f10q0610_guangzhou.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_____________________

FORM 10-Q

_____________________

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

For the quarterly period ended June 30, 2010

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

For the transition period from ______to______.

GUANGZHOU GLOBAL TELECOM, INC.

(Exact name of registrant as specified in the Charter)

Florida		333-130937		59-3565377
(State or other jurisdiction of incorporation or organization)		(Commission File No.)		(IRS Employee Identification No.)

c/o CORPORATION SERVICE COMPANY

1201 HAYS STREET

TALLAHASSEE FL 32301-2525 US

(Address of Principal Executive Offices)

(850) 521-1000‎

(Issuer Telephone number)

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

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

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

Large accelerated filer	o	Accelerated filer	o

Non-accelerated filer (Do not check if a smaller reporting company)	o	Smaller reporting company	x

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

State the number of shares outstanding of each of the issuer’s classes of common equity, as of August 16, 2010: 106,162,071 shares of common stock.

GUANGZHOU GLOBAL TELECOM, INC.

FORM 10-Q

June 30, 2010

TABLE OF CONTENTS

PART I— FINANCIAL INFORMATION

Item 1.	Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24
Item 4T.	Controls and Procedures	29

PART II— OTHER INFORMATION

Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 3.	Defaults Upon Senior Securities	30
Item 4.	(Removed and Reserved)	30
Item 5.	Other Information	30
Item 6.	Exhibits	30

SIGNATURES		31

PART 1 - FINANCIAL INFORMATION

Item 1. Financial Statements

Guangzhou Global Telecom, Inc.

Unaudited Consolidated Financial Statements

June 30, 2010 and December 31, 2009

(Stated in US Dollars)

Guangzhou Global Telecom, Inc.

Contents	Pages

Report of Independent Registered Public Accounting Firm	1

Consolidated Balance Sheets	2 – 3

Consolidated Statements of Income	4

Consolidated Statements of Changes in Stockholders’ Equity	5

Consolidated Statements of Cash Flows	6 – 7

Notes to Consolidated Financial Statements	8 – 23

Board of Directors and Stockholders

Guangzhou Global Telecom, Inc.

Report of Independent Registered Public Accounting Firm

We have reviewed the accompanying consolidated balance sheets of Guangzhou Global Telecom, Inc. as of June 30, 2010 and December 31, 2009, and the related consolidated statements of income, stockholders’ equity and cash flows for the three and six-month periods ended June 30, 2010 and 2009. These interim consolidated financial statements are the responsibility of the Company's management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the accompanying interim consolidated financial statements for them to be in conformity with United States generally accepted accounting principles.

South San Francisco, California	Samuel H. Wong & Co., LLP
July 30, 2010	Certified Public Accountants

Guangzhou Global Telecom, Inc

Consolidated Balance Sheets

As of June 30, 2010 and December 31, 2009

(Stated in US Dollars)

ASSETS			06/30/2010		12/31/2009
	Note
Current Assets
Cash and Cash Equivalents			$	641,892	$	377,591
Other Receivable		4		8,812		1,418,759
Purchase Deposits		6		169,751		1,525,935
Inventory				879,554		799,480
Total Current Assets				1,700,009		4,121,765

Non-Current Assets
Property, plant & equipment, net		7		71,791		520,149
Goodwill		2(s)		63,000		63,000
Total Non-Current Assets				134,790		583,149

TOTAL ASSETS			$	1,834,800	$	4,704,914

LIABILITIES & STOCKHOLDERS' EQUITY

Current Liabilities
Taxes payable			$	704,122	$	684,043
VAT payable		8		1,405,694		1,399,932
Due to shareholders		5		240,661		59,490
Accrued liabilities and other payable				169,480		347,268
Convertible debenture - current portion		10		2,866,323		2,866,323
Total Current Liabilities				5,386,280		5,357,056

Non-Current Liabilities
Convertible debenture – non-current portion		10		-		-
Total Non-Current Liabilities				-		-

TOTAL LIABILITIES			$	5,386,280	$	5,357,056

Guangzhou Global Telecom, Inc

Consolidated Balance Sheets

As of June 30, 2010 and December 31, 2009

(Stated in US Dollars)

		06/30/2010			12/31/2009
STOCKHOLDERS' EQUITY

Common Stock US$0.01 par value; 1,000,000,000 authorized, 106,162,071 and 74,839,071 issued and outstanding as of June 30, 2010 and December 31, 2009, respectively	11	$	1,475,376		$	1,494,751
Additional Paid in capital			1,082,115			1,409,399
Other Comprehensive Income			29,989			38,758
Retained Earnings			(6,532,551	)		(3,816,247	)
Minority Interest			393,551			221,197

TOTAL STOCKHOLDERS' EQUITY		$	(3,551,480	)	$	(652,142	)

TOTAL LIABILITIES AND
STOCKHOLDERS' EUITY		$	1,834,800		$	4,704,914

See Notes to Consolidated Financial Statements and Accountants’ Report

Guangzhou Global Telecom, Inc

Consolidated Statements of Income

For the three and six-month period ended June 30, 2010 and 2009

(Stated in US Dollars)

			3 Months			6 Months			3 Months			6 Months
			Ended			Ended			Ended			Ended
Revenues	Note		06/30/2010			06/30/2010			06/30/2009			06/30/2009
Sales		2(j)	$	9,186,173		$	18,607,294		$	3,795,931		$	14,818,306
Cost of Sales				8,909,339			18,032,901			3,544,287			14,391,166
Gross Profit				276,834			574,393			251,644			427,140

Operating Expenses
Selling Expenses				-			-			(7,694	)		38,337
General and Administrative Expenses		13		1,474,823			2,760,968			138,411			1,009,646
Total Operating Expense				1,474,823			2,760,968			130,717			1,047,983

Operating Income/(Loss)				(1,197,989	)		(2,186,575	)		120,927			(620,843	)

Other Income & Expenses
Interest Income				2			5			11			20
Other Income				32,346			68,235			(31,675	)		1,347
Interest Expenses				(20,487	)		(20,489	)		145			(26	)
Other Expenses				(116	)		(310,159	)		(456	)		(477	)
Total other income/(expense)				11,745			(262,408	)		(31,975	)		864

Income/(Loss) before taxation				(1,186,244	)		(2,448,983	)		88,952			(619,979	)
Income tax		2(p)		30,918			28,544			6,968			11,164
Discontinued operation, net of tax		12		-			210,156			160,081			160,081
Net Income/(Loss) attributable to:
Parent				(1,217,162	)		(2,687,683	)		(78,098	)		(791,224	)
Non-controlling interest				(32,985	)		(28,621	)		(9,944	)		(53,264	)
			$	(1,250,147	)	$	(2,716,304	)	$	(88,042	)	$	(844,488	)
Earnings Per Share
Basic				(0.0084	)		(0.0182	)		(0.0010	)		(0.0105	)
Diluted				(0.0084	)		(0.0182	)		(0.0010	)		(0.0105	)
Weighted Average Shares Outstanding
Basic				148,251,263			148,870,071			85,590,335			80,520,646
Diluted				148,251,263			148,870,071			85,590,335			80,520,646



