UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)
x ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 2016

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 
Commission File Number: 000-53780

STAR CENTURY PANDAHO CORPORATION

(Exact name of registrant as specified in its charter)

 

Nevada	27-0491634
(State or other jurisdiction of incorporation or organization	(I.R.S. Employer Identification No.)
1980 Festival Plaza Drive Suite 530 Las Vegas, Nevada	89135
(Address of Principal executive offices)	(Zip Code)
Registrant’s telephone number, including area code.	(702) 628-8899

 

Securities registered under Section 12(b) of the Exchange Act:	None
Securities registered under Section 12(g) of the Exchange Act:	Common stock, par value $0.001 per share
	(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x

 

Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the last 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

 

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

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

 

Aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of December 31, 2015: $9,536,040

 

As of September 22, 2016 the registrant had 68,708,924 outstanding shares of Common Stock.

Documents incorporated by reference: None.

TABLE OF CONTENTS

PART I		Page
Item 1.	Business	4
Item 1A.	Risk Factors	5
Item 1B.	Unresolved Staff Comments	8
Item 2.	Properties	8
Item 3.	Legal Proceedings	9
Item 4.	Mine Safety Disclosures	9
PART II
Item 5.	Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	9
Item 6.	Selected Financial Data	10
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	13
Item 8.	Financial Statements and Supplementary Data	13
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	14
Item 9A.	Controls and Procedures	14
Item 9B.	Other Information	15
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	15
Item 11.	Executive Compensation	16
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	17
Item 13.	Certain Relationships and Related Transactions and Director Independence	18
Item 14.	Principal Accountant Fees and Services	18
PART IV
Item 15.	Exhibits, Financial Statement Schedules	19
	Signatures	20

 

PART I.

Forward-Looking Information

 

Much of the discussion in this Item is “forward looking”.  Actual operations and results may materially differ from present plans and projections due to changes in economic conditions, new business opportunities, changed business conditions, and other developments.  Other factors that could cause results to differ materially are described in our filings with the Securities and Exchange Commission.

 

There are several factors that could cause actual results or events to differ materially from those anticipated, and include, but are not limited to, general economic, financial and business conditions, changes in and compliance with governmental laws and regulations, including various state and federal environmental regulations, our ability to obtain additional financing from outside investors and/or bank and mezzanine lenders, and our ability to generate sufficient revenues to cover operating losses and position us to achieve positive cash flow.

 

Readers are cautioned not to place undue reliance on the forward-looking statements contained herein, which speak only as of the date hereof.  We believe the information contained in this Form 10-K to be accurate as of the date hereof.  Changes may occur after that date.   We will not update that information except as required by law in the normal course of its public disclosure practices.

 

ITEM 1. BUSINESS.

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 as 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 June 30, 2016, the Company and Pisona have not engaged in any licensed product activity.

 

Employees

 

Star Century Pandaho Corporation currently has three employees.

 

Office and Facilities

 

Our corporate headquarters are located at 8250 W. Charleston Blvd. Suite 120, Las Vegas, Nevada 89117.

 

ITEM 1A. RISK FACTORS.

 

An investment in our common stock involves a high degree of risk. You should carefully consider the risks described below before deciding to purchase shares of our common stock. If any of the events, contingencies, circumstances or conditions described in the risks below actually occurs, our business, financial condition or results of operations could be seriously harmed.

 

RISK FACTORS CONCERNING OUR BUSINESS

 

Our business is subject to numerous risk factors, including the following:

 

The Company's independent registered public accounting firm have issued a report questioning the Company's ability to continue as a going concern.

 

Primarily as a result of our recurring losses and our lack of liquidity, the Company’s independent registered public accounting firm, in their report on our financial statements for the year ending June 30, 2016, expressed substantial doubt about the Company’s ability to continue as a going concern. We anticipate incurring losses in the foreseeable future. We do not have an established source of revenue sufficient to cover our operating costs. Our ability to continue as a going concern is dependent upon our ability to successfully compete, operate profitably and/or raise additional capital through other means. If we are unable to reverse our losses, we will have to discontinue operations.

 

We have had little operating history and no revenues or earnings from operations.

 

We will, in all likelihood, sustain operating expenses without corresponding revenues, at least until we begin to generate revenue from new plan of operations. This may result in us incurring a net operating loss that will increase continuously until we can generate revenues or raise additional capital through other means. There is no assurance that we can identify such a business entity and consummate such an agreement or combination.

 

We do not have significant cash or other material assets and we are relying on advances from stockholders, officers and directors to meet our limited operating expenses. We may become insolvent if we are unable to pay our debts in the ordinary course of business as they become due.

 

Our proposed plan of operation is speculative.

 

Our proposed plan of operation strategy depends in large part on our ability to build a robust platform of official and professional fan clubs for the celebrities. We may not be able to enter into a substantial number of contracts that we anticipate would be necessary to support our business model.

  

There can be no assurance that the Company will be able to enhance its products or services, or develop other products or services.

 

If we are unable to achieve profitability in the future, recruit sufficient personnel or raise money in the future, our ability to develop our services would be adversely affected. Our inability to develop our services or develop new services, in view of rapidly changing technology, changing customer demands and competitive pressures, would have a material adverse effect upon our business, operating results and financial condition.

 

Our principal shareholder will be able to approve all corporate actions without shareholder consent and will control our Company.

 

On January 8, 2015, Star Century Entertainment, Inc. owned 53.66% of the Company’s total outstanding shares of common stock. In May and June 2015, the Company issued approximately 67.9 million shares of common stock for the licensing of the Pandaho intellectual property and for various services. After the issuance of shares, Star Century Entertainment, Inc. owned less than 1% of our Common Stock. On September 4, 2015, the Board of Directors designated 100,000 shares of Series B Preferred Stock, par value $0.01. Each share of Series B Preferred Stock has the voting power of 5,000 common shares. On September 8, 2015, the Company issued 25,000 shares of Series B Preferred Stock to Star Century Entertainment Inc. that will have voting power of 125,000,000 common shares and will have significant influence over all matters requiring approval by our shareholders, but not requiring the approval of the minority shareholders. Because it will have the majority of voting rights, it will be able to elect all of the members of our board of directors, allowing it to exercise significant control of our affairs and management. In addition, it may transact most corporate matters requiring shareholder approval by written consent, without a duly-noticed and duly-held meeting of shareholders.

 

The reporting requirements under federal securities law may delay or prevent us from making certain acquisitions.

 

Sections 13 and 15(d) of the Securities Exchange Act of 1934, as amended, (the "1934 Act"), require companies subject thereto to provide certain information about significant acquisitions, including certified financial statements for the company acquired, covering one, two, or three years, depending on the relative size of the acquisition. The time and additional costs that may be incurred by some target entities to prepare such statements may significantly delay or essentially preclude consummation of an otherwise desirable acquisition by the Company. Acquisition prospects that do not have or are unable to obtain the required audited statements may not be appropriate for acquisition so long as the reporting requirements of the 1934 Act are applicable.

