HH BIOTECHNOLOGY HOLDINGS CO - FORM 10-Q

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EX-32.1 - THE CERTIFICATIONS REQUIRED BY RULE 13A-14(B) OR RULE 15D-14(B) AND 18 U.S.C. SECTION 1350 - HH BIOTECHNOLOGY HOLDINGS CO	ex321q093015.htm
EX-31.1 - THE CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER REQUIRED BY RULE 13A-14(A) OR RULE 15D-14(A) - HH BIOTECHNOLOGY HOLDINGS CO	ex311q093015.htm

U.S. 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, 2015

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

Commission File No. 0-23015

GREAT CHINA INTERNATIONAL HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Nevada

(State or other jurisdiction of

incorporation or organization)

87-0450232

(IRS Employer Identification No.)

C Site 25-26F President Building, No. 69 Heping North Street

Heping District, Shenyang 110003, Peoples Republic of China

(Address of principal executive offices)

0086-24-22813888

(Issuer’s telephone number)

Not Applicable

(Former name, address and fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the issuer 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 is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company (as defined in Rule 12b-3 of the Exchange Act).

Large Accelerated Filer [ ] Accelerated Filer [ ] Non-Accelerated Filer [ ] 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]

State the number of shares outstanding of each of the issuer’s classes of common equity: As of September 30, 2015, there were 14,059,966 shares of common stock outstanding.

FORM 10-Q

GREAT CHINA INTERNATIONAL HOLDINGS, INC.

TABLE OF CONTENTS

		Page
PART I.	Item 1. Financial Information

	Balance Sheet as of September 30, 2015 and December 31, 2014 (Unaudited)	3

	Statements of Operations for the Three-Month and Nine-Month Periods Ended September 30, 2015 and 2014 (Unaudited)	4

	Statements of Cash Flows for the Nine-Month Periods Ended September 30, 2015 and 2014 (Unaudited)	5

	Notes to the Financial Statements	6

	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	14

PART II.	Other Information

	Item 6. Exhibits	17

	Signatures	17

GREAT CHINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2015 AND DECEMBER 31, 2014

(UNAUDITED)

		As of
		September 30, 2015		December 31, 2014

ASSETS
Current assets:
	Cash and cash equivalents	$	9,909,082	$	8,799,261
	Accounts receivable, net		110,523		21,424
	Other receivable, net		700,959		629,956
	Other current assets		18,541		15,374
	Short-term loan receivable, net		-		4,029,269
Total current assets			10,739,105		13,495,284
Long-term loan receivable, net			-		-
Property and equipment, net			215,677		207,295
Rental property, net			36,954,304		40,281,831
Total assets		$	47,909,085	$	53,984,409
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Bank loans	$	6,576,877	$	21,242,304
	Accounts payable		4,456,891		4,566,001
	Accrued expenses		8,991		7,388
	Other payable		2,322,912		2,208,408
	Payable to disposed subsidiaries		819,079		839,013
	Advances from tenants		1,490,410		1,449,792
	Taxes payable		4,328,977		4,535,002
	Total current liabilities		20,004,137		34,847,908

Stockholders' equity:
	Common stock, $.001 par value 50,000,000
	shares authorized, 14,059,966 and 11,759,966 issued and outstanding
	as of September 30, 2015 and December 31, 2014		14,060		11,760
	Additional paid in capital		12,107,856		4,566,156
	Statutory reserve		638,128		638,128
	Accumulated other comprehensive income		4,189,924		4,624,890
	Retained earnings		10,788,733		9,295,567
	Non-controlling interests		166,246		-
	Total stockholders' equity		27,904,948		19,136,501
Total liabilities and stockholders' equity		$	47,909,085	$	53,984,409

The accompanying notes are integral part of these condensed consolidated financial statements.

