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, 2009





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 has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).


Yes    No 





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





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 June 30, 2009 based upon the closing price reported for
such date on the OTC Bulletin Board was US $633,977.





As of
April 12, 2010, the registrant had 149,475,127 shares of its common stock
outstanding.





Documents Incorporated by
Reference: None.










TABLE
OF CONTENTS





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













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.




2


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.





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.




3




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.





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 April 14, 2010, 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





Currently
there are no legal proceedings pending or threatened against us. However, from
time to time, we may become involved in various lawsuits and legal proceedings
which arise in the ordinary course of business.  Litigation is subject
to inherent uncertainties, and an adverse result in these or other matters may
arise from time to time that may harm our business.





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.





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
            
            
            $
            0.012009First
      Quarter
            
            $
            0.015
            
            
            $
            0.007Second
      Quarter
            
            $
            0.025
            
            
            $
            0.006Third
      Quarter
            
            $
            0.021
            
            
            $
            0.007Fourth
      Quarter
            
            $
            0.015
            
            
            $
            0.0072010First
      Quarter
            
            $
            0.012
            
            
            $
            0.007




4







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
April 12, 2010, in accordance with our transfer agent records, we had 54
recordholders of our 149,475,127 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.





On
December 29, 2009, the Company entered into a Settlement Agreement with the
Holders. Pursuant to the Settlement Agreement, the Company would make a total
payment of $1,300,000 to the Holders no later than January 21, 2010. The
Convertible Debentures would be deemed satisfied and all outstanding Warrants
held by the Holders would be cancelled. In addition, the Holders agreed to
cancel all of the Company shares held by them at such time as the payment has
been made. However, as of March 20, 2010, the Company has not paid the sum of
$1,300,000 to the Holders.




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.


5





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, 2009 COMPARE TO THE YEAR ENDED DECEMBER 31,
2008





Total
Revenue
 
 During
fiscal year ended December 31, 2009, we earned $33,294,591 in revenues as
compared to $44,810,929 during the fiscal year ended in 2008, representing a
decrease of $11,516,338 or approximately 26%.  The decrease is mainly
resulted from the revenue of discontinued operation of 4 entities were not
included in year 2009, while these entities contributed revenue of $13,442,021
during 2008.
 
 Gross
Profit
 
 The gross
profit decreased to $819,761 during the fiscal year ended December 31, 2009 from
$3,511,028 in 2008, representing $2,691,267 or 77% decrease. The gross
margin decreased from 7.2% to 2.5%. The decrease of gross profit is mainly due
to the decrease of sales as explained above. In addition, decrease both in gross
profit and gross margin contributed to the reasons as follows: (1) financial
crisis take effect to the cell phone and calling cards demand in China; (2)
selling our products at negative margin to close our Wuhan Branch, Beijing
Branch and Zhengzhou Branches due to their un-expected performance; (3)
exclusive of discontinued operations.
 
 Expenses
 
 Our
selling, general and administrative expenses (“SG&A expenses”) were
$3,457,719 during the fiscal year ended December 31, 2009 as compared to
$1,945,433 for the fiscal year ended in 2008, representing an increase of
$1,512,286 or approximately 78%.   The increase of SG&A expenses
is mainly due to the allowance for bad debt of $1,664,013 made during 2009
against purchase deposit.
 
 Other
expenses were $26,879 during the year ended December 31, 2009, while other
expenses of $1,032,720 during the year ended December 31, 2008 mainly
representing interest expenses of $1,065,222, which includes $776,744
restructuring expenses.
 
 Discontinued
Operations
 
 Resulted
from the shrunk market and unsatisfied operating results, we decided to close 3
branches in mainland China and sell 50% equity interest to former Beijing Lihe's
owner to keep our core business. These 4 entities resulted $185,321 loss in
during 2009.
 
 Net
loss
 
 Net loss
recorded $2,890,849 during the fiscal year ended December 31, 2009, as compared
to a net loss of $283,590 during the fiscal year ended December 31,
2008.  The increase of net loss is mainly due to decrease of gross
profit and increase of SG&A expenses as explained above.
 
 Liquidity and Capital
Resources
 
 Cash used
in operating activities were $(2,091,714) during the fiscal year ended December
31, 2009 as compared to cash used in operating activities of $(526,814) for the
year ended December 31, 2008.   Cash used in operating activities
during year 2009 was mainly resulted from net loss of $2,890,849, increase of
receivables of $498,279, decrease of non-controlling interest of $554,310 by
netting off decrease of purchase deposit of $2,057,733.  Increase of
purchase deposits is mainly due to the allowance for bad debt of
$1,664,013.  While the cash used in operating activities during 2008
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 provided from investing activities were $445,843 for the fiscal year ended
December 31, 2009 as compared to $404,406 used for the fiscal year ended
December 31, 2008.  Cash provided from investing activities during year
2009 was resulted from proceeds from proceeds on disposal of fixed assets and
intangible assets of $315,081, proceeds on disposal of discontinued operation of
$193,762, netting off the deposit payment of 63,000.  Cash used for
investing activities during year 2008 was resulted from acquisition of property
and equipment and intangible assets of $586,884, and $41,602 respectively, by
netting of proceeds from repayment of note receivable and repayment from
business development of $31,751 and $192,329 respectively.
 