 

In addition to the audited financial statements, the time and additional costs that may be incurred by some target entities to prepare and disclose such information may significantly delay or essentially preclude consummation of an otherwise desirable acquisition by the Company.

 

An acquisition could create a situation wherein we would be required to register under The Investment Company Act of 1940 and thus be required to incur substantial additional costs and expenses.

 

Although we will be subject to regulation under the 1934 Act, management believes the Company will not be subject to regulation under the Investment Company Act of 1940, insofar as we will not be engaged in the business of investing or trading in securities. In the event we engage in a business combination that results in us holding passive investment interests in a number of entities, we could be subject to regulation under the Investment Company Act of 1940. In such event, we would be required to register as an investment company and could be expected to incur significant registration and compliance costs. We have obtained no formal determination from the Securities and Exchange Commission as to the status of our Company under the Investment Company Act of 1940 and, consequently, any violation of such Act would subject us to material adverse consequences.

 

The requirement of audited financial statements may disqualify some business opportunities seeking a business combination with us.

 

Our management believes that any potential business combination opportunity must provide audited financial statements for review, for the protection of all parties to the business combination. One or more attractive business opportunities may choose to forego the possibility of a business combination with us, rather than incur the expenses associated with preparing audited financial statements. 

 

If our Common Stock does not meet blue sky resale requirements, certain shareholders may be unable to resell our Common Stock.

 

The resale of Common Stock must meet the blue sky resale requirements in the states in which the proposed purchasers reside. If we are unable to qualify the Common Stock and there is no exemption from qualification in certain states, the holders of the Common Stock or the purchasers of the Common Stock may be unable to sell them.

 

Our shareholders may face significant restrictions on the resale of our Common Stock due to state "blue sky" laws or if we are determined to be a "blank check" company.

 

There are state regulations that may adversely affect the transferability of our Common Stock. We have not registered our Common Stock for resale under the securities or "blue sky" laws of any state. We may seek qualification or advise our shareholders of the availability of an exemption. We are under no obligation to register or qualify our Common Stock in any state or to advise the shareholders of any exemptions.

 

Current shareholders, and persons who desire to purchase the Common Stock in any trading market that may develop in the future, should be aware that there might be significant state restrictions upon the ability of new investors to purchase the Common Stock. 

Blue sky laws, regulations, orders, or interpretations place limitations on offerings or sales of securities by "blank check" companies or in "blind-pool" offerings, or if such securities represent "cheap stock" previously issued to promoters or others. Our former CEO, because he received stock at a price of $.001 for each share, may be deemed to hold "cheap stock." These limitations typically provide, in the form of one or more of the following limitations that such securities are:

 

(a) Not eligible for sale under exemption provisions permitting sales without registration to accredited investors or qualified purchasers;

 

(b) Not eligible for the transaction exemption from registration for non-issuer transactions by a registered broker-dealer;

 

(c) Not eligible for registration under the simplified small corporate offering registration (SCOR) form available in many states;

 

(d) Not eligible for the "solicitations of interest" exception to securities registration requirements available in many states;

 

(e) Not permitted to be registered or exempted from registration, and thus not permitted to be sold in the state under any circumstances.

 

Virtually all 50 states have adopted one or more of these limitations, or other limitations or restrictions affecting the sale or resale of stock of blank check companies or securities sold in "blind pool" offerings or "cheap stock" issued to promoters or others. Specific limitations on such offerings have been adopted in:

 

Alaska	Nevada	Tennessee
Arkansas	New Mexico	Texas
California	Ohio	Utah
Delaware	Oklahoma	Vermont
Florida	Oregon	Washington
Georgia	Pennsylvania
Idaho	Rhode Island
Indiana	South Carolina
Nebraska	South Dakota

 

Any secondary trading market which may develop may only be conducted in those jurisdictions where an applicable exemption is available or where the shares have been registered.

 

Current shareholders and persons who desire to purchase the Common Stock in any trading market that may develop in the future, should be aware that we are under no obligation to register the shares on behalf of our shareholders under the Securities Act of 1933, as amended.

 

The Company's officers, directors and majority shareholders have expressed their intentions not to engage in any transactions with respect to the Company's Common Stock except in connection with or following a business combination resulting in us no longer being defined as a blank check issuer. Any transactions in our Common Stock by said shareholders will require compliance with the registration requirements under the Securities Act of 1933, as amended.

 

Our Common Stock may be subject to significant restriction on resale due to federal penny stock restrictions.

 

The Securities and Exchange Commission has adopted rules that regulate broker or dealer practices in connection with transactions in penny stocks. Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the Nasdaq system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange system). The penny stock rules require a broker or dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document prepared by the Securities and Exchange Commission that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker or dealer also must provide the customer with bid and offer quotations for the penny stock, the compensation of the broker or dealer, and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer's account. The penny stock rules also require that prior to a transaction in a penny stock not otherwise exempt from such rules, the broker or dealer must make a special written determination that a penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction.

 

These disclosure requirements may have the effect of reducing the level of trading activity in any secondary market for our stock that becomes subject to the penny stock rules, and accordingly, shareholders of our Common Stock may find it difficult to sell their securities, if at all.

 

ITEM 1B. UNRESOLVED STAFF COMMENTS

We have received no written comments regarding our periodic or current reports from the staff of the SEC that were issued 180 days or more preceding the end of our fiscal year 2016 that remain unresolved.

ITEM 2. PROPERTIES.

The Company owns no real property.

 

ITEM 3. LEGAL PROCEEDINGS.

None.

ITEM 4. MINE SAFETY DISCLOSURES

N/A

PART II.

ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market Information

 

Our common stock is quoted under the symbol “SCPD” on the OTCBB operated by the Financial Industry Regulatory Authority, Inc. (“FINRA”) and the OTCQB operated by OTC Markets Group, Inc.  Few market makers continue to participate in the OTCBB system because of high fees charged by FINRA.  Consequently, market makers that once quoted our shares on the OTCBB system may no longer be posting a quotation for our shares. As of the date of this report, however, our shares are quoted by several market makers on the OTCQB. The criteria for listing on either the OTCBB or OTCQB are similar and include that we remain current in our SEC reporting.

 

Only a limited market exists for our securities. There is no assurance that a regular trading market will develop, or if developed, that it will be sustained. Therefore, a shareholder may be unable to resell his securities in our company.

 

The following tables set forth the range of high and low prices for our common stock for the each of the periods indicated as reported by the OTCQB. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

 

Fiscal Year Ending June 30, 2016
Quarter Ended		High $		Low $
June 30, 2016		$0.55		$0.06
March 31, 2016		$0.80		$0.50
December 31, 2015		$0.99		$0.55
September 30, 2015		$1.00		$0.55

 

Fiscal Year Ending June 30, 2015
Quarter Ended		High $		Low $
June 30, 2015		$0.63		$0.30
March 31, 2015		$1.00		$0.50
December 31, 2014		$1.00		$0.50
September 30, 2014		$2.00		$0.50

 

On September 22, 2016, the last sales price per share of our common stock was $0.05.

