f10q0908_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 September 30, 2008

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.)

Room 03/04, 16/F, Jinke Building,

No.17/19, Guangwei Road

Guangzhou, China 510180

(Address of Principal Executive Offices)

_________________________

(86) 20-8317-2821

(Issuer Telephone number)

__________________________

(Former Name or Former Address if Changed Since Last Report)

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 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 o		Smaller reporting company x
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act.

Yes o No x

State the number of shares outstanding of each of the issuer’s classes of common equity, as of November 14, 2008: 53,170,000 shares of common stock.

GUANGZHOU GLOBAL TELECOM, INC

FORM 10-Q

September 30, 2008

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	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4T.	Controls and Procedures	26

PART II— OTHER INFORMATION

Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 3.	Defaults Upon Senior Securities	27
Item 4.	Submission of Matters to a Vote of Security Holders	27
Item 5.	Other Information	27
Item 6.	Exhibits	27

SIGNATURES		28

PART 1 - FINANCIAL INFORMATION

Item 1 Financial Statements

Guangzhou Global Telecom, Inc.

Unaudited Consolidated Financial Statements

September 30, 2008 and December 31, 2007

(Stated in US Dollars)

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

Reconciliation of Net Income to Cash Flow Used in Operating Activities	7

Notes to Consolidated Financial Statements	8-23

iii

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 September 30, 2008 and December 31, 2007, and the related consolidated statements of income, stockholders’ equity and cash flows for the three-month and nine-month periods ended September 30, 2008 and 2007. 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 U.S. generally accepted accounting principles

South San Francisco, California

October 12, 2008

/s/ Samuel H. Wong & Co., LLP

Samuel H. Wong & Co., LLP

Certified Public Accountants

Guangzhou Global Telecom, Inc.

Consolidated Balance Sheets

As of September 30, 2008 and December 31, 2007

(Stated in US Dollars)

			September 30, 2008		December 31, 2007
ASSETS
	Notes
Current Assets
Cash and cash equivalent		2(e)	$	2,113,949	$	228,202
Other receivable		2(f),4		851,665		515,862
Notes receivable		5		34,016		31,751
Due from related party				-		32,560
Due from shareholder		6		152,181		118,047
Purchase deposits		7		3,104,589		2,380,375
Advance for business development				193,048		192,329
Inventory		2(g)		194,491		430,398
Total Current Assets				6,643,939		3,929,524

Non-Current Assets
Property, plant & equipment, net		2(h),8		644,702		168,679
Goodwill		2(u)		390,168		173,958
Total Non-Current Assets				1,034,870		342,637

TOTAL ASSETS			$	7,678,809	$	4,272,161

LIABILITIES & STOCKHOLDERS' EQUITY

Current Liabilities
Taxes payable			$	274,214	$	60,535
VAT payable		9		1,403,812		1,310,395
Income tax payable				284,652		200,961
Accrued liabilities and other payable				453,307		259,326
Convertible debenture - current portion		11		1,373,560		1,373,560
Total Current Liabilities				3,789,545		3,204,777

Non-Current Liabilities
Convertible debenture - non current		11		1,241,239		749,175
Interest discount – share purchase warrant				-		-
Total Non-Current Liabilities				1,241,239		749,175

TOTAL LIABILITIES			$	5,030,784	$	3,953,952
Minority interest				609,620		-

See Notes to Financial Statements and Accountants’ Report

Guangzhou Global Telecom, Inc.

Consolidated Balance Sheets

As of September 30, 2008 and December 31, 2007

(Stated in US Dollars)

			September 30, 2008	December 31, 2007
STOCKHOLDERS' EQUITY		Note

	Common Stock US$0.01 par value; 75,000,000
	authorized, 67,539,071 and 53,170,000 issued
	and outstanding as of September 30, 2008 and
	December 31, 2007 , respectively	12	$ 675,391	$ 531,700
	Additional Paid-in Capital		1,425,247	408,216
	Accumulated Comprehensive Income		85,674	20,101
	Accumulated Deficit		(147,907)	(641,808)

TOTAL STOCKHOLDERS' EQUITY			$ 2,038,405	$ 318,209

TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY			$ 7,678,809	$ 4,272,161

See Notes to Financial Statements and Accountants’ Report

Guangzhou Global Telecom, Inc.

