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GMEC > SEC Filings for GMEC > Form 10-Q on 14-Nov-2013All Recent SEC Filings

Show all filings for GREAT CHINA MANIA HOLDINGS, INC. | Request a Trial to NEW EDGAR Online Pro

Form 10-Q for GREAT CHINA MANIA HOLDINGS, INC.


14-Nov-2013

Quarterly Report


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 "USD" 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 US 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:


4. Collectability is reasonably assured.

(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.

For discontinued operations, the Company recognizes revenue when the following criteria are met:

(i) Revenue from electronic content sales like iPhone and Android applications is recognized when receipt is confirmed by service providers.
(ii) Revenue from traditional paper magazines sales is recognized when magazines are sold to customers, net of sales return.
(iii) Revenue from the provision of advertising services is recognized when services are rendered.
(iv) Revenue from retail sales of video games and accessories is recognized upon delivery of goods 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 September 30, 2013 as
Compared to Three Months Ended September 30, 2012.

The following table summarizes the results of our continuing operations during
the three-month period ended September 30, 2013 and 2012, and provides
information regarding the dollar and percentage increase / (decrease) from the
three-month period ended September 30, 2012 to the three-month period ended
September 30, 2013.

                                              Three months ended September 30,
                                                                                        Increase /
                                                 2013                   2012            (decrease)      % Change
Revenue                                    $        470,279       $        545,251     $    (74,972 )      (13.75 %)
Cost of sales                                       338,243                340,403           (2,160 )       (0.63 %)
Gross profit                                        132,036                204,848          (72,812 )      (35.54 %)
General & administrative                            612,276                410,686          201,590         49.09 %
Loss from operations                               (480,240 )             (205,838 )       (274,402 )     (133.31 %)
Other expense                                       (99,503 )              (29,379 )        (70,124 )     (238.69 %)
Income tax expenses                                       -                      -                -           N/A
Net loss from continuing Operations        $       (579,743 )     $       (235,217 )   $   (344,526 )     (146.47 %)

Revenues

Revenues decreased by $74,972 to $470,279 for the three months ended September 30, 2013 as compared to $545,251 for the same period in 2012, representing a 13.75% decrease. The decrease in revenue was mainly due to the decrease in volume of artists' performance in China.

Cost of sales


Cost of sales decreased by $2,160 to $338,243 for the three months ended September 30, 2013, as compared to $340,403 for the same period in 2012, representing a 0.63% decrease. The decreases were mainly due to the decrease of other direct cost by $37,137 in aggregate offset by the increase of artist fee by $14,740 and agency fee by $20,237.

Gross margin

Gross margin decreased by $72,812 to $132,036 for the three months ended September 30, 2013 as compared to $204,484 for the same period in 2012, representing a 35.54% decrease. The decrease was mainly due to 1) the decrease of the revenue by $74,972, 2) the increase of artist fees by $14,740 and 3) agency fees by $20,237, offset by the decrease of other direct costs by $37,137 in aggregate in the same period.

General and administrative

The following table summarizes general and administrative expenses during the three-month period ended September 30, 2013 and 2012, and provides information regarding the dollar and percentage increase / (decrease) from the three-month period ended September 30, 2012 to the three-month period ended September 30, 2013.

                                               Three months ended
                                                  September 30,
                                                                             Increase
                                              2013             2012         (decrease)        % Change

Payroll cost                                  111,070          102,300             8,770           8.57 %
Rental expenses                                30,843           37,101            (6,258 )       (16.87 %)
Legal and professional fee                    459,122          252,280           206,842          81.99 %
Entertainment                                   4,568            5,640            (1,072 )       (19.01 %)
Miscellaneous                                   6,673           13,365            (6,692 )       (50.07 %)
                                              612,276          410,686           201,590          49.09 %

Payroll cost increased by $8,770 to $111,070 for the three months ended September 30, 2013 as compared to $102,300 for the same period in 2012, representing a 8.57% increase. The increase was mainly due to the increase of the number of staff during the period.

Rental expenses decreased by $6,258 to $30,843 for the three months ended September 30, 2013, as compared to $37,101 for the same period in 2012, representing a 16.87% decrease. The decrease was mainly due to rent saved by the closure of the Beijing office in September 2012.

