Attached files
UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 2016
or
¨ 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 000-53780
STAR CENTURY PANDAHO CORPORATION
(Exact name of registrant as specified in its charter)
Nevada | 27-0491634 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
1980 Festival Plaza Drive Suite 530 Las Vegas, Nevada |
89135 |
(Address of Principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code. | (702) 628-8899 |
(Former name and former address, 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 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 þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. o
Large accelerated filer o | Accelerated filer o |
Non-accelerated filer o | Smaller reporting company þ |
Indicate by
check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o
No þ
As of November 14, 2016, the registrant had 68,708,924 outstanding shares of Common Stock.
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STAR CENTURY PANDAHO CORPORATION
INDEX
Page Number | ||
PART I. | FINANCIAL INFORMATION | |
Item 1 | Financial Statements: | |
Condensed Balance Sheets as of September 30, 2016 (Unaudited) and June 30, 2016 | 5 | |
Condensed Statements of Operations for the Three months Ended September 30, 2016 and 2015 (Unaudited) | 6 | |
Condensed Statement of Stockholders’ Deficiency for the Three months Ended September 30, 2016 (Unaudited) | 7 | |
Condensed Statements of Cash Flows for the Three months Ended September 30, 2016 and 2015 (Unaudited) | 8 | |
Notes to Condensed Financial Statements (Unaudited) - Three Months Ended September 30, 2016 and 2015 | 10 | |
Item 2 | Management's Discussion and Analysis of Financial Condition and Results of Operations | 14 |
Item 3 | Quantitative and Qualitative Disclosures About Market Risk | 17 |
Item 4T | Controls and Procedures | 17 |
PART II | OTHER INFORMATION | |
Item 1 | Legal Proceedings | 17 |
Item 1A | Risk Factors | 18 |
Item 2 | Unregistered Sales of Equity Securities and Use of Proceeds | 18 |
Item 3 | Defaults upon Senior Securities | 18 |
Item 4 | Mine Safety Disclosures | 18 |
Item 5 | Other Information | 18 |
Item 6 | Exhibits | 19 |
SIGNATURES | 20 | |
EXHIBITS |
3 |
Forward-Looking Statements
This report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “1933 Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact are “forward-looking statements” for purposes of this Quarterly Report on Form 10-Q, including any projections of earnings, revenue or other financial items, any statements regarding the plans and objectives of management for future operations, any statements concerning proposed new products or services, any statements regarding future economic conditions or performance, any statements regarding expected benefits from any transactions and any statements of assumptions underlying any of the foregoing. In some cases, forward-looking statements can be identified by the use of terminology such as “may,” “will,” “expects,” “plans,” “anticipates,” “estimates,” “potential” or “continue,” or the negative thereof or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements contained herein are reasonable, there can be no assurance that such expectations or any of the forward-looking statements will prove to be correct and actual results could differ materially from those projected or assumed in the forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to inherent risk and uncertainties, including, but not limited to, the risk factors set forth in “Part II, Item 1A – Risk Factors” below and for the reasons described elsewhere in this Quarterly Report on Form 10-Q. All forward looking statements and reasons why results may differ included in this report are made as of the date hereof and we do not intend to update any forward-looking statements except as required by law or applicable regulations. Except where the context otherwise requires, in this Quarterly Report on Form 10-Q, the “Company,” “Star Century Pandaho Corporation,”, “the Company ”, “we,” “us” and “our” refer to Star Century Pandaho Corporation, a Nevada corporation.
