Attached files
| file | filename |
|---|---|
| EX-32.2 - EXHIBIT 32.2 - GME INNOTAINMENT, INC. | exhibit32_2.htm |
| EX-31.1 - EXHIBIT 31.1 - GME INNOTAINMENT, INC. | exhibit31_1.htm |
| EX-31.2 - EXHIBIT 31.2 - GME INNOTAINMENT, INC. | exhibit31_2.htm |
| EXCEL - IDEA: XBRL DOCUMENT - GME INNOTAINMENT, INC. | Financial_Report.xls |
| EX-32.1 - EXHIBIT 32.1 - GME INNOTAINMENT, INC. | exhibit32_1.htm |
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.20549
Form 10-Q
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2014
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 333-139008
GREAT CHINA MANIA HOLDINGS, INC.
(Exact Name of Registrant as Specified in Its Charter)
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Florida
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59-2318378
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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Room 1902, 19/F., Kodak House II,
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321 Java Road, Hong Kong
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n/a
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(Address of principal executive offices)
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(Zip Code)
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(852) 3543-1208
(Registrant’s telephone number, including area code)
Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes T No £
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§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 x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Ruble 12b-2 of the Exchange Act.
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Large accelerated filer £
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Accelerated filer £
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Non-accelerated filer £ (Do not check if a smaller reporting company)
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Smaller reporting company T
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes £ No T
The number of shares of Common Stock, $0.01 par value, outstanding on May 15, 2014 was 25,693,357.
GREAT CHINA MANIA HOLDINGS, INC. AND SUBSIDIARIES
GREAT CHINA MANIA HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
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March 31,
2014
(Unaudited)
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December 31,
2013
(Audited)
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|||||||
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ASSETS
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CURRENT ASSETS
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||||||||
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Cash and cash equivalents
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$ | 920,365 | $ | 640,383 | ||||
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Accounts receivable
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113,567 | 288,195 | ||||||
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Short term loan receivable
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37,973 | 113,883 | ||||||
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Prepaid expenses and other receivables
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174,983 | 185,235 | ||||||
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Assets held for disposal
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485,000 | 495,000 | ||||||
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Total current assets
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1,731,888 | 1,722,696 | ||||||
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Property, plant and equipment
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- | - | ||||||
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Intangible asset
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190,000 | - | ||||||
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Other assets
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115,380 | 115,380 | ||||||
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TOTAL ASSETS
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$ | 2,037,268 | $ | 1,838,076 | ||||
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LIABILITIES AND EQUITY
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LIABILITIES
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CURRENT LIABILITIES
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Accounts payable
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728,165 | 759,126 | ||||||
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Accrued expenses and other payables
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23,939 | 183,874 | ||||||
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Unearned revenue
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413,721 | 123,648 | ||||||
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Short-term borrowings
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63,347 | 64,079 | ||||||
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Convertible notes
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99,351 | 99,351 | ||||||
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Total current liabilities
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1,328,523 | 1,230,078 | ||||||
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LONG-TERM LIABILITIES
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Convertible note
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31,301 | 31,301 | ||||||
| 31,301 | 31,301 | |||||||
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TOTAL LIABILITIES
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$ | 1,359,824 | $ | 1,261,379 | ||||
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SHAREHOLDERS’ EQUITY
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Common stock, par value $0.01; 375,000,000 shares authorized; 25,693,357 and 5,619,926 shares issued and outstanding as of March 31, 2014 and December 31, 2013, respectively
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256,933 | 56,199 | ||||||
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Additional paid in capital
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9,909,357 | 9,909,359 | ||||||
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Accumulated deficits
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(9,490,338 | ) | (9,390,353 | ) | ||||
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Accumulated other comprehensive loss
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1,492 | 1,492 | ||||||
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TOTAL SHAREHOLDERS’ EQUITY
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$ | 677,444 | $ | 576,697 | ||||
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TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
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$ | 2,037,268 | $ | 1,838,076 | ||||
See accompanying notes to condensed consolidated financial statements.
GREAT CHINA MANIA HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (UNAUDITED)
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Three months ended March 31,
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2014
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2013
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CONTINUING OPERATIONS
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REVENUES
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$ | 287,810 | $ | 371,391 | ||||
| COST OF SALES | 161,482 | 168,269 | ||||||
| 126,328 | 203,122 | |||||||
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EXPENSES
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Sales & marketing expenses
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11,011 | 13,420 | ||||||
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General and administrative
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204,552 | 285,829 | ||||||
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TOTAL OPERATING EXPENSES
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215,563 | 299,249 | ||||||
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LOSS FROM CONTINUING OPERATIONS BEFORE PROVISION FOR INCOME TAXES
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(89,235 | ) | (96,127 | ) | ||||
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OTHER INCOME/(EXPENSE)
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Other income
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587 | 2,214 | ||||||
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Interest expenses
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- | (32,246 | ) | |||||
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Other expenses
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(11,337 | ) | (6,152 | ) | ||||
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TOTAL OTHER EXPENSE
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(10,750 | ) | (36,184 | ) | ||||
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NET LOSS BEFORE PROVISION FOR INCOME TAXES
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(99,985 | ) | (132,311 | ) | ||||
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PROVISION FOR INCOME TAXES
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- | - | ||||||
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NET LOSS FROM CONTINUING OPERATIONS
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$ | (99,985 | ) | $ | (132,311 | ) | ||
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DISCONTINUED OPERATIONS
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Net (loss) / income
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- | (173,948 | ) | |||||
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NET INCOME FROM DISCONTINUED OPERATIONS
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$ | - | $ | (173,948 | ) | |||
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NET (LOSS) / INCOME FOR THE PERIOD
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$ | (99,985 | ) | $ | (306,259 | ) | ||
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TOTAL COMPREHENSIVE LOSS FOR THE PERIOD
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Arising from continuing operations
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(99,985 | ) | (132,311 | ) | ||||
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Arising from discontinued operations
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- | (173,948 | ) | |||||
| $ | (99,985 | ) | $ | (306,259 | ) | |||
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LOSS PER SHARE, BASIC AND DILUTED – CONTINUING OPERATIONS
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$ | (0.00 | ) | (0.03 | ) | |||
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WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING, BASIC AND DILUTED
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22,105,301 | 4,017,077 | ||||||
See accompanying notes to condensed consolidated financial statements.
