Attached files

file filename
EX-31.2 - CERTIFICATION OF CHIEF FINANCIAL OFFICER FILED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - GME INNOTAINMENT, INC.exhibit312.htm
EX-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 - GME INNOTAINMENT, INC.exhibit321.htm
EX-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 - GME INNOTAINMENT, INC.exhibit322.htm
EX-31.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER FILED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - GME INNOTAINMENT, INC.exhibit311.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 June 30, 2015


[  ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


Commission file number 000-54446


GME INNOTAINMENT, 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 [X] 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 [X] No [  ]


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  [X]


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


The number of shares of Common Stock, $0.01 par value, outstanding on August 14, 2015 was 28,433,094.



1





GME INNOTAINMENT, INC. AND SUBSIDIARIES


TABLE OF CONTENTS



PART I – FINANCIAL INFORMATION

 

Item 1

Financial Statements

 

  

Unaudited Condensed Consolidated Balance Sheets, June 30, 2015 and December 31, 2014

3

  

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income for the six months ended June 30, 2015 and 2014

4

  

Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2015 and 2014

5

  

Notes to the Unaudited Condensed Consolidated Financial Statements

6

Item 2

Management’s Discussion and Analysis or Plan of Operation

14

Item 3

Quantitative and Qualitative Disclosures about Market Risk

19

Item 4

Controls and Procedures

19

 

 

 

PART II – OTHER INFORMATION

 

Item 1

Legal Proceedings

21

Item 2

Unregistered Sales Of Equity Securities And Use Of Proceeds

21

Item 3

Defaults Upon Senior Securities

21

Item 4

[Removed and Reserved]

21

Item 5

Other Information

21

Item 6

Exhibits

21

 

 

 

SIGNATURES

 




2




PART I – FINANCIAL INFORMATION


ITEM 1. FINANCIAL STATEMENTS


GME INNOTAINMENT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS


 

June 30,

2015

(Unaudited)

 

December 31,

2014

(Audited)

ASSETS

 

 

 

CURRENT ASSETS

 

 

 

Cash and cash equivalents

$

1,576,412 

 

$

657,115 

Accounts receivable

700,969 

 

92,695 

Prepaid expenses and other receivables

3,744,774 

 

204,917 

Total current assets

6,022,155 

 

954,727 

Property, plant and equipment

123,447 

 

Goodwill

40,634 

 

TOTAL ASSETS

$

6,186,236 

 

$

954,727 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

LIABILITIES

 

 

 

CURRENT LIABILITIES

 

 

 

Accounts payable

5,615,389 

 

448,149 

Accrued expenses and other payables

246,900 

 

136,442 

Due to related parties

588,776 

 

144,413 

Unearned revenue

786,911 

 

478,211 

Convertible notes

119,634 

 

88,333 

Total current liabilities

7,357,610 

 

1,295,548 

 

 

 

 

LONG-TERM LIABILITIES

 

 

 

Convertible note

 

31,301 

 

 

31,301 

 

 

 

 

TOTAL LIABILITIES

$

7,357,610 

 

$

1,326,849 

 

 

 

 

SHAREHOLDERS’ EQUITY

 

 

 

Common stock, par value $0.01; 375,000,000 shares authorized; 28,433,094 and 26,433,094 shares issued and outstanding as of June 30, 2015 and December 31, 2014, respectively

284,331 

 

264,331 

Additional paid in capital

9,521,345 

 

9,501,345 

Accumulated deficits

(10,105,324)

 

(10,140,513)

Accumulated other comprehensive loss

3,732 

 

3,780 

Total shareholders’ equity attributable to GME Innotainment, Inc. and subsidiaries

(295,916)

 

(371,057)

Non controlling interests

(875,458)

 

(1,065)

 

 

 

 

TOTAL SHAREHOLDERS’ EQUITY

$

(1,171,374)

 

$

(372,122)

 

 

 

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

$

6,186,236 

 

$

954,727 

 

 

 

 


See accompanying notes to condensed consolidated financial statements.