GREAT CHINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE LOSS

FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2015 and 2014

(UNAUDITED)

		Three-Months Ended September 30				Nine-Months Ended September 30
		2015		2014		2015		2014
Revenues
Consumer products income			923				923
	Rental income	$	1,274,821	$	1,318,008	$	4,167,016	$	4,387,585
	Management fee income		490,802		520,128		1,574,283		1,584,643
	Total revenues		1,766,546		1,838,136		5,742,222		5,972,228
Cost of revenues
Consumer products cost			2,421				2,421
	Rental cost		954,121		1,165,388		3,101,658		3,688,274
	Management fee cost		359,006		286,651		996,506		1,002,976
	Total cost		1,315,549		1,452,039		4,100,586		4,691,250
Gross profit			450,997		386,097		1,641,636		1,280,977

Operation expenses
	Selling expenses		17,228		3,606		30,900		20,853
	General and administrative expenses		389,532		405,898		1,078,609		1,234,512
	Recovery of bad debt		-		-		(1,573,416)		-
	Depreciation and amortization		2,092		7,750		12,188		17,817
	Total operation expenses		408,852		417,254		(451,718)		1,273,182

Income (loss) from operations			42,145		(31,157)		2,093,354		7,796

Other income (expense)
	Disposal of parking lots income		-				-		6,487
	Other income, net		49,908		40,717		241,441		292,803
	Interest and finance costs		(105,795)		(523,930)		(780,956)		(1,575,924)
	Total other expense, net		(55,887)		(483,213)		(539,515)		(1,276,634)

Income (loss) before provision for income taxes			(13,741)		(514,370)		1,553,839		(1,268,838)

Provision for income taxes			-		-		-		-

Net income (loss)			(13,741)		(514,370)		1,553,839		(1,268,838)

Net loss attributable to non-controlling interest			(18,470)		-		(29,245)		-
Net income (loss) attributable to the Company			4,729		(514,370)		1,583,084		(1,268,838)

Other comprehensive income (loss):
	Foreign currency translation adjustment		(509,434)		241,565		(434,966)		(340,271)

Total comprehensive income (loss)		$	(523,175)	$	(272,805)	$	1,118,874	$	(1,609,109)

Comprehensive loss attributable to non-controlling interest			(18,470)		-		(31,137)		-
Comprehensive income (loss) attributable to the Company			(504,705)		(272,805)		1,150,011		(1,609,109)

Earnings (loss) per share attributable to owners of the company
	Basic	$	(0.00)	$	(0.04)	$	0.12	$	(0.14)
	Diluted	$	(0.00)	$	(0.04)	$	0.12	$	(0.14)

Weighted average number of shares outstanding
	Basic		14,059,966		11,759,966		13,392,907		11,759,966
	Diluted		14,059,966		11,759,966		13,392,907		11,759,966

The accompanying notes are integral part of these condensed consolidated financial statements.

GREAT CHINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015 AND 2014

(UNAUDITED)

		September 30
		2015		2014
Cash flows from operating activities:
Net income (loss)		$	1,553,839	$	(1,268,838)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Net cash provided by operating activities
	Depreciation and amortization		2,382,676		2,480,353
	Recovery of bad debt		(1,573,416)		-

Changes in operating assets and liabilities:
	Accounts receivable and other receivable		(172,330)		(330,700)
	Advances to suppliers		(5,803)		(163,809)
	Other current assets		(3,593)		(936)
	Accounts payable and accrued expenses		163,001		659,195
	Advances from buyers		76,373		(69,231)
	Income and other taxes payable		(100,028)		(46,550)

Net cash provided by operating activities			2,320,719		1,259,484

Cash flows used in investing activities:
	Purchase of property & equipment		(25,497)		(631)

Net cash used in investing activities			(25,497)		(631)

Cash flows from financing activities:
	Loans repayment from the borrowing parties		5,603,031		-
Loans paid to the bank			(14,407,794)		-
	Proceeds from stock issuance, net of offering costs		7,544,000		-
Proceeds from non-controling interest			191,466		-
Net cash used in financing activities			(1,069,297)		-
Effect of exchange differences			(116,104)		14,150

Net increase in cash and cash equivalents			1,109,821		1,273,003

Cash and cash equivalents, beginning of period			8,799,261		7,115,476

Cash and cash equivalents, end of period		$	9,909,082	$	8,388,479

Supplemental disclosures of cash flow information:
	Interest paid	$	790,609	$	1,587,723
	Income taxes	$	-	$	-

The accompanying notes are integral part of these condensed consolidated financial statements.

