UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2017
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______.
Commission File Number: 001-34858
ALTERNATIVE INVESTMENT CORPORATION
(Exact name of registrant as specified in its charter)
___________________________________________________
Nevada |
| 98-0568076 |
(State or other jurisdiction of incorporation or organization) |
| (IRS Employee Identification No.) |
|
|
|
150 East 52nd Street, Suite 1102 New York, NY |
| 10022 |
(Address of principal executive offices) |
| (Zip Code) |
(917) 480-1169
(Registrant’s telephone number, including area code)
_____________________________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company" in Rule 12b-2 of the Exchange Act:
Large accelerated filer o | Accelerated filer o |
Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company x |
Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act. Yes x No o
As of February 16, 2018, the registrant had 172,976 shares of its Common Stock, $0.001 par value, outstanding.
ALTERNATIVE INVESTMENT CORPORATION
FORM 10-Q
DECEMBER 31, 2017
INDEX
PART I – FINANCIAL INFORMATION | Page | |
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F-1 | ||
| Balance Sheets as of December 31, 2017 (unaudited) and September 30, 2017 | F-1 |
| Statements of Operations for the Three Months ended December 31, 2017 and 2016 (unaudited) | F-2 |
| Statements of Cash Flows for the Three Months Ended December 31, 2017 and 2016 (unaudited) | F-3 |
| F-4 | |
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 3 | |
6 | ||
6 | ||
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PART II – OTHER INFORMATION |
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7 | ||
7 | ||
7 | ||
7 | ||
7 | ||
7 | ||
8 | ||
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9 |
2
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
ALTERNATIVE INVESTMENT CORPORATION
Balance Sheets
(Unaudited)
| December 31, 2017 |
| September 30, 2017 | ||
ASSETS |
|
|
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Current assets: |
|
|
|
|
|
Cash and cash equivalents | $ | 109,199 |
| $ | 10,396 |
Due from Fingi |
| 56,502 |
|
| 56,502 |
Miscellaneous receivable other |
| 14,050 |
|
| 61 |
Interest receivable! |
| 3,508 |
|
| 27,654 |
Prepaid expenses |
| - |
|
| 406 |
Investment in commercial paper, net allowance for doubtful recovery |
| - |
|
| 100,000 |
Total current assets | $ | 183,259 |
| $ | 195,019 |
Total assets | $ | 183,259 |
| $ | 195,019 |
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LIABILITIES AND STOCKHOLDERS' DEFICIT |
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Current liabilities: |
|
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Accounts payable |
| 85,439 |
|
| 49,037 |
Accrued expense |
| 1,508 |
|
| - |
Deferred interest income |
| 4,536 |
|
| - |
Loan payable, short-term |
| 163,000 |
|
| 145,000 |
Accrued interest |
| 22,783 |
|
| 17,155 |
Amount due to shareholder |
| 311,973 |
|
| 311,973 |
Total liabilities | $ | 589,239 |
| $ | 523,165 |
|
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Stockholders' deficit: |
|
|
|
|
|
Common stock, $.001 par value, 1,600,000,000 shares authorized, 172,976 shares issued and 172,775 outstanding at December 31, 2017 and September 30, 2017 |
| 173 |
|
| 173 |
Additional paid-in capital |
| 472,086 |
|
| 472,086 |
Common stock issuable |
| 574,975 |
|
| 574,975 |
Treasury stock, at cost |
| (80) |
|
| (80) |
Accumulated deficit |
| (1,453,134) |
|
| (1,375,300) |
Total stockholders' deficit |
| (405,980) |
|
| (328,146) |
Total liabilities and stockholders' deficit | $ | 183,259 |
| $ | 195,019 |
The accompanying notes are an integral part of the condensed consolidated financial statements.
