10-Q 1 gmec10q09302014.htm 10-Q gmec10q09302014.htm


UNITED STATES
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 September 30, 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)


Florida
 
59-2318378
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)

Room 1902, 19/F., Kodak House II,
   
321 Java Road, Hong Kong
 
n/a
(Address of principal executive offices)
 
(Zip Code)

(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 o No x

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.

Large accelerated filer   £
Accelerated filer £
Non-accelerated filer  £ (Do not check if a smaller reporting company)
Smaller reporting company  T

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

The number of shares of Common Stock, $0.01 par value, outstanding on November 11, 2014 was 26,433,094.

 
 

 
 

TABLE OF CONTENTS


 
 
 
 
   
   





ITEM 1. FINANCIAL STATEMENTS

GREAT CHINA MANIA HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

   
September 30, 2014 (Unaudited)
   
December 31, 2013
(Audited)
 
ASSETS
           
CURRENT ASSETS
           
Cash and cash equivalents
  $ 432,548     $ 640,383  
Accounts receivable
    259,793       288,195  
Short term loan receivable
    114,195       113,883  
Prepaid expenses and other receivables
    335,738       185,235  
Assets held for disposal
    -       495,000  
                 
Total current assets
    1,142,274       1,722,696  
Property, plant and equipment
    -       -  
Intangible asset
    170,000       -  
Other assets
    115,380       115,380  
                 
TOTAL ASSETS
  $ 1,427,654     $ 1,838,076  
                 
LIABILITIES AND EQUITY
               
LIABILITIES
               
CURRENT LIABILITIES
               
Accounts payable
    428,091       759,126  
Accrued expenses and other payables
    2,514       183,874  
Unearned revenue
    496,765       123,648  
Short-term borrowings
    115,447       64,079  
Convertible note payable
    88,333       99,351  
Total current liabilities
    1,131,150       1,230,078  
                 
LONG-TERM LIABILITIES
               
Long-term Convertible note
    31,301       31,301  
      31,301       31,301  
                 
TOTAL LIABILITIES
  $ 1,162,451     $ 1,261,379  
                 
SHAREHOLDERS’ EQUITY
               
Common stock, par value $0.01; 375,000,000 shares authorized; 25,974,317 and 5,619,926 shares issued and outstanding as of September 30, 2014 and December 31, 2013, respectively
    259,743       56,199  
Additional paid in capital
    9,484,643       9,909,359  
Accumulated deficits
    (9,480,675 )     (9,390,353 )
Accumulated other comprehensive income
    1,492       1,492  
                 
TOTAL SHAREHOLDERS’ EQUITY
    265,203       576,697  
                 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
  $ 1,427,654     $ 1,838,076  
                 
See accompanying notes to condensed consolidated financial statements.



CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (UNAUDITED)

   
Three months ended
September 30,
   
Nine months ended
September 30,
 
   
2014
   
2013
   
2014
   
2013
 
CONTINUING OPERATIONS
                       
REVENUES
  $ 571,270     $ 470,279     $ 1,390,900     $ 1,455,059  
                                 
COST OF SALES
    400,988       338,243       899,125       924,716  
                                 
GROSS PROFIT
    170,282       132,036       491,775       530,343  
                                 
EXPENSES
                               
Sales & marketing expenses
    10,748       7,828       32,999       29,657  
General and administrative
    182,549       604,448       565,888       1,342,300  
TOTAL OPERATING EXPENSES
    193,297       612,276       598,887       1,371,957  
                                 
LOSS FROM CONTINUING OPERATIONS BEFORE PROVISION FOR INCOME TAXES
    (23,015 )     (480,240 )     (107,112 )     (841,614 )
                                 
OTHER INCOME/(EXPENSE)
                               
Other income
    19,192       3,588       31,158       8,781  
Interest expense
    -       (32,795 )     -       (98,517 )
Other expenses
    (2,131 )     (70,296 )     (14,368 )     (84,276 )
TOTAL OTHER EXPENSE
    17,061       (99,503 )     16,790       (174,012 )
                                 
