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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 10-Q

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
 
For the quarterly period ended October 31,  2012
   
[   ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from __________ to __________

000-54154
Commission File Number
 
FuluCai Productions Ltd.
(Exact name of registrant as specified in its charter)
   
Nevada
68-0680436
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
   
920 Crescent Blvd SW, Calgary, Alberta
T2S 1L5
(Address of principal executive offices)
(Zip Code)
 
(403) 880-7474
(Registrant’s  telephone number, including area code)
 
161 Silverado Ponds Way S.W., Calgary, AB T2X 0B7
(Former name, former address and former fiscal year, 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 [X]  No [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

 
Yes [X]  No [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer
[  ]
Accelerated filer
[  ]
       
Non-accelerated filer
[  ]
Smaller reporting company
[X]
(Do not check if a smaller reporting company)
     
 
 

 
 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 
Yes [ ] No [X]

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

 
Yes [  ]  No [  ]

APPLICABLE ONLY TO CORPORATE ISSUERS

90,000,000 common shares outstanding as of December 10,  2012
(Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.)

.

 
2

 

FuLuCai Productions Ltd.

TABLE OF CONTENTS

   
Page
 
PART I – Financial Information
 
Item 1.
Financial Statements
    4
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
  15
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
  17
Item 4.
Controls and Procedures
  17
     
 
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
  18
Item 5.
Other Information
  18
Item 6.
Exhibits
  19
 
Signatures
  2/



 
3

 

PART I – FINANCIAL INFORMATION

 
FuLuCai Productions Ltd.
 
 

 
UNAUDITED FINANCIAL STATEMENTS
FOR THE SIX MONTH PERIODS ENDED OCTOBER 31, 2012 AND OCTOBER 31, 2011
AND FOR THE PERIOD FROM INCEPTION (MARCH 26, 2010) TO OCTOBER 31, 2012

REPORTED IN UNITED STATES DOLLARS


 
4

 

ITEM 1.  FINANCIAL STATEMENTS

The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Article 210 8-03 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.  In the opinion of management, all adjustments considered necessary for a fair presentation have been included.  All such adjustments are of a normal recurring nature.  Operating results for the six month period ended October 31, 2012, are not necessarily indicative of the results that may be expected for the fiscal year ending April 30, 2013.  For further information refer to the financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended April 30, 2012.



 
Page
Balance Sheets
  6
Statements of Operations
  7
Statements of Cash Flows
  8
Notes to Financial Statements
  9 to 14

 
 

 
5

 

FuLuCai Productions Ltd.
 (A development stage enterprise)
Balance Sheets
(Unaudited)
 
       
       
   
October 31,
 2012
   
April 30,
2012
 
Assets
           
Current assets
           
Cash
  $ -     $ 2,718  
 Total current assets
          2,718  
                 
Property and equipment, net
    10,940       14,689  
Total assets
  $ 10,940     $ 17,407  
                 
Liabilities and Shareholders’ (Deficit)
               
 Current liabilities
               
Accounts payable and accrued expenses
  $ 21,220     $ 15,187  
Accounts payable and accrued expense  – related party
    123       5,057  
Loan payable – related party
    19,121       -  
 Total current liabilities
    40,464       20,244  
                 
Shareholders’ (Deficit)
               
Common stock  -  $0.0001 par value, 200,000,000 shares authorized,
90,000,000 shares issued and outstanding as of October 31, 2012 and April 30, 2012,  respectively
    9,000       9,000  
Additional paid in capital
    108,000       108,000  
Accumulated deficit during the development stage
    (146,524 )     (119,837 )
Total Shareholders' (Deficit)
    (29,524 )     (2,837 )
Total Liabilities and Shareholders' (Deficit)
  $ 10,940     $ 17,407  


The accompanying notes are an integral part of these financial statements

 
6

 

FuLuCai Productions Ltd.
 (A development stage enterprise)
Statements of Operations
(Unaudited)
 
 
For the three months
   
For the six months
     
Inception
 
   ended October 31,    ended October 31,     (March 26, 2010) to  
     2012     2011     2012     2011     October 31, 2012  
                               
                               
Revenue
  $ -     $ -     $ -     $ 15,750     $ 15,750  
                                         
Operating Expenses
                                       
Depreciation
    1,875       1,647       3,749       3,219       11,553  
Professional expenses
    3,285       21,703       14,042       28,507       68,469  
Video production
    -       3,000       -       3,000       33,880  
Consulting fees
    -       -       -       7,000       7,000  
General and administration
    2,289       5,060       8,773       7,002       41,249  
Total operating expenses
    7,449       31,410       26,564       48,727       162,151  
Loss from operations
    (7,449 )     (31,410 )     (26,564 )     (32,977 )     (146,401 )
                                         
