Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarter ended August 31, 2010
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OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Commission file number 333-165751
Santaro Interactive Entertainment Company
(Exact name of registrant as specified in its charter)
Nevada
(State or other jurisdiction of incorporation or organization)
5348 Vegas Drive, Las Vegas, NV 89108
(Address of principal executive offices, including zip code.)
(702) 871-8678
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has 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-Y (§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 ¨ NO ¨ Not required
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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Smaller reporting company
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x
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
YES ¨ NO x
As of October 20, 2010, there are 67,500,000 shares of common stock outstanding.
All references in this Report on Form 10-Q to the terms “we,” “our,” “us,” the “Company,” “Santaro,” and the “Registrant” refer to Santaro Interactive Entertainment Company unless the context indicates another meaning.
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PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The unaudited interim financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The financial statements and notes are presented as permitted on Form 10-Q and do not contain information included in the Company’s annual statements and notes. Certain information and footnote 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 disclosures are adequate to make the information presented not misleading. It is suggested that these financial statements be read in conjunction with the February 28, 2010 audited financial statements and the accompanying notes thereto. While management believes the procedures followed in preparing these financial statements are reasonable, the accuracy of the amounts are in some respects dependent upon the facts that will exist, and procedures that will be accomplished by the Company later in the year. These unaudited financial statements reflect all adjustments, including normal recurring adjustments which, in the opinion of management, are necessary to present fairly the operations and cash flows for the periods presented.
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Santaro Interactive Entertainment Company
(A Development Stage Company)
Index to the Financial Statements (Unaudited)
For the Period from December 30, 2009
(Inception) to August 31, 2010
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Santaro Interactive Entertainment Company
(A Development Stage Company)
Balance Sheets
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August 31, 2010
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February 28, 2010
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(Unaudited)
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ASSETS
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Current assets:
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Cash
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$ | 974 | $ | 12,268 | ||||
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Prepaid expenses
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- | 8,669 | ||||||
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Total current assets
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974 | 20,937 | ||||||
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Other assets:
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Intangible assets, net
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6,116 | 6,282 | ||||||
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Total assets
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$ | 7,090 | $ | 27,219 | ||||
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current liabilities:
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Accounts payable
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$ | 2,950 | $ | 6,844 | ||||
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Total current liabilities
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2,950 | 6,844 | ||||||
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Stockholders' Equity:
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Common stock, par value $.001, 100,000,000 shares authorized, 11,830,000 issued and outstanding
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11,830 | 11,830 | ||||||
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Additional paid-in capital
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21,249 | 10,085 | ||||||
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Deficit accumulated during the development stage
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(28,939 | ) | (1,540 | ) | ||||
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Total stockholders' equity
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4,140 | 20,375 | ||||||
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Total liabilities and stockholders' equity
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$ | 7,090 | $ | 27,219 | ||||
See accompanying notes to the financial statements (Unaudited).
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Santaro Interactive Entertainment Company
(A Development Stage Company)
Statements of Operations (Unaudited)
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For the Three Months Ended August 31, 2010
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For the Six Months Ended August 31, 2010
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For the Period from December 30, 2009 (Inception) to August 31, 2010
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Revenues:
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$ | - | $ | - | $ | - | ||||||
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Operating expenses:
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Selling, general, and administrative
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13,009 | 27,399 | 28,939 | |||||||||
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Operating loss before income taxes
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(13,009 | ) | (27,399 | ) | (28,939 | ) | ||||||
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Income tax (expense) benefit
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- | - | - | |||||||||
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Net loss available to common stockholders
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$ | (13,009 | ) | $ | (27,399 | ) | $ | (28,939 | ) | |||
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Basic and diluted loss per common share
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(0.00 | ) | (0.00 | ) | ||||||||
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Weighted average shares outstanding
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11,830,000 | 11,830,000 | ||||||||||
See accompanying notes to the financial statements (Unaudited).
