10-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Amendment No. 1 to

FORM 10-K

(Mark One)

T	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2013
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______

Commission file number 333-134883

VELATEL GLOBAL COMMUNICATIONS, INC.

(Exact name of registrant as specified in its charter)

Nevada	98-0489800
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

5950 La Place Court, Suite 160, Carlsbad, California 92008

(Address of principal executive offices)

760-230-8988

(Issuer’s telephone number)

Securities registered pursuant to Section 12(b) of the Exchange Act:

None

Securities registered pursuant to Section 12(g) of the Exchange Act:

Series A Common Stock, par value $0.001 per share

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No T

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes o No T

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

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

Indicate by checkmark if disclosure of delinquent filers in response to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the 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 or any amendment to this Form 10-K. Yes o No T

Indicate by checkmark whether registrant is a large accelerated filer, an accelerated filer, a non-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 T

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

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked prices of such common equity, as of June 30, 2013 (the Registrant’s most recently completed second fiscal quarter) was approximately $2,463,400.

As of the date of this Report, 3,073,285,607 shares of the Company’s Series A common stock, par value of $0.001 per share (“Series A Common Stock,” Series A Shares” or “Shares”), are issued and outstanding, and 330,000,000 shares of the Company’s Series B common stock, with a par value $0.001 per share (“Series B Common Stock” or “Series B Shares”), are issued and outstanding (“collectively, “Common Stock”). All references to any specific number of shares described in this Report take into account the effect of a 100 to 1 reverse stock split that took effect on or about July 23, 2012.

EXPLANATORY NOTE

The purpose of this Amendment No. 1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, filed with the Securities and Exchange Commission on May 14, 2014 (the “Form 10-K”), is solely to furnish Exhibit 101 to the Form 10-K in accordance with Rule 405 of Regulation S-T. Exhibit 101 to this report provides the consolidated financial statements and related notes from the Form 10-K formatted in XBRL (eXtensible Business Reporting Language).

No other changes have been made to the Form 10-K.  This Amendment No. 1 to the Form 10-K speaks as of the original filing date of the Form 10-K, does not reflect events that may have occurred subsequent to the original filing date, and does not modify or update in any way disclosures made in the original Form 10-K.

Pursuant to Rule 406T of Regulation S-T, the interactive data files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

2

PART IV

Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

101.INS*	XBRL Instance Document
101.SCH*	XBRL Schema Document
101.CAL*	XBRL Calculation Linkbase Document
101.DEF*	XBRL Definition Linkbase Document
101.LAB*	XBRL Label Linkbase Document
101.PRE*	XBRL Presentation Linkbase Document

* Pursuant to Rule 406T of Regulation S-T, the interactive data files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

3

SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, Registrant caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

	VelaTel Global Communications, Inc.
Date:  May 19, 2014	By:	/s/ George Alvarez
		George Alvarez, Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed by the following persons on behalf of Registrant and in the identified capacities and on the dates indicated.

Name	Title	Date
/s/ George Alvarez	Chief Executive Officer	May 19, 2014
George Alvarez
/s/ Carlos Trujillo	Chief Financial Officer	May 19, 2014
Carlos Trujillo

4

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17. INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2013

Income Taxes Tables

Deferred tax assets (liabilities)

At December 31, 2013 and 2012, the significant components of the deferred tax assets (liabilities) are summarized below:

	December 31,			December 31,
	2013			2012
Approximate net operating loss carry forwards expiring in 2028	$	195,000,000		$	183,000,000
Deferred tax assets:
Federal net operating loss	$	66,000,000		$	62,000,000
State net operating loss		8,000,000			7,000,000
Foreign net operating loss		1,000,000			2,000,000
Total deferred tax assets		75,000,000			71,000,000
Less valuation allowance		(75,000,000	)		(71,000,000	)
	$	–		$	–

Effective income tax rate to federal statutory rate

The reconciliation of the effective income tax rate to the federal statutory rate for the years ended December 31, 2013 and 2012 is as follows:

	December 31,		December 31,
	2013		2012
Federal income tax rate		-34.0%		-34.0%
State tax, net of federal benefit		-6.0%		-6.0%
Stock options		0.0%		0.0%
Impairments		13.0%		5.0%
Change in derivative liability		1.0%		6.0%
Increase in valuation allowance		26.0%		29.0%
Effective income tax rate		0.0%		0.0%

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8. NOTES PAYABLE, OTHER (Details Narrative) (USD $)	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2009 Minimum [Member]	Dec. 31, 2009 Maximum [Member]
Judgements interest rate			3.60%	10.00%
Principal balance of the three judgements	$ 821,735	$ 821,735

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4. INTANGIBLE ASSETS (Details 1) (USD $)	Dec. 31, 2013
Intangible Assets Details 1
2014	$ 207,858
2015	207,858
2016	173,195
Total	$ 588,911

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15. FAIR VALUE MEASUREMENT (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Derivative Liability	$ 18,058,465	$ 6,393,863
Derivative Liability, Beginning balance	6,393,863	220,914
Derivative liability for Series B preferred stock	9,900,000	2,133,333
Derivative liability for convertible notes	1,332,036
Change in value of derivative liability	432,566	4,039,616
Derivative Liability, Ending balance	18,058,465	6,393,863
FairValueInputsLevel1Member
Derivative Liability
FairValueInputsLevel2Member
Derivative Liability
FairValueInputsLevel3Member
Derivative Liability	$ 18,058,465

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9. DERIVATIVE FINANCIAL INSTRUMENTS (Details Narrative) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Derivative Instruments and Hedging Activities Disclosure [Abstract]
Derivative liability	$ 18,058,465	$ 6,393,863

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3. INVESTMENTS (Details Narrative) (USD $)	Dec. 31, 2012
Investment written off	$ 2,661,000
VN Tech joint venture
Investment written off	$ 224,000

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10. NON CONTROLLING INTEREST (Tables)

12 Months Ended

Dec. 31, 2013

Stockholders' Equity Attributable to Noncontrolling Interest [Abstract]

Non-Controlling Interests

The following table summarizes the changes in Non-Controlling Interest for the years ended December 31, 2013 and 2012:

	Vela Tel
	Peru			Herlong			Zapna			Total
Balance as of December 31, 2011		(139,816	)		–			–			(139,816	)
Purchase of non-controlling interest through acquisition		–			1,244,943			66,667			1,311,610
Period loss applicable to non-controlling interest for the year ended December 31, 2012		(364,442	)		(2,000,270	)		(83,373	)		(2,448,085	)
Balance as of December 31, 2012	$	(504,258	)	$	(755,327	)	$	(16,706	)	$	(1,276,291	)
Period income (loss) applicable to non-controlling interest for the year ended December 31, 2013		504,258			(348,693	)		16,706			172,271
Balance as of December 31, 2013	$	–		$	(1,104,020	)	$	–		$	(1,104,020	)
Non Controlling interest percentage		5%			25%			25%

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17. INCOME TAXES (Details Narrative) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2013
Notes to Financial Statements
Net operating loss carry forward	$ 183,000,000	$ 195,000,000
Net operating loss carry forward expiry	Dec. 31, 2028

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11. DEFICIENCY (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
STOCKHOLDERS' DEFICIENCY
Outstanding,Beginning, Options outstanding	375,000	375,000
Granted, Options outstanding
Forfeited, Options outstanding
Exercised, Options outstanding
Outstanding, Ending, Options outstanding	375,000	375,000
Exercisable, Ending, Options outstanding	375,000
Weighted Average Exercise Price	$ 13.00	$ 13.00
Granted, Weighted Average Exercise Price
Forfeited, Weighted Average Exercise Price
Exercised, Weighted Average Exercise Price
Weighted Average Exercise Price	$ 13.00	$ 13.00
Exercisable, Ending, Weighted Average Exercise Price	$ 13.00
Outstanding, Weighted average remaining contractual life	8 years 6 months 18 days	9 years 6 months 18 days
Outstanding, Weighted average remaining contractual life	7 years 6 months 18 days	8 years 6 months 18 days
Exercisable, Weighted average remaining contractual life	7 years 6 months 18 days
Outstanding, Ending, Aggregate Intrinsic Value
Exercisable, Ending, Aggregate Intrinsic Value

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18. ACQUISITIONS (Details 2) (USD $)	Dec. 31, 2013
Cash	$ 60,536
Accounts receivable	1,188
Stock subscription receivable
Inventory
Prepaid expense	5,186
Property and equipment
Workforce
Customer list
Telecom licenses
Goodwill	285,508
Accounts payable and accrued expenses	(85,751)
Note payable
Non-controlling interest	(66,667)
Purchase price	200,000
Zapna [Member]
Cash	602,690
Accounts receivable	471,438
Stock subscription receivable	3,065,767
Inventory	295,421
Prepaid expense	98,769
Property and equipment	246,117
Workforce	65,720
Customer list	159,212
Telecom licenses	535,169
Goodwill
Accounts payable and accrued expenses	(305,221)
Note payable	(255,311)
Non-controlling interest	(1,244,943)
Purchase price	3,734,828
Herlong [Member]
Cash	663,226
Accounts receivable	472,626
Stock subscription receivable	3,065,767
Inventory	295,421
Prepaid expense	103,955
Property and equipment	246,117
Workforce	65,720
Customer list	159,212
Telecom licenses	535,169
Goodwill	285,508
Accounts payable and accrued expenses	(390,972)
Note payable	(255,311)
Non-controlling interest	(1,311,610)
Purchase price	$ 3,934,828

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19. DISCONTINUED OPERATIONS/DISPOSITION (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Revenues	$ 1,926,129
Cost of revenue	1,238,804
Gross profit	687,325
Operating expenses	12,808,202	13,776,347
Loss from operations	(12,120,877)	(13,776,347)
Non-operating income	(9,953,483)	(16,201,536)
Net loss	(17,877,716)	(45,601,292)
Current assets	3,425,970	6,669,090
Long-term assets	861,368	630,730
Assets	4,560,618	7,366,359
Current liabilities	53,076,583	43,921,357
DiscontinuedOperations
Revenues	1,316,884	2,501,612
Cost of revenue	598,274	1,803,908
Gross profit	718,610	697,704
Operating expenses	2,583,252	15,575,828
Loss from operations	(1,864,642)	(14,878,124)
Non-operating income	523,685	(745,285)
Net loss	(1,340,957)	(15,623,409)
Current assets	150,228	696,897
Long-term assets	863,278	5,764,290
Assets	1,013,506	6,461,187
Current liabilities	$ 6,754,825	$ 15,422,191

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17. INCOME TAXES (Details) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Notes to Financial Statements
Approximate net operating loss carry forwards expiring in 2028	$ 195,000,000	$ 183,000,000
Deferred tax assets:
Federal net operating loss	66,000,000	62,000,000
State net operating loss	8,000,000	7,000,000
Foreign net operating loss	1,000,000	2,000,000
Total deferred tax assets	75,000,000	71,000,000
Less valuation allowance	(75,000,000)	(71,000,000)
Net deferred tax assets

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19. DISCONTINUED OPERATIONS/DISPOSITION

12 Months Ended

Dec. 31, 2013

Discontinued Operations and Disposal Groups [Abstract]

Note 19. DISCONTINUED OPERATIONS/DISPOSITION

NOTE 19    DISCONTINUED OPERATIONS/DISPOSITION

Sale of Tower Assets of VelaTel Peru

On August 16, 2013, VelaTel Peru entered into an asset purchase agreement (“VelaTel Peru APA”) with Inversiones Balesia, S.A.C., a Peru corporation (“IB”) for sale to IB of 30 cellular towers, along with a mutual warranty agreement (“IB Mutual Warranties”) regarding the future permitting of the cellular towers. Under the VelaTel Peru APA, the purchase price for the towers is assumption by IB of all liabilities associated with the towers, which includes (i) $112,904 in past unpaid rent to site landlords, (ii) future rents totaling $7,975 per month aggregate for all 30 cellular towers, (iii) $7,918 in unpaid electricity charges advanced by site landlords, and (iv) $61,736 owed to the steel fabricator who contracted to erect the towers. Under the IB Mutual Warranties, VelaTel Peru agrees that IB may make application in the name of VelaTel Per for any such permit for which VTP's status as a holder of telecommunications licenses or concessions is required or advantageous, and to assign any permits so obtained in whole or in part in favor of other licensed telephone operators who may wish to lease space on the towers. In return, VelaTel Peru is allowed to maintain its existing equipment on each tower until 90 days after the later of the date a permit is issued for that tower or the date IB determines the applicable municipality will not grant a permit. Closing of the VelaTel Peru APA and IB Mutual Warranties occurred on September 4, 2013.

In recognition of the fact the Company received benefit pursuant to the AQC Loan Agreement that did not flow to VelaTel Peru in exchange for the obligation of VelaTel Peru to transfer title to the 30 cellular towers to IB as an affiliate of AQC, VelaTel Peru received a credit in the amount of $600,000 against the balance of the intercompany debt that VelaTel Peru and GMR owe to the Company. FGPM consented to this reduction in connection with the VelaTel Peru SPA described immediately below.

Sale of Stock of VelaTel Peru

Also on August 16, 2013, the Company, through Gulfstream Seychelles, along with the owners of the other 5% of VelaTel Peru’s stock, entered into a stock purchase agreement (“VelaTel Peru SPA”) with First Global Projects Management, Ltd. (“FGPM”) for the sale of 100% of the capital stock of VelaTel Peru. Under the VelaTel Peru SPA, in exchange for payment to the Company at closing of $1,300,000, the Company (i) transferred to FGPM all of the Company’s 95% interest in the capital stock of VelaTel Peru; (ii) transferred all of the Company’s 99.9% interest in the capital stock of VelaTel Peru’s sister company Go Movil Resources, S.A.C. (“GMR”); and (iii) assigned to FGPM the balance of all intercompany debt that VelaTel Peru and GMR owed to the Company as of closing of the VelaTel Peru SPA. Under the VelaTel Peru SPA, FGPM also acquired the 5% equity interest of the minority shareholders of VelaTel Peru in exchange for $68,422. The Company and the other sellers are not making representations or warranties as extensive as would be typical in such a transaction, nor are they agreeing to indemnify FGPM regarding the past operations or financial condition of VelaTel Peru that have already been identified as contingencies during FGPM’s due diligence. The limited representations that Gulfstream did make are also guaranteed by the Company. The purchase price reflects a discount for the limitations of such representations, warranties and indemnities. The purchase price also reflects a reduction for the separate transfer of assets and liabilities associated with cellular towers designed, constructed and owned by VelaTel Peru transferred to IB and described immediately above. Closing of the VelaTel Peru SPA occurred on September 4, 2013.

The sale of Velatel Peru resulted in a gain on the disposition of a subsidiary in the amount of $5,048,048.

Sale of Stock of Zapna

Commencing July 1, 2013, the Company determined that it had lost effective control over Zapna’s management, and made the decision to discontinue Zapna’s operations and attempt to sell its equity interest in Zapna.

On September 30, 2013, through Gulfstream Seychelles, the Company entered into a Stock Purchase Agreement with Aerial Investments, LLC (“Aerial”) for Aerial to acquire the Company’s 75% equity ownership of Zapna for $75. The transaction was subject to a right of first refusal and tag along rights in favor Ahmad Holdings and/or Omair Khan (collectively “Minority Owner”) pursuant to the 2012 stock purchase agreement by which the Company acquired its 75% interest in Zapna. As additional consideration, the Company agreed to assign to Aerial at closing without warranty, all rights the Company may have against Minority Owner related to Zapna. In the Aerial SPA, the Company warranted only its corporate qualifications, the capital structure of Zapna, and its ownership of the Zapna Shares. The Company expressly disclaimed any representations or warranties regarding the past or future financial, legal or other status of Zapna. Aerial agreed to waive its assignment if Minority Owner exercised either its right of first refusal or its tag along rights.

On October 9, 2013, the Company delivered a copy of the signed Aerial SPA to Minority Owner, together with notice of Minority Owner’s rights for a period of 30 days to exercise either its right of first refusal or its tag along rights. Minority Owner did not formally respond to the notice. On November 19, 2013, after expiration of Minority Owner’s rights, closing of the Aerial SPA occurred when Aerial paid the Company the purchase price of $75 and the Company caused the delivery of instruments of ownership of the 75 shares of Zapna Stock to Aerial and in Aerial’s name.

The sale of Zapna resulted in a gain on the disposition of a subsidiary in the amount of $489,553. The gain was determined as follows: net proceeds of $75 and the disposition of Zapna net liabilities of $489,478.

Discontinuance of Investment in Herlong

As of December 31, 2013, the Company determined to discontinue its investment in the operations of Herlong.  Subsequent to the period ended December 31, 2013 the Company’s equity interest in Herlong’s common stock that was subject to a stock pledge in favor of minority owners was forfeited.  Additional events which occurred after December 31, 2013 associated with the Company’s investment in Herlong are described in Note 20, Subsequent Events.

VelaTel Peru, Zapna and Herlong have been presented as discontinued operations in the accompanying Consolidated Financial Statements.

The operating results for VelaTel Peru, Zapna and Herlong have been presented in the accompanying Consolidated Statement of Operations for the years ended December 31, 2013 and 2012 as discontinued operations and are summarized below:

	Years Ended December 31,
	2013			2012
Revenues	$	1,316,884		$	2,501,612
Cost of revenue		598,274			1,803,908
Gross profit		718,610			697,704
Operating expenses		2,583,252			15,575,828
Loss from operations		(1,864,642	)		(14,878,124	)
Non-operating income		523,685			(745,285	)
Net loss	$	(1,340,957	)	$	(15,623,409	)

The assets and liabilities of the discontinued operations at December 31, 2013 and 2012 are summarized below:

	December 31,
	2013		2012
Current assets	$	150,228	$	696,897
Long-term assets		863,278		5,764,290
	$	1,013,506	$	6,461,187
Current liabilities	$	6,754,825	$	15,422,191

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5. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Details) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Payables and Accruals [Abstract]
Accounts payable	$ 5,310,098	$ 3,426,173
Accrued expenses	6,823,229	7,855,630
Accrued interest on indebtedness	1,729,922	921,954
Accounts payable and accrued liabilities	$ 13,863,249	$ 12,203,757

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1. SIGNIFICANT ACCOUNTING POLICIES (Details)	12 Months Ended
	Dec. 31, 2013
Equipment [Member] | Minimum [Member]
Estimated useful lives of property, plant and equipment	5 years
Equipment [Member] | Maximum [Member]
Estimated useful lives of property, plant and equipment	10 years
Computer Equipment [Member]
Estimated useful lives of property, plant and equipment	5 years
Furniture And Fixtures [Member]
Estimated useful lives of property, plant and equipment	5 years
Leasehold Improvements [Member]
Estimated useful lives of property, plant and equipment	3 years

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18. ACQUISITIONS (Details 1) (USD $)	12 Months Ended		2 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013 China Motion [Member]
Revenue	$ 1,926,129		$ 1,926,129
Cost of revenue	1,238,804		1,238,804
Gross profit	687,325		687,325
Operating expenses			690,287
Loss from operations			(2,962)
Net income			$ 493

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14. COMMITMENTS AND CONTINGENCIES (Tables)

12 Months Ended

Dec. 31, 2012

Commitments And Contingencies Tables

Future minimum rental commitments

The future minimum rental commitments as of December 31, 2013, for all non-cancelable operating leases are as follows:

For the years ending December 31,
	2014	$	847,989
	2015		619,426
	2016		238,420
	2017
	2018
	Thereafter
	Total	$	1,705,835

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6. CONVERTIBLE NOTES (Details Narrative) (USD $)	12 Months Ended
	Dec. 31, 2013
Convertible Notes Details Narrative
Amortized Debt Discount	$ 1,149,817

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13. RELATED PARTY TRANSACTIONS (Details Narrative) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Notes to Financial Statements
Accrued interest due to related party	$ 200,243	$ 118,241

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12. WARRANTS (Details) (USD $)	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Number Outstanding	375,000	375,000	375,000
Weighted Average Remaining Contractual Life (Years)	7 years 6 months 18 days	8 years 6 months 18 days	9 years 6 months 18 days
Weighted Average Exercise Price	$ 13.00	$ 13.00	$ 13.00
Number Exercisable	375,000
Warrant1Member
Exercise Price	$ 21.00
Number Outstanding	265,453
Weighted Average Remaining Contractual Life (Years)	1 year 9 months
Weighted Average Exercise Price	$ 21.00
Number Exercisable	265,453
Weighted Average Exercise Price exercisable	$ 21.00
Warrant2Member
Exercise Price	$ 21.00
Number Outstanding	344,887
Weighted Average Remaining Contractual Life (Years)	2 years
Weighted Average Exercise Price	$ 21.00
Number Exercisable	344,887
Weighted Average Exercise Price exercisable	$ 21.00
Warrant3Member
Exercise Price	$ 21.00
Number Outstanding	37,732
Weighted Average Remaining Contractual Life (Years)	2 years 3 months
Weighted Average Exercise Price	$ 21.00
Number Exercisable	37,732
Weighted Average Exercise Price exercisable	$ 21.00
Warrant4Member
Exercise Price	$ 21.00
Number Outstanding	102,279
Weighted Average Remaining Contractual Life (Years)	2 years 6 months
Weighted Average Exercise Price	$ 21.00
Number Exercisable	102,279
Weighted Average Exercise Price exercisable	$ 21.00
Warrant5Member
Exercise Price	$ 20.00
Number Outstanding	301,168
Weighted Average Remaining Contractual Life (Years)	9 months
Weighted Average Exercise Price	$ 20.00
Number Exercisable	301,168
Weighted Average Exercise Price exercisable	$ 20.00
Warrant6Member
Exercise Price	$ 18.00
Number Outstanding	86,444
Weighted Average Remaining Contractual Life (Years)	1 year
Weighted Average Exercise Price	$ 18.00
Number Exercisable	86,444
Weighted Average Exercise Price exercisable	$ 18.00
Warrant7(Minimum)Member
Exercise Price	$ 0.01
Number Outstanding	673,155,105
Weighted Average Remaining Contractual Life (Years)	1 year 9 months
Weighted Average Exercise Price	$ 0.001
Number Exercisable	673,155,105
Weighted Average Exercise Price exercisable	$ 0.001
Warrant7(Maximum)Member
Exercise Price	$ 0.012
Number Outstanding	673,155,105
Weighted Average Remaining Contractual Life (Years)	1 year 9 months
Weighted Average Exercise Price	$ 0.012
Number Exercisable	673,155,105
Weighted Average Exercise Price exercisable	$ 0.012
Warrant [Member]
Number Outstanding	674,293,068
Number Exercisable	674,293,068

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4. INTANGIBLE ASSETS (Details) (USD $)	12 Months Ended
	Dec. 31, 2013
Intangible assets	$ 623,575
Accumulated amortization	(34,664)
Intangible assets, Net	588,911
Customer Lists
Intangible assets	238,108
Telecom Licenses
Intangible assets	$ 385,467

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3. INVESTMENTS

12 Months Ended

Dec. 31, 2013

Investments [Abstract]

NOTE 3 - INVESTMENTS

NOTE 3     INVESTMENTS

Sino Crossings Joint Venture

On November 11, 2010, the Company entered into two related Subscription and Shareholder Agreements, collectively the “Sino Crossings Agreements.”  The first agreement is between three parties: (1) Shanghai Ying Yu Network Technology Ltd., a PRC limited liability company (“YYNT”); (2) Azur Capital SDN BHD, a Brunei company (“Azur”); and (3) the Company. The second agreement is between Azur and the Company. Under the Sino Crossings Agreements, the parties will each contribute certain defined resources in order to upgrade existing installed, but unimproved by infrastructure equipment, fiber optic cable located in China with engineering services and equipment that will make it suitable for transmission of data and to charge market rate transport fees to telecommunications operators who use the lit fiber comprising the “Sino Crossings Network.” On December 2, 2010, the Company issued to Azur 90,000 Series A Shares valued at $1,440,000. On December 2, 2011, the Company and Azur amended their agreement to require Azur to undertake additional duties. On that same date, the Company issued to Azur 150,000 additional Series A Shares valued at $1,245,000.

