HH Biotechnology (HHBT) 10-Q 2012 Q1 Quarterly report

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 March 31, 2012

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

For the transition period from          to

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). (check one)

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 April 30, 2012, there were 11,759,966 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 March 31, 2012 (Unaudited) and December 31, 2011
	Statements of Operations for the Three-Month Periods Ended March 31, 2012 and 2011 (Unaudited)
	Statements of Cash Flows for the Three-Month Periods Ended March 31, 2012 and 2011 (Unaudited)
	Notes to the Financial Statements
	Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3.  Quantitative and Qualitative Disclosures About Market Risk
	Item 4.  Controls and Procedures
PART II.	Other Information
	Item 6.  Exhibits
	Signatures

GREAT CHINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
AS OF MARCH 31, 2012 AND DECEMBER 31, 2011
(UNAUDITED)
			March 31, 2012		December 31, 2011
ASSETS
Current assets:
	Cash and cash equivalents		$	6,468,882	$	6,294,500
	Accounts receivable, net			179,804		12,782
	Other receivable, net			280,776		233,634
		Total current assets		6,929,461		6,540,916
Long-term loan receivable				4,811,433		5,131,953
Property and equipment, net				290,430		313,679
Rental property, net				48,594,958		49,420,220
Total assets			$	60,626,282	$	61,406,768
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Bank loans		$	20,928,940	$	20,940,911
	Accounts payable			4,497,041		4,515,394
	Accrued expenses			231,502		165,418
	Other payable			2,057,820		2,031,351
	Payable to disposed subsidiaries			833,894		834,371
	Advances from buyers			1,208,213		1,327,291
	Taxes payable			4,289,765		4,369,834
Total current liabilities				34,047,175		34,184,571
Total liabilities				34,047,175		34,184,571
Stockholders' equity:
	Common stock,  $.001 par value 50,000,000 shares authorized,
	11,759,966  issued and outstanding
	as of Mar. 31, 2012 and Dec. 31,2011			11,760		11,760
	Additional paid in capital			4,566,156		4,566,156
	Statutory reserve			638,128		638,128
	Accumulated other comprehensive income			4,239,605		4,256,243
	Retained earnings			17,123,459		17,749,911
Total stockholders' equity				26,579,107		27,222,198
Total liabilities and stockholders' equity			$	60,626,282	$	61,406,768
The accompanying notes are integral part of these unaudited consolidated financial statements.

GREAT CHINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME/(LOSS)
FOR THE THREE MONTHS ENDED MARCH 31,2012 AND 2011
(UNAUDITED)
			MARCH 31
			2012		2011
Revenues
	Rental income		$	1,458,515	$	1,227,373
	Management fee income			514,324		484,530
	Total revenues			1,972,839		1,711,903
Cost of revenues
	Rental cost			999,801		1,006,297
	Management fee cost			582,908		572,502
	Total cost of revenues			1,582,709		1,578,799
	Gross profit			390,130		133,104
Operation expenses
	Selling expenses			17,041		17,872
	General and administrative expenses			468,237		666,974
	Depreciation and amortization			22,224		21,532
	Total operation expenses			507,503		706,378
Loss from operations				(117,373)		(573,274)
Other income (expense)
	Disposal of parking lots income			-		281,069
	Other income, net			33,734		51,169
	Interest and finance costs			(542,648)		(492,740)
		Total other expense		(508,915)		(160,502)
Net Loss				(626,287)		(733,775)
Other comprehensive income (loss):
	Foreign currency translation adjustment			(16,639)		216,551
Comprehensive loss			$	(642,926)	$	(517,224)
Net income (loss) per share
	Basic		$	(0.05)	$	(0.04)
	Diluted		$	(0.05)	$	(0.04)
Weighted average number of shares outstanding
	Basic			11,759,966		11,759,966
	Diluted			11,759,966		11,759,966
The accompanying notes are integral part of these unaudited consolidated financial statements.

