UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended March 31, 2017

 

Or

 

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

 

For the transition period from ________ to _________   

 

Commission File Number 333-130937

 

CHINA TELETECH HOLDING, INC.

 (Exact name of registrant as specified in its charter)

 

Florida		59-3565377
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
Liwan District, No. 145 Enzhou Big Lane, B2 Fuli Square, 8th Zhongshan Road, Unit 505, 5/F, Guangzhou, Guangdong, China		32301
(Address of principal executive offices)		(Zip Code)

 

(850) 521-1000

 (Registrant’s telephone number, including area code) 

 

N/A

 (Former name, former address and former fiscal year, if changed since last report)

 

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, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer	☐		Accelerated filer	☐
Non-accelerated filer	☐		Smaller reporting company	☒
			Emerging growth company	☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

 

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

 

As of May 15, 2017, there were 173,663,776 shares of common stock, $0.01 par value outstanding.

 

 

 

CHINA TELETECH HOLDINGS, INC.
TABLE OF CONTENTS
FORM 10-Q REPORT
March 31, 2017

 

			Page  Number
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements.		1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.		18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.		22
Item 4.	Controls and Procedures.		22
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings.		23
Item 1A.	Risk Factors.		23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.		23
Item 3.	Defaults Upon Senior Securities.		23
Item 4.	Mine Safety Disclosures		23
Item 5.	Other Information.		23
Item 6.	Exhibits.		23
SIGNATURES			24

 

 

PART I - FINANCIAL INFORMATION

 

Item 1.

Financial Statements.

 

China Teletech Holding, Inc.

Consolidated Balance Sheets

As of March 31, 2017 (unaudited) and December 31, 2016 (audited)

(Stated in US Dollars)

 

		Note		3/31/2017				12/31/2016
				USD				USD
				(Unaudited)				(Audited)
ASSETS
Current Assets
Cash and cash equivalents				$	-			$	-
Deposit and prepaid expenses					230,000				200,000
Other receivable					-				-
Total Current Assets					230,000				200,000
Non-Current Assets
Other asset deposit					-				-
Total Non-Current Assets					-				-
TOTAL ASSETS				$	230,000			$	200,000
LIABILITIES & STOCKHOLDERS’ EQUITY
Current Liabilities
Due to related parties				$	477,817			$	413,152
Accrued liabilities and other payable					79,874				54,000
Total Current Liabilities					557,691				467,152
TOTAL LIABILITIES				$	557,691			$	467,152
STOCKHOLDERS’ EQUITY
Common stock US$0.01 par value; 1,000,000,000 authorized, 173,663,776 and 147,513,776 shares issued and outstanding at March 31, 2017 and December 31, 2016, respectively				$	1,736,638			$	1,475,138
Additional paid in capital					5,693,999				5,878,765
Other comprehensive capital					8,970				8,970
Retained Deficit					(7,767,298	)			(7,630,025	)
TOTAL STOCKHOLDERS’ DEFICIT					(327,691	)			(267,152	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT					230,000				200,000

 

See Notes to Consolidated Financial Statements

 

 

China Teletech Holding, Inc.

Consolidated Statements of Income

For the three-month periods ended March 31, 2017 and 2016 (unaudited)

(Stated in US Dollars)

 

		3/31/2017				3/31/2016
		USD				USD
		(Unaudited)				(Unaudited)
Sales		$	-			$	-
Cost of sales			-				-
Gross profit			-				-
Operating expenses
Administrative and general expenses			137,273				-
Total operating expense			137,273				-
Operating Income / (Loss)			(137,273	)			-
Gain on forgiveness of long term debt			-				-
Other income			-				-
Interest income			-				-
Other Expenses			-				-
Interest expenses			-				-
Total other income / (expense)			-				-
Income/(Loss) before taxation			(137,273	)			-
Income tax			-				-
Loss from Continuing Operations			(137,273	)			-
Net Income (Loss)		$	(137,273	)		$	-
Other comprehensive income:
Foreign currency translation change			-				-
Comprehensive income:		$	-			$	-
Attributable to:
-minority interest		$	-			$	-
-the Company			-				-
		$	-			$	-
Earnings Per Share
Basic		$	0.00			$	0.00
Diluted		$	0.00			$	0.00
Weighted Average Shares Outstanding
-Basic			171,913,332				147,513,776
-Diluted			171,913,332				147,513,776

 

See Notes to Consolidated Financial Statements

 

 

China Teletech Holding, Inc.