Consolidated Statements of Income

For the three months and nine months periods ended September 30, 2008 and 2007

(Stated in US Dollars)

			Three Months Ended						Nine Months Ended
			September 30,						September 30,
	Note		2008			2007			2008			2007

Sales		2(j)	$	13,037,014		$	6,417,955		$	29,454,982		$	15,016,769
Cost of sales		2(k)		12,131,830			6,014,799			27,016,697			14,233,807
Gross Profit				905,184			403,156			2,438,285			782,962
Operating expense
Selling expenses		2(l)		69,215			56,897			221,055			198,110
Administrative and general expenses		2(m)		231,582			238,364			1,206,022			419,060
Total Operating Expense				300,797			295,261			1,427,077			617,170
Operating Income / (Loss)				604,387			107,895			1,011,208			165,792
Other income				24,524			-			27,056			-
Interest income				1,047			-			32,766			10,842
Other expenses				1,093			(486,444	)		(1,165	)		(487,556	)
Interest expenses				(58,414	)		-			(287,362	)		-
Total other income/(expense)				(31,750	)		(486,444	)		(228,705	)		(476,714	)
Income/(Loss) before tax				572,637			(378,549	)		782,503			(310,922	)
Income tax		2(q)		(277,330	)		(51,252	)		(277,330	)		(90,060	)
Minority Interest				(9,980	)		-			(134,247	)		-
Net Income/(Loss)			$	285,327		$	(429,801	)	$	370,926		$	(400,982	)

Earnings Per Share
Basic			$	0.0044		$	(0.0081	)	$	0.0058		$	(0.0076	)
Diluted			$	0.0044		$	(0.0081	)	$	0.0058		$	(0.0076	)

Weighted Average Shares Outstanding
Basic				64,155,499			53,170,000			64,155,499			53,050,000
Diluted				64,155,499			53,170,000			64,155,499			53,050,000

See Notes to Financial Statements and Accountants’ Report

Guangzhou Global Telecom, Inc.

Consolidated Statements of Changes in Stockholders' Equity

As of September 30, 2008 and December 31, 2007

(Stated in US Dollars)



	Total number		Common		Additional Paid-In		Subscription			Accumulated Comprehensive			Accumulated
	of share		stock		Capital		receivable			Income			Deficit			Total

Balance, January 1, 2007		52,890,000		528,900		-		(86,384	)		25,664			268,322			736,502
Issuance of new share		280,000		2,800		408,216		86,384			-			-			497,400
Net income/(loss)		-		-		-		-			-			(910,130	)		(910,130	)
Foreign currency translation		-		-		-		-			(5,563	)		-			(5,563	)
Balance, December 31, 2007		53,170,000		531,700		408,216		-			20,101			(641,808	)		318,209


Balance, January 1, 2008		53,170,000		531,700		408,216		-			20,101			(641,808	)		318,209
New issuance of common stock		14,369,071		143,691		1,017,031		-			-			-			1,160,722
Net income/(loss)		-		-		-		-			-			370,926			370,926
Renwoxing Retained Earnings (Pre-acquisition)		-		-		-		-			-			122,975			122,975
Foreign currency translation		-		-		-		-			65,573			-			65,573
Balance, September 30, 2008		67,539,071		675,391		1,425,247		-			85,674			(147,907	)		2,038,405

	Accumulated Comprehensive Income
	12/31/2007	9/30/2008	Total
Comprehensive Income
Net Income	(910,130)	370,926	(539,204)

Other Comprehensive Income
Foreign Currency Translation Adjustment	(5,563)	65,573	60,010

	(915,693)	436,499	(479,194)

See Notes to Financial Statements and Accountants’ Report

Guangzhou Global Telecom, Inc.

Consolidated Statements of Cash Flow

For the three months and nine months periods ended September 30, 2008 and 2007


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2008			2007			2008			2007
Cash Flow from Operating Activities
Cash received from customers	$	13,036,932		$	6,417,954		$	29,690,889		$	15,145,068
Cash paid to suppliers		(12,477,166	)		(6,400,282	)		(27,790,388	)		(14,755,412	)
Cash Paid for Selling, Administrative, and General Expenses		(300,797	)		(152,767	)		(1,427,077	)		(440,189	)
Cash received from other income		24,524			-			27,056			-
Cash Paid to Director		-			(349,890	)		-			(600,111	)
Cash Paid for Other Expenses		1,093			(375,050	)		(1,165	)		(375,977	)
Interest received		1,047			-			32,766			-
Interest paid		(58,413	)		-			(287,361	)		-
Minority interest		346,351			-			609,620			-
Cash Sourced from/(Used in) Operating Activities		573,571			(860,035	)		854,339			(1,026,621	)

Cash Flow from Investing Activities
Settlement of / (investment in ) Notes Receivable		-			180,065			-			324,428
Advance for business development		-			-			-			-
Purchase of property, plant & equipment		(131,863	)		(57,556	)		(613,825	)		(111,148	)
Acquisition of equity shares in a subsidiary		-			(37,500	)		-			(37,500	)
Purchase of intangible assets		23,197			-			(192,261	)		-
Investment		122,975			-			122,975
Cash Sourced from/(Used in) Investing Activities		14,309			85,009			(683,111	)		175,780