NET LOSS BEFORE PROVISION FOR INCOME TAXES
    (5,954 )     (579,743 )     (90,322 )     (1,015,626 )
                                 
PROVISION FOR INCOME TAXES
    -       -       -       -  
                                 
NET LOSS FROM CONTINUING OPERATIONS
  $ (5,954 )   $ (579,743 )   $ (90,322 )   $ (1,015,626 )
                                 
DISCONTINUED OPERATIONS
                               
Net loss
    -       -       -       (501,965 )
Gain on disposal of discontinued operations
    -       -       -       697,649  
                                 
NET INCOME / (LOSS) FROM DISCONTINUED OPERATIONS
  $ -     $ -     $ -     $ 195,684  
                                 
NET INCOME/ (LOSS) FOR THE PERIOD
  $ (5,954 )   $ (579,743 )   $ (90,322 )   $ (819,942 )
                                 
OTHER COMPREHENSIVE INCOME
    -       -       -       -  
                                 
TOTAL COMPREHENSIVE INCOME / (LOSS) FOR THE PERIOD
                               
Arising from continuing operations
    (5,954 )     (579,743 )     (90,322 )     (1,015,626 )
Arising from discontinued operations
    -       -       -       195,684  
    $ (5,954 )   $ $(579,743 )   $ (90,322 )   $ (819,942 )
LOSS PER SHARE, BASIC AND DILUTED – CONTINUING OPERATIONS
  $ 0.00     $ (0.11 )   $ (0.00 )     (0.24 )
                                 
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING, BASIC AND DILUTED
    25,878,660       4,572,250       24,559,306       4,327,951  
                                 
See accompanying notes to condensed consolidated financial statements.


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

   
For the nine months ended September 30,
 
   
2014
   
2013
 
Cash flows from operating activities
           
Net loss from continuing operations
  $ (90,322 )   $ (1,015,626 )
Amortization of discount on Convertible Note
    -       66,936  
Accrued interest expense
    -       31,581  
Amortization of intangible asset
    30,000       -  
Net gain on asset hold for disposal
    (5,000 )     -  
Gain on conversion of debt notes into shares
    (11,018 )     -  
Share based payments
    -       762,363  
Changes in operating assets and liabilities:
               
Decrease / (Increase) in accounts receivable
    28,402       (118,241 )
Increase in prepaid expenses and other receivables
    (150,503 )     (173,302 )
(Decrease) / Increase in accounts payable
    (331,035 )     211,277  
Increase in unearned revenue
    373,117       120,869  
(Decrease) / Increase in accrued expenses and other payables
    (181,359 )     87,931  
Net cash (used in)/provided by continuing operating activities
    (337,718 )     (26,212 )
Net cash used in discontinued operating activities
    -       (370,745 )
Net cash (used in) / provided by operating activities
    (337,718 )     (396,957 )
                 
Cash flows from investing activities
               
Net cash used in continuing investing activities
    -       -  
Net cash used in discontinued investing activities
    -       (1,282 )
Net cash used in investing activities
    -       (1,282 )
                 
Cash flows from financing activities
               
Decrease in subscription receivable
    -       445,077  
Advance from short-term borrowings
    114,463       57,690  
Advance to short-term loan receivable
    (312 )     -  
Issuance of shares capital
    15,732       -  
Issuance of convertible note
    -       100,000  
Repayment of convertible note
    -       (125,859 )
Net cash provided by / (used in) continuing financing activities
    129,883       476,908  
Net cash provided by / (used in) discontinued financing activities
    -       327,915  
Net cash provided by / (used in) financing activities
    129,883       804,823  
                 
Net increase / (decrease) in cash and cash equivalents
               
Continuing operations
    (207,835 )     450,696  
Discontinued operations
    -       (44,112 )
      (207,835 )     406,584  
Cash and cash equivalents at beginning of period
               