3



GME INNOTAINMENT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME (UNAUDITED)


 

Three months ended June 30,

Six months ended June 30,

 

 

2015

 

2014

 

2015

 

2014

 

 

 

 

 

 

 

 

 

REVENUES

 

$

 3,692,290 

 

$

531,820 

 

$

4,245,315 

 

$

819,630 

 

 

 

 

 

 

 

 

 

COST OF SALES

 

3,099,200 

 

336,655 

 

3,429,735 

 

498,137 

 

 

 

 

 

 

 

 

 

GROSS PROFIT

 

593,090 

 

195,165 

 

815,580 

 

321,493 

 

 

 

 

 

 

 

 

 

EXPENSES

 

 

 

 

 

 

 

 

Sales & marketing expenses

 

50,059 

 

11,240 

 

78,453 

 

22,251 

General and administrative

 

401,099 

 

178,787 

 

591,761 

 

383,339 

TOTAL OPERATING EXPENSES


451,158 

 

190,027 

 

670,214 

 

405,590 

 

 

 

 

 

 

 

 

 

OPERATING INCOME/(LOSS)

 

141,932 

 

5,138 

 

145,366 

 

(84,097)

 

 

 

 

 

 

 

 

 

OTHER INCOME/(EXPENSE)

 

 

 

 

 

 

 

 

Other income

 

65,793 

 

26,379 

 

70,563 

 

26,966 

Interest expense

 

(59,355)

 

 

(59,355)

 

Other expenses

 

(2,559)

 

(900)

 

(3,643)

 

(12,237)

TOTAL OTHER INCOME

 

3,879 

 

25,479 

 

7,565 

 

14,729 

 

 

 

 

 

 

 

 

 

NET INCOME/(LOSS) BEFORE PROVISION FOR INCOME TAXES

 

145,811 

 

30,617 

 

152,931 

 

(69,368)

 

 

 

 

 

 

 

 

 

PROVISION FOR INCOME TAXES

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME / (LOSS) FOR THE PERIOD

 

$

145,811 

 

$

30,617 

 

$

152,931 

 

$

(69,368)

 

 

 

 

 

 

 

 

 

NET (INCOME) / LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS

 

$

(127,586)

 

$

 

$

(117,742)

 

$

 

 

 

 

 

 

 

 

 

NET INCOME / (LOSS) ATTRIBUTABLE TO GME Innotainment, INC. AND SUBSIDIARIES

 

$

18,225 

 

$

30,617 

 

$

35,189 

 

$

(69,368)

 

 

 

 

 

 

 

 

 

Gain / (Loss) on foreign exchange translation

 

$

536 

 

$

 

$

(48)

 

$

 

 

 

 

 

 

 

 

 

TOTAL COMPREHENSIVE INCOME / (LOSS) FOR THE PERIOD

 

$

18,761 

 

$

30,617 

 

$

35,141 

 

$

(69,368)

 

 

 

 

 

 

 

 

 

BASIC INCOME / LOSS PER SHARE

 

$

0.00 

 

$

(0.00)

 

$

(0.00)

 

$

(0.00)

 

 

 

 

 

 

 

 

 

DILUTED INCOME / LOSS PER SHARE –

 

$

0.00 

 

$

(0.00)

 

$

(0.00)

 

$

(0.00)

 

 

 

 

 

 

 

 

 

BASIC WEIGHTED AVERAGE NUMBER OF  SHARES OUTSTANDING

 

28,433,094 

 

25,660,390 

 

27,527,016 

 

23,892,480 

 

 

 

 

 

 

 

 

 

DILUTED WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING

 

30,886,788 

 

26,111,068 

 

29,980,710 

 

24,343,158 



See accompanying notes to condensed consolidated financial statements.



4



GME INNOTAINMENT, INC.AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


 

 

For the Six months ended June 30,

 

 

2015

 

2014

Cash flows from operating activities

 


 

 

Net income / (loss) from operations

 

$

152,931 

 

$

(69,368)

Adjustments to reconcile net income to net cash flows used in operating activities for:


 

 

 

Share based payment


40,000 

 

Amortization of intangible asset


 

20,000 

Gain on asset held for disposal

 

 

(5,000)

Gain on conversion of debt notes into shares

 

 

(11,018)

Depreciation of property, plant and equipment

 

6,776 

 

Changes in operating assets and liabilities:

 

 

 

 

(Increase) / Decrease in accounts receivable

 

(291,464)

 

162,354 

Decrease/(Increase) in prepaid expenses and other receivables

 

60,768 

 

(69,704)

Increase / (Decrease ) in accounts payable

 

449,582 

 

(382,094)

Increase in unearned revenue

 

78,188 

 

344,700 

 (Decrease) in accrued expenses and other payables

 

(375,367)

 

(163,518)

Net cash provided by/(used in) operating activities

 

121,414 

 

(173,648)

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

Cash acquired from a subsidiary

 

764,312 

 

Net cash provided by investing activities

 

764,312 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

Advance from a related party

 

33,619 

 

Proceed from short term loan receivable

 

 

113,883 

Issue of shares capital

 

 

732 

Net cash provided by financing activities

 

33,619 

 

114,615 

 

 

 

 

 

Net increase /(decrease) in cash and cash equivalents

 

919,345 

 

(59,033)

 

 

 

 

 

Effect of foreign exchange rate changes

 

(48)

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

657,115 

 

640,383 

 

 

 

 

 

Cash and cash equivalents at end of period

 

$

1,576,412 

 

$

581,350 

 

 

 

 

 

Supplemental disclosure of cash flows information:

 

 

 

 

Interest paid

 

$

59,355 

 

$

 

 

 

 

 

Non cash financing activities:

 

 

 

 

Issuance of shares for acquisition of asset

 

 

200,000 

Shares cancelled for disposal of asset

 

 

(500,000)

 

 

$

 

$

(300,000)


See accompanying notes to condensed consolidated financial statements.



