ITEM 1. BUSINESS.
Our History and Background
We were incorporated in the State of Delaware on November 8, 2007. Since inception, we have been engaged in organizational efforts, obtaining financing and establishing the groundwork both in China and in the US to organize training programs for Chinese students and participants who wish to pursue higher levels of practical education in the entertainment industry with leading US film schools and colleges. We also plan to provide design, development, investment and management services in the creation and building of cultural theme parks and related facilities and destinations in China. We were originally formed as a vehicle to pursue a business combination through the acquisition of, or merger with, an operating business and/or entering into collaboration and joint venture agreements with existing businesses compatible with our core business objectives. Since the effectiveness of our registration statement on Form 10-SB, we have focused our efforts on identifying a possible business combination and/or compatible joint ventures and business opportunities and further developing our core business related to the field of entertainment, particularly with music, motion picture and TV production, and animation.
Overview of Our Business
To date, we have been primarily a development stage company with the intent to enter into a business combination with one or more privately held businesses since we believe that we would be attractive to privately held operating companies interested in becoming publicly traded by means of a business combination with us, without offering their own securities to the public. We still hold to this previous view.
In fourth quarter 2011 we began to realize our additional objective of placing Chinese students with US schools and we received revenue from the placement of Chinese students with an educational institution in Los Angeles and reflected this as revenue.
We intend to explore similar opportunities and may receive future revenue from this type of activity. In addition, we are planning to organize training centers for Chinese students both in China and in the US, focusing on 3D animation and motion picture production instruction which we expect will commence to operate in second half 2013. In addition, we are planning to offer design, development, investment and management services to create and build cultural theme parks and related facilities and destinations in China.
Meanwhile, until these potential plans materialize, we still consider ourselves to be a development stage and we continue to be unrestricted in our search for business combination candidates in any particular geographical area, industry or industry segment, and may enter into a combination or joint venture with a private business engaged in any line of business particularly that associated with the entertainment industry. Management’s discretion is, as a practical matter, unlimited in the selection of a combination candidate.
If we effect a business combination with any entity unaffiliated with our current management, our current officers and directors may be required to resign their directorships and officer positions with us in connection with our consummation of a business combination (see “Form of Acquisition” below). In such an instance, our current management may not have any control over the conduct of our business following the completion of such business combination.
It is anticipated that prospective business opportunities will come to our attention from various sources, including our management, professional advisors such as attorneys and accountants, securities broker-dealers, venture capitalists, members of the financial community, and others who may present unsolicited proposals. There are no plans currently to use advertisements, notices or any general solicitation in the search for combination candidates.
We have established a board of 10 highly qualified senior advisors to provide recommendations and guidance to management on their particular field of expertise, who have agreed to serve without compensation. These advisors are as follows:
Tom Saviano (appointed on January 22, 2012) Mr. Saviano is an outstanding Recording Artist, Composer, Conductor and Music Producer based in Hollywood, California. He was awarded the “Finest Saxophonist InThe World”, together with 9 Platinum Album Awards and 5 Grammy Awards.
Michael O’Nell (appointed on March 15, 2012) Mr.O’Nell is a world renowned American Guitarist and Jazz Musician. He is the recipient of a Grammy Nominee Participation Award.
Rob Chiarelli (appointed on March 15, 2012) Mr. Chiarelli is a top class Soundtrack Mixer, Producer and Composer based in Hollywood California with many Grammy and Oscar Awards for Music, together with more than 100 music award worldwide.
Tony Christopher (appointed on April 2, 2012) Mr. Christopher is a well known expert in the field of world class concept design for theme parks and theatre shows. He is founder and president of Landmark Entertainment Group, which has designed worldwide theme parks for such major companies as Universal Studios and Six Flags.
Zhaojun Jin (appointed on May 5, 2012) Mr. Jin is one of the top Music Critics and Cultural Planners in China. He serves as Editorial Director and Deputy Editor-in-Chief of the Chinese Musicians' Association, "the people's music" as well as the Secretary-General of Society of Popular Music of the Chinese Musicians' Association.
Haiying Li (appointed on July 30, 2012) Mr. Li is a Chinese pop music pioneer and top level Musician and Composer. He serves as Vice president of Society of Popular Music of the Chinese Musicians' Association and Vice president of the China Film Music Society.
He has received more than 100 Awards and Prizes for his National and International Music Compositions and he has served as the Music Director of the CCTV Spring Festival Galas as well as a judge for the CCTV National Young Singer TV Grand Prix competition.
Zhaoyuan Zhang (appointed on August 15, 2012) Mr. Zhang is a leading educator and Economic Expert, and he serves as Director of China Higher Education Training Center of Education Ministry of China.
Xiaolei Li (appointed on September 22, 2012) Mr. Li is a senior expert with the Cultural Industry of China. He has served as Deputy Director General of Industries Division of the Culture Ministry of China. He has extensive experience in the development and strategy of the Chinese Culture Industry.
Yonggao Gu (appointed December 15, 2012.) Mr. Gu is a senior expert on project strategy and planning, senior Editor and Reporter and the former Editor-in-Chief of China Press of National Press and Publication Administration of China. Now serves as Senior Consultant to the National Development and Reform Commission (NDRC) of China.
Todd Berhorst (appointed January 22, 2013.) Mr. Berhorst is a senior coach of pop music and a former Vice President of the Musicians Institute in Hollywood, California. He currently serves as Vice president and Executive School Director of the EI school of Professional Makeup in Hollywood, California.
Combination Suitability Standards
The analysis of new business opportunities has and will be undertaken by or under the supervision of our management. To a large extent, a decision to participate in a specific combination may be made upon management’s analysis of the quality of the candidate company’s management and personnel, the anticipated acceptability of new products or marketing concepts, the merit of technological changes, the perceived benefit the candidate will derive from becoming a publicly held entity, and numerous other factors which are difficult, if not impossible, to objectively quantify or analyze. In many instances, it is anticipated that the historical operations of a specific candidate may not necessarily be indicative of the potential for the future because of the possible need to shift marketing approaches substantially, expand significantly, change product emphasis, change or substantially augment management, or make other changes. We will be dependent upon the owners and management of a candidate to identify any such problems which may exist and to implement, or be primarily responsible for the implementation of, required changes. Because we may participate in a business combination with a newly organized candidate or with a candidate which is entering a new phase of growth, it should be emphasized that we will incur further risks, because management in many instances will not have proved its abilities or effectiveness, the eventual market for the candidate's products or services will likely not be established, and the candidate may not be profitable when acquired.
Otherwise, we anticipate that we may consider, among other things, the following factors:
• Potential for growth, indicated by new technology, anticipated market expansion or new products;
• Competitive position as compared to other firms of similar size and experience within the industry segment as well as within the industry as a whole;
• Strength and diversity of management, either in place or scheduled for recruitment;
• Capital requirements and anticipated availability of required funds, to be provided by us or from operations, through the sale of additional securities, through joint ventures or similar arrangements or from other sources;
• The cost of participation by us as compared to the perceived tangible and intangible values and potentials;
• The extent to which the business opportunity can be advanced;
• The accessibility of required management expertise, personnel, raw materials, services, professional assistance and other required items; and
• Other relevant factors.
No one of the factors described above will be controlling in the selection of a candidate. Potentially available candidates may occur in many different industries and at various stages of development, all of which will make the task of comparative investigation and analysis of such business opportunities extremely difficult and complex. It should be recognized that, because of our limited capital available for investigation, we may not discover or adequately evaluate adverse facts about the opportunity to be acquired. We cannot predict when we may participate in a business combination. We expect, however, that the analysis of specific proposals and the selection of a candidate may take several months or more.