GREAT CHINA MANIA HOLDINGS, INC.AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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For the three months ended March 31,
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2014
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2013
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Cash flows from operating activities
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Net loss from continuing operations
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$ | (99,985 | ) | $ | (132,311 | ) | ||
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Adjustments to reconcile net income to net cash flows used in operating activities for:
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Amortization of discount on Convertible Notes
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- | 25,257 | ||||||
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Accrued interest expense on Convertible Notes
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- | 6,989 | ||||||
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Amortization of intangible asset
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10,000 | - | ||||||
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Impairment loss on other asset
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10,000 | - | ||||||
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Interest income receivable
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(561 | ) | - | |||||
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Changes in operating assets and liabilities:
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Decrease in accounts receivable
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174,628 | 32,818 | ||||||
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(Increase)/ Decrease in prepaid expenses and other receivables
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10,252 | 10,606 | ||||||
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(Decrease)/Increase in accounts payable
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(26,892 | ) | 37,090 | |||||
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Increase/(Decrease) in unearned revenue
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290,073 | (12,107 | ) | |||||
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Increase/(Decrease) in accrued expenses and other payables
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(164,736 | ) | 62,976 | |||||
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Net cash provided by/(used in) continuing operating activities
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202,779 | 31,318 | ||||||
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Net cash (used in)/provided by discontinued operating activities
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- | (255,639 | ) | |||||
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Net cash (used in)/provided by operating activities
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202,779 | (224,321 | ) | |||||
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Cash flows from investing activities
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Repayment of short-term loan receivable
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76,471 | - | ||||||
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Net cash flows from continuing investing activities
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76,471 | - | ||||||
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Net cash used in discontinued investing activities
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- | (23,311 | ) | |||||
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Net cash used in investing activities
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76,471 | (23,311 | ) | |||||
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Cash flows from financing activities
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Advance from short-term borrowings
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- | 2,731 | ||||||
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Decrease in subscription receivable
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- | 53,844 | ||||||
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Issue of convertible note
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- | 50,000 | ||||||
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Issue of shares capital
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732 | - | ||||||
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Cash advanced to discontinued operations
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- | (14,064 | ) | |||||
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Net cash provided by/(used in) continuing financing activities
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732 | 92,511 | ||||||
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Net cash provided by/(used in) discontinued financing activities
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- | 234,838 | ||||||
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Net cash provided by/(used in) financing activities
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732 | 327,349 | ||||||
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Net increase /(decrease) in cash and cash equivalents
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Continuing operations
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279,982 | 123,829 | ||||||
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Discontinued operations
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- | (44,112 | ) | |||||
| 279,982 | 79,717 | |||||||
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Effect of foreign exchange rate changes
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Continuing operations
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- | - | ||||||
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Discontinued operations
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- | - | ||||||
| - | - | |||||||
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Cash and cash equivalents at beginning of period
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Continuing operations
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640,383 | 174,661 | ||||||
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Discontinued operations
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- | 44,112 | ||||||
| 640,383 | 218,773 | |||||||
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Cash and cash equivalents at end of period
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Continuing operations
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920,365 | 298,490 | ||||||
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Discontinued operations
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- | - | ||||||
| $ | 920,365 | $ | 298,490 | |||||
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Supplemental disclosure of cash flows information:
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Non cash continuing financing activities:
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Conversion of debt to shares
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$ | - | $ | 68,965 | ||||
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Issuance of shares for acquisition of asset
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200,000 | - | ||||||
| $ | 200,000 | $ | 68,965 | |||||
See accompanying notes to condensed consolidated financial statements.
GREAT CHINA MANIA HOLDINGS, INC. AND SUBSIDIARIES
MARCH 31, 2014
NOTE 1 – ORGANIZATION AND PRINCIPAL ACTIVITIES
Great China Mania Holdings, Inc. (“GMEC” or the “Company”) was incorporated in Florida on July 8, 1983. In February 2011, three subsidiaries of the Company were formed in Hong Kong and have since maintained operations. These subsidiaries are GME Holdings Limited (“GMEH”), Great China Games Limited (“GCG”) and Great China Media Limited (“GCM”). In June 2011, the Company formed another subsidiary GMEC Ventures Limited (“GMEV”) in Hong Kong. The company held those subsidiaries through two wholly-owned BVI companies known as Sharp Achieve Holdings Limited (“Sharp Achieve”) and Super China Global Limited (SCGL).