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PART 1 – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
STAR CENTURY PANDAHO CORPORATION
CONDENSED BALANCE SHEETS
September 30, | June 30, | |||||||
2016 | 2016 | |||||||
(Unaudited) | ||||||||
Assets | ||||||||
Current assets: | ||||||||
Cash | $ | 610 | $ | 920 | ||||
Prepaid expenses | 6,667 | 9,167 | ||||||
Total current assets | $ | 7,277 | $ | 10,087 | ||||
Liabilities and Stockholders’ Deficiency
| ||||||||
Current Liabilities: | ||||||||
Accounts payable and accrued liabilities | $ | 172,661 | $ | 156,508 | ||||
Accrued compensation-related party | 1,327,014 | 867,220 | ||||||
Advances (including $25,000 and $25,000 due to related parties at September 30, 2016 and June 30, 2016, respectively) | 79,390 | 79,390 | ||||||
Convertible notes – related parties, net of discount of $13,975 and $34,942 at September 30, 2016 and June 30, 2016, respectively | 163,962 | 131,639 | ||||||
Total current liabilities | 1,743,027 | 1,234,757 | ||||||
Non-redeemable convertible note – related parties | 43,180 | 42,551 | ||||||
Total liabilities | 1,786,207 | 1,277,308 | ||||||
Commitments and contingencies | ||||||||
Stockholders' Deficiency: | ||||||||
Preferred stock; par value $0.01; 48,900,000 shares authorized; no shares issued and outstanding | — | — | ||||||
Series A Convertible Preferred Stock; par value $0.01; 1,000,000 shares authorized; no shares issued and outstanding | — | — | ||||||
Series B Preferred Stock; par value $0.01; 100,000 shares authorized; 25,000 shares issued and outstanding at September 30, 2016 and June 30, 2016 | 250 | 250 | ||||||
Common stock; par value $0.001; 250,000,000 shares authorized; 68,708,924 shares issued and outstanding at September 30, 2016 and June 30, 2016 | 95,709 | 95,709 | ||||||
Additional paid-in capital | 119,250,999 | 119,250,999 | ||||||
Notes receivable | (5,000,000 | ) | (5,000,000 | ) | ||||
Accumulated deficiency | (116,125,888 | ) | (115,614,179 | ) | ||||
Total stockholders' deficiency | (1,778,930 | ) | (1,267,221 | ) | ||||
Total liabilities and stockholders’ deficiency | $ | 7,277 | $ | 10,087 | ||||
See accompanying notes |
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STAR CENTURY PANDAHO CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended September
30, |
Three months ended September
30, | |||||||
Revenue | $ | — | $ | — | ||||
Operating costs: | ||||||||
Compensation–related party | 459,794 | 504,352 | ||||||
General and administrative | 26,135 | 64,925 | ||||||
Total operating expenses | 485,929 | (569,277 | ) | |||||
Loss from operations | (485,929 | ) | (569,277 | ) | ||||
Other expenses: | ||||||||
Interest expense | (25,780 | ) | (15,011 | ) | ||||
Net loss | $ | (511,709 | ) | $ | (584,288 | ) | ||
Net loss per common share-basic and diluted | $ | (0.01 | ) | $ | (0.01 | ) | ||
Weighted average number of common shares outstanding – basic and diluted | 68,708,924 | 68,252,650 |
See accompanying notes
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STAR CENTURY PANDAHO CORPORATION
CONDENSED STATEMENT OF STOCKHOLDERS' DEFICIENCY
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2016
(Unaudited)
Common Shares | Common Stock | Series B Preferred Shares | Series B Preferred Stock | Additional Paid-in Capital | Accumulated Deficiency | Note Receivable | Total Stockholders’
Deficiency | |||||||||||||||||||||||||
Balance July 1, 2016 | 68,708,924 | $ | 95,709 | 25,000 | $ | 250 | $ | 119,250,999 | $ | (115,614,179 | ) | $ | (5,000,000 | ) | $ | (1,267,221 | ) | |||||||||||||||
Net loss | — | — | — | — | — | (511,709 | ) | — | (511,709 | ) | ||||||||||||||||||||||
Balance September 30, 2016 (Unaudited) | 68,708,924 | $ | 95,709 | 25,000 | $ | 250 | $ | 119,250,999 | $ | (116,125,888 | ) | $ | (5,000,000 | ) | $ | (1,778,930 | ) |
See accompanying notes
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STAR CENTURY PANDAHO CORPORATION |
CONDENSED STATEMENTS OF CASH FLOWS |
(Unaudited) |
Three
Months Ended |
Three
Months Ended | |||||||
Cash Flows from Operating Activities: | ||||||||
Net loss | $ | (511,709 | ) | $ | (584,288 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities and liabilities: | ||||||||
Amortization of debt discount | 20,967 | 12,445 | ||||||
Changes in operating assets and liabilities: | ||||||||
Prepaid expenses | 2,500 | 3,400 | ||||||
Accounts payable and accrued expenses | 16,152 | 41,111 | ||||||
Accrued compensation-related party | 459,794 | 504,352 | ||||||
Accrued interest - related parties | 4,813 | 2,566 | ||||||
