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EX-32.1 - CERTIFICATION - Ceetop Inc.f10q0916ex32i_ceetopinc.htm
EX-31.2 - CERTIFICATION - Ceetop Inc.f10q0916ex31ii_ceetopinc.htm
EX-31.1 - CERTIFICATION - Ceetop Inc.f10q0916ex31i_ceetopinc.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

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

SECURITIES EXCHANGE ACT OF 1934

 

For the Quarterly Period ended: September 30, 2016

 

Commission File Number: 000-53307 

 

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 ☒  No ☐

 

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

 

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

 

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

 

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

 

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, 2016, the Company had outstanding 44,596,631 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) F-1
  Consolidated Statements of Operations and Comprehensive Loss (unaudited) F-2
  Consolidated Statements of Cash Flows (unaudited) F-3
  Notes to Consolidated Financial Statements (unaudited) F-4 - F-10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 2
Item 3. Quantitative and Qualitative Disclosures about Market Risk 6
Item 4. Controls and Procedures 6
PART II – OTHER INFORMATION  
Item 1. Legal Proceedings 7
Item 1A. Risk Factors 7
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 7
Item 3. Defaults Upon Senior Securities 7
Item 4. Mine Safety Disclosures 7
Item 5. Other Information 7
Item 6. Exhibits 7
Signatures 8

 

 

 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Consolidated Financial Statements (Unaudited)

 

CEETOP INC.

 CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2016

 

CEETOP INC.
CONSOLIDATED BALANCE SHEETS

   

   September 30,
2016
   December 31,
2015
 
   (Un-audited)   (Audited) 
ASSETS        
         
Current Assets        
Cash and cash equivalents  $7,272   $2,788 
Other receivables (Note 4)   833,486    1,053,655 
Total Current Assets   840,758    1,056,443 
           
Property, plant and equipment, net (Note 5)   87,303    112,162 
Intangible assets (Note 6)   869,177    920,680 
Equity investment in an investee company (Note 7)   -    1,132,994 
           
Total Assets  $1,797,237   $3,222,279 
           
LIABILITIES AND STOCKHOLDERS' EQUITY          
           
Current Liabilities          
           
Accounts payable  $-   $904 
Accrued expenses and other payables (Note 8)   348,073    132,071 
Due to related party (Note 12)   163,195    1,044,512 
Total Current Liabilities   511,267    1,177,487 
           
Stockholders' Equity          
Preferred Stock, $0.001 par values, 3,558,046 shares authorized, 0 shares issued and Outstanding at September 30, 2016 and December 31, 2015   -    - 
Common Stock, $0.001 par value, 100,000,000 shares authorized, 44,596,631 and 47,596,631 shares issued and outstanding as at September 30, 2016 and December 31, 2015   44,596    47,596 
Additional paid-in capital   12,128,722    12,577,747 
Accumulated other comprehensive income (loss)   (13,331)   40,890 
Accumulated (deficit)   (10,874,016)   (10,621,441 
Total Stockholders' Equity   1,285,970    2,044,792 
           
Total Liabilities and Stockholders' Equity  $1,797,237   $3,222,279 

 

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

 

 F-1 

 

 

CEETOP INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Un-audited)

 

   Three months ended
September 30,
   Nine months ended
September 30,
 
   2016   2015   2016   2015 
Sales   -    -    -    - 
Cost of Sales   -    -    -    - 
Gross Profit   -    -    -    - 
Selling, general and administrative expense  $71,627   $144,864   $261,604   $376,384 
(Loss) from operations   (71,627)   (144,864)   (261,604)   (376,384)
Other income (loss)   (10)   3,735    1,445    3,773 
Equity (loss) - share of investee company (Note 7)   64    (6,097)   (9,491)   (62,683)
Investment income (loss)   (214)        31,936      
Interest expense   100    -    (14,881)   - 
Interest income   7    39    19    79 
Net loss  $(71,680)  $(147,187)  $(252,575)  $(435,215)
Other comprehensive loss - Foreign currency translation adjustment   (6,993)   (102,668)   (54,221)   (84,086)
Comprehensive loss  $(78,674)  $(249,855)  $(306,797)  $(519,301)
Net loss per share - basic and diluted  $(0.00)  $(0.00)  $(0.01)  $(0.01)
Weighted average shares outstanding                    
-basic and diluted   44,596,631    46,956,631    46,816,143    46,956,631 