Comprehensive Income
Net Income(Loss)			$	(2,716,304	)	$	(844,488	)	$	(3,560,792	)

Other Comprehensive Income				(8,769	)		532,896			524,127
Foreign Currency Translation Adjustment			$	(2,725,073	)	$	(311,592	)	$	(3,036,665	)

See Notes to Consolidated Financial Statements and Accountants’ Report

Guangzhou Global Telecom, Inc

Consolidated Statements of Changes in Stockholders’ Equity

For the six-month period ended June 30, 2010 and the year ended December 31, 2009

(Stated in US Dollars)

							Additional			Other
	Total Number			Common			Paid in			Comprehensive			Retained			Minority
	of Shares			Stock			Capital			Income			Earnings			Interest			Total

Balance, January 1, 2009		74,839,071		$	748,391		$	1,439.607		$	(202,845	)	$	(925,398	)	$	775,507		$	1,835,262
Conversion of convertible debenture to common stock		60,086,056			600,860			(8,333	)		-			-			-			592,527
Issuance of common stock in relation to management compensation		14,550,000			145,500			(21,875	)		-			-			-			123,625
Net Income/(Loss)		-			-			-			-			(2,890,849	)		-			(2,890,849	)
Non-controlling Interest		-			-			-			-			-			(554,310	)		(554,310	)
Foreign Currency Translation		-			-			-			241,603			-			-			241,603
Balance at December 31, 2009		149,475,127		$	1,494,751		$	1,409,399		$	38,758		$	(3,816,247	)	$	221,197		$	(652,142	)

Balance, January 1, 2010		149,475,127		$	1,494,751		$	1,409,399		$	38,758		$	(3,816,247	)	$	221,197		$	(652,142	)
Redemption of common stock		(3,650,000	)		(19,375	)		(327,244	)		-			-			-			(346,619	)
Net Income/(Loss)		-			-			-			-			(2,716,304	)		-			(2,716,304	)
Non-controlling Interest		-			-			-			-			-			172,354			172,354
Foreign Currency Translation		-			-			-			(8,769	)		-			-			(8,769	)
Balance at June 30, 2010		145,825,127		$	1,475,376		$	1,082,155		$	29,989		$	(6,532,551	)	$	393,551		$	(3,551,480	)

See Notes to Consolidated Financial Statements and Accountants’ Report

Guangzhou Global Telecom, Inc

Consolidated Statements of Cash Flows

For the three and six-month periods ended June 30, 2010 and 2009

(Stated in US Dollars)

	3 Months			6 Months			3 Months			6 Months
	Ended			Ended			Ended			Ended
Cash Flow from Operating Activities	06/30/2010			06/30/2010			06/30/2009			06/30/2009
Cash Received from Customers	$	9,620,668		$	20,017,240		$	6,227,107		$	17,446,218
Cash Paid to Suppliers		(8,784,279	)		(16,788,532	)		(5,788,400	)		(16,118,098	)
Cash Paid for Selling and G&A expenses		(1,056,567	)		(2,516,644	)		(130,717	)		(1,047,983	)
Cash Received from Other Income		(101,167	)		(69,644	)		63,041			1,391
Cash Paid to Director		240,661			181,171			(77,771	)		-
Cash Paid for Other Expense		(343,159	)		(346,159	)		179,687			(477	)
Interest Received		2			5			11			20
Interest Paid		(20,487	)		(20,489	)		136			(35	)
Minority Interest		143,733			143,733			(404,854	)		(623,942	)
Tax Paid		7,565			(2,702	)		(437,168	)		(435,369	)
Cash Sourced from/(Used in) Operating Activities		(296,030	)		597,980			(368,928	)		(778,275	)

Cash Flow from Investing Activities
Sale of Property, Plant And Equipment		21,050			21,709			10,998			13,478
Sale of Intangible Assets		-			-			40,508			40,508
Cash Sourced from/(Used in) Investing Activities		21,050			21,709			51,596			53,986

Cash Flow from Financing Activities
Issuance of Common Stock		-			-			360,917			373,917
Repayment of Notes		-			-			(341,092	)		(354,092	)
Redemption of Common Stock		(346,619	)		(346,619	)		-			-
Cash Sourced from/(Used in) Financing Activities		(346,619	)		(346,619	)		19,825			19,825

Net Increase/(Decrease) in Cash & Cash Equivalents	$	(621,599	)	$	273,070		$	(297,597	)	$	(704,464	)

Effect of Currency Translation		(46,807	)		(8,769	)		430,838			532,896

Cash & Cash Equivalent at the Beginning of Period		1,320,298			377,591			1,323,325			1,628,134

Cash & Cash Equivalent at the End of Period	$	642,892		$	641,892		$	1,456,566		$	1,456,566

See Notes to Consolidated Financial Statements and Accountants’ Report

Guangzhou Global Telecom, Inc.

Reconciliation of Net Income to Cash Flow Used in Operating Activities

For the three and six-month periods ended June 30, 2010 and 2009

(Stated in US Dollars)

	3 Months			6 Months			3 Months			6 Months
	Ended			Ended			Ended			Ended
	06/30/2010			06/30/2010			06/30/2009			06/30/2009

Net income/(loss)	$	(1,250,147	)	$	(2,716,304	)	$	(88,042	)	$	(844,488	)

Adjustments to reconcile net income/(loss) to
net cash provided by cash activities

Minority interest		176,719			172,354			(394,910	)		(570,678	)
Depreciation		2,099			4,992			15,073			31,627
Loss on disposal of property, plant and equipment		110,124			421,655			-			-
Decrease/(Increase) in Other Receivable		512,361			1,409,946			(142,666	)		54,071
Decrease/(Increase) in Purchase Deposits		494,696			1,356,184			(294,157	)		-
Decrease/(Increase) in Related Party Receivable		-			-			(387	)		(387	)
Decrease/(Increase) in Inventory		(373,700	)		(80,073	)		329,606			536,150
Decrease/(Increase) in Advance to Suppliers		-			-			94,068			94,068
Increase/(Decrease) in Tax Payable		32,947			33,068			(33	)		390,041
Increase/(Decrease) in Accrued Liabilities and Other Payable		(169,460	)		(177,788	)		150,729			(46,390	)
Increase/(Decrease) in VAT Payable		5,537			5,762			65			1,917
Increase/(Decrease) in Due to Shareholders		162,794			181,171			(44,697	)		(44,698	)
Increase/(Decrease) in Income Tax Payable		-			(12,988	)		6,423			(379,508	)

Total of All Adjustments	$	954,117		$	3,314,284		$	(280,886	)	$	66,213

Net Cash Provided by (Used in)/Sourced from Operating Activities	$	(296,030	)	$	597,980		$	(368,928	)	$	(778,275	)

See Notes to Consolidated Financial Statements and Accountants’ Report

Guangzhou Global Telecom, Inc.