5



GME INNOTAINMENT, INC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

JUNE 30, 2015


NOTE 1 – ORGANIZATION AND PRINCIPAL ACTIVITIES


GME Innotainment, Inc. (“GMEV” or the “Company”) was incorporated in Florida on July 8, 1983 and adopted the current name on July 8, 2015. At the balance sheet date, the Company owns nineteen (19) subsidiaries.  


The Company incorporated a wholly owned subsidiary named Super China Global Limited (“SCGL”) in British Virgin Islands (BVI) on January 28, 2011 to hold fellow subsidiaries.


GME Holdings Limited (“GMEH”) was incorporated in Hong Kong on February 18, 2011 to operate an artist management and event management businesses in Hong Kong. The Company holds 56% equity interest of GMEH through SCGL and GME China Entertainment Limited.


GMEC Ventures Limited (“GMET”) was incorporated in Hong Kong on June 1, 2011 to hold future investment. The Company holds 100% equity interest of GMET through SCGL.


3A Pictures Limited (“3A”) was incorporated in Hong Kong on December 30, 2013 under the name of Number 5 Asia Management Limited to hold future investment. It adopted the current name on May 30, 2014. The Company holds 100% equity interest of 3A through SCGL.


GME Distribution Workshop Limited (“GMED”) was incorporated in Hong Kong on January 24, 2014 to manage the movie-related businesses. The Company holds 100% equity interest of GMED through SCGL.


Celestial Talent International Limited (“Celestial”) was incorporated in BVI on August 20, 2014 to hold the fellow subsidiaries incorporated after October 2014. The Company holds 100% equity interest of Celestial through SCGL.


GME London Limited (“GME London”) was incorporated in England and Wales on December 18, 2014 to operate the businesses of concert management in the United Kingdom and Asia Pacific region. The Company owns 51% equity interest of GME London through a BVI company named as Platinum China Enterprises Limited.


GME Casting Studio Limited (“GME Casting”) was incorporated in Hong Kong on 31 October, 2014 to operate the movie casting and talent management in Hong Kong and China excluding Beijing, Shanghai and Hangzhou. MY GME Sdn. Bhd. (“MY GME”) was incorporated in Malaysia on December 5, 2014 to operate the businesses of movie casting, model management, model scouting and event management in Malaysia, Singapore and Thailand. The Company owns 51% equity interest of both of GME Casting and MY GME through a BVI company named as Access Max International Limited.


iScout Models Limited (“iScout”) was incorporated in Hong Kong on November 20, 2014 to hold future investment of a wholly owned foreign enterprise (WOFE) subsidiary in Shanghai (temporarily named as Shanghai Junyue Limited, which is planned to be formed in the second half of 2015) to operate the artist’s social media management and modelling businesses in China. The Company owns 51% equity interest of iScout through Celestial.


GMECM Limited (“GMECM”) was incorporated on December 31, 2014 in Hong Kong to hold future investments of a WOFE subsidiary in China (temporarily named as Xingyao Limited, which is planned to be formed in the second half of 2015) to operate the movie and television program casting businesses in China. The Company owns 51% equity interest of GMECM through Celestial.


GME Paragon Limited (“GME Paragon”) was incorporated in Hong Kong on February 9, 2015 to operate the artist management in China. The Company owns 51% equity interest of GME Paragon through Celestial.


On May 6, 2015, the Company and its wholly owned subsidiary GMEH executed a share exchange agreement with GME China Entertainment Limited (“GME China”, formerly known as Direct Success Group Limited), an investment holding BVI company owning 100% of Markwin Investment Limited (“Markwin”). Pursuant to the terms of the share exchange agreement, the Company acquired 20% equity interest of GME China and control of Markwin in exchange for GME China acquiring 55% equity interest of GMEH from the Company. After the transction, the Company retains 56% equity interest and control of GMEH.



6




NOTE 2 – PRINCIPLES OF CONSOLIDATION


The unaudited interim financial statements of the Company and the Company’s subsidiaries (see Note 1) for the six months ended June 30, 2015 and 2014 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 six months ended June 30, 2015 and 2014, 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 June 30, 2015, the results of its operations and cash flows for the six months ended for June 30, 2015 and 2014.


