UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): March 30, 2012
 
CHINA TELETECH HOLDING, INC.
(Exact name of registrant as specified in its charter)
 
Florida
 
333-130937
 
59-3565377
(State or other jurisdiction of
incorporation)
 
(Commission File Number)
 
(IRS Employer Identification No.)
 
c/o Corporation Service Company
1201 Hays Street
Tallahassee, FL
(Address of principal executive offices) (Zip Code)
 
Registrant’s telephone number, including area code: (850) 521-1000
 
Guangzhou Global Telecom, Inc.
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):

o          Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o         Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a -12)

o          Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d -2(b))

o          Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e -4(c))

 
 
 
 
Item 1.01 Entry into a Material Definitive Agreement.

Reference is made to the disclosure set forth under Items 2.01 of this Report, which disclosure is incorporated herein by reference.

Item 2.01 Completion of Acquisition or Disposition of Assets.

On March 30, 2012 (the “Closing Date”), China Teletech Holding, Inc., a Florida corporation (“we” or the “Company”), completed a share exchange transaction with China Teletech Limited, a British Virgin Islands corporation (“CTL”), by entering into a share exchange agreement (the “Agreement”) with CTL and the former shareholders of CTL, dated March 30, 2012. Pursuant to the Agreement, we acquired all the outstanding capital stock of CTL from the former shareholders of CTL in exchange for the issuance of 40,000,000 shares of our common stock (the “Share Exchange”). The shares issued to the former shareholders of CTL constituted approximately 68.34% of our issued and outstanding shares of common stock as of an immediately after the commutation of the Share Exchange. As a result of the Share Exchange, CTL became our wholly owned subsidiary and Dong Liu and Yuan Zhao, the former shareholders of CTL, became our principal shareholders.  

In connection with the Share Exchange, Yankuan Li resigned as our Chief Financial Officer, Secretary and Chairman of the Board of Directors, effective as of the Closing Date. Also effective upon closing of the Share Exchange, Dong Liu, Yuan Zhao, Yau Kwong Li and Kwok Ming Wai Andrew were appointed as our directors. In addition, Kwok Ming Wai Andrew was appointed as our Chief Financial Officer and Secretary. Ms. Yankuan Li will remain President, Chief Executive Officer and a member of the board of directors of the Company.

The foregoing description of the Agreement does not purport to be complete and is qualified in its entirety by reference to the provisions of the Agreement filed as Exhibit   10.1 to this Current Report on Form 8-K (this “Report”), which is incorporated by reference herein.

About China Teletech Limited

China Teletech Limited is the holding company of Shenzhen Rongxin Investment Co., Ltd. (“Shenzhen Rongxin”) and Guangzhou Rongxin Science and Technology Limited (“Guangzhou Rongxin”).  Shenzhen Rongxin is primarily engaged in the wholesale and distribution of mineral water and trading of wine in China.  Guangzhou Rongxin is primarily engaged in the distribution of rechargeable phone cards and prepaid subway tickets.

Item 3.02 Unregistered Sales of Equity Securities.

Reference is made to the disclosure set forth under Items 2.01 of this Report, which disclosure is incorporated herein by reference.

The shares of common stock issued to the former shareholders of CTL in connection with the Share Exchange were offered and sold in a private transaction in reliance upon exemptions from registration pursuant to Section 4(2) of the Securities Act and Regulation S promulgated under the Securities Act. Our reliance on Section 4(2) of the Securities Act was based upon the following factors: (a) the issuance of the securities was an isolated private transaction by us which did not involve a public offering; (b) there were only a limited number of offerees; (c) there were no subsequent or contemporaneous public offerings of the securities by us; (d) the securities were not broken down into smaller denominations; and (e) the negotiations for the sale of the stock took place directly between the offerees and us. Our reliance on Regulation S was based on that such shareholders were not a “U.S. person” as that term is defined in Rule 902(k) of Regulation S under the Act, and that such shareholders were acquiring our common stock, for investment purposes for their own respective accounts and not as nominees or agents, and not with a view to the resale or distribution thereof, and that the shareholders understood that the shares of our common stock may not be sold or otherwise disposed of without registration under the Securities Act or an applicable exemption therefrom.

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

Departure of Directors and Officer
 
On the Closing Date, Yankuan Li submitted resignation letter pursuant to which she resigned as our Chief Financial Officer, Secretary and Chairman of the Board of Directors, effective as of the closing of the Share Exchange. Yankuan Li will remain President, Chief Executive Officer and a member of the board of directors of the Company. The resignation was not in connection with any known disagreement with us on any matter.
 
Appointment of Directors and Officers
 
On the Closing Date, Dong Liu, Yuan Zhao, Yau Kwong Li and Kwok Ming Wai Andrew were appointed by our Board of Directors as directors of the Company, effective upon the closing of the Share Exchange.
 
 
 
 
 
On the Closing Date, our Board of Directors appointed Kwok Ming Wai Andrew as our Chief Financial Officer and Secretary, effective upon the closing of the Share Exchange.

The biographical information regarding the new officers is listed below:

Dong Liu , age 41, was appointed as our Chairman of the Board of Directors on March 30, 2012. Mr. Liu was the Director and General Manager of Shenzhen Rongxin Investment Company Limited, a company mainly engaged in the wholesale and distribution of mineral water and trading of wine in China since 2009.  Mr. Liu had previously worked for China’s state-owned enterprises in Hainan Province and Shenzhen for more than 10 years and participated in business development of many government-sponsored projects of various industries.

Yuan Zhao , age 31, was appointed as our Director on March 30, 2012. Mr. Zhao was the Director of Guangzhou Rongxin Science and Technology Limited, a company mainly engaged in distribution of rechargeable phone cards and prepaid subway tickets in Guangzhou City, China since 2010.  Previously, Mr. Zhao studied BBA in Singapore.  He was a business consultant for a Singapore investment company, Huantong Singapore Co. Ltd.

Yau Kwong Li , age 60, was appointed as our Director on March 30, 2012. Mr. Li was engaged in the auto and property industries in the Mainland China over 30 years.  Previously, Mr. Li was the chief executive officer of Xi An Xin Hui Estate Properties Ltd.

Kwok Ming Wai Andrew , age 42, was appointed as our Chief Financial Officer, Secretary and Director on March 30, 2012. Mr. Kwok joined China Teletech Group as CFO-designate since October 2011.  Mr. Kwok earned an MBA degree in 1996.  He is a CPA of HKICPA since 2000 and is a fellow member of ACCA.  Mr. Kwok started his career in auditing in 1997 and moved to in-house finance since 2002.  He had previously worked as a Finance Manager and Company Secretary for an insurance broker firm in Hong Kong.

Family Relationships
 
Each of the newly appointed officers and directors has no family relationship with any of the officers or directors of the Company except that Mr. Yuan Zhao is the son-in-law of Ms. Yankuan Li, our president and chief executive officer.
 
Related Party Transactions
 
There are no related party transactions reportable under Item 5.02 of Form 8-K and Item 404(a) of Regulation S-K.
 
Employment Agreement

There is no employment agreement entered into between the new officers, directors and the Company.

Item 5.03 Amendments to Articles of Incorporation of Bylaws; Change in Fiscal Year.

On March 8, 2012, we filed an Articles of Amendment to our Articles of Incorporation (the “Amendment”) to change the corporate name from “Guangzhou Global Telecom, Inc.” to “China Teletech Holding, Inc.” The Amendment was effective as of March 8, 2012. A copy of the Amendment is attached hereto as Exhibit 3.1. The name change was declared effective by Financial Industry Regulatory Authority, or FINRA, as of March 20, 2012.
 
Item 8.01 Other Events.
 
On December 9, 2011, the Board and the shareholders representing more than 50% of the Company’s common stock approved a 1-10 reverse split. The forward split was declared effective by FINRA as of February 16, 2012.
 
On March 2, 2012, the Board and the shareholders representing more than 50% of the Company’s common stock approved a change in the Company’s name. In connection with the name change, we have applied for a new trading symbol “CNCT” for the Company’s common stock, which is quoted on the OTCQB. Both the name change and symbol change have been approved by FINRA and became effective as of March 20, 2012.
 
 
 
 
 
Item 9.01 Financial Statements and Exhibits.
 
(a)  
Financial Statements of Business Acquired

Filed herewith as Exhibit 99.1 to this Report and incorporated herein by reference are the Audited Consolidated Financial Statements for the years ended December 31, 2011 and 2010 for CTL.

(b)  
Pro Forma Financial Information

Filed herewith as Exhibit 99.2 to this Report and incorporated herein by reference is unaudited pro forma combined financial information of China Teletech Holding, Inc. and its subsidiaries.

(c)
Shell Company Transactions.

Not applicable.

(d)  
Exhibits

Exhibit No.
 
Description
     
3.1
 
Certificate of Amendment to Articles of Incorporation.
10.1
 
Share Exchange Agreement, by and among the Company, CTL and the former shareholders of CTL.
99.1
 
Audited Consolidated Financial Statements for the years ended December 31, 2011 and 2010 for CTL
99.2
 
Unaudited Pro Forma Combined Financial Information of China Teletech Holding, Inc. and its subsidiaries.
 
 
 
 
 
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 hereunto duly authorized.

Dated: April 5, 2012
 
CHINA TELETECH HOLDING, INC.
     
 
 By:
/s/ Yankuan Li                                           
   
Yankuan Li
Chief Executive Officer


 
 5
Exhibit 3.1
 
March 8, 2012
 
FLORIDA DEPARTMENT OF STATE
Division of Corporations
 
CHINA TELETECH HOLDING, INC.
11TH FLOOR, AIE BUILDING
33 CONNAUGHT ROAD CENTRL
HONG KONG, HK
 
Re: Document Number P99000028316
 
The Articles of Amendment to the Articles of Incorporation of GUANGZHOU GLOBAL TELECOM, INC. which changed its name to CHINA TELETECH HOLDING, INC., a Florida corporation, were filed on March 8, 2012.
 
This document was electronically received and filed under FAX audit number H12000060933.
 
Should you have any questions regarding this matter, please telephone (850) 245-6050, the Amendment Filing Section.
 
Carol Mustain
Regulatory Specialist II
Division of Corporations
    Letter Number: 912A00008774
 
P.O BOX 6327 — Tallahassee, Flonda 32314
 
 
 
 
 
Articles of Amendment
to
Articles of Incorporation
of
 
(Name of Corporation as currently filed with the Florida Dept. of State)
Guangzhou Global Telecom, Inc.
(Document Number of Corporation (if known)
 
Pursuant to the provisions of section 607.1006, Florida Statutes, this Florida Profit Corporation adopts the following amendments) to its Articles of Incorporation:
 
A.
If amending name, enter the new name of the corporation:
   
 
China Teletech Holding, Inc.
The new name must be distinguishable and contain the word "corporation," "company," or "incorporated" or the abbreviation "Corp.," "Inc.," or Co.," or the designation "Corp," "Inc," or "Co". A professional corporation name must contain the word "chartered," "professional association," or the abbreviation "P.A."
 
B. Enter new principal office address, if applicable:  
 
(Principal office address MUST BE A STREET ADDRESS)
 
     
     
     
     
C . Enter new mailing address, if applicable:  
 
(Mailing address MAY BE A POST OFFICE BOX )
 
     
     
     
     
     
D.
If amending the registered agent and/or registered office address in Florida, enter the name of the new registered agent and/or the new registered office address:
 
  Name of New Registered Agent  
     
     
   
(Florida street address)
     
 
  New Registered Office Address:  , Florida  
    (City) (Zip Code)
 
New Registered Agent's Signature, if changing Registered Agent:
 
I hereby accept the appointment as registered agent. I am familiar with and accept the obligations of the position.
 
Signature of New Registered Agent, if changing
 
 
Page 1 of 4
 
 
If amending the Officers and/or Directors, enter the title and name of each officer/director being removed and title, name, and address of each Officer and/or Director being added:
(Attach additional sheets, i f necessary)
 
Please note the officer/director title by the first letter ofthe office title:
P = President; V= Vice President; T= Treasurer; S= Secretary; D= Director; TR= Trustee; C = Chairman or Clerk: CEO = Chief Executive Officer; CFO = Chief Financial Officer. If an officer/director holds more than one title, list the first letter of each office held. President, Treasurer, Director would be PTD.
 
Changes should be noted in the following manner. Currently John Doe is listed as the PST and Mike Jones is listed as the V. There is a change, Mike Jones leaves the corporation, Sally Smith is named the V and S. These should be noted as John Doe, PT as a Change, Mike Jones, V as Remove, and Sally Smith, SV as an Add.
 
Example:
 
X Change    PT John Doe  
       
X Remove  V Mike Jones  
       
X Add  SV Sally Smith  
 
Type of Action   Title   Name   Address
(Check One)            
                 
1)  
Change
           
    Add            
    Remove             
                 
2)  
Change
           
    Add            
    Remove             
                 
3)  
Change
           
    Add            
    Remove             
                 
4)  
Change
           
    Add            
    Remove             
                 
5)  
Change
           
    Add            
    Remove             
                 
6)  
Change
           
    Add            
    Remove             
 
 
Page 2 of 4
 
 
E.
If amending or adding additional Articles, enter change(s) here:
(attach additional sheets, if necessary). (Be specific)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
F.
If an amendment provides for an exchange, reclassification, or cancellation of issued shares, provisions for implementing the amendment if not contained in the amendment itself:
(if not applicable, indicate N/A)
 
 
 
 
 
 
 
 
 
 
Page 3 of 4
 
 
The date of each amendment(s) adoption:   3-2-2012
 
Effective date if applicable:  
 
(no more than 90 days after amendment file date)
 
Adoption of Amendment(s)
(CHECK ONE)
 
x
The amendment(s) was/were adopted by the shareholders. The number of votes cast for the amendment(s) by the shareholders was/were sufficient for approval.
 
o
The amendment(s) was/were approved by the shareholders through voting groups. The following statement must be separately provided for each voting group entitled to vote separately on the amendment(s):
 
 
  "The number of votes cast for the amendment(s) was/were sufficient for approval  
  by ______________________________________________________________"  
 
(voting group)
 
 
o
The amendment(s) was/were adopted by the board of directors without shareholder action and shareholder action was not required.
 
o
The amendment(s) was/were adopted by the incorporators without shareholder action and shareholder action was not required.
 
    Dated 3-2-2012  
       
   Signature Yankuan Li  
    (By a director, president or other officer— if directors or officers have not been selected, by an incorporator — if in the hands of a receiver, trustee, or other court appointed fiduciary by that fiduciary)  
       
   
Yankuan Li
 
   
(Typed or printed name of person signing)
 
       
   
President, CEO, CFO and Chairman
 
   
(Title of person signing)
 
 
Page 4 of 4

 
 
Exhibit 10.1
 
SHARE EXCHANGE AGREEMENT
 
BY AND AMONG
 
CHINA TELETECH HOLDING, INC.
 