Interest (expense)-related party
    (123 )     -       (123 )     -       (123 )
  (Loss) before taxes
    (7,572 )     (31,410 )     (26,687 )     (32,977 )     (146,524 )
                                         
Provision for taxes on income
    -       -       -       -       -  
Net Loss
  $ (7,572 )   $ (31,410 )   $ (26,687 )   $ (32,977 )   $ (146,524 )
                                         
                                         
Basic and diluted loss per share
  $ (0.00 )   $ (0.00 )   $ (0.00 )   $ (0.00 )        
                                         
Weighted average number of shares outstanding
    90,000,000       90,000,000       90,000,000       90,000,000          

The accompanying notes are an integral part of these financial statements


 
7

 

FuLuCai Productions Ltd.
(A development stage enterprise)
Statements of Cash Flows
(Unaudited)
 
             
         
Inception
 
         
(March 26, 2010)
 
   
Six months ended October 31,
   
Through
 
   
2012
   
2011
   
October 31, 2012
 
Cash flows from operating activities:
                 
Net (loss)
  $ (26,687 )   $ (32,977 )   $ (146,524 )
Adjustments to reconcile net (loss) to net cash provided (used)
                       
    by operating activities
                       
Depreciation
    3,749       3,218       11,553  
Changes in current assets and liabilities:
                       
Accounts payable and accrued expenses
    12,807       5,617       27,994  
Accounts payable related parties
    1,319       1,500       6,376  
Customer deposits
    -       (15,750 )     -  
Net cash flows provided (used) by operating activities
    (8,812 )     (38,392 )     (100,601 )
                         
Cash from Investing Activities:
                       
Purchase equipment
    -       (3,010 )     (22,493 )
Net cash flows used in investing activities
    -       (3,010 )     (22,493 )
                         
Cash flows from financing activities:
                       
Proceeds from sale of common stock, net of offering costs
    -       -       117,000  
Proceeds from related party loans
    6,094       -       9,094  
Repayment of related party loans
    -       -       (3,000 )
Net cash flows from financing activities
    6,094       -       123,094  
                         
 Net increase (decrease) in cash  and cash equivalents
    (2,718 )     (41,402 )     -  
 Cash and equivalents, beginning of period
    2,718       57,780       -  
 Cash and equivalents, end of period
  $ -     $ 16,378     $ -  
                         
 Supplemental cash flow disclosures:
                       
   Cash paid for interest
  $ -     $ -     $ -  
   Cash paid for income taxes
  $ -     $ -     $ -  
                         
Non-cash transactions:
                       
Accounts payable – related party transfer to loan payable – related party
  $ 6,253     $ -     $ 6,253  
Accounts payable transfer to loan payable – related party
    6,774               6,774  
    $ 13,027     $ -     $ 13,027  


The accompanying notes are an integral part of these financial statements


 
8

 

FuLuCai Productions Ltd.
(A development stage enterprise)
Notes to the Financial Statements
October 31, 2012
(Unaudited)

Note 1 - Organization and summary of significant accounting policies

Following is a summary of our organization and significant accounting policies:

Organization and nature of business – Fulucai Productions Ltd. (identified in these footnotes as “we” or “the Company”) is a Nevada corporation incorporated on March 26, 2010. We are currently based in Calgary, Alberta, Canada. We intend to operate in the U.S. and Canada. Our fiscal year end is April 30 for financial reporting purposes. Our website can be viewed at www.fulucai.tv.

Currently, we are a television and movie production company. Our initial plan of operation was to develop reality-based show concepts for sale to television and Internet production interests. This planned development was expected to include the production of “trailers”. Trailers are short videos that demonstrate the concept to potential buyers. We developed our first reality show, however, we were unable to find a buyer and we determined to undertake production of a full-length feature film.

On June 29, 2012, the Company finalized negotiations with Equine Venture Group, Inc. (“Equine”) and entered into an acquisition agreement with Equine and Equine’s sole shareholder, Jennifer Serek (“Serek”) to acquire all of the issued and outstanding shares of Equine.  As of the date of these financial statements the Company had not completed the acquisition.

On July 27, 2012, Mr. James Durward and Mr. Gordon Rix resigned as officers and directors of the Company. Ms. Jennifer Serek was appointed the sole officer and director of the Company.

