Georgia Intl Mining (GREY:GIMC)

On November 17, 2011, PricewaterhouseCoopers Hong Kong (“PwC”) resigned as our independent registered public accounting firm.

Our Board of Directors had engaged PwC on December 1, 2010 to audit our financial statements for the fiscal year ended December 31, 2010. On March 28, 2011, by letter to our Chief Executive Officer, PwC advised us that it was unable to complete its audit work because it had encountered five issues that remained unresolved and that, in PwC’s view, prevented PwC from obtaining a full understanding of transactions carried out by us. The issues identified by PwC in its letter of March 28, 2011 were:

(1)  discrepancies in our VAT invoices and our VAT filings with tax authorities;
 
   
(2)  discrepancies in certain supporting documents for payments and receipts and in certain of our banking records;
 
   
(3)  inability to verify sales of finished goods through third party acknowledgement and inconsistencies in records of finished goods and raw materials inventories;
 
   
(4)  inconsistencies in pricing arrangements among us, export-import companies and overseas dealers; and
 
   
(5)  inability to verify the existence and valuation of certain items of property, plant, equipment and work-in-progress.
 

On March 31, 2011, Jinhao Motor Company (the “Company”) filed a Form 12b-25, Notification of Late Filing, pursuant to which it disclosed that it would be unable to timely file its Annual Report on Form 10-K for the year ended December 31, 2010 due to the fact that it has not completed the process of preparing and integrating its operating and financial information into financial statements for the fiscal year ended December 31, 2010. The Company stated that it anticipated that it would file its Form 10-K no later than the fifteenth calendar day following the prescribed due date, as permitted by Rule 12b-25 under the Securities Exchange Act of 1934, as amended (“Exchange Act Rule 12b-25”).

The Company has determined that it is unable to file its Annual Report on Form 10-K for the year ended December 31, 2010 within the grace period afforded by Exchange Act Rule 12b-25. The Company’s audit committee, which consists of two independent directors participating in the Company’s first annual reporting cycle since the Company’s reverse acquisition transaction in August 2010, is conducting an independent review of certain of the Company’s accounting policies and practices and related matters in order that the Company’s financial reporting be as complete and accurate as possible. The Company currently expects that this internal investigation will be completed, and its Form 10-K filed, within 30 days.

Third Quarter Financial Performance Highlights

• Revenue was $69.96 million for the three months ended September 30, 2010, an increase of $13.38 million, or 23.6%, from $56.58 for the same period last year.

• Gross profit was $18.04 million for the three months ended September 30, 2010, an increase of $4.30 million, or 31.3%, from $13.74 million for the same period last year.

•  Gross margin was 25.8% for the three months ended September 30, 2010 as compared to 24.3% for the same period last year, a 1.5% increase mainly due to increase in sales from the electric vehicle division, which has an average gross margin of 30%, compared to the motorcycle’s average gross margin of 25%.

• Net income was $11.88 million for the three months ended September 30, 2010, an increase of $4.87 million, or approximately 69.4%, from $7.01 million for the same period of last year.

• Basic and fully diluted net income per share was approximately $0.09 for the three months ended September 30, 2010, based on basic and diluted 54,857,640 common shares outstanding, as compared to approximately $0.37 for the same period last year

We intend to expand into the electric vehicle segment and we have launched our electric vehicle production line and delivered our first order in October 2009. We invested approximately $26 million in the research and development of electric vehicles, and have entered into exclusive patent license agreements for 2 patents to be used in our planned large scale production such vehicles. In addition, we have signed a sales agency agreement with six distributors across China, and overseas and have signed sales contracts with buyers from Spain, Finland, Italy, Chile and Thailand. We are also focused on developing distribution channels in the European Union and the United States

As we suspected, Jinhao Motor has gone public via a reverse merger transaction.

 Company Snapshot:

Engaged in the production and distribution of motorcycles and small engines to domestic and overseas markets. 

Industry Snapshot:

• The motorcycle industry is a highly competitive sector, both locally and internationally. Our motorcycles are sold to domestic and international markets, including in Southeast Asia, Africa, the Middle East, Central America and South America.
  
• According to a publication by Freedonia Research, World Motorcycles (including Electric Bicycles and Mopeds), published August 1, 2009, or the Freedonia Report, the global demand for motorcycles is forecast to rise 7.6% per year through 2013 to 114 million
  units.
  