On March 16, 2011, the Company amended its Articles of Incorporation and changed the name of the Company from “Great East Bottles & Drinks (China) Holdings, Inc.” to “Great China Mania Holdings, Inc.”
On April 23, 2013, the Company disposed the entire interest in GCG to a non affiliate shareholder in exchange for the shareholder assuming the liabilities of GCG and returning 150,000 shares of the Company’s common stock back to the Company.
On May 6, 2013, the Company disposed of the entire interest in Sharp Achieve and GCM to Mr. Yau Wai Hung, a former CEO and director who resigned on April 30 2013, in exchange for his assuming the liabilities of both Sharp Achieve and GCM.
After the above disposals, the Company now only specializes in artiste and project management services operations in Hong Kong, China and the Asia-Pacific region.
NOTE 2 – PRINCIPLES OF CONSOLIDATION
The unaudited interim financial statements of the Company and the Company’s subsidiaries (see Note 1) for the three months ended March 31, 2014 and 2013 have been prepared pursuant to the rules & regulations of the SEC. Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the following disclosures are adequate to make the information presented not misleading. All significant intercompany balances and transactions have been eliminated. The functional currency for the majority of the Company’s operations is the Hong Kong Dollar (HKD) for three months ended March 31, 2014 and 2013, while the reporting currency is the US Dollar.
In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation of the Company’s financial position as of March 31, 2014, the results of its operations and cash flows for the three months ended for March 31, 2014 and 2013.
The results of operations for the three months ended March 31, 2014 are not necessarily indicative of the results for a full year period.
The accompanying unaudited consolidated financial statements and the following notes should be read in conjunction with the audited consolidated financial statements and the notes thereto in the Company’s Form 10-K for the year ended December 31, 2013
NOTE3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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(a)
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Economic and political risk
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The Company’s continuing operations and discontinued operations are conducted in Hong Kong. Accordingly, the political, economic, and legal environments in the Hong Kong may influence the Company’s business, financial condition, and results of operations.
The Company’s major operations in the Hong Kong are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic, and legal environment. The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, and rates and methods of taxation, among other things.
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(b)
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Cash and cash equivalents
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The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. The Company’s continued operations maintain bank accounts in Hong Kong. The Company’s discontinued operations maintain bank accounts in Hong Kong.
(c) Income tax
Income taxes are based on pre-tax financial accounting income. Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. The Company periodically assesses the need to establish valuation allowances against its deferred tax assets to the extent the Company no longer believes it is more likely than not that the tax assets will be fully utilized.
The Company evaluates a tax position to determine whether it is more likely than not that the tax position will be sustained upon examination, based upon the technical merits of the position. A tax position that meets the more-likely-than-not recognition threshold is subject to a measurement assessment to determine the amount of benefit to recognize and the appropriate reserve to establish, if any. If a tax position does not meet the more-likely-than-not recognition threshold, no benefit is recognized
In accordance with the relevant tax laws and regulations of Hong Kong, the applicable corporation income tax rate was 16.5% on assessable profits, if any, for the periods ended March 31, 2014 and 2013, respectively.
(d) Fair value of financial instruments
The Company’s financial instruments primarily consist of cash and cash equivalents, amount due from a related company, prepaid expenses and other receivables, accounts payable, accrued expenses and other payables, receipt in advance, taxes payable and amount due to a related party.
The estimated fair value amounts have been determined by the Company, using available market information or other appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop estimates of fair value. Consequently, the estimates are not necessarily indicative of the amounts that could be realized or would be paid in a current market exchange.
As of the balance sheet dates, the estimated fair values of the financial instruments were not materially different from their carrying values as presented, due to the short maturities of these instruments and the fact that the interest rates on the borrowings approximate those that would have been available for loans of similar remaining maturity and risk profiles at respective year ends.
(e) Long-Lived Assets
Property and equipment is stated at cost. Depreciation is computed by the straight-line method over estimated useful lives (2-7 years). Intellectual property assets are stated at their fair value acquisition cost. Amortization of intellectual property assets is calculated by the straight line method over their estimated useful lives. Historical costs are reviewed and evaluated for their net realizable value of the assets. The carrying amount of all long-lived assets is evaluated periodically to determine if adjustment to the depreciation and amortization period or the unamortized balance is warranted. Based upon its most recent analysis, the Company believes that no impairment of property and equipment existed at December 31, 2013.
Long-lived assets such as property, equipment and identifiable intangibles are reviewed for impairment whenever facts and circumstances indicate that the carrying value may not be recoverable. When required impairment losses on assets to be held and used are recognized based on the fair value of the asset. The fair value is determined based on estimates of future cash flows, market value of similar assets, if available, or independent appraisals, if required. If the carrying amount of the long-lived asset is not recoverable from its undiscounted cash flows, an impairment loss is recognized for the difference between the carrying amount and fair value of the asset. When fair values are not available, the Company estimates fair value using the expected future cash flows discounted at a rate commensurate with the risk associated with the recovery of the assets. We did not recognize any impairment losses for any periods presented.