During the year ended December 31, 2012, the Company wrote off its entire investment in the Sino Crossings joint venture of $2,661,000, which is included in “impairment of investments” in the accompanying Consolidated Statements of Operations.

Further discussion of a dispute between the Company and Azur that is subject to a pending arbitration is found in Note 15, Contingencies and Commitments, and developments in the arbitration occurring after the year ended December 31, 2013 are described in Note 20, Subsequent Events.

VN Tech Fuel Cell Business

On April 1, 2011, Shenzhen VN Technologies Co., Ltd, a PRC corporation (“VN Tech”), and VN Tech’s sole shareholder, Luo Hongye (“Luo”), entered into a Subscription and Shareholder Agreement (“VN Tech Shareholder Agreement”) with Gulfstream Seychelles. Under the VN Tech Shareholder Agreement, the parties were to form a series of entities, including a Cayman Island parent company, a Hong Kong wholly owned subsidiary of the Cayman company and a PRC wholly owned subsidiary of the Hong Kong company that also qualified as a wholly owned foreign enterprise (“WOFE”) under PRC law. The Company was required to subscribe to 51% and VN Tech to 49% of the equity interest of the entities comprising the joint venture. VN Tech was to assign to the WOFE its tangible and intangible assets associated with hydrogen fuel cell systems, for which the Company was to pay VN Tech 50,000 Series A Shares. The parties subsequently formed the Hong Kong company contemplated under the VN Tech Shareholder Agreement, VN Tech Investment, Ltd. (HK), a Hong Kong corporation.  The parties then began the process of forming the Cayman Island corporation under the name VN Tech Investment, Ltd., a Cayman Island corporation (“VN Tech Cayman”).

On April 22, 2012, Gulfstream Seychelles and the Company entered into an Amended and Restated VN Tech Subscription and Shareholder Agreement with VN Tech and Luo (“VN Tech Amended Shareholder Agreement”). Under the VN Tech Amended Shareholder Agreement, the parties deemed it no longer necessary to form a WOFE in connection with this transaction. Instead, VN Tech will now become the wholly owned subsidiary of VN Tech HK, which in turn will become a wholly owned subsidiary of VN Tech Cayman. Under the VN Tech Amended Shareholder Agreement, the Company’s equity interest in the entities comprising the joint venture has been increased from 51% to 75%, and Luo is subscribing to the remaining 25% in the entities directly instead of through VN Tech.  In addition, under the VN Tech Amended Shareholder Agreement, the consideration the Company is paying Luo instead of VN Tech was increased from 50,000 shares to 100,000 Series A Shares. On April 22, 2012, the Company issued 100,000 Series A Shares to Luo valued at $224,000 pursuant to the VN Tech Amended Shareholder Agreement.

During the year ended December 31, 2012, the Company wrote off its entire investment in the VN Tech joint venture of $224,000, which is included in “impairment of investments” in the accompanying Consolidated Statements of Operations.

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12. WARRANTS (Details 1) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Exercised, Number of Shares
Warrant [Member]
Outstanding at Beginning, Number of Shares	60,051,772	1,137,963
Issued, Number of Shares	614,241,296	58,913,809
Exercised, Number of Shares
Canceled or expired, Number of Shares
Outstanding at Ending, Number of Shares	674,293,068	60,051,772
Outstanding at Beginning, Weighted Average Price Per Share	$ 0.45	$ 20.51
Issued, Weighted Average Price Per Share	$ 0.01	$ 0.005
Exercised, Weighted Average Price Per Share
Canceled or expired, Weighted Average Price Per Share
Outstanding at Ending, Weighted Average Price Per Share	$ 0.04	$ 0.45

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1. SIGNIFICANT ACCOUNTING POLICIES (Details 1) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Property, plant and equipment	$ 304,865	$ 113,032
Accumulated depreciation	(31,585)	(46,493)
Property, plant and equipment, Net	273,280	66,539
Equipment [Member]
Property, plant and equipment	50,997	86,265
Computer Equipment [Member]
Property, plant and equipment	73,554	26,767
Furniture And Fixtures [Member]
Property, plant and equipment	30,659	0
Leasehold Improvements [Member]
Property, plant and equipment	$ 149,655	$ 0

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4. INTANGIBLE ASSETS (Tables)

12 Months Ended

Dec. 31, 2013

Intangible Assets Tables

Intangible Assets and Goodwill

Intangible assets at December 31, 2013 are comprised of the following:

Customer list	$	238,108
Telecom licenses		385,467
		623,575
Accumulated amortization		(34,664	)
	$	588,911

Depriciation and Amortization of Intangible Assets

Amortization expense for the years ending December 31, 2013 to 2016 is as follows:

Year Ending December 31,
	2014	$	207,858
	2015		207,858
	2016		173,195
		$	588,911

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1. SIGNIFICANT ACCOUNTING POLICIES (Tables)

12 Months Ended

Dec. 31, 2013

Accounting Policies [Abstract]

Property, Plant and Equipment

The estimated useful lives of property, plant and equipment are as follows:

Equipment	5-10 years
Computer equipment	5 years
Furniture and fixtures	5 years
Leasehold improvements	3 years

Depriciation and Amortization

Property, plant and equipment at December 31, 2013 and 2012 is as follows:

	2013			2012
Equipment	$	50,997		$	86,265
Computer Equipment		73,554			26,767
Furniture & Fixtures		30,659			0
Leasehold Improvements		149,655			0
		304,865			113,032
Accumulated depreciation		(31,585	)		(46,493	)
	$	273,280		$	66,539

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10. NON CONTROLLING INTEREST (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Balance at beginning	$ (1,276,291)	$ (139,816)
Purchase of non-controlling interest through acquisition		1,311,610
Period loss applicable to non-controlling interest for the period ended September 30, 2013	172,271	(2,448,085)
Balance at end	(1,104,020)	(1,276,291)
VelaTelPeruMember
Balance at beginning	(504,258)	(139,816)
Purchase of non-controlling interest through acquisition
Period loss applicable to non-controlling interest for the period ended September 30, 2013	504,258	(364,442)
Balance at end		(504,258)
Non-Controlling interest percentage	5.00%
HerlongBusinessCooperationMember
Balance at beginning	(755,327)
Purchase of non-controlling interest through acquisition		1,244,943
Period loss applicable to non-controlling interest for the period ended September 30, 2013	(348,693)	(2,000,270)
Balance at end	(1,104,020)	(755,327)
Non-Controlling interest percentage	25.00%
Zapna [Member]
Balance at beginning	(16,706)
Purchase of non-controlling interest through acquisition		66,667
Period loss applicable to non-controlling interest for the period ended September 30, 2013	16,706	(83,373)
Balance at end		$ (16,706)
Non-Controlling interest percentage	25.00%

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1. SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Notes to Financial Statements
Allowance for doubtful accounts	$ 43,356	$ 6,500
Depreciation and amortization	58,884	24,550
Non-cash impairment charge		273,048
Long-lived assets write down		$ 7,001,870

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5. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Tables)

12 Months Ended

Dec. 31, 2013

Payables and Accruals [Abstract]

Accounts payable and accrued liabilities

Accounts payable and accrued liabilities are comprised of the following:

	2013		2012
Accounts payable	$	5,310,098	$	3,426,173
Accrued expenses		6,823,229		7,855,630
Accrued interest on indebtedness		1,729,922		921,954
	$	13,863,249	$	12,203,757

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6. CONVERTIBLE NOTES (Tables)

12 Months Ended

Dec. 31, 2013

Convertible Notes

Convertible notes

	2013			2012
10% Convertible Note Purchase Agreements (“Convertible Notes”) were due and payable December 31, 2008; accrued and unpaid interest was due at maturity; convertible note holder had the option to convert note principal together with accrued and unpaid interest to the Shares at a rate of $95.00 per Share. The Company is currently in default.	$	80,000		$	80,000
10% Amended and Restated Convertible Note Purchase Agreements (“Amended Convertible Notes”) were due and payable December 31, 2009, with interest payable at maturity.  The Amended Convertible Notes were convertible into Shares at the lesser of: (i) $0.95 per Share; or (ii) 80% of the volume weighted average of the closing bid price for the Shares on the Over The Counter Bulletin Board quotation system (“OTCBB”) for the ten day period prior to the convertible note holder’s election to convert.  The Company is currently in default.		218,923			218,923
8% convertible note dated October 14, 2013.  The note matures on October 14, 2014 and is convertible into shares of the Company's Series A common stock at a conversion price equal to 60% of the market value at the date of conversion.		100,000
10% convertible note dated October 14, 2013.  The note matures on October 14, 2014 and is convertible into shares of the Company's Series A common stock at a conversion price equal to 60% of the market value at the date of conversion.		25,000			–
12% convertible note dated June 26, 2013.  The note matures on June 26, 2014 and is convertible into shares of the Company's Series A common stock at a conversion price equal to 70% of the market value at the date of conversion.		178,200			–
12% convertible note dated June 26, 2013.  The note matures on December 26, 2013 and is convertible into shares of the Company's Series A common stock at a conversion price equal to 60% of the market value at the date of conversion.		25,000			–
12% convertible note dated July 5, 2013.  The note matures on January 6, 2014 and is convertible into shares of the Company's Series A common stock at a conversion price equal to 60% of the market value at the date of conversion.		75,000			–
12% convertible note dated September 6, 2013.  The note matures on March 6, 2014 and is convertible into shares of the Company's Series A common stock at a conversion price equal to 60% of the market value at the date of conversion.		50,000			–
12% convertible note dated September 6, 2013.  The note matures on March 6, 2014 and is convertible into shares of the Company's Series A common stock at a conversion price equal to 60% of the market value at the date of conversion.		100,000			–
10% convertible note dated July 5, 2013.  The note matures on April 1, 2014 and is convertible into shares of the Company's Series A common stock at a conversion price equal to 80% of the market value at the date of conversion.		81,000			–
Total		933,123			298,923
Less debt discounts		(182,219	)		–
		750,904			298,923
Less current maturities		(750,904	)		(298,923	)
Long term portion	$	–		$	–

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2. GOING CONCERN MATTERS

12 Months Ended

Dec. 31, 2013

Going Concern Matters

NOTE 2 - GOING CONCERN MATTERS

NOTE 2     GOING CONCERN MATTERS

The accompanying Consolidated Financial Statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  As shown in the accompanying Consolidated Financial Statements, the Company incurred a net loss of $17,877,716 for the twelve months ended December 31, 2013.  In addition, the Company had negative working capital of $49,650,613 and a total deficiency of $48,597,048 as of December 31, 2013.

In addition, the Company requires substantial additional capital to finance its planned business operations and expects to incur operating losses in future periods.  The Company has not realized material revenue since its commenced doing business in the telecommunications sector, and it is not without doubt that it will be successful in generating revenues in the future.  

If the Company is not able to raise substantial additional capital in a timely manner, the Company may lose its rights to participate in one or more of its projects and may be forced to cease operations.

The Company will continue to be dependent on outside capital to fund its operations for the foreseeable future.  Any financing obtained may further dilute or otherwise impair the ownership interest of the current stockholders.  If the Company fails to generate positive cash flows or fails to obtain additional capital when required, the Company could modify, delay or abandon some or all of its business plans.

The accompanying Consolidated Financial Statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern.

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7. NOTES PAYABLE (Tables)

12 Months Ended

Dec. 31, 2013

Debt Disclosure [Abstract]

Notes payable

Notes payable at December 31, 2013 and 2012 were comprised of the following:

	2013			2012
Note payable, dated December 12, 2012; due June 12, 2013 unsecured and accrues interest at 8% per annum	$	–		$	103,500
Note payable, dated February 24, 2012 is unsecured, due on February 24, 2013 and accrues interest at 10% per annum, and is in default		719,211			684,210
Note payable dated December 12, 2012, 10% per annum interest		200,000			200,000
Note payable, dated April 12, 2012 is unsecured, due on April 12, 2013 and accrues interest at 10% per annum, and is in default		15,789			38,653
Line of Credit Loan Agreement and Promissory Note (“First Note”), due December 31, 2011, and Second Note, all unsecured, interest at 10% per annum. During 2012, the First Note was split into 15 separate notes. As of December 31, 2013, six notes had been paid in full, three were partially paid, and the unpaid balance is in default.		3,766,718			5,999,558
Note payable issued in connection with acquisition of China Motion, as amended on October 28, 2013.  The note is due on February 28, 2014, is interest free if paid on time; otherwise the default interest rate is 36% per annum.		2,411,598			–
Note payable, dated June 24, 2013, amended on December 12, 2013 and is due on April 2, 2014 and accrues interest at 10.0% per annum.		1,901,000			–
Total		9,014,316			7,025,921
Less current maturities		(9,014,316	)		(7,025,921	)
Long term portion	$	–		$	–

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18. ACQUISITION (Tables)

12 Months Ended

Dec. 31, 2013

Business Combinations [Abstract]

Purchase price allocated based on the fair value of the individual assets and liabilities acquired

The purchase of China Motion was accounted for under the purchase method of accounting, with the purchase price allocated based on the fair value of the individual assets and liabilities acquired as of October 28, 2013 as follows:

Cash	$	848,645
Accounts receivable		1,320,449
Inventory		61,921
Prepaid expense		404,001
Property and equipment		265,625
Deposits		215,806
Purchased intangible assets		623,945
Accounts payable and accrued expenses		(2,067,691	)
Unearned income		(815,950	)
Bargain purchase	$	856,751

Operating results from the acquisition

The operating results of China Motion are included in the accompanying Consolidated Statements of Operations from the date the Company took control of the operation of China Motion on October 28, 2013. Operating results from this date to December 31, 2013 are as follows:

Revenue	$	1,926,129
Cost of revenue		1,238,804
Gross profit		687,325
Operating expenses		690,287
Loss from operations		(2,962	)
Net income	$	493

Pro forma financial information

Both transactions were accounted for under the acquisition method of accounting, with the purchase price allocated based on the fair value of the individual assets and liabilities acquired as follows:

	Zapna			Herlong			Total
Cash	$	60,536		$	602,690		$	663,226
Accounts receivable		1,188			471,438			472,626
Stock subscription receivable		–			3,065,767			3,065,767
Inventory		–			295,421			295,421
Prepaid expense		5,186			98,769			103,955
Property and equipment		–			246,117			246,117
Workforce		–			65,720			65,720
Customer list		–			159,212			159,212
Telecom licenses		–			535,169			535,169
Goodwill		285,508			–			285,508
Accounts payable and accrued expenses		(85,751	)		(305,221	)		(390,972	)
Note payable		–			(255,311	)		(255,311	)
Non-controlling interest		(66,667	)		(1,244,943	)		(1,311,610	)
Purchase price	$	200,000		$	3,734,828		$	3,934,828

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7. NOTES PAYABLE (Details) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Notes payable	$ 9,014,316	$ 7,025,921
Less current maturities	(9,014,316)	(7,025,921)
Long term portion
Note Payable A
Notes payable		103,500
Note Payable B
Notes payable	719,211	684,210
Note Payable C
Notes payable	200,000	200,000
Note Payable D
Notes payable	15,789	38,653
Note Payable E
Notes payable	3,766,718	5,999,558
Note Payable F
Notes payable	2,411,598
Note Payable G
Notes payable	$ 1,901,000

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17. INCOME TAXES (Details 1)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Notes to Financial Statements
Federal income tax rate	(34.00%)	(34.00%)
State tax, net of federal benefit	(6.00%)	(6.00%)
Stock options	0.00%	0.00%
Impairments	13.00%	5.00%
Change in derivative liability	1.00%	6.00%
Increase in valuation allowance	26.00%	29.00%
Effective income tax rate	0.00%	0.00%

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CONSOLIDATED BALANCE SHEETS (USD $)	Dec. 31, 2013	Dec. 31, 2012
Current assets:
Cash and cash equivalents	$ 897,993	$ 207,903
Accounts receivable, net of provision for doubtful accounts of $43,356 as of December 31, 2013	1,165,592
Inventory, net	61,219
Prepaid expenses and other current assets	287,660
Assets held for sale/discontinued operations	1,013,506	6,461,187
Total current assets	3,425,970	6,669,090
Property, plant and equipment, net of accumulated depreciation of $31,585 and $46,493 as of December 31, 2013 and 2012, respectively	273,280	66,539
Other assets:
Intangible assets, net of accumulated amortization of $34,664 as of December 31, 2013	588,911
Deposits	272,457	630,730
Total other assets	861,368	630,730
Total assets	4,560,618	7,366,359
Current liabilities:
Accounts payable and accrued expenses	13,863,249	12,203,757
Due to officers and related parties	2,313,783	825,845
Unearned revenue	824,958
Notes payable, related party	674,348	929,122
Notes payable, current portion	9,014,316	7,025,921
Convertible debentures, net	750,904	298,923
Notes payable, other	821,735	821,735
Derivative liability	18,058,465	6,393,863
Liabilities of discontinued operations	6,754,825	15,422,191
Total current liabilities	53,076,583	43,921,357
Mandatory redeemable Series B common stock; $0.001 par value, 1,000,000,000 shares authorized, 130,000,000 and 20,000,000 issued and outstanding as of December 31, 2013 and 2012, respectively,	81,083	11,870
Total liabilities	53,157,666	43,933,227
Stockholders' deficiency:
Preferred stock, Series B; $0.001 par value, 2,500 shares authorized, 285 and 120 shares issued and outstanding as of December 31, 2013 and 2012, respectively
Common stock:
Series A common stock; $0.001 par value, 10,000,000,000 shares authorized, 1,416,234,340 and 105,153,206 shares issued and outstanding as of December 31, 2013 and 2012, respectively	1,416,234	105,153
Additional paid in capital	276,734,713	263,199,856
Common stock in escrow	(178,664)	(178,664)
Accumulated other comprehensive loss	(67,800)	(69,398)
Accumulated deficit	(325,397,511)	(298,347,524)
Total Velatel Global Communications, Inc.'s stockholders' deficiency	(47,493,028)	(35,290,577)
Non controlling interest	(1,104,020)	(1,276,291)
Total deficiency	(48,597,048)	(36,566,868)
Total liabilities and deficiency	$ 4,560,618	$ 7,366,359

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2. GOING CONCERN MATTERS (Details Narrative) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Going Concern Matters
Net loss	$ 17,877,716	$ 45,601,292
Working capital	49,650,613
Total deficiency	$ 48,597,048

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (17,877,716)	$ (45,601,292)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	738,404	760,951
Impairment of investments	6,387,100	3,919,000
Impairment of assets	35,163	10,286,459
Amortization of debt discounts	1,149,817
(Gain) loss on settlement of debt	9,115,414	10,822,764
(Gain) loss on change in fair value of debt derivative	432,566	4,039,616
Allowance for (recovery of) bad debts	52,851	3,337
Gain on sale of subsidiary	(5,537,601)
Bargain purchase gain of China Motion	(856,751)
(Increase) decrease in:
Accounts receivable	768,430	(49,954)
Inventory	702	(132,581)
Prepaid expenses and other current assets	(220,975)	1,069,837
Increase (decrease) in:
Accounts payable and accrued liabilities	3,340,237	12,555,857
Unearned revenue	9,008
Net cash used in operating activities	(2,463,351)	(2,326,006)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment	(211,659)	(1,782,755)
Purchase of intangible assets	(7,554)	(92,660)
Proceeds from the sale of subsidiary	1,259,791
Cash paid for China Motion	(4,163,000)	(669,061)
Cash received with acquisitions	848,654	663,226
Net cash used in investing activities	(2,273,768)	(1,881,250)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds (payments) on advances from officers	1,487,383	540,948
Proceeds from issuance of convertible notes	784,500
Proceeds from issuance of notes payable	2,265,000	2,631,317
Proceeds from issuance of Series B preferred stock	900,000
Proceeds from issuance of notes payable, related party		1,116,714
Payments on notes payable		(8,158)
Payments on notes payable, related party	(10,750)	(24,527)
Net cash provided by financing activities	5,426,133	4,256,294
Effect of currency rate change on cash	1,076	(24,592)
Net increase in cash and cash equivalents	690,090	24,446
Cash and cash equivalents, beginning of the period	207,903	183,457
Cash and cash equivalents, end of the period	897,993	207,903
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest
Cash paid during the period for taxes
NON CASH INVESTING AND FINANCING ACTIVITIES
Common stock issued in settlement of debt	9,931,777	14,443,020
Common stock issued for acquisitions		424,000
Common stock issued for investment		224,000
Note payable issued for equipment		$ 5,501,870

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11. DEFICIENCY (Details 2) (USD $)	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Options outstanding	375,000	375,000	375,000
Weighted Average Exercise Price	$ 13.00	$ 13.00	$ 13.00
Exercise Price 0.13
Options outstanding	375,000

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12. WARRANTS (Tables)

12 Months Ended

Dec. 31, 2013

Warrants

Warrants outstanding

The following table summarizes the changes in warrants outstanding and the related prices for the Series A Shares issued to non-employees of the Company.  These warrants were in connection with the sale of the Company’s Series A Shares.

		Warrants Outstanding						Warrants Exercisable
				Weighted AverageRemaining		Weighted				Weighted
		Number		Contractual		Average		Number		Average
Exercise Price		Outstanding		Life (Years)		Exercise Price		Exercisable		Exercise Price
$	21.00		265,453		1.50	$	21.00		265,453	$	21.00
$	21.00		344,887		2.00	$	21.00		344,887	$	21.00
$	21.00		37,732		2.25	$	21.00		37,732	$	21.00
$	21.00		102,279		2.50	$	21.00		102,279	$	21.00
$	20.00		301,168		0.75	$	20.00		301,168	$	20.00
$	18.00		86,444		1.00	$	18.00		86,444	$	18.00
$	0.001-.012		673,155,105		1.75	$	0.001-.012		673,155,105	$	0.001-.012
			674,293,068						674,293,068

Transactions involving warrants

Transactions involving warrants are summarized as follows:

			Weighted
			Average
	Number of		Price
	Shares		Per Share
Outstanding at December 31, 2011		1,137,963	$	20.51
Issued		58,913,809		0.05
Exercised		–		–
Canceled or expired		–		–
Outstanding at December 31, 2012		60,051,772	$	0.45
Issued		614,241,296		0.01
Exercised		–		–
Canceled or expired		–		–
Outstanding at December 31, 2013		674,293,068	$	0.04

Assumptions used

The assumptions used in calculating the fair value of warrants granted using the Black-Scholes option- pricing model for warrants granted in 2013 are as follows:

Risk-free interest rate	0.39%
Expected life of the warrants	3 years
Expected volatility	241-437%
Expected dividend yield	0%

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13. RELATED PARTY TRANSACTIONS (Details) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Notes payable, related party	$ 674,348	$ 929,122
On April 15, 2009 Member
Notes payable, related party		473
On February 24, 2012, Member
Notes payable, related party	85,553	81,343
On May 20, 2009 Member
Notes payable, related party	200,000	200,000
On April 1, 2009, Member
Notes payable, related party	100,000	100,000
On July 1, 2009, Member
Notes payable, related party	100,000	100,000
On 13 March 2013, Member
Notes payable, related party	$ 188,795	$ 447,306

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16. NET LOSS PER SHARE

12 Months Ended

Dec. 31, 2013

Earnings Per Share, Basic, Other Disclosures [Abstract]

NOTE 16 - NET LOSS PER SHARE

NOTE 16    NET LOSS PER SHARE

The Company accounts for net loss per share in accordance with ASC subtopic 260-10, Earnings Per Share (“EPS”). This requires presentation of basic and diluted EPS on the face of the statement of operations for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS.