Consolidated Statements of Changes in Stockholders’ Deficit

For the three-month periods ended March 31, 2017 (unaudited) and the year ended December 31, 2016 (audited)

(Stated in US Dollars)

 

														Foreign
		Total								Additional				Currency								Non-
		Number				Common				Paid in				Translation				Retained				controlling
		of Shares				Stock				Capital				Adjustment				Deficit				Interest				Total
Balance, January 1, 2016			147,513,776				1,475,138				5,878,765				8,970				(7,577,437	)			-				(214,564	)
Net Loss			-				-				-				-				(52,588	)			-				(52,588	)
Foreign Currency Translation Adjustment			-				-				-				-				-				-				-
Balance at December 31, 2016			147,513,776				1,475,138				5,878,765				8,970				(7,630,025	)			-				(267,152	)
Balance, January 1, 2017			147,513,776				1,475,138				5,878,765				8,970				(7,630,025	)			-				(267,152	)
Net Income/loss			-				-				-				-				(137,273	)			-				(137,273	)
Issuance of common stock - acquisition			10,000,000				100,000				(70,000	)			-				-				-				30,000
Issuance of common stock – compensation			13,650,000				136,500				(97,266	)			-				-				-				39,234
Issuance of common stock – commission			2,500,000				25,000				(17,500	)			-				-				-				7,500
Balance at March 31, 2017			173,663,776				1,736,638				5,693,999				8,970				(7,767,298	)			-				(327,691	)

 

See Notes to Consolidated Financial Statements

 

 

China Teletech Holding, Inc.

Consolidated Statements of Cash Flows

For the three months periods ended March 31, 2017 and 2016 (unaudited)

(Stated in US Dollars)

 

 

		3/31/2017				3/31/2016
		(Unaudited)				(Unaudited)
Cash flow from operating activities
Net Income (Loss)			(137,273	)		$	-
Reconciliation to cash flow:							-
Share issued for commission			7,500				-
Share issued for compensation			39,234				-
Depreciation							-
Decrease (Increase) in other receivables			-				-
Decrease (Increase) in amount due from related parties			-				-
Decrease (Increase) in deposit and prepaid expenses			(30,000	)			-
Decrease (Increase) in purchase deposit			-				-
Decrease (Increase) in inventories			-				-
Increase (Decrease) in tax payables			-				-
Increase (Decrease) in accrued liabilities and other payables			25,874				-
Increase (Decrease) in due to related parties			64,665				-
Cash provided by operating activities			(30,000	)			-
			-				-
Net cash provided by (used in) operating activities			(30,000	)			-
Cash flows from investing activities
Net cash inflow			-				-
Payments for deposits			-				-
Disposal for short-term investment			-				-
Net cash provided by (used in) investing activities			-				-
Cash flows from financing activities
Issuance of common stock			30,000				-
			-				-
Net cash provided by (used in) financing activities			30,000				-
Net increase in cash and cash equivalents for the Year			-				-
Effect of Currency Translation			-				-
			-				-
Cash & Cash Equivalents at Beginning of Year			-				-
Cash & Cash Equivalents at End of Year			-				-
NON CASH ITEMS
Issuance of common stock for compensation			39,234				-
Issuance of common stock for commission			7,500				-
Issuance of common stock for acquisition			30,000				-
TOTAL			76,734				-

 

See Notes to Consolidated Financial Statements

 

 

China Teletech Holding, Inc.

Notes to Consolidated Financial Statements

As of March 31, 2017 and December 31, 2016

 

1.	ORGANIZATION AND PRINCIPAL ACTIVITIES

 

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

 

On June 30, 2014, the Company entered into a cooperation agreement (the “Agreement”) with Shenzhen Jinke Energy Development Co., Ltd. (“SJD”). Pursuant to the Agreement, the Company will purchase, in an aggregate, 51% of all the outstanding capital of SJD in exchange for 20 million newly issued shares of the Company’s common stock. The Company filed Form 8-K with the U.S Securities and Exchange Commission on August 8, 2014 detailing the transaction; the Agreement was filed as an exhibit to the Form 8-K. As of December 31, 2014, 16 million shares of the 20 million shares have been issued, and 4 million shares are pending issuance.