On September 5, 2012, Ms. Jennifer Serek resigned as President, Chief Executive Officer and Treasurer of the Company.  On September 5 2012, the Board of Directors appointed John Carl Anderson the President, Chief Executive Officer Treasurer and a Director of the Company. On September 17, 2012, Mr. John Carl Anderson, resigned as President, Chief Executive Officer, Treasurer and a Director of the Company and Mr. John Demoleas was appointed President, Chief Executive Officer, Treasurer and a Director of the Company.

In the current development stage, we anticipate incurring operating losses as we implement our business plan.

Basis of presentation - The accounting and reporting policies of the Company conform to U.S. generally accepted accounting principles applicable to development stage enterprises.

Use of 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 amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and cash equivalents - For purposes of the statement of cash flows, we consider all cash in banks, money market funds, and certificates of deposit with an original maturity of less than three months to be cash equivalents.

Fair value of financial instruments and derivative financial instruments - The carrying amounts of cash and current liabilities approximate fair value because of the short maturity of these items. These fair value estimates are subjective in nature and involve uncertainties and matters of significant judgment, and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect these estimates. We do not hold or issue financial instruments for trading purposes, nor do we utilize derivative instruments in the management of our foreign exchange, commodity price or interest rate market risks.

 
9

 

FULUCAI PRODUCTIONS LTD.
(A development stage enterprise)
Notes to the Financial Statements
October 31, 2012
(Unaudited)

Note 1 - Organization and summary of significant accounting policies (continued):

Fixed assets - Property, plant and equipment is valued at cost less accumulated depreciation and impairment losses. If the costs of certain components of an item of property, plant and equipment are significant in relation to the total cost of the item, they are accounted for and depreciated separately. Depreciation expense is recognized using the straight-line method and is amortized over the estimated useful life of the related asset. The following useful lives are assumed:

Furniture & office equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 - 5 years

Revenue recognition for services – The Company recognizes revenue for services using the completed performance method, which is applied when more than one act must be performed to complete a service, and when the final act is so significant to the entire transaction taken as a whole, that performance cannot be considered to have taken place until the performance of that final act occurs, at which time revenue in respect of the service will be recognized.

Federal income taxes - Deferred income taxes are reported for timing differences between items of income or expense reported in the financial statements and those reported for income tax purposes in accordance with ASC Topic 740 regarding Accounting for Income Taxes, which requires the use of the asset/liability method of accounting for income taxes. Deferred income taxes and tax benefits are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and for tax loss and credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company provides deferred taxes for the estimated future tax effects attributable to temporary differences and carryforwards when realization is more likely than not.

Net income per share of common stock – We have adopted ASC Topic 260 regarding Earnings per Share, which requires presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. In the accompanying financial statements, basic earnings per share of common stock is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period.

Development Stage Company - The accompanying financial statements have been prepared in accordance with ASC Topic 915 "Accounting and Reporting by Development Stage Enterprises". A development stage enterprise is one in which planned principal operations have not commenced or if its operations have commenced, there has been no significant revenue therefrom. Development stage companies report cumulative costs from the enterprise's inception.

Note 2 – Going concern:

At October 31, 2012, we had limited operations and we expect to incur development stage operating losses as we continue to develop our operating business. We raised sufficient funds under our prospectus offering to fund our initial business plan, and we intend to rely on our officers and directors to perform essential functions without compensation until we raise sufficient funding for ongoing operations or until revenues from operations commence. We do not have sufficient funds to fund our operations over the next twelve months based on our current budgets and business plan. As we progress the development of our business we may need to raise additional capital, the amounts of which cannot be known at this time.

There is substantial doubt about our ability to continue as a going concern as the continuation of our business is dependent upon achieving success in our required television development efforts or closing the acquisition of Equine and achieving success in the business of training and marketing show horses and ultimately having a profitable level of operations.

 
10

 

FULUCAI PRODUCTIONS LTD.
(A development stage enterprise)
Notes to the Financial Statements
October 31, 2012
(Unaudited)

Note 3 – Acquisition of Media Rights

On inception, our Company’s CEO and a director at that time, Mr. James Durward, transferred all rights to the title and interest he held along with all ancillary rights in the following original work written by himself: “The Real Deal”, Writers Guild of Canada Reg. # S10-00417 (the “Properties”). Mr. Durward became the controlling shareholder of the Company on April 28, 2010. We have not placed any value on these Properties due to the additional difficulty and expense of securing appraisals to comply with ASC Topic 926 (Entertainment-Films). In respect of these and all future properties Mr. Durward has a 5% (five percent) gross overriding royalty on all revenues generated. Our former CFO, Secretary Treasurer and member of the Board Mr. Gordon Rix holds a 1% (one percent) gross overriding royalty on all broadcast licensing revenues generated by “The Real Deal”. Mr. Douglas MacLeod, an unrelated third party also holds a .5% (one half of one percent) gross overriding royalty on all broadcast licensing revenues generated by “The Real Deal”, bringing total broadcast licensing royalties payable to all parties to 6.5% (six and one half percent).