Basic net loss per share is computed by dividing net loss by the weighted average number of shares of Series A Shares outstanding during each period.  It excludes the dilutive effects of potentially issuable common shares such as those related to the Company’s convertible notes.  Diluted net loss per share is calculated by including potentially dilutive share issuances in the denominator.  However, diluted net loss per share for the period from January 1, 2012 through December 31, 2013 does not reflect the effects of shares potentially issuable upon conversion of convertible notes, preferred stock, outstanding warrants, and options.  These potentially issuable Shares would have an anti-dilutive effect on the Company’s net loss per share.

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13. RELATED PARTY TRANSACTIONS (Tables)

12 Months Ended

Dec. 31, 2013

Related Party Transactions [Abstract]

Related Party Transactions

The Company has the following material related party transactions at December 31, 2013 and 2012:

	2013		2012
Note payable dated April 15, 2009, non-interest bearing, due on demand, unsecured	$	–	$	473
Note payable dated February 24, 2012, 10% per annum interest, payable upon demand		85,553		81,343
Note payable dated May 20, 2009, 8% per annum interest, due December 1, 2009, unsecured, currently in default		200,000		200,000
Note payable dated April 1, 2009, 8% per annum interest, due originally October 1, 2009, unsecured, currently in default		100,000		100,000
Note payable dated July 1, 2009, 8% per annum interest, due March 17, 2010, currently in default		100,000		100,000
Line of Credit Promissory Note, due March 13, 2013, unsecured, interest at 10% per annum, currently in default		188,795		447,306
Total	$	674,348	$	929,122

Advances from Officers and Related Parties

Officers of the Company or its subsidiaries have advanced certain operating expenses for unpaid consulting fees, including business travel, which is non-interest bearing and expected to be repaid within 12 months:

	2013		2012
Advances to VelaTel	$	2,269,472	$	785,715
Advances to Gulfstream Seychelles		44,311		40,130
	$	2,313,783	$	825,845

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18. ACQUISITIONS

12 Months Ended

Dec. 31, 2013

Business Combinations [Abstract]

NOTE 18. ACQUISITIONS

NOTE 18    ACQUISITIONS

China Motion Stock Purchase Agreement

Funds described in the some of the following agreements were payable in Hong Kong dollars (HK$). Currency conversions to US dollars (US$) are expressed in parentheses at a conversion rate of HK$7.75=US$1.00, with the US$ equivalent rounded to the nearest US$100.

Original Stock Purchase Agreement as Amended through Closing

On November 27, 2012, the Company, through its wholly owned subsidiary Gulfstream Seychelles, entered into a Stock Purchase Agreement (“China Motion SPA”) with China Motion Holdings Limited; and its parent and sister companies (collectively “Holdings”) to acquire 100% of the capital stock of China Motion. The China Motion SPA was amended on two occasions prior to closing. The Company closed its acquisition of China Motion on March 1, 2013. The purchase price for 100% of the capital stock of China Motion (“China Motion Stock”) was HK$49,500,000 (US$6,387,100). The Company paid HK$12,009,363 (US$1,549,600) in cash at or prior to closing and the balance in the form of a promissory note (“Note”) issued by the Company at closing. The Note was in the total amount of HK$38,990,637 (US$5,031,000), of which the principal balance of HK$37,490,637 (US$4,837,500) was applicable to the purchase price and the remaining HK$1,500,000 (US$193,500) represented interest accruing on the Note through its maturity and is not part of the purchase price. The Note called for a payment of HK$4,650,000 (US$600,000) principal only on or before May 31, 2013 (which the Company paid on or about June 27, 2013) and the remaining HK$34,340,637 (US$4,431,100) balance of principal and accrued interest due on or before August 31, 2013 (which the Company paid on or about October 28, 2013). The Company also paid to Holdings at closing HK$387,500 (US$50,000) towards reimbursement of costs and disbursements incurred by Holdings in connection amendments to the China Motion SPA, which payment was in addition to and not part of the purchase price or the Note. The Company agreed to pledge to Holdings 100% of the capital stock of China Motion as collateral for repayment of the Note and performance of the Company’s obligations under the China Motion SPA. For so long as the Note remained unpaid, Holdings was entitled to appoint one of three or more members of China Motion’s board of directors, and certain fundamental decisions required the unanimous consent of all directors and the written consent of Holdings. For a period of one year following the Closing, Holdings agreed to assist the Company with managing relationships between China Motion and key suppliers and customers by assigning an executive representative of Holdings who has significant past experience managing those relationships on behalf of China Motion.

The Company’s Analysis Regarding Impairment of Investment and Ability to Consolidate

Although the Company became the owner of 100% of the China Motion Stock as of March 1, 2013, the Company determined as of June 2013 that it could not control the operations of China Motion, because the management of China Motion continued to follow instructions of Holdings that blocked significant decisions made by the Company in the ordinary course of business. Most significantly, the Company was unable to change signature authority on the bank accounts maintained by China Motion in a manner that would allow the Company’s representatives to approve or issue payments from those accounts without also obtaining the authority or counter-signature of a representative of Holdings. During the quarter ended June 30, 2013, the Company determined that its investment in China Motion must be completely impaired, and wrote off the entire purchase price. On July 20, 2013, the Company commenced arbitration against Holdings pursuant to the terms of the China Motion SPA. The Company’s impairment analysis remained unchanged as of the quarter ended September 30, 2013. As a result of transactions with Holdings and Xin Hua described below, the Company changed its impairment and consolidation analysis. As of the period ended December 31, 2013, the Company has accounted for its investment in China Motion on its consolidated balance sheet, and has included the results of China Motion’s operations as a wholly owned subsidiary in its consolidated financial statements for the partial period commencing October 28, 2013, the date the Company has determined it obtained operational control of China Motion.

Refinance of Acquisition Purchase Price Through Loan Agreement with Xin Hua

Deed of Settlement with Holdings

On October 28, 2013, the Company and Holdings entered into a Deed of Settlement whereby the Company agreed to pay at closing (a) the unpaid balance of the Note in the amount of HK$34,340,637 (US$4,431,100), and (b) HK$850,000 (US$109,700) towards Holdings’ attorney fees incurred in connection with the arbitration proceeding and negotiation and preparation of the Deed of Settlement. Holdings agreed to withdraw all default notices and release all its collateral in the capital stock of China Motion. The Company agreed to dismiss the arbitration proceeding it had filed, and to waive and release any claims against Holdings arising under the representations and warranties contained in the China Motion SPA or otherwise related to the transaction documents. Holdings authorized its representative on China Motion’s board of directors to join in execution of board resolutions to change banking mandates to restore the Company’s operational control over China Motion.

Loan Agreement with Xin Hua

Also on October 28, 2013, the Company (together with Gulfstream Seychelles) entered into a Loan Agreement with Xin Hua, under which Xin Hua paid directly to Holdings the loan amount of HK$26,540,637 (US$3,424,600), which the Company agreed to repay to Xin Hua, without interest, in two installments, the first of HK$7,800,000 (US$1,006,500) on or before December 15, 2013, and the second of HK$18,740,637 (US$2,814,100) on or before February 28, 2014. Also on October 28, 2013, the Company, with Xin Hua’s consent, also borrowed HK$1,936,216 (US$249,800) from China Motion for the sole purposes of: (a) settling agreed legal costs of HK$850,000 (US$109,700) towards Holdings’ attorney fees described above, plus HK400,000 (US$51,600) towards Xin Hua’s attorney fees, and (b) settling other miscellaneous amounts due Holdings pursuant to the China Motion SPA in the amount of HK$686,216 (US$88,600). The amount borrowed from China Motion was also due, without interest, on or before December 15, 2013. Repayment of the loan amount and the Company’s other obligations under the Loan Agreement was secured by a Share Charge against the Company’s ownership in the China Motion Stock, and an Option Deed to effect enforcement of the Share Charge. Xin Hua also had the right to appoint one member of China Motion’s board of directors, and certain fundamental decisions required unanimous consent of all board members and the written consent of Xin Hua. The Company timely repaid all amounts called for under the Loan Agreement, and on February 28, 2014, Xin Hua delivered a Deed of Release acknowledging payment in full and returning to the Company all instruments associated with the Share Charge and the Option Deed.

Refinance of Xin Hua Loan Agreement Through Loan Agreements with AQC and Tai Chun-ya

History of Agreements with AQC

On August 16, 2013, the Company entered into a loan agreement with AQC, LLC (“AQC”) for repayment of $600,000 that AQC advanced to the Company on June 27, 2013 and paid directly to Holdings as the principal only installment called for under the Note to Holdings described above. Under the AQC Loan Agreement, the Company agreed: (i) to repay $600,000, together with interest accruing at 5% per annum, on or before January 27, 2013 “(Maturity Date”); and (ii) to cause the Company’s subsidiary VelaTel Peru to transfer to Inversiones Balesia, S.A. (“IB”), an affiliate of AQC, 30 cellular towers designed, constructed and owed by VelaTel Peru. The Company was entitled to repay $600,000 plus accrued interest in any combination of: (iii) cash; and/or (iv) transfer to AQC of China Motion Stock. One hundred percent of the China Motion Stock was valued for purposes of repayment at $6,437,100.

On December 13, 2013, the Company and AQC entered into an Amended AQC Loan Agreement, under which AQC loaned the Company the additional sum of $1,262,000 which the Company paid towards the Xin Hua Loan Agreement. The principal balance due under the Amended AQC Loan Agreement was combined with the amount due under the original AQC Loan Agreement, which was increased to $1,898,000 (representing an extension fee plus accrued interest). Under the Amended AQC Loan Agreement, the Maturity Date was extended to April 2, 2014, and interest accrual on the principal balance was increased to 10% per annum. At AQC’s election in its sole discretion, the Company was granted up to four extensions of the Maturity Date for consecutive increments of three months each upon a cash payment of 3% of the principal balance per extension. After the Maturity Date or any other default, interest was to accrue at the rate of 20% per annum. Upon payment of the total amount due under the Xin Hua Loan Agreement, the Company agreed to grant AQC both (a) a security interest in 100% of the China Motion Stock, on terms substantially identical to the Share Charge and Option Deed with Xin Hua, and (b) an option to receive repayment of any amounts due under the Amended AQC Loan Agreement in the form of China Motion Stock, 100% of which was valued for purposes of repayment at $6,437,100, subject to a limitation of no more than 49% of the China Motion Stock, taking into account the prior option granted under a Cooperation Agreement between China Motion and StarHub Mobile Pte, Ltd. to acquire up to 25% of the China Motion Stock (described in Note 14, Commitments and Contingencies).

Although the Company owned 100% of the shares of China Motion, during the second quarter of 2013, the Company did not believe it could control China Motion, because the management of China Motion continued to follow instructions of the Seller that blocked significant decisions made by the Company in the ordinary course of business. Most significantly, the Company was unable to change signature authority on the bank accounts maintained by China Motion in a manner that would allow the Company’s representatives to approve or issue payments from those accounts without also obtaining the authority or counter-signature of a representative of the Seller. The Company’s inability to control management of China Motion was discovered in June 2013. In accordance with ASC 810, the Company believes this lack of control over management is significant enough to overcome the presumption of consolidation by the Company even though it is the majority shareholder. Instead, at June 30, 2013, the Company accounted for its acquisition of China Motion on the cost method. During the quarter ended June 30, 2013, the Company determined that its investment in China Motion must be completely impaired, and wrote off the entire purchase price of $6,387,100. However on October 28, 2013, the Company was able to make necessary payments on the acquisition notes to enable it to take control of China Motion. At this date the Company took control of China Motion and began to consolidate China Motion’s operation with those of the Company. Since the Company had previously written of the entire purchase price of China Motion, when the Company finally took control of China Motion, the net assets exceed the Company’s basis in the purchase price (which was $0) by $856,751, resulting in a bargain purchase gain.

The Company acquired China Motion to expand its operations into Asia.

The purchase of China Motion was accounted for under the purchase method of accounting, with the purchase price allocated based on the fair value of the individual assets and liabilities acquired as of October 28, 2013 as follows:

Cash	$	848,645
Accounts receivable		1,320,449
Inventory		61,921
Prepaid expense		404,001
Property and equipment		265,625
Deposits		215,806
Purchased intangible assets		623,945
Accounts payable and accrued expenses		(2,067,691	)
Unearned income		(815,950	)
Bargain purchase	$	856,751

The intangible assets purchased in the above acquisition consist of customer list and telecom licenses of $238,250 and $385,695, respectively. Both of these intangible assets will be amortized over their respective useful lives of 36 months.

The operating results of China Motion are included in the accompanying Consolidated Statements of Operations from the date the Company took control of the operation of China Motion on October 28, 2013. Operating results from this date to December 31, 2013 are as follows:

Revenue	$	1,926,129
Cost of revenue		1,238,804
Gross profit		687,325
Operating expenses		690,287
Loss from operations		(2,962	)
Net income	$	493

Additional events which occurred after December 31, 2013 associated with the acquisition of China Motion are described in Note 20, Subsequent Events.

Zapna and Herlong

On April 2, 2012, the Company, through its subsidiary Gulfstream Seychelles, closed its acquisition of 75% of Herlong (and with it, the acquisition of 100% of Herlong’s operating subsidiaries Novi-Net and Montenegro Connect) by paying a €500,000 ($669,061 USD) down payment towards the total budgeted capital and operating expenses, plus the Company has committed to invest another $3,065,767 into Herlong.  Herlong issued the Company 48,843 shares of its common stock, which represents 75% of Herlong’s total shares issued and outstanding.

On April 3, 2012, the Company, through its subsidiary Gulfstream Seychelles, entered into and closed the purchase of 75% of the outstand shares of Zapna. The Company issued 6,666,667 Series A Shares valued at $200,000.

The Company acquired both Herlong and Zapna to expand its operations into Europe.

Both transactions were accounted for under the acquisition method of accounting, with the purchase price allocated based on the fair value of the individual assets and liabilities acquired as follows:

	Zapna			Herlong			Total
Cash	$	60,536		$	602,690		$	663,226
Accounts receivable		1,188			471,438			472,626
Stock subscription receivable		–			3,065,767			3,065,767
Inventory		–			295,421			295,421
Prepaid expense		5,186			98,769			103,955
Property and equipment		–			246,117			246,117
Workforce		–			65,720			65,720
Customer list		–			159,212			159,212
Telecom licenses		–			535,169			535,169
Goodwill		285,508			–			285,508
Accounts payable and accrued expenses		(85,751	)		(305,221	)		(390,972	)
Note payable		–			(255,311	)		(255,311	)
Non-controlling interest		(66,667	)		(1,244,943	)		(1,311,610	)
Purchase price	$	200,000		$	3,734,828		$	3,934,828

The intangible assets purchased in the above acquisitions include workforce, customer list and telecom licenses that are being amortized over their respective useful lives ranging from 3 to 7 years.

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14. COMMITMENTS AND CONTINGENCIES (Details) (USD $)	Dec. 31, 2012
Commitments And Contingencies Details
2014	$ 847,989
2015	619,426
2016	238,420
2017
2018
Thereafter
Total	$ 1,705,835

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1. SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2013

Accounting Policies [Abstract]

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES

NOTE 1     SIGNIFICANT ACCOUNTING POLICIES

A summary of the significant accounting policies applied in the presentation of the accompanying Consolidated Financial Statements follows:

General

The accompanying Consolidated Financial Statements of VelaTel Global Communications, Inc. (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

Capital Structure

The Company’s capital stock consists of three series of its stock that are authorized: (i) Series A common stock (“Series A Common Stock,” “Series A Shares” or “Shares”); (ii) Series B common stock (“Series B Common Stock” or “Series B Shares”); and (iii) Series B Convertible and Redeemable Preferred Stock (“Series B Preferred Shares”). Series A Common Stock, together with Series B Common Stock, are collectively referred to in these Notes as “Common Stock.”

Attributes of Each Class and Series of Stock

Each Class and Series of the Company’s capital stock has a par value of $0.001. The other rights, preferences and attributes of each class and series of capital stock are as follows:

Series A Common Stock

The holders of Series A Shares are entitled to receive dividends as may be declared by the Company’s Board, are entitled to share ratably in all of the Company assets available for distribution upon winding up of the affairs of the Company, and are entitled to one non-cumulative vote per share on all matters on which shareholders may vote at all meetings of the shareholders.

The holders of Series A Shares are not entitled to preference as to dividends or interest, preemptive rights to purchase in new issuances of Series A Shares, preference upon liquidation or any other special rights or preferences.

The holders of Series A Shares do not have cumulative voting rights.

Series B Common Stock

Voting Rights. Each Series B Share is entitled to ten votes in all matters for any action that each Series A Share is entitled to vote.

Non Participatory. The holders of Series B Shares do not participate in any declared dividends for any class of stock.

Transferability. The consent of 80% of the issued and outstanding Series B Shares is required in order to sell, assign or transfer Series B Shares to a third party, or to grant proxies or voting rights with respect to Series B Shares.

Mandatory Redemption. Series B Shares will be redeemed in 2023 at par value $0.001 per share, and is therefore classified outside of equity for reporting purposes.  As of the date of this Report, the present value balance of liability for redemption of Series B Shares issued and outstanding is $81,083, which is the deemed fair value of the Series B Shares.

Preferred Shares

The Company has authorized 25 million shares of Preferred Stock, issuable from time to time in one or more series. The Company’s Board is authorized to fix the dividend rights, dividend rate, voting rights, conversion rights, rights and terms of redemption and liquidation preferences of any wholly unissued series of preferred stock and the number of shares constituting any series and the designation thereof, of any of them.

Series B Preferred Stock

On December 14, 2012, the Company filed with the Nevada Secretary of State a Certificate of Designations of Preferences, Rights and Limitations of the Company’s Preferred Shares (“Certificate of Designations”). They are as follows:

Designation, Amount and Par Value. The Company had previously designated 20 million shares of its Preferred Stock as Series A Preferred Shares (this Designation was subsequently withdrawn by filing of Amended and Restated Articles of Incorporation described above). The December 14, 2012 Certificate of Designations covers 2,500 shares of the Company’s Preferred Stock designated as Series B Preferred Shares. The number of Series B Preferred Shares designated will not be increased without consent of the shareholders of Series B Preferred Shares that may be required by law.

Ranking. The Series B Preferred Shares will, with respect to dividend rights and rights upon liquidation, winding-up or dissolution, rank: (i) senior with respect to dividends and rights upon liquidation than shares of the Company’s Series A Shares; and (ii) junior to all existing and future indebtedness of the Company.

Voting. Without the affirmative approval of the shareholders of a majority of Series B Preferred Shares (voting as a class), the Company may not: (i) authorize or issue any class stock that is not junior to the Series B Preferred Shares in right of dividends and/or liquidation; (ii) change the rights given to Series B Preferred Shares; (iii) liquidate, dissolve or wind-up the business of the Company (collectively “Liquidate”); or (iv) effect any merger, consolidation or similar transaction the effect of which the capital stock of the Company would not constitute a majority of the voting power of the capital stock of the surviving entity (“Deemed Liquidation Event”). Except as required by law or as set forth in this paragraph, Holders have no right to vote on any matters regarding the Company, including election of directors.

Dividends and Other Distributions. Shareholders are entitled to receive dividends on each outstanding Series B Preferred Share from its date of issuance at a rate equal to 2.50% per annum, based on a 365-day year, compounded annually. Dividends are payable as and if declared by our Board in its sole discretion. So long as any Series B Preferred Share is outstanding, no dividends or other distributions will be paid, delivered or set apart with respect to Series A Shares unless accrued dividends are first paid to shareholders of all outstanding Series B Preferred Shares. No Series A Shares will be redeemed while any Series B Preferred Shares are outstanding.

Liquidation. Upon any Liquidation, after payment or provision for payment of the Company’s debts and other liabilities, pari passu with any distribution or payment made to the shareholders of Series A Shares, the holders of Series B Preferred Shares will be entitled to be paid out of the Company’s assets available for distribution to the Company’s shareholders $10,000 per Series B Preferred Share, plus any accrued but unpaid dividends thereon (collectively “Series B Liquidation Value”).

Redemption. The Company may redeem any whole number or all of its Series B Preferred Shares at any time 18 years after each issuance date at a “Corporation Redemption Price” equal to the Series B Liquidation Value. Prior to 18 years after each issuance date, the Company may redeem any whole number or all of the Series B Preferred Shares at a price per share (“Early Redemption Price”) equal to the sum of the following: (i) 100% of the Corporate Redemption Price; plus (ii) the Embedded Derivative Liability (as defined in the Certificate of Designations); less (iii) any dividends that have been paid. In addition, if the Company Liquidates or engages in any Deemed Liquidation Event, it must redeem all Series B Preferred Shares at the Early Redemption Price.

Payment in Cash or Series A Shares. Upon the Company’s election to redeem any Series B Preferred Shares, the Company shall pay the holder either the Corporation Redemption Price or the Early Redemption Price, as the case may be, in cash. The Company may pay dividends and any Embedded Derivative Liability, at its election, (i) in cash, or (ii) in Series A Shares registered under a current and effective S-1 Registration Statement, valued at 81.0% of the closing bid price of the Series A Shares on the date of delivery of the dividend or redemption payment, not to exceed the closing bid price on any trading day beginning 30 trading days prior to the applicable date of determination and ending 30 trading days after the applicable date of determination (“Equity Conditions Measuring Period”).

Conversion. Series B Preferred Shares may be converted into Series A Shares (“Conversion Shares”) at the option of a shareholder of any Series B Preferred Shares, or by the Company. Upon a conversion, the Company is required to issue a number of Conversion Shares equal to: (i) the Early Redemption Price; multiplied by (ii) the number of Series B Preferred Shares subject to conversion; divided by (iii) $0.20 per Series A Share (“Conversion Price”). Conversion rights are subject to a limitation that at no time shall the issuance of Conversion Shares, aggregated with all other Series A Shares then beneficially owned by a converting shareholder result in that shareholder owning more than 9.99% of all Series A Shares then outstanding (“Conversion Limitation”). As to a conversion by the Company, an additional Conversion Limitation is that the Company may not convert more than 30 Series B Preferred Shares during any Equity Conditions Measuring Period. The Company may convert Series B Preferred Shares only if the closing bid price of Series A Shares exceeds 300% of the Conversion Price for 20 consecutive trading days preceding the conversion. Each conversion by the Company is also subject to other “Equity Conditions” (as defined in the Certificate of Designations), including that a minimum of $3.0 million in aggregate trading volume has traded during the 20 trading days preceding the conversion.