AND
 
CHINA TELETECH LIMITED
 
AND
 
THE SHAREHOLDERS OF CHINA TELETECH LIMITED
 
Dated as of: March 30, 2012
 
 
 
 
 
TABLE OF CONTENTS
 
ARTICLE I DEFINITIONS     1  
Section 1.1
Definitions
    1  
ARTICLE II SHARE EXCHANGE; CLOSING     4  
Section 2.1
Share Exchange
    4  
Section 2.2
Closing
    4  
Section 2.3
Closing Deliveries by Acquiror
    4  
Section 2.4
Closing Deliveries by Acquiree and Acquiree Shareholders
    5  
Section 2.5
Section 368 Reorganization
    5  
ARTICLE III REPRESENTATIONS OF ACQUIREE SHAREHOLDERS     5  
Section 3.1
Authority
    5  
Section 3.2
Binding Obligations
    6  
Section 3.3
No Conflicts
    6  
Section 3.4
Ownership of Shares
    6  
Section 3.5
Certain Proceedings
    6  
Section 3.6
No Brokers or Finders
    6  
Section 3.7
Investment Representations
    6  
Section 3.8
Stock Legends
    9  
Section 3.9
Disclosure
    10  
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE ACQUIREE     10  
Section 4.1
Organization and Qualification
    10  
Section 4.2
Authority
    11  
Section 4.3
Binding Obligations
    11  
Section 4.4
No Conflicts
    11  
Section 4.5
Subsidiaries
    11  
Section 4.6
Organizational Documents
    11  
Section 4.7
Capitalization
    12  
Section 4.8
No Brokers or Finders
    12  
Section 4.9
Disclosure
    12  
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR     12  
Section 5.1
Organization and Qualification
    12  
Section 5.2
Authority
    12  
Section 5.3
Binding Obligations
    13  
Section 5.4
No Conflicts
    13  
Section 5.5
Subsidiaries
    13  
Section 5.6
Organizational Documents
    13  
Section 5.7
Capitalization
    13  
Section 5.8
No Brokers or Finders
    14  
Section 5.9
Investment Company
    14  
Section 5.10
Bank Holding Company Act
    14  
Section 5.11
Public Utility Holding Act
    14  
Section 5.12
Federal Power Act
    14  
Section 5.13
Money Laundering Laws
    15  
Section 5.14
Foreign Corrupt Practices
    15  
 
 
i
 
 
ARTICLE VI ADDITIONAL AGREEMENTS     15  
Section 6.1
Access to Information
    15  
Section 6.2
Legal Requirements
    15  
Section 6.3
Notification of Certain Matters
    15  
ARTICLE VII POST CLOSING COVENANTS     16  
Section 7.1
General
    16  
Section 7.2
Litigation Support
    16  
Section 7.3
Assistance with Post-Closing SEC Reports and Inquiries
    16  
Section 7.4
Public Announcements
    16  
ARTICLE VIII CONDITIONS TO CLOSING     16  
Section 8.1
Conditions to Obligation of the Parties Generally
    16  
Section 8.2
Conditions to Obligation of the Acquiree Parties
    17  
Section 8.3
Conditions to Obligation of the Acquiror Parties
    18  
ARTICLE IX TERMINATION     19  
Section 9.1
Grounds for Termination
    19  
Section 9.2
Procedure and Effect of Termination
    20  
Section 9.3
Effect of Termination
    20  
ARTICLE X SURVIVAL     20  
Section 10.1
Survival
    20  
ARTICLE XI MISCELLANEOUS PROVISIONS     20  
Section 11.1
Expenses
    20  
Section 11.2
Confidentiality
    21  
Section 11.3
Notices
    21  
Section 11.4
Further Assurances
    22  
Section 11.5
Waiver
    22  
Section 11.6
Entire Agreement and Modification
    22  
Section 11.7
Assignments, Successors, and No Third-Party Rights
    22  
Section 11.8
Severability
    23  
Section 11.9
Section Headings
    23  
Section 11.10
Construction
    23  
Section 11.11
Counterparts
    23  
Section 11.12
Specific Performance
    23  
Section 11.13
Governing Law; Submission to Jurisdiction
    24  
Section 11.14
Waiver of Jury Trial
    24  
 
 
ii
 
 
SHARE EXCHANGE AGREEMENT
 
This SHARE EXCHANGE AGREEMENT (“ Agreement ”), dated as of March 30, 2012, is made by and among CHINA TELETECH HOLDING, INC., a corporation organized under the laws of Florida (the “ Acquiror ”), CHINA TELETECH LIMITED, a corporation organized under the laws of British Virginia Islands (the “ Acquiree ”), and each of the Persons listed on Schedule I hereto who are shareholders of the Acquiree (collectively, the “ Acquiree Shareholders ,” and individually an “ Acquiree Shareholder ”).  Each of the Acquiror, Acquiree and Acquiree Shareholders are referred to herein individually as a “ Party ” and collectively as the “ Parties .”
 
RECITALS:
 
WHEREAS, the Acquiree Shareholders have agreed to transfer to the Acquiror, and the Acquiror has agreed to acquire from the Acquiree Shareholders, all of the Acquiree Shares (as defined below), which Acquiree Shares constitute all of the outstanding shares of Acquiree Common Stock (as defined below), in exchange for the Acquiror Shares (as defined below), which Acquiror Shares shall constitute approximately 68.34% of the issued and outstanding shares of Acquiror Common Stock (as defined below) immediately after the closing of the transactions contemplated herein, in each case, on the terms and conditions as set forth herein.
 
NOW, THEREFORE, in consideration of the foregoing premises, and the covenants, representations and warranties set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged and accepted, the Parties, intending to be legally bound, hereby agree as follows:
 
ARTICLE I
DEFINITIONS
 
Section 1.1    Definitions.  For all purposes of and under this Agreement, the following terms shall have the following respective meanings:
 
“ Accredited Investor ” has the meaning set forth in Rule 501 under the Securities Act.
 
“ Acquiree ” has the meaning set forth in the preamble.
 
“ Acquiree Common Stock ” means the common stock, with no par value, of the Acquiree.
 
“ Acquiree Organizational Documents ” has the meaning set forth in Section 4.6 .
 
“ Acquiree Shareholder ” and “ Acquiree Shareholders ” have the respective meanings set forth in the preamble.
 
“ Acquiree Shares ” has the meaning set forth in Section 2.1 .
 
 
1
 
 
“ Acquiree Subsidiary ” means Guangzhou Rongxin Technology Co Ltd. and Shenzhen Rongxin Investment Co Ltd, each of which is organized under the Laws of the People’s Repuglic of China and wholly owned subsidiary of the Acquiree.
 
“ Acquiror ” has the meaning set forth in the recitals.
 
“ Acquiror Common Stock ” means the common stock, par value $0.01 per share, of the Acquiror.
 
“ Acquiror Most Recent Fiscal Year End ” means December 31, 2011.
 
“ Acquiror Shares ” has the meaning set forth in Section 2.1 .
 
“ Acquiror Subsidiary ” means Global Telecom Holdings, Ltd., Guangzhou Global Telecommunication Co., Ltd., and Guangzhou Renwoxing Telecom Co., Ltd.
 
“ Action ” means any action, suit, inquiry, notice of violation, proceeding (including any partial proceeding such as a deposition) or investigation pending or threatened before or by any court, arbitrator, governmental or administrative agency, regulatory authority (federal, state, county, local or foreign), stock market, stock exchange or trading facility.
 
“ Affiliate ” has the meaning set forth in Rule 12b-2 of the regulations promulgated under the Exchange Act.
 
“ Agreement ” has the meaning set forth in the preamble.
 
“ BHCA ” has the meaning set forth in Section 5.10 .
 
“ Business Day ” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in New York, New York are required or authorized to be closed.
 
“ Closing ” has the meaning set forth in Section 2.2 .
 
“ Closing Date ” has the meaning set forth in Section 2.2 .
 
“ Code ” means the Internal Revenue Code of 1986, as amended.
 
“ Contract ” means any written or oral contract, lease, license, indenture, note, bond, agreement, arrangement, understanding, permit, concession, franchise or other instrument.
 
“ Exchange Act ” means the Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and regulations of the SEC thereunder, all as the same will then be in effect.
 
“ Federal Reserve ” has the meaning set forth in Section 5.10 .
 
“ GAAP ” means, with respect to any Person, generally accepted accounting principles in the U.S. applied on a consistent basis with such Person’s past practices.
 
 
2
 
 
“ Governmental Authority ” means any domestic or foreign, federal or national, state or provincial, municipal or local government, governmental authority, regulatory or administrative agency, governmental commission, department, board, bureau, agency or instrumentality, political subdivision, commission, court, tribunal, official, arbitrator or arbitral body.
 
“ Knowledge ” shall mean, except as otherwise explicitly provided herein, actual knowledge after reasonable investigation.  The Acquiror shall be deemed to have “Knowledge” of a matter if any of its officers, directors, stockholders, or employees has Knowledge of such matter.  Phrases such as “to the Knowledge of the Acquiror” or the “Acquiror’s Knowledge” shall be construed accordingly.
 
“ Laws ” means, with respect to any Person, any U.S. or non-U.S., federal, national, state, provincial, local, municipal, international, multinational or other Law (including common law), constitution, statute, code, ordinance, rule, regulation or treaty applicable to such Person.
 
“ License ” means any security clearance, permit, license, variance, franchise, Order, approval, consent, certificate, registration or other authorization of any Governmental Authority or regulatory body, and other similar rights.
 
“ Lien ” means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind, including, without limitation, any conditional sale or other title retention agreement, any lease in the nature thereof and the filing of or agreement to give any financing statement under the Uniform Commercial Code of any jurisdiction and including any lien or charge arising by Law.
 
“ Material Adverse Effect ” means, with respect to any Person, a material adverse effect on the business, financial condition, operations, results of operations, assets, customer, supplier or employee relations or future prospects of such Person.
 
“ Money Laundering Laws ” has the meaning set forth in Section 5.13 .
 
“ Order ” means any order, judgment, ruling, injunction, assessment, award, decree or writ of any Governmental Authority or regulatory body.
 
“ Party ” and “ Parties ” have the respective meanings set forth in the preamble.
 
“ Person ” means all natural persons, corporations, business trusts, associations, companies, partnerships, limited liability companies, joint ventures and other entities, governments, agencies and political subdivisions.
 
“ Regulation S ” means Regulation S under the Securities Act, as the same may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission.
 
“ SEC ” means the U.S. Securities and Exchange Commission, or any successor agency thereto.
 
 
3
 
 
“ Securities Act ” means the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same will be in effect at the time.
 
“ Share Exchange ” has the meaning set forth in Section 2.1 .
 
“ Tax ” or “ Taxes ” means all taxes, assessments, duties, levies or other charge imposed by any Governmental Authority of any kind whatsoever together with any interest, penalties, fines or additions thereto and any liability for payment of taxes whether as a result of (i) being a member of an affiliated, consolidated, combined, unitary or similar group for any period, (ii) any tax sharing, tax indemnity or tax allocation agreement or any other express or implied agreement to indemnify any Person, (iii) being liable for another Person’s taxes as a transferee or successor otherwise for any period, or (iv) operation of Law.
 
“ Termination Date ” means March 31, 2012.
 
“ Transaction Documents ” means, collectively, this Agreement and all agreements, certificates, instruments and other documents to be executed and delivered in connection with the transactions contemplated by this Agreement.
 
“ Treasury Regulations ” means the income tax regulations, including temporary regulations, promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).
 
“ U.S. ” means the United States of America.
 
“ U.S. Person ” has the meaning set forth in Regulation S under the Securities Act.
 
ARTICLE II
SHARE EXCHANGE; CLOSING
 
Section 2.1    Share Exchange.        At the Closing, the Acquiree Shareholders shall sell, transfer, convey, assign and deliver shares of Acquiree Common Stock (the “ Acquiree Shares ”), representing 100% of the issued and outstanding shares of Acquiree Common Stock, to the Acquiror, and in consideration therefor the Acquiror shall issue a total of 40,000,000 fully paid and nonassessable share of Acquiror Common Stock (the “ Acquiror Shares ”) to the Acquiree Shareholders, as set forth beside the name of each such Acquiree Shareholder on Schedule I hereto (the “ Share Exchange ”).
 
Section 2.2     Closing.     Upon the terms and subject to the conditions of this Agreement, the transactions contemplated by this Agreement shall take place at a closing (the “ Closing ”) to be held at the offices of Anslow & Jaclin LLP located at 195 Route 9 South, Manalapan, NJ 07726, at a time and date to be specified by the Parties, or at such other location, date and time as Acquiree and Acquiror shall mutually agree.  The date and time of the Closing is referred to herein as the “ Closing Date .”
 
Section 2.3    Closing Deliveries by Acquiror.     At  the Closing: (a) the Acquiror shall deliver, or cause to be delivered, a certificate evidencing the number of Acquiror Shares, set forth beside each Acquiree Shareholder’s name on Schedule I hereto; and (b) the Acquiror shall deliver, or cause to be delivered, to the Acquiree and the Acquiree Shareholders, as applicable, the various documents required to be delivered as a condition to the Closing pursuant to Section 8.2 hereof.
 
 
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Section 2.4    Closing Deliveries by Acquiree and Acquiree Shareholders.    At the Closing: (a) each Acquiree Shareholder shall deliver, or cause to be delivered, certificate(s) representing such Acquiree Shareholder’s Acquiree Shares, accompanied by an executed instrument of transfer for transfer by such Acquiree Shareholder of such Acquiree Shareholder’s Acquiree Shares to the Acquiror; and (b) the Acquiree and the Acquiree Shareholders, as applicable, shall deliver, or cause to be delivered, to the Acquiror, the various documents required to be delivered as a condition to the Closing pursuant to Section 8.3 hereof.
 
Section 2.5    Section 368 Reorganization. For U.S. federal income Tax purposes, the Share Exchange is intended to constitute a “reorganization” within the meaning of Section 368(a)(1)(B) of the Code.  The Parties hereby adopt this Agreement as a “plan of reorganization” within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the Treasury Regulations.  Notwithstanding the foregoing or anything else to the contrary contained in this Agreement, the Parties acknowledge and agree that no Party is making any representation or warranty as to the qualification of the Share Exchange as a reorganization under Section 368 of the Code or as to the effect, if any, that any transaction consummated prior to or after the Closing Date has or may have on any such reorganization status.  The Parties acknowledge and agree that each (i) has had the opportunity to obtain independent legal and tax advice with respect to the transaction contemplated by this Agreement, and (ii) is responsible for paying its own Taxes, including without limitation, any adverse Tax consequences that may result if the transaction contemplated by this Agreement is not determined to qualify as a reorganization under Section 368 of the Code.
 
ARTICLE III
REPRESENTATIONS OF ACQUIREE SHAREHOLDERS
 
The Acquiree Shareholders severally, and not jointly, hereby represent and warrant to the Acquiror that the statements contained in this Article III are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as thought the Closing Date were substituted for the date of this Agreement throughout this Article III ) (except where another date or period of time is specifically stated herein for a representation or warranty).
 
Section 3.1    Authority.    Such Acquiree Shareholder has all requisite authority and power to enter into and deliver this Agreement and any of the other Transaction Documents to which such Acquiree Shareholder is a party, and any other certificate, agreement, document or instrument to be executed and delivered by such Acquiree Shareholder in connection with the transactions contemplated hereby and thereby and to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby.  This Agreement has been, and each of the Transaction Documents to which such Acquiree Shareholder is a party will be, duly and validly authorized and approved, executed and delivered by such Acquiree Shareholder.
 