Notes to Consolidated Financial Statements

For the three and six-month periods ended June 30, 2010 and 2009

1. ORGANIZATION AND PRINCIPAL ACTIVITIES

Guangzhou Global Telecom, Inc. (the “Company”) formerly Avalon Development Enterprise, Inc. was incorporated in the State of Florida, United States (an OTCBB Company) on March 29, 1999.

On March 27, 2007, the Company underwent a reverse-merger with Global Telecom Holding Limited (GTHL, a British Virgin Islands (BVI) Company incorporated on April 1, 2004 under the British Virgin Islands International Business Companies Act (CAP. 291)) and its wholly-owned subsidiary Guangzhou Global Telecommunication Company Limited (GGT, established on December 4, 2004 in PRC with a registered and paid-up capital of RMB 3,030,000 (approximate $375,307)) involving an exchange of shares whereby the Company issued an aggregate of 39,817,500 shares of common stock in exchange for all of the issued and outstanding shares of GTHL. In connection with the reverse merger, the Company issued 200,000 shares of common stock to Zenith Capital Management LLC in April 2007 at a price of $2.50 per share.

In 2007, the Company established 4 subsidiaries; namely, Zhengzhou Global Telecom Equipment Limited (“ZGTE”), Macau Global Telecom Company Limited (“MGT”), Huantong Telecom Hongkong Holding Limited (“HTHKH”), and Huantong Telecom Singapore Company PTE Limited (“HTS”) with capital of RMB 500,000, Macau Dollar 300,000, Hong Kong Dollar 100 and Singapore Dollar 200,000, respectively. Simultaneously, the Company newly established a subsidiary; namely, Guangzhou Huantong Telecom Technology and Consultant Services, Ltd (“GHTTCS”) with capital of RMB 8,155,730. Pursuant to a Stock Purchase Agreement dated April 9, 2008 and July 29, 2008, respectively, the Company acquired 50% of the issued and outstanding shares in the capital of Beijing Lihe Jiahua Technology and Trading Company Ltd (“BLJ”) and 51% of the issued and outstanding shares in Guangzhou Renwoxing Telecom (“GRT”), a limited liability company incorporated in China. Pursuant to the terms of the Stock Purchase Agreements, the Shareholders agreed to sell and transfer the proportion of the shares to the Company for a purchase consideration of US$300,000 and US$291,833 respectively.

The Company, through its subsidiaries, is principally engaged in the distribution and trading of rechargeable phone cards, cellular phones and accessories within cities in PRC. Customers of the Company embrace wholesalers, retailers, and final users.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a)	Method of Accounting

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

Guangzhou Global Telecom, Inc.

Notes to Consolidated Financial Statements

For the three and six-month periods ended June 30, 2010 and 2009

(b)	Consolidation

The consolidated financial statements include the accounts of Guangzhou Global Telecom, Inc. and eight wholly and partially owned subsidiaries. The consolidated financial statements were compiled in accordance with generally accepted accounting principles of the United States of America. All significant inter-company accounts and transactions have been eliminated in consolidation.

The company owned the following subsidiaries since the reserve-merger and soon thereafter. As of June 30, 2009, detailed identities of the consolidating subsidiaries are as follows:-

Name of Company	Place of Incorporation	Attributable Equity Interest %	Registered Capital

Global Telecom Holding, Ltd.	BVI	100	HKD 7,800
Huantong Telecom Hong Kong Holding, Ltd.	Hong Kong SAR	100	HKD 100
Guangzhou Global Telecommunication Co., Ltd.	PRC	100	RMB 3,030,000
Zhengzhou Global Telecom Equipment, Ltd.	PRC	100	RMB 500,000
Guangzhou Huantong Telecom Technology and Consultant Services, Ltd.	PRC	100	RMB 8,155,730
Guangzhou Renwoxing Telecom Co., Ltd.	PRC	51	RMB 3,010,000
Macau Global Telecom Co., Ltd.	Macau SAR	100	MOP 300,000
Huantong Telecom Singapore Co. PTE, Ltd.	Singapore	65	SGD 200,000

(c)	Economic and Political Risks

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

Guangzhou Global Telecom, Inc.

Notes to Consolidated Financial Statements

For the three and six-month periods ended June 30, 2010 and 2009

(d)	Use of Estimates

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

(e)	Cash and Cash Equivalents

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

(f)	Accounts Receivable – Trade

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

(g)	Inventories

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

(h)	Property, Plant, and Equipment

Property, plant and equipment are carried at cost net of accumulated depreciation. Depreciation is provided over their estimated useful lives, using the straight-line method with no salvage value. Estimated useful lives of the property, plant and equipment are as follows:

Building	20 years
Equipment	5 years
Furniture and Fixtures	5 years
Leasehold Improvement	5 years
Motor Vehicles	3 years

Guangzhou Global Telecom, Inc.

Notes to Consolidated Financial Statements

For the three and six-month periods ended June 30, 2010 and 2009

(i)	Accounting for Impairment of Long-Lived Assets

The Company adopted Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Live Assets” (“SFAS 144”), which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. The Company periodically evaluates the carrying value of long-lived assets to be held and used in accordance with SFAS 144.SFAS 144 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the long-lived assets.

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

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

(j)	Revenue Recognition

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

(k)	Cost of Sales

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

(l)	Selling Expense

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

(m)	General & Administrative Expense

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

Guangzhou Global Telecom, Inc.

Notes to Consolidated Financial Statements

For the three and six-month periods ended June 30, 2010 and 2009

(n)	Advertising

The Company expensed all advertising costs as incurred.

(o)	Foreign Currency Translation

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

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

Exchange Rates	06/30/10		12/31/09		06/30/09
Period end RMB : US$ exchange rate		6.8086		6.8372		6.8448
Average period RMB : US$ exchange rate		6.8335		6.8409		6.8432

Period end HKD : US$ exchange rate		7.7847		7.7551		7.7504
Average period HKD : US$ exchange rate		7.7794		7.7522		7.7530

Period end MOP : US$ exchange rate		8.1844		8.1439		8.1230
Average period MOP : US$ exchange rate		8.1779		8.1303		8.1382

Period end SGD : US$ exchange rate		1.3987		1.4054		1.4543
Average period SGD : US$ exchange rate		1.3920		1.4545		1.4922

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

(p)	Income Taxes

Guangzhou Global Telecom, Inc.