Adjustments for Stock Splits. The Conversion Price and certain other variable metrics used in calculating the Embedded Derivative Liability are subject to upward or downward adjustment in the event of forward or reverse stock split of Series A Shares, solely to maintain the proportionality intended under the Certificate of Designations.

Increases, Decreases and Other Changes Regarding Capital Structure

2012 Increase in Authorized Common Stock. On March 28, 2012, the Company filed with the Nevada Secretary of State a Certificate of Amendment of its Articles of Incorporation, which increased its authorized Series A Shares from 1 billion to 2 billion and its authorized Series B Shares from 100 million to 200 million, both effective March 28, 2012.

Reverse Stock Split. Effective July 23, 2012, the Company completed a 100 to 1 reverse stock split of: (i) issued Series A Shares; (ii) authorized Series A Shares; (iii) issued Series B Shares; and (iv) authorized Series B Shares. All share and per share information described in this Report that occurred prior to the effectiveness of the reverse stock split has been retroactively restated to reflect this reverse stock split.

2013 Increase in Authorized Common Stock / Amended and Restated Articles of Incorporation. On September 19, 2013, the Company filed Amended and Restated Articles of Incorporation with the Nevada Secretary of State containing the following substantive changes to the Articles of Incorporation previously on file: (i) increasing the authorized Series A Shares from 1 billion to 10 billion; (ii) increasing the authorized Series B Shares from 100 million to 1 billion; (iii) withdrawing the designation of up to 20 million authorized shares of Series A Preferred Stock and instead treating such shares as undesignated Preferred Stock; (iv) prescribing that future amendments to the Company’s Articles of Incorporation may, to the maximum extent allowable by Nevada law, be approved by resolution of the Board and without necessity of approval by the Company’s shareholders (provided that future amendments which increase the number of authorized shares of any class or series of the Company’s capital stock for which there are shares outstanding will continue to require shareholder approval); and (v) electing not to be governed by certain provision of the Nevada Revised Statutes (“NRS”) governing “acquisition of a controlling interest” and/or “combinations with interested shareholders (collectively, “Action”).

Prior to each of the three corporate actions described above, the Company obtained the requisite approval of its shareholders by a resolution of the Company’s Board of Directors, a written consent by a majority of the voting power of the Company’s Commons Stock, the filing of a Preliminary Information Statement with the SEC, and the filing with the SEC and the mailing to shareholders of record of a Definitive Information Statement.

Corporate Formation and Subsidiaries

The Company was incorporated under the name Mortlock Ventures, Inc. pursuant to the laws of the State of Nevada on September 19, 2005 for the purpose of acquiring and developing mineral properties.  During the quarter ended March 31, 2008, the Company changed its business and commenced concentrating on the telecommunications industry.  The Company changed its name to China Tel Group, Inc. on April 8, 2008 and acquired Trussnet USA, Inc., a Nevada corporation (“Trussnet Nevada”), on May 21, 2008.  The Company changed its name to “VelaTel Global Communications, Inc.” on July 25, 2011. 

The Consolidated Financial Statements include the accounts of the Company, and the following wholly owned and majority owned subsidiaries:

Trussnet USA, Inc., a Nevada corporation (“Trussnet Nevada”) (100% ownership)

Gulfstream Capital Partners, Ltd., a Republic of Seychelles corporation (“Gulfstream Seychelles”) (100% ownership)

Gulfstream Capital Partners, Ltd., a Cayman Island corporation (“Gulfstream Cayman”) (100% ownership)

Beijing Yunji Technology Co., Ltd., a Peoples Republic of China corporation (“Beijing Yunji”) (100% ownership)

NGSN Communications Network (HK), Ltd. a Hong Kong corporation (“NGSN HK”) (100% ownership)

VelaTel Peru, S.A., formerly known as “Perusat, S.A.,” a Peru corporation (“VelaTel Peru”) (95% ownership)

Herlong Investments, Ltd., a Cyprus corporation, (“Herlong”) (75% ownership)

Novi-Net, d.o.o., a Croatia corporation (“Novi-Net”) (75% ownership)

Novi-Net Mobile, d.o.o., a Croatia corporation (“Novi-Net Mobile”) (75% ownership)

Montenegro Connect, d.o.o., a Montenegro corporation (“Montenegro Connect”) (75% ownership)

Zapna, ApS, a Denmark corporation (“Zapna”) (75% ownership)

China Motion Telecom (HK), Ltd., a Hong Kong corporation (“China Motion”) (100% ownership)

All significant intercompany balances and transactions have been eliminated in consolidation.

During the first quarter of 2012, the Company commenced its planned operations when it commercially launched its first wireless broadband telecommunications network in Peru.  Prior to that and from the Company’s inception, it was a development stage company as defined by the ASC subtopic 915 Development Stage Entities.  The Company accumulated a deficit during its development stage of $253,600,984. Effective January 1, 2012, the Company is no longer a Development Stage Entity.

Segment Reporting

ASC Topic 280, “Segment Report,” requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the company for making operating decisions and assessing performance.  ASC Topic 280 has no effect on the Company’s consolidated financial statements as the Company consists of one reportable business segment.  All revenue is from telecommunications operations.

Use of Estimates

The Company’s Consolidated Financial Statements have been prepared in accordance with GAAP.  The preparation of these Consolidated Financial Statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period.  On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition, accrued expenses, financing operations, contingencies and litigation.  Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.  Actual results could differ from the Company’s estimates.

Revenue Recognition

For revenue from product sales and services, the Company recognizes revenue in accordance with ASC subtopic 605, Revenue Recognition, which requires that four basic criteria must be met before revenue can be recognized: (i) persuasive evidence of an arrangement exists; (ii) delivery has occurred or services have been rendered; (iii) the selling price is fixed and determinable; and (iv) collectability is reasonably assured.  Determination of criteria (iii) and (iv) are based on management's judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts.  Provisions for discounts and rebates to customers, estimated returns and allowances and other adjustments are provided for in the same period the related sales are recorded.  The Company defers any revenue for which the product has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required.  ASC 605-10 incorporates ASC subtopic 605-25, Multiple-Element Arrangements.  ASC 605-25 addresses accounting for arrangements that may involve the delivery or performance of multiple products, services and/or rights to use assets.

Revenue arises from sale of local and long distance service access and/or wireless broadband service access where some payments are received before and some payments are received after the service has been rendered.  The Company sells its products separately and in various bundles that contain multiple deliverables.  These revenues include long distance and prepaid telephone cards, prepaid wireless access plans, along with other products and services.  In accordance with ASC 605-25, sales arrangements with multiple deliverables are divided into separate units of accounting, if the deliverables in the arrangement meet the following criteria: (i) the product has value to the customer on a standalone basis; (ii) there is objective and reliable evidence of the fair value of undelivered items; and (iii) delivery or performances of any undelivered item is probable and substantially in the Company’s control.  The fair value of each separate element is generally determined by prices charged when sold separately.  If there is any discount from the combined fair value of the individual elements, the discount is allocated to the portion of the revenues attributable to the individual elements.  In accordance with ASC 605-25, if fair value of all undelivered elements in an arrangement exists, but fair value does not exist for a delivered element, then revenue is recognized using the residual method.  Under the residual method, the fair value of undelivered elements is deferred and the remaining portion of the arrangement fee (after allocation of 100 percent of any discount to the delivered item) is recognized as revenue. 

Cash and Cash Equivalents

For purposes of the Statements of Cash Flows, the Company considers all highly liquid debt instruments purchased with a maturity date of three months or less to be cash equivalents.

Fair Values

ASC subtopic 825-10, Financial Instruments requires disclosure of the fair value of certain financial instruments.  The carrying value of cash and cash equivalents, as well as short-term borrowings, approximate fair value because of the short-term maturity of these instruments.  All other significant financial assets, financial liabilities and equity instruments of the Company are either recognized or disclosed in the Consolidated Financial Statements together with other information relevant for making a reasonable assessment of future cash flows, interest rate risk and credit risk.  Where practicable, the fair values of financial assets and financial liabilities have been determined and disclosed; otherwise, only available information pertinent to fair value has been disclosed.

Accounting For Bad Debt and Allowances

Bad debts and allowances are provided based on historical experience and management's evaluation of outstanding accounts receivable.  Management evaluates past due or delinquency of accounts receivable based on the open invoices aged on due date basis.  Allowance for doubtful accounts at December 31, 2013 was $43,356. Allowance for doubtful accounts at December 31, 2012 was $6,500, which is included in the loss from discontinued operations in the accompanying Consolidated Statements of Operations and Other Comprehensive Loss.

Inventories

The inventory consists of finished goods ready for resale purposes.  The Company purchases the merchandise on delivered duty paid basis.  Inventories are valued at the lower of cost or market, with cost determined using the first-in, first-out method.

Property, Plant and Equipment

Property, plant and equipment are stated at cost, less accumulated depreciation and impairment losses.  Depreciation is computed over the estimated useful lives of the respective assets, except leasehold improvements, which are amortized over the shorter of their useful life or the term of the lease.

The estimated useful lives of property, plant and equipment are as follows:

Equipment	5-10 years
Computer equipment	5 years
Furniture and fixtures	5 years
Leasehold improvements	3 years

The Company evaluates the carrying value of items of property, plant and equipment to be held and used whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The carrying value of an item of property, plant and equipment is considered impaired when the projected undiscounted future cash flows related to the asset are less than its carrying value. The Company measures impairment based on the amount by which the carrying value of the respective asset exceeds its fair value. Fair value is determined primarily using the projected future cash flows discounted at a rate commensurate with the risk involved. Depreciation and amortization for the years ended December 31, 2013 and 2012 are $58,884 and $24,550, respectively.

Property, plant and equipment at December 31, 2013 and 2012 is as follows:

	2013			2012
Equipment	$	50,997		$	86,265
Computer Equipment		73,554			26,767
Furniture & Fixtures		30,659			0
Leasehold Improvements		149,655			0
		304,865			113,032
Accumulated depreciation		(31,585	)		(46,493	)
	$	273,280		$	66,539

Long-Lived Assets

The Company has adopted ASC subtopic 360-10, Property, Plant and Equipment.  ASC 360-10 requires that long-lived assets and certain identifiable intangibles held and used by the Company be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  Events relating to recoverability may include significant unfavorable changes in business conditions, recurring losses or a forecasted inability to achieve break-even operating results over an extended period.  The Company evaluates the recoverability of long-lived assets based upon forecasted undiscounted cash flows.  Should impairment in value be indicated, the carrying value of intangible assets would be adjusted, based on estimates of future discounted cash flows resulting from the use and ultimate disposition of the asset.  ASC 360-10 also requires assets to be disposed of be reported at the lower of the carrying amount or the fair value less costs to sell. During the year ended December 31, 2013, no impairment was recorded. During the year ended December 31, 2012, the Company evaluated the recoverability of its long-lived assets and took a write down of $7,001,870, which is included in the loss from discontinued operations in the accompanying Consolidated Statements of Operations and Other Comprehensive Loss.

Intangible Assets and Goodwill

The Company accounts for acquisitions in accordance with the provisions of ASC 805-10.  The Company assigns to all identifiable assets acquired (including intangible assets), and to all identifiable liabilities assumed, a portion of the cost of the acquired company equal to the estimated fair value of such assets and liabilities at the date of acquisition.  The Company records the excess of the cost of the acquired company over the sum of the amounts assigned to identifiable assets acquired less liabilities assumed, if any, as goodwill.

The Company amortized its identifiable intangible assets over the period which the asset is expected to contribute to future cash flows.  The estimated useful life of developed software is ten years.  The Company periodically evaluates the recoverability of intangible assets and takes into account events or circumstances that warrant revised estimates of useful lives or indicate that impairment exists.

The Company accounts for and reports acquired goodwill and other intangible assets under ASC subtopic 350-10, Intangibles, Goodwill and Other.  In accordance with ASC 350-10, the Company tests its intangible assets for impairment on an annual basis and when there is reason to suspect that their values have been diminished or impaired.  Any write-downs will be included in results from operations. During the year ended December 31, 2012, the Company evaluated the recoverability of its intangible assets and took an impairment charge of $273,048 (included in the loss from discontinued operations in the accompanying Consolidated Statements of Operations and Other Comprehensive Loss), which represents the entire goodwill balance generated from the Zapna acquisition.

Functional Currency

A majority of the transactions of VelaTel Peru are in US Dollars; accordingly, this subsidiary’s functional currency is the US Dollar. The accounts of Zapna are maintained in Danish Kroner, the accounts of Novi-Net and Novi-Net Mobile are maintained in Croatian Kuna, the accounts of Herlong and Montenegro Connect are maintained in the Euro, and the accounts of China Motion are maintained in Hong Kong Dollars. The accounts of these foreign subsidiaries were translated into US Dollars in accordance with ASC Topic 830 “Foreign Currency Matters.” According to ASC Topic 830, all assets and liabilities were translated at the exchange rate on the balance sheet dates, stockholders’ equity is translated at historical rates and statement of operation items are translated at the weighted average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income in accordance with ASC Topic 220, “Comprehensive Income.” Gains and losses resulting from the translations of foreign currency transactions and balances are reflected in the statements of income.

Foreign Currency Transactions and Comprehensive Income

GAAP requires that recognized revenue, expenses, gains and losses be included in net income. Certain statements, however, require entities to report specific changes in assets and liabilities, such as gain or loss on foreign currency translation, as a separate component of the equity section of the balance sheet. Such items, along with net income, are components of comprehensive income. Translation gains are classified as an item of accumulated other comprehensive income in the stockholders’ equity section of the consolidated balance sheet.

Advertising Costs

Advertising costs, which are included in selling, administrative and general, are expensed as incurred.   Advertising costs for the twelve months ended December 31, 2013 and 2012 were not significant.

Net Loss Per Share

The Company has adopted ASC subtopic 260-10, Earnings Per Share.  This requires the computation, presentation and disclosure requirements of earnings per Share information.  Basic earnings per Share have been calculated based upon the weighted average number of Shares outstanding.  Stock options and warrants, preferred stock and convertible debentures have been excluded as common stock equivalents in the diluted earnings per Share, because they are anti-dilutive.

Concentrations of Credit Risk

Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, consist primarily of cash, cash equivalents and trade receivables.  The Company places its cash and temporary cash investments with high credit quality institutions.  At times, such investments may be in excess of the FDIC insurance limit.

Stock Based Compensation

The Company adopted ASC subtopic 718-10, Compensation.  ASC 718-10 requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors, including employee stock options and employee stock purchases related to an employee stock purchase plan based on the estimated fair values.

Research and Development

The Company accounts for research and development costs in accordance with the ASC subtopic 730-10, Research and Development. Under ASC 730-10, all research and development costs must be charged to expense as incurred.  Accordingly, internal research and development costs are expensed as incurred.  Third-party research and development costs are expensed when the contracted work has been performed or as milestone results have been achieved.  Company sponsored research and development costs related to both present and future products and services are expensed in the period incurred.

Reclassifications

Certain reclassifications have been made to prior periods’ data to conform to the presentation set forth in this Report.  These reclassifications had no effect on reported income or losses.

Recent Accounting Pronouncements

The Financial Accounting Standards Board (“FASB”) has issued ASU No. 2013-04, Liabilities (Topic 405), “Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date.” ASU 2013-04 provides guidance for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this ASU is fixed at the reporting date, except for obligations addressed within existing guidance in U.S. GAAP. The guidance requires an entity to measure those obligations as the sum of the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors and any additional amount the reporting entity expects to pay on behalf of its co-obligors. The amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The Company does not expect the adoption of this guidance to have a material impact on the Company’s consolidated financial statements.

In July 2013, the FASB issued ASU 2013-11, Income Taxes (Topic 740): “Presentation of Unrecognized Tax Benefit When a Net Operating Loss Carryforward, A Similar Tax Loss, or a Tax Credit Carryforward Exists (A Consensus the FASB Emerging Issues Task Force)”. ASU 2013-11 provides guidance on financial statement presentation of unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The FASB’s objective in issuing this ASU is to eliminate diversity in practice resulting from a lack of guidance on this topic in current U.S. GAAP. This ASU applies to all entities with unrecognized tax benefits that also have tax loss or tax credit carryforwards in the same tax jurisdiction as of the reporting date. This amendment is effective for public entities for fiscal years beginning after December 15, 2013 and interim periods within those years. The company does not expect the adoption of this standard to have a material impact on the Company’s consolidated financial statements.

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the Securities Exchange Commission (the “SEC”) did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.

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CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Provision for doubtful accounts	$ 43,356
Accumulated depreciation	31,585	46,493
Accumulated amortization intangible assets	$ 34,664
Series B, Preferred stock par value	$ 0.001	$ 0.001
Series B, Preferred stock shares authorized	2,500	2,500
Series B, Preferred stock shares issued	285	120
Series B, Preferred stock shares outstanding	285	120
Series B Common Stock Member
Common stock par value	$ 0.001	$ 0.001
Common stock shares authorized	1,000,000,000	1,000,000,000
Common stock shares issued	130,000,000	20,000,000
Common stock shares outstanding	130,000,000	20,000,000
Common Stock Series A Member
Common stock par value	$ 0.001	$ 0.001
Common stock shares authorized	1,000,000,000	1,000,000,000
Common stock shares issued	1,416,234,340	105,153,206
Common stock shares outstanding	1,416,234,340	105,153,206

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11. DEFICIENCY

12 Months Ended

Dec. 31, 2013

Stockholders' Equity Note [Abstract]

NOTE 11 - DEFICIENCY

NOTE 11    DEFICIENCY

Stock Issuances

2013 Stock Issuances

As of December 31, 2013, the Company was authorized to issue 10 billion Series A Shares, of which there were 1,416,234,340 issued and outstanding; 1 billion Series B Shares, of which there were 130 million issued and outstanding; and 2,500 Series B Preferred Shares, of which there were 285 issued and outstanding.

2011 Stock Option and Incentive Plan

On May 10, 2011, the Company adopted the "China Tel Group, Inc. 2011 Stock Option and Incentive Plan" ("the 2011 SOP").  The Company did so pursuant to a resolution of the Company’s Board of Directors and pursuant to a majority written consent of the shareholders of the Company’s Common Stock.  It was implemented pursuant to a Definitive Information Statement filed with the SEC and mailed to the shareholders of the Company’s Common Stock.

The material terms of the 2011 SOP are as follows:

(i)     The 2011 SOP is to be administered by the Company's board of directors or a committee of the board, including a committee consisting of two or more non-employee directors to the extent required under applicable laws or rules of any stock exchange on which the shares of the Company's Series A Common Stock are listed (any administrator, the "Committee");

(ii)    An award under the 2011 SOP may consist of incentive stock options, non-statutory stock options, restricted stock awards, unrestricted stock awards, performance stock awards, or stock appreciation rights, with the amount and type of any award at the discretion of the Committee;

(iii)   Eligible recipients under the 2011 SOP are all employees, officers, directors, consultants or advisors of the Company or any of its subsidiaries;

(iv)   The maximum number of shares of the Company’s Series A Common Stock available for issuance under the 2011 SOP is 750,000, no more than 300,000 of which may be awarded other than as options or stock appreciation rights, and no more than 500,000 of which may be awarded to any one participant in any one taxable year of the Company.  Shares of the Company’s Series A Common Stock issued pursuant to an award reduce the maximum shares of the Company’s Series A Common Stock remaining available for issuance under the 2011 SOP; however, shares of Series A Common Stock that are subject to any award that subsequently lapses, expires or is forfeited automatically become available for re-issuance.  In the event of any reorganization, merger, stock dividend, or stock split, the Committee may adjust the number or kind of securities available for issuance or payment under the 2011 SOP to avoid dilution or enlargement of the rights of participants under any prior award;

(v)    The exercise price of any stock option must be at least 100% of the fair market value of a Share on the date of grant (110% with respect to an incentive stock option granted to a participant who owns more than 10% of the total combined voting power of all classes of stock of the Company or any parent or subsidiary of the Company).  Vesting and duration of any option is at the Committee's discretion up to a maximum of 10 years duration (5 years in the case of an incentive option to a participant with more than 10% voting power as described above).  Payment of the purchase price upon exercise of any option is to be in cash, except the Committee may accept payment through a broker exercise notice, a net share payment, or other any other form of payment acceptable to the Committee;

(vi)   Upon a participant's separation from employment or other service with the Company or subsidiary, certain unvested or unexercised rights with respect to prior awards outstanding under the Plan will terminate immediately or within three months following such separation, depending upon the type of award and the reason for separation; and

(vii)  The 2011 SOP is non-exclusive and does not limit the power or authority of the Company’s board of directors to adopt, modify or terminate the 2011 SOP or such additional compensation arrangements as the board may deem necessary or desirable. The 2011 SOP terminates by its terms on December 31, 2020, unless earlier terminated by action of the board, provided that awards outstanding upon termination may continue to be exercised, or to become free of restrictions, according to their terms.

On July 15, 2011, the Company issued 375,000 options to purchase shares of the Company’s Series A Common Stock at an exercise price of $13 per Share. The options were issued to eligible recipients under the 2011 SOP.  All options were fully vested upon issuance and constitute non-statutory options under the terms of the 2011 SOP.

The following is a summary of stock option activity:

			Weighted		Weighted
			Average		average
	Options		Exercise		remaining		Aggregate
	outstanding		Price		contractual life		Intrinsic Value
Outstanding, December 31, 2011		375,000	$	13.00		9.55	$	–
Granted		–		–				–
Forfeited		–		–				–
Exercised		–		–				–
Outstanding, December 31, 2012		375,000	$	13.00		8.55	$	–
Granted		–		–				–
Forfeited		–		–				–
Exercised		–		–				–
Outstanding, December 31, 2013		375,000	$	13.00		7.55	$	–
Exercisable, December 31, 2013		375,000	$	13.00		7.55	$	–

The assumptions used in calculating the fair value of options granted using the Black-Scholes option- pricing model for options granted are as follows:

Risk-free interest rate	2.00%
Expected life of the options	10 years
Expected volatility	139%
Expected dividend yield	0%

The exercise price for options outstanding at December 31, 2013:

Number of Options	Exercise Price
375,000	$13
375,000

No options were granted for the years ended December 31, 2013 and 2012, respectively.

Equity Funding Agreements

Ironridge Technology Preferred Stock Purchase Agreement

On December 14, 2012, the Company entered into a Stock Purchase Agreement (“Ironridge Technology SPA”) with Ironridge Technology Co., a division of Ironridge Global (collectively “Ironridge Technology”), for the sale of 1,200 shares of convertible redeemable Series B Preferred Stock (“Series B Preferred Shares”) at a price of $10,000 per share, for a total purchase price of $12,000,000. The first Closing of 60 Series B Preferred Shares occurred on December 17, 2012 by direct wire transfer of $600,000 to the designated escrow holder under the China Motion SPA, as the down payment deposit for this acquisition. Each successive closing is to occur on the first day of each calendar month, or sooner at the Company’s sole option, subject to fulfillment of designated equity conditions, as defined in the Certificate of Designations. Ironridge Technology was entitled to and received a one-time non-refundable commitment fee of 60 shares of Series B Preferred Stock in consideration for providing the $12 million irrevocable funding commitment.