 
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Section 3.2     Binding Obligations.     Assuming this Agreement and the Transaction Documents have been duly and validly authorized, executed and delivered by the parties hereto and thereto other than such Acquiree Shareholder, this Agreement and each of the Transaction Documents to which such Acquiree Shareholder is a party are duly authorized, executed and delivered by such Acquiree Shareholder, and constitutes the legal, valid and binding obligations of such Acquiree Shareholder, enforceable against such Acquiree Shareholder in accordance with their respective terms, except as such enforcement is limited by general equitable principles, or by bankruptcy, insolvency and other similar Laws affecting the enforcement of creditors rights generally.
 
Section 3.3   No Conflicts.    Neither the execution or delivery by such Acquiree Shareholder of this Agreement or any Transaction Document to which such Acquiree Shareholder is a party, nor the consummation or performance by such Acquiree Shareholder of the transactions contemplated hereby or thereby will, directly or indirectly, have a Material Adverse Effect on such Acquiree Shareholder.
 
Section 3.4    Ownership of Shares.     Such Acquiree Shareholder owns, of record and beneficially, and has good, valid and indefeasible title to and the right to transfer to the Acquiror pursuant to this Agreement, such Acquiree Shareholder’s Acquiree Shares free and clear of any and all Liens.  there are no options, rights, voting trusts, stockholder agreements or any other Contracts or understandings to which such Acquiree Shareholder is a party or by which such Acquiree Shareholder or such Acquiree Shareholder’s Acquiree Shares are bound with respect to the issuance, sale, transfer, voting or registration of such Acquiree Shareholder’s Acquiree Shares.  At the Closing Date, the Acquiror will acquire good, valid and marketable title to such Acquiree Shareholder’s Acquiree Shares free and clear of any and all Liens.
 
Section 3.5    Certain Proceedings.   There is no Action pending against, or to the Knowledge of such Acquiree Shareholder, threatened against or affecting, such Acquiree Shareholder by any Governmental Authority or other Person with respect to such Acquiree Shareholder that challenges, or may have the effect of preventing, delaying, making illegal, or otherwise interfering with, any of the transactions contemplated by this Agreement.
 
Section 3.6    No Brokers or Finders.    No Person has, or as a result of the transactions contemplated herein will have, any right or valid claim against such Acquiree Shareholder for any commission, fee or other compensation as a finder or broker, or in any similar capacity, based upon arrangements made by or on behalf of such Acquiree Shareholder and such Acquiree Shareholder will indemnify and hold the Acquiror harmless against any liability or expense arising out of, or in connection with, any such claim.
 
Section 3.7    Investment Representations.    Each Acquiree Shareholder severally, and not jointly, hereby represents and warrants, solely with respect to itself and not any other Acquiree Shareholder, to the Acquiror as follows:
 
(a)   Purchase Entirely for Own Account .  Such Acquiree Shareholder is acquiring such Acquiree Shareholder’s portion of the Acquiror Shares proposed to be acquired hereunder for investment for its own account and not with a view to the resale or distribution of any part thereof, and such Acquiror Shareholder has no present intention of selling or otherwise distributing such Acquiror Shares, except in compliance with applicable securities Laws.
 
 
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(b)   Restricted Securities .  Such Acquiree Shareholder understands that the Acquiror Shares are characterized as “restricted securities” under the Securities Act inasmuch as this Agreement contemplates that, if acquired by the Shareholder pursuant hereto, the Acquiror Shares would be acquired in a transaction not involving a public offering.  The issuance of the Acquiror Shares hereunder is being effected in reliance upon an exemption from registration afforded under Section 4(2) of the Securities Act.  Such Acquiree Shareholder further acknowledges that if the Acquiror Shares are issued to such Acquiree Shareholder in accordance with the provisions of this Agreement, such Acquiror Shares may not be resold without registration under the Securities Act or the existence of an exemption therefrom.  Such Acquiree Shareholder represents that he is familiar with Rule 144 promulgated under the Securities Act, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act
 
(c)   Acknowledgment of Non-Registration .  Such Acquiree Shareholder understands and agrees that the Acquiror Shares to be issued pursuant to this Agreement have not been registered under the Securities Act or the securities Laws of any state of the U.S.
 
(d)   Status .  By its execution of this Agreement, each Acquiree Shareholder represents and warrants to the Acquiror as indicated on its signature page to this Agreement, either that: (i) such Acquiree Shareholder is an Accredited Investor; or (ii) such Acquiree Shareholder is not a U.S. Person.  Each Acquiree Shareholder understands that the Acquiror Shares are being offered and sold to such Acquiree Shareholder in reliance upon the truth and accuracy of the representations, warranties, agreements, acknowledgments and understandings of such Acquiree Shareholder set forth in this Agreement, in order that the Acquiror may determine the applicability and availability of the exemptions from registration of the Acquiror Shares on which the Acquiror is relying.
 
(e)    Additional Representations and Warranties .  Such Acquiree Shareholder, severally and not jointly, further represents and warrants to the Acquiror as follows: (i) such Person qualifies as an Accredited Investor; (ii) such Person consents to the placement of a legend on any certificate or other document evidencing the Acquiror Shares substantially in the form set forth in Section 3.8(a) ; (iii) such Person has sufficient knowledge and experience in finance, securities, investments and other business matters to be able to protect such Person’s or entity’s interests in connection with the transactions contemplated by this Agreement; (iv) such Person has consulted, to the extent that it has deemed necessary, with its tax, legal, accounting and financial advisors concerning its investment in the Acquiror Shares and can afford to bear such risks for an indefinite period of time, including, without limitation, the risk of losing its entire investment in the Acquiror Shares; (v) such Person has had access to the SEC Reports; (vi) such Person has been furnished during the course of the transactions contemplated by this Agreement with all other public information regarding the Acquiror that such Person has requested and all such public information is sufficient for such Person to evaluate the risks of investing in the Acquiror Shares; (vii) such Person has been afforded the opportunity to ask questions of and receive answers concerning the Acquiror and the terms and conditions of the issuance of the Acquiror Shares; (viii) such Person is not relying on any representations and warranties concerning the Acquiror made by the Acquiror or any officer, employee or agent of the Acquiror, other than those contained in this Agreement or the SEC Reports; (ix) such Person will not sell or otherwise transfer the Acquiror Shares, unless either (A) the transfer of such securities is registered under the Securities Act or (B) an exemption from registration of such securities is available; (x) such Person understands and acknowledges that the Acquiror is under no obligation to register the Acquiror Shares for sale under the Securities Act; (xi) such Person represents that the address furnished in Schedule I is the principal residence if he is an individual or its principal business address if it is a corporation or other entity; (xii) such Person understands and acknowledges that the Acquiror Shares have not been recommended by any federal or state securities commission or regulatory authority, that the foregoing authorities have not confirmed the accuracy or determined the adequacy of any information concerning the Acquiror that has been supplied to such Person and that any representation to the contrary is a criminal offense; and (xiii) such Person acknowledges that the representations, warranties and agreements made by such Person herein shall survive the execution and delivery of this Agreement and the purchase of the Acquiror Shares.
 
 
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(f)    Additional Representations and Warranties of Non-U.S. Persons .  Each Acquiree Shareholder that is not a U.S. Person, severally and not jointly, further represents and warrants to the Acquiror as follows: (i) at the time of (A) the offer by the Acquiror and (B) the acceptance of the offer by such Person, of the Acquiror Shares, such Person was outside the U.S; (ii) no offer to acquire the Acquiror Shares or otherwise to participate in the transactions contemplated by this Agreement was made to such Person or its representatives inside the U.S.; (iii) such Person is not purchasing the Acquiror Shares for the account or benefit of any U.S. Person, or with a view towards distribution to any U.S. Person, in violation of the registration requirements of the Securities Act; (iv) such Person will make all subsequent offers and sales of the Acquiror Shares either (A) outside of the U.S. in compliance with Regulation S; (B) pursuant to a registration under the Securities Act; or (C) pursuant to an available exemption from registration under the Securities Act; (v) such Person is acquiring the Acquiror Shares for such Person’s own account, for investment and not for distribution or resale to others; (vi) such Person has no present plan or intention to sell the Acquiror Shares in the U.S. or to a U.S. Person at any predetermined time, has made no predetermined arrangements to sell the Acquiror Shares and is not acting as an underwriter or dealer with respect to such securities or otherwise participating in the distribution of such securities; (vii) neither such Person, its Affiliates nor any Person acting on behalf of such Person, has entered into, has the intention of entering into, or will enter into any put option, short position or other similar instrument or position in the U.S. with respect to the Acquiror Shares at any time after the Closing Date through the one year anniversary of the Closing Date except in compliance with the Securities Act; (viii) such Person consents to the placement of a legend on any certificate or other document evidencing the Acquiror Shares substantially in the form set forth in   Section 3.8(b) and (ix) such Person is not acquiring the Acquiror Shares in a transaction (or an element of a series of transactions) that is part of any plan or scheme to evade the registration provisions of the Securities Act.
 
(g)   Opinion .  Such Acquiree Shareholder will not transfer any or all of such Acquiree Shareholder’s Acquiror Shares pursuant to Regulation S or absent an effective registration statement under the Securities Act and applicable state securities law covering the disposition of such Acquiree Shareholder’s Acquiror Shares, without first providing the Acquiror with an opinion of counsel (which counsel and opinion are reasonably satisfactory to the Acquiror) to the effect that such transfer will be made in compliance with Regulation S or will be exempt from the registration and the prospectus delivery requirements of the Securities Act and the registration or qualification requirements of any applicable U.S. state securities laws.
 
 
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(h)   Consent .  Such Acquiree Shareholder understands and acknowledges that the Acquiror may refuse to transfer the Acquiror Shares, unless such Acquiree Shareholder complies with Section 3.7 and any other restrictions on transferability set forth herein.  Such Acquiree Shareholder consents to the Acquiror making a notation on its records or giving instructions to any transfer agent of the Acquiror’s Common Stock in order to implement the restrictions on transfer of the Acquiror Shares.
 
Section 3.8    Stock Legends.   Such Acquiree Shareholder hereby agrees with the Acquiror as follows:
 
(a)   The certificates evidencing the Acquiror Shares issued to those Acquiree Shareholders who are Accredited Investors, and each certificate issued in transfer thereof, will bear the following or similar legend:
 
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED EXCEPT (1) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR (2) PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, IN WHICH CASE THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE COMPANY AN OPINION OF COUNSEL, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS.
 
(b)   The certificates evidencing the Acquiror Shares issued to those Acquiree Shareholders who are not U.S. Persons, and each certificate issued in transfer thereof, will bear the following legend:
 
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED EXCEPT (1) IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S PROMULGATED UNDER THE SECURITIES ACT, AND BASED ON AN OPINION OF COUNSEL, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT THE PROVISIONS OF REGULATION S HAVE BEEN SATISFIED, (2) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR (3) PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, IN WHICH CASE THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE COMPANY AN OPINION OF COUNSEL, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS.  HEDGING TRANSACTIONS INVOLVING THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.
 
 
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(c)   Other Legends .  The certificates representing such Acquiror Shares, and each certificate issued in transfer thereof, will also bear any other legend required under any applicable Law, including, without limitation, any state corporate and state securities law, or Contract.
 
Section 3.9    Disclosure. No representation or warranty of such Acquiree Shareholder contained in this Agreement or any other Transaction Document and no statement or disclosure made by or on behalf of such Acquiree Shareholder to the Acquiror pursuant to this Agreement or any other agreement contemplated herein contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements contained herein or therein not misleading.
 
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE ACQUIREE
 
The Acquiree hereby represents and warrants to the Acquiror that the statements contained in this Article IV are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as thought the Closing Date were substituted for the date of this Agreement throughout this Article IV ) (except where another date or period of time is specifically stated herein for a representation or warranty).
 
Section 4.1    Organization and Qualification.    The Acquiree is a corporation duly organized, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization, has all requisite corporate authority and power, Licenses, authorizations, consents and approvals to carry on its business as presently conducted and to own, hold and operate its properties and assets as now owned, held and operated by it, and is duly qualified to do business and in good standing in each jurisdiction in which the failure to be so qualified would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect on the Acquiree.
 
 
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Section 4.2    Authority. The Acquiree has all requisite authority and power (corporate and other), Licenses, authorizations, consents and approvals to enter into and deliver this Agreement and any of the other Transaction Documents to which the Acquiree is a party and any other certificate, agreement, document or instrument to be executed and delivered by the Acquiree in connection with the transactions contemplated hereby and thereby and to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby.  The execution and delivery of this Agreement and the other Transaction Documents by the Acquiree and the performance by the Acquiree of its obligations hereunder and thereunder and the consummation by the Acquiree of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Acquiree.  The Acquiree does not need to give any notice to, make any filing with, or obtain any authorization, consent or approval of any Person or Governmental Authority in order for the Parties to execute, deliver or perform this Agreement or the transactions contemplated hereby.  This Agreement has been, and each of the Transaction Documents to which the Acquiree is a party will be, duly and validly authorized and approved, executed and delivered by the Acquiree.
 
Section 4.3    Binding Obligations.    Assuming this Agreement and the Transaction Documents have been duly and validly authorized, executed and delivered by the parties hereto and thereto other than the Acquiree, this Agreement and each of the Transaction Documents to which the Acquiree is a party are duly authorized, executed and delivered by the Acquiree and constitutes the legal, valid and binding obligations of the Acquiree enforceable against the Acquiree in accordance with their respective terms, except as such enforcement is limited by general equitable principles, or by bankruptcy, insolvency and other similar Laws affecting the enforcement of creditors rights generally.
 
Section 4.4    No Conflicts.  Neither the execution nor the delivery by the Acquiree of this Agreement or any Transaction Document to which the Acquiree is a party, nor the consummation or performance by the Acquiree of the transactions contemplated hereby or thereby will, directly or indirectly, have a Material Adverse Effect on the Acquiree.
 
Section 4.5    Subsidiaries. Other than the Acquiree Subsidiary, the Acquiree does not own, directly or indirectly, any equity or other ownership interest in any corporation, partnership, joint venture or other entity or enterprise.
 
Section 4.6    Organizational Documents.  The Acquiree has delivered or made available to the Acquiror a true and correct copy of the Articles of Incorporation and Bylaws of the Acquiree and any other organizational documents of the Acquiree, each as amended, and each such instrument is in full force and effect (the “ Acquiree Organizational Documents ”).  The Acquiree is not in violation of any of the provisions of the Acquiree Organizational Documents.
 
 
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Section 4.7    Capitalization .
 
(a)   The authorized capital stock of the Acquiree consists of 50,000 shares of Acquiree Common Stock of which 10 shares of Acquiree Common Stock are issued and outstanding.  Except as set forth above, no shares of capital stock or other voting securities of the Acquiree were issued, reserved for issuance or outstanding.  All outstanding shares of the capital stock of the Acquiree are, and all such shares that may be issued prior to the Closing Date will be when issued, duly authorized, validly issued, fully paid and nonassessable and not subject to or issued in violation of any purchase option, call option, right of first refusal, preemptive right, subscription right or any similar right under any provision of the Laws of the jurisdiction of the Acquiree’s formation, the Acquiree Organizational Documents or any Contract to which the Acquiree is a party or otherwise bound.
 
Section 4.8    No Brokers or Finders.   No Person has, or as a result of the transactions contemplated herein will have, any right or valid claim against the Acquiree for any commission, fee or other compensation as a finder or broker, or in any similar capacity, based upon arrangements made by or on behalf of the Acquiree, and the Acquiree will indemnify and hold the Acquiror harmless against any liability or expense arising out of, or in connection with, any such claim.
 