 Cash
flows provided by financing activities were $153,725 during the fiscal year
ended December 31, 2009 compared to $2,554,098 used in financing activities for
the fiscal year ended in 2008.   Cash provided by the financing
activities during 2009 was mainly due to the proceeds from issuance of stock,
while cash provided by financing activities during 2008 was mainly due to
proceeds from issuance of stock and issuance of convertible debt.


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.





6




ITEM
8.            FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA.





Guangzhou
Global Telecom, Inc.
 
 Audited
Consolidated Financial Statements
 
 December
31, 2009 and 2008
 
 (Stated
in US Dollars)
 
 
 7
 
 Guangzhou
Global Telecom, Inc.
 
 
 
 
 Content
              PageReport
      of Independent Registered Public Accounting Firm
              F-1Consolidated
      Balance
      Sheets
              F-2
      – 3Consolidated
      Statements of Income
              F-4Consolidated
      Statements of Changes in Stockholders’
      Equity
              F-5Consolidated
      Statements of Cash Flows
              F-6
      – 7Notes
      to Consolidated Financial Statements
              F-8
      – 23
 
 F-
 
  To:
              The Board of
      Directors and Stockholders ofGuangzhou 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, 2009 and 2008, 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, 2009 and 2008, 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.
 
 The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 13 to the consolidated
financial statements, the Company has incurred substantial losses, and has
difficulty to pay the PRC government Value Added Tax and past due Debenture
Holders Settlement, all of which raise substantial doubt about its ability to
continue as a going concern. These consolidated financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
 
 
 
 
 South
      San Francisco, California
              Samuel
      H. Wong & Co., LLPJanuary
      30, 2010
              Certified
      Public Accountants
  F-1
  Guangzhou
Global Telecom, Inc
 Consolidated
Balance Sheets
 As
of December 31, 2009 and 2008
 (Stated
in US Dollars)
 ASSETS
              
              
              
              
              12/31/2009
              
              
              12/31/2008NoteCurrent
      AssetsCash
      and cash equivalent
              
              
              
              
              $
              377,591
              
              
              $
              1,628,134Other
      receivable
              
              
              4
              
              
              
              1,418,759
              
              
              
              920,481Purchase
      deposits
              
              
              6
              
              
              
              1,525,935
              
              
              
              3,583,669Inventory
              
              
              
              
              
              
              799,480
              
              
              
              849,518Total
      Current Assets
              
              
              
              
              
              
              4,121,765
              
              
              
              6,981,802Non-Current
      AssetsProperty,
      plant & equipment, net
              
              
              7
              
              
              
              520,149
              
              
              
              624,030Goodwill
              
              
              
              
              
              
              -
              
              
              
              215,560Other
      non-current assets
              
              
              
              
              
              
              63,000
              
              
              
              -Total
      Non-Current Assets
              
              
              
              
              
              
              583,149
              
              
              
              839,590TOTAL
      ASSETS
              
              
              
              
              
              $
              4,704,914
              
              
              $
              7,821,392LIABILITIES
      & STOCKHOLDERS' EQUITYLIABILITIESCurrent
      LiabilitiesTaxes
      payable
              
              
              
              
              
              $
              684,043
              
              
              $
              695,687VAT
      payable
              
              
              8
              
              
              
              1,399,932
              
              
              
              1,396,460Due
      to shareholder
              
              
              5
              
              
              
              59,490
              
              
              
              44,698Accrued
      liabilities and other payable
              
              
              
              
              
              
              347,268
              
              
              
              420,535Convertible
      debenture - current portion
              
              
              10
              
              
              
              2,866,323
              
              
              
              1,943,037Total
      Current Liabilities
              
              
              
              
              
              
              5,357,056
              
              
              
              4,500,416Non-Current
      LiabilitiesConvertible
      debenture - non-current portion
              
              
              10
              
              
              
              -
              
              
              
              1,485,714Total
      Non-Current Liabilities
              
              
              
              
              
              
              -
              
              
              
              1,485,714TOTAL
      LIABILITIES
              
              
              
              
              
              $
              5,357,056
              
              
              $
              5,986,130
  See Notes
to Financial Statements and Accountants’ Report
  F-2
  Guangzhou
Global Telecom, Inc
 Consolidated
Balance Sheets
 As
of December 31, 2009 and 2008
 (Stated
in US Dollars)
 12/31/2009
              
              
              12/31/2008STOCKHOLDERS' EQUITYCommon
      Stock US$0.01 par value; 1,000,000,000Shares authorized, 149,475,127 and 74,839,071 sharesissued
      and outstanding as of December 31, 2009and
      December 31, 2008, respectively
              
              $
              1,494,751
              
              
              $
              748,391Additional
      paid in capital
              
              
              1,409,399
              
              
              
              1,439,607Other
      comprehensive income
              
              
              38,758
              
              
              
              (202,845
              )Retained
      earnings
              
              
              (3,816,247
              )
              
              
              (925,398
              )Non-controlling
      interest
              
              
              221,197
              
              
              
              775,507TOTAL
      STOCKHOLDERS' EQUITY
              
              $
              (652,141
              )
              