GREAT CHINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. Description of business

Great China International Holdings, Inc., (the “Company”) was incorporated in the State of Nevada on December 4, 1987, under the name of Quantus Capital, Inc. The Company, through its various subsidiaries, is engaged in commercial and residential real estate leasing, management, consulting, investment, development and sales in the city of Shenyang, Liaoning Province, in the People’ Republic of China (“PRC”).

2. Summary of significant accounting policies

Unaudited Interim Financial Information

The accompanying unaudited financial statements of the Company have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the interim periods are not necessarily indicative of the results for any future period. These statements should be read in conjunction with the Company's audited financial statements and notes thereto for the fiscal year ended December 31, 2014. The results of the nine months periods ended September 30, 2015 are not necessarily indicative of the results to be expected for the full fiscal year ending December 31, 2015

Principles of consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant inter-company transactions and balances within the Company are eliminated in consolidation.

Use of estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Foreign currency translation

The Company uses the United States dollar for financial reporting purposes. The Company’s subsidiaries maintain their books and records in their functional currency - Chinese Yuan Renminbi (CNY) and Japanese Yen, being the primary currency of the economic environment in which their operations are conducted. All assets and liabilities are translated at the current exchange rate, stockholder’s equity are translated at the historical rates and income statement and statement of cash flows items are translated at the average exchange rate for the period. As a result, amounts related to assets and liabilities reported on the statement of cash flows may not necessarily agree with changes in the corresponding balances on the balance sheet. The resulting translation adjustments are reported under other comprehensive as a component of shareholders’ equity.

Cash and cash equivalents

The Company considers all cash on hand and in banks, including accounts in book overdraft positions, certificates of deposit and other highly-liquid investments with maturities of three months or less, when purchased, to be cash and cash equivalents.

Allowance for doubtful accounts

The Company maintains reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and other receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. As of September 30, 2015 and December 31, 2014, the Company reserved $1,774,610 and $1,817,799 respectively, for other receivable bad debt, and $688,925 and $705,691, respectively, for accounts receivable bad debt. The Company also reserved $3,091,762 and $4,778,713 respectively for loans receivable as of September 30, 2015 and December 31, 2014 respectively.

Property and equipment

Property and equipment is being depreciated over the estimated useful lives of the related assets. Depreciation is computed on the straight-line basis over useful lives as follows:

Buildings	8-26 years
Equipment	5 years
Automobile	5 years
Office furniture and fixtures	5 years

Repairs and maintenance costs are normally charged to the statement of operations and other comprehensive income in the year in which they are incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of the asset, the expenditure is capitalized as an additional cost of the asset.

Property and equipment are evaluated annually for any impairment in value. Where the recoverable amount of any property and equipment is determined to have declined below its carrying amount, the carrying amount is reduced to reflect the decline in value. There were no property and equipment impairments recognized as of September 30,2015 and December 31, 2014 respectively.

Properties held for rental

Properties include buildings held for rental and land use rights, which are being depreciated over the estimated useful lives of the related assets. Depreciation is computed on the straight-line basis over 20-26 years. As of September 30, 2015 and December 31, 2014, net property held for rental amounted to $36,954,304 and $40,281,831 respectively. Accumulated depreciation of rental properties amounted to $34,928,171 as of September 30, 2015 and $33,350,033 as of December 31, 2014.

Revenue recognition

Rental income and management fee income – The Company recognizes the rental income on the straight-line basis over the terms of the tenancy agreements. The management fee, including the service fee mainly for property management, maintenance and repair, and security, is recognized quarterly over the terms of the tenancy agreements.

Other income

Other income consists of parking lot income, cleaning income and etc. This income was recognized as the services were performed and the settled amount has been paid in accordance with the terms of the agreement.

