Attached files
file | filename |
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EX-31 - EXHIBIT 31 - CHINA MEDIA INC. | exhibit312.htm |
EX-32 - EXHIBIT 32 - CHINA MEDIA INC. | exhibit321.htm |
EX-31 - EXHIBIT 31 - CHINA MEDIA INC. | exhibit311.htm |
EX-32 - EXHIBIT 32 - CHINA MEDIA INC. | exhibit322.htm |
EXCEL - IDEA: XBRL DOCUMENT - CHINA MEDIA INC. | Financial_Report.xls |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2013
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission file number: 333-150952
China Media Inc.
(Exact name of registrant as specified in its charter)
Nevada |
| 46-0521269 |
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
Room 10128, No. 269-5-1 Taibai South Road, Yanta District, Xi'an City, Shaan'xi Province, China |
| 710068 |
(Address of principal executive offices) |
| (Zip Code) |
Registrant's telephone number, including area code: (86) 298765-1114
Copy of Communications to:
Bernard & Yam, LLP
140-75 Ash Avenue, Suite 2D
Queens, NY 11355
Phone: 212-219-7783
Facsimile: 212-219-3604
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days [X] Yes [ ] No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-K (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [X] Yes [ ] 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.
[ ] Large accelerated filer Accelerated filer | [ ] Non-accelerated filer |
[X] Smaller reporting company |
|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
[ ] Yes [X] No
As of February 14, 2014, the registrant had 39,750,000 shares of common stock outstanding.
1
Table of Contents
PART I - FINANCIAL INFORMATION |
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Item 1. Financial Statements |
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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. Quantitative and Qualitative Disclosures About Market Risk |
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Item 4. Controls and Procedures |
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PART II - OTHER INFORMATION |
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Item 1. Legal Proceedings |
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds |
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Item 3. Defaults Upon Senior Securities |
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Item 4. Submission of Matters to a Vote of Security Holders |
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Item 5. Other Information |
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Item 6. Exhibits |
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The unaudited interim consolidated financial statements of China Media Inc. (the Company, China Media, we, our, us) follow. All currency references in this report are to U.S. dollars unless otherwise noted.
CHINA MEDIA INC.
DECEMBER 31, 2013
(UNAUDITED)
Financial Statement Index
Consolidated Balance Sheets as of December 31, 2013 (Unaudited) and June 30, 2013 |
|
Consolidated Statements of Operations for the three and six months ended December 31, 2013 and 2012 (Unaudited) |
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Consolidated Statements of Cash Flows for the six months ended December 31, 2013 and 2012 (Unaudited) |
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Notes to the Consolidated Financial Statements (Unaudited) |
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2
CHINA MEDIA INC. | ||||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||||
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| |||||||||
|
|
| December 31, 2013 (Unaudited) |
| June 30, 2013 | |||||
Assets |
|
|
| |||||||
| Current assets |
|
|
| ||||||
|
| Cash and cash equivalents | $ 161,974 |
| $ 184,746 | |||||
|
| Accounts receivable, net of allowance of $39,889 and $39,493 at December 31, 2013 and June 30, 2013, respectively | 2,034,237 |
| 2,032,981 | |||||
|
| Notes receivable | 1,660,530 |
| 1,643,637 | |||||
|
| Prepaid and other receivable | 188,950 |
| 267,325 | |||||
| Total current assets | 4,045,691 |
| 4,128,689 | ||||||
|
|
|
|
|
| |||||
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| Fixed assets, net | 31,938 |
| 35,322 | |||||
|
| Intangible assets, net | 16,366 |
| 22,679 | |||||
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| Film costs | 3,490,395 |
| 3,442,526 | |||||
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|
|
|
| |||||
| Total assets | $ 7,584,390 |
| $ 7,629,216 | ||||||
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|
|
| |||||
Liabilities and Stockholders' Equity |
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|
| |||||||
| Current liabilities |
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|
| ||||||
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| Accounts payable | $ 9,658 |
| $ 15,681 | |||||
|
| Customer deposits | 43,205 |
| 162,274 | |||||
|
| Accrued liabilities and other payable | 259,774 |
| 262,255 | |||||
|
| Due to related parties | 210,667 |
| 136,790 | |||||
| Total current liabilities | 523,304 |
| 577,000 | ||||||
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|
|
|
|
| |||||
| Total liabilities | 523,304 |
| 577,000 | ||||||
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|
| |||||
Stockholders' equity |
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|
| |||||||
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| Common stock, $0.00001 par value, 180,000,000 shares authorized; 39,750,000 shares issued and outstanding at December 31, 2013 and June 30, 2013, respectively | $ 398 |
| $ 398 | |||||
|
| Additional paid-in capital | 11,172,740 |
| 11,168,616 | |||||
|
| Accumulated other comprehensive income | 1,171,084 |
| 1,098,903 | |||||
|
| Accumulated deficit | (5,283,136) |
| (5,215,701) | |||||
| Total stockholders' equity | 7,061,086 |
| 7,052,216 | ||||||
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| |||||
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| |||||
| Total liabilities and stockholders' equity | $ 7,584,390 |
| $ 7,629,216 |
The accompanying notes are an integral part of these unaudited consolidated financial statements.
