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THUNDERCLAP ENTERTAINMENT, INC. - 10-Q - Management's Discussion and Analysis of Financial Conditions and Results of Operations

August 8, 2014

The following is management's discussion and analysis of financial condition and results of operations and is provided as a supplement to the accompanying unaudited financial statements and notes to help provide an understanding of our financial condition, results of operations and cash flows during the periods included in the accompanying unaudited financial statements.

In this Quarterly Report on Form 10-Q, "Company," "the Company," "us," and "our" refer to Thunderclap Entertainment, Inc., a California corporation, unless the context requires otherwise.

We intend the following discussion to assist in the understanding of our financial position and our results of operations for the three months ended June 30, 2014 and June 30, 2013 and for the six months ended June 30, 2014 and June 30, 2013 and for the period from September 10, 2009 (inception) through June 30, 2014. You should refer to the Financial Statements and related Notes in conjunction with this discussion.

Results of Operations General



We were incorporated under the laws of the State of California on September 10, 2009 with fiscal year end in December 31. We are a development stage enterprise that seeks to become an independent film production company, to develop and produce low-budget, independent feature films under $2,000,000. Since beginning operations in September 2009, we have not developed or produced any films and we have accumulated losses in the amount of $193,730 as of June 30, 2014. We have never been party to any bankruptcy, receivership or similar proceeding, nor have we undergone any material reclassification, merger, consolidation, purchase or sale of a significant amount of assets not in the ordinary course of business.

We have yet to commence planned operations to any significant measure. As of the date of this registration statement, we have had only limited start-up operations and have not generated any revenues. We will not be profitable until we derive sufficient revenues and cash flows from the development, production and sale of film projects. Our chief executive officer and sole director, Gary L. Blum, and our president, Michael F. Matondi, III, are our only employees. Mr. Blum and Mr. Matondi will devote at least ten hours per week to us but may increase the number of hours as necessary.

As of June 30, 2014, we had $238 cash on hand and in the bank. Management does not believe this amount will satisfy our cash requirements for the next six months. We plan to satisfy our future cash requirements - primarily the working capital required for operations by loans from our shareholders or additional equity financing. The additional equity financings will likely be in the form of private placements of common stock. As of June 30, 2014, the Company borrowed $37,118 from two of our shareholders.

Management believes that if subsequent private placements are successful, we will generate sales revenue within the following twelve months thereof. However, additional equity financing may not be available to us on acceptable terms or at all, and thus we could fail to satisfy our future cash requirements.

If we are unsuccessful in raising the additional proceeds through a private placement offering, we will then have to seek additional funds through debt financing, which would be highly difficult for a new development stage company with nominal assets to secure. Therefore, we are highly dependent upon the success of a future private placement offering and failure thereof would result in our having to seek capital from other resources such as debt financing, which may not even be available to us. However, if such financing were available, because we are a development stage company with no operations to date, we would likely have to pay additional costs associated with high-risk loans and be subject to an above market interest rate. At such time these funds are required, management would evaluate the terms of such debt financing and determine whether the business could sustain operations and growth and manage the debt load. If we cannot raise additional proceeds via a private placement of our common stock or secure debt financing we would be required to cease business operations. As a result, investors in our common stock would lose all of their investment.

3 Thunderclap Entertainment, Inc. (A Development Stage Company)



We have no current plans, preliminary or otherwise, to merge with any other entity although we may consider such plans in the future.

At the present time, we are negotiating with various investors to obtain additional equity financing. There can be no assurance that we will be successful in obtaining additional capital from these negotiations. If are unable to raise additional capital, we will either suspend marketing operations until we do raise the cash, or cease operations entirely. Other than as described in this paragraph and the preceding paragraphs, we have no other financing plans.

Management does not plan to hire additional employees at this time. Our officers and directors will be responsible for the initial product and service sourcing. We have hired an independent consultant to build the site.

Critical Accounting Policy and Estimates. Our Management's Discussion and Analysis of Financial Condition and Results of Operations section discusses our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition, accrued expenses, financing operations, and contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The most significant accounting estimates inherent in the preparation of our financial statements include estimates as to the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources. In addition, these accounting policies are described at relevant sections in this discussion and analysis and in the notes to the financial statements included in this Quarterly Report on Form 10-Q.

The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited financial statements for the three months ended June 30, 2014 and 2013, together with notes thereto, which are included in this Quarterly Report on Form 10-Q.

Three months ended June 30, 2014 compared with the three months ended June 30, 2013

Revenues. We had no revenues for the three months ended June 30, 2014 and 2013.

Operating expenses. Operating expenses include general and administrative expenses, professional and consulting fees, rent expense, website development and depreciation. In total, operating expenses decreased $667 or 13% to $4,437 for the three months ended June 30, 2014 from $5,104, for the three months ended June 30, 2013. The components of operating expenses are discussed below.