Notes to Consolidated Financial Statements

For the three and six-month periods ended June 30, 2010 and 2009

The Company uses the accrual method of accounting to determine and report its taxable reduction of income taxes for the year in which they are available. The Company has implemented Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes. Income tax liabilities computed according to the United States, Singapore, People’s Republic of China (PRC), Macau SAR, and Hong Kong SAR tax laws are provided for the tax effects of transactions reported in the financial statements and consists of taxes currently due plus deferred taxes related primarily to differences between the basis of fixed assets and intangible assets for financial and tax reporting. The deferred tax assets and liabilities represent the future tax return consequences of those differences, which will be either taxable or deductible when the assets and liabilities are recovered or settled. Deferred taxes also are recognized for operating losses that are available to offset future income taxes. A valuation allowance is created to evaluate deferred tax assets if it is more likely than not that these items will either expire before the Company is able to realize that tax benefit, or that future realization is uncertain.

In respect of the Company’s subsidiaries domiciled and operated in China, Singapore, Macau and Hong Kong, the taxation of these entities are summarized below:

GGT, ZGTG, BLJ and GRT are located in the PRC, and GTHL is located in the British Virgin Islands, HTHKN is in Hong Kong, MGT is in Macau SAR, and HTS is in Singapore; all of these entities are subject to the relevant tax laws and regulations of the PRC, Hong Kong SAR, Macau SAR, British Virgin Islands, and Singapore in which the related entity domiciled. The maximum tax rates of the subsidiaries pursuant to the countries in which they domicile are: -

Subsidiary	Country of Domicile	Income Tax Rate
GGT, ZGTG, BLJ and GRT	PRC	25.0%
HTHKN	Hong Kong SAR	16.5%
MGT	Macau SAR	12.0%
GTHL	British Virgin Islands	0.00%
HTS	Singapore	18.0%

Effective January 1, 2008, PRC government implements a new 25% tax rate across the board for all enterprises regardless of whether domestic or foreign enterprise without any tax holiday which is defined as "two-year exemption followed by three-year half exemption" hitherto enjoyed by tax payers. As a result of the new tax law of a standard 25% tax rate, tax holidays terminated as of December 31, 2007. However, PRC government has established a set of transition rules to allow enterprises already started tax holidays before January 1, 2008, to continue enjoying the tax holidays until being fully utilized.

·	Since Guangzhou Global Telecom, Inc. is primarily a holding company without any business activities in the United States, the Company shall not be subject to United States income tax for the period ended June 30, 2010.

Guangzhou Global Telecom, Inc.

Notes to Consolidated Financial Statements

For the three and six-month periods ended June 30, 2010 and 2009

(q)	Statutory Reserve

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

However, since GGT being an operating company in PRC does not itself have any foreign shareholders and that the Memorandum and Articles do not provide for such appropriation, the Company is therefore not required to fund the Statutory Reserve.

(r)	Other Comprehensive Income

Comprehensive income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. Among other disclosures, all items that are required to be recognized under current accounting standards, as components of comprehensive income are required to be reported in a financial statement that is presented with the same prominence as other financial statements. The Company’s current component of other comprehensive income is the foreign currency translation adjustment.

(s)

Goodwill

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable assets acquired in a business combination. In accordance with Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets", goodwill is no longer subject to amortization. Rather, goodwill is subject to at least an annual assessment for impairment, applying a fair-value based test. Fair value is generally determined using a discounted cash flow analysis.

(t)	Recent Accounting Pronouncements

In June 2009, FASB issued FASB Statement No. 166, Accounting for Transfers for Financial Assets (FASB ASC 860 Transfers and Servicing) and FASB Statement No. 167 (FASB ASC 810 Consolidation), a revision to FASB Interpretation No. 46 (Revised December 2003), Consolidation of Variable Interest Entities (FASB ASC 810 Consolidation).

Statement 166 is a revision to FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities (FASB ASC 860 Transfers and Servicing), and will require more information about transfers of financial assets, including securitization transactions, and where entities have continuing exposure to the risks related to transferred financial assets. It eliminates the concept of a “qualifying special-purpose entity,” changes the requirements for derecognizing financial assets, and requires additional disclosures. Statement No. 166 (FASB ASC 860 Transfers and Servicing) must be applied as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. Earlier application is prohibited. This Statement must be applied to transfers occurring on or after the effective date. The Company is still evaluating the impact of the above pronouncement.

Guangzhou Global Telecom, Inc.

Notes to Consolidated Financial Statements

For the three and six-month periods ended June 30, 2010 and 2009

Statement 167 is a revision to FASB Interpretation No. 46 (Revised December 2003), Consolidation of Variable Interest Entities (FASB ASC 810 Consolidation), and changes how a reporting entity determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. The determination of whether a reporting entity is required to consolidate another entity is based on, among other things, the other entity’s purpose and design and the reporting entity’s ability to direct the activities of the other entity that most significantly impact the other entity’s economic performance. Statement No. 167 (FASB ASC 810 Consolidation) shall be effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. Earlier application is prohibited. The Company is still evaluating the impact of the above pronouncement.

On June 30, 2009, FASB issued FASB Statement No. 168, Accounting Standards Codification™ ( FASB ASC 105 Generally Accepted Accounting Principles) a replacement of FASB Statement No. 162 the Hierarchy of Generally Accepted Accounting Principles. On the effective date of this standard, FASB Accounting Standards Codification™ (ASC) became the source of authoritative U.S. accounting and reporting standards for nongovernmental entities, in addition to guidance issued by the Securities and Exchange Commission (SEC). This statement is effective for financial statements issued for interim and annual periods ending after September 15, 2009. If an accounting change results from the application of this guidance, an entity should disclose the nature and reason for the change in accounting principle in their financial statements. This new standard flattens the GAAP hierarchy to two levels: one that is authoritative (in FASB ASC) and one that is non-authoritative (not in FASB ASC). Exceptions include all rules and interpretive releases of the SEC under the authority of federal securities laws, which are sources of authoritative GAAP for SEC registrants, and certain grandfathered guidance having an effective date before March 15, 1992. Statement No. 168 is the final standard that will be issued by FASB in that form. There will no longer be, for example, accounting standards in the form of statements, staff positions, Emerging Issues Task Force (EITF) abstracts, or AICPA Accounting Statements of Position. The Company does not believe adoption of this standard will have any material on its consolidated financial position and results of operation.

Guangzhou Global Telecom, Inc.

Notes to Consolidated Financial Statements

For the three and six-month periods ended June 30, 2010 and 2009

3.	CONCENTRATION

A substantial portion of GGT’s business operations depend on mobile telecommunications in PRC; any loss or deterioration of such relationship may result in severe disruption to the business operations impacting the Company's revenue. GGT relies entirely on the networks and gateways of these phone operators to provide its services. The Company's agreements with these operators are generally for a short period of one year and generally do not have automatic renewal provision. If these providers are unwilling to continue business with the Company, the Company's ability to conduct its existing business would be adversely affected.