 

Penny Stock

 

The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a market price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to a violation of such duties or other requirements of the securities laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (f) contains such other information and is in such form, including language, type size and format, as the SEC shall require by rule or regulation.

 

 

ITEM 6. SELECTED FINANCIAL DATA.

 
Not Applicable.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.

Star Century Pandaho Corporation (formerly Journal of Radiology, Inc.) (“SCPD” or "the Company") was organized under the laws of the State of Nevada on May 21, 2009. The Company was established as part of the Chapter 11 reorganization of AP Corporate Services, Inc. ("AP"). Under AP's Plan of Reorganization, as confirmed by the U.S. Bankruptcy Court for the Central District of California, the Company was organized to own and develop a professional journal devoted to radiology.

 

On January 8, 2015, two shareholders of the Company agreed to sell an aggregate of 216,000 shares of the Company’s common stock, representing 53.66% of total outstanding shares at the time to Star Century Entertainment, Inc., an unrelated third party, and the Company experienced a change in control. In conjunction with the change in control, three individuals were elected to be the Company’s management, and the Company’s former President resigned. Effective January 16, 2015, the Company’s Board of Directors and the majority shareholder amended the Company’s Articles of Incorporation to (i) change the name of the Company to Star Century Pandaho Corporation (ii) effect a 1-for-5,000 reverse common stock split and (iii) decrease the Company’s authorized common stock to 150,000,000 shares, par value $0.001.

 

On May 20, 2015, the Company’s Board of Directors and the majority shareholder amended the Company’s Articles of Incorporation to increase authorized common stock to 250,000,000 shares.

 

The Company’s headquarters are based in Las Vegas, Nevada with planned primary operation in Beijing, China. Our planned services, though to be offered globally, will initially be focused throughout China, surrounding Asia-Pacific countries, the United States and Canada. The Company’s business plan includes the establishment of officially licensed and professional operated fan clubs for celebrities and selected brands that will engage in event management, talent shows, brand and image licensing and associated product distribution, music festivals, and multi-media productions such as movies, television shows and web channel content. Within our planned services we also intend to utilize our license rights to the character and brand Pandaho, not only for the above referenced activities but also for Pandaho (Panda) themed areas as well branding, toys, art, entertainment and e-commerce.

 

Pandaho the Panda is a cartoon styled character developed by Ms. Liu Li that is quickly growing in popularity and recognition throughout the global Chinese community.

 

On May 22, 2015, the Company issued 40,000,000 shares of common stock to Lui Li as payment for the non-exclusive licensing rights in the “Pandaho” brand and other related names and products. Immediately after the transaction Lui Li held 61.5% of the outstanding common stock of the Company. Based on Li’s 61.5% ownership percentage in the Company at the time, Li in substance controlled the Pandaho intellectual property directly before and after the purchase of the Pandaho IP by the Company. Given this, the value of the intellectual property recorded at the date of acquisition was carried over at the historical cost to Li of zero.

 

The Company is optimistic about the opportunity to utilize the Pandaho brand. The Panda image is a national treasure of China. The Company plans to develop and launch appropriate commercial, philanthropic and cultural activities as a part of the comprehensive brand development of Pandaho, the Panda. The Company believes that Pandaho, the Panda, brand is an excellent entry point for the implementation of the Company’s business plan.

 

 

Critical Accounting Policies and Estimates

 

The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States, or GAAP, requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. When making these estimates and assumptions, we consider our historical experience, our knowledge of economic and market factors and various other factors that we believe to be reasonable under the circumstances. Actual results may differ under different estimates and assumptions.

 

The accounting estimates and assumptions discussed in this section are those that we consider to be the most critical to an understanding of our financial statements because they inherently involve significant judgments and uncertainties.

 

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 stock options and warrants to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for stock option and warrant grants issued and vesting to employees based on the authoritative guidance provided by the FASB whereas the value of the award is measured on the date of grant and recognized over the vesting period. The Company accounts for stock option and warrant grants issued and vesting to non-employees in accordance with the authoritative guidance of the FASB whereas the value of the stock compensation is based upon the measurement date as determined at either a) the date at which a performance commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete. Non-employee stock-based compensation charges generally are amortized over the vesting period on a straight-line basis. In certain circumstances where there are no future performance requirements by the non-employee, option grants are immediately vested and the total stock-based compensation charge is recorded in the period of the measurement date.

 

The fair value of the Company's common stock option grants are estimated using the Black-Scholes option pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the common stock options, and future dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes option pricing model, and based on actual experience. The assumptions used in the Black-Scholes option pricing model could materially affect compensation expense recorded in future periods.

 

RECENTLY ISSUED ACCOUNTING STANDARDS

 

See Footnote 2 of financial statements for discussion of recently issued accounting standards.

 

RESULTS OF OPERATIONS

 

FISCAL YEAR ENDED JUNE 30, 2016 COMPARED TO THE FISCAL YEAR ENDED JUNE 30, 2015

 

RELATED PARTY COMMISSION REVENUE

 

For the fiscal years ended June 30, 2016 and 2015, we had $0 and $50,000 of commission revenue, respectively for the sales of plush toys.

 

In May 2015, the Company sold 2,000 Pandaho themed products to an unrelated party, Beijing Rui He Jia Ye International for $100,000, and purchased the 2,000 Pandaho themed products from Beijing Yishengyuankai Culture Co., a company wholly owned by Li Lui, at a cost of $50,000. The Company determined that it was an agent and not the primary obligor in the arrangement and recorded the transaction as a net commission revenue of $50,000. There were no such transactions for the fiscal year ended June 30, 2016.

 

 

OPERATING COSTS

 

Compensation includes salaries, stock-based compensation expenses and benefits paid and payable to three executives of the Company and a shareholder of the Company. Compensation was $751,830 for the year ended June 30, 2016, compared to $159,255 for the year ended June 30, 2015. The increase in compensation is due to employment contracts with three executives and a consulting agreement with a shareholder entered into during May 2015. Pursuant to the terms of these agreements, total annual compensation for services is $396,000. The executive or shareholder have the option to accept shares of the Company’s common stock in lieu of cash based on a 50% discount to the average stock price, as defined. For the year ended June 30, 2016, the Company recorded $751,830 of compensation related to these agreements, which included $396,000 for accrual of annual compensation, with the balance reflecting an expense for the value that could be paid in shares of common stock.