GREAT CHINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2012 AND 2011
(UNAUDITED)
		For the Three Months Ended March 31
		2012		2011
Cash flows from operating activities:
Net loss		$	(626,287)	$	(733,775)
Adjustments to reconcile net loss to to net cash (used in) provided by operating activities:
Net cash (used in) provided by operating activities
	Depreciation and amortization		882,815		777,290
	Provision for doubtful accounts		-		32,818
Changes in operating assets and liabilities:
	Accounts receivable and other receivable		(217,126)		(46,695)
					-
	Advances to suppliers		8,502		-
Increase/(decrease) in current liabilities:
	Accounts payable and accrued expenses		74,713		68,767
	Advances from buyers		(115,183)		(38,921)
	Income and other taxes payable		(75,516)		(2,641)
Net cash (used in) provided by operating activities			(68,082)		56,842
Cash flows from investing activities:
	Purchases of property & equipment		-		(1,473)
	Sale of property & equipment		718		-
Net cash provided by (used in) investing activities			718		(1,473)
Cash flows from financing activities:
	loan to third party		-		(2,290,671)
	Repayment of loan to third party		309,169		-
Net cash provided by (used in) financing activities			309,169		(2,290,671)
Effect of exchange rate			(67,423)		76,005
Net increase (decrease) in cash and cash equivalents			174,382		(2,159,296)
Cash and cash equivalents, beginning of period			6,294,500		9,584,071
Cash and cash equivalents, end of period		$	6,468,882	$	7,424,774
Supplemental disclosures of cash flow information:
	Interest paid	$	542,531	$	498,321
	Income taxes	$	-	$	-
The accompanying notes are integral part of these unaudited consolidated financial statements.

GREAT CHINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED 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, 2011. The results of the three month periods ended Mar 31, 2012 are not necessarily indicative of the results to be expected for the full fiscal year ending December 31, 2012.

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), 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 March 31, 2012 and December 31,2011, the Company reserved $1,698,843 and $1,699,814 respectively, for other receivable bad debt, and $695,281 and $695,678, respectively, for accounts receivable bad debt. The Company also reserved $1,984,915 and $1,986,050 respectively for loans receivable.

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 March 31, 2012 and December 31, 2011 respectively.

Real estate held for development or sale

The Company capitalizes as real estate held for development or sale, the direct construction and development costs, property taxes, interest incurred on costs related to land under development and other related costs (i.e. engineering, surveying, landscaping, etc.) until the property reaches its intended use. As of the December 31, 2010, except the parking spaces, all the merchantable real estates of Qiyuan New Village, Peacock Garden, Chenglong Garden had been sold. As of March 31,2012 and December 31, 2011, real estate held for development or sale amounted to zero.

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 March 31,2012 and December 31, 2011, net property held for rental amounted to $48,594,958 and $49,420,220, respectively. Accumulated depreciation of rental properties amounted to $24,185,110 as of March 31,2012 and $23,402,215 as of December 31, 2011.

Revenue recognition

Real estate sales – Revenue from the sales of development properties is recognized by the full accrual method when the sale is consummated. A sale is not considered consummated until (1) the parties are bound by the terms of a contract, (2) all consideration has been exchanged, (3) any permanent financing of which the seller is responsible has been arranged, (4) all conditions precedent to closing have been performed, (5) the seller does not have substantial continuing involvement with the property, and (6) the usual risks and rewards of ownership have been transferred to the buyer. Sales transactions not meeting all the conditions of the full accrual method are accounted for using the deposit method of accounting. Under the deposit method, all costs are capitalized as incurred, and payments received from the buyer are recorded as a deposit liability.

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.

Real estate capitalization and cost allocation – Real estate held for development or sale is stated at cost or estimated net realizable value, whichever is lower. Costs include land and land improvements, direct construction costs and development costs, including predevelopment costs, interest on indebtedness, real estate taxes, insurance, construction overhead and indirect project costs. Selling and advertising costs are expensed as incurred. Total estimated costs of multi-unit developments are allocated to individual units based upon specific identification methods.

Impairment – If real estate is determined to be impaired, it will be written down to its fair market value. Real estate held for development or sale costs include the cost of land use rights, land development and home construction costs, engineering costs, insurance costs, wages, real estate taxes, and interest related to development and construction. All costs are accumulated by specific projects and allocated to residential and commercial units within the respective projects. The Company leases the land for the residential unit sites under land use rights with various terms from the government of the PRC. The Company evaluates the carrying value for impairment based on the undiscounted future cash flows of the assets. Write-downs of inventory deemed impaired would be recorded as adjustments to the cost basis. No depreciation is provided for construction in progress.