Section 4.9    Disclosure .   No representation or warranty of the Acquiree contained in this Agreement and no statement or disclosure made by or on behalf of the Acquiree to the Acquiror pursuant to this Agreement or any other agreement contemplated herein contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements contained herein or therein not misleading.
 
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR
 
The Acquiror hereby represents and warrants to the Acquiree and each of the Acquiree Shareholders that the statements contained in this Article V are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as thought the Closing Date were substituted for the date of this Agreement throughout this Article V ) (except where another date or period of time is specifically stated herein for a representation or warranty).
 
Section 5.1    Organization and Qualification. The Acquiror is a corporation duly organized, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization, has all requisite corporate authority and power, Licenses, authorizations, consents and approvals to carry on its business as presently conducted and to own, hold and operate its properties and assets as now owned, held and operated by it, and is duly qualified to do business and in good standing in each jurisdiction in which the failure to be so qualified would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect on the Acquiror.
 
Section 5.2    Authority .  The Acquiror have all requisite authority and power, Licenses, authorizations, consents and approvals to enter into and deliver this Agreement and any of the other Transaction Documents to which the Acquiror is a party, and any other certificate, agreement, document or instrument to be executed and delivered by the Acquiror in connection with the transactions contemplated hereby and thereby and to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby.  The execution and delivery of this Agreement and the other Transaction Documents by the Acquiror and the performance by the Acquiror of its obligations hereunder and thereunder and the consummation by the Acquiror of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Acquiror.  The Acquiror does not need to give any notice to, make any filing with, or obtain any authorization, consent or approval of any Person or Governmental Authority in order for the Parties to execute, deliver or perform this Agreement or the transactions contemplated hereby.  This Agreement has been, and each of the Transaction Documents to which the Acquiror is a party will be, duly and validly authorized and approved, executed and delivered by the Acquiror.
 
 
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Section 5.3    Binding Obligations .   Assuming this Agreement and the Transaction Documents have been duly and validly authorized, executed and delivered by the parties hereto and thereto other than the Acquiror, this Agreement and each of the Transaction Documents to which the Acquiror is a party are duly authorized, executed and delivered by the Acquiror and constitutes the legal, valid and binding obligations of the Acquiror, enforceable against the Acquiror in accordance with their respective terms, except as such enforcement is limited by general equitable principles, or by bankruptcy, insolvency and other similar Laws affecting the enforcement of creditors rights generally.
 
Section 5.4    No Conflicts .   Neither the execution nor the delivery by the Acquiror of this Agreement or any Transaction Document to which the Acquiror, nor the consummation or performance by the Acquiror of the transactions contemplated hereby or thereby will, directly or indirectly, have a Material Adverse Effect on the Acquiror.
 
Section 5.5    Subsidiaries .   Other than the Acquiror Subsidiary, the Acquiror does not own, directly or indirectly, any equity or other ownership interest in any corporation, partnership, joint venture or other entity or enterprise.
 
Section 5.6    Organiza tional Documents. The Acquiror has delivered or made available to Acquiree a true and correct copy of the Certificate of Incorporation and Bylaws of the Acquiror and any other organizational documents of the Acquiror, each as amended, and each such instrument is in full force and effect (the “ Acquiror Organizational Documents ”).  The Acquiror is not in violation of any of the provisions of its Acquiror Organizational Documents.  The minute books (containing the records or meetings of the stockholders, the board of directors and any committees of the board of directors), the stock certificate books, and the stock record books of the Acquiror, each as provided or made available to the Acquiree, are correct and complete.
 
Section 5.7    Capitalization .
 
(a)   The authorized capital stock of the Acquiror consists of 1,000,000,000 shares of Acquiror Common Stock of which 18,528,637 shares of Acquiror Common Stock are issued and outstanding.  Except as set forth above, no shares of capital stock or other voting securities of the Acquiror were issued, reserved for issuance or outstanding.  All outstanding shares of the capital stock of the Acquiror are, and all such shares that may be issued prior to the Closing Date will be when issued, duly authorized, validly issued, fully paid and nonassessable and not subject to or issued in violation of any purchase option, call option, right of first refusal, preemptive right, subscription right or any similar right under any provision of the Laws of the jurisidication of the Acquiror’s organization, the Acquiror Organizational Documents or any Contract to which the Acquiror is a party or otherwise bound.
 
 
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(b)   The issuance of the Acquiror Shares to the Acquiree Shareholders has been duly authorized and, upon delivery to the Acquiree Shareholders of certificates therefor, respectively, in accordance with the terms of this Agreement, the Acquiror Shares, will have been validly issued and fully paid, and will be nonassessable, have the rights, preferences and privileges specified, will be free of preemptive rights and will be free and clear of all Liens and restrictions, other than Liens created by the Acquiree Shareholders, and restrictions on transfer imposed by this Agreement and the Securities Act.
 
Section 5.8    No Brokers or Finders. No Person has, or as a result of the transactions contemplated herein will have, any right or valid claim against the Acquiror or the Acquiror Subsidiary for any commission, fee or other compensation as a finder or broker, or in any similar capacity, based upon arrangements made by or on behalf of the Acquiror or the Acquiror Subsidiary.
 
Section 5.9    Investment Company .  Neither the Acquiror nor the Acquiror Subsidiary is, nor is it an affiliate of, and immediately following the Closing will not have become, an “investment company” within the meaning of the Investment Company Act of 1940, as amended.
 
Section 5.10   Bank Holding Company Act.  Neither the Acquiror nor the Acquiror Subsidiary is subject to the Bank Holding Company Act of 1956, as amended (the “ BHCA ”) and to regulation by the Board of Governors of the Federal Reserve System (the “ Federal Reserve ”).  Neither the Acquiror nor any of its Affiliates owns or controls, directly or indirectly, five percent (5%) or more of the outstanding shares of any class of voting securities or twenty-five percent (25%) or more of the total equity of a bank or any equity that is subject to the BHCA and to regulation by the Federal Reserve.  Neither the Acquiror nor any of its Affiliates exercises a controlling influence over the management or policies of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve.
 
Section 5.11   Public Utility Holding Act Neither the Acquiror nor the Acquiror Subsidiary is a “holding company,” or an “affiliate” of a “holding company,” as such terms are defined in the Public Utility Holding Act of 2005.
 
Section 5.12   Federal Power Act.   Neither the Acquiror nor the Acquiror Subsidiary is subject to regulation as a “public utility” under the Federal Power Act, as amended.
 
 
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Section 5.13   Money Laundering Laws .  The operations of the Acquiror and the Acquiror Subsidiary are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes of all U.S. and non-U.S. jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any Governmental Authority (collectively, the “ Money Laundering Laws ”) and no Proceeding involving the Acquiror or the Acquiror Subsidiary with respect to the Money Laundering Laws is pending or, to the knowledge of the Acquiror, threatened.
 
Section 5.14   Foreign Corrupt Practices .  Neither the Acquiror nor the Acquiror Subsidiary, nor, to the Knowledge of the Acquiror, any director, officer, agent, employee or other Person acting on behalf of the Acquiror or the Acquiror Subsidiary has, in the course of its actions for, or on behalf of, the Acquiror or the Acquiror Subsidiary (a) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; (b) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; (c) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (d) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.
 
ARTICLE VI
ADDITIONAL AGREEMENTS
 
Section 6.1    Access to Information.    The Acquiror shall afford Acquiree, its accountants, counsel and other representatives (including the Acquiree Shareholders), reasonable access, during normal business hours, to the properties, books, records and personnel of the Acquiror and the Acquiror Subsidiary at any time prior to the Closing in order to enable Acquiree obtain all information concerning the business, assets and properties, results of operations and personnel of the Acquiror and the Acquiror Subsidiary as Acquiree may reasonably request.  No information obtained in the foregoing investigation by Acquiree pursuant to this Section 6.1 shall affect or be deemed to modify any representation or warranty contained herein or the conditions to the obligations of the Acquiror to consummate the transactions contemplated hereby.
 
Section 6.2    Legal Requirements.   The Parties shall take all reasonable actions necessary or desirable to comply promptly with all legal requirements which may be imposed on them with respect to the consummation of the transactions contemplated by this Agreement (including, without limitation, furnishing all information required in connection with approvals of or filings with any Governmental Authority, and prompt resolution of any litigation prompted hereby), and shall promptly cooperate with, and furnish information to, the other Parties to the extent necessary in connection with any such requirements imposed upon any of them in connection with the consummation of the transactions contemplated by this Agreement.
 
Section 6.3    Notification of Certain Matters.  Acquiree shall give prompt notice to the Acquiror, and the Acquiror shall give prompt notice to the Acquiree, of the occurrence, or failure to occur, of any event, which occurrence or failure to occur would be reasonably likely to cause (i) any representation or warranty contained in this Agreement to be untrue or inaccurate at the Closing, such that the conditions set forth in Article VIII hereof, as the case may be, would not be satisfied or fulfilled as a result thereof, or (ii) any material failure of any Acquiree, Acquiree Shareholderor the Acquiror, as the case may be, or of any officer, director, employee or agent thereof, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it under this Agreement.  Notwithstanding the foregoing, the delivery of any notice pursuant to this Section 6.3 shall not limit or otherwise affect the rights and remedies available hereunder to the Party receiving such notice.
 
 
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ARTICLE VII
POST CLOSING COVENANTS
 
Section 7.1    General . In case at any time after the Closing any further action is necessary to carry out the purposes of this Agreement, each of the Parties will take such further action (including the execution and delivery of such further instruments and documents) as any other Party reasonably may request.
 
Section 7.2    Litigation Support.    In the event and for so long as any Party actively is contesting or defending against any action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand in connection with (i) any transaction contemplated under this Agreement or (ii) any fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act, or transaction that existed on or prior to the Closing Date involving the Acquiror or the Acquiror Subsidiary, each of the other Parties will cooperate with such Party and such Party’s counsel in the contest or defense, make available any personnel under their control, and provide such testimony and access to their books and records as shall be reasonably necessary in connection with the contest or defense, all at the sole cost and expense of the contesting or defending Party.
 
Section 7.3    Assistance with Post-Closing SEC Reports and Inquiries .  After the Closing Date, the Acquiror shall use its reasonable best efforts to provide such information available to them, including information, filings, reports, financial statements or other circumstances of the Acquiror occurring, reported or filed prior to the Closing, as may be necessary or required for the preparation of the post-Closing Date reports that the Acquiror is required to file with the SEC, or filings required to address and resolve matters as may relate to the period prior to the Closing and any SEC comments relating thereto or any SEC inquiry thereof.
 
Section 7.4    Public Announcements. The Acquiror shall file with the SEC a Form 8-K describing the material terms of the transactions contemplated hereby as soon as practicable following the Closing Date but in no event more than four (4) business days following the Closing Date.
 
ARTICLE VIII
CONDITIONS TO CLOSING
 
Section 8.1     Conditions to Obligation of the Parties Generally .  The Parties shall not be obligated to consummate the transactions to be performed by each of them in connection with the Closing if, on the Closing Date, (i) any Action shall be pending or threatened before any Governmental Authority wherein an Order or charge would (A) prevent consummation of any of the transactions contemplated by this Agreement or (B) cause any of the transactions contemplated by this Agreement to be rescinded following consummation, (ii) any Law or Order which would have any of the foregoing effects shall have been enacted or promulgated by any Governmental Authority; or (iii) the Acquiree shall not have received an audit report with respect to its two most recently completed fiscal years from an independent accounting firm that is registered with the Public Company Accounting Oversight Board.
 
 
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Section 8.2    Conditions to Obligation of the Acquiree Parties .   The obligations of the Acquiree and the Acquiree Shareholders to enter into and perform their respective obligations under this Agreement are subject, at the option of the Acquiree and the Acquiree Shareholders, to the fulfillment on or prior to the Closing Date of the following conditions, any one or more of which may be waived by the Acquiree and the Acquiree Shareholders in writing:
 
(a)   The representations and warranties of the Acquiror set forth in this Agreement shall be true and correct in all material respects as of the Closing Date (except to the extent such representations and warranties are specifically made as of a particular date, in which case such representations and warranties shall be true and correct as of such date);
 
(b)   The Acquiror shall have performed and complied with all of their covenants hereunder in all material respects through the Closing, except to the extent that such covenants are qualified by terms such as “material” and “Material Adverse Effect,” in which case the Acquiror shall have performed and complied with all of such covenants in all respects through the Closing;
 
(c)   All consents, waivers, approvals, authorizations or Orders required to be obtained, and all filings required to be made, by the Acquiror for the authorization, execution and delivery of this Agreement and the consummation by it of the transactions contemplated by this Agreement, shall have been obtained and made by the Acquiror and Acquiror shall have delivered proof of same to the Acquiree and Acquiree Shareholders;
 
(d)   Acquiror shall have delivered to the Acquiree and Acquiree Shareholders a certificate, dated the Closing Date, executed by an officer of the Acquiror, certifying the satisfaction of the conditions specified in Sections 8.2(a) through 8.2(c) , inclusive, relating to the Acquiror;
 
(e)   Acquiror shall have delivered to the Acquiree and the Acquiree Shareholders a certified copy of the Certificate of Incorporation of the Acquiror as certified by the Secretary of State (or comparable office) of the Acquiror’s jurisdiction of formation within five (5) days of the Closing Date;
 
(f)    Acquiror shall have delivered to the Acquiree and the Acquiree Shareholders a certificate duly executed by the Secretary of the Acquiror and dated as of the Closing Date, as to (i) the resolutions as adopted by the Acquiror’s board of directors, in a form reasonably acceptable to the Acquiree, approving this Agreement and the Transaction Documents to which it is a party and the transactions contemplated hereby and thereby; (ii) the Acquiror Organizational Documents, each as in effect at the Closing; and (iv) the incumbency of each authorized officer of the Acquiror signing this Agreement and any other agreement or instrument contemplated hereby to which the Acquiror is a party;
 
 
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(g)   Acquiror shall have delivered to the Acquiree and the Acquiree Shareholders duly executed letter of resignation from Ms. Yankuan Li as the Acquiror’s Chief Financial Officer, Secretary and Chairman of the Board of Directors, effective as of the Closing;
 
(h)   Acquiror shall have delivered to the Acquiree and the Acquiree Shareholders resolutions of the Acquiror’s board of directors (i) appointing Mr. Kwok Ming Wai Andrew to serve as Chief Financial Officer and Secretary; (ii) nominating Mr. Dong Liu to serve as Chairman of the Acquiror’s board of directors; and (iv) nominating Mr. Yuan Zhao, Mr. Yau Kwong Li and Mr. Kwok Ming Wai Andrew to serve as members of the Acquiror’s board of directors, effective as of the Closing. Ms. Yankuan Li will remain President, Chief Executive Officer and a member of the board of directors;
 
(i)    Acquiree and the Acquiree Shareholders shall have completed their legal, accounting and business due diligence of the Acquiror and the results thereof shall be satisfactory to the Acquiree and the Acquiree Shareholders in their sole and absolute discretion; and
 
(j)    All actions to be taken by the Acquiror in connection with consummation of the transactions contemplated hereby and all certificates, opinions, instruments, and other documents required to effect the transactions contemplated hereby shall be reasonably satisfactory in form and substance to the Acquiree and the Acquiree Shareholders.
 