Earnings (loss) per share

Basic earnings (loss) per share is computed by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted earnings (loss) per share is computed by dividing net income by the weighted-average number of common shares and dilutive potential common shares outstanding during the period.

As of September 30, 2015 and December 31, 2014, respectively, there were no outstanding securities or other contracts to issue common stock, such as options, warrants or conversion rights, which would have a dilutive effect on earnings per share. The basic and diluted weighted-average number of common shares are 13,392,907 and 11,759,966 for the nine months ended September 30, 2015 and 2014, respectively.

Stock issuance

On March 27, 2015, the Company completed the sale of 2,300,000 shares of its common stock at a price of US$3.28 per share, or a total of $7,544,000, to two non-U.S. unrelated business entities. The Company had received all proceeds from these two entities. There are no options or warrants associated, nor conversion features embedded in this transaction.

Income taxes

The Company accounts for income taxes using an asset and liability approach which allows for the recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the difference are expected to affect taxable income.

The Company records a valuation allowance for deferred tax assets, if any, based on its estimates of its future taxable income as well as its tax planning strategies when it is more likely than not that a portion or all of its deferred tax assets will not be realized.

Concentrations of business and credit risk

Financial instruments that potentially subject the Company to concentrations of credit risk are cash and cash equivalents, accounts receivable and other receivables arising from its normal business activities. The Company places its cash and cash equivalents in what it believes to be credit-worthy financial institutions. The Company maintains large sums of cash in one bank in United States and two major banks in China. As of September 30, 2015, the balance in US account was $7,190,383 and the aggregate balance in China accounts was $2,340,964. There is no insurance securing these deposits in China. The Company has a diversified customer base, most of which are in China.

The Company controls credit risk related to accounts receivable through credit approvals, credit limits and monitoring procedures. The Company routinely assesses the financial strength of its customers and, based upon factors surrounding the credit risk, establishes an allowance, if required, for uncollectible accounts and, as a consequence, believes that its accounts receivable credit risk exposure beyond such allowance is limited.

Statement of cash flows

Cash flows from the Company's operations is calculated based upon the local currencies. As a result, amounts related to assets and liabilities reported on the statement of cash flows may not necessarily agree with changes in the corresponding balances on the balance sheet.

Recent accounting pronouncements

There have been no new accounting pronouncements as the date of September 30, 2015 that are of significance, or potential significance, to the Company.

Reclassifications

Certain amounts in the 2014 financial statements may have been reclassified to conform to the 2015 presentation. These reclassifications had no effect on previously reported results of operations or retained earnings.

3. Going concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. This basis of accounting contemplates the recovery of the Company’s assets and the satisfaction of its liabilities in the normal course of business. The Company has a working capital deficit of $9,265,032 and $21,352,624 as of September 30,2015 and December 31, 2014, respectively..

The current year to date working deficit and the impacts of recurring losses in prior years have had a significant negative impact on the financial condition of the Company and raise substantial doubt about the Company’s ability to continue as a going concern.

To address this matter, the Company’s management has taken several actions to provide additional liquidity and reduce expenses going forward. These actions are described in the following paragraphs.

During the nine months ended September 30, 2015, the Company worked with the debtors to recover $5,603,031(RMB35,000,000) of loan receivables, of which $1,600.866(RMB10,000,000) was reserved with bad debt allowance.

During the nine months ended September 30, 2015, the Company reduced the bank loans from $21,242,304 to $6,576,877. This significantly reduces the interest expenses in the future periods.

The Company is in the process of obtaining informal assurance from our current lender that our short term loans will continue to be renewed and further opening dialog with the lender to convert the short term loans to long term loans. Additionally, the Company is assessing its ability to increase rental rates for its leasing business in order to generate additional revenue. Further, the Company is continuing to focus efforts on cost containment to reduce general and administrative expenses. With its relevant hands-on expertise, the Company also plans to expand operations to include property management.

