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GMEC > SEC Filings for GMEC > Form 10-K on 14-Apr-2014All Recent SEC Filings

Show all filings for GREAT CHINA MANIA HOLDINGS, INC.

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


14-Apr-2014

Annual Report


Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

Note regarding forward looking statements

This annual 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-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.

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:

- Persuasive evidence of an arrangement exists,
- Delivery has occurred or services have been rendered,
- The seller's price to the buyer is fixed or determinable, and
- 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:
(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.

Recent Accounting Pronouncements

The Financial Accounting Standards Board and other entities issued new or modifications to, or interpretations of, existing accounting guidance during 2013. 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 December 31, 2013 through the date these financial statements were issued. Results of Continued Operations - Year Ended December 31, 2013, as Compared to Year Ended December 31, 2012.

The following table summarizes the results of our continued operations during the year ended December 31, 2013 and 2012, and provides information regarding the dollar and percentage increase or (decrease) from the year ended December 31, 2012 to the year ended December 31, 2013.

                                                                              Increase
                                               2013            2012          (decrease)       % Change

Revenue                                    $  2,310,329     $ 1,931,005     $    379,324          19.64 %
Cost of sales                                 1,562,252       1,282,555          279,697          21.81 %
Gross profit                                    748,077         648,450           99,627          15.36 %
Sales & marketing                                51,330          43,182            8,148          18.87 %
General & administrative                      1,648,016         986,138          661,878          67.12 %
Loss of impairment of asset                      15,000               -           15,000         100.00 %
Loss from operations                           (966,269 )      (380,870 )       (585,399 )       153.70 %
Other income (expense)                         (162,098 )       (50,027 )       (112,071 )       224.02 %
Provision for taxation                                -               -                -            N/A
Net loss from continuing operations        $ (1,128,367 )   $  (430,897 )   $   (697,470 )       161.86 %

Revenues

Sales revenue increased by $379,324 to $2,310,329 for the year ended December 31, 2013 as compared to $1,931,005 for 2012, representing a 19.64% increase. The increase in revenue was mainly due to the increase of $454,779 by the artists' performances in promotional events for brands and institutional customers and $8,978 by artist-related merchandising and shared profit of intellectual property rights offset by the decrease of $84,433 by the artists' performances in TV shows.


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Cost of sales

Cost of sales increased by $279,697 to $1,562,252 for the year ended December 31, 2013 as compared to $1,282,555 for 2012, representing a 21.81% increase. The increase was mainly due to the increase of artist fee by $24,040, events promotion expenses by $151,798, agency fee by $36,146 and other direct cost by $67,713.

Gross margin

Gross margin increased by $99,627 to $748,077 for the year ended December 31, 2013 as compared to $648,450 for 2012, representing a 15.36% increase. The increase was mainly due to the increase of the institutional promotion events boost up the both of the revenue volume and gross margin.

Sales & marketing expenses

Sales & marketing expenses increased by $8,148 to $51,330 for the year ended December 31, 2013 as compared to $43,182 for 2012, representing an 18.87% increase. The increase was mainly due to the increase of 1.) Advertising expenses by $6,090 and 2.) Entertainment expenses by $12,034 offset by the decrease of travelling expenses by $9,976.

General and administrative

The following table summarizes general and administrative expenses during the year ended December 31, 2013 and 2012, and provides information regarding the dollar and percentage (increase) / decrease from the year ended December 31, 2012 to the year ended December 31, 2013.

                                                                          (Increase)
                                              2013           2012          decrease         %Change

Payroll cost                                   473,495       471,854             1,641          0.35 %
Rental expenses                                119,842       140,774           (20,932 )      (14.87 %)
Legal and professional fee                   1,007,548       334,255           673,293        201.43 %
Miscellaneous                                   47,131        39,255             7,876         20.06 %
                                             1,648,016       986,138           661,878         67.12 %

Payroll cost increased by $1,641 to $473,495 for the year ended December 31, 2013 as compared to $471,854 for 2012, representing a 0.35% increase. The payroll cost remained stable in both 2012 and 2013.

Rental expenses decreased by $20,932 to $119,842 for the year ended December 31, 2013 as compared to $140,774 for 2012, representing a 14.87% decrease. The decrease was mainly due to saving in closure of Beijing office in September 2012.