In connection with the Ironridge Technology SPA, on December 14, 2012, the Company filed a Certificate of Designations with the Nevada Secretary of State in order to fix the dividend, conversion, redemption, voting rights and other attributes of the Series B Preferred Shares called for under the Ironridge Technology SPA. The Company may redeem or the Company or the holder of any Series B Preferred Shares may convert one or more Series B Preferred Shares into Series A Shares at $10,000 per Series B Preferred Share being redeemed or converted, divided by the fixed conversion price of $0.20 per Series A Share, together with the sum of accrued dividends, plus an Embedded Derivative Liability, divided by 81% of the closing bid price for such Series A Shares during an Equity Conditions Measuring Period. The other attributes of Series B Preferred Stock are described in Note 1, Significant Accounting Policies.

Also on December 14, 2012, the Company and Ironridge Technology entered into a Registration Rights Agreement (“RRA”). Under the RRA, the Company is required to file with the SEC an S-1 Registration Statement to cover the resale of any Series A Shares issued upon conversion of shares of Series B Preferred Shares (collectively “Registrable Securities”). The Company is required to use its best efforts to cause the S-1 Registration Statement to become effective under the Securities Act of 1933, as amended (“Securities Act”), as soon as practicable, but no later than 90 days after filing, and to file such amendments as are necessary for the S-1 Registration Statement to remain continuously effective for registration of such additional Registrable Securities as are subsequently issued under the Ironridge Technology SPA.

On January 20, 2013, the Company filed with the SEC an S-1 Registration Statement contemplated by the RRA. The S-1 Registration Statement sought to register 32,000,000 Series A Shares issuable upon conversion of Series B Preferred Shares. The number of Series A Shares to be registered was determined based on one-third of the Company’s public float as of January 27, 2013. On February 25, 2013, the SEC submitted its first Comment Letter in response to the filing. The SEC requested the Company to provide updated Financial Statements for the S-1 Registration Statement and indicated that it believed the Ironridge Technology SPA is an “Equity Line Agreement” and therefore constitutes an “indirect primary offering” which the SEC does not permit. The Company considers it unlikely that the SEC will approve the effectiveness of the S-1 Registration Statement based on the structure of the Ironridge Technology SPA, and has made no effort to address the issues raised in the SEC’s Comment Letter.

On February 26, 2013, the Company and Ironridge Technology entered into a Waiver Agreement, pursuant to which Ironridge Technology waived completion of certain conditions described in the Ironridge Preferred SPA to allow the Company to call for a Closing to occur. Pursuant to and on the date of the Waiver Agreement, Ironridge Technology agreed to purchase 75 Series B Preferred Shares and to pay the Company $750,000. The Company also agreed to issue Ironridge Technology 75 Series B Preferred Shares as a non-refundable fee for entering into the Waiver Agreement. On February 27, 2013, Ironridge Technology paid the Company $750,000 and the Company issued Ironridge Technology 150 Series B Preferred Shares.

On May 15, 2013, Ironridge Technology paid the Company $150,000 and the Company issued Ironridge Technology 15 Series B Preferred Shares.

The Company's identified embedded derivatives related to the Preferred Stock issued to Ironridge. These embedded derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the inception date of the Preferred stock and to fair value as of each subsequent balance sheet date. At the inception of the 2012 and the 2013 issuance of Preferred stock, the Company determined a total fair value $12,033,333 of the embedded derivative. The fair value of the embedded derivative was determined using the Black Scholes Option Pricing Model based on the following assumptions:  dividend yield: -0-%, volatility 230%, risk free rate: 1.00%, expected term of .01 years

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Document and Entity Information (USD $)	12 Months Ended
	Dec. 31, 2013	Jun. 30, 2013
Entity Registrant Name	VELATEL GLOBAL COMMUNICATIONS, INC.
Entity Central Index Key	0001357531
Document Type	10-K
Document Period End Date	Dec. 31, 2013
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer	No
Is Entity a Voluntary Filer	No
Is Entity's Reporting Status Current	Yes
Entity Filer Category	Smaller Reporting Company
Entity Public Float		$ 2,463,400
Document Fiscal Period Focus	FY
Document Fiscal Year Focus	2013
Common Stock Series A Member
Entity Common Stock, Shares Outstanding	3,073,285,607
Series B Common Stock Member
Entity Common Stock, Shares Outstanding	330,000,000

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12. WARRANTS

12 Months Ended

Dec. 31, 2013

Warrants

NOTE 12 - WARRANTS

NOTE 12    WARRANTS

The following table summarizes the changes in warrants outstanding and the related prices for the Series A Shares issued to non-employees of the Company.  These warrants were in connection with the sale of the Company’s Series A Shares.

		Warrants Outstanding						Warrants Exercisable
				Weighted AverageRemaining		Weighted				Weighted
		Number		Contractual		Average		Number		Average
Exercise Price		Outstanding		Life (Years)		Exercise Price		Exercisable		Exercise Price
$	21.00		265,453		1.50	$	21.00		265,453	$	21.00
$	21.00		344,887		2.00	$	21.00		344,887	$	21.00
$	21.00		37,732		2.25	$	21.00		37,732	$	21.00
$	21.00		102,279		2.50	$	21.00		102,279	$	21.00
$	20.00		301,168		0.75	$	20.00		301,168	$	20.00
$	18.00		86,444		1.00	$	18.00		86,444	$	18.00
$	0.001-.012		673,155,105		1.75	$	0.001-.012		673,155,105	$	0.001-.012
			674,293,068						674,293,068

Transactions involving warrants are summarized as follows:

			Weighted
			Average
	Number of		Price
	Shares		Per Share
Outstanding at December 31, 2011		1,137,963	$	20.51
Issued		58,913,809		0.05
Exercised		–		–
Canceled or expired		–		–
Outstanding at December 31, 2012		60,051,772	$	0.45
Issued		614,241,296		0.01
Exercised		–		–
Canceled or expired		–		–
Outstanding at December 31, 2013		674,293,068	$	0.04

The assumptions used in calculating the fair value of warrants granted using the Black-Scholes option- pricing model for warrants granted in 2013 are as follows:

Risk-free interest rate	0.39%
Expected life of the warrants	3 years
Expected volatility	241-437%
Expected dividend yield	0%

The weighted-average fair value of the Warrants and Adjusted Warrants to be issued during the year ended December 31, 2013 was $0.005. The fair value of the warrants issued in 2013 was $4,914,161.

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CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Income Statement [Abstract]
REVENUE	$ 1,926,129
Cost of revenue	1,238,804
Gross profit	687,325
OPERATING EXPENSES:
Selling, general and administrative expenses	6,327,554	9,832,797
Impairment of investments	6,387,100	3,919,000
Depreciation and amortization	93,548	24,550
Total operating expenses	12,808,202	13,776,347
Net loss from operations	(12,120,877)	(13,776,347)
OTHER INCOME (EXPENSES):
Other income	165,157	31
Loss on settlement of debt	(9,115,414)	(10,820,537)
Loss on foreign currency transactions	(2,593)	(524)
Loss on change in fair value of debt derivative	(432,566)	(4,039,616)
Interest expense	(2,378,055)	(1,340,890)
Management fee income from related party	953,237
Bargain purchase gain of China Motion	856,751
Total other income (expense)	(9,953,483)	(16,201,536)
Loss from continuing operations	(22,074,360)	(29,977,883)
Discontinued operations:
Loss from operations of discontinued operation	(1,340,957)	(15,623,409)
Gain on disposition of discontinued operation	5,537,601
Net loss	(17,877,716)	(45,601,292)
(Income) loss attributed to non controlling interest	(172,271)	2,448,085
NET LOSS ATTRIBUTABLE TO VELATEL GLOBAL COMMUNICATIONS, INC.	(18,049,987)	(43,153,207)
Net loss per common share (basic and fully diluted) - continuing operations	$ (0.05)	$ (0.98)
Net income (loss) per common share (basic and fully diluted) - discontinued operations	$ 0.01	$ (0.55)
Weighted average number of shares outstanding, basic and fully diluted	482,018,361	28,213,128
Comprehensive Loss:
Net Loss	(17,877,716)	(45,601,292)
Foreign currency translation gain (loss)	1,598	(69,398)
Comprehensive Loss:	(17,876,118)	(45,670,690)
Comprehensive gain (loss) attributable to the non controlling interest	(172,271)	2,448,085
Comprehensive loss attributable to Velatel Global Communications, Inc.	$ (18,048,389)	$ (43,222,605)

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6. CONVERTIBLE NOTES

12 Months Ended

Dec. 31, 2013

Convertible Notes

NOTE 6 - CONVERTIBLE NOTES

NOTE 6     CONVERTIBLE NOTES

	2013			2012
10% Convertible Note Purchase Agreements (“Convertible Notes”) were due and payable December 31, 2008; accrued and unpaid interest was due at maturity; convertible note holder had the option to convert note principal together with accrued and unpaid interest to the Shares at a rate of $95.00 per Share. The Company is currently in default.	$	80,000		$	80,000
10% Amended and Restated Convertible Note Purchase Agreements (“Amended Convertible Notes”) were due and payable December 31, 2009, with interest payable at maturity.  The Amended Convertible Notes were convertible into Shares at the lesser of: (i) $0.95 per Share; or (ii) 80% of the volume weighted average of the closing bid price for the Shares on the Over The Counter Bulletin Board quotation system (“OTCBB”) for the ten day period prior to the convertible note holder’s election to convert.  The Company is currently in default.		218,923			218,923
8% convertible note dated October 14, 2013.  The note matures on October 14, 2014 and is convertible into shares of the Company's Series A common stock at a conversion price equal to 60% of the market value at the date of conversion.		100,000
10% convertible note dated October 14, 2013.  The note matures on October 14, 2014 and is convertible into shares of the Company's Series A common stock at a conversion price equal to 60% of the market value at the date of conversion.		25,000			–
12% convertible note dated June 26, 2013.  The note matures on June 26, 2014 and is convertible into shares of the Company's Series A common stock at a conversion price equal to 70% of the market value at the date of conversion.		178,200			–
12% convertible note dated June 26, 2013.  The note matures on December 26, 2013 and is convertible into shares of the Company's Series A common stock at a conversion price equal to 60% of the market value at the date of conversion.		25,000			–
12% convertible note dated July 5, 2013.  The note matures on January 6, 2014 and is convertible into shares of the Company's Series A common stock at a conversion price equal to 60% of the market value at the date of conversion.		75,000			–
12% convertible note dated September 6, 2013.  The note matures on March 6, 2014 and is convertible into shares of the Company's Series A common stock at a conversion price equal to 60% of the market value at the date of conversion.		50,000			–
12% convertible note dated September 6, 2013.  The note matures on March 6, 2014 and is convertible into shares of the Company's Series A common stock at a conversion price equal to 60% of the market value at the date of conversion.		100,000			–
10% convertible note dated July 5, 2013.  The note matures on April 1, 2014 and is convertible into shares of the Company's Series A common stock at a conversion price equal to 80% of the market value at the date of conversion.		81,000			–
Total		933,123			298,923
Less debt discounts		(182,219	)		–
		750,904			298,923
Less current maturities		(750,904	)		(298,923	)
Long term portion	$	–		$	–

The Company identified embedded derivatives related to (i) the Amended Convertible Notes, and (ii) the convertible notes issued in 2013. These embedded derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the inception date of the instruments and to fair value as of each subsequent balance sheet date.

At the inception of the Amended Convertible Notes, the Company determined a fair value $14,083,386 of the embedded derivative. The fair value of the embedded derivative was determined using the Black Scholes Option Pricing Model based on the following assumptions:  dividend yield: -0-%, volatility 144.76%, risk free rate: 1.08%, expected term of four hundred and nine days. Refer to Note 9, Derivative Financial Instruments.

The convertible notes issued in 2013 converted into shares of the Company’s Series A Shares at a discount to the market price, which gives rise to a beneficial conversion feature. The Company calculated the beneficial conversion feature to be $1,332,036, which has been recorded as a debt discount and as the fair value at the inception date of the convertible notes issued in 2013. The Company amortized $1,149,817 of this debt discount during the year ended December 31, 2013.The fair value of the embedded derivative was determined using the Black Scholes Option Pricing Model based on the following assumptions:  dividend yield: -0-%, volatility 230%, risk free rate: 1.00%, expected term of .01 years. Refer to Note 9, Derivative Financial Instruments.

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5. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

12 Months Ended

Dec. 31, 2013

Payables and Accruals [Abstract]

NOTE 5 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

NOTE 5     ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities are comprised of the following:

	2013		2012
Accounts payable	$	5,310,098	$	3,426,173
Accrued expenses		6,823,229		7,855,630
Accrued interest on indebtedness		1,729,922		921,954
	$	13,863,249	$	12,203,757

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17. INCOME TAXES

12 Months Ended

Dec. 31, 2013

Income Taxes

Note 17. INCOME TAXES

NOTE 17    INCOME TAXES

At December 31, 2013, the Company has available for federal income tax purposes a net operating loss carry forward of approximately $195 million expiring through the year 2028 that may be used to offset future taxable income.  The Company has provided a valuation reserve against the full amount of the net operating loss benefit, since in the opinion of management based upon the earnings history of the Company; it is more likely than not that the benefits will not be realized.  Due to possible significant changes in the Company's ownership, the future use of its existing net operating losses may be limited.  Components of deferred tax assets as of December 31, 2013 are as follows: (i) income tax expense for the year ended December 31, 2013 is comprised of state taxes, which primarily are not based on earnings; (ii) no other income taxes were recorded on the earnings in 2013 and 2012 as a result of the utilization of the carry forwards; and all or portion of the remaining valuation allowance may be reduced in future years based on an assessment of earnings sufficient to fully utilize these potential tax benefits.

At December 31, 2013 and 2012, the significant components of the deferred tax assets (liabilities) are summarized below:

	December 31,			December 31,
	2013			2012
Approximate net operating loss carry forwards expiring in 2028	$	195,000,000		$	183,000,000
Deferred tax assets:
Federal net operating loss	$	66,000,000		$	62,000,000
State net operating loss		8,000,000			7,000,000
Foreign net operating loss		1,000,000			2,000,000
Total deferred tax assets		75,000,000			71,000,000
Less valuation allowance		(75,000,000	)		(71,000,000	)
	$	–		$	–

The reconciliation of the effective income tax rate to the federal statutory rate for the years ended December 31, 2013 and 2012 is as follows:

	December 31,		December 31,
	2013		2012
Federal income tax rate		-34.0%		-34.0%
State tax, net of federal benefit		-6.0%		-6.0%
Stock options		0.0%		0.0%
Impairments		13.0%		5.0%
Change in derivative liability		1.0%		6.0%
Increase in valuation allowance		26.0%		29.0%
Effective income tax rate		0.0%		0.0%

The Company has never been audited by either the Internal Revenue Service or any state, and the 2009 to present tax years are still open and could be subject to audit.

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13. RELATED PARTY TRANSACTIONS

12 Months Ended

Dec. 31, 2013

Related Party Transactions [Abstract]

NOTE 13 - RELATED PARTY TRANSACTIONS

NOTE 13    RELATED PARTY TRANSACTIONS

The Company has the following material related party transactions at December 31, 2013 and 2012:

	2013		2012
Note payable dated April 15, 2009, non-interest bearing, due on demand, unsecured	$	–	$	473
Note payable dated February 24, 2012, 10% per annum interest, payable upon demand		85,553		81,343
Note payable dated May 20, 2009, 8% per annum interest, due December 1, 2009, unsecured, currently in default		200,000		200,000
Note payable dated April 1, 2009, 8% per annum interest, due originally October 1, 2009, unsecured, currently in default		100,000		100,000
Note payable dated July 1, 2009, 8% per annum interest, due March 17, 2010, currently in default		100,000		100,000
Line of Credit Promissory Note, due March 13, 2013, unsecured, interest at 10% per annum, currently in default		188,795		447,306
Total	$	674,348	$	929,122

Accrued interest, as of December 31, 2013 and 2012 due to related parties was $200,243 and $118,241, respectively.

Advances from Officers and Related Parties

Officers of the Company or its subsidiaries have advanced certain operating expenses for unpaid consulting fees, including business travel, which is non-interest bearing and expected to be repaid within 12 months:

	2013		2012
Advances to VelaTel	$	2,269,472	$	785,715
Advances to Gulfstream Seychelles		44,311		40,130
	$	2,313,783	$	825,845

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9. DERIVATIVE FINANCIAL INSTRUMENTS

12 Months Ended

Dec. 31, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

NOTE 9 - DERIVATIVE FINANCIAL INSTRUMENTS

NOTE 9     DERIVATIVE FINANCIAL INSTRUMENTS

The Company's derivative financial instruments consisted of embedded derivatives related to the Amended Convertible Notes, the convertible notes issued in 2013 and the Series B Preferred Stock.  The embedded derivatives included certain conversion features.  The accounting treatment of derivative financial instruments required that the Company record the derivatives at their fair values as of the inception date and at fair value as of each subsequent balance sheet date.  Any change in fair value was recorded as non-operating, non-cash income or expense at each reporting date.  If the fair value of the derivatives was higher at the subsequent balance sheet date, the Company recorded a non-operating, non-cash charge.  If the fair value of the derivatives was lower at the subsequent balance sheet date, the Company recorded non-operating, non-cash income.  The derivatives were classified as short-term liabilities.  The derivative liability at December 31, 2013 and December 31, 2012 was $18,058,465 and $6,393,863, respectively.

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11. DEFICIENCY (Details Narrative) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Preferred stock shares authorized	2,500	2,500
Preferred stock shares issued	285	120
Preferred stock shares outstanding	285	120
Weighted-average fair value options	$ 12,033,333	$ 12,033,333
Risk-free interest rate	2.00%
Expected life of the options	10 years
Expected volatility	139.00%
Expected dividend yield	0.00%
Ironridge Technology
Risk-free interest rate	1.00%
Expected life of the options	4 days
Expected volatility	230.00%
Expected dividend yield	0.00%
Series B Common Stock Member
Common Stock Authorized	1,000,000,000	1,000,000,000
Common Stock Issued	130,000,000	20,000,000
Common Stock Outstanding	130,000,000	20,000,000

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7. NOTES PAYABLE

12 Months Ended

Dec. 31, 2013

Debt Disclosure [Abstract]

NOTE 7 - NOTES PAYABLE

NOTE 7     NOTES PAYABLE

Notes payable at December 31, 2013 and 2012 were comprised of the following:

	2013			2012
Note payable, dated December 12, 2012; due June 12, 2013 unsecured and accrues interest at 8% per annum	$	–		$	103,500
Note payable, dated February 24, 2012 is unsecured, due on February 24, 2013 and accrues interest at 10% per annum, and is in default		719,211			684,210
Note payable dated December 12, 2012, 10% per annum interest		200,000			200,000
Note payable, dated April 12, 2012 is unsecured, due on April 12, 2013 and accrues interest at 10% per annum, and is in default		15,789			38,653
Line of Credit Loan Agreement and Promissory Note (“First Note”), due December 31, 2011, and Second Note, all unsecured, interest at 10% per annum. During 2012, the First Note was split into 15 separate notes. As of December 31, 2013, six notes had been paid in full, three were partially paid, and the unpaid balance is in default.		3,766,718			5,999,558
Note payable issued in connection with acquisition of China Motion, as amended on October 28, 2013.  The note is due on February 28, 2014, is interest free if paid on time; otherwise the default interest rate is 36% per annum.		2,411,598			–
Note payable, dated June 24, 2013, amended on December 12, 2013 and is due on April 2, 2014 and accrues interest at 10.0% per annum.		1,901,000			–
Total		9,014,316			7,025,921
Less current maturities		(9,014,316	)		(7,025,921	)
Long term portion	$	–		$	–

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8. NOTES PAYABLE, OTHER

12 Months Ended

Dec. 31, 2013

Notes Payable Other

NOTE 8 - NOTES PAYABLE, OTHER

NOTE 8     NOTES PAYABLE, OTHER

During the year ended December 31, 2009, three judgments were entered against the Company relating to certain Convertible Notes currently in default.  The judgments are accruing interest at rates ranging from 3.6% to 10% per annum.  The principal balance of the three judgments totaled $821,735 and $821,735 as of December 31, 2013 and 2012, respectively. The judgments are deemed current (as opposed to long-term) but are in default.

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10. NON CONTROLLING INTEREST

12 Months Ended

Dec. 31, 2013

Stockholders' Equity Attributable to Noncontrolling Interest [Abstract]

NOTE 10 - NON CONTROLLING INTEREST

NOTE 10    NON-CONTROLLING INTEREST

The following table summarizes the changes in Non-Controlling Interest for the years ended December 31, 2013 and 2012:

	Vela Tel
	Peru			Herlong			Zapna			Total
Balance as of December 31, 2011		(139,816	)		–			–			(139,816	)
Purchase of non-controlling interest through acquisition		–			1,244,943			66,667			1,311,610
Period loss applicable to non-controlling interest for the year ended December 31, 2012		(364,442	)		(2,000,270	)		(83,373	)		(2,448,085	)
Balance as of December 31, 2012	$	(504,258	)	$	(755,327	)	$	(16,706	)	$	(1,276,291	)
Period income (loss) applicable to non-controlling interest for the year ended December 31, 2013		504,258			(348,693	)		16,706			172,271
Balance as of December 31, 2013	$	–		$	(1,104,020	)	$	–		$	(1,104,020	)
Non Controlling interest percentage		5%			25%			25%

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12. WARRANTS (Details Narrative) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Fair value of the warrants issued	$ 4,914,161	$ 4,387,363
Warrant [Member]
Weighted-average fair value Warrants	$ 0.005

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13. RELATED PARTY TRANSACTIONS (Details 1) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Advances from officers	$ 2,313,783	$ 825,845
Advances To VelaTel Member
Advances from officers	2,269,472	785,715
Advances To Gulfstream Seychellesl Member
Advances from officers	$ 44,311	$ 40,130

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12. WARRANTS (Details 2)	12 Months Ended
	Dec. 31, 2013
Warrants
Risk-free interest rate	0.39%
Expected life of the warrants	3 years
Expected volatility, Minimum	241.00%
Expected volatility, maximum	437.00%
Expected dividend yield	0.00%

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11. DEFICIENCY (Tables)

12 Months Ended

Dec. 31, 2013

Notes to Financial Statements

Stock option activity

The following is a summary of stock option activity:

			Weighted		Weighted
			Average		average
	Options		Exercise		remaining		Aggregate
	outstanding		Price		contractual life		Intrinsic Value
Outstanding, December 31, 2011		375,000	$	13.00		9.55	$	–
Granted		–		–				–
Forfeited		–		–				–
Exercised		–		–				–
Outstanding, December 31, 2012		375,000	$	13.00		8.55	$	–
Granted		–		–				–
Forfeited		–		–				–
Exercised		–		–				–
Outstanding, December 31, 2013		375,000	$	13.00		7.55	$	–
Exercisable, December 31, 2013		375,000	$	13.00		7.55	$	–

Assumptions used in calculating fair value of options granted

The assumptions used in calculating the fair value of options granted using the Black-Scholes option- pricing model for options granted are as follows:

Risk-free interest rate	2.00%
Expected life of the options	10 years
Expected volatility	139%
Expected dividend yield	0%

Exercise price options outstanding

The exercise price for options outstanding at December 31, 2013:

Number of Options	Exercise Price
375,000	$13
375,000

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6. CONVERTIBLE NOTES (Details) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Convertible note	$ 933,123	$ 298,923
Less debt discounts	(182,219)
Total convertible notes	750,904	298,923
Less current maturities	(750,904)	(298,923)
Long term portion
Convertible Debt A
Convertible note	80,000	80,000
Convertible Debt B
Convertible note	218,923	218,923
Convertible Debt C
Convertible note	100,000
Convertible Debt D
Convertible note	25,000
Convertible Debt E
Convertible note	178,200
Convertible Debt F
Convertible note	25,000
Convertible Debt G
Convertible note	75,000
Convertible Debt H
Convertible note	50,000
Convertible Debt I
Convertible note	100,000
Convertible Debt J
Convertible note	$ 81,000

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15. FAIR VALUE MEASUREMENT

12 Months Ended

Dec. 31, 2013

Fair Value Disclosures [Abstract]

NOTE 15 - FAIR VALUE MEASUREMENT

NOTE 15    FAIR VALUE MEASUREMENT

The Company adopted the provisions of ASC 825-10 on January 1, 2008.  ASC 825-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance.  ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.  ASC 825-10 establishes three levels of inputs that may be used to measure fair value:

Level 1 - Quoted prices in active markets for identical assets or liabilities;

Level 2 - Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities; and

Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment.  In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy.  In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed and is determined based on the lowest level input that is significant to the fair value measurement.