(f) Revenue recognition
Revenue represents the invoiced value of goods sold or services rendered during the year, net of sales discounts and returns. Generally revenue is recognized when all of the following criteria are met:
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-
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Persuasive evidence of an arrangement exists,
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-
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Delivery has occurred or services have been rendered,
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-
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The seller’s price to the buyer is fixed or determinable, and
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-
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Collectability is reasonably assured
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Revenue recognition policies for each of the major products and services of continuing operations are illustrated as follows:
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(i)
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Revenue from provision of artist management, event management, and promotion for its clients is recognized when services are rendered.
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(ii)
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Revenue from artist-related merchandising is recognized when receipt is confirmed by clients according to the relating predetermined agreements.
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(iii)
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Revenue from intellectual property rights on CD, DVD and video products is recognized upon delivery of products to customers.
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(g)
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Earnings per share
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Basic earnings per share is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. As of March 31, 2014 and 2013, there were no dilutive securities outstanding.
(h) Use of estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates.
(i) Comprehensive income
Comprehensive income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. Among other disclosures, all items that are required to be recognized under current accounting standards as components of comprehensive income are required to be reported in a financial statement that is presented with the same prominence as other financial statements. Comprehensive income includes net income and the foreign currency translation gain, net of tax.
(j) Foreign currency translation
The accompanying consolidated financial statements are presented in United States Dollars (US$). The functional currency of the Company is the Hong Kong Dollar (HKD). Capital accounts of the consolidated financial statements are translated into US$ from HKD at their historical exchange rates when the capital transactions occurred. Assets and liabilities are translated at the exchange rates as of balance sheet date. Income and expenditures are translated at the average exchange rate of the period. The translation rates are as follows:
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March 31,
2014
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December 31, 2013
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March 31,
2013
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|||||||
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Period end HKD : US$ exchange rate
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0.1282 | 0.1282 | 0.1282 | ||||||
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Average for the period HKD : US$ exchange rate
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0.1282 | 0.1282 | 0.1282 |
These translation rates are referenced to the linked rates of HKD and US$ guaranteed by the Government of Hong Kong.
(k) Recent accounting pronouncements
The Financial Accounting Standards Board and other entities issued new or modifications to, or interpretations of, existing accounting guidance upon March 31, 2014. Management has carefully considered the new pronouncements that altered generally accepted accounting principles and does not believe that any other new or modified principles will have a material impact on the Company’s reported financial position or operations in the near term.
The Company reviews new accounting standards as issued. No new standards had any material effect on these financial statements. The accounting pronouncements issued subsequent to the date of these financial statements that were considered significant by management were evaluated for the potential effect on these consolidated financial statements. Management does not believe any of the subsequent pronouncements will have a material effect on these consolidated financial statements as presented and does not anticipate the need for any future restatement of these consolidated financial statements because of the retro-active application of any accounting pronouncements issued subsequent to March 31, 2014 through the date these financial statements were issued.
NOTE 4 – SHORT TERM LOAN RECEIVABLE
During the three months ended March 31, 2014, the Company retained a short term loan amount of $37,973 issued to a third party company at 6% interest per annum with no fixed payment terms. Interest income in conjunction with this short term loan for the three months ended March 31, 2014 and 2013 was $561 and $2,107, respectively.
NOTE 5 – DEPOSITS, PREPAID EXPENSES AND OTHER RECEIVABLES
As of March 31, 2014, the Company’s deposits, prepaid expenses and other receivables accrued expenses and other payables are summarized as follows:
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March 31, 2014
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December 31, 2013
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||||||||
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Prepaid expenses
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101,712 | 108,779 | |||||||
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Other receivables
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70,665 | 70,665 | |||||||
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Deposits paid
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2,606 | 5,791 | |||||||
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Total deposits, prepaid expenses and other receivables
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$ | 174,983 | $ | 185,235 | |||||
NOTE 6 – PROPERTY, PLANT AND EQUIPMENT
As of March 31, 2014, the Company’s property, plant and equipment are summarized as follows:
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March 31,2014
|
December 31, 2013
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|||||||
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At cost:
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||||||||
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Computer
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9,989 | 9,989 | ||||||
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Less: Accumulated depreciation
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9,989 | 9,989 | ||||||
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Property, plant and equipment, net
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$ | - | $ | - | ||||
No depreciation expense attributable to the property, plant and equipment of both continuing operations and discontinued operations for the three months ended March 31, 2014 and 2013 respectively.
NOTE 7 – INTANGIBLE ASSET
As of March 31, 2014, the Company’s intangible asset are summarized as follows:
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March 31,2014
|
December 31, 2013
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|||||||
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At cost:
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||||||||
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Movie and entertainment distribution agreements
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200,000 | - | ||||||
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Less: Accumulated amortization
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(10,000 | ) | - | |||||
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Intangable asset, net
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$ | 190,000 | $ | - | ||||
On January 14, 2014, the Company acquired certain overseas movie and entertainment distribution agreements with a consideration of 20,000,000 shares of restricted common stock to Mr. Wong Wing Fung Charlie (Wong). This contractual interest stated at par value of $0.01 and valued at $200,000. No impairment loss was recognized for the three months ended March 31, 2014. Amortization expense attributable to the intangible asset of continuing operations for the three months ended March 31, 2014 and 2013 was $10,000 and $0 respectively. On the balance sheet date and the date of this filing, Wong owned 73.95% and 38.92% of the issued and outstanding shares of the Company’s common stock separately.