3
CHINA MEDIA INC. | ||||||||||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME | ||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||
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| |||||||||||||||||
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| FOR SIX MONTHS ENDED DECEMBER 31, |
| FOR THREE MONTHS ENDED DECEMBER 31, | |||||||||||||||||||
| 2013 |
| 2012 |
| 2013 |
| 2012 | |||||||||||||||
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|
|
|
|
|
|
| |||||||||||||||
Revenues | $ - |
| $ 7,798 |
| $ - |
| $ 2,871 | |||||||||||||||
Cost of revenues | 1,612 |
| - |
| 1,612 |
| - | |||||||||||||||
Gross profit | (1,612) |
| 7,798 |
| (1,612) |
| 2,871 | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||
Selling, general and administrative | 170,275 |
| 161,380 |
| 115,355 |
| 105,396 | |||||||||||||||
Depreciation and amortization expense | 10,240 |
| 9,470 |
| 5,136 |
| 4,694 | |||||||||||||||
Total operating expenses | 180,515 |
| 170,850 |
| 120,491 |
| 110,090 | |||||||||||||||
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|
|
|
|
| |||||||||||||||
Other income (expense) |
|
|
|
|
|
|
| |||||||||||||||
Government grant | 79,032 |
| - |
| 79,032 |
| - | |||||||||||||||
Interest income | 39,784 |
| 22,030 |
| 25,129 |
| 11,125 | |||||||||||||||
Interest expense | (4,124 ) |
| - |
| (2,068) |
| - | |||||||||||||||
Net income (loss) before income taxes | (67,435) |
| (141,022) |
| (20,010) |
| (96,094) | |||||||||||||||
Income taxes | - |
| 176 |
| - |
| 176 | |||||||||||||||
Net income (loss) | $ (67,435) |
| $ (141,198) |
| $ (20,010) |
| $ (96,270) | |||||||||||||||
|
|
|
|
|
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| |||||||||||||||
Comprehensive income (loss) |
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|
|
|
|
|
| |||||||||||||||
Net income (loss) | (67,435) |
| (141,198) |
| (20,010) |
| (96,270) | |||||||||||||||
Foreign currency translation gain (loss) | 72,181 |
| 8,411 |
| 30,055 |
| 19,360 | |||||||||||||||
Comprehensive income (loss) | $ 4,746 |
| $ (132,788) |
| $ 10,045 |
| $ (76,911) | |||||||||||||||
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Net income (loss) per common share, basic and diluted | $ (0.00) |
| $ (0.00) |
| $ (0.00) |
| $ (0.00) | |||||||||||||||
Weighted average number of shares outstanding - basic and diluted | 39,750,000 |
| 39,750,000 |
| 39,750,000 |
| 39,750,000 | |||||||||||||||
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The accompanying notes are an integral part of these unaudited consolidated financial statements. |
4
CHINA MEDIA INC. | ||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||
FOR SIX MONTHS ENDED DECEMBER 31, 2013 AND 2012 (Unaudited) | ||||||||||
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| FOR SIX MONTHS ENDED DECEMBER 31, | ||||||
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| 2013 |
| 2012 | ||||
CASH FLOWS OPERATING ACTIVITIES |
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| |||||||
| Net income (loss) | $ (67,435) |
| $ (141,198) | ||||||
| Adjustments to reconcile net income to net cash provided by (used in) |
|
| |||||||
| operating activities: |
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|
| ||||||
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| Imputed interest | 4,124 |
| - | |||||
|
| Amortization expense | 6,512 |
| 6,345 | |||||
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| Depreciation expense | 3,728 |
| 3,125 | |||||
| Changes in operating assets and liabilities: |
|
|
| ||||||
|
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| Accounts receivable | 19,536 |
| 1,656 | ||||
|
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| Prepaid and other receivables |
| 12,320 | |||||
|
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| Accounts payable | (6,152) |
| (6,903) | ||||
|
|
| Accrued liabilities and other payables | (5,150) |
| 529 | ||||
|
|
| Customer deposits | (120,110) |
| (27,240) | ||||
|
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| Cash paid for film costs | (12,385) |
| (3,172,589) | ||||
Net cash used in operating activities | $ (96,631) |
| $ (3,323,955) | |||||||