Cash Flow from Financing Activities
Private investor's deposit for purchase of common stock		-			-			-			475,000
Issuance of common stock		291,833			-			1,160,722			10,260
Issuance of convertible debenture		-			1,999,038			-			1,999,038
Proceed from notes		(265	)		-			(2,265	)		-
Repayment to shareholders		(34,135	)		-			(34,135	)		-
Due from related party		-			-			32,560			-
Loan from shareholders		(31,840	)		-			-			-
Cash received from issuance of convertible debenture		-			-			492,064			-
Cash Sourced from/(Used in) Financing Activities		225,593			1,999,038			1,648,946			2,484,298

Net Increase/(Decrease) in Cash & Cash Equivalents		813,473			1,224,012			1,820,174			1,633,457
Effect of Currency Translation		(76,492	)		(18,527	)		65,573			(8,493	)

Cash & Cash Equivalent at the Beginning of Year		1,376,968			456,627			228,202			37,148

Cash & Cash Equivalent at the End of Year	$	2,113,949		$	1,662,112		$	2,113,949		$	1,662,112

See Notes to Financial Statements and Accountants’ Report

Guangzhou Global Telecom, Inc.

Reconciliation of Net Income to Cash Flow Used in Operating Activities

For the three months and nine months periods ended September 30, 2008 and 2007

(Stated in US Dollars)



	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2008			2007			2008			2007

Net (loss)/income	$	285,328		$	(429,801	)	$	370,926		$	(400,982	)

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

Minority interest		346,350			-			609,620			-
Depreciation		77,431			-			113,853			32,613
Interest expense on convertible debenture		-			104,454			-			104,454
Interest expense on Share Purchase Warrant		-			7,114			-			7,114
Decrease/(increase) in other receivable		(37,480	)		(430,365	)		(335,803	)		(530,906	)
Decrease/(increase) in due from shareholder		-			(349,890	)		-			(600,111	)
Decrease/(increase) in purchase deposit		(463,337	)		-			(724,932	)		-
Decrease/(increase) in related party		-			-			-			-
Decrease/(increase) in inventory		(82	)		44,881			235,907			(2,502	)
Decrease/(increase) in rental deposit		-			3,514			-			19,920
Increase/(decrease) in tax payable		2,190			29,100			213,678			55,112
Increase/(decrease) in accrued liabilities and other payable		73,581			(7,934	)		193,981			(56,365	)
Increase/(decrease) in VAT payable		10,929			104,106			93,417			255,764
Increase/(decrease) in income tax payable		278,659			50,663			83,691			89,268

Total of all adjustments		288,241			(430,234	)		483,412			(625,639	)


Net Cash Provided by (Used in)/Sourced from Operating Activities	$	573,569		$	(860,035	)	$	854,339		$	(1,026,621	)

See Notes to Financial Statements and Accountants’ Report

Guangzhou Global Telecom, Inc.

Notes to Consolidated Financial Statements

For the period ended September 30, 2008 and

the year ended December 31, 2007

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 $375,307 (RMB 3,030,000)) 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. For financial reporting purposes, these two transactions are classified as a recapitalization of Guangzhou Global Telecom, Inc. and the historical financial statements of GTHL. The accompanying consolidated financial statements were adjusted to reflect the effects of the recapitalization at December 31, 2007, as well as retroactively at December 31, 2006, as if these two transactions occurred at the beginning of the year ended December 31, 2006 in wake of the reverse-merger presentation.

In last year, the Company newly 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 100,000 and Singapore Dollar 200,000, respectively.

During the year, the Company newly established a subsidiary; namely, Guangzhou Hantong Telecom Technology and Consultant Services, Ltd (“GHTTCS”) with capital of RMB 3,030,000. On the other hand, the Company owns 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 a Stock Purchase Agreement dated April 9, 2008 and July 29, 2008, respectively. 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.

Guangzhou Global Telecom, Inc.

Notes to Consolidated Financial Statements

For the period ended September 30, 2008 and

the year ended December 31, 2007

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.

The Company operates in a leased facility located at Room 03/04, 16/F, JinKe Building, No.17/19, GuangWei Road, Guangzhou, PRC.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a)	Method of Accounting

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

(b)	Consolidation

The consolidated financial statements include the accounts of 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 September 30, 2008, detailed identities of the consolidating subsidiaries are as follows:-

Name of Company	Place of Incorporation	Attributable Equity interest %
Global Telecom Holding Ltd.	BVI	100
Guangzhou Global Telecommunication Company Ltd.	PRC	100
Zhengzhou Global Telecom Equipment Limited	PRC	100
Huantong Telecom Hong Kong Holding Ltd.	Hong Kong SAR	100
Macau Global Telecom Company Ltd.	Macau SAR	100
Huantong Telecom Singapore Company PTE Ltd.	Singapore	100
Guangzhou Huantong Telecom Technology and Consultant Services, Ltd.	PRC	100
Beijing Lihe Jiahua Technology and Trading Company Ltd.	PRC	50
Guangzhou Renwoxing Telecom	PRC	51

Guangzhou Global Telecom, Inc.