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Santaro Interactive Entertainment Company
(A Development Stage Company)
Statement of Cash Flows (Unaudited)
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For the Six Months Ended August 31, 2010
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For the Period from December 30, 2009 (Inception) to August 31, 2010
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Cash flows from operating activities:
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Net loss
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$ | (27,399 | ) | $ | (28,939 | ) | ||
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Amortization of intangible assets
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166 | 194 | ||||||
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Adjustments to reconcile net loss to net cash used in operating activities:
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Accounts payable
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2,306 | 2,950 | ||||||
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Prepaid expenses
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8,669 | - | ||||||
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Net cash used in operating activities
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(16,258 | ) | (25,795 | ) | ||||
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Cash flows from investing activities:
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Purchase of intangible assets
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(6,200 | ) | (6,310 | ) | ||||
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Net cash used in investing activities
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(6,200 | ) | (6,310 | ) | ||||
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Cash flows from financing activities:
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Issuance of common stock for cash
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- | 21,915 | ||||||
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Contributed capital
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11,164 | 11,164 | ||||||
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Net cash provided by financing activities
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11,164 | 33,079 | ||||||
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Net increase (decrease) in cash
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(11,294 | ) | 974 | |||||
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Cash at beginning of period
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12,268 | - | ||||||
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Cash at end of period
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$ | 974 | $ | 974 | ||||
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Supplemental Disclosures:
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Cash paid for interest
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$ | - | $ | - | ||||
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Cash paid for income taxes
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$ | - | $ | - | ||||
See accompanying notes to the financial statements (Unaudited).
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Santaro Interactive Entertainment Company
(A Development Stage Company)
Notes to the Financial Statements (Unaudited)
For the Period from December 30, 2009 (Inception) to August 31, 2010
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1)
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ORGANIZATION
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Santaro Interactive Entertainment Company (the “Company”) was incorporated on December 30, 2009 in the State of Nevada. The Company’s accounting and reporting policies conform to accounting principles generally accepted in the United States of America, and the Company’s fiscal year end is February 28.
The Company’s intended operations are to develop and market online interactive gaming products. The Company currently owns the right and title to technology relating to an interactive gaming platform acquired through a Technology Assignment Agreement. To date, the Company’s activities have been limited to its formation, minimal operations, and the raising of equity capital.
DEVELOPMENT STAGE COMPANY
The Company is considered to be in the development stage as defined in ASC 915, Development Stage Entities. The Company’s efforts have been devoted primarily to raising capital, borrowing funds and attempting to implement its planned, principal activities.
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2)
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SIGNIFICANT ACCOUNTING POLICIES
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USE OF ESTIMATES
The preparation of the Company’s 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 amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company’s periodic filings with the Securities and Exchange Commission include, where applicable, disclosures of estimates, assumptions, uncertainties, and markets that could affect the financial statements and future operations of the Company.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 2009, the FASB established the Accounting Standards Codification (“Codification” or “ASC”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in accordance with generally accepted accounting principles in the United
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Santaro Interactive Entertainment Company
(A Development Stage Company)
Notes to the Financial Statements (Unaudited)
For the Period from December 30, 2009 (Inception) to August 31, 2010
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2)
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SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (CONTINUED)
States (“GAAP”). Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) issued under authority of federal securities laws are also sources of GAAP for SEC registrants. Existing GAAP was not intended to be changed as a result of the Codification, and accordingly the change did not impact our financial statements. The ASC does change the way the guidance is organized and presented.
Statement of Financial Accounting Standards (“SFAS”) No. 165 (ASC Topic 855), “Subsequent Events,” SFAS No. 166 (ASC Topic 810), “Accounting for Transfers of Financial Assets-an Amendment of FASB Statement No. 140,” SFAS No. 167 (ASC Topic 810), “Amendments to FASB Interpretation No. 46(R),” and SFAS No. 168 (ASC Topic 105), “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles- a replacement of FASB Statement No. 162” were recently issued. SFAS No. 165, 166, 167, and 168 have no current applicability to the Company or their effect on the financial statements would not have been significant.
Accounting Standards Update (“ASU”) ASU No. 2009-05 (ASC Topic 820), which amends Fair Value Measurements and Disclosures – Overall, ASU No. 2009-13 (ASC Topic 605), Multiple Deliverable Revenue Arrangements, ASU No. 2009-14 (ASC Topic 985), Certain Revenue Arrangements that include Software Elements, and various other ASU’s No. 2009-2 through ASU No. 2010-25 which contain technical corrections to existing guidance or affect guidance to specialized industries or entities were recently issued. These updates have no current applicability to the Company or their effect on the financial statements would not have been significant.