NOTE 8 – OTHER ASSET
On September 25, 2013, the Company acquired a 4.5% equity interest of a restaurant that is operated in Hong Kong by a non affiliate corporation with a cash consideration of $115,380. This equity interest stated at cost and no impairment losses were recognized for the three months ended March 31, 2014 and 2013.
NOTE 9 – SHORT-TERM BORROWINGS
The Company’s short-term borrowings are unsecured, interest free advances from a non affiliate individual with no fixed repayment term.
NOTE 10 – CONVERTIBLE NOTES
On June 1, 2011, the Company issued a non-interest bearing convertible note in the amount of $256,400 ( “Note 1”) to a third party note holder (“Holder 1”), which matures on May 31, 2016. On September 30, 2011, the first installment of $128,200 on Note 1 was received. Note 1 bears a call back option exercisable by Holder 1 on the unused portion of Note 1 after 12 months from the date of Note 1. Note 1 can be converted into common stock of the Company by Holder 1 under certain conditions. During the year, a total of $0 was repaid by the Company. As of December 31, 2013, Note 1 did not qualify to be converted under those conditions and is therefore not dilutive.
On February 20, 2013, the Company issued another 12% convertible note in the amount of $50,000 (“Note 5”) to another third party note holder (“Holder 3”). Note 5 mature on November 20, 2013 and was fully received on March 4, 2013. The outstanding principal balance plus any accrued interest under Note 5 is convertible into common stock of the Company after 180 days from the date of issued with a 40% discount over the convertible price upon the option of Holder 3. The conversion price is determined by the average of the lowest 3 closing bid prices out of the 10 days prior to the Conversion Date. As of March 31, 2014, fair value adjustment on option amounted to $35,333 and unamortized debt discount amount to $0. Debt discount is being amortized using effective interest method over the life of Note 5. For three months ended March 31, 2014, the amortization of debt discount of $0 was charged to Statement of Operations. Accrued interest expense of Note 5 for the three months ended March 31, 2014 was $0. On September 10, 2013, part of the note of $7,415 was converted into 8,000 shares of common stock by the holder. On October 2, 2013, part of the note of $42,586 was converted into 53,769 shares of common stock by the holder. The gross outstanding balance of Note 5 at March 31, 2014 was $11,018 after deducting the partial settlement of $77,315 by shares. As of March 31, 2014, Note 5 qualified to be converted 11,038 shares of common stock under the conditions of Note 5 and is therefore dilutive.
On April 22, 2013, the Company issued another 12% convertible note in the amount of $50,000 (“Note 6”) to Holder 3. Note 6 mature on January 22, 2014 and was fully received on June 14, 2013. The outstanding principal balance plus any accrued interest under Note 6 is convertible into common stock of the Company after 180 days from the date of issued with a 40% discount over the convertible price upon the option of Holder 3. The conversion price is determined by the average prices of the 5 days prior to the Conversion Date. As of March 31, 2014, fair value adjustment on option amounted to $35,333 and unamortized debt discount amount to $0. Debt discount is being amortized using effective interest method over the life of Note 6. For the three months ended March 31, 2014, the amortization of debt discount of $0 was charged to Statement of Operations. Accrued interest expense of Note 6 for the three months ended March 31, 2014 was $0. As of March 31, 2014, Note 6 qualified to be converted 88,333 shares of common stock under the conditions of Note 6 and is therefore dilutive.
Total interest expense in connection with Note 2, Note 3 and Note 4 for he three months ended March 31, 2014 and 2013 were $0 and $32,246, respectively. Total interest expenses in connection with all Convertible Notes for the three months ended March 31, 2014 and 2013 amounted to $0 and $32,246 respectively.
The convertible notes as of the year-end dates are summarized as follows:
|
March 31,2014
|
December 31, 2013
|
|||||||
|
Noncurrent liabilities:
|
||||||||
|
Non-interest bearing convertible note
|
$ | 31,301 | $ | 31,301 | ||||
|
Current liabilities:
|
||||||||
|
12% convertible note 5, net (including fair value adjustment on option $ 35,333, accrued interest expense $3,000)
|
11,018 | 11,018 | ||||||
|
12% convertible note 6, net (including fair value adjustment on option $ 35,333, accrued interest expense $3,000)
|
88,333 | 88,333 | ||||||
| 99,351 | 99,351 | |||||||
|
Total convertible note outstanding
|
$ | 130,652 | $ | 130,652 | ||||
NOTE 11 – COMMON STOCK AND WEIGHTED AVERAGE NUMBER OF SHARES FOR EARNINGS PER SHARE CALCULATION
On January 7, 2014 the Company issued 95 shares of common stock to round up the variance raised form the reverse split executed.
On January 12, 2014 the Company issued 39,721 shares of common stock at the par value of $0.01 for a cash consideration of $397.
On January 17, 2014 the Company issued 20,000,000 shares of common stock to pursuant to an Agreement with C&M Film Workshop Limited.
On March 17, 2014 the Company issued 33,615 shares of common stock at the par value of $0.01 for a cash consideration of $335.