 

The Company has accounted for the transaction with SJD as reverse takeover and recapitalization of the Company; accordingly, the legal acquirer is the accounting acquiree and the legal acquirer is the accounting acquirer. As a result of this transaction, the Company is deemed to be a continuation of the business of SJD. Accordingly, the financial data included in the accompanying consolidated financial statements for all periods prior to June 30, 2014 is that of the accounting acquirer (SJD). The historical stockholders’ equity of the accounting acquirer prior to the share exchange has been retroactively restated as if the share exchange transaction occurred as of the beginning of the first period presented.

 

On November 15, 2016, the Company, SJD and Guangyuan Liu, the holder of 97% of the equity interest of SJD, entered into a certain Mutual Rescission Agreement (the “Rescission Agreement”), whereby the parties agreed to rescind the Jinke Exchange Agreement and unwind the Jinke Reverse Merger as if they never occurred, for a consideration of 10,000,000 newly issued restricted shares (the “Rescission Shares”) of the Company’s common stock to be issued to the Guangyuan Liu, the holder of 97% of the equity interest of SJD upon closing of the transactions contemplated in the Rescission Agreement. Upon closing of the Rescission Agreement on November 15, 2016, the Guangyuan Liu, the holder of 97% of the equity interest of SJD, returned and surrendered 20 million of the Company share and the Company returned and surrendered the 51% of the issued and outstanding securities of SJD and issued the Rescission Shares to Guangyuan Liu, the holder of 97% of the equity interest of SJD. The Company filed Form 8-K with the U.S Securities and Exchange Commission on November 15, 2016 detailing the transaction; the Rescission Agreement was filed as an exhibit to the Form 8-K.

 

The difference between the beginning balance of 2014 and the ending balance of 2013 is due to the change of organization structure. According to Rescission Agreement, whereby the parties agreed to rescind the Jinke Exchange Agreement and unwind the Jinke Reverse Merger as if they never occurred, for a consideration of 10,000,000 newly issued restricted shares (the “Rescission Shares”) of the Company’s common stock to be issued to the Guangyuan Liu, the holder of 97% of the equity interest of SJD upon closing of the transactions contemplated in the Rescission Agreement.

 

 

China Teletech Holding, Inc.

Notes to Consolidated Financial Statements

As of March 31, 2017 and December 31, 2016

 

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

(a)

Method of Accounting

 

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

 

(b)

Consolidation

 

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

 

The company owned the following subsidiary since the reserve-merger and soon thereafter. As of March 31, 2017 detailed identities of the consolidating subsidiary are as follows:-

 

	Name of Company		Place of Incorporation		Attributable Equity Interest %				Registered Capital
	Strategic Services Group Limited		BVI			100	%		USD 100

 

 

China Teletech Holding, Inc.

Notes to Consolidated Financial Statements

As of March 31, 2017 and December 31, 2016

 

(c)

Economic and Political Risks

 

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

 

(d)

Use of Estimates

 

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

 

(e)

Cash and Cash Equivalents

 

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

 

(f)

Accounts Receivable

 

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

 

 

China Teletech Holding, Inc.

Notes to Consolidated Financial Statements

As of March 31, 2017 and December 31, 2016

 

(g)

Inventories

 

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

 

(h)

Accounting for Impairment of Long-Lived Assets

 

The Company adopted FASB Topic 360-10-05 “Impairment or Disposal of Long-Live Assets” which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. The Company periodically evaluates the carrying value of long-lived assets to be held and used in accordance with ASC 360. ASC 360 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the long-lived assets.

 

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

 

If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. During the reporting periods, there was no impairment loss.

 

(i)

Revenue Recognition

 

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

 

(j)

Cost of Sales

 

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

 

 

China Teletech Holding, Inc.

Notes to Consolidated Financial Statements

As of March 31, 2017 and December 31, 2016

 

(k)

Selling Expenses

  

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

 

(l)

General & Administrative Expenses

 

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

 

(m)

Advertising

 

The Company expensed all advertising costs as incurred.