Legal and professional fee increased by $206,842 to $459,122 for the three months ended September 30, 2013, as compared to $252,280 for the same period in 2012, representing a 81.99% increase. The increase was mainly due to a business development consultation fee $356,368, offset by the decrease of 1) press releasing expenses by $140,000, 2) legal consultation fee by $8,550, and 3) legal related disbursement by $976.

Miscellaneous expenses decreased by $6,692 to $6,673 for the three months ended September 30, 2013, as compared to $13,365 for the same period in 2012, representing a 50.07% decrease. The decrease was mainly due to the decrease of
1) traveling expenses by $4,783 and 2) maintenance expenses by $2,099 offset the increase of other expenses of $190 in aggregate.

Net loss from continuing operations

Net loss from continuing operations increased by $344,526 to a net loss of $579,743 for the three months ended September 30, 2013 as compared to $235,217 for the same period in 2012.


Results of Discontinued Operations -Three Months Ended September 30, 2013 as
Compared to Three Months Ended September 30, 2012.

The following table summarizes the results of discontinued operations for the
three-month period ended September 30, 2013 and 2012, and provides information
regarding the dollar and percentage increase or (decrease) from the three-month
period ended September 30, 2012 to the three-month period ended September 30,
2013.

                                               For three months ended
                                                    September 30,
                                                                                 Increase
                                              2013                2012          (decrease)      % Change
Revenue
GCM                                        $         -         $   488,422     $   (488,422 )     (100.00 %)
GCG                                                  -              53,874          (53,874 )     (100.00 %)
                                                     -             542,296         (542,296 )     (100.00 %)
Cost of sales
GCM                                                  -             348,242         (348,242 )     (100.00 %)
GCG                                                  -              46,244          (46,244 )     (100.00 %)
                                                     -             394,486         (394,486 )     (100.00 %)
Gross (loss) / profit
GCM                                                  -             140,180         (140,180 )     (100.00 %)
GCG                                                  -               7,630           (7,630 )     (100.00 %)
                                                     -             147,810         (147,810 )     (100.00 %)
General & administrative                             -             215,261         (215,261 )     (100.00 %)
Loss from operations                                 -             (67,451 )        (67,451 )     (100.00 %)
Other expense                                        -              (2,903 )         (2,903 )     (100.00 %)
Income tax expenses                                  -                   -                -           N/A

Net loss from discontinued operations
GCM                                                  -             (61,169 )        (61,169 )     (100.00 %)
GCG                                                  -              (9,185 )         (9,185 )     (100.00 %)
                                           $         -         $   (70,354 )   $    (70,354 )     (100.00 %)

Revenue

Revenue decreased by $542,296 to $0 for the three months ended September 30, 2013, as compared to $542,296 for the same period in 2012, representing a 100.00% decrease. The decreases were mainly due to decreases in revenue from both GCM and GCG operations.

Sales revenue of GCM decreased by $488,422 to $0 for the three months ended September 30, 2013, as compared to $488,422 for the same period in 2012, representing a 100.00% decrease. The decrease in revenue was mainly due to the fact that GCM was disposed of on May 6 2013 and therefore received no revenue in the third quarter ended September 30, 2013, as compared to the three months figure in the same quarter of 2012.

Sales revenue of GCG decreased by $53,874 to $0 for the three months ended September 30, 2013, as compared to $53,874 for the same period in 2012, representing a 100.00% decrease. The decrease in revenue was mainly due to the closure of another retail shop in January 2013. GCG was disposed of on April 23, 2013.

Cost of sales

Cost of sales decreased by $394,486 to $0 for the three months ended September 30, 2013, as compared to $394,486 for the same period in 2012, representing a 100.00% decrease. The decreases were mainly due to decreases in cost of sales from both GCM and GCG operations.


Cost of sales of GCM decreased by $348,242 to $0 for the three months ended September 30, 2013, as compared to $348,242 for the same period in 2012, representing a 100.00% decrease. The decrease was mainly due to the fact that GCM was disposed of on May 6 2013 and therefore contributed to only a one month cost of sales in the third quarter ended September 30, 2013, as compared to the three months figure in the same quarter of 2012.

Cost of sales of GCG decreased by $46,244 to $0 for the three months ended September 30 2013, as compared to $46,244 for the same period in 2012, representing a 100.00% decrease. The decrease was mainly due to the closure of another retail shops in January 2013. GCG was disposed of on April 23, 2013.