The results of operations for the six months ended June 30, 2015 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, 2014.


NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


(a)

Economic and political risk


The Company’s operations are mainly 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 the 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 maintain principal 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.



7




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 June  30, 2015 and 2014, 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)

Long-Lived Assets


Property and equipment is stated at cost.  Depreciation is computed by the straight-line method over estimated useful lives (2-7 years).  Intellectual property assets are stated at their fair value acquisition cost. Amortization of intellectual property assets is calculated by the straight line method over their estimated useful lives. Historical costs are reviewed and evaluated for their net realizable value of the assets.  The carrying amount of all long-lived assets is evaluated periodically to determine if adjustment to the depreciation and amortization period or the unamortized balance is warranted. Based upon its most recent analysis, the Company believes that no impairment of property and equipment existed at June 30, 2015.


Long-lived assets such as property, equipment and identifiable intangibles are reviewed for impairment whenever facts and circumstances indicate that the carrying value may not be recoverable.  When required impairment losses on assets to be held and used are recognized based on the fair value of the asset.  The fair value is determined based on estimates of future cash flows, market value of similar assets, if available, or independent appraisals, if required.  If the carrying amount of the long-lived asset is not recoverable from its undiscounted cash flows, an impairment loss is recognized for the difference between the carrying amount and fair value of the asset.  When fair values are not available, the Company estimates fair value using the expected future cash flows discounted at a rate commensurate with the risk associated with the recovery of the assets.  We did not recognize any impairment losses for any periods presented.


(f)

Prepaid expenses


Any expenses paid prior to the related services rendered will be recorded as prepaid expenses. Such prepaid expenses will be reconciled and determinable in earlier of 60 days after the services rendered or 2 years after the initial payment date.


(g)

Unearned revenue


Any revenue received prior to the service rendered will recorded as unearn revenue. Such advance will be reconciled and determinable in earlier of date of service rendered or collectability of related revenue is reasonably assured.



8




(h)

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 are illustrated as follows:

 (i)

Revenue from provision of artist management, event management, and promotion for its clients is recognized when services are rendered. Revenues and expenses of major concerts are recorded when all receipts and expenses are reconciled and determinable which may be up to 60 days after the event.

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.


(i)

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. For the years ended June 30, 2015 and 2014, there are a total of 2,453,694 and 450,678 shares of common stock included in the calculation of diluted weighted average number of shares outstanding respectively.


(j)

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.


(k)

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.


(l)

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:


 

 

June 30,

2015

 

December 31, 2014

June 30,

2014

 

 

 

 

 

 

Period end HKD : US$ exchange rate

 

0.1290

 

0.1290

0.1282

Average for the period HKD : US$ exchange rate

 

0.1290

 

0.1290

0.1282



9




(m)

Recent accounting pronouncements


The Financial Accounting Standards Board and other entities issued new or modifications to, or interpretations of, existing accounting guidance upon June 30, 2015. 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 June 30, 2015 through the date these financial statements were issued.


NOTE 4 – ACCOUNTS RECEIVABLE


Accounts receivable consist of amounts due from customers for the provision of services or sale of merchandise. An allowance for doubtful accounts is considered to be established for any amounts that may not be recoverable, which is based on an analysis of the Company’s customer credit worthiness, and current economic trends. Based on management’s review of accounts receivable, allowances for doubtful accounts were established as deemed necessary. Receivables are determined to be past due, based on payment terms of original invoices. The Company does not typically charge interest on past due receivables. An allowance of $0 was established for the 6 months ended June 30, 2015 and 2014 respectively.


NOTE 5 – DEPOSITS, PREPAID EXPENSES AND OTHER RECEIVABLES


As of June 30, 2015, the Company’s deposits, prepaid expenses and other receivables are summarized as follows:


 

 

June 30, 2015

 

December 31, 2014

 

 


 


Prepaid expenses

 

  3,636,422

 

  103,606

Other receivables

 

  103,164

 

  98,689

Deposits paid

 

  5,188

 

  2,622

Total deposits, prepaid expenses and other receivables

 

 $ 3,744,774

 

 $ 204,917


NOTE 6 – PROPERTY, PLANT AND EQUIPMENT


As of June 30, 2015, the Company’s property, plant and equipment are summarized as follows:


 

 

June 30, 2015

 

December 31, 2014

At cost:

 

 

 

 

Funiture and Equipment

 

11,032

 

9,989

Motor Vehicles

 

129,180

 

-

Total cost

 

140,212

 

9,989

 

 

 

 

 

Less: Accumulated depreciation

 

 

 

 

Furniture and Equipment

 

10,325

 

9,989

Motor Vehicles

 

6,440

 

-

Total Accumulated depreciation

 

16,765

 

9,989

Property, plant and equipment, net

 

$

123,447

 

$

-


Depreciation expense attributable to the property, plant and equipment for the six months ended June 30, 2015 and 2014 were $6,776 and $0 respectively.