F-1
ALTERNATIVE INVESTMENT CORPORATION
STATEMENTS OF OPERATIONS
(Unaudited)
| For the three months ended December 31, | ||||
| 2017 |
| 2016 | ||
|
|
|
|
|
|
Revenue | $ | - |
| $ | - |
Cost of revenue |
| - |
|
| - |
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Gross profit |
| - |
|
| - |
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Operating expenses |
|
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General and administrative expenses |
| 58,904 |
|
| 107,296 |
Professional fees |
| 18,000 |
|
| 6,500 |
Total operating expenses |
| 76,904 |
|
| 113,796 |
|
|
|
|
|
|
Loss from operations |
| (76,904) |
|
| (113,796) |
|
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Other income (expense): |
|
|
|
|
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Interest income |
| 4,698 |
|
| 4,544 |
Interest expense |
| (5,628) |
|
| (2,418) |
Forfeiture of acquisition deposit |
| - |
|
| (310,000) |
Total other income (expense) |
| (930) |
|
| (307,874) |
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Loss before income taxes | $ | (77,834) |
| $ | (421,670) |
|
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Provision for income taxes |
| - |
|
| - |
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Net loss | $ | (77,834) |
| $ | (421,670) |
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Net loss per share - basic and diluted | $ | (0.45) |
| $ | (2.44) |
|
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Weighted average number of shares outstanding - Basic and Diluted |
| 172,775 |
|
| 172,775 |
The accompanying notes are an integral part of the condensed consolidated financial statements.
F-2
ALTERNATIVE INVESTMENT CORPORATION
Statements of Cash Flows
(Unaudited)
| For the three months ended December 31, | ||||
| 2017 |
| 2016 | ||
Cash flows from operating activities |
|
|
|
|
|
Net loss | $ | (77,834) |
| $ | (421,670) |
Adjustments to reconcile net loss to net cash used in operations: |
|
|
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|
Forfeiture of acquisition deposit |
| - |
|
| 310,000 |
Changes in operating assets and liabilities: |
|
|
|
|
|
Interest receivable |
| (4,478) |
|
| (4,544) |
Credit card payable |
| - |
|
| 10,043 |
Accounts payable |
| 36,402 |
|
| 22,336 |
Miscellaneous receivable |
| (13,989) |
|
| - |
Deferred revenue |
| 4,536 |
|
| - |
Interest payable |
| 5,628 |
|
| - |
Accrued expenses |
| 1,508 |
|
| - |
Prepaids and deposits |
| 406 |
|
| - |
Due to Fess |
| - |
|
| 35,120 |
Net cash used in operating activities |
| (47,821) |
|
| (48,715) |
|
|
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Cash flows from investing activities: |
|
|
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Acquisition deposit |
| - |
|
| (20,000) |
Due (to) from Fingi |
| - |
|
| 12,450 |
Repayment of commercial paper investment |
| 100,000 |
|
| - |
Repayment of commercial paper interest |
| 28,624 |
|
| - |
Net cash from (used in) investing activities |
| 128,624 |
|
| (7,550) |
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Cash flows from financing activities: |
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Proceeds from issuance of notes payable |
| 18,000 |
|
| - |
Payments on notes payable |
| - |
|
| 2,341 |
Proceeds from loans from shareholder |
| - |
|
| 10,000 |
Proceeds from sale of common stock |
| - |
|
| - |
Net cash provided by financing activities |
| 18,000 |
|
| 12,341 |
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Net (decrease) increase in cash |
| 98,803 |
|
| (43,924) |
Cash and cash equivalents at beginning of year |
| 10,396 |
|
| 47,428 |
Cash and cash equivalents at end of year | $ | 109,199 |
| $ | 3,504 |
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Supplemental disclosure of cash flow information: |
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Cash interest received | $ | 33,160 |
| $ | - |
Cash paid for taxes | $ | - |
| $ | - |
The accompanying notes are an integral part of the condensed consolidated financial statements.
F-3
ALTERNATIVE INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2017
(UNAUDITED)
NOTE 1 – NATURE OF BUSINESS, PRESENTATION AND GOING CONCERN
The unaudited financial statements included herein have been prepared, without audit, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). The financial statements and notes are presented as permitted on Form 10-Q and do not contain certain information included in the Company’s annual statements and notes. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these financial statements be read in conjunction with the September 30, 2017 Form 10-K filed with the SEC, including the audited financial statements and the accompanying notes thereto. While management believes the procedures followed in preparing these financial statements are reasonable, the accuracy of the amounts is in some respects dependent upon the facts that will exist, and procedures that will be accomplished by the Company later in the year.
These unaudited financial statements reflect all adjustments, including normal recurring adjustments which, in the opinion of management, are necessary to present fairly the operations and cash flows for the periods presented.
Organization
Alternative Investment Corporation (the "Company") was incorporated in Nevada on March 26, 2007 under the name of China Digital Ventures Corporation. The principal business of the Company was its web-based telecom and IPTV businesses, both of which were disposed of during the year ended September 30, 2010. As of the date hereof, the Company has no operations.
