UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

For the Quarterly Period ended September 30, 2014

 

Commission File Number  000-32629

 

Ceetop Inc.

(Exact name of registrant as specified in charter)

 

Oregon		98-0408707
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

 

A2803, Lianhe Guangchang, 5022 Binhe Dadao, Futian District, Shenzhen, China		518026
(Address of principal executive offices)		(Zip Code)

 

(86-755) 3336-6628

---

Registrant’s telephone number, including area code

 

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

 

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

 

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

 

	Large accelerated filer  o		Accelerated Filer                      o
	Non-accelerated filer    o (Do not check if smaller reporting company)		Smaller Reporting Company   x

 

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

 

Indicate the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: As of November 18, 2014 the Company had outstanding 40,956,631 shares of its common stock, par value $0.001.

 

 

 

Special Note Regarding Forward-Looking Statements

 

This Quarterly Report on Form 10-Q, including "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 2 of Part I of this report include forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by forward-looking statements.

 

In some cases, you can identify forward-looking statements by terminology such as "may," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "proposed," "intended," or "continue" or the negative of these terms or other comparable terminology. You should read statements that contain these words carefully, because they discuss our expectations about our future operating results or our future financial condition or state other "forward-looking" information. There may be events in the future that we are not able to accurately predict or control. Before you invest in our securities, you should be aware that the occurrence of any of the events described in this Quarterly Report could substantially harm our business, results of operations and financial condition, and that upon the occurrence of any of these events, the trading price of our securities could decline and you could lose all or part of your investment. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, growth rates, levels of activity, performance or achievements. We are under no duty to update any of the forward-looking statements after the date of this Quarterly Report to conform these statements to actual results.

 

  

TABLE OF CONTENTS

 

PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets (unaudited and audited)	F-1
	Consolidated Statements of Income and Comprehensive Income (unaudited)	F-2
	Consolidated Statements of Cash Flows (unaudited)	F-3
	Consolidated Statements of Stockholders’ Equity (unaudited)	F-4
	Notes to Consolidated Financial Statements (unaudited)	F-5 - F-12
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	7
Item 4.	Controls and Procedures	7
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	8
Item 1A.	Risk Factors	8
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	8
Item 3.	Defaults Upon Senior Securities	8
Item 4.	Mine Safety Disclosures	8
Item 5.	Other Information	8
Item 6.	Exhibits	9
Signatures		10

 

 

PART I - FINANCIAL INFORMATION

  

Item 1. Consolidated Financial Statements (Unaudited)

  

CEETOP INC

(FORMERLY CHINA CEETOP.COM INC.)

CONSOLIDATED BALANCE SHEETS

 

		September 30, 2014				December 31, 2013
		(Un-audited)				(Audited)
ASSETS
Current Assets
Cash and cash equivalents		$	5,530			$	118,299
Other receivables			74,421				86,603
Prepaid expenses and deposits			-				22,994
Total Current Assets			79,951				227,896
Non-current assets
Property, plant and equipment, net (note 4)			220,194				266,583
Equity investment in an investee company (note 5)			1,170,745				1,299,995
Prepayment for software development (note 6)			974,865				981,643
Total Assets		$	2,445,755			$	2,776,117
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accrued expenses and other payables		$	355,276			$	335,228
Due to related parties (note 10)			260,577				-
Total Current Liabilities			615,853				335,228
Stockholders' Equity
Common stock, $0.001 par value, 100,000,000 shares authorized, 40,956,631 and 17,956,631 shares issued and outstanding as at September 30, 2014 and December 31, 2013 (note 8a)			40,956				17,956
Share subscription			-				3,680,000
Additional paid-in capital			10,934,187				7,277,187
Deferred stock based compensation (note 8b)			-				(117,285	)
Accumulated other comprehensive income			170,586				188,666
Accumulated (deficit)			(9,315,827	)			(8,605,635	)
Total Stockholders' Equity			1,829,902				2,440,889
Total Liabilities and Stockholders' Equity		$	2,445,755			$	2,776,117

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

CEETOP INC

(FORMERLY CHINA CEETOP.COM INC.)

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Un-audited)

 

		Three months ended September 30,								Nine months ended September 30,
		2014				2013				2014				2013
Selling, general and administrative expense		$	91,991			$	427,416			$	586,262			$	932,872
Loss on disposal of property and equipment			-				-				3,837				-
(Loss) from operations			(91,991	)			(427,416	)			(590,099	)			(932,872	)
Other income (loss)
Equity (loss) - share of investee company (note 5)			(39,668	)			(72,386	)			(120,170	)			(72,386	)
Interest income			5				1,734				77				4,191
Net (loss)		$	(131,654	)		$	(498,068	)		$	(710,192	)		$	(1,001,067	)
Other comprehensive income (loss) - Foreign currency translation adjustment			888				20,383				(18,080	)			54,603
Comprehensive (loss)		$	(130,766	)		$	(477,685	)		$	(728,272	)		$	(946,464	)
Net (loss) per share - basic and diluted		$	(0.00	)		$	(0.03	)		$	(0.02	)		$	(0.06	)
Weighted average shares outstanding
-basic and diluted			40,956,631				16,805,243				36,575,679				16,804,191

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

CEETOP INC

(FORMERLY CHINA CEETOP.COM INC.)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Un-audited)

 