Gross margin

Gross margin decreased by $147,810 to $0 for the three months ended September 30, 2013, as compared to a profit of $147,810 for the same period in 2012, representing a 100.00% decrease. The decreases were mainly due to decreases in gross margin from both GCM and GCG operations.

Gross margin of GCM decreased by $140,180 to $0 for the three months ended September 30, 2013, as compared to a profit of $140,180 for the same period in 2012, representing a 100.00% decrease. The decrease was mainly due to the fact that GCM was disposed of on May 6 2013 and therefore contributed to no gross margin in third quarter ended September 30, 2013 as compared to the three months figure in the same quarter of 2012.

Gross margin of GCG decreased by $7,630 to $0 for three months ended September 30 2013, as compared to $7,630 for the same period in 2012, representing a 100.00% decrease. The decrease was mainly due to the closure of another retail shops in January 2013. GCG was disposed of on April 23, 2013.

General and administrative

The following table summarizes general and administrative expenses during the three months ended September 30, 2013 and 2012, and provides information regarding the dollar and percentage increase / (decrease) from the three-month period ended September 30, 2012 to the three-month period ended September 30, 2013.

                                               For three months ended
                                                    September 30,
                                                                                  Increase
                                              2013                2012          / (decrease)       % Change

Payroll cost                                         -             173,125            (173,125 )     (100.00 %)
Rental expenses                                      -              25,383             (25,383 )     (100.00 %)
Miscellaneous                                        -              16,753             (16,753 )     (100.00 %)
                                                     -             215,261            (215,261 )     (100.00 %)

Payroll cost decreased by $173,125 to $0 for the three months ended September 30, 2013, as compared to $173,125 for the same period in 2012, representing a 100.00% decrease. The decrease was mainly due to the fact that GCG and GCM was disposed of on April 23, 2013 and May 6, 2013 separately, and therefore there was no payroll cost in third quarter ended September 30, 2013 as compared to the three months figure in the same quarter of 2012.

Rental expenses decreased by $25,383 to $0 for the three months ended September 30, 2013, as compared to $25,383 for the same period in 2012, representing a 100.00% decrease. The decrease was mainly due to the fact that GCG and GCM were disposed of on April 23, 2013 and May 6, 2013 separately, and therefore there was no rent incurred in third quarter ended September 30, 2013 as compared to the three months figure in the same quarter of 2012.

Miscellaneous expenses decreased by $16,753 to $0 for the three months ended September 30 2013, as compared to $16,753 for the same period in 2012, representing a 100.00% decrease. The decrease was mainly due to the fact that GCG and GCM were disposed of on April 23, 2013 and May 6, 2013 separately, and therefore there was no miscellaneous expense in third quarter ended September 30, 2013 as compared to the three months figure in the same quarter of 2012.


Net loss from discontinued operations

Net loss from discontinued operations decreased by $70,354 to $0 for the three months ended September 30, 2013 as compared to $70,354 for the same period in 2012.

Results of Continuing Operations - Nine months Ended September 30, 2013 as Compared to Nine months Ended September 30, 2012.

The following table summarizes the results of our continuing operations during the nine-month period ended September 30, 2013 and 2012, and provides information regarding the dollar and percentage increase / (decrease) from the nine-month period ended September 30, 2012 to the nine-month period ended September 30, 2013.

                                                 Nine months ended September 30,
                                                                                          Increase
                                                     2013                  2012          (decrease)      % Change

Revenue                                        $       1,455,059       $  1,426,135     $     28,924          2.03 %
Cost of sales                                            924,716            898,742           25,974          2.89 %
Gross profit                                             530,343            527,393            2,950          0.56 %
General & administrative                               1,371,957            796,727          575,230         72.20 %
Loss from operations                                    (841,614 )         (269,334 )       (572,280 )     (212.48 %)
Other income (expense)                                  (174,012 )          (36,951 )       (137,061 )     (370.93 %)
Provision for taxation                                         -                  -                -           N/A
Net income/(loss) from continuing operations   $      (1,015,626 )     $   (306,285 )   $   (709,341 )     (231.60 %)

Revenues

Revenues increased by $28,924 to $1,455,059 for the nine months ended September 30, 2013, as compared to $1,426,135 for the same period in 2012. The increase of revenue was mainly due to increase of income $103,896 generated from new artists' performance that joined the company in 2013 during January and June 2013; offset by the decrease of income totaling $74,972 generated from the artists' performance in China during July and September 2013.