              $
              1,835,262TOTAL
      LIABILITIES ANDSTOCKHOLDERS'
      EUITY
              
              $
              4,704,914
              
              
              $
              7,821,392
 See Notes
to Financial Statements and Accountants’ Report
  F-3
 Guangzhou
Global Telecom, Inc
 Consolidated
Statements of Income
 For
the years ended December 31, 2009 and 2008
 (Stated
in US Dollars)
   Note
              
              12/31/2009
              
              
              12/31/2008Sales
              
              
              $
              33,294,591
              
              
              $
              44,810,929Cost
      of sales
              
              
              
              32,474,830
              
              
              
              41,299,901Gross
      profit
              
              
              
              819,761
              
              
              
              3,511,028Operating
      expenseSelling
      expenses
              
              
              
              61,618
              
              
              
              361,236G&A  expenses
              
              
              
              3,396,101
              
              
              
              1,584,197Total
      operating expense
              
              
              
              3,457,719
              
              
              
              1,945,433Operating
      income / (loss)
              
              
              
              (2,637,958
              )
              
              
              1,565,595Other
      income/(expense)Other
      income
              
              
              
              82,162
              
              
              
              3,398Interest
      income
              
              
              
              22
              
              
              
              32,159Other
      expenses
              
              
              
              (55,305
              )
              
              
              (3,055
              )Interest
      expenses
              
              
              
              -
              
              
              
              (1,065,222
              )Total
      other income/(expense)
              
              
              
              26,879
              
              
              
              (1,032,720
              )Income/(loss)
      from continued operation
              
              
              
              (2,611,079
              )
              
              
              532,875Income
      tax
              
              
              
              (27,603
              )
              
              
              (411,671
              )Loss
      from discontinued operation, net of tax
              
              
              
              (185,321
              )
              
              
              -Non-controlling
      interest
              
              
              
              (66,846
              )
              
              
              (404,794
              )Net
      Income/(Loss)
              
              
              $
              (2,890,849
              )
              
              $
              (283,590
              )Earnings
      Per ShareBasic
              
              
              $
              (0.028
              )
              
              $
              (0.005
              )Diluted
              
              
              $
              (0.028
              )
              
              $
              (0.005
              )Weighted
      Average Shares OutstandingBasic
              
              
              
              104,014,950
              
              
              
              61,342,162Diluted
              
              
              
              104,014,950
              
              
              
              61,342,162
 
 Accumulated Comprehensive
      IncomeComprehensive Income
              
              12/31/2008
              
              
              12/31/2009
              
              
              TotalNet
      Income
              
              $
              (283,590
              )
              
              $
              (2,890,849
              )
              
              $
              (3,174,439)Other Comprehensive IncomeForeign
      Currency Translation Adjustment
              
              
              (222,946
              )
              
              
              241,603
              
              
              
              18,657$
              (506,536
              )
              
              $
              (2,649,246
              )
              
              $
              (3,155,782)
  See Notes
to Financial Statements and Accountants’ Report
  F-4
  Guangzhou
Global Telecom, Inc
 Consolidated
Statements of Changes in Stockholders’ Equity
 As
of and for the years ended December 31, 2009 and 2008
 (Stated
in US Dollars)
 
 Additional
              
              
              OtherTotal
      Number
              
              
              Common
              
              
              Paid
      in
              
              
              Comprehensive
              
              
              Retained
              
              
              Minorityof Shares
              
              
              Stock
              
              
              Capital
              
              
              Income
              
              
              Earnings
              
              
              Interest
              
              
              TotalBalance,
      January 1, 2008
              
              
              53,170,000
              
              
              $
              531,700
              
              
              $
              408,216
              
              
              $
              20,101
              
              
              $
              (641,808
              )
              
              $
              -
              
              
              $
              318,209Conversion
      of convertible 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
              )Non-controlling
      interest
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              775,507
              
              
              
              775,507Foreign
      Currency Translation
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (222,946
              )
              
              
              -
              
              
              
              -
              
              
              
              (222,946
              )Balance
      at December 31, 2008
              
              
              74,839,071
              
              
              $
              748,391
              
              
              $
              1,439,607
              
              
              $
              (202,845
              )
              
              $
              (925,398
              )
              
              $
              775,507
              
              
              $
              1,835,262Balance,
      January 1, 2009
              
              
              74,839,071
              
              
              $
              748,391
              
              
              $
              1,439,607
              
              
              $
              (202,845
              )
              
              $
              (925,398
              )
              
              $
              775,507
              
              
              $
              1,835,262Conversion
      of convertible debenture to common stock
              
              
              60,086,056
              
              
              
              600,860
              
              
              
              (8,333
              )
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              592,527Issuance
      of common stock in relation to management compensation
              
              
              14,550,000
              
              
              
              145,500
              
              
              
              (21,875
              )
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              123,625Net
      Income/(Loss)
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (2,890,849
              )
              
              
              -
              
              
              
              (2,890,849
              )Non-controlling
      interest
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (554,310
              )
              
              
              (554,310
              )Foreign
      Currency Translation
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              241,603
              
              
              
              -
              
              
              
              -
              
              
              