The Company recorded a net income of $1,553,839 and a positive cash flow for the nine-month period ended September 30, 2015, that will fund Company operations through the remainder of 2015 as a result of collecting on a loan written off as a bad debt in an earlier period

Management will continue to review all aspects of the business in an effort to improve cash flow and reduce costs and expenses in recurring basis, while continuing to invest, to the extent possible, in new business development for future revenue streams.

Management will also continue to seek additional working capital through debt and equity financing, but there are no assurances that such financings will be available at all, or on terms acceptable to the Company.

Management believes that through the actions to date and possible future actions described above, the Company should have the necessary liquidity to continue its operations at least for the next twelve months, though no assurances can be made in this regard based on uncertainties with respect to the Company’s new revenue streams and the recovery of loan receivables discussed above. The Consolidated Financial Statements have been prepared assuming the Company will continue as a going concern and do not include any adjustments that might result if the Company were unable to do so.

4. Loans receivable

The company entered into series of collateralized loan agreements with third parties from 2009, the total loan receivable is $0 and $4,029,269 as of September 30, 2015 and December 31, 2014, respectively.

During 2011, the Company entered into a collateralized loan agreement with Beijing Sihai Real Estate Development Ltd.(Sihai), due on November 29, 2013, and then resigned the agreement at the same terms due on November 29, 2015. The loan bears interest at a variable rate based on the Peoples’ Bank of China lending rate applicable to the period plus 10%. During 2011 to 2015, the Company loaned more money to Sihai through reassigned the agreement and also received part of loan payment from Sihai. As of September 30, 2015, the balance of loan capital was $2,698,408. Although the loan will be due on November 29, 2015, the Company accrued bad debt provision of $2,698,408 with the consideration of uncertain collectability of the remaining loan balance. The net loan receivable from Sihai, was $0 and $2,764,078 as of September 30, 2015 and December 31, 2014, respectively.

During 2011, the Company entered into a collateralized loan agreement with Shenyang Landing Concrete Ltd., pursuant to which, the Company loaned $2,360,123, due on March 27, 2013. The loan bears interest at a variable rate based on the Peoples’ Bank of China lending rate applicable to the period. On November 30, 2011, the Company, along with Shenyang Landing Concrete Ltd., reassigned the loan amount to KaiyuanHongyun Concrete Admixture Ltd., with the same terms due on November 30, 2013. In August 15, 2013, the loan agreement was extended to August 15, 2015, on the same terms. As of the September 30, 2015, the company collected all the loan receivable from KaiyuanHongyun Concrete Admixture Ltd.

During 2009, the Company entered into an uncollateralized loan agreement with ZhongxinGuoan Ltd., pursuant to which the Company loaned $1,966,769 due on October 30, 2011. The loan bore interest at a variable rate based on the Peoples’ Bank of China lending rate applicable to the period. During the fourth quarter of 2011, this loan was reassigned to Shenyang Konggang New City Investment Development Ltd., who is working on a development project with ZhongxinGuoan Ltd. The Company had received $1,573,416 (RMB10,000,000)from Shenyang Konggang New City Investment Development Ltd. as of September 30,2015,and the loan balance $393,354 remains uncollateralized ,booked as bad debts by the Company. The loan is due on October 30, 2015 and bears interest at a variable rate based on the Peoples’ Bank of China lending rate applicable to the period.

5. Property and equipment

Property, Plant & Equipment consisted of the following:

	September 30, 2015		December 31, 2014

Building	$	15,435	$	15,811
Automobile		1,158,647		1,186,845
Office equipment & Furniture		588,298		578,069
Cost of properties and equipments		1,762,380		1,780,725
Accumulated depreciation		(1,546,703)		(1,573,430)
Property and equipment, net	$	215,677	$	207,295

The Company recorded depreciation expense relating to properties held for rental, as well as property and equipment amounting to $2,382,676 and $2,480,353 for the nine months ended September 30,2015 and 2014, respectively, of which, $10,656 and $17,817 were recorded as general and administrative expense, respectively.

As of September 30, 2015, fixed assets and rental property totaling $30,734,690 were pledged as security for various bank loans totaling $6,576,877.