		Nine months ended September 30,
		2014				2013
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss)		$	(710,192	)		$	(1,001,067	)
Adjustments to reconcile net (loss) to net cash used in operating activities
Depreciation of property, plant and equipment			38,448				21,738
Share based payment expenses			117,285				215,637
Accounts receivable written off			-				198,905
Loss on disposal of property and equipment			3,837				-
Share of loss in equity investment in Softview			120,170				72,386
Changes in operating assets and liabilities:
Accounts receivable			-				(1,817	)
Other receivables, deposits and prepayment			34,751				77,476
Accrued expenses and other payables			20,710				(381,117	)
Net cash (used in) operating activities			(374,991	)			(797,859	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment			(1,444	)			(272,602	)
Disposal of property and equipment			8,442				-
Equity investment in Softview			-				(1,379,550	)
Net cash generated by (used in) investing activities			6,998				(1,652,152	)
CASH FLOWS FROM FINANCING ACTIVITIES
Advance from a director (note 10a)			613				-
Advance from an investee company (note 10b)			259,964				-
Cash received in advance of shares subscription			-				2,988,947
Net cash generated by financing activities			260,577				2,988,947
Effect of exchange rate changes on cash and cash equivalents			(5,353	)			49,892
Net change in cash and cash equivalents			(112,769	)			588,828
Cash and cash equivalents, beginning balance			118,299				71,608
Cash and cash equivalents, ending balance		$	5,530			$	660,436

 

SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES

 

In February 2014, the Company completed a Stock Purchase Agreement and sold an aggregate of 23,000,000 shares of the Company’s common stock for an aggregate purchase price of $3,680,000 ($0.16) per share to 10 different investors (note 8a). The consideration of $3,680,000 was entrusted by the investors to the Company during the year ended December 31, 2013 and was previously recorded as Share Subscription on the consolidated balance sheets as at December 31, 2013. 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

CEETOP INC

(FORMERLY CHINA CEETOP.COM INC.)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

 

		Common Stock												Additional				Deferred stock based				Accumulated Other								Total Stock-holders'
Description		Stock outstanding				Amount				Shares subscription				paid-in capital				compensation (note 8b)				Comprehensive Income (Loss)				Accumulated Deficit				Equity (Deficit)
Balance, December 31, 2012 (audited)			16,790,631			$	16,790			$	-			$	5,836,413			$	(394,664	)		$	116,580			$	(5,719,076	)		$	(143,957	)
Foreign currency translation adjustments			-				-				-				-				-				72,086				-				72,086
Amortization of deferred stock based compensation			-				-				-				-				277,379				-				-				277,379
Issuance of common stock to employees			1,150,000				1,150				-				1,436,350				-				-				-				1,437,500
Issuance of common stock for legal services			16,000				16				-				4,424				-				-				-				4,440
Shares subscription			-				-				3,680,000				-				-				-				-				3,680,000
Loss for the year			-				-				-				-				-				-				(2,886,559	)			(2,886,559	)
Balance, December 31, 2013 (audited)			17,956,631				17,956				3,680,000				7,277,187				(117,285	)			188,666				(8,605,635	)			2,440,889
Foreign currency translation adjustments			-				-				-				-				-				(18,080	)			-				(18,080	)
Amortization of deferred stock based compensation (note 8b)			-				-				-				-				117,285				-				-				117,285
Issuance of common stock due to shares subscription (note 8a)			23,000,000				23,000				(3,680,000	)			3,657,000				-				-				-				-
Loss for the nine months			-				-				-				-				-				-				(710,192	)			(710,192	)
Balance, September 30, 2014 (un-audited)			40,956,631			$	40,956			$	-			$	10,934,187			$	-			$	170,586			$	(9,315,827	)		$	1,829,902

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

CEETOP INC.

(FORMERLY CHINA CEETOP.COM INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2014

(Un-audited)

 

Note 1 - ORGANIZATION

 

Ceetop, Inc. (the “Company” or “Ceetop”) was incorporated in Oregon on February 18, 2003 under the name of GL Gold Inc.  On June 6, 2003 the Company filed an amendment with the State of Oregon changing its name to Oregon Gold, Inc.  On January 7, 2011 Oregon Gold Inc. changed its name to China Ceetop.com, Inc.  On September 12, 2013, the Company further changed its name to Ceetop Inc.

 

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

 

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

 

Since Surry, Westow, SZ Ceetop and HZ Ceetop were under common control of a controlling party both before and after the completion of the Group Reorganization, the Group Reorganization has been accounted for using merger accounting.  The consolidated financial statements have been prepared on the basis as if Surry had always been the holding company of Westow, SZ Ceetop and HZ Ceetop and this group structure had been in existence throughout the nine months ended September 30, 2014 and year ended December 31, 2013 as defined by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810, “Consolidation”.

 

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

 

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

 

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

 

The Company has transformed from online retail sales into an integrated supply chain service provider, and focuses on business to business supply chain management and related value added services for customers.  

 

On March 5, 2013, the name of the subsidiary company, SZ Ceetop was changed to Guizhou Ceetop Network Technology Co., Limited (“GZ Ceetop”).

 

On May 29, 2013, GZ Ceetop established two 100% owned subsidiaries, Hangzhou Tuoyin Management Consulting Co., Limited and Hangzhou Lianzhan Supply Chain Management Co., Limited to enhance the management of Business to Business supply chain service.

 

 

On August 22, 2013, GZ Ceetop acquired a 42.5% interest in Hangzhou Softview Information Technology Company Limited to enhance information technology in the supply chain management system. On January 14, 2014, the name of GZ Ceetop was changed to Guizhou Ceetop Group Holding Co., Limited.