              241,603Balance
      at December 31, 2009
              
              
              149,475,127
              
              
              $
              1,494,751
              
              
              $
              1,409,399
              
              
              $
              38,758
              
              
              $
              (3,816,247
              )
              
              $
              221,197
              
              
              $
              (652,141
              )
  See Notes
to Financial Statements and Accountants’ Report
  F-5
  Guangzhou
Global Telecom, Inc
 Consolidated
Statements of Cash Flows
 For
the years ended December 31, 2009 and 2008
 (Stated
in US Dollars)
   12/31/2009
              
              
              12/31/2008Cash
      Flow from Operating ActivitiesCash
      received from customers
              
              $
              32,602,550
              
              
              $
              44,438,871Cash
      paid to suppliers
              
              
              (30,362,664
              )
              
              
              (42,786,815
              )Cash
      paid for selling and G&A expenses
              
              
              (3,457,719
              )
              
              
              (1,945,433
              )Cash
      received from other income
              
              
              158,005
              
              
              
              186,822Cash
      paid to director
              
              
              14,793
              
              
              
              162,745Cash
      paid for other expense
              
              
              (389,769
              )
              
              
              (29,238
              )Interest
      received
              
              
              24
              
              
              
              32,159Interest
      paid
              
              
              (2
              )
              
              
              (1,065,222
              )Non-controlling
      interest
              
              
              (621,156
              )
              
              
              370,713Tax
      paid
              
              
              (35,775
              )
              
              
              108,584Cash
      Sourced from/(Used in) Operating Activities
              
              
              (2,091,714
              )
              
              
              (526,814
              )Cash
      Flow from Investing ActivitiesProceeds
      from notes receivable
              
              
              -
              
              
              
              31,751Advance
      for business development
              
              
              -
              
              
              
              192,329Purchase
      of property, plant & equipment
              
              
              -
              
              
              
              (586,884
              )Proceeds
      of disposal Assets
              
              
              99,521
              
              
              
              -Sale/(purchase)
      of intangible assets
              
              
              215,560
              
              
              
              (41,602
              )Payments
      for deposits
              
              
              (63,000
              )
              
              
              -Net
      cash inflow from disposal of discontinued operation
              
              
              193,762
              
              
              
              -Cash
      Sourced from/(Used in) Investing Activities
              
              
              445,843
              
              
              
              (404,406
              )Cash
      Flow from Financing ActivitiesIssuance
      of common stock
              
              
              746,361
              
              
              
              216,691Additional
      paid in capital for common stock
              
              
              -
              
              
              
              1,031,391Proceeds/(settlements)
      of convertible debentures
              
              
              (592,636
              )
              
              
              1,306,016Cash
      Sourced from/(Used in) Financing Activities
              
              
              153,725
              
              
              
              2,554,098Net
      Increase/(Decrease) in Cash & Cash Equivalents
              
              
              (1,492,146
              )
              
              
              1,622,878Effect
      of Foreign Currency Translation
              
              
              241,603
              
              
              
              (222,946
              )Cash
      & Cash Equivalent at the Beginning of Year
              
              
              1,628,134
              
              
              
              228,202Cash
      & Cash Equivalent at the End of Year
              
              $
              377,591
              
              
              $
              1,628,134
  See Notes
to Financial Statements and Accountants’ Report
  F-6
  Guangzhou
Global Telecom, Inc.
 Reconciliation
of Net Income to Cash Flow Used in Operating Activities
 For
the years ended December 31, 2009 and 2008
 (Stated
in US Dollars)
   12/31/2009
              
              
              12/31/ 2008Net
      (loss)/income
              
              $
              (2,890,849
              )
              
              $
              (283,590
              )Adjustments
      to reconcile net (loss)/income tonet
      cash provided by cash activitiesMinority
      interest
              
              
              (554,310
              )
              
              
              775,507Depreciation
              
              
              64,643
              
              
              
              131,533Gain
      on disposal of property, plant and equipment
              
              
              13,868
              
              
              
              -Loss
      on disposal of discontinued operation
              
              
              (267,912
              )
              
              
              -Decrease/(increase)
      in other receivable
              
              
              (498,279
              )
              
              
              (404,619
              )Decrease/(increase)
      in due from director
              
              
              -
              
              
              
              118,047Decrease/(increase)
      in purchase deposit
              
              
              2,057,733
              
              
              
              (1,203,294
              )Decrease/(increase)
      in related party
              
              
              -
              
              
              
              32,560Decrease/(increase)
      in inventory
              
              
              50,038
              
              
              
              (419,120
              )Increase/(decrease)
      in tax payable
              
              
              387,367
              
              
              
              213,394Increase/(decrease)
      in accrued liabilities and other payable
              
              
              (58,474
              )
              
              
              205,907Increase/(decrease)
      in VAT payable
              
              
              3,472
              
              
              
              86,065Increase/(decrease)
      in income tax payable
              
              
              (399,011
              )
              
              
              220,797Total
      of all adjustments
              
              
              799,135
              
              
              
              (243,224
              )Net
      Cash Provided by (Used in)/Sourced from Operating
    Activities
              
              $
              (2,091,714
              )
              
              $
              (526,814
              )
 See Notes
to Financial Statements and Accountants’ Report
 F-7
 Guangzhou
Global Telecom, Inc.
 Notes
to Consolidated Financial Statements
 As
of and for the years ended December 31, 2009 and 2008
 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.
 