On October 14, 2011, the Company and its then President, James Durward, entered into a Royalty Agreement whereby the Company has acquired all rights (“Rights”) to the intellectual property known as “All the Wrong Reasons” as registered with the Writer’s Guild of America Registration Number 1533357 (the “Production”). The Production has been re-named "Inevitable". In return for the Rights, the Company has agreed to pay James Durward a 20% gross overriding royalty on any and all worldwide revenues generated by, or derived from, the Production.

As of February 20, 2012, the Production was completed. Production costs were approximately $11,000. The Company submitted the Production to a variety of film festivals world-wide in an attempt to have it picked up for distribution.  Subsequent to the period covered by this report, the Company entered into a licensing and distribution agreement for Inevitable which is described below under Note 10   - Subsequent Events.

Note 4 – Service agreements

On March 28, 2011, Fulucai Productions Ltd. (the “Company”) and Octacation Productions Ltd. (“Octacation”) entered into a Development Agreement (the “Agreement”) whereby the Company was to provide video production and post-production services (the “Services”) for the development of a marketing video (the “Trailer”) for Octacation’s movie, “Smack in the Middle of Nowhere”.

Under the terms of the Agreement, the Company was to provide video production and post-production services, voice acquisition and mixing, sound effects, non-union actors, craft services, direction, and editing. Any and all other services, including music, are considered extras and billed on a cost-plus-20% basis.

Gordon Rix, a director and officer of the Company at that time licensed the rights to “Smack in the Middle of Nowhere” to Octacation Productions Ltd. Mr. Rix abstained from voting on the entry into the Agreement between Octacation and the Company.

On or before April 29, 2011, Octacation was to provide the Company with ten (10) storyboarded scenes and scripted dialogue, if any, to be used by the Company as guidance for the Trailer production. Prior to April 29, 2011, Octacation delivered to the Company the required storyboarded scenes and planning of the trailer commenced.

Octacation agreed to pay the Company a total of US$40,000 for the Trailer development, $15,750 of which was paid upon signing of the Agreement with the balance due within 30 days of the closing of Octacation’s contemplated financing on Form S-1 Registration Statement, which was originally filed on March 22, 2011. The Company was required to deliver the complete Trailer within six months of the final payment. On May 31, 2011, Octacation advised the Company they had withdrawn their Form S-1 Registration Statement and would not be proceeding with the trailer. The Company invoiced Octacation for the amount of the deposit and recorded $15,750 as income for work completed on the project. The balance of the contract was cancelled.

 
11

 

FULUCAI PRODUCTIONS LTD.
(A development stage enterprise)
Notes to the Financial Statements
October 31, 2012
(Unaudited)

Note 5 – Property and equipment

Property and Equipment consisted of the following at October 31, 2012 and April 30, 2012.

   
October 31, 2012
   
April 30, 2012
 
Computer and production equipment
 
$
22,493
   
$
22,493
 
Less accumulated depreciation/amortization
   
(11,553)
     
(7,804
)
Property and equipment, net
 
$
10,940
   
$
14,689
 

Note 6 – Common Stock

As of October 31, 2012, the Company was authorized to issue 200,000,000 shares of common stock, par value $0.0001 common stock, of which 90,000,000 shares of common stock are issued and outstanding.

Note 7 – Related Party Transactions

During the three month period ended July 31, 2012, the Company received invoices from Mr. Durward, a former director and officer of the Company and a shareholder of the Company, totaling the amount of $9,455 (2011- $12,700) for costs related to video production, equipment, advances for the payment of Company invoices and general administration expenses paid by Mr. Durward on behalf of the Company. The Company made cash payments in the amount of $8,259 to Mr. Durward, leaving the amount of $6,253 due and owing, however, on September 27, 2012, the Company received notification of the assignment of debt from Mr. Durward to Able Star Capital Investment Ltd. (“Able Star”),  therefore as at October 31, 2012 the debt to Mr. Durward was retired in full and assigned to a related party as Able Star is a shareholder of the Company.

Mr. Durward and Mr. Rix, both of whom are the former directors and officers of the Company hold gross overriding royalties on all revenues generated by the Company’s Properties. Please refer to Note 3 - Acquisition of Media Rights for further details.