Section 8.3    C onditions to Obligation of the Acquiror Parties The obligations of the Acquiror to enter into and perform their respective obligations under this Agreement are subject, at the option of the Acquiror, to the fulfillment on or prior to the Closing Date of the following conditions, any one or more of which may be waived by the Acquiror in writing:
 
(a)    The representations and warranties of the Acquiree and the Acquire Shareholders set forth in this Agreement shall be true and correct in all material respects as of the Closing Date (except to the extent such representations and warranties are specifically made as of a particular date, in which case such representations and warranties shall be true and correct as of such date);
 
(b)   The Acquiree and the Acquire Shareholders shall have performed and complied with all of their covenants hereunder in all material respects through the Closing, except to the extent that such covenants are qualified by terms such as “material” and “Material Adverse Effect,” in which case the Acquiree and the Acquire Shareholders shall have performed and complied with all of such covenants in all respects through the Closing;
 
(c)   All consents, waivers, approvals, authorizations or Orders required to be obtained, and all filings required to be made, by the Acquiror for the authorization, execution and delivery of this Agreement and the consummation by it of the transactions contemplated by this Agreement, shall have been obtained and made by the Acquiree and Acquiree shall have delivered proof of same to the Acquiror;
 
(d)   Acquiree shall have delivered to the Acquiror a certificate, dated the Closing Date, executed by an officer of the Acquiree, certifying the satisfaction of the conditions specified in Sections 8.3(a) through 8.3(c) , inclusive, relating to the Acquiree;
 
 
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(e)   Acquiree shall have delivered to the Acquiror a certificate duly executed by the Secretary of the Acquiror and dated as of the Closing Date, as to (i) the resolutions as adopted by the Acquiror’s board of directors, in a form reasonably acceptable to the Acquiree, approving this Agreement and the Transaction Documents to which it is a party and the transactions contemplated hereby and thereby; (ii) the Acquiree Organizational Documents, each as in effect at the Closing; and (iii) the incumbency of each authorized officer of the Acquiree signing this Agreement and any other agreement or instrument contemplated hereby to which the Acquiree is a party;
 
(f)    Acquiror shall have completed their legal, accounting and business due diligence of the Acquiree and the results thereof shall be satisfactory to the Acquiror in their sole and absolute discretion; and
 
(g)   All actions to be taken by the Acquiree and the Acquiree Shareholders in connection with consummation of the transactions contemplated hereby and all payments, certificates, opinions, instruments, and other documents required to effect the transactions contemplated hereby shall be reasonably satisfactory in form and substance to the Acquiror.
 
ARTICLE IX
TERMINATION
 
Section 9.1    Grounds for Termination. Anything herein or elsewhere to the contrary notwithstanding, this Agreement may be terminated and the transactions contemplated hereby may be abandoned at any time prior to the Closing Date:
 
(a)   by the mutual written agreement of the Parties;
 
(b)   by acquiree and the Acquiree Shareholders (by written notice of termination from Acquiree and the Acquiree Shareholders to the Acquiror, in which reference is made to this subsection) if the Closing has not occurred on or prior to the Termination Date, unless the failure of the Closing to have occurred is attributable to a failure on the part of Acquiree or the Acquiree Shareholders to perform any material obligation to be performed by Acquiree or the Acquiree Shareholders pursuant to this Agreement at or prior to the Closing;
 
(c)   by the Acquiror (by written notice of termination from the Acquiror to the Acquiree and the Acquiree Shareholders, in which reference is made to this subsection) if the Closing has not occurred on or prior to the Termination Date, unless the failure of the Closing to have occurred is attributable to a failure on the part of the Acquiror to perform any material obligation required to be performed by any such Acquiror pursuant to this Agreement at or prior to the Closing; or
 
(d)   by either party with written notice if (i) any of representations and warranties contained in this Agreement are inaccurate as of the date of this Agreement or as of a date subsequent to the date of this Agreement (as if made on such subsequent date), such that the condition set forth in Section 8.3(a) would not be satisfied and such inaccuracy has not been cured by the other party within five (5) Business Days after its receipt of written notice thereof and remains uncured at the time notice of termination is given, (ii) any of the covenants contained in this Agreement shall have been breached, such that the condition set forth in Section 8.3(b) would not be satisfied, or (iii) any Action shall be initiated, threatened or pending which could reasonably be expected to materially and adversely affect such party (including, without limitation, any such Action relating to any alleged violation of, or non-compliance with, any applicable Law or any allegation of fraud or intentional misrepresentation).
 
 
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Section 9.2    Procedure and Effect of Termination.    In the event of the termination of this Agreement by the Acquiree pursuant to Section 9.1 hereof, written notice thereof shall forthwith be given to the other Party.  If this Agreement is terminated as provided herein (a) each Party will redeliver all documents, work papers and other material of any other Party relating to the transactions contemplated hereby, whether so obtained before or after the execution hereof, to the Party furnishing the same; provided, that each Party may retain one copy of all such documents for archival purposes in the custody of its outside counsel and (b) all filings, applications and other submission made by any Party to any Person, including any Governmental Authority, in connection with the transactions contemplated hereby shall, to the extent practicable, be withdrawn by such Party from such Person.
 
Section 9.3    Effect of Termination .   If this Agreement is terminated pursuant to Section 9.1 hereof, this Agreement shall become void and of no further force and effect, except for the provisions of (i) Article X , (iii) Sections 3.6 , 4.8 and 5.10 hereof relating to brokers’ fees or commissions, (iv) Section 9.2 and this Section 9.3 .
 
ARTICLE X
SURVIVAL
 
Section 10.1   S urvival . All representations, warranties, covenants, and obligations in this Agreement shall survive the Closing.  The right to indemnification, payment of damages or other remedy based on such representations, warranties, covenants, and obligations will not be affected by any investigation conducted with respect to, or any knowledge acquired (or capable of being acquired) at any time, whether before or after the execution and delivery of this Agreement, with respect to the accuracy or inaccuracy of or compliance with, any such representation, warranty, covenant, or obligation.  The waiver of any condition based on the accuracy of any representation or warranty, or on the performance of or compliance with any covenant or obligation, will not affect the right to indemnification, payment of damages, or other remedy based on such representations, warranties, covenants, and obligations.
 
ARTICLE XI
MISCELLANEOUS PROVISIONS
 
Section 11.1   Expenses.    Except as otherwise expressly provided in this Agreement, each Party will bear its respective expenses incurred in connection with the preparation, execution, and performance of this Agreement and the transactions contemplated by this Agreement, including all fees and expenses of agents, representatives, counsel, and accountants.  In the event of termination of this Agreement, the obligation of each Party to pay its own expenses will be subject to any rights of such Party arising from a breach of this Agreement by another Party.
 
 
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Section 11.2   Confidentiality.
 
(a)   The Parties will maintain in confidence, and will cause their respective directors, officers, employees, agents, and advisors to maintain in confidence, any written, oral, or other information obtained in confidence from another Person in connection with this Agreement or the transactions contemplated by this Agreement, unless (a) such information is already known to such Party or to others not bound by a duty of confidentiality or such information becomes publicly available through no fault of such Party, (b) the use of such information is necessary or appropriate in making any required filing with the SEC, or obtaining any consent or approval required for the consummation of the transactions contemplated by this Agreement, or (c) the furnishing or use of such information is required by or necessary or appropriate in connection with legal proceedings.
 
(b)   If the transactions contemplated by this Agreement are not consummated, each Party will return or destroy all of such written information each party has regarding the other Parties.
 
Section 11.3   Notices.    All notices, demands, consents, requests, instructions and other communications to be given or delivered or permitted under or by reason of the provisions of this Agreement or in connection with the transactions contemplated hereby shall be in writing and shall be deemed to be delivered and received by the intended recipient as follows: (i) if personally delivered, on the Business Day of such delivery (as evidenced by the receipt of the personal delivery service), (ii) if mailed certified or registered mail return receipt requested, two (2) Business Days after being mailed, (iii) if delivered by overnight courier (with all charges having been prepaid), on the Business Day of such delivery (as evidenced by the receipt of the overnight courier service of recognized standing), or (iv) if delivered by facsimile transmission or other electronic means, including email, on the Business Day of such delivery if sent by 6:00 p.m. in the time zone of the recipient, or if sent after that time, on the next succeeding Business Day.  If any notice, demand, consent, request, instruction or other communication cannot be delivered because of a changed address of which no notice was given (in accordance with this Section 11.3 ), or the refusal to accept same, the notice, demand, consent, request, instruction or other communication shall be deemed received on the second business day the notice is sent (as evidenced by a sworn affidavit of the sender).  All such notices, demands, consents, requests, instructions and other communications will be sent to the following addresses or facsimile numbers as applicable:
 
If to Acquiror, to:
 
China Teletech Holding, Inc.
Room 1604, Jinke Building
No. 17-19 Guangwei Road
Guangzhou, China
Attention: Yankuan Li, President
Telephone No.: (+86) 20-8317-2821
Facsimile No.: (+86) 20-8317-2822
     
With copies to:
 
Anslow & Jaclin, LLP
195 Route 9 South, Second Floor
Manalapan, New Jersey 07726
Attention: Richard I. Anslow, Esq.
Telephone No.: 732-409-1212
Facsimile No.: 732-577-1188
 
 
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If to the Acquiree, to:
 
China Teletech Limited
Room A, 20/F, International Trade Residential and Commercial Building, Nanhu Road
Shenzhen, China
Attention: Yuan Zhao
Telephone No.: (+86) 755-8220-4422
Facsimile No.: (+86) 755-8225-3468
     
If to the Acquiree Shareholders, to:
 
The applicable address set forth on Schedule I hereto.
 
or such other addresses as shall be furnished in writing by any Party in the manner for giving notices hereunder.
 
Section 11.4  Further Assurances .  The Parties agree (a) to furnish upon request to each other such further information, (b) to execute and deliver to each other such other documents, and (c) to do such other acts and things, all as the other Parties may reasonably request for the purpose of carrying out the intent of this Agreement and the documents referred to in this Agreement.
 
Section 11.5  Waiver .  The rights and remedies of the Parties are cumulative and not alternative.  Neither the failure nor any delay by any Party in exercising any right, power, or privilege under this Agreement or the documents referred to in this Agreement will operate as a waiver of such right, power, or privilege, and no single or partial exercise of any such right, power, or privilege will preclude any other or further exercise of such right, power, or privilege or the exercise of any other right, power, or privilege.  To the maximum extent permitted by applicable Law, (a) no claim or right arising out of this Agreement or the documents referred to in this Agreement can be discharged by one Party, in whole or in part, by a waiver or renunciation of the claim or right unless in writing signed by the other Parties; (b) no waiver that may be given by a Party will be applicable except in the specific instance for which it is given; and (c) no notice to or demand on one Party will be deemed to be a waiver of any obligation of such Party or of the right of the Party giving such notice or demand to take further action without notice or demand as provided in this Agreement or the documents referred to in this Agreement.
 
Section 11.6   Entire Agreement and Modification. This Agreement supersedes all prior agreements between the Parties with respect to its subject matter and constitutes (along with the documents referred to in this Agreement) a complete and exclusive statement of the terms of the agreement between the Parties with respect to its subject matter.  This Agreement may not be amended except by a written agreement executed by the Party against whom the enforcement of such amendment is sought.
 
Section 11.7   Assignments, Successors, and No Third-Party Rights .  No Party may assign any of its rights under this Agreement without the prior consent of the other Parties.  Subject to the preceding sentence, this Agreement will apply to, be binding in all respects upon, and inure to the benefit of and be enforceable by the respective successors and permitted assigns of the Parties.
 
 
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Section 11.8  Severability.  If any provision of this Agreement is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement will remain in full force and effect.  Any provision of this Agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable.
 
Section 11.9  Section Headings .  The headings of Articles and Sections in this Agreement are provided for convenience only and will not affect its construction or interpretation.  All references to “Article” or “Articles” or “Section” or “Sections” refer to the corresponding Article or Articles or Section or Sections of this Agreement, unless the context indicates otherwise.
 
Section 11.10   Construction .   The Parties have participated jointly in the negotiation and drafting of this Agreement.  In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement.  Any reference to any federal, state, local, or foreign statute or Law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise.  Unless otherwise expressly provided, the word “including” shall mean including without limitation.  The Parties intend that each representation, warranty, and covenant contained herein shall have independent significance.  If any Party has breached any representation, warranty, or covenant contained herein in any respect, the fact that there exists another representation, warranty, or covenant relating to the same subject matter (regardless of the relative levels of specificity) which the Party has not breached shall not detract from or mitigate the fact that the Party is in breach of such representation, warranty, or covenant.  All words used in this Agreement will be construed to be of such gender or number as the circumstances require.
 
Section 11.11   Counterparts .  This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement.  In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the Party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.
 
Section 11.12   Specific Performance .   Each of the Parties acknowledges and agrees that the other Parties would be damaged irreparably in the event any of the provisions of this Agreement are not performed in accordance with their specific terms or otherwise are breached.  Accordingly, each of the Parties agrees that the other Parties shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically this Agreement and the terms and provisions hereof in any action instituted in any court of the U.S. or any state thereof having jurisdiction over the Parties and the matter (subject to the provisions set forth in Section 11.13 below), in addition to any other remedy to which they may be entitled, at Law or in equity.
 
 
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Section 11.13   Governing Law; Submission to Jurisdiction.  This Agreement shall be governed by and construed in accordance with the Laws of the State of New York without regard to conflicts of Laws principles.  Each of the Parties submits to the jurisdiction of any state or federal court sitting in the State of New York, in any action or proceeding arising out of or relating to this Agreement and agrees that all claims in respect of the action or proceeding may be heard and determined in any such court.  Each of the Parties waives any defense of inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety, or other security that might be required of any other Party with respect thereto.  Any Party may make service on any other Party by sending or delivering a copy of the process to the Party to be served at the address and in the manner provided for the giving of notices in Section 11.3 above.  Nothing in this Section 11.13 , however, shall affect the right of any Party to serve legal process in any other manner permitted by Law or at equity.  Each Party agrees that a final judgment in any action or proceeding so brought shall be conclusive and may be enforced by suit on the judgment or in any other manner provided by Law or at equity.
 
Section 11.14   Waiver of Jury Trial .   EACH OF THE PARTIES HEREBY IRREVOCABLY WANES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
 
[Signatures follow on next page]
 
 
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IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed as of the date first above written.
 
 
ACQUIROR:
   
 
CHINA TELETECH HOLDING, INC.
   
 
By:
/s/ Yankuan Li
 
Name:
Yankuan Li
 
Title:
Chief Executive Officer
   

 
 
ACQUIREE:
   
 
CHINA TELETECH LIMITED
   
 
By:
/s/ Dong Liu
 
Name:
Dong Liu
 
Title:
Director

 
25
 
 
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed as of the date first above written.
 