? General and administrative expenses increased by $2,947 between 2014 and 2013 to $2,998 from $51. The increase between 2014 and 2013 is primarily attributable to an increase in travel and entertainment related expenses. ? Professional fees decreased $3,340 between 2014 and 2013 to $1,139 from $4,479. The decrease is attributable to a reduction in audit and review related fees and Edgar filing fees. ? Rent expense decreased $200 between 2014 and 2013 to $300 from $500. The decrease between 2014 and 2013 is attributable to a reduction in the imputed rent expense that we recognize as additional paid-in capital and not based on actual rent we pay. ? Depreciation expense was $0 for the three months ended June 30, 2014 and $74 for the comparable period in 2013. The decrease is due to the equipment being fully depreciated.



Net Loss. Our net loss decreased to $4,437 for the three months ended June 30, 2014 from $5,104 for the comparable period in 2013, or an decrease of $667. The decrease is primarily attributable to a greater reduction in audit and review related professional fees as well as Edgar filing fees offset by an increase in travel and entertainment related expenses.

4 Thunderclap Entertainment, Inc. (A Development Stage Company)



Six months ended June 30, 2014 compared with the six months ended June 30, 2013

Revenues. We had no revenues for the six months ended June 30, 2014 and 2013.

Operating expenses. Operating expenses include general and administrative expenses, professional and consulting fees, rent expense and depreciation. In total, operating expenses increased $417 or 7% to $6,737 for the six months ended June 30, 2014 from $6,320 for the six months ended June 30, 2013. The components of operating expenses are discussed below.

? General and administrative expenses increased by $2,807 between 2014 and 2013 to $2,998 from $191. The increase between 2014 and 2013 is primarily attributable to increases in travel and entertainment related expenses. ? Professional and consulting fees decreased $1,340 between 2014 and 2013 to $3,139 from $4,479. This decrease was primarily due to the decrease in our audit and review related fees and Edgar filing fess in 2014. ? Rent expense decreased $500 between 2014 and 2013 to $600 from $1,100. The decrease between 2014 and 2013 is attributable to a reduction in the imputed rent expense that we recognize as additional paid-in capital and not based on actual rent we pay. ? Depreciation expense decreased $550 for the six months ended June 30, 2014 to $0 from $550 for the six months ended June 30, 2013. The decrease was primarily due to the equipment being fully depreciated.



Net Loss. Our net loss increased to $6,737 for the six months ended June 30, 2014 from $6,320 for the comparable period in 2013, or an increase of $417.

Liquidity and Capital Resources. In 2014, we did not issue any shares for capital. In April 2011, one of our minority shareholders, who is neither an officer or director, and who owns less than 10% of our issued and outstanding common stock, loaned us $12,000 interest-free and has orally agreed to defer repayment until we are financial able to repay the loan. From May 2011 to December 2013, our majority shareholder loaned us $19,711and from January 1, 2014 to June 30, 2014, he loaned us an additional $5,408, interest-free and has orally agreed to defer repayment until we are financial able to repay the loans. We intend to seek additional financing for our working capital, in the form of equity or debt, to provide us with the necessary capital to accomplish our plan of operation. There can be no assurance that we will be successful in our efforts to raise additional capital.

Our total assets are $238 as of June 30, 2014, consisting of $238 in cash. Our working capital deficit was $36,880 as of June 30, 2014.

Our total liabilities are $37,118 as of June 30, 2014, consisting of $37,118 in current liabilities, which includes advances from shareholders of $37,118.

Our total stockholders' deficit is $36,880 as of June 30, 2014, and an accumulated deficit of $193,730 as of June 30, 2014.

We had $7,271 in net cash used in operating activities for the six months ended June 30, 2014, which included $6,737 in net loss, which amount was offset by $600 in rent expense and increased by $1,134 in accounts payable.

We had no cash provided by investing activities in the six months ended June 30, 2014.

We had $5,408 cash provided by financing activities for the six months ended June 30, 2014.

We do not now have funds sufficient for pursuing our plan of operation, but we are in the process of trying to procure funds sufficient to fund our operations until we are able to finance our operations through cash flow. There can be no assurance that we will be able to procure funds sufficient for such purpose. If operating difficulties or other factors (many of which are beyond our control) delay our realization of revenues or cash flows from operations, we may be limited in our ability to pursue our business plan. Moreover, if our resources from obtaining additional capital or cash flows from operations, once we commence them, do not satisfy our operational needs or if unexpected expenses arise due to unanticipated pressures or if we decide to expand our business plan beyond its currently anticipated level or otherwise, we will require additional financing to fund our operations, in addition to anticipated cash generated from our operations. Additional financing might not be available on terms favorable to us, or at all. If adequate funds were not available or were not available on acceptable terms, our ability to fund our operations, take advantage of unanticipated opportunities, develop or enhance our business or otherwise respond to competitive pressures would be significantly limited. In a worst-case scenario, we might not be able to fund our operations or to remain in business, which could result in a total loss of our stockholders' investment. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders would be reduced, and these newly issued securities might have rights, preferences or privileges senior to those of existing stockholders.

5 Thunderclap Entertainment, Inc. (A Development Stage Company)



The Company had no formal long-term lines or credit or other bank financing arrangements as of June 30, 2014.

The Company has no current plans for the purchase or sale of any plant or equipment.