Notes to Consolidated Financial Statements

For the period ended September 30, 2008 and

the year ended December 31, 2007

On or about August 13, 2007, the Company acquired 51% interest of Guangzhou Renwoxing Telecom at a purchase price of $291,833 payable by the issuance of 9,727,769 Global Telecom Holding Ltd. shares at $0.03 per share.

(c)	Economic and Political Risks

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

(d)	Use of Estimates

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

(e)	Cash and Cash Equivalents

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

(f)	Accounts Receivable – 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.

Guangzhou Global Telecom, Inc.

Notes to Consolidated Financial Statements

For the period ended September 30, 2008 and

the year ended December 31, 2007

(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

(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.

Guangzhou Global Telecom, Inc.

Notes to Consolidated Financial Statements

For the period ended September 30, 2008 and

the year ended December 31, 2007

(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 of raw materials, factory worker salaries and related benefits, machinery supplies, maintenance supplies, depreciation, utilities, inbound freight, purchasing and receiving costs, inspection and warehousing costs.

(l)	Selling Expense

Selling expenses are comprised of outbound freight, salary for the sales force, client entertainment, commissions, depreciation, advertising, and travel and lodging expenses.

(m)	General & Administrative Expense

General and administrative expenses include outside consulting services, research & development, executive compensation, quality control, and general overhead such as the finance department, administrative staff, and depreciation and amortization expense.

(n)	Advertising

The Company expensed all advertising costs as incurred.

(o)	Research and Development

All research and development costs are expensed as incurred.

(p)	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.

Guangzhou Global Telecom, Inc.

Notes to Consolidated Financial Statements

For the period ended September 30, 2008 and

the year ended December 31, 2007

Exchange Rates	9/30/2008	12/31/2007	9/30/2007
Period end RMB : US$ exchange rate	6.8183	7.3141	7.5108
Average period RMB : US$ exchange rate	6.8402	7.6172	7.5618

Period end HKD : US$ exchange rate	7.7701	7.8049	7.7760
Average period HKD : US$ exchange rate	7.8001	7.8026	7.8796

Period end MOP : US$ exchange rate	8.1941	8.1594	8.1261
Average period MOP : US$ exchange rate	8.1790	8.2166	8.1711

Period end SGD : US$ exchange rate	1.4307	1.4467	1.4858
Average period SGD : US$ exchange rate	1.3969	1.5072	1.5178

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.

(q)	Income Taxes

The Company uses the accrual method of accounting to determine and report its taxable reduction of income taxes for the year in which they are available. The Company has implemented 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.

Guangzhou Global Telecom, Inc.

Notes to Consolidated Financial Statements

For the period ended September 30, 2008 and

the year ended December 31, 2007

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	17.5%
MGT	Macau SAR	12.0%
GTHL	British Virgin Islands	0.00%
HTS	Singapore	18.0%

Effective January 1, 2008, PRC government implements a new 15% 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 15% 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.

·	The Company is subject to United States Tax according to Internal Revenue Code Sections 951 and 957. Corporate income tax is imposed on progressive rates in the range of: -

Taxable Income
Rate	Over	But Not Over	Of Amount Over
15%	0	50,000	0
25%	50,000	75,000	50,000
34%	75,000	100,000	75,000
39%	100,000	335,000	100,000
34%	335,000	10,000,000	335,000
35%	10,000,000	15,000,000	10,000,000
38%	15,000,000	18,333,333	15,000,000
35%	18,333,333	-	-

Guangzhou Global Telecom, Inc.

Notes to Consolidated Financial Statements

For the period ended September 30, 2008 and

the year ended December 31, 2007

Based on the consolidated net income for the period ended September 30, 2008, the Company shall not be subject to income tax.

(r)	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.

(s)	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.

(t)	Accounting for Derivative instruments

The Company designates its derivatives based upon the criteria established by SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. SFAS 133, as amended by SFAS 138 and SFAS 149, requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. The accounting for the changes in the fair value of the derivative depends on the intended use of the derivative and the resulting designation. For a derivative designated as a fair value hedge, the gain or loss is recognized in earnings in the period of change together with the offsetting loss or gain on the hedged item due to the risk being hedged. For a derivative designated as a cash flow hedge, the effective portion of the derivative's gain or loss is initially reported as a component of accumulated other comprehensive income (loss) and is subsequently reclassified to earnings when the hedge exposure affects earnings. The ineffective portion of the hedge is reported in earnings immediately. For a derivative that does not qualify as a fair value hedge or cash flow hedge, the change in fair value is recognized in net income in the current period. It is the Company's policy to classify all of its derivative instruments for cash flow purposes as operating activities.

Guangzhou Global Telecom, Inc.

Notes to Consolidated Financial Statements

For the period ended September 30, 2008 and

the year ended December 31, 2007

(u)

Goodwill

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible 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.