Continuing operations
    640,383       174,661  
Discontinued operations
    -       44,112  
      640,383       218,773  
Cash and cash equivalents at end of period
               
Continuing operations
    432,548       625,357  
Discontinued operations
    -       -  
    $ 432,548     $ 625,357  
Supplemental disclosure of cash flows information:
               
Non cash financing activities:
               
Conversion of debt to shares
  $ 63,096     $ 136,380  
Shares cancelled for disposal of an subsidiary
    -       (54,000 )
Shares cancelled for disposal of asset
    (500,000 )     -  
Issuance of shares for acquisition of asset
    200,000       -  

See accompanying notes to condensed consolidated financial statements.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2014

NOTE 1 – ORGANIZATION AND PRINCIPAL ACTIVITIES

Great China Mania Holdings, Inc. (“GMEC” or the “Company”) was incorporated in Florida on July 8, 1983 and adopted the current name on March 16, 2011. In February 2011, the Company formed a subsidiary GME Holdings Limited (“GMEH”) that specialized in artist and event management services operation. In June 2011, the Company formed another subsidiary GMEC Ventures Limited (“GMEV”), a Hong Kong company, and maintained for holding future investment if any. In January 2014, the Company formed another subsidiary GME Distribution Workshop Limited (“GMED”), a Hong Kong company, to manage and maintain the movie-related business. The Company held those subsidiaries though a wholly-owned BVI companies known as Super China Global Limited (SCGL).

On May 21, 2014, the Company signed  a letter of intent with Concept X Limited (“Concept X”) for the proposed acquisition of its 100% equity interest. On September 2, 2014, the Company has entered into a definitive material agreement with Concept X for the acquisition of 100% of the issued and outstanding shares of the company. The closing of the Agreement is subject to the following closing conditions: (1) Due diligence review; (2) all existing unsettled loans and debts of Concept X will be transferred to a third party; (3) cancel all payables and loans owed to shareholder and shareholder’s affiliate; and (4) the shareholder of Concept X assumes the liabilities of the net trade payables as of the date of completion of acquisition.

On October 8, 2014, GMEC entered into a shareholder agreement with an individual, to form two joint venture subsidiaries in Malaysia and Hong Kong in the field of film casting, model management, model scouting and event management.  As of the date of the filing of this quarterly report the joint ventures have not been established.

On October 14, 2014, GMEC entered into a shareholder agreement with an individual to form two joint venture subsidiaries in Shanghai and Sydney in the field of model management, model scouting and event management.  As of the date of the filing of this quarterly report the joint ventures have not been established.

NOTE 2 – PRINCIPLES OF CONSOLIDATION

The unaudited interim financial statements of the Company and the Company’s subsidiaries (see Note 1) for the three and nine months ended September 30, 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 and nine months ended September 30, 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 September 30, 2014, the results of its operations and cash flows for the three and nine months ended for September 30, 2014 and 2013.

The results of operations for the three and nine months ended September 30, 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.

NOTE 3– SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a)           Economic and political risk

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 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.

(b)           Cash and cash equivalents



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 September 30, 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)           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

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.

(f)           Earnings per share

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 September 30, 2014 and 2013, there were 469,856 shares and 0 shares of dilutive securities outstanding separately.



(g)           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.

(h)           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.

(i)           Foreign currency translation

The accompanying consolidated financial statements are presented in United States Dollars (US$). The functional currency of the Company is Hong Kong Dollar (HKD). Capital accounts of the consolidated financial statements are translated into United States dollars 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:

   
September 30,2014
   
December 31, 2013
   
September 30,2013
 
                   
Period end HKD : US$ exchange rate
    0.1282       0.1282       0.1282  
Average for the period HKD : US$ exchange rate
    0.1282       0.1282       0.1282  

(j)           Recent accounting pronouncements

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 September 30, 2014 through the date these financial statements were issued.