• We believe that rising living standards in the developing world are making motorcycles a more affordable alternative to walking, bicycling and mass transit. Higher energy prices, along with a rebound in economic growth after the global recessionary that began in 2008, are also expected to contribute to motorcycle market gains in both developing and developed areas. According to the Freedonia Report, product sales are expected to expand at a slower pace in value terms, climbing 7.2% annually to $66.6 billion in 2013, because of an expected decline in sales-weighted prices. We expect that some offsetting support will be provided by the introduction of new models equipped with sophisticated emissions control systems and increased sales of machines with more features, boosting motorcycle dollar demand.
  
• According to the Freedonia Report, the strongest market advances through 2013 are expected to be registered by the African and Mideast regions. The Asia/Pacific region is expected to post the second strongest gains, followed by Eastern Europe (rising from a very small current market base) and Latin America. China alone is expected to account for 55% of all additional product demand through 2013, solidifying its position as the biggest national market for motorcycles. Growth is also expected to be healthy in lower volume markets such as Nigeria, the Philippines, Vietnam and Indonesia. Product demand is expected to expand at a more moderate rate in developed countries, where automobiles and other light vehicles are the primary form of personal transportation, and motorcycles are generally considered to be luxury goods used for recreational purposes. Nevertheless, we believe that high energy prices, city center congestion (especially in Western Europe) and personal income growth will provide some impetus to motorcycle sales advances in these areas.
  
• In China, according to the China Association of Automotive Manufactures, the motorcycle industry has generated a sales output of RMB 77.2 billion (or approximately $11.35 billion) from January 2009 through September 2009, a decrease of 9.51% compared the same period last year. Overall, in the domestic market, the market focus is shifting from consumer bases in large and middle-sized cities to those in small-sized cities and rural areas.

Post Merger Share Calculation:

•   4,879,519: Pre reverse merger outstanding shares 
•   2,479,523: Shares cancelled as part of the Share Exchange
• 45,600,418: Newly issued shares of Common Stock
•   6,857,204: Shares from units associated with private placement
•   3,428,602: warrants associated with private placement exercisable at $6.56244
•      342,860: Share issued to placement agents
•      171,430: agent warrants exercisable at $6.56244

GeoTeam® best effort calculation of total post reverse merger shares assuming full conversions:  58,800,510

Financial Snapshot:

• Our sales revenue increased to $50.4 million in the three months ended March 31, 2010 from $32.1 million in the same period in 2009, representing a 56.5% increase period-over-period.
• In the three months ended March 31, 2010, we generated a net income of $6.4 million, an increase of $2.5 million, or 63.3%, from $3.9 million in the same period in 2009

We are considering Georgia Intl Mining as a reverse merger candidate China play. Although the company has the following business description...

We are in the mining business and the purpose of the company is to explore minerals for commercial use. The main focus is on the precious metal such as gold, diamond and silver. The secondary focus will be on the prime industrial metals such as copper and zinc. The mineralization focus is based on the market breadth and width for each type of mineral. The precious metals are used to hedge against economic fluctuations and for personal use, such as jewelry, and therefore its market is much greater than the industrial metals which, depends on economic conditions related to the manufacturing sector.

 ...we located filings that point to an imminent merger transaction with a Chinese entity

Excerpt buried in 2009 10K filing:

On November 15, 2009, the Company entered into a non-binding letter of intent offering to merge with Guangdong Jinhao Motorcycle Co., Ltd. ("GJM") and its subsidiaries. The letter of intent constitutes an expression of mutual intent to pursue the consummation of the transaction but except for provisions set out in the Term Sheet, shall not bind any of the parties.

Excerpt 8K filing on April 15, 2010: Amendments to Articles of Incorporation or Bylaws; Reverse Share Split and Change in Fiscal Year.

Our Board of Directors also approved a consolidation of our current issued and outstanding common shares on a 0.590 new share for 1 old share.

Effective April 9, 2010, the Company amended it articles with the Secretary of State Nevada to reflect the following:

• An amendment to our Articles of Incorporation to increase the authorized number of shares of our common stock from 70,000,000 shares to 200,000,000 shares, par value of $0.001 per share.
  
• An amendment to our Articles of Incorporation to establish preferred shares with authorized capital of 50,000,000 shares, par value $0.001 per share (the "Preferred Shares"), for which the Board of Directors may fix and determine the designations, rights, preferences or other variations of each class or series within each class of the Preferred Share.
  
• An amendment to our Articles of Incorporation to change our name from Georgia International Mining Corp., to Jinhao Motor Company.