Net cash used in operating activities | (7,483 | ) | (20,414 | ) | ||||
Cash Flows from Financing Activities: | ||||||||
Proceeds from convertible notes-related parties | 7,173 | 85,581 | ||||||
Payment made on non-redeemable convertible note | — | (61,892 | ) | |||||
Net cash provided by financing activities | 7,173 | 23,689 | ||||||
Net change in cash | (310 | ) | 3,275 | |||||
Cash beginning of year | 920 | 15,291 | ||||||
Cash end of year | $ | 610 | $ | 18,566 | ||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
Cash paid during period for: | ||||||||
Interest paid | $ | — | $ | 18,892 | ||||
Income tax paid | $ | — | $ | — | ||||
NON-CASH FINANCING ACTIVITIES | ||||||||
Issuance of Series B Preferred Stock in settlement of advance due to a shareholder | $ | — | $ | 44,787 | ||||
Beneficial conversion feature associated with issued convertible notes | $ | — | $ | 85,581 | ||||
Accrued interest added to convertible notes - related parties and non-redeemable convertible note - related parties | $ | 4,813 | $ | 2,566 |
See accompanying notes
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STAR CENTURY PANDAHO CORPORATION
Notes to Condensed Financial Statements
Three months ended September 30, 2016 and 2015
(Unaudited)
NOTE 1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Star Century Pandaho Corporation ("the Company", “SCPD”) was organized under the laws of the State of Nevada on May 21, 2009. The Company was established as part of the Chapter 11 reorganization of AP Corporate Services, Inc. ("AP").
In January, 2015, Star Century Entertainment, Inc acquired 53.66% of total outstanding shares of the Company. In conjunction with gaining control of the Company, Star Century Entertainment elected three individuals to be the Company’s management, amended the Company’s Articles of Incorporation to (i) change the name of the Company to Star Century Pandaho Corporation (ii) effect a 1-for-5,000 reverse common stock split and (iii) decrease the Company’s authorized common stock to 150,000,000 shares, par value $0.001. On May 20, 2015, the Company’s Board of Directors and the majority shareholder amended the Company’s Articles of Incorporation to increase authorized common stock to 250,000,000 shares. All common stock share and per-share amounts for all periods presented in these financial statements have been adjusted retroactively to reflect the reverse stock split.
Pandaho the Panda is a cartoon styled character. On May 22, 2015, the Company secured certain licensing rights to the Pandaho character and brand though a licensing agreement with the creator of Pandaho, Ms. Liu Li. The Company’s aim is to build Pandaho into a competitive cartoon brand in China and surrounding areas with Pandaho-themed merchandise and multi-media exhibitions. Currently the Company does not have any operations in China.
Basis of presentation
The accompanying condensed financial statements are unaudited. These unaudited interim condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these unaudited interim condensed financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2016 filed with the SEC on September 28, 2016. The condensed balance sheet as of June 30, 2016 included herein was derived from the audited financial statements as of that date, but does not include all disclosures, including notes, required by GAAP.
In the opinion of management, the accompanying unaudited condensed financial statements contain all adjustments necessary to fairly present the Company’s financial position and results of operations for the interim periods reflected. Unless noted, all adjustments contained herein are of a normal recurring nature. Results of operations for the fiscal periods presented herein are not necessarily indicative of fiscal year-end results.
Going concern
The Company’s condensed financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. For the three months ended September 30, 2016, the Company incurred a net loss of $511,709 and used cash in operating activities of $7,483, and at September 30, 2016, had a stockholders’ deficiency of $1,778,930. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s independent registered public accounting firm, in their report on the Company’s financial statements for the year ending June 30, 2016, expressed substantial doubt about the Company’s ability to continue as a going concern. The Company’s financial statements do not include any adjustments that might result be necessary if the Company is unable to continue as a going concern.