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CASH FLOW INVESTING ACTIVITIES |
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| |||||||
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| Loans made to others | (1,022,511) |
| - | ||||
|
|
| Cash paid for purchase of fixed assets | - |
| (1,071) | ||||
|
|
| Collection of long term investments | - |
| 3,172,589 | ||||
|
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| Collection of notes receivable | 1,022,511 |
| 158,228 | ||||
Net cash provided by investing activities | - |
| 3,329,746 | |||||||
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|
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| ||||
CASH FLOW FINANCING ACTIVITIES |
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|
| |||||||
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| Proceeds from related parities | 72,095 |
| 87,055 | ||||
Net cash provided by financing activities | 72,095 |
| 87,055 | |||||||
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|
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|
|
|
| ||||
Effect of exchange rate changes on cash | 1,764 |
| 505 | |||||||
NET CHANGE IN CASH | (22,772) |
| 93,351 | |||||||
CASH AT BEGINNING OF THE PERIOD | 184,746 |
| 45,681 | |||||||
CASH AT END OF THE PERIOD | $ 161,974 |
| $ 139,032 | |||||||
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SUPPLEMENTAL INFORMATION: |
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| |||||||
| Interest paid | $ - |
| $ - | ||||||
| Income taxes paid | $ - |
| $ 7,513 | ||||||
|
|
|
|
The accompanying notes are an integral part of these unaudited consolidated financial statements.
5
CHINA MEDIA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
December 31, 2013
NOTE 1. Description of Business
China Media Inc. (the Company, China Media) formerly Protecwerx Inc., was incorporated in the State of Nevada on October 16, 2007.
Vallant Pictures Entertainment Co., Ltd. (Vallant,) was incorporated in the British Virgin Islands on May 23, 2007.
XiAn TV Media Co. Ltd. (XiAn TV) was incorporated in XiAn, ShaanXi Province, Peoples Republic of China (PRC) on March 9, 2005. XiAn TV is in the businesses of producing and developing television programming for the Chinese market.
On July 7, 2009, Fullead Overseas Limited, a company incorporated under the laws of the British Virgin Islands (the Buyer), entered into a share purchase agreement (the Share Purchase Agreement), pursuant to which the Buyer agreed to purchase a total of 32,500,000 shares of the Companys common stock, representing 85% of the total issued and outstanding shares of common stock of the Company on a fully-diluted basis. Bin Li, the Companys Director, is the owner and sole Director of the Buyer.
On September 16, 2009, the Company entered into a share exchange agreement (the Share Exchange Agreement) with Vallant and Bin Li, the Companys Director and the former sole shareholder of Vallant. According to the terms of the Share Exchange Agreement, the Company agreed to acquire the sole issued and outstanding common share of Vallant from Bin Li in exchange for 7,000 shares of the Companys common stock.
On November 30, 2009, the Company closed the transactions contemplated by the Share Exchange Agreement and acquired Vallant as its wholly owned subsidiary. Vallant has entered into a series of contractual obligations with XiAn TV as well as the holders of 62.61% of the voting shares of XiAn TV. In December 2009, the former shareholders of XiAn TV transferred all of its equity interest in the entity to three individuals, as a result of this change of control, Vallant and the new shareholders amended the series of contractual obligations in December 2009.
On September 17, 2010, Vallant and the holders of 100% of the voting shares of XiAn TV further amended the various consulting agreements and equity pledge agreement dated December 28, 2009. According to the amended agreements, XiAn TV will provide Vallant with 100% of its income. XiAn TV shareholders now pledged 100% of their equity interests in XiAn TV to Vallant to guarantee XiAn TVs performance of its obligations under the Business Operations Agreement.