 

On April 3, 2014, the name of Surry was changed to Ceetop Holdings Limited.

 

These Consolidated Financial Statements present the Company and its subsidiaries on a historical basis.

 

Note 2 - GOING CONCERN

 

The accompanying Consolidated Financial Statements have been prepared assuming the Company will continue as a going concern.  As shown in the accompanying Consolidated Financial Statements, the Company generated no income for the nine months ended September 30, 2014 due to transitioning from online retail sales to supply chain services, incurred net losses of $131,654 and $498,068 for the three months ended September 30, 2014 and 2013 respectively; $710,192 and $1,001,067 for the nine months ended September 30, 2014 and 2013 respectively, and has accumulated deficit of $9,315,827 and $8,605,635 at September 30, 2014 and December 31, 2013, respectively.  Furthermore, previous discussion between the Company and the Government of Guiyang (the “Government”) during the year ended December 31, 2012, to provide subsidies to the Company amounting to RMB 10,000,000 per year for three consecutive years to entice the Company to relocate to Guiyang remains inconclusive.  It appears, as at September 30, 2014, it is more-likely-than-not, the Company will not be able to obtain the subsidies from the Government. Furthermore, the Company has transformed from online retail sales into an integrated supply chain service provider. There has been no revenue generated so far from this new business segment and the Company requires additional capital and funds to continue its development in this activity. These factors create an uncertainty about the Company’s ability to continue as a going concern.  In this regard, management is proposing to raise any necessary additional funds not provided by operations through loans or through additional sales of common stock, in addition to the sale of 23,000,000 shares of the Company’s stock for $3,680,000 during the nine months ended September 30, 2014 (note 8a) and a pending stock purchase agreement (note 8c), although there is no guarantee the Company will be successful in raising these necessary additional funds.

  

Note 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The accompanying Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).  The Company adopted the new accounting guidance (“Codification”) on July 1, 2009.  All reference for periods subsequent to July 1, 2009 are based on the Codification.  The Company's functional currency is the Chinese Yuan (“Renminbi”, “RMB”); however the accompanying consolidated financial statements have been translated and presented in the United States Dollars (“$”).

 

Principles of Consolidation

 

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

 

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

 

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

 

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

 

 

Translation Adjustment

 

As of September 30, 2014 and December 31, 2013, the accounts of the Company were maintained, and its financial statements were expressed, in RMB. Such financial statements were translated into USD in accordance with the Foreign Currency Matters Topic of the Codification, with the RMB as the functional currency. According to the Codification, all assets and liabilities were translated at the current exchange rate, stockholders’ equity are translated at the historical rates and income statement items are translated at the average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income in accordance with the Comprehensive Income Topic of the Codification, as a component of shareholders’ equity. Transaction gains and losses are reflected in the Consolidated Statements of Operations and Comprehensive Loss.

 

Equity Method Investments

 

In accordance with ASC 323, accounting for equity method investments, investee companies that are not consolidated, but over which the Company exercises significant influence, are accounted for under the equity method of accounting. Whether or not the Company exercises significant influence with respect to an investee depends on an evaluation of several factors including, among others, representation on the investee company’s board of directors and ownership level, which is generally a 20% to 50% interest in the voting securities of the investee company. Under the equity method of accounting, an investee company’s accounts are not reflected within the Company’s Consolidated Balance Sheets and Consolidated Statements of Operations and Comprehensive Loss. The Company’s share of the earnings or losses of the investee company is however reflected in the caption “Equity (loss)/gain-share of investee company” in the Consolidated Statements of Operations and Comprehensive Loss. The Company’s carrying value in an investee company under equity method is reflected in the caption ‘‘Equity investment in an Investee company’’ in the Company’s Consolidated Balance Sheets.

 

When the Company’s carrying value in an equity method investee company is reduced to zero, no further losses are recorded in the Company’s consolidated financial statements unless the Company has guaranteed the obligations of the investee company or has committed additional funding to finance the investee company. When the investee company subsequently reports income, the Company will not record its share of such income until it equals the amount of its share of losses not previously recognized.

 

With respect to the difference between investor cost and underlying equity in net assets of investee at date of investment (basis difference), ASC 323 requires this difference to be assigned to depreciable or amortizable assets or liabilities and the basis difference should be amortized or depreciated in connection with the income/loss recognized by the investor of their proportionate share of the investee’s net income or loss.  This effectively adjusts the investee basis to the investor’s basis, generally over a period of time.

 

Unaudited Interim Financial Information

 

These unaudited interim consolidated financial statements have been prepared in accordance with GAAP for interim financial reporting and the rules and regulations of the Securities and Exchange Commission that permit reduced disclosure for interim periods. Therefore, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. In the opinion of management, all adjustments of a normal recurring nature necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented have been made. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the year ending December 31, 2014.

 

The consolidated balance sheets and certain comparative information as of December 31, 2013 are derived from the audited consolidated financial statements and related notes for the year ended December 31, 2013 (“2013 Annual Financial Statements”), included in the Company’s 2013 Annual Report on Form 10-K. These unaudited interim consolidated financial statements should be read in conjunction with the 2013 Annual Financial Statements.

 

Use of Estimates

 

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

 

Recent accounting pronouncements

 

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, a converged standard on revenue recognition. The new pronouncement requires revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also specifies the accounting for some costs to obtain or fulfil a contract with a customer, as well as enhanced disclosure requirements.  ASU 2014-9 is effective for annual reporting periods beginning after December 15, 2016. Early adoption is not permitted. The adoption of ASC 2014-9 is not expected to have a material effect on our consolidated financial statements.

