Unassociated Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_______________

FORM 10-K

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

For the fiscal year ended December 31, 2013

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

Commission File Number: 333-152535

CHINA ELECTRONICS HOLDINGS, INC.

(Exact Name of Registrant as specified in its Charter)

Nevada		98-0550385
(State or other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification Nos.)

Building 3, Binhe District, Longhe East Road, Lu’an City, Anhui Province, PRC		237000
(Address of Principal Executive Offices)		(Zip code)

Registrants’ telephone number, including area code: 011-86-564-3224888

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

o Yes x No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

o Yes x No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x Yes o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

x Yes o No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

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

Large Accelerated Filer o

Accelerated Filer o

Non-accelerated Filer 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).

o Yes x No

As of June 30, 2013, the number of outstanding shares of the registrant’s common stock held by non-affiliates (excluding shares held by directors, officers and other holding more than 5% of the outstanding shares of the class) was 5,218,825. The market value of the voting and non-voting common equity held by non-affiliates was $208,753 based on the closing trade price $0.04 as of June 28, 2013.

Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date 16,775,113 as of March 31, 2014.

CHINA ELECTRONICS HOLDINGS, INC.

TABLE OF CONTENTS

Forward-Looking Statements		1

PART I		2
Item 1.	Business	2
Item 1A.	Risk Factors	17
Item 2.	Properties	29
Item 3.	Legal Proceedings	29
Item 4	Mine Safety Disclosures

PART II		29
Item 5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	29
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 8.	Financial Statements and Supplementary Data	53
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	54
Item 9A.	Controls and Procedures	54
Item 9B.	Other Information	55

PART III		56
Item 10.	Directors, Executive Officers and Corporate Governance	56
Item 11.	Executive Compensation	57
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	58
Item 13.	Certain Relationships and Related Transactions, and Director Independence	59
Item 14.	Principal Accountant Fees and Services	60

PART IV		60
Item 15.	Exhibits, Financial Statement Schedules	60

Throughout this Annual Report on Form 10-K, the "Company", "we," "us," and "our," refer to (i) China Electronics Holdings, Inc., a Nevada corporation (“China Electronics”), (ii) China Electronic Holdings, Inc., a Delaware corporation (“CEH Delaware”), and (iii) Lu’an Guoying Electronic Sales Co., Ltd., a wholly foreign-owned enterprise under the laws of the People’s Republic of China (“Guoying”), unless otherwise indicated or the context otherwise requires.

FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains certain forward-looking statements (as such term is defined in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934). The statements herein which are not historical reflect our current expectations and projections about the Company’s future results, performance, liquidity, financial condition, prospects and opportunities and are based upon information currently available to us and our management and our interpretation of what we believe to be significant factors affecting our business, including many assumptions about future events. Such forward-looking statements include statements regarding, among other things:

our ability to produce, market and generate sales of our private label products;

our ability to market and generate sales of the products that we sell as a wholesaler;

our ability to develop, acquire and/or introduce new products;

our projected future sales, profitability and other financial metrics;

our future financing plans;

our plans for expansion of our stores and manufacturing facilities;

our anticipated needs for working capital;

the anticipated trends in our industry;

our ability to expand our sales and marketing capability;

acquisitions of other companies or assets that we might undertake in the future;

our operations in China and the regulatory, economic and political conditions in China;

our ability as a U.S. company to operate our business in China through our subsidiary, Guoying;

competition existing today or that will likely arise in the future; and

other factors discussed under Item 1A—“Risk Factors” and elsewhere herein.

Forward-looking statements, which involve assumptions and describe our future plans, strategies, and expectations, are generally identifiable by use of the words “may,” “should,” “will,” “plan,” “could,” “target,” “contemplate,” “predict,” “potential,” “continue,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” “seek,” or “project” or the negative of these words or other variations on these or similar words. Actual results, performance, liquidity, financial condition and results of operations, prospects and opportunities could differ materially from those expressed in, or implied by, these forward-looking statements as a result of various risks, uncertainties and other factors, including the ability to raise sufficient capital to continue the Company’s operations. These statements may be found under Item 1—“Business,” Item 1A—“Risk Factors” and Item 7—“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as elsewhere in this Annual Report on Form 10-K. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, the risks outlined under Item 1A—“Risk Factors” and matters described in this Annual Report on Form 10-K generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this Annual Report on Form 10-K will in fact occur.

Potential investors should not place undue reliance on any forward-looking statements. Except as expressly required by the federal securities laws, there is no undertaking to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.

The forward-looking statements in this Annual Report on Form 10-K represent our views as of the date of this Annual Report on Form 10-K. Such statements are presented only as a guide about future possibilities and do not represent assured events, and we anticipate that subsequent events and developments will cause our views to change. You should, therefore, not rely on these forward-looking statements as representing our views as of any date after the date of this Annual Report on Form 10-K.

This Annual Report on Form 10-K also contains estimates and other statistical data prepared by independent parties and by us relating to market size and growth and other data about our industry. These estimates and data involve a number of assumptions and limitations, and potential investors are cautioned not to give undue weight to these estimates and data. We have not independently verified the statistical and other industry data generated by independent parties and contained in this Annual Report on Form 10-K. In addition, projections, assumptions and estimates of our future performance and the future performance of the industries in which we operate are necessarily subject to a high degree of uncertainty and risk.

Potential investors should not make an investment decision based solely on our projections, estimates or expectations.

PART I

ITEM 1. BUSINESS

Introduction

China Electronics Holdings, Inc (“CEHD Nevada” or the “Company”), formerly named Buyonate, Inc. and the public company, was incorporated in the State of Nevada on July 9, 2007. China Electronic Holdings, Inc (“CEH Delaware”) was organized on November 15, 2007 in Delaware as a development stage company. Lu'an Guoying Electronic Sales Co., Ltd. a domestic PRC corporation, (“Guoying”) was established on January 4, 2002 to engage in wholesale and retail of electronics consumer products to rural areas in An Hui province. Mr. Hailong Liu is the CEO and Chairman of Guoying. CEH Nevada owns 100% equity interest in CEH Delaware which owns 100% equity interest in Guoying.

On December 26, 2008, pursuant to the Share Transfer Agreement entered into (the “2008 Share Transfer”) between the shareholders of Guoying (the “Guoying Shareholders”) and CEH Delaware, CEH Delaware agreed to acquire 40% of the outstanding equity securities of Guoying (the “Guoying Shares”) from Guoying Shareholders in consideration for RMB 400,000 contribution of registered capital from CEH Delaware to Guoying.

On December 31, 2009, pursuant to the Share Transfer Agreement entered into (the “2009 Share Transfer”) between Guoying Shareholders and CEH Delaware, CEH Delaware agreed to acquire the remaining 60% of Guoying Shares from Guoying Shareholders in consideration for RMB 600,000 contribution of registered capital from CEH Delaware to Guoying.

The amount of RMB400, 000 was paid in February 2010 and the amount of RMB 600,000 was paid in July 2010 by CEH. The 40% and 60% Guoying shares were actually transferred from Guoying Shareholders to CEH Delaware on September 29, 2009 and November 25, 2010 respectively and registered with local government authority. As a result of the transactions, Guoying became a wholly foreign-owned subsidiary (“WFOE”) of CEH Delaware with registered capital of RMB 1,000,000 and subsequently increased its paid-in capital to RMB 19,302,687 in 2010 subsequent to the 2010 PIPE financing. The transaction was approved by Ministry of Commerce of Anhui Province and registered with Administration and Industry of Commerce of Lu An City.

On January 4, 2010, the Board of Directors of CEH Delaware adopted a board resolution and resolved that it is in the best interest of CEH Delaware to issue 13,213,268 CEH Delaware shares pursuant to a call option agreement which provides that Sherry Li is the call option holder on behalf of Guoying Shareholders.

In February 2010, as a result of 2008 and 2009 Share Transfer Agreements, CEHD Delaware issued 13,213,268 CEH Delaware Shares, constituting 96.6% of issued and outstanding shares of CEH Delaware to Sherry Li, the nominee shareholder on behalf of Mr. Hailong Liu who is the nominee shareholder on behalf of Guoying Shareholders concurrent with the 2008 and 2009 Shares Transfers.

On February 10, 2010, Mr. Hailong Liu entered into a call option agreement (the “2010 February Call Option Agreement”) and voting trust agreement (the “2010 February Voting Trust Agreement) with Sherry Li. Pursuant to the 2010 February Call Option and Voting Trust Agreement, Ms. Sherry Li agreed to serve as nominee shareholder for Mr. Liu and grant Mr. Hailong Liu the voting power and call option to acquire 13,213,268 CEH Delaware shares held by Ms. Sherry Li. The Voting Trust Agreements provide that Ms. Sherry Li shall not vote or dispose of the respective portion of the shares of common stock without Mr. Liu’s prior written consent and is obligated to transfer Option Shares to Mr. Liu at nominal consideration of $0.001 per share par value. The Voting Trust Agreements further provides that, Sherry Li, the nominee shareholder, has no decision power to vote or dispose of the Option Shares without Mr. Liu’s consent.

On July 9, 2010, the Company entered into a Share Exchange Agreement, dated (the “Share Exchange Agreement”) with CEH Delaware and CEH Delaware Stockholders. Pursuant to the Share Exchange Agreement, on July 15, 2010, 10 CEH Delaware Stockholders transferred 100% of the outstanding shares of common stock and preferred stock and 100% of the warrants to purchase common stock of CEH Delaware held by them, in exchange for an aggregate of 13,785,902 newly issued shares of the Company’s Common Stock and warrants to purchase an aggregate of 1,628,570 shares of our Common Stock. The shares of the Company’s common stock acquired by the CEH Delaware Stockholders in such transactions constitute approximately 82.2% of the Company’s issued and outstanding Common Stock (including 68.9% owned by former Guoying Shareholders) giving effect to the share and warrant exchange and the sale of the Company’s Common Stock pursuant to the Subscription Agreement, but not including any outstanding purchase warrants to purchase shares of the Company’s common stock, including the warrants issued pursuant to the Subscription Agreement.

On July 9, 2010, Mr. Hailong Liu entered into a call option agreement (the “2010 July Call Option Agreement”) and voting trust agreement (the “2010 July Voting Trust Agreement”) with Sherry Li. Pursuant to the 2010 July Call Option Agreements, Mr. Liu received two-year options exercisable for 11,556,288 shares of common stock (the Option Shares) from Sherry Li concurrent with the 2010 July Share Exchange and Mr. Liu shall have right and option to acquire 50% of Option Shares upon first filing of a quarterly report on Form 10-Q with the SEC on August 23, 2010 following the execution of the Share Exchange Agreement and 50% of the remaining Option Shares 2 years after such filing by August 23, 2012. The Voting Trust Agreements provide that Ms. Sherry Li shall not vote or dispose of the respective portion of the shares of common stock without Mr. Liu’s prior written consent and is obligated to transfer Option Shares to Mr. Liu at nominal consideration of $0.001 per share par value. The Voting Trust Agreements further provides that, Sherry Li, the nominee shareholder, has no decision power to vote or dispose of the Option Shares without Mr. Liu’s consent. Pursuant to the terms of the Call Option Agreement, Mr. Liu received 5,778,144 shares in August 2010 and 5,778,144 shares in January 2013 from Ms. Sherry Liu pursuant to the vesting schedule set forth in the Call Option Agreement. During the period from July 15, 2010 to August 17, 2010 we consummated a series of Private Placements of our Common Stock and warrants to purchase our Common Stock pursuant to a Subscription Agreement dated as of July 9, 2010 (the “Purchase Agreement”). Pursuant to the Purchase Agreement we sold to 105 investors for an aggregate gross purchase price of $5,251,548 an aggregate of (a) 1,989,211 shares of our Common Stock, (b) three year Series C Warrants to purchase an aggregate of 497,303 shares of our Common Stock for $3.70 per share and (c) three year Series D Warrants to purchase an aggregate of 497,303 shares of our Common Stock for $4.75 per share.

Our Corporate Structure

The chart below sets forth our corporate structure:

Our principal executive offices are located at Building G-08, Guangcai Market, Foziling West Road, Lu’an City, Anhui Province, PRC 237001, and our telephone number is 011-86-564-3224888.

Overview of Business

Through our subsidiary, Guoying, we are engaged in the wholesale and retail sale of consumer electronics and appliances in the People’s Republic of China (the “PRC”), such as solar heaters, refrigerators, air conditioners, televisions, and similar items. We sell such products in certain rural markets in Anhui province.

We started selling consumer electronics and appliances in China in 2002. For the 2013 year, approximately 9.9% of our revenue was due to the sale of solar energy products, approximately 9.0% of our revenue was due to the sale of refrigerators, approximately 27.8% of our revenue was due to the sale of televisions and approximately 36.2% of our revenue was due to the sale of air conditioners.

We distribute merchandise through company-owned stores and to exclusive franchise stores and non-exclusive franchise stores. As of December 31, 2013, and today, we own and operate one store under the Guoying brand name at which we sell only merchandise that we provide. Exclusive franchise stores are stores that sell merchandise we provide as their exclusive wholesaler pursuant to cooperation franchise agreements. The merchandise we provide includes Guoying branded products as well as products from major manufacturers such as Sony, Samsung and LG. Non-exclusive franchise stores are stores to which we provide Guoying branded merchandise as a wholesaler or distributor and which also sell consumer electronics and appliances supplied by others. During 2013, approximately 12.7% of our revenue was from sales by company-owned stores, approximately80.0%was from sales to exclusive franchise stores and approximately 7.3%of our 2013 revenue was from sales to non-exclusive stores.

As of December 31, 2013, we operated one company-owned stores,. During 2013, we closed one company-owned store which is Haomen Huangming located in Haomen Garden . As of December 31, 2013, we had 133 exclusive franchise stores operating under the Guoying brand name pursuant to cooperation agreements and 18 non-exclusive franchise stores (the “Non-Exclusive Franchise Stores”) to which we provide Guoying branded merchandise. Set forth below are the number of exclusives and non-exclusive franchise stores opened or closed by us in each of the years indicted:

	Exclusive Franchise Store				Non-exclusive Franchise Store
Year	Opened		Closed		Opened		Closed
2010		61		0		557		18
2011		93		233		1		362
2012		91		131		20		198
2013		25		198		1		161

When we use the terms “open” or “opened” in referring to an exclusive or non exclusive franchise store, we mean that we entered into a franchise agreement with such store and that it was in operation. When we use the terms “close,” “closed” or “terminated” in reference to an exclusive or non-exclusive franchise store we mean that we terminated our agreement with such store.

In2013, our Board decided to terminate our exclusive and non-exclusive franchise agreements with a number of stores in order to strengthen and grow the Company’s business after concluding that the rapid growth of the number of stores and aggressive business expansion had caused deficiencies in the company’s internal controls and management. The following criteria was used to determine which stores (“Disqualified Exclusive Stores” and “Disqualified Non-Exclusive Stores”) to close (i) exclusive franchise stores that sold merchandise supplied by other wholesalers in breach of the exclusive franchise agreement; (ii) exclusive and non-exclusive franchise stores that failed to obey the Company’s pricing and resulting in lower profit margins; and (iii) stores located remotely Lu An City that result in higher transportation and logistics expenses to us We do not expect to terminate our franchise contracts with a significant number of non-exclusive stores in the immediate future.

We currently target customers in counties, townships and villages (the third, fourth and fifth tiers of the market) in Anhui Province, China. Our distribution and sales network currently covers twelve districts and counties in Anhui province, namely Shou County, Shu City, Jin An, Yu An, Huo Shan, Jinn Sai, Huo Qiu, Gu Shi , Ye Ji, Fei West, Fei East, and Huai Nan Districts.

We purchase consumer electronics and appliances from well-known manufacturers or large distributors and sell them through company-owned stores and to the exclusive franchise stores and non-exclusive stores. Guoying is a wholesaler in the Lu’an area for products under the brand names, Sony, LG, Samsung, Shanghai Shangling, Tsinghua Tongfng, Chigo, Huayang, Huangming and Oulin. Guoying is a general sales agency for electronic products of Sino-Japan Sanyo, such as Sanyo televisions, air conditioners, washing machines and micro-wave ovens. Guoying has teamed up with Huangming and Huayang, the two largest manufacturers of solar thermal products in China, to be their large retail outlet in Lu’an. Their energy efficient, “green” products include solar thermal water heaters, solar panels (photovoltaic) and energy saving glass.

In addition to providing wholesale merchandise purchased from manufacturers or distributors, we provided refrigerators manufactured by an original equipment manufacturer (“OEM”), Shanghai Pengbai Electronic Co., Ltd. (“Pengbai”), under the Company’s trademark “Guoying”. Guoying refrigerators have “3C” quality national authentication certificates, which are mandatory in PRC for the sale of refrigerators. We entered into an OEM agreement with Pengbai in August 2007, pursuant to which Pengbai agreed to manufacture our private label brand refrigerators and Guoying agreed to provide loan to Pengbai in amount of RMB 80 million (approximately $12.12 million) in four installments of RMB 20 million from 2006 to 2010. Pengbai agreed to repay the loan by October 2017, with payments in four equal installments of RMB 20 million (approximately $2.9 million) beginning in October 2013. The loan is secured by all the assets of Pengbai and is interest free. Guoying actually loaned Pengbai RMB63 million (approximately $9.8million) as of December 2009. We terminated our OEM agreement with Pengbai and stopped manufacturing “Guoying” brand refrigerators in 2011. . Pengbai has fully repaid us RMB 63 million by end of 2012.

We purchased 164,983 square meters (approximately 300 Chinese acres) of land in Pingqiao Industrial Park, in Lu An City, on which we originally planned to build an LED manufacturing facility. Also as part of our plan to become an LED manufacturer, we have reserved the company name “Lu An Guoying Opto-Electronics Technology Co., Ltd.” with the Lu An Administration of Industry and Commerce on September 5, 2011 and filed a proposal to seek approval to enter into the LED manufacturing business with the Reform and Development Commission of Yu An District, Lu An City, on May 13, 2011 and a planning permit for the project and land construction was issued to us by the Housing and Urban-Rural Development Bureau of Yu An District, Lu An City on October 28, 2011. Due to a change in our plans we are currently not going ahead with our plans to manufacturer LEDs and, instead, are building logistics centers on a portion of the land. We intend to use these facilities to provide logistics and transportation services to deliver merchandise and Guoying branded products to counties, townships and villages in Hubei, Henan and Anhui provinces. We have started construction of four warehouses in Pingqiao Industrial Park since October 2011. Each logistics center is 4,800 square meters, 19,200 square meters in the aggregate. We currently do not have sufficient working capital to continue building the warehouses and are seeking business partners and financing to continue the project.

On June 29, 2013, China Electronics Holdings, Inc. (the “Company”), through its indirectly wholly owned subsidiary Lu’an Guoying Electronic Sales Co., Ltd., a wholly foreign enterprise under the laws of the People’s Republic of China (“Guoying”), executed a share transfer agreement (the “Transfer Agreement”) with Mr. Li Xiaoyu (“Buyer of Opto-Electronics”) to sell its 99% ownership interest in its subsidiary Lu’an Guoying Opto-Electronics Technology Co., Ltd. (“Opto-Electronics”) for a total consideration of $962,224 (RMB 5,940,000). The Company has accounted for the disposition of the assets of discontinued operation in accordance with SFAS 144 (“FASB ASC 360”), “Accounting for the Impairment or Disposal of Long-Lived Assets”. No gain or loss was recognized for this disposal in the Company’s consolidated statements of operation and comprehensive income for the year ended December 31, 2013

In order to improve its cash flows from operations and working capital, the Company decided to redeploy its capital to meet requirements of its business plan. On July 28, 2013, the Company through its indirectly wholly owned subsidiary Guoying executed an assets sales agreement (the “Sales Agreement”) with Opto-Electronics. Pursuant to the Sales Agreement, Opto-Electronics agreed to purchase the Company’s assets associated with the logistics and transportation centers for total consideration of $3,239,810 (RMB 20,000,000). Three installments in the amounts of: a) $809,952 (RMB 5,000,000), b) $1,619,906 (RMB 10,000,000) and c) $809,952 (RMB 5,000,000) are due by the ends of December 31, 2013, 2014 and 2015, respectively. In the event that Opto-Electronics does not consummate the payments, Opto-Electronics will be penalized 0.02% of the outstanding balance monthly. On December 26, 2013, the Company agreed Mr. Li Xiaoyu's request to extend the payment schedule. The first $809,952 (RMB 5,000,000) installment will be paid by May, 2014.

We will continue to focus on becoming a significant retailer and wholesaler of consumer electronics and appliances to rural markets in China with a goal of having a national distribution network throughout China. Our working capital will continue to be used to develop wholesale and retail business.

Retail Operations

The various types of stores are described below:

Company-owned stores

As of December 31, 2013, and today, we own and operate one company-owned stores. We owned and operated two company-owned stores as of December 2011. Our company-owned stores focus on the sale of solar thermal products, refrigerators, air conditioners, televisions and consumer electronics and appliances. Our administrative offices are located on the second floor of our new headquarters store. We renewed our lease for our Haomen Store and entered into a new lease for our Guangcai Market Store with Mr. Haibo Liu, a director of our company in 2011, in each case the lease is for a three year term subject to renewal upon both parties’ consent. The number of company-owned stores opened or closed in every year from 2010 through 2013 is as follows:

Year	Total Company-Owned Stores (year end)		Company Owned Stores Opened		Company Owned Stores Closed
12/31/2009		1	0		0

2010				2		0
12/31/2010		3

2011				1		2
Total 12/31/2011		2

2012				0		0
Total 12/31/2012		2

2013		1		0		1

Total 12/31/2013		1

Exclusive Franchise Stores

As of December 31, 2013, there were 133 exclusive franchise stores operating under the Guoying brand name pursuant to cooperation agreements with us. The exclusive franchise stores are owned by third parties and operate under our brand name pursuant to cooperation agreements with the Company. Such stores sell both Guoying branded products and other products that we provide as the exclusive wholesaler. Guoying is the only wholesaler providing products to our exclusive franchise stores. The exclusive franchise stores are located in rural areas around Lu’an City, Anhui Province, and the primary customers of these stores are residents of the local towns and villages. The store owners own or lease the operating space for the exclusive franchise stores. Guoying makes deliveries to each store and upon delivery, the stores pay in cash the wholesale price of the products provided. After receiving orders from such stores we are generally able to deliver the merchandise within two to three hours to stores located in or near Lu’an City or within three days to stores that are further away. Due to the PRC “Rural consumer electronics and appliances” plan, which is available to some of our stores, Guoying is able to offer the exclusive franchise stores certain discounts based on the quantity of their purchases.

We have signed cooperation agreements with each exclusive franchise store with a term ranging from 1 year to 3 years, subject to renewals. The average remaining term under most of the cooperation agreements is three years subject to renewal. . As of December 31, 2013, the account receivables from exclusive franchise stores are approximately RMB17,542,085.50.

Set forth below is the number of exclusive franchise stores opened or closed in every quarter from 2010 to the through 2013 and the number of exclusive franchise stores in operation as of the end of each of every quarter and year:

	Number of Exclusive Franchise Stores In Operation		Exclusive Franchise Stores Opened		Exclusive Franchise Stores Closed
Quarter-Ended 3/31/2011		557		71		0
Quarter-Ended 6/30/2011		559		2		0
Quarter-Ended 9/30/2011		552		13		20
Quarter-Ended 12/31/2011		346		7		213
Total 12/31/2011		346		93		233

Quarter-Ended 3/31/2012		276		5		75
Quarter-Ended 6/20/2012		324		76		28
Quarter-Ended 9/30/2012		296		0		28
Quarter-Ended 12/31/2012		306		10		0
Total 12/31/2012		306		91		131

Quarter-Ended 03/31/2013		306		0		0
Quarter-Ended 06/30/2013		306		0		0
Quarter-Ended 09/30/2013		136		21		191
Quarter Ended 12/31/2013		133		4		7
Total 12/31/2013		133		25		198

Non-exclusive stores

As of December 31, 2013, we provided merchandise to 16 non-exclusive stores as a wholesaler. Such stores are owned and operated by third parties and are located in the rural areas around Lu’an City, Anhui province. These stores sell both Guoying branded merchandise and merchandise distributed by other companies. Our merchandise is sold to the stores by the Company pursuant to franchise agreements and sales agreements between the operators of the stares and the Company. The non-exclusive stores pay the Company cash upon the Company’s delivery of products, or Guoying extends unsecured credit to such stores in the ordinary course of business but mitigates the associated risks by performing credit checks and actively pursuing past due accounts. Under the franchise agreements, each non-exclusive store was obligated to pay Guoying an annual fee of RMB 5,000 (approximately $735). We have not collected annual fees since 2009.

Set forth below is the number of non-exclusive franchise stores opened or closed in every quarter from 2010 to the through 2013 and the number of non-exclusive franchise stores to which we distributed products as of the end of each of every quarter and year:

	Number of Non-Exclusive Franchise Stores		Non-Exclusive Franchise Stores Opened		Non-Exclusive Franchise Stores Closed
Quarter-Ended 3/31/2011		715		0		0
Quarter-Ended 6/30/2011		716		1		0
Quarter-Ended 9/30/2011		686		0		30
Quarter-Ended 12/31/2011		354		0		322
Total 12/31/2011		354		1		352

Quarter-Ended 3/31/2012		196		0		158
Quarter-Ended 6/30/2012		175		19		40
Quarter-Ended 9/30/2012		175		0		0
Quarter-Ended 12/31/2012		176		1		0
Total 12/31/2012		176		20		198

Quarter-Ended 03/31/2013		176		0		0
Quarter-Ended 06/30/2013		177		1		0
Quarter-Ended 09/30/2013		18		0		159
Quarter Ended 12/31/2013		16		0		2
Total		16		1		161

Our Leases

Warehouse Leases

We currently distribute products to company-owned stores, exclusive franchise stores and non-exclusive stores from two warehouses located within Lu’an city, which are leased by Guoying. We engage third parties to transport the products from our warehouses to the stores. We entered into a lease agreement with Youbang Pharmaceuticals Co., Ltd. on April 1, 2010 to lease the warehouse located in the development zone of east road of Jing Er, Foziling Road for one year, and renewed the lease for two years valid from April 1, 2011 to April 1, 2013 and another two years from April 1, 2013 to April 1, 2015. The rent for the lease is RMB138,000 per year. We entered into a lease agreement with Mr. Haibo Liu on January 1, 2008 for the Wangpai warehouse of 808 square meters located in Liu Fo Road to store Huangming solar products. The term of the lease was from January 1, 2008 to December 31, 2012 and the rent is RMB 6, 464 per year (RMB 8 per square meters). We renewed the lease for another two years valid from January 1, 2013 to December 31, 2014 at the same rent.

