The following discussion should be read in conjunction with our financial
statements, including the notes thereto, appearing elsewhere in this annual
report. The discussion of results, causes and trends should not be construed to
imply any conclusion that these results or trends will necessarily continue into
the future. All references to currency in this "Management's Discussion and
Analysis of Financial Condition and Results of Operations" section are to U.S.
dollars, unless otherwise noted.
Liquidity and Capital Resources
For the years ended June 30, 2020 and 2019
As of June 30, 2020, we had $1,351 in cash, current assets of $5,022, current
liabilities of $1,261,089 and working capital deficit of $1,256,067. As of June
30, 2019, we had $2,603 in cash, current assets of $6,383, current liabilities
of $1,087,760 and working capital deficit of $1,081,377. As of June 30, 2020, we
had total assets of $49,745, compared to total assets of $21,119as of June 30,
2019.
During the year ended June 30, 2020, we used net cash of $112,611 in operating
activities, compared to net cash used of $146,973in operating activities during
the year ended June 30, 2019.The decrease of $34,362 for net cash used in
operating activities was primarily due to increase in noncash lease expense and
depreciation expense.
During the year ended June 30, 2020, we received net cash of $105,927 from
financing activities, compared to net cash received of $142,628 in financing
activities during the year ended June 30, 2019. The decrease of $36,701 in net
cash provided by financing activities was due to decrease in proceeds received
from a related party.
Our net cash level decreased by $1,252 during the year ended June 30, 2020,
compared to a decrease of$4,576 during the year ended June 30, 2019. The changes
in cash were a result of the factors described above.
In assessing its liquidity, management monitors and analyzes the Company's cash
on-hand, its ability to generate sufficient revenue sources in the future and
its operating and capital expenditure commitments. The Company plans to fund
working capital through cooperation with other film and television producers and
obtaining shareholders' loans to meet our cash requirements. The President and
Chief Executive Officer of the Company, Mr. Dean Li, has pledged to provide
personal loans whenever necessary to the Company as working capital for next
twelve months.
We anticipate that we will meet our ongoing cash requirements by retaining
income as well as through equity or debt financing. We plan to cooperate with
various individuals and institutions to acquire the financing required to
produce and distribute our films and television series and anticipate this will
continue until we accrue sufficient capital reserves to finance all of our
productions independently.
We estimate that our expenses over the next 12 months (beginning October 2020)
will be approximately $650,000 as described in the table below. These estimates
may change significantly depending on the nature of our future business
activities and our ability to raise capital from shareholders or other sources.
Description Estimated Completion Date Estimated Expenses
($)
Legal and accounting fees 12 months 100,000
Management and operating costs 12 months 200,000
Salaries and consulting fees 12 months 200,000
General and administrative expenses 12 months 150,000
Total 650,000
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We intend to meet our cash requirements for the next 12 months through a
combination of debt financing and equity financing by way of private placements.
There is good potential for the development of our business in China. If we get
more liquidity, it will be best way to expand our business and improve profit.
We currently do not have any arrangements in place to complete any private
placement financings and there is no assurance that we will be successful in
completing any such financings. If we are not able to successfully complete any
private placement financings, we plan to cooperate with film and television
producers or obtain shareholder loans to meet our cash requirements. However,
there is no assurance that any such financing will be available or if available,
on terms that will be acceptable to us. We may not raise sufficient funds to
fully carry out our business plan.
Results of Operations
The following table sets forth information from our statements of operations for
the years ended June 30, 2020 and 2019:
For The Years Ended June 30
2020 2019
Operating expenses
Selling, general and administrative
expenses $ 189,436 $ 206,553
Depreciation and amortization expense 14,049 -
Impairment loss on film costs - 732,966
Total operating expenses 203,485 939,519
Other expenses:
Interest expense 26,926 25,187
Total other expenses 26,926 25,187
Net loss before income taxes (230,411) (964,706)
Income taxes - -
Net loss $ (230,411) $ (964,706)
Revenues and cost
We had no sales and cost for the years ended June 30, 2020 and 2019.
Operating Expenses
During the year ended June 30, 2020, our total operating expenses were $203,485,
a decrease of $736,034 as compared to $939,519for the year ended June 30, 2019.
The main decrease was primarily due to decrease in impairment loss on film
costs.
Net Loss
For the year ended June 30, 2020, we incurred a net loss of $230,411, as
compared to a net loss of $964,706for the year ended June 30, 2019, a decrease
of $734,295. This decrease was primarily due to the decrease in operating
expenses.
Impact of COVID-19 Pandemic
In late January 2020, the coronavirus ("COVID-19") was rapidly evolving in China
and globally led to disruptions in the business and transportation. The Chinese
government implemented a series of restrictions, including lock-downs, social
distancing requirements, and travel restrictions that drastically reduced
traditional offline business. Considering the features of our business in the
media industries, we experienced business disruption as a result of those
measures to contain the COVID-19 outbreak. Since March 2020, the Chinese
government has eased its COVID-19 restrictions domestically, and the Chinese
domestic business started to recover. Our operations in the third quarter and
fourth quarter of 2020 was not significantly impacted by the COVID-19. However,
it is not possible to determine the ultimate impact of the COVID-19 pandemic on
the Company's business operations and financial results, which is highly
dependent on numerous factors, including the duration and spread of the pandemic
and any resurgence of COVID-19 in China or elsewhere, actions taken by
governments, the responses of businesses and individuals to the pandemic.
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Contractual Obligations
As a "smaller reporting company", we are not required to provide tabular
disclosure obligations.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to
have a current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that are material to stockholders.
APPLICATION OF CRITICAL ACCOUNTING POLICIES
Our audited financial statements and accompanying notes are prepared in
accordance with generally accepted accounting principles used in the United
States. Preparing financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenue,
and expenses. These estimates and assumptions are affected by management's
application of accounting policies. We believe that understanding the basis and
nature of the estimates and assumptions involved with the following aspects of
our consolidated financial statements is critical to an understanding of our
financials.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires
management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes, including estimates of ultimate
revenues and ultimate costs of film and television products, estimates of
product sales that will be returned and the amount of receivables that
ultimately will be collected, the potential outcome of future tax consequences
of events that have been recognized in the Company's financial statements and
loss contingencies. Actual results could differ from those estimates. To the
extent that there are material differences between these estimates and actual
results, the Company's financial condition or results of operations will be
affected. Estimates are based on past experience and other assumptions that
management believes are reasonable under the circumstances, and management
evaluates these estimates on an ongoing basis.
Fair Value of Financial Instruments
The fair value of financial instruments, which consist of cash and cash
equivalents, prepaid and other receivable, accounts payable, accrued liabilities
and other payable, were estimated to approximate their carrying values due to
the immediate or relatively short maturity of these instruments.
Earnings (loss) Per Share
The Company calculates net income (loss) per share in accordance with ASC 260,
Earnings Per Share. Basic earnings (loss) per share is computed by dividing net
income (loss) by the weighted average number of shares of common stock
outstanding during each period. Diluted earnings (loss) per share is computed by
dividing net income (loss) by the weighted average number of shares of common
stock, common stock equivalents and potentially dilutive securities outstanding
during each period. As of June 30, 2020 and 2019, respectively, the Company had
no common stock equivalents that could potentially dilute future earnings (loss)
per share.
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