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 March 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

 

 

  1  

 

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 May 13, 2016, the registrant had 68,252,650 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 March 31, 2016 (Unaudited) and June 30, 2015 5
  Condensed Statements of Operations for the Three and Nine months Ended March 31, 2016 and 2015 (Unaudited) 6
  Condensed Statement of Stockholders’ Deficiency for the Nine months Ended March 31, 2016 (Unaudited) 7
  Condensed Statements of Cash Flows for the Nine months Ended March 31, 2016 and 2015 (Unaudited) 8
  Notes to Condensed Financial Statements (Unaudited) - Three and Nine Months Ended March 31, 2016 and 2015 9
Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 15
Item 3 Quantitative and Qualitative Disclosures About Market Risk 18
Item 4T Controls and Procedures 18
     
PART II OTHER INFORMATION  
     
Item 1 Legal Proceedings 19
Item 1A Risk Factors 19
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds 19
Item 3 Defaults upon Senior Securities 19
Item 4 Mine Safety Disclosures 19
Item 5 Other Information 19
Item 6 Exhibits 20
     
SIGNATURES 21
     
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
 
      As of       As of  
      March 31,       June  30,  
      2016       2015  
Assets     (Unaudited)          
 Current assets:                
 Cash   $ 1,330     $ 15,291  
 Prepaid expenses     1,667       10,967  
 Total current assets   $ 2,997     $ 26,258  
                 
Liabilities and Stockholders’ Deficiency                
Current Liabilities:                
Accounts payable and accrued liabilities   $ 153,836     $ 107,303  
Accrued compensation     1,165,589       287,693  
Advances (including $25,000 and $79,987 due to related parties at March 31, 2016 and June 30, 2015, respectively)     79,390       134,377  
Convertible notes - related parties, net of debt discount of $48,372 and $0 at March 31, 2016 and June 30, 2015, respectively     76,716       —    
Total current liabilities     1,475,531       529,373  
                 
Non-redeemable convertible note (including $40,762 and $35,474 due to related parties at March 31, 2016 and June 30, 2015, respectively)     40,762       96,490  
Total liabilities     1,516,293       625,863  
                 
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 and 0 issued and outstanding at March 31, 2016 and June 30, 2015 respectively
    250       —    
Common stock; par value $0.001; 250,000,000 shares authorized,
68,252,650 issued and outstanding at March 31, 2016 and June 30, 2015 respectively
    95,253       95,253  
Additional paid-in capital     118,894,550       118,734,432  
Notes receivable     (5,000,000 )     (5,000,000 )
Accumulated deficiency     (115,503,349 )     (114,429,290 )
Total stockholders' deficiency     (1,513,296 )     (599,605 )
Total liabilities and stockholders’ deficiency   $ 2,997     $ 26,258  
                 
See accompanying notes.

 

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STAR CENTURY PANDAHO CORPORATION

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

 

      For the Three Months Ended
March 31, 2016
      For the Three Months Ended
March 31, 2015
      For the Nine months Ended
March 31, 2016
      For the Nine months Ended
March 31, 2015
 
                                 
                                 
Revenue   $ —       $ —       $ —       $ —    
                                 
Costs and expenses:                                
Compensation     195,288       —         877,896       —    
Administrative expenses     21,497       19,786       123,484       43,491  
Loss from operations     216,785       19,786       1,001,380       43,491  
                                 
Other income (expense)                                
Interest expense     (30,262 )     (4,024 )     (72,679 )     (26,533 )
                                 
Net loss   $ (247,047 )   $ (23,810 )   $ (1,074,059 )   $ (70,024 )
                                 
Net loss per share-basic and diluted   $ (0.00 )   $ (0.06 )   $ (0.02 )   $ (0.17 )
                                 
Weighted average shares outstanding-basic and diluted     68,252,650       402,650       68,252,650       402,650  

 

See accompanying notes.