The Company has no current plans to make any changes in the number of employees.

Income Tax Expense (Benefit)

The Company has a prospective income tax benefit resulting from a net operating loss carry forward and startup costs that may offset any future operating profit.

Impact of Inflation



The Company believes that inflation has had a negligible effect on operations over the past quarter.

Capital Expenditures



The Company expended no amounts on capital expenditures for the six months ended June 30, 2014 and 2013, respectively.

Plan of Operation



Our business strategy is to market our website (www.thunderclapinc.com) to writers, producers and agents to submit their screenplays, treatments and other projects on the site. Theses submissions will be available for public to view and critique. We have already received various treatments and scripts that we are in the process of evaluating. We intend to exclusively own all right title and interest in and to the underlying screenplay and any film derived from it.

The number of screenplays to which we will be able to secure production rights during the development stage will depend upon the success of securing financing for each project. We plan to develop at least one screenplay based on the submissions we anticipate being uploaded to our website. There are currently no agreements in place between any funding sources and us for the production of any submissions. There can be no guarantee we will have enough funds to secure the rights of any screenplay in the future.

We intend to implement the following tasks within the next twelve months if we are able to obtain additional financing:

Secure Rights to Screenplay: (Estimated cost $10,000). We estimate it will take approximately six to twelve months after the website is operational to secure the rights to a screenplay. We will attempt to acquire any screenplay rights with the issuance of our common stock to the writer.

Pre-Production Business Plan: (Estimated cost - None). Our officers and sole director will complete this without compensation. Once we complete the above tasks, we estimate completing a pre-production business plan by the end of the third quarter of 2014. This pre-production business plan together with the preliminary screenplay, budget, shooting schedule, production board and any talent commitment will be presented to prospective directors, actors, investors and/or financiers by our management.

6 Thunderclap Entertainment, Inc. (A Development Stage Company)



If we are able to successfully complete the above goals within the estimated timeframes set forth and are able to raise additional proceeds above the minimum ($10,000) that may be needed to secure the screenplay, those funds would be allocated as follows:

Retain Screen Writer: (Estimated cost $10,000). After a screenplay has been secured, we estimate an additional three months thereafter would be required to secure a screenwriter. We intend to pay for this expense from the funding source for the production.

Completion of Screenplay: (Estimated cost $10,000). We believe the screenplay can be finalized within three months.

Secure Director, Actor(s) and Supporting Cast for Film Production: (Estimated cost $75,000- $125,000; this fee may be secured with issuance of the Company's common stock - however, management cannot predict at this time if its common stock will be attractive to secure the above personnel). We believe this can be completed within 30-45 days after the screenplay has been written.

The following steps would require additional financing from a third party source or from the issuance of our common stock in the future. We believe if we are able to complete the above goals we would be in a position to obtain additional financing to complete the below tasks within the specified timeframe; however, there can be no guarantee or assurance that we will be successful in completing any of the above described tasks.

Secure Financing: We cannot provide any estimated cost for the financing aspect of the film, as there are multiple variables to financing the film. We anticipate that we will be in discussions regarding the financing of a film, with various potential investors and/or participants, as soon as we identify a viable screenplay.

Film/Production: We plan to focus its business on the development and production of commercial feature-length motion pictures having budgets of up to $2 million. Estimated time to complete filming and production is estimated at nine to twelve months.

Secure Distribution Agreements: (Estimated cost $2,500). Upon completion of the film/production process we plan to seek and secure distribution agreements.

Our management does not anticipate the need to hire additional full or part-time employees over the next six (6) months, as the services provided by our officers and director appear sufficient at this time. We believe that our operations are currently on a small scale that is manageable by these two individuals. Our management's responsibilities are mainly administrative at this early stage. While we believe that the addition of employees is not required over the next six (6) months, the professionals we plan to utilize will be considered independent contractors. We do not intend to enter into any employment agreements with any of these professionals. Thus, these persons are not intended to be employees of our Company.

Our management does not expect to incur research costs in the next twelve months; we currently do not own any significant plants or equipment that we would seek to sell in the near future; we do not have any off-balance sheet arrangements; and we have not paid for expenses on behalf of our director. Additionally, we believe that this fact shall not materially change.

Off-Balance Sheet Arrangements

None.



CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States ("GAAP"). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenues and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.

7 Thunderclap Entertainment, Inc. (A Development Stage Company) Use of Estimates:



Areas where significant estimation judgments are made and where actual results could differ materially from these estimates are the carrying value of certain assets and liabilities which are not readily apparent from other sources and the classification of net operating loss and tax credit carry forwards.

We believe the following is among the most critical accounting policies that impact our financial statements:

We evaluate impairment of our long-lived assets by applying the provisions of SFAS No. 144. In applying those provisions, we have not recognized any impairment charge on our long-lived assets during the three-months ended June 30, 2014.

We suggest that our significant accounting policies, as described in our financial statements in the Summary of Significant Accounting Policies, be read in conjunction with this Management's Discussion and Analysis of Financial Condition and Results of Operations.


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Source: Edgar Glimpses


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