On October 14, 2011, the Company and its then President, James Durward, entered into a Royalty Agreement whereby the Company has acquired all rights (“Rights”) to the intellectual property known as “All the Wrong Reasons” as registered with the Writer’s Guild of America Registration Number 1533357 (the “Production”). Mr. Durward will receive a 20% gross overriding royalty on any and all worldwide revenues generated by, or derived from, the Production. Please refer to Note 3 - Acquisition of Media Rights for further details.

During the three month period ended July 31, 2012, the Company received funds in the amount of $6,094 (CAD$6,000) from a shareholder of the Company. The Company received notification that as of September 27, 2012, the loan had been assigned to Able Star, a shareholder of the Company.  The Company did not make any cash payments, leaving the amount of $6,094 due and owing to the shareholder as loans payable – related parties as at October 31, 2012.

The Company received notification that as of October 9, 2012, Able Star, a shareholder of the Company had paid the amount of $6,774 due and owing to a creditor of the Company, thus making the amount of $6,774 due to Able Star as accounts payable-related party as at October 31, 2012.   Therefore the total amount of the debt owing to Able Star as at October 31, 2012 is the amount of $19,121, of which $6,094 was a loan payable and the balance of $13,027 was accounts payable.

The amounts owing to Able Star are unsecured, bear interest at 8% per annum, and are due on demand. During the period ended October 31, 2012, the accrued interest expense in the amount of $123 was reflected in the balance sheets as accounts payable and accrued expenses – related party.


 
12

 

FULUCAI PRODUCTIONS LTD.
(A development stage enterprise)
Notes to the Financial Statements
October 31, 2012
(Unaudited)
Note 8 - Income taxes

The provision (benefit) for income taxes for the six months period ended October 31, 2012 was as follows (assuming a 34 percent effective tax rate):

   
October 31, 2012
 
Current Tax Provision:
     
Federal-
     
Taxable income
 
$
-
 
Total current tax provision
 
$
-
 
Deferred Tax Provision:
       
Federal-
       
Loss carryforwards
 
$
9,073
 
Change in valuation allowance
   
(9,073
)
Total deferred tax provision
 
$
-
 

The Company had deferred income tax assets as of October 31, 2012, and April 30, 2012 as follows:

   
October 31, 2012
   
April 30, 2012
 
Loss carryforwards
 
$
49,817
   
$
40,744
 
Less - valuation allowance
   
(49,817
)
   
(40,744
)
Total net deferred tax assets
 
$
-
   
$
-
 

The Company provided a valuation allowance equal to the deferred income tax assets for the six month period ended October 31, 2012 because it is not presently known whether future taxable income will be sufficient to utilize the loss carryforwards. As of October 31, 2012, the Company had approximately $146,524 (April 30, 2012 - $119,837) in tax loss carryforwards that can be utilized in future periods to reduce taxable income, and begin to expire in the year 2029.

The Company accounts for income taxes in accordance with ASC Topic No. 740, “Income Taxes.” This standard requires the Company to provide a net deferred tax asset or liability equal to the expected future tax benefit or expense of temporary reporting differences between book and tax accounting and any available operating loss or tax credit carryforwards.

The Company has no tax positions at October 31, 2012 or April 30, 2012 for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.

The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. Income tax periods from inception are open for examination by taxing authorities.  During the six month period ended October 31, 2012 the Company recognized no interest and penalties. The Company had no accruals for interest and penalties at October 31, 2012 or April 30, 2012.

Note 9- Recent accounting pronouncements

There are no new pronouncements that have current application to the Company, or may be applicable to the Company's future financial reporting.


 
13

 

FULUCAI PRODUCTIONS LTD.
(A development stage enterprise)
Notes to the Financial Statements
October 31, 2012
(Unaudited)

Note 10– Subsequent Events

Effective November 15, 2012, the Company entered into a licensing and distribution agreement with ConvergTV (CGTV) whereby CGTV was granted the worldwide rights and license to the movie Inevitable (the “Program”) for a period of two years commencing November 15, 2012. CGTV will get any and all License Rights, all rights of distribution, the right to copy and reproduce the Program, the right to create derivative works of the Program for the purpose of creating branding elements and short form promotional materials (“Promotional Works”), the right to sell copies, the right to import and export the Program and the Promotional Works, the right to display the Program and Promotional Works publicity, the right to transmit the Program and Promotional Works through any transmission or delivery method that exists today, or that is created in the future, to any number of devices or users, including transmission through simultaneous delivery or streaming, and the right to sublicense and/or assign some or all of these rights to others. The Company will receive a share of the revenues from revenues earned by CGTV in regard to its licensing and distribution.

On June 29, 2012, the Company finalized negotiations with Equine Venture Group, Inc. (“Equine”) and entered into an acquisition agreement with Equine and Equine’s sole shareholder, Jennifer Serek (“Serek”) to acquire all of the issued and outstanding shares of Equine. The Company was unable to finalize the agreement with Equine Venture Group Inc. and has determined not to pursue the acquisition as of November 21, 2012.