 

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  STAR CENTURY PANDAHO CORPORATION

CONDENSED STATEMENT OF STOCKHOLDERS' DEFICIENCY

FOR THE NINE MONTHS ENDED MARCH 31, 2016

(Unaudited)

 

    Common
Shares
  Common
Stock
  Preferred B Shares   Preferred B Stock   Additional Paid-in Capital   Accumulated
Deficiency
  Note
Receivable
  Total Stockholders’
Deficiency
Balance
June 30,
2015
    68,252,650     $ 95,253       —       $ —       $ 118,734,432     $ (114,429,290 )   $ (5,000,000 )   $ (599,605 )
                                                                 
Preferred shares issued to settle  $44,787 advances due to shareholder     —         —         25,000       250       44,537       —         —         44,787  
 Beneficial conversion feature associated with issued
convertible notes
    —         —         —         —         115,581       —         —         115,581  
                                                                 
Net loss     —         —         —         —         —         (1,074,059 )     —         (1,074,059 )
Balance
March 31,
2016 (Unaudited)
    68,252,650     $ 95,253       25,000     $ 250     $ 118,894,550     $ (115,503,349 )   $ (5,000,000 )   $ (1,513,296 )

 

See accompanying notes.

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    STAR CENTURY PANDAHO CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
         
      For the Nine months       For the Nine months  
      Ended       Ended  
      March 31,       March 31,  
      2016       2015  
Cash Flows from operating activities                
Net loss   $ (1,074,059 )   $ (70,024 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Accrued interest     6,165       13,440  
Amortization of debt discount     66,515       13,093  
Changes in operating assets and liabilities                
Prepaid expenses     9,300       475  
Accounts payable and accrued liabilities     46,533       5,693  
Accrued interest on redeemable secured note payable     —         —    
Accrued compensation     877,896       —    
Net cash used in operating activities     (67,650 )     (37,323 )
                 
Cash Flows from financing activities                
  Advances from shareholder     —         38,094  
  Cash payment made on non-redeemable convertible note     (61,892 )     —    
  Proceeds from issuance of convertible notes-related parties     115,5811       —    
Net cash provided by financing activities     53,689       38,094  
                 
Net increase (decrease) in cash     (13,961 )     771  
Cash, beginning of period     15,291       215  
Cash, end of period   $ 1,330     $ 986  
                 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:                
Cash paid during the period for:                
 Interest   $ —       $ —    
 Income taxes   $ —       $ —    
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   $ 115,581     $ —    
Reclassification of  advances to convertible notes   $ 10,200     $ —    
 See accompanying notes.  

 

 

 

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STAR CENTURY PANDAHO CORPORATION

Notes to Condensed Financial Statements

Three and Nine months ended March 31, 2016 and 2015

(Unaudited)

 

NOTE 1. NATURE AND BACKGROUND OF BUSINESS

 

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 with Pandaho-themed merchandise and multi-media exhibitions.

 

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 (“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, 2015 filed with the SEC. The condensed balance sheet as of June 30, 2015 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 nine months ended March 31, 2016, the Company incurred a net loss of $1,074,059 and used cash in operating activities of $67,650, and at March 31, 2016, had a stockholders’ deficiency of $1,513,296. 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, 2015, 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.

 

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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.

 

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

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 March 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:

 

    March 31,
2016
  March 31,
2015
Common stock issuable upon conversion of convertible and non-redeemable convertible notes payable     2,073,050       176,794  
Common stock issuable upon conversion of accrued compensation     2,331,178       —    
Total     4,404,228       176,794  

 

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STOCK-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. ASU 2014-09 is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted on in annual reporting periods beginning after December 31, 2016. 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 August 2014, the FASB issued Accounting Standards Update 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, with early adoption permitted. The Company is currently evaluating the impact the adoption of ASU 2014-15 on the Company’s financial statements and disclosures.

 

In February 2016, the FASB issued Accounting Standards Update (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.

 

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 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 March 31, 2016 and June 30, 2015, the Company was obligated for the following advances:

 

    March 31,
2016
(unaudited)
  June 30,
2015
Advances due to shareholders   $ 25,000     $ 79,987  
Advances due to unrelated parties     54,390       54,390  
    $ 79,390     $ 134,377  
                 

 

NOTE 4. CONVERTIBLE NOTES-RELATED PARTIES

 

    March 31,
2016
(unaudited)
  June 30,
2015
Balance due on convertible notes   $ 125,781     $ —    
Unamortized note discounts     (49,065 )     —    
Balance on convertible notes, net of note discounts   $ 76,716     $ —    

 