On July 23, 2010, the Company experienced a change in control. Canton Investments Ltd (“CIL” or “Canton”) acquired a majority of the issued and outstanding common stock of the Company in accordance with stock purchase agreements by and between CIL and Wireless One International Limited (“Wireless One”), Bing HE and Ning HE, the Company’s former directors, and other various shareholders. On the closing date, July 23, 2010, pursuant to the terms of the Stock Purchase Agreement, CIL purchased from Wireless One and Bing HE and Ning HE 575,000 shares of the Company’s outstanding common stock for $205,750. Also, on July 23, 2010, CIL purchased 122,000 shares of the Company’s outstanding common stock for $36,600 from various shareholders. As a result of the change in control, CIL owned a total of 697,000 shares of the Company’s common stock representing 91.54%.
On May 10, 2012, the Company filed an amendment to its Articles of Incorporation in the State of Nevada to change its name to Paradigm Resource Management Corporation.
On September 10, 2012, CIL contributed 600,000 shares of common stock to the Company’s treasury. The Company immediately retired and canceled these shares. As a result of the contribution of shares, CIL owns a total of 97,000 shares of the Company’s common stock representing 56% of the outstanding shares.
On July 24, 2013, the Company entered into an agreement with AMSA Development Technology Co Ltd (“AMSA”) to acquire 402,300 shares of TOSS Plasma Technologies Ltd. (“TPT”) previously held by AMSA in exchange for 17,933 shares of its common stock. The 402,300 shares of TPT represent 10.1% of TPT’s outstanding common stock. The agreement also provided AMSA the option to acquire an additional 22,417 shares of the Company’s common stock and provided the Company an option to acquire an additional 402,300 shares of TPT common stock from AMSA.
On December 4, 2013, the Company and AMSA entered into an Amendment to the Agreement dated July 24, 2013. Under the terms of the amendment, the Company had the option to acquire up to a total of 3,432,000 shares of TPT from AMSA and AMSA had the option to acquire up to a total of 114,933 shares of common stock of the Company. The options expired on June 2, 2014.
On September 10, 2015, the Company and AMSA entered into a Rescission Agreement to fully rescind the previous acquisition agreement of shares of TPT and returned previously issued shares of each company to each other.
On September 18, 2015, the Company filed an amendment to its Articles of Incorporation in the State of Nevada to change its name to Alternative Investment Corporation.
On April 1, 2016, the Company entered into a Shareholders’ Agreement (the “Agreement”) with Basil and Barns, Inc., a New York corporation incorporated on February 2, 2016, (“B&B Inc.”), Fess Holdings LLC, Basil and Barns LLC and JIF Holdings LLC to acquire 55% of the outstanding common shares of B&B Inc.
F-4
ALTERNATIVE INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2017
(UNAUDITED)
NOTE 1 – NATURE OF BUSINESS, PRESENTATION AND GOING CONCERN (CONTINUED)
Organization (Continued)
On February 27, 2017, the Company entered into an agreement with B&B Inc., Fess, Basil and Barns LLC and JIF Holdings LLC, wherein the Company has been unable to provide funding as per the original Agreement, having only provided $360,000 to date, the parties agreed to allow the Company to assign its remaining funding obligations and its ownership shares to a new ownership, in consideration of $50,000 to be paid to the Company and forfeiture of the $360,000 acquisition deposit. As of February 27, 2017, the Company is no longer participating in the original Agreement, directly or through related parties.
On November 30, 2017, Mr. Daniel Otazo, Director, Chief Executive Officer and interim Chief Financial Officer, tendered his resignation. Mr. Otazo’s resignation was not a result of any disagreement with the Company.
On December 1, 2017, the Shareholders of the Corporation voted to elect Mr. Antonio Treminio as Director and CEO of the Company. Mr. Treminio, 46, has over 20 years of experience in the financial markets with special focus on corporate financing for private and public companies.
The Company is focused on new investment opportunities in the real estate sector with primary focus on distressed real estate assets and/or alternative real estate developments.
Basis of Presentation
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in The United States of America and the rules and regulations of the Securities and Exchange Commission (“SEC”).