The Company’s ability to continue as a going concern is dependent upon its ability to develop additional sources of capital and to ultimately achieve profitable operations. Currently, the Company does not have significant cash or other material assets, nor does it have operations or a source of revenue sufficient to cover its operating costs and allow it to continue as a going concern. Over the next 12 months, the Company expects to expend up to approximately $50,000 for legal, accounting and administrative costs. The Company’s officers or principal shareholders have committed to making advances or loans to pay for these legal, accounting, and administrative costs. The Company has not yet determined the amount of cash that will be necessary to fund its planned operations in China.
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The Company hopes to be able to attract suitable investors for our business plan, which will not require us to use our cash. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing or cause substantial dilution for our stockholders, in case or equity financing.
Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The more significant estimates and assumptions by management include, among others, the accrual of potential liabilities, and the assumptions used in valuing share-based instruments issued for services.
Revenue
Revenue is recognized when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service has been delivered, and collectability is reasonably assured. In transactions in which the Company brokers a sale and determines that it was not the primary obligor in the arrangement, the Company records as net the commission earned from the transaction.
Basic and Diluted loss per share
Basic loss per share is computed by dividing net loss applicable to common stockholders by the weighted average number of outstanding common shares during the period. Diluted loss per share is computed by dividing the net loss applicable to common stockholders by the weighted average number of common shares outstanding plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued. Diluted loss per share excludes all potential common shares if their effect is anti-dilutive.
At September 30, 2016 and 2015, we excluded the outstanding securities summarized below, which entitle the holders thereof to acquire shares of common stock as their effect would have been anti-dilutive:
September 30, 2016 | September 30, 2015 | |||||||
Common stock issuable upon conversion of convertible and non-redeemable convertible notes payable | 2,642,968 | 1,701,090 | ||||||
Common stock issuable upon conversion of accrued compensation | 26,540,268 | 800,045 | ||||||
Total | 29,183,236 | 2,501,135 |
Share-Based Compensation
The Company may periodically issue shares of common stock, stock options, or warrants to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for stock option and warrant grants issued and vesting to employees based on the authoritative guidance provided by the FASB whereas the value of the award is measured on the date of grant and recognized over the vesting period. The Company accounts for stock option and warrant grants issued and vesting to non-employees in accordance with the authoritative guidance of the FASB whereas the value of the stock compensation is based upon the measurement date as determined at either a) the date at which a performance commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete. Non-employee stock-based compensation charges generally are amortized over the vesting period on a straight-line basis. In certain circumstances where there are no future performance requirements by the non-employee, option grants are immediately vested and the total stock-based compensation charge is recorded in the period of the measurement date.
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The fair value of the Company's common stock option grants are estimated using the Black-Scholes option pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the common stock options, and future dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes option pricing model, and based on actual experience. The assumptions used in the Black-Scholes option pricing model could materially affect compensation expense recorded in future periods.
Fair Value of Financial Instruments
Fair value is defined as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk including our own credit risk.
In addition to defining fair value, the standard expands the disclosure requirements around fair value and establishes a fair value hierarchy for valuation inputs. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels which are determined by the lowest level input that is significant to the fair value measurement in its entirety. These levels are:
Level 1 – inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.
Level 2 – inputs are based upon significant observable inputs other than quoted prices included in Level 1, such as quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 – inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques.
The estimated fair value of certain financial instruments, including cash and cash equivalents and accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments. The recorded values of the convertible notes-related parties and non-redeemable convertible note approximates their fair values based upon their effective interest rates.
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 is a comprehensive revenue recognition standard that will supersede nearly all existing revenue recognition guidance under current U.S. GAAP and replace it with a principle based approach for determining revenue recognition. ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract. The ASU also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted only in annual reporting periods beginning after December 15, 2016, including interim periods therein. Entities will be able to transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. The Company is in the process of evaluating the impact of ASU 2014-09 on the Company’s financial statements and disclosures.