Company-Owned Stores Leases

We currently lease our one company-owned store. We entered into a lease agreement for our Guangcai Big Market Store on October 30, 2008 for 3 years at a rent of RMB20, 882 per year and renewed the lease on April 1, 2011 for another 3 years until March 31, 2014 at a rent of RMB 720,000 per year. .We plan to renew the lease agreement for our Guangcai Big Market Store on April 1, 2014. We entered into a lease agreement with Mr. Haibo Liu in 2010 for our Hao Men store for one year and renewed the lease on March 15, 2011 for another 3 years until March 15, 2014 at a rent of RMB 68,000 per year.The store was closed at the end of June, 2013 and we do not plan to renew the lease.

For additional information concerning the location, area and terms of each of the Company’s self-owned stores and warehouse see “Item 2. Property” herein.

Land Use Right

Pingqiao Industrial Park Land

We entered into a Land Use Right Purchase Agreement on October 28, 2010 and a supplemental Deposit Agreement on December 28, 2010 with the management committee of Pingqiao Industrial Park (the “Pingqiao Committee”), under which the Pingqiao Committee granted us a land use right for 164,983 square meters (approximately 300 Chinese acres). 120 Chinese acres of this land is for commercial use and 180 Chinese acres of this land is for industrial use. We paid RMB 100 million (approximately $15.74 million) of the purchase price as of December 31, 2010.

We are not obligated to pay the remaining $3.7 million until we receive the land use right certificate to be issued by relevant PRC government pursuant to the Land Use Right Purchase Agreement. The Company received a land use right certificate issued by Pingqiao Industrial Park on April 16, 2012 with a term of 50 years until 2062 for a 38,449 square meter portion of the land which has been collaterized for a loan of RMB 10 million to a bank, including the 19,200 square meters where the four warehouses are built.

In order to improve its cash flows from operations and working capital, the Company decided to redeploy its capital to meet requirements of its business plan. On July 28, 2013, the Company through its indirectly wholly owned subsidiary Guoying executed an assets sales agreement (the “Sales Agreement”) with Opto-Electronics. Pursuant to the Sales Agreement, Opto-Electronics agreed to purchase the Company’s assets associated with the logistics and transportation centers for total consideration of $3,239,810 (RMB 20,000,000). Three installments in the amounts of: a) $809,952 (RMB 5,000,000), b) $1,619,906 (RMB 10,000,000) and c) $809,952 (RMB 5,000,000) are due by the ends of December 31, 2013, 2014 and 2015, respectively. In the event that Opto-Electronics does not consummate the payments, Opto-Electronics will be penalized 0.02% of the outstanding balance monthly. On December 26, 2013, the Company agreed Opto-Electronics' buyer Mr. Li Xiaoyu's request to extend the payment schedule. The first $809,952 (RMB 5,000,000) installment will be paid by May 2014.

The sales price of the 38,449 square meters land with land use rights certificate was appraised by an independent appraisal firm, Luan Century Price Evaluation Consultative Co., Ltd., on April 24, 2013. The appraisal firm concluded the fair market value of the 38,449 square meter portion of the land for which the Company has received a land use rights certificate was $1,774,722 (RMB 11,073,378). The appraised value excluded the remaining 126,534 square meters of Pingqiao Land for which the Company has not received a land use rights certificate. Further, pursuant to Article 2 of the Sales Agreement, 1) Opto-Electronics is obligated to negotiate with the Yu An government to: a) obtain the land use rights certificate for the remaining 126,534 square meters of land and b) pay to the Company the agreed upon purchase price of the remaining land up to the amount which the Company has advanced to the Pingqiao Committee; and 2) upon completion of the logistics center by Opto-Electronics, the Company has a right of first refusal to lease the building at a favorable rent. The Company is no longer obligated to pay Pingqiao Industrial Park the remaining $3.7 million.

Youbang Warehouse Land

We entered into a Land Use Right Purchase Agreement in 2010 with Youbang Pharmaceuticals Co., Ltd., under which Youbang Pharmaceuticals granted us a land use right for 200 Chinese acres for commercial use where Guoying department building and logistics center will be built. We paid RMB40 million (approximately $6,296,000) of the purchase price as of December 2011 and Youbang is obligated to deliver the land use right certificate and real estate property certificate by December 31, 2011 or no later than December 31, 2012. It was agreed in 2011 that the land use right certificate for this parcel of land could not be transferred due to change of local zoning regulations, the agreement was canceled and RMB10 million (approximately $1,574,000) was returned to the Company by September 2011. The remaining RMB30 million (approximately $4,722,000) was returned to the Company in December 2012.

Guoying Agricultural and Forestry Land

On January 3, 2011, the Company leased 503 Chinese acres of land with twenty years term from Yumin Village, Sun Gang County, Jin An District (“Yumin Village”) for the Company’s agricultural and forestry business at an annual rent of approximately $94,500. The Company has paid $94,500 and $94,500 rents for the years ended December 31, 2011 and 2012, respectively.

On January 1, 2011, the Company leased 5,006 Chinese acres of land from Yumin Village for thirty years at an annual rent of approximately $961,000 (RMB 6,007,200). The Company paid $961,000 and $0 rent for the years ended December 31, 2011 and 2012, respectively.

In order to improve the Company’s cash flows from operations and working capital to support its business strategy to continue focusing on becoming a significant retailer and wholesaler of consumer electronics and appliances to rural markets with a goal of having a national distribution network throughout China. On December 9, 2012, the Company’s board of directors approved the decision to transfer the leases of the 5,006 and 503 Chinese acres of lands together with plants grown on the leased lands to Lu’an Senyuan Ecological Park Ltd. (“Senyuan”), an affiliated company controlled and owned by the father and ex-wife of the CEO of the Company, for approximately $1,123,500, due by October 2015.

At December 31, 2012, the Company has fully reserved an allowance for the balance of related party receivable from Senyuan due to the uncertainty of the collection because no collateral was provided to secure the payment from Senyuan to the Company. On November 30, 2013, Shenyuan fully prepaid the loan to the Company. The Company then used the payment to settle the rent with Yumin Village. The collection of Shenyuan's loan has been recorded as a reduction of operating expense in the consolidated statements of operations and comprehensive income.

Our Private Label Brands

We entered into an OEM agreement with Pengbai in August 2007, pursuant to which Pengbai agreed to manufacture refrigerators to be sold under our brand.

Pursuant to the OEM agreement, Guoying agreed to provide loans to Pengbai in amount of RMB 80 million (approximately $12.12 million) in four installments of RMB 20 million each from 2006 to 2010. Pengbai agreed to repay the loan by October 2017, with payments in four equal installments of RMB 20 million (approximately $2.9 million) beginning in October 2013. The loan is secured by all the assets of Pengbai and is interest free. Guoying actually loaned Pengbai RMB63 million (approximately $9.8 million) as of December 2009. In 2011 the agreement was terminated and Pengbai stopped manufacturing “Guoying” brand refrigerators in 2011. Pengbai has fully repaid us RMB 63 million by end of 2012.

Industry Background

According to the 2010 PRC Census, more than 50% of China’s population resides in rural areas of China and they comprise the largest consumer group in China. After many years of economic reforms, the average income of people living in China’s rural areas has gradually increased, and according to the National Bureau of Statistics of China, the per capita net income of rural residents increased 10.9% in 2010. We believe that this segment of the population has significant growth potential and that they are not served by many of the urban chains of electronics distributors which have not expanded into the rural communities.

We believe that there are several reasons why the distribution of consumer electronics and appliances in rural markets can be profitable.

China Economic News reported on December 9, 2010, the central government had increased the disposable income of the rural population by reducing the tax rate paid by farmers. We believe that this tax relief combined with continuing improvements in the power network, transportation, and communications in rural areas makes the rural market more accessible to home appliances and electronics.

The Chinese government has initiated a rural home appliance and electronics rebate program, called the “Rural Consumer Electronics” plan. The plan provides that the maximum sales price of electronics in rural areas is fixed at a price which is usually equal to the market price of the same products in urban areas, and allows rural consumers to receive a 13% rebate from the government on their purchases of electronics.

In addition, the current consumer electronics and appliances markets in big PRC cities like Beijing, Shanghai, and Shenzhen are already saturated by electronics stores, which results in limited margins. While we have some competitors in the rural markets, we believe that the retail chains that exist in larger cities have not established any significant name recognition in the rural markets. Therefore, we believe that such stores’ success in larger cities will not necessarily result in success in the rural areas where we operate.

Our Growth Strategies

The following are some of the steps we currently intend to take in an effort to grow our business:

Partnering with well-known electric appliance manufacturers. We will negotiate with well-known brands in order to act as a wholesaler of these brands. We currently sell Samsung washing machines and Sony LCD televisions. We are negotiating with other companies with well-known brands to sell their consumer electronics and appliances in rural markets.

Exclusive Franchise Stores and Non-Exclusive Stores. Close disqualified Exclusive and Non-Exclusive Franchise Stores in Anhui province; open new Exclusive and Non-Exclusive Franchise Stores in Anhui, Hunan and Hubei provinces; maintain and grow our business with existing profitable Exclusive Franchise Stores;

Company-Owned Stores. We closed two of our company-owned stores, Longhe and Guangcai, in 2010 and opened our new headquarters store in the center business district of Lu’an City in 2011. This store focuses on the sale of solar thermal products, refrigerators, air conditioners, televisions and other products.

To date we have funded our growth primarily from our working capital and below is a summary of approximately how much we have spent in the years 2012 and 2013 to achieve our growth strategies:

Growth Strategy	Spent in 2013		Estimate in 2014

Develop new company-owned stores	$	-		242,362

Develop new exclusive franchise stores	$	101,792		1,211,808

Develop new non-exclusive stores	$	4,847		48,472

Raw Materials and Suppliers

Approximately 95% of the cost of sales is the purchase price of products.

Our principal suppliers of merchandise (over 10% of our supply amount) in 2013, in terms of cost to us, were:

Name of Supplier	Type of Products
Shenzhen Chuangwei RGB Electronics Sales Co., Anhui Branch	Chuangwei Television, Chigo Air Conditioner
Lu’an Zhongxing Commercial Trade Co. Ltd	Gree Air Conditioner
Lu’an Jin’an Shengfa Electronic Trading Co.	Longdi Small Domestic Appiances, Gree Air Conditioner, Chuangwei Television, Meiling Washing Machine

Our principal suppliers of merchandise in 2012, in terms of cost to us, were:

Name of Supplier	Type of Products
Guangdong Zhigao Air Conditioner Sales Co.	Air Conditioner
Lu An Zhong Zing Commercial Trade Co.	Televisions, refrigerators, air conditioners

Shenzhen Tongfang Multimedia Technology Company	LCD Televisions
Shenzhen Chuangwei RGB Electronics Sales Co., Anhui Branch	Televisions, refrigerators, washing machines, air conditioners
Shanghai Shangling Electronic Appliances Manufacturing Ltd.

We receive all of our merchandise from our suppliers, which are often the manufacturers, through deliveries to our two warehouses located within Lu’an city.

Marketing, Sales, and Distribution

We have a staff of 27 employees who take orders and provide customer service to each exclusive franchise store and non-exclusive store in assigned geographical areas. We advertise in many ways, including using television advertisements, advertisements on buses and walls, fliers distributed on the streets by our promotion personnel and general promotions, including discounts. We base our advertising on our analysis of the market and our competitors. We are responsible for the cost of marketing of our Guoying brand products and promoting our Guoying franchise brand. Under contracts we have with our suppliers, our suppliers are responsible for the costs of all discounts and promotions of sales and distribution of products sold from the suppliers to us.

Customers and Pricing

Our customers pay different prices for our products depending on where they live.

●	In general, most of the products sold in the franchise stores are subject to the national “Rural Consumer Electronics” plan. The plan provides that the maximum sales price of electronics in rural areas is fixed at a price which is usually equal to the market price of the same products in urban areas. The plan allows rural consumers to receive a 13% rebate from the government on their purchases of electronics.

●	Some of the products sold by our company-owned stores to the residents in Lu’an city are sold at the market price for urban areas.

Most customers pay for their purchases in cash.

In recent years, the pricing of our merchandise has changed as the price charged by our vendors has changed. For example, due to inflation in recent years, the market price of consumer electronics and appliances has risen. Due to the Rural Consumer Electronics Plan, our rural customers are not affected by such inflation as greatly as urban customers. However, the selling prices of some older models of products have decreased since such models are being discontinued.

Employees

As of December 31, 2013, Guoying had 66 full-time employees, including 12 management and supervisory personnel, 23 sales and marketing personnel and 6 after sale support personnel.

Seasonality

Approximately 30% of our sales of products are made in the first quarter of the year as the Chinese Spring Festival, the traditional shopping period occurs during the first quarter. The fourth quarter is our second busiest season.

Competition

We believe our main competitor is Hefei Ri Ri Shun Sales Corp(“Ri Ri Shun”) and Guosheng Electronic (“Guosheng”), which is a state-owned enterprise in Anhui Province. Ri Ri Shun is the second largest retrailer and Guosheng is the third largest retailer of consumer electronics and appliances in Anhui Province and runs several franchise stores in small cities and towns. Guosheng also has stores in Lu’an city.

We compete on the basis of price and the quality of the products we distribute. Both Ri Ri Shun and Guosheng have greater financial resources and brand recognition than us. In order for us to succeed we will need to focus our efforts on the rural markets not targeted byRi Ri Shun and Guosheng, promote our brand name and operate efficiently. There is no guarantee we will be able to achieve our goals.

Compared to Guosheng, our competitive disadvantages are:

●	Funding. We need more capital than larger wholesalers in order to expand. As a state-owned enterprise, it is easier for Guosheng to obtain bank loans.

●	Exclusive Representative Rights. Currently we are smaller than Guosheng and it is easier for Guosheng to be the exclusive representative of certain major brands because it is larger.

●	Brand Recognition. As a smaller wholesaler, we need to invest more in advertising in order to make our brand as competitive as larger wholesalers such as Guosheng.

Compared to Guosheng, our competitive advantages are:

●	Rural Market. We have relationships with hundreds of exclusive franchise stores and non-exclusive stores in rural markets, which are markets that have a high potential volume of sales, but which markets are ignored by the big retail chain stores.

●	Flexibility. We make deliveries quickly and consistently. After receiving an order, we are able to deliver products within 2 hours to stores within or close to Lu’an city. Large state-owned retail stores, such as Guosheng, typically take 2-3 days to deliver products after the receipt of orders.
●	Sales Networking. We have 27 sales persons visiting the exclusive franchise stores and non-exclusive stores each week, which allows us to maintain good relationships with the stores.

Intellectual Property

Mr. Hailong Liu, our CEO, owns the following trademarks:

(i)	Trademark Registration No:	5307764
	Owned Trademark:	GUOYING(国鹰)
	Clarification No:	11
	Term:	May 7, 2009 to May 6, 2019
	Issued by:	Trademark Office, State Administration for Industry and Commerce

(ii)	Trademark Registration No:	5307765
	Owned Trademark:	GUOYING(国鹰)
	Clarification No:	7
	Term:	April 28, 2009 to April 27 2019
	Issued by:	Trademark Office, State Administration for Industry and Commerce

Mr. Liu has granted Guoying the right to use all of the trademarks listed above from January 1, 2008 to December 31, 2012. Our right to use such marks without charge was renewed and the grant was extended to December 31, 2014

Regulation

We are subject to a wide range of regulations covering every aspect of our business. The most significant of these regulations are set forth below. Management believes it is in material compliance with applicable regulations.

Chain Stores Management

In March 1997, the Domestic Trade Ministry issued the Standard Opinions on the Operation and Management of Chain Stores (the “Opinions”), to regulate and administrate the forms, management models, composition, business area and other requirements of chain stores. The Opinions discuss three forms of chain stores: regular chain, franchise chain and voluntary chain. The Opinions stipulate that franchise chain and voluntary chain stores must execute relevant cooperation contracts with their suppliers and that the contracts must contain certain clauses including but not limited to clauses relate to the use of trademarks, product quality management, centralized purchase and sales promotion policies.

In May 1997, the State Administration of Industry and Commerce issued the Circular of the Relevant Issues for the Administration of Registration of Chain Stores, which provides the conditions for the establishment of chain stores and branches, the procedures and documents for application for registration with the administration of industry and commerce, and the names of chain stores, to regulate registration issues relating to chain stores.

Regulations relating to consumer protection

On October 31, 1993, the Standing Committee of the National People’s Congress issued the Law on the Protection of the Rights and Interests of Consumers, or the Consumer Protection Law, revised in 2009. The State Administration of Industry and Commerce also issued the notice regarding “Handling of Acts of Infringement of Rights of Consumers” or the Notice in March 2004. Under the Consumer Protection Law and the Notice, a business operator providing a commodity or service to a consumer undertakes certain responsibilities relating to products. These liabilities include restoring the consumer’s reputation, eliminating the adverse effects suffered by the consumer, and offering an apology and compensation for any losses incurred. The following penalties may also be imposed upon business operators for the infraction of these obligations: issuance of a warning, confiscation of any illegal income, imposition of a fine, an order to cease business operation, revocation of its business license or imposition of criminal liabilities under circumstances that are specified in laws and statutory regulations.

Regulations on commercial franchising

On May 1, 2007, the State Council issued the Regulations for Administration of Commercial Franchising, to supervise franchising activities. The Regulations for Administration of Commercial Franchising were later supplemented by the Administrative Measures for Archival Filing of Commercial Franchise and the Administrative Measures for Information Disclosure of Commercial Franchise, both of which were issued by the Ministry of Commerce. Under these regulations, Franchisors are required to file franchise contracts with the Ministry of Commerce or its local counterparts; and franchise contracts shall include certain provisions, such as terms, termination rights and payments. Franchisors are also required to satisfy certain requirements including, without limitation, having mature business models and the capacity to provide operation guidance, technical support and training to franchisees. Franchisors engaged in franchising activities without satisfying the above requirements may be subject to administrative penalties.

Regulations on trademarks

The State Council issued the PRC Trademark Law in 1982, revised in 2001, and the Implementation Regulation of the PRC Trademark Law in 2002, to protect the owners of registered trademarks and trade names. The Trademark Office handles trademark registrations and grants a term of ten years to registered trademarks. Trademark license agreements must be filed with the Trademark Office or its regional counterpart.

Home appliance sales on the rural market

On April 16, 2009, the Ministry of Commerce, the Ministry Of Finance, the Industry and Information Technology, National Development and Reform Committee, the Ministry of Environmental Protection, State Administration of Industry and Commerce and State Administration of Quality Supervision promulgated the Implementation Rules of Home Appliance Sales on the Rural Market, or the Implementation Rules to stimulate domestic demand and promote economic development. According to the Implementation Rules, the local government authority would make its decision concerning the qualification of home appliance selling enterprises based on the process of public bidding and tendering. Such enterprises shall satisfy certain requirements, including having measures on dispatching, price management, after-sale service and sales channels. Such enterprises are also required to file with the local commerce bureau for sale of home appliances and shall provide good service. The qualification of sales enterprises to sell home appliances in rural areas may be cancelled in the event of any serious violation of commitments or duties as set forth in the Implementation Rules.

PRC M&A Rule

On August 8, 2006, six Chinese government agencies, namely, the Ministry of Commerce, or MOFCOM, the State Administration for Industry and Commerce, or SAIC, the China Securities Regulatory Commission, or CSRC, the State Administration of Foreign Exchange, or SAFE, the State Assets Supervision and Administration Commission, or SASAC, and the State Administration for Taxation, or SAT, jointly issued the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, referred to as the “New M&A Rules”, which became effective on September 8, 2006. The New M&A Rules purport, among other things, to require offshore “special purpose vehicles,” that are (1) formed for the purpose of overseas listing of the equity interests of Chinese companies via acquisition and (2) are controlled directly or indirectly by Chinese companies and/or Chinese individuals, to obtain the approval of the CSRC prior to the listing and trading of their securities on overseas stock exchanges.

ITEM 1A. RISK FACTORS

An investment in our Common Stock involves a high degree of risk. You should carefully consider the risks described below, together with all of the other information included in this Annual Report on Form 10-K, before making an investment decision. If any of the following risks actually occurs, our business, financial condition or results of operations could suffer. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment.

Risks Related To Our Business

Our sales revenues are derived primarily from our exclusive franchise stores and non-exclusive stores, and should any of them perform poorly or cease purchasing wholesale merchandise from us, our sales results, revenues, net income, reputation and competitive position would suffer.

We sell most of our products through exclusive franchise stores and non-exclusive stores. Though our personnel visit the stores regularly, third party store managers make decisions about order quantities and are responsible for the daily operations and success of the stores. If the stores to which we sell products are not successful, the store’s income could decrease and the volume of products they order from us could decline, which would negatively impact our sales. If an exclusive franchise store bearing our brand name performs poorly or is run improperly, our reputation could be adversely affected. Additionally, if a number of exclusive franchise stores and non-exclusive franchise stores choose to cease purchasing products from us, we could experience a material decrease in revenues and net income. There is no termination provision in, or expiration of the term of, the exclusive franchise agreements.

We depend heavily on large suppliers and if any of our largest suppliers cease to provide products to us, our business could be adversely affected.

All of the products purchased by us during 2012 and 2013 were provided by nineteen vendors. In 2013, with six major vendors, Lu’an Jin’an Shengfa Electric Appliance Co.(formerly known as Lu’An Zhongxing Trade Co.), Shenzhen Skyworth·RGB Electronics Co. Anhui Branch, Shenzhen Tongfang Multimedia Technology Co., Lu’an Weilaizhixing Sales Co., Ltd., Shanghai Shangling Electric Appliance Manufacturing Co., Ltd., and Ningbo Hailu Electric Appliance Co., Ltd., accounted for 36%, 10%, 7%, 6%, 6% and 5%, respectively, of our total purchases in 2013. In 2012, with six major vendors, Guangdong Zhigao air conditioners Co., Lu’An Zhongxing Trade Co., Shenzhen Skyworth·RGB Electronics Co. Anhui Branch, Shenzhen Tongfang Multimedia Technology Co., Shanghai Shangling Electric Appliance Manufacturing Co., Ltd., and Shangdong Huangming Solar Power Sales Co. accounted for 14%, 13%, 12%, 12%, 12% and 10%, respectively, of our total purchases in 2012. If any of vendors ceased doing business with us, we would experience significant reductions in our sales and income.

We may not be able to effectively control and manage our growth, and a failure to do so could adversely affect our operations and financial condition.

We plan to increase the number of our company-owned stores. We have tried and in the future may try to enter other businesses. Increasing the number of our company stores and entering into new businesses will likely require significant capital. Even if we are able to secure the funds necessary to implement our growth strategies (of which there can be no assurance), we will face management, resource and other challenges in expanding our current facilities, integrating acquired assets or businesses with our own, and managing expanding product offerings. Failure to effectively deal with increased demands on our resources could interrupt or adversely affect our operations and cause production backlogs, longer product development time frames and administrative inefficiencies. Other challenges involved with expansion, acquisitions and operation include:

unanticipated costs;

the diversion of management’s attention for unanticipated business concerns;

potential adverse effects on existing business relationships with suppliers and customers;

obtaining sufficient working capital to support expansion;

expanding our product offerings and maintaining the high quality of our products;

maintaining adequate control of our expenses and accounting systems;

successfully integrating any future acquisitions;

anticipating and adapting to changing conditions in the electronics retail industry, whether from changes in government regulations, mergers and acquisitions involving our competitors, technological developments or other economic, competitive or market dynamics; and

outsourcing the manufacture and production of our refrigerators to OEM manufacturers may not give us sufficient control over the quality of those products.

Even if we do experience increased sales due to expansion, there may be a lag between the time when the expenses associated with an expansion or acquisition are incurred and the time when we recognize such benefits, which would affect our earnings.

We may not be able to hire and retain qualified personnel to support our growth and if we are unable to do so, our ability to implement our business objectives could be limited. Difficulties with hiring, employee training and other labor issues could disrupt our operations.

Our operations depend on the work of our sales persons and other employees. We may not be able to retain those employees, successfully hire and train new employees or integrate new employees into the Company. Any such difficulties would reduce our operating efficiency and increase our costs of operations, and could harm our overall financial condition.

Our operations also depend in significant part upon the continued contributions of our key technical and senior management personnel, including Mr. Hailong Liu, and upon our ability to attract and retain additional qualified management, technical, marketing and sales and support personnel for our operations. If one or more of our senior executives or other key personnel are unable or unwilling to continue in their present positions, we may not be able to replace them within a reasonable time, which could result in disruption of our business and an adverse effect on our financial condition and results of operations. None of our senior management personnel have signed employment agreements. Turnover in our senior management could significantly deplete the institutional knowledge held by our existing senior management team. We depend on the skills and abilities of these key employees in managing the technical, marketing and sales aspects of our business, which could be harmed by turnover in the future. Competition for senior management and personnel is intense, the pool of qualified candidates is very limited, and we may not be able to retain the services of our senior executives or senior personnel, or attract and retain high-quality senior executives or senior personnel in the future. This failure could limit our future growth and reduce the value of our common stock.

The consumer electronics and appliances retail industry in the PRC is competitive and, unless we are able to compete effectively with competitor retailers, our profits could suffer.

The consumer electronics and appliances retail industry in the PRC has become highly and increasingly competitive. Large national retailers such as Suning Appliance and Guomei Appliance have expanded, and local and regional competition has increased. Some of these companies have substantially greater financial, marketing, personnel and other resources than we do.

Our competitors could adapt more quickly to evolving consumer preferences or market trends, have greater success in their marketing efforts, control supply costs and operating expenses more effectively, or do a better job in formulating and executing expansion plans. Increased competition may also lead to price wars, counterfeit products or negative brand advertising, all of which may adversely affect our market share and profit margins. Existing or new competitors could receive contracts for which we compete due to events and factors beyond our control, and expansion of large retailers into new locations may limit the locations into which we may profitably expand. To the extent that our competitors are able to take advantage of any of these factors, our competitive position and operating results may suffer.