6. Accrued expenses

Accrued expenses consisted of the following:

	September 30, 2015		December 31, 2014

Payroll and welfare payable	$	4,376	$	2,773
Accrued expenses		4,615		4,615
Total	$	8,991	$	7,388

7. Other payables

Other payables consisted of the following:

	September 30, 2015		December 31, 2014

Customer guarantee deposit	$	1,069,737	$	1,146,627
Customer deposit for property decoration		17,284		17,705
Miscellaneous payable		1,235,891		1,044,077
Total	$	2,322,912	$	2,208,408

8. Tax payables

Tax payables consisted of the following:

	September 30, 2015		December 31, 2014

Income tax payable in Mainland China	$	1,415,200	$	1,449,641
Business tax		605,802		647,510
Land VAT payable		2,360,928		2,418,386
Other levies		(52,953)		19,465
Total	$	4,328,977	$	4,535,002

9. Payable to disposed subsidiary

The Company had amounts due to a Loyal Best, a previously disposed of entity, as of September 30,2015 and December 31, 2014 in the amount of $819,079 and $839,013, respectively.

10. Loan Payable

Loans payable (including accrued interest) consisted of the following:

Nature	Due on	Interest per Annum	September 30, 2015		December 31, 2014

Bank loan	6-12-2016	8.775%	$	6,293,662	$	6,446,830
Bank loan	10-13-2016	10.395%		283,215		14,795,474

Less current portion				-		-
			$	6,576,877	$	21,242,304

The above loans are secured by Company rental properties.

For the period ended September 30, 2015 and 2014, the Company’s incurred interest expense of $790,609 and $1,587,723, respectively.

11. Statutory reserve

As stipulated by the Company Law of the People’s Republic of China (PRC), net income after taxation can only be distributed as dividends after appropriation has been made for the following:

i.	Making up cumulative prior years’ losses, if any;

ii.	Allocations to the “Statutory Surplus Reserve” of at least 10% of income after tax, as determined under PRC accounting rules and regulations, until the fund amounts to 50% of the Company’s registered capital;

iii.	Allocations of 5% to 10% of income after tax, as determined under PRC accounting rules and regulations, to the Company’s “Statutory Common Welfare Fund”, which is established for the purpose of providing employee facilities and other collective benefits to the Company’s employees; and statutory common welfare fund is no longer required per the new cooperation law executed in 2006; and

iv.	Allocations to the discretionary surplus reserve, if approved in the stockholders’ general meeting.

The Company did not contribute to statutory reserve for the period ended September 30,2015 and 2014, respectively, due to the net loss incurred for its Chinese operation.

12. Segment information

ASC 280 requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company.

During 2015 and 2014, the Company was organized into three main business segments: (1) healthcare products and (2) Rental income and Income of management fee of commercial buildings. The following table presents a summary of operating information and certain year-end balance sheet information as of year ended of September 30,2015 and 2014, respectively.

			September 30
			2015		2014
Revenues from unaffiliated customers:
	Consumer products		$	923	$
	Rental income & Management fee			5,741,299		5,972,228
		Consolidated		5,742,222		5,972,228

Operating income (loss):
	Consumer products			(83,054)
	Rental income & Management fee			2,359,192		115,357
	Corporation (1)			(182,784)		(107,562)
		Consolidated		2,093,354		7,796

Net loss before taxes:
	Consumer products			(82,755)
	Rental income & Management fee			1,819,440		(1,161,060)
	Corporation (1)			(182,846)		(107,778)
		Consolidated		1,553,839		(1,268,838)

Identifiable assets:
	Consumer products			511,170
	Rental income & Management fee			40,156,866		47,387,726
	Corporation (1)			7,241,049		10,620,443
		Consolidated		47,909,085		58,008,169

Depreciation and amortization:
	Rental income & Management fee			2,372,020		2,462,537
	Corporation (1)			10,656		17,817
		Consolidated		2,382,676		2,480,353

Capital expenditures:
	Consumer products			21,290
	Rental income & Management fee			4,196		631
		Consolidated	$	25,486	$	631

(1). Unallocated loss from Operating income (loss) and Net income before provision for income taxes are primarily related to general corporate expenses.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Caution Regarding Forward-Looking Information

The following discussion and analysis should be read in conjunction with our consolidated financial statements prepared in accordance with accounting principles generally accepted in the USA. Unless otherwise indicated, references in this discussion to “we”, “our” and “us” are to Great China International Holdings, Inc., and its subsidiaries.