During the nine months ended March 31, 2016, the Company issued seven convertible notes for total proceeds of $115,581. The notes are unsecured, accrue interest at 10% per annum, are due through January 24, 2017, and are convertible into 1,155,810 shares of the Company’s common stock at a conversion price of $0.10 per share. The closing price of the Company’s common stock ranged from $0.53 per share to $0.81 per share on the dates the notes were issued. The Company determined that the notes contained a beneficial conversion feature of $115,581 since the market price of the Company’s common stock was higher than the conversion price of the notes when issued. The Company recorded the beneficial conversion feature as a discount (up to the face amount of the applicable note) to be amortized over the life of the related note. During the three and nine months ended March 31, 2016, $28,473 and $66,515 of discount amortization is included in interest expense, respectively, and at March 31, 2016, there was an unamortized discount balance of $48,372 to be amortized through January 2017. In addition, at March 31, 2016, $10,200 of advances due to shareholders that are convertible into 102,000 shares of the Company’s common stock at a conversion price of $0.10 per share are included in the balance due on convertible notes. The advances are unsecured, noninterest bearing, and due June 3, 2016.

 

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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, 2016. 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 March 31, 2016, the face amount of the note, due to a related party, plus accrued interest was $40,762 and is convertible into 815,240 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 condensed balance sheets.

 

NOTE 6. STOCKHOLDERS' EQUITY

 

Designation and issuance of Series B Preferred stock

 

On September 4, 2015, the Company filed a Certificate of Designation designating the rights and restrictions of 100,000 shares of Series B Preferred stock, par value $0.01 pursuant to resolutions approved by the Company’s Board of Directors on June 11, 2015.

 

The holders of Series B Preferred stock are entitled to vote together with the holders of common stock, as a single class, upon all matters submitted to holders of common stock for a vote. Each share of Series B Preferred Stock has the voting power of 5,000 shares of common stock. The Series B Preferred stock is not convertible into common stock. In the event of any liquidation, dissolution or winding up of the Company, Series B Preferred stock shall have a liquidation preference to the common stock in the amount of par value per share.

 

On September 8, 2015, the Company issued 25,000 shares of Series B Preferred Stock in exchange for $44,787 due to Star Century Entertainment Corporation. The price per share of the Series B Preferred Stock was determined to be $0.73 per share, which was the closing price of the Company's common stock on September 8, 2015. The debt settled by the issuance of shares totaled $44,787. Based on $0.73 per share, this results in a valuation of the 25,000 shares of Series B Preferred Stock of $18,250. The difference of $26,537 is a gain on settlement of debt, which is recorded as a contribution to capital because it is a transaction between a principal shareholder of the Company and the Company. At March 31, 2016, there were 68,252,650 shares of common stock outstanding. Based on the voting rights of the Series B Preferred stock of 125,000,000 shares of common stock, Star Century Entertainment has the ability to elect our directors and determine the outcome of votes by our stockholders on corporate matters, including mergers, sales of our assets, charter amendments and other matters requiring stockholder approval.

 

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NOTE 7. RELATED PARTY TRANSACTIONS

 

Compensation and accrued compensation 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 March 31, 2016, accrued cash compensation totaled $582,795, which, if the executives and shareholder elected to be paid in shares of common stock, would result in the issuance of 2,331,178 shares of the Company’s common stock valued at $1,165,589. Accordingly, at March 31, 2016, the Company has recorded accrued compensation of $1,165,589. For the three and nine months ended March 31, 2016, the Company recorded $195,288 and $877,896 of compensation, respectively, related to these agreements, which included $97,644 and $295,101, respectively, for the pro-rata accrual of annual cash compensation, with the balance reflecting an expense for the value that could be paid in shares of common stock.

  

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2016 AND 2015

 

Company Overview

 

Star Century Pandaho Corporation (“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").

 

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 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 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. 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.

 

The Company is optimistic about the opportunity to utilize the Pandaho brand. The associated 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.

 

Cooperation Agreement

 

On November 1, 2015, the Company entered into a cooperation agreement with Pisona Tour Company Limited (“Pisona”) that outlines the intentions of the Company and Pisona in relation to Patong Bay Hill, a master planned community and hotel being developed in Thailand by Pisona. Under the agreement, the Company has agreed to allow Pisona to use the “Pandaho” trademark as the hotel’s mascot, and to sell “Pandaho” products under a license agreement to be negotiated. The agreement has an initial term of five years. At March 31, 2016, the Company and Pisona have not engaged in any licensed product activity.

 

RESULTS OF OPERATIONS

 

THREE MONTHS ENDED MARCH 31, 2016 COMPARED WITH THE THREE MONTHS ENDED MARCH 31, 2015

 

REVENUES

 

For the three months ended March 31, 2016 and 2015, we had no revenues. We are completely dependent upon the willingness of our management to fund our operations by way of loans or advances from our Chief Executive Officer, shareholders and others.