4.	OTHER RECEIVABLE

Other receivable at June 30, 2010 and December 31, 2009 pertained to the Company voluntarily extending financing to business associates for purchase of merchandise in return for 60% of gross profit in those transactions, in lieu of interest.

Type of Account	06/30/2010			12/31/2009
Trade financing to business associates	$	376,786		$	1,484,325
Allowance for bad debt		(367,974	)		(65,566	)
Other receivable, net	$	8,812		$	1,418,759

5.	DUE TO SHAREHOLDERS

The following table presents the balances the Company owed to shareholders.

	06/30/2010			12/31/2009
Due to shareholders	$	(240,661	)	$	(59,490	)
	$	(240,661	)	$	(54,490	)

Amounts owing to the Company’s shareholders are non-interest-bearing and payable on demand. During the six-month period ended June 30, 2010, Guangzhou Huantong Telecom Technology and Consultant Services, Ltd., one of the Company’s wholly owned subsidiaries, sold a property to a shareholder of the Company for $130,191.

Guangzhou Global Telecom, Inc.

Notes to Consolidated Financial Statements

For the three and six-month periods ended June 30, 2010 and 2009

6.	PURCHASE DEPOSITS

Purchase deposits consist of advances to suppliers for the purchase of inventories and prepayments for general operating costs as at June 30, 2010 and December 31, 2009.

Type of Account	6/30/2010			12/31/2009
Purchase deposits, gross	$	1,840,755		$	3,189,948
Allowance for uncollectible amounts		(1,671,004	)		(1,664,013	)
Purchase deposits, net	$	169,751		$	1,525,935

The Company has advanced $386,165, $785,100 and $499,739 to suppliers Tangxin Technology Co., Ltd., Guangda Commercial Co., Ltd. and Tianhe Tangxie Co., Ltd. respectively for purchase of operating inventories. However, Tianxin Technology Co. filed for bankruptcy, whereas Guangda Commercial Co. Ltd. and Tianhe Tangxie Co. Ltd. have been closed. The Company has fully provided for these uncollectible purchase deposits.

7.	PROPERTY, PLANT, AND EQUIPMENT

Property, plant, and equipment consist of the following as of June 30, 2010 and December 31, 2009:

06/30/2010
Category of Asset	Cost		Accumulated Depreciation		Net
Equipment	$	30,615	$	18,414	$	12,201
Furniture & Fixtures		118,924		72,442		46,482
Motor Vehicles		-		-		-
Building		20,516		7,408		13,109
Total	$	170,056	$	182,148	$	71,791

12/31/2009
Category of Asset	Cost		Accumulated Depreciation		Net
Equipment	$	36,557	$	21,596	$	14,961
Furniture & Fixtures		119,850		66,029		53,821
Motor Vehicles		103,687		103,661		26
Building		492,541		41,200		451,341
Total	$	752,635	$	232,486	$	520,149

The depreciation expenses were $4,992 and $16,554 for the six months ended June 30, 2010 and the year ended December 31, 2009, respectively.

Guangzhou Global Telecom, Inc.

Notes to Consolidated Financial Statements

For the three and six-month periods ended June 30, 2010 and 2009

8. VALUE ADDED TAX PAYABLE

The Company has been collecting from its customers Value Added Tax (VAT), on behalf of the government. The Company was granted by the government to pay the balance dues under installments up to the end of 2008. The reason of this special arrangement is that the government may waive past due VAT after decision has been made in accordance with regulations for technology zone on tax-exemption matter. However, the Company has not received the approval notice from the government at June 30, 2009. Thus, the VAT payable as of June 30, 2010 included the past due VAT possibly to be waived.

9. LEASE COMMITMENTS

The Company leases office space and retail stores under operating leases with non-cancelable terms of less than a year at fixed monthly rent. None of the leases included contingent rentals. Lease expense charged to operations for the period ended June 30, 2010 and year ended December 31, 2009 amounted to $ and $21,068, respectively. Future minimum lease payments under non-cancelable operating leases until termination of the leases amounted to $ distributed as:

Fiscal Year	Minimum Lease Payments
2010	$	2,246
2011		4,493
Total	$	6,739

10. CONVERTIBLE BONDS AND BOND WARRANTS

On July 31, 2007 and January 1, 2008, the Company completed two financing transactions with several investors (the “Subscriber”) issuing $2,000,000 and $1,000,000, respectively, Fixed Rate Convertible Debenture due in 2009 and a stock purchase warrant to purchase an aggregate of 2,090,592 shares of the Company common stock, subject to adjustments for stock splits or reorganizations as set forth in the warrant, that will expire in 2012 (the “Warrants”).

The Debentures were subscribed at a price equal to 87.5% of their principal amount, which is the issue price of $3,428,571 less a 12.5% discount. The Debentures were issued pursuant to, and are subject to the terms and conditions of, a trust deed dated July 31, 2007 (the “Trust Deed”).

·	Interest Rate. The Debenture bears interest at the rate of 8% per annum of the principal amount of the Debentures.

·	Conversion. Each Debenture is convertible at the option of the holder at any time after July 31, 2007 up to July 31, 2009, into shares of our common stock at a fixed conversion price of $0.82 per share.

Guangzhou Global Telecom, Inc.

Notes to Consolidated Financial Statements

For the three and six-month periods ended June 30, 2010 and 2009

On July 31, 2007, the Company also entered into a registration rights agreement with the Subscriber pursuant to which the Company agreed to include the Debenture, the Warrants, and the shares of common stock underlying the Debenture and Warrants in a pre-effective amendment to a registration statement that the Company have on file with the SEC. The Company intends to have the registration statement cover the resale of the Debenture, the Warrants, and the shares of common stock underlying the Debenture and Warrants.

At July 31, 2007 and January 1, 2008, the dates of issuance, the Company determined the fair value of the Debenture to be $2,000,000 and $1,000,000, respectively. The values of the warrants and the beneficial conversion feature as at December 31, 2007 and 2008 determined under the Black-Scholes valuation method were immaterial. Accordingly, the interest discount on the warrants and beneficial conversion feature were recorded, and are being amortized by the straight-line method over 5 years and 2 years respectively.

Because of the fact that the Fixed Rate Convertible Debenture contain three separate securities and yet merged into one package, the Debenture security must identify its constituents and establish the individual value as determined by the Issuer as follows: -

(1	)	Convertible Debenture (after two rounds)	$	3,428,571
(2	)	Discount	$	428,571
(3	)	Warrant	$	-
(4	)	Beneficial Conversion Feature	$	-

The above item (2) is to be amortized to interest expense over the term of the Debenture by the effective interest method.