The Company has determined to continue with its current business and to review other potential acquisitions.

On November 21, 2012, Ms. Jennifer Serek resigned as Secretary and Director of the Company.

On November 23, 2012, Mr. John Demoleas resigned as President, Chief Executive Officer, Treasurer and Chief Financial Officer of the Company.

On November 23, 2012, the Board of Directors appointed Malcolm Albery as the President, Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer and a Director of the Company.

On November 26, 2012, Mr. John Demoleas resigned as a Director of the Company.

The Company has evaluated subsequent events from the balance sheet date through the date that the financial statements were issued and determined that there were no other events to disclose.
 
 
14

 
 
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
This quarterly report contains forward-looking statements relating to future events or our future financial performance.  In some cases, you can identify forward-looking statements by terminology such as "may", "should", "intends", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential", or "continue" or the negative of these terms or other comparable terminology.  These statements are only predictions and involve known and unknown risks, uncertainties and other factors which may cause our or our industry's actual results, levels of activity or performance to be materially different from any future results, levels of activity or performance expressed or implied by these forward-looking statements.

Such factors include, among others, the following:  international, national and local general economic and market conditions;  demographic  changes; the ability of the Company to sustain,  manage or  forecast  its growth;  the ability of the Company to successfully make and integrate acquisitions;  raw material costs and availability;  new product  development and  introduction;  existing  government regulations  and  changes  in,  or  the  failure  to  comply  with,   government regulations;  adverse publicity;  competition; the loss of significant customers or suppliers;  fluctuations  and  difficulty in forecasting  operating  results; changes in business strategy or development  plans;  business  disruptions;  the ability  to attract  and  retain  qualified  personnel;  the  ability to protect technology; and other factors referenced in this and previous filings.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity or performance.  Except as required by applicable law and including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Given these uncertainties, readers of this Form 10-Q and investors are cautioned not to place undue reliance on such forward-looking statements.  We disclaim any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements contained herein to reflect future events or developments.

All dollar amounts stated herein are in US dollars unless otherwise indicated.

The management’s discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with generally accepted accounting principles ("GAAP") in the United States of America.  The following discussion of our financial condition and results of operations should be read in conjunction with our audited financial statements for the year ended April 30, 2012, along with the accompanying notes.  As used in this quarterly report, the terms "we", "us", "our", and the "Company" means FuLuCai Productions Ltd.

Liquidity and Capital Resources

As of October 31, 2012, we had total assets of $10,940 ($17,407 as at April 30, 2012) comprised of $Nil ($2,718 – April 30, 2012) in cash and $10,940 ($14,689 – April 30, 2012) in fixed assets, being equipment and software. This reflects a decrease of $6,467 in the value of our total assets from $17,407 on April 30, 2012. The decrease in assets is due to cash payments to vendors offset by the cash advances made from a shareholder. As of October 31, 2012, our total liabilities increased to $40,464 from $20,244 as of April 30, 2012 due to an increase in accounts payable, accounts payable- related-party and loan payable – related parties. During the six months ended October 31, 2012 we did not generate any revenues as compared to the six months ended October 31, 2011 when we generated $15,750 in revenues due to a production contract for our services.

We do not have sufficient working capital to satisfy our cash requirements for the next twelve months of operations.

Subsequent to the period covered by this report, the Company has determined not to finalize the acquisition agreement with Equine Ventures.
 
 
15

 

Management has determined it will continue with the Company’s movie production business and seek other potential acquisitions to increase stockholder value. Effective November 15, 2012, the Company entered into a licensing and distribution agreement with ConvergTV (CGTV) whereby CGTV was granted the worldwide rights and license to the movie Inevitable (the “Program”) for a period of two years commencing November 15, 2012. CGTV will get any and all License Rights, all rights of distribution, the right to copy and reproduce the Program, the right to create derivative works of the Program for the purpose of creating branding elements and short form promotional materials (“Promotional Works”), the right to sell copies, the right to import and export the Program and the Promotional Works, the right to display the Program and Promotional Works publicity, the right to transmit the Program and Promotional Works through any transmission or delivery method that exists today, or that is created in the future, to any number of devices or users, including transmission through simultaneous delivery or streaming, and the right to sublicense and/or assign some or all of these rights to others. The Company will receive a share of the revenues from revenues earned by CGTV in regard to its licensing and distribution.  At this time the Company has no way to determine what revenues, if any, it will receive from this agreement.