Form of Acquisition
It is likely that we will acquire our participation in a business opportunity through the issuance of common stock or other of our securities. Although the terms of any such transaction cannot be predicted, it should be noted that in certain circumstances the criteria for determining whether or not an acquisition is a so-called “tax free” reorganization under the Internal Revenue Code of 1986, depends upon the issuance to the stockholders of the acquired company of a controlling interest (i.e. 80% or more) of the common stock of the combined entities immediately following the reorganization.
If a transaction were structured to take advantage of these provisions rather than other “tax free” provisions provided under the Internal Revenue Code, our current stockholders would retain in the aggregate 20% or less of the total issued and outstanding shares. This could result in substantial additional dilution in the equity of those who were our stockholders prior to such reorganization. Any such issuance of additional shares might also be done simultaneously with a sale or transfer of shares representing a controlling interest in us by the current officers, directors and principal stockholders.
It is anticipated that any new securities issued in any reorganization would be issued in reliance upon exemptions, if any are available, from registration under applicable federal and state securities laws. In some circumstances, however, as a negotiated element of the transaction, we may agree to register such securities either at the time the transaction is consummated, or under certain conditions or at specified times thereafter. The issuance of substantial additional securities and their potential sale into any trading market that might develop in our securities may have a depressive effect upon such market.
We will participate in a business opportunity only after the negotiation and execution of a written agreement. Although the terms of such agreement cannot be predicted, generally such an agreement would require specific representations and warranties by all of the parties thereto, specify certain events of default, detail the terms of closing and the conditions which must be satisfied by each of the parties thereto prior to such closing, outline the manner of bearing costs if the transaction is not closed, set forth remedies upon default, and include miscellaneous other terms.
It is anticipated that the investigation of specific business opportunities and the negotiation, drafting and execution of relevant agreements, disclosure documents and other instruments will require substantial management time and attention and substantial costs for accountants, attorneys and others. If a decision is made not to participate in a specific business opportunity, the costs theretofore incurred in the related investigation would not be recoverable. Moreover, because many providers of goods and services require compensation at the time or soon after the goods and services are provided, our inability to pay until an indeterminate future time may make it impossible to procure goods and services.
Post Combination Activities
Management anticipates that, following consummation of a combination, control of us may change as a result of the issuance of additional common stock to the stockholders of the business acquired in the combination. Once ownership control has changed, it is likely that the new controlling stockholders will call a meeting for the purpose of replacing our incumbent directors with candidates of their own, and that the new directors will then replace the incumbent officers with their own nominees. Rule 14f-1 under the Exchange Act requires that, if in connection with a business combination or sale of our control there should arise any arrangement or understanding for a change in a majority of our directors and the change in the board of directors is not approved in advance by our stockholders at a stockholder meeting, then none of the new directors may take office until at least ten (10) days after an information statement has been filed with the SEC and sent to our stockholders. The information statement furnished must as a practical matter include the information required by Items 6(a), (d) and (e), 7 and 8 of Schedule 14A of Regulation 14A in a proxy statement. Following consummation of a combination, management anticipates that we will file a current report on Form 8-K with the Commission which discloses among other things the date and manner of the combination, material terms of the definitive agreement, the assets and consideration involved, the identity of the person or persons from whom the assets or other property was acquired, changes in management and biographies of the new directors and executive officers, identity of principal stockholders following the combination, and contains the required financial statements. Such a Form 8-K report also will be required to include all information that is required to be disclosed under a Form 10 relating to the target company.
Use of Consultants and Finders
Our management might hire and pay an outside consultant to assist in the investigation and selection of candidates, and might pay a finder’s fee to a person who introduces a candidate with which we complete a combination. Since our management has no current plans to use any outside consultants or finders to assist in the investigation
and selection of candidates, no policies have been adopted regarding use of consultants or finders, the criteria to be used in selecting such consultants or finders, the services to be provided, the term of service, or the structure or amount of fees that may be paid to them. However, because of our limited resources, it is likely that any such fee we agree to pay would be paid in stock and not in cash.
It is possible that compensation in the form of common stock, options, warrants or other of our securities, cash or any combination thereof, may be paid to outside consultants or finders. None of our securities will be paid to our officers, directors or promoters or any of their respective affiliates in the form of finder’s fees.
Any payments of cash to a consultant or finder would be made by the business acquired or persons affiliated or associated with it, and not by us. It is possible that the payment of such compensation may become a factor in any negotiations for our acquisition of a business opportunity. Any such negotiations and compensation may present conflicts of interest between the interests of persons seeking compensation and those of our stockholders, and there is no assurance that any such conflicts will be resolved in favor of our stockholders.
State Securities Laws and Considerations
Section 18 of the Securities Act provides that no law, rule, regulation, order or administrative action of any state may require registration or qualification of securities or securities transactions that involve the sale of a “covered security”. The term “covered security” is defined in Section 18 to include among other things transactions by “any person not an issuer, underwriter or dealer”, (in other words, secondary transactions in securities already outstanding) that are exempted from registration by Section 4(1) of the Securities Act, provided the issuer of the security is a “reporting company,” meaning that it files reports with the SEC pursuant to Section 13 or 15(d) of the Exchange Act.
Section 18 preserves the authority of the states to require certain limited notice filings by issuers and to collect fees as to certain categories of covered securities, specifically including Section 4(1) secondary transactions in the securities of reporting companies. Section 18 expressly provides, however, that a state may not “directly or indirectly prohibit, limit, or impose conditions based on the merits of such offering or issuer, upon the offer or sale of any (covered) security.” This provision prohibits states from requiring registration or qualification of securities of an Exchange Act reporting company which is current in its filings with the SEC.
The states generally are free to enact legislation or adopt rules that prohibit secondary trading in the securities of “blank check” companies like us. Section 18 of the Securities Act, however, preempts state law as to covered securities of reporting companies. Thus, while the states may require certain limited notice filings and payment of filing fees by us as a precondition to secondary trading of our shares in those states, they cannot, so long as we are a reporting issuer, prohibit, limit or condition trading of our securities based on the fact that we are or ever were a blank check company. We will comply with such state limited notice filings as may be necessary in regard to secondary trading. At this time, our stock is not actively traded in any market, and an active market in our common stock is not expected to arise, if ever, until after completion of a business combination.
No Investment Company Act Regulation
Prior to completing a combination, we will not engage in the business of investing or reinvesting in, or owning, holding or trading in securities, or otherwise engaging in activities which would cause us to be classified as an “investment company” under the Investment Company Act of 1940, as amended, or the Investment Company Act. To avoid becoming an investment company, not more than 40% of the value of our assets (excluding government securities and cash and cash equivalents) may consist of “investment securities”, which is defined to include all securities other than U.S. government securities and securities of majority-owned subsidiaries. Because we will not own less than a majority of any assets or business acquired, we will not be regulated as an investment company. We will not pursue any combination unless it will result in our owning at least a majority interest in the business acquired.
Recent Developments
On June 1, 2012, the Company entered into an Agreement of Intent to Cooperate with the Leading Group of the Cultural Industry of Shijiazhuang City Government relating to the design, creation and build of the Shijiazhuang International Cultural Theme Park. Under this Agreement it is expected that Shijiazhuang City will provide land of approximately 4,000 MU ( about 659 Acres ) in cooperation with the Company for the purposes of building an international cultural theme park within Shijiazhuang City (which is the capital of the Hebei Province of China, approximately 55 minutes from Beijing by Express Train. The population of Hebei Province is approximately 70 million and with an additional 30 million in neighboring Beijing. The total budget for the project is equivalent to approximately US dollars 2.5 billion.)