Cost of sales

Cost of sales increased by $25,974 to $924,716 for the nine months ended September 30, 2013, as compared to $898,742 for the same period in 2012. The increase of cost of sales was mainly due to the increase of artist fees and agency fees by $15,137 and $18,705 separately; offset by the decrease of other direct cost by $7,868 in aggregate.

Gross margin

Gross margin increased by $2,950 to $530,343 for the nine months ended September 30, 2013, as compared to $527,393 for the same period in 2012. The increase of gross margin was mainly due to 1) the increase of revenue by $28,924, and 2) other direct costs by $7,868 in aggregate; offset by the increase of 3) artist fees by $15,137 and 4) agency fees by $18,705 in the same period.

General and administrative

The following table summarizes general and administrative expenses during the nine-month period ended September 30, 2013 and 2012, and provides information regarding the dollar and percentage increase /


(decrease) from the nine-month period ended September 30, 2012 to the nine-month period ended September 30, 2013.

                                               Nine months ended
                                                 September 30,
                                                                           Increase
                                              2013           2012         (decrease)        % Change

Payroll cost                                   357,497       364,999            (7,502 )        (2.06 %)
Rental expenses                                 89,867       109,821           (19,954 )       (18.17 %)
Legal and professional fee                     875,861       270,245           605,616         224.10 %
Entertainment                                   18,582        10,352             8,230          79.50 %
Miscellaneous                                   30,150        41,310           (11,160 )       (27.02 %)
                                             1,371,957       796,727           575,230          72.20 %

Payroll cost decreased by $7,502 to $357,497 for the nine months ended September 30, 2013, as compared to $364,999 for the same period in 2012, representing a 2.06% decrease. The payroll cost remains stable between both periods.

Rental expenses decreased by $19,954 to $89,867 for nine months ended September 30, 2013, as compared to $109,821 for the same period in 2012, representing a 18.17% decrease. The decrease was mainly due to rent saved by the closure of Beijing office in September 2012.

Legal and professional fee increased by $605,616 to $875,861 for the nine months ended September 30, 2013, as compared to $270,245 for the same period in 2012, representing a 224.10% increase. The increase was mainly due to an increase of
1) business development consultation fee by $662,368 2) audit related expenses by $ 17,369 and 3) transfer agency expenses by $1,059; offset by a decrease of
4) press releasing expenses by $70,752, 5) EDGAR filing disbursement by $2,428, and 6) legal consultation fees by $2,000.

Miscellaneous expenses decreased by $11,160 to $30,150 for the nine months ended September 30, 2013, as compared to $41,310 for the same period in 2012, representing a 27.02% decrease. The decrease was mainly due to the decrease of
1) traveling expenses totaling $8,354 and 2) maintenance expenses totaling $3,096 offset the increase of other expenses of $290 in aggregate .

Net loss from continuing operations

Net loss from continuing operations decreased by $709,341 to a net loss of $1,015,626 for the nine months ended September 30, 2013, as compared to $306,285 for the same period in 2012.

Liquidity and Capital Resources

Cash

Our cash balance as of September 30, 2013 was $625,357 representing an increase of $430,440, as compared to $194,917 as of September 30, 2012. The increase of cash was mainly due to the net cash inflows between January and September 2013 of $450,696; offset by the net cash outflow between October and December 2012 $20,256 in aggregate.

Cash flow

Operating Activities

Net cash used in operating activities for the nine months ended September 30, 2013 amounted to $26,212 compared to net cash provided by operating activities of $155,256 in the same period of 2012.

Financing Activities


Net cash used in operating activities for the nine months ended September 30, 2013 amounted to $26,212, compared to net cash provided by operating activities of $155,256 in the same period of 2012.

Financing Activities

Net cash provided by financing activities for the nine months ended September 30, 2013 amounted to $476,908, compared to net cash used in financing activities of $189,152 in the same period of 2012.

Working capital

Our current net assets increased by $444,769 to $82,606 as of September 30, 2013, from net current liabilities of $362,163 as of September 30, 2012.

As of September 30, 2013, 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 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. . . .

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