM
9A(T).   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 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, 2008.  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. Based on that assessment,
our management has determined that as of December 31, 2008, the Company’s
internal control over financial reporting was effective for the purposes for
which it is intended.





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 the
period covered by this report, fourth quarter of the fiscal year ended December
31, 2008 that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.





PART
III





ITEM
10.         DIRECTORS, EXECUTIVE
OFFICERS AND CORPORATE GOVERNANCE





Our
executive officers and directors and their ages as of March 27, 2009 are as
follows:




NAME
                AGE
                POSITIONYankuan
      Li
                51
                President,
      Chief Executive Officer, and DirectorRichard
      Yan (1)
                34
                Chief
      Financial OfficerJingda
      Ni (1)
                25
                General
      Manager





Note: (1)
Effective October 16, 2008, Mr. Zhihan Hu resigned as the Chief Financial
Officer and Director of our company. Yiwen Wu resigned as General Manager
and Director of our company. There were no disagreements between Zhihan Hu
and Yiwen Wu and us or any officer or director of the Company. Effective October
16, 2008, Richard Yan and Jingda Ni were appointed as our Chief Financial
Officer and General Manager.





Set forth
below is a brief description of the background and business experience of our
executive officers and directors for the past five years.





10




Yankuan
Li, President, Chief Executive Officer and Chairman of the Board





Yankuan
Li has been Chairman of the Board of GTL since 2005. From 2004-2005, she was
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.





Mr. Richard Yan, Chief
Financial Officer





Mr. Yan
previously served in several positions at Sancon Resources Recovery, Inc.
(OTCBB: SRRY) since its inception in 2004 as Vice President, Acting CFO and
Financial Controller. Richard previously served as the Financial Controller of
Hartcourt Companies Inc. through 2002 to 2003 (OTCBB: HRCT), a consolidator of
IT distribution company. Prior to that, Mr. Yan worked at KPMG China for several
years and accumulated extensive experience in the areas of financial advisory,
auditing, and taxation services. Mr. Yan is also a partner of KRC, an
independent consulting firm based in Shanghai rendering accounting and financial
services to private firms seeking to go public. He is a Certified Public
Accountant of China, and holds a Bachelor Degree in Economics and MBA from
Shanghai JiaoTong University.





Mr. Jingda Ni, General
Manager





Ni Jingda
joined Guangzhou Global Telecom in 2005 as marketing manager. Mr. Ni previously
served as principal supervisor in charge of Marketing with Guangzhou YueShen
TaiYang Technology Ltd., a former subsidiary of PacificNet Inc from 2004 to
2005, and accumulated extensive telecommunications expertise and experience.
After playing a senior role in the planning and execution of PacificNet Inc’s
rapid growth in Guangzhou, Mr. Ni was headhunted to become marketing manager at
Guangzhou Global Telecom. Mr. Ni also served at the People’s Court of Yuexiu
District, Guangzhou from 2003 to 2004. His appointment as general manager is
testimony of his strengths proven by the current successful expansion and growth
of Guangzhou Global Telecom since its inception.





Board of
Directors





Our sole
director holds office until the annual meeting of stockholders of the Company
following the election or until her successors are duly elected and qualified.
Officers are appointed by the Board of Directors and serve at its
discretion.





Significant
Employees





None.





Family
Relationships





No family
relationships exist among our directors, executive officers, or persons
nominated or chosen by us to become directors or executive
officers.





Involvement in Certain Legal
Proceedings





To our
knowledge, during the past five (5) years, none of our directors, executive
officers, promoters, control persons, or nominees has been:




§
            the
      subject of any bankruptcy petition filed by or against any business of
      which such person was a general partner or executive officer either at the
      time of the bankruptcy or within two years prior to that
    time;




§
            convicted
      in a criminal proceeding or is subject to a pending criminal proceeding
      (excluding traffic violations and other minor
  offenses);




§
            subject
      to any order, judgment, or decree, not subsequently reversed, suspended or
      vacated, of any court of competent jurisdiction, permanently or
      temporarily enjoining, barring, suspending or otherwise limiting his
      involvement in any type of business, securities or banking activities;
      or




§
            found
      by a court of competent jurisdiction (in a civil action), the Commission
      or the Commodity Futures Trading Commission to have violated a federal or
      state securities or commodities
law.




11




Auditors;
Code of Ethics; Financial Expert





We do not
have an audit committee financial expert.  We do not have an audit
committee financial expert because we believe the cost related to retaining a
financial expert at this time is prohibitive.  Furthermore, because we
are only beginning our commercial operations, at the present time, we believe
the services of a financial expert are not warranted.