 (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.
  F-8
  Guangzhou
Global Telecom, Inc.
 Notes
to Consolidated Financial Statements
 As
of and for the years ended December 31, 2009 and 2008
  The
company owned the following subsidiaries since the reserve-merger and soon
thereafter. As of December 31, 2009, 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
      8,155,730Guangzhou
      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
              65
              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.
 
 
 (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.
  F-9
  Guangzhou
Global Telecom, Inc.
 Notes
to Consolidated Financial Statements
 As
of and for the years ended December 31, 2009 and 2008
 
 (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
 
 
 (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.
  F-10
  Guangzhou
Global Telecom, Inc.
 Notes
to Consolidated Financial Statements
 As
of and for the years ended December 31, 2009 and 2008
 
 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.
 
 (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.
  F-11
 Guangzhou
Global Telecom, Inc.
 Notes
to Consolidated Financial Statements
 As
of and for the years ended December 31, 2009 and 2008
  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
              12/31/2009
              12/31/2008Period
      end RMB : US$ exchange rate
              6.8372
              6.8542Average
      period RMB : US$ exchange rate
              6.8409
              6.9623Period
      end HKD : US$ exchange rate
              7.7551
              7.7507Average
      period HKD : US$ exchange rate
              7.7522
              7.7874Period
      end MOP : US$ exchange rate
              8.1439
              8.1823Average
      period MOP : US$ exchange rate
              8.1303
              8.1657Period
      end SGD : US$ exchange rate
              1.4054
              1.4426Average
      period SGD : US$ exchange rate
              1.4545
              1.4156
 
 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.
 
 (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, 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: -
  F-12
  Guangzhou
Global Telecom, Inc.
 Notes
to Consolidated Financial Statements
 As
of and for the years ended December 31, 2009 and 2008
   Subsidiary
              Country of Domicile
              Income Tax RateGGT,
      ZGTG 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.
 
 ·
              Since
      Guangzhou Global Telecom, Inc. is primarily a holding company without any
      business activities in the United States, the Company shall not be subject
      to United States income tax for the year ended December 31,
      2009.
 
 (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-13
 
 Guangzhou
Global Telecom, Inc.
 Notes
to Consolidated Financial Statements
 As
of and for the years ended December 31, 2009 and 2008
 (t)
              Goodwill
 
 Goodwill
represents the excess of the purchase price over the fair value of the net
tangible and identifiable assets acquired in a business combination. In
accordance with Statement of Financial Accounting Standards ("SFAS") No. 142,
"Goodwill and Other Intangible Assets", goodwill is no longer subject to
amortization. Rather, goodwill is subject to at least an annual assessment for
impairment, applying a fair-value based test. Fair value is generally determined
using a discounted cash flow analysis.
 
 (u)
              Recent
      Accounting Pronouncements
 
 In June
2009, FASB issued FASB Statement No. 166, Accounting for Transfers for
Financial Assets (FASB ASC 860 Transfers and Servicing) and
FASB Statement No. 167 (FASB ASC 810 Consolidation), a revision to
FASB Interpretation No. 46 (Revised December 2003), Consolidation of Variable Interest
Entities(FASB ASC 810 Consolidation).
 Statement
166 is a revision to FASB Statement No. 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities(FASB
ASC 860 Transfers and
Servicing), and
will require more information about transfers of financial assets, including
securitization transactions, and where entities have continuing exposure to the
risks related to transferred financial assets. It eliminates the concept of a
“qualifying special-purpose entity,” changes the requirements for derecognizing
financial assets, and requires additional disclosures. Statement No. 166 (FASB
ASC 860 Transfers and
Servicing) must be applied as of the beginning of each reporting entity’s
first annual reporting period that begins after November 15, 2009, for interim
periods within that first annual reporting period and for interim and annual
reporting periods thereafter. Earlier application is prohibited. This Statement
must be applied to transfers occurring on or after the effective date.  The
Company is still evaluating the impact of the above pronouncement.
   Statement
167 is a revision to FASB Interpretation No. 46 (Revised December 2003), Consolidation of Variable Interest
Entities (FASB ASC 810 Consolidation), and changes how a reporting
entity determines when an entity that is insufficiently capitalized or is not
controlled through voting (or similar rights) should be consolidated. The
determination of whether a reporting entity is required to consolidate another
entity is based on, among other things, the other entity’s purpose and design
and the reporting entity’s ability to direct the activities of the other entity
that most significantly impact the other entity’s economic
performance. Statement No. 167 (FASB ASC 810 Consolidation) shall be
effective as of the beginning of each reporting entity’s first annual reporting
period that begins after November 15, 2009, for interim periods within that
first annual reporting period, and for interim and annual reporting periods
thereafter.  Earlier application is prohibited. The Company is still
evaluating the impact of the above pronouncement.
 On June
30, 2009, FASB issued FASB Statement No. 168, Accounting Standards CodificationTM( FASB ASC 105 Generally Accepted Accounting
Principles)a replacement of FASB
Statement No. 162  the Hierarchy of Generally Accepted
Accounting Principles. On the effective date of this standard, FASB
Accounting Standards CodificationTM (ASC) became the source of authoritative U.S.
accounting and reporting standards for nongovernmental entities, in addition to
guidance issued by the Securities and Exchange Commission (SEC). This statement
is effective for financial statements issued for interim and annual periods
ending after September 15, 2009.  If an accounting change results from the
application of this guidance, an entity should disclose the nature and reason
for the change in accounting principle in their financial statements.  This
new standard flattens the GAAP hierarchy to two levels: one that is
authoritative (in FASB ASC) and one that is non-authoritative (not in FASB ASC).
Exceptions include all rules and interpretive releases of the SEC under the
authority of federal securities laws, which are sources of authoritative GAAP
for SEC registrants, and certain grandfathered guidance having an effective date
before March 15, 1992. Statement No. 168 is the final standard that will be
issued by FASB in that form.  There will no longer be, for example,
accounting standards in the form of statements, staff positions, Emerging Issues
Task Force (EITF) abstracts, or AICPA Accounting Statements of
Position.
  F-14
  Guangzhou
Global Telecom, Inc.
 Notes
to Consolidated Financial Statements
 As
of and for the years ended December 31, 2009 and 2008
 
