UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 205495

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 December 31, 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.)
8250 w. Charleston Blvd. Suite 120 Las Vegas, Nevada	89117
(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

 

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 February 6, 2017, the registrant had 68,708,924 outstanding shares of Common Stock.

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

STAR CENTURY PANDAHO CORPORATION

INDEX

 

		Page Number
PART I.	FINANCIAL INFORMATION
Item 1	Financial Statements:
	Condensed Balance Sheets as of December 31, 2016 (Unaudited) and June 30, 2016	5
	Condensed Statements of Operations for the Three and Six months Ended December 31, 2016 and 2015 (Unaudited)	6
	Condensed Statement of Stockholders’ Deficiency for the Six months Ended December 31, 2016 (Unaudited)	7
	Condensed Statements of Cash Flows for the Six months Ended December 31, 2016 and 2015 (Unaudited)	8
	Notes to Condensed Financial Statements (Unaudited) - Six Months Ended December 31, 2016 and 2015	9
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	18
PART II	OTHER INFORMATION
Item 1	Legal Proceedings	18
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	19
Item 5	Other Information	19
Item 6	Exhibits	19
SIGNATURES		20
EXHIBITS

 

 

 

 

 

 

 

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.

 

 

 

PART 1 – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

 

STAR CENTURY PANDAHO CORPORATION
CONDENSED BALANCE SHEETS
			December 31,				June  30,
			2016				2016
			(Unaudited)
Assets
Current assets:
Cash		$	4,188			$	920
Prepaid expenses			4,167				9,167
Total current assets		$	8,355			$	10,087
Liabilities and Stockholders’ Deficiency
Current Liabilities:
Accounts payable and accrued liabilities		$	126,395			$	156,508
Accrued compensation-related party			197,369				867,220
Advances (including $25,000 due to related parties at December 31, 2016 and June 30, 2016, respectively)			79,390				79,390
Convertible notes – related party, net of discount of $10,254 and $34,942 at December 31, 2016 and June 30, 2016, respectively			187,142				131,639
Total current liabilities			590,296				1,234,757
Commitments and contingencies
Non-redeemable convertible note – related party			43,180				42,551
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 December 31, 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 December 31, 2016 and June 30, 2016			95,709				95,709
Additional paid-in capital			120,636,116				119,250,999
Notes receivable			(5,000,000	)			(5,000,000	)
Accumulated deficiency			(116,357,196	)			(115,614,179	)
Total stockholders' deficiency			(625,121	)			(1,267,221	)
Total liabilities and stockholders’ deficiency		$	8,355			$	10,087
See accompanying notes

 

STAR CENTURY PANDAHO CORPORATION

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

 

		For the Three Months Ended December 31, 2016				For the Three Months Ended December 31, 2015				For the Six Months Ended December 31, 2016				For the Six Months Ended December 31, 2015
Revenue		$	—			$	—			$	—			$	—
Costs and expenses:
Compensation – related party			199,627				408,888				659,421				913,055
General and administrative			18,502				36,877				44,637				101,988
Total operating expenses			218,129				445,765				704,058				1,015,043
Other expenses:
Interest expense			(13,179	)			(27,406	)			(38,959	)			(42,417	)
Net loss		$	(231,308	)		$	(473,171	)		$	(743,017	)		$	(1,057,460	)
Net loss per share - basic and diluted		$	(0.00	)		$	(0.01	)		$	(0.01	)		$	(0.02	)
Weighted average number of common shares outstanding - basic and diluted			68,708,924				68,252,550				68,708,924				68,252,550

 

See accompanying notes

 

 STAR CENTURY PANDAHO CORPORATION

CONDENSED STATEMENT OF STOCKHOLDERS' DEFICIENCY

FOR THE SIX MONTHS ENDED DECEMBER 31, 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	)
Beneficial conversion feature on issuance of convertible note payable			—				—				—				—				5,000				—				—				5,000
Gain on settlement of accrued compensation–related party treated as a capital contribution			—				—				—				—				1,380,117				—				—				1,380,117
Net loss			—				—				—				—				—				(743,017	)			—				(743,017	)
Balance December 31, 2016 (Unaudited)			68,708,924			$	95,709				25,000			$	250			$	120,636,116			$	(116,357,196	)		$	(5,000,000	)		$	(625,121	)

 

See accompanying notes

 

 