Going Concern
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred net losses of $77,834 and $421,670 for the three months ended December 31, 2017 and 2016, respectively, and had an accumulated deficit of $1,453,134. The Company had stockholders’ deficit of $405,980 At December 31, 2017. These conditions raise substantial doubt about the ability of the Company to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon its ability to develop and sustain a viable business model capable of generating sufficient revenues to support ongoing operations and overhead and to continue to raise investment capital through the sale of Company stock. No assurance can be given that the Company will be successful in these efforts. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. Management believes that actions presently being taken to obtain additional funding and implement its strategic plans provide the opportunity for the Company to continue as a going concern. No assurance can be given that the Company will be successful in these efforts.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates in the accompanying financial statements include the valuation of share-based payments and the valuation allowance on deferred tax assets.
Cash and Cash Equivalents
The Company considers all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents. At December 31, 2017 and September 30, 2017, the Company had no cash equivalents.
F-5
ALTERNATIVE INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2017
(UNAUDITED)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Fair Value of Financial Instruments
ASC 825 "Financial Instruments" codified Statement of Financial Accounting Standard No. 107, Disclosures about fair value of financial instruments, requires that the Company disclose estimated fair values of financial instruments. Unless otherwise indicated, the fair values of all reported assets and liabilities, which represent financial instruments, none of which are held for trading purposes, approximate the carrying values of such amounts.
Impairment or Disposal of Long-Lived Assets
The Company accounts for the impairment or disposal of long-lived assets according to the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 360 “Property, Plant and Equipment”. ASC 360 clarifies the accounting for the impairment of long-lived assets and for long-lived assets to be disposed of, including the disposal of business segments and major lines of business. Long-lived assets are reviewed when facts and circumstances indicate that the carrying value of the asset may not be recoverable. When necessary, impaired assets are written down to estimated fair value based on the best information available. Estimated fair value is generally based on either appraised value or measured by discounting estimated future cash flows. Considerable management judgment is necessary to estimate discounted future cash flows. Accordingly, actual results could vary significantly from such estimates.
Income Taxes
The Company accounts for income taxes under ASC Topic 740-10-25 (“ASC 740-10-25”). Under ASC 740-10-25, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740-10-25, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations.
Accounts payable
The Company accounts for expenses on the accrual basis of accounting under US GAAP (Generally Accepted Accounting Principles) where expenses are recorded when incurred. Invoices for expense are recorded in the period in which they are incurred and reflected in accounts payable on the balance sheet of the Company. Often expenses should be accounted for prior to an invoice being received. These amounts are reflected in accrued expense in the Company’s financial statements. At December 31, 2017, the Company has accounts payable of $85,439.
Stock Based Compensation
The Company accounts for Stock-Based Compensation under ASC Topic 718-10 (“ASC 718-10”), which addresses the accounting for transactions in which an entity exchanges its equity instruments for goods or services, with a primary focus on transactions in which an entity obtains employee services in share-based payment transactions. ASC 718-10 is a revision to SFAS No. 123, "Accounting for Stock-Based Compensation," and supersedes Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,” and its related implementation guidance. ASC 718-10 requires measurement of the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). Incremental compensation costs arising from subsequent modifications of awards after the grant date must be recognized. The Company has not adopted a stock option plan and has not granted any stock options.
Issuance of Shares for Services
The Company accounts for the issuance of equity instruments to acquire goods and services based on the fair value of the goods and services or the fair value of the equity instrument at the time of issuance, whichever is more reliably measurable.
F-6
ALTERNATIVE INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2017
(UNAUDITED)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Earnings (Loss) Per Share
The Company computes income (loss) per share in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) ASC Topic 260, “Earnings Per Share", which requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the statement of operations. Basic EPS is computed by dividing income (loss) available to common shareholders by the weighted average number of shares outstanding during the period. Diluted EPS gives effect to all dilutive potential shares of common stock outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares for periods in which the Company incurs losses as their effect is anti-dilutive. For the three months ended December 31, 2017 and 2016, respectively, there were no common share equivalents outstanding which would be deemed as dilutive.
Dividends
The Company has not yet adopted any policy regarding payment of dividends. No dividends have been paid during the periods shown.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current period presentation. The reclassifications had no effect on the net loss or cash flows of the Company.
Accounting Standards Codification
The FASB’s Accounting Standards Codification (“ASC”) became effective on September 15, 2009. At that date, the ASC became the FASB’s officially recognized source of authoritative generally accepted accounting principles (“GAAP”) applicable to all public and non-public non-governmental entities, superseding existing FASB, American Institute of Certified Public Accountants (“AICPA”), Emerging Issues Task Force (“EITF”) and related literature. All other accounting literature is considered non-authoritative. The switch to the ASC affects the way companies refer to U.S. GAAP in financial statements and accounting policies. Citing particular content in the ASC involves specifying the unique numeric path to the content through the Topic, Subtopic, Section and Paragraph structure.