Any statements in this discussion that are not historical facts are forward-looking statements that involve risks and uncertainties; actual results may differ from the forward-looking statements. Sentences or phrases that use such words as “believes”, “anticipates”, “plans”, “may”, “hopes”, “can”, “will”, “expects”, “is designed to”, “with the intent”, “potential” and others indicate forward-looking statements, but their absence does not mean that a statement is not forward-looking. This information may involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from the future results, performance or achievements expressed or implied by any forward-looking statements. We do not undertake any obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Executive Summary

Great China International Holdings, through its various subsidiaries, is or has been engaged in commercial and residential real estate leasing, management, consulting, investment, development and sales, We conduct all our operation in the People’s Republic of China through our direct and indirect wholly owned subsidiaries; Silverstrand International Holdings Company Limited (“Silverstrand”)., Shenyang Maryland International Industry Company Limited (“Maryland”),Shenyang Ai Zhuang Trading Co., Ltd (“Ai Zhuang”), and Panacea Co., Ltd. Ai Zhuang and Panacea Co., Ltd.were established during the first six months of 2015 to engage in wholesale and retail distribution of consumer products including food products, dietary supplements, household products and publications. Ai Zhuang and Panacea Co., Ltd. had started business operation during the quarter ended September 30, 2015.

Recent Development

Effective April 27, 2015, Great China International Holdings, Inc., entered into a Cooperation Agreement with FT Solution Co., Ltd., a Japanese company. Pursuant to the Cooperation Agreement, the Company is investing approximately $224,473 (26.5 million Japanese Yen) for approximately 53% of shares in a joint venture which will engage in the distribution of a variety of consumer products including food products, dietary supplements, over-the-counter medications, and daily necessities, etc. It has not started business operation thus far.

Results of Operations

Comparison of operations for the nine months period ended September 30, 2015 and 2014:

The Company had net income of $1,553,839 for the nine months period ended September 30, 2015, which represents an increase in net income by $2,822,677 or 222.5%, compared with a net loss of $1,268,838 in the same period of 2014. Components resulting in this increase are discussed below.

Revenues decreased by $230,006 or 3.9% from $5,972,228 for the nine months period ended September 30, 2014 to $5,742,222 for the same period of 2015. The decrease is mainly due to a decrease in rental income by $220,569 or 5.0% from $4,387,585 for the nine months period ended September 30, 2014 to $4,167,016 for the same period of 2015 due to more vacancies in our rental properties.

The cost of revenue decreased by $590,664 or 12.6% from $4,691,250 for the nine months period ended September 30, 2014 to $4,100,586 for the same period of 2015, which is attributed to the decrease of rental cost.

The gross margin for the rental business was 25.5% and 15.9% for the nine months period ended September 30, 2015 and 2014 respectively. This increase is attributable to the Company's effective cost controlling measure. The gross margin for the management business was 36.7% for the nine months period ended September 30, 2015,which had no change compared to the same period of 2014.

Selling expenses increased by $10,047 or 48.2% from $20,853 for the nine months period ended September 30, 2014 to $30,900 for the same period of 2015. This increase mainly due to the sales activity of Ai Zhuang and Panacea Co., Ltd.

General and administrative expenses decreased by $155,903 or 12.6% from $1,234,512 for the nine months period ended September 30, 2014 to $1,078,609 for the same period of 2015. The decrease is mainly because the Company strengthened controlling of running expenses payment.