Because we face intense competition, we must anticipate and quickly respond to changing consumer demands more effectively than our competitors. In order to succeed in implementing our business plan, we must achieve and maintain favorable recognition of our private label brands (i.e. our Guoying branded products, company-owned stores and exclusive franchise stores operating under our brand name), effectively market our products to consumers, competitively price our products, and maintain and enhance a perception of value for consumers. We must also source and distribute our merchandise efficiently. Failure to accomplish these objectives could impair our ability to compete with larger retailers and could adversely affect our growth and profitability.

We do not maintain product liability insurance or business interruption insurance, and our property and equipment insurance does not cover the full value of our property and equipment.

We currently do not carry any product liability or other similar insurance or business interruption insurance. If product liability litigation becomes more commonplace in the PRC, we could be exposed to additional liability. Moreover, we may have increased product liability exposure as we expand our sales into international markets, like the United States, where product liability claims are more prevalent.

We may be required from time to time to recall products entirely or from specific markets or batches. We do not maintain recall insurance. Additionally, our property and equipment insurance does not cover the full value of our property and equipment. In the event we do experience product liability claims or a product recall, or suffer from a natural or other unexpected disaster, business or government litigation, or any uncovered risks of operation, our financial condition and business operations could be materially adversely affected.

As all of our operations and personnel are in the PRC, we may have difficulty establishing adequate western style management, legal and financial controls.

The PRC has not adopted a Western style of management and financial reporting concepts and practices. We may have difficulty in hiring and retaining a sufficient number of qualified employees to work in the PRC. As a result, we may experience difficulty in establishing accounting and financial controls, collecting financial data, budgeting, managing our funds and preparing financial statements, books and records and instituting business practices that meet Western standards.

We currently do not have in house accounting personnel that have adequate knowledge of U.S. generally accepted accounting principles. Instead, we rely on the expertise and knowledge of external financial advisors in US GAAP conversion who help us prepare and review the consolidated financial statements. Our lack of familiarity with Western practices generally and Section 404 specifically may unduly divert management’s time and resources, which could have a material adverse effect on our operating results. As a result of our lack of U.S. GAAP trained personnel and our lack of familiarity with U.S. GAAP, our internal control over financial reporting may be deficient. If material weaknesses in our internal controls over financial reporting are identified, this could result in a loss of investor confidence in our financial reports, have an adverse effect on our stock price and/or subject us to sanctions or investigation by regulatory authorities.

We do not presently have a Chief Financial Officer with U.S. public company experience.

We do not presently have a Chief Financial Officer that is familiar with the accounting and reporting requirements of a U.S. publicly-listed company. Currently we do not have sufficient in-house expertise in US GAAP reporting. Instead, we rely on the expertise and knowledge of external financial advisors in US GAAP conversion who help us prepare and review the consolidated financial statements. Thus no assurance can be given that there are no material errors or weaknesses existing with our financial reporting or internal controls. In addition, we do not believe we have sufficient documentation with our existing financial process, risk assessment and internal controls. The position of Chief Financial Officer of a U.S. publicly-listed company is critical to the operations of such a company, and our failure to fill this position in a timely and effective manner will negatively impact our business.

We closed a significant number of exclusive and non-exclusive stores, mainly during the fourth quarter of 2012 and third quarter of 2013, and we cannot assure you that we will be able to retain contracts with all or a substantial portion of our long-term stores or develop relationships with a significant number of stores in the future.

Our success depends in part upon retaining our contracts with exclusive and non-exclusive franchise stores. We face the risk of losing customers as a result of the expiration or termination of their contracts with us, or selection by our customers of other distributors and wholesalers of electronic consumer products of other brands. We generate a significant portion of our revenues from contracted exclusive and non-exclusive stores. Although we do not expect to terminate our contracts with a significant number of stores in 2013, we cannot assure you that we will be able to retain contracts with all or a substantial portion of our stores or develop relationships with a significant number of stores in the future.

We will have to change the name of one of the brands and stores which sell those products if our principal stockholder does not extend the license to use the name Guoying beyond December 31, 2014, which is likely to have a disruptive and materially adverse effect on our business.

We sell certain of our products under the brand Guoying under a trademark license granted by Hailong Liu, our Chairman, CEO and principal stockholder which expires at the end of 2014. If the license is not extended when it expires, we will have to rebrand the products we sell under the Guoying name and change the name and associated signage of our Guoying stores. The rebranding is likely to have a disruptive and materially adverse effect on our business.

Risks Related To Doing Business In China

The Company faces the risk that changes in the policies of the PRC government could have a significant impact upon the business that the Company may be able to conduct in the PRC and the profitability of such business.

The PRC economy is in a transition from a planned economy to a market oriented economy subject to five-year and annual plans adopted by the government that set national economic development goals. Policies of the PRC government can have significant effects on the economic conditions of the PRC. The PRC government has confirmed that economic development will follow the model of a market economy, but there can be no assurance that this will be the case. A change in policies by the PRC government could adversely affect the Company’s interests due to factors such as changes in laws, regulations or the interpretation thereof, confiscatory taxation, restrictions on currency conversion, imports or sources of supplies, or the expropriation or nationalization of private enterprises. There can be no assurance that the government will continue to pursue economic reform policies or that such policies may not be significantly altered, especially in the event of a change in leadership, social or political disruption, or other circumstances affecting the PRC political, economic and social life.

The PRC laws and regulations governing the Company’s business operations are sometimes vague and uncertain. Any changes in such PRC laws and regulations may have a material and adverse effect on the Company’s business.

There are substantial uncertainties regarding the interpretation and application of PRC laws and regulations, including but not limited to the laws and regulations governing the Company’s business, or the enforcement and performance of the Company’s arrangements with customers in the event of the imposition of statutory liens, death, bankruptcy and criminal proceedings. The Company and any future subsidiaries are considered foreign persons or foreign funded enterprises under PRC laws, and as a result, the Company is required to comply with PRC laws and regulations. These laws and regulations are sometimes vague and may be subject to future changes, and their official interpretation and enforcement may involve substantial uncertainty.

The effectiveness of newly enacted laws, regulations or amendments may be delayed, resulting in detrimental reliance by foreign investors. New laws and regulations that affect existing and proposed future businesses may also be applied retroactively. The Company cannot predict what effect the interpretation of existing or new PRC laws or regulations may have on the Company’s businesses.

New labor laws in the PRC may adversely affect our results of operations.

On January 1, 2008, the PRC government promulgated the Labor Contract Law of the PRC, or the New Labor Contract Law. The New Labor Contract Law imposes greater liabilities on employers and significantly impacts the cost of an employer’s decision to reduce its workforce. Further, it requires certain terminations to be based upon seniority and not merit. In the event we decide to significantly change or decrease our workforce, the New Labor Contract Law could adversely affect our ability to enact such changes in a manner that is most advantageous to our business or in a timely and cost effective manner, thus materially and adversely affecting our financial condition and results of operations.

A slowdown or other adverse developments in the PRC economy may materially and adversely affect the Company’s customers, demand for the Company’s products and the Company’s business.

All of the Company’s operations are conducted in the PRC and all of its revenue is generated from sales in the PRC and we cannot assure you that our historic growth will continue. In addition, the PRC government exercises significant control over PRC economic growth through the allocation of resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies. Efforts by the PRC government to slow the pace of growth of the PRC economy could result in reduced demand for our products. A slowdown in overall economic growth, an economic downturn or recession or other adverse economic developments in the PRC may materially reduce the demand for our products and materially and adversely affect our business.

Inflation in the PRC could negatively affect our profitability and growth.

In recent years, the Chinese economy has experienced periods of rapid expansion and highly fluctuating rates of inflation. During the past ten years, the rate of inflation in China has been as high as 20.7% and as low as -2.2%. These factors have led to the adoption by the Chinese government, from time to time, of various corrective measures designed to restrict the availability of credit or regulate growth and contain inflation. High inflation may in the future cause the Chinese government to impose controls on credit and/or prices, or to take other action, which could inhibit economic activity in China, reduce demand, materially increase our costs, and harm the market for our products and our Company.

Governmental control of currency conversion may affect the value of an investment in the Company and may limit our ability to receive and use our revenues effectively.

At the present time, the Renminbi, the currency of the PRC, is not a freely convertible currency. We receive all of our revenue in Renminbi, which may need to be converted to other currencies, primarily U.S. dollars, in order to be remitted outside of the PRC. The PRC government imposes controls on the convertibility of Renminbi into foreign currencies and, in certain cases, the remittance of currency out of the PRC. Any future restrictions on currency exchanges may limit our ability to use revenue generated in Renminbi to fund any future business activities outside China or to make dividend or other payments in U.S. dollars.

Effective July 1, 1996, foreign currency “current account” transactions by foreign investment enterprises are no longer subject to the approval of State Administration of Foreign Exchange (“SAFE,” formerly, “State Administration of Exchange Control”), but need only a ministerial review, according to the Administration of the Settlement, Sale and Payment of Foreign Exchange Provisions promulgated in 1996 (the “FX regulations”). “Current account” items include international commercial transactions, which occur on a regular basis, such as those relating to trade and provision of services. Distributions to joint venture parties also are considered “current account transactions.” Non-current account items, including direct investments and loans, known as “capital account” items, remain subject to SAFE approval and companies are required to open and maintain separate foreign exchange accounts for capital account items. There are other significant restrictions on the convertibility of Renminbi, including that foreign-invested enterprises may only buy, sell or remit foreign currencies after providing valid commercial documents, at those banks in China authorized to conduct foreign exchange business. Under current regulations, we can obtain foreign currency in exchange for Renminbi from swap centers authorized by the government. While we do not anticipate problems in obtaining foreign currency to satisfy our requirements, we cannot be certain that foreign currency shortages or changes in currency exchange laws and regulations by the PRC government will not restrict us from freely converting Renminbi in a timely manner.

The fluctuation of the Renminbi may materially and adversely affect investments in the Company and the value of our securities.

As the Company relies principally on revenues earned in the PRC, any significant revaluation of the Renminbi may materially and adversely affect the Company’s cash flows, revenues and financial condition, and the price of our common stock may be harmed. The value of the Renminbi depends to a large extent on PRC government policies and the PRC’s domestic and international economic and political developments, as well as supply and demand in the local market. Since 1994, the official exchange rate for the conversion of Renminbi to the U.S. dollar had generally been stable and the Renminbi had appreciated slightly against the U.S. dollar. However, on July 21, 2005, the PRC government changed its policy of pegging the value of Renminbi to the U.S. dollar. Under the new policy, Renminbi may fluctuate within a narrow and managed band against a basket of certain foreign currencies. It is possible that the PRC government could adopt a more flexible currency policy, which could result in more significant fluctuation of Renminbi against the U.S. dollar. We can offer no assurance that Chinese Renminbi will be stable against the U.S. dollar or any other foreign currency.

For example, to the extent that the Company needs to convert U.S. dollars it receives from an offering of its securities into Renminbi for the Company’s operations, appreciation of the Renminbi against the U.S. dollar could have a material adverse effect on the Company’s business, financial condition and results of operations. Conversely, if the Company decides to convert its Renminbi into U.S. dollars for the purpose of making payments for dividends on its common stock or for other business purposes and the U.S. dollar appreciates against the Renminbi, the U.S. dollar equivalent of the Renminbi that the Company converts would be reduced. In addition, the depreciation of significant U.S. dollar denominated assets could result in a charge to the Company’s income statement and a reduction in the value of these assets.

The application of Chinese regulations relating to the overseas listing of Chinese domestic companies is uncertain, and we may be subject to penalties for failing to request approval of the Chinese authorities prior to listing our shares in the U.S.

On August 8, 2006, six Chinese government agencies, namely, the Ministry of Commerce, or MOFCOM, the State Administration for Industry and Commerce, or SAIC, the China Securities Regulatory Commission, or CSRC, the State Administration of Foreign Exchange, or SAFE, the State Assets Supervision and Administration Commission, or SASAC, and the State Administration for Taxation, or SAT, jointly issued the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, which we refer to as the “New M&A Rules”, which became effective on September 8, 2006. The New M&A Rules purport, among other things, to require offshore “special purpose vehicles,” that are (1) formed for the purpose of overseas listing of the equity interests of Chinese companies via acquisition and (2) are controlled directly or indirectly by Chinese companies and/or Chinese individuals, to obtain the approval of the CSRC prior to the listing and trading of their securities on overseas stock exchanges. The Company has not sought any approvals under the New M&A Rules.

There are substantial uncertainties regarding the interpretation, application and enforcement of the New M&A Rules and CSRC has yet to promulgate any written provisions or formally declare or state whether the overseas listing of a China-related company structured similar to ours is subject to the approval of CSRC. Any violation of these rules could result in fines and other penalties on our operations in China, restrictions or limitations on remitting dividends outside of China, and other forms of sanctions that may cause a material and adverse effect to our business, operations and financial conditions.

The new mergers and acquisitions regulations also established additional procedures and requirements that are expected to make merger and acquisition activities by foreign investors more time-consuming and complex, including requirements in some instances that the Ministry of Commerce be notified in advance of any change-of-control transaction in which a foreign investor takes control of a Chinese domestic enterprise that owns well-known trademarks or China’s traditional brands. We may grow our business in part by acquiring other businesses. Complying with the requirements of the new mergers and acquisitions regulations in completing this type of transactions could be time-consuming, and any required approval processes, including CSRC approval, may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share.

PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may subject our PRC resident shareholders or our PRC subsidiary to penalties, limit our ability to distribute capital to our PRC subsidiary, limit our Chinese subsidiary’s ability to distribute funds to us, or otherwise adversely affect us.

The PRC State Administration of Foreign Exchange (“SAFE”) issued a public notice in October 2005, or the SAFE Circular No. 75, requiring PRC residents to register with the local SAFE branch before establishing or controlling any company outside of China for the purpose of capital financing with assets or equities of PRC companies, referred to in the SAFE Circular No. 75 as special purpose vehicles, or SPVs. PRC residents who are shareholders of SPVs established before November 1, 2005 were required to register with the local SAFE branch before June 30, 2006. Further, PRC residents are required to file amendments to their registrations with the local SAFE branch if their SPVs undergo a material event involving changes in capital, such as changes in share capital, mergers and acquisitions, share transfers or exchanges, spin-off transactions or long-term equity or debt investments.

Our current shareholders and/or beneficial owners may fall within the ambit of the SAFE notice and be required to register with the local SAFE branch as required under the SAFE notice. If so required, and if such shareholders and/or beneficial owners fail to timely register their SAFE registrations pursuant to the SAFE notice, or if future shareholders and/or beneficial owners of our company who are PRC residents fail to comply with the registration procedures set forth in the SAFE notice, this may subject such shareholders, beneficial owners and/or our PRC subsidiary to fines and legal sanctions and may also limit our ability to contribute additional capital to our PRC subsidiary, limit our PRC subsidiary’s ability to distribute dividends to our company, or otherwise adversely affect our business. To date, our current shareholders and beneficial owners have not made any filings with the applicable SAFE branch.

We face uncertainty from the Circular on Strengthening the Administration of Enterprise Income Tax on Non-resident Enterprises’ Share Transfer, or Circular 698, released in December 2009 by China’s State Administration of Taxation, or the SAT, effective as of January 1, 2010.

Pursuant to the Circular 698, where a foreign investor transfers the equity interests of a Chinese resident enterprise indirectly via disposing of the equity interests of an overseas holding company, which we refer to as an Indirect Transfer, and such overseas holding company is located in a tax jurisdiction that: (i) has an effective tax rate less than 12.5% or (ii) does not tax foreign income of its residents, the foreign investor shall report such Indirect Transfer to the competent tax authority of the Chinese resident enterprise. The Chinese tax authority will examine the true nature of the Indirect Transfer, and if the tax authority considers that the foreign investor has adopted an abusive arrangement in order to avoid Chinese tax, they will disregard the existence of the overseas holding company and re-characterize the Indirect Transfer and as a result, gains derived from such Indirect Transfer may be subject to Chinese withholding tax at the rate of up to 10%. Circular 698 also provides that, where a non-Chinese resident enterprise transfers its equity interests in a Chinese resident enterprise to its related parties at a price lower than the fair market value, the competent tax authority has the power to make a reasonable adjustment to the taxable income of the transaction.

Since Circular 698 became effective on January 1, 2010, we cannot assure you that our reorganization will not be subject to examination by Chinese tax authorities or that any direct or indirect transfer of our equity interests in our Chinese subsidiary via our overseas holding companies will not be subject to a withholding tax of 10%.

We may be exposed to liabilities under the Foreign Corrupt Practices Act, and any determination that we violated the Foreign Corrupt Practices Act could harm our business.

Although we are currently not subject to these regulations, we anticipate that we will be subject to the United States Foreign Corrupt Practices Act, or FCPA, and other laws that prohibit U.S. companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. Our activities in China create the risk of unauthorized payments or offers of payments by one of the employees, consultants, sales agents or distributors of our Company, even though these parties are not always subject to our control. It is our policy to implement safeguards to discourage these practices by our employees. However, our existing safeguards and any future improvements may prove ineffective, and the employees, consultants, sales agents or distributors of our Company may engage in conduct for which we might be held responsible. Violations of the FCPA may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could adversely impact our business, operating results and financial condition.

Because the Company’s principal assets are located outside of the United States and the Company’s officers and directors reside outside of the United States, it may be difficult for investors to enforce their rights in the U.S. based on U.S. federal securities laws against the Company and the Company’s officers and directors or to enforce U.S. court judgments against the Company or them in the PRC.

The Company is located in the PRC and substantially all of its assets are located outside of the United States. The PRC does not have a treaty with United States providing for the reciprocal recognition and enforcement of judgments of courts. It may therefore be difficult for investors in the United States to enforce their legal rights based on the civil liability provisions of the United States federal securities laws against us in the courts of either the United States or the PRC and, even if civil judgments are obtained in courts of the United States, to enforce such judgments in PRC courts. Further, it is unclear if extradition treaties now in effect between the United States and the PRC would permit effective enforcement against us or our officers and directors of criminal penalties, under the United States federal securities laws or otherwise.

There are substantial uncertainties regarding the interpretation and application of PRC laws and regulations governing the validity and legality of call options which are held by our Chairman and others and there can be no assurance that the call options are not in breach of such laws and regulations.

Under a call option agreement with our Chairman Hailong Liu, Sherry Li, the holder of 11,556,288 shares of our Common Stock, has granted to Mr. Liu an option to purchase all of her shares over the course of two years in installments upon achievement of certain performance milestones by the Company. While we believe that this arrangement is not governed by PRC laws and regulations, there are substantial uncertainties regarding the interpretation and application of current or future PRC laws and regulations, including regulations governing the validity and legality of call options. Accordingly, we cannot assure you that PRC government authorities will not determine that the call option agreement is subject to PRC laws and regulations. If the call option agreement is deemed to be governed by PRC laws and regulations, our Chairman may be required to register with the local SAFE branch for his overseas direct investment in the Company. Failure to make such SAFE registration may subject our Chairman to fines and legal sanctions, and may also limit his ability to receive dividends from our PRC subsidiary and remit his proceeds from their overseas investment into the PRC as a result of foreign exchange control under PRC laws and regulations.

The cessation of tax exemptions and deductions by the Chinese government may affect our profitability.

On March 16, 2007, the National People’s Congress of China enacted a new tax law, or the New Tax Law, whereby both foreign investment enterprises, or FIEs, and domestic companies will be subject to a uniform income tax rate of 25%. On November 28 2007, the State Council of China promulgated the Implementation Rules of the New Tax Law, the “Implementation Rules”. Both the New Tax Law and the Implementation Rules became effective on January 1, 2008. Both the New Tax Law and the Implementation Rules provide that companies not entitled to tax exemption or relevant preferential tax treatment shall be subject to 17% value added tax. The Company recognizes its revenues net of value-added taxes (“VAT”). The Company is subject to VAT which is levied at a fixed annual amount. Currently, the Company is charged at a fixed annual amount of approximately $1,200 to cover all types of taxes including income taxes and VATs. This is approved by the PRC tax department. In the future, if the relevant tax authorities determine that the Company is not eligible for preferential treatment of VAT, loss of such preferential treatment may materially and adversely affect our profits, business and financial performance.

Risks Related To Our Common Stock

Our common stock is quoted on the OTCQB which may have an unfavorable impact on our stock price and liquidity.

Our common stock is quoted on the OTCQB. The OTCQB is a significantly more limited market than the New York Stock Exchange or NASDAQ. The quotation of our shares on the OTCQB may result in a less liquid market for our common stock, could depress the trading price of our common stock, could cause high volatility and price fluctuations, and could have a long-term adverse impact on our ability to raise capital in the future.

There is a limited trading market for our common stock.

There is currently a limited trading market on the OTCQB for our common stock, and there can be no assurance that more active limited trading market will develop or be sustained.

Certain of our existing stockholders will control the outcome of matters requiring stockholder approval, and their interests may not be aligned with the interests of our other stockholders.

Sherry Li is our majority stockholder of record, holding of record, 11,556,288 shares of our Common Stock, approximately 68.9 % of the outstanding shares of Common Stock as of December 31, 2012. As more particularly described in footnote (1) and (2) to the table contained in “Item 12. Security Ownership of Certain Beneficial Owners and Management,” Ms. Li has entered into a voting trust agreement with, and granted options to, our Chairman, Hailong Liu, to vote or purchase all 11,556,288 of ther shares held in her name. As a result, Mr. Liu has the ability to control the election of our directors and the outcome of corporate actions requiring stockholder approval, such as changes to our articles of incorporation and by-laws and a merger or a sale of our company or a sale of all or substantially all of our assets. This concentration of voting power and control could have a significant effect in delaying, deferring or preventing an action that might otherwise be beneficial to our other stockholders and be disadvantageous to our stockholders with interests different from those of our officers, directors and affiliates. Additionally, this significant concentration of share ownership may adversely affect the trading price for our Common Stock because investors often perceive disadvantages in owning stock in companies with controlling stockholders.

The elimination of monetary liability of the Company’s directors and officers under Nevada law and the existence of indemnification rights of the Company’s directors, officers and employees may result in substantial expenditures by the Company and may discourage lawsuits against the Company’s directors and officers.

Under Nevada law, a corporation may indemnify its directors, officers, employees and agents under certain circumstances, including indemnification of such persons against liability under the Securities Act of 1933, as amended (the “Securities Act”). In addition, a corporation may purchase or maintain insurance on behalf of its directors, officers, employees or agents for any liability incurred by him in such capacity, whether or not the corporation has the authority to indemnify such person. We do not currently maintain such insurance.

These provisions may eliminate the rights of the Company and its stockholders (through stockholder’s derivative suits on behalf of the Company) to recover monetary damages against a director, officer, employee or agent for breach of fiduciary duty. Insofar as indemnification for liabilities arising under the Securities Act may be provided for directors, officers, employees, agents or persons controlling an issuer pursuant to the foregoing provisions, the opinion of the Commission is that such indemnification is against public policy as expressed in the Securities Act, and is therefore unenforceable.

Shares eligible for future sale may adversely affect the market price of our common stock, as the future sale of a substantial amount of outstanding stock in the public marketplace could reduce the price of our common stock.

As of March 31, 2014, there were issued and outstanding (i) 16,775,113 shares of our Common Stock, and (ii) immediately exercisable warrants to purchase an aggregate of 2,903,528 shares of our Common Stock. We currently have obligations to register the resale of an aggregate of 2,623,178 shares of our Common Stock, including shares issuable upon exercise of warrants. Future sales of substantial amounts of our Common Stock in the trading market could adversely affect the market price of our Common Stock.

Our holding company structure may limit the payment of dividends.

We have no direct business operations, other than ownership of our subsidiaries. While we have no current intention of paying dividends, should we decide to do so in the future, as a holding company, our ability to pay dividends and meet other obligations depends upon the receipt of dividends or other payments from our operating subsidiaries and other holdings and investments. In addition, our operating subsidiaries may be subject to restrictions on their ability to make distributions to us, including restrictions resulting from restrictive covenants in loan agreements, restrictions on the conversion of local currency into U.S. dollars or other hard currency and other regulatory restrictions discussed below. If future dividends are paid in RMB, fluctuations in the exchange rate for the conversion of RMB into U.S. dollars may reduce the amount received by U.S. stockholders upon conversion of the dividend payment into U.S. dollars.

The Wholly-Foreign Owned Enterprise Law (1986), as amended, the Wholly-Foreign Owned Enterprise Law Implementing Rules (1990), as amended and the Company Law of China (2006) contain the principal regulations governing dividend distributions by wholly foreign-owned enterprises. Under these regulations, wholly foreign-owned enterprises may pay dividends only out of their accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. Our subsidiary in China is also required to set aside a certain amount of its accumulated profits each year, if any, to fund certain reserve funds. These reserves are not distributable as cash dividends except in the event of liquidation and cannot be used for working capital purposes. The Chinese government also imposes controls on the conversion of RMB into foreign currencies and the remittance of currencies out of China. We may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currency for the payment of dividends from the profits of our subsidiary in China.

Furthermore, if our subsidiary in China incurs debt in the future, the instruments governing the debt may restrict its ability to pay dividends or make other payments. If we are unable to receive all of the revenues from our operations through these contractual or dividend arrangements, we may be unable to pay dividends on our common stock. In addition, under current PRC law, we must retain a reserve equal to 10 percent of net income after taxes each year, with the total amount of the reserve not to exceed 50 percent of registered capital. Accordingly, this reserve will not be available to be distributed as dividends to our shareholders.

Provisions in our Articles of Incorporation could prevent or delay stockholders’ attempts to replace or remove current management or otherwise adversely affect the rights of the holders of our Common Stock.

Under our Articles of Incorporation, our Board of Directors is authorized to issue “blank check” preferred stock, with any designations, rights and preferences they may determine. Any shares of preferred stock that are issued are likely to have priority over our common stock with respect to dividend or liquidation rights. If issued, preferred stock could be used under certain circumstances as a method of discouraging, delaying or preventing a change in control, which could have discourage bids to acquire us and thereby prevent shareholders from receiving the maximum value for their shares. Though we have no present intention to issue any additional shares of preferred stock, there can be no assurance that preferred stock will not be issued at some time in the future.