We anticipate we will require a minimum of $50,000 for general and administrative expenses and to pay the fees required to maintain our filing status with the SEC for the next twelve months.   The Company has not determined whether to undertake further production projects at this time, but will continue to seek agreements to license its currently developed projects.    We do not have sufficient funds for the next twelve months of operations. We will be required to raise additional capital to continue operations. There can be no assurance that we will be able to raise any funds on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, we will not be able to meet our other obligations as they become due and we may be forced to cease the operation of the business. We currently do not have any negotiated funding available. It is unsure as to how we will raise the required funds to continue our current business.

There is substantial doubt about our ability to continue as a going concern as the continuation of our business is dependent upon achieving success in our television and movie production efforts and ultimately having a profitable level of operations. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.

Results of Operations

Our operating results for the three and six month periods ended October 31, 2012 as compared to October 31, 2011 are described below.

Revenue

During the three month periods ended October 31, 2012 and October 31, 2011 we did not earn any revenue.

During the six month period ended October 31, 2012 we did not earn any revenue as compared to revenue earned of $15,750 during the comparable six month period ended October 31, 2011.

We have entered into a licensing and distribution agreement for our movie Inevitable with a television station, however, it is unknown how much revenue we will generate from this agreement or if we will generate any revenue at all.

Expenses

Three months ended October 31, 2012 as compared to October 31, 2011:

Our net loss, which is all related to operating losses, for the three month period ended October 31, 2012 was ($7,572) as compared to a net loss of ($31,410) for the three month period ended October 31, 2011, of which $1,875 for the three months ended October 31, 2012 was depreciation as compared to $1,647 for the three months ended October 31, 2011, $3,285 ($21,703 – 2011) was paid for professional fees, including legal and audit, and $2,289 ($5,060 – 2011) for general office expenses, offset by a reduction in video production  fees to nil from $3,000 (2011) .


 
16

 
 
Six months ended October 31, 2012 as compared to October 31, 2011:

Our net loss, which is all related to operating losses, for the six month period ended October 31, 2012 was ($26,687) as compared to a net loss of ($32,977) for the six month period ended October 31, 2011, of which $3,749 for the six months ended October 31, 2012 was depreciation as compared to $3,219 for the six months ended October 31, 2011, $14,042 ($28,507 – 2011) was paid for professional fees, including legal and audit, and $8,773 ($7,001 – 2011) for general office expenses, offset by a reduction in consulting fees to nil from $7,000 (2011), and video production fees to nil from $3,000 (2011) .
 
Basic and diluted losses per share for the respective three month periods ended October 31, 2012 and October 31, 2011 was ($0.00).

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

A smaller reporting company is not required to provide the information required by this Item.

ITEM 4.  CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of our management, our Principal Executive Officer and our Principal Financial Officer, of the effectiveness of the design of our disclosure controls and procedures (as defined by Exchange Act Rules 13a-15(e) or 15d-15(e)) as of October 31, 2012, pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, our Principal Executive Officer, who is also our Principal Financial Officer, concluded that our disclosure controls and procedures are not effective as of October 31, 2012 in ensuring that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

This conclusion is based on findings that constituted material weaknesses. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s interim financial statements will not be prevented or detected on a timely basis.
In performing the above-referenced assessment, our management identified the following material weaknesses:

1)
We currently do not have an audit committee or an independent audit committee financial expert. While not being legally obligated to have an audit committee or independent audit committee financial expert, it is the management’s view that to have an audit committee, comprised of independent board members, and an independent audit committee financial expert is an important entity-level control over financial statements;

2)
Inadequate staffing and supervision within our bookkeeping operations. We have one consultant involved in bookkeeping functions, who provides two staff members. The relatively small number of people who are responsible for bookkeeping functions and the fact that they are from the same firm of consultants prevents us from segregating duties within our internal control system. The inadequate segregation of duties is a weakness because it could lead to the untimely identification and resolution of accounting and disclosure matters or could lead to a failure to perform timely and effective reviews. This may result in a failure to detect errors in spreadsheets, calculations or assumptions used to compile the financial statements and related disclosures as filed with the SEC;

3)
Outsourcing of our accounting operations. Because there are no employees in our administration, we have outsourced all of our accounting functions to an independent firm. The employees of this firm are managed by supervisors within the firm and are not answerable to our management. This is a material weakness because it could result in a disjunction between the accounting policies adopted by our Board of Directors and the accounting practices applied by the independent firm;

4)
Insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements;

5)
Ineffective controls over period end financial disclosure and reporting processes.


