Great China Mania (OTC BB:GMEC)

Please take note that the 2012 first quarter 10Q contains a  New Liquidity Statement:

We currently generate our cash flow from our operations. We believe that our cash flow generated from operations will be sufficient to sustain our operations for at least the next 12 months. There is no identifiable expansion plan as of March 31, 2012, but from time to time, we may identify new expansion opportunities for which there will be a need for use of cash.

However, in previous filings the company made the following liquidity statement:

The Company will need additional working capital to carry out its planned activity, which raises substantial doubt about its ability to continue as a going concern. Continuation of the Company as a going concern is dependent upon obtaining additional working capital through loans, equity financing or merger with another entity. Management of the Company has developed a strategy, which it believes will accomplish this objective through additional equity funding and other financing which will enable the Company to operate for the coming year.

We are highly skeptical that enough has changed in the GMEC story to believe that previous capital requirements have changed.  Furthermore, the company has not raised substantial capital.

HONG KONG--(Marketwire - Apr 17, 2012) - Great China Mania Holdings, Inc. (OTCBB: GMEC) (the "Company" or " Great China Mania Holdings Inc.) and its wholly owned subsidiary Great China Media Limited, released its 10-K annual report and reported a sales revenue increase of $5,371,787 during 2011 as compared to nil in 2010. The gross profits increased to 1,143,333 in 2011 as compared to nil in 2010. The change was mainly due to the establishment of new and entirely different operations during 2011.

The revenue generated from artist and project management services operation, publication of magazines operation, and retail of video games and accessories operation newly established were $1,106,507, $2,641,324 and $1,623,956, respectively. The company's sources of revenue are mainly originated from Hong Kong and China.

Great China Mania Holdings, Inc. is an electronic content provider that creates and provides leisure and lifestyle-related electronic content to Hong Kong, Macau and China.

The company provides 3 main products and services:

1. Electronic content in the form of electronic magazines
2. Traditional magazines
3. Advertisement

Great China Mania Holdings, Inc. has established distribution agreements with various major operators in Hong Kong, Macau, and China. Customers can purchase subscription packages through the portal websites of their cell phone operators or through their cell phone and mobile devices directly. The contents of the company's electronic magazines will be regularly pushed to customers' cell phones and mobile devices through MMS and SMS once they have subscribed for the package. Subscription revenues are split between the company and cell phone operators.

Since December 30, 2010, the Company has restructured some of its business operations and corporate structure.  As of the date of this filing, our corporate structure is as follows:

Great East owns a wholly-owned subsidiary, Sharp Achieve Holdings Limited (BVI).  Sharp Achieve Holdings Limited (BVI) has a wholly-owned subsidiary, Super China Global Limited (BVI).  Super China Global Limited has three subsidiaries: 1) GME Holdings Limited which was incorporated February 18, 2011; 2) Great China Media Limited which was incorporated February 1, 2011; and 3) Great China Games Limited which was incorporated February 1, 2011 (collectively, the “Subsidiaries”).  The Subsidiaries and their business will be discussed in greater detail under the “Current Operations” heading of this Section, as this will be the Company’s primary business going forward.  However, for purposes of this Form 10-K the Company’s business operations of 2011 are presented in the “General Description of Business” and subsequent sections.

In addition, the Company, as of March 31, 2011, disposed of Water Scientific Holdings Limited (“Water Scientific”).  As of the date of this filing, the Company no longer carries on the operations of Water Scientific.

New Direction:

Water Scientific Holdings Limited

Water Scientific Holdings Limited (“Water Scientific”) was a fully-operating subsidiary of the Company from October 26, 2010 to March 31, 2011. Water Scientific produces a product called Solidwater(sometimes referred to as Waterlog, depending on the market). Solidwater is an ecological product that provides an optimal alternative solution for total irrigation and synchronous irrigation.

GME Holdings Limited

GME Holdings Limited was incorporated February 18, 2011, in Hong Kong.  GME Holdings Limited organizes artists to participate in movies, event management and promotion for its clients. GME Holdings Limited currently represents and promotes four male artists and twelve female artists, for a total of sixteen clients.  There are 10 employees of GME Holdings Limited. GME Holdings Limited promotes its clients by providing event management and booking for movies, public relations functions, and brand promotions.