Potential
Conflicts of Interest





We are
not aware of any current or potential conflicts of interest with any of our
executives or directors.





ITEM
11.         EXECUTIVE
COMPENSATION





Compensation of Executive
Officers





The
following executives of the Company received compensation in the amounts set
forth in the chart below for the fiscal years ended December 31, 2008 and 2007.
All compensation listed is in US dollars. 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, Chief Executive Officer and Chairman of the
                        2008
                        
                        
                        
                        
                        
                        0
                        
                        
                        
                        0
                        
                        
                        
                        0
                        
                        
                        
                        0
                        
                        
                        
                        0
                        
                        
                        
                        0Board
                        2007
                        
                        $
                        12,000
                        
                        
                        
                        0
                        
                        
                        
                        0
                        
                        
                        
                        0
                        
                        
                        
                        0
                        
                        
                        
                        0
                        
                        
                        
                        0
                        
                        
                        $
                        12,000Richard
      Yan, Chief Financial Officer (1)
                        2008
                        
                        $
                        
                        
                        
                        
                        0
                        
                        
                        
                        0
                        
                        
                        
                        0
                        
                        
                        
                        0
                        
                        
                        
                        0
                        
                        
                        
                        0
                        
                        
                        $Jingda
      Ni, General Manager (1)
                        2008
                        
                        $
                        
                        
                        
                        
                        0
                        
                        
                        
                        0
                        
                        
                        
                        0
                        
                        
                        
                        0
                        
                        
                        
                        0
                        
                        
                        
                        0
                        
                        
                        $Yiwen
      Wu, Chief Operating Officer
                        2008
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        $and
      Director (1)
                        2007
                        
                        $
                        10,800
                        
                        
                        
                        0
                        
                        
                        
                        0
                        
                        
                        
                        0
                        
                        
                        
                        0
                        
                        
                        
                        0
                        
                        
                        
                        0
                        
                        
                        $
                        10,800Zhihan
      Hu, Chief Financial Officer and
                        2008
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        $Director
      (1)
                        2007
                        
                        $
                        9,600
                        
                        
                        
                        0
                        
                        
                        
                        0
                        
                        
                        
                        0
                        
                        
                        
                        0
                        
                        
                        
                        0
                        
                        
                        
                        0
                        
                        
                        $
                        9,600





Note: (1)
Effective October 16, 2008, Mr. Zhihan Hu resigned as the Chief Financial
Officer and Director of our company. Yiwen Wu resigned as General Manager
and Director of our company. There were no disagreements between Zhihan Hu
and Yiwen Wu and us or any officer or director of the Company. Effective October
16, 2008, Richard Yan and Jingda Ni were appointed as our Chief Financial
Officer and General Manager.





Option Grants
Table.There were
no individual grants of stock options to purchase our common stock made to the
executive officer named in the Summary Compensation Table through March 27,
2009.




12




Aggregated
Option Exercises and Fiscal Year-End Option Value Table.There were no stock options
exercised during period ending March 27, 2009 by the executive officer named in
the Summary Compensation Table.




Long-Term Incentive Plan
(“LTIP”) Awards Table.There were no awards made to a named executive officer in the last
completed fiscal year under any LTIP




Compensation of
Directors





Directors
are permitted to receive fixed fees and other compensation for their services as
directors. The Board of Directors has the authority to fix the compensation of
directors. No amounts have been paid to, or accrued to, directors in such
capacity.




Employment
Agreements




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





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 March 27, 2009, for: (i) each director; (ii) each person
who is known to us to be the beneficial owner of more than 5%of our outstanding
common stock; (iii) each of our executive officers named in the Summary
Compensation Table; and (iv) all of our current executive officers and directors
of as a group. Except as otherwise indicated in the footnotes, all information
with respect to share ownership and voting and investment power has been
furnished to us by the persons listed. Except as otherwise indicated in the
footnotes, each person listed has sole voting power with respect to the shares
shown as beneficially owned.