 

(n)

Foreign Currency Translation

 

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

 

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

 

	Exchange Rates		3/31/2017				12/31/2016
	Period end RMB : US$ exchange rate			6.8832				6.9448
	Average period RMB : US$ exchange rate			6.8853				6.6435

 

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

 

 

China Teletech Holding, Inc.

Notes to Consolidated Financial Statements

As of March 31, 2017 and December 31, 2016

 

(o)

Income Taxes

 

The Company uses the accrual method of accounting to determine and report its taxable reduction of income taxes for the year in which they are available. The Company has implemented FASB ASC Topic 740 “Income Taxes”. Income tax liabilities computed according to the United States, People’s Republic of China (PRC), and British Virgin Islands (BVI) tax laws are provided for the tax effects of transactions reported in the financial statements and consists of taxes currently due plus deferred taxes related primarily to differences between the basis of fixed assets and intangible assets for financial and tax reporting. The deferred tax assets and liabilities represent the future tax return consequences of those differences, which will be either taxable or deductible when the assets and liabilities are recovered or settled. Deferred taxes also are recognized for operating losses that are available to offset future income taxes. A valuation allowance is created to evaluate deferred tax assets if it is more likely than not that these items will either expire before the Company is able to realize that tax benefit, or that future realization is uncertain.

 

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

 

	Subsidiary		Country of Domicile		Income Tax Rate
	Strategic Services Group Limited		British Virgin Islands			0.00	%

 

●

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

 

●

Since China Teletech Holding, Inc. is primarily a holding company without any business activities in the United States. The Company shall not be subject to United States income tax for the quarter ended March 31, 2017 and for year ended December 31, 2016.

 

 

China Teletech Holding, Inc.

Notes to Consolidated Financial Statements

As of March 31, 2017 and December 31, 2016

 

(p)

Statutory Reserve

 

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

 

(r)

Fair Value of Financial Instruments

 

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

 

●

Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.

 

●

Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

 

●

Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.

 

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

 

As of March 31, 2017 and December 31, 2016, the Company did not identify any assets and liabilities that were required to be presented on the balance sheet at fair value.

 

 

China Teletech Holding, Inc.

Notes to Consolidated Financial Statements

As of March 31, 2017 and December 31, 2016

 

(s)

Other Comprehensive Income (Loss)

 

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

 

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

 

The Company uses FASB ASC Topic 220, “Reporting Comprehensive Income”. Comprehensive income is comprised of net income and all changes to the statements of stockholders’ equity, except the changes in paid-in capital and distributions to stockholders due to investments by stockholders. Comprehensive income for the three-month periods ended March 31, 2014 and 2013 included net income and foreign currency translation adjustments.

 

(t)

Goodwill

 

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable assets acquired in a business combination. In accordance with Statement of FASB ASC Topic 350, “Intangibles and Other”, goodwill is no longer subject to amortization. Rather, goodwill is subject to at least an annual assessment for impairment, applying a fair-value based test. Fair value is generally determined using a discounted cash flow analysis.

 

(u)

Segment Reporting

 

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

 

 

China Teletech Holding, Inc.

Notes to Consolidated Financial Statements

As of March 31, 2017 and December 31, 2016

 

(v)

Stock-based Compensation

 

The Company records stock-based compensation expense pursuant to FASB Topic ASC 718-10, “Share Based Payment Arrangement,” which requires companies to measure compensation cost for stock-based employee compensation plans at fair value at the grant date and recognize the expense over the employee’s requisite service period. The Company’s expected volatility assumption is based on the historical volatility of Company’s stock or the expected volatility of similar entities. The expected life assumption is primarily based on historical exercise patterns and employee post-vesting termination behavior. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

 

Stock-based compensation expense is recognized based on awards expected to vest, and there were no estimated forfeitures as the Company has a short history of issuing options. ASC 718-10 requires forfeitures to be estimated at the time of grant and revised in subsequent periods, if necessary, if actual forfeitures differ from those estimates.