Great China Media Limited

Great China Media Limited was incorporated February 1, 2011, in Hong Kong.  Great China Media Limited leases an office in Hong Kong.and employs 70 employees.  Great China Media Limited publishes eight magazines.  Each magazine title is produced on either a weekly or bi-weekly basis.  Each magazine published focuses on a specialized subject matter, including computer technologies, video games, digital equipment, and automobiles.  The actual printing of these magazines is performed by a third party vendor.

Great China Games Limited

Great China Games Limited was incorporated February 1, 2011, in Hong Kong.  Great China Games Limited leases two retail stores in Hong Kong. Each store sells video game machines (including Play Station, Nintendo Wii, and Xbox, among others) as well as an assortment of video games and accessories.

On March 31, 2011 the Company entered into a ASSET SALE, PURCHASE AND TRANSFER AGREEMENT with Wong Heong Kin and Chung A. Tsan Guy whereby the Company sold its operations to the Buyers. As consideration for this transaction, the Buyers will assume all of the assets and liabilities of the subsidiary Water Scientific Holdings Limited.

Shares of GEBD have fallen from around $1.00 to $0.12 (Bid) since its RTO transaction in March of 2008, probably due in part to stagnating sales and the lack of any meaningful IR. Furthermore, the following comment from the 2010 third quarter 10Q indicates that growth initiatives are not a priority:

We believe that our cash flow generated from operations will be sufficient to sustain operations for at least the next 12 months. There is no identifiable expansion plan as of September 30, 2010, but from time to time, we may identify new expansion opportunities for which there will be a need for use of cash.

Additional reasons to be weary of this story and why shares have been depressed:

• High Debt to equity to equity: 1.34 (We generally prefer to invest in companies with a debt to equity ratio of less than 20%).
  • Short-term debt: $29.6 million  (includes a large note payable)
  • Long-term debt:  $2.8 million 
• Weak internal controls

Some investors may view the fact that the GEBD has some bank debt on its balance sheet to as an a testament to the reliability of its financial statements.  Bank loans are also secured by Machineries of the Company Land and buildings of the Company.

The maturity dates for the bank loans are summarized as follows:

The GeoTeam® continually attempts to identify catalysts that can affect change in company's fortunes for the better or worse.

A couple recent events have prompted us to track (but not yet endorse) GEBD:

1. It looks like GEBD ownership has changed hands

• On December 30, 2010, the Company entered into an Asset Purchase and Sale Agreement with Chung A. Tsan Guy whereby the Company sold its subsidiary Great East Bottles & Drinks (BVI) Inc. in exchange for Mr. Chung surrendering 31,498,000 shares of common stock of the Company.
  
• Pursuant to a private Stock Purchase Agreement dated January 25, 2011, between Chung A. Tsan Guy and Chan Ka Wai, Mr. Chung sold 6,099,400 shares of common stock of the Registrant to Mr. Wai for a total purchase price of $548,964 or $0.09 per share.  According to this transaction, a change of control of the company has occurred.
  
• On January 28, 2011 the following individuals were appointed to the Board of Directors of the Company: Chan
  Wing Hing, Kwong Kwan Yin Roy, Yau Wai Hung. Also on January 28, 2011, Yau Wai Hung was appointed as Chief Executive Officer of the Company. Additionally, on January 28, 2011, Mr. Stetson Chung submitted his resignation as Chief Executive Officer and Mr. Danny Poon also resigned as Chief Financial Officer of the Company.  

2. The company recently consummated an acquisition:

• On October 26. 2010, the Company entered into an Acquisition Agreement with Water Scientific Holdings Limited (“Water Scientific”) and the shareholder of Water Scientific whereby the Company acquired 100% of Water Scientific in exchange for 500,000 shares of common stock of the Company.

We will keep a close vigil on developments to this story and consider pulling SAIC filings.

Eastern Environment Sols (OTC BB:EESC) is another stock in this industry.