 

As of September 30, 2014, there are no recently issued accounting standards not yet adopted that would have a material effect on the Company’s financial statements.

 

 

Note 4 – PROPERTY, PLANT AND EQUIPMENT

 

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

 

Office equipment			3 - 5 years
Leasehold improvement			3 years
Motor vehicles			10 years

 

As of September 30, 2014 and December 31, 2013, property, plant & equipment consist of the following:

 

			9/30/2014				12/31/2013
Office equipment			396,497				406,306
Leasehold improvement			95,507				96,171
Motor vehicles			53,943				54,318
Accumulated depreciation			(325,753	)			(290,212	)
		$	220,194			$	266,583

  

Depreciation expense for the three months ended September 30, 2014 and 2013 was $12,585 and $11,681, respectively; for the nine months ended September 30, 2014 and 2013 was $38,448 and $21,738, respectively.

  

Note 5 – EQUITY INVESTMENT IN AN INVESTEE COMPANY

 

In August 2013 the Company entered into a Capital Investment and Share Expansion Agreement (the “Agreement”) with Hangzhou Softview Information Technology Company Limited (“Softview”).  Softview, located in Hangzhou, Zhejiang Province, China, is an enterprise focusing on e-commerce, supply chain information systems development, maintenance and support.  Pursuant to the Agreement, in exchange for a 42.5% of the total equity in Softview, the Company paid $1,382,761 (RMB 8,500,000) to Softview, while the existing shareholders of Softview contributed approximately $0.1 million in cash and intellectual property with a fair value of approximately $1.6 million.

 

As at September 30, 2014 and December 31, 2013, the Company’s share of underlying net assets of Softview is as follows:

 

			9/30/2014				12/31/2013
Current assets		$	1,458,358			$	1,596,417
Current liabilities			(165,550	)			(134,337	)
Property, plant and equipment			13,128				15,194
Intangible assets			1,448,757				1,581,536
Underlying net assets of Softview		$	2,754,693			$	3,058,810
The Company's investment			1,170,745			$	1,299,995
The Company's share of underlying net assets of Softview			1,170,745				1,299,995
Difference			-			$	-

 

 

The results of operations of Softview are summarized below:

 

Condensed income statement information:

 

		Three months ended September 30, 2014				Nine months ended September 30, 2014
Net sales		$	18,876			$	129,466
Gross profit		$	(19,833	)		$	(3,765	)
Net (loss)		$	(93,336	)		$	(282,752	)
Company's 42.5 % share of loss		$	(39,668	)		$	(120,170	)

 

For the purpose of incorporating Softview’s condensed financial information into these Consolidated Financial Statements, management determined that there are no significant differences between the Company’s and Softview’s accounting policy.

 

Note 6 – PREPAYMENT FOR SOFTWARE DEVELOPMENT

 

In December 2013, the Company entered into a software development agreement with certain software developer in the PRC to develop a customized software for the Company’s exclusive use by December 31, 2014, for total consideration of $981,643 (RMB 6,000,000).  Pursuant to the terms of the software development agreement, the Company made a prepayment of $981,643 upon signing of the software development agreement.  In accordance with the Company’s accounting policies on translation adjustment, the amount was translated from RMB at the current exchange rate at September 30, 2014 to $974,865. Total amount of the prepayment is fully refundable if the software developer fails to develop and deliver the customized software to the Company that meets the Company’s specification by December 31, 2014.

 

Note 7 - INCOME TAXES

 

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

 

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

 

The Company has not recognized deferred tax asset in respect of tax loss in these Consolidated Financial Statements as it is not more-likely-than-not that the future taxable profit against which loss can be utilized will be available to the entities operating in PRC.

 

Uncertain Tax Positions

 

Interest associated with unrecognized tax benefits are classified as income tax and penalties in selling, general and administrative expenses in the statements of operations.  For the three and nine months ended September 30, 2014 and 2013, the Company had no related interest and penalties expenses. Currently, the Company is not subject to examination by major tax jurisdictions, but the tax authority in PRC has the right to examine the Company’s tax position in all past years.

 

 

Note 8 – SHARE CAPITAL

 

(a) Common shares

 

The Company is authorized to issue up to 100,000,000 shares of common stock of par value of $0.001 per share and 3,558,046 shares of Series A preferred stock of par value of $0.001 per share.  As of September 30, 2014 and December 31, 2013, the Company has a total of 40,956,631 and 17,956,631 shares of common stock and no shares of Series A Preferred Stock outstanding. 

 

For the year ended December 31, 2013		Shares issued				Value
i. issued for legal advisory services, valued at $0.02 per share			12,000			$	240
ii. issued for legal advisory services, valued at $1.05 per share			4,000				4,200
iii. issued to employees for past services, valued at $1.25 per share			1,150,000				1,437,500
Total common stock issued during the year ended December 31, 2013			1,166,000			$	1,441,940

 

For the nine months ended September 30, 2014		Shares issued				Value
iv. sale of shares of common stock to 10 different investors pursuant to a Stock Purchase Agreement, valued at $0.16 per share			23,000,000			$	3,680,000
Total common stock issued during the nine months ended September 30, 2014			23,000,000			$	3,680,000

 

These shares were fully vested and not subject to forfeiture when issued.