  

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

 

 F-2 

 

 

CEETOP INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Un-audited)

 

   Nine months ended
September 30,
 
   2016   2015 
         
CASH FLOWS FROM OPERATING ACTIVITIES        
Net (loss)  $(252,575)  $(435,215)
Adjustments to reconcile net loss to net cash used in operating activities          
Depreciation of property, plant and equipment   22,154    22,500 
Amortization of intangible assets   27,244    - 
Gain on disposal of investment   (31,936)   - 
Share of loss in equity investment in Softview   9,491    62,683 
Changes in operating assets and liabilities:          
Accounts payable   (892)   - 
Due to related party   252,819    - 
Other receivables, deposits and advance to suppliers   (260,110)   (609,960)
Accrued expenses and other payables   219,057    23,929 
Net cash used in operating activities   (14,749)   (936,164)
           
CASH FLOWS FROM FINANCING ACTIVITIES          
Advance from a director (Note 12)   20,074    - 
Advance from an investee company   -    550,285 
Funds received from investors   -    373,750 
Net cash provided by financing activities   20,074    924,035 
           
Effect of exchange rate changes on cash and cash equivalents   (841)   (7,635)
           
Net change in cash and cash equivalents   4,484    (19,764)
Cash and cash equivalents, beginning balance   2,788    25,157 
Cash and cash equivalents, ending balance  $7,272   $5,393 
Cash interest paid  $-    - 
Cash income tax paid  $-    - 
           
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES          
           
Other accounts receivable paid by stock  $452,025    - 
Stock paid to offset funds owed in other accounts receivable   (452,025)   - 
Disposal of investments by offsetting payables  $1,124,843    - 

 

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

 

 F-3 

 

  

CEETOP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2016

(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 changed its name to Ceetop Inc.

 

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

 

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

 

Since Surry, Westow, SZ Ceetop and HZ Ceetop were under common control of a controlling party both before and after the completion of the Group Reorganization, the Group Reorganization was accounted for using merger accounting.  The consolidated financial statements “CFS” were prepared on the basis as if Surry had always been the holding company of Westow, SZ Ceetop and HZ Ceetop.

 

The Company operates in a single reportable segment, and the Company providing an online platform for distribution of 3C products (computers/communications/consumer electronics) in the PRC by way of a website named www.ceetop.com.

 

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 its subsidiary, Shenzhen Ceetop Network Technology Co., Limited (“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, GZ Ceetop changed its name to Guizhou Ceetop Group Holding Co., Limited.

 

On April 3, 2014, Surry changed its name to Ceetop Holdings Limited.

 

On July 24, 2014, the Company established a wholly owned company Ceetop (Hong Kong) Limited in Hong Kong as a subsidiary of Ceetop Holdings Limited for its business expansion.

 

On June 30, 2016, the Company discontinued operations, and terminated the registration, of its subsidiary Hangzhou Ceetop Network Technology LLC .

 

These CFS present the Company and its subsidiaries on a historical basis.

  

 F-4 

 

 

Note 2 - GOING CONCERN

 

The accompanying unaudited CFS were prepared assuming the Company will continue as a going concern.  As shown in the accompanying unaudited Consolidated Financial Statements, the Company incurred net losses of $71,680 and $147,187, for the three months ended September 30, 2016 and 2015 respectively; $252,575 and $435,215 for the nine months ended September 30, 2016 and 2015, respectively, and has accumulated deficit of $10,874,016 and $10,621,441 at September 30, 2016 and December 31, 2015, respectively.  These factors create an uncertainty about the Company’s ability to continue as a going concern.  In this regard, management may attempt to raise any necessary additional funds not provided by operations through loans or through additional sales of common stock.  There is no guarantee the Company will be able to successfully raise funds or if it does those funds will be available at terms favorable to the Company.

 

Note 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The accompanying CFS were prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).   The Company's functional currency is the Chinese Renminbi; however, the accompanying CFS were translated and presented in the United States Dollars (“USD”).

 

Basis of Accounting and Principles of Consolidation

 

The CFS include the financial statements of the Company and its subsidiaries  including Ceetop Inc., Ceetop Holdings Ltd., Westow Technology Limited, Guizhou Ceetop Network Technology Co Ltd., and Ceetop (Hong Kong) Ltd. All significant inter-company accounts and transactions have been eliminated on consolidation.