 

(w)

Recent Accounting Pronouncements

 

In January 2017, the FASB issued ASU No. 2017-1 “Topic 805, Business Combinations: Clarifying the Definition of a Business”. The amendments in this update provide a screen to determine when a set is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This screen reduces the number of transactions that need to be further evaluated. The amendments in this update affect all reporting entities that must determine whether they have acquired or sold a business. Public business entities should apply the amendments in this update to annual periods beginning after December 15, 2017, including interim periods within those periods. All other entities should apply the amendments to annual periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019. We do not expect the adoption of ASU 2017-1 to have a material impact on our consolidated financial statements.

 

From time to time, new accounting pronouncements are issued by FASB that are adopted by the Company as of the specified effective date. If not discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on the Company’s financial statements upon adoption. Management does not believe that any recently issued, but not yet effective accounting pronouncements, when adopted, will have a material effect on the accompanying financial statements.

 

 

China Teletech Holding, Inc.

Notes to Consolidated Financial Statements

As of March 31, 2017 and December 31, 2016

 

3.	DEPOSIT AND PREPAID EXPENSES

 

			3/31/2017				12/31/2016
	Type of Account
	Deposit		$	30,000			$	-
	Prepaid expenses			200,000				200,000
	Total prepaid expenses			230,000				200,000

 

On January 3, 2017, the Company issued 10,000,000 shares of its common stock as deposit to acquire Liaoning Kuncheng Education Investment Co. Ltd. The market price was $0.003 on January 3, 2017, total amount paid was $30,000.

 

The $200,000 prepaid expenses were paid to Jinke per agreement. The agreement was canceled on November 2016. According to the Jinke Rescission Agreement, the Company is expecting to receive the repayment from Jinke.

 

4.	OTHER RECEIVABLES

 

			3/31/2017				12/31/2016
	Type of Account
	Other receivables		$	800,000			$	800,000
	Less: Provision of impairment			(800,000	)			(800,000	)
	Other receivable, net			-				-

 

The Company issued 1,000,000 shares, 5,000,000 shares, 6,000,000 shares and 6,000,000 shares of common stock to Appinero LLC, Chunling Au, IT Appraiser Corp. and Surf Financial Group LLC in March 2013 respectively for the cancellation and purchase of debt. Since the Company has not received payment for these issuances, the Company recorded them as subscription receivables. The Company authorized Mr. Hinman Au to collect on behalf of the Company the subscription proceeds and he entered into a Letter of Commitment with the Company assuring the collection of such proceeds. In the third quarter of 2013, the Company determined that the subscription receivable was impaired, and accordingly, has written off the amount from its accounts; however, should the Company deem further action is necessary, the Company reserves the right to pursue Mr. Hinman Au in the future for the delinquent subscription proceeds.

 

The payment date of stock subscription receivables cannot be determined as there is no payment received prior to the publication of financial statements.

 

 

China Teletech Holding, Inc.

Notes to Consolidated Financial Statements

As of March 31, 2017 and December 31, 2016

 

5.	DUE TO RELATED PARTIES

 

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

 

			3/31/2017				12/31/2016
	Due to Ms. Li, Yankuan		$	477,817			$	413,152
	Other shareholder			-				-
				477,817				413,152

 

Ms. Yankuan Li, Chief Executive Officer and Director of the Company, made advances to the Company to help fund the Company’s prior operations. These advances are unsecured and interest free. There is no due date for repayment.

 

6.	EARNINGS PER SHARE

 

			3/31/2017				12/31/2016
	Basic and diluted loss per share numerator
	Net Loss		$	(137,273	)		$	(52,588	)
	Loss attributable to non-controlling interest			-				-
	Loss attributable to common stockholders			(137,273	)		$	(52,588	)
	Original Shares:			147,513,776				147,513,776
	Additions from Actual Events
	Issuance of shares			26,150,000				-
	Balance as at end of period and year			173,663,776				147,513,776
	Basic weighted average shares outstanding
	Loss Per Share
	-Basic		$	-			$	-
	-Diluted			-				-
	Weighted average shares outstanding
	-Basic			171,913,332				147,513,776
	-Diluted			171,913,332				147,513,776

 

 

China Teletech Holding, Inc.

Notes to Consolidated Financial Statements

As of March 31, 2017 and December 31, 2016

  

7.	GOING CONCERN UNCERTAINTIES

 

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

 

As of March 31, 2017, the Company reported a net loss of $137,273 and working capital deficit of $327,691. The Company had an accumulated deficit of $7,767,298 as of March 31, 2017 due to the fact that the Company continued to incur losses over the past several years.