 

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COSTS AND EXPENSES

 

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 $195,288 for the three months ended March 31, 2016, compared to $0 for the three months ended March 31, 2015. The increase in compensation is due to employment contracts with three executives and a consulting agreement with a shareholder entered into during 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 March 31, 2016, the Company recorded $195,288 of compensation related to these agreements, which included $98,729 for accrual of annual compensation, with the balance reflecting an expense for the value that could be paid in shares of common stock.

 

Administrative expenses include costs primarily related to professional services, travel and related expenses, information technology, communication and information services, other general operating items. Administrative expenses were $21,497 for the three months ended March 31, 2016, compared to $19,786 for the three months ended March 31, 2015. Included in administrative expenses for the three months ended March 31, 2016 are $7,470 of payroll taxes, compared to no payroll taxes in 2015, offset by decreases in professional fees and investor relation expenses.

 

OTHER INCOME (EXPENSE)

 

Other income (expense) was made up of interest expense of $30,262 for the three months ended March 31, 2016 and interest expense of $4,024 for the three months ended March 31, 2015.

 

NET LOSS

 

Our net losses for the three months ended March 31, 2016 and 2015 were $247,047 and $23,810, respectively. Our losses increased in the current year primarily because of an increase in compensation, administrative, professional fees, amortization on debt discount and interest expense.

 

NINE MONTHS ENDED MARCH 31, 2016 COMPARED WITH THE NINE MONTHS ENDED MARCH 31, 2015

 

REVENUES

 

For the nine months ended March 31, 2016 and 2015, we had no revenues. We are completely dependent upon the willingness of our management to fund our operations by way of loans or advances from our Chief Executive Officer, shareholders and others.

 

OPERATING COSTS

 

Compensation was $877,896 for the nine months ended March 31, 2016, compared to $0 for the nine months ended March 31, 2015. The increase in compensation is due to employment contracts with three executives and a consulting agreement with a shareholder entered into during 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 nine months ended March 31, 2016, the Company recorded $877,896 of compensation related to these agreements, which included $295,101 for accrual of annual compensation with the balance reflecting an expense for the value that could be paid in shares of common stock.

 

Administrative expenses were $123,484 for the nine months ended March 31, 2016, compared to $43,491 for the nine months ended March 31, 2015. Included in administrative expenses for the nine months ended March 31, 2016 are $44,584 of payroll taxes, compared to no payroll taxes in 2015. Other increases in total administrative costs for the nine months ended March 31, 2016 compared to 2015 are due to increases in professional fees, costs related to SEC compliance, and investor relation expenses.

 

 

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OTHER INCOME (EXPENSE)

 

Other income (expense) was made up interest expense of $72,679 for the nine months ended March 31, 2016 and interest expense of $26,533 for the nine months ended March 31, 2015.

 

NET LOSS

 

Our net losses for the nine months ended March 31, 2016 and 2015 were $1,074,059 and $70,024, respectively. Our losses increased in the current year primarily because of an increase in compensation, administrative, professional fees, and amortization on debt discount and interest expense.

 

LIQUIDITY

 

As of March 31, 2016, we had cash of $1,330, a decrease of $13,961 compared to $15,291 at June 30, 2015. Net cash used in operating activities for the nine months ended March 31, 2016 was $67,650 compared to $37,323 cash used in operating activities in the same period of the prior year. Cash used in operations during the nine months ended March 31, 2016 was primarily due to our net loss in the period offset by non-cash charges and an increase in accrued compensation. Net cash provided by financing activities of $53,689 during the nine months ended March 31, 2016 was primarily due to proceeds received from notes payable of $115,581 offset by payments on notes payable of $61,892. During the same period of the prior year, net cash provided by financing activities of $38,094 was from advances made by a shareholder.

 

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 nine months ended March 31, 2016, the Company incurred a net loss of $1,074,059 and used cash in operating activities of $67,650, and at March 31, 2016, had a stockholders’ deficiency of $1,513,296. 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, 2015, 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.

 

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. 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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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.

 

Stock-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.

 

Recent Accounting Pronouncements

 

See Footnote 2 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. 

 

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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, 2016, 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 March 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, 2015.

 

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 March 31, 2016

 

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:  May 13, 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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