 

Investments in business entities, in which the Company does not have control but has the ability to exercise significant influence over operating and financial policies are accounted for using the equity method. On August 22, 2013, the Company acquired a 42.5% interest in Hangzhou Softview Information Technology Company Limited (Softview), which was disposed on May 14, 2016. During the holding period, Softview was accounted for using equity method. See Note 7 for details.

  

Unaudited Interim Financial Information

 

These unaudited interim CFS were 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, 2015. 2016.

 

The consolidated balance sheets and certain comparative information as of December 31, 2015 are derived from the audited CFS and related notes for the year ended December 31, 2015 (“2015 Annual Financial Statements”), included in the Company’s 2015 Annual Report on Form 10-K. These unaudited interim CFS should be read in conjunction with the 2015 Annual Financial Statements.

  

Use of Estimates

 

The preparation of financial statements in conformity with GAAP 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. 

 

 F-5 

 

 

Recent Accounting Pronouncements

 

In November 2015, the FASB (“Board”) issued ASU No. 2015-17, "Balance Sheet Classification of Deferred Taxes". The new guidance requires that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent on the balance sheet. This update is effective for annual periods beginning after December 15, 2016 and interim periods within those annual periods. The Company does not anticipate the adoption of this ASU will have a significant impact on its CFS.

 

In February 2016, the Board issued ASU No. 2016-02, Leases (Topic 842). The guidance in ASU No. 2016-02 supersedes the lease recognition requirements in Topic 840, Leases (FAS 13). ASU No. 2016-02 requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases, along with additional qualitative and quantitative disclosures. ASU No. 2016-02 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the effect this standard will have on its CFS.

 

In March 2016, the Board issued an ASU amending the accounting for stock-based compensation and requiring excess tax benefits and deficiencies to be recognized as a component of income tax expense rather than equity. This guidance also requires excess tax benefits to be presented as an operating activity on the statement of cash flows and allows an entity to make an accounting policy election to either estimate expected forfeitures or to account for them as they occur. The ASU is effective for reporting periods beginning after December 15, 2016, with early adoption permitted. We are currently evaluating the impact of the ASU; however, we expect the ASU will have a material impact on our CFS.

 

As of September 30, 2016, there are no recently issued accounting standards not yet adopted that would have a material effect on the CFS.

 

Note 4 - OTHER RECEIVABLES

 

Other receivables contains the following:

 

   As of
 September 30,
2016 (Unaudited)
   As of December 31, 2015 
         
Receivable from third party individuals  $97,170   $462,300 
Receivable from former investee   149,979    - 
Receivable from suppliers   494,931    508,530 
Other receivables   91,406    82,825 
           
Total  $833,486   $1,053,655 

 

The Company loaned three million RMB (the “Loan”) to an individual that was secured by 3,000,000 shares of common stock (the “Shares”) of the Company (the “Collateral”). In June 2016, the Loan was cancelled in exchange for the holders agreeing to cancel and terminate the Shares. As a result of the above cancellations, the balance of other accounts receivable decreased by $452,025 (3,000,000,000 RMB) and the equity accounts decreased by the same amount. Specifically, Common Stock decreased by $3,000 and Additional Paid-In Capital decreased by $449,025. Because this transaction was a transaction dealing with equity, no gain was recognized, the excess of the fair value of the shares over the book value of the receivable was reflected in additional paid in capital.

  

The receivable from former investee is due on or before May 30, 2017.

 

Other receivables are such items as rent deposit, prepayment for social benefits.

 

 F-6 

 

 

Note 5 - PROPERTY, PLANT AND EQUIPMENT

 

Property, plant and equipment are stated at cost. Expenditures for maintenance and repairs are changed 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, 2016 and December 31, 2015, property, plant & equipment consist of the following:

 

  

9/30/2016

(Unaudited)

   12/31/2015 
Office equipment  $117,998   $367,895 
Motor vehicles   49,793    51,161 
Accumulated depreciation   (80,488)   (306,894)
   $87,303   $112,162 

 

Depreciation for the three months ended September 30, 2016 and 2015 was $6,919 and $6,635, respectively; for the nine months ended September 30, 2016 and 2015 was $22,154 and $22,500, respectively.