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In February 2016, the FASB issued ASU No. 2016-02, Leases. ASU 2016-02 requires a lessee to record a right of use asset and a corresponding lease liability on the balance sheet for all leases with terms longer than 12 months. ASU 2016-02 is effective for all interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is currently evaluating the expected impact that the standard could have on its financial statements and related disclosures.
In March 2016, the FASB issued the ASU 2016-09, Improvements to Employee Share-Based Payment Accounting. The amendments in this ASU require, among other things, that all income tax effects of awards be recognized in the income statement when the awards vest or are settled. The ASU also allows for an employer to repurchase more of an employee's shares than it can today for tax withholding purposes without triggering liability accounting and allows for a policy election to account for forfeitures as they occur. The amendments in this ASU are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted for any entity in any interim or annual period. The Company is currently evaluating the expected impact that the standard could have on its financial statements and related disclosures.
In August 2014, the FASB issued ASU No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which provides guidance on determining when and how to disclose going-concern uncertainties in the financial statements. ASU 2014-15 requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued. An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity’s ability to continue as a going concern. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods thereafter. Early adoption is permitted. The Company is currently evaluating the expected impact that the standard could have on its financial statements and related disclosures.
Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future consolidated financial statements.
NOTE 2. COMPENSATION AND ACCRUED COMPENSATION-RELATED PARTY
Compensation-related party and accrued compensation-related party represent amounts recorded for employment contracts with three executives and a consulting agreement with a shareholder. Pursuant to the terms of these agreements, total annual compensation for services is $396,000 (“cash compensation”), and the executives and shareholder have the option to accept shares of the Company’s common stock in lieu of cash based on a 50% discount to the average stock price, as defined. The option to accept shares of common stock in lieu of cash is accounted for at the intrinsic value of the potentially issuable common shares and is subject to adjustment at each reporting date based on the change in market value of the shares. At September 30, 2016, accrued cash compensation totaled $663,507, which if the executives and shareholder elected to be paid in shares of common stock, would result in the issuance of 26,540,268 shares of the Company’s common stock with a fair value of $1,327,014. Accordingly, at September 30, 2016, the Company has recorded accrued compensation of $1,327,014. For the three months ended September 30, 2016 and 2015, the Company recorded $459,794 and $504,352 of compensation expense, respectively, related to these agreements, which included $99,813 and $98,729, respectively, for the accrual of cash compensation, with the balance reflecting an expense for the value that could be paid in shares of common stock.
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NOTE 3. ADVANCES
The Company from time to time borrows from our principal shareholders, or others, to pay expenses such as filing fees, accounting fees and legal fees. These advances are non-interest bearing, unsecured, and generally due upon demand. At September 30, 2016 and June 30, 2016, the Company was obligated for the following advances:
September 30, 2016 | June 30, 2016 | |||||||
Advances due to shareholders | $ | 25,000 | $ | 25,000 | ||||
Advances due to unrelated parties | 54,390 | 54,390 | ||||||
$ | 79,390 | $ | 79,390 |
NOTE 4. CONVERTIBLE NOTES-RELATED PARTIES
September
30, 2016 | June
30, 2016 | |||||||
Balance due on convertible notes | $ | 177,937 | $ | 166,581 | ||||
Unamortized note discounts | (13,975 | ) | (34,942 | ) | ||||
$ | 163,962 | $ | 131,639 |
The notes are unsecured, accrue interest at 10% per annum, are due through September, 2017, and are convertible into shares of the Company’s common stock at a conversion price of $0.10 per share. During the three months ended September 30, 2016, the Company issued two convertible notes for total proceeds of $7,173, and interest of $4,183 accrued during the period on all notes was added to principal.
At June 30, 2016, the unamortized discount on convertible notes was $34,942. During the three months ended September 30, 2016, $20,966 of discount amortization is included in interest expense. At September 30, 2016, the unamortized discount on convertible notes is $13,975, and is to be amortized through September 2017.