The Convertible Debentures Payable, net consisted of the following: -

	06/30/2010		12/31/2009
Convertible Debenture - Principal and interest
Balance as at beginning of period	$	2,866,323	$	3,428,751
Addition		-		-
Redemption		-		(562,428	)
Interest charged for the current year		-		-
Repayment of interest in current year		-		-
Restructure cost		-		-
Balance as at end of year		2,866,323		2,866,323

Less: Interest discount – Beneficial conversion feature
Balance as at beginning of year	$	-	$	-
Addition		-		-
Amortization		-		-
Balance as at end of year	$	-	$	-

Less: Interest Discount – Warrant
Balance as at beginning of year	$	-	$	-
Addition		-		-
Amortization		-		-
Balance as at end of year	$	-	$	-
Convertible Debenture, net	$	2,866,323	$	2,866,323

Guangzhou Global Telecom, Inc.

Notes to Consolidated Financial Statements

For the three and six-month periods ended June 30, 2010 and 2009

The Convertible Debenture was classified as current and non-current as follows:

	06/30/2010		12/31/2009

Current portion	$	2,866,323	$	2,866,323
Non - current Portion		-		-
	$	2,866,323	$	2,866,323

On November 3, 2008, due to market conditions, the Company re-negotiated the terms of the Debentures and Warrants, and entered into a modification agreement (the “Amendment Agreement”) with the Holders. Pursuant to the Amendment Agreement, the Company agreed to completely remove the monthly interest payment of the Debentures and Increase the annual interest rate to 18%. Therefore, as described in the Schedule A of the Amendment Agreement, the Company will pay an aggregate of $2,151,110.85 and $1,485,714.10 to the Holders that are due on July 31, 2009 and February 21, 2010, respectively. The Company acknowledged that the conversion price of the Debentures on the conversion date shall be equal to the lesser of (a) $0.015 (subject to adjustment), and (b) 80% of the lowest closing bid price during the 20 Trading Days immediately prior to the applicable conversion date (subject to adjustment).

The Amendment Agreement further modified the terms of the transaction by reducing the exercise price of the Warrants to $0.015 (subject to further adjustment), and therefore the number of shares underlying Warrants issued to the Holders will be increased to an aggregate of 156,097,534 shares as described in Schedule B of the Amendment Agreement.

The Company further amended the Articles of Incorporation to increase the number of authorized shares of common stock to 1,000,000,000.

On December 29, 2009, the Company entered into a Settlement Agreement with the Holders. Pursuant to the Settlement Agreement, the Company would make a total payment of $1,300,000 to the Holders no later than January 21, 2010. The Convertible Debentures would be deemed satisfied and all outstanding Warrants held by the Holders would be cancelled. In addition, the Holders agreed to cancel all of the Company shares held by them at such time as the payment has been made. However, as of July 30, 2010, the Company has not paid the sum of $1,300,000 to the Holders.

Guangzhou Global Telecom, Inc.

Notes to Consolidated Financial Statements

For the three and six-month periods ended June 30, 2010 and 2009

In May 2010, the Holders commenced an action against the Company in the Supreme Court of the State of New York in order to recover the outstanding amount of $1,300,000 under the Settlement Agreement. The outcome and estimated loss from this lawsuit cannot be determined at this time.

11. COMMON STOCK CAPITAL

The Company is authorized by its Memorandum of Association (i.e. equivalent to Articles of Incorporation) to issue a total of 1,000,000,000 shares at a par value of US$0.01 of which 106,162,071 and 74,839,071 shares have been issued and outstanding as of June 30, 2009 and December 31, 2008, respectively.

The presentation of recapitalization as of June 30, 2009 is depicted in the following table:

Name of Shareholders	Number of Shares		Common Stock Capital		Additional Paid-in Capital			% of Equity Holdings
Shell: Avalon Development of Enterprises Inc. prior to reverse-merger		13,072,500		130,725		-			8.96	%
Shareholders of Shell in exchange of all of GTHL shares upon reverse-merger		39,817,500		398,175		-			27.30	%
Zenith Capital Management LLC		200,000		2,000		498,000			0.14	%
Li Dongming		80,000		800		61,600			0.05	%
Less: Cost of Issue		-		-		(151,384	)		-
Beijing Lihe		1,500,000		15,000		285,000			1.03	%
Guangzhou Renwoxing		9,727,769		97,278		194,555			6.67	%
Private placement investors		65,777,358		680,273		194,384			45.11	%
Management / Insider		15,650,000		151,125		-			10.74	%
		145,825,127		1,475,376		1,082,155			100.00	%

Guangzhou Global Telecom, Inc.

Notes to Consolidated Financial Statements

For the three and six-month periods ended June 30, 2010 and 2009

12. DISCONTINUED OPERATIONS

During the six-month period ended June 30, 2010, the Company closed the operation of Zhengzhou Global Telecom Equipment Ltd. (“Zhengzhou Global”), Macau Global Telecom Co. Ltd. (“Macau Global”), and Huantong Telecom Singapore Co. PTE Ltd. (“Huantong Telecom:”). Their operation results, net of tax effect, are reported in detail as follows:

Financial Position
At March 31, 2010
	Zhengzhou		Macau		Huantong
	Global		Global		Telecom			Total
Assets
Current assets	$	515,558	$	518,853	$	36,689		$	1,071,100
Non-current assets		-		-		17,388			17,388
Total assets		515,558		518,853		54,077			1,088,488

Liabilities
Current liabilities		39,080		183,780		229,683			452,543
Non-current liabilities		-		-		-			-
Total liabilities		39,080		183,780		229,683			452,543

Net Assets/(Liabilities)		476,478		335,073		(175,606	)		635,945

Total Liabilities & Net Assets	$	515,558	$	518,853	$	54,077		$	1,088,488

Guangzhou Global Telecom, Inc.

Notes to Consolidated Financial Statements

For the three and six-month periods ended June 30, 2010 and 2009

Results of Operations
For the three-month period
March 31, 2010
	Zhengzhou Global		Macau Global			Huantong Telecom			Total
Sales		-	$	311,369			-		$	311,369
Cost of sales		-		283,282			-			283,282
Gross profit (loss)		-		28,087						28,087

Selling expenses		-		-			-			-
General & administrative expenses		-		145,097			93,146			238,243
Total operating expenses		-		145,097			93,146			238,243

Other income		-		-			-			-
Other expense		-		-			-			-
Interest expense		-		-			-			-
Loss before tax		-		(117,010	)		(93,146	)		(210,156	)
Income tax		-		(2,965	)		-			(2,965	)
Net loss		-	$	(114,045	)		(93,146	)	$	(207,191	)

13. BONUS EXPENSE

Included in general and administrative expenses are $1,339,233 of bonus expenses paid to employees for the six-month period ended June 30, 2010.

14. GOING CONCERN UNCERTAINTIES

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

As of June 30, 2010, the Company has an accumulated deficit of $6,532,551 due to the fact that the Company continued to incur losses over the past several years, and has difficulty to pay the PRC government Value Added Tax and past due Debenture Holders Settlement.