NOTE 4 – SHORT-TERM LOAN RECEIVABLE

As of September 30, 2014, the short term loan to a third party is bearing interest at 6% per annum with no fixed payment terms. Interest income in conjunction with this short term loan for the nine months ended September 30, 2014 and 2013 was $4,246 and $4,769, respectively.

NOTE 5 – DEPOSITS, PREPAID EXPENSES AND OTHER RECEIVABLES

As of September 30, 2014, the Company’s deposits, prepaid expenses and other receivables are summarized as follows:
   
September 30, 2014
 
December 31, 2013
   
           
Prepaid expenses
    249,862       108,779  
Other receivables
    83,270       70,665  
Deposits paid
    2,606       5,791  
Total deposits, prepaid expenses and other receivables
  $ 335,738     $ 185,235  

The Company evaluates the amounts recorded as prepaid expenses on a periodic basis and records a charge to the current operations of the Company when the related expense has been incurred.

NOTE 6 – PROPERTY, PLANT AND EQUIPMENT

As of September 30, 2014, the Company’s property, plant and equipment are summarized as follows:



   
September 30, 2014
   
December 31, 2013
 
At cost:
           
Computer
    9,989       9,989  
Less: Accumulated depreciation
    9,989       9,989  
Property, plant and equipment, net
  $ -     $ -  

No depreciation expense attributable to the property, plant and equipment of both continuing operations and discontinued operations for the nine months ended September 30, 2014 and 2013 respectively.

NOTE 7 – INTANGIBLE ASSET

As of September 30, 2014, the Company’s intangible asset is summarized as follows:

   
September 30, 2014
   
December 31, 2013
 
At cost:
           
Movie and entertainment distribution agreements
    200,000       -  
Less: Accumulated amortization
    (30,000 )     -  
Intangible asset, net
  $ 170,000     $ -  

On January 14, 2014, the Company purchased certain overseas movie and entertainment distribution agreements with a consideration of 20,000,000 shares of restricted common stock to a non affiliate individual. This contractual interest stated at par value of $0.01 and valued at $200,000. No impairment loss was recognized for the nine months ended September 30, 2014. Amortization expense attributable to the intangible asset of continuing operations for the nine months ended September 30, 2014 and 2013 was $30,000 and $0 respectively.

NOTE 8 – OTHER ASSET

The Company acquired a 4.5% entity interest of a restaurant that operated in Hong Kong by a non affiliate corporation with a cash consideration of $115,380 on September 25, 2013. This entity interest stated at cost and no impairment losses was recognized for the nine months ended September 30, 2014.

NOTE 9 – ASSET HOLD FOR DISPOSAL

On June 25, 2013, the Company cancelled 500,000 shares of the Company common stock from a non affiliate shareholder to reverse a licensing right granted. A gain of $5,000 was recorded for the nine month ended September 30, 2014.

NOTE 10 – SHORT TERM BORROWINGS

The short-term borrowings are unsecured, interest free advances from a non affiliate individual with no fixed repayment term. During the reporting period, this individual converted a portion of the short term borrowings of $63,096 into 630,960 shares of Company’s common stock.

NOTE 11 – UNEARNED REVENUE

As of September 30, 2014, the Company’s unearned revenue is summarized as follows:

   
September 30, 2014
 
December 31, 2013
   
           
Receipt in advance for future artist performance
    494,097       113,425  
Presales of artist related merchandise
    2,668       10,223  
Total unearned revenue
  $ 496,765     $ 123,648  

No amortization expense attributable to the unearned revenue of continuing operations for the nine months ended September 30, 2014 and 2013 respectively.
 