The calculation of common stock as at March 31, 2014 and weighted average number of shares for the three months ended March 31, 2014 is illustrated as follows:
|
Number
of shares
|
Weighted average number of shares
|
|||||||
|
Issued and outstanding as of January 1, 2014
|
5,619,926 | 5,619,926 | ||||||
|
Issuance of share on January 7, 2014 for reverse split executed
|
95 | 89 | ||||||
|
Issuance of share on January 12, 2014 for cash consideration of $397
|
39,721 | 34,866 | ||||||
|
Issuance of share on January 17, 2014 for pursuant to a sales and purchase agreement
|
20,000,000 | 16,444,444 | ||||||
|
Issuance of share on March 17, 2014 for cash consideration of $335
|
33,615 | 5,976 | ||||||
|
Issued and outstanding as of March 31, 2014
|
25,693,357 | 22,105,301 | ||||||
NOTE 12 – INTEREST EXPENSES
Interest expenses for the three months ended March 31, 2014 and 2013 are summarized as follows:
|
2014
|
2013
|
|||||||
|
Amortization on discount of convertible note
|
$ | - | $ | 25,257 | ||||
|
Accrued interest on convertible note
|
- | 6,989 | ||||||
|
Total
|
$ | - | $ | 32,246 | ||||
NOTE 13 – CONTINGENCIES AND COMMITMENTS
As of March 31, 2014, the expected annual lease payments under the Company continuing operating leases are as follows:
|
For the year ending December 31,
|
||||
|
2014
|
27,797 | |||
|
Total
|
27,797 | |||
NOTE 14- GOING CONCERN
As of March 31, 2014, the Company has accumulated deficits of $9,490,338 a positive working capital of $413,365, and also recorded a net loss from the continuing operations of $99,985 for the three months then ended.
As of March 31, 2014, the Company may need additional cash resources to operate during the upcoming 12 months, and the continuation of the Company may dependent upon the continuing financial support of investors, directors and/or stockholders of the Company. The Company intends to attempt to acquire additional operating capital through private equity offerings to the public and existing investors to fund its business plan. However, there is no assurance that equity or debt offerings will be successful in raising sufficient funds to assure the eventual profitability of the Company. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.
ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Note regarding forward – looking statements
This quarterly report contains forward-looking statements within the meaning of the federal securities laws. These include statements about our expectations, beliefs, intentions or strategies for the future, which we indicate by words or phrases such as "anticipate", "expect", "intend", "plan", "will", "we believe", "the Company believes", "management believes" and similar language. The forward-looking statements are based on the current expectations of the Company and are subject to certain risks, uncertainties and assumptions, including those set forth in the discussion under "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this report. The actual results may differ materially from results anticipated in these forward-looking statements. We base the forward-looking statements on information currently available to us, and we assume no obligation to update them.
Investors are also advised to refer to the information in our filings with the Securities and Exchange Commission, specifically Forms 10-K, 10-Q and 8-K, in which we discuss in more detail various important factors that could cause actual results to differ from expected or historic results. It is not possible to foresee or identify all such factors. As such, investors should not consider any list of such factors to be an exhaustive statement of all risks and uncertainties or potentially inaccurate assumptions.
Except as otherwise indicated by the context, references in this Form 10-K to “we”, “us”, “our”, “the Registrant”, “our Company” or “the Company” are to Great China Mania Holdings, Inc., a Florida corporation and its consolidated subsidiaries. Unless the context otherwise requires, all references to (i) “BVI” are to British Virgin Islands; (ii) “PRC” and “China” are to the People’s Republic of China; (iii) “U.S. dollar”, “$” and “US$” are to United States dollars; (iv) “HKD” are to the Hong Kong Dollar; (v) “Securities Act” are to the Securities Act of 1933, as amended; and (vi) “Exchange Act” are to the Securities Exchange Act of 1934, as amended.
Critical Accounting Policies and Estimates
Our financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States ("US GAAP"). US GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenues and expenses amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.
We believe the following is among the most critical accounting policies that impact our consolidated financial statements. We suggest that our significant accounting policies, as described in our consolidated financial statements in the Summary of Significant Accounting Policies, be read in conjunction with this Management's Discussion and Analysis of Financial Condition and Results of Operations.
We recognize revenue in accordance with Staff Accounting Bulletin ("SAB") No. 104. All of the following criteria must exist in order for us to recognize revenue:
1. Persuasive evidence of an arrangement exists;
2. Delivery has occurred;
3. The seller's price to the buyer is fixed or determinable; and
4. Collectability is reasonably assured.
Revenue recognition policies for each of the major products and services of continuing operations are illustrated as follows:
|
(i)
|
Revenue from provision of artist management, event management, and promotion for its clients is recognized when services are rendered.
|
|
(ii)
|
Revenue from artist-related merchandising is recognized when receipt is confirmed by clients according to the relating predetermined agreements.
|
|
(iii)
|
Revenue from intellectual property rights on CD, DVD and video products is recognized upon delivery of products to customers.
|
Based on these factors, the Company believes that it can apply the provisions of SAB 104 with minimal subjectivity.
Recent Accounting Pronouncements
The Company does not expect that the adoption of any recent accounting pronouncements will have any material impact on its financial statements.
Results of Continuing Operations – Three Months Ended March 31, 2014 as Compared to Three Months Ended March 31, 2013.