On June 6, 2012, the Company entered into a Collaboration Agreement with China Higher Education Training Center (CHETC) of the China Education Ministry. Both the Company and CHETC agree to fully cooperate as long term partners in the field of advanced training in the US for senior Chinese professionals and teachers. Training will include educational staff, business managers, professional technicians and performing Artists.
On August 16, 2012, the Company entered into a Memorandum of Understanding with the College of Continuing and Professional Education (CCPE) of California State University, Long Beach (CSULB) to mutually cooperate in developing and offering academic and professional educational programs, both in the US and China. Both parties wish expand upon the development of professional education and training programs between CSULB and the Company, including organizing educational and training activities for students, faculty, executives, and managers of government agencies as well as from the private sector.
On August 28, 2012, the Company entered into a Collaboration Agreement with the Landmark Entertainment Group (LEG) to develop global entertainment and cultural theme parks in China. Landmark Entertainment Group is a leading worldwide enterprise for concept design, master planning and feasibility studies for the creation and building of theme and cultural industry parks, and has received high acclaim on theme park designs for such enterprises as Universal Studios (Hollywood, Orlando, Florida and Japan); Six Flags ( Houston, Atlanta and Baltimore); and Paramount Parks and Resorts ( World of Caesars and Caesars Palace in Las Vegas, EFX! Las Vegas MGM Las Vegas ). Pursuant to the Agreement, the Company and Landmark Entertainment Group agree to fully cooperate together on the Company’s theme park and cultural industry park projects in China.
On Nov. 20, 2012, the Company entered into a Collaboration Agreement with China Commercial International Travel Service Co. Ltd.("CCITS") which is a leading travel provider for commercial business travelers and their operators. It is within the top 20 in China in servicing the Chinese tourism industry as a provider of domestic and international business travel. Both parties agree to cooperate together in organizing the training of up to 1,500 Chinese personnel in the US selected from CCITS’s extensive portfolio of business customers and 20 local branches in China.
Recent Developments (Continued)
On February 4, 2013 the Company entered into an exclusive Collaboration Agreement with Global Entertainment Holdings, Inc. (“GEHI”), a US publicly traded independent motion production and distribution company based in Hollywood, California, which sets the stage for further joint venture projects to be undertaken in both the U.S. and China. The partnership with GEHI will also more easily enable the Company to place Chinese students in entertainment related training programs in the US and will also allow the Company to engage with GEHI in the production of live action feature motion pictures, as well as 3D animation and video game creation.
Competition
We face significant competition from other companies with similar objectives. We are in a highly competitive market for a small number of business opportunities which could reduce the likelihood of consummating a successful business combination. A large number of established and well-financed entities, including small public companies and venture capital firms, are active in mergers and acquisitions of companies that may be desirable target candidates for us. Nearly all these entities have significantly greater financial resources, technical expertise and managerial capabilities than we do; consequently, we will be at a competitive disadvantage in identifying possible business opportunities and successfully completing a business combination. These competitive factors may reduce the likelihood of our identifying and consummating a successful business combination.
Employees
We presently have no employees other than our officers.
ITEM 1A.
ITEM 1A. RISK FACTORS.
You should carefully review and consider the following risks as well as all other information contained in this report, including our financial statements and the notes to those statements. The following risks and uncertainties are not the only ones facing us. Additional risks and uncertainties of which we are currently unaware or which we believe are not material also could materially adversely affect our business, financial condition, results of operations, or cash flows. To the extent any of the information contained in this annual report constitutes forward-looking information, the risk factors set forth below are cautionary statements identifying important factors that could cause our actual results for various financial reporting periods to differ materially from those expressed in any forward-looking statements made by or on our behalf and could materially adversely effect our financial condition, results of operations or cash flows.
There may be conflicts of interest as a result of our management being involved with other companies which may result in decisions that are adverse to our business.
Conflicts of interest and non-arms length transactions may arise in the future. Conflicts of interest create the risk that management may have an incentive to act adversely to the interests of the Company. The terms of a business combination may include terms like the retention of our current officers and directors as officers and directors of the successor company in the business combination. The terms of a business combination may provide for a payment by cash or otherwise to members of our management team for the purchase or retirement of all or part of our common stock that is held by them or for services rendered incident to or following a business combination. Our management team would directly benefit from this type of employment or payment. These benefits may influence our management team's choice of a target company. Our certificate of incorporation provides that we may indemnify our officers and/or directors for liabilities, which can include liabilities arising under the securities laws. Therefore, our assets could be used or attached to satisfy any liabilities subject to this indemnification.
Our management is currently or in the future may become, involved with other companies, and in our pursuit of business combinations, conflicts with such other companies may arise. If we desire to take advantage of the same opportunities then those members of management that are affiliated with both companies would abstain from voting upon the opportunity. In the event of identical officers and directors, the officers and directors will arbitrarily determine which company will be entitled to proceed with the proposed transaction. These conflicts may result in management decisions that could negatively affect our operations and potentially result in the loss of opportunities.
We have a limited operating history and limited revenues or earnings from operations.
We have a limited operating history and have only limited revenues or earnings from operations since inception. While we may sustain additional operating expenses without corresponding revenues at least until the consummation of a merger, other business combination with a private company or until our own operations better develop, with the receipt of proceeds totaling $120,000 from the sale of our common stock during fourth quarter 2012, in we believe that we now have the financial resources to accelerate and complete the development of our core business.
Since our inception on November 8, 2007 through December 31, 2012, we have accumulated a net loss of
$41,288. There can be no assurance that we will complete a merger or other business combination with an operating business or that we will ever be profitable.
We face a number of risks associated with potential acquisitions.
We intend to use reasonable efforts to complete a merger or other business combination with an operating business. Such combination will be accompanied by risks commonly encountered in acquisitions, including, but not limited to, difficulties in integrating the operations, technologies, products and personnel of the acquired companies and insufficient revenues to offset increased expenses associated with acquisitions. Failure to manage and successfully integrate acquisitions we make could harm our business, our strategy and our operating results in a material way.
There is competition for those private companies suitable for a merger transaction of the type contemplated by management.
We are in a highly competitive market for a small number of business opportunities which could reduce the likelihood of consummating a successful business combination. We are, and will continue to be, an insignificant participant in the business of seeking mergers with, joint ventures with and acquisitions of small private and public entities. A large number of established and well-financed entities, including small public companies and venture capital firms, are active in mergers and acquisitions of companies that may be desirable target candidates for us. Nearly all these entities have significantly greater financial resources, technical expertise and managerial capabilities than we do; consequently, we will be at a competitive disadvantage in identifying possible business opportunities and successfully completing a business combination. These competitive factors may reduce the likelihood of our identifying and consummating a successful business combination.
We face a number of risks associated with potential acquisitions.
We intend to use reasonable efforts to complete a merger or other business combination with an operating business. Such combination will be accompanied by risks commonly encountered in acquisitions, including, but not limited to, difficulties in integrating the operations, technologies, products and personnel of the acquired companies and insufficient revenues to offset increased expenses associated with acquisitions. Failure to manage and successfully integrate acquisitions we make could harm our business, our strategy and our operating results in a material way.
There is competition for those private companies suitable for a merger transaction of the type contemplated by management.
We are in a highly competitive market for a small number of business opportunities which could reduce the likelihood of consummating a successful business combination. We are, and will continue to be, an insignificant participant in the business of seeking mergers with, joint ventures with and acquisitions of small private and public entities. A large number of established and well-financed entities, including small public companies and venture capital firms, are active in mergers and acquisitions of companies that may be desirable target candidates for us. Nearly all these entities have significantly greater financial resources, technical expertise and managerial capabilities than we do; consequently, we will be at a competitive disadvantage in identifying possible business opportunities and successfully completing a business combination. These competitive factors may reduce the likelihood of our identifying and consummating a successful business combination.