 

Note 6 – INTANGIBLE ASSET

 

In December 2013, the Company entered into a software development agreement with a software developer in the PRC to develop custom software for the Company’s exclusive use for $981,643 (RMB 6,000,000).  Pursuant to the terms of the software development agreement, the Company prepaid $981,643 upon signing the software development agreement. 

 

As of December 31, 2015, the software development was completed and the prepayment ($981,643) was reported as an intangible asset. As of September 30, 2016 and December 31, 2015, the value of intangible assets was $869,177 and $920,680, respectively. The amortization expense for the nine months ended September 30, 2016 was $27,244.

 

Note 7 – EQUITY INVESTMENT

 

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. Whether or not the Company exercises significant influence with respect to an investee company 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 CFS. However, the Company’s share of the earnings or losses of the investee company is reflected in the caption “Equity (loss)/gain-share of investee company” in the Consolidated Statements of Income and Comprehensive Income. The Company’s carrying value in an investee company under equity method is reflected in the caption ‘‘Equity interest 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.

 

 F-7 

 

 

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.

 

On May 14, 2016 GZ Ceetop entered into an agreement whereby it sold its equity interest in Softview, with an original value of $1,280,738 (8,500,000 RMB), to Softview for $1,130,063 (7,500,000 RMB, the “Purchase Price”). The Purchase Price was payable as follows: offsetting by Softview of $979,388 (6,500,000 RMB) owed to it by GZ Ceetop, $75,338 (500,000 RMB) payable before March 1, 2017, and $75,338 (500,000 RMB) payable before May 1, 2017, respectively.

 

As a result of the disposition of the equity investment, the Company recorded a gain of $31,936.

 

As of the date of disposition and December 31, 2015, the Company’s share of underlying net assets of Softview is as follow:

 

   Date of Disposition (Unaudited)   12/31/2015 
         
Current assets  $1,271,024   $1,322,351 
Current liabilities   (98,625)   (103,257)
Property, plant and equipment   55,541    59,874 
Intangible assets   1,330,963    1,386,900 
Underlying net assets of Softview  $2,558,902   $2,665,869 
           
The Company's investment   -   $1,132,994 
The Company's share of underlying net assets of Softview   -    1,132,994 
Difference  $-   $- 

 

The results of operations of Softview are summarized below:

 

Condensed income statement information:

 

For the period up to the date of disposition (May 14, 2016 ), the Company incurred a loss of $9,491, and for the nine months ended September 30, 2015, the Company had a loss of $62,683.

 

 F-8 

 

 

Note 8 - ACCRUED EXPENSES AND OTHER PAYABLES

 

Accrued expenses and other payables contain the following:

 

   As of
September 30,
2016 (Unaudited)
   As of December 31, 2015 
Payables to third party individuals  $210,055   $124,643 
Accrued salaries   54,693    863 
Other payables   83,325    6,565 
           
Total  $348,073   $132,071 

  

The loans from third party individuals do not have terms and conditions in writing and bear no interest. The loans are due on demand.

 

Note 9 - 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.

  

The deferred tax asset not recognized is as follows: 

 

   09/30/2016 (unaudited)   12/31/2015 
Unused tax loss brought forward  $4,929,353   $6,025,093 
Loss for the year   252,575    599,478 
Unused tax loss expired during the year   -    (1,596,587)
           
Expenses not deductible for tax (share-based payment)   -    (99,000)
Total net operating loss carry forwards  $5,181,928   $4,929,353 
Effective tax rate   25%   25%
Unrecognized deferred tax asset carried forward  $1,300,482   $1,232,338 
Less : valuation allowances   (1,300,482)   (1,232,338)
           
Deferred income tax benefit, net of valuation allowance  $-   $- 

 

The following table reconciles the statutory rates to the Company’s effective tax rate for the three and nine months ended September 30, 2016 and 2015:

 

   2016   2015 
US statutory rates (benefit)   (34.0)%   (34.0)%
Tax rate difference   9.0%   9.0%
Non deductable  stock compensation   0%   5%
Valuation allowance on NOL   25%   20%
Tax per financial statements   -%   -%

 

 F-9 

 

 

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 nine months ended September 30, 2016 and 2015, 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 10 – SHARE CAPITAL

 

The Company is authorized to issue up to 100,000,000 shares of common stock, par value $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, 2016 (unaudited) and December 31, 2015, the Company has/had 44,596,631 and 47,596,631 shares of common stock, respectively, and no shares of Series A Preferred Stock outstanding. 