 

The continuation of the Company as a going concern is dependent upon improving the profitability and the continuing financial support from its stockholders or other capital sources. Management believes that the continuing financial support from the existing shareholders or external debt financing will provide the additional cash to meet the Company’s obligations as they become due.

 

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

 

 

China Teletech Holding, Inc.

Notes to Consolidated Financial Statements

As of March 31, 2017 and December 31, 2016

 

8.	COMMON STOCK

 

On January 3, 2017, the Company issued 23,220,000 share of common stock for acquisition, compensation and commission. The market price was $0.003. The payment for acquisition was $30,000; for compensation was $32,160 and for commission was $7,500.

 

On February 3, 2017, the Company issued 1,400,000 share of common stock as a stock compensation. The market price was $0.0022 and the total payment was $3,278.

 

On February 8, 2017, the Company issued 1,400,000 share of common stock as a stock compensation. The market price was $0.0026 and the total payment was $3,796.

 

9.	SUBSEQUENT EVENTS

 

The company has evaluated the period after the balance sheet date through the day that the financial statements were issued, and determined that there were no subsequent events or transactions that required recognition or disclosure in the financial statements except the following:

 

On November 15, 2016, the Company, Liaoning Kuncheng Education Investment Co. Ltd. (“LKEI”), a company organized under the laws of the People’s Republic of China (the “Kuncheng”), and Kunyuan Yang, the sole shareholder of Kuncheng (the “Kuncheng Shareholder”), entered into a certain share exchange agreement (the “Kuncheng Exchange Agreement”) pursuant to which the Company agreed to purchase 51% of the equity ownership in Kuncheng, with the purchase price as an aggregate of 30 million shares of Common Stock issued to the Kuncheng Shareholder (the “Kuncheng Share Exchange”). The Company filed Form 8-K with the U.S Securities and Exchange Commission on November 15, 2016 detailing the transaction; the Agreement was filed as an exhibit to the Form 8-K. The Company issued 10 million shares on January 3, 2017. As of March 31, 2017, 20 million shares are pending issuance.

 

On May 15, 2017, the Company established a Joint Venture Company Liaoning Kunchengyuan Internet Technology Co. Ltd. in the PRC with LKEI. The Company owns 51% while the LKEI owns 49%.

 

 

Item 2.

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

 

The following discussion and analysis of the results of operations and financial condition of the Company for the three months ended March 31, 2017 shall be read in conjunction with its financial statements and notes. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results of the timing of events could differ materially from those projected in these forward-looking statements as a result of a number of factors, including those set forth under the Risk Factors, Special Note Regarding Forward-Looking Statements and Business sections in our Form 10-K for the year ended December 31, 2016. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.

 

Company Overview

 

The Company is currently an investment holding company with no business operation.

 

Sale of the Company’s Wholly-Owned Subsidiaries Global Telecom Holdings Limited and China Teletech Limited

 

On January 1, 2015, the Company entered into the share exchange agreement with a third-party, pursuant to which the Company transferred 100% equity interest in both China Teletech Co., Ltd. and Global Telecom Co., Ltd. to an unrelated third-party, for a cash consideration of $2,000.

 

Share Exchange with Jinke

 

On January 28, 2015, the Company entered into a Share Exchange Agreement (the “Share Exchange Agreement”) with Shenzhen Jinke Energy Development Co., Ltd., a company organized under the laws of the People’s Republic of China (“Jinke”), and Guangyuan Liu, the holder of 97% of the equity interest of Jinke (the “Jinke Shareholder”), pursuant to which China Teletech acquired 51% of the issued and outstanding equity securities of Jinke (the “Share Exchange”). Both the Company and Jinke believed that the acquisition transaction is in the best interest of their respective shareholders. The Company believed that the acquisition would enhance the value of the Company through the acquisition of a majority equity interest in Jinke’s viable business, and Jinke believes that such transaction will afford Jinke access to the U.S. capital market and other possible financial resources. Prior to the execution of the Cooperation Agreement, no material relationship between the company and its affiliates, on the one hand, and Shenzhen Jinke Energy Development Co. Ltd and their affiliates, on the other,. Jinke was introduced to the Company by Ms. Chen Xiaoqiao, a PRC resident, who is a mutual business contact of Ms. Li Yankuan, the Company’s CEO and Mr. Liu Guangyuan, Jinke’s former owner. For her role in this, Ms. Chen received 1,000,000 shares of the Company’s common stock subsequent to the closing of the acquisition. Other than the foregoing, no third party played a material role in arranging or facilitating the acquisition.