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

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

The following discussion should be read in conjunction with the Consolidated Financial Statements and Notes thereto appearing elsewhere in this Form 10-Q. The following discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 relating to future events or our future performance. Actual results may materially differ from those projected in the forward-looking statements as a result of certain risks and uncertainties set forth in this prospectus. Although management believes that the assumptions made and expectations reflected in the forward-looking statements are reasonable, there is no assurance that the underlying assumptions will, in fact, prove to be correct or that actual results will not be different from expectations expressed in this report.

BUSINESS OVERVIEW

We were incorporated as Avalon Development Enterprises, Inc. (“Avalon”) on March 29, 1999, under the laws of the State of Florida. From inception, we engaged in the acquisition of commercial property and expanded into building cleaning, maintenance services, and equipment leasing as supporting ancillary services and sources of revenue. On January 10, 2007, Avalon, Global Telecom Holdings, Ltd., a British Virgin Islands Corporation (“GTHL”), and the shareholders of GTHL, entered into a Share Exchange Agreement. Pursuant to that Agreement, the Company issued 39,817,500 shares of its restricted common stock to the Shareholders of GTHL in exchange for all of the issued and outstanding common shares of GTHL common stock. Pursuant to this transaction, on March 27, 2007, GTHL became a wholly-owned subsidiary of Avalon, and the Company changed its name to Guangzhou Global Telecom Holdings, Inc. and succeeded to the business of GTHL. Now we are a nationally integrated mobile phone handset and pre-paid calling card distributor and provider of mobile handset value-added services. Future products and services include the GTL Lineless Messaging Service and retail sales and customer service operations. We are an independent qualified corporation that serves as a principle distribution agent for China Telecom, China Unicom, and China Mobile. We also maintain and operate the largest prepaid mobile phone card sales and distribution center in Guangdong Province and maintain cooperative distribution relationships with VK, Panasonic, Motorola, LG, GE and Bird corporations, among others.

RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2010 COMPARE TO THE THREE AND SIX MONTHS ENDED JUNE 30, 2009

The following table presents the statement of operations for the three and six months ended June 30, 2010 as compared to the comparable period of the three and six months ended June 30, 2009. The discussion following the table is based on these results.

			3 Months			6 Months			3 Months			6 Months
			Ended			Ended			Ended			Ended
Revenues	Note		06/30/2010			06/30/2010			06/30/2009			06/30/2009
Sales		2(j)	$	9,186,173		$	18,607,294		$	3,795,931		$	14,818,306
Cost of Sales				8,909,339			18,032,901			3,544,287			14,391,166
Gross Profit				276,834			574,393			251,644			427,140

Operating Expenses
Selling Expenses				-			-			(7,694	)		38,337
General and Administrative Expenses		13		1,474,823			2,760,968			138,411			1,009,646
Total Operating Expense				1,474,823			2,760,968			130,717			1,047,983

Operating Income/(Loss)				(1,197,989	)		(2,186,575	)		120,927			(620,843	)

Other Income & Expenses
Interest Income				2			5			11			20
Other Income				32,346			68,235			(31,675	)		1,347
Interest Expenses				(20,487	)		(20,489	)		145			(26	)
Other Expenses				(116	)		(310,159	)		(456	)		(477	)
Total other income/(expense)				11,745			(262,408	)		(31,975	)		864

Income/(Loss) before taxation				(1,186,244	)		(2,448,983	)		88,952			(619,979	)
Income tax		2(p)		30,918			28,544			6,968			11,164
Discontinued operation, net of tax		12		-			210,156			160,081			160,081
Net Income/(Loss) attributable to:
Parent				(1,217,162	)		(2,687,683	)		(78,098	)		(791,224	)
Non-controlling interest				(32,985	)		(28,621	)		(9,944	)		(53,264	)
			$	(1,250,147	)	$	(2,716,304	)	$	(88,042	)	$	(844,488	)
Earnings Per Share
Basic				(0.0084	)		(0.0182	)		(0.0010	)		(0.0105	)
Diluted				(0.0084	)		(0.0182	)		(0.0010	)		(0.0105	)
Weighted Average Shares Outstanding
Basic				148,251,263			148,870,071			85,590,335			80,520,646
Diluted				148,251,263			148,870,071			85,590,335			80,520,646



Comprehensive Income
Net Income(Loss)			$	(2,716,304	)	$	(844,488	)	$	(3,560,792	)

Other Comprehensive Income				(8,769	)		532,896			524,127
Foreign Currency Translation Adjustment			$	(2,725,073	)	$	(311,592	)	$	(3,036,665	)

Results of Operation for the three months ended June 30, 2010 compared with three months ended June 30, 2009

Total Revenue

During the three months ended June 30, 2010, we earned $9,186,173 in revenues as compared to $3,795,931 during the same period in 2009, representing an increase of $5,390,242 or approximately 142%. The lower sales amount during the three months ended June 30, 2009, is mainly resulted from the effect of financial crisis on our business.

Gross Profit

The gross profit increased to $276,834 during the three months ended June 30, 2010 from $251,644 in the same period of 2009, representing $25,190 or 10% increase. However, the gross margin decreased from 6.6% to 3%. The increase in gross profit is mainly due to the increase revenue as explained above. While, the decrease of gross margin is mainly resulted from more extensive competition in this business sector.

Expenses

Our selling, general and administrative expenses (“SG&A expenses”) were $1,474,823 during the three months ended June 30, 2010 as compared to $130,717 during the same period of 2009, representing an increase of $1,344,106. The significant increase in SG&A expenses are generally resulted from following reasons: 1) laid-off expenses and special bonus for Macau Branch at $506,770; 2) special bonus in Guangzhou Branch amounted to $346,041; 3) more consulting fee to settle outstanding debt issue.

Discontinued operations

Discontinued operation during the period ended June 30, 2009 represent the operation result of our 3 branches in mainland and Beijing Lihe, our subsidiary.

Non-controlling interest

Non-controlling interest were -$32,986 during the three months ended June 30, 2010, which resulted from the non-controlling interest generated from Renwoxing, our 51% owned subsidiary. The non-controlling interest during the three months ended March 31, 2009 also represent the non-controlling interest generated from Renwoxing.

Net loss

Net loss recorded $1,250,147 during the three months ended June 30, 2009, as compared to a net loss of $88,042 during the three months ended June 30, 2009. The increase of net loss is mainly due to decrease of gross profit as explained above.

Results of Operation for the six months ended June 30, 2010 compared with six months ended June 30, 2009

Total Revenue

During the six months ended June 30, 2010, we earned $18,607,294 in revenues as compared to $14,818,306 during the same period in 2009, representing an increase of $3,788,988 or approximately 25%. The increase of sales is mainly resulted from the lower sales amount during the six months ended June 30, 2009, which is mainly resulted from the effect of financial crisis on our business.

Gross Profit

The gross profit increased to $574,393 during the six months ended June 30, 2009 from $427,140 in the same period of 2008, representing $147,253 or 34% increase. The gross profit increase is mainly resulted from increase of sales. The margin keeps at 3% for both periods.