 

The Company loaned three million RMB (the “Loan”) to an individual that was secured by 3,000,000 shares of common stock (the “Shares”) of the Company (the “Collateral”). On June 28, 2016, the Company determined that the Loan was uncollectible, and the holders of the Collateral agreed to cancel the Shares. In lieu of the cancellation of the Shares, the Loan has been cancelled. 

  

Note 11 - 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% of the net income and the cumulative allocations are not to exceed (Note 4) 50% of the registered capital.  However, the laws do not prohibit enterprises to allocate net income to this reserve after the limit of fifty percent (50%) 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, 2016(unaudited) and December 31, 2015, the Company has not allocated to these non-distributable reserve funds due to losses sustained in the nine months ended September 30, 2016 and the year ended December 31, 2015.

 

Note 12 – RELATED PARTY TRANSACTIONS

 

Listed below is a summary of material relationships or transactions with the Company’s related parties:

 

In the normal course of business, the Company advanced funds from its related parties. In May 2016, the Company disposed its equity investment in Softview to offset its loan from Softview of $979,388 (6,500,000 RMB). In addition, Softview will pay the Company $150,675 (1,000,000 RMB) (See Note 7).

 

During the nine months ended September 30, 2016, the Company borrowed an additional $20,074 from its sole director.

 

As of September 30, 2016(unaudited) and December 31, 2015, the balance due to related parties was $163,195 and $1,044,512, respectively.

 

As of September 30, 2016, Softview is no longer a related party.

 

Note 13 - 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.

 

 F-10 

 

 

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

 

Description of Business

 

Overview

 

Ceetop, Inc. (the “Company”) is a corporation organized under the laws of the State of Oregon. The Company’s main business is warehousing management services and focusing on business to business 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 business-to-business 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 focuses on business-to-business 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

 

Ceetop Inc. (formerly China Ceetop)

 

Ceetop Inc. (formerly China Ceetop. com, Inc.) was incorporated in Oregon on February 18, 2003 under the name of GL Gold Inc. On June 6, 2003, the Company filed an amendment with the State of Oregon changing its name to Oregon Gold, Inc. On January 7, 2011, Oregon Gold Inc. changed its name to China Ceetop.com, Inc. On January 27, 2011, the Company became the holding company of Surry Holding Limited (“Surry”) through a reverse acquisition. On September 12, 2013, the Company changed its name to Ceetop Inc.

 

Ceetop Holdings Limited (Formerly Surry)

 

Surry was incorporated in the British Virgin Islands on September 18, 2009. Surry holds 100% of Westow Technology Limited (“Westow”), a company incorporated in the British Virgin Islands, which in turn holds 100% of Shenzhen Ceetop Network Technology Co., Limited ("SZ Ceetop"), a company incorporated in Shenzhen, Peoples’ Republic of China ("PRC") and held 100% of Hangzhou Ceetop Network Technology Co., Limited ("HZ Ceetop"), a company incorporated in Hangzhou, PRC until it discontinued operations, and terminated its registration on June 30, 2016. On April 3, 2015, Surry changed its name to Ceetop Holdings Limited.

 

Westow Technology Limited

 

Westow was incorporated on September 7, 2009, and owns 100% of the outstanding securities of Shenzhen Ceetop Network Technology Co., Limited, a company incorporated in Shenzhen, PRC.

 

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Westow entered into share-holding entrustment agreements with three individuals: Fan Zhengqiang, Jin Wanxia, and Liu Weiliang (CEO of the Company) to hold 20%, 40%, and 40%, respectively, of the equity interest of SZ Ceetop on behalf of Westow. The entrustment agreements confirm that Westow is the actual owner of SZ Ceetop. Westow enjoys the actual shareholder’s rights and has the right to obtain any benefits received by the nominal holders. Fan Zhengqiang and Jin Wanxia have no other relationship with the Company. No consideration was given to these individuals who held the equity of SZ Ceetop on behalf of Westow.

 

Guizhou Ceetop Network Technology Co., Ltd., and Ceetop (Hong Kong) Limited.