 
NOTE 12 – 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 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 April 22, 2013, the Company issued another 12% convertible note in the amount of $50,000 (“Note 6”) to Holder 3. Note 6 matured 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 September 30, 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 nine months ended September 30, 2014, the amortization of debt discount of $0 was charged to Statement of Operations. Accrued interest expense of Note 6 for the nine months ended September 30, 2014 was $0. As of September 30, 2014, Note 6 qualified to be converted 469,856 shares of common stock under the conditions of Note 6 and is therefore dilutive.

Total interest expense in connection with other fully repaid convertible notes for the nine months ended September 30, 2014 and 2013 were $0 and $27,865 respectively.

The convertible notes as of the balance sheet date are summarized as follows:

   
September 30, 2014
   
December 31, 2013
 
Noncurrent liabilities:
           
Non-interest bearing convertible note
  $ 31,301     $ 31,301  
                 
Current liabilities:
               
12% convertible note 5, net
    -       11,018  
12% convertible note 6, net (including fair value adjustment on option $ 35,333, accrued interest expense $3,000)
    88,333       88,333  
      88,333       99,351  
                 
Total note outstanding
  $ 119,634     $ 130,652  

NOTE 13 – 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 valued $200,000 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.

On June 25, 2014, the Company cancelled 500,000 shares of common stock from a non affiliate shareholder in exchange of an asset held for disposal.

On July 7, 2014 the Company converted $63,096 short term borrowings into 630,960 shares of common stock of the Company.

On August 8, 2014 the Company issued 150,000 shares of common stock at the par value of $0.01 for a cash consideration of $15,000.
 
 

The calculation of common stock as at September 30, 2014 and weighted average number of shares for the nine months ended September 30, 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       93  
Issuance of share on January 12, 2014 for cash consideration of $397
    39,721       38,121  
Issuance of share on January 17, 2014 for pursuant to a sales and purchase agreement
    20,000,000       18,827,839  
Issuance of share on March 17, 2014 for cash consideration of $335
    33,615       24,380  
Forfeiture of shares on June 25, 2014 for disposal of asset
    (500,000 )     (179,487 )
Issuance of share on July 7, 2014 for debt conversion
    630,960       198,764  
Issuance of share on August 8, 2014 for cash consideration of $15,000
    150,000       29,670  
                 
Issued and outstanding as of September 30, 2014
    25,974,317       24,559,306  

NOTE 14 – INTEREST EXPENSE

Interest expense for the nine months ended September 30, 2014 and 2013 are summarized as follows:

   
2014
   
2013
 
             
Amortization on discount of convertible note
  $ -     $ 66,936  
Accrued interest on convertible note
    -       31,581  
Total
  $ -     $ 98,517  

NOTE 15 – CONTINGENCIES AND COMMITMENTS

At September 30, 2014, the expected annual lease payments under the Company and its subsidiaries’ operating leases are as follows:

       
For the year ended December 31,
     
2014
    24,141  
2015
    96,564  
Total
    120,705  

NOTE 16- GOING CONCERN

As of September 30, 2014 the Company has accumulated deficits of $9,480,675 a positive working capital of $11,124, and also recorded a net loss from the continuing operations of $90,322 for the nine months then ended.

As of September 30, 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 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.

NOTE 17 –SUBSEQUENT EVENTS

On October 8, 2014, the Company entered into a shareholder agreement with an individual to form two joint venture subsidiaries in Malaysia and Hong Kong in the field of film casting, models management, models scouting and event management.

On October 14, 2014, the Company entered into a shareholder agreement with another individual to form two joint venture subsidiaries in Shanghai and Sydney in the field of models management, models scouting and event management.

On October 22, 2014 the Company converted $41,290 short term borrowings into 458,777 shares of common stock of the Company.



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.

Our estimate of the reliability of the deferred tax assets will change as the Company becomes more profitable.



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, 2014 as Compared to Three Months Ended September 30, 2013.

The following table summarizes the results of our continuing operations during the three-month period ended September 30, 2014 and 2013, and provides information regarding the dollar and percentage increase / (decrease) from the three-month period ended September 30, 2013 to the three-month period ended September 30, 2014.
 