Legal and professional fee increased by $673,293 to $1,007,548 for the year ended December 31, 2013 as compared to $334,255 for 2012, representing a 201.43% increase. The increase was mainly due to an increase of 1) business development consultation fee by $653,900 2) legal consultation fee by $8,965 and 3) legal related disbursement by $10,428. During the year ended December 31, 2013, legal and professional fee included a non cash expenses totaling $833,900. The non cash expenses included business development consultation fee $653,900, legal consultation fee $40,000 and investor relationship expenses $140,000.

Miscellaneous expenses increased by $7,876 to $47,131 for the year ended December 31, 2013 as compared to $39,255 for 2012, representing a 20.06% increase. The increase was mainly due to the increase of accounts receivable written off by $6,434 and the other general expenses by $1,442 in aggregate. Net loss from continuing operations

Net loss from continuing operations increased by $697,470 to a net loss of $1,128,367 for the year ended December 31, 2013 as compared to $430,807 for 2012.

Liquidity and Capital Resources

Cash

Our cash balance as of December 31, 2013 was $640,383, representing an increase of $465,722 as compared to $174,661as of December 31, 2012.

Cash flow

Operating Activities

Net cash provided by operating activities for the year ended December 31, 2013 amounted to $22,876 compared to net cash used in $108,988 in the same period of 2012. The change of $131,874 was mainly due to an increase of 1.) accrued expenses and other payables by $183,585, 2.) accrued interest expense of convertible notes by $29,168 and, 3.) prepaid expense by $4,940, offset the increase of accounts receivable by $87,866.


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Investing Activities

Net cash used in investing activities for the year ended December 31, 2013 amounted to $85,760 compared to net cash used in investing activities of $0 for 2012. The change of $85,760 was primarily due to the purchase of other asset by $115,380 offset re repayment of short-term loan receivable by $29,620.

Financing Activities

Net cash provided by financing activities for the year ended December 31, 2013 amounted to $528,606 compared to net cash provided by financing activities of $54,837 for 2012. The change of $473,767 was mainly due to an increase in settlement of subscription receivable $474,350 offset the decrease of net proceeds from convertible notes $6,540.

Working capital

Our net asset increased by $1,100,270 to $607,998 as of December 31, 2013 from net current liabilities of $492,272 as of December 31, 2012.

As of December 31, 2013 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.

Results of Discontinued Operations - Year Ended December 31, 2013, as Compared to Year Ended December 31, 2013.

The following table summarizes the results of our discontinued operations during the year ended December 31, 2013 and 2012, and provides information regarding the dollar and percentage increase or (decrease) from the year ended December 31, 2012 to the year ended December 31, 2013.

                                                                            Increase
                                              2013           2012          (decrease)       % Change
Revenue
GCM                                           524,020       2,238,117        (1,714,097 )      (76.59 %)
GCG                                                 -         643,473          (643,473 )     (100.00 %)
                                              524,020       2,881,590        (2,357,570 )      (81.81 %)
Cost of sales
GCM                                           497,389       1,475,726          (978,337 )      (66.30 %)
GCG                                                 -         593,818          (593,818 )     (100.00 %)
                                              497,389       2,069,544        (1,572,155 )      (75.97 %)
Gross profit
GCM                                            26,631         762,391          (735,760 )      (96.51 %)
GCG                                                 -          49,655           (49,655 )     (100.00 %)
                                               26,631         812,046          (785,415 )      (96.72 %)
General & administrative                      501,571         913,409          (411,838 )      (45.09 %)
Loss from operations                         (474,940 )      (101,363 )        (373,577 )      368.55 %
Other income (expense)                         (2,304 )        (2,227 )             (77 )        3.46 %
Provision for taxation                              -               -                 -           N/A

Net (loss)/income from continuing operations

GCM                                          (473,153 )       (51,730 )        (421,423 )      814.66 %
GCG                                            (4,091 )       (51,860 )          47,769        (92.13 %)

$ (477,244 ) $ (103,590 ) $ (373,654 ) 360.30 %


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Revenues

Revenues decreased by $2,357,570 to $524,020 for the year ended December 31, 2013 as compared to $2,881,590 for 2012. The decreases were mainly due to the decrease in revenue from GCM and GCG operations.