NOTE 5. NON-REDEEMABLE CONVERTIBLE NOTE
On February 20, 2014, the Company agreed to exchange advances due an unrelated party, the original note holder, for a note for $68,000. The note bears interest at 20% per annum, and is secured by all the assets of the Company. The note was originally due August 1, 2014 and has been was extended to August 1, 2017. The Company may prepay the note in readily available funds at any time prior to the maturity date. The Company has the right to convert the note into shares of the Company’s common stock at any time prior to the maturity date at a fixed price of $0.05 per share of common stock. In January 2015, $25,000 of the $68,000 principal and accrued interest was assigned to a related party of the Company by the original note holder. On July 31, 2015, the Company repaid $61,892 of principal and interest due to the original note holder. At June 30, 2016, the balance of the note was $42,551. Interest of $629 was accrued and added to principal during the period ended September 30, 2016. At September 30, 2016, the face amount of the note, due to a related party, plus accrued interest was $43,180 and is convertible into 863,600 shares of common stock. As it is the Company’s choice to convert the note into shares of the Company’s common stock or to pay the note in cash, the note is presented below current liabilities on the accompanying balance sheets.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
Company Overview
Star Century Pandaho Corporation (formerly Journal of Radiology, Inc.) (“SCPD” or "the Company") was organized under the laws of the State of Nevada on May 21, 2009. The Company was established as part of the Chapter 11 reorganization of AP Corporate Services, Inc. ("AP"). Under AP's Plan of Reorganization, as confirmed by the U.S. Bankruptcy Court for the Central District of California, the Company was organized to own and develop a professional journal devoted to radiology.
On January 8, 2015, two shareholders of the Company agreed to sell an aggregate of 216,000 shares of the Company’s common stock, representing 53.66% of total outstanding shares at the time to Star Century Entertainment, Inc., an unrelated third party, and the Company experienced a change in control. In conjunction with the change in control, three individuals were elected to be the Company’s management, and the Company’s former President resigned. Effective January 16, 2015, the Company’s Board of Directors and the majority shareholder amended the Company’s Articles of Incorporation to (i) change the name of the Company to Star Century Pandaho Corporation (ii) effect a 1-for-5,000 reverse common stock split and (iii) decrease the Company’s authorized common stock to 150,000,000 shares, par value $0.001.
On May 20, 2015, the Company’s Board of Directors and the majority shareholder amended the Company’s Articles of Incorporation to increase authorized common stock to 250,000,000 shares.
The Company’s headquarters are based in Las Vegas, Nevada with planned primary operation in Beijing, China. Our planned services, though to be offered globally, will initially be focused throughout China, surrounding Asia-Pacific countries, the United States and Canada. The Company’s business plan includes the establishment of officially licensed and professional operated fan clubs for celebrities and selected brands that will engage in event management, talent shows, brand and image licensing and associated product distribution, music festivals, and multi-media productions such as movies, television shows and web channel content. Within our planned services we also intend to utilize our license rights to the character and brand Pandaho, not only for the above referenced activities but also for Pandaho (Panda) themed areas as well branding, toys, art, entertainment and e-commerce.
Pandaho the Panda is a cartoon styled character developed by Ms. Liu Li that is quickly growing in popularity and recognition throughout the global Chinese community.
On May 22, 2015, the Company issued 40,000,000 shares of common stock to Lui Li as payment for the non-exclusive licensing rights in the “Pandaho” brand and other related names and products. Immediately after the transaction Lui Li held 61.5% of the outstanding common stock of the Company. Based on Li’s 61.5% ownership percentage in the Company at the time, Li in substance controlled the Pandaho intellectual property directly before and after the purchase of the Pandaho IP by the Company. Given this, the value of the intellectual property recorded at the date of acquisition was carried over at the historical cost to Li of zero.
The Company is optimistic about the opportunity to utilize the Pandaho brand. The Panda image is a national treasure of China. The Company plans to develop and launch appropriate commercial, philanthropic and cultural activities as a part of the comprehensive brand development of Pandaho, the Panda. The Company believes that Pandaho, the Panda, brand is an excellent entry point for the implementation of the Company’s business plan.