10




NOTE 7 – ACCRUED EXPENSES AND OTHER PAYABLES


As of June 30, 2015, the Company’s accrued expenses and other payables are summarized as follows:


 

 

June 30, 2015

 

December 31, 2014

 

 


 


Accrued expenses

 

  184,881

 

  76,916

Deposits received

 

  2,493

 

  -

Advance from a non affiliate individual

 

  59,526

 

  59,526

Total accrued expenses and other payables

 

 $ 246,900

 

 $ 136,442


NOTE 8 – 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 June 30, 2015, 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 mature 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 June 30, 2015, 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 six months ended June 30, 2015, the amortization of debt discount of $0 was charged to Statement of Operations. Accrued interest expense of Note 6 for the six months ended June 30, 2015 was $0. As of June 30, 2015, Note 6 qualified to be converted 2,453,694 shares of common stock under the conditions of Note 6 and is therefore dilutive.


Total interest expenses in connection with all Convertible Notes for the six months ended June 30, 2015 and 2014 amounted to $0 and $0 respectively.


The convertible notes as of the year-end dates are summarized as follows:


 

June 30, 2015

 

December 31, 2014

Noncurrent liabilities:

 

 

 

Non-interest bearing convertible note

$

-

 

$

31,301

 

 

 

 

Current liabilities:

 

 

 

Non-interest bearing convertible note

$

31,301

 

$

-

12% convertible note 6, net (including fair value adjustment on option $ 35,333, accrued interest expense $3,000)

$

88,333

 

$

88,333

 

$

119,634

 

$

88,333

Total convertible note outstanding

$

119,634

 

$

119,634


NOTE 9 – SIGNIFICANT BUSINESS ACQUISITIONS


On May 6, 2015, we acquired control of Markwin Investment Limited (“Markwin”) by a share exchange agreement in which we have given up equity interest of 44% of our subsidiary GMEH. On the day of acquisition, the carrying amount of GMEH shares exchanged was approximately negative $165,919. Markwin’s financial results are included in our Consolidated Financial Statements beginning on the acquisition date.



11




Markwin’s assets acquired, liabilities assumed and residual goodwill at their respective acquisition dates are summarized as follows.


 

 

 

May 6, 2015

 

 

 

 

Property, plant & equipment

 

 

130,223

Other assets, including cash and equivalents

 

 

3,889,830

Asset acquired

 

 

4,020,053

Less:

 

 

 

Accounts payable, accruals and other liabilities

 

 

5,052,820

Liabilities assumed

 

 

5,052,820

 

 

 

 

Outside Interest

 

 

826,214

 

 

 

 

Net liabilities assumed

 

 

$

206,553


The following table sets forth certain unaudited pro forma consolidated earnings data for 2015 and 2014, as if the acquisitions discussed previously were consummated on the same terms at the beginning of the year preceding their respective acquisition dates.


 

Three months ended June 30,

Six months ended June 30,

 

 

2015

 

2014

 

2015

 

2014

 

 

 

 

 

 

 

 

 

Revenues

 

$

4,761,022

 

$

2,084,259

 

$

8,485,639 

 

$

3,490,891 

 

 

 

 

 

 

 

 

 

Net earnings/(loss) attributable to GME Innotainment, Inc

 

59,504

 

25,606

 

(36,436)

 

(211,208)

 

 

 

 

 

 

 

 

 

Net earnings/(loss) per share attributable to GME Innotainment, Inc

 

0.00

 

0.00

 

(0.00)

 

(0.01)


NOTE 10 – COMMON STOCK AND WEIGHTED AVERAGE NUMBER OF SHARES FOR EARNINGS PER SHARE CALCULATION


On March 23, 2015, the Company issued to a consultant 1,000,000 shares of common stock in exchange for professional services rendered in 2014. Based on the share price of $0.02 per share on the grant date, the fair value of these issued shares was $20,000.


On March 25, 2015, the Company issued to another consultant 1,000,000 shares of common stock in exchange for professional services rendered in 2014. Based on the share price of $0.02 per share on the grant date, the fair value of these issued shares was $20,000.