 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.
 
 
 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, 2009 and 2008 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
              
              12/31/2009
              
              
              12/31/2008Trade
      financing to business associates
              
              $
              1,484,325
              
              
              $
              920,481Allowance
      for bad debt
              
              
              (65,566
              )
              
              
              -Other
      receivable, net
              
              $
              1,418,759
              
              
              $
              920,481
  5.
              DUE
      TO SHAREHOLDER
 
 The
following table presents the balances the Company owed to
shareholders.
 
 12/31/2009
              
              
              12/31/2008Due
      to  shareholders
              
              $
              (59,490
              )
              
              $
              (44,698
              )$
              (59,490
              )
              
              $
              (44,698
              )
 
 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.
  F-15
  Guangzhou
Global Telecom, Inc.
 Notes
to Consolidated Financial Statements
 As
of and for the years ended December 31, 2009 and 2008
   6.
              PURCHASE
      DEPOSITS
 
 Purchase
Deposits of $1,525,935 and $3,583,669 at December 31, 2009 and 2008
respectively, consisted of advances to suppliers for the purchase of
inventories, and prepayments for general operating costs.
 
 Type of Account
              
              12/31/2009
              
              
              12/31/2008Purchase
      deposits, gross
              
              $
              3,189,948
              
              
              $
              3,583,669Allowance
      for bad debt
              
              
              (1,664,013
              )
              
              
              -Purchase
      deposit, net
              
              $
              1,525,935
              
              
              $
              3,583,669
 
 The
Company has advanced $388,343, $787,213 and $488,457 to suppliers Tangxin
Technology Co., Ltd., Guangda Commercial Co., Ltd. and Tianhe Tangxie Co., Ltd.
for purchase of operating inventories. However, Tianxin filed bankruptcy,
Guangda and Tianhe have been closed. The Company accrued 100% bad debt allowance
for these purchase deposits.
  7.
              PROPERTY,
      PLANT, AND EQUIPMENT
 
 Property,
plant, and equipment consist of the following as of December 31, 2009 and 2008:
-
 
 12/31/2009Category of Asset
              
              Cost
              
              
              Accumulated Depreciation
              
              
              NetEquipment
              
              
              36,557
              
              
              
              21,596
              
              
              
              14,961Furniture
      & Fixtures
              
              
              119,850
              
              
              
              66,029
              
              
              
              53,821Motor
      Vehicles
              
              
              103,687
              
              
              
              103,661
              
              
              
              26Building
              
              
              492,541
              
              
              
              41,200
              
              
              
              451,341Total
              
              
              752,635
              
              
              
              232,486
              
              
              
              520,149
 
 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
 
 The
depreciation expenses were $ 4,361 and $131,533 for the years ended December 31,
2009and 2008, respectively.
  F-16
 Guangzhou
Global Telecom, Inc.
 Notes
to Consolidated Financial Statements
 As
of and for the years ended December 31, 2009 and 2008
   8.   
VALUE ADDED TAX 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 2009. 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, 2009.
 
 
 9.   
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, 2009 and 2008 amounted to $9,624  and
$199,718, respectively. Future minimum lease payments under non-cancelable
operating leases until termination of the leases amounted to $9,436 distributed
as:
 
 Fiscal Years
              
              Minimum Lease Payments2010
              
              $
              4,9382011
              
              
              4,498Total
              
              $
              9,436
 
 
 10.  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.
 
 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.
 