RESULTS OF OPERATIONS
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THREE MONTHS ENDED SEPTEMBER 30, 2016 COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 2015
REVENUE
For the three months ended September 30, 2016 and 2015, we had $0 of revenue.
OPERATING COSTS
Compensation includes salaries, stock-based compensation expenses and benefits paid and payable to three executives of the Company and a shareholder of the Company. Compensation was $459,794 for the three months ended September 30, 2016, compared to $504,352 for the three months ended September 30, 2015. The decrease in compensation is due to employment contracts with three executives and a consulting agreement with a shareholder entered into during May 2015. Pursuant to the terms of these agreements, total annual compensation for services is $396,000. The executive or shareholder have the option to accept shares of the Company’s common stock in lieu of cash based on a 50% discount to the average stock price, as defined. For the three months ended September 30, 2016, the Company recorded $459,794 of compensation related to these agreements, which included $99,813 for accrual of three months compensation, with the balance reflecting an expense for the value that could be paid in shares of common stock.
General and Administrative expenses were $26,135 for the three months ended September 30, 2016, compared to $64,925 for the three months ended September 30, 2015. Administration comprise accounting, audit, legal and transfer agent costs related to SEC compliance and investor relation expenses. The decrease in general and administrative expenses is primarily due to decrease in payroll taxes and consulting fees.
OTHER INCOME (EXPENSE)
Other income (expense) includes interest expense of $25,780 and $15,011 for the three months ended September 30, 2016 and 2015, respectively. The increase in interest expense is due to additional convertible notes issued during past 12 months.
NET LOSS
Our net losses for the three months ended September 30, 2016 and 2015 was $511,709 and $584,288, respectively. Our losses decreased in the current year primarily because of compensation expense.
LIQUIDITY
As of September 30, 2016, we had cash of $610 and total liabilities of $1,786,207. Our current cash balance and cash flow from operating activities will not be sufficient to fund our operations.
The Company's financial statements are prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying financial statements, for the three months ended September 30, 2016, the Company had a net loss of $511,709 and used cash in operating activities of $7,484, and at September 30, 2016, had a working capital deficiency of $1,778,930 and stockholders’ deficiency of $1,778,930. These factors, among others, raise substantial doubt about our ability to continue as a going concern. The Company’s independent registered public accounting firm, in its report on our June 30, 2016 financial statements, has raised substantial doubt about the Company’s ability to continue as a going concern. The Company’s financial statements do not include any adjustments that might result from the outcome of this uncertainty.
We expect to be able to secure capital through advances from our officers or principal shareholders in order to pay expenses such as filing fees, accounting fees and legal fees. Over the next 12 months, the Company expects to expend approximately $60,000 for such filing fees, accounting fees and legal fees. The Company has not yet determined the amount of cash that will be necessary to fund its planned operations in China. We hope to be able to attract suitable investors for our business plan. The inability to obtain financing or generate sufficient cash from operations could require us to reduce or eliminate expenditures or otherwise curtail or discontinue our operations, which could have a material adverse effect on our business, financial condition and results of operations. Furthermore, to the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities may result in dilution to existing stockholders. If we raise additional funds through the issuance of debt securities, these securities may have rights, preferences and privileges senior to holders of our common stock and the terms of such debt could impose restrictions on our operations. Regardless of whether our cash assets prove to be inadequate to meet our operational needs, we may seek to compensate providers of services by issuing stock in lieu of cash, which may also result in dilution to existing stockholders.
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OPERATING CAPITAL AND CAPITAL EXPENDITURE REQUIREMENTS
Our controlling shareholders expect to advance us additional funding for operating costs in order to implement our business plan. The funds are loaned to the Company as required to pay amounts owed by the Company. As such, our operating capital is currently limited to the resources of our controlling shareholders. The loans from our controlling shareholders are unsecured and non-interest bearing and have no set terms of repayment. We anticipate receiving additional capital once we are able to have our securities actively trading on a public exchange. There is no guarantee our stock will develop a market on that public exchange.