(v)	Recent accounting pronouncements

In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133" ("SFAS 161"). SFAS 161 applies to all derivative instruments and related hedged items accounted for under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"). SFAS 161 requires entities to provide greater transparency about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity's financial position, results of operations and cash flows. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008.

In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles" ("SFAS 162"). SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (the GAAP hierarchy). Statement 162 will become effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board amendments to AU Section 411, "The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles."

In May 2008, the FASB issued FSP Accounting Principles Board ("APB") 14-1 "Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)" ("FSP APB 14-1"). FSP APB 14-1 requires the issuer of certain convertible debt instruments that may be settled in cash (or other assets) on conversion to separately account for the liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the issuer's non-convertible debt borrowing rate. FSP APB 14-1 is effective for fiscal years beginning after December 15, 2008 on a retroactive basis.

Guangzhou Global Telecom, Inc.

Notes to Consolidated Financial Statements

For the period ended September 30, 2008 and

the year ended December 31, 2007

In September 2008, FASB issued FSP No. 133-1 and FIN 45-4, “Disclosures about Credit Derivatives and Certain Guarantees”, an amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161. This FSP is intended to improve disclosures about credit derivatives by requiring more information about the potential adverse effects of changes in credit risk on the financial position, financial performance, and cash flows of the sellers of credit derivatives. The provisions of the FSP that amend Statement 133 and FIN 45 are effective for reporting periods (annual or interim) ending after November 15, 2008.

This FSP amends FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, to require disclosures by sellers of credit derivatives, including credit derivatives embedded in hybrid instruments. This FSP also amends FASB Interpretation (FIN) No. 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others, to require an additional disclosure about the current status of the payment/performance risk of a guarantee. The provisions of the FSP that amend Statement 133 and FIN 45 are effective for reporting periods (annual or interim) ending after November 15, 2008.

Finally, this FSP clarifies the effective date in FASB Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities. The disclosures required by Statement 161 should be provided for any reporting period (annual or quarterly interim) beginning after November 15, 2008. For example, an entity with a March 31 fiscal year-end should provide the disclosures for its fourth quarter interim period ending March 31, 2009, in its 2009 annual financial statements. This clarification of the effective date of Statement 161 is effective upon issuance of the FSP.

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.

3.	CONCENTRATION

(a) Significant Relationships

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 with the Company, the Company's ability to conduct its existing business would be adversely affected.

Guangzhou Global Telecom, Inc.

Notes to Consolidated Financial Statements

For the period ended September 30, 2008 and

the year ended December 31, 2007

4.	OTHER RECEIVABLE

Other Receivable at September 30, 2008 and December 31, 2007 pertained to the Company voluntarily extended 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		9/30/2008		12/31/2007
Trade financing to business associates	$	851,665	$	515,862

5.	NOTE RECEIVABLE

Note receivable at September 30, 2008 and December 31, 2007 pertained to the Company’s financing of two unrelated business associates without collateral on the following terms:

Borrower	Terms	Interest	9/30/2008	12/31/2007

(a) Wai Zhou Wong Choy Cable Factory	On Demand	12%	$ -	$ -
(b) Kit Yeung Twilight Telecommunication & Cable Factory	On Demand	12%	34,016	31,751
			$ 34,016	$ 31,751

6.	DUE FROM SHAREHOLDER

The following table presents the balances the Company owed to related parties.

	9/30/2008			12/31/2007
Due from Li Yan Kuan	$	157,159		$	123,024
Due to other shareholder		(4,977	)		(4,977	)
	$	152,182		$	118,047

Due from Li Yan Kuan

The Company was due $157,159 from Li Yan Kuan which was non- interest- bearing and, payable on demand. There is no impact to the statement of operations as result of the receivable to the shareholder.

Guangzhou Global Telecom, Inc.

Notes to Consolidated Financial Statements

For the period ended September 30, 2008 and

the year ended December 31, 2007

Due to shareholder

Payables owed to the Company’s shareholders are non- interest- bearing and, payable on demand. There is no impact to the statement of operations as result of the payables to the shareholder.

7.	PURCHASE DEPOSITS

Purchase Deposits of $3,104,589 and $2,380,375 at September 30, 2008 and December 31, 2007 respectively, consisted of advances to suppliers for the purchase of inventories, and prepayments for general operating costs.

8.	PROPERTY, PLANT, AND EQUIPMENT

Property, plant, and equipment consist of the following as of September 30, 2008 and December 31, 2007:

	9/30/2008			12/31/2007
Category of Asset
Equipment	$	134,332		$	30,839
Furniture & Fixtures		123,695			16,734
Leasehold Improvement		39,450			125,991
Motor Vehicles		187,417			91,708
Building		370,254			-
		855,148			265,272

Less: Accumulated Depreciation		(210,446	)		(96,593	)
	$	644,702		$	168,679

The depreciation expenses were $ 41,245 and $6,239 for the period ended September 30, 2008 and the year ended December 31, 2007, respectively.