 

General and Administrative expenses were $249,555 for the fiscal year ended June 30, 2016, compared to $3,608,940 for the fiscal year ended June 30, 2015. Administration comprise accounting, audit, legal and transfer agent costs related to SEC compliance, stock based compensation issued for services, and investor relation expenses. The decrease in administration expense is due to a decrease in stock based compensation issued for services. Stock-based compensation was $153,993 for the fiscal year ended June 30, 2016, compared to $3,375,000 for the fiscal year ended June 30, 2015. During the year ended June 30, 2016, the Company issued 256,441 shares of common stock valued at $153,993 for consulting services. During the year ended June 30, 2015, the Company issued 4,200,000 shares of common stock valued at $1,290,000 for consulting services, 650,000 shares of common stock valued at $195,000 to three executives as signing bonuses, and 3,000,000 shares of common stock valued at $1,890,000 to a consultant for services. The Company also recorded $1,000,000 expense related to the difference between the total fair value of the 20,000,000 shares of common stock issued and the face amount of a note receivable received in consideration for the shares of $5,000,000. There were no such transactions for the fiscal year ended June 30, 2016.

 

OTHER INCOME (EXPENSE)

 

Other income (expense) includes interest expense of $183,504 and $30,602 for the years ended June 30, 2016 and 2015, respectively. The increase related to $65,000 loss on settlement of debt and increased interest expense in fiscal 2016 related to new convertible notes issued in fiscal 2016 compared to fiscal 2015.

 

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, a related party. The fair value of the Series B Preferred Stock was determined to be $109,787. The difference of $65,000 is recorded as a loss on settlement of debt in the statement of operations.

 

NET LOSS

 

Our net losses for the year ended June 30, 2016 and 2015 was $1,184,889 and $4,748,797, respectively. Our losses decreased in the current year primarily because of a decrease in stock-based compensation expense.

 

LIQUIDITY

 

As of June 30, 2016, we had cash of $920 and total liabilities of $1,277,308. Our current cash balance and cash flow from operating activities will not be sufficient to fund our operations.

 

The Company's financial statements are prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying financial statements, for the year ended June 30, 2016, the Company had a net loss of $1,184,889 and used cash in operating activities of $96,860, and at June 30, 2016, had a working capital deficiency of $1,129,920 and stockholders’ deficiency of $1,267,221. These factors, among others, raise substantial doubt about our ability to continue as a going concern. The Company’s independent registered public accounting firm, in its report on our June 30, 2016 financial statements, has raised substantial doubt about the Company’s ability to continue as a going concern. The Company’s financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

 

We expect to be able to secure capital through advances from our officers or principal shareholders in order to pay expenses such as filing fees, accounting fees and legal fees. Over the next 12 months, the Company expects to expend approximately $60,000 for such filing fees, accounting fees and legal fees. The Company has not yet determined the amount of cash that will be necessary to fund its planned operations in China. We hope to be able to attract suitable investors for our business plan. The inability to obtain financing or generate sufficient cash from operations could require us to reduce or eliminate expenditures or otherwise curtail or discontinue our operations, which could have a material adverse effect on our business, financial condition and results of operations. Furthermore, to the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities may result in dilution to existing stockholders. If we raise additional funds through the issuance of debt securities, these securities may have rights, preferences and privileges senior to holders of our common stock and the terms of such debt could impose restrictions on our operations. Regardless of whether our cash assets prove to be inadequate to meet our operational needs, we may seek to compensate providers of services by issuing stock in lieu of cash, which may also result in dilution to existing stockholders.

 

OPERATING CAPITAL AND CAPITAL EXPENDITURE REQUIREMENTS

 

Our controlling shareholders expect to advance us additional funding for operating costs in order to implement our business plan. The funds are loaned to the Company as required to pay amounts owed by the Company. As such, our operating capital is currently limited to the resources of our controlling shareholders. The loans from our controlling shareholders are unsecured and non-interest bearing and have no set terms of repayment. We anticipate receiving additional capital once we are able to have our securities actively trading on a public exchange. There is no guarantee our stock will develop a market on that public exchange.

 

PLAN OF OPERATION AND FUNDING

We do not currently engage in enough business activities that provide cash flow. The costs of investigating and analyzing business combinations for the next 12 months and beyond such time will be paid with amounts to be loaned to or invested in us by our stockholders, management or other investors.

      During the next twelve months we anticipate incurring costs related to:

      (i) filing of Exchange Act reports, and

      (ii) costs relating to developing our business plan

 

We believe we will be able to meet these costs through amounts, as necessary, to be loaned to or invested in us by our stockholders, management or other investors.

 

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

 

The financial statements and related notes are included as part of this report as indexed in the appendix on page F-1 through F-14.

ITEM 9. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

 

ITEM 9A. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15 under the Securities Exchange Act of 1934, we have carried out an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this annual report, being June 30, 2016. This evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer.

 

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our company’s reports filed under the Securities Exchange Act of 1934 is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

 

Based upon that evaluation, including our Chief Executive Officer and Chief Financial Officer, we have concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this annual report.

 

Management’s Report on Internal Control over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934). Management has assessed the effectiveness of our internal control over financial reporting as of June 30, 2016 based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). As a result of this assessment, management concluded that, as of June 30, 2016 our internal control over financial reporting was not effective. Our management identified the following material weaknesses in our 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 US GAAP and SEC guidelines.

 

We plan to take steps to enhance and improve the design of our internal control over financial reporting. During the period covered by this annual report on Form 10-K, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we hope to implement the following changes during our fiscal year ending June 30, 2016: (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 in (i) and (ii) 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 was no change in the Company’s internal control over financial reporting identified in connection with the requisite evaluation that occurred during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

ITEM 9B. OTHER INFORMATION.

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The executive officers and directors of the Company as of September 28, 2016 are as follows:

	Name	Age	Position
	Fen Xing	38	Chief Executive Officer, Secretary, Treasurer and Director
	Jian Zhang	33	Chief Operating Officer and Director
	Yan Zhang	60	Director of Public Relations and Director

 

Duties, Responsibilities and Experience

 

Biographical Information

 

Fen Xing Ms. Xing brings over 15 years of entrepreneurial business development and management/marketing experience. From 1999 to 2002, Ms. Xing acted as vice president for Japan plastic products Co. Ltd. Tianjin branch. Ms. Xing was appointed as chairman of the board of Beijing Net Technology Co., ltd. in 2005. In 2009 Ms. Xing set up the Beijing North Kidd energy equipment limited company and served as assistant general manager. This company merged in 2010 and Beijing actor Collier Energy Equipment Co. Ltd in Beijing actor Collier energy equipment limited company and she served as marketing manager responsible for the company’s marketing planning and sales work. In 2008, Ms. Xing assisted in the establishment of the small Lanting Pavilion private clubs in China World Trade Center district business Mong block center, classical furniture, luxury goods exhibition, held a private party. At the same time she also assisted Beijing client manager Shandong Zhongkai wind power equipment manufacturing Co., Ltd. financing work. In December 2014, Ms. Xing resigned from Collier Energy Equipment.

 

Education:

In 1997 October, Tianjin University Department of computer education. The database.

In1999 July Tianjin Foreign Studies University study. English level Four.

In 2003 October, Beijing foreign language school to learn business English, business English four levels of Japanese.