Upon adoption of ASC 825-10, there was no cumulative effect adjustment to beginning retained earnings and no impact on the consolidated financial statements.

The carrying value of the Company’s cash and cash equivalents, accounts receivable, accounts payable, short-term borrowings (including convertible notes payable), and other current assets and liabilities approximate fair value, because of their short-term maturity.

Items recorded or measured at fair value on a recurring basis in the accompanying consolidated financial statements consisted of the following items as of December 31, 2013:

	Quoted Prices
	in Active		Significant
	Markets for		Other		Significant
	Identical		Observable		Unobservable
	Instruments		Inputs		Inputs
	Level 1		Level 2		Level 3		Total
Derivative Liability	$	–	$	–	$	18,058,465	$	18,058,465
	Rollforward
	of Balance
Balance, December 31, 2011	$	220,914
Derivative liability for Series B preferred stock		2,133,333
Change in value of derivative liability during 2012		4,039,616
Balance, December 31, 2012	$	6,393,863
Derivative liability for Series B preferred stock		9,900,000
Derivative liability for convertible notes		1,332,036
Change in value of derivative liability during 2013		432,566
Balance, December 31, 2013	$	18,058,465

The Company's derivative liability was valued using pricing models, and the Company generally uses similar models to value similar instruments.  Where possible, the Company verifies the values produced by its pricing models to market prices.  Valuation models require a variety of inputs, including contractual terms, market prices, yield curves, credit spreads, measures of volatility, and correlations of such inputs.  These financial liabilities do not trade in liquid markets, and, as such, model inputs cannot generally be verified and do involve significant management judgment.  Such instruments are typically classified within Level 3 of the fair value hierarchy.  The change in fair value of the derivative liability is included as a component of other income in the consolidated statements of operations.

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20. SUBSEQUENT EVENTS

12 Months Ended

Dec. 31, 2013

Subsequent Events [Abstract]

NOTE 20 - SUBSEQUENT EVENTS

NOTE 20     SUBSEQUENT EVENTS

The Company has evaluated events subsequent to December 31, 2013, to assess the need for potential recognition or disclosure in this Report. Such events were evaluated through the date the Company’s Consolidated Financial Statements were issued.  Based upon this evaluation, it was determined that no subsequent events occurred that require recognition in the Consolidated Financial Statements and that the following items represent subsequent events that merit disclosure in this Report.

Sales of Unregistered Securities of the Company

Subsequent to December 31, 2013 and through the date this Report is filed, the Company has issued a total of 1,704,473,192 Series A Shares for the settlement of lawsuits, notes payable and accounts payable, and 200 million Series B Shares in order to ensure continued management voting control.

Forfeiture of Equity Interest In Herlong Investments, Ltd.

The Company acquired its 75% equity interest in Herlong and Herlong’s wholly owned subsidiaries through a Business Cooperation Agreement (“BCA”) entered into in 2011 and closed in 2012. Pursuant to the BCA, the Company was obligated to make certain minimum investments into Herlong upon certain milestone dates. The Company’s investment obligations were secured by a pledge of its common stock of Herlong in favor of the 25% minority stockholder, pursuant to a stock pledge agreement and an escrow agreement. Prior to December 31, 2013, the Company determined that it would discontinue its investment in Herlong. On January 16, 2014, the minority shareholder declared a forfeiture of the Company’s 75% equity interest in the shares of Herlong’s common stock covered by the stock pledge. The Company maintains its interest in 1,028,086 Redeemable Preference Shares issued at closing of the BCA, and has exchanged notices with the minority shareholder that are a prerequisite to commencement of arbitration under the BCA for issuance of additional Redeemable Preference Shares for other amounts the Company invested in Herlong, as well as adjustment of equities based on breach of representations and warranties made by the minority shareholder in connection with the BCA.

Amendments to Agreements for Financing Acquisition of China Motion

On March 4, 2014, the Company and AQC entered into a Second Amended Loan Agreement, acknowledging that in consideration of an additional $918,000 AQC had advanced directly to Xin Hua on or before February 25, 2014 towards repayment of the Xin Hua Loan Agreement, all rights and obligations of the parties under the original and Amended AQC Loan Agreements were deemed satisfied and replaced by the terms of the following new instruments directly between AQC and China Motion: (1) an AQC Promissory Note, (2) an AQC Security Agreement, and (3) an AQC Warrant for purchase of China Motion Stock, each of which was also executed on March 4, 2014.

The AQC Promissory Note is in the amount of $2,863,000, representing the sum of all amounts previously advanced by AQC, plus interest accrued through the date of the AQC Promissory Note on such amounts. The principal balance of the AQC Promissory Note bears interest at 10% per annum, which increases to 20% in the event of any default. The total term of the AQC Promissory Note is three years, with a final maturity date of March 3, 2017, subject to payment in cash of extension fees in three month intervals, each equal to 3% of the principal balance then due. The AQC Promissory Note may be prepaid in whole or in part without penalty. In addition to standard provisions describing events of default, the filing of any voluntary or involuntary bankruptcy petition, appointment of receiver, or other extraordinary action to dissolve or liquidate the assets of the Company or Gulfstream Seychelles, or writ for attachment of any of the China Motion Stock, which proceeding is not dismissed within thirty days of filing, constitutes a default under the AQC Promissory Note, as does any change of management control of the Company. For so long as there is any amount owing under the AQC Promissory Note, AQC has the right to appoint one director of China Motion, and certain fundamental corporate events are subject to unanimous approval of all directors.

The AQC Security Agreement grants AQC a security interest in all of China Motion’s current and future assets, as security for repayment of the AQC Promissory Note. In the event of default, AQC may take control of and sell any or all of the assets and apply the proceeds of such sale against the amount then owed under the AQC Promissory Note.

The AQC Warrant grants AQC the right to purchase 49% (on a fully diluted basis) of the China Motion Stock (Series A Warrant). The AQC Warrant may be exercised in whole or in part from time to time until expiration on March 1, 2024 at an exercise price of $0.0001 per Share, subject to price adjustment in the event of future equity or other corporate events that would cause the number of Shares outstanding to change. AQC has the right to vote the number of shares equal to 49% of the total outstanding shares that are represented by the AQC Warrant, as though the AQC Warrant had been fully exercised. AQC has the option but not the obligation to partially exercise the AQC Warrant for the number of shares required to fulfill the prior option of StarHub Mobile Pte., Ltd to acquire up to 25% of the Shares. The Warrant is subject to increase (Series B Warrant) upon any of the following events (each percentage described also on a fully diluted basis): (i) 1% for each extension fee described in the Promissory Note that is not timely paid, (ii) 10% in the event of a change of management control of the Company, and/or (iii) 10% in the event of filing of a voluntary or involuntary bankruptcy petition, appointment of receiver, or other extraordinary action to dissolve or liquidate the assets of the Company or Gulfstream Seychelles, or a writ for attachment of any of the China Motion Stock, which proceeding is not dismissed within thirty days of filing. AQC has the right to vote the shares represented by the Series B Warrant only upon exercise of that portion of the AQC Warrant. Exercise of the entire portion of the AQC Warrant not previously exercised shall be deemed to have occurred automatically one day prior to the occurrence of any event described in sub-part (i) or (ii) above, without notice and with sixty (60) days grace period for AQC to pay the exercise price.

Loan Agreement with Tai Chun-ya

On January 20, 2014, the Company (through Gulfstream Seychelles) entered into a Loan Agreement with Tai Chun-ya. On February 21, 2014, Tai Chun-ya paid to Xin Hua directly $1,500,000. The Tai Chun-ya Loan Agreement calls for repayment of $1,500,000, plus interest at 10% per annum on or before July 26, 2014. Tai Chun-ya has the option to accept repayment (including interest) in the form of 15% of the China Motion Stock.

Legal Proceedings

Ironridge Global Litigation – On January 14, 2014, Ironridge Global filed an ex parte application for enforcement of the Ironridge Global Order. Ironridge contended that the Company failed and refused to reserve the number of Series A Shares required under both the Ironridge Global Order and the Preferred Stock Purchase Agreement between the Company and Ironridge, and to issue the number of Shares required under the Ironridge Global Order. The Company disputed the number of shares Ironridge claims are owed, and the court’s jurisdiction to enforce the Preferred Stock Purchase Agreement pursuant to the retention of jurisdiction provided for in the Ironridge Global Order. The Company also contended that Ironridge’s actions made Ironridge an “affiliate” within the meaning of federal securities laws, such that the Company was required to place a restrictive legend on issuance of future certificates for Series A Shares. The court continued the ex parte hearing until February 6, 2014 and following that hearing took the matter under advisement. On February 19, 2014, the court directed the parties to file additional papers addressing specific issues, including a detailed description of the issuances to and sales of Series A Shares by Ironridge, including the dates, number of shares per issuance, and selling prices of all shares issued. The court also scheduled a follow up hearing which occurred on March 26, 2014. As of the date this Report is filed, the court has not yet ruled on Ironridge’s application.

BDO Litigation –On January 20, 2014, BDO Statsautoriseret Revisionsaktieselskab, aka BDO Copenhagen (“BDO”) filed a complaint against the Company in County of San Diego Superior Court of the State of California, identified as Case No. 37-2014-0081872-CU-BC-CTL. The complaint alleged breach of contract for the Company’s failure to pay $48,858, plus interest in connection with services BDO provided in compiling financial information regarding the Company’s former subsidiary Zapna to include in the Company’s consolidated financial statements. The Company allowed a default judgment to be entered and on March 21, 2014 BDO filed an order for writ of attachment in the amount of $55,997. The Company intends to pay or settle the judgment when funds are available to do so.

Developments in Sino Crossings Arbitration – On March 18, 2014, the arbitrator denied the Company’s request to join additional parties, and directed the parties to propose timetables for scheduling the arbitration.

Developments in Westmoore Receiver Litigation – On April 22, 2014, Plaintiff entered a notice of voluntary dismissal of the Company, George Alvarez, and certain other defendants alleged to have been affiliates of the Company, pursuant to a tolling agreement whereby the Company agreed (i) to provide Plaintiff certain information regarding past transactions with Westmoore Entities, and (ii) acknowledging Plaintiff’s right to refile claims against the dismissed defendants should further investigation establish a basis to do so, in which case the dismissed defendants would agree not to assert a statute of limitations or similar defense based on the passage of time between filing of the original complaint and re-filing of a new claim against the dismissed defendants. The Company believes that the additional information the Company will supply will persuade Plaintiff to not re-file any claims against the Company.

Potential Claim by ZTE – On April 24, 2014, the Company received correspondence from attorneys on behalf of ZTE Corporation and ZTE Corporation Peru (collectively “ZTE”) asserting a claim for collection of amounts allegedly due pursuant to contracts and purchase orders for equipment and services ZTE provided to the Company’s former subsidiary VelaTel Peru. The total amount claimed is $4,606,163 including accrued interest through April 24, 2014, plus additional interest at the rate of $283 per day. ZTE’s correspondence demands payment within seven days and asserts that ZTE will commence arbitration against the Company pursuant to the contracts if payment is not so made. Also on April 24, 2014, the Company responded to ZTE’s correspondence by asserting that the Company is not a party to nor co-signer or guarantor of the obligations of VelaTel Peru under the contracts, and is not otherwise liable for any debts of VelaTel Peru based on sale of its equity interest in VelaTel Peru completed in September 2013, and for the same reasons is not bound by the arbitration clause contained in the contracts.

Herlong Shareholder Arbitration – On April 29, 2014, 7L Capital Partners Emerging Europe, LP (“7L”), Karlo Vlah, Durda Vlah and Joseph Vlah (collectively with 7L “Herlong Shareholders”) delivered to the Company a notice of arbitration asserting a claim for damages under the Business Cooperation Agreement (“BCA”) between the Herlong Shareholders and the Company related to the Company’s investment in its former subsidiary Herlong. The Herlong Shareholders seek recovery of alleged damages totaling €5,359,200 (approximately $7,395,000) as diminished value of their respective equity interests in Herlong and its subsidiaries as a result of the Company’s failure to pay the amounts called for under the BCA. 7L also seeks termination of the pledge and escrow agreement whereby 7L’s 25% equity interest in Herlong is collateral for any damages the Company may incur as a result of 7L’s breach of the BCA. The Company has not yet responded to the notice for arbitration, but intends to vigorously defend the claim. Among other defenses, the BCA provides that any damages recoverable against the Company are limited to the value of the Company’s common shares in Herlong, which have already been forfeited.

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4. INTANGIBLE ASSETS (Details Narrative) (USD $)	12 Months Ended
	Dec. 31, 2013
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization of intangible assets	$ 34,664

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19. DISCONTINUED OPERATIONS/DISPOSITION (Tables)

12 Months Ended

Dec. 31, 2013

Discontinued Operations and Disposal Groups [Abstract]

Discontinued operations financials

The operating results for VelaTel Peru, Zapna and Herlong have been presented in the accompanying Consolidated Statement of Operations for the years ended December 31, 2013 and 2012 as discontinued operations and are summarized below:

	Years Ended December 31,
	2013			2012
Revenues	$	1,316,884		$	2,501,612
Cost of revenue		598,274			1,803,908
Gross profit		718,610			697,704
Operating expenses		2,583,252			15,575,828
Loss from operations		(1,864,642	)		(14,878,124	)
Non-operating income		523,685			(745,285	)
Net loss	$	(1,340,957	)	$	(15,623,409	)

The assets and liabilities of the discontinued operations at December 31, 2013 and 2012 are summarized below:

	December 31,
	2013		2012
Current assets	$	150,228	$	696,897
Long-term assets		863,278		5,764,290
	$	1,013,506	$	6,461,187
Current liabilities	$	6,754,825	$	15,422,191

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CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT (USD $)	Total	Series B Preferred Stock	Common Stock Series A Member	Common Stock Subscribed	Additional Paid-in Capital	Prepaid Deposit	Accumulated Other Comprehensive Income (Loss)	Accumulated Deficit	Noncontrolling Interest
Beginning Balance, Amount at Dec. 31, 2011	$ (9,928,838)		$ 6,672		$ 244,043,954	$ (178,664)		$ (253,660,984)	$ (139,816)
Beginning Balance, Shares at Dec. 31, 2011			6,672,115
Issuance of Series B preferred stock for deposit, Amount	600,000	600,000
Issuance of Series B preferred stock for deposit, Shares		120
Beneficial conversion feature associated with Series B preferred stock	(2,133,333)	(600,000)						(1,533,333)
Issuance of Series A common stock in exchange for convertible debentures and related interest, Amount	154,124		16		154,108
Issuance of Series A common stock in exchange for convertible debentures and related interest, Shares			16,326
Issuance of Series A common stock issued in settlement of accounts payable, Amount	11,682,958		37,386		11,645,572
Issuance of Series A common stock issued in settlement of accounts payable, Shares			37,385,654
Issuance of Series A common stock in settlement of debt, Amount	2,409,123		60,849		2,348,274
Issuance of Series A common stock in settlement of debt, Shares			60,848,955
Issuance of Series A common stock for settlement, Amount	196,815		63		196,752
Issuance of Series A common stock for settlement, Shares			63,489
Issuance of Series A common stock for investment in Zapna, Amount	200,000		67		199,933
Issuance of Series A common stock for investment in Zapna, Shares			66,667
Issuance of Series A common stock for investment in VN Tech, Amount	224,000		100		223,900
Issuance of Series A common stock for investment in VN Tech, Shares			100,000
Value of warrants issued	4,387,363				4,387,363
Other comprehensive loss and foreign currency translation loss	(69,398)						(69,398)
Acquisition of Hurlong and Zapna	1,311,610								1,311,610
Net loss	(45,601,292)							(43,153,207)	(2,448,085)
Ending Balance, Amount at Dec. 31, 2012	(36,566,868)		105,153		263,199,856	(178,664)	(69,398)	(298,347,524)	(1,276,291)
Ending Balance, Shares at Dec. 31, 2012		120	105,153,206
Issuance of Series B preferred stock for deposit, Amount	900,000	900,000
Issuance of Series B preferred stock for deposit, Shares		165
Beneficial conversion feature associated with Series B preferred stock	(9,900,000)	(900,000)						(9,000,000)
Issuance of Series A common stock issued in settlement of accounts payable, Amount	287,127		23,385		263,742
Issuance of Series A common stock issued in settlement of accounts payable, Shares			23,384,967
Issuance of Series A common stock in settlement of debt, Amount	9,644,650		1,287,696		8,356,954
Issuance of Series A common stock in settlement of debt, Shares			1,287,696,167
Value of warrants issued	4,914,161				4,914,161
Other comprehensive loss and foreign currency translation loss	1,598						1,598
Net loss	(17,877,716)							(18,049,987)	172,271
Ending Balance, Amount at Dec. 31, 2013	$ (48,597,048)		$ 1,416,234		$ 276,734,713	$ (178,664)	$ (67,800)	$ (325,397,511)	$ (1,104,020)
Ending Balance, Shares at Dec. 31, 2013		285	1,416,234,340

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4. INTANGIBLE ASSETS

12 Months Ended

Dec. 31, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

NOTE 4 - INTANGIBLE ASSETS

NOTE 4     INTANGIBLE ASSETS

Intangible assets at December 31, 2013 are comprised of the following:

Customer list	$	238,108
Telecom licenses		385,467
		623,575
Accumulated amortization		(34,664	)
	$	588,911

For the years ending December 31, 2013, the Company recorded amortization of $34,664 as a charge to current period operations.

Amortization expense for the years ending December 31, 2013 to 2016 is as follows:

Year Ending December 31,
	2014	$	207,858
	2015		207,858
	2016		173,195
		$	588,911

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11. DEFICIENCY (Details 1)	12 Months Ended
	Dec. 31, 2013
Deficiency Details 1
Risk-free interest rate	2.00%
Expected life of the options	10 years
Expected volatility	139.00%
Expected dividend yield	0.00%

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14. COMMITMENTS AND CONTINGENCIES (Details Narrative) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Rental expense	$ 297,259	$ 313,156
FischerLitigationMember
Litigation settlement	560,000
Payment of Settlement Agreement	400,000
GomezLitigationMember
Litigation settlement	455,950
Payment of Settlement Agreement	280,824
OlaecheaLitigationMember
Litigation settlement	47,500
Payment of Settlement Agreement	$ 140,911
Ironridge Global Litigation [Member]
Shares issued	376,000,000	13,595,000

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1. SIGNIFICANT ACCOUNTING POLICIES (Policies)

12 Months Ended

Dec. 31, 2013

Accounting Policies [Abstract]

General

The accompanying Consolidated Financial Statements of VelaTel Global Communications, Inc. (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

Capital Structure

The Company’s capital stock consists of three series of its stock that are authorized: (i) Series A common stock (“Series A Common Stock,” “Series A Shares” or “Shares”); (ii) Series B common stock (“Series B Common Stock” or “Series B Shares”); and (iii) Series B Convertible and Redeemable Preferred Stock (“Series B Preferred Shares”). Series A Common Stock, together with Series B Common Stock, are collectively referred to in these Notes as “Common Stock.”

Attributes of Each Class and Series of Stock

Each Class and Series of the Company’s capital stock has a par value of $0.001. The other rights, preferences and attributes of each class and series of capital stock are as follows:

Series A Common Stock

The holders of Series A Shares are entitled to receive dividends as may be declared by the Company’s Board, are entitled to share ratably in all of the Company assets available for distribution upon winding up of the affairs of the Company, and are entitled to one non-cumulative vote per share on all matters on which shareholders may vote at all meetings of the shareholders.

The holders of Series A Shares are not entitled to preference as to dividends or interest, preemptive rights to purchase in new issuances of Series A Shares, preference upon liquidation or any other special rights or preferences.

The holders of Series A Shares do not have cumulative voting rights.

Series B Common Stock

Voting Rights. Each Series B Share is entitled to ten votes in all matters for any action that each Series A Share is entitled to vote.

Non Participatory. The holders of Series B Shares do not participate in any declared dividends for any class of stock.

Transferability. The consent of 80% of the issued and outstanding Series B Shares is required in order to sell, assign or transfer Series B Shares to a third party, or to grant proxies or voting rights with respect to Series B Shares.

Mandatory Redemption. Series B Shares will be redeemed in 2023 at par value $0.001 per share, and is therefore classified outside of equity for reporting purposes.  As of the date of this Report, the present value balance of liability for redemption of Series B Shares issued and outstanding is $81,083, which is the deemed fair value of the Series B Shares.

Preferred Shares

The Company has authorized 25 million shares of Preferred Stock, issuable from time to time in one or more series. The Company’s Board is authorized to fix the dividend rights, dividend rate, voting rights, conversion rights, rights and terms of redemption and liquidation preferences of any wholly unissued series of preferred stock and the number of shares constituting any series and the designation thereof, of any of them.

Series B Preferred Stock

On December 14, 2012, the Company filed with the Nevada Secretary of State a Certificate of Designations of Preferences, Rights and Limitations of the Company’s Preferred Shares (“Certificate of Designations”). They are as follows:

Designation, Amount and Par Value. The Company had previously designated 20 million shares of its Preferred Stock as Series A Preferred Shares (this Designation was subsequently withdrawn by filing of Amended and Restated Articles of Incorporation described above). The December 14, 2012 Certificate of Designations covers 2,500 shares of the Company’s Preferred Stock designated as Series B Preferred Shares. The number of Series B Preferred Shares designated will not be increased without consent of the shareholders of Series B Preferred Shares that may be required by law.