12




The calculation of common stock as at June 30, 2015 and weighted average number of shares for the six months ended June 30, 2015 is illustrated as follows:

 

Number

of shares

 

Weighted average number of shares

 

 

 

 

Issued and outstanding as of January 1, 2015

26,433,094

 

26,433,094

Share based payment made on March 23, 2015

1,000,000

 

552,486

Share based payment made on March 25, 2015

1,000,000

 

541,436

 


 


Issued and outstanding as of June 30, 2015

28,433,094

 

27,527,016

Dilutive number of shares outstanding for Convertible note

2,453,694

 

2,453,694

Dilutive number of shares outstanding as of June 30, 2015

30,886,788

 

29,980,710


NOTE 11  – CONTINGENCIES AND COMMITMENTS


As of June 30, 2015, the expected annual lease payments under the Company continuing operating leases are as follows:


For the year ending December 31,

 

 

2015

 

58,648

2016

 

59,792

Total

 

118,440


NOTE 12– NON-CONTROLLING INTEREST


Related parties hold 49% of four of the operating subsidiaries and 80% of one of the operating subsidiary. The income associated with the non-controlling interest has been segregated as required.


NOTE 13–RELATED PARTY TRANSACTIONS


At June 30, 2015 the Company owed a related party $178,032. This loan is short-term in nature, payable on demand and do not carry an interest rate.


The Company owed another related party $410,744. This amount is short-term in nature and is payable on demand and carry a floating interest rate. For the six month ended 30 June 2015, the average interest rate was 2.25%.


NOTE 14- GOING CONCERN


As of June 30, 2015 the Company has accumulated deficits of $10,105,324, a negative working capital of $1,335,455, and also recorded a net income from operations of $35,189 for the six months then ended.


As of June 30, 2015 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.




13



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 GME Innotainment, 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.



14




Revenue recognition policies for each of the major products and services are illustrated as follows:


(i)

Revenue from provision of artist management, event management, and promotion for its clients is recognized when services are rendered. Revenues and expenses of major concerts are recorded when all receipts and expenses are reconciled and determinable which may be up to 60 days after the event.

(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 Operations – Three Months Ended June 30, 2015 as Compared to Three Months Ended June 30, 2014.


The following table summarizes the results of our operations during the three-month period ended June 30, 2015 and 2014, and provides information regarding the dollar and percentage increase / (decrease) from the three-month period ended June 30, 2014 to the three-month period ended June 30, 2015.


 

Three months ended June 30,

 

 

 

 

2015

 

2014

 

Increase (decrease)

% Change

Revenue

$

3,692,290

 

$

531,820

 

$

3,160,470 

894.27%

Cost of sales

3,099,200

 

336,655

 

2,762,545 

820.59%

Gross profit

593,090

 

195,165

 

397,925 

203.89%

Sales & marketing

50,059

 

11,240

 

38,819 

345.36%

General & administrative

401,099

 

178,787

 

222,312 

124.34%

Operating income

141,932

 

5,138

 

136,794 

2662.40%

Other income (expense)

3,879

 

25,479

 

(21,600)

(84.78%) 

Income tax expenses

-

 

-

 

         N/A

Net Income

$

145,811

 

$

30,617

 

$

115,194 

376.24%


Revenues


Revenues increased by $3,160,470 to $3,692,290 for the three months ended June 30, 2015 as compared to $531,820 for the same period in 2014, representing a 594.27% increase. The increase in revenue was mainly due to the acquisition of Markwin Investment Limited and its portfolio of Artiste talent.


Cost of sales


Cost of sales increased by $2,762,545 to $3,099,200 for the three months ended June 30, 2015 as compared to $336,655 for the same period in 2014, representing a 820.59% increase. The increase were mainly due to the increase of artiste fee by $1,784,435, agency fee by $83,964 and other direct cost by $894,146.


Gross margin


Gross margin increased by $397,925 to $593,090 for the three months ended June 30 of 2015 as compared to $195,165 for the same period in 2014, representing a 203.89% increase. The increase was mainly due to the expansion of the group by acquisition of Markwin Investment Limited’s portfolio.



15




Sales & marketing expenses


Sales & marketing expenses increased by $38,819 to $50,059 for the three months ended June 30 of 2015 as compared to $11,240 for 2014, representing a 345.36% increase. The increase was mainly due to the increase of job-related travelling by $16,752 and other sales & marketing expenses by $22,067.


General and administrative


The following table summarizes general and administrative expenses during the three-month period ended June 30, 2015 and 2014, and provides information regarding the dollar and percentage increase / (decrease) from the three-month period ended June 30, 2014 to the three-month period ended June 30, 2015.