Other income

Other income consists of land leveling income, parking lot income, cleaning income and etc, of which land leveling income was a one-time service performed at the request of our customers. 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 per share

Basic earnings per share is computed by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted earnings 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 March 31, 2012 and December 31, 2012, 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 as the effect of options outstanding at that time was anti- dilutive.

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 two major banks in China. The aggregate balance in such accounts as of March 31, 2012 was $ 6,330,775. 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

In December 2011, the FASB issued guidance on offsetting (netting) assets and liabilities. Entities are required to disclose both gross information and net information about both instruments and transactions eligible for offset in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting arrangement. The new guidance is effective for annual periods beginning after January 1, 2013. The Company does not believe that this will have a material impact on its consolidated financial statements.

In June 2011, the FASB issued amended guidance on the presentation of comprehensive income. The amendments provide an entity with an option to present the total of comprehensive income, the components of net income and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. The guidance is effective for fiscal years, and interim periods within those years beginning after December 15, 2011 and should be applied on a retrospective basis. As the amendments are limited to presentation only, the Company does not believe that this will have a material impact on its consolidated financial statements.

Reclassifications

Certain amounts in the 2011 financial statements may have been reclassified to conform to the 2012 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 $27,117,713 and $27,643,654 as of March 31, 2012 and December 31, 2011, respectively.. As the Company has limited cash flow from operations, its ability to maintain normal operations is dependent upon obtaining adequate cash to finance its overhead, sales and marketing activities. Additionally, in order for the Company to meet its financial obligations, including salaries, debt service and operations, it has maintained substantial short term bank loans that have historically been renewed each year. The Company’s ability to meet its cash requirements for the next twelve months largely depends on the bank loans that involve interest expense requirements that reduce the amount of cash we have for our operations. These factors raise substantial doubt about the Company's ability to continue as a going concern.

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.

4.   Loans receivable

During 2011, the Company entered into a collateralized loan agreement with Beijing Sihai Real Estate Development Ltd., pursuant to which the Company loaned $2,748,693, due on November 29, 2013. The loan bears interest at a variable rate based on the Peoples’ Bank of China lending rate applicable to the period plus 10%. $317,586 of repayment from Beijing Sihai Real Estate Development Ltd was received during 2012 first quarter.

During 2011, the Company entered into a collateralized loan agreement with Shenyang Landing Concrete Ltd. Company, pursuant to which, the Company loaned $2,383,260, 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 and Kaiyuan Hongyun Concrete Admixture Ltd. with the same terms.

During 2009, the Company entered into an uncollateralized loan agreement with Zhongxin Guoan Ltd., pursuant to which the Company loaned $1,986,050, 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.  Subsequent to the issuance of the loan, the Company determined that the loan was uncollectible and recorded a reserve on the entire loan amount.  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 Zhongxin Guoan Ltd.  The loan remains uncollateralized and is now due on November 24, 2013. The loan 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:

	March 31, 2012		December 31, 2011
Building	$	15,578	$	15,587
Automobile		1,169,337		1,170,005
Office equipment & Furniture		554,305		555,469
		1,739,220		1,741,061
Accumulated depreciation		(1,448,790)		(1,427,382)
Property and equipment, net	$	290,430	$	313,679

The Company recorded depreciation expense relating to properties held for rental, as well as property and equipment amounting to $882,815 and $777,290 for the first three month ended of 2012 and 2011, respectively, of which, $22,224 and $21,532 were recorded as general and administrative expense, respectively.

As of March 31, 2012, fixed assets and rental property totaling $31,018,244 were pledged as security for various bank loans totaling $20,928,940.