 

(b) Deferred stock-based compensation

 

On July 12, 2011, the Company issued an aggregate of 2,900,000 shares of the Company’s common stock to four independent parties, in exchange for market research and other advisory services from them pursuant to the terms of four consultancy agreements dated May 6, 2011, June 15, 2011, April 3, 2011 and May 5, 2011 respectively (“Consultancy Agreements”).  The shares were fully vested and not subject to forfeiture when issued. The fair value of the shares issued was $0.31 per share and the total fair value of the shares issued was $899,000.  The fair value of the shares issued was based on the quoted market price of the Company’s shares as of July 12, 2011. The total fair value of the shares issued are recognized as a share-based payment expense over the period from the date of the Consultancy Agreements to the consultancy services are completed.  The consultancy services are to be performed for two to three years.   For the three months ended September 30, 2014 and 2013, the Company amortized $2,733 and $66,183; for the nine months ended September 30, 2014 and 2013, the Company amortized $117,285 and $215,637 as share-based payment expense respectively.  No unrecognized share-based payment expense was recognized as of September 30, 2014.  There is no tax benefit related to the share-based payment expense recognized.

 

(c) Stock purchase agreement

 

On August 2, 2014, the Company entered into a stock purchase agreement (the “Share Transaction”) to issue 6,000,000 shares of the Company’s common stock to four arm’s length investor for total consideration of $960,000. Subsequent to September 30, 2014, on November 18, 2014, the Company received $407,000 (RMB2,500,000) in respect of the Share Transaction, the remainder of $569,800 (RMB3,500,000) is still outstanding. The transaction is expected to be completed by the end of year 2014 when the remainder of $569,800 is expected to be received and the stock certificates will then be delivered to the respective investors. As of the date hereof the Share Transaction has not yet been completed.

 

Note 9 - STATUTORY RESERVE

 

In accordance with the laws and regulations of the PRC, a wholly-owned Foreign Invested Enterprise’s income, after the payment of the PRC income taxes, shall be allocated to the statutory reserves.  The allocation is 10 percent of the net income and the cumulative allocations are not to exceed 50 percent of the registered capital.  However, the laws do not prohibit enterprises to allocate net income to this reserve after the limit of 50 per cent of registered capital has been reached.  These reserves are not transferable to the Company in the form of cash dividends, loans or advances. These reserves are therefore not available for distribution except in liquidation. As of September 30, 2014 and December 31, 2013, the Company has not allocated to these non-distributable reserve funds due to losses sustained in the three and nine months ended September 30, 2014 and the year ended December 31, 2013.

 

Note 10 – RELATED PARTY TRANSACTION

 

(a)

During the nine months ended September 30, 2014, the Company received net advances totaling $613 from a director, who is also an officer of the Company. These advances are non-interest bearing and have no stated repayment terms.

 

(b)

During the nine months ended September 30, 2014, the Company received advances totaling $259,964 from Softview. These advances are non-interest bearing and have no stated repayment terms.

 

 

Note 11 - CURRENT VULNERABILITY DUE TO CERTAIN RISK FACTORS

 

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

 

Note 12 - SUBSEQUENT EVENTS

 

The Company has evaluated subsequent events for potential recognition and disclosure.

 

As of November 18, 2014, the Company received $407,000 (RMB2,500,000) in respect of the Share Transaction as set out in note 8(c) above. Up to the filing of these consolidated financial statements the share certificates have not been delivered to the respective investors and the Share Transaction has not yet been completed.

 

No other significant events occurred subsequent to the balance sheet date but prior to the filing of this report that would have a material impact on our consolidated financial statements.

 

Note 13 - AMENDMENT

 

The accompanying consolidated balance sheet as at September 30, 2013, consolidated statements of operations and comprehensive loss, consolidated statement of cash flows, statement of stockholders’ equity and certain sections of the notes to consolidated financial statements for the three and nine months then ended, have been amended to correct an over-statement of the Company’s equity investment in Softview as at September 30, 2013 and the Company’s share of loss thereof.

 

Softview’s condensed income statement information:

 

		Since date of investment to September 30, 2013
		Amounts previously reported				Amended
Net sales		$	24,707			$	24,707
Gross profit		$	24,618			$	24,618
Net income (loss)		$	7,556			$	(13,770	)
Company's 42.5 % share of gain (loss)		$	3,211			$	(5,852	)
Goodwill written-off			-				(66,534	)
Equity gain (loss) in investee company		$	3,211			$	(72,386	)

 

The Company’s share of underlying net assets of Softview is as follows:

 

		As at September 30, 2013
		Amounts previously reported				Amended
Current assets		$	1,585,648			$	1,599,779
Current liabilities			(66,503	)			(143,450	)
Property, plant and equipment			12,860				16,198
Intangible assets			1,642,355				1,616,417
Underlying net assets of Softview		$	3,174,360			$	3,088,944
The Company's investment		$	1,382,761			$	1,318,679
The Company's share of underlying net assets of Softview			1,382,761				1,318,679
Difference		$	-			$	-

 

 

 

The amendment has the following effect on net loss, comprehensive loss and loss per share:

 

		Three months ended September 30, 2013								Nine months ended September 30, 2013
		Amounts previously reported				Amended				Amounts previously reported				Amended
Net (loss)		$	(422,471	)		$	(498,068	)		$	(925,470	)		$	(1,001,067	)
Comprehensive (loss)		$	(466,17	)		$	(477,685	)		$	(934,949	)		$	(946,464	)
(Loss) per share - basic and diluted		$	(0.03	)		$	(0.03	)		$	(0.06	)		$	(0.06	)

 

The amendment has no effect on items reported on the Company’s consolidated financial statements subsequent to September 30, 2013.