ITEM 2. PROPERTIES

Set forth below is a table containing certain information concerning the location and area of our company-owned stores and warehouses and the terms under which such properties are leased.

Name

Area

(Square Meters)

Location

Landlord

Lease

Commencement

Date

Term

(years)

Rent per Year ($)

Guangcai Big Market Lease (Guangcai Big Market Store)

528

1,166

Foziling West Road, Lu’an City, Anhui Province

Haibo Liu

October 30, 2008

Renewed April 1, 2011

Decided to renew on April 1, 2014

3 years

$3,315

$114,286

Haomen Garden Lease (Hao Men Store)

Hao Men Garden road, Lu’an city, Anhui province

Haibo Liu

June 2010

Renewed March 15, 2011, terminated on March 15, 2014 and no plan to renew

1 year

3 years subject to renewal

$10,794

Development Zone Warehouse Lease

1437.50

Development Zone, East of Jing Er Road, North of Foziling Road, Lu’An City, Anhui Province

Benjun Zhang

Youbang Pharmaceuticals Co., Ltd.

April 1, 2010

Renewed April 1 2011

Renewed April 2013

1 year

2 years

$3,221

$21,905

Wangpai Warehouse

808

Liu Fo Road, Lu’An City, Anhui province

Haibo Liu

Jan 2008

Renewed January 1, 2013

3 years

2 years

$1,026

Set forth below is a table containing certain information concerning the use right of land we acquired and the terms of the land use right agreement we entered into.

Land

Area (Chinese Acres)

Location

Owner

Term

Total

Purchase

Price

Payments

for Land

Guoying Agricultural and Forestry Land

5006 (barren mountain)

Yumin Village, Sun Gang County, Jin An District

Yumin Village Committee

30 years

RMB 1,200/

Chinese Acre

$961,000

387 (barren mountain)

116(slope land)

20 years

RMB1,200/ Chinese Acre

RMB1,600/

Chinese Acre

$189,000

We believe that the foregoing properties are adequate for our present needs.

ITEM 3. LEGAL PROCEEDINGS

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such material legal proceedings or claims that we believe will have a material adverse affect on our business, financial condition or operating results.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable

PART II

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our Common Stock is quoted on the OTCQB under the symbol “CEHD.QB.”

The following table sets forth the high and low sales prices, without retail mark-up, mark-down or commission, of our Common Stock for the periods indicated, and may not represent actual transactions.

	High		Low
Fiscal Year 2012
First quarter	$	0.07	$	0.06
Second quarter	$	0.11	$	0.06
Third quarter	$	0.12	$	0.05
Fourth quarter	$	0.06	$	0.03

Fiscal Year 2013
First quarter	$	0.16	$	0.03
Second quarter	$	0.14	$	0.04
Third quarter	$	0.10	$	0.01
Fourth quarter	$	0.10	$	0.02

As of March 31, 2014, there were 16,775,113 shares of our Common Stock outstanding. Our shares of Common Stock are held by approximately 96 stockholders of record. The number of record holders was determined based on the records of our transfer agent and does not include beneficial owners of Common Stock whose shares are held in the names of various securities brokers, dealers, and registered clearing agencies.

Securities Authorized for Issuance under Equity Compensation Plans

We do not have any equity compensation plans.

Dividend Policy

There are no restrictions in our Articles of Incorporation or By-laws that prevent us from declaring dividends. The Nevada Revised Statutes, however, prohibit us from declaring dividends where after giving effect to the distribution of the dividend:

1.	we would not be able to pay our debts as they become due in the usual course of business, or

2.	our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of shareholders who have preferential rights superior to those receiving the distribution.

Because we are a holding company, we rely entirely on dividend payments from our direct wholly owned subsidiary, CEH Delaware, and in turn, the various direct and indirect subsidiaries of CEH Delaware, who may, from time to time, be subject to certain additional restrictions on its ability to make distributions to us. PRC accounting standards and regulations currently permit payment of dividends only out of accumulated profits, a portion of which must be set aside to fund certain reserve funds. Our inability to receive all of the revenues from our subsidiaries’ operations may create an additional obstacle to our ability to pay dividends on our Common Stock in the future. Additionally, because the PRC government imposes controls on the convertibility of RMB into foreign currencies and, in certain cases, the remittance of currency out of the PRC, shortages in the availability of foreign currency may occur, which could restrict our ability to remit sufficient foreign currency to pay dividends.

We currently intend to retain any future earnings to finance the development and growth of our business and do not anticipate paying cash dividends on our Common Stock in the foreseeable future, but will review this policy as circumstances dictate. If in the future we are able to pay dividends and determine it is in our best interest to do so, such dividends will be paid at the discretion of the Board of Directors after taking into account various factors, including our financial condition, operating results, capital requirements, restrictions contained in any future financing instruments and other factors the Board of Directors deems relevant.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of financial condition and results of operations relates to the operations and financial condition reported in the audited consolidated financial statements of the Company for the fiscal years ended December 31, 2013 and 2012, and should be read in conjunction with such consolidated financial statements and related notes included in this annual report. Those statements in the following discussion that are not historical in nature should be considered to be forward looking statements that are inherently uncertain. Actual results and the timing of the events may differ materially from those contained in these forward looking statements due to a number of factors, including those discussed in the “Cautionary Note on Forward Looking Statements” set forth elsewhere in this annual report.

Overview

China Electronics Holdings, Inc. (“CEHD Nevada” or the “Company”), formerly named Buyonate, Inc. and the public company, was incorporated in the State of Nevada on July 9, 2007. China Electronic Holdings, Inc (“CEH Delaware”) was organized on November 15, 2007 in Delaware as a development stage company. Lu’an Guoying Electronic Sales Co., Ltd., a domestic PRC corporation, (“Guoying”) was established on January 4, 2002 to engage in wholesale and retail of electronics consumer products to rural areas in An Hui province. Mr. Hailong Liu is the CEO and Chairman of Guoying. CEH Delaware owns 100% equity interest in CEH Nevada which owns 100% equity interest in Guoying. Mr. Hailong Liu is the CEO and Chairman of Guoying. In August 2012, Guoying and Mr. Hailing Liu contributed $945,054 (RMB 5,940,000) and $9,546 (RMB 60,000), representing 99% and 1% registered capital respective, to establish Lu’an Guoying Opto-Electronics Technology Co., Ltd. (“Opto-Electronics”). On June 29, 2013, the Company through its indirectly wholly owned subsidiary Guoying executed share transfer agreement (the “Transfer Agreement”) with Mr. Li Xiaoyu (“Buyer of Opto-Electronics”) to sell its 99% ownership interest in its subsidiary Opto-Electronics for total consideration of $959,752 (RMB 5,940,000).

Share Exchange between Guoying and CEH Delaware

The amount of RMB400, 000 was paid in February 2010 and the amount of RMB 600,000 was paid in July 2010 by CEH. The 40% and 60% Guoying shares were actually transferred from Guoying Shareholders to CEH Delaware on September 29, 2009 and November 25, 2010 respectively and registered with local government authority. As a result of the transactions, Guoying became a wholly foreign-owned subsidiary (“WFOE”) of CEH Delaware with registered capital of RMB 1,000,000 and subsequently increased its paid-in capital to $2,838,653 in 2010 subsequent to the 2010 PIPE financing. The transaction was approved by Ministry of Commerce of Anhui Province and registered with Administration and Industry of Commerce of Lu An City.

On January 4, 2010, the Board of Directors of CEH Delaware adopted a board resolution and resolved that it is in the best interest of CEH Delaware to issue 13,213,268 CEH Delaware shares pursuant to a call option agreementwhich provides that Sherry Li is the call option holder on behalf of Guoying Shareholders.

Mr. Hailong Liu indirectly controlled CEH Delaware on February 10, 2010 through the Call Option Agreement and Voting Trust Agreement, as of the same date that CEH Delaware issued 13, 213, 268 CEH Delaware Shares to Sherry Li, the nominee shareholder of Mr. Hailong Liu who is the nominee shareholder of former Guoying Shareholders in February 2010, as a result of the 2008 and 2009 Share Transfer Agreements.

The 2008 and 2009 Share Transfer Transaction was accounted for as a reverse acquisition at historical costs since Guoying Shareholders obtained control of 96.6% of outstanding CEH Delaware Shares through Sherry Li as nominee shareholder and Guoying management, Mr. Hailong Liu, became the management of CEH Delaware. Accordingly, the merger of Guoying into CEH Delaware was recorded as a recapitalization of Guoying, with Guoying being treated as the continuing entity. The historical financial statements presented are the financial statements of Guoying.

Share Exchange between CEH Delaware and CEHD Nevada

The Share Exchange resulted in (i) a change in our control with a shareholder of CEH Delaware owning approximately 82.2% of issued and outstanding shares of the Company’s common stock, including the shares of common stock sold to PIPE investors pursuant to the Subscription Agreement, (ii) CEH Delaware becoming our wholly-owned subsidiary, and (iii) appointment of Mr. Hailong Liu as the Company’s sole director, Chief Executive Officer, Chief Financial Officer, Secretary and Treasurer.

The exchange of shares pursuant to the July 10, 2010 Share Exchange was accounted for as a reverse acquisition at historical cost since CEH Delaware Shareholders obtained control of 82.2% of outstanding shares of the Company, including 68.9% of outstanding shares of the Company owned by Guoying Shareholders, and the management of CEH Delaware, Mr. Hailong Liu, became the management of the Company. Mr, Liu, who maintained control of Guoying prior to the mergers and subsequently, obtained control of CEH Delaware pursuant to 2009 Share Transfer, effectively obtained control of the Company upon completion of 2010 Share Exchange subject to the Voting Trust Agreement and Call Option Agreement. Accordingly, the merger of CEH Delaware into the Company was recorded as a recapitalization of CEH Delaware, with CEH Delaware being treated as the continuing entity. The historical financial statements presented are the financial statements of CEH Delaware which are in essence the financial statements of Guoying.

2008 and 2010 Bridge Financings

On January 30, 2008, CEH Delaware consummated a bridge financing in amount of $275,000 made pursuant to a Securities Purchase Agreement with a bridge investor, pursuant to which it sold 343,750 Series A Convertible Preferred Stock par value $0.00001 per share and common stock Warrant E to purchase one million shares of common stock (“CEH Delaware Shares”) at $1 per share. On January 5, 2010, CEH Delaware consummated a second bridge financing in amount of $550,000 made pursuant to Securities Purchase Agreements with four bridge investors (together collectively referred to as “Bridge Investors”), pursuant to which it sold 314,285 shares of CEH Delaware Shares, 314,285 common stock underlying Warrant A and 314,285 common stock underlying Warrant B. Upon consummation of 2008 and 2010 bridge financings, the Bridge Investors constitute 8.58% of issued and outstanding shares of CEH Delaware. Guoying Shareholders, Bridge Investors, China Financial Services and its affiliates are together referred to as CEH Delaware Shareholders.

2010 PIPE Transaction

On July 15, 2010 we consummated a Private Placement made pursuant to a Subscription Agreement dated as of July 9, 2010 (the “Purchase Agreement”) with certain of the Selling Stockholders, pursuant to which we sold units (the “Units”) to such Selling Stockholders. Each Unit consists of four shares of our Common Stock, a warrant to purchase one share of Common Stock at an exercise price of $3.70 per share (a “Series C Warrant”) and a warrant to purchase one share of Common Stock at an exercise price of $4.75 per share (a “Series D Warrant”). Additional Private Placements were consummated on July 26, 2010 and August 17, 2010. The aggregate gross proceeds from the sale of the Units was $5,251,548 and in such Private Placements, an aggregate of (a) 1,989,211 shares of our Common Stock, (b) Series C Warrants to purchase an aggregate of 497,303 shares of our Common Stock and (c) Series D Warrants to purchase an aggregate of 497,303 shares of our Common Stock was sold.

In August 2012, Guoying contributed $945,054 registered capital to Lu An Guoying Opto-Electronics Technology Co., Ltd. (“Opto-Electronics”) which is 99% owned by Guoying. Mr. Hailong Liu, the CEO and Chairman of the Company, contributed $9,546 registered capital in cash and owned 1% of Opto-Electronics.

Results of Operations

Wholesale and Retail of Consumer Electronics Appliances

We operated 1 company-owned store as of December 31, 2013. We do not expect to open or close any company-owned stores in the next three months after December 31, 2013, respectively.

As of December 31, 2013, we have exclusive franchise agreements with 133 exclusive franchise stores operated under the Guoying brand name (the “Exclusive Franchise Stores”). We entered into franchise agreements with 93, 91 and 25 new exclusive franchise stores in 2011, 2012 and 2013, respectively. We terminated our exclusive franchise agreement with 233, 131 and 198 exclusive franchise stores in 2011, 2012 and 2013, respectively. Both our Company-owned stores and our exclusive franchise stores only sell merchandise that we provide as their exclusive wholesaler, and such merchandise includes Guoying branded products as well as products from major wholesalers and manufacturers, such as Sony, Samsung and LG. We expect to open 10 and close 0 exclusive franchise stores in the next three months after December 31, 2013, respectively.

As of December 31, 2013, we have non-exclusive franchise agreements with 16 stores (the “Non-Exclusive Franchise Stores”) to which we provide Guoying branded merchandise on a non-exclusive wholesale basis. We entered into franchise agreements with 1, 20 and 1 non-exclusive franchise stores in 2011, 2012 and 2013, respectively. We terminated our non-exclusive franchise agreements with 362, 198 and 161 non-exclusive franchise stores in 2011, 2012 and 2013, respectively. We do not expect to open or close any non-exclusive franchise stores in the next three months after December 31, 2013, respectively.

We currently target customers in county, township and villages (the third, fourth and fifth tiers of markets) in rural areas in Anhui Province of China. Our distribution and sales network currently covers twelve districts and counties in Anhui province, namely Shou County, Shu City, Jin An, Yu An, Huo Shan, Jinn Sai, HuoQiu, Gu Shi, Ye Ji, Fei West, Fei East, and Huai Nan Districts. We expect to expand (withdraw) our business to the following districts in the next twelve months after December 31, 2013.

In 2013, our Board decided to terminate our exclusive and non-exclusive franchise agreements with a number of stores in order to strengthen and grow the Company’s business after concluding that the rapid growth of the number of stores serviced by the Company and aggressive business expansion had caused deficiencies in the Company’s internal controls and management. The following criteria was used to determine which stores (“Disqualified Exclusive Stores” and “Disqualified Non-Exclusive Stores”) to close (i) exclusive franchise stores that sold merchandise supplied by other wholesalers in breach of the exclusive franchise agreement; (ii) exclusive and non-exclusive franchise stores that failed to obey the Company’s pricing and resulting in lower profit margins; and (iii) stores located remotely Lu An City that result in higher transportation and logistics expenses to us. During the year ended December 31, 2012, we closed 0 company-owned stores, terminated our contracts with 131 exclusive franchise stores, and terminated our contracts with 198 non-exclusive franchise stores. During the year ended December 31, 2013, we closed 1 company-owned store, terminated our contracts with 206 exclusive franchise stores, and terminated our contracts with 159 non-exclusive franchise stores. We will continue to evaluate and decide if we need to terminate any more stores in the future.

When we use the terms "open" or "opened" in referring to an exclusive or non-exclusive franchise store, we mean that we had entered into a franchise agreement with such store and that it was in operation. When we use the terms "close," "closed" or "terminated" in reference to an exclusive or non-exclusive franchise store we mean that we had terminated our agreement with such store.

Logistics and Transportations

We entered into a Land Investment Agreement for 300 Chinese acres (164,983 square meters) land with Pingqiao Industrial Park. We originally planned to build our LED manufacturing facility on the land. We filed a proposal to obtain permission to enter into the LED manufacturing business with the Reform and Development Commission of Yu An District, Lu An City on May 13, 2011. We obtained a construction permit issued by the Housing and Urban-Rural Development Bureau of Yu An District, Lu An City on October 28, 2011 to build an LED manufacturing facility on the Pingqiao Land. Due to a change in the Company’s business plans, we determined to build logistic centers on 38,449 square meters of the land. Our plan was to construct four warehouses/logistics centers to provide distribution channels and logistics transportation services to deliver merchandise and Guoying branded products to counties, townships and villages in Hubei, Henan and Anhui provinces. We have started construction of four warehouses located on the Pingqiao land since October 2011. Each warehouse is 4,800 square meters.

In order to improve its cash flows from operations and working capital, the Company decided to redeploy its capital to meet the requirements of its business plan. In accordance with SFAS No. 144 (ASC 360-10), “Accounting for the Impairment or Disposal of Long-lived Assets” (“SFAS 144”), the Company classified its logistics and transportation centers, which were still under construction, as a component of discontinued operations on June 30, 2013. Accordingly, the assets associated with the logistics and transportation centers have been classified as long-term assets held for sale in the consolidated balance sheets. The long-term assets held for sale included: a) construction in progress, b) advances for the construction of property and equipment, and c) land use rights the Company acquired through Pingqiao Industrial Park in Lu’an City.

On July 28, 2013, the Company through its indirectly wholly owned subsidiary Guoying executed an asset sales agreement (the “Sales Agreement”) with Opto-Electronics. Pursuant to the Sales Agreement, Opto-Electronics agreed to purchase the Company’s assets associated with the logistics and transportation centers for total consideration of $3,239,810 (RMB 20,000,000) to be paid in three installments of: a) $809,952 (RMB 5,000,000), b) $1,619,906 (RMB 10,000,000) and c) $809,952 (RMB 5,000,000) due December 31, 2013, 2014 and 2015, respectively. In the event that Opto-Electronics does not consummate the payments, Opto-Electronics will be penalized 0.02% monthly of the outstanding balance. On December 26, 2013, the Company agreed Opto-Electronics' buyer Mr. Li Xiaoyu's request to extend the payment schedule. The first $809,952 (RMB 5,000,000) installment will be paid by May 2014.

The sales price of the 38,449 square meters land with land use rights certificate was appraised by an independent appraisal firm, Luan Century Price Evaluation Consultative Co., Ltd., on April 24, 2013. The appraisal firm concluded the fair market value of the 38,449 square meter portion of the land for which the Company has received a land use rights certificate with a term extending to l 2062 was $1,774,722 (RMB 11,073,378). The appraised value excluded the remaining 126,534 square meters of Pingqiao Land for which the Company has not received a land use rights certificate. Further, pursuant to Article 2 of the Sales Agreement, 1) Opto-Electronics is obligated to negotiate with the Yu An government to: a) obtain the land use rights certificate for the remaining 126,534 square meters of land and b) pay to the Company the agreed upon purchase price of the remaining land up to the amount which the Company has advanced to the Pingqiao Committee; and 2) upon completion of the logistics center by Opto-Electronics, the Company has a right of first refusal to lease the building at a favorable rent.

Constructions by the Company of its logistics center on the Pingqiao land resulted significant impairments due to the facts and circumstances that: a) the Company has decided to discontinue and sell its Opto-Electronics subsidiary, b) the construction caused a current period operating loss and negative cash flow combined with a history of such losses in the prior periods, c) a significant decrease in the market price of constructions in progress.

The Company assessed its long-term assets held for sale associated with the logistics and transportation centers based on above mentioned events and circumstances and determined that a write-down was necessary because the sales price of the long-term assets held for sale was significantly less than their carrying value. For the year ended December 31, 2013, the Company has recorded a $31,134,887 impairment loss in the consolidated statements of operations and comprehensive income.

The Company’s business strategy has been to become a significant retailer and wholesaler of consumer electronics and appliances to rural markets in China with a goal of having a national distribution network throughout China. The Company’s decision to discontinue and sell its Opto subsidiary and its logistics business on the Pingqiao land reflects its belief that: a) The industry in which Opto-Electronics was to compete has become more competitive and less profitable; b) the Company would like to continue using its working capital to focus on developing its wholesale and retail business; c) the Company does not have sufficient capital to complete the construction of its logistics facility.

Year ended December 31, 2013 Compared with Year ended December 31, 2012

Revenues

Our net revenue for the year ended December 31, 2013 was $26,211,901, a decrease of 54.9%, or $31,870,996, from $58,082,897 for the year ended December 31, 2012.

For the year ended December 31, 2013, net revenue from exclusive franchise stores was $20,968,736, a decrease of 38.8%, or $13,287,961, from $34,256,697 for the year ended December 31, 2012. There were 133 exclusive franchise stores as of December 31, 2013, compared to the 306 exclusive franchise stores as of December 31, 2012. The Company entered into franchise agreements with 25 exclusive stores and terminated its agreement with 198 exclusive stores in 2013. The decreased revenue is because of decreased number of exclusive stores and decreased sales from some product lines due to less demand and more competition.

For the year ended December 31, 2013, net revenue from non-exclusive stores was $1,917,498, a decrease of 88.1%, or $14,229,614, from $16,147,112 for the year ended December 31, 2012. There were 16 non-exclusive stores as of December 31, 2013, compared to the 176 non-exclusive stores as of December 31, 2012. The Company entered into a non-exclusive franchise agreement with 1 non-exclusive stores and terminated its agreement with 161 non-exclusive stores in 2013. The decreased revenue is because of decreased number of exclusive stores and decreased sales from some product lines due to less demand and more competition.

For the year ended December 31, 2013, net revenue from company owned stores was $3,325,667, a decrease of 56.7%, or $4,353,421, from $7,679,088 for the year ended December 31, 2012. The decreased revenue from company-owned stores was mainly because of decreased sales from some product lines due to less demand and more competition.

Revenue Classified by Store Type

Our disaggregation of revenue and cost of sales by each store type in the years ended December 31, 2013 and 2012 are as follows:

Year-Ended 12/31/2012	Non-Exclusive Franchise Stores		Exclusive Franchise Stores		Company-Owned Stores		Total
Revenue	$	16,147,112	$	34,256,697	$	7,679,088	$	58,082,897
Cost of Sales	$	14,940,751	$	31,656,380	$	6,883,229	$	53,480,360
Gross Profit	$	1,206,361	$	2,600,317	$	795,859	$	4,602,537

Year-Ended 12/31/2013	Non-Exclusive Franchise Stores		Exclusive Franchise Stores		Company-Owned Stores		Total
Revenue	$	1,917,498	$	20,968,736	$	3,325,667	$	26,211,901
Cost of Sales	$	1,776,574	$	19,373,992	$	3,011,869	$	24,162,435
Gross Profit	$	140,924	$	1,594,744	$	313,798	$	2,049,466

Sales and Average Per Store Sales of Same Stores

Same Stores are defined as stores that we opened or entered into franchise agreements with prior to 2012 and that have been in continuous operation as of December 31, 2013 and excludes stores that were newly opened or closed or with which we entered into or terminated franchise agreements in 2012 or 2013. Same Store Sales are defined as sales from the Same Stores.

Same Stores Sales in 2012 and 2013, and the increase or decrease experienced as a percentage of Same Store Sales are as follows:

Same Store Sales	Year-Ended 12/31/2013		Year-Ended 12/31/2012		Difference			Change
Non-Exclusive Franchise Stores	$	923,405	$	1,231,747	$	(308,342	)		(25	)%
Exclusive Franchise Stores	$	9,192,965	$	7,663,304	$	1,529,661			20	%
Company-Owned Stores	$	3,011,236	$	7,098,990	$	(4,087,754	)		(58	)%
Total	$	13,127,606	$	15,994,041	$	(2,866,435	)		(18	)%

The primary reason for the decrease in Same Stores Sales was the decrease in sales from non-exclusive stores (“Same Non-Exclusive Franchise Stores”), and decrease in sales from company-owned stores (“Same Company-Owned Stores”), offset by increase in sales from exclusive stores (“Same Exclusive Franchise Stores”). The increase in our sales in Same Exclusive Franchise stores is a result of better promotion during the year ended December 31, 2013 compared to the same period last year. The decrease of sales in Non-exclusive franchise stores and decrease in sales in Company-Owned stores are due to less demand and more competition. The Company estimates that the sales from same stores will amount to approximately $ 3.6 million during the three months ended March 31, 2014.

The number of Same Stores included in the calculation of average sales of per-store Same Stores is as follows:

Number of Same Stores	Year-Ended 12/31/2013		Year-Ended 12/31/2012
Non-Exclusive Franchise Stores		13		13
Exclusive Franchise Stores		64		64
Company-Owned Stores		1		1

The average sales per-store of Same Stores and its trend up or down are as follows:

Average Per-Store Same Store Sales	Year-Ended 12/31/2013		Year-Ended 12/31/2012		Difference			Change
Non-Exclusive Franchise Stores	$	71,031	$	94,750	$	(23,719	)		(25	)%
Exclusive Franchise Stores	$	143,640	$	119,739	$	23,901			20	%
Company-Owned Stores	$	3,011,236	$	7,098,990	$	(4,087,754	)		(58	)%

Sales and Average Per Store Sales of New Stores

New Stores are defined as stores that were newly opened or with which we entered into a franchise agreement in either 2013 or 2012 that are in existence under normal business operations as of December 31, 2013 and excluding stores that closed in 2013 or 2012 (“New Stores”). New Store Sales are defined as sales from the New Stores. 2012 New Store Sales refer to the sales from New Stores opened or with which we entered into a franchise agreement in 2012 and not closed in 2013. 2013 New Store Sales refer to the sales generated in 2013 from both New Stores opened or with which we entered into a franchise agreement in 2012 and 2013 that have not closed as of the end of December 31, 2013.

New Stores Sales operating in 2012 and 2013, and the increase experiences at a percentage are as follows:

New Store Sales	Year-Ended 12/31/2013		Year-Ended 12/31/2012		Difference		Change
Non-Exclusive Franchise Stores	$	413,955	$	154,377	$	259,578		168	%
Exclusive Franchise Stores	$	8,145,958	$	4,029,056	$	4,116,902		102	%
Company-Owned Stores	$	-	$	-	$	-		-	%
Total	$	8,559,913	$	4,183,433	$	4,376,480		105	%

The primary reason for the increase in New Stores Sales was the increase of sales from new exclusive franchise stores (the “New Exclusive Franchise Stores”), the increase in sales from new Non-Exclusive franchise stores (the “New Non-Exclusive Franchise Stores). The increase of sales from New Non-Exclusive Franchise Stores is due to there are 1 more New Non-exclusive Franchise Stores as of December 31, 2013 compared to December 31, 2012 and due to increased average per-store sales for New Non-Exclusive Franchise Stores. The increase of sales from exclusive stores is because there are 116 New Exclusive Franchise Stores as of December 31, 2013 compared to 91 as of December 31, 2012 and due to increased average per-store sales for New Exclusive Stores. The Company estimates that the sales from new stores will amount to approximately $820,000 during the next three months ended March 31, 2014.