Title
      of Class
                                  Name
      and Address
                                  
                                  Number
      of Common Shares Beneficially Owned(2)
                                  
                                  Percent
      of ClassCommon
      Stock
                                  Yankuan
      Li
                                  
                                  
                                  14,193,934
                                  
                                  
                                  18.353%Common
      Stock
                                  Richard
      Yan (1)Common
      Stock
                                  Jingda
      Ni (1)
                                  
                                  
                                  1,400,000
                                  
                                  
                                  1.81%Common
      Stock
                                  Yiwen
      Wu (1)
                                  
                                  
                                  250,000
                                  
                                  
                                  0.323%Common
      Stock
                                  Zhihan
      Hu (1)
                                  
                                  
                                  10,000
                                  
                                  
                                  0.013%Common
      Stock
                                  All
      directors and executive officers as a group
                                    (3
      persons)
                                  
                                  
                                  
                                  
                                  
                                  %




(1)
Effective October 16, 2008, Mr. Zhihan Hu resigned as the Chief Financial
Officer and Director of our company. Yiwen Wu resigned as General Manager and
Director of our company. There were no disagreements between Zhihan Hu and Yiwen
Wu and us or any officer or director of the Company. Effective October 16, 2008,
Richard Yan and Jingda Ni were appointed as our Chief Financial Officer and
General Manager.


(2) Based
on 77,339,071 shares of common stock issued and outstanding as of March 27,
2009.





Securities
authorized for issuance under equity compensation plans.





We have
no equity compensation plans





ITEM
13.         CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE




Transactions with Management
and Others





There
were no material transactions, or series of similar transactions, since the
beginning of the Company’s last fiscal year, or any currently proposed
transactions, or series of similar transactions, to which we were or are a
party, in which the amount involved exceeds $60,000, and in which any director
or executive officer, or any security holder who is known by us to own of record
or beneficially more than 5% of any class of our common stock, or any member of
the immediate family of any of the foregoing persons, has an
interest.




13




Indebtedness of
Management




There
were no material transactions, or series of similar transactions, since the
beginning of our last fiscal year, or any currently proposed transactions, or
series of similar transactions, to which we were or are a party, in which the
amount involved exceeds $60,000 and in which any director or executive officer,
or any security holder who is known to us to own of record or beneficially more
than 5% of any class of our common stock, or any member of the immediate family
of any of the foregoing persons, has an interest.




Transactions with
Promoters




There
were no material transactions between us and our promoters or
founders.


.


ITEM
14.          PRINCIPAL
ACCOUNTING FEES AND SERVICES





(1)
Audit Fees





For the
Company’s fiscal years ended December 31, 2008 and 2007, we were billed
approximately $70,000 and
$80,000 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, 2008
and 2007.




Tax Fees




For the
Company’s fiscal years ended December 31, 2008 and 2007, we were not billed for
professional services rendered for tax compliance, tax advice, and tax
planning.




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, 2008 and
2007.




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.





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 were
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.




PART
IV





ITEM
15.   EXHIBITS, FINANCIAL STATEMENT
SCHEDULES.




a)
Documents filed as part of this Annual Report




1.
Financial Statements




2.
Financial Statement Schedules




3.
Exhibits




14








Exhibit No.
                Title
      of Document3.1
                Articles
      of Incorporation (1)
                  Amendment
      to Articles of Incorporation3.2
                Bylaws
      (1)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 Singapor 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)21
                List
      of subsidiaries of the Registrant23.1
                Consent
      of  Samuel H. Wong & Co. LLP31.1
                Rule
      13a-14(a)/ 15d-14(a) Certification of Chief Executive
    Officer31.2
                Rule
      13a-14(a)/ 15d-14(a) Certification of Chief Financial
    Officer32.1
                Section
      1350 Certification of Chief Executive Officer32.2
                Section
      1350 Certification of Chief Financial
Officer





(1)
            Incorporated
      by reference to Form SB-2 filed on January 6,
  2006.


(2)
            Incorporated
      by reference to Form 8K/A filed on August 8,
  2007.


(3)
            Incorporated
      by reference to Form 8K filed on February 28,
  2008.


(4)
            Incorporated
      by reference to Form 8K filed on March 11,
2008.


(5)
            Incorporated
      by reference to Form 8K filed on July 31,
2008.


(6)
            Incorporated
      by reference to Form 8K filed on November 5,
  2008.








15




SIGNATURES





In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.







GUANGZHOU
      GLOBAL TELECOM, INC.Date:
      March 30, 2009
                By:
                /s/ Li,
      YankuanLi,
      YankuanPresident,
      Chief Executive Officer and Chairman of the Board of
Directors





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





Name
                        
                        Title
                        
                        Date/s/
      Li Yankuan
                        
                        President,
      Chief Executive Officer and Director
                        
                        March
      30, 2009Li
      Yankuan/s/Richard
      Yan
                        
                        Chief
      Financial Officer and Principal Accounting Officer
                        
                        March
      30, 2009Richard
      Yan/s/Jingda
      Ni
                        
                        General
      Manager
                        
                        March
      30, 2009Jingda
      Ni




16