 
ACQUIREE SHAREHOLDERS:
   
 
By:
/s/ Dong Liu
 
Name:
Dong Liu
 
Title:
Director
   
  By: /s/ Yuan Zhao
 
Name:
Yuan Zhao
 
Title:
Director

 
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SCHEDULE I
 
Acquiree Shareholders
 
Total
Acquiree Shares
Held Prior to
the Closing
   
Acquiror
Common Shares
to be Issued at
the Closing
 
             
Dong Liu
Unit 4, 13rd Floor, Jade Mansion
40 Waterloo Road
Kowloon, Hong Kong
    5       20,000,000  
                 
Yuan Zhao
Room 904, Sheng Yue Ju
149 Feng Yuan Road, Li Wan District
Guangzhou, China
    5       20,000,000  
                 
Total
    10       40,000,000  

 
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Exhibit 99.1
 
CHINA TELETECH LIMITED
Consolidated Financial Statements
December 31, 2011 and 2010
(Stated in US Dollars)
 
 
 
 
 
China Teletech Limited
 
Contents
 
Pages
 
       
Report of Independent Registered Public Accounting Firm
    1  
         
Consolidated Balance Sheets
    2  
         
Consolidated Statements of Operations
    3  
         
Consolidated Statements of Changes in Stockholders’ Equity
    4  
         
Consolidated Statements of Cash Flows
    5  
         
Notes to Consolidated Financial Statements
    6 - 22  

 
 
 
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
To:   The Board of Directors and Stockholders of    
   China Teletech Limited    
 
Report of Independent Registered Public Accounting Firm
 
We have audited the accompanying consolidated balance sheets of China Teletech Limited (the “Company”) as of December 31, 2011 and 2010, and the related consolidated statements of operations, changes in stockholders' equity, and cash flows for the years then ended. These financial statements are the responsibility of China Teletech Limited's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of China Teletech Limited as of December 31, 2011 and 2010, and the results of its operations and its cash flows for each of the years then ended in conformity with accounting principles generally accepted in the United States of America.
 
San Mateo, California      Samuel H. Wong & Co., LLP
March 21, 2012      Certified Public Accountants
 
 
1
 
 
China Teletech Limited
Consolidated Balance Sheets
As of December 31, 2011 and 2010
 (Stated in US Dollars)
                                                                                                                                                                       
ASSETS
 
Notes
   
12/31/2011
   
12/31/2010
 
Current Assets
                 
Cash and Cash Equivalents
    2D     $ 1,714,241     $ 907,959  
Other Receivable
    3       158,091       152,182  
Related Party Receivable
            69,080       -  
Inventories
    2F       139,488       151,245  
Prepaid Expenses
            128,773       132,430  
Total Current Assets
            2,209,673       1,343,816  
                         
Non-Current Assets
                       
Property, Plant & Equipment, net
    2H,4       -       638  
Other Assets
            9,057       258  
                         
TOTAL ASSETS
          $ 2,218,730     $ 1,344,712  
                         
LIABILITIES
                       
Current Liabilities
                       
Accounts Payable
          $ 721     $ 686  
Taxes Payable
            504,519       297,246  
Other Payable
            5,802       5,585  
Related Parties Payable
    5       276,782       173,701  
Accrued Liabilities
            16,362       40,000  
Total Current Liabilities
            804,186       517,218  
                         
TOTAL LIABILITIES
          $ 804,186     $ 517,218  
                         
STOCKHOLDERS' EQUITY
                       
Registered Capital
          $ 10     $ 10  
Additional Paid in Capital
            1,410,246       1,410,246  
Statutory Reserve
    2I,6       -       -  
Retained Earnings
            (191,040 )     (732,831 )
Accumulated Other Comprehensive Income
    2J       195,328       150,069  
TOTAL STOCKHOLDERS' EQUITY
            1,414,544       827,494  
                         
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
    $ 2,218,730     $ 1,344,712  
 
See Notes to Consolidated Financial Statements and Accountant's Report
 
 
2
 
 
China Teletech Limited
Consolidated Statements of Operations
For the years ended December 31, 2011 and 2010
 (Stated in US Dollars)
 
   
Notes
   
12/31/2011
   
12/31/2010
 
Revenues
                 
Sales
    2K     $ 19,647,888     $ 14,655,224  
Cost of Sales
    2L       18,564,973       14,136,735  
     Gross Profit
            1,082,915       518,489  
                         
Operating Expenses
                       
Selling Expenses
    2M       36,116       40,031  
General & Administrative Expenses
    2N       284,329       296,545  
     Total Operating Expense
            320,445       336,576  
                         
Operating Income/(Loss)
            762,470       181,913  
                         
Other Income (Expenses)
                       
Bad Debt Recovery
            -       75,622  
Other Income
            3,268       40  
Other Expenses
            (31,439 )     (11,681 )
Interest Income
            14       11  
Interest Expense
            (164 )     -  
Total Other Income/(Expenses)
            (28,321 )     63,992  
                         
Earnings before Tax
            734,149       245,905  
                         
Income Tax
    2Q       (192,358 )     (62,794 )
                         
Net Income
            541,791       183,111  
                         
Net Income
            541,791       183,111  
Foreign Currency Translation Adjustment
            45,259       30,268  
Other Comprehensive Income
          $ 587,050     $ 213,379  

Earnings per share
           
Basic
  $ 53,852.60     $ 18,311.10  
Diluted
  $ 53,852.60     $ 18,311.10  
                 
Weighted average shares outstanding
               
Basic
    10       10  
Diluted
    10       10  
 
See Notes to Consolidated Financial Statements and Accountant's Report
 
 
3
 
 
China Teletech Limited
Consolidated Statements of Changes in Stockholders’ Equity
As of December 31, 2011 and 2010
 (Stated in US Dollars)
 
                     
Accumulated
     
 
Number
     
Additional
         
Other
     
 
of
 
Registered
 
Paid in
 
Statutory
 
Retained
 
Comprehensive
     
 
Shares
 
Capital
 
Capital
 
Reserve
 
Earnings
 
Income
 
Total
 
Balance at January 1, 2010
  10   $ 10   $ 1,410,246   $ -   $ (915,942 ) $ 119,801   $ 614,115  
Net Income
  -     -     -     -     183,111     -     183,111  
Foreign Currency Translation Adjustment
  -     -     -     -     -     30,268     30,268  
Balance at December 31, 2010
  10   $ 10   $ 1,410,246   $ -   $ (732,831 ) $ 150,069   $ 827,494  
                                           
Balance at January 1, 2011
  10   $ 10   $ 1,410,246   $ -   $ (732,831 ) $ 150,069   $ 827,494  
Net Income
  -     -     -     -     541,791     -     541,791  
Foreign Currency Translation Adjustment
  -     -     -     -     -     45,259     45,259  
Balance at December 31, 2011
  10   $ 10   $ 1,410,246   $ -   $ (191,040 ) $ 195,328   $ 1,414,544  
 
See Notes to Consolidated Financial Statements and Accountant's Report
 
 
4
 
 
China Teletech Limited
Consolidated Statements of Cash Flows
For the years ended December 31, 2011 and 2010
(Stated in US Dollars)
 
   
12/31/2011
   
12/31/2010
 
Cash Flows from Operating Activities
           
Net Income
  $ 541,791     $ 183,111  
Depreciation
    -       4,227  
Loss on disposal of Property, Plant and Equipment
    638       11,794  
Decrease/(Increase) in Other Receivables
    (5,909 )     8,780  
Decrease/(Increase) in Related Party Receivables
    (69,080 )     -  
Decrease/(Increase) in Inventories
    11,757       101,873  
Decrease/(Increase) in Advance to Suppliers
    -       117,007  
Decrease/(Increase) in Prepaid Expenses
    3,657       (8,753 )
Increase/(Decrease) in Accounts Payable
    35       (1,430 )
Increase/(Decrease) in Taxes Payable
    207,273       72,049  
Increase/(Decrease) in Other Payables
    217       (81,139 )
Increase/(Decrease) in Related Parties Payables
    103,081       120,815  
Increase/(Decrease) in Accrued Liabilities
    (23,638 )     -  
Cash Sourced/(Used) in Operating Activities
    769,822       528,334  
                 
Cash Flows from Investing Activities
               
Proceeds from Sale of Short-term Investment
    -       -  
Proceeds on Disposition of Property, Plant and Equipment
    -       11,867  
Purchases of Other Assets
    (8,799 )     -  
Cash Used/(Sourced) in Investing Activities
    (8,799 )     11,867  
                 
Cash Flows from Financing Activities
               
Cash Used/(Sourced) in Financing Activities
    -       -  
                 
Net Increase/(Decrease) in Cash & Cash Equivalents for the Period
    761,023       540,201  
Effect of Other Comprehensive Income
    45,259       30,268  
Cash & Cash Equivalents at Beginning of Period
    907,959       337,490  
                 
Cash & Cash Equivalents at End of Period
  $ 1,714,241     $ 907,959  
 
See Notes to Consolidated Financial Statements and Accountant's Report
 
 
5
 
 
China Teletech Limited
Notes to Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
(Stated in US Dollars)
 
1.  
The Company and Principal Business Activities

Organizational Structure

China Teletech Limited (“CTL”), formerly “Sierra Vista Group Limited,” is a British Virgin Islands Company, incorporated on January 30, 2008 under the British Virgin Islands Business Companies Act, 2004.  CTL was formed for the purpose of providing a group structure to enhance the viable capacity as discussed below of a variable interest entity and a wholly owned subsidiary located in the People’s Republic of China (“PRC”); namely, (a) Shenzhen Rongxin Investment Co., Ltd. (“Shenzhen Rongxin”) and (b) Guangzhou Rongxin Science and Technology Limited (“Guangzhou Rongxin”, formerly known as Guangzhou Yueshen Taiyang Network and Technology Co., Ltd.). respectively, and to undergo a reverse merger transaction with China Teletech Limited (the “Company”) , formerly “Stream Horizon Studios, Inc.”, which may include an equity financing in the near future. CTL’s primary business operations are conducted through Shenzhen Rongxin and Guangzhou Rongxin. Pursuant to a share transfer agreement, CTL purchased 100% of the shares of Guangzhou Rongxin for a price of RMB 800,000.  The share purchase was approved by the Guangzhou government in PRC on September 8, 2010.

Share Exchange Agreement

The Company was incorporated under the laws of the Province of British Columbia, Canada on October 1, 2001.  The Company was formerly a subsidiary of Wavelit, Inc., a Nevada corporation. The Compnay will be spun off from its parent to the shareholders of Wavelit, Inc where the shareholders of Wavelit, Inc. will receive an aggregate of 8,750,000 common shares. The Compnay is in the process of submitting a Form S-1 to register the securities that it will issue in this transaction. Concurrently, the Company is applying to have its common shares independently quoted on the Over the Counter Bulletin Board Market in the United States of America.

Upon declaration of effectiveness by the US Securities and Exchange Commission of the Form S-1, the Company will enter into reverse merger transaction via a share exchange agreement with CTL.  Under the terms of the share exchange agreement, the Company will issue an aggregate of 241,250,000 shares of common stock to the shareholders of CTL for 100% of the outstanding stock of CTL.

As the share exchange transaction between CTL and the Company has not been completed as at December 31, 2011, no recapitalization of CTL has occurred.

Variable Interest Entity Agreement

CTL entered into three contractual agreements that for accounting purposes will be collectively known as the variable interest entity (“VIE”) agreement, with Mr. Liu Dong and Mr. Zhao Yuan who beneficially own Shenzhen Rongxin 51% and 49%, respectively.  The VIE agreement entitles CTL to 100% of the future earnings and losses of Shenzhen Rongxin.  CTL accounted for the VIE agreement, in accordance to ASC 810-10, by consolidating Shenzhen Rongxin as a wholly owned subsidiary because CTL has the authority to (1) direct the operations of the Shenzhen Rongxin, (2) provide financial support for Shenzhen Rongxin, and (3) CTL is primary beneficiary of the results of operations of Shenzhen Rongxin.  The significant terms of the VIE agreement are detailed by each contract below:

 
6
 
 
China Teletech Limited
Notes to Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
(Stated in US Dollars)
 
I.      Exclusive Option Agreement

CTL, or parties designated by CTL, has been granted the irrevocable right to purchase all or part of the ownership interest of Shenzhen Rongxin at any time when the Exclusive Option Agreement is in effect.  The purchase price for all of the ownership interest of Shenzhen Rongxin is RMB$10,000,000 or 80% of the appraised value of Shenzhen Rongxin, subject to PRC laws at the time of exercising the option.   If CTL chooses to purchase part of the ownership interest, the purchase price will be 80% of the appraised value of Shenzhen Rongxin.  Mr. Liu Dong and Mr. Zhao Yuan cannot dispose, assign or mortgage Shenzhen Rongxin’s assets or operations, increase or decrease the registered capital of Shenzhen Rongxin, change the members of the board of directors, distribute dividends, and alter the articles and ownership of Shenzhen Rongxin, without the expressed written consent of CTL.

These rights are exclusively granted to CTL and are not transferable without expressed written consent by Mr. Liu Dong and Mr. Zhao Yuan.

This agreement remains in effect for CTL, Mr. Liu Dong and Mr. Zhao Yuan  and their successors if their rights are assigned, unless this agreement is unanimously terminated by all aforementioned parties.

II.    Shareholders' Voting Agreement

Mr. Liu Dong and Mr. Zhao Yuan have agreed to attend and vote at any shareholder meeting of Shenzhen Rongxin or otherwise exercise all voting power in accordance with the direction of CTL.

III.   Shares Pledge Agreement

Shenzhen Rongxin intended to sell all of its stock to CTL; however, before such transactions could be realized under PRC laws, in order to protect the interest of the shareholders of CTL, Mr. Liu Dong and Mr. Zhao Yuan have pledged all their ownership of Shenzhen Rongxin to CTL.  In the event that there was a significant decline in value and the interest of the shareholders of CTL was undermined, CTL could sell all the stock of Shenzhen Rongxin at its discretion.

 
7
 
 
China Teletech Limited
Notes to Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
(Stated in US Dollars)
 
Business

Shenzhen Rongxin’s primary business is the wholesale and distribution of mineral water as well as trading of wine.  Shenzhen Rongxin is the exclusive supplier of Tibet Glacial 5100 spring water to the Guangdong Province of PRC, which currently has a population of approximately 110 million people.

Guangzhou Rongxin is principally engaged in the trading and distribution of rechargeable phone cards, prepaid subway tickets, cellular phones, and cellular phone accessories in Guangzhou in the PRC.  Guangzhou Rongxin sells to wholesalers, retailers, and end users.
 
2.  
Summary of Significant Accounting Policies

(A)  
Method of Accounting

CTL maintains its general ledger and journals with the accrual method accounting for financial reporting purposes. The financial statements and notes are representations of management. Accounting policies adopted by CTL 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 all the accounts of CTL acted as variable interest entity of Shenzhen Rongxin, and its wholly owned subsidiary, Guangzhou Rongxin.  Inter-company transactions, such as sales, cost of sales, due to/due from balances, investment in subsidiaries, and subsidiaries’ capitalization have been eliminated.

As of December 31, 2011, the detailed identities of the operating wholly owned subsidiary and variable interest entity are as follows:-
 
Name of Entities
 
Date of Incorporation
 
Place of Incorporation
 
Attributable Equity Interest
 
Registered Capital
Shenzhen Rongxin
 
11/21/1996
 
PRC
    100 %
RMB 10,000,000
Guangzhou Rongxin
 
4/19/2004
 
PRC
    100 %
HKD 1,700,000

 
8
 
 
China Teletech Limited
Notes to Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
(Stated in US Dollars)
 
(C)  
Use of Estimates

In the preparation of the 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, 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 valuation of accounts receivable, inventories, and the estimation on useful lives of property, plant and equipment.  Actual results could differ from those estimates.