The number of new stores included in the calculation of average per store sales of New Stores is as follows:

Number of New Stores	Year-Ended 12/31/2013		Year-Ended 12/31/2012
Non-Exclusive Franchise Stores		3		3
Exclusive Franchise Stores		69		69
Company-Owned Stores		-		-

The average sales per-store of New Stores and its trend as a percentage of New Store Sales are as follows:

Average Per-Store New Store Sales	Year-Ended 12/31/2013		Year-Ended 12/31/2012		Difference		Change
Non-Exclusive Franchise Stores	$	137,985	$	51,459	$	86,526		168	%
Exclusive Franchise Stores	$	118,057	$	58,392	$	59,665		102	%
Company-Owned Stores	$	-	$	-	$	-		-	%

Sales and Average Per Store Sales of Closed Stores

Closed Stores are defined as stores that were closed or with which the Company terminated its agreement in either 2013 or 2012 (the “Closed Stores”). Closed Store Sales are defined as sales from the Closed Stores. 2012 Closed Store Sales refer to sales generated in 2012 from stores whose franchise agreements were terminated or which closed in 2012 or 2013. 2013 Closed Store Sales refer to sales generated in 2013 from stores whose franchise agreements were terminated or which closed in 2013.

Closed Store Sales in 2012 and 2013, and the change experienced as a percentage are as follows:

Closed Store Sales	Year-Ended 12/31/2013		Year-Ended 12/31/2012		Difference			Change
Non-Exclusive Franchise Stores	$	580,138	$	14,760,988	$	(14,180,850	)		(96	)%
Exclusive Franchise Stores	$	3,629,813	$	22,564,336	$	(18,934,523	)		(84	)%
Company-Owned Stores	$	314,431	$	580,099	$	(265,668	)		(46	)%
Total	$	4,524,382	$	37,905,423	$	(33,381,041	)		(88	)%

The decrease in Closed Store Sales results from the fact that Stores whose franchise agreements were terminated or which closed in 2012 generated no sales for the Company in the year ended December 31, 2013. The Company resolved to close (i) exclusive franchise stores that sold merchandise supplied by other wholesalers in breach of the exclusive franchise agreement; (ii) exclusive and non-exclusive franchise stores that failed to obey the Company’s pricing strategies, resulting in lower profit margins; (iii) stores located remotely from Lu An City that resulted in higher transportation and logistics expenses to us; and (iv) stores that sold brands of merchandise not supplied by us. The Company estimates that the sales from closed stores will amount to $820,000 during the next three months ended March 31, 2014.

The number of closed stores included in the calculation of average per-store sales of Closed Stores is as follows:

Number of Closed Stores	Year-Ended 12/31/2013		Year-Ended 3/31/202
Non-Exclusive Franchise Stores		161		161
Exclusive Franchise Stores		226		226
Company-Owned Stores		1		1

The average per-store sales of Closed Stores and its trend of increase or decrease are as follows:

Average Per-Store Closed Store Sales	Year-Ended 12/31/2013		Year-Ended 12/31/2012		Difference			Change
Non-Exclusive Franchise Stores	$	3,603	$	91,683	$	(88,080	)		(96	)%
Exclusive Franchise Stores	$	16,061	$	99,842	$	(83,781	)		(84	)%
Company-Owned Stores	$	314,431	$	580,099	$	(265,668	)		(46	)%

Other information

The following is a summary of revenue by product line for the years ended December 31, 2013 and 2012:

	Year-Ended 12/31/2013		Year-Ended 12/31/2012
Solar Power Products	$	2,588,128	$	8,010,810
Air Conditioner	$	9,477,767	$	21,816,999
Refrigerator	$	2,364,418	$	7,412,664
TV	$	7,297,974	$	17,044,581
Washer	$	2,238,456	$	2,911,735
Others	$	2,245,158	$	886,108
Total	$	26,211,901	$	58,082,897

The decrease of revenue for the year ended December 31, 2013 compared to the same period last year is mainly due to the decreased sales from Solar-powered products, Air-conditioners, Refrigerators and TV.

Solar-powered products sales decreased by 5,422,682, or 67.7%, from $8,010,810 in the year ended December 31, 2012 to $2,588,128 in the same period in 2013. The decrease is mainly due to decreased solar-powered products sales of Huayang Brand. The decrease is due to increased market competition of solar-powered products, fulfilled market, and Huayang’s failure to increase its sales in the market. The Company predicts that the market demand will keep decreasing and that the sales of solar products will amount to approximately $574,000 in the three months ended March 31, 2014.

Air-conditioners sales decreased by $12,339,232, or 56.6%, from $21,816,999 in the year ended December 31, 2012 to $9,477,767 in the same period in 2013. The decrease is due to more competition, especially from Internet sales providers. The Company predicts that the market demand will keep decreasing and that the sales of air-conditioners products will amount to approximately $1,148,000 in the three months ended March 31, 2014.

Refrigerators sales decreased by $5,048,246, or 68.1%, from $7,412,664 in the year ended December 31, 2012 to $2,364,418 in the same period in 2013. The decrease is due to more competition, especially from Internet sales providers. The Company predicts that the market demand will keep decreasing and that the sales of refrigerators products will amount to approximately $410,000 in the three months ended March 31, 2014.

TV sales decreased by $9,746,607, or 57.2%, from $17,044,581 in the year ended December 31, 2012 to $7,297,974 in the same period in 2013. The decrease is due to more competition, especially from Internet sales providers. The Company predicts that the market demand will keep decreasing and that the sales of TV products will amount to approximately $410,000 in the three months ended March 31, 2014.

The decrease of these products are due to decreased demand and increased competition, especially from Internet sales providers.

Cost of Goods Sold

Our cost of goods sold for the year ended December 31, 2013 was $24,162,435, a decrease of $29,317,925, or 54.8%, compared to $53,480,360 for the year ended December 31, 2012. The decrease was mainly due to the decrease in sales.

	Year-Ended 12/31/2013		Year-Ended 12/31/2012

Cost of goods sold from non-exclusive stores	$	1,776,574	$	14,940,751
Cost of goods sold from exclusive franchise stores		19,373,992		31,656,380
Cost of goods sold from company-owned stores		3,011,869		6,883,229
Cost of goods sold	$	24,162,435	$	53,480,360

For the year ended December 31, 2013, cost of goods sold from non-exclusive stores was $1,776,574, a decrease of 88.1%, or $13,164,177, from $14,940,751 for the year ended December 31, 2012. The decrease was in line with the decrease in sales from non-exclusive stores.

For the year ended December 31, 2013, cost of goods sold from company-owned stores was $3,011,869, a decrease of 56.2%, or $3,871,360, from $6,883,229 for the year ended December 31, 2012. The decrease was in line with the decrease in sales from company-owned stores.

For the year ended December 31, 2013, cost of goods sold from exclusive franchise stores was $19,373,992, a decrease of 38.8%, or $12,282,388, from $31,656,380 for the year ended December 31, 2012. The decrease was in line with the decrease in sales from exclusive stores.

Cost of goods sold and Average Per Store Cost of goods sold of Same Stores

Same Store Cost of Goods Sold	Year-Ended 12/31/2013		Year-Ended 12/31/2012		Difference			Change
Non-Exclusive Franchise Stores	$	852,934	$	1,136,959	$	(284,025	)		(25	)%
Exclusive Franchise Stores	$	8,272,588	$	7,098,807	$	1,173,781			17	%
Company-Owned Stores	$	2,725,356	$	6,356,524	$	(3,631,168	)		(57	)%
Total	$	11,850,878	$	14,592,290	$	(2,741,412	)		(19	)%

The average cost of goods sold per-store of same Stores and its trend as a percentage of Same Store Cost of goods sold are as follows:

Average Per-Store Same Store Cost of Goods Sold	Year-Ended 12/31/2013		Year-Ended 12/31/2012		Difference			Change
Non-Exclusive Franchise Stores	$	65,610	$	87,458	$	(21,848	)		(25	)%
Exclusive Franchise Stores	$	129,259	$	110,919	$	18,340			17	%
Company-Owned Stores	$	2,725,356	$	6,356,524	$	(3,631,168	)		(57	)%

Cost of goods sold and Average Per Store Cost of goods sold of New Stores

New Store Cost of Goods Sold	Year-Ended 12/31/2013		Year-Ended 12/31/2012		Difference		Change
Non-Exclusive Franchise Stores	$	389,380	$	141,924	$	247,456		174	%
Exclusive Franchise Stores	$	7,755,264	$	3,696,208	$	4,059,056		110	%
Company-Owned Stores	$	-	$	-	$	-		-	%
Total	$	8,144,644	$	3,838,132	$	4,306,512		112	%

The average cost of goods sold per-store of New Stores and its trend as a percentage of New Store cost of goods sold are as follows:

Average Per-Store New Store Cost of Goods Sold	Year-Ended 12/31/2013		Year-Ended 12/31/2012		Difference		Change
Non-Exclusive Franchise Stores	$	129,793	$	47,308	$	82,485		174	%
Exclusive Franchise Stores	$	112,395	$	53,568	$	58,827		110	%
Company-Owned Stores	$	-	$	-	$	-		-	%

Cost of goods sold and Average Per Store Cost of goods sold of Closed Stores

Closed Store Cost of Goods Sold	Year-Ended 12/31/2013		Year-Ended 12/31/2012		Difference			Change
Non-Exclusive Franchise Stores	$	534,259	$	13,661,868	$	(13,127,610	)		(96	)%
Exclusive Franchise Stores	$	3,346,140	$	20,861,365	$	(17,515,225	)		(84	)%
Company-Owned Stores	$	286,513	$	526,705	$	(240,192	)		(46	)%
Total	$	4,166,912	$	35,049,939	$	(30,883,027	)		(88	)%

The average cost of goods sold per-store of Closed Stores and its trend as a percentage of Closed Store cost of goods sold are as follows:

Average Per-Store Closed Store Cost of Goods Sold	Year-Ended 12/31/2013		Year-Ended 12/31/2012		Difference			Change
Non-Exclusive Franchise Stores	$	3,318	$	85,924	$	(81,538	)		(96	)%
Exclusive Franchise Stores	$	14,806	$	89,151	$	(77,501	)		(84	)%
Company-Owned Stores	$	286,513	$	526,705	$	(240,192	)		(46	)%

Other information

The following is a summary of cost of goods sold by product line for the years ended December 31, 2013 and 2012:

	Year-Ended 12/31/2013		Year-Ended 12/31/2012
Solar Power Products	$	2,396,139	$	7,445,248
Air Conditioner	$	8,705,677	$	19,997,169
Refrigerator	$	2,171,898	$	6,834,769
TV	$	6,745,057	$	15,707,324
Washer	$	2,049,256	$	2,679,246
Others	$	2,094,408	$	816,604
Total	$	24,162,435	$	53,480,360

Gross Profit

Gross profit for the year ended December 31, 2013 was $2,049,466, a decrease of $2,553,071, or approximately 55.5%, compared to $4,602,537 for the year ended December 31, 2012.

For the year ended December 31, 2013, gross profit for non-exclusive stores was $140,924, a decrease of 88.3%, or $1,065,437, from $1,206,361 for the year ended December 31, 2012. The decrease was mainly due to the decreased sales from non-exclusive stores.

For the year ended December 31, 2013, gross profit for exclusive franchise stores was $1,594,744, a decrease of 38.7%, or $1,005,573, from $2,600,317 for the year ended December 31, 2012. The decrease was mainly due to the decreased sales from exclusive franchise stores.

For the year ended December 31, 2013, gross profit for company-owned stores was $313,798, a decrease of 60.6%, or $482,061, from $795,859 for the year ended December 31, 2012. The decrease was mainly due to decreased sales from company-owned stores.

Gross profit and Average Per Store Gross Profit of Same Stores

Same Store Gross Profit	Year-Ended 12/31/2013			Year-Ended 12/31/2012		Difference			Change
Non-Exclusive Franchise Stores	$	70,471	)	$	94,788	$	(24,317	)		(26	)%
Exclusive Franchise Stores	$	920,377		$	564,497	$	355,880			63	%
Company-Owned Stores	$	285,880		$	742,466	$	(456,586	)		(61	)%
Total	$	1,276,728		$	1,401,751	$	(125,023	)		(9	)%

The average gross profit per-store of same Stores and its trend as a percentage of Same Store gross profit are as follows:

Average Per-Store Same Store Gross Profit	Year-Ended 12/31/2013		Year-Ended 12/31/2012		Difference			Change
Non-Exclusive Franchise Stores	$	5,421	$	7,291	$	(1,870	)		(26	)%
Exclusive Franchise Stores	$	14,381	$	8,820	$	5,561			63	%
Company-Owned Stores	$	285,880	$	742,466	$	(456,586	)		(61	)%

Gross Profit and Average Per Store Gross Profit of New Stores

New Store Gross Profit	Year-Ended 12/31/2013		Year-Ended 12/31/2012		Difference		Change
Non-Exclusive Franchise Stores	$	24,575	$	12,453	$	12,122		97	%
Exclusive Franchise Stores	$	390,694	$	332,848	$	57,846		17	%
Company-Owned Stores	$	-	$	-	$	-		-	%
Total	$	415,269	$	345,301	$	69,968		20	%

The average cost of gross profit per-store of New Stores and its trend as a percentage of New Store gross profit are as follows:

Average Per-Store New Store Gross Profit	Year-Ended 12/31/2013		Year-Ended 12/31/2012		Difference		Change
Non-Exclusive Franchise Stores	$	8,192	$	4,151	$	4,041		97	%
Exclusive Franchise Stores	$	5,662	$	4,824	$	838		17	%
Company-Owned Stores	$	-	$	-	$	-		-	%

Gross Profit and Average Per Store Gross Profit of Closed Stores

Closed Store Gross Profit	Year-Ended 12/31/2013		Year-Ended 12/31/2012		Difference			Change
Non-Exclusive Franchise Stores	$	45,879	$	1,099,119	$	(1,053,240	)		(96	)%
Exclusive Franchise Stores	$	283,673	$	1,702,971	$	(1,419,298	)		(83	)%
Company-Owned Stores	$	27,918	$	53,394	$	(25,476	)		(48	)%
Total	$	357,470	$	2,855,484	$	(2,498,014	)		(87	)%

The average gross profit per-store of Closed Stores and its trend as a percentage of Closed Store gross profit are as follows:

Average Per-Store Closed Store Gross Profit	Year-Ended 12/31/2013		Year-Ended 12/31/2012		Difference			Change
Non-Exclusive Franchise Stores	$	285	$	6,827	$	(6,542	)		(96	)%
Exclusive Franchise Stores	$	1,255	$	7,535	$	(6,280	)		(83	)%
Company-Owned Stores	$	27,918	$	53,394	$	(25,476	)		(48	)%

Other information

The following is a summary of gross profit by product line for the years ended December 31, 2013 and 2012:

	Year-Ended 12/31/2013		Year-Ended 12/31/2012
Solar Power Products	$	191,989	$	565,562
Air Conditioner	$	772,090	$	1,819,830
Refrigerator	$	192,520	$	577,895
TV	$	552,917	$	1,337257
Washer	$	189,200	$	232,489
Others	$	150,750	$	65,504
Total	$	2,049,466	$	4,602,537

Gross Profit Rate

Gross profit rate for the year ended December 31, 2013 was 7.82%, a decrease of approximately 0.10%, compared to 7.92% for the year ended December 31, 2012. The decrease of gross profit rate is because the change of product portfolios in our sales during the year ended December 31, 2013 compared to the same period last year. The Company continues to improve managing its sales network as well as products offered, which continuously requires us to review pricing on existing products and existing sales channels. We expect that our pricing strategies will continue to evolve to market conditions and expect improvements to have a marginalizing effect on the noted increase in gross profit rates at exclusive franchise stores as changes in product offerings mature along with their related pricing strategies.

For the year ended December 31, 2013, gross profit rate for exclusive franchise stores was 7.61%, an increase of 0.02% compared to 7.59% for the year ended December 31, 2012. The increase of gross profit rate is because the change of product portfolios in our sales during the year ended December 31, 2013 compared to the same period last year.

For the year ended December 31, 2013, gross profit rate for non-exclusive stores was 7.35%, a decrease of 0.12%, compared to 7.47% for the year ended December 31, 2012. The decrease of gross profit rate is because the change of product mix in our sales during the year ended December 31, 2013 compared to the same period last year.

For the year ended December 31, 2013, gross profit rate for company-owned stores was 9.44%, a decrease of 0.92%, compared to 10.36% for the year ended December 31, 2012.

Operating Expenses

Operating expenses for the year ended December 31, 2013 were $7,336,920, an increase of $812,704, or 12.5%, from $6,524,216 for the year ended December 31, 2012.

Selling expenses for the year ended December 31, 2013 were $2,953,662, an increase of $866,874, or 41.5%, from $2,086,788 for the year ended December 31, 2012. The increase of selling expensesis primarily due to the increase of marketing and promotion expenses.

General and administrative expenses for the year ended December 31, 2013 were $2,197,117, a decrease of $772,792, or 26.0%, from $2,969,909 for year ended December 31, 2012. The decrease is mainly due to the decrease of overhead expenses related to drop of sales.

During the years ended December 31, 2013 and 2012, bad debt allowance for receivable in the amounts of $1,756,405 and $3,323,745 were recorded as operating expenses.

During the years ended December 31, 2013 and 2012, recovery of debt expenses of $1,513,706 and $1,856,226 were recorded as a reduction of operating expenses.

In October 2013, during the rainy season, our warehouse was leaking. Some of our inventories were damaged. In order to promote the sales of those malfunction items, the Company sold them in discount. The price difference between the product cost and fair market value was $1,891,388 (RMB 11,564, 893). At December 31, 2013, we did conclude that certain slow movement inventories in the amount of $52,054 (RMB 318,281) should be written down as obsolete products. Total $1,943,442 inventory loss of lower cost or market value was recorded under operating expenses for the year ended December 31, 2013.

Net Operating Loss

Our net operating loss for the year ended December 31, 2013 was $5,287,453, an increase of $3,365,775, or 175.1%, from $1,921,679 for the same period in 2012. The increase was mainly due to the decrease of sales and gross profit and the increase of operating expenses.

Other Income (Expense)

Our net other expense for the year ended December 31, 2013 was $31,090,759 , an increase of $31,911,385, or 3,888.7%, from net other income $820,626for the same period in 2012. The increase of other expense was mainly due to increase in impairment loss for long-term assets held for sale of $31,134,887 during the year ended December 31, 2013.

Provision for Income Taxes

Under the Income Tax Laws of the PRC, the Company’s subsidiaries are generally subject to an Enterprise Income Tax (EIT) at a standard rate of 25% on income reported in the statutory financial statements after appropriate tax adjustments. The State Tax Bureau of Lu’An City, Anhui province issued an income tax and VAT benefit approval to Guoying on September 2, 2007 providing that Guoying was eligible to enjoy a reduced tax rate valid from October 1, 2007 until December 31, 2010. On January 10, 2011, the State Tax Bureau of Lu’an City has renewed the term of tax benefit approval until December 31, 2013. However, according to the approval, Guoying has an option to pay more tax per year at its discretion. Therefore, currently, Guoying is charged at a fixed annual amount of reduced tax rate of no less than RMB 7,500 per year that changes to cover all types of taxes including income tax and VAT. There were no significant book and tax basis differences. On January 1, 2014, the State Tax Bureau of Lu'an City renewed the term of tax benefit approval. Pursuant to the renewal approval, Guoying will continue to enjoy the same tax benefits until December 31, 2017.

Net Income (Loss) Attributable to China Electronics Holdings, Inc.

Our net loss attributable to China Electronics Holdings, Inc. for the year ended December 31, 2013 was $36,378,221, an increase of $35,276,880, or 3203.1%, from net loss attributable to China Electronics Holdings, Inc. of $1,101,341 for the same period in 2012. The increase was mainly due to impairment loss for long-term assets held for sale during the year ended December 31, 2013.

Off-Balance Sheet Arrangements

There were no off-balance sheet arrangements during the year ended December 31, 2013 or during the year ended December 31, 2012 that have, or are reasonably likely to have, a current or future material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Liquidity and Capital Resources

As of December 31, 2013, we had cash and cash equivalents of $26,269, an increase of $16,804 from $9,465 as of December 31, 2012. We have historically funded our working capital needs with amounts from operations, advance payments from customers, bank borrowings, and capital from shareholders. Our working capital requirements are influenced by the level of our operations, and the timing of accounts receivable collections.

The following table sets forth a summary of our cash flows for the periods indicated:

	December 31, 2013			December 31, 2012
Net cash provided by/(used in) operating activities	$	1,681,464		$	(4,574,235)
Net cash provided by/ (used in) investing activities		(2,123	)		2,493,891
Net cash provided by/ (used in ) provided by financing activities		(1,936,786	)		1,904,771
Effect of rate changes on cash		274,220			13,200
Increase in cash and cash equivalents		16,804			(162,373	)
Cash and cash equivalents, beginning of periods		9,465			171,838
Cash and cash equivalents, end of periods	$	26,269		$	9,465

Net cash provided by operating activities was $1,681,464 for the year ended December 31, 2013, compared to net cash used in operating activities of $4,574,235 for the year ended December 31, 2012, an increase of $6,255,728. The increase of net cash provided by operating activities was primarily due to the significant decrease of advance to suppliers for purchase deposit of inventories.

On July 28, 2013, the Company through its indirectly wholly owned subsidiary Guoying executed an assets sales agreement (the “Sales Agreement”) with Opto-Electronics. Pursuant to the Sales Agreement, Opto-Electronics agreed to purchase the Company’s assets associated with the logistics and transportation centers for total consideration of $3,231,488 (RMB 20,000,000). Three installments in the amounts of: a) $807,872 (RMB 5,000,000), b) $1,615,744 (RMB 10,000,000) and c) $807,872 (RMB 5,000,000) are due by the ends of December 31, 2013, 2014 and 2015, respectively. In the event that Opto-Electronics does not consummate the payments, Opto-Electronics will be penalized 0.02% of the outstanding balance monthly. On December 26, 2013, the Company agreed Opto-Electronics' buyer Mr. Li Xiaoyu's request to extend the payment schedule. The first $809,952 (RMB 5,000,000) installment will be paid by May 2014.

Growth Strategies

We funded our growth strategy from our working capital and below are a summary of approximately how much we have spent in year 2013 and estimates for 2014 to achieve our growth strategies:

Growth Strategies	Spent in 2013		Estimate in 2014

Develop new company-owned stores	$	-		242,362

Develop new exclusive franchise stores	$	101,792		1,211,808

Develop new non-exclusive stores	$	4,847		48,472

Investing Activities

Net cash used in investing activities was $2,123 for the year ended December 31, 2013, compared $2,493,891provided by investing activities for the year ended December 31, 2012, a decrease of $2,496,014, or 100%. The decrease of net cash provided by investing activities was primarily because we collected $4.7 million proceeds from the cancellation of intangible assets purchase in the year ended December 31, 2012. The Company estimates that it will spend $5,000 and $0 on acquisition of property, and equipment and construction in progress for the next three months ended March 31, 2014.

The Company through its subsidiary Guoying entered into a land use rights purchase agreement in 2010 with Youbang Pharmaceuticals Co., Ltd., (“Youbang”). Pursuant to the purchase agreement, Youbang agreed to grant a 200 Chinese acres commercial use land use rights to Guoying for a consideration of $6,296,000 (RMB 40,000,000). Guoying planned to use the land to build its department office and a logistics center. During 2011, Guoying advanced $6,296,000 to Youbang and Youbang promised to transfer the land use rights certificate to Guoying by December 31, 2011 or no later than December 31, 2012. Subsequently, Youbang identified it had difficulty to transfer the land use rights certificate to Guoying because the PRC local government regulated the zoning plan of the land use rights. Therefore, Guoying and Youbang agreed to cancel the purchase agreement and Youbang committed to refund the payments to Guoying. $1,574,000 (RMB 10,000,000) and $4,722,000 (RMB 30,000,000) were refunded to Guoying in September 2011 and December 2012 respectively.

Financing Activities

Net cash used in financing activities was $1,936,786 for the year ended December 31, 2013, compared to $1,904,771 provided by for the year ended December 31, 2012. The decrease was mainly because we settled $3.2 million bank loans in the year 2013. The Company estimates that it will borrow (return) $1.3 million and return $0 additional loans for the next three months ended March 31, 2014.

Inflation and Changing Prices

In recent years, the Chinese economy has experienced periods of rapid expansion and high rates of inflation. Fluctuations in inflation in China compared to inflation in the U.S. is likely to result in fluctuations in the exchange rate between U.S. dollars and RMB, which will in turn affect our financial position and results of operations.

Contractual Obligations

Our significant contractual obligations are as follows:

The Company incurred rent expenses of $182,020 and $160,349 for the years ended December 31, 2013 and 2012, respectively.

The lease expenses for the next five years are estimated to be as follows:

2014	$	55,382
2015		5,642
2016		-
2017		-
2018		-
Total	$	61,024

Application of Critical Accounting Policies

Our financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. Critical accounting policies for us include revenue recognition, contingencies, income taxes, and stock-based compensation.

See Note 2, Summary of Significant Accounting Policies, to the Notes to Consolidated Financial Statements for a complete discussion of related accounting policies.

Revenue Recognition

a) Product Sales

The Company recognizes revenue from sale of electronic products. The Company's revenue recognition policies are in compliance with ASC 605 (previously Staff Accounting Bulletin 104). The Company recognizes all product sales revenue at the date of shipment to customers, when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectability is reasonably assured.

Electronic products are mainly sold to: a) exclusive franchise stores, b) non-exclusive franchise stores (collectively referred to as “co-operative stores”), and c) company-owned stores.