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3)
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MATERIAL TRANSACTIONS
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During the three month period ended August 31, 2010, the Company amended its Articles of Incorporation in the state of Nevada, whereby the Company increased the number of authorized common shares from 75,000,000 to 100,000,000. The par value per share remained the same at $0.001 per share. The amended Articles of Incorporation were approved by majority vote of the Company’s stockholders.
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Santaro Interactive Entertainment Company
(A Development Stage Company)
Notes to the Financial Statements (Unaudited)
For the Period from December 30, 2009 (Inception) to August 31, 2010
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4)
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GOING CONCERN AND LIQUIDITY CONSIDERATIONS
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The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. As of August 31, 2010, the Company has negative working capital totaling $1,976 and an accumulated deficit totaling $28,939. The Company intends to fund operations through equity financing arrangements, which may be insufficient to fund its capital expenditures, working capital, and other cash requirements for the next twelve months.
The ability of the Company to emerge from the development stage is dependent upon, among other things, obtaining additional financing to continue operations, and to develop, patent, and market its patent-pending technology. In response to these problems, management intends to raise additional funds through public or private placement offerings. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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5)
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SUBSEQUENT EVENTS
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On October 12, 2010, the Company entered into a Share Exchange Agreement (the “Exchange Agreement”), with Santaro Holdings, Ltd. (“SHL”), a limited liability company organized under the laws of British Virgin Islands. Pursuant to the terms of the Exchange Agreement, the SHL shareholders transferred to the Company 100% of the outstanding shares of SHL in exchange for the issuance of 55,670,000 restricted shares of the Company’s common stock. SHL is a holding company which has a 100% ownership interest in Santaro Investments, Ltd., a Hong Kong company, which in turn has a 100% ownership interest in Ningbo Santaro Network Technology Co., Ltd, a Wholly Foreign Owned Enterprise (“WFOE”) established in the People’s Republic of China. Through control of the WFOE, the Company controls Beijing Santaro Technology Co., Ltd, a company organized under the laws of the People’s Republic of China and engaged in the development and operation of online games.
As a result of the Exchange Agreement, there was a change in control and the Company’s management. On October 12, 2010, Mr. James D. Edsall resigned from all positions as officer and director, while Mr. Zhilian Chen was elected as Chief Executive Officer and President, Yan Dong was elected as the Chief Financial Officer, and Sixiao Yan was elected as the Chief Operating Officer of the Company. Also on October 12, 2010, Mr. Zhilian Chen, Xiongbing Zhong, Mingyang Li, Yanjie Shao, David Cohen and Ji Chen were appointed as Directors of the Company.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements and Associated Risks.
The following discussion should be read in conjunction with the financial statements and the notes to those statements included elsewhere in this Quarterly Report on Form 10-Q. This Quarterly Report on Form 10-Q contains certain statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Certain statements contained in the MD&A are forward-looking statements that involve risks and uncertainties. The forward-looking statements are not historical facts, but rather are based on current expectations, estimates, assumptions and projections about our industry, business, and future financial results. Our actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors, including those discussed in other sections of this Quarterly Report on Form 10-Q.
Our Company
Santaro Interactive Entertainment Company was incorporated in the State of Nevada, United States of America, on December 30, 2009. Its fiscal year end is February 28.
Santaro Interactive Entertainment Company is focused on digital interactive entertainment products, primarily in developing and operating interactive online games based on our proposed proprietary Character Adapted Gaming Platform. As a newcomer to the digital interactive entertainment industry, our ultimate objective is to provide premier digital interactive entertainment products that perform within a virtual reality environment. Our proposed proprietary gaming platform will be designed to allow a player to interact with other users in a player designed action scenario. The virtual reality environment will also provide a marketplace for vendors of virtual items, as well as real-world advertisers to do business. We will primarily generate income through user licensing, while fees generated from the virtual marketplace will provide a secondary source of income for the Company. Our proposed product is in the early stages of development and we do not currently have a marketable product. We are currently planning to establish a web site to help introduce our proposed gaming platform to the online gaming world.