Our proposed operations are purely speculative. Future success is highly dependent on the ability of management to locate and attract a suitable acquisition. There can be no assurance that we will successfully consummate a business combination.
The nature of our operations is highly speculative, and there is a consequent risk of loss of your investment. The success of our plan of operation will depend to a great extent on the operations, financial condition and management of the identified business opportunity. While management intends to seek business combination(s) with entities having established operating histories, we cannot assure you that we will be successful in locating candidates meeting these criteria.
In the event we complete a business combination, the success of our proposed plan of operation will depend to a great extent on the operations, financial condition and management of the identified target company and numerous other factors beyond our control. We can give no assurances that we will successfully identify and evaluate suitable business opportunities, negotiate a business combination on favorable terms, or that we will conclude a business combination.
Our management team does not devote its full time to our business and operations which may adversely impact our ability to identify a suitable acquisition candidate.
Our officers and directors serve on a part-time basis and we will are solely dependent on them. We lack the funds or other incentives to hire full-time experienced management. Each of our management members has other employment or business interests to which they devote their attention and will continue to do so, devoting time to us only on an as-needed basis. This limited commitment may adversely impact our ability to identify and consummate a successful business combination.
The time and cost of preparing a private company to become a public reporting company may preclude us from entering into a merger or acquisition with the most attractive private companies.
Target companies that fail to comply with SEC reporting requirements may delay or preclude acquisition. Sections 13 and 15(d) of the Exchange Act require reporting companies 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 these statements may significantly delay or essentially preclude consummation of an acquisition. Otherwise suitable acquisition prospects that do not have or are unable to obtain the required audited statements may be inappropriate for acquisition so long as the reporting requirements of the Exchange Act are applicable.
We may be subject to further government regulation which would adversely affect our operations.
Although we are subject to the reporting requirements under the Exchange Act, management believes we are not subject to regulation under the Investment Company Act since we are not engaged in the business of investing or trading in securities. If we engage in business combinations which result in our holding passive investment interests in a number of entities, we could be subject to regulation under the Investment Company Act. If so, 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 SEC as to our status under the Investment Company Act and, consequently, violation of the Investment Company Act could subject us to material adverse consequences.
Any potential acquisition or merger with a foreign company may subject us to additional risks.
If we enter into a business combination with a foreign company, we will be subject to risks inherent in business operations outside of the United States. These risks include, for example, currency fluctuations, regulatory problems, punitive tariffs, unstable local tax policies, trade embargoes, risks related to shipment of raw materials and finished goods across national borders and cultural and language differences. Foreign economies may differ favorably or unfavorably from the United States economy in growth of gross national product, rate of inflation, market development, rate of savings, and capital investment, resource self-sufficiency and balance of payments positions, and in other respects.
We may be subject to certain tax consequences in our business, which may increase our cost of doing business.
Federal and state tax consequences will, in all likelihood, be major considerations in any business combination that we may undertake. We may not be able to structure our acquisition to result in tax-free treatment for the companies or their stockholders, which could deter third parties from entering into certain business combinations with us or result in being taxed on consideration received in a transaction. Currently, a transaction may be structured so as to result in tax-free treatment to both companies, as prescribed by various federal and state tax provisions. We intend to structure any business combination so as to minimize the federal and state tax consequences to both us and the target entity; however, we cannot guarantee that the business combination will meet the statutory requirements of a tax- free reorganization or that the parties will obtain the intended tax-free treatment upon a transfer of stock or assets. A non-qualifying reorganization could result in the imposition of both federal and state taxes that may have an adverse effect on both parties to the transaction.
Because we may seek to complete a business combination through a “reverse merger,” following such a transaction we may not be able to attract the attention of major brokerage firms.
Additional risks may exist since we expect to assist a privately held business to become public through a “reverse merger.” Securities analysts of major brokerage firms may not provide coverage of our Company since there is no incentive to brokerage firms to recommend the purchase of our common stock.
There is not now, and there may never be, an active market for our common stock and we cannot assure you that the common stock will become liquid or that it will be listed on a securities exchange
There currently is no market for our common stock. We plan to list our common stock as soon as practicable. However, we cannot assure you that we will be able to meet the initial listing standards of any stock exchange, or that we will be able to maintain any such listing. In this venue, however, an investor may find it difficult to obtain accurate quotations as to the market value of the common stock and trading of our common stock may be extremely sporadic. For example, several days may pass before any shares may be traded. A more active market for the common stock may never develop. In addition, if we failed to meet the criteria set forth in SEC regulations, various requirements would be imposed by law on broker-dealers who sell our securities to persons other than established customers and accredited investors. Consequently, such regulations may deter broker-dealers from recommending or selling the common stock, which may further affect its liquidity. This would also make it more difficult for us to raise additional capital.
We cannot assure you that following a business combination with an operating business, our common stock will be listed on NASDAQ or any other securities exchange; and if listed we may be subject to penny stock rules.
Following a business combination, we may seek the listing of our common stock on NASDAQ or the American Stock Exchange. However, we cannot assure you that following such a transaction, we will be able to meet the initial listing standards of either of those or any other stock exchange, or that we will be able to maintain a listing of common stock on either of those or any other stock exchange. After completing a business combination, until our common stock is listed on the NASDAQ or another stock exchange, we expect that our common stock would be eligible to trade on the OTC Bulletin Board, another over-the-counter quotation system, or on the “pink sheets,” where our stockholders may find it more difficult to dispose of shares or obtain accurate quotations as to the market value of our common stock.
In addition, after such listing, our securities may be classified as penny stock. The SEC has adopted Rule 15g-9 which establishes the definition of a "penny stock," for purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share whose securities are admitted to quotation but do not trade on the Nasdaq Capital Market or on a national securities exchange. For any transaction involving a penny stock, unless exempt, the rules require delivery of a document to investors stating the risks, special suitability inquiry, regular reporting and other requirements. Prices for penny stocks are often not available and investors are often unable to sell this stock. Consequently, such rule may deter broker-dealers from recommending or selling our common stock, which may further affect its liquidity. This would also make it more difficult for us to raise additional capital following a business combination.
The majority of our issued and outstanding capital stock is owned and controlled by our Officers.
Our officers currently own the majority of our issued and outstanding capital stock, and therefore control our operations and will have the ability to control all matters submitted to stockholders for approval, including:
• election of our board of directors;
• removal of any directors;
• amendment of our Certificate of Incorporation or Bylaws; and
• adoption of measures that could delay or prevent a change in control or impede a merger, takeover or other business combination.
These stockholders thus have complete control over our management and affairs. Accordingly, their ownership may have the effect of impeding a merger, consolidation, takeover or other business consolidation, or discouraging a potential acquirer from making a tender offer for our common stock, which may further affect its liquidity.
Our stockholders may have a minority interest in the Company following a merger or other business combination with an operating business.
If we consummate a merger or business combination with a company with a value in excess of the value of our Company and issue shares of common stock to the stockholders of such company as consideration for merging with us, our stockholders would own less than 50% of the Company after the business combination. The stockholders of the acquired company would therefore be able to control the election of our board of directors and control our Company.
We have never paid dividends on our common stock.
We have never paid dividends on our common stock and do not presently intend to pay any dividends in the foreseeable future. We anticipate that any funds available for payment of dividends will be re-invested into the Company to further its business strategy.
We intend to issue more shares to raise capital or in a merger or acquisition, which will result in substantial dilution.