 

 

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

Description of Business

 

Overview

 

Ceetop, Inc. (the “Company”) is an Oregon-registered corporation. Before 2013 the Company owned and operated the online retail platform: www.ceetop.com. Due to excessive competition in online retail, the Company has transformed itself into an integrated supply chain services provider, and focuses on Business to Business (“B to B”) supply chain management and related value-added services among enterprises.

 

Since the second half of 2012, the Company gradually has changed its focus away from online retail business, and focused on providing warehousing management and B to B supply chain information technology service for suppliers. After business restructuring and a pilot run in the first half of 2013, the Company’s main business was adjusted to conduct warehousing management services and focusing on B to B supply chain information technology, providing third party supply chain management service for customers, providing data services, and supply chain financial services, and other value-added services for customers. The Company provides customers with B to B integrated supply chain services.

 

By establishing a warehousing base, using iSCM (namely, e-commerce supply chain management system) platform to build a "standardized" identity for the "non-standardized" products, and completing standard data transmission between the upstream and downstream enterprise resource planning of enterprises through the iSCM platform, the Company makes the information of purchases, sales and logistics of its customers more accurate and transparent. With the support of this platform, our customers’ business information is displayed accurately in front of their partners, such as banks. By providing customers with this platform and providing customers with third party logistics supervision, the Company assists banks and other financial institutions in providing customers with supply chain based financial services.

 

Through the stimulation of labor specialization, the original competition between products or companies has turned into the competition between supply chains. Each supply chain is represented by collaboration among multiple enterprises, and provides a set of final products for consumers. The Company now focuses on B to B data collection and transmission among multiple enterprises, and data analysis services. Our advanced technology, experiences in supply chain management and efficient data processing ability provides value-added data services for other online platforms, offline stores and logistic servers, banks and others.

 

The Company is headquartered in Guiyang, China. We also maintain an operating office and warehousing base located in Hangzhou, China.

 

Organization History

 

Organizational History of Ceetop, Inc

 

Ceetop, Inc. was incorporated in Oregon on February 18, 2003 under the name of GL Gold Inc.  On June 6, 2003 the Company filed an amendment with the State of Oregon changing its name to Oregon Gold, Inc.  On January 7, 2011 Oregon Gold Inc. changed its name to China Ceetop.com, Inc., and on September 12, 2013 the Company changed its name to Ceetop Inc.   

 

Organizational History of Surry

 

Surry Holdings Limited (“Surry”) was incorporated in the British Virgin Islands on September 18, 2009. Surry owns 100% of the outstanding securities of Westow Technology Limited (“Westow”), a company incorporated in the British Virgin Islands. Surry’s subsidiaries are engaged in supply chain services business. Pursuant to a transaction completed on February 28, 2010, the Company holds 100% of Westow. Surry changed its name to Ceetop Holdings Limited on April 3, 2014.

 

Organizational History of Westow

 

Westow was incorporated on September 7, 2009, and owns 100% of the outstanding securities of Guizhou Ceetop Network Technology Co., Ltd (formerly Shenzhen Ceetop Network Technology Co., Limited), a company registered and located in Guiyang, PRC.

 

 

Organizational History of Guizhou Ceetop Network Technology Co., Ltd, Hangzhou Ceetop Network Technology Co., Ltd, Hangzhou Lianzhan Supply Chain Management Co., Ltd, and Hangzhou Tuoyin Management Consulting Co., Ltd.

 

Guizhou Ceetop Network Technology Co., Ltd. (formerly Shenzhen Ceetop Network Technology Co., Ltd. was incorporated in Shenzhen in August, 2009) changed its name and moved to Guiyang, PRC during the second quarter of 2013. On January 14, 2014, Guizhou Ceetop Network Technology Co., Ltd. changed its name to Guizhou Ceetop Group Holding Co., Ltd. Hangzhou Ceetop Network Technology Co., Ltd. was incorporated in October 31, 2006. Both Hangzhou Lianzhan Supply Chain Management Co., Ltd. (mainly provides integrated supply chain services, focuses on B to B supply chain management and related value-added service among enterprises) and Hangzhou Tuoyin Management Consulting Co., Ltd. (mainly accumulates knowledge, technology expertise and patents, and provides consulting services for other enterprises) were incorporated in Hangzhou in June 2013. Guizhou Ceetop Group Holding Co., Ltd owns 100% outstanding securities of Hangzhou Ceetop Network Technology Co., Ltd., Hangzhou Lianzhan Supply Chain Management Co., Ltd. and Hangzhou Tuoyin Management Consulting Co., Ltd.

 

Organizational History of Hangzhou Softview Information Technology Co., Ltd. (“Softview”)

 

Softview was incorporated in Hangzhou on July 7, 2010.  Guizhou Ceetop Network Technology Co., Ltd. owns 42.5% of the outstanding securities of Softview. Softview is engaged in the information technology in the supply chain management system.