 F-17
  Guangzhou
Global Telecom, Inc.
 Notes
to Consolidated Financial Statements
 As
of and for the years ended December 31, 2009 and 2008
 
 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,
2008 and 2009 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: -
 
 12/31/2009
              
              
              12/31/2008Convertible Debenture - Principal and
      interestBalance
      at beginning of year
              
              $
              3,428,751
              
              
              $
              2,122,735Addition
              
              
              -
              
              
              
              1,000,000Redemption
              
              
              (562,428
              )
              
              
              (507,936
              )Interest charged for the current year
              
              
              -
              
              
              
              400,188Repayment of interest in current year
              
              
              -
              
              
              
              -Restructure cost
              
              
              -
              
              
              
              413,764Restructure of convertible debenture
              
              
              -Balance
      at end of year
              
              $
              2,866,323
              
              
              $
              3,428,751Less: 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
              
              $
              2,866,323
              
              
              $
              3,428,751
 
  F-18
  Guangzhou
Global Telecom, Inc.
 Notes
to Consolidated Financial Statements
 As
of and for the years ended December 31, 2009 and 2008
 
 The
      Convertible Debenture was classified as current and non-current as
      follows:12/31/2009
              
              
              12/31/2008Current
      portion
              
              $
              2,866,323
              
              
              $
              1,943,057No
      current portion
              
              
              -
              
              
              
              1,485,714$
              2,866,323
              
              
              $
              3,428,751
  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.
 
 On
December 29, 2009, the Company entered into a Settlement Agreement with
Debenture Holders. Pursuant to the Settlement Agreement, the Company would make
a total payment of $1,300,000 to the Holders no later than January 21, 2010. The
Convertible Debentures would be deemed satisfied and all outstanding Warrants
held by the Holders would be cancelled. In addition, the Holders agreed to
cancel all of the Company shares held by them at such time as the payment has
been made. However, as of March 20, 2010, the Company has not paid the sum of
$1,300,000 to the Debenture Holders.
  F-19
 Guangzhou
Global Telecom, Inc.
 Notes
to Consolidated Financial Statements
 As
of and for the years ended December 31, 2009 and 2008
   11. 
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 149,475,127 and 74,839,071 shares have been issued and
outstanding as of December 31, 2009 and 2008, respectively.
 
 The
presentation of recapitalization as of December 31, 2009 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
              
              
              $
              -
              
              
              
              8.75
              %Shareholders
      of Shell in exchange of all of GTHL shares upon
    reverse-merger
              
              
              39,817,500
              
              
              
              398,175
              
              
              
              -
              
              
              
              26.64
              %Zenith
      Capital Management LLC
              
              
              200,000
              
              
              
              2,000
              
              
              
              498,000
              
              
              
              0.13
              %Miss.
      Li Yan Kuan
              
              
              80,000
              
              
              
              800
              
              
              
              61,600
              
              
              
              0.05
              %Less: Cost of
      Issuance
              
              
              -
              
              
              
              -
              
              
              
              (151,384
              )
              
              
              -Beijing
      Lihe
              
              
              1,500,000
              
              
              
              15,000
              
              
              
              285,000
              
              
              
              1.00
              %Guangzhou
      Renwoxing
              
              
              9,727,769
              
              
              
              97,278
              
              
              
              194,555
              
              
              
              6.51
              %Private
      placement investors
              
              
              68,027,358
              
              
              
              680,273
              
              
              
              511,628
              
              
              
              45.51
              %Management
      / Insider
              
              
              17,050,000
              
              
              
              170,500
              
              
              
              10,000
              
              
              
              11.41
              %149,475,127
              
              
              $
              1,494,751
              
              
              $
              1,409,399
              
              
              
              100.00
              %
   F-20
  Guangzhou
Global Telecom, Inc.
 Notes
to Consolidated Financial Statements
 As
of and for the years ended December 31, 2009 and 2008
 
 12. 
DISCONTINUED OPERATION
 
 During
the year ended December 31, 2009, the Company closed operation of three branches
namely “Beijing, Wuhan, and Zhengzhou” of Guangzhou Global Telecom Company
Limited. Their operation results, net of tax effect are reported in detail as
follow:
 
 
 Financial
      PositionAt
      December 31, 2009Beijing
              
              
              Wuhan
              
              
              ZhengzhouBranch
              
              
              Branch
              
              
              Branch
              
              
              TotalAssetsCurrent
      assets
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Non-current
      assets
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Total
      assets
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -LiabilitiesCurrent
      liabilities
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Non-current
      liabilities
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Total
      liabilities
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Net Assets
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Total Liabilities & Net
      Assets
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
  F-21
  Guangzhou
Global Telecom, Inc.
 Notes
to Consolidated Financial Statements
 As
of and for the years ended December 31, 2009 and 2008
 
 Results
      of OperationsFor
      the year endedDecember
      31, 2009Beijing
      Branch
              
              
              Wuhan
      Branch
              
              
              Zhengzhou
      Branch
              
              
              TotalRevenue
              
              
              689,269
              
              
              
              480,546
              
              
              
              445,010
              
              
              
              1,614,825Cost
      of revenue
              
              
              698,999
              
              
              
              505,277
              
              
              
              462,644
              
              
              
              1,666,920Gross
      profit (Loss)
              
              
              (9,730
              )
              
              
              (24,731
              )
              
              
              (17,634
              )
              
              
              (52,095
              )Selling
      expenses
              
              
              8,771
              
              
              
              2,192
              
              
              
              6,578
              
              
              
              17,541General
      and administrative expenses
              
              
              60,766
              
              
              
              27,526
              
              
              
              16,968
              
              
              