In compliance with the PRCs laws and regulations, Vallant conducts all of the business in China through XiAn TV, a domestic Variable Interest Entity (VIE). It does this by controlling XiAn TV through various consulting agreements and equity pledge agreement dated June 20, 2007, as amended on December 28, 2009 and September 17, 2010, respectively.
According to the Business Services Agreement, Vallant has the exclusive right to provide services required in the regular course of business to XiAn TV, effectively restricting and controlling the operations of XiAn TV. In exchange, XiAn TV will provide Vallant with 100% (62.61% prior to September 17, 2010) of its income. Furthermore, the Business Operations agreement also states that Vallant has the right to control the appointment of the board members and senior executives of XiAn TV.
According to the Option Agreement, Vallant has the exclusive and irrevocable right to acquire 100% of the equity interests of XiAn TV if permitted under the PRC law. In the Equity Pledge Agreement, XiAn TV shareholders also pledged 100% (62.61% prior to September 17, 2010) of their equity interests in XiAn TV to Vallant to guarantee XiAn TVs performance of its obligations under the Business Operations Agreement.
In light of the above, Vallant has a controlling interest in XiAn TV based on the fact that:
· |
| Vallant has the ability to absorb 100% (62.61% prior to September 17, 2010) of the expected residual return from XiAn TV, which makes Vallant the primary beneficiary of XiAn TV. In the event XiAn TV fails to pay any required amounts, Vallant could exercise its right to acquire certain pledged shares in XiAn TV pursuant to a equity pledge agreement executed by and between Vallant and XiAn TV which guarantee all required payment; |
6
· |
| Vallant has the exclusive right to purchase all of the outstanding interests in XiAn TV, which would make XiAn TV a wholly-owned subsidiary of Vallant when its allowable under the PRC regulation; and |
· |
| Vallant could exercise absolute influence over XiAn TV through overseeing the board and senior executives of XiAn TV. |
|
Upon executing the above agreements, XiAn TV is considered a VIE and Vallant is its primary beneficiary. XiAn TV is consolidated into the Vallant under the guidance of FASB Accounting Standards Codification (ASC) 810, Consolidation.
The Company had 39,743,000 shares of our common stock issued and outstanding before the closing of the transactions contemplated by the Share Exchange Agreement. Upon the closing of the transactions, we issued 7,000 shares of our common stock to Bin Li, our Director and the former sole shareholder of Vallant. Mr. Li is the beneficial owner of 2,000,000 additional shares of our common stock. The 7,000 shares were issued in reliance upon an exemption from registration pursuant to Regulation S promulgated under the Securities Act of 1933, as amended (the Securities Act). Upon the closing of the Share Exchange, there were 39,750,000 shares of our common stock issued and outstanding.
The share exchange is being accounted for as a reverse merger, since the former sole shareholder of Vallant, Bin Li acquired the majority of the Companys common stock with the aim of completing the share exchange with Vallant, and Vallant is deemed to be the accounting acquirer in the reverse merger. Consequently, the assets and liabilities and the historical operations that will be reflected in the consolidated financial statements for periods prior to the Share Exchange Agreement will be those of Vallant and will be recorded at the historical cost basis. After the completion of the Share Exchange Agreement, the Companys consolidated financial statements will include the assets and liabilities of Vallant, the historical operations of Vallant and its subsidiaries from the closing date of the Share Exchange Agreement.
NOTE 2. Summary of Significant Accounting Policies
Basis of Presentation and Consolidation
The accompanying unaudited interim consolidated financial statements of China Media, Inc. (We or the Company), have been prepared in accordance with United States generally accepted accounting principles (U.S. GAAP) and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto contained in the Companys annual financial statements for the years ended June 30, 2013. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the consolidated financial statements which would substantially duplicate the disclosure contained in the audited financial statements for the year ended June 30, 2013 included in this document have been omitted.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes, including estimates of ultimate revenues and ultimate costs of film and television product, estimates of product sales that will be returned and the amount of receivables that ultimately will be collected, the potential outcome of future tax consequences of events that have been recognized in the Companys financial statements and loss contingencies. Actual results could differ from those estimates. To the extent that there are material differences between these estimates and actual results, the Companys financial condition or results of operations will be affected. Estimates are based on past experience and other assumptions that management believes are reasonable under the circumstances, and management evaluates these estimates on an ongoing basis.
