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GMEC > SEC Filings for GMEC > Form 10-Q on 15-May-2014All Recent SEC Filings

Show all filings for GREAT CHINA MANIA HOLDINGS, INC.

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


15-May-2014

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", "$" and "US$" 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.


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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.

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.


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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.


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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.

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