In 2007 12 School of economics and management of Beijing Jiaotong University attended EMBA (EMBA) Bachelor's degree

 

Jian Zhang Mr. Zhang, has over ten years of experience in analyzing management structures and finance. From 2006 to 2012, Mr. Zhang served as finance director as well as serving in other entry level positions of Hunan Fudizhiye Co., LTD. From 2013 to 2014, he served as a member of the board of directors of Changsha Sky Network Technology Co., LTD as well as participating in project construction and operations. In 2014, Zhang served as a member of the board of directors of Xiangxi Longchang. Manganese Industry Co., LTD as well as assisting in the electrolytic manganese listing in Boce Commodity Exchange. September 2013, Mr. Zhang participated in the BOCE Commodity Exchange, commodities analyst qualification training and in November 2013, obtained the Senior management personnel qualification certificate. December 2013, he obtained the commodities analyst qualification. From 2004 to 2007, Mr. Zhang studied at China Central Radio and Television University, majoring in accounting professional.

 

Yan Zhang Mr. Zhang, has over thirty years entrepreneurial experience in entertainment and medical industry. In 1985, Mr. Zhang assisted medical team involved in the agricultural economy in Peng Republic. In 1995 he participated in the 50th anniversary celebration of the United Nations Mission of China to the United Nations in New York, accompanied by the leadership of the heads of state reception. In 1998, Mr. Zhang organized by the famous painter solo exhibition at the United Nations, In 2012, he assisting in the Zuying concert held at the Austrian Embassy and In 2014, he organized the artist Zhang Yi who wrote solo exhibition in Paris. Mr. Zhang’s Civil aviation licenses & professional certifications include Advanced Certificate in 1993 national authority technology assessment.

 

ITEM 11. EXECUTIVE COMPENSATION.

Summary of Cash and Certain Other Compensation 

The following table provides certain summary information concerning the compensation earned by the named executive officers for the fiscal years ended June 30, 2016 and 2015, for services rendered in all capacities to Star Century Pandaho Corporation:

 

Name & Principal Position		Year				Salary ($)				Bonus ($)				Stock Awards ($)				Option Awards ($)				Non-Equity Incentive Plan Compensation ($)				Nonqualified Deferred Compensation Earnings ($)				All Other Compensation ($)				Total ($)
Fen Xing, Chief Executive Officer, Secretary, Treasurer and Director			2016			$	120,000			$	—			$	—			$	—			$	—			$	—			$	—			$	120,000
			2015			$	56,877			$	—			$	77,500			$	—			$	—			$	—			$	—			$	134,377
Jian Zhang, Chief Operating Officer and Director			2016			$	120,000			$	—			$	—			$	—			$	—			$	—			$	—			$	120,000
			2015			$	56,877			$	—			$	77,500					`$-		$	—			$	—			$	—			$	134,377
Yan Zhang, Director of Public Relations and Director			2016			$	96,000			$	—			$	—			$	—			$	—			$	—			$	—			$	96,000
			2015			$	45,501			$	—			$	46,350			$	—			$	—			$	—			$	—			$	91,851

 

Director Compensation

 

The following table provides compensation summary concerning the compensation earned by the named directors for the years ended June 30, 2016 and 2015.

 

Name		Year				Fees Earned or Paid in Cash				Stock Awards				Option Awards				Non-Equity Incentive Plan Compensation				Non-Qualified Deferred Compensation Earnings				All Other Compensation				Total
Fen Xing, Chief Executive Officer, Secretary, Treasurer and Director			2016			$	120,000			$	—			$	—			$	—			$	—			$	—			$	120,000
			2015			$	56,877			$	77,500			$	—			$	—			$	—			$	—			$	134,377
Jian Zhang, Chief Operating Officer and Director			2016			$	120,000			$	—			$	—			$	—			$	—			$	—			$	120,000
			2015			$	56,877			$	77,500			$	—			$	—			$	—			$	—			$	134,377
Yan Zhang, Director of Public Relations and Director			2016			$	96,000			$	—			$	—			$	—			$	—			$	—			$	96,000
			2015			$	45,501			$	46,350			$	—			$	—			$	—			$	—			$	91,851

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth, as of September 2, 2016, information about the beneficial ownership of our capital stock with respect to each person known by Star Century Pandaho Corporation to own beneficially more than 5% of the outstanding capital stock, each director and officer, and all directors and officers as a group.

 

	Number of Shares Beneficially Owned		Percentage of Class (2)
Name and Address(1)		Class
Fen Xing, Chief Executive Officer	250,000	Common	*
Jian Zhang, Chief Operating Officer	250,000	Common	*
Yan Zhang, Director of Public Relations	150,000	Common	*
All directors and executive officers (3 persons)	650,000	Common	*
5% Holders
Asia International Holdings Limited	20,000,000	Common	29.2%
Memory Hospitality Consultancy PTE Ltd.	19,782,500	Common	28.8%
Lui Li	11,900,000	Common	17.3%
Changsha 3D Technology Co., Ltd.	4,000,000	Common	5.8%
*Denotes less than 1%

 

	1)	Unless noted otherwise, the address for all persons listed is c/o the Company at 2230 8250 W. Charleston Blvd. Suite 110, Las Vegas, Nevada 89117.
	2)	The above percentages are based on 68,708,924 shares of common stock outstanding as September 23, 2016.

 

“Beneficial ownership” means the sole or shared power to vote or to direct the voting of, a security, or the sole or shared investment power with respect to a security (i.e., the power to dispose of or to direct the disposition of, a security).

There are no arrangements, known to us, including any pledge by any person of our securities, the operation of which may at a subsequent date result in a change in control of Star Century Pandaho Corporation

There are no arrangements or understandings among members of both the former and the new control groups and their associates with respect to election of directors or other matters.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE.

None.

 

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Audit Fees

The aggregate fees billed by the Company's auditors for the professional services rendered in connection with the audit of the Company's annual financial statements, review of our Form 10 and reviews of the financial statements included in the Company's Forms 10-Qs and Form 10-Ks for fiscal 2016 and 2015 were approximately $30,330 and $15,560, respectively.

Audit-Related Fees

None.

Tax Fees

None.

All Other Fees

None.

PART IV.

ITEM 15. EXHIBITS.

			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

 

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:  September 28, 2016	By:	/s/ Fen Xing
		Fen Xing Chief Executive Officer, Secretary, Treasurer and Director (Principal Executive Officer, Principal Accounting and Financial Officer)

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

 

Date:  September 28, 2016	By:	/s/ Fen Xing
		Fen Xing Chief Executive Officer, Secretary, Treasurer and Director (Principal Executive Officer, Principal Accounting and Financial Officer)

 

 

 

 

 

STAR CENTURY PANDAHO CORPORATION

Index to Financial Statements

 

 

	Page
Report of Independent Registered Public Accounting Firm	F-2
Balance Sheets as of June 30, 2016 and 2015	F-3
Statements of Operations for the years ended June 30, 2016 and 2015	F-4
Statement of Stockholders’ Deficiency for the years ended June 30, 2016 and 2015	F-5
Statements of Cash Flows for the years ended June 30, 2016 and 2015	F-6
Notes to Financial Statements for the years ended June 30, 2016 and 2015	F-7

 

 

 

 

 

 

Report of Independent Registered Public Accounting Firm

 

 

To the Board of Directors and Stockholders

Star Century Pandaho Corporation,

 

We have audited the accompanying balance sheets of Star Century Pandaho Corporation (the “Company”) as of June 30, 2016 and 2015, and the related statements of operations, stockholders’ deficiency, and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Star Century Pandaho Corporation as of June 30, 2016 and 2015, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has a stockholders’ deficiency and has incurred recurring losses from operations and used cash in operating activities since inception. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1 to the financial statements. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

 

 

/s/Weinberg & Company, P.A.