Reversal of bad debt allowance increased by $1,573,416 or 100% for the nine months period ended September 30, 2015 compared with the same period of 2014 due to the Company collected loan of $1,573,416 which was reserved with bad debt allowance, from Shenyang Konggang New City Investment Development Ltd.

Depreciation and amortization was $12,188 and $17,817 for the nine months period ended September 30, 2015 and 2014 respectively.

Interest and finance costs was $780,956 and $1,575,924 for the nine months period ended September 30, 2015 and 2014 respectively. The decrease is mainly because the Company paid $14,407,794 (RMB90,000,000) to bank in March and June of 2015.

Other income, net decreased by $51,362 from $292,803 for the nine months period ended September 30, 2014 to $241,441 for the same period of 2015.

Cash Flow Discussion

Net cash flows provided by operating activities for the nine months period ended September 30, 2015 and 2014 were $2,320,719 and $1,259,484, respectively. The increase in net operating activities cash flow amounted to $1,061,235 or 84.3%, which is due primarily to the below factors:

The Company received in advance more cash from tenants, which increased by $145,604 or 210.3% for the nine months period ended September 30, 2015 compared with the same period of 2014;

The change of accounts receivable and other receivable increased by $158,370 or 47.9% for the nine months period ended September 30, 2015 compared with the same period of 2014 due to the Company collected more cash from the customers.

The Company reduced the payment of advance to suppliers, which increased cash $158,006 for the nine months period ended September 30, 2015 compared with the same period of 2014.

Net cash flows used in investing activities were not significant.

Net cash flows used in financing activities were $1,069,297 and $0 for the nine months period ended September 30, 2015 and 2014, respectively. In 2015 the Company made a bank loan repayment $ 14,407,794 (RMB 90,000,000) to the bank in March and June of 2015 which was substantially offset by the Company’s collection of a loan with a third party in the amount of $5,603,031(RMB 35,000,000) and the proceeds realized by the Company on the sale of common stock for $7,544,000 and a third party investment of $191,466 in the Company’s consumer products joint venture.

Liquidity and Capital Resources

Current liabilities exceeded current assets by $ 9,265,032 as of September 30, 2015. The Short Term Loans amounted to $6,576,877 (RMB 41,800,000), and accounted for about 71.0% of the working capital deficit. In March and June 2015, the Company repaid US$14,407,794 (RMB 90,000,000), leaving a remaining principal of US$ 6,576,877 (RMB 41,800,000) . The rest of the Short Term Loan is due in June 2016 and October 2016, and is secured by the Company’s real estate assets. It has become common practice in China, for banks and companies to renegotiate loan extensions on an annual basis. This is driven by the ever changing banking regulatory environment and a situation where banks are becoming more conservative. Under the circumstances, most lending banks have usually worked closely with borrowers for loan extension or restructuring within the administrative guidelines of the government. As State policies are issued outside the control of the banks in China and form part of the macro and micro-economic measures, many bankers and their customers work together to deal with the situation provided the borrowers are responsible.

Contractual Obligations

The following table was a summary of the Company’s contractual obligations as of September 30, 2015:

	Total		Less than one year		1-3 Years		Thereafter

Short-Term Debt	$	6,576,877	$	6,576,877	$	-	$	-
Long-Term Debt		-		-		-		-
Amounts due to related parties		-		-		-		-
Construction commitments		-		-		-		-
Total Contractual Cash Obligations	$	6,576,877	$	6,576,877	$	-	$	-

PART II. OTHER INFORMATION.

Item 6. Exhibits.

Copies of the following documents are included or furnished as exhibits to this report, pursuant to Item 601 of Regulation S-K.

Exhibit No.	SEC Ref. No.	Title of Document

31.1	31	The certification of chief executive officer and chief financial officer required by Rule 13a-14(a) or Rule 15d-14(a)

32.1	32	The certifications required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. Section 1350

SIGNATURES

In accordance with the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	GREAT CHINA INTERNATIONAL HOLDINGS, INC.



Date: November 16, 2015	By:	/s/ Frank Jiang
		Frank Jiang, CEO (Principal Executive Officer) (Principal Financial and Accounting Officer)

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