Ranking. The Series B Preferred Shares will, with respect to dividend rights and rights upon liquidation, winding-up or dissolution, rank: (i) senior with respect to dividends and rights upon liquidation than shares of the Company’s Series A Shares; and (ii) junior to all existing and future indebtedness of the Company.

Voting. Without the affirmative approval of the shareholders of a majority of Series B Preferred Shares (voting as a class), the Company may not: (i) authorize or issue any class stock that is not junior to the Series B Preferred Shares in right of dividends and/or liquidation; (ii) change the rights given to Series B Preferred Shares; (iii) liquidate, dissolve or wind-up the business of the Company (collectively “Liquidate”); or (iv) effect any merger, consolidation or similar transaction the effect of which the capital stock of the Company would not constitute a majority of the voting power of the capital stock of the surviving entity (“Deemed Liquidation Event”). Except as required by law or as set forth in this paragraph, Holders have no right to vote on any matters regarding the Company, including election of directors.

Dividends and Other Distributions. Shareholders are entitled to receive dividends on each outstanding Series B Preferred Share from its date of issuance at a rate equal to 2.50% per annum, based on a 365-day year, compounded annually. Dividends are payable as and if declared by our Board in its sole discretion. So long as any Series B Preferred Share is outstanding, no dividends or other distributions will be paid, delivered or set apart with respect to Series A Shares unless accrued dividends are first paid to shareholders of all outstanding Series B Preferred Shares. No Series A Shares will be redeemed while any Series B Preferred Shares are outstanding.

Liquidation. Upon any Liquidation, after payment or provision for payment of the Company’s debts and other liabilities, pari passu with any distribution or payment made to the shareholders of Series A Shares, the holders of Series B Preferred Shares will be entitled to be paid out of the Company’s assets available for distribution to the Company’s shareholders $10,000 per Series B Preferred Share, plus any accrued but unpaid dividends thereon (collectively “Series B Liquidation Value”).

Redemption. The Company may redeem any whole number or all of its Series B Preferred Shares at any time 18 years after each issuance date at a “Corporation Redemption Price” equal to the Series B Liquidation Value. Prior to 18 years after each issuance date, the Company may redeem any whole number or all of the Series B Preferred Shares at a price per share (“Early Redemption Price”) equal to the sum of the following: (i) 100% of the Corporate Redemption Price; plus (ii) the Embedded Derivative Liability (as defined in the Certificate of Designations); less (iii) any dividends that have been paid. In addition, if the Company Liquidates or engages in any Deemed Liquidation Event, it must redeem all Series B Preferred Shares at the Early Redemption Price.

Payment in Cash or Series A Shares. Upon the Company’s election to redeem any Series B Preferred Shares, the Company shall pay the holder either the Corporation Redemption Price or the Early Redemption Price, as the case may be, in cash. The Company may pay dividends and any Embedded Derivative Liability, at its election, (i) in cash, or (ii) in Series A Shares registered under a current and effective S-1 Registration Statement, valued at 81.0% of the closing bid price of the Series A Shares on the date of delivery of the dividend or redemption payment, not to exceed the closing bid price on any trading day beginning 30 trading days prior to the applicable date of determination and ending 30 trading days after the applicable date of determination (“Equity Conditions Measuring Period”).

Conversion. Series B Preferred Shares may be converted into Series A Shares (“Conversion Shares”) at the option of a shareholder of any Series B Preferred Shares, or by the Company. Upon a conversion, the Company is required to issue a number of Conversion Shares equal to: (i) the Early Redemption Price; multiplied by (ii) the number of Series B Preferred Shares subject to conversion; divided by (iii) $0.20 per Series A Share (“Conversion Price”). Conversion rights are subject to a limitation that at no time shall the issuance of Conversion Shares, aggregated with all other Series A Shares then beneficially owned by a converting shareholder result in that shareholder owning more than 9.99% of all Series A Shares then outstanding (“Conversion Limitation”). As to a conversion by the Company, an additional Conversion Limitation is that the Company may not convert more than 30 Series B Preferred Shares during any Equity Conditions Measuring Period. The Company may convert Series B Preferred Shares only if the closing bid price of Series A Shares exceeds 300% of the Conversion Price for 20 consecutive trading days preceding the conversion. Each conversion by the Company is also subject to other “Equity Conditions” (as defined in the Certificate of Designations), including that a minimum of $3.0 million in aggregate trading volume has traded during the 20 trading days preceding the conversion.

Adjustments for Stock Splits. The Conversion Price and certain other variable metrics used in calculating the Embedded Derivative Liability are subject to upward or downward adjustment in the event of forward or reverse stock split of Series A Shares, solely to maintain the proportionality intended under the Certificate of Designations.

Increases, Decreases and Other Changes Regarding Capital Structure

2012 Increase in Authorized Common Stock. On March 28, 2012, the Company filed with the Nevada Secretary of State a Certificate of Amendment of its Articles of Incorporation, which increased its authorized Series A Shares from 1 billion to 2 billion and its authorized Series B Shares from 100 million to 200 million, both effective March 28, 2012.

Reverse Stock Split. Effective July 23, 2012, the Company completed a 100 to 1 reverse stock split of: (i) issued Series A Shares; (ii) authorized Series A Shares; (iii) issued Series B Shares; and (iv) authorized Series B Shares. All share and per share information described in this Report that occurred prior to the effectiveness of the reverse stock split has been retroactively restated to reflect this reverse stock split.

2013 Increase in Authorized Common Stock / Amended and Restated Articles of Incorporation. On September 19, 2013, the Company filed Amended and Restated Articles of Incorporation with the Nevada Secretary of State containing the following substantive changes to the Articles of Incorporation previously on file: (i) increasing the authorized Series A Shares from 1 billion to 10 billion; (ii) increasing the authorized Series B Shares from 100 million to 1 billion; (iii) withdrawing the designation of up to 20 million authorized shares of Series A Preferred Stock and instead treating such shares as undesignated Preferred Stock; (iv) prescribing that future amendments to the Company’s Articles of Incorporation may, to the maximum extent allowable by Nevada law, be approved by resolution of the Board and without necessity of approval by the Company’s shareholders (provided that future amendments which increase the number of authorized shares of any class or series of the Company’s capital stock for which there are shares outstanding will continue to require shareholder approval); and (v) electing not to be governed by certain provision of the Nevada Revised Statutes (“NRS”) governing “acquisition of a controlling interest” and/or “combinations with interested shareholders (collectively, “Action”).

Prior to each of the three corporate actions described above, the Company obtained the requisite approval of its shareholders by a resolution of the Company’s Board of Directors, a written consent by a majority of the voting power of the Company’s Commons Stock, the filing of a Preliminary Information Statement with the SEC, and the filing with the SEC and the mailing to shareholders of record of a Definitive Information Statement.

Corporate Formation and Subsidiaries

The Company was incorporated under the name Mortlock Ventures, Inc. pursuant to the laws of the State of Nevada on September 19, 2005 for the purpose of acquiring and developing mineral properties.  During the quarter ended March 31, 2008, the Company changed its business and commenced concentrating on the telecommunications industry.  The Company changed its name to China Tel Group, Inc. on April 8, 2008 and acquired Trussnet USA, Inc., a Nevada corporation (“Trussnet Nevada”), on May 21, 2008.  The Company changed its name to “VelaTel Global Communications, Inc.” on July 25, 2011. 

The Consolidated Financial Statements include the accounts of the Company, and the following wholly owned and majority owned subsidiaries:

Trussnet USA, Inc., a Nevada corporation (“Trussnet Nevada”) (100% ownership)

Gulfstream Capital Partners, Ltd., a Republic of Seychelles corporation (“Gulfstream Seychelles”) (100% ownership)

Gulfstream Capital Partners, Ltd., a Cayman Island corporation (“Gulfstream Cayman”) (100% ownership)

Beijing Yunji Technology Co., Ltd., a Peoples Republic of China corporation (“Beijing Yunji”) (100% ownership)

NGSN Communications Network (HK), Ltd. a Hong Kong corporation (“NGSN HK”) (100% ownership)

VelaTel Peru, S.A., formerly known as “Perusat, S.A.,” a Peru corporation (“VelaTel Peru”) (95% ownership)

Herlong Investments, Ltd., a Cyprus corporation, (“Herlong”) (75% ownership)

Novi-Net, d.o.o., a Croatia corporation (“Novi-Net”) (75% ownership)

Novi-Net Mobile, d.o.o., a Croatia corporation (“Novi-Net Mobile”) (75% ownership)

Montenegro Connect, d.o.o., a Montenegro corporation (“Montenegro Connect”) (75% ownership)

Zapna, ApS, a Denmark corporation (“Zapna”) (75% ownership)

China Motion Telecom (HK), Ltd., a Hong Kong corporation (“China Motion”) (100% ownership)

All significant intercompany balances and transactions have been eliminated in consolidation.

During the first quarter of 2012, the Company commenced its planned operations when it commercially launched its first wireless broadband telecommunications network in Peru.  Prior to that and from the Company’s inception, it was a development stage company as defined by the ASC subtopic 915 Development Stage Entities.  The Company accumulated a deficit during its development stage of $253,600,984. Effective January 1, 2012, the Company is no longer a Development Stage Entity.

Segment reporting

ASC Topic 280, “Segment Report,” requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the company for making operating decisions and assessing performance.  ASC Topic 280 has no effect on the Company’s consolidated financial statements as the Company consists of one reportable business segment.  All revenue is from telecommunications operations.

Use of Estimates

The Company’s Consolidated Financial Statements have been prepared in accordance with GAAP.  The preparation of these Consolidated Financial Statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period.  On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition, accrued expenses, financing operations, contingencies and litigation.  Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.  Actual results could differ from the Company’s estimates.

Revenue Recognition

For revenue from product sales and services, the Company recognizes revenue in accordance with ASC subtopic 605, Revenue Recognition, which requires that four basic criteria must be met before revenue can be recognized: (i) persuasive evidence of an arrangement exists; (ii) delivery has occurred or services have been rendered; (iii) the selling price is fixed and determinable; and (iv) collectability is reasonably assured.  Determination of criteria (iii) and (iv) are based on management's judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts.  Provisions for discounts and rebates to customers, estimated returns and allowances and other adjustments are provided for in the same period the related sales are recorded.  The Company defers any revenue for which the product has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required.  ASC 605-10 incorporates ASC subtopic 605-25, Multiple-Element Arrangements.  ASC 605-25 addresses accounting for arrangements that may involve the delivery or performance of multiple products, services and/or rights to use assets.

Revenue arises from sale of local and long distance service access and/or wireless broadband service access where some payments are received before and some payments are received after the service has been rendered.  The Company sells its products separately and in various bundles that contain multiple deliverables.  These revenues include long distance and prepaid telephone cards, prepaid wireless access plans, along with other products and services.  In accordance with ASC 605-25, sales arrangements with multiple deliverables are divided into separate units of accounting, if the deliverables in the arrangement meet the following criteria: (i) the product has value to the customer on a standalone basis; (ii) there is objective and reliable evidence of the fair value of undelivered items; and (iii) delivery or performances of any undelivered item is probable and substantially in the Company’s control.  The fair value of each separate element is generally determined by prices charged when sold separately.  If there is any discount from the combined fair value of the individual elements, the discount is allocated to the portion of the revenues attributable to the individual elements.  In accordance with ASC 605-25, if fair value of all undelivered elements in an arrangement exists, but fair value does not exist for a delivered element, then revenue is recognized using the residual method.  Under the residual method, the fair value of undelivered elements is deferred and the remaining portion of the arrangement fee (after allocation of 100 percent of any discount to the delivered item) is recognized as revenue. 

Cash and Cash Equivalents

For purposes of the Statements of Cash Flows, the Company considers all highly liquid debt instruments purchased with a maturity date of three months or less to be cash equivalents.

Fair Values

ASC subtopic 825-10, Financial Instruments requires disclosure of the fair value of certain financial instruments.  The carrying value of cash and cash equivalents, as well as short-term borrowings, approximate fair value because of the short-term maturity of these instruments.  All other significant financial assets, financial liabilities and equity instruments of the Company are either recognized or disclosed in the Consolidated Financial Statements together with other information relevant for making a reasonable assessment of future cash flows, interest rate risk and credit risk.  Where practicable, the fair values of financial assets and financial liabilities have been determined and disclosed; otherwise, only available information pertinent to fair value has been disclosed.

Accounting For Bad Debt and Allowances

Bad debts and allowances are provided based on historical experience and management's evaluation of outstanding accounts receivable.  Management evaluates past due or delinquency of accounts receivable based on the open invoices aged on due date basis.  Allowance for doubtful accounts at December 31, 2013 was $43,356. Allowance for doubtful accounts at December 31, 2012 was $6,500, which is included in the loss from discontinued operations in the accompanying Consolidated Statements of Operations and Other Comprehensive Loss.

Inventories

The inventory consists of finished goods ready for resale purposes.  The Company purchases the merchandise on delivered duty paid basis.  Inventories are valued at the lower of cost or market, with cost determined using the first-in, first-out method.

Property, Plant and Equipment

Property, plant and equipment are stated at cost, less accumulated depreciation and impairment losses.  Depreciation is computed over the estimated useful lives of the respective assets, except leasehold improvements, which are amortized over the shorter of their useful life or the term of the lease.

The estimated useful lives of property, plant and equipment are as follows:

Equipment	5-10 years
Computer equipment	5 years
Furniture and fixtures	5 years
Leasehold improvements	3 years

The Company evaluates the carrying value of items of property, plant and equipment to be held and used whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The carrying value of an item of property, plant and equipment is considered impaired when the projected undiscounted future cash flows related to the asset are less than its carrying value. The Company measures impairment based on the amount by which the carrying value of the respective asset exceeds its fair value. Fair value is determined primarily using the projected future cash flows discounted at a rate commensurate with the risk involved. Depreciation and amortization for the years ended December 31, 2013 and 2012 are $58,884 and $24,550, respectively.

Property, plant and equipment at December 31, 2013 and 2012 is as follows:

	2013			2012
Equipment	$	50,997		$	86,265
Computer Equipment		73,554			26,767
Furniture & Fixtures		30,659			0
Leasehold Improvements		149,655			0
		304,865			113,032
Accumulated depreciation		(31,585	)		(46,493	)
	$	273,280		$	66,539

Long-Lived Assets

The Company has adopted ASC subtopic 360-10, Property, Plant and Equipment.  ASC 360-10 requires that long-lived assets and certain identifiable intangibles held and used by the Company be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  Events relating to recoverability may include significant unfavorable changes in business conditions, recurring losses or a forecasted inability to achieve break-even operating results over an extended period.  The Company evaluates the recoverability of long-lived assets based upon forecasted undiscounted cash flows.  Should impairment in value be indicated, the carrying value of intangible assets would be adjusted, based on estimates of future discounted cash flows resulting from the use and ultimate disposition of the asset.  ASC 360-10 also requires assets to be disposed of be reported at the lower of the carrying amount or the fair value less costs to sell. During the year ended December 31, 2013, no impairment was recorded. During the year ended December 31, 2012, the Company evaluated the recoverability of its long-lived assets and took a write down of $7,001,870, which is included in the loss from discontinued operations in the accompanying Consolidated Statements of Operations and Other Comprehensive Loss.

Intangible Assets and Goodwill

The Company accounts for acquisitions in accordance with the provisions of ASC 805-10.  The Company assigns to all identifiable assets acquired (including intangible assets), and to all identifiable liabilities assumed, a portion of the cost of the acquired company equal to the estimated fair value of such assets and liabilities at the date of acquisition.  The Company records the excess of the cost of the acquired company over the sum of the amounts assigned to identifiable assets acquired less liabilities assumed, if any, as goodwill.

The Company amortized its identifiable intangible assets over the period which the asset is expected to contribute to future cash flows.  The estimated useful life of developed software is ten years.  The Company periodically evaluates the recoverability of intangible assets and takes into account events or circumstances that warrant revised estimates of useful lives or indicate that impairment exists.

The Company accounts for and reports acquired goodwill and other intangible assets under ASC subtopic 350-10, Intangibles, Goodwill and Other.  In accordance with ASC 350-10, the Company tests its intangible assets for impairment on an annual basis and when there is reason to suspect that their values have been diminished or impaired.  Any write-downs will be included in results from operations. During the year ended December 31, 2012, the Company evaluated the recoverability of its intangible assets and took an impairment charge of $273,048 (included in the loss from discontinued operations in the accompanying Consolidated Statements of Operations and Other Comprehensive Loss), which represents the entire goodwill balance generated from the Zapna acquisition.

Functional Currency

A majority of the transactions of VelaTel Peru are in US Dollars; accordingly, this subsidiary’s functional currency is the US Dollar. The accounts of Zapna are maintained in Danish Kroner, the accounts of Novi-Net and Novi-Net Mobile are maintained in Croatian Kuna, the accounts of Herlong and Montenegro Connect are maintained in the Euro, and the accounts of China Motion are maintained in Hong Kong Dollars. The accounts of these foreign subsidiaries were translated into US Dollars in accordance with ASC Topic 830 “Foreign Currency Matters.” According to ASC Topic 830, all assets and liabilities were translated at the exchange rate on the balance sheet dates, stockholders’ equity is translated at historical rates and statement of operation items are translated at the weighted average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income in accordance with ASC Topic 220, “Comprehensive Income.” Gains and losses resulting from the translations of foreign currency transactions and balances are reflected in the statements of income.

Foreign Currency Transactions and Comprehensive Income

GAAP requires that recognized revenue, expenses, gains and losses be included in net income. Certain statements, however, require entities to report specific changes in assets and liabilities, such as gain or loss on foreign currency translation, as a separate component of the equity section of the balance sheet. Such items, along with net income, are components of comprehensive income. Translation gains are classified as an item of accumulated other comprehensive income in the stockholders’ equity section of the consolidated balance sheet.

Advertising Costs

Advertising costs, which are included in selling, administrative and general, are expensed as incurred.   Advertising costs for the twelve months ended December 31, 2013 and 2012 were not significant.

Net Loss Per Share

The Company has adopted ASC subtopic 260-10, Earnings Per Share.  This requires the computation, presentation and disclosure requirements of earnings per Share information.  Basic earnings per Share have been calculated based upon the weighted average number of Shares outstanding.  Stock options and warrants, preferred stock and convertible debentures have been excluded as common stock equivalents in the diluted earnings per Share, because they are anti-dilutive.

Concentrations of Credit Risk

Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, consist primarily of cash, cash equivalents and trade receivables.  The Company places its cash and temporary cash investments with high credit quality institutions.  At times, such investments may be in excess of the FDIC insurance limit.

Stock Based Compensation

The Company adopted ASC subtopic 718-10, Compensation.  ASC 718-10 requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors, including employee stock options and employee stock purchases related to an employee stock purchase plan based on the estimated fair values.

Research and Development

The Company accounts for research and development costs in accordance with the ASC subtopic 730-10, Research and Development. Under ASC 730-10, all research and development costs must be charged to expense as incurred.  Accordingly, internal research and development costs are expensed as incurred.  Third-party research and development costs are expensed when the contracted work has been performed or as milestone results have been achieved.  Company sponsored research and development costs related to both present and future products and services are expensed in the period incurred.

Reclassifications

Certain reclassifications have been made to prior periods’ data to conform to the presentation set forth in this Report.  These reclassifications had no effect on reported income or losses.

Recent Accounting Pronouncements

The Financial Accounting Standards Board (“FASB”) has issued ASU No. 2013-04, Liabilities (Topic 405), “Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date.” ASU 2013-04 provides guidance for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this ASU is fixed at the reporting date, except for obligations addressed within existing guidance in U.S. GAAP. The guidance requires an entity to measure those obligations as the sum of the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors and any additional amount the reporting entity expects to pay on behalf of its co-obligors. The amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The Company does not expect the adoption of this guidance to have a material impact on the Company’s consolidated financial statements.

In July 2013, the FASB issued ASU 2013-11, Income Taxes (Topic 740): “Presentation of Unrecognized Tax Benefit When a Net Operating Loss Carryforward, A Similar Tax Loss, or a Tax Credit Carryforward Exists (A Consensus the FASB Emerging Issues Task Force)”. ASU 2013-11 provides guidance on financial statement presentation of unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The FASB’s objective in issuing this ASU is to eliminate diversity in practice resulting from a lack of guidance on this topic in current U.S. GAAP. This ASU applies to all entities with unrecognized tax benefits that also have tax loss or tax credit carryforwards in the same tax jurisdiction as of the reporting date. This amendment is effective for public entities for fiscal years beginning after December 15, 2013 and interim periods within those years. The company does not expect the adoption of this standard to have a material impact on the Company’s consolidated financial statements.

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the Securities Exchange Commission (the “SEC”) did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.

XML

18. ACQUISITIONS (Details) (USD $)	Dec. 31, 2013	Dec. 31, 2012	Oct. 28, 2013 China Motion [Member]
Cash	$ 60,536		$ 848,645
Accounts receivable	1,188		1,320,449
Inventory			61,921
Prepaid expense	5,186		404,001
Property and equipment			265,625
Deposits			215,806
Purchased intangible assets			623,945
Accounts payable and accrued expenses	13,863,249	12,203,757	(2,067,691)
Unearned income			(815,950)
Bargain purchase			$ 856,751

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15. FAIR VALUE MEASUREMENT (Tables)

12 Months Ended

Dec. 31, 2013

Fair Value Disclosures [Abstract]

Fair value on a recurring basis

Items recorded or measured at fair value on a recurring basis in the accompanying consolidated financial statements consisted of the following items as of December 31, 2013:

	Quoted Prices
	in Active		Significant
	Markets for		Other		Significant
	Identical		Observable		Unobservable
	Instruments		Inputs		Inputs
	Level 1		Level 2		Level 3		Total
Derivative Liability	$	–	$	–	$	18,058,465	$	18,058,465
	Rollforward
	of Balance
Balance, December 31, 2011	$	220,914
Derivative liability for Series B preferred stock		2,133,333
Change in value of derivative liability during 2012		4,039,616
Balance, December 31, 2012	$	6,393,863
Derivative liability for Series B preferred stock		9,900,000
Derivative liability for convertible notes		1,332,036
Change in value of derivative liability during 2013		432,566
Balance, December 31, 2013	$	18,058,465

XML

14. COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2013

Commitments and Contingencies Disclosure [Abstract]

NOTE 14 - COMMITMENTS AND CONTINGENCIES

NOTE 14    COMMITMENTS AND CONTINGENCIES

Lease Commitments

The Company leases certain of its facilities under operating leases.  The total rental expense for all operating leases amounted to $297,259 and $313,156 for the years ended December 31, 2013 and 2012, respectively.

The future minimum rental commitments as of December 31, 2013, for all non-cancelable operating leases are as follows:

For the years ending December 31,
	2014	$	847,989
	2015		619,426
	2016		238,420
	2017
	2018
	Thereafter
	Total	$	1,705,835

Litigation

The Company is subject to the following legal proceedings that arise in the ordinary course of its business.

Fischer Litigation – On May 22, 2009, Michael Fischer (“Fischer”) filed a complaint against the Company in the Central District of California of the United States District Court, identified as Case No. CV09-3682 VBF.  The complaint alleged a claim for breach of contract relating to the Company’s default of a 2008-09 Convertible Note in favor of Fischer.  The complaint requested damages in the amount of $1,000,000 plus interest, court costs and attorneys’ fees. The Company settled this case for $960,000. As of December 31, 2013, the Company has paid $560,000 of the settlement amount.  The Company intends to complete the settlement when sufficient funds are available to do so. The balance payable of $400,000 is included in Note 8, Notes Payable, Other.