Product sales to all co-operative stores are recorded at the gross amount billed to the stores. The Company is not obliged to provide any further services to be entitled to payment by co-operative stores. The products are fully functional upon shipment. The Company’s products delivered to Co-operative stores will be checked on site by such stores and, once the products are accepted by such stores, co-operative stores will sign the acceptance notice. No return rights are granted to co-operative stores if such stores are unable to sell their purchase to the end users. Rewards or incentives given to co-operative stores are an adjustment of the selling prices. The consideration of the adjustment is characterized as a reduction of revenue when recognized in the income statement.

Additionally, product sales from company-owned stores are covered by the respective manufacturers’ return and warranty policies and the Company will receive full reimbursement for any costs associated with returns and warranty payments. Therefore, revenue from company-owned stores sales is presented as gross amount and the Company does not estimate deductions or allowance for company-owned stores sales return.

Payments received before all of the relevant criteria for revenue recognition satisfied are recorded as unearned revenue. Unearned revenue amounted to $0 and $430,833 as of December 31, 2013 and December 31, 2012, respectively.

Product sales revenue represents the invoice value of goods, net of the value-added taxes (“VAT”). The Company has been giving tax holiday status by the PRC local government. The Company benefits a reduced fixed annual tax rate in amount of no more than approximately $1,200 for both its income tax and value added taxes.

b) Franchise Fees

Franchise fees, including area development and initial franchise fee, continuing fee, and royalty (collectively referred to as “franchise fees”), are revenue received from co-operative stores. Initial fee is recorded as unearned franchise revenue when payment received from a franchisee. When the Company has fulfilled all significant obligations to establish a new franchise for the franchisee, unearned franchise revenue is recognized as franchise fees. Royalty is charged to the franchisee based on a percentage of the franchised store’s sales. Continuing fee and royalty revenue are recognized in the period earned.

Currently, in connection with promotional efforts aimed at network growth, the Company has ceased charging initial franchise fee, continuing fee and royalty to exclusive franchise stores. As such, total franchise fees for the year period ended December 31, 2013 and 2012 were $0.

Legal and Other Contingencies

The outcomes of legal proceedings and claims brought against us are subject to significant uncertainty. An estimated loss from a loss contingency such as a legal proceeding or claim is accrued by a charge to income if it is probable that an asset has been impaired or a liability has been incurred and the amount of the loss can be reasonably estimated. Disclosure of a contingency is required if there is at least a reasonable possibility that a loss has been incurred. In determining whether a loss should be accrued we evaluate, among other factors, the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss. Changes in these factors could materially impact our financial statements.

Income Taxes

The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in an entity’s financial statements or tax returns. We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Accounting literature also provides guidance on recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, and income tax disclosures. Judgment is required in assessing the future tax consequences of events that have been recognized in our financial statements or tax returns. Variations in the actual outcome of these future tax consequences could materially impact our financial statements.

Stock-Based Compensation

Stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the requisite service period. Determining the fair value of stock-based awards at the grant date requires judgment, including estimating expected dividends. In addition, judgment is also required in estimating the amount of stock-based awards that are expected to be forfeited. If actual results differ significantly from these estimates, stock-based compensation expense and our results of operations could be impacted.

Recent Accounting Pronouncements

The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on its financial condition or the results of its operations.

On July 18, the FASB issued ASU No. 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carry forward, a Similar Tax Loss, or a Tax Credit Carry forward Exists (a consensus of the FASB Emerging Issues Task Force)” (“ASU 2013-11”). The ASU presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carry forward, a Similar Tax Loss, or a Tax Credit Carry forward Exists (a consensus of the FASB Emerging Issues Task Force), which requires an entity to present an unrecognized tax benefit as a reduction of a deferred tax asset for an net operating loss (NOL) carry forward, or similar tax loss or tax credit carry forward, rather than as a liability when (1) the uncertain tax position would reduce the NOL or other carry forward under the tax law of the applicable jurisdiction and (2) the entity intends to use the deferred tax asset for that purpose. The ASU does not require new recurring disclosures. It is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2013 and December 15, 2014, for public and nonpublic entities, respectively. Early adoption and retrospective application are permitted. Management does not expect the adoption of this standard will have a significant effect on the Company’s consolidated financial position or results of operations.

In February 2013, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2013-02, which requires entities to present information about significant items reclassified out of accumulated other comprehensive income (loss) by component either on the face of the statement where net income is presented or as a separate disclosure in the notes to the financial statements. This ASU is effective for the Company in the first quarter of fiscal 2014. Management does not expect the adoption will have a significant impact on the Company’s consolidated financial statements.

In July 2012, the FASB issued ASU 2012-02, which amends how companies test for impairment of indefinite-lived intangible assets. The new guidance permits a company to assess qualitative factors to determine whether it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount as a basis for determining whether it is necessary to perform the annual impairment test. The ASU is effective for the Company in the first quarter of fiscal 2014. Management does not expect the adoption of this standard will have a significant effect on the Company’s consolidated financial position or results of operations.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements and supplementary data of China Electronics Holdings, Inc. required by this item are described in Item 15 of this Annual Report on Form 10-K and are presented beginning on page F-1.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures as required under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to ensure that information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As of December 31, 2013, the Company’s management carried out an evaluation, under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of its disclosure controls and procedures. Based on the foregoing, its Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were not effective as of December 31, 2013. The Company does not have a Chief Financial Officer that is familiar with the accounting and reporting requirements of a U.S. publicly-listed company, nor does it have a financial staff with accounting and financial expertise in U.S. generally accepted accounting principles (“US GAAP”) reporting. In addition, the Company does not believe it has sufficient documentation concerning its existing financial processes, risk assessment and internal controls. There are also certain deficiencies in the design or operation of the Company’s internal control over financial reporting that has adversely affected its disclosure controls that may be considered to be “material weaknesses.”

We plan to designate individuals responsible for identifying reportable developments and to implement procedures designed to remediate the material weakness by focusing additional attention and resources on our internal accounting functions. However, the material weakness will not be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected. Such limitations include the fact that human judgment in decision-making can be faulty and that breakdowns in internal control can occur because of human failures, such as simple errors or mistakes or intentional circumvention of the established process.

Management’s Report on Internal Control Over Financial Reporting.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, our principal executive officer and principal financial officer and effected by our Board of Directors, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

●

Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

●

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

●

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, our internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As of December 31, 2013, the Company’s management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2012, based on criteria for effective internal control over financial reporting described in “ Internal Control—Integrated Framework “ issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management’s assessment included an evaluation of the design of the Company’s internal control over financial reporting and testing of the operational effectiveness of its internal control over financial reporting.

Based on this assessment, management determined that as of December 31, 2013, the Company’s internal controls over financial reporting were not effective. The Company does not have a Chief Financial Officer that is familiar with the accounting and reporting requirements of a U.S. publicly-listed company, nor does it have a financial staff with accounting and financial expertise in US GAAP reporting. Instead, the Company relies on the expertise and knowledge of external financial advisors in US GAAP conversion who helped prepare and review the consolidated financial statements. In addition, the Company does not believe it has sufficient documentation concerning its existing financial processes, risk assessment and internal controls. There also are certain deficiencies in the design or operation of the Company’s internal control over financial reporting that may be considered to be “material weaknesses.”

Changes in Internal Control over Financial Reporting

Since the first quarter of our 2011 fiscal year, we began to implement the remedial measures, including but without limitations to: standardizing the Company’s definitions of each type of stores, time of signing franchise agreement and beginning of time of generation of revenue from stores; standardizing our non-accounting information system into electronic format; hiring financial professionals and supporting staff in both U.S. and China; intensifying the interaction and cooperation between our U.S. and China offices; enhancing the design and documentation of our internal control policies and procedures to ensure appropriate controls over our financing reporting.

Except as described above, there were no changes in the Company’s internal control over financial reporting that occurred during the last quarter of 2013 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Directors and Executive Officers

The following table sets forth the name and position of each of our current executive officers and directors.

Name	Age	Position

Hailong Liu	41	Chairman, President, CEO and CFO

Haibo Liu	38	Director and Vice President

Hailong Liu became our Chairman, President, CEO and CFO on July 15, 2010. Mr. Liu has been the CEO of Lu’an Guoying Electronic Sales Co., Ltd. since May 2007. From 2004 to 2007, Mr. Liu was the general manager of Guoying (Formerly named as Lu’an Dongshen Electronic Sales Co., Ltd.). From 2001 to 2003, Mr. Liu was the general manager of Lu’an Xianglong Electronic Sales Co., Ltd. From 1997 to 2001, Mr. Liu was the associate manager of Operation Department of Lu’an Xianglong Electronic Sales. From 1994 to 1996, Mr.Liu was the manager of Nanjing Branch of Shanghai Kaili Company. From 1990 to 1994, Mr. Liu was the manager of Shenzhen Branch of Shanghai Kaili Company. Mr. Liu got his Executive MBA Degree on Marketing and Sales from Beijing University in 2005. He is currently studying for his Ph.D. degree in economics at Tsinghua University in China. We believe his knowledge of our company and years of experience in our industry give him the ability to guide our company as a director and executive officer.

Haibo Liu became our Director and Vice President on July 15, 2010. Mr.Liu has been the general manager of sales of Lu’an Guoying Electronic Sales Co., Ltd. since September 2007. From January 2004 to September 2007, Mr. Liu was the shareholder and general manager of Guoying. From 2000 to 2003, Mr. Liu was the general manager of Lu’an Shengtang Sales Co., Ltd. From 1992 to 1999, Mr. Liu established Lu’an Haifeng Sales Operation Department. Haibo Liu and Hailong Liu are brothers. Mr. Liu has been enrolled as a part-time student in Shenzhen Jucheng Business School since October 2007, majoring in marketing and sales. We believe we can benefit from his intimate knowledge of the business and operations of Guoying and his leadership skills.

Family Relationships

Hailong Liu and Haibo Liu are brothers.

The legal representative of CEH is Chuan Fa Liu, who is Hailong Liu,’s Father.

Board Committees

We currently do not have standing audit, nominating or compensation committees. Currently, our entire board of directors is responsible for the functions that would otherwise be handled by these committees. We intend, however, to establish an audit committee, a nominating committee and a compensation committee of the board of directors as soon as practicable. We envision that the audit committee will be primarily responsible for reviewing the services performed by our independent auditors, evaluating our accounting policies and our system of internal controls. The nominating committee would be primarily responsible for nominating directors and setting policies and procedures for the nomination of directors. The nominating committee would also be responsible for overseeing the creation and implementation of our corporate governance policies and procedures. The compensation committee will be primarily responsible for reviewing and approving our salary and benefit policies (including stock options), including compensation of executive officers.

Our board of directors has not made a determination as to whether any member of our board of directors is an audit committee financial expert. Upon the establishment of an audit committee, the board will determine whether any of the directors qualify as an audit committee financial expert.

Director Compensation

The Company did not have any non-executive directors during 2013. The Company does not pay any compensation to its non-officer directors.

Code of Ethics

Our board of directors will adopt a new code of ethics that applies to all of our directors, officers and employees, including our principal executive officer, principal financial officer and principal accounting officer. The new code will address, among other things, honesty and ethical conduct, conflicts of interest, compliance with laws, regulations and policies, including disclosure requirements under the federal securities laws, confidentiality, trading on inside information, and reporting of violations of the code.

ITEM 11. EXECUTIVE COMPENSATION

Summary Compensation Table

Our current executive officers do not receive any compensation for serving as executive officers of China Electronics; however, they are compensated by and through Guoying. The following table sets forth information concerning cash and non-cash compensation paid by Guoying to our Hailong Liu, our chief executive officer, for services rendered in all capacities, during the periods indicated. None of our executive officers received compensation in excess of $100,000 for either of those two years.

Name and Principal Position	Year Ended	Salary ($)		Bonus ($)		Stock Awards ($)		Option Awards ($)		Non- Equity Incentive Plan Compensation ($)		Non- Qualified Deferred Compensation Earnings ($)		All Other Compensation ($)		Total ($)
Hailong Liu,	2013	$	161,812													$	161,812
Chairman, President, CEO and CFO	2012	$	48,530		—		—		—		—		—		—	$	48,530

Equity Compensation Plans

The Company does not have any equity compensation plans.

Employment Agreements

We have not entered into employment agreements with any of our officers or other key employees.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth information regarding beneficial ownership of our Common Stock as of March 31, 2014 (i) by each person who is known by us to beneficially own more than 5% of our Common Stock; (ii) by each of the officers and directors of the Company and (iii) by all of officers and directors of the Company as a group. Beneficial Ownership is determined in accordance with the rules of the Securities and Exchange Commission (the “SEC” or the “Commission”) and generally includes voting or investment power with respect to securities. The percent of class has also been determined in accordance with rules of the Commission. For purposes of computing such percentage, as of March 31, 2014, there were 16,775,113 shares of our Common Stock outstanding. Unless otherwise provided, the address of each person is G-8, Guangcai Big Market, Foziling West Road, Lu’An City, Anhui Province, 237001.

Name of Beneficial Owner	Positions with the Company	Amount and Nature of Beneficial Ownership			Percent of Class
Directors and Officers :
Hailong Liu (1)(2)(3)	Chairman, CEO, President and CFO		11,556,288			68.9	%
Haibo Liu	Director and Vice President		0			--
All officers and directors as a group (2 persons named above)			11,556,288			68.9	%
Owners of More than 5% of Shares:
Professional Capital Partners, Ltd. 1400 Old Country Road Suite 206, Westbury NY 11590			1,463,750	(4)		8.7	%

_____

(1) Hailong Liu is the Voting Trustee under a Voting Trust Agreement dated as of July 9, 2010 between Sherry Li and Hailong Liu pursuant to which Hailong has the right to vote an aggregate of 11,556,288 shares of Common Stock which were issued to Sherry Li.

(2) Ms. Sherry Li is the nominee shareholder on behalf of Mr. Hailong Liu. Pursuant to that certain Call Option Agreement between Ms. Sherry Li and Hailong Liu, Hailong Liu has been granted an option to purchase from Ms. Li for $0.0001 per share, up to 11,556,288 shares of our Common Stock held by Ms. Li. As of March 31, 2014,

11,556,288 Option Shares have been assigned to Mr. Liu from Sherry Li.

(3) Under a Stock Option Agreement dated as of July 9, 2010, Hailong Liu has granted to American Capital Partners, LLC an option to purchase an aggregate of 757,576 shares of Common Stock at an exercise price of $2.64 per share. The option becomes exercisable in two installments of 378,788 shares each, the first installment of which is exercisable from October 9, 2010 to April 8, 2011 and the second installment of which is exercisable from April 9, 2011 to October 8, 2011. To date, no options have been exercised under the Stock Option Agreement.

(4) Includes 1,000,000 shares issuable upon exercise of currently exercisable warrants.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Transactions with Related Persons

On July 9, 2010, Hailong Liu (“Mr. Liu”), our Chairman, President, Chief Executive Officer and Chief Financial Officer, entered into a Call Option Agreement with Sherry Li (the “Ms. Li”), the holder of 11,556,288 shares of our Common Stock (the “Option Shares”). Under the Call Option Agreement, the Mr. Liu shall have right and option to acquire 50% of Option Shares upon first filing of a quarterly report on Form 10-Q with the SEC on August 23, 2010 following the execution of the Share Exchange Agreement and 50% of the remaining Option Shares 2 years after such filing by August 23, 2012. Pursuant to the terms of the Call Option Agreement, Sherry Li transferred to Mr. Liu 5,778,144 Option Shares in August 2010.

We entered into a lease agreement with Mr. Haibo Liu on January 1, 2008 to rent Wangpai warehouse of 808 square meters located in Liu Fo Road to storage Huangming solar products. The term of the lease is from 2008 to 2011 and the rent is RMB 6, 464 per year (RMB 8 per square meters).The Company has renewed the lease with Mr. Haibo Liu and the term is from January 1, 2013 to December 31, 2014.

We currently lease for our two company-owned stores. We entered into a lease agreement with Mr. Haibo Liu to rent first floor for our Guangcai Big Market Store on October 30, 2008 for 3 years until 2011 at a rent of RMB 20, 882 per year. We renewed the lease to rent all four floors for our Guangcai Big Market Store on April 1, 2011 for another 3 years until 2014 subject to renewal at a rent of RMB 720,000 per year. We entered into a lease agreement with Mr. Haibo Liu in 2010 for our Hao Men store for one year and renewed our lease on March 15, 2011 for another 3 years until 2014 subject to renewal at a rent of RMB 68,000 per year.The Company decides to renew the lease on April 1, 2014.

We entered into a loan agreement with the CEO on August 28, 2012 in amount of $838,865 for operating advances and the loan carried an annual 10% interest rate, collateralized with the CEO's personal property. The loan was to mature on May 27, 2013. As of December 31, 2013, our CEO has repaid this loan to the Company.

Director Independence

We currently do not have any independent directors, as the term “independent” is defined by the Rule 5605(a)(2) of the Marketplace Rules of the NASDAQ Stock Market.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table sets forth the aggregate fees billed to the Company for the fiscal years ended December 31, 2013 and 2012 by its independent registered public accounting firm, UltraCPA LLP and Kabani & Company, Inc. respectively.

	Fiscal Year Ended December 31,
	2013		2012
Audit Fees (1)	$	56,000	$	110,000
Audit-Related Fees
Total Audit and Audit-Related Fees	$		$
Tax Fees
All Other Fees
Total	$	56,000	$	110,000

______

(1)	Audit fees represent the aggregate fees billed or to be billed for professional services rendered for the audit of our annual consolidated financial statements and review of interim quarterly financial statements included in our quarterly reports on Form 10-Q.

Policy on Audit Committee Pre-Approval of Services Provided by Independent Registered Public Accounting Firm

We currently do not have a standing audit committee. Currently, our entire board of directors is responsible for the functions that would otherwise be handled by this committee. The board of directors pre-approves all audit and non-audit services provided by the independent registered public accounting firm, other than de minimis non-audit services, and does not engage the independent registered public accounting firm to perform the specific non-audit services proscribed by law or regulation.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a)	The financial statements beginning on page F-1 are filed as a part of this report.

(b)	See the Exhibit Index attached hereto for a list of the exhibits filed or incorporated by reference as a part of this report.

CHINA ELECTRONICS HOLDINGS, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Report of Independent Registered Public Accounting Firm		F-2-F3

Consolidated Balance Sheets		F-4

Consolidated Statements of Operations and Comprehensive Income		F-5

Consolidated Statements of Stockholders’ Equity		F-6

Consolidated Statements of Cash Flows		F-7

Notes to Consolidated Financial Statements		F-8 - F-31

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of

China Electronics Holdings, Inc.

We have audited the accompanying consolidated balance sheet of China Electronics Holdings, Inc. as of December 31, 2013, and the related consolidated statements of operations and comprehensive income, stockholders’ equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of China Electronics Holdings, Inc. as of December 31, 2013, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 18 to the consolidated financial statements, the Company has incurred substantial losses and has an accumulated deficit, all of which raise substantial doubt about its ability to continue as a going concern. These consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ UltraCPA LLP

Millbrae, California

March 31, 2014

F-2

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders of

China Electronics Holdings, Inc. and Subsidiaries

We have audited the accompanying balance sheets of China Electronics Holdings, Inc. and Subsidiaries as of December 31, 2012 and 2011, and the related statements of income, stockholders' equity, and cash flows for the two years period ended December 31, 2012 and 2011. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of China Electronics Holdings, Inc. and Subsidiaries as of December 31, 2012 and 2011, and the results of their operations and their cash flows for the two years period ended December 31, 2012 and 2011, in conformity with U.S. generally accepted accounting principles.

As discussed in note 21, the Company restated its financial statements for the year ended December 31, 2012.

/s/ Kabani & Company, Inc.

Certified Public Accountants

Los Angeles, California

April 16, 2013 except for note 6, 8 and 21 which are as of May 22, 2013

F-3

CHINA ELECTRONICS HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2013 AND 2012


			12/31/2013		12/31/2012
Assets	Note
Current assets
Cash and cash equivalents		2E	$	26,269	$	9,465
Accounts receivable, net		2F, 3		1,099,118		2,331,713
Other receivable		4		3,544,942		593,850
Related party receivable		5		-		642,000
Inventory		2G		5,449,341		956,779
Advance to suppliers		2H, 6		7,432,827		17,532,739
Prepaid expenses				226,204		-
Total current assets				17,778,701		22,066,546

Non-current assets
Property, plant and equipment, net		2I, 7		57,890		342,705
Construction in progress		2K		-		8,196,005
Intangible assets, net		2J, 8		-		15,381,250
Advance		2H, 6		-		13,954,191
Security deposit				32,315		-
Total non-current assets				90,205		37,874,151

Total Assets			$	17,868,906	$	59,940,697

Liabilities and Stockholders’ Equity

Liabilities
Current liabilities
Bank loans		9	$	-	$	1,605,000
Accounts payable and accrued expenses		10		203,316		224,884
Taxes payable				-		103
Other payable		11		54,144		3,512,045
Related party payable		5		-		964,156
Unearned revenue				-		430,833
Total current liabilities				257,460		6,737,021

Total Liabilities			$	257,460	$	6,737,021

			12/31/2013			12/31/2012
Stockholders’ Equity	Note
Preferred stock, $0.0001 par value; 50,000,000 shares authorized; 0 shares issued and outstanding as of December 31, 2013 and 2012 respectively		12	$	-		$	-
Common stock, $0.0001 par value; 150,000,000 shares authorized; 16,775,113 shares issued and outstanding as of December 31, 2013 and 2012 respectively		12		1,678			1,678
Additional paid-in capital				15,341,710			15,341,710
Statutory reserve		2W		3,849,684			3,849,684
Retained earnings/(accumulated deficit)				(6,768,251	)		29,609,970
Accumulated other comprehensive income		2X		5,186,625			4,391,004
Total Stockholders’ Equity				17,611,446			53,194,046
Non-controlling interest				-			9,630
Total Equity				17,611,446			53,203,676

Total Liabilities and Stockholders’ Equity			$	17,868,906		$	59,940,697

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

F-4

CHINA ELECTRONICS HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012

Sales revenue	Note		2013			2012
Revenue from exclusive franchise stores			$	20,968,736		$	34,256,697
Revenue from non-exclusive franchise stores				1,917,498			16,147,112
Revenue from company owned stores				3,325,667			7,679,088
Sales revenue		2M		26,211,901			58,082,897
Cost of goods sold
Cost from exclusive franchise stores				19,373,992			31,656,380
Cost from non-exclusive franchise stores				1,776,574			14,940,751
Cost from company owned stores				3,011,869			6,883,229
Cost of goods sold		2N		24,162,435			53,480,360
Gross profit				2,049,466			4,602,537

Operating expenses
Selling expenses		2O		2,953,662			2,086,788
General and administrative expenses		2P		2,197,117			2,969,909
Bad debt allowance for accounts receivable				1,756,405			-
Bad debt allowance for other receivable				-			2,214,245
Bad debt recovery for accounts receivable				(368,886	)		(1,856,226	)
Bad debt allowance/(recovery) for due from related party				(1,144,820	)		1,109,500
Inventory loss of lower cost or net realizable value				1,943,442			-
Total operating expenses				7,336,920			6,524,216
Operating loss				(5,287,454	)		(1,921,679	)

Other income/(expenses)
Other income				2,383			917,359
Other expense				(1,325	)		(203,865	)
Interest income				480,109			107,132
Interest expense				(165,783	)		-
Impairment loss for plant and equipment		2K		(271,256	)		-
Impairment loss for long-term assets held for sale		2K		(31,134,887	)		-
Total other income/(expenses)				(31,090,759	)		820,626

Loss from continued operation before income taxes				(36,378,213	)		(1,101,053	)
Provision for income taxes		2S, 14		-			288
Loss from discontinued operation, net of tax		17		(8	)		-
Net loss			$	(36,378,221	)	$	(1,101,341	)
Other comprehensive income		2X
Foreign currency adjustment				795,621			1,044,003
Comprehensive income			$	(35,582,600	)	$	(57,338	)

Earnings per share		2V,16
- Basic: - Net Loss			$	(2.17	)	$	(0.07	)
- Loss from continued operation				(2.17	)		(0.07	)
- Loss from discontinued operation				-			-
- Diluted : - Net loss			$	(2.17	)	$	(0.07	)
- Loss from continued operation				(2.17	)		(0.07	)
- Loss from discontinued operation				-			-
Weighted average shares outstanding
- Basic				16,775,113			16,775,113
- Diluted				16,775,113			16,775,113

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

F-5

CHINA ELECTRONICS HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012

										Retained			Accumulated
	Number				Additional					Earnings			Other					Non-
	Of		Common		Paid in		Statutory			(Accumulated			Comprehensive					controlling
	Shares		Stock		Capital		Reserve			Deficit)			Income		Total			Interest
Balance at January 1, 2012		16,775,113	$	1,678	$	15,341,710	$	3,958,981		$	30,602,014		$	3,347,001	$	53,251,385		$	-
Net income		-		-		-		-			(1,101,341	)		-		(1,101,341	)		-
Appropriations of retained earnings		-		-		-		(109,297	)		109,297			-		-			-
Share issuance of subsidiary		-		-		-		-			-			-		-			9,630
Foreign currency translation adjustment		-		-		-		-			-			1,044,003		1,044,003			-
Balance at December 31, 2012		16,775,113	$	1,678	$	15,341,710	$	3,849,684		$	29,609,970		$	4,391,004	$	53,194,046		$	9,630

Balance at January 01, 2013		16,775,113	$	1,678	$	15,341,710	$	3,849,684		$	29,609,970		$	4,391,004	$	53,194,046		$	9,630
Net income		-		-		-		-			(36,378,221	)		-		(36,378,221	)		-
Appropriations of retained earnings		-		-		-		-			-			-		-			-
Discontinued operations of subsidiary		-		-		-		-			-			-		-			(9,630	)
Foreign currency translation adjustment		-		-		-		-			-			795,621		795,621			-
Balance at December 31, 2013		16,775,113	$	1,678	$	15,341,710	$	3,849,684		$	(6,768,251	)	$	5,186,625	$	17,611,446		$	-

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

F-6

CHINA ELECTRONICS HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012

	2013			2012

Net Loss	$	(36,378,221	)	$	(1,101,341	)
Adjustments to reconcile net income to net cash from operations:
Bad debt provision		1,756,405			1,467,519
Impairment loss for plant and equipment		271,256			1,048
Impairment loss for long-term assets held for sale		31,134,887			-
Inventory loss of lower cost or net realizable value		1,943,442			-
Amortization and depreciation		294,081			705,585
Changes in operating assets and liabilities:
Accounts and other receivables		(203,988	)		5,211,651
Inventories		(6,436,004	)		868,626
Advance to suppliers		10,099,912			(10,767,133	)
Prepaid expenses		(226,204	)		-
Accounts payables and accruals		(143,240	)		(1,385,656	)
Unearned revenue		(430,833	)		425,465
Net cash provided by/(used in) operating activities		1,681,493			(4,574,235	)

Cash flows from investing activities
Proceeds from disposal of plant and equipment					121,553
Payments for purchase of plant and equipment		(2,123	)		-
Payments for construction in progress		-			(2,349,662	)
Proceeds from cancellation of intangible assets purchase		-			4,722,000
Net cash provided by/(used in) investing activities		(2,123	)		2,493,891

Cash flows from financing activities
Contribution from non-controlling interest		-			9,630
Payments to non-controlling interest		(9,630	)		-
Proceeds from bank loans		1,605,000			1,585,000
Repayments of bank loans		(3,210,000	)		-
Proceeds from related party loans		642,000			952,141
Payments of related party loans		(964,156	)		(642,000	)
Net cash provided by/(used in) financing activities		(1,936,786	)		1,904,771

Effect of foreign currency translation on cash		274,220			13,200

Net increase/(decrease) of cash and cash equivalents		16,804			(162,373	)
Cash and cash equivalents at beginning of year		9,465			171,838
Cash and cash equivalents at end of year	$	26,269		$	9,465

Supplementary cash flow information:
Interest received	$	480,109		$	-
Interest paid	$	165,783		$	94,059
Tax paid	$	103		$	288

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

F-7

CHINA ELECTRONIC HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.	Nature of Operations

China Electronics Holdings, Inc. (“CEHD Nevada” or the “Company”), formerly named Buyonate, Inc. and the public company, was incorporated in the State of Nevada on July 9, 2007. China Electronic Holdings, Inc. (“CEH Delaware”) was incorporated on November 15, 2007 in Delaware as a development stage company. Lu’an Guoying Electronic Sales Co., Ltd. (“Guoying”), a domestic PRC corporation, was established on January 4, 2002 to engage in wholesale and retail of electronics consumer products to rural areas in Anhui province. The Company owns 100% equity interest in CEH Delaware which owns 100% equity interest in Guoying. Mr. Hailong Liu is the CEO and Chairman of Guoying. In August 2012, Guoying and Mr. Hailing Liu contributed $945,054 and $9,546, representing 99% and 1% registered capital respectively, to establish Lu’an Guoying Opto-Electronics Technology Co., Ltd. (“Opto-Electronics”). On June 29, 2013, the Company through its indirectly wholly owned subsidiary Guoying executed a share transfer agreement (the “Transfer Agreement”) with Mr. Li Xiaoyu (“Buyer of Opto-Electronics”) to sell its 99% ownership interest in Opto-Electronics for a total consideration of $962,224 (RMB 5,940,000).