Recent Accounting Pronouncements
In February 2013, the FASB issued ASU 2013-02, Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income (ASU 2013-02). Under ASU 2013-02, an entity is required to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the financial statements or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income, but only if the amount reclassified is required to be reclassified in its entirety in the same reporting period. For amounts that are not required to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures that provide additional details about those amounts. ASU 2013-02 does not change the current requirements for reporting net income or other comprehensive income in the financial statements. The amendments in this update will be effective for fiscal periods beginning after December 15, 2012. The Company does not expect the adoption to have a material impact on its consolidated financial statements.
7
In March 2013, the FASB issued ASU 2013-05 Parents Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity. ASU 2013-05 addresses the accounting for the cumulative translation adjustment when a parent either sells part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity. For public entities, the ASU is effective prospectively for fiscal years, and interim periods, within those years, beginning after December 15, 2013. Early adoption is permitted. The adoption of ASU 2013-05 is not expected to have a material impact on the Companys consolidated financial statements.
In July 2013, the FASB issued ASU 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. These amendments provide that an unrecognized tax benefit, or a portion thereof, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except to the extent that a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date to settle any additional income taxes that would result from disallowance of a tax position, or the tax law does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, then the unrecognized tax benefit should be presented as a liability. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The adoption of ASU 2013-11 is not expected to have a material impact on the Companys consolidated financial statements.
Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption.
NOTE 3. Related Party Transactions
Mr. Dean Li, President and Shareholder of XiAn TV, had advanced $210,667 and $136,790 to the Company at December 31, 2013 and June 30, 2013, respectively. The shareholder loan discussed above is non-secured, free of interest with no maturity date. The imputed interests are assessed as an expense to the business operation and an addition to the paid-in-capital and calculated based on annual interest rate in the range of 5.94-6.56% with reference to one-year loan.
The Company also leased an office space from a former shareholder with a monthly rent of approximately $1,085 with lease termination date of May 7, 2014.
NOTE 4. Film Costs
Film costs consist of the following:
|
| December 31, 2013 |
| June 30, 2013 | ||
Completed and not released: |
|
|
|
| ||
TV Series |
| $ | 3,436,764 |
| $ | 3,401,802 |
In development - TV Series |
|
| 53,631 |
|
| 40,724 |
Film costs |
| $ | 3,490,395 |
| $ | 3,442,526 |
NOTE 5. Notes Receivable
On April 22, 2011, the Company lent RMB10M (approximately $1.6M) to ShaanXi Railway Transportation Trade Company (SXRT), a company owned by a business friend of Dean Li, the President and Shareholder of China Media Inc. On June 30, 2013, the balance of notes receivable from SXRT was RMB9.2M (approximately $1.5M). In the three months ended September 30, 2013, the Company collected RMB6.3M (approximately $1M) from SXRT, and SXRT promised to pay back the remaining RMB2.9M (approximately $0.5M) no later than December 31, 2013. However, SXRT failed to repay the remaining RMB 2.9M (approximately $0.5M) as of December 31, 2013 and orally promised to pay off the borrowing once they get rid of the cash shortage. The loan has a specified interest rate of 3%.
On March 20, 2013, the Company lent RMB946,500 (approximately $155K) in the form of interest free loan to Zhongshi Fengde (Zhongshi Fengde), one of the Companys business partners. In July 2013, the Company paid for a copyright transfer fee of one TV series on behalf of Zhongshi Fengde in the amount of RMB6.3M (approximately $1M). The parties agreed to treat the borrowing as an interest free loan and Zhongshi Fengde promised to repay the loan no later than December 31, 2013. However, Zhongshi Fengde did not pay back the loan as of December 31, 2013 and orally promised to pay off the loan once they get rid of the cash shortage.
8
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Forward Looking Statements
This quarterly report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology including "could", "may", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential" and the negative of these terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially.
While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested in this report.