(D)  
Cash and Cash Equivalents

Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments.

(E)  
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.

(F)  
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.

(G)  
Advances to Suppliers

Advances to suppliers represent the cash paid in advance for the purchase of goods. The advances to suppliers are interest free and unsecured.
 
(H)  
Property, Plant, and Equipment

Property, plant, and equipment are stated at cost.  Repairs and maintenance to these assets are charged to expense as incurred; major improvements enhancing the function and/or useful life are capitalized.  When items are sold or retired, the related cost and accumulated depreciation are removed from the accounts and any gains or losses arising from such transactions are recognized.

Property, plant, and equipment are depreciated using the straight-line method over their estimated useful life with a 10% salvage value.  Their useful lives are as follows:
 
Fixed Assets Classification
 
Useful Lives
Office Equipment
 
3 Years
Furniture & Fixture
 
3 Years
Motor Vehicles
 
10 Years

(I)  
Statutory Reserve

Statutory reserve refer to the amount appropriated from the net income in accordance with laws or regulations, which can be used to recover losses and increase capital, as approved, and, are to be used to expand production or operation. 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 capital.
 
(J) 
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:

 
9
 
 
China Teletech Limited
Notes to Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
(Stated in US Dollars)
 
  o
●
Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.
  o
●
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.
  o
●
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 December 31, 2011 and 2010, the Company did not identify any assets and liabilities that were required to be presented on the balance sheet at fair value.
 
(K)  
Comprehensive Income

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 years ended December 31, 2011 and 2010 included net income and foreign currency translation adjustments.

(L)  
Recognition of Revenue

Guangzhou Rongxin establishes retail outlets in Guangzhou city for the trading and distribution of rechargeable phone cards, prepaid subway tickets, cellular phones and cellular phone accessories.  The customers include other retailers, wholesalers, Airtime on the rechargeable phone cards is provided by the respective wireless carriers.  CTL is not responsible for the delivery and unutilized portion of airtime minutes.

 
10
 
 
China Teletech Limited
Notes to Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
(Stated in US Dollars)
 
With reference to ASC 605-45-45, Guangzhou Rongxin has recorded the revenue from the sale of its products on a gross basis.  It purchases its inventory from different suppliers and most of them require prepayment before delivery of goods.  It is responsible for damaged, lost or stolen inventory.  Depending on the selection of suppliers, volume of purchases, and the intensity of market competition, the profit margin will vary.

In terms of the timing of recognizing revenue, it is recognized on the transfer of risk and rewards of ownership, which generally coincides with the time when the goods are delivered to customers and the titles have been passed at the retail outlets.  Prepayments by customers for phone cards, subway tickets and cellular phone are rare but if any are presented as customer deposits.  Guangzhou Rongxin is not responsible for tracking usage of the airtime or dollar value stored on the phone cards and subway tickets.  These are the responsibilities of the wireless and subway carriers.  Therefore, the earnings process of Guangzhou Rongxin is complete upon delivery of the products to its customers.

Shenzhen Rongxin establishes network in Guangdong Province for the resale of Tibet 5100 mineral water products. Revenue from the sale of mineral water is recognized when goods are delivered to customers or loaded on customers’ pick-up trucks and the titles have been passed.   

Neither Guangzhou Rongxin nor Shenzhen Rongxin has any refund policies for the return of goods.

(M)  
Cost of Sales

Guangzhou Rongxin’s cost of sales is primarily comprised of cost of goods sold, namely the costs phone and subway card sold.  Freight cost is none or minimal because CTL usually picks up purchases from the suppliers and delivers them to the customers directly at the retail outlets.

Shenzhen Rongxin’s cost of sales consists of cost of mineral water and wine.  Freight cost is none or minimal because the suppliers do not charge freight and the customers for water and wine products pick up the goods themselves.

 
11
 
 
China Teletech Limited
Notes to Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
(Stated in US Dollars)
 
(N)  
Selling Expenses

Selling expenses include salaries of the sales force, client entertainment, commissions, advertising, and office rental expenses.
 
(O)  
General & Administrative Expenses

General and administrative expenses are comprised of executive compensation, general overhead such as the finance department and administrative staff costs, depreciation, travel and lodging, meals and entertainment and utilities.

(P)  
Advertising Expenses

Costs related to advertising and promotion expenditures are expensed as incurred during the year.  Advertising costs are charged to selling expenses.

(Q)  
Retirement Benefits

Full-time employees of CTL are entitled to staff welfare benefits including Medicare, welfare subsidies, unemployment insurance, and pension benefits through a PRC government-mandated multi-employer defined contribution plan. CTL is required to accrue for these benefits based on certain percentages of the employees’ salaries. Costs related to the retirement benefits are charged to CTL’s statements of operations as incurred.

(R)  
Income Tax

CTL uses the accrual method of accounting to determine and report its taxable reduction of income taxes for the year in which they are available. In accordance with SFAS No. 109 “Accounting for Income Taxes”, CTL accounts for income tax using an asset and liability approach and allows for recognition of deferred tax benefits in future years.  Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not that such items will either expire before CTL is able to realize their benefits, or that future realization is uncertain.

In respect of CTL and its subsidiaries domiciled and operated in the British Virgin Islands and People’s Republic of China, the taxation of these entities are summarized below:

 
12
 
 
China Teletech Limited
Notes to Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
(Stated in US Dollars)
 
Entities
 
Countries of Domicile
 
Income Tax Rate
 
China Teletech Limited
 
BVI
    0.00 %
Shenzhen Rongxin
 
PRC
    25.00 %
Guangzhou Rongxin
 
PRC
    25.00 %
 
(S)  
Foreign Currency Translation

CTL’s two operating subsidiaries Shenzhen Rongxin and Guangzhou Rongxin maintain their 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 Shenzhen Rongxin and Guangzhou Rongxin, which are prepared using the functional currency, have been translated into United States dollars.  Assets and liabilities are translated at the exchange rates at the balance sheet dates and revenue and expenses are translated at the average exchange rates, and stockholders’ equity is translated at historical exchange rates. Translation adjustments are not included in determining net income but are included in foreign exchange adjustment to other comprehensive income, a component of stockholders’ equity.

Exchange Rates
 
12/31/11
   
12/31/10
 
Year end RMB : USD
    6.3647       6.6118  
Average yearly RMB : USD
    6.4735       6.7788  
                 
Year end HKD : USD
    7.7691       7.7832  
Average yearly HKD : USD
    7.7850       7.7695  

 
13
 
 
China Teletech Limited
Notes to Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
(Stated in US Dollars)
 
(T)
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.
 
(U)  
Recent Accounting Pronouncements

In December 2010, FASB issued ASU No. 2010-29, Business Combinations (Topic 805): Disclosure of Supplementary Pro Forma Information for Business Combinations. The amendments in this update specify that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. The amendments also expand the supplemental pro forma disclosures to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. The amendments in this update are effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. The Company adopted the disclosure requirements for the business combinations in 2011.

In May 2011, FASB issued ASU No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs, which is not expected to have a material impact on the Company’s consolidated financial statements upon adoption.

In June 2011, FASB issued ASU 2011-05, Comprehensive Income (ASC Topic 220):  Presentation of Comprehensive Income.  Under the amendments in this update, an entity has the option to present the total of comprehensive income, the components of net income and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. Under both options, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income and a total amount for comprehensive income. In a single continuous statement, the entity is required to present the components of net income and total net income, the components of other comprehensive income and a total for other comprehensive income, along with the total of comprehensive income in that statement. In the two-statement approach, an entity is required to present components of net income and total net income in the statement of net income. The statement of other comprehensive income should immediately follow the statement of net income and include the components of other comprehensive income and a total for other comprehensive income, along with a total for comprehensive income. In addition, the entity is required to present on the face of the financial statements reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statement(s) where the components of net income and the components of other comprehensive income are presented.  The amendments in this update should be applied retrospectively and are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The Company is currently assessing the effect that the adoption of this pronouncement will have on its financial statements.

 
14
 
 
China Teletech Limited
Notes to Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
(Stated in US Dollars)
 
In September 2011, FASB issued ASU No. 2011-08, Intangibles-Goodwill and Other (ASC Topic 350): Testing Goodwill for Impairment, to simplify how entities test goodwill for impairment. ASU No. 2011-08 allows entities to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If greater than 50 percent likelihood exists that the fair value is less than the carrying amount then a two-step goodwill impairment test as described in Topic 350 must be performed. The guidance provided by this update becomes effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011. The Company does not intend to adopt this ASU No. 2011-08 before September 15, 2011, and does not expect it to have a material impact on the Company’s consolidated financial position and results of operations.

 
15
 
 
China Teletech Limited
Notes to Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
(Stated in US Dollars)
 
3.  
Other Receivable

   
12/31/2011
   
12/31/2010
 
             
JinJing Co., Ltd.
  $ 113,124     $ 108,896  
Shenzhen Ziyang Investment Consultant Co., Ltd.
    44,967       43,286  
    $ 158,091     $ 152,182  
 
The amounts receivable from JinJing Co., Ltd. and henzhen Ziyang Investment Consultant Co., Ltd. are unsecured and repayable on demand.   When JinJing Co., Ltd. and Shenzhen Ziyang Investment Consultant Co., Ltd. commence their business and become profitable, CTL is entitled to a share of the profit to be negotiated at that time.

4. 
Property, Plant and Equipment

         
Accumulated
       
12/31/2011
 
Cost
   
Depreciation
   
Net
 
Office Equipment
  $ -     $ -     $ -  
Motor Vehicles
    -       -       -  
    $ -     $ -     $ -  
                         
           
Accumulated
         
12/31/2010
 
Cost
   
Depreciation
   
Net
 
Office Equipment
  $ 12,764     $ 12,126     $ 638  
Motor Vehicles
    -       -       -  
    $ 12,764     $ 12,126     $ 638  

 
16
 
 
China Teletech Limited
Notes to Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
(Stated in US Dollars)
 
5.  
Related Parties Payable

   
12/31/2011
   
12/31/2010
 
             
Mr. Liu Dong, shareholder of Shenzhen Rongxin
  $ 40,228     $ 22,307  
Mr. Liu Yong, brother of Mr. Liu Dong
    8,421       8,107  
Mr. Zhao Yuan, shareholder of Shenzhen Rongxin
    48,392       46,583  
Ms. Li Yan Kuan, mother-in-law of Zhao Yuan
    -       96,704  
Guangzhou Global Telecom, Inc., holding company of CTL
    179,741       -  
    $ 276,782     $ 173,701  

The outstanding related parties payable do not bear any interest or collateral and are repayable on demand.
 
6. 
Statutory Reserve

In compliance with PRC laws, CTL is required to appropriate a portion of its net income to its statutory reserve up to a maximum of 50% of an enterprise’s registered capital in the PRC.  CTL had future unfunded commitments, as provided below.

   
12/31/2011
   
12/31/2010
 
             
PRC Subsidiaries Registered Capital
           
      Shenzhen Rongxin
  $ 1,206,753     $ 1,206,753  
      Guangzhou Rongxin
    219,200       153,502  
                 
Statutory Reserve Ceiling based  on 50% of PRC Registered  Capital
    712,977       680,128  
                 
                 
Less : Retained Earnings appropriated to Statutory  Reserve
    -       -  
                 
Reserve Commitment Outstanding
  $ 712,977     $ 680,128  

 
17
 
 
China Teletech Limited
Notes to Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
(Stated in US Dollars)
7. 
Operating Segments

CTL individually tracks the performance of its operating subsidiaries Shenzhen Rongxin and Guangzhou Rongxin. Shenzhen Rongxin’s business activities involve the trading of mineral water and wine. Guangzhou Rongxin is primarily engaged in distribution of prepaid phone cards and subway tickets.

 
18
 
 
China Teletech Limited
Notes to Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
(Stated in US Dollars)
 
The following is a presentation of CTL’s financial position and operation results for its operating entities as of December 31, 2011 and 2010, and for the years then ended.
 
Financial Position
                             
As of
                             
12/31/2011
 
Phone Card
 
Subway Card
 
Water
 
Wine
 
Mobile Phone
 
Stamp
 
Total
 
Current Assets
  $ 717,122   $ 86,207   $ 409,544   $ 974,322   $ 6,036   $ 16,442   $ 2,209,673  
Non-Current Assets
    58     7     2,661     6,330     -     1     9,057  
Total Assets
    717,180     86,214     412,205     980,652     6,036     16,443     2,218,730  
                                             
Current Liabilities
    358,332     43,076     115,875     275,671     3,016     8,216     804,186  
Non-Current Liabilities
    -     -     -     -     -     -     -  
Total Liabilities
    358,332     43,076     115,875     275,671     3,016     8,216     804,186  
                                             
Net Assets
    358,848     43,138     296,330     704,981     3,020     8,227     1,414,544  
                                             
Total Liabilities
                                           
& Net Assets
  $ 717,180   $ 86,214   $ 412,205   $ 980,652   $ 6,036   $ 16,443   $ 2,218,730  
 
Results of Operations
       
For the year ended
                   
12/31/2011    
 
   
 
   
 
   
 
   
 
    Stamp    
 
Revenue
  $ 12,418,749   $ 408,202   $ 1,281,778   $ 5,445,961   $ 29,708   $ 63,490   $ 19,647,888
Cost of Goods sold
    12,176,226     379,048     1,043,948     4,880,155     27,667     57,929     18,564,973
Gross Profit
    242,523     29,154     237,830     565,806     2,041     5,561     1,082,915
                             
 Operating Expenses
    71,764     8,627     70,376     167,428     604     1,646     320,445
 Operating Profit
    170,759     20,527     167,454     398,378     1,437     3,915     762,470
                             
 Total Other Expenses
    3,810     850     6,937     16,503     60     161     28,321
 Earnings before Tax
    166,949     19,677     160,517     381,875     1,377     3,754     734,149
 Income Tax Expense
    43,078     5,179     42,246     100,504     363     988     192,358
                             
 Net Income
  $ 123,871   $ 14,498   $ 118,271   $ 281,371   $ 1,014   $ 2,766   $ 541,791

 
19
 
 
China Teletech Limited
Notes to Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
(Stated in US Dollars)
 
Financial Position
                                   
As of
                                   
12/31/2010
 
Phone Card
   
Subway Card
   
Water
   
Wine
   
Mobile Phone
   
Total
 
Current Assets
  $ 635,275     $ 26,470     $ 82,594     $ 598,473     $ 1,004     $ 1,343,816  
Non-Current Assets
    184       7       85       620       -       896  
Total Assets
    635,459       26,477       82,679       599,093       1,004       1,344,712  
                                                 
Current Liabilities
    253,544       10,564       30,087       222,629       394       517,218  
Non-Current Liabilities
    -       -       -       -       -       -  
Total Liabilities
    253,544       10,564       30,087       222,629       394       517,218  
                                                 
Net Assets
    381,915       15,913       52,592       376,464       610       827,494  
                                                 
Total Liabilities
                                               
& Net Assets
  $ 635,459     $ 26,477     $ 82,675     $ 599,097     $ 1,004     $ 1,344,712  
 
Results of Operations
                           
For the year ended
                               
12/31/2010
 
Phone Card
 
Subway Card
  Water     Wine    
Mobile Phone
   
Total
 
Revenue
  $ 10,421,763   $ 434,240   $ 407,278     $ 3,376,130     $ 15,813     $ 14,655,224  
Cost of Goods sold
    10,236,416     426,517     367,806       3,090,102       15,894       14,136,735  
Gross Profit
    185,347     7,723     39,472       286,028       (81 )     518,489  
                                             
 Operating Expenses
    118,129     4,922     16,423       121,297       183       260,954  
 Operating Profit
    67,218     2,801     23,049       164,731       (264 )     257,535  
                                             
 Other Income
    11,102     463     7       40       18       11,630  
 Earnings before Tax
    56,116     2,338     23,042       164,691       (282 )     245,905  
 Income Tax Expense
    9,619     401     6,398       46,361       15       62,794  
                                             
 Net Income
  $ 46,497   $ 1,937   $ 16,644     $ 118,330     $ (297 )   $ 183,111  

 
20
 
 
China Teletech Limited
Notes to Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
(Stated in US Dollars)
 
8.            Income Tax

All of CTL’s operations are in the PRC, and in accordance with the relevant tax laws and regulations of PRC, the corporate income tax rate is 25%.  The provision for income taxes for PRC sourced net income amounted to $192,358 and $62,794 for the year ended December 31, 2011 and 2010, respectively.
 