The following table summarizes the results of our continuing operations during the three-month periods ended March 31, 2014 and 2013, and provides information regarding the dollar and percentage increase / (decrease) from the three-month period ended March 31, 2013 to the three-month period ended March 31, 2014.
|
Three months ended March 31,
|
Increase
|
||||||||||||
|
2014
|
2013
|
(decrease)
|
% Change
|
||||||||||
|
Revenue
|
$ | 287,810 | $ | 371,391 | $ | (83,581) | (22.50%) | ||||||
|
Cost of sales
|
161,482 | 168,269 | (6,787) | (4.03%) | |||||||||
|
Gross profit
|
126,328 | 203,122 | (76,794) | (37.81%) | |||||||||
|
Sales & marketing
|
11,011 | 13,420 | (2,409) | (17.95%) | |||||||||
|
General & administrative
|
204,552 | 285,829 | (81,277) | (28.44%) | |||||||||
|
Loss from operations
|
(89,235) | (96,127) | (6,892) | (7.17%) | |||||||||
|
Other income (expense)
|
(10,750) | (36,184) | (25,434) | (70.29%) | |||||||||
|
Income tax expenses
|
- | - | - | N/A | |||||||||
|
Net loss from continuing operations
|
$ | (99,985) | $ | (132,311) | $ | (32,326) | (24.44%) | ||||||
Revenues decreased by $83,581 to $287,810 for the three months ended March 31, 2014 as compared to $371,391 for the same period in 2013, representing a 22.50% decrease. The decrease in revenue was mainly due to the decrease in revenue of promotion events in Mainland China.
Cost of sales
Cost of sales decreased by $6,787 to $161,482 for the three months ended March 31, 2014 as compared to $168,269 for the same period in 2013, representing a 4.03% decrease. The increase were mainly due to the decrease of other direct cost by $20,104 offset by the increase in artiste fee by $4,227 and agency fee by $9,090.
Gross margin
Gross margin decreased by $76,794 to $126,328 for the three months ended March 31, 2014 as compared to $203,122 for the same period in 2013, representing a 37.81% decrease. The decrease was mainly due to 1) the decrease of promotion events revenue in Mainland China by $83,581, 2) the increase of artiste fee and agency by $13,317 offset the decrease of other direct cost by $20,104.
Sales & marketing expenses
Sales & marketing expenses decreased by $2,409 to $11,011 for the three months ended March 31, 2014 as compared to $13,420 for 2013, representing a 17.95% decrease. The decrease was mainly due to the increase of advertising expenses by $10,218 offset the decrease of other sales & marketing expenses by $12,627 in aggregate.
General and administrative
The following table summarizes general and administrative expenses during the three-month periods ended March 31, 2014 and 2013, and provides information regarding the dollar and percentage increase / (decrease) from the three-month period ended March 31, 2013 to the three-month period ended March 31, 2014.
|
Three months ended March 31,
|
Increase
|
|||||||||||||||
|
2014
|
2013
|
(decrease)
|
% Change
|
|||||||||||||
|
Payroll cost
|
151,183 | 139,511 | 11,672 | 8.37% | ||||||||||||
|
Rental expenses
|
26,881 | 32,016 | (5,135 | (16.04%) | ||||||||||||
|
Legal and professional fee
|
7,777 | 109,749 | (101,972) | (92.91%) | ||||||||||||
|
Miscellaneous
|
18,711 | 4,553 | 14,158 | 310.96% | ||||||||||||
| 204,552 | 285,829 | (81,277) | 28.44% | |||||||||||||
Payroll cost increased by $11,672 to $151,183 for the three months ended March 31, 2014 as compared to $139,511 for the same period in 2013, representing an 8.37% increase. The increase was mainly due to the salary adjustment of employees newly recruited in 2014.
Rental expenses decreased by $5,135 to $25,625 for the three months ended March 31, 2014 as compared to $32,016 for the same period in 2013, representing a 16.04% decrease. The decrease was mainly due to rent saved by the relocation of Guangzhou office in December 2013.
Legal and professional fee increased by $101,972 to $7,777 for the three months ended March 31, 2014 as compared to $109,749 for the same period in 2013, representing a 92.91% increase. The decrease was mainly due to 1.) a business development consultation fee $70,000 paid in 2013, 2.) a legal consultation fee $18,000 paid in 2013, 3.) a decrease of press release expenses $8,275 and 4.) a decrease of legal related disbursement by $5,697 in aggregate.
Miscellaneous expenses increased by $14,158 to $18,711 for the three months ended March 31, 2014 as compared to $4,553 for the same period in 2013, representing a 91.32% increase. The increase was mainly due to the increase of repair and maintenance expenses by $4,400 and the increast of amortization expenses by $10,000 offset the decrease of the other general expenses by $242 in aggregate.
Net loss from continuing operations
Net loss from continuing operations decreased by $32,326 to a net loss of $99,985 for the three months ended March 31, 2014 as compared to $132,311 for the same period in 2013.
Liquidity and Capital Resources
Cash
Our cash balance of continuing operations as of March 31, 2014 was $920,365, representing an increase of $279,982 as compared to $640,383 as of December 31, 2013.