Our Certificate of Incorporation authorizes the issuance of a maximum of 100,000,000 shares of common stock. Any merger or acquisition effected by us may result in the issuance of additional securities without stockholder approval and the substantial dilution in the percentage of common stock held by our then existing stockholders. Moreover, the common stock issued in any such merger or acquisition transaction may be valued on an arbitrary or non-arm’s-length basis by our management, resulting in an additional reduction in the percentage of common stock held by our current stockholders. Our board of directors has the power to issue any or all of such authorized but unissued shares without stockholder approval. To the extent that additional shares of common stock or preferred stock are issued in connection with a business combination or otherwise, dilution to the interests of our stockholders will occur and the rights of the holder of common stock might be materially and adversely affected.
There are issues impacting liquidity of our securities with respect to the SEC’s review of a future resale registration statement.
Since shares of our common stock issued prior to a business combination or reverse merger cannot currently, nor will they for a considerable period of time after we complete a business combination, be available to be offered, sold, pledged or otherwise transferred without being registered pursuant to the Securities Act, we will likely file a resale registration statement on Form S-1, or some other available form, to register for resale such shares of our common stock. We cannot control this future registration process in all respects as some matters are outside our control. Even if we are successful in causing the effectiveness of the resale registration statement, there can be no assurances that the occurrence of subsequent events may not preclude our ability to maintain the effectiveness of the registration statement. Any of the foregoing items could have adverse effects on the liquidity of our shares of our common stock.
In addition, the SEC has recently disclosed that it has developed internal informal guidelines concerning the use of a resale registration statement to register the securities issued to certain investors in private investment in public equity (PIPE) transactions, where the issuer has a market capitalization of less than $75 million and, in general, does not qualify to file a Registration Statement on Form S-3 to register its securities. The SEC has taken the position that these smaller issuers may not be able to rely on Rule 415 under the Securities Act, or Rule 415, which generally permits the offer and sale of securities on a continued or delayed basis over a period of time, but instead would require that the issuer offer and sell such securities in a direct or “primary” public offering, at a fixed price, if the facts and circumstances are such that the SEC believes the investors seeking to have their shares registered are underwriters and/or affiliates of the issuer. It appears that the SEC in most cases will permit a registration for resale of up to one third of the total number of shares of common stock then currently owned by persons who are not affiliates of such issuer and, in some cases, a larger percentage depending on the facts and circumstances. Staff members also have indicated that an issuer in most cases will have to wait until the later of six months after effectiveness of the first registration or such time as substantially all securities registered in the first registration are sold before filing a subsequent registration on behalf of the same investors. Since, following a reverse merger or business combination, we may have little or no tradable shares of common stock, it is unclear as to how many, if any, shares of common stock the SEC will permit us to register for resale, but SEC staff members have indicated a willingness to consider a higher percentage in connection with registrations following reverse mergers with shell companies such as the Company.
The SEC may require as a condition to the declaration of effectiveness of a resale registration statement that we reduce or “cut back” the number of shares of common stock to be registered in such registration statement. The result of the foregoing is that a stockholder’s liquidity in common stock may be adversely affected in the event the SEC requires a cut back of the securities as a condition to allow us to rely on Rule 415 with respect to a resale registration statement, or, if the SEC requires us to file a primary registration statement.
In order to grow at the pace expected by management, we will require additional capital to support our long-term business plan. If we are unable to obtain additional capital in future years, we may be unable to proceed with our long-term business plan and we may be forced to curtail or cease our operation or further business expansion.
We will require additional working capital to support our long-term business plan, which includes identifying suitable targets for horizontal or vertical mergers or acquisitions, so as to enhance the overall productivity and benefit from economies of scale. After a suitable business combination, our working capital requirements and the cash flow provided by future operating activities, if any, will vary greatly from quarter to quarter, depending on the volume of business during the period and payment terms with our customers. Due to the current global financial crisis, we may not be able to obtain adequate levels of additional financing, whether through equity financing, debt financing or other sources. To raise funds, we may need to issue new equities or bonds which could result in additional dilution to our shareholders, and additional financings could result in significant dilution to our earnings per share or the issuance of securities with rights superior to our current outstanding securities or contain covenants that would restrict our operations and strategy. In addition, we may grant registration rights to investors purchasing our equity or debt securities in the future. If we are unable to raise additional financing, we may be unable to implement our long-term business plan, develop or enhance new products and services, take advantage of future opportunities or respond to competitive pressures on a timely basis, if at all. In addition, a lack of additional financing could force us to substantially curtail or cease operations. The current global credit crisis is making it difficult, if not impossible, for companies to obtain financing for acquisitions and operational growth. There is no indication when this credit crisis will abate. Accordingly, we cannot assure you that we will be able to obtain such third party financing on terms favorable to us or at all.
ITEM 1B.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable
ITEM 2.
ITEM 2. PROPERTIES.
We neither rent nor own any properties. We utilize the office space and equipment at no cost. Management estimates such amounts to be immaterial. We currently have no policy with respect to investments or interests in real estate, real estate mortgages or securities of, or interests in, persons primarily engaged in real estate activities.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS.
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse affect on our business, financial condition or operating results.
ITEM 4.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Market Information
There currently is no market for our common stock. Following a business combination, we may seek the listing of our common stock on the OTC.BB, NASDAQ, the American Stock Exchange or another stock exchange. However, we cannot assure you that we will be able to meet the initial listing standards of any stock exchange, or that we will be able to maintain any such listing. Until our common stock is listed on an exchange, we expect that it would be eligible to be quoted in the over-the-counter bulletin board maintained by the Financial Industry Regulatory Authority. In this venue, however, an investor may find it difficult to obtain accurate quotations as to the market value of the common stock and trading of our common stock may be extremely sporadic.
For example, several days may pass before any shares may be traded. A more active market for the common stock may never develop. In addition, if we failed to meet the criteria set forth in SEC regulations, various requirements would be imposed by law on broker-dealers who sell our securities to persons other than established customers and accredited investors. Consequently, such regulations may deter broker-dealers from recommending or selling the common stock, which may further affect its liquidity and could make it more difficult for us to raise additional capital.
Number of Holders of Our common stock
As of February 22, 2013, there were 5 stockholders of record of our common stock.
Dividends
We have never declared or paid a cash dividend. Any future decisions regarding dividends will be made by our board of directors. We currently intend to retain and use any future earnings for the development and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future. Our board of directors has complete discretion on whether to pay dividends, subject to the approval of our stockholders. Even if our board of directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the board of directors may deem relevant.
Securities Authorized for Issuance Under Equity Compensation Plans
We do not have in effect any compensation plans under which our equity securities are authorized for issuance and we do not have any outstanding stock options.
Recent Sales of Unregistered Securities
On November 19, 2012 the Board of Directors approved the sale of 10 million of the Company’s common shares to Hollywood Hipac Group Inc., an affiliated company.
On December 3, and December 26, 2012 respectively the Board of Directors approved the sale of 20,000 and 10,000 of the Company’s common shares to third-parties.
Proceeds totaling $120,000 were received by the company in the quarter ending December 31, 2012 from the above stock issuances.
Purchases of Our Equity Securities
No repurchases of our common stock have been made to date through December 31, 2012.
Change in Officers
Hollis Liu resigned as Chief Executive Officer effective January 23, 2012.
However, Ms. Liu retained her title as President of the Company and remains as a member and Chairman of the Board of Directors and Chair of the Audit Committee.
David Lau was appointed Chief Executive Officer and member of the Board of Directors of the Company effective January 23, 2012.