We are a development stage company and have limited active business operations and no significant assets. We have no revenues and have incurred losses since our inception on December 30, 2009. The Company to date has funded its initial operations through the issuance of 11,830,000 shares of capital stock for net proceeds of $21,915, and $11,164 in capital contributed by our majority stockholder. Due to the uncertainty of our ability to generate sufficient revenues from our operating activities and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due, in their report on our financial statements for the period from inception (December 30, 2009) to February 28, 2010, our registered independent auditors included additional comments indicating concerns and substantial doubt about our ability to continue as a going concern. Our audited financial statements for the period ended February 28, 2010, filed with the United States
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Securities and Exchange Commission, contain additional note disclosures describing the circumstances that led to this disclosure by our registered independent auditors. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
On October 12, 2010, the Company entered into a Share Exchange Agreement (the “Exchange Agreement”), with Santaro Holdings, Ltd. (“SHL”), a limited liability company organized under the laws of British Virgin Islands. Pursuant to the terms of the Exchange Agreement, the SHL shareholders transferred to the Company 100% of the outstanding shares of SHL in exchange for the issuance of 55,670,000 restricted shares of the Company’s common stock. SHL is a holding company which has a 100% ownership interest in Santaro Investments, Ltd., a Hong Kong company, which in turn has a 100% ownership interest in Ningbo Santaro Network Technology Co., Ltd, a Wholly Foreign Owned Enterprise (“WFOE”) established in the People’s Republic of China. Through control of the WFOE, the Company controls Beijing Santaro Technology Co., Ltd, a company organized under the laws of the People’s Republic of China and engaged in the development and operation of online games.
As a result of the Exchange Agreement, there was a change in control and the Company’s management. On October 12, 2010, Mr. James D. Edsall resigned from all positions as officer and director, while Mr. Zhilian Chen was elected as Chief Executive Officer and President, Yan Dong was elected as the Chief Financial Officer, and Sixiao Yan was elected as the Chief Operating Officer of the Company. Also on October 12, 2010, Mr. Zhilian Chen, Xiongbing Zhong, Mingyang Li, Yanjie Shao, David Cohen and Ji Chen were appointed as Directors of the Company.
These events were fully disclosed in Forms 8-K filed with the SEC on October 18, 2010 and September 10, 2010.
Results of Operations
Due to our lack of funds, our operations are very limited. As a result, we realized no revenue during the period of inception through August 31, 2010, and inflation and changing prices have had no impact on the Registrant's revenues or income from continuing operations since inception.
While the Registrant currently owns the rights to one pending U.S. patent application, it remains uncertain whether the patent application will ever issue. Furthermore, our patent counsel informs us that the cost of both obtaining and enforcing patent protection is difficult to estimate. The inability to obtain or enforce patent protection on our online gaming platform may have a material unfavorable impact on our ability to earn revenue or income from continuing operations.
Liquidity and Capital Resources
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates, among other things, the realization of assets
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and satisfaction of liabilities in the normal course of business. As of August 31, 2010, the Company has a negative working capital of $1,976 and an accumulated deficit of $28,939.
Since we initiated our business operations, we have been funded primarily by the private sale of equity to investors. The Company to date has funded its initial operations through $11,164 in capital contributed by its majority stockholder, and the issuance of 11,830,000 shares of capital stock for the net proceeds of $21,915.
We currently have very little cash on hand and no other liquid assets. Therefore, in order to carry on our business, we must obtain additional capital. The Company intends to fund continuing operations through equity financing arrangements, which may be insufficient to fund its capital expenditures, working capital, and other cash requirements for the next twelve months.
Recent Accounting Pronouncements
See Note 2 to the Financial Statements.
Off Balance Sheet Arrangements
None.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we have conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer concluded as of the evaluation date that our disclosure controls and procedures were effective such that the material information required to be included in our Securities and Exchange Commission reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms relating to our company, particularly during the period when this report was being prepared.
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Additionally, there were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the evaluation date. We have not identified any significant deficiencies or material weaknesses in our internal controls, and therefore there were no corrective actions taken.
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Currently we are not involved in any pending litigation or legal proceeding.
ITEM 1A. RISK FACTORS
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
Removed and Reserved.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
The following documents are filed as a part of this report or are incorporated by reference to previous filings, if so indicated:
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Exhibit No.
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Description
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3.1
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Articles of Incorporation (1)
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3.2
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Bylaws (1)
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*filed herewith
(1) Incorporated by reference to the Form S-1 registration statement filed on March 29, 2010.
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.
| October 20, 2010 | |
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| By: SANTARO INTERACTIVE ENTERTAINMENT COMPANY | |
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By: /s/ Zhilian Chen
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Zhilian Chen, President
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