Sales revenue of GCM decreased by $1,714,097 to $524,020 for the year ended December 31, 2013 as compared to$2,238,117 for 2012, representing a 76.59% decrease. The decrease in revenue was mainly due to the fact that GCM disposed on May 6 2013 and therefore there was only 4 months figure in 2013 as compared to 12 months figure in 2012.

Sales revenue of GCG decreased by $643,473 to $0 for the year ended December 31, 2013 as compared to $643,473 for 2012, representing a 100.00% decrease. The decrease in revenue was mainly due to the closure of retail shop in December 2012.

Cost of sales

Cost of sales decreased by $1,572,155 to $497,389 for the year ended December 31, 2013 as compared to $2,069,544 for 2012. The increase was mainly due to the decreases in cost of sales from GCM and GCG operations.

Cost of sales of GCM decreased by $978,337 to $497,389 for the year ended December 31, 2012 as compared to$1,475,726 for 2012, representing a 66.30% decrease. The decrease was mainly due to the fact that GCM was disposed on May 6 2013 and therefore there was only 4 month cost of sales in 2013 as compared to 12 months figure in 2012.

Cost of sales of GCG decreased by $593,818 to $0 for the year ended December 31, 2013 as compared to $593,818 for 2012, representing a 100.00% decrease. The decrease in cost of sales was mainly due to the closure of retail shop in December 2012.

Gross margin

Gross margin increased by $785,415 to $26,631 for the year ended December 31, 2013 as compared to $812,046 for 2012. The increases were mainly due to decreases of gross margin from GCM and GCG operations.

Gross margin of GCM decreased by $735,760 to $26,631 for the year ended December 31, 2013 as compared to $762,391 for 2012, representing a 96.51% decrease. The decrease was mainly due to the fact that GCM was disposed on May 6 2013 and therefore there was only 4 month gross margin in 2013 as compared to 12 months figure in 2012.

Gross margin of GCG decreased by $49,655 to $0 for the year ended December 31, 2013 as compared to $49,655 for 2012, representing a 100.00% decrease. The decrease was mainly due to the closure of retail shop in December 2012.

General and administrative

The following table summarizes general and administrative expenses during the year ended December 31, 2013 and 2012, and provides information regarding the dollar and percentage (increase) / decrease from the year ended December 31, 2012 to the year ended December 31, 2013.

                                2013          2012         (Increase) decrease      %Change

 Payroll cost                   463,001       719,992                  (256,991 )     (35.69 %)
 Rental expenses                 25,640       127,338                  (101,698 )     (79.86 %)
 Legal and professional fee         212         2,050                    (1,838 )     (89.66 %)
 Miscellaneous                   12,718        64,029                   (51,311 )     (80.13 %)
                                501,571       913,409                  (411,838 )     (45.09 %)

Payroll cost decreased by $256,991 to $463,001 for the year ended December 31, 2013 as compared to $719,992 for 2012, representing a 35.69% decrease. The decrease was mainly due to the fact that GCM and GCG disposed on May 6 2013 and 23 April 2013 respectively therefore there was only 4 month payroll cost in 2013 as compared to 12 months figure in 2012.

Rental expenses decreased by $101,698 to $25,640 for the year ended December 31, 2013 as compared to $127,338 for 2012, representing a 79.86% decrease. The decrease was mainly due to the fact that GCM and GCG were disposed on May 6 2013 and April 23 2013 respectively therefore there was only 4 month rental expense in 2013 as compared to 12 months figure in 2012.

Miscellaneous expenses increased by $55,765 to $12,718 for the year ended December 31, 2013 as compared to $64,029 for 2012, representing a 80.13% decrease. The decrease was mainly due to the fact that GCM and GCG were disposed on May 6 2013 and April 23 2013 respectively therefore there was only 4 month miscellaneous expense in 2013 as compared to 12 months figure in 2012.


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Net loss from discontinued operations

Net loss from discontinued operations decreased by $373,564 to a net loss of $477,244 for the year ended December 31, 2013 as compared to $103,590 for 2012.

Off-Balance Sheet Arrangements

We do not have any off balance sheet arrangements

Inflation

Inflation has not had a material impact on our business and we do not expect inflation to have an impact on our business in the near future.

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