Share Exchange between Guoying and CEH Delaware

On December 26, 2008, pursuant to the Share Transfer Agreement entered into (the “2008 Share Transfer”) between the shareholders of Guoying (the “Guoying Shareholders”) and CEH Delaware, CEH Delaware agreed to acquire 40% of the outstanding equity securities of Guoying (the “Guoying Shares”) from Guoying Shareholders in consideration for RMB 400,000, contribution of registered capital from CEH Delaware to Guoying.

The amount of RMB400, 000 was paid in February 2010 and the amount of RMB 600,000 was paid in July 2010 by CEH Delaware. The 40% and 60% Guoying Shares were actually transferred from Guoying shareholders to CEH Delaware on September 29, 2009 and November 25, 2010 respectively and registered with local government authority. As a result of the transactions, Guoying became a wholly foreign-owned subsidiary (“WFOE”) of CEH Delaware with registered capital of RMB 1,000,000 and subsequently increased to RMB 19,302,687 subsequent to the 2010 PIPE financing. The transaction was approved by Ministry of Commerce of Anhui Province and registered with Administration and Industry of Commerce of Lu An City.

On January 4, 2010, the Board of Directors of CEH Delaware adopted a board resolution and resolved that it was in the best interest of CEH Delaware to issue 13,213,268 CEH Delaware Shares pursuant to a call option agreement, which provided that Sherry Li was the call option holder on behalf of Guoying Shareholders.

In February 2010, as a result of 2008 and 2009 Share Transfer Agreements, CEHD Delaware issued 13,213,268 CEH Delaware Shares, constituting 96.6% of its issued and outstanding shares to Sherry Li, the nominee shareholder on behalf of Mr. Hailong Liu who was the nominee shareholder on behalf of Guoying Shareholders concurrent with the 2008 and 2009 Shares Transfers.

On February 10, 2010, Mr. Hailong Liu entered into a call option agreement (the “2010 February Call Option Agreement”) and voting trust agreement (the “2010 February Voting Trust Agreement) with Sherry Li. Pursuant to the 2010 February Call Option and Voting Trust Agreements, Ms. Sherry Li agreed to serve as nominee shareholder for Mr. Liu and grant Mr. Hailong Liu the voting power and call option to acquire 13,213,268 CEH Delaware shares held by Ms. Sherry Li. The Voting Trust Agreement provided that Ms. Sherry Li should not vote or dispose of the respective portion of the shares of common stock without Mr. Liu’s prior written consent and was obligated to transfer Option Shares to Mr. Liu at nominal consideration of par value $0.001 per share. The Voting Trust Agreements further provided that, Sherry Li, the nominee shareholder, had no decision power to vote or dispose of the Option Shares without Mr. Liu’s consent.

Mr. Hailong Liu indirectly controlled CEH Delaware on February 10, 2010 through the Call Option Agreement and Voting Trust Agreement, as of the same date CEH Delaware issued 13,213,268 CEH Delaware shares to Sherry Li.

The 2008 and 2009 Share Transfer Transaction was accounted for as a reverse acquisition at historical costs since Guoying Shareholders obtained control of 96.6% of outstanding CEH Delaware shares through Sherry Li and Guoying management, Mr. Hailong Liu, became the management of CEH Delaware. Accordingly, the merger of Guoying into CEH Delaware was recorded as a recapitalization of Guoying, with Guoying being treated as the continuing entity. The historical financial statements presented were the financial statements of Guoying.

F-8

2008 and 2010 Bridge Financings

On January 30, 2008, CEH Delaware consummated a bridge financing in amount of $275,000 made pursuant to a Securities Purchase Agreement with a bridge investor, pursuant to which it sold 343,750 Series A Convertible Preferred Stock par value $0.00001 per share and Warrants E to purchase one million shares of common stock (“CEH Delaware Shares”) at $1 per share. On January 5, 2010, CEH Delaware consummated a second bridge financing in amount of $550,000 made pursuant to Securities Purchase Agreements with four bridge investors (together collectively referred to as “Bridge Investors”), pursuant to which it sold 314,285 shares of CEH Delaware shares, 314,285 common stock underlying Warrants A and 314,285 common stock underlying Warrants B. Upon consummation of 2008 and 2010 bridge financings, the Bridge Investors constitute 8.58% of issued and outstanding shares of CEH Delaware. Guoying Shareholders, Bridge Investors, China Financial Services and its affiliates were together referred to as CEH Delaware Shareholders.

Share Exchange between CEH Delaware and CEHD Nevada

On July 9, 2010, the Company entered into a Share Exchange Agreement (the “Share Exchange Agreement”) with CEH Delaware and CEH Delaware Shareholders. Pursuant to the Share Exchange Agreement, on July 15, 2010, 10 CEH Delaware Shareholders transferred 100% of the outstanding shares of common stock and preferred stock and 100% of the warrants to purchase common stock of CEH Delaware held by them, in exchange for an aggregate of 13,785,902 newly issued shares of the Company’s common stock and warrants to purchase an aggregate of 1,628,570 shares of the Company's common stock. The shares of the Company’s common stock acquired by the CEH Delaware shareholders in such transactions constitute approximately 82.2% of the Company’s issued and outstanding common stock (including 68.9% owned by former Guoying Shareholders) giving effect to the share and warrant exchange and the sale of the Company’s common stock pursuant to the Subscription Agreement, but not including any outstanding purchase warrants to purchase shares of the Company’s common stock, including the warrants issued pursuant to the Subscription Agreement.

The Share Exchange resulted in (i) a change in control with a shareholder of CEH Delaware owning approximately 82.2% of issued and outstanding shares of the Company’s common stock, including the shares of common stock sold to PIPE investors pursuant to the Subscription Agreement, (ii) CEH Delaware becoming CEHD Nevada's wholly-owned subsidiary, and (iii) appointment of Mr. Hailong Liu as the Company’s sole director, Chief Executive Officer, Chief Financial Officer, Secretary and Treasurer.

The exchange of shares pursuant to the July 10, 2010 Share Exchange was accounted for as a reverse acquisition at historical cost since CEH Delaware Shareholders obtained control of 82.2% of outstanding shares of the Company, including 68.9% of outstanding shares of the Company owned by Guoying shareholders, and the management of CEH Delaware, Mr. Hailong Liu, became the management of the Company. Mr, Liu, who maintained control of Guoying prior to the mergers and subsequently, obtained control of CEH Delaware pursuant to 2009 Share Transfer, effectively obtained control of the Company upon completion of 2010 Share Exchange subject to the Voting Trust Agreement and Call Option Agreement. Accordingly, the merger of CEH Delaware into the Company was recorded as a recapitalization of CEH Delaware, with CEH Delaware being treated as the continuing entity. The historical financial statements presented were the financial statements of CEH Delaware which were in essence the financial statements of Guoying.

F-9

2010 PIPE Transaction

On July 15, 2010, the Company consummated a Private Placement made pursuant to a Subscription Agreement dated as of July 9, 2010 (the “Purchase Agreement”) with certain of the Selling Stockholders, pursuant to which the Company sold units (the “Units”) to such Selling Stockholders. Each Unit consists of four shares of the Company’s common stock, a warrant to purchase one share of common stock at an exercise price of $3.70 per share (a “Series C Warrants”) and a warrant to purchase one share of common stock at an exercise price of $4.75 per share (a “Series D Warrants”). Additional Private Placements were consummated on July 26, 2010 and August 17, 2010. The aggregate gross proceeds from the sale of the Units was $5,251,548 and in such Private Placements, an aggregate of (a) 1,989,211 shares of the Company’s common stock, (b) Series C Warrants to purchase an aggregate of 497,303 shares of the Company’s common stock and (c) Series D Warrants to purchase an aggregate of 497,303 shares of the Company’s common stock was sold.

2.	Significant Accounting Policies

Basis of Presentation

The accompanying consolidated balance sheets and the related consolidated statements of operations and comprehensive income, stockholders’ equity and cash flows are prepared in accordance with the accounting principles generally accepted in the United States of America (“US GAAP”). The financial statements and notes are representations of management.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its subsidiaries CEH Delaware and Guoying. All significant inter-company transactions and balances, such as due to/due from, investment in subsidiaries, and subsidiaries’ capitalization have been eliminated.

Use of Estimates

The preparation of the financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates and assumptions are used for, but not limited to: (1) allowance for trade receivables, (2) economic lives of property, plant and equipment, (3) asset impairments, and (4) contingency reserves. Management makes these estimates using the best information available at the time the estimates are made; however actual results could differ materially from those estimates

F-10

Economic and Political Risks

The Company’s operations are conducted in the People’s Republic of China (the “PRC”). Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC economy.

Cash and Cash Equivalents

The Company classifies the following instruments as cash and cash equivalents: cash on hand, unrestricted bank deposits, and all highly liquid investments purchased with original maturities of three months or less. Deposits held in financial institutions in the PRC are not insured by any government entity or agency.

Accounts Receivable

The Company extends unsecured credit to its customers in the ordinary course of business but mitigates the associated risks by performing credit checks and actively pursuing past due accounts. Accounts receivable are recognized and carried at gross invoice amounts less an allowance for any doubtful accounts. Management understands and expects the Company’s credit sales outstanding to vary from period to period within a given range. Based on the credit terms the Company grants to its customers, management expects credit sales outstanding not to exceed 90 days by any large margin. Management regularly reviews outstanding accounts and provides an allowance for doubtful accounts for any specific aging of receivables over 90 days. In a situation, management uses all its efforts, such as having internal staff call for payment, hiring collection agent and filing legal pledge to pursue payment, but the collection is no longer probable. The Company will then write off the accounts receivable amounts against the allowance for doubtful accounts. On the contrary, if payment is collected in subsequent period, management will reverse the doubtful accounts. Subsequent cash recovery is recognized as income in the period it occurs.

Inventory

Inventory is stated at the lower of cost determined on a weighted average basis or net realizable value. Cost of inventory is comprised of the cost of acquiring electronic products sold plus freight in cost incurred acquiring the electronic products. The freight in cost is allocated to the individual product purchased. Net realizable value is equal to the estimated selling price, in the ordinary course of business, less estimated selling costs, completion and disposal. Inventory as of December 31, 2013 and December 31, 2012 consisted of:

Description		As of December 31, 2013				As of December 31, 2012
Electronic products		$	5,449,341			$	956,779

Advances

Advance represents the cash paid in advance to suppliers for: a) the purchase of inventory and b) the construction of property and plant. Advance related to the purchase of inventory is classified as current assets. Advance to suppliers for the construction of property and plant is classified as non-current assets.

Property, Plant and Equipment

Property, plant and equipment are carried at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the useful lives of the assets. Major renewals are capitalized and depreciated; maintenance and repairs that do not extend the life of the respective assets are charged to expense as incurred. Upon disposal of assets, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is included in income. Depreciation related to manufacturing is reported in cost of revenue. Depreciation not related to manufacturing is reported in selling, general and administrative expenses. Estimated useful lives of the property, plant and equipment are as follows:

Furniture	5 years
Motor vehicles	10 years
Office equipment	5 years

F-11

Intangible Assets

The Company individually tracks and accounts for each intangible asset. Each intangible asset is carried at its original acquisition cost less accumulated amortization. The Company provides amortization for each intangible asset using the straight line method over its estimated useful life.

Construction in Progress

During 2011, the Company started construction of four buildings, 4,800 square meters each and 19,200 square meters in total, on its Pingqiao land. These four buildings were intended to be used as warehouses to build the Company’s logistic center. The Company did not have sufficient capital to continue building the construction and has disposed the construction of logistics center on July 28, 2013. See Note 17 – Discontinued Operations.

Accounting for the Impairment or Disposal of Long-Lived Assets

The Company has adopted Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS 144”), ASC 360-10-35. The Company evaluates its long-lived assets for impairment when indicators of impairment are present or annually, whichever occurs sooner. When there are indications of impairment, the Company will record a loss to statement of operations equal to the difference between the carrying value and the fair value of the long-lived assets. The Company typically, but not exclusively uses the expected future discounted flows method to determine fair value of long-lived assets subject to impairment. The fair value of long-lived assets that held for disposition will include the cost of disposal.

The Company’s long-lived assets are grouped by their presentation on the consolidated balance sheets, and further segregated by their operating and asset type. Long-lived assets subject to impairment include property, plant and equipment, intangible assets, construction in progress, and advance for the construction of property and equipment. The Company makes its determinations based on various factors that impact those assets.

At December 31, 2013, the Company assessed its long-lived assets and has concluded that cash flows generated by its ongoing business, which incorporate significant use of the property, plant and equipment, did not provide sufficient profit. Therefore, the Company recorded $271,256 impairment loss for its plant and equipment. Simultaneously, the Company also recorded $31,134,887 impairment loss for long-term assets held for sale. See Note 17 – Discontinued Operations.

M.	Revenue Recognition

Product Sales

F-12

Electronic products are mainly sold to: a) exclusive franchise stores, b) non-exclusive franchise stores (collectively referred to as “co-operative stores”), and c) company-owned stores.

Product sales revenue represents the invoice value of goods, net of the value-added taxes (“VAT”). The Company has been giving tax holiday status by the PRC local government. The Company benefits a reduced fixed annual tax rate in amount of no less than RMB 7,500 (approximately $1,200) for both income tax and VAT.

b)	Franchise Fees

Currently, in connection with promotional efforts aimed at network growth, the Company has ceased charging initial franchise fee, continuing fee and royalty to co-operativestores. As such, total franchise fees for the years ended December 31, 2013 and 2012 were $0.

N.	Cost of Goods Sold

Cost of goods sold consists primarily of the costs of the products sold, including freight in charges on those goods.

O.	Selling Expenses

Selling expenses include costs incurred in connection with performing general selling activities, such as sales commissions, freight-out charges, marketing and advertisement costs, shipping and handling costs, and sales salaries.

F-13

P.	General and Administrative Expenses

General and administrative expenses include the costs of non-selling related salaries and related employee benefits, professional service fees, rent and depreciation, warehouse costs, office supplies, bad debt expense, and amortization of intangible assets.

Q.	Shipping and Handling Costs

ASC 605-45-20 (formerly EITF No. 00-10, “Accounting for Shipping and Handling Fees and Costs”) establishes standards for the classification of shipping and handling costs. Shipping and Handling costs include shipping and handling costs related to shipping and handling the Company's products from warehouses to buyers’ designated locations at exclusive or non-exclusive franchise stores, and company owned stores (collectively referred to as the “Stores”). Shipping and handling costs that are billed to Stores are classified as revenue, while those costs not billed to Stores are classified as selling expenses. Shipping and handling costs billed to customers and included within revenue for the years ended December 31, 2013 and 2012 were $0 because the Company did not charge any shipping and handling expenses from Stores. Shipping and handling costs not billed to Stores and included within selling expenses for the years ended December 31, 2013 and 2012 were $474,312 and $863,798 respectively.

R.	Advertising Costs

The Company records advertising costs as incurred. Advertising costs in the amounts of $1,262,791 and $107,323 were included in selling expenses for the years ended December 31, 2013 and 2012 respectively.

S.	Income Taxes

The Company accounts for income taxes in accordance with ASC 740 (formerly SFAS 109, “Accounting for Income Taxes.”) Under the asset and liability method as required by ASC 740, deferred income taxes are recognized for the tax consequences of temporary differences by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. Under ASC 740, the effect on deferred income taxes of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recognized if it is more likely than not that some portion, or all of, a deferred tax asset will not be realized. As of December 31, 2013 and 2012, the Company did not have any deferred tax assets or liabilities, and as such, no valuation allowances were recorded at December 31, 2013 and 2012.

ASC 740 clarifies the accounting and disclosure for uncertain tax positions and prescribes a recognition threshold and measurement attribute for recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

Under ASC 740, evaluation of a tax position is a two-step process. The first step is to determine whether it is more-likely-than-not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigation based on the technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefit to be recognized in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent period in which the threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not criteria should be de-recognized in the first subsequent financial reporting period in which the threshold is no longer met.

F-14

The Company’s operations are subject to income and transaction taxes in the United States and the PRC jurisdictions. Significant estimates and judgments are required in determining the Company’s worldwide provision for income taxes. Some of these estimates are based on interpretations of existing tax laws or regulations, and as a result the ultimate amount of tax liability may be uncertain. However, the Company does not anticipate any events that would lead to changes to these uncertainties.

T.	Restrictions on Transfer of Assets Out of the PRC

Dividend payments by the Company are limited by certain statutory regulations in the PRC. No dividends may be paid by the Company without first receiving prior approval from the Foreign Currency Exchange Management Bureau. However, no such restrictions exist with respect to loans and advances.

U.	Foreign Currency Translation

The accompanying financial statements are presented in United States dollars. The functional currency of the Company is the Renminbi (RMB). The financial statements are translated into United States dollars from RMB at year-end exchange rates as to assets and liabilities and average exchange rates as to revenues and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred.

Exchange Rates	12/31/2013	12/31/2012
Year end RMB: US$ exchange rate	6.1891	6.3011
Average RMB: US$ exchange rate	6.1145	6.3034

The 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 Dollar at the rates used in translation.

V.	Earnings Per Share

The Company computes earnings per share (“EPS”) in accordance with FASB ASC 260 “Earnings per share”. FASB ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as the income or loss available to common shareholders divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., contingent shares, convertible securities, options, and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.

W.	Statutory Reserve

As stipulated by the Company Law of PRC as applicable to Chinese companies with foreign ownership, net income after taxation can only be distributed as dividends after appropriation has been made to the statutory reserve. Statutory reserve refers to the appropriation from net income to be used for recovery of prior years’ losses, increase of capital and for future company development, as approved, to expand production or operations. PRC laws prescribe that an enterprise operating at a profit, must appropriate, on an annual basis, an amount equal to 10% of its profit. Such an appropriation is necessary until the reserve reaches a maximum that is equal to 50% of the enterprise’s PRC registered capital. The Company cannot pay dividends out of statutory reserves or paid in capital registered in PRC.

F-15

X.	Comprehensive income

Comprehensive income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. The Company presents components of comprehensive income with equal prominence to other financial statements. The Company’s current component of other comprehensive income is the foreign currency translation adjustment.

Y.	Fair Value of Financial Instruments

The Company has adopted ASC 820-10, Fair Value Measurements and Disclosures, which defines fair value, establishes a framework for using fair value to measure assets and liabilities, and expands disclosures about fair value measurements. ASC 820-10 applies whenever other statements require or permit assets or liabilities to be measured at fair value.

ASC 820-10 includes a fair value hierarchy that is intended to increase the consistency and comparability in fair value measurements and related disclosures. The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources while unobservable inputs reflect a reporting entity’s pricing an asset or liability based upon their own market assumptions. The fair value hierarchy consists of the following three levels:

Level 1–inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2–observable inputs other than level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3–instrument valuations are obtained without observable market values and require a high-level of judgment to determine the fair value.

The Company’s financial instruments consist mainly of cash, restricted cash, bank notes receivable, and debt obligations. Bank notes receivable are reflected in the accompanying financial statements at historical cost, which approximates fair value due to the short-term nature of these instruments. Based on the borrowing rates currently available to the Company for loans with similar terms and average maturities, the fair value of debt obligations also approximates its carrying value due to the short-term nature of the instruments. While the Company believes its valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

There was no stock based compensation for the years ended December 31, 2013 and 2012.

	Quoted in		Significant
	Active Markets		Other		Significant
	For Identical		Observable		Unobservable
	Assets		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
As of December 31, 2013
Financial assets:
Cash	$	26,269	$	-	$	-	$	26,269
Total financial assets	$	26,269	$	-	$	-	$	26,269

Financial Liabilities:
Total financial liabilities	$	-	$	-	$	-	$	-

F-16

In January 2008, the Company adopted ASC 825-10, Fair Value Option for Financial Assets and Financial Liabilities, and has elected not to measure any of the Company’s current eligible financial assets or liabilities at fair value. ASC 825-10 was issued to allow entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs. If the fair value option is elected for an instrument, ASC 825-10 specifies that unrealized gains and losses for that instrument shall be reported in earnings at each subsequent reporting date. ASC 825-10 became effective January 1, 2008. The Company did not elect the fair value option for its financial assets and liabilities existing on January 1, 2008, and did not elect the fair value option for any financial assets or liabilities transacted during the year ended December 31, 2013.

Z.	Share-Based Compensation

The Company records share-based compensation expense pursuant to ASC 718 (formerly SFAS 123R, “Share Based Payment.”) The Company uses the Black-Scholes option pricing model which requires the input of highly complex and subjective variables including the expected life of options granted and the Company’s expected stock price volatility over a period equal to or greater than the expected life of the options. Because changes in the subjective assumptions can materially affect the estimated value of the Company’s employee stock options, it is management’s opinion that the Black-Scholes option pricing model may not provide an accurate measure of the fair value of the Company’s employee stock options. Although the fair value of employee stock options is determined in accordance with ASC 718 using an option pricing model, that value may not be indicative of the fair value observed in a willing buyer/willing seller market transaction.

Stock-based compensation expense is recognized based on awards expected to vest, and there were no estimated forfeitures as the Company has a short history of issuing options. ASC 718 (formerly SFAS 123R) requires forfeitures to be estimated at the time of grant and revised in subsequent periods, if necessary, if actual forfeitures differ from those estimates.

There was no stock based compensation for the years ended December 31, 2013 and 2012.

AA.	Employee Welfare Plan

The employees of the Company participate in the defined contribution welfare plan managed by the local government authorities whereby the Company is required to contribute to the schemes at fixed rates of the employees’ salary. The Company’s contributions to this plan are charged to the statements of operations when incurred. The Company has no obligations for the payment of retirement and other post-retirement benefits of staff other than the contributions described above. The total expenses for the welfare plan were $458,258 and $74,490 for the years ended December 31, 2013 and 2012 respectively.

BB.	Subsequent Events

The Company evaluates subsequent events that have occurred after the consolidated balance sheet date but before the consolidated financial statements are issued. There are two types of subsequent events: (1) recognized, or those that provide additional evidence with respect to conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements, and (2) non-recognized, or those that provide evidence with respect to conditions that did not exist at the date of the balance sheet but arose subsequent to that date. The Company has evaluated subsequent events, and based on this evaluation, the Company identified two subsequent events that would require disclosure to the consolidated financial statements. See Note - 19 Subsequent Events

F-17

CC.	Recent accounting pronouncements

3.	Accounts Receivable

Accounts receivable	As of December 31, 2013			As of December 31, 2012
Exclusive franchise stores	$	2,633,882		$	2,693,729
Non-exclusive franchise stores		200,470			-
Accounts receivable, gross		2,834,352			2,693,729
Less: allowance for doubtful accounts		(1,735,234	)		(362,016	)
Accounts receivable, net	$	1,099,118		$	2,331,713

F-18

Allowance for doubtful accounts	As of December 31, 2013			As of December 31, 2012
Beginning balance	$	(362,016	)	$	(2,198,376	)
Allowance provided		(1,756,405	)		(43,288	)
Recovery		368,886			1,897,648
Foreign currency adjustment		14,301			-
Ending Balance	$	(1,735,234	)	$	(362,016	)

Accounts receivable aging analysis	As of December 31, 2013		As of December 31, 2012
1-30 Days	$	718,809	$	2,084,751
30-60 Days		190,477		-
61-90 Days		189,832		246,962
Over 90 Days		-		-
Total	$	1,099,118	$	2,331,713

4.	Other Receivable

Description	Note	As of December 31, 2013			As of December 31, 2012
Hongrong Real Estate Company	(1)	$	2,257,194		$	2,242,185
Mr. Li Xiaoyu (Buyer of Opto-Electronics)	(2)		3,544,942			-
Others			-			593,850
Subtotal			5,802,136			2,836,035
Less: allowance	(1)		(2,257,194	)		(2,242,185	)
Total		$	3,544,942		$	593,850

(1). The Company loaned $2,242,185 to Hongrong Real Estate Company (“Hongrong”), an unrelated party, on August 20, 2012. The loan was due on August 19, 2013 and secured by a building owned by Hongrong. The building was still under construction in progress in 2012 and as of today. As completion of substantial building construction was required to evaluate the value of the security under the loan, the Company reserved full amount of $2,242,185 of other receivable from Hongrong as of December 31, 2012. An allowance for loans receivables is recorded when circumstances indicate that collection of all or a portion of a specific balance is unrecoverable. The Company provides for allowance on a specific identification basis. Subsequent loan repayment from Hongrong to the Company will be recognized as reduction of operating expenses in the period when it occurs.