 

The Company and Jinke had previously entered into a certain Cooperation Agreement on June 30, 2014. The Cooperation Agreement was superseded and replaced by the Share Exchange Agreement by and between the Company and Jinke, dated as of January 28, 2015. The parties decided to change from an asset purchase to a share purchase primarily due to the difficulty in ascertaining Jinke’s assets to be acquired based on the percentages as set forth in the previous Cooperation Agreement. In connection with the Share Exchange, the cooperation agreement dated June 30, 2014 into which Jinke and the Company previously entered, and which was first disclosed on the Company’s current report on Form 8-K filed August 8, 2014, was terminated and superseded in its entirety by the Share Exchange Agreement.

Pursuant to the Share Exchange Agreement, the Company agreed to issue an aggregate of 20,000,000 shares of its Common Stock, to the Jinke Shareholder in exchange for 51% of the issued and outstanding securities of Jinke. Of the 20,000,000 shares to be issued by the Company, 16,000,000 were issued on October 6, 2014 and delivered to the Jinke Shareholder and his designee prior to closing and 4,000,000 were to be issued and delivered at closing. The Share Exchange closed on January 28, 2015.

In connection with the Share Exchange, Mr. Guangyuan Liu was appointed a director of the Company, and Ms. Yankuan Li was appointed a director of Jinke. Immediately following the Share Exchange, Mr. Liu beneficially owns 10.87% of the issued and outstanding common stock of the Company, which includes shares held by Mr. Liu’s son, Liu Jiexun.

 

Incorporation of Strategic Services Group Limited

 

On November 8, 2016, Strategic Services Group Limited (“SSGL”) was incorporated in the British Virgin Islands and became a wholly owned subsidiary of the Company. SSGL is an investment holding company with no business operation since its incorporation.

 

 

Rescission Agreement with Jinke

 

On November 15, 2016, the Company, Jinke and the Jinke Shareholder entered into a certain Mutual Rescission Agreement (the “Rescission Agreement”), whereby the parties agreed to rescind the Jinke Exchange Agreement and unwind the Jinke Reverse Merger as if they never occurred, for a consideration of 10,000,000 newly issued restricted shares (the “Rescission Shares”) of the Company’s common stock to be issued to the Jinke Shareholder upon closing of the transactions contemplated in the Rescission Agreement.

 

Share Exchange with Kuncheng

 

On November 15, 2016, the Company, Kuncheng, and Kuncheng Shareholder, entered into the Kuncheng Exchange Agreement pursuant to which the Company agreed to purchase 51% of the equity ownership in Kuncheng, with the purchase price as an aggregate of 30 million shares of Common Stock issued to the Kuncheng Shareholder.

 

Going Concern

 

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

 

As of March 31, 2017, the Company reported a net loss of $137,273, working capital deficit of $327,691 and had an accumulated deficit of $7,767,298 due to the fact that the Company continued to incur losses over the past several years.

 

The continuation of the Company as a going concern is dependent upon improving the profitability and the continuing financial support from its stockholders or other capital sources. Management believes that the continuing financial support from the existing shareholders or external debt financing will provide the additional cash to meet the Company’s obligations as they become due.

 

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

 

 

Results of Operations

 

Results of Operation for the three months ended March 31, 2017 compared with three months ended March 31, 2016

 

Total Revenue

 

The revenue was nil for the three months ended March 31, 2017, as compared to nil during the three months ended March 31, 2016, since we were an investment holding company without business activities.

 

Expenses

 

Our general and administrative expenses (“G&A expenses”) were $137,273 during the three months ended March 31, 2017 as compared to nil during the three months ended March 31, 2016, representing a decrease in amount of $137,273. The increase in G&A Expenses was mainly due to the increase in professional fees incurred for certain exchange agreements.