PLAN OF OPERATION AND FUNDING
We do not currently engage in enough business activities that provide cash flow. The costs of investigating and analyzing business combinations for the next 12 months and beyond such time will be paid with amounts to be loaned to or invested in us by our stockholders, management or other investors.
During the next twelve months we anticipate incurring costs related to:
(i) filing of Exchange Act reports, and
(ii) costs relating to developing our business plan
We believe we will be able to meet these costs through amounts, as necessary, to be loaned to or invested in us by our stockholders, management or other investors.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Critical Accounting Policies
Revenue
Revenue is recognized when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service has been delivered, and collectability is reasonably assured. In transactions in which the Company brokers a sale and determines that it was not the primary obligor in the arrangement, the Company records as net the commission earned from the transaction.
Share-Based Compensation:
The Company may periodically issue stock options and warrants to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for stock option and warrant grants issued and vesting to employees based on the authoritative guidance provided by the FASB whereas the value of the award is measured on the date of grant and recognized over the vesting period. The Company accounts for stock option and warrant grants issued and vesting to non-employees in accordance with the authoritative guidance of the FASB whereas the value of the stock compensation is based upon the measurement date as determined at either a) the date at which a performance commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete. Non-employee stock-based compensation charges generally are amortized over the vesting period on a straight-line basis. In certain circumstances where there are no future performance requirements by the non-employee, option grants are immediately vested and the total stock-based compensation charge is recorded in the period of the measurement date.
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The fair value of the Company's common stock option grants are estimated using the Black-Scholes option pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the common stock options, and future dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes option pricing model, and based on actual experience. The assumptions used in the Black-Scholes option pricing model could materially affect compensation expense recorded in future periods.
Recent Accounting Pronouncements
See Footnote 1 of condensed financial statements for a discussion of recently issued accounting standards.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4T. CONTROLS AND PROCEDURES
Evaluation of Disclosure
Controls and Procedures
As required by Rule 13a-15 of the Securities Exchange Act of 1934, our principal executive officer and principal financial officer evaluated our company's disclosure controls and procedures (as defined in Rules 13a-15(e) of the Securities 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 that as of the end of the period covered by this report, these disclosure controls and procedures were not effective to ensure that the information required to be disclosed by our company in reports it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities Exchange Commission and to ensure that such information is accumulated and communicated to our company's management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. The conclusion that our disclosure controls and procedures were not effective was due to the presence of the following material weaknesses in internal control over financial reporting which are indicative of many small companies with small staff: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both United States generally accepted accounting principles and Securities and Exchange Commission guidelines. Management anticipates that such disclosure controls and procedures will not be effective until the material weaknesses are remediated.
We plan to take steps to enhance and improve the design of our internal controls over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes during our fiscal year ending June 30, 2017, subject to obtaining additional financing: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out above are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the quarter ended September 30, 2016 that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
NONE.
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ITEM 1A. RISK FACTORS
There have been no material changes in our risk factors from those disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended June 30, 2016.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable
ITEM 5. OTHER INFORMATION.
None
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ITEM 6. EXHIBITS.
Except as so indicated in Exhibits 32.1 and 32.2, the following exhibits are filed as part of, or incorporated by reference, to this Quarterly Report on Form 10-Q.
Incorporated by reference | ||||||
Exhibit | Exhibit Description | Filed herewith | Form | Period ending | Exhibit | Filing date |
3.1 | Articles of Incorporation | 10/A#2 | 3.1 | 11/5/2009 | ||
3.2 | Bylaws | 10/A #2 | 3.2 | 11/5/2009 | ||
31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | X | ||||
31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | X | ||||
32.1 | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | X | ||||
32.2 | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | X | ||||
101 | Interactive Data Files for the Star Century Pandaho Corporation Form 10Q for the period ended September 30, 2016
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X |
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SIGNATURES
In accordance with Section 13 or 15 (d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
STAR CENTURY PANDAHO CORPORATION | ||
Date: November 14, 2016 | By: | /s/ Fen Xing |
Fen Xing Chief Executive Officer, Secretary, Treasurer and Director (Principal Executive Officer, Principal Accounting and Financial Officer) | ||
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