STAR CENTURY PANDAHO CORPORATION

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

		Six months Ended December 31, 2016				Six months Ended December 31, 2015
Cash Flows from Operating Activities:
Net loss		$	(743,017	)		$	(1,057,460	)
Adjustments to reconcile net loss to net cash used in operating activities and liabilities:
Amortization of debt discount			29,688				38,042
Changes in operating assets and liabilities:
Prepaid expenses			5,000				6,701
Accounts payable and accrued expenses			20,732				34,541
Accrued compensation-related party			659,421				913,055
Accrued interest			9,271				4,375
Net cash used in operating activities			(18,905	)			(60,746	)
Cash Flows from Financing Activities:
Proceeds from convertible notes - related parties			22,173				110,581
Payment made on non-redeemable convertible note			—				(61,892	)
Net cash provided by financing activities			22,173				48,689
Net change in cash			3,268				(12,057	)
Cash beginning of year			920				15,291
Cash end of year		$	4,188			$	3,234
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during period for:
Interest paid		$	—			$	—
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		$	5,000			$	110,581
Reclassification of advances to convertible notes		$	—			$	10,200
Gain on settlement of accrued compensation–related party treated as a capital contribution		$	1,380,117			$	—

See accompanying notes

 

STAR CENTURY PANDAHO CORPORATION

Notes to Condensed Financial Statements

Six months ended December 31, 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 six months ended December 31, 2016, the Company incurred a net loss of $743,017 and used cash in operating activities of $18,905, and at December 31, 2016, had a stockholders’ deficiency of $625,121. 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.

 

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 December 31, 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:

 

		December 31, 2016				December 31, 2015
Common stock issuable upon conversion of convertible and non-redeemable convertible notes payable			4,193,150				1,987,270
Common stock issuable upon conversion of accrued compensation			19,736,915				1,212,877
Total			23,930,065				3,200,147

 

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.

 

 

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. In addition, during 2016 the FASB has issued ASU 2016-08, ASU 2016-10 and ASU 2016-12, all of which clarify certain implementation guidance within ASU 2014-09, and ASU 2016-11, which rescinds certain SEC guidance effective upon an entity’s adoption of ASU 2014-09. 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. The standard can be adopted either retrospectively to each prior reporting period presented or as a cumulative effect adjustment as of the date of adoption. The Company is currently in the process of evaluating the impact of ASU 2014-09 on the Company’s financial statements and disclosures.

 

 

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 PARTIES

 

Compensation-related party and accrued compensation-related party represent amounts recorded for employment contracts with three executives who are also shareholders, and a consulting agreement with another shareholder. Pursuant to the terms of these agreements, total annual compensation for services was $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.

 

On June 30, 2016, accrued compensation related to the three executives totaled $761,930. During the six months ended December 31, 2016, additional compensation of $567,342 was accrued, including $169,380 accrual of cash compensation, with the balance reflecting an expense for the value that could be paid in shares of common stock. At December 31, 2016, accrued compensation due to the three executives totaled $1,329,272 and related accrued payroll taxes were $50,845, or an aggregate of $1,380,117. Effective December 31, 2016, the three executives agreed to forgive the aggregate of $1,380,117, and to also terminate their employment agreements. Accordingly, at December 31, 2016, the total due to the three executives for accrued compensation was zero. The Company determined that based on the related party nature of the settlement, the gain on settlement of accrued compensation was treated as a capital contribution.

 

On June 30, 2016, accrued compensation due to the shareholder consultant was $105,290. During the six months ended December 31, 2016, additional compensation of $92,079 was recorded, including $30,246 accrual of cash compensation due, and a charge of $61,833 for the fair value that could be paid in shares of common stock. At December 31, 2016, the accrued compensation due to the shareholder consultant was $197,369, which if the shareholder consultant elected to be paid in shares of common stock, would result in the issuance of 19,736,915 shares of the Company’s common stock.

 

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 December 31, 2016 and June 30, 2016, the Company was obligated for the following advances:

 

		December 31, 2016				June 30, 2016
Advances due to shareholder		$	25,000			$	25,000
Advances due to unrelated parties			54,390				54,390
		$	79,390			$	79,390

  

NOTE 4. CONVERTIBLE NOTES - RELATED PARTY

 

		December 31,   2016				June 30, 2016
Balance due on convertible notes		$	197,396			$	166,581
Unamortized note discounts			(10,254	)			(34,942	)
		$	187,142			$	131,639

 

Convertible notes-related party are unsecured, accrue interest at 10% per annum, and are due through December, 2017. The notes are convertible into shares of the Company’s common stock at a conversion price ranging from of $0.01 per share to $0.10 per share. At December 31, 2016, the notes are convertible into 3,329,550 shares of common stock. At June 30, 2016, principal and accrued interest totaled $166,581. During the six months ended December 31, 2016, the Company issued four convertible notes for total proceeds of $22,173, and accrued interest of $8,642 was added to principal, and at December 31, 2016, principal and accrued interest totaled $197,396.