  

The address for each entity is set forth below:

 

Name		Address
Ceetop, Inc. (formerly China Ceetop.com, Inc.)		A2803, Lianhe Guangchang, 5022 Binhe Dadao, Futian District, Shenzhen, China
Ceetop Holdings Limited (formerly Surry Holdings Limited)		P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands
Westow Technology Limited		P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands
Guizhou Ceetop Group Holding Co., Ltd. (formerly Guizhou Ceetop Network Technology Co. Ltd.) (headquarters)		East Yunhuan Road, Baiyun District, Guiyang, China
Hangzhou Ceetop Network Technology Co. Ltd		501 A YuanhuaWangzuo Center, 65 Xintang Road, Hangzhou, China, 310020
Hangzhou Lianzhan Supply Chain Management Co., Ltd.		Suite A1028, 9th Xiyuan Road, Boke Dasha, Hangzhou, China
Hangzhou Tuoyin Management Consulting Co., Ltd.		Suite A1027, 9th Xiyuan Road, Boke Dasha, Hangzhou, China
Hangzhou Softview Information Technology Company Limited		Suite A1026, 9th Xiyuan Road, Boke Dasha, Hangzhou, China

  

Financial Condition and Changes in Financial Condition

 

Overall Operating Results:

 

Net Sales.  For the three and nine months ended September 30, 2014 and 2013, sales were $nil, The lack of revenues is due to the Company transitioning from online retail sales to B to B supply chain service.

 

Selling, General and Administrative Expenses. Our selling, general and administrative expenses decreased 78% to $91,991 for the three months ended September 30, 2014 from $427,416 for the three months ended September 30, 2013; decreased 37% to 586,262 for the nine months ended September 30, 2014 from $932,872 for the nine months ended September 30, 2013.

 

Net Loss. The Company’s net loss was $131,654 and $498,068 for the three months ended September 30, 2014 and 2013, respectively; and $710,192 and $1,001,067 for the nine months ended September 30, 2014 and 2013, respectively.

 

 

Liquidity and Capital Resources:

 

The Company incurred net losses of $131,654 and $498,068 for the three months ended September 30, 2014 and 2013 respectively; and $710,192 and $1,001,067 for the nine months ended September 30, 2014 and 2013, respectively, and has accumulated deficit of $9,315,827 at September 30, 2014.

 

For the year ended December 31, 2013, our independent auditors, in their report on the financial statements, have indicated that the Company has experienced recurring losses from operations and may not have enough cash and working capital to fund its operations beyond the very near term, which raises substantial doubt about our ability to continue as a going concern. Management has made a similar note in the financial statements.  As indicated herein, we will have to raise capital for the implementation of our business plan, and continuing our operations.  We do not have sufficient revenues to pay our expenses of operations. Unless the Company is able to raise working capital, in addition to the sale of 23,000,000 shares of the Company’s stock for $3,680,000 during the nine months ended September 30, 2014 (note 8a) and a pending stock purchase agreement (note 8c), it is likely that the Company either will have to cease operations, substantially change its methods of operations, or change its business plan.

 

Critical Accounting Policies

 

We believe that the critical accounting policies and estimates discussed below involve the most complex management judgments due to the sensitivity of the methods and assumptions necessary in determining the related asset, liability, revenue and expense amounts. In consultation with our Board of Directors, we have identified the following critical accounting policies that require management’s most difficult subjective judgment:

 

Cash and Cash Equivalents

 

For purposes of the statement of cash flows, the Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.  

 

Revenue Recognition

 

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

 

Accounts Receivable/Bad Debt

 

The Company maintains reserves for potential credit losses on accounts receivable.  Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves.  Reserves are recorded based on the Company’s historical collation history.  

 

Property and Equipment

 

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

 

Impairment of Long-Lived Assets

 

The Property, Plant and Equipment Topic of the Codification addresses financial accounting and reporting for the impairment or disposal of long-lived assets and supersedes previous accounting guidance, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,” and “Reporting the Results of Operations for a Disposal of a Segment of a Business.”  The Company periodically evaluates the carrying value of long-lived assets to be held and used, which requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets carrying amounts.  In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the long-lived assets.  Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair market values are reduced for the cost of disposal. Based on its review, the Company believes that, as of September 30, 2014 and December 31, 2013, there were no impairments of its long-lived assets.

 

Equity Method Investments

 

In accordance with ASC 323, accounting for equity method investments, investee companies that are not consolidated, but over which the Company exercises significant influence, are accounted for under the equity method of accounting. Whether or not the Company exercises significant influence with respect to an investee depends on an evaluation of several factors including, among others, representation on the investee company’s board of directors and ownership level, which is generally a 20% to 50% interest in the voting securities of the investee company. Under the equity method of accounting, an investee company’s accounts are not reflected within the Company’s Consolidated Balance Sheets and Consolidated Statements of Operations and Comprehensive Loss. The Company’s share of the earnings or losses of the investee company is however reflected in the caption “Equity (loss)/gain-share of investee company” in the Consolidated Statements of Operations and Comprehensive Loss. The Company’s carrying value in an investee company under equity method is reflected in the caption ‘‘Equity investment in an Investee company’’ in the Company’s Consolidated Balance Sheets.

 

 

When the Company’s carrying value in an equity method investee company is reduced to zero, no further losses are recorded in the Company’s consolidated financial statements unless the Company has guaranteed the obligations of the investee company or has committed additional funding to finance the investee company. When the investee company subsequently reports income, the Company will not record its share of such income until it equals the amount of its share of losses not previously recognized.

 

With respect to the difference between investor cost and underlying equity in net assets of investee at date of investment (basis difference), ASC 323 requires this difference to be assigned to depreciable or amortizable assets or liabilities and the basis difference should be amortized or depreciated in connection with the income/loss recognized by the investor of their proportionate share of the investee’s net income or loss.  This effectively adjusts the investee basis to the investor’s basis, generally over a period of time.