   
Three months ended September 30,
             
    2013    
Increase / (decrease)
   
% Change
 
Revenue
  $ 571,270     $ 470,279     $ 100,991       21.47 %
Cost of sales
    400,988       338,243       62,745       18.55 %
Gross profit
    170,282       132,036       38,246       28.97 %
Sales & marketing
    10,748       7,828       2,920       37.30 %
General & administrative
    182,549       604,448       (423,513 )     (69.80 %)
Loss from operations
    (23,015 )     (480,240 )     457,225       95.21 %
Other expense
    17,061       (99,503 )     116,564       117.15 %
Income tax expenses
    -       -       -       N/A  
Net income/(loss) from continuing operations
  $ (5,954 )   $ (579,743 )   $ 573,789       98.97 %

Revenues

Revenues increased by $100,991 to $571,270 for the three months ended September 30, 2014 as compared to $470,279 for the same period in 2013, representing a 21.47% increase. The increase in revenue was mainly due to 1.) the increase of $76,920 generated by a new sales contract, and 2.) the increase of $24,071 due to the volume increase of overseas artists’ performance.

Cost of sales

Cost of sales increased by $ 62,745 to $400,988 for the three months ended September 30, 2014 as compared to $338,243 for the same period in 2013, representing a 18.55% increase. The increases were mainly due to the increase of artist fee by $63,593 and other direct cost by $7,833 in aggregate offset by the decrease of referral fee by $8,681.

Gross margin

Gross margin increased by $38,246 to $170,282 for the three months ended September 30, 2014 as compared to $132,036 for the same period in 2013, representing a 28.97% increase. The increase was mainly due to 1.) the increase of the revenue by $100,991, and 2.) the decrease of referral fee by $8,681 offset by 3.) the increase of artist fee by $63,593 and 4.) other direct cost by $7,833 in aggregate in the same period.

Sales & marketing expenses

Sales & marketing expenses increased by $2,920 to $10,478 for the three months ended September 30, 2014 as compared to $7,828 for the same period in 2013. The increase was mainly due to the increase of advertising expenses by $6,964 offset by the decrease of other sales & marketing expenses by $4,044 in aggregate.

General and administrative

The following table summarizes general and administrative expenses during the three-month period ended September 30, 2014 and 2013, and provides information regarding the dollar and percentage increase / (decrease) from the three-month period ended September 30, 2013 to the three-month period ended September 30, 2014.
 
   
Three months ended September 30,
             
   
2014
   
2013
   
Increase (decrease)
   
% Change
 
                         
Payroll cost
    109,364       111,070       (1,706 )     (1.54 %)
Rental expenses
    27,698       30,843       (3,145 )     (10.20 %)
Legal and professional fee
    31,284       459,122       (427,838 )     (93.19 %)
Miscellaneous
    14,203       3,413       10,790       316.14 %
      182,549       604,448       (421,899 )     (69.80 %)

 
 
 
Payroll cost decreased by $1,706 to $109,364 for the three months ended September 30, 2014 as compared to $111,070 for the same period in 2013, representing a 1.54% decrease. The decrease was mainly due to the decrease of number of staffs during the period.

Rental expenses decreased by $3,145 to $27,698 for the three months ended September 30, 2014 as compared to $30,843 for the same period in 2013, representing a 10.20% decrease. The decrease was mainly due to rent saved by the relocation of Guangzhou office in December 2013.

Legal and professional fee decreased by $427,838 to $31,284 for the three months ended September 30, 2014 as compared to $459,122 for the same period in 2013, representing a 93.19% decrease. The decrease was mainly due to the saving of 1.) a business development consultation fee by $356,368, 2.) a legal consultation fee by $31,225, 3.) legal cost relating to convertible note by $5,000, and 4.) press release expenses by $42,775 offset by the increase of legal related disbursement by $7,530 in aggregate.