 

At June 30, 2016, the unamortized discount on convertible notes was $34,942. During the six months ended December 31, 2016, $5,000 of discount was added for the beneficial conversion feature on issuance of a convertible note payable, and $29,688 of discount was amortized and included in interest expense. At December 31, 2016, the unamortized discount on convertible notes is $10,254, and is to be amortized through December 2017.

 

NOTE 5. NON-REDEEMABLE CONVERTIBLE NOTE-RELATED PARTY

 

Non-redeemable convertible note-related party bears interest at 20% per annum, is secured by all the assets of the Company, and is due 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. At June 30, 2016, principal and accrued interest totaled $42,551. During the six month ended December 31, 2016, interest of $629 was accrued and added to principal. At December 31, 2016, principal and accrued interest totaled $43,180 and are convertible into 863,300 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.

  

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 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.

 

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.

 

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

 

THREE MONTHS ENDED DECEMBER 31, 2016 COMPARED TO THE THREE MONTHS ENDED DECEMBER 31, 2015

 

REVENUE

 

For the three months ended December 31, 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 $199,627 for the three months ended December 31, 2016, compared to $408,888 for the three months ended December 31, 2015. Pursuant to the terms of employment agreements, total annual compensation for services was $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 December 31, 2016, the Company recorded $199,627 of compensation related to these agreements, which included $99,814 for accrual of three months compensation, with the balance reflecting an expense for the value that could be paid in shares of common stock. The decrease in compensation is due to the part of the compensation determined by the 50% discount to the average stock price, as defined, which decreased during the period. At December 31, 2016, accrued compensation due to the three executives totaled $1,329,272 and related accrued payroll taxes were $50,845, or an aggregate of $1,380,117. Effective December 31, 2016, the three executives agreed to forgive the aggregate of $1,380,117, and to also terminate their employment agreements. The Company determined that based on the related party nature of the settlement, the gain on settlement of accrued compensation was treated as a capital contribution.

 

General and Administrative expenses were $18,502 for the three months ended December 31, 2016, compared to $36,877 for the three months ended December 31, 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 $13,179 and $27,406 for the three months ended December 31, 2016 and 2015, respectively. The decrease in interest expense is due the debt discount on outstanding convertible notes being fully amortized.

 

NET LOSS

 

Our net losses for the three months ended December 31, 2016 and 2015 was $231,308 and $473,171, respectively. Our losses decreased in the current year primarily because of decrease in compensation expense.

 

SIX MONTHS ENDED DECEMBER 31, 2016 COMPARED TO THE SIX MONTHS ENDED DECEMBER 31, 2015

 

REVENUE

 

For the Six months ended December 31, 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 $659,421 for the six months ended December 31, 2016, compared to $913,055 for the six months ended December 31, 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 six months ended December 31, 2016, the Company recorded $659,421 of compensation related to these agreements, which included $199,627 for accrual of six months compensation, with the balance reflecting an expense for the value that could be paid in shares of common stock. The decrease in compensation is due to the part of the compensation determined by the 50% discount to the average stock price, as defined, which decreased during the period. At December 31, 2016, the three executives agreed to terminate their employment agreements.

 

General and Administrative expenses were $44,637 for the six months ended December 31, 2016, compared to $101,988 for the six months ended December 31, 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 $38,959 and $42,417 for the Six months ended December 31, 2016 and 2015, respectively. The decrease in interest expense is due the debt discount on outstanding convertible notes being fully amortized.

 

NET LOSS

 

Our net losses for the Six months ended December 31, 2016 and 2015 was $743,017 and $1,057,460, respectively. Our losses decreased in the current year primarily because of decrease in compensation expense.

 

LIQUIDITY

 

As of December 31, 2016, we had cash of $4,188 and total liabilities of $633,476. 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 six months ended December 31, 2016, the Company had a net loss of $743,017 and used cash in operating activities of $18,905, and at December 31, 2016, had a working capital deficiency of $581,941 and stockholders’ deficiency of $625,121. These factors, among others, raise substantial doubt about our ability to continue as a going concern. In addition, 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 $50,000 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.

 

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.

 

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 December 31, 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

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

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 December 31, 2016	X

 

 

 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:  February 8, 2017	By:	/s/ Fen Xing
		Fen Xing Chief Executive Officer, Secretary, Treasurer and Director (Principal Executive Officer, Principal Accounting and Financial Officer)