 

Guizhou Ceetop Network Technology Co., Ltd. (formerly Shenzhen Ceetop Network Technology Co., Ltd.) was incorporated in Shenzhen in August 2009, and changed its name and moved to Guiyang, PRC during the second quarter of 2013. On June 30, 2016, the Company discontinued operations, and terminated the registration, of its subsidiary Hangzhou Ceetop Network Technology Co., Limited. Before disposition, Hangzhou Ceetop Network Technology Co., Limited. Had minimal operations. All assets and liabilities were rolled up to its parent company GZ Ceetop.

 

On July 24, 2014, the Company established a wholly owned company Ceetop (Hong Kong) Limited in Hong Kong under Ceetop Holdings Limited for its business expansion. Ceetop (Hong Kong) Limited is 100% owned by Ceetop Holdings Limited.

  

The address for each entity is set forth below:

 

Name   Address
Ceetop Inc.   A2803, Lianhe Guangchang, 5022 Binhe Dadao, Futian District, Shenzhen, China
     
Ceetop 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 Network Technology Co. Ltd (headquarters)   East Yunhuan Road, Baiyun District, Guiyang, China
     
Ceetop (Hong Kong) Limited   Unit B 8/F Wing Yee Comm Building, 5 Wing Cut St, Sheung Wan, Hong Kong

 

Financial Condition and Changes in Financial Condition

 

Overall Operating Results:

 

Net Sales.  For the three and nine months ended September 30, 2016 and 2015, sales were $nil. The lack of revenues is due to the Company transitioning from online retail sales to business to business supply chain service.

 

Selling, General and Administrative Expenses. Our selling, general and administrative expenses decreased to $71,627 for the three months ended September 30, 2016 from $144,864 for the three months ended September 30, 2015, 51% decrease; and decreased to $261,604 for the nine months ended September 30, 2016 from $376,384 for the nine months ended September 30, 2015, a 30% decrease. The decrease was mainly due to the decrease in salaries and reduction of staffing in the supply chain business.

 

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Net Loss. The Company’s net loss was $71,680 and $147,187 for the three months ended September 30, 2016 and 2015, respectively; and $252,575 and $435,215 for the nine months ended September 30, 2016 and 2015, respectively.  The decrease was due to the decrease of expenses as a result of the transition of the business of the Company.

 

Liquidity and Capital Resources:

 

The Company incurred net losses of $71,680 and $147,187 for the three months ended September 30, 2016 and 2015 respectively; $252,575 and $435,215, for the nine months ended September 30, 2016 and 2015 respectively, and has accumulated deficit of $10,874,016 at September 30, 2016.

 

For the year ended December 31, 2015, our independent auditors, in their report on the financial statements, indicated the Company has experienced recurring losses from operations and may not have enough cash and working capital to fund its operations beyond the very near term, which raises substantial doubt about our ability to continue as a going concern. Management has made a similar note in the financial statements.  As indicated herein, we have need of capital for the implementation of our business plan, and we will need additional capital for continuing our operations.  We do not have sufficient revenues to pay our expenses of operations. Unless the Company is able to raise working capital, or generate sufficient revenues, it is likely that the Company will either have to cease operations or 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 comply 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.

 

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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, 2016 and December 31, 2015, there were no impairments of its long-lived assets.

 

Income Taxes

 

The Company applies FASB ASC 740-10, Accounting For Uncertainty In Income Taxes, which provides clarification related to the process associated with accounting for uncertain tax positions recognized in financial statements. ASC 740-10 prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken, or expected to be taken, in a tax return. ASC 740-10 also provides guidance related to, among other things, classification, accounting for interest and penalties associated with tax positions, and disclosure requirements.

 

All of the Company’s income is generated in the PRC, and accordingly, its income tax provision is calculated based on the applicable tax rates and existing legislation, interpretation and practices in respect thereof.

 

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 compensation 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.

 

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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, 2016. 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 due to the Company only having one person serving on its Board of Directors who also serves as the Chief Executive Officer of the Company.

 

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, 2016. 

 

During the quarter ended September 30, 2016, 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.

 

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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, 2016 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.

 

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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)
   
Date: November 21, 2016 By: /s/ Weiliang Liu
    Weiliang Liu
    CEO, President, Secretary, and Director

 

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 21, 2016
Weiliang Liu        
         
/s/ Shengming Jia   CFO, and Treasurer   November 21, 2016
Shengming Jia        

 

 

 

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