Gomez Litigation – On July 17, 2009, Edgar Pereda Gomez (“Gomez”) filed a complaint against the Company in the County of San Diego Superior Court of the State of California, identified as Case No. 37-2009-00094247-CU-BC-CTL.  The complaint alleged a claim for breach of contract relating to the Company’s default of a 2008-09 Convertible Note in favor of Gomez. The complaint requested damages in the amount of $525,000 plus interest, court costs and attorneys’ fees.   The Company settled this case for approximately $684,000. As of December 31, 2013, the Company has paid approximately $455,950 of the settlement amount. The Company intends to complete the settlement when sufficient funds are available to do so. The balance payable of $280,824 is included in Note 8, Notes Payable, Other.

Olaechea Litigation – On December 13, 2010, Estudio Olaechea SOC. Civil DE R.L. (“Olaechea”) filed a complaint against the Company in the County of San Diego Superior Court of the State of California, identified as Case No. 37-2010-00105897.  The complaint alleged a breach of contract arising from the Company’s default under a promissory note in favor of Olaechea in the amount of approximately $149, 500. The complaint requested damages in the amount of approximately $149,500 plus interest, court costs and attorneys’ fees. The Company settled this case for approximately $188,500. The Company has paid $47,500 of the settlement. The Company intends to complete the settlement when sufficient funds are available to do so. The balance payable of $140,911 is included in Note 8, Notes Payable, Other.

Chinacomm Litigation – On November 18, 2011, the Company, along with Trussnet Capital Partners (HK), Ltd. (collectively “Plaintiffs”), filed a complaint against CECT Chinacomm Communications Co. Ltd., Thrive Century International Limited, Newtop Holdings Limited, Smart Channel Development Limited, Mong Sin, Qiu Ping, Yuan Yi, CECT Chinacomm Shanghai Co. Ltd. (collectively, “Defendants”) in The High Court of the Hong Kong Special Administrative Region, Court of First Instance, Action No. 1978 of 2011 (“Chinacomm Litigation”). The complaint was later amended to add Feng Xiao Ming as a defendant. The Chinacomm Litigation arises out of the breach of numerous agreements between Plaintiffs and some Defendants, related to a joint venture to deploy a wireless broadband network in 29 cities in the People’s Republic of China. In connection with the joint venture, Plaintiffs claim defendants caused the unauthorized removal of Colin Tay as an authorized signatory to a joint bank account into which Plaintiffs deposited $4,749,599. The Chinacomm Litigation seeks injunctive relief to prevent Defendants from utilizing or dissipating the deposited funds pending the trial of the action and compensatory damages in excess of $1 million plus interest and court costs. Injunction orders have been issued and remain in place prohibiting Defendants from utilizing or dissipating the deposited funds.

Ironridge Global Litigation – On June 20, 2012, Ironridge Global IV, Ltd. filed a complaint against the Company in the County of Los Angeles Superior Court for the State of California, identified as Case No, BC 486893. The Ironridge Litigation was commenced pursuant to an agreement between the Company and Ironridge Global whereby Ironridge Global would negotiate assignments of the accounts of certain creditors of the Company, file the lawsuit as assignee of those accounts, and, by obtaining court approval of the fairness of a settlement, would become entitled to issuance of Series A Shares that would be exempt from registration pursuant to Section 3(a)(10) of the Securities Act. On July 5, 2012, the Company issued 1,170,000 Shares to Ironridge Global. The initial issuance was pursuant to an Order for Approval of Stipulation for Settlement of Claims between the Company and Ironridge Global (“Ironridge Global Order”) in settlement of $1,367,693 of accounts payable of the Company which Ironridge Global had purchased from certain creditors of the Company, in an amount equal to the assigned accounts, plus brokerage and legal fees and costs totaling $95,300. In addition to the initial issuance, the Ironridge Global Order provides for an adjustment in the total number of Shares which may be issuable to Ironridge Global, based on a calculation period for the transaction defined as that number of consecutive trading days following the date on which the initial Shares have been issued, received in Ironridge Global’s account in electronic form and fully cleared for trading required for the aggregate trading volume of the Shares, as reported by Bloomberg LP, to exceed $6.5 million. Pursuant to the Ironridge Global Order, Ironridge Global will receive an aggregate of: (i) 1,000,000 Shares, plus that number of Shares with an aggregate value equal to; (ii) the sum of the claim amount plus a 6% agent fee and plus Ironridge Global’s reasonable attorney fees and expenses, less $10,000 previously paid; and (iii) divided by 80% of the following: the volume weighted average price of the Shares during the calculation period, not to exceed the arithmetic average of the individual daily volume weighted average prices of any five of each consecutive twenty trading days during the calculation period (any increment with fewer than twenty trading days will have the days added to the final increment). On December 17, 2012, the Company and Ironridge Global stipulated to amend the Ironridge Global Order to strike the words “of each consecutive twenty” in describing the pricing formula, retroactive to the date the Ironridge Global Order was entered. During the period ended December 31, 2013 and 2012, the Company issued to Ironridge Global 376,000,000 and 13,595,000 Shares, respectively. Additional events which occurred after December 31, 2013 associated with the Ironridge Litigation are described in Note 20, Subsequent Events.

Sino Crossings Arbitration – On July 13, 2012, Azur Capital SDN BHD (“Azur”) served a notice of arbitration against the Company. On July 31, 2012, Azur filed the Notice of Arbitration with the Hong Kong International Arbitration Centre, the agreed forum for dispute resolution under the Sino Crossings Agreements. The notice of arbitration alleged that Azur suffered damages and losses due to breaches by the Company in implementing the terms of the Sino Crossings Agreements.  In the claim, Azur demanded acknowledgment of termination and a declaration of rescission of the Sino Crossings Agreements.  Further, it demanded indemnification by the Company for Azur’s claimed damages, including $2,000,000 Azur paid to Shanghai Ying Yu Network Technology Ltd. (“YYNT”) pursuant to the first Sino Crossings Agreement.  On August 11, 2012, the Company responded to the allegations of Azur, asserted counterclaims against Azur and named additional parties, including YYNT, the Company requested be joined into the arbitration proceeding.  An arbitrator has been appointed. Additional events which occurred after December 31, 2013 associated with the Sino Crossings Arbitration are described in Note 20, Subsequent Events.

Ace Litigation – On January 15, 2013, Ace American Insurance Company (“Ace”) filed a complaint against the Company in the County of San Diego Superior Court of the State of California, identified as Case No. 37-2013-00029913. The complaint alleged breach of contract for the Company’s failure to pay $37,603 as premium due on a commercial general liability insurance policy in force from March 30, 2012 through May 30, 2012, plus interest. The Company is in discussion with Ace to confirm the terms of the insurance policy and the amount allegedly due.

Westmoore Receiver Litigation – On March 22, 2013, David Gill (“Plaintiff”), in his capacity as Court-Appointed Receiver for Westmoore Management, LLC, Westmoore Investment, LP, Westmoore Capital Management, Inc., Westmoore Securities, Inc., Westmoore Capital, LLC, Westmoore Lending Opportunity Fund and Westmoore Holdings, Inc. (collectively, the “Westmoore Entities”) filed a first amended complaint against numerous defendants including the Company, its subsidiary Trussnet Nevada, its Chief Executive Officer George Alvarez, other entities Plaintiff claims were affiliated with the Company, and other persons and entities The complaint was filed in the Central District of California of the United States District Court, identified as Case No. SACV-12-02236 AG. The complaint described an alleged “Ponzi scheme” by the Westmoore Entities pursuant to which the Westmoore Entities transferred funds to one or more of the defendants while the Westmoore Entities were insolvent. Additional events which occurred after December 31, 2013 associated with the Westmoore Receiver Litigation are described in Note 20, Subsequent Events.

SEC Subpoena Investigating Ironridge – On December 4, 2013, the Company was served with a subpoena issued by the Securities and Exchange Commission (“SEC”) in connection with the SEC’s investigation of Ironridge Global, IV, Ltd. and/or its affiliates (collectively “Ironridge”). The subpoena demanded production of a broadly defined scope of documents related to any communications or transactions between the Company and Ironridge. The Company cooperated fully by producing responsive documents and participating in a phone interview with SEC investigators. Although the SEC declined to provide the Company with specific information regarding the nature or scope of its investigation, the Company believes that the investigation does not extend to any claim that the Company violated federal securities laws in connection with its dealings with Ironridge.

Other Material Agreements

NGSN Agreements

On October 21, 2011, the Company entered into the NGSN Business Agreement with Next Generation Special Network Communications Technology Co. Ltd., a PRC corporation (“NGSN”).  Under the NGSN Business Agreement, the Company is required to form a PRC operating company to be jointly owned with NGSN subject to the Company’s control.  The operating company is required to enter into an exclusive services contract with NGSN to deliver the information services and deploy and operate a 4G wireless broadband network that will utilize TD-LTE technology.  The Company will finance the first phase of the joint venture’s deployment, and the joint venture will own the infrastructure equipment.  The operating company will initially provide its services to consumers, wireless carriers, enterprises, automobile manufacturers and original equipment manufacturers in two regions of China.

On February 1, 2012, the Company and NGSN entered into the NGSN Exclusive Services Agreement contemplated by the NGSN Business Agreement. The Company has completed the formation of the holding company entities contemplated by the NGSN Business Agreement, specifically NGSN Communications Network Co., Ltd. a Cayman Islands corporation (“NGSN Cayman”), and NGSN Communications Network (HK) Co., Ltd., a Hong Kong corporation (“NGSN HK”).  Pending formation of a WOFE that will be an operating subsidiary of NSGN HK, the Company may begin providing services to NGSN through its subsidiary, Beijing Yunji.

There have been no operations during 2013 associated with the NGSN Agreements. Neither party has sought to terminate the NGSN Agreements. Accordingly, it remains possible that there will be operations in the future. Since the Company made no investment associated with the NGSN Agreements, the Company has not been required to make a determination whether to impair any investment.

Aerostrong Agreements

Aerostrong Business Agreement

On November 11, 2011, the Company entered into a Business Agreement (“Aerostrong Business Agreement”) with Aerostrong Company Limited (“Aerostrong”).  The Company will partially meet its contractual obligations with Aerostrong through Beijing Yunji, which is a technical service company engaged mainly in the business of telecommunication service related technology development, consulting, design, deployment management and operation management. Aerostrong is a subsidiary of China Aerospace Science and Technology Group (“China Aerospace”).  Aerostrong holds a PRC-issued license for value added telecommunication services by which Aerostrong is authorized to provide these services throughout China and internet services in 18 major cities in China. Aerostrong has been commissioned by Beijing Zhengzhou Software Technology Co., Ltd., a subsidiary of the China Aerospace, to deploy an internal wireless broadband network (“Commercial Network”) and application platform for China Aerospace.  The Commercial Network will cover the companies, research institutions and other entities owned by or affiliated with China Aerospace.  The preliminary estimated total investment in the Commercial Network is approximately $32.15 million, and the estimated investment for Phase 1 of the Commercial Network is approximately $8.4 million.

Aerostrong and Beijing Yunji will enter into agreements for the implementation of projects and for Beijing Yunji to act as the exclusive contractor for Aerostrong to provide deployment management, operation management and other services for the projects.  Beijing Yunji and/or the Company will pay for all capital expenditures, operating expenditures and other negative cash flow in connection with the projects and will arrange financing for the projects.  The revenue generated by the telecommunication business will be used in priority to reimburse Beijing Yunji and/or the Company for any amounts paid for by either of them and to repay any financing arranged by Beijing Yunji and/or the Company.  Aerostrong and Beijing Yunji will share the profit generated from the telecommunication business in a manner to be agreed to in the services agreement.  

Aerostrong Strategic Agreement

On April 19, 2012, Beijing Yunji entered into a strategic business agreement with Aerostrong (“Aerostrong Strategic Agreement”), which is the exclusive services agreement contemplated under the Aerostrong Business Agreement. The term of the Aerostrong Strategic Agreement is from April 19, 2012 until all projects agreed upon between the parties are completed and Beijing Yunji receives the last payment from Aerostrong. The parties will cooperate on application of jointly approved wireless broadband projects for which the rights and obligations of each party will be set forth in a separate project agreement. The agreed upon initial cooperation projects are: (i) the Digital Lijiang management platform project in Guangxi Autonomous Region; (ii) the Shen Hua wireless broadband special network project for railway; and (iii) the overload wireless broadband surveillance projects in Shanxi Province. Aerostrong is responsible for the development and follow-up of governmental markets and industrial markets. The Company is responsible to provide each component usually associated with the design, deployment and operation of a wireless broadband telecommunications network in China.

There have been no operations during 2013 associated with the Aerostrong Agreements. Neither party has sought to terminate the Aerostrong Agreements. Accordingly, it remains possible that there will be operations in the future. Since the Company made no investment associated with the Agreements, the Company has not been required to make a determination whether to impair any investment.

Independent Contractor Agreements

Effective January 16, 2012 and throughout 2013, all employees of the Company, with the exception of (i) Colin Tay and (ii) employees of operating subsidiaries, commenced providing consulting services to the Company pursuant to their respective Independent Contractor Agreements.  From January 1, 2012 until January 16, 2012, they were providing services to the Company as employees.

Equipment Contracts for Montenegro Connect and Novi-Net Wireless Broadband Networks

On May 10, 2012, the Company entered into three related contracts and three purchase orders with ZTE for the supply of infrastructure equipment and software for the Company’s wireless broadband network projects in Croatia and Montenegro. The aggregate price of the goods covered by the three contracts and the purchase order associated with each contract is $7,001,870. The components of each purchase order are described as follows:

Equipment Contract and Purchase Order for Montenegro Connect. Total contract price $820,304.29 for 25 base transceiver stations (“BTS”), including their back up power supply and installation materials, 32 microwave radios and antennae, and data center core equipment including back up power supply, gateway equipment, servers, routers, switches and racks.

Equipment Contract and Purchase Order for Novi-Net. Total contract price $1,280,256.81 for 50 BTS, including their back up power supply and installation materials, nine microwave radios and antennae, and data center core equipment including back up power supply, gateway equipment, servers, routers, switches and racks.

Software Contract and Purchase Order for Herlong. Total contract price of $4,901,309.00 for all software associated with the equipment described above, including access gateways, lawful interception gateways, elements management, network management systems, operations maintenance, universal subscriber databases, switching and router software, and mobile broadband wireless BTS software systems.

Each of Montenegro Connect, Novi-Net and Herlong are contracting parties to one contract and its associated purchase order for purposes of delivery of goods and allocation of value on the balance sheets of the Company’s subsidiaries. Herlong will license the software it has contracted to purchase to Montenegro Connect and Novi-Net. The Company is a contracting party to all contracts and purchase orders for purposes of guaranteed payment of the purchase price. The Company had previously paid $1 million as a deposit to ZTE that was applied against the aggregate down payment for all contracts, and has since paid an additional $500,000 down payment. Each installment of down payment has been allocated pro rata in relation to the total contract price for each contract.

The contract terms common to all three contracts and all three purchase orders are as follows: (i) all equipment and software includes a one-year warranty; (ii) the delivery terms are “FCA Hong Kong,” under which term the Company is responsible for payment of shipping and other costs of transport to final destination, customs, duty and value added tax; (iii) “FCA Hong Kong,” under which terms the purchase price, net of down payment described above, is the seller financed by ZTE for 2.5 years, with a one-year grace period commencing on the bill of lading date for each purchase order. The principal amount financed is payable in three equal semi-annual installments, with the first installment due 180 days after expiration of the grace period. Interest accrues on the unpaid balance at an interest rate equal to the 6-month LIBOR rate plus a margin of 2.5%. Each installment will include principal repayment plus the interest accrued. ZTE has a mortgage on 100% of the goods covered under each contract, and each contract provides for protection of intellectual property and other confidential information, and events, circumstances or limitations describing the rights of either party to delay performance, assign rights, terminate, or enforce remedies through arbitration under each contract, all upon terms the Company believes to be standard in commercial contracts of a similar nature.

Contracts for Upgrade of China Motion’s Network

Since acquiring China Motion, the Company has negotiated the following contracts for upgrade of China Motion’s core telephony network and other hardware and software used in China Motion’s operations.

Turnkey Upgrade Agreement with New Host. On November 11, 2013, the Company and China Motion entered into a Turnkey Upgrade Agreement with New Host International Co., Ltd. (“New Host”) for project management and financing of the upgrade of China Motion’s telephony core network and associated customer billing and accounting functions. The material terms of the Turnkey Upgrade Agreement are:

(i)          New Host will subcontract with three vendors China Motion has previously negotiated pricing and scope of services, ZTE Corporation (“ZTE”), Niceuc Communication Co., Ltd. (“Niceuc”)and Tectura Hong Kong Limited (“Tectura” and together with ZTE and Niceuc collectively “Subcontractors”). New Host will provide project management services to coordinate the work of the Subcontractors and pay each according to the tenor of their respective contracts. The aggregate amount payable to Subcontractors is US$2,437,139 (“Subcontracted Amount”).

(ii)         New Host is entitled to a Management Fee equal to 15% of the Subcontracted Amount (initially US$365,571, subject to any future additions to the Subcontracted Amount). Following a 12 month Deferral Period, Finance Charges equal to 7.5% interest per annum accrue on the Subcontracted Amount but not the Management Fee (the Subcontracted Amount, the Management Fee and the Finance Charges collectively, “Purchase Price”).

(iii)        Repayment of the Purchase Price shall be in 60 equal monthly installment, commencing on the same calendar day of the month following expiration of the Deferral Period, broken into separate installments for Subcontracted Amount plus amortized Finance Charges (“P&I Installments,” initially US$48,835) and Management Fee Installments (initially US$6,093). In the event of future increase in the Subcontracted Amount, Installment amounts shall be re-calculated so that any unpaid Installments remain equal. Customer may prepay the P&I Installments in whole or in part without penalty and subject to reduction in future Finance Charges, provided that partial prepayment of either the Management Fee or the Subcontracted Amount shall not decrease subsequent P&I Installments or Management Fee Installments until one or both have been paid in full.

(iv)       Title to all equipment, software, and other property included in the Project, whether tangible or intangible, shall pass to China Motion upon delivery to its business premises, provided that until the Purchase Price is paid in full, New Host shall have a purchase money security interest in all such equipment, software and other tangible and intangible property. New Host shall assign to China Motion all warranties provided by each Subcontractor.

Sales Agreement with ZTE. On November 18, 2013, China Motion and New Host entered into a sales contract with ZTE (“ZTE Sales Agreement”) for the primary components of hardware and software (including installation and optimization) required to upgrade China Motion’s core telephony network from 2G to 4G technology, and to increase the capacity of the network to meet the future projected growth of China Motion’s subscribers. The total contract amount is US$2,050,609, payable (by New Host pursuant to the Turnkey Upgrade Agreement) upon certain milestones associated with delivery, acceptance and testing of the integrated network components. Title or ownership to the products covered by the ZTE Sales Contract passes to China Motion upon delivery of the products to China Motion’s premises, subject to a security interest in favor of ZTE against the full payment of the contract amount. The contract price includes training of China Motion’s personnel on proper operations of the products, and a one year warranty against defect. The parties have negotiated the terms and price of an operations and maintenance agreement for further protection of the products beyond warranty expiration.

Sales Agreement with Niceuc. On November 18, 2013, China Motion and New Host entered into a sales contract with Niceuc Communication Co., Limited (“Niceuc Sales Contract”) for value added services and components (including installation and optimization) associated with specialty functions of the planned upgrade of China Motion’s core telephony network, including functions beneficial to China Motion’s performance of the StarHub Cooperation Agreement described below. The total contract amount is US$256,314, payable (by New Host pursuant to the Turnkey Upgrade Agreement) upon certain milestones associated with delivery, acceptance and testing of the integrated network components. The contract price includes a one year warranty against defect. The parties have negotiated the terms and price of an operations and maintenance agreement for further protection of the products beyond warranty expiration.

ERP Purchase and Implementation Agreement with Tectura. On November 18, 2013, New Host and Tectura Hong Kong Limited (“Tectura”) entered into an agreement for purchase and implementation of an enterprise resource planning solution utilizing Microsoft Dynamics NAV accounting software (“Tectura Agreement”). The contract amount is HK$375,690 ( approximately US$48,500), which is based on Tectura’s estimate of the quantity of end user licenses to meet China Motion’s requirements, plus estimated implementation and training services to be provided by Tectura on a time and materials basis. The contract amount is payable upon certain milestones contained in the Tectura Agreement.

Cooperation Agreement with StarHub

On December 2, 2013, China Motion entered into a Cooperation Agreement with StarHub Mobile Pte, Ltd., a Singapore corporation and a leading mobile network operator in Asian telecommunication markets (“StarHub”). The material terms of the Cooperation Agreement provides that the parties will work together in three areas of cooperation in three phases. During Phase 1, China Motion’s customers will be permitted to roam on StarHub’s network in Singapore at agreed prices. During Phase 2, following completion of the upgrade of China Motion’s telephony core network, each Party will supply the other Party with an agreed allotment of phone numbers and international mobile subscriber identifiers (“IMSIs”) for provisioning onto SIM cards which the assigned Party may market or sell to its post-paid subscribers to complete interconnections through its own network operations center or switch, which will provide subscribers access to the home network of the assigning Party and/or other networks to which such Party has been assigned rights by other mobile network operators. During Phase 3, StarHub or its affiliates will have an option to purchase up to a 25% equity stake in China Motion at its then market value (“StarHub Option”). The initial term of the Cooperation Agreement is 36 months, with automatic renewal in increments of 12 months unless either Party delivers notice of non-renewal.

The StarHub Option is exercisable for three years, based on the proportionate total enterprise value of China Motion as of the date of exercise, payable within 90 days after notice of exercise. For purposes of the StarHub Option, “enterprise value” is defined as the amount of money payable in Hong Kong dollars that a willing and well qualified buyer would pay to acquire 100% of the capital stock of China Motion taking into account the net asset value on its balance sheet, the relative age, quality of and debt service on its capital infrastructure, its employees and distribution base and its contracts with mobile network operators and other partners, its historical and projected revenues and EBITDA, the number and growth rates of its subscribers (by category) and the average revenue per user and churn rates associated with such subscribers, comparable sales of similar companies and the revenue and EBITDA multipliers applicable to such sales and to the telecommunications industry generally, the impact of potential exit into public listing onto the Hong Kong Stock Exchange, and such other factors as may be reasonably considered. If the Parties are unable to agree on the total enterprise value, such value shall be determined by appraisal. Each Party shall designate a valuation expert with expertise in valuing telecommunications companies. The two experts shall first agree together on the appointment of a third expert. Each Party’s expert shall then independently prepare a report of the total enterprise value of China Motion. Such valuation shall be without discount for minority interest compared to control premium. If the total enterprise value as determined by each Party’s designated expert is within 10% of each other, the Parties shall accept the average of the two. If the enterprise values differ by greater than 10%, the third expert shall review the reports of the two experts and determine which report best reflects the total enterprise value, and that value shall be used for payment of the option exercise price.