9. VAT PAYABLE

The Company has been collecting from its customers Value Added Tax (VAT), on behalf of the government. The Company has been granted to pay the balance dues under installments up to September 30, 2008, by the government. 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.

Guangzhou Global Telecom, Inc.

Notes to Consolidated Financial Statements

For the period ended September 30, 2008 and

the year ended December 31, 2007

10. 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 September 30, 2008 and the year ended December 31, 2007 amounted to $ 142,167 and $143,772, respectively. Future minimum lease payments under non-cancelable operating leases until termination of the leases amounted to $149,451 distributed as:

Fiscal Year	Minimum Lease Payments

2008	$	57,551
2009		91,548
2010		352
Total	$	149,451

11. CONVERTIBLE BONDS AND BOND WARRANTS

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

The Debenture were subscribed at a price equal to 87.25% of their principal amount, which is the issue price of $2,285,714 less a 12.5% discount. The Debenture 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 Debenture.

·	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.

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, the date of issuance, the Company determined the fair value of the Debenture to be $2,000,000. The values of the warrants and the beneficial conversion feature as at December 31, 2007 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.

Guangzhou Global Telecom, Inc.

Notes to Consolidated Financial Statements

For the period ended September 30, 2008 and

the year ended December 31, 2007

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	$	2,285,714
(2	)	Discount	$	285,714
(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:

	9/30/2008			12/31/2007
Convertible Debenture - Principal and interest
Balance as at beginning of year	$	2,122,735		$	-
Addition		1,000,000			2,000,000
Redemption		(507,936	)		-
Interest Charged for the current year		-			168,448
Repayment of interest in current year		-			(45,713	)
Balance as at end of year		2,614,799			2,122,735

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	$	2,614,799		$	2,122,735
The Convertible Debenture was classified as current and non-current as follows:

	9/30/2008			12/31/2007

Non-current portion	$	1,241,239		$	749,175
Current Portion		1,373,560			1,373,560
	$	2,614,799		$	2,122,735

Guangzhou Global Telecom, Inc.

Notes to Consolidated Financial Statements

For the period ended September 30, 2008 and

the year ended December 31, 2007

12. COMMON STOCK CAPITAL

The Company is authorized by its Memorandum of Association (i.e. equivalent to Articles of Incorporation) to issue a total of 75,000,000 shares at a par value of US$0.01 of which 67,539,071 and 53,170,000 shares at a par value of US$0.01 per share have been issued and outstanding as of September 30, 2008 and December 31, 2007, respectively.

The presentation of recapitalization as of September 30, 2008 is being depicted in the following table:

Date	Name of Shareholders	Number of Shares	Common Stock Capital	Additional Paid-in Capital	% of Equity Holdings
3/7/2007	Shell: Avalon Development of Enterprises Inc. prior to reverse-merger	13,072,500	$ 130,725	$ -	19.36%
3/7/2007	Shareholders of Shell in exchange of all of GTHL shares upon reverse-merger	39,817,500	398,175	-	58.95%
4/2/2007	Zenith Capital Management LLC	200,000	2,000	498,000	0.30%
7/1/2007	Miss Li, Yan Kuan	80,000	800	61,600	0.12%
	Less: Cost of Issue	-	-	(151,384)	0.00%
3/14/2008	Issuance of New Shares	793,651	7,937	269,521	1.18%
3/10/2008	TCAM(SPORE)	3,500,000	35,000	502,993	5.18%
4/9/2008	BEIJING LIHE	1,500,000	15,000	215,569	2.22%
4/10/2008	Issuance of New Shares	649,112	6,491	93,285	0.96%
5/9/2008	Issuance of New Shares	1,698,539	16,985	244,101	2.51%
6/6/2008	Shares cancelled: TCAM(SPORE)	(3,500,000)	(35,000)	(502,993)	(5.18%)
7/29/2008	GUANGZHOU RENWOXING	9,727,769	97,278	194,555	14.40%

		67,539,071	$ 675,391	$ 1,425,247	100.00%

Guangzhou Global Telecom, Inc.

Notes to Consolidated Financial Statements

For the period ended September 30, 2008 and

the year ended December 31, 2007

13. RELATED PARTY TRANSACTIONS

The following material transactions with related parties during the periods were in the opinion of the directors, carried out in the ordinary course of business and on normal commercial terms:

(a.)	The due from related party at September 30, 2008 and December 31, 2007 were $0 and $32,560, respectively.

(b.)	The due from shareholder at September 30, 2008 and December 31, 2007 were $152,181 and $118,047, respectively.

(c.)	On July 1, 2007, the Group acquired the entire equity shares of Macau Global Telecom Co., Ltd. from a shareholder of the Company at a consideration of $150,000 cash plus new issuance of 80,000 common shares of the Company.