 
17

 

We continue to review our disclosure controls and procedures related to these material weaknesses and expect to implement changes in the near term, including identifying specific areas within our governance, accounting and financial reporting processes to add adequate resources and personnel to potentially mitigate these material weaknesses. Our present management will continue to monitor and evaluate the effectiveness of our internal controls and procedures and our internal controls over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal controls over financial reporting that occurred during the three months ended October 31, 2012 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting. We believe that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within any company have been detected.



PART II – OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS

None

ITEM 1A.  RISK FACTORS

A smaller reporting company is not required to provide the information required by this Item.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Unregistered Sales of Equity Securities

There were no unregistered securities sold or issued by the Company without the registration of these securities under the Securities Act of 1933 in reliance on exemptions from such registration requirements, within the period covered by this report, which have not been previously included in a Quarterly Report on Form 10-Q or a Current Report on Form 8-K.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable

ITEM 5. OTHER INFORMATION

None

 
18

 


ITEM 6.  EXHIBITS

Number
Description
 
3.1
Articles of Incorporation.
Incorporated by reference to our Form S-1 registration statement filed with the Securities and Exchange Commission on May 19, 2010
3.2
Bylaws.
Incorporated by reference to our Form S-1 registration statement filed with the Securities and Exchange Commission on May 19, 2010
 
10.1
 
Executed Royalty Agreement between the Company and Doug MacLeod dated April 14, 2010 granting a one half of a percent (0.5%) royalty of the reality show concept The Real Deal.
 
Incorporated by reference to our Form S-1 registration statement filed with the Securities and Exchange Commission on May 19, 2010
10.2
Executed Royalty Agreement between the Company and Gordon Rix, dated April 14, 2010 granting a one percent (1%) royalty of the reality show concept The Real Deal.
Incorporated by reference to our Form S-1 registration statement filed with the Securities and Exchange Commission on May 19, 2010
10.3
Executed Royalty Agreement between the Company and James Durward, dated April 14, 2010 granting a five percent (5%) royalty of the reality show concept The Real Deal.
Incorporated by reference to our Form S-1 registration statement filed with the Securities and Exchange Commission on May 19, 2010
10.4
Escrow Agreement between the Company and International Securities Group Inc. dated May 1, 2010.
Incorporated by reference to our Form S-1 registration statement filed with the Securities and Exchange Commission on May 19, 2010
10.5
Development Agreement between the Company and Octacation Productions Ltd. dated March 28, 2011
Incorporated by reference to our Form 8-K filed with the Securities and Exchange Commission on April 15, 2011
10.6
Executed Royalty Agreement between the Company and James Durward, dated October 14, 2011 granting a twenty percent (20%) royalty with respect to worldwide revenues generated from the intellectual property known as “All the Wrong Reasons”.
Incorporated by reference to our Form 8-K filed with the Securities and Exchange Commission on October 18, 2011.
10.7
Assignment Agreement between the Company and SFT Diversified Global LLC dated April 4, 2012.
Incorporated by reference to our Form 8-K filed with the Securities and Exchange Commission on April 11, 2012.
10.8
Acquisition Agreement dated June 29, 2012 between the Company and Equine Venture Group Inc. and Jennifer Serek.
Incorporated by reference to our Form 8-K filed with the Securities and Exchange Commission on July 6, 2012.
 
10.9
 
Licensing and Distribution Agreement dated November 15, 2012 between the Company and ConvergTV.
 
 
Filed herewith
16.1
Letter from Child, Van Wagoner & Bradshaw, PLLC dated August 9, 2012 regarding change in certified accountant.
Incorporated by reference to our Form 8-K filed with the Securities and Exchange Commission on August 9, 2012.
31.1
Section 302 Certification- Principal Executive Officer
Filed herewith
31.2
Section 302 Certification- Principal Financial Officer
Filed herewith
32.1
Certification Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Filed herewith
101.INS
XBRL Instance Document**
Filed Herewith
101.SCH
XBRL Taxonomy Extension Schema**
Filed Herewith
101.CAL
XBRL Taxonomy Extension Calculation Linkbase**
Filed Herewith
101.DEF
XBRL Taxonomy Extension Definition Linkbase**
Filed Herewith
101.LAB
XBRL Taxonomy Extension Label Linkbase**
Filed Herewith
101.PRE
XBRL Taxonomy Extension Presentation Linkbase**
Filed Herewith
**Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability.

 
19

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


   
FULUCAI PRODUCTIONS  LTD.
       
Date:
December 17, 2012
By:
/s/ Malcolm Albery
   
Name:
Malcolm Albery
   
Title:
Chief Executive Officer,  Principal Executive Officer, Principal Financial Officer,  Principal Accounting Officer, Secretary-Treasurer and Director


 
20