 

Three months ended June 30,

 

 

 

 

2015

 

2014

 

Increase (decrease)

% Change

Payroll cost

298,352

 

123,391

 

174,961

141.79%

Rental expenses

45,561

 

24,850

 

20,711

83.34%

Legand and professional fee

32,623

 

13,528

 

190,095

141.15%

Miscellaneous

24,563

 

17,018

 

7,545

44.34%

 

401,099

 

178,787

 

222,312

124.34%


Payroll cost increased by $174,961 to $298,352 for the three months ended June 30, 2015 as compared to $123,391 for the same period in 2014, representing an 141.79% decrease. The increase was mainly due to the expansion of the group from acquisition and new ventures.


Rental expenses increased by $20,711 to $45,561 for the three months ended June 30, 2015 as compared to $24,850 for the same period in 2014, representing a 83.34% increase. The increase was mainly due to the renewal of rental agreement in Hong Kong office at a higher rental rate as well as new offices from expansion.


Legal and professional fee increased by $19,095 to $32,623 for the three months ended June 30, 2015 as compared to $13,528 for the same period in 2014, representing a 141.15% increase. The increase was mainly due to the additional professional and legal support required for the company’s expansion.


Miscellaneous expenses increased by $7,545 to $24,563 for the three months ended June 30, 2015 as compared to $17,018 for the same period in 2014, representing a 44.34% increase. The increase was mainly due to increase of repair and maintence expenses by $ 9,780, depreciation expense by $6,776 and other expenses by $989, offset by savings from amortization of $10,000.


Net income/( loss) from operations


Net income from operations increased by $115,194 to a net income of $145,811 for the three months ended June 30, 2015 as compared to of $30,617 for the same period in 2014.



16



Results of Operations – Six Months Ended June 30, 2015 as Compared to Six Months Ended June 30, 2014.


The following table summarizes the results of our operations during the six-month period ended June 30, 2015 and 2014, and provides information regarding the dollar and percentage increase / (decrease) from the six-month period ended June 30, 2014 to the six-month period ended June 30, 2015.


 

Six months ended June 30,

 

 

 

 

2015

 

2014

 

Increase (decrease)

% Change

Revenue

$

4,245,315

 

$

819,630 

 

$

3,425,685 

417.96%

Cost of Sales

3,429,735

 

498,137 

 

2,931,598 

588.51%

Gross Profit

815,580

 

321,493 

 

494,087 

153.69%

Sales & marketing

78,453

 

22,251 

 

56,202 

252.58%

General & administrative

591,761

 

383,339 

 

208,422 

54.37%

Operating income

145,366

 

(84,097)

 

229,463 

(272.86%) 

Other income (expense)

7,565

 

14,729 

 

(7,164)

(48.64%) 

Income tax expenses

-

 

 

          N/A

Net Income/ (loss)

$

152,931

 

$

(69,368)

 

$

222,299 

(320.46%) 


Revenues


Revenues increased by $3,425,685 to $4,245,315 for the six months ended June 30, 2015 as compared to $819,630 for the same period in 2014, representing a 417.96% increase. The increase in revenue was mainly due to the acquisition of Markwin Investment Limited and its portfolio of Artiste talent.


Cost of sales


Cost of sales increased by $2,931,598 to $3,429,735 for the six months ended June 30, 2015 as compared to $498,137 for the same period in 2014, representing a 588.51% increase. The increase were mainly due to the increase of artiste fee by $1,904,766, agency fee by $90,411 and other direct cost by $936,421.


Gross margin


Gross margin increased by $494,087 to $815,580 for the six months ended June 30 of 2015 as compared to $321,493 for the same period in 2014, representing a 153.69% increase. The increase was mainly due to the expansion of the group by acquisition of Markwin Investment Limited’s portfolio.


Sales & marketing expenses


Sales & marketing expenses increased by $56,202 to $78,453 for the six months ended June 30 of 2015 as compared to $22,251 for 2014, representing a 252.58% increase. The increase was mainly due to the increase of job-related travelling by $23,600 and other sales & marketing expenses by $32,602.


General and administrative


The following table summarizes general and administrative expenses during the six-month period ended June 30, 2015 and 2014, and provides information regarding the dollar and percentage increase / (decrease) from the six-month period ended June 30, 2014 to the six-month period ended June 30, 2015.


 

Six months ended June 30,

 

 

 

 

 

2015

 

2014

 

Increase (decrease)

 

% Change

Payroll cost

443,396

 

274,574

 

168,822

 

61.49%

Rental expenses

76,053

 

51,731

 

24,322

 

47.02%

Legal and proessional fee

40,331

 

21,305

 

19,026

 

89.30%

Miscellaneous

31,981

 

35,729

 

(3,748)

 

(10.49%)

 

591,761

 

383,339

 

208,422

 

54.37%




17




Payroll cost increased by $168,822 to $443,396 for the six months ended June 30, 2015 as compared to $274,574 for the same period in 2014, representing an 61.49% decrease. The increase was mainly due to the expansion of the group from acquisition and new ventures.


