STUDIO II BRANDS INC

These interim consolidated financial statements are unaudited. In the opinion of management, all adjustments (consisting of normal recurring accruals) and disclosures for a fair presentation of these interim consolidated financial statements have been included. The results reported in the consolidated financial statements for any interim periods are not necessarily indicative of the results that may be reported for the entire year. The accompanying consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission and do not include all information and footnotes necessary for a complete presentation of financial statements in conformity with accounting principles generally accepted in the United States. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying footnotes of the Company for the year ended March 31, 2015, as filed in Form 10-K with the Securities and Exchange Commission on July 14, 2015.

Franchise arrangements are pursuant to franchise agreements entered by the Company as the franchisee and Sizegenic Holdings Limited as the franchisor, including payment to Sizegenic of franchise fee payable on anniversary basis and monthly management fee base upon a percent of franchisees’ net income after tax throughout the term of franchise.  Under this arrangement, franchise agreement is entered in February 2010 and renewed in April 2012, in which the Company is granted the right to operate café bistro using the brand name “Caffé Kenon” for a term of 3 years. The franchise agreement has been renewed for 3 years terms from 10 February 2015 to 9 February 2018 with the consent of the franchisor. The franchise agreement will be expired in 9 February 2018. Franchise fee expenses on the use of the license of the brand name and trademark “Caffé Kenon” is recorded upon the granting of the non-exclusive rights by Sizegenic as the fee is non-refundable to and non-cancellable by the Company.

The two subsidiaries, Sino Wish and Golden Spring had to pay management fee to Ever Lucid Limited during the period ended June 30, 2015 for the office used. As there are no agreement signed, no operating lease commitment has to be considered.

The increase of operating expenses to $356,413 for the three months ended June 30, 2015 as compared to operating expenses of $283,983 for the same period for 2014, which represents an increase of operating expenses of $72,430 or approximately 25.5% increase, was mainly due to the shop acquired on May 28, 2014 which was operated by Golden Spring. i.e. the direct cost including foods, rental and staff cost was increased comparatively.

The Company believes that the existing cash and cash equivalents on hand together with monthly average net cash inflow generated from the Company-owned restaurants, will be sufficient to meet our working capital requirements for the current level of operations and to sustain business operations at the current levels for the next twelve months.