Results of Operations
Comparison of the six months ended December 31, 2013 and 2012:
| For The Six Months Ended December 31, | ||||
| 2013 |
| 2012 | ||
|
|
|
| ||
Revenues | $ | - |
| $ | 7,798 |
Cost of revenues |
| 1,612 |
|
| - |
Gross profit |
| (1,612) |
|
| 7,798 |
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
Selling, general and administrative expenses |
| 170,275 |
|
| 161,380 |
Depreciation and amortization expense |
| 10,240 |
|
| 9,470 |
Total operating expenses |
| 180,515 |
|
| 170,850 |
|
|
|
|
|
|
Other income (expenses): |
|
|
|
|
|
Government grant |
| 79,032 |
|
| - |
Interest income |
| 39,784 |
|
| 22,030 |
Interest expense |
| (4,124) |
|
| - |
Total other income (expenses) |
| 114,692 |
|
| 22,030 |
|
|
|
|
|
|
Net loss before income taxes |
| (67,435) |
|
| (141,022) |
Income taxes |
| - |
|
| 176 |
Net loss | $ | (67,435) |
| $ | (141,198) |
Revenues
We had no revenue for the six months ended December 31, 2013, compared to $7,798 in the same period in 2012. We reported our advertising revenue based on net amount retained as an agent.
Cost of revenues
We had $1,612 cost of sales for the six months ended December 31, 2013, compared to $0 in the same period in 2012.
Gross profit
9
We had a negative gross profit for the six months ended December 31, 2013, mainly due to conversion from Business Tax to Value Added Tax (VAT) in Shaanxi province. The Company reported its advertising revenue based on net amount retained as an agent, which is after VAT deduction.
Operating expenses
During the six months ended December 31, 2013 our total operating expenses were $180,515, an increase of $9,665 as compared to $170,850 for the six months ended December 31, 2012.
Net loss
For the six months ended December 31, 2013 we incurred a net loss of $67,435. During the same period in 2012 we incurred a net loss of $141,198. This decrease was the result of increase in government subsidy income, which recorded in other income.
Comparison of the three months ended December 31, 2013 and 2012:
| For The Three Months Ended December 31, | ||||
| 2013 |
| 2012 | ||
|
|
|
| ||
Revenues | $ | - |
| $ | 2,871 |
Cost of revenues |
| 1,612 |
|
| - |
Gross profit |
| (1,612) |
|
| 2,871 |
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
Selling, general and administrative expenses |
| 115,355 |
|
| 105,396 |
Depreciation and amortization expense |
| 5,136 |
|
| 4,694 |
Total operating expenses |
| 120,491 |
|
| 110,090 |
|
|
|
|
|
|
Other income (expenses): |
|
|
|
|
|
Government grant |
| 79,032 |
|
| - |
Interest income |
| 25,129 |
|
| 11,125 |
Interest expense |
| (2,068) |
|
| - |
Total other income (expenses) |
| 102,093 |
|
| 11,125 |
|
|
|
|
|
|
Net loss before income taxes |
| (20,010) |
|
| (96,094) |
Income taxes |
| - |
|
| 176 |
Net loss | $ | (20,010) |
| $ | (96,270) |
Revenues
We had no revenue for the three months ended December 31, 2013, compared to $2,871 in the same period in 2012. We reported our advertising revenue based on net amount retained as an agent.
Cost of revenues
We had $1,612 cost of sales for the three months ended December 31, 2013, compared to $0 in the same period in 2012.
Gross profit
We had a negative gross profit for the three months ended December 31, 2013, mainly due to conversion from Business Tax to Value Added Tax (VAT) in Shaanxi province. The Company reported its advertising revenue based on net amount retained as an agent, which is after VAT deduction
10
Operating expenses
During the three months ended December 31, 2013 our total operating expenses were $120,491, an increase of $10,401 as compared to $110,090 for the three months ended December 31, 2012.
Net loss
For the three months ended December 31, 2013 we incurred a net loss of $20,010. During the same period in 2012 we incurred a net loss of $96,270.
Liquidity and Capital Resources
The following table sets forth a summary of our cash flows for the periods indicated:
|
| For the six months ended |
| |||||
|
| December 31, |
| |||||
|
| 2013 |
|
| 2012 |
| ||
|
|
|
|
|
|
| ||
Net cash provided by (used in) operating activities |
| $ | (96,631 | ) |
| $ | (3,323,955 | ) |
Net cash provided by (used in) investing activities |
|
| - |
|
|
| 3,329,746 |
|
Net cash provided by (used in) financing activities |
|
| 72,095 |
|
|
| 87,055 |
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents |
|
| 1,764 |
|
|
| 505 |
|
NET CHANGE IN CASH |
|
| (22,772) |
|
|
| 93,351 |
|
CASH AT BEGINNING OF PERIOD |
|
| 184,746 |
|
|
| 45,681 |
|
CASH AT END OF PERIOD |
| $ | 161,974 |
|
| $ | 139,032 |
|
As of December 31, 2013 we had cash of $161,974 in our bank accounts and a working capital surplus of $3,522,387.