(d.)	On July 29, 2008, the Group acquired 51% of equity shares of Guangzhou Renwoxing Telecom from a shareholder of the Company at a consideration of new issuance of 9,727,769 common shares of the Company

14. SUBSEQUENT EVENTS

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 agreed to hold a shareholder meeting on or before January 15, 2009 to increase the number of authorized shares of common stock of the Company to at least 1,000,000,000.

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

FORWARD LOOKING STATEMENTS

This quarterly report contains forward-looking statements that involve risks and uncertainties. We use words such as anticipate, believe, plan, expect, future, intend and similar expressions to identify such forward-looking statements. You should not place too much reliance on these forward-looking statements. Our actual results are likely to differ materially from those anticipated in these forward-looking statements for many reasons, including the risks faced by us described in this Risk Factors section and elsewhere in this annual report.

Plan of Operation

We expect to take the following steps in connection with the development of our business and the implementation of our plan of operations:

In addition to existing hardware distribution and retail sales, in the coming months, we will focus on expanding our services, building a retail presence and developing e-commerce business units in order to build and maintain a high-quality brand and service reputation. We currently serve as a nationally integrated mobile phone handset and pre-paid calling card distributor and provider of mobile handset value-added services.

We plan to focus our operations in the coming months on corporate development activities, as they are a fundamental building block to our success in the long term. More specifically, we will devote significant resources to identifying and developing value-added services through an expanded network of regional and neighborhood service centers, shops and via a virtual store. We will continue to expand our distribution operations and network of regional and neighborhood retail service centers and shops.

We build strong customer relationships in the local communities that are served in order to take advantage of future sales from existing loyal customers and through word of mouth advertisement.

We are constantly using our wide connection of relationships within the telecommunications distribution network to develop and to offer additional value-added services and connected mobile handset services. After entry into a region, we will consult strategies used by existing and successful operations such as Virgin’s entry into England and America. GTL has opened the mobile markets in key cities and regions such as Beijing, Zhengzhou, Wuhan and Macau. GTL aims to become the largest mobile handset services distributor for China Mobile and China Unicom. Using resources from partners above us in the supply value chain and agreements in other services, we will realize maximal profit via bundling communication, handset and value-added services . As of March 31, 2008, we have successfully expanded our operations in Zhengzhou, Wuhan, Beijing, Hong Kong and Macau. We will cement and protect existing market share and then expand further with our proven successful distribution sales model. Subsequently, we will expand into other cities in China as new opportunities are being identified.

Results of Operation

Three months ended September 30, 2008 compared with three months ended September 30, 2007

During the three months ended September 30, 2008, we earned $13,037,014 in revenues as compared to $6,417,955 during the same period ended in 2007, an increase of $6,619,059 or 103%. The significant increase in revenue was a result of the management’s continuous meticulous planning and strategizing which focused on the long term growth of the company.

The cost of sales was $12,131,830 during the three months ended September 30, 2008, representing a 101% increase as compared to the same period of 2007. The increase is generally in line with the increase in sales.

Gross profit increased from $403,156 during the three months ended September 30, 2007 to $905,184 in the same period of 2008. The increase of gross profit is mainly generated from the increase in revenue. Meanwhile, the gross margin improved from 6.3% during the quarter ended September 30, 2007 to 7% during the quarter ended September 30, 2008. Continued focus and initiatives on sales expansion, together with certain rebates, contributed to the higher margins.

Selling expenses were $69,215 during the three months ended September 30, 2008 as compared to $56,897 for the same period of 2007, representing an increase of 22%. The increase is mainly due to the company’s expansion into new sales geographical regions.

General and administrative expenses were $231,582 during the three month period ended September 30, 2008 as compared to $238,364 for the same period ended in 2007, representing a decrease of $6,782.

Operating profit recorded $604,387 during the three months ended September 30, 2008, as compared to a gain of $107,895 during the same period of 2007, representing an increase of $496,492 or 460%. The improvement was mainly from the increase in revenue, gross profit and also the implementation of cost reduction measures.

Interest expenses of $58,414 during the three months ended September 30, 2008, which mainly included the interest payment of convertible debt.

Net gain recorded $285,327 during the three months ended September 30, 2008, as compared to net loss of $429,801 during the same period of 2007. The increase in net profit is mainly due to the increase in revenue and gross.

Nine months ended September 30, 2008 compared with Nine months ended September 30, 2007

During the nine months ended September 30, 2008, we earned $29,454,982 in revenues as compared to $15,016,769 during the same period ended in 2007, an increase of $14,438,213 or 96%. This significant increase in revenue was a result of the management’s continuous meticulous planning and strategizing which focused on the long term growth of the company.

The cost of sales recorded $27,016,697 during the nine months ended September 30, 2008, representing an 89% increase as compared to the same period of 2007. The increase is generally in line with the increase of sales.