 

Net Income

 

We recorded a net loss of $137,273 during the three months ended March 31, 2017 as compared to net loss of nil during the three months ended March 31, 2016. The increase of net loss was mainly due to the increase of G&A Expenses during the three months ended March 31, 2017. 

 

 

Liquidity and Capital Resources

 

Cash used by operating activities was $30,000 during the three months ended March 31, 2017 as compared to cash provided by operating activities was $0 during the same period of 2016.  Cash used by operating activities during the first three months of 2017 was mainly resulted from general and administrative expenses of $137,273, added adjustments of stock issued for compensation and commission $ net decrease in current assets (other receivables, amounts due from a related party, purchase deposit, inventories) $19,038 and net increase in current liabilities (accrued liabilities and other payables and tax payables) $21,034.  Cash provided by operating activities during the first three months of 2013 was mainly resulted from net profit of $43,706, added adjustments of non-controlling interest $18,160, net decrease in current assets (other receivables, amounts due from a related party, purchase deposit, inventories) $40,794, net increase in current liabilities (accrued liabilities and other payables and tax payables) $36,528 and share compensation $30,000.

 

There was no cash flow provided by or used in investing activities in the first three months of 2017 and the same period of 2016.

 

Cash flows used in financing activities were $30,000 and nil for the first three months of 2017 and 2016. Cash provided from investing activities during the three months period of 2017 was resulted from issuance of common stock for acquisition.

 

The cash balance for the Company as of March 31, 2017 was nil as all the cash expenses were paid by the director. Please refer to Note 8 Going Concern for the long term financial support arrangement in the cash requirements of the Company.

 

Critical Accounting Policies

 

Our significant accounting policies are summarized in Note 2 of our financial statements included in this quarter report on Form 10-Q for the period ended March 31, 2017.  Our financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States (“GAAP”).  GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenues and expense amounts reported.  These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition.  We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied.  We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances.  Actual results may differ materially from these estimates under different assumptions or conditions.  We continue to monitor significant estimates made during the preparation of our financial statements.

 

Recent Accounting Pronouncements

 

Please refer to Note 2(w) to Consolidated Financial Statements for the periods ended March 31, 2017. 

 

Off-Balance Sheet Arrangements

 

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

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

 

Smaller reporting companies are not required to provide the information required by this item.

 

Item 4.

Controls and Procedures.

 

Disclosure of Controls and Procedures

 

Our disclosure controls and procedures are designed to ensure (i) that information required to be disclosed by us in the reports we file or submit under the Exchange Act are recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms; and (ii) that information required to be disclosed by us in the reports it files or submits under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. As of March 31, 2017 we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of the end of the period covered by this report, our disclosure controls and procedures were not effective at the reasonable assurance level.

 

Changes in Internal Controls Over Financial Reporting

 

There has been no change in our internal control over financial reporting that occurred during the fiscal quarter covered by this quarterly report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 

 

 

PART II - OTHER INFORMATION

 

Item 1.

Legal Proceedings.

 

We are not currently involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect. 

 

Item 1A.

Risk Factors.

 

We are a smaller reporting company and therefore, we are not required to provide information required by this Item of Form 10-Q.

 

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 No.		Description
31.1		Certification of Chief Executive Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *
31.2		Certification of Chief Financial Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *
32.1		Certification of Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 **
32.2		Certification of Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 **
101.INS (1)		XBRL Instance Document
101.SCH (1)		XBRL Taxonomy Schema
101.CAL (1)		XBRL Taxonomy Calculation Linkbase
101.DEF (1)		XBRL Taxonomy Definition Linkbase
101.LAB (1)		XBRL Taxonomy Label Linkbase
101.PRE (1)		XBRL Taxonomy Presentation Linkbase

 

*	Filed herewith.
**	In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are furnished and not filed.
(1)	Furnished herewith. XBRL (eXtensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	CHINA TELETECH HOLDING, INC.
Date: May 22, 2017	By:	/s/ Yankuan Li
		Yankuan Li
		President and Chief Executive Officer   (Principal Executive Officer)

 

Date: May 22, 2017	By:	/s/ Jane Yu
		Jane Yu
		Chief Financial Officer and Secretary (Principal Financial and Accounting Officer)

 

 

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