For the six months ended December 31, 2013, we used net cash of $96,631 in operating activities, compared to net cash used of $3,323,955 in operating activities during the same period in fiscal 2012. The decrease in net of cash of $3,227,324 was mainly due to the decreases in cash paid for film costs.
During the six months ended December 31, 2013, we collected $1,022,511 of notes receivable and paid $1,022,511 as a loan to others. During the six months ended December 31, 2012, we received net cash of $3,329,746 from investing activities, including $3,172,589 collection of long term investments and $158,228 collection of notes receivable.
During the six months ended December 31, 2013, we earned net cash of $72,095 in financing activities, compared to net cash earned of $87,055 in financing activities during the same period in fiscal 2012. The decrease was mainly due to decrease in short-term loan from a related party.
Our cash level decreased by $22,772 during the six months ended December 31, 2013, compared to an increase of $93,351 in the same period of 2012.
We anticipate that we will meet our ongoing cash requirements by retaining income as well as through equity or debt financing. We plan to cooperate with various individuals and institutions to acquire the financing required to produce and distribute our products and anticipate this will continue until we accrue sufficient capital reserves to finance all of our productions independently.
We intend to meet our cash requirements for the next 12 months through retaining income generated from daily operations and partnerships with finance groups on television and movie projects.
Critical Accounting Policies and Estimates
Please refer to Managements Discussion and Analysis of Financial Condition and Results of Operations in our 2013 10-K for disclosures regarding our critical accounting policies and estimates. The interim financial statements follow the same accounting policies and methods of computations as those for the year ended June 30, 2013.
Off-Balance Sheet Arrangements
11
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
Inflation
The amounts presented in the financial statements do not provide for the effect of inflation on our operations or financial position. The net operating losses shown would be greater than reported if the effects of inflation were reflected either by charging operations with amounts that represent replacement costs or by using other inflation adjustments.
Audit Committee
The functions of the audit committee are currently carried out by our Board of Directors, who has determined that we do not have an audit committee financial expert on our Board of Directors to carry out the duties of the audit committee. The Board of Directors has determined that the cost of hiring a financial expert to act as a director and to be a member of the audit committee or otherwise perform audit committee functions outweighs the benefits of having a financial expert on the audit committee.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"), that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2013. Based on the evaluation of these disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective.
Management Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on the evaluation performed, our management concluded that during the period covered by this report, our internal controls over financial reporting were effective.
During the quarterly period, we implemented the following measures to improve our internal control over financial reporting:
(1).
Engaged outside consultants to assist in our assessment of the effectiveness of the companys internal controls over financial reporting; and
(2).
Developed and instituted new internal control procedures to strengthen our month-end close and financial reporting processes;
We believe these measures have strengthened our internal control over financial reporting and disclosure controls and procedures.
Changes in Internal Control
Except for the changes discussed above, there was no change in our internal control over financial reporting (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act) that occurred during the quarterly period that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
We are not aware of any legal proceedings to which we are a party or of which our property is the subject. None of our directors, officers, affiliates, any owner of record or beneficially of more than 5% of our voting securities, or any associate of any such director, officer, affiliate or security holder are (i) a party adverse to us in any legal proceedings, or (ii) have a material interest adverse to us in any legal proceedings. We are not aware of any other legal proceedings that have been threatened against us.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
13
Item 6. Exhibits
ExhibitNumber | Exhibit Description |
31.1 | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
31.2 | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
32.1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
|
32.2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
|
SIGNATURES
Pursuant to the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| China Media Inc. |
| (Registrant) |
|
|
| /s/ Dean Li |
Date: February 14, 2014 | Dean Li |
| President, Chief Executive Officer |
| (Principal Executive Officer) |
|
|
| /s/ Shuncheng Ma |
Date: February 14, 2014 | Shuncheng Ma |
| Chief Financial Officer |
| (Principal Financial Officer and Principal Accounting Officer) |
14