Los Angeles, California

September 28, 2016

 

 

 

 

 

 

STAR CENTURY PANDAHO CORPORATION
BALANCE SHEETS
			June 30,				June  30,
			2016				2015
Assets
Current assets:
Cash		$	920			$	15,291
Prepaid expenses			9,167				10,967
Total current assets		$	10,087			$	26,258
Liabilities and Stockholders’ Deficiency
Current Liabilities:
Accounts payable and accrued liabilities		$	156,508			$	107,303
Accrued compensation-related party			867,220				287,693
Advances (including $25,000 and $44,787 due to related parties at June 30, 2016 and 2015, respectively)			79,390				134,377
Current portion of convertible notes – related parties, net of discount of $9,792 and $0 at June 30, 2016 and 2015, respectively			36,889				—
Total current liabilities			1,140,007				529,373
Long-term portion of convertible notes – related parties, net of discount of $25,150 and $0 at June 30, 2016 and 2015, respectively			94,750				—
Non-redeemable convertible note (including $42,551 and $35,474 due to related parties at June 30, 2016 and 2015, respectively)			42,551				96,490
Total liabilities			1,277,308				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 issued and outstanding at June 30, 2016; no shares issued and outstanding at June 30, 2015			250				—
Common stock; par value $0.001; 250,000,000 shares authorized; 68,708,924 and 68,252,650 issued and outstanding at June 30, 2016 and 2015, respectively			95,709				95,253
Additional paid-in capital			119,250,999				118,734,432
Notes receivable			(5,000,000	)			(5,000,000	)
Accumulated deficiency			(115,614,179	)			(114,429,290	)
Total stockholders' deficiency			(1,267,221	)			(599,605	)
Total liabilities and stockholders’ deficiency		$	10,087			$	26,258
See accompanying notes to the financial statements

 

STAR CENTURY PANDAHO CORPORATION

STATEMENTS OF OPERATIONS

		Year ended June 30, 2016				Year ended June 30, 2015
Related party commission revenue, net		$	—			$	50,000
Operating costs:
Compensation–related party			751,830				287,693
General and administrative (including related party share -based compensation of $153,993 and $2,085,000, respectively)			249,555				3,480,502
Fair value of common shares subscribed for by in excess of purchase price - related party			—				1,000,000
Total operating expenses			1,001,385				4,768,195
Loss from operations			(1,001,385	)			(4,718,195	)
Other expenses:
Interest expense			(118,504	)			(30,602	)
Loss on settlement of debt			(65,000	)			—
			(183,504	)			(30,602	)
Net loss		$	(1,184,889	)		$	(4,748,797	)
Net loss per common share-basic and diluted		$	(0.02	)		$	(0.65	)
Weighted average number of common shares outstanding – basic and diluted			68,535,640				7,327,171

 See accompanying notes to the financial statements

 

 

STAR CENTURY PANDAHO CORPORATION

STATEMENT OF STOCKHOLDERS' DEFICIENCY

 

		Common Shares				Common Stock				Series B Preferred Shares				Series B Preferred Stock				Additional Paid-in Capital				Accumulated Deficit				Note Receivable				Total Stockholders’ Deficiency
Balance July 1, 2014			402,650			$	403				—			$	—			$	109,454,282			$	(109,680,493	)		$	—			$	(225,808	)
Related party
Shares issued for Pandaho licensing rights			40,000,000				40,000				—				—				(40,000	)			—				—				—
Fair value of shares issued to officers			650,000				650				—				—				194,350								—				195,000
Fair value of shares issued for subscription receivable			20,000,000				20,000				—				—				5,980,000				—				(5,000,000	)			1,000,000
Fair value of shares issued for services			3,000,000				30,000				—				—				1,860,000				—				—				1,890,000
Other
Fair value of shares issued for services			4,200,000				4,200				—				—				1,285,800				—				—				1,290,000
Net loss			—				—				—				—				—				(4,748,797	)			—				(4,748,797	)
Balance June 30, 2015			68,252,650				95,253				—				—				118,734,432				(114,429,290	)			(5,000,000	)			(599,605	)
Related party
Fair value of Series B Preferred Shares issued for settlement of debt			—				—				25,000				250				109,537				—				—				109,787
Beneficial conversion feature of issued convertible notes			—				—				—				—				133,493				—				—				133,493
Fair value of shares issued for settlement  of compensation payable-related party			199,833				200				—				—				119,800				—				—				120,000
Fair value of shares issued for services			256,441				256				—				—				153,737				—				—				153,993
Net loss			—				—				—				—				—				(1,184,889	)			—				(1,184,889	)
Balance June 30, 2016			68,708,924			$	95,709				25,000			$	250			$	119,250,999			$	(115,614,179	)		$	(5,000,000	)		$	(1,267,221	)

 

See accompanying notes to the financial statements

  

STAR CENTURY PANDAHO CORPORATION

STATEMENTS OF CASH FLOWS

 

		Year Ended June 30, 2016				Year Ended June 30, 2015
Cash Flows from Operating Activities:
Net loss		$	(1,184,889	)		$	(4,748,797	)
Adjustments to reconcile net loss to net cash used in operating activities and liabilities:
Accrued interest			19,953				17,509
Amortization of debt discount			98,551				13,093
Fair value of shares issued for services			153,993				3,375,000
Loss on settlement of debt			65,000				—
Fair value of shares subscribed for in excess of purchase price			—				1,000,000
Changes in operating assets and liabilities:
Prepaid expenses			1,800				(9,592	)
Accounts payable and accrued expenses			49,205				9,702
Accrued compensation-officers			602,676				159,255
Accrued consulting-related party			96,851				128,438
Net cash used in operating activities			(96,860	)			(55,392	)
Cash Flows from Financing Activities:
Proceeds from issuance of convertible notes-related parties			144,381				—
Payment made on non-redeemable convertible note			(61,892	)			—
Proceeds from advances-related party			—				44,787
Proceeds from advances			—				25,681
Net cash provided by financing activities			82,489				70,468
Net change in cash			(14,371	)			15,076
Cash beginning of year			15,291				215
Cash end of year		$	920			$	15,291
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during period for:
Interest paid		$	—			$	—
Income tax paid		$	—			$	—
NON-CASH FINANCING ACTIVITIES
Issuance of Series B Preferred Stock in settlement of advance due to a shareholder		$	44,787			$	—
Beneficial conversion feature associated with issued convertible notes		$	133,493			$	—
Issuance of shares of common stock to settle compensation payable-related party		$	120,000			$	—
Reclassification of  advances to convertible notes		$	10,200			$	—

See accompanying notes to the financial statements

STAR CENTURY PANDAHO CORPORATION

Notes to Financial Statements

For the years ended June 30, 2016 and 2015

 

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.