(2). See Note 17 - Discontinued Operations

5.	Related Party Receivable and Payable

Related Party Receivable	Note	As of December 31, 2013		As of December 31, 2012
Due from Mr. Hailong Liu	(1)	$	-	$	642,000
Due from Shenyuan	(2)		-		1,123,500
Subtotal			-		1,765,500
Less: allowance			-		(1,123,500	)
Related party receivable, net		$	-	$	642,000

F-19

Allowance for Receivable	As of December 31, 2013			As of December 31, 2012
Beginning balance	$	(1,123,500	)	$	-
Allowance provided		-			(1,123,500	)
Recovery		1,144,820			-
Foreign currency adjustment		21,320			-
Ending Balance	$	-		$	(1,123,500	)

Related Party Payable		Note				As of December 31, 2013				As of December 31, 2012
Yumin Village			(2)			$	-			$	964,156

(1)

Related party receivable from the Company’s CEO Mr. Hailong Liu was a company loan to the CEO for operating advance collateralized with the CEO’s personal property. This loan carried a 10% annual interest rate. The term of the loan was from August 28, 2012 to May 27, 2013. Mr. Hailong Liu has already repaid this loan in 2013.

(2)

At December 31, 2012, the Company has fully reserved an allowance for the balance of related party receivable from Senyuan due to the uncertainty of the collection because no collateral was provided to secure the payment from Senyuan to the Company. On November 30, 2013, Senyuan fully prepaid the loan to the Company. The Company then used the payment to settle the $964,156 rent owed to Yumin Village. The collection of Senyuan's loan has been recorded as a reduction of operating expenses in the consolidated statements of operations and comprehensive income.

Advance

A.	Advance to Suppliers - Short Term

The current advance to suppliers amounted $7,432,827 and $17,532,739 as of December 31, 2013 and 2012 respectively. As a wholesaler of consumer electronics and appliances, the Company purchased products from large distributors, including Sony, Samsung, LG, Haier, etc. Pursuant to purchase agreements with these large suppliers, advance deposit in significant amount of following year purchase is mandatory. Therefore, the Company deposited advance to suppliers for 2014 purchase at the end of year 2013 and the beginning of 2014. The Company has purchased insurance to secure its advance.

F-20

B.	Advance - Long Term

Long term advances related to construction were $0 and $13,954,191 as of December 31, 2013 and 2012 respectively. Because the Company did not have sufficient capital to continue building the construction and wanted to improve its cash flows from operation and working capital, the Company disposed the construction of logistics center on July 28, 2013. See Note 17 – Discontinued Operations.

7.	Property, Plant and Equipment

As of December 31, 2013			Accumulated
Category of Asset	Cost		Depreciation			Net
Vehicle	$	74,418	$	(35,831	)	$	38,587
Furniture and equipment		44,947		(25,644	)		19,303
	$	119,365	$	(61,475	)	$	57,890

As of
December 31, 2012			Accumulated
Category of Asset	Cost		Depreciation			Net
Vehicle	$	73,924	$	(27,089	)	$	46,835
Furniture and equipment		365,147		(69,277	)		295,870
	$	439,071	$	(96,366	)	$	342,705

Depreciation expenses were $21,505 and $73,783 for the years ended December 31, 2013 and 2012 respectively.

8.	Intangible Assets

As of
December 31, 2013			Accumulated
Category of Asset	Cost		Amortization			Net
Land use rights	$	-	$	-		$	-
Trade mark		1,357		(1,357	)		-
	$	1,357	$	(1,357	)	$	-

As of
December 31, 2012			Accumulated
Category of Asset	Cost		Amortization			Net
Land use rights	$	17,215,013	$	(1,833,763	)	$	15,381,250
Trade Mark		1,348		(1,348	)		-
	$	17,216,361	$	(1,835,111	)	$	15,381,250

F-21

The Chinese government owns all land in the PRC. However, the government grants "land use rights" for terms ranging from 20 to 50 years. The Company acquired through Pingqiao Industrial Park in Lu’an City the land use rights for a parcel of land for $17,215,013 (RMB 100,000,000). The Company was amortizing the cost of land use rights over the usage terms of 30 years. The Company has amortized land use right for a portion of the Pingqiao land for the period before it received a land use rights certificate because the Company has advanced a down payment for the land, built constructions on the land, and received the land use rights for a parcel of the land. The Company initially intended to construct a factory, research and development center and a commercial center on this land. However, the Company did not have sufficient capital to continue building the construction. Therefore, the Company disposed this land use rights on July 28, 2013. See Note 17 – Discontinue Operations.

Amortization expenses amounted $272,576 and $631,802 for the years ended December 31, 2013 and 2012 respectively.

9.	Bank Loans

						As of		As of
		Interest Rate				December 31,		December 31,
Name of Creditor	Note	Per Annum			Maturity	2013		2012
Rural Credit Cooperatives of Lu’an	(1)		11.808	%	4/28/2013	$	-	$	802,500
Rural Credit Cooperatives of Lu’an	(2)		11.70	%	8/17/2013		-		802,500
						$	-	$	1,605,000

(1)	The loan from Rural Credit Cooperatives of Lu’an was secured by the Company’s land use rights.

(2)	The loan from Rural Credit Cooperative of Lu’an was guaranteed by Anhui Juneng Guarantee Company.

Rural Credit Cooperative of Lu’an did not implement restrictive covenants such as minimum bank balance, level of working capital, or net income requirement on above loans.

10.	Accounts Payable and Accrued Expenses

Description	As of December 31, 2013		As of December 31, 2012
Accrued payroll	$	58,008	$	79,576
Claimed unpaid legal fee in dispute		145,308		145,308
Total	$	203,316	$	224,884

F-22

11.	Other Payables

Description	As of December 31, 2013		As of December 31, 2012
HaiFeng Trading Company	$	-	$	3,274,200
Others		54,144		237,845
Total	$	54,144	$	3,512,045

12.	Capitalization

The Company’s outstanding securities at December 31, 2013 are shown in the following table:

	Authorized Shares		Shares Issued and Outstanding
Common Stock		150,000,000		16,775,113
Preferred Stock		50,000,000		-

	Strike Price		Contractual Life	Expiration Date	Shares Issued and Outstanding		Weighted Average Fair Value
Series E Warrants	$	0.25	5 years	07/13/2015		1,000,000	$	4.12
Series F(i) Warrants	$	1.75	5 years	07/13/2015		31,429	$	2.64
Series F(ii) Warrants	$	2.64	5 years	07/13/2015		94,329	$	1.77
Series F(iii) Warrants	$	2.64	5 years	07/13/2015		104,592	$	1.77

Common Stock

Total 150,000,000 shares of common stock, par value $0.0001 per share, are authorized. 16,775,113 shares were issued and outstanding at December 31, 2013.

Preferred Stock

Total 50,000,000 shares of preferred stock, par value $0.0001 per share, are authorized. 0 share was issued and outstanding at December 31, 2013.

F-23

Warrants

Total 1,230,350 warrants, including 1,000,000 series warrants E and 230,350 series warrants F, were outstanding at December 31, 2013. 314,285 series warrants A, 314,285 series warrants B, 497,303 series warrants C, 497,303 series warrants D, and 50,000 series warrants G have been expired on July 9, 2013. The Company used the Black-Scholes option pricing model to calculate the values of these warrants. The following table depicts the assumptions that were employed in the model:

Warrants	Series: E and F(i,ii,iii)
Annual dividend yield		-
Risk-free interest rate		0.30	%
Expected volatility		12	%
Year to maturity		1.75

13.	Income Taxes

The Company is registered in the State of Nevada and has operations in primarily two tax jurisdictions – the PRC and the United States. For operation in the US, the Company has incurred net accumulated operating losses for income tax purpose. The Company believes that it is more likely than not that these net accumulated operating losses will not be utilized in the future. Accordingly, the Company has no deferred tax assets.

Effective tax rates were approximately 0% and 0% for the years ended December 31, 2013 and 2012 respectively. Central government tax benefits which have been granted to Guoying will expire on December 31, 2013 and local government tax benefits will expire on December 31, 2016. The Company’s effective tax rate was lower than the U.S. federal statutory rate due to the fact that its operations are carried out in foreign jurisdictions, which are subject to lower income tax rates.

The following table reconciles the U.S. statutory rates to the Company’s effective tax rate for the years ended December 31, 2013 and 2012:

	For Years Ended
	December 31, 2013			December 31, 2012
U.S. Statutory rates		34.00	%		34.00	%
Foreign income not recognized in USA		(34.00	%)		(34.00	%)
China income taxes		25.00	%		25.00	%
China income tax exemption		(25.00	%)		(25.00	%)
Total provision for income taxes		0.00	%		0.00	%

The provision for income taxes from continuing operations on income consists of the following for the years ended December 31, 2013 and 2012:

	For Years Ended
	December 31, 2013		December 31, 2012
US current income tax expense	$	-	$	-
Federal		-		-
State		-		-
PRC current income tax expense		-		288
Total provision for income tax	$	-	$	288

United States of America

As of December 31, 2013, the Company in the United States had approximately $1,404,996 in net operating loss carry forwards available to offset future taxable income. Federal net operating losses can generally be carried forward 20 years. As of December 31, 2013 and 2012, the Company did not have any deferred tax assets or liabilities, and as such, no valuation allowance were recorded for the years then ended.

F-24

The following table sets forth the significant components of the net deferred tax assets for operations in the US as of December 31, 2013 and 2012.

	As of December 31, 2013			As of December 31, 2012
Net operation loss carry forward	$	(1,404,996	)	$	(1,404,996	)
Total deferred tax assets		-			-
Less: valuation allowance		-			-
Net deferred tax assets		-			-
Change in valuation allowance	$	-		$	-

People’s Republic of China (PRC)

14.	Concentration of Credit Risks, Uncertainties, Contingencies, and Commitments

Credit Risk

The Company’s practical operations are all carried out in the PRC. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by the political, economic and legal environments in the PRC, and by the general state of the PRC's economy.

The Company’s operations in the PRC are subject to specific 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 and legal environments and foreign currency exchange. The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.

Concentration of credit risk exists when changes in economic, industry or geographic factors similarly affect groups of counter parties whose aggregate credit exposure is material in relation to the Company’s total credit exposure.

F-25

For the year ended December 31, 2013, there is no major customer that individually comprised more than 10% of the Company’s total sales. There are three major suppliers individually accounting for over 10% of the Company’s total purchase. These three major suppliers accounted for 46.82% of total purchase:

Suppliers	For Year Ended December 31, 2013		%
Shenzhen Skyworth - RGB Electronics Co., Ltd.	$	3,236,403		10.56	%
Lu’an ZhongXing Trading Co., Ltd.		5,455,437		17.80	%
Lu’an Jinan District Shenfa Electronics Co., Ltd.		5,657,347		18.46	%
	$	14,349,187		46.82	%

The Company’s exposure to foreign currency exchange rate risk primarily relates to cash and cash equivalents and short-term investments, denominated in the U.S. dollar. Any significant revaluation of RMB may materially and adversely affect the cash flows, revenues, earnings and financial position of the Company.

Contingency

The Company is in litigation with its prior attorney, who commenced an action against the company in the Supreme Court of the State of New York County of New York on February 2011 for approximately $145,308 plus accrued interest for legal services provided to China Financial Services, a financial advisory firm, on behalf of the Company. The Company intends to contest this action and believes that there are defenses available to the Company. This amount has been accrued as of December 31, 2013 and was included in accrued expenses.

Operating Leases

The Company leases various facilities under operating leases that terminate on various dates. The Company incurred rent expenses of $182,020 and $160,349 for the years ended December 31, 2013 and 2012 respectively.

The lease expenses for the next five years are estimated to be as follows:

2014	$	53,065
2015		5,642
2016		-
2017		-
2018		-
	$	58,707

Obligations for Land Use Rights

The Company entered into a Land Investment Agreement on October 28, 2010 and a supplemental Deposit Agreement on December 28, 2010 with the management committee of Pingqiao Industrial Park (the “Pingqiao Committee”), under which the Pingqiao Committee is obligated to assist the Company to obtain a land use right for 164,983 square meters (approximately 300 Chinese acres) to be issued by local people's government where our construction and investment project will be built. The land use rights certificate is to be approved and issued by People’s Government of Yu An District and Pingqiao Committee is the management committee in charge of project investment on this parcel of land. 120 Chinese acres of this land is for commercial use and 180 Chinese acres of this land is for industrial use. The Company paid RMB 100 million (approximately $15.74 million) of the purchase price as of December 31, 2010. The Company is not obligated to pay the remaining $3.7 million until it receives the land use rights certificate issued by PRC government pursuant to the Land Investment Agreement. The Company received a land use rights certificate issued by Yu An people’s government on April 16, 2012 with a term of 50 years until 2062 for a 38,449 square meter portion of the land which has been collateralized for a loan of RMB 5 million to a bank, including the 19,200 square meters where the four warehouses were built. The Company waited to receive the land use rights certificate for the remaining 126,534 square meters of Pingqiao land. The government may not remove the Company’s facilities from the land which the Company has obtained the land use right certificate but could remove any future constructions that the Company builds on the land which the Company has not obtained land use rights certificate. Due to burdensome and repetitive approval procedures, the Company has not been granted land use rights certificate for the rest of land. The Company disposed the land use rights on July 28, 2013. Buyer carries a contractual obligation to obtain a land use rights certificate for the remaining 126,534 square meters of Pingqiao land. The Company is no longer obligated to pay the remaining $3.7 million. See Note 17 – Discontinued Operations.

F-26

15.	Operating Segments

ASC 280 (formerly SFAS No. 131, “Disclosure about Segments of an Enterprise and Related Information”) requires use of the “management approach” model for segment reporting. The Company uses the management approach model for segment reporting, which is based on the way a company's management organizes segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company. The Company has determined that its operations consist of three reportable business segments: (1) exclusive franchise stores, (2) non-exclusive franchise stores, and (3) company owned stores, as all revenue is derived from customers in the People’s Republic of China (PRC) and all of the Company’s assets are located in PRC.

The following table presents a summary of operating information and balance sheet information as of and for the years ended December 31, 2013 and 2012 respectively.

	For Years Ended
	December 31, 2013			December 31, 2012
Revenues from unaffiliated customers:
Exclusive franchise stores	$	20,968,736		$	34,256,697
Non-exclusive stores		1,917,498			16,147,112
Company owned stores		3,325,667			7,679,088
Consolidated		26,211,901			58,082,897
Gross Profit:
Exclusive franchise stores		1,594,744			2,600,317
Non-exclusive stores		140,924			1,206,361
Company owned stores		313,779			795,859
Consolidated		2,049,466			4,602,537

Depreciation and amortization:
Exclusive franchise stores		-			-
Non-exclusive stores		-			-
Company owned stores		-			-
Corporate		294,081			705,585
Consolidated		294,081			705,585

Capital expenditures:
Exclusive franchise stores		-			-
Non-exclusive stores		-			-
Company owned stores		-			-
Corporate		(2,123	)		2,228,109
Consolidated	$	(2,123	)	$	2,228,109

	As of December 31, 2013		As of December 31, 2012
Identified Assets:
Exclusive franchise stores	$	-	$	-
Non-exclusive stores		-		-
Company owned stores		-		-
Corporate		17,868,906		59,940,697
Consolidated	$	17,868,906	$	59,940,697

F-27

16.	Earnings Per Share

Components of basic and diluted earnings per share were as follows:

	For Years Ended
	December 31, 2013			December 31, 2012

Net loss	$	(36,378,221	)	$	(1,101,341	)
- Loss from continued operation		(36,378,213	)		(1,101,341	)
- Loss from discontinued operation		(8	)		-

Original Shares of Common Stock		16,775,113			16,775,113
New Issuance of Common Stock		-			-
Basic Weighted Average Shares Outstanding		16,775,113			16,775,113

Addition to Common Stock from exercise of Warrant		-			-
Diluted Weighted Average Shares Outstanding		16,775,113			16,775,113

Earnings Per Share
- Basic:
Net Loss	$	(2.17	)	$	(0.07	)
Loss from continued operation		(2.17	)		(0.07	)
Loss from discontinued operation		-			-
- Diluted:
Net Loss	$	(2.17	)	$	(0.07	)
Loss from continued operation		(2.17	)		(0.07	)
Loss from discontinued operation		-			-

Weighted Average Shares Outstanding
- Basic		16,775,113			16,775,113
- Diluted		16,775,113			16,775,113

F-28

17.	Discontinued Operations

(1)

On June 29, 2013, the Company through its indirectly wholly owned subsidiary Guoying executed share transfer agreement (the “Transfer Agreement”) with Mr. Li Xiaoyu (“Buyer of Opto-Electronics”) to sell assets and ownership of its subsidiary Opto-Electronics for total consideration of $969,486 (RMB 5,940,000). The Company has accounted for the disposition of the assets of discontinued operation in accordance with SFAS 144 (“FASB ASC 360”), “Accounting for the Impairment or Disposal of Long-Lived Assets”. No gain or loss was recognized for this disposal in the Company’s consolidated statements of operations and comprehensive income for the year ended December 31, 2013.

The following tabulation presents the calculation of the disposal of the subsidiary Opto-Electronics:

	Valuation of		Buyer’s
Subsidiary	Disposition		Acquisition Price		Gain/(Loss)
Opto-Electronics	$	969,479	$	969,479	$	-

The following tabulation summarizes the operation results of Opto-Electronics, which was accounted as discontinued operation for the year ended December 31, 2013 in the consolidated statements of operations and comprehensive income.

	For Year Ended
	December 31, 2013
Revenue	$	-
Loss from discontinued operation before income tax		(8	)

Provision for income tax		-
Gain on disposal		-
Loss from discontinued operation, net of tax	$	(8	)

The following table presents Opto-Electronics' aggregate carrying amounts of the major assets and liabilities:

	As of
	December 31, 2013
Assets:
Cash	$	-
Other receivable		646,319
Inventory		323,160
Total Assets	$	969,479
Liabilities:	$	-

F-29

(2)

On July 28, 2013, the Company through its indirectly wholly owned subsidiary Guoying executed an asset sales agreement (the “Sales Agreement”) with Opto-Electronics. Pursuant to the Sales Agreement, Opto-Electronics agreed to purchase the Company’s assets associated with the logistics and transportation centers for total consideration of RMB 20,000,000 (approximately $3,239,810) to be paid in three installments of: a) RMB 5,000,000 (approximately $809,952), b) RMB 10,000,000 (approximately $1,619,904) and c) RMB 5,000,000 (approximately $809,952) due on December 31, 2013, 2014 and 2015, respectively. In the event that Opto-Electronics does not consummate the payments, Opto-Electronics will be penalized 0.02% monthly of the outstanding balance. On December 26, 2013, the Company agreed Opto-Electronics’ buyer Mr. Li Xiaoyu's request to extend the payment schedule. The first RMB 5,000,000 (approximately $809,952) installment will be paid by May 2014.

The sales price of the 38,449 square meters land with land use rights certificate was appraised by an independent appraisal firm, Luan Century Price Evaluation Consultative Co., Ltd., on April 24, 2013. The appraisal firm concluded the fair market value of the 38,449 square meter portion of the land for which the Company has received a land use rights certificate with a term of 50 years until 2062 was RMB 11,073,378 (approximately $1,774,722). The appraised value excluded the remaining 126,534 square meters of Pingqiao Land for which the Company has not received a land use rights certificate. Further, pursuant to Article 2 of the Sales Agreement, 1) Opto-Electronics is obligated to negotiate with the Yu An government to: a) obtain the land use rights certificate for the remaining 126,534 square meters of land and b) pay to the Company the agreed upon purchase price of the remaining land up to the amount which the Company has advanced to the Pingqiao Committee; and 2) upon completion of the logistics center by Opto-Electronics, the Company has a right of first refusal to lease the building at a favorable rent.

F-30

The following tabulation presents the calculation of the impairment loss, the difference between the sales price and the carrying value of the long-term assets held for sale:

	For Year Ended December 31, 2013
Land use rights	$	15,400,551
Construction in progress		8,351,534
Advance for construction of plant and equipment		10,653,692
		34,405,776
Less: sales price		(3,270,889	)

Impairment loss	$	31,134,887

18.	Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As of December 31, 2013, the Company has an accumulated deficit of $6,768,251 because the Company continued to incur operating losses over the past several periods and has recorded impairment loss of $31,134,887 for the disposal of long lived assets for the year then ended.

The Company's continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis, to retain its current financing, to obtain additional financing, and ultimately to attain profitability. If the Company is unable to generate profits and is unable to continue to obtain financing for its working capital requirements, it may have to curtail its business sharply or cease business altogether.

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that could result from the outcome of this uncertainty.

19. Subsequent Events

(1)

The Company through its wholly owned subsidiary Guoying borrowed a loan in the amount of RMB 8,000,000 (approximately $1,292,595) from Rural Credit Cooperatives of Lu’an on January 3, 2014. The loan carries annual 10.08% interest rate and is due on January 3, 2015. The loan is guaranteed by Lu'an Senyuan Ecological Park Ltd and secured by the forestry plants grown on its land.

(2)

On January 1, 2014, the State Tax Bureau of Lu'an City renewed the term of tax benefit approval. Pursuant to the renewal approval, Guoying will continue to enjoy the same income tax and VAT benefits until December 31, 2017.

	CHINA ELECTRONICS HOLDINGS, INC.

	By:	/s/ Hailong Liu
		Name: Hailong Liu
		Title: Chairman, Chief Executive Officer and President (principal executive officer) & Chief Financial Officer (principal financial officer and principal accounting officer)

Signature	Title	Date

/s/ Hailong Liu	Chairman, Chief Executive Officer and President & Chief Financial Officer	March 31, 2014
Hailong Liu

/s/ Haibo Liu	Vice President and Director	March 31, 2014
Haibo Liu

Number		Description
2.1		Share Transfer Agreement between Guoying Shareholders and CEH Delaware dated December 26, 2008. Incorporated by reference to Exhibit 2.3 to our Form S-1 Registration Statement with the Commission on January 25, 2013.

2.2		Share Transfer Agreement between Guoying Shareholders and CEH Delaware dated December 31, 2009

2.3		Share Exchange Agreement by and among China Electronics Holdings, Inc. (formerly, Buyonate, Inc.), China Electronic Holdings, Inc. and the CEH Stockholders dated as of July 9, 2010. Incorporated by reference to Exhibit 2.1 to our Current Report on Form 8-K filed with the Commission on July 22, 2010 (the “July 2010 8-K”).
2.4		Share Transfer Agreement of Opto-Electronics between Lu’an Guoying Electronics Sales Co., Ltd and Mr. Li Xiao Yu dated June 29, 2013(incorporated herein by reference to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2013 filed on December 6, 2013).
2.5		Asset Sales Agreement of Pingqiao Land Use Right and Logistics Centers between Lu’an Guoying Electronics Sales Co., Ltd and Lu’an Guoying Opto-Electronics Technology Co., Ltd dated July 28, 2013(incorporated herein by reference to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2013 filed on December 6, 2013).

3.1		Articles of Incorporation of the Company. Incorporated by reference to Exhibit 3.1 to our Registration Statement on Form S-1 (File No. 333-152535) filed on July 25, 2008 (the “2008 S-1”).

3.2		By-laws of the Company. Incorporated by reference to Exhibit 3.2 to the 2008 S-1.

4.1		Subscription Agreement between among China Electronics Holdings, Inc. (formerly, Buyonate, Inc.) and certain investors, dated as of July 9, 2010. Incorporated by reference to Exhibit 4.1 to the July 2010 8-K.

4.2		Form of Warrant of China Electronics Holdings, Inc. (formerly, Buyonate, Inc.) issued on July 15, 2010. Incorporated by reference to Exhibit 4.2 to the July 2010 8-K.

4.3		Chairman Lock-up Agreement between China Electronics Holdings, Inc. (formerly, Buyonate, Inc.) and Hailong Liu, dated July 9, 2010. Incorporated by reference to Exhibit 4.3 to the July 2010 8-K.

4.4		Specimen of Common Stock certificate. Incorporated by reference to Exhibit 4.4 to our Registration Statement on Form S-1 (File No. 333-169968) filed on October 15, 2010.

10.1		Call Option Agreement between Sherry Li and Hailong Liu, dated February 10,2012
10.2		Call Option Agreement between Sherry Li and Hailong Liu, dated as July 9, 2010. Incorporated by reference to Exhibit 10.1 to the July 2010 8-K.

10.3		Voting Trust Agreement between Sherry Li and Hailong Liu, dated February 10, 2010

10.4 10.5		Voting Trust Agreement between Sherry Li and Hailong Liu, dated as July 9, 2010 Incorporated by reference to Exhibit 10.2 to the July 2010 8-K. Investment Agreement between Ping Bridge Industrial Park and Lu'an Guoying Electronic Sales Co., Ltd., dated as October 28, 2010, incorporated by referednce to Exhibit 10.5 to the Registration Statement Amendment No.4 filed with the Commission dated April 23, 2012.

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

32.1		Section 1350 Certification, Chief Executive Officer and Chief Financial Officer.*