Mr. David Lau is a senior strategist and coordinator in the film and entertainment industry both USA and China. Mr. Lau currently serves as CEO of Hollywood Entertainment EDU Holding Inc. With decades of experience, Mr. Lau has strong ability on planning, finance, construction and management on International Projects as well as world class Industry Park and Theme Park, Mr. Lau’s work experience extends to the successful management of many institutional and organizations, including directing and participating in International EXPOs, International Arts Exhibitions and Film & Animation events as an overseas expert. He has assisted in the production of such motion pictures as “The Terminal” with OSCAR academy award winner Steven Spielberg and starring OSCAR academy awards winners Tom Hanks and Catherine Zeta-Jones; and “Collateral” starring world movie star Tom Cruise and OSCAR academy awards winner Jamie Foxx.
Tony Liu and Kevin Zhang were appointed additional members of the Board of Directors of the Company effective December 31, 2012
Mr. Tony Liu is a financial professional, having graduated from University of California at Los Angeles. He is experienced in the fields of investment analysis and enterprise management, particularly with respect to financial reporting, financial planning, corporate law and related business practices. Mr. Liu is also an accomplished signer and recording artist and has received honorable awards for his performing talent and experience from leading Las Vegas shows.
Mr. Kevin Zhang is a Master of Public Administration. He graduated from California State University and has several years of experience with cultural exchange, trading, and finance matters. Mr. Zhang is proficient with both marketing and with business opportunities associated with cultural interflow, international education and training.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA.
Not Applicable.
ITEM 7.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following management’s discussion and analysis should be read in conjunction with our financial statements and the notes thereto and the other financial information appearing elsewhere in this report. In addition to historical information, the following discussion contains certain forward-looking information. See “Special Note Regarding Forward Looking Statements” above for certain information concerning those forward looking statements. Our financial statements are prepared in U.S. dollars and in accordance with U.S. GAAP.
Overview of Our Business
We were incorporated in the State of Delaware on November 8, 2007. Since inception, we have been a development stage company engaged in organizational efforts and obtaining initial financing. We were formed as a vehicle to pursue a business combination through the acquisition of, or merger with, an operating business. Since the effectiveness of our registration statement on Form 10-SB, we have focused our efforts on identifying a possible business combination.
Management believes that we have been, and are currently, a shell company that intends to enter into a business combination with one or more privately held businesses since we believe that we would be attractive to privately held operating companies interested in becoming publicly traded by means of a business combination with us, without offering their own securities to the public. While we continue to still hold to our previous view, during fourth quarter 2011 we recognized fee revenue from the placement of Chinese students with an educational institution in Los Angeles and we continued to explore similar activity in 2012. In addition, we are planning the organization and operation of training centers for Chinese students both in China and in the US, focusing on 3D animation and video game instruction, as well as planning to offer design, development, investment and management services to create and establish cultural theme parks and destinations in China. Meanwhile, we continue to be unrestricted in our search for business combination candidates in any particular geographical area, industry or industry segment, and may enter into a combination with a private business engaged in any line of business, particularly those associated with the entertainment industry. Management’s discretion is, as a practical matter, unlimited in the selection of a combination candidate.
Plan of Operation
While our original plan was solely to locate a suitable acquisition or merger candidate and consummate a business combination, our primary business plan currently is to act as a placement service in placing Chinese students with educational institutions in Los Angeles. In addition, we are planning to organize and operate training centers for Chinese students both in China and in the US, focusing on 3D animation and video game instruction. We may need additional cash investment from the sale of stock or through debt to advance our business objectives. Although it is currently anticipated that we can fund our operating expenses with our existing cash resources for at least the next twelve months, we can provide no assurance that we can necessarily continue to satisfy our cash requirements for a longer period.
While we continue to look for opportunities, we currently have no definitive agreements or understanding with any prospective business combination candidates and have not targeted any business for investigation and evaluation nor are there any assurances that we will find a suitable business with which to combine.
Our officers are only required to devote a portion of their time to our affairs on an as-needed basis. We expect to use outside consultants, advisors, attorneys and accountants as necessary, none of which will be hired on a retainer basis. We do not anticipate hiring any full-time employees so long as we are seeking and evaluating business opportunities or until our operations grow sufficiently to justify full-time employees.
Results of Operations
Since inception on November 8, 2007 through December 31, 2012, we had an accumulated net loss of
$ 41,288 primarily relating to accounting, legal, travel and miscellaneous general and administrative costs, less nominal fee revenue
Liquidity and Capital Resources
At December 31, 2012 we had cash totaling $120,814 derived mainly from the issuance of Company stock during fourth quarter 2012 which realized $120,000
We have no commitment for any capital expenditure and presently foresee none. However, we will incur routine fees and expenses incident to our reporting duties as a public company, and we will incur expenses in finding and investigating possible acquisitions and other fees and expenses in the event we make an acquisition or attempts but are unable to complete an acquisition. Our cash requirements for the next twelve months are relatively modest, principally legal, accounting expenses and other expenses relating to making the filings required under the Exchange Act. We plan to enter into collaboration agreements with third parties whereby they will provide facilities and resources to operate our training centers on a revenue sharing basis. In addition, we anticipate continuing to be successful in earning student placement fees.
Our current management has informally agreed to continue rendering services to us and to not demand compensation unless and until we complete an acquisition or until our revenues have grown substantially to justify the payment of such compensation. We have no intention of borrowing money to reimburse or pay salaries to any of our officers, directors or stockholders or their affiliates.
Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires our management to make assumptions, estimates and judgments that affect the amounts reported, including the notes thereto, and related disclosures of commitments and contingencies, if any. We have identified certain accounting policies that are significant to the preparation of our financial statements. These accounting policies are important for an understanding of our financial condition and results of operation. Critical accounting policies are those that are most important to the portrayal of our financial conditions and results of operations and require management’s difficult, subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management's current judgments. We believe the following critical accounting policies involve the most significant estimates and judgments used in the preparation of our financial statements.
Method of Accounting. These financial statements are prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America.
Development Stage. The Company has operated as a development stage enterprise since its inception by devoting substantially all of its efforts to financial planning, raising capital, research and development, and developing markets for its services. The Company prepares its financial statements in accordance with the requirements of FASB ASC 915 ( Prior authoritative literature Statement of Financial Accounting Standards No.7,”Accounting and Reporting by Development Stage Enterprises”).
Organizational Costs. Organizational costs represent management, consulting, legal, accounting, and filing fees incurred to date in the formation of the company. Organizational costs are expenses as incurred in accordance with FASB ASC 720-15( Prior authoritative literature Statement of Position 98-5,”Reporting on the Costs of Start-Up Activities”).
Revenue Recognition. Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable and collectability is assured..
Income Taxes. We utilize the liability method of accounting for income taxes. Under the liability method, deferred tax assets and liabilities are determined based on the differences between financial reporting basis and tax basis of the assets and liabilities and are measured using enacted tax rates that will be in effect when the differences are expected to reverse. An allowance against deferred tax assets is recognized, when it is more likely than not, that such tax benefits will not be realized.
Loss per Common Share. Basic loss per share is calculated using the weighted-average number of common shares outstanding during each period. Diluted loss per share includes potentially dilutive securities such as outstanding options and warrants, using various methods such as the treasury stock or modified treasury stock method in the determination of dilutive shares outstanding during each period. We do not have any potentially dilutive instruments.
Fair Value of Financial Instruments. The carrying value of current assets and liabilities approximate fair value due to their short term nature.
Recent Accounting Pronouncements
The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position , or cash flow.
Off Balance Sheet Arrangements
We do not have any 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 or capital expenditures or capital resources that is material to an investor in our securities.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not Applicable.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements required by this item begin on page hereof.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM 9A
ITEM 9A CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) that are designed to ensure that information that would be required to be disclosed in Exchange Act reports is recorded, processed, summarized and reported within the time period specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including to our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
As required by Rule 13a-15 under the Exchange Act, our management evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2012. Based on our assessment, our management determined that, as of December 31, 2012, and as of the date that the evaluation of the effectiveness of our disclosure controls and procedures was completed, our disclosure controls and procedures were effective to satisfy the objectives for which they are intended.