 

Going concern

 

The accompany financial statements on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying financial statements, for the year ended June 30, 2016, the Company had a net loss of $1,184,889 and used cash in operating activities of $96,860, and at June 30, 2016, had a working capital deficiency of $1,129,920 and stockholders’ deficiency of $1,267,221. These factors, among others, raise substantial doubt about our ability to continue as a going concern. The Company’s independent registered public accounting firm, in its report on our June 30, 2016 financial statements, has raised substantial doubt about the Company’s ability to continue as a going concern. The Company’s financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

The Company has experienced recurring operating losses and used cash in operating activities since inception. We expect to be able to secure capital through advances from our officers or principal shareholders in order to pay expenses such as filing fees, accounting fees and legal fees. Over the next 12 months, the Company expects to expend approximately $60,000 for such filing fees, accounting fees and legal fees. The Company has not yet determined the amount of cash that will be necessary to fund its planned operations in China. We hope to be able to attract suitable investors for our business plan. The inability to obtain financing or generate sufficient cash from operations could require us to reduce or eliminate expenditures or otherwise curtail or discontinue our operations, which could have a material adverse effect on our business, financial condition and results of operations. Furthermore, to the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities may result in dilution to existing stockholders. If we raise additional funds through the issuance of debt securities, these securities may have rights, preferences and privileges senior to holders of our common stock and the terms of such debt could impose restrictions on our operations. Regardless of whether our cash assets prove to be inadequate to meet our operational needs, we may seek to compensate providers of services by issuing stock in lieu of cash, which may also result in dilution to existing stockholders.

 

 

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.

 

CASH AND CASH EQUIVALENTS

 

Investments with original maturities of three months or less are considered to be cash equivalents.

 

INCOME TAXES

 

The Company follows the asset and liability method of accounting for income taxes. Under this method, deferred income tax assets and liabilities are recognized for the estimated tax consequences attributable to differences between the financial statement carrying values and their respective income tax basis (temporary differences). The effect on deferred income tax assets and liabilities of a change in tax rates is recognized as income (loss) in the period that includes the enactment date.

 

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 June 30, 2016 and 2015, we excluded the outstanding securities summarized below, which entitle the holders thereof to acquire shares of common stock as their effect would have been anti-dilutive:

 

		June 30, 2016				June 30, 2015
Common stock issuable upon conversion of convertible and non-redeemable convertible notes payable			2,516,830				1,940,000
Common stock issuable upon conversion of accrued compensation			14,453,671				—
Total			16,970,501				1,940,000

 

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 as compensation expense on the straight-line basis 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. Options granted to non-employees are revalued each reporting period to determine the amount to be recorded as an expense in the respective period. As the options vest, they are valued on each vesting date and an adjustment is recorded for the difference between the value already recorded and the then current value on the date of vesting. 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-Merton 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-Merton option pricing model, and based on actual experience. The assumptions used in the Black-Scholes-Merton 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.

 

Authoritative guidance provided by the FASB defines the following levels directly related to the amount of subjectivity associated with the inputs to fair valuation of these financial assets:

 

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.

 

CONCENTRATION OF CREDIT RISK

 

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist of cash and cash equivalents. The Company places its cash with high quality financial institutions and at times may exceed the FDIC $250,000 insurance limit. The Company does not anticipate incurring any losses related to these credit risks. The Company extends credit based on an evaluation of the customer's financial condition, generally without collateral. Exposure to losses on receivables is principally dependent on each customer's financial condition. The Company monitors its exposure for credit losses and intends to maintain allowances for anticipated losses, as required.

 

During the year ended June 30, 2015, 100% of our revenue was from one customer.

 

RECENT ACCOUNTING PRONOUNCEMENTS

 

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 is a comprehensive revenue recognition standard that will supersede nearly all existing revenue recognition guidance under current U.S. GAAP and replace it with a principle based approach for determining revenue recognition. ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract. The ASU also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted only in annual reporting periods beginning after December 15, 2016, including interim periods therein. Entities will be able to transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. The Company is in the process of evaluating the impact of ASU 2014-09 on the Company’s financial statements and disclosures.

 

In February 2016, the FASB issued ASU No. 2016-02, Leases. ASU 2016-02 requires a lessee to record a right of use asset and a corresponding lease liability on the balance sheet for all leases with terms longer than 12 months. ASU 2016-02 is effective for all interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is currently evaluating the expected impact that the standard could have on its financial statements and related disclosures.

 

In March 2016, the FASB issued the ASU 2016-09, Improvements to Employee Share-Based Payment Accounting. The amendments in this ASU require, among other things, that all income tax effects of awards be recognized in the income statement when the awards vest or are settled. The ASU also allows for an employer to repurchase more of an employee's shares than it can today for tax withholding purposes without triggering liability accounting and allows for a policy election to account for forfeitures as they occur. The amendments in this ASU are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted for any entity in any interim or annual period. The Company is currently evaluating the expected impact that the standard could have on its financial statements and related disclosures.

 

In August 2014, the FASB issued ASU No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which provides guidance on determining when and how to disclose going-concern uncertainties in the financial statements. ASU 2014-15 requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued. An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity’s ability to continue as a going concern. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods thereafter. Early adoption is permitted. The Company is currently evaluating the expected impact that the standard could have on its financial statements and related disclosures.

 

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future consolidated financial statements.

 

NOTE 3. COMPENSATION AND ACCRUED COMPENSATION-RELATED PARTY

 

Compensation-related party and accrued compensation-related party represent amounts recorded for employment contracts with three executives and a consulting agreement with a shareholder. Pursuant to the terms of these agreements, total annual compensation for services is $396,000 (“cash compensation”), and the executives and shareholder have the option to accept shares of the Company’s common stock in lieu of cash based on a 50% discount to the average stock price, as defined. The option to accept shares of common stock in lieu of cash is accounted for at the intrinsic value of the potentially issuable common shares and is subject to adjustment at each reporting date based on the change in market value of the shares. At June 30, 2015, the balance of accrued compensation was $287,693. During the year ended June 30, 2016, one individual elected to be paid in shares for $120,000 of accrued compensation due him. The total fair value of shares issued to the individual was $273,993, and the difference of $153,993 was recognized as stock compensation expense. During the year ended June 30, 2016, cash compensation of $396,000 was accrued and at June 30, 2016, accrued cash compensation totaled $563,693. At June 30, 2016, if the executives and shareholder elected to be paid in shares of common stock, it would result in the issuance of 14,453,671 shares of the Company’s common stock with a fair value of $867,220. Accordingly, at June 30, 2016, the Company has recorded accrued compensation of $867,220. For the years ended June 30, 2016 and 2015, the Company recorded $751,830 and $287,693 of compensation expense, respectively, related to these agreements, which included $396,000 and $287,693, respectively, for the accrual of annual cash compensation, with the balance reflecting an expense for the value that could be paid in shares of common stock.