Gross profit increased from $782,962 during the nine months ended September 30, 2007 to $2,438,285 in the same period of 2008. The increase in gross profit is mainly from the increase in revenue. Meanwhile, the gross margin increased from 5.2% during the nine months ended September 30, 2007 to 8.3% during the corresponding period in 2008. Continued focus and initiatives on sales expansion, together with certain rebates, contributed to the higher margins.

Selling, general and administrative expenses were $1,427,077 during the nine months ended September 30, 2008 as compared to $617,170 for the same period in 2007, representing an increase of $809,907. The increase is mainly due to the expansion of operations and a special bonus granted to employees during the first quarter ended March 31, 2008.

Operating gain recorded $1,011,208 during the nine months ended September 30, 2008, as compared to $165,792 during the same period in 2007, representing an increase of $845,416 or 510%. The sharp increase was mainly from the increase in revenue, gross profit and also the implementation of cost reduction measures.

Interest expenses of $287,362 during the nine months ended September 30, 2008, which mainly included interest payments of convertible debt and funding costs related to the second phase of financing in February 2008.

Net gain recorded $370,926 during the nine months ended September 30, 2008, as compared to a net loss of $400,982 during the same period in 2007. The increase in net profit is mainly due to the increase in revenue and gross profit.

Liquidity and Capital Resources

Cash provided by operating activities were $854,339 during the nine months ended September 30, 2008 as compared to cash used in operating activities of $1,026,621 for the same period ended in 2007. Cash provided by operating activities during the nine months ended September 30, 2008 mainly consisted of cash received from customers of $29,690,889, other income of $27,056 and interest received of $32,766 and by netting off the cash paid to suppliers of $ 27,790,388, cash paid for interest of $287,361, selling and G&A expenses of $1,427,077. Cash used in operating activities for the nine months ended September 30, 2007 mainly resulted from cash received from customers of $ 15,145,068 and by netting off the cash paid to suppliers of $ 14,755,41, cash paid for selling and general administrative expenses of $440,189, cash paid to director of $600,111 and others of $375,977.

Cash flows used in investing activities were $683,111 during the nine months ended September 30, 2008 as compared to $175,780 provided during the same period in 2007. Cash used in investing activities during the nine months ended September 30, 2008 mainly consisted of purchase of property and equipment of $613,825, purchase of intangible assets of $192,261 and by netting off the cash from investments of $122,975.

Cash flows provided by financing activities were $1,648,946 during the nine months ended September 30, 2008 as compared to $2,484,298 during the same period in 2007. During the nine months ended September 30, 2008, the cash flows provided by financing activities consisted of $1,160,722 of net proceeds from subscription of our common stock, cash from the issuance of convertible debt, due from related party of $524,624, and by netting off proceeds from notes of $2,265 and repayment to shareholders of $34,135.

Critical Accounting Pronouncements

Guangzhou Global Telecom Inc.’s 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, revenue 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 if 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.

Our significant accounting policies are summarized in Note 2 of our financial statements. While all these significant accounting policies impact its financial condition and results of operations, Equity Ventures views certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on Equity Ventures’ consolidated financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates. Our management believes that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause effect on our consolidated results of operations, financial position or liquidity for the periods presented in this report.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable to 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 fiscal 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.

Currently we are not aware of any litigation pending or threatened by or against the Company.

Item 1A. Risk Factors

Not applicable because we are a smaller reporting company.

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

Reference is made to the disclosures contained in Item 3.02 of our Current Report on Form 8-K, filed with the Securities and Exchange Commission on November 5, 2008 for information concerning certain unregistered sales of equity securities thereof.

On July 31, 2007, we entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with the following three investors: Enable Growth Partners LP, Pierce Diversified Strategy Master Fund LLC, and Enable Opportunity Partners LP (collectively, the “Holders"). The aggregate purchase price was $3,000,000, and the investment was as follows:

* Senior Secured Convertible Debentures (the “Debentures”) for up to $3,428,571, with an annual interest rate of 8%. The Debentures will be convertible at the option of the holder at any time into shares of common stock, at an initial conversion price equal to $.82.

* Common Stock Purchase Warrants (the “Warrants”) to purchase 2,090,592 shares of the Company’s common stock at a price of $1.12 per share, subject to adjustment, exercisable for a period of five years.

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, 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).

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Submission of Matters to a Vote of Security Holders.

None.

Item 5. Other Information.

None.

Item 6. Exhibits

31.1 Certification of CEO pursuant to Section 302 of Sarbanes Oxley Act of 2002

32.1 Certification of CFO pursuant to Section 906 of Sarbanes Oxley Act of 2002

31.1 Certification of CEO pursuant to Section 302 of Sarbanes Oxley Act of 2002

32.1 Certification of CFO pursuant to Section 906 of Sarbanes Oxley Act of 2002

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: November 14, 2008	By:	/s/ Li Yankuan
		Li YanKuan
		President, Chief Executive Officer and Director