Rental expenses increased by $24,322 to $76,053 for the six months ended June 30, 2015 as compared to $51,731 for the same period in 2014, representing a 47.02% increase. The increase was mainly due to the renewal of rental agreement in Hong Kong office at a higher rental rate as well as new offices from expansion of business.


Legal and professional fee increased by $19,026 to $40,331 for the six months ended June 30, 2015 as compared to $21,305 for the same period in 2014, representing a 89.30% increase. The increase was mainly due to the additional professional and legal support required for the company’s expansion.


Miscellaneous expenses decreased by $3,748 to $31,981 for the six months ended June 30, 2015 as compared to $35,729 for the same period in 2014, representing a 10.49% decrease. The decrease was mainly due to savings from amortization of $20,000, offset by increase in depreciation expense of $6,776, increase of repair and maintence expenses by $ 4,665 and increase in other expenses by $8,559.


Net income/( loss) from operations


Net income from operations increased by $222,299 to a net income of $152,931 for the six months ended June 30, 2015 as compared to loss of $69,368 for the same period in 2014.


Liquidity and Capital Resources


Cash


Our cash balance as of June 30, 2015 was $1,576,412, representing an increase of $919,297 as compared to $657,115 as of December 31, 2014. The change of $919,297 was mainly due to 1.) The $764,312 from acquisition of a subsidiary, 2.) the net cash generated from other operating activities by $121,414 the 6 months ended June 30, 2015.


Cash flow


Operating Activities


Net cash provided by operating activities for the six months ended June 30, 2015 amounted to $121,414 compared to net cash outflow of $173,648 in the same period of 2014. The increase of $295,062 was mainly due to: 1.) an increase of $222,299 in income from operations, offset by 2.) increase of $29,969 from changes  in operating assets and liabilities.


Investing Activities


Net cash provided by investing activities for the six months ended June 30, 2015 amounted to $764,312 compared to $0 for the same period of 2014. The change was primarily due to acquired cash from a subsidiary.


Financing Activities


Net cash provided by financing activities for the six months ended June 30, 2015 amounted to $33,619 compared to net cash provided by financing activities of $114,615 in the same period of 2014. The change of $80,996 was primarily due to decrease in proceeds from short term loan receivable of $113,883, offset by advance from a third party for $33,619.


Working capital


As of June 30, 2015 the Company has accumulated deficits of $10,105,324, a negative working capital of $1,335,455, and also recorded a net income from the operations of $35,189 for the six months then ended.



18




As of June 30, 2015 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.


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 six months ended June 30, 2015 were denominated in HKD and were converted into US dollars at the exchange rate of 7.75 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.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


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


ITEM 4. CONTROLS AND PROCEDURES


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 June 30, 2015. 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. 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 June 30, 2015.



19




Management’s Report on Internal Control over Financial Reporting


Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f).  Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. In connection with management's assessment of our internal control over financial reporting as required under Section 404 of the Sarbanes-Oxley Act of 2002, we identified the following material weakness in our internal control over financial reporting as of June 30, 2015:

 

1.

Insufficient accounting personnel with the appropriate level of accounting knowledge, experience and training in the application of accounting principles generally accepted in the United States commensurate with financial statement reporting requirements.

 

As a result, we have concluded that our internal controls over financial reporting are not effective as of June 30, 2015.

 

Remediation of Material Weakness in Internal Control


All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can only provide reasonable assurances with respect to financial statement preparation and presentation. In addition, any evaluation of effectiveness for future periods is subject to the risk that controls may become inadequate because of changes in conditions in the future.


This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.


To remediate the material weakness surrounding this, we have performed and are continuing to perform, 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


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.



20



PART II--OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS


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.


ITEM 1A. RISK FACTORS


No material change since the filing of the 10-K on April 10, 2015.


ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS


None.


Issuer Purchases of Equity Securities


None.


ITEM 3.DEFAULTS UPON SENIOR SECURITIES


None.


ITEM 4. [REMOVED AND RESERVED].


ITEM 5.OTHER INFORMATION


None.


ITEM 6.EXHIBITS


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




21



SIGNATURES


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.


GME INNOTAINMENT, INC.

(Registrant)


By:

 /S/ Kwong Kwan Yin Roy

Kwong Kwan Yin Roy

Chief Executive Officer and Director

 

Date: August 14, 2015


By:

/S/ Kwong Kwan Yin Roy

Kwong Kwan Yin Roy

Chief Financial Officer


Date: August 14, 2015





22