Internal Controls over Financial Reporting
Management’s Annual Report on Internal Control over Financial Reporting.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Internal control over financial reporting refers to the process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP, and includes those policies
and procedures that: (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with the authorization of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2012. In making this assessment, management used the framework set forth in the report entitled Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation, our management concluded that our internal control over financial reporting is effective, as of December 31, 2012.
Changes in Internal Controls over Financial Reporting.
During the fiscal year ended December 31, 2012, there were no changes in our internal control over financial reporting identified in connection with the evaluation performed during the fiscal year covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B.
ITEM 9B. OTHER INFORMATION.
None
PART III
ITEM 10.
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
Directors and Executive Officers
The following sets forth the name and position of each of our current executive officers and directors.
NAME AGE POSITION
David Lau Chief Executive Officer and Director
Hollis Liu President, Secretary and Director
Alan J. Bailey Chief Financial Officer and Director
Tony Liu Director
Kevin Zhang Director
David Lau is a senior strategist and coordinator in the film and entertainment industry in both Hollywood and China.
Hollis Liu is an outstanding entrepreneur and educator in the field of performance, film , entertainment and experienced vocalist in the field of vocal education and training.
Alan. J Bailey has been a senior executive in the entertainment industry for approximately 35 years, and is a director and senior officer of several new media businesses. He is a Fellow of the UK Institute of Chartered Accountants.
Tony Liu is a financial professional experienced in the fields of investment analysis and enterprise management.
Kevin Zhang is a Master of Public Administration with several years of experience regarding cultural exchange, trading, and financial matters.
Except as noted above, there are no agreements or understandings for any of our executive officers or directors to resign at the request of another person and no officer or director is acting on behalf of, nor will any of them act at the direction of, any other person. Directors are elected until their successors are duly elected and qualified.
Involvement in Certain Legal Proceedings
To the best of our knowledge, none of our directors or executive officers has been convicted in a criminal proceeding, excluding traffic violations or similar misdemeanors, or has been a party to any judicial or administrative proceeding during the past five years that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws, except for matters that were dismissed without sanction or settlement. Except as set forth in our discussion below in “Certain Relationships and Related Transactions, and Director Independence,” none of our directors, director nominees or executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the SEC.
Promoters and Certain Control Persons
We have not had any promoters at any time since incorporation.
Section 16(A) Beneficial Ownership Reporting Compliance
Under U.S. securities laws, directors, certain executive officers and persons holding more than 10% of our common stock must report their initial ownership of the common stock, and any changes in that ownership, to the SEC. The SEC has designated specific due dates for these reports. Ms. Hollis Liu, our President and majority stockholder did file her Initial Statement of Beneficial Ownership of Securities on Form 3 by the due date. No other reports were required to be filed in fiscal year 2012.
Code of Ethics
We adopted a Code of Ethics and an Insider Trading Policy as of January 18, 2010.
Material Changes to Director Nomination Procedures
There have been no material changes to the procedures by which stockholders may recommend nominees to our board of directors since such procedures were last disclosed.
Audit Committee and Audit Committee Financial Expert
We established a standing audit committee and an audit committee charter on January 18, 2010 together with an insider trader policy. Our Audit Committee consists of Hollis Liu (Chair) and Alan J. Bailey.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION.
Summary Compensation - 2012 and 2011
For the years ended December 31, 2012 and December 31, 2011, and through the date of this report, we have not paid any executive officer or director any cash or cash equivalent compensation. We have no agreements or understandings, express or implied, with any director or executive officer concerning employment or cash or other compensation for services. We will undoubtedly pay compensation to officers and other employees should we succeed in acquiring a business that has funds available to pay such compensation or if our operations grow significantly to justify such compensation.
Outstanding Equity Awards at Fiscal Year End
None.
Compensation of Directors
During the fiscal years ended December 31, 2012 and December 31,2011, there were no fees earned or paid in cash for services to our directors and no stock or stock options or other equity incentives were awarded to our directors. We have no standard arrangements in place to compensate our directors for their service as directors or as members of any committee of directors. In the future, if we retain non-employee directors, we may decide to compensate them for their service to us as directors and members of committees.
ITEM 12.
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 February 22, 2013, certain information with respect to the beneficial ownership of our common stock by (i) each director and executive officer, (ii) each person known by us to be the beneficial owner of five percent or more of the outstanding shares of common stock, and (iii) all directors and executive
officers as a group. Unless otherwise specified, the address of each of the persons set forth below is in care of the Company at 1875 Century Park East, 6th Floor, Suite 73, Century City, CA 90067.
(1) Beneficial Ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Except as noted below, each of the beneficial owners listed above has direct ownership of and sole voting power and investment power with respect to the shares of our common stock.
(2) As of February 22, 2013, a total of 62,030,000 shares of our common stock are considered to be outstanding pursuant to SEC Rule 13d-3(d)(1). The most recent transaction for the subscription for the Company’s stock was at $ 1.00 per share. For each Beneficial Owner above, any options exercisable within 60 days have been included in the denominator.
Changes in Control
None.
Securities Authorized for Issuances under Equity Compensation Plans
We do not have in effect any compensation plans under which our equity securities are authorized for issuance and we do not have any outstanding stock options.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Related Party Transactions
None of our directors, director nominees or executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the SEC, except for the sale of 10 million of our common shares on November 19, 2012 to an affiliated company Hollywood Hipac Group Inc.
Director Independence
Only Tony Liu and Kevin Zhang are independent directors as the term “independent” is defined by the rules of the SEC.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
Independent Auditors’ Fees
The following is a summary of the fees billed to the Company for professional services rendered for the fiscal year ended December 31, 2012 and 2011:
EFP Rotenberg LLP has served as our independent registered public accounting firm since inception on November 8, 2007.
“Audit Fees” consisted of fees billed for professional services rendered by the principal accountant for the audit of our annual financial statements and review of the financial statements included in our Form 10-Q or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements.
“Audit-Related Fees” consisted of fees billed for assurance and related services by the principal accountant that were reasonably related to the performance of the audit or review of our financial statements and are not reported under the paragraph captioned “Audit Fees” above.
“Tax Fees” consisted of fees billed for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning.
“All Other Fees” consisted of fees billed for products and services provided by the principal accountant, other than the services reported above under other captions of this Item 14.
Pre-Approval Policies and Procedures
Under the Sarbanes-Oxley Act of 2002, all audit and non-audit services performed by our auditors must be approved in advance by our board of directors to assure that such services do not impair the auditors’ independence from us. In accordance with its policies and procedures, our board of directors pre-approved the audit service performed by EFP Rotenberg LLP for our financial statements as of and for the year ended December 31, 2012.
PART IV
ITEM 15.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
Financial Statements and Schedules
The financial statements are set forth under Item 8 of this annual report on Form 10-K. Financial statement schedules have been omitted since they are either not required, not applicable, or the information is otherwise included.
Exhibit List
The following exhibits are filed as part of this report or incorporated by reference.
Exhibit
No.
Description
31.1*
Certifications of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*
Certifications of Principal Financial and Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*
Certifications of Principal Executive Officer and Principal Financial and Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
*Filed herewith
HOLLYWOOD ENTERTAINMENT EDU HOLDING, INC
(A Development Stage Company)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Hollywood Entertainment EDU Holdings, Inc.
