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4TH GRADE FILMS INC - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations.

January 24, 2014

Forward-looking Statements Statements made in this Quarterly Report which are not purely historical are forward-looking statements with respect to the goals, plan objectives, intentions, expectations, financial condition, results of operations, future performance and our business, including, without limitation, (i) our ability to raise capital, and (ii) statements preceded by, followed by or that include the words "may," "would," "could," "should," "expects," "projects," "anticipates," "believes," "estimates," "plans," "intends," "targets" or similar expressions. Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond our control) that could cause actual results to differ materially from those set forth in the forward-looking statements, including the following, general economic or industry conditions, nationally and/or in the communities in which we may conduct business, changes in the interest rate environment, legislation or regulatory requirements, conditions of the securities markets, our ability to raise capital, changes in accounting principles, policies or guidelines, financial or political instability, acts of war or terrorism, other economic, competitive, governmental, regulatory and technical factors affecting our current or potential business and related matters. Accordingly, results actually achieved may differ materially from expected results in these statements. Forward-looking statements speak only as of the date they are made. We do not undertake, and specifically disclaim, any obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of such statements. Plan of Operation The Company's plan of operations for the next 12 months is to continue with its current efforts in the independent film production arena. The Company has also entered the Corporate Promotional Video Market. 4th Grade has been involved in the film production primarily focused on developing, financing, producing, marketing and distributing film content within the independent film market. The Company will continue to seek opportunities developing, financing, producing, marketing and distributing additional media content. Over the past twelve months, the Company has developed several screenplays. The screenplays are "Working Late", "Beaver Parade" and "Devil Music" (working title). The Company has been marketing the screenplays within the independent film community to try to generate interest in one or more of these projects. Over the past few years the Company's management has developed a network and database of contacts within film studios, productions companies, literary agencies, and management companies, to whom it has concentrated its marketing efforts for the screenplays. The Company recently began discussions with independent film producers to provide screenplay writing services ("Pre-Production Services") to producers. During the quarter ended December 31, 2013 the Company executed a Pre-Production Services Agreement whereby the Company will develop and draft a screenplay for a producer. Along with marketing screenplays and providing Pre-Production Services the Company began a new line of business within the video production arena. The new line of business is involved in producing corporate and promotional videos. For the year ending June 30, 2013 , the Company completed a promotional video project for a corporate customer. The Company hopes to grow this line of its business. The Company anticipates that it will produce more corporate and promotional videos for clients over the next twelve months. The Company's management may advance the Company monies, not to exceed $150,000 , to finance the existing and future projects or fund working capital requirements. The monies advanced from the Company's management will be non-secured loans to the Company. The loan will be on terms no less favorable to the Company than would be available from a commercial lender in an arm's length transaction. The Company is also seeking financing from outside sources to fund future projects. These funds may be raised as either debt or equity, but management does not have any plans or relationships currently in place and can provide no assurance that it will be able to obtain such funds. 8 The Company has accumulated losses since inception and has not been able to generate profits from operations. The Company signed a distribution agreement with Vanguard Cinema to distribute St. Julian through various media channels throughout the United States , Puerto Rico and Canada . Effective February 1, 2011 the Company signed a foreign distribution agreement to distribute St. Julian to all other worldwide markets. The Company can provide no assurance that revenue generated from these distribution agreements will be sufficient to fund future operating activities. The Company's plan of operation for the next twelve months will continue to be managed and operated solely by the Company's officers and directors. Other than the Company officers and directors the Company does not have any employees nor does it anticipate hiring any employees over the next twelve months. The Company has not been able to generate positive cash flow from operations since inception. This along with the above mentioned factors raise substantial doubt about the Company's ability to continue as a going concern. The Company's common stock currently trades on the Over-the-Counter Bulletin Board (OTCBB) under the symbol FHGR. Results of Operations Three Months Ended December 31, 2013 Compared to Three Months Ended December 31, 2012 Overview The three months ended December 31, 2013 resulted in a net loss of $5,627 . The three months ended December 31, 2012 , resulted in a net loss of $4,631 . The basic loss per share for the three months ended December 31, 2013 , was $0.01 and a loss per share of $0.01 for the three months ended December 31, 2012 . Details of changes in revenues and expenses can be found below. Revenues The Company generated no revenue from the Film for the three month periods ended December 31, 2013 and December 31, 2012 . Operating Expenses Operating expense for the three months ended December 31, 2013 , increased to $3,191 compared to $2,679 for the three months ended December 31, 2012 . The increase can be attributed to higher SG&A and professional expenses. Interest Expenses Interest expense for the three months ended December 31, 2013 , was $2,436 , compared to $1,952 for the three months ended December 31, 2012 . The outstanding Notes Payable balances were higher for the three months ended December 31, 2013 ; therefore, the Company incurred greater interest expenses compared to the three month period ended December 31, 2012 . Six Months Ended December 31, 2013 Compared to Six Months Ended December 31, 2012 Overview The six months ended December 31, 2013 resulted in a net loss of $18,502 . The six months ended December 31, 2012 , resulted in a net loss of $15,625 . The basic loss per share for the six months ended December 31, 2013 , was $0.01 and a loss per share of $0.01 for the six months ended December 31, 2012 . Details of changes in revenues and expenses can be found below. 9 Revenues The Company generated $141 in revenue in the six month period ended December 31, 2013 and no revenue for the same period ended in 2012. Operating Expenses Operating expense for the six months ended December 31, 2013 , increased to $13,956 compared to $11,939 for the six months ended December 31, 2012 . The increase can be attributed to higher SG&A and professional expenses. Interest Expenses Interest expense for the six months ended December 31, 2013 , was $4,687 , compared to $3,686 for the six months ended December 31, 2012 . The outstanding Notes Payable balances were higher for the six months ended December 31, 2013 ; therefore, the Company incurred greater interest expenses compared to the six month period ended December 31, 2012 . Liquidity and Capital Requirements As of December 31, 2013 , the Company had current assets of $685 and $27,736 in current liabilities. The Company has a cash balance of $685 as of December 31, 2013 . Management does not anticipate that the Company's existing cash balance will cover the Company's general expenses of operation for the next twelve months. However, the Company's management will continue to advance the Company monies not to exceed $150,000 , as loans to the Company. The loan will be on terms no less favorable to the Company than would be available from a commercial lender in an arm's length transaction. Currently two shareholders, James Doolin and Michael Doolin , have loaned the Company money. James Doolin has loaned the Company approximately $53,532 in principal. Michael Doolin has loaned the Company $23,221 in principal. If the Company needs funds in excess of $150,000 , it will be up to the Company's management to raise such monies. These funds may be raised as either debt or equity, but management does not have any plans or relationships currently in place to raise such funds. The Company can provide no assurances that if additional funds are needed the Company will be able to obtain financing. Off-balance Sheet Arrangements None; not applicable


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Source: Edgar Glimpses


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