6.   Accrued expenses

Accrued expenses consisted of the following:

	March 31, 2012		December 31, 2011
Payroll and welfare payable	$	111,928	$	112,083
Accrued expenses		119,574		53,335
Total	$	231,502	$	165,418

7.   Other payables

Other payables consisted of the following:

	March 31, 2012		December 31, 2011
Customer guarantee deposit	$	1,071,544	$	1,044,960
Customer deposit for property decoration		17,443		19,042
Miscellaneous payable		968,833		967,349
Total	$	2,057,820	$	2,031,351

8.   Tax payables

Tax payables consisted of the following:

	March 31, 2012		December 31, 2011
Income tax payable in Mainland China	$	1,217,055	$	1,217,751
Income tax payable in Hong Kong
Business tax		657,361		685,396
Land VAT payable		2,383,557		2,390,499
Other levies		31,792		76,188
Total	$	4,289,765	$	4,369,834

In 2007, the Company sold its interest in Loyal Best, a subsidiary of the Company, booking a gain and the corresponding income tax of $5,049,321. GCIH initially acquired Loyal Best to obtain land use rights for development of real estate assets. Based on an assessment from the taxing authority in Hong Kong, the Company was provided relief of income taxes payable in Hong Kong of $5,049,321 during the year-ended December 31, 2011.

9.   Payable to disposed subsidiary

The Company had amounts due to a Loyal Best, a previously disposed of entity, as of March 31,2012 and December 31, 2011 in the amount of $833,894and $834,371, respectively.

10.   Loan Payable

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

Nature	Due on	Interest per Annum	March 31, 2012		December 31, 2011
Bank loan	6-12-2012	8.775%	$	6,351,727	$	6,355,360
Bank loan	10-13-2012	10.395%		14,577,213		14,585,551
				20,928,940		20,940,911
Less current portion				20,928,940		20,940,911
			$	-	$	-

The above loans are secured by Company rental properties.

As of  March 31,2012 and 2011, the Company’s accrued  interest and finance cost amounted to $542,648 and $492,740  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.
iv.	Allocations to the discretionary surplus reserve, if approved in the stockholders’ general meeting.

The Company did not contribute to statutory reserve for the three month ended of March 31 2012 and 2011, 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 2011 and 2010, the Company was organized into two main business segments: (1) Property for sale, 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 three month ended of March 31,2012 and2011, respectively.

			March 31
			2012		2011
Revenues from unaffiliated customers:
	Rental Business		$	1,458,515	$	1,227,374
	Management Business			514,324		484,530
		Consolidated	$	1,972,839	$	1,711,903
Operating income (loss):
	Rental Business		$	97,613	$	(334,885)
	Management Business			(211,267)		(180,710)
	Corporation (1)			(3,719)		(57,679)
		Consolidated	$	(117,373)	$	(573,274)
Net income (loss) before taxes:
	Rental Business		$	(443,619)	$	(531,465)
	Management Business			(178,647)		(144,360)
	Corporation (1)			(4,022)		(57,951)
		Consolidated	$	(626,287)	$	(733,775)
Identifiable assets:
	Rental Business		$	59,868,931	$	57,627,841
	Management Business			348,638		1,163,819
	Corporation (1)			408,713		1,340,264
		Consolidated	$	60,626,282	$	60,131,925
Depreciation and amortization:
	Rental Business		$	21,143	$	16,494
	Management Business			1,082		5,038
	Corporation (1)
		Consolidated	$	22,224	$	21,532
Capital expenditures:
	Rental Business		$	-	$	-
	Management Business
	Corporation (1)					1,159
		Consolidated	$	-	$	1,159

(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

(1)  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.  Factors that could have a material and adverse impact on actual results are described in our annual report on Form 10-K for the year ended December 31, 2010, filed with the Securities and Exchange Commission on April 15, 2011.  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.

(2)  Executive Summary

Great China International Holdings Inc., 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; Shenyang Maryland International Industry Company Limited and Silverstrand International Holdings Company Limited.

(3)  Results of Operations

Comparison of operations for the periods ended March 31, 2012 and 2011:

The Company incurred a net loss of $626,287 for first three month of 2012, an increase of $107,488, or 14.65%, compared with the same period of 2011. Components resulting in this increase are discussed below.

Sales revenues increased by $260,936 or 15.24% from $1,711,903 for first three month of 2011 to $1,972,839 for the same period of 2012. End of March 31,2012, both the rental income and management fee income increased during first three month in 2012 compared to the same period of 2011,of which the rental income increased by $231,142 or 18.83%`from $1,227,373 of 2011 to $1,458,515 for the same period of`2012, which is largely attributable to the Company increasing rental rates in 2012. The management fee income increased by $29,794 or 6.15% from $484,530 for 2011 to $514,324 for the same period of 2012.