 

NOTE 4. 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 June 30, 2016 and June 30, 2015, the Company was obligated for the following advances:

 

		June 30, 2016				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 5. CONVERTIBLE NOTES-RELATED PARTIES

 

		June 30   2016				June 30, 2015
Balance due on convertible notes		$	166,581			$	—
Unamortized note discounts			(34,942	)			—
Current maturities			(36,889	)			—
Long-term portion		$	94,750			$	—

 

Principal payments due on convertible notes-related party are as follows: Fiscal year ending June 30, 2017: $58,581, and fiscal year ending June 30, 2018: $108,000.

 

During the year ended June 30, 2016, the Company issued twelve convertible notes for total proceeds of $144,381. At June 30, 2016 and 2015, the notes include accrued interest payable of $12,000 and $0, respectively. The notes are unsecured, accrue interest at 10% per annum, are due through December, 2017, and are convertible into shares of the Company’s common stock at a conversion price of $0.10 per share. In addition, at June 30, 2016, $10,200 of advances due to a shareholder is included in convertible notes-related party. The advances are convertible into the Company’s common stock at a conversion price of $0.10 per share, are unsecured, noninterest bearing, and due June 30, 2017.

 

The closing price of the Company’s common stock ranged from $0.08 per share to $0.81 per share on the dates the notes were issued. The Company determined that certain of the notes contained a beneficial conversion feature of $133,493 since the market price of the Company’s common stock was greater than the conversion price for eleven 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 year ended June 30, 2016, $98,551 of discount amortization is included in interest expense at June 30, 2016, there was an unamortized discount balance of $34,942 to be amortized through June 2017.

 

NOTE 6. 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 June 30, 2016, the face amount of the note, due to a related party, plus accrued interest was $42,551 and is convertible into 851,020 shares of common stock. As it is the Company’s choice to convert the note into shares of the Company’s common stock or to pay the note in cash, the note is presented below current liabilities on the accompanying balance sheets.

 

NOTE 7. 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, a related party. The fair value of the Series B Preferred Stock as determined by a third party valuation expert was determined to be $109,787. The difference between the fair value of Series B Preferred Stock of $109,787 and the $44,787 debt settled of $65,000 is recorded as a loss on settlement of debt in the accompany statement of operations. At June 30, 2016, there were 68,708,924 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.

 

Common stock

 

Fiscal 2016

 

On November 16, 2015, the Company issued 456,274 shares of common stock valued at $273,933 to Mr. Peter Chin, a shareholder. 199,833 shares of common stock were issued to settle compensation payable of $120,000. The balance of 256,441 shares of common stock valued at $153,993 was for services rendered and was recognized as stock compensation expense.

 

Fiscal 2015

 

On May 22, 2015, the Company issued 40,000,000 shares of common stock to Ms. Lui Li as payment for the non-exclusive licensing rights in the “Pandaho” the Panda brand and other related names and intangibles. Immediately after the transaction Lui Li held 61.5% of the outstanding common stock of the Company. Based on Li’s 61.5% ownership percentage, Li in substance controlled the Pandaho intellectual property directly after the purchase of the Pandaho IP by the Company. Given this, the value of the intellectual property recorded at the date of acquisition was carried over at the historical cost to Li of zero.

On May 22, 2015, the Board authorized the issuance of 20,000,000 shares of common stock to Asia International Finance Holdings, Hong Kong for an unsecured, non-interest bearing note receivable with a face value of $6,000,000 due on December 31, 2016. The note receivable is presented in the balance sheet as a deduction from stockholders’ equity. The CEO of Asian International is also the President of Star Century Entertainment.

On May 22, 2015 the Company issued 650,000 shares of common stock valued in the aggregate at $195,000 to three members of management as signing bonuses for their employment contracts.

 

Effective June 30, 2016, the Company issued 3,000,000 shares of common stock valued at $1,890,000 to Mr. Peter Chin for services rendered for the Company on the merger and acquisition of the Company by Star Century Entertainment.

 

During the year ended June 30, 2015, the Company issued 4,200,000 shares of common stock to unrelated consultants valued in aggregate at $1,290,000 for services,

 

NOTE 8. INCOME TAXES

 

For the years ended June 30, 2016 and 2015, our net losses were $1,184,889 and $4,748,797, respectively, and no provision for income taxes was recorded. We made no provision for income taxes due to our utilization of federal net operating loss carry forwards to offset both regular taxable income and alternative minimum taxable income.

 

Income taxes differ from the amount that would be computed by applying the Federal statutory income tax rates of 34% as follows:

 

		Year ended June 30, 2016				Year ended June 30, 2015
Provision for income taxes:
Net loss		$	(1,184,889	)		$	(4,748,797	)
Adjustments:
Amortization of debt discount			98,551				13,000
Share based compensation			273,993				4,375,000
			(812,345	)			(360,797	)
Federal statutory income tax rate			34	%			34	%
Income tax expense (benefit)			(276,197	)			(122,639	)
Change in valuation allowance			276,197				122,639
		$	—			$	—

 

 Deferred tax assets and liabilities consist of the following as of June 30:

 

		2016				2015
Deferred tax assets:
Net operating loss carry forwards		$	501,389			$	225,114
Less valuation allowance			(501,389	)			(225,114	)
Net deferred tax asset		$	—			$	—

The Company has provided a valuation allowance on the deferred tax assets at June 30, 2016 and 2015 to reduce such asset to zero, since there is no assurance that the Company will generate future taxable income to utilize such asset. Management will review this valuation allowance requirement periodically and make adjustments as warranted. The net change in the valuation allowance for the year ended June 30, 2015 was an increase of $276,275.

 

The Company has net operating loss carryforwards of approximately $1.4 million for federal purposes available to offset future taxable income that expire in varying amounts through 2034. The ability to utilize the net operating loss carry forwards could be limited by Section 382 of the Internal Revenue Code which limits their use if there is a change in control (generally a greater than 50% change in ownership). The Company is subject to examination by tax authorities for all years for which a loss carry forward is utilized in subsequent periods.

 

The Company follows FASB guidelines that address the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under this guidance, we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. This guidance also provides guidance on derecognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. As of June 30, 2016 and 2015, the Company did not have a liability for unrecognized tax benefits, and no adjustment was required at adoption. The tax years 2011 through 2016 remain open to examination by the major taxing jurisdictions in which the Company operate

 

The Company’s policy is to record interest and penalties on uncertain tax provisions as income tax expense. As of June 30, 2016 and 2015, the Company has no accrued interest or penalties related to uncertain tax positions.