Income before taxes consists of the following:
 
 
December 31, 2011
 
December 31, 2010
 
Income (loss) before taxes:
 
BVI
  $ (38,551 )   $ (78,983 )
PRC
    772,700       324,888  
Total income before taxes
  $ 734,149     $ 245,905  
                 
Provision for taxes:
 
Current:
 
BVI
  $ -     $ -  
PRC
    192,358       62,794  
      192,358       62,794  
                 
Deferred:
 
BVI
    -       -  
PRC
    -       -  
      -       -  
Total provision for taxes
  $ 192,358     $ 62,794  
Effective tax rate
    26.32 %     25.54 %
 
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts for income tax purposes. Deferred tax assets and liabilities have not been accrued as at December 31, 2011 and 2010 because the accounting bases of assets and liabilities approximate their tax values and because CTL’s tax loss arose from BVI where the income tax rate is nil.
 
The differences between the PRC income tax rates and CTL's effective tax rate for the year ended December 31, 2011 and 2010 are shown in the following table:
 
 
21
 
 
China Teletech Limited
Notes to Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
(Stated in US Dollars)
 
   
December 31, 2011
   
December 31, 2010
 
PRC income tax rates
    25.00 %     25.00 %
Adjustments of prior periods
    -       -  
Effect of deferred income taxes
    1.32 %     0.54 %
Effective tax rate
    26.32 %     25.54 %
 
9. 
Concentration of Risk

Shenzhen Rongxin is subject to supply shortage risk because its purchases of mineral water for resale are sourced from a single vendor, Tibet Glacial Mineral Water Co., Ltd. (“Tibet Glacial”). On January 1, 2009, Shenzhen Rongxin entered into a purchase agreement whereby Tibet Glacial would provide spring water at fixed price until December 31, 2012 and in return, Shenzhen Rongxin needed to consume no less than 140,000 trunks of bottle water per year.
 
10.            Economic, Political, and Legal Risks

CTL’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 economic, political, legal environment, and foreign currency exchange. CTL’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.
 
11. 
Commitments
 
Guangzhou Rongxin and Shenzhen Rongxin have operating leases for their premises expiring between December 2012 and April 2015.  The minimum lease payments for the next four years are as follows:

2012                      $  68,901
2013                      $  47,243
2014                      $  14,695
2015                      $  14,816
 
12.            Related Party Transactions

During the year, CTL paid $22,245 (2010 - $21,243) in rent to Liu Dong, the shareholder of Shenzhen Rongxin, for its office space in Shenzhen, PRC.  These transactions are in the normal course of business.

22

Exhibit 99.2
Guangzhou Global Telecom, Inc. / China Teletech Limited

Unaudited Pro forma Financial Information

December 31, 2011

States in US Dollar
 
 
 
 
 
Contents
Page
   
   
Report of Registered Independent Public Accounting Firm
1
   
Unaudited Pro forma Consolidated Balance Sheets
2
   
Unaudited Pro forma Consolidated Statements of Income
3
   
Notes to Pro forma Financial Statements
4 - 5

 
 
 

To:          Board of Directors and Stockholders
Guangzhou Global Telecom, Inc. / China Teletech Limited
 
Report of Registered Independent Public Accounting Firm

We have examined the pro forma adjustments reflecting the transactions described in Note 1 and the application of those adjustments to the historical amounts in the accompanying pro forma consolidated balance sheet of Guangzhou Global Telecom, Inc. as of December 31, 2011, and the pro forma consolidated statement of operations for the year then ended.  The historical consolidated financial statements are derived from the historical financial statements of Guangzhou Global Telecom, Inc. and China Teletech Limited, which were audited by us.  Such pro forma adjustments are based on management’s assumptions described in Note 1. The Company’s management is responsible for the pro forma financial information. Our responsibility is to express an opinion on the pro forma financial information based on our examination.

Our examination was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants and, accordingly, included such procedures as we considered necessary in the circumstances. We believe that our examination provides a reasonable basis for our opinion.

The objective of this pro forma financial information is to show what the significant effects on the historical financial information might have been had the transactions occurred at an earlier date. However, the pro forma consolidated financial statements are not necessarily indicative of the results of operations or related effects on financial position that would have been attained had the above-mentioned transactions actually occurred earlier.

In our opinion, management’s assumptions provide a reasonable basis for presenting the significant effects directly attributable to the above-mentioned transactions described in Note 1, the related pro forma adjustments give appropriate effect to those assumptions, and the pro forma column reflects the proper application of those adjustments to the historical financial statement amounts in the pro forma consolidated balance sheet as of December 31, 2011, and the pro forma consolidated statement of operations for the year then ended.
 
San Mateo       Samuel H. Wong & Co., LLP
March 27, 2012      Certified Public Accountants
       
 
 
1
 
 
Guangzhou Global Telecom, Inc. / China Teletech Limited
Unaudited Pro Forma Consolidated Balance Sheet as of December 31, 2011
 
   
As Reported
   
As Reported
   
Pro Forma
         
Pro Forma
 
   
GZGT
   
CTL
   
Adjustments
   
Note
   
Combined
 
ASSETS
                             
                               
Current Assets
                             
Cash and Cash Equivalents
  $ 69,270     $ 1,714,241     $ -           $ 1,783,511  
Short-term Investment
    597,043       -       -             597,043  
Prepaid Expenses
    -       128,773       -             128,773  
Other Receivables
    204,252       158,091       -             362,343  
Due from Related Parties
    904,846       69,080       (211,011 )     3       762,915  
Purchase Deposits
    23,049       -       -               23,049  
Inventories
    549,908       139,488       -               689,396  
Total Current Assets
    2,348,368       2,209,673       -               4,347,030  
                                         
Non-Current Assets
                                       
Property, Plant & Equipment, net
    -       -       -               -  
Other Non-current Assets
    71,145       9,057       -               80,202  
Total Non-current Assets
    71,145       9,057       -               80,202  
                                         
TOTAL ASSETS
  $ 2,419,513     $ 2,218,730     $ -             $ 4,427,232  
                                         
LIABILITIES AND STOCKHOLDERS’ EQUITY
                                 
                                         
Current liabilities
                                       
Accounts Payable
  $ -     $ 721     $ -             $ 721  
Taxes Payable
    859,315       504,519       -               1,363,834  
VAT Payable
    1,221,729       -       -               1,221,729  
Due to Related Parties
    30,000       276,782       (209,741 )     3       97,041  
Accrued Liabilities and Other Payables
    127,548       22,164       -               149,712  
Convertible Debenture - Current Portion
    2,866,323       -       -               2,866,323  
Total Current Liabilities
    5,104,915       804,186       -               5,699,360  
                                         
TOTAL LIABILITIES
    5,104,915       804,186       -               5,699,360  
                                         
STOCKHOLDERS’ EQUITY
                                       
                                         
Common Stock
    1,852,836       10       (1,267,563 )     1, 2       585,283  
Additional Paid in Capital
    1,684,019       1,410,246       1,271,851       1, 2       4,366,116  
Other Comprehensive Income
    32,231       195,328       (196,598 )     2, 3       30,961  
Retained Earnings (Accumulated Deficit)
    (6,548,179 )     (191,040 )     191,040       2       (6,548,179 )
Minority Interest
    293,691       -       -               293,691  
                                         
TOTAL STOCKHOLDERS’ EQUITY
    (2,685,402 )     1,414,544       -               (1,272,128 )
                                         
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
  $ 2,419,513     $ 2,218,730       -             $ 4,427,232  
 
See Accompanying Notes to Pro forma Financial Statement
 
 
2
 
 
Guangzhou Global Telecom, Inc. / China Teletech Limited
Unaudited Pro Forma Consolidated Statement of Income for the year ended December 31, 2011
 
   
As Reported
   
As Reported
               
Pro Forma
 
   
GZGT
   
CTL
   
Adjustments
   
Note
   
Combined
 
                               
Sales
  $ 18,847,061     $ 19,647,888     $ -           $ 38,494,949  
Cost of Sales
    18,426,846       18,564,973       -             36,991,819  
Gross Profit
    420,215       1,082,915       -             1,503,130  
                                       
Operating Expenses
                                     
Selling Expenses
    -       36,116       (35,035 )     4       1,081  
Administrative and General Expenses
    806,388       284,329       -               1,090,717  
Total Operating Expense
    806,388       320,445       -               1,091,798  
                                         
Income (Loss) from Operations
    (386,173 )     762,470       -               411,332  
                                         
Other Income (Expenses)
                                       
Other Income
    201,151       3268       (35,035 )     4       169,384  
Interest Income
    15,461       14       -               15,475  
Other Expenses
    (120,850 )     (31,439 )     -               (152,289 )
Interest Expense
    -       (164 )     -               (164 )
Total Other Income (Expenses)
    95,762       (28,321 )     -               32,406  
                                         
Gain (Loss) before Taxation
    (290,411 )     734,149       -               443,738  
                                         
Income Tax
    (57,713 )     (192,358 )     -               (250,071 )
                                         
Foreign Currency Translation Adjustment
            45,259                       45,259  
                                         
Net Income (Loss)
    (348,124 )     587,050       -               238,926  
                                         
Net Income Attributable to Non-controlling Interest
    (61,161 )     -       -               (61,161 )
                                         
                                         
Net Income (Loss) Attributable to the Company
  $ (409,285 )   $ 587,050     $ -             $ 177,765  
                                         
                                         
Basic and Diluted Earnings Per Share
                                       
Basic and Diluted -Net Income (Loss) Attributable to the Company
  $ (0.00 )   $ 58,705                     $ (0.00 )
Basic and Diluted -Net Income (Loss)
    (0.00 )     58,705                       (0.00 )
Basic and Diluted -Non-controlling Interest
  $ (0.00 )   $ -                     $ (0.00 )
                                         
Weighted Average Shares Outstanding
                                       
-Basic
    15,351,147       10                       15,351,157  
-Diluted
    15,351,147       10                       15,351,157  
 
See Accompanying Notes to Pro forma Financial Statement
 
 
3
 
 
Guangzhou Global Telecom, Inc. / China Teletech Limited
Notes to Unaudited Pro Forma Consolidated Financial Statements
As of and for the year ended December 31, 2011
 
Note 1. 
Accounting Treatment of the Transactions

1)  
10 to 1 Reverse Stock Split of Guangzhou Global Telecom, Inc. Shares

On December 9, 2011, shareholders of Guangzhou Global Telecom, Inc. (the “GZGT”) jointly agreed to a 10 to 1 reverse stock split (the “Reverse Split”) on its issued and outstanding common stock, having a par value of $0.01 per share. After the reverse split, the par value of its common stock will remain at $0.01 per share.

2)  
Business Combination of Guangzhou Global Telecom, Inc. and China Teletech Limited

The acquisition will be accounted for by us under the purchase method of accounting. Under the purchase method, the purchase price for China Teletech Limited (the “CTL”) will be allocated to identifiable assets (including intangible assets) and liabilities of CTL with any excess being treated as goodwill. Since intangible assets are amortized over their useful lives, we will incur accounting charges from the acquisition. In addition, intangible assets and goodwill are both subject to periodic impairment tests and could result in potential write-down charges in future periods.

For the purpose of the pro forma financial information, the combination of the two entities (i.e. the purchaser and seller) is presented on the assumption that the combination had been completed on March 30, 2012. Based on this assumption, the purchase price has been taken as the consideration as the GZGT per share price at $0.0354. Accordingly, the value of 40,000,000 shares at $0.0354 per share would amount to $1,414,544.

The actual purchase price, however, will finally be determined when the closing date occurred in the near future.

The pro forma financial information included herein contains an initial estimate of this allocation. For financial reporting purposes, the results of operations of CTL will be included in our consolidated statement of income following the time that the acquisition is effective under applicable law. Our financial statements for prior periods will not be restated as a result of the acquisition.
 
Note 2. 
Material U.S. Federal Income Tax Consequences to Our Stockholders
                   
 
There will be no U.S. federal income tax consequences to a holder of our common stock as a result of the issuance of the shares or acquisition.

 
4
 

Guangzhou Global Telecom, Inc. / China Teletech Limited
Notes to Unaudited Pro Forma Consolidated Financial Statements
As of and for the year ended December 31, 2011
 
Note 3. 
Adjusting Journal Entries to Pro forma Financial Information for December 31, 2011
 
AJE
 
Account Name
 
Dr.
   
Cr.
 
                 
1
 
Common Stock – GZGT
  $ 1,667,553        
   
Additional Paid in Capital – GZGT
          $ 1,667,553  
                     
Narration:
 
To record the effect of 10 to 1 reverse split of GZGT common stock.
 
                     
2
 
Common Stock – CTL Common Stocks
  $ 10          
   
Additional Paid in Capital
  $ 1,410,246          
   
Other Comprehensive Income
  $ 195,328          
   
Retained Earnings
          $ 191,040  
   
Common Stock - Issuance of GZGT Common Stocks
          $ 400,000  
   
Additional Paid in Capital
          $ 1,014,544  
                     
Narration:
 
To record the assumption of issuance 40,000,000 shares common stock with par value $0.01, based
 
   
on $0.0354 per share average trading price, to acquire 100% ownership of China Teletech Limited
 
                     
3
 
Due to Related Parties
  $ 209,741          
   
Other Comprehensive Income
    1,270          
   
Due from Related Parties
          $ 211,011  
                     
Narration:
 
To record the assumption that due to/due from balances between GZGT and CTL should be
 
   
eliminated.
 
                     

4
 
Other income
  $ 35,035        
   
Selling expenses
          $ 35,035  
                     
Narration:
 
To record the assumption that rental income/ expense from balances between GZGT and CTL
 
   
should be eliminated.
 

Notes to AJEs:

AJE
 
Note
 
       
1
 
Reduction in GZGT Common Stock = $0.01 Par Value X [185,283,627 Shares –  (185,283,627 Shares /10 ) ] = $1,667,553
 
       
2
 
Common Stock – Issuance of GZGT Common Stocks = 40,000,000 Shares X $0.01 Par Value = $400,000
 
 
 
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