Cost of revenue increased slightly in 2012 with 0.25% compared to2011 with first three month figures.

The rate of gross profit of rental business were 31% and 18% ,in first three month of 2012 and 2011,respectively, which increased by 13% . The rate of gross profit of management business increased by 5%  compared first three month of 2012 to the same period of 2011.These increase attributed to the constant increase of rental fee and management fee since last year, but the cost of management business and rental business remained  stable.

Selling expenses decreased by $831 or 4.65% from $17,872 for first three month of 2011 to $17,041 for the same period of 2012.

General and administrative expenses decreased by$198,737 or 29.8% from $666,974 for first three month of 2011 to $468,237 for the same period of 2012, the decrease mainly due from the company paid`an agent service fee about RMB 2,000,000 during first three month of last year, but there was no such service fee occurred in the same period of 2012.

Depreciation expense increased by $692 or 3.22% from $21,532 for first three month of 2011 to $22,224 for the same period of 2012. This increase was mainly due to the decrease of the exchange rate.

Interest and finance costs increased by $49,908 or 10.13% from $492,740 for first three month of 2011 to $542,648 for the same period of 2012, which is primarily the company accrued more interest in 2012 than the same period of 2011.

The company earned $281,069 income from disposal of parking lots in first three month of 2011, but there is no such business occurred during the same period of 2012.

 (4)  Cash Flow Discussion

Net cash flows provided by operating activities for first three month of 2012 and 2011 were negative $68,082 and positive $56,842, respectively. The decrease amounted to $124,924 or 220% ,this significant change  was due to the below three factors:

The first factor is that balance of account receivable the other receivable increased by $217,126 during the first three month of 2012, but only $46,695 increase during the same period of 2011. This resulted the cash flow from operating activity decrease by $170,431 compared first three month of 2012 to the same period of 2011.

The second factor is that the balance of advance from buyers decrease by $115,183 during the first three month of 2012, but during the same period of 2011, the decrease from advance from buyers only $38,921. which resulted that cash flow from operating activity decreased by $76,262 compared first three month of 2012 to the same period of 2011.

The last factor is the company paid more tax during the first three month of 2012 than the same period of 2011.

Net cash flows used in investing activities for the first three month of 2012 were not significant.

Net cash flows from financing activities were $309,169 and negative $2,290,671,during first three month of 2012 and 2011, respectively. The increase is due to the repayment of around $300,000 from the loan to a third party during 2012 first quarter.

(5)  Liquidity and Capital Resources

Current liabilities exceeded current assets by $27,117,713 as of March 31, 2012. The Short Term Loans amounted to $20,928,940, about 77% of the working capital deficit. They were bank loans due in June 2012 and October 2012, respectively, and secured by some of 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.

(6)  Contractual Obligations

The following table was a summary of the Company’s contractual obligations as of March 31, 2012:

	Total		Less than one year		1-3 Years		Thereafter
Short-Term Debt	$	20,928,940	$	20,928,940	$	-	$	-
Long-Term Debt				-				-
Amounts due to related parties		-		-		-		-
Construction commitments		-		-		-		-
Total Contractual Cash Obligations	$	20,928,940	$	20,928,940	$		$	-

Item 3.  Quantitative and Qualitative Disclosure About Market Risk

Disclosure under this item is not required of a smaller reporting company.

Item 4.  Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in rules and forms adopted by the Securities and Exchange Commission (“SEC”), and that such information is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures.

In connection with the preparation of this report, Great China International’s management, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, reassessed the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2011.  Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that Great China International’s disclosure controls and procedures were effective as of the end of the fiscal quarter on March 31, 2011, to ensure that information that is required to be disclosed by Great China International in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.  Notwithstanding the foregoing, a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures within Great China International to disclose information that is otherwise required to be set forth in its periodic reports.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the three-month period ended March 31, 2011, that have materially affected, or are likely to materially affect, our internal control over financial reporting.

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 required by   Rule 13a-14(a) or Rule 15d-14(a)
31.1	31	The certification of 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: May 21, 2012	By	/s/ Jiang Peng
		Jiang Peng, Chairman of the Board
		(Principal Executive Officer)
Date: May 21, 2012	By	/s/ Sun Dongqing
		Sun Dongqing, Chief Financial Officer
		(Principal Financial and Accounting Officer)