Cash flow
Operating Activities
Net cash provided by operating activities for the three months ended March 31, 2014 amounted to $202,779 compared to $31,318 in the same period of 2013. The change of $171,461 was mainly due to: 1.) an increase of $302,180 in unearned revenue, 2.) a decrease of $141,456 in trade and other receivable, and 3.) a decrease of $232,296 in net loss before offset by an increase of 4.) $10,000 in impairment loss of asset, 5.) $10,000 in,amortization expenses, and a decrease of 6.) $7,550 of interest income, 7.) $25,275 of interest payable , and 8.) $291,694 in trade and other payable.
Investing Activities
Net cash provided by investing activities for the three months ended March 31, 2014 amounted to compared to $0 for the same period of 2013.The change of $76,471 was primarily due to the repayment of short-term loan receivable by $76,471.
Financing Activities
Net cash provided by financing activities for the three months ended March 31, 2014 amounted to $732 compared to net cash provided by financing activities of $92,511 in the same period of 2013. The change of $91,779 was primarily due to the fact that the company only issued 73,336 shares for the three months ended March 31, 2014 in compared to all other financing activities occurred in the same period of 2013.
Working capital
Our net current assets increased by $1,079,087 to $403,365 as of March 31, 2014 from net current liabilities of as of March 31, 2013.
As of March 31, 2014 we may need additional cash resources to operate during the upcoming 12 months, and the continuation of the Company may dependent upon the continuing financial support of investors, directors and/or stockholders of the Company. We intend to attempt to acquire additional operating capital through private equity offerings to the public and existing investors to fund its business plan. However, there is no assurance that equity or debt offerings will be successful in raising sufficient funds to assure the eventual profitability of the Company. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.
Off-Balance Sheet Arrangements
We do not have any off balance sheet arrangements
Inflation
Inflation does not have a material impact on our business and we do not expect inflation to have an impact on our business in the near future
Currency Exchange Fluctuations
All of the Company’s revenues and a majority of its expenses in the three months ended March 31, 2014 were denominated in HKD and were converted into US dollars at the exchange rate of 7.8 to 1. There can be no assurance that HKD-to-U.S. dollar exchange rates will remain stable. A devaluation of HKD relative to the US dollar would adversely affect our business, consolidated financial condition and results of operations. We do not engage in currency hedging.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
This item is not applicable as we are currently considered a smaller reporting company.
ITEM 4T. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed by us in reports that we file under the Exchange Act is recorded, processed, summarized and reported as specified in the SEC’s rules and forms and that such information required to be disclosed by us in reports that we file under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer, and our Principal Accounting Officer, to allow timely decisions regarding required disclosure. Management, with the participation of our Chief Executive Officer and Principal Accounting Officer, performed an evaluation of the effectiveness of our disclosure controls and procedures as of March 31, 2014. Based on that evaluation and as described below under “Management’s Report on Internal
Control Over Financial Reporting”, we have identified a material weakness in our internal control over financial reporting. As a result of this material weakness and as a result of our failure to identify this material weakness in our internal control over financial reporting as a material weakness in our disclosure controls and procedures, our management, including our Chief Executive Officer and Principal Accounting Officer, concluded that our disclosure controls and procedures were not effective as of March 31, 2014.
Changes in Internal Control over Financial Reporting
Our Chief Executive Officer and Principal Accounting Officer have indicated that there were significant changes in our internal controls or other factors that could significantly affect such controls subsequent to the date of their evaluation, and there were such control actions with regard to significant deficiencies and material weaknesses. We have performed, among others, the following actions:
|
|
·
|
additional training of our accounting personnel by our independent accountants of the proper format and compilation of data for US GAAP financial statements; and
|
|
|
·
|
additional coordination with our local accountants and auditors to strengthen our controls in an attempt to supplement the additional training of our employees.
|
ITEM 1. LEGAL PROCEEDINGS
We are not presently a party to any material litigation, nor to the knowledge of management is any litigation threatened against us, which may materially affect us.
ITEM 1A. RISK FACTORS
No material change since the filing of the 10-K on April 14, 2014.
On January 7, 2014 the Company issued 95 shares of common stock to round up the variance raised form the reverse split executed.
On January 12, 2014 the Company issued 39,721 shares of common stock at the par value of $0.01 for a cash consideration of $397.
On January 17, 2014 the Company issued 20,000,000 shares of common stock to pursuant to an Agreement with C&M Film Workshop Limited.
On March 17, 2014 the Company issued 33,615 shares of common stock at the par value of $0.01 for a cash consideration of $335.
Issuer Purchases of Equity Securities
None
None.
ITEM 4. [REMOVED AND RESERVED].
None.
|
Exhibit Number
|
Description
|
|
31.1
|
Certification of Chief Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
31.2
|
Certification of Chief Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
32.1
|
Certification of Chief Executive Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
32.2
|
Certification of Chief Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
GREAT CHINA MANIA HOLDINGS, INC.
(Registrant)
|
By:
|
/S/ Kwong Kwan Yin Roy
|
|
Kwong Kwan Yin Roy
|
|
|
Chief Executive Officer and Director
|
Date: May 15, 2014
|
By:
|
/S/ Kwong Kwan Yin Roy
|
|
Kwong Kwan Yin Roy
|
|
|
Chief Executive Officer and Director
|
Date: May 15, 2014
19