 

Income Taxes

 

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

 

The Company adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, (“FIN 48”), codified in FASB ASC Topic 740.  When tax returns are filed, it is likely that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained.  The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any.  Tax positions taken are not offset or aggregated with other positions.  Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority.  The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest associated with unrecognized tax benefits are classified as interest expense and penalties are classified in selling, general and administrative expenses in the statements of income.  The adoption of FIN 48 did not have a material impact on the Company’s financial statements.  At September 30, 2014 and December 31, 2013, the Company did not take any uncertain positions that would necessitate recording a tax related liability.

 

Basic and Diluted Income / (Loss) Per Share

 

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

 

Fair Value of Financial Instruments

 

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

 

Share Based Compensation

 

Share-based payment is accounted for based on the FASB Statement No. 123R, “Share-Based Payment, an Amendment of FASB Statement No. 123” (“FAS No. 123R”) and Emerging Issue Task Force 96-18, “Accounting for Equity Instruments that are Issued to Other than Employees for Acquiring, or in Conjunction with Selling, Goods or Services” (“EITF 96-18”) and Emerging Issue Task Force 00-18 “Accounting Recognition for Certain Transactions involving Equity Instruments Granted to Other Than Employees” (“EITF 00-18”) (codified in FASB ASC Topic 505-50).  The Company recognized in the Consolidated Statements of Income and Comprehensive Income the fair value of shares, stock options and other equity-based compensation issued to non-employees when the service provided by non-employees is completed, or the date when the shares were issued (provided that the shares issued are fully vested and not subject to forfeiture) with the prepaid services presented as contra equity.  This is in accordance with the consensus reached in EITF 00-18 that in the event that a note or receivable is acquired in exchange for the fully vested, non-forfeitable equity instruments, the note or receivable should be displayed as contra-equity by the granter.  The Company, as granter, interprets that the term “receivable” also embraces prepaid service fees. For employees, the Company recognized in the Consolidated Statements of Income and Comprehensive Income the grant date fair value of the shares, stock options and other equity-based compensation over the requisite service period.

 

Off Balance Sheet Arrangements

 

None.

 

 

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

 

As a smaller reporting company, we are not required to provide the information required by this Item.

 

ITEM 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in the Company’s reports filed or submitted under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the Company’s reports filed under the Exchange Act is accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer (the “Certifying Officers”), as appropriate to allow timely decisions regarding required disclosure.

 

As required by Rules 13a-15 and 15d-15 under the Exchange Act, the Certifying Officers carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of September 30, 2014. Their evaluation was carried out with the participation of the Company’s management. Based upon their evaluation, the Certifying Officers concluded that the Company’s disclosure controls and procedures were not effective.

 

Notwithstanding the conclusion that our internal control over financial reporting was not effective as of the end of the period covered by this report, the Chief Executive Officer and the Chief Financial Officer believe that the financial statements and other information contained in this quarterly report present fairly, in all material respects, our business, financial condition and results of operations.  Nothing has come to the attention of management that causes them to believe that any material inaccuracies or errors exist in our financial statements as of September 30, 2014. 

 

During the quarter ended September 30, 2014, there were no changes in our internal control over financial reporting identified in connection with management’s evaluation of the effectiveness of our internal control over the financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.

 

 

PART II – OTHER INFORMATION

 

Item 1.    Legal Proceedings

 

Neither the Company nor its property is a party to any pending legal proceeding.

 

Item 1A. Risk Factors

 

Smaller reporting companies are not required to provide disclosure pursuant to this Item.

 

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

 

None.

 

Item 3.    Defaults Upon Senior Securities

 

None

 

Item 4.    Mine Safety Disclosures

 

Not applicable.

 

Item 5.    Other Information

 

None

 

 

Item 6.    Exhibits

 

Exhibit Number		Name of Exhibit
31.1		Certification of Chief Executive Officer, pursuant to Rule 13a-14(a) of the Exchange Act, as enacted by Section 302 of the Sarbanes-Oxley Act of 2002.(1)
31.2		Certification of Chief Financial Officer, pursuant to Rule 13a-14(a) of the Exchange Act, as enacted by Section 302 of the Sarbanes-Oxley Act of 2002.(1)
32.1		Certification of Chief Executive Officer and Chief Financial Officer, pursuant to 18 United States Code Section 1350, as enacted by Section 906 of the Sarbanes-Oxley Act of 2002. (1)
101		The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2014 formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations and Comprehensive loss, (iii) the Consolidated Statements of Stockholders’ Equity, (iv) the Consolidated Statements of Cash Flows and (v) the Notes to Consolidated Financial Statements, tagged as blocks of text. (2)

 

(1)	Filed herewith

 

(2)

Users of this data are advised that pursuant to Rule 406T of Regulation S-T, this XBRL information is being furnished and not filed herewith for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and Sections 11 or 12 of the Securities Act of 1933, as amended, and is not to be incorporated by reference into any filing, or part of any registration statement or prospectus, of Ceetop Inc., whether made before or after the date hereof, regardless of any general incorporation language in such filing.

 

 

SIGNATURES

 

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	CEETOP INC.
	(Registrant)
	By:	/s/ Weiliang Liu
		Weiliang Liu
		CEO, President, Secretary, and Director

 

Date: November 19, 2014

 

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Signatures		Title		Date
/s/ Weiliang Liu		CEO, President, Secretary, and Director		November 19, 2014
Weiliang Liu

 

/s/ Shengming Jia		CFO, and Treasurer		November 19, 2014
Shengming Jia

 

 

 

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