Miscellaneous expenses increased by $10,790 to $14,203 for the three months ended September 30, 2014 as compared to $3,413 for the same period in 2013, representing a 316.14% increase. The increase was mainly due to the increase of amortization expense $10,000 and all other expenses of $790 in aggregate.

Net income / (loss) from continuing operations

Net income from continuing operations decreased by $573,789 to a net loss of $5,954 for the three months ended September 30, 2014 as compared to a net loss of $579,743 for the same period in 2013.

Results of Continuing Operations – Nine months Ended September 30, 2014 as Compared to Nine months Ended September 30, 2013.

The following table summarizes the results of our continuing operations during the nine-month period ended September 30, 2014 and 2013, and provides information regarding the dollar and percentage increase / (decrease) from the nine-month period ended September 30, 2013 to the nine-month period ended September 30, 2014.
 
   
Nine months ended September 30,
             
   
2014
   
2013
   
Increase (decrease)
   
% Change
 
                         
Revenue
  $ 1,390,900     $ 1,455,059     $ (64,159 )     (4.41 %)
Cost of sales
    899,125       924,716       (25,591 )     (2.77 %)
Gross profit
    491,775       530,343       (38,568 )     (7.27 %)
Sales & marketing
    32,999       29,657       3,342       11.27 %
General & administrative
    565,888       1,342,300       (776,412 )     (57.84 %)
Loss from operations
    (107,112 )     (841,614 )     734,502       87.27 %
Other income (expense)
    16,790       (174,012 )     190,802       109.65 %
Provision for taxation
    -       -       -       N/A  
Net income/(loss) from continuing operations
  $ (90,322 )   $ (1,015,626 )   $ 925,304       91.11 %
 
Revenues

Revenues decreased by $64,159 to $1,390,900 for the nine months ended September 30, 2014 as compared to $1,455,059 for the same period in 2013. The decrease in revenue was mainly due to the loss of a material sales contract values $120,312 in the second quarter of 2014 and the decrease of overseas promotion events revenue by $20,767 in aggregate offset by a new sales contract values $76,920 closed in the third quarter 2014.

Cost of sales

Cost of sales decreased by $25,591 to $899,125 for the nine months ended September 30, 2014 as compared to $924,716 for the same period in 2013.The decrease of cost of sales was mainly due to the increase of referral fee and other direct cost by $3,236 and $27,838 separately offset by the decrease of artist fee by $56,665.



Gross margin

Gross margin increased by $38,568 to $491,775 for the nine months ended September 30, 2014 as compared to $530,343 for the same period in 2013. The increase of gross margin was mainly due to the decrease of artist fee by $56,665 offset by 1.) the decrease of revenue by $64,159, 2.) the increase of referral fee by $3,236 and 3.) the increase of other direct cost by $27,838 in aggregate in the same period.

Sales & marketing expenses

Sales & marketing expenses increased by $3,342 to $32,999 for the nine months ended September 30, 2014 as compared to $29,657 for the same period in 2013. The increase was mainly due to the increase of advertising expenses by $22,083 offset by the decrease of other sales & marketing expenses by $19,284 in aggregate.

General and administrative

The following table summarizes general and administrative expenses during the nine-month period ended September 30, 2014 and 2013, and provides information regarding the dollar and percentage increase / (decrease) from the nine-month period ended September 30, 2013 to the nine-month period ended September 30, 2014.
 
   
Nine months ended
September 30,
             
   
2014
   
2013
   
Increase (decrease)
   
% Change
 
                         
Payroll cost
    383,938       357,497       26,441       7.40 %
Rental expenses
    79,429       89,867       (10,438 )     (11.61 %)
Legal and professional fee
    52,589       875,861       (823,272 )     (94.00 %)
Miscellaneous
    49,932       19,075       30,857       161.77 %
      565,888       1,342,300       (776,412 )     (57.84 %)

Payroll cost increased by $26,441 to $383,938 for the nine months ended September 30, 2014 as compared to $357,497 for the same period in 2013, representing a 7.40% increase. The increase was mainly due to the salary adjustment of employees newly recruited in the first quarter of 2014.