Expenses

Our selling, general and administrative expenses (“SG&A expenses”) were $2,760,968 during the six months ended June 30, 2010 as compared to $1,047,983 during the same period of 2009, representing a decrease of $1,712,985 or approximately 63%. The increase in SG&A expenses are generally resulted from the special bonus or compensation for laid-off employees.

Other income/expenses

Other expenses were $262,408, which is mainly consist of loss on disposal of fixed assets of $310,159, during the six months ended June 30, 2010 as compared to other expenses-net of $864 during the same period of 2009.

Discontinued operations

During the six months ended June 30, 2010, dis-continued operations represent the operating results for our Singapore subsidiary, Zhengzhou Equipment subsidiary and Macau subsidiary. Our Singapore subsidiary was not able to start its operation since its inception, so we decided to close it. Different from Singapore subsidiary, our Zhenzhou Equipment subsidiary and Macau subsidiary generated profit for the Company in the past, even during the financial crisis period. However, recently, these two subsidiaries were not able to continue to generate profit for the company. Due to limited capital support, we decided to close these two entities.

During the same period of 2009, we decided to close 3 branches in mainland China and sell 50% equity interest to former Beijing Lihe’s owner to keep our profitability. These 4 entities resulted $160,081 loss in total during the 6 months ended June 30, 2009.

Non-controlling interest

Non-controlling interest were -$28,621 during the six months ended June 30, 2010, which resulted from the non-controlling interest generated from Renwoxing, our 51% owned subsidiary. The non-controlling interest during the six months ended June 30, 2009 was $53,264, which represents the non-controlling interest generated from Renwoxing.

Net loss

Net loss recorded $2,716,304 during the six months ended June 30, 2009, as compared to a net loss of $844,488 during the six months ended June 30, 2009. The increase of net loss is mainly due to increase of G&A expenses as explained above.

Liquidity and Capital Resources

Cash provided by operating activities were $143,499 during the six months ended June 30, 2009 as compared to cash used in operating activities were $778,275 for the six months ended June 30, 2009. Cash provided by operating activities during the six months ended June 30, 2010 was mainly resulted from decrease of other receivable and purchase deposits, which are $1,409,946 and $1,356,184 respectively, by offset the operating loss of $2,716,304. The increase our other working capital are generally off-set each other. Cash used in operating activities during the six months ended June 30, 2009 was mainly resulted from net loss of $844,488, change of minority interest of $570,678, by netting off decrease in inventory of $536,150.

Cash flows provided by investing activities were $476,191 for the six months ended June 30, 2009 as compared to cash provided by investing activities were $53,986 for the six months ended June 30, 2009. Cash provided by investing activities during the six months ended June 30, 2010 mainly resulted from proceeds of disposal of properties or equipment. Cash provided by investing activities during the same period of 2009 represent the cash proceeds from sale of property and equipment and other intangible assets. We did not incur any investment cash outflow is due to the bad market status.

Cash flows used in financing activities were $346,619 during the six months ended June 30, 2010 compared to cash provided by financing activities were $19,825 during the six months ended June 30, 2009. Cash used in financing activities during the six months ended June 30, 2010 represent the redemption of common stock. Cash provided by the financing activities during the same period of 2009 mainly consisted of issuance of stock to redeem convertible debt.

CRITICAL ACCOUNTING POLICIES

Our significant accounting policies are summarized in Notes 2 of our financial statements included in this quarter report on Form 10-Q for the three months ended June 30, 2010. Our financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States (“GAAP”). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenues and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.

Recent Accounting Pronouncements

In June 2009, FASB issued FASB Statement No. 166, Accounting for Transfers for Financial Assets and FASB Statement No. 167, a revision to FASB Interpretation No. 46 (Revised December 2003), Consolidation of Variable Interest Entities.

Statement 166 is a revision to FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, and will require more information about transfers of financial assets, including securitization transactions, and where entities have continuing exposure to the risks related to transferred financial assets. It eliminates the concept of a “qualifying special-purpose entity,” changes the requirements for derecognizing financial assets, and requires additional disclosures.

Statement 167 is a revision to FASB Interpretation No. 46 (Revised December 2003), Consolidation of Variable Interest Entities, and changes how a reporting entity determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. The determination of whether a reporting entity is required to consolidate another entity is based on, among other things, the other entity’s purpose and design and the reporting entity’s ability to direct the activities of the other entity that most significantly impact the other entity’s economic performance.

On June 30, 2009, FASB issued FASB Statement No. 168, Accounting Standards Codification™ (FASB ASC 105 Generally Accepted Accounting Principles) a replacement of FASB Statement No. 162 the Hierarchy of Generally Accepted Accounting Principles. On the effective date of this standard, FASB Accounting Standards Codification™ (ASC) became the source of authoritative U.S. accounting and reporting standards for nongovernmental entities, in addition to guidance issued by the Securities and Exchange Commission (SEC). This statement is effective for financial statements issued for interim and annual periods ending after September 15, 2009. If an accounting change results from the application of this guidance, an entity should disclose the nature and reason for the change in accounting principle in their financial statements. This new standard flattens the GAAP hierarchy to two levels: one that is authoritative (in FASB ASC) and one that is non-authoritative (not in FASB ASC). Exceptions include all rules and interpretive releases of the SEC under the authority of federal securities laws, which are sources of authoritative GAAP for SEC registrants, and certain grandfathered guidance having an effective date before March 15, 1992. Statement No. 168 is the final standard that will be issued by FASB in that form. There will no longer be, for example, accounting standards in the form of statements, staff positions, Emerging Issues Task Force (EITF) abstracts, or AICPA Accounting Statements of Position. The Company does not believe adoption of this standard will have any material on its consolidated financial position and results of operation.

The Company is currently evaluating the potential impact, if any, of the adoption of the above recent accounting pronouncements on its consolidated results of operations and financial condition.

OFF-BALANCE SHEET ARRANGEMENTS

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

Item 3. Quantitative and Qualitative Disclosures about Market Risks

Not applicable because we are a smaller reporting company.

Item 4T. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”),of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Controls

There have been no changes in the Company’s internal control over financial reporting during the latest quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

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

Item 1A. Risk Factors

Not applicable because we are a smaller reporting company.

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

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. (Removed and Reserved).

Item 5. Other Information.

None.

Item 6. Exhibits.

31.1 Rule 13a-14(a)/ 15d-14(a) Certification of Chief Executive Officer and Chief Financial Officer

32.1 Section 1350 Certification of Chief Executive Officer and Chief Financial Officer

SIGNATURES

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

	GUANGZHOU GLOBAL TELECOM, INC.

Date: August 16, 2010	By:	/s/ Li YanKuan
		Li, Yankuan President, Chief Executive Officer and Chairman of the Board of Directors