              105,260Total
      operating expenses
              
              
              69,537
              
              
              
              29,718
              
              
              
              23,546
              
              
              
              122,801Other
      income
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Other
      expense
              
              
              -
              
              
              
              (805
              )
              
              
              (9,620
              )
              
              
              (10,425
              )Interest
      expense
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Earnings/(Losses)
      before tax
              
              
              (79,267
              )
              
              
              (55,254
              )
              
              
              (50,800
              )
              
              
              (185,321
              )Income
      tax
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -(79,267
              )
              
              
              (55,254
              )
              
              
              (50,800
              )
              
              
              (185,321
              )
 
 F-22
 
 Guangzhou
Global Telecom, Inc.
 Notes
to Consolidated Financial Statements
 As
of and for the years ended December 31, 2009 and 2008
    13.
GOING CONCERN UNCERTAINTIES
 
 These
consolidated financial statements have been prepared assuming that Company will
continue as a going concern, which contemplates the realization of assets and
the discharge of liabilities in the normal course of business for the
foreseeable future.
 
 As of
December 31, 2009, the Company has an accumulated deficit of $2,890,843 due to
the fact that the Company continued to incur losses over the past several years,
and has difficulty to pay the PRC government Value Added Tax and past due
Debenture Holders Settlement.
 
 As a
result, the financial statements do not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets or
the amounts and classification of liabilities that may result from the outcome
of the Company’s ability to continue as a going concern.




F-23


ITEM
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
 
 None.
 
 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, 2009.  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, 2009, 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, 2009 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 April 12, 2010 are as
follows:





NAME
            AGE
            POSITIONYankuan
      Li
            51
            President,
      Chief Executive Officer, Chief Financial Officer and Director
      (1)





(1)
Effective April 15, 2010, Ms. Yankuan Li was appointed as the Chief Financial
Officer of the Company.




Yankuan
Li, President, Chief Executive Officer, Chief Financial 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.





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.





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, 2009 and 2008.
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.




8





SUMMARY
COMPENSATION TABLE





Name
      and Principal Position
            Year
            
            Salary
              ($)
            
            
            Bonus
              ($)
            
            
            Stock
      Awards
              ($)
            
            
            Option
      Awards
              ($)
            
            
            Non-Equity
      Incentive Plan Compensation ($)
            
            
            Non-Qualified
      Deferred Compensation Earnings
              ($)
            
            
            All
      Other Compensation
              ($)
            
            
            Totals
              ($)Yankuan
      Li, CEO, CFO and
            2009
            
            
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0Chairman
      (1)
            2008
            
            $
            
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            $Richard
      Yan, former CFO (2)
            2009
            
            $
            
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            $2008
            
            $
            
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            $Jingda
      Ni, General Manager (3)
            2009
            
            $
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            $2008
            
            $
            
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            $





(1)
Effective April 15, 2010, Ms. Yankuan Li was appointed as the Chief Financial
Officer of the Company.
 
 (2)
Effective March 12, 2010, Mr. Richard Yan resigned as the Chief Financial
Officer of the Company due to personal reasons.  There were no
disagreements between Mr. Yan and us or any officer or director of the
Company.
 
 (3)
Effective September 21, 2009, Mr. Jingda Ni resigned as the General Manager of
the Company due to personal and health reasons.  There were no
disagreements between Mr. Ni and us or any officer or director of the
Company.





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.





Aggregated Option Exercises
and Fiscal Year-End Option Value Table.There were no stock options
exercised.





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 April 12, 2010, 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
              
              Percent
      of Class (1)Common
      Stock
              Yankuan
      Li
              
              
              14,193,934
              
              
              9.50%Common
      Stock
              Enable
      Growth Partners LP (2)
              
              
              32,704,376
              
              
              21.88%Common
      Stock
              All
      directors and executive officers as a group (1
    person)
              
              
              14,193,934
              
              
              9.50%




(1)
              Based
      on 149,475,127 shares of common stock issued and outstanding as of April
      12, 2010.
 (2)
              Including
      27,798,719 shares of common stock held by Enable Growth Partners LP,
      3,270,438 shares held by Enable Opportunity Partners LP and 1,635,219
      shares held by Pierce Diversified Strategy Master Fund LLC (collectively,
      “Enable”). The Company and Enable agreed to cancel these
      shares.





Securities
authorized for issuance under equity compensation plans.





We have
no equity compensation plans




9




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.





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, 2009 and 2008, we were billed
approximately $81,000 and $92,000 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, 2009
and 2008.





Tax Fees





For the
Company’s fiscal years ended December 31, 2009 and 2008, 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, 2009 and
2008.





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 was pre-approved.  However, all of the above services and
fees were reviewed and approved by the entire board of directors either before
or after the respective services were rendered.





10




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





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)10.11
            Settlement
      Agreement, dated December 29, 2009  (7)31.1
            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.(7)
            Incorporated
      by reference to the Form 8-K filed on January 4,
  2010.




11




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:
      April 15, 2010
            By:
            /s/ Li,
      YankuanLi,
      YankuanPresident,
      Chief Executive Officer, Chief Financial 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, Chief Financial Officer and
      Director
            
            April
      15, 2010Li
      Yankuan