Rental expenses decreased by $10,438 to $79,429 for nine months ended September 30, 2014 as compared to $89,867 for the same period in 2013, representing a % decrease. The decrease was mainly due to rent saved by the relocation of Guangzhou office in December 2013.

Legal and professional fee decreased by $823,272 to $52,589 for the nine months ended September 30, 2014 as compared to $875,861 for the same period in 2013, representing a 94.00% decrease. The decrease was mainly due to the savings of: 1.) business development consultation fee by $662,368 2.) transfer agency expenses by $1,717, 3.) legal consultation fee by $52,594, 4.) press releasing expenses by $98,061 and 5.) legal related disbursement by $8,532 in aggregate.

Miscellaneous expenses increased by $30,857 to $49,932 for the nine months ended September 30, 2014 as compared to $19,075 for the same period in 2013, representing a 161.77% increase. The increase was mainly due to the increase of amortization expense $30,000 and all other expenses of $857 in aggregate.

Net loss from continuing operations

Net loss from continuing operations decreased by $925,304 to a net loss of $90,322 for the nine months ended September 30, 2014 as compared to $1,015,626 for the same period in 2013.

Liquidity and Capital Resources

Cash

Our cash balance as of September 30, 2014 was $432,548 representing a decrease of $192,809 as compared to $640,383 as of December 31, 2013.

Cash flow

Operating Activities


Net cash used in operating activities for the nine months ended September 30, 2014 amounted to $337,718 compared to net cash provided by operating activities of $26,212 in the same period of 2013. The change of $311,506 was mainly due to: 1.) a decrease of $925,304 in net loss, 2.) $30,000 in amortization expenses, 3.) an increase of $146,643 in trade and other receivable and 4.) an increase of $252,248 in unearned revenue offset by 5.) $5,000 in gain on disposal of asset, 6.) a decrease of $31,581 in net interest payable, 7.) a decrease of $66,936 in amortization of discount on convertible notes, 8.) a decrease of $762,363 in share based payment, and 9.) a decrease of $811,602 in trade and other payable.

Financing Activities

Net cash provided by financing activities for the nine months ended September 30, 2014 amounted to $129,883 compared to $476,908 for the same period of 2013. The change of $347,025 was primarily due to the net proceeds from the short term borrowing $56,416 and the issuance of 223,336 shares by $15,732 for the nine months ended September 30, 2014 in compared to the net proceeds from convertible loan $100,000 and subscription receivable by $445,077 offset by the net repayment of short term borrowing $125,859 in the same period of 2013.

Working capital

Our working capital decreased by $481,494 to $11,124 as of September 30, 2014 as compared to $492,618 as of December 31, 2013 .

As of September 30, 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 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.

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 nine months ended September 30, 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 U.S. dollar would adversely affect our business, consolidated financial condition and results of operations. We do not engage in currency hedging.


This item is not applicable as we are currently considered a smaller reporting company.


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 September 30, 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.


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 September 30, 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.





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.


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 valued $200,000 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.

On June 25, 2014, the Company cancelled 500,000 shares of common stock from a non affiliate shareholder in exchange of an asset held for disposal.

On July 7, 2014 the Company converted $63,095 short term borrowings into 630,960 shares of common stock of the Company.

On August 8, 2014 the Company issued 150,000 shares of common stock at the par value of $0.01 for a cash consideration of $15,000.

On October 22, 2014 the Company converted $41,290 short term borrowings into 458,777 shares of common stock of the Company.

Issuer Purchases of Equity Securities

None.


None.


Not applicable


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: November 11, 2014

By:           /S/ Kwong Kwan Yin Roy                                                                
Kwong Kwan Yin Roy
Chief Financial Officer

Date: November 11, 2014