We have audited the accompanying balance sheets of Hollywood Entertainment EDU Holdings, Inc. as of December 31, 2012 and 2011, and the related statements of operations, stockholders’ deficit, and cash flows for each of the years in the two-year period ended December 31, 2012 and for the period since inception (November 8, 2007) through December 31, 2012. Hollywood Entertainment EDU Holdings, Inc.’s management is responsible for these financial statements. 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 Hollywood Entertainment EDU Holdings, Inc. as of December 31, 2012 and 2011, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2012 and for the period since inception (November 8, 2007) through December 31, 2012 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 3 to the financial statements, these conditions raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern
EFP Rotenberg, LLP
Rochester, New York
April 15, 2013
HOLLYWOOD ENTERTAINMENT EDU HOLDING, INC.
(A Development Stage Company)
Balance Sheets
As of December 31, 2012 and 2011
The accompanying notes are an integral part of these financial statements.
HOLLYWOOD ENTERTAINMENT EDU HOLDING, INC.
(A Development Stage Company)
Statements of Operations
The accompanying notes are an integral part of these financial statements.
HOLLYWOOD ENTERTAINMENT EDU HOLDING, INC.
(A Development Stage Company)
Statements of Changes in Stockholders’ Equity (Deficit)
For the Period November 8, 2007 (Inception) through December 31, 2012
(* less than $ 1.00)
The accompanying notes are an integral part of these financial statements.
HOLLYWOOD ENTERTAINMENT EDU HOLDING, INC.
(A Development Stage Company)
Statements of Cash Flows
The accompanying notes are an integral part of these financial statements.
HOLLYWOOD ENTERTAINMENT EDU HOLDING, INC.
Notes to Financial Statements
December 31, 2012
Note 1 - Development Stage Company:
Nature of Operations:
HOLLYWOOD ENTERTAINMENT EDU HOLDING, INC (“the Company”) was incorporated in the State of Delaware on November 8, 2007. Since inception, we have been engaged in organizational efforts, obtaining financing and establishing the groundwork both in China and in the US to organize training programs for Chinese students and participants who wish to pursue higher levels of practical education in the entertainment industry with leading US film schools and colleges. In addition, we also plan to provide design, development, investment and management services in the creation and building of cultural theme parks and related facilities and destinations in China. We were also formed as a vehicle to pursue a business combination through the acquisition of, or merger with, an operating business and/or entering into collaboration and joint venture agreements with existing businesses compatible with our core business objectives The Company is therefore looking to acquire an existing company or acquire the technology or enter into cooperation agreements with learning and educational institutions to establish and operate training centers.
Except during fourth quarter 2011(when the Company earned nominal revenue in placement fees from the placing of Chinese students with a learning institution in Los Angeles, California) the Company has not earned any other revenue to date.
Note 2 - Summary of Significant Accounting Policies:
The accompanying financial statements are prepared in accordance with accounting principles generally accepted in the United States. Significant accounting policies follow:
Method of Accounting: These financial statements are prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America.
Estimates: The preparation of financial statements in conformity with generally accepted accounting principles of the United States of America requires management to make estimates and assumptions that affect the 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 year. However, actual results may differ from the estimates.
Development Stage: The Company has operated as a development stage enterprise since its inception through third quarter 2011 by devoting substantially all of its efforts to financial planning, raising capital, research and development, and developing markets for its services. The Company prepares its financial statements in accordance with the requirements of FASB ASC 915 ( Prior authoritative literature Statement of Financial Accounting Standards No.7,”Accounting and Reporting by Development Stage Enterprises”).
Organizational Costs: Organizational costs represent management, consulting, legal, accounting, and filing fees incurred to date in the formation of the company. Organizational costs are expensed as incurred in accordance with FASB ASC 720-15( Prior authoritative literature Statement of Position 98-5,”Reporting on the Costs of Start-Up Activities”).
Revenue Recognition: Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable and collectability is assured.
Income Taxes: The Company accounts for income taxes in accordance with FASB ASC 740-10 ( “Accounting for Income Taxes”), using the asset and liability approach, which requires recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of such assets and liabilities. . The method utilizes enacted statutory tax rates in effect for the year in which temporary differences are expected to reverse and gives immediate effect to changes in income tax rates upon enactment. Deferred tax assets are recognized, net of any valuation allowance, for temporary differences and net operating loss and tax credit carry forwards. Deferred income tax expense represents the change in net deferred assets and liability balances. The Company has no uncertain tax positions. The net operating loss carry forward has been fully reserved.
Net loss per Common Share: The Company computes net loss per share in accordance with FASB ASC 260-10 (Earnings per Share and SEC Staff Accounting Bulletin No.98) . Under the provisions of ASC 260-10, basic net loss per share is computed by dividing the net loss available to common stockholders for the period by the weighted average number of shares of common stock outstanding during the period. The calculation of diluted net loss per share gives effect to common stock equivalents; however, potential common shares are excluded if their effect is anti-dilutive.
Fair Value of Financial Instruments: The FASB ASC 320-12-65 (“Disclosures about Fair Value of Financial Instruments”), requires the determination of fair value of the Company’s financial assets and liabilities. The estimated fair values of financial instruments were determined by management using available market information and appropriate valuation methodologies. The carrying amounts of financial instruments including cash and advances from officer approximate their fair value because of their short maturities.
Note 3 - Going Concern:
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the recoverability of assets and the satisfaction of liabilities in the normal course of business.
Except during fourth quarter 2011 when it earned nominal fee revenue of $ 20,000, the Company has had no other revenue and has incurred net accumulated losses from November 8, 2007 (inception) through the period ended December 31, 2012 of $ 41,288. In addition, the Company’s activities since inception have been financially sustained through equity financing and advances from an officer.
While the Company has a cash balance of $ 120,814 at December 31, 2012 the ability of the Company to continue as a going concern on a longer term basis may be dependent upon its ability to find a suitable acquisition/merger candidate, raise additional capital from the sale of common stock, and receive additional advances from its officer and, ultimately, the achievement of significant operating revenues.
Note 4 - Shareholder’s Equity:
Holders of shares of common stock shall be entitled to cast one vote for each common share held at all stockholders meetings for all purposes, including the election of directors. The common stock does not have cumulative voting rights.
No holder of shares of stock shall be entitled as a matter of right to subscribe for or purchase or receive any part of any new or additional issue of shares of stock of any class, or of securities convertible into shares of stock of any class, whether now hereafter authorized or whether issued for money, for consideration other than money, or by way of dividend.
Note 5 - Income Taxes:
No current provision or benefit for federal income taxes has been recorded for the year ended December 31, 2012 or for any period from inception through December 31, 2012 as the Company has no taxable income.
Note 6 - Related Party Transactions:
The Company utilizes the office space and equipment provided through an officer at no cost to Company. Management estimates such amounts to be immaterial. During fourth quarter, 2012 the Company received
$ 100,000 from the issuance of 10,000,000 common shares to Hollywood Hipac Group Inc., a company in which our CEO, President and 2 of our Directors each have a 25% ownership interest.
Note 7 - Due from Related Party:
Accounts receivable are reported net of allowance for expected losses. It represents the amount management expects to collect from outstanding balances, net of refunds. Differences between the amount due and the amount management expect to collect, are charged to operations in the year in which those differences are determined, with an offsetting entry to a valuation allowance. As of December 31, 2012 and 2011, the Company determined that no reserves were necessary against accounts receivable.
Note 8 - Recent Pronouncements:
The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position, or cash flow.
SIGNATURES
In accordance with section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant caused this Report on Form 10-K to be signed on its behalf by the undersigned, thereto duly authorized individual.
Date: March 15 ,2013
In accordance with 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.