NOTE 3 – RECENT ACCOUNTING PRONOUNCEMENTS
In February 2016, the FASB issued ASU 2016-02, "Leases." ASU 2016-02 significantly changes the accounting for leases by requiring lessees to recognize assets and liabilities for leases greater than 12 months on their balance sheet. The lessor model stays substantially the same; however, there were modifications to conform lessor accounting with the lessee model, eliminate real estate specific guidance, further define certain lease and non-lease components, and change the definition of initial direct costs of leases requiring significantly more leasing related costs to be expensed upfront. ASU 2016-02 is effective for the Company in the first quarter of fiscal 2020, and we are currently assessing the impact this standard will have on the Company's financial statements. The Company is currently party to a long-term lease that is being considered relative to the adoption of this standard (See NOTE 5).
The Company has evaluated all other new ASU's issued by FASB and has concluded that these updates do not have a material effect on the Company's condensed consolidated unaudited financial statements as of December 31, 2017.
NOTE 4 – LOAN RECEIVABLE
On January 18, 2017, the Company issued a loan to B&B Inc. in the amount of $11,000 at annual rate of eight percent (8%) and is due on July 18, 2018. Accrued interest at December 31, 2017 and September 30, 2017 was $835 and $615, respectively. As of December 31, 2017 and September 30, 2017, the Company has fully reserved this loan and accrued interest as doubtful to be collected.
F-7
ALTERNATIVE INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2017
(UNAUDITED)
NOTE 5 – RELATED PARTIES
As of December 31, 2017, and September 30, 2017, $311,973 was due to Canton. This is an unsecured loan, non-interest bearing and there is no repayment date. Interest has been calculated at imputed interest rate of 3% and reflected as interest expense and as accrued interest in the amount of $11,656 in the three months ended December 31, 2017.
On April 1, 2016, the Company issued a loan to Fingi Inc., a company of which Canton may be deemed a controlling person, in the amount of $50,000. The terms include no monthly payments with interest compounding monthly at an annual rate of four percent (4%). The entirety of the accrued interest and principal were originally due on December 31, 2016. Additionally, Fingi Inc. had net related advances to the Company in the amount of $6,502. The note remained in default until November 8, 2017, when the Company entered into an amendment agreement on this note to extend the maturity date to June 30, 2018. At December 31, 2017, accrued interest receivable was $3,508.
On February 2, 2016, the Company entered into an expense sharing agreement with Fingi Inc. Under the expense sharing agreement, the Company shares the rent and utility expenses incurred in connection with occupancy of office space that is being leased by Fingi Inc. During the three months ended December 31, 2017, amount due for rent was $5,684 per month. Total rent and utilities expenses amounted to $19,302. The rent due under expense sharing agreement for future periods is as follows:
For the fiscal year ended September 30, |
| |
2018 | $ | 52,174 |
2019 |
| 71,302 |
2020 |
| 73,441 |
2021 |
| 37,263 |
Total | $ | 234,180 |
Related party transactions are not necessarily indicative of an arm’s length transaction or comparable to a transaction that had been entered into with independent parties.
As of December 31, 2017 and September 30, 2017, the Company had a liability due to its Chief Executive and Chief Financial Officer, Daniel Otazo in the amount of $2,000 and $6,000, respectively. The amount was reflected in accounts payable on the Company’s financial statements. Amounts are due under a compensation for services provided agreement. Mr. Otazo resigned from the Company in all official capacities on November 30, 2017.
NOTE 6 – ACQUISITION DEPOSIT
Effective April 1, 2016, the Company entered into a Shareholders’ Agreement (the “Agreement”) with Basil and Barns, Inc., a New York corporation incorporated on February 2, 2016, (“B&B Inc.”), Fess Holdings LLC, Basil and Barns LLC and JIF Holdings LLC to acquire 55% of the outstanding common shares of B&B Inc. Under the Agreement, the Company was to invest $1,400,000 including a $600,000 capital contribution for its 55% interest in B&B Inc., a $500,000 3-year loan at 7% interest per annum, and $300,000 line of credit. The Company also agreed to provide up to an additional $1,800,000 of asset-based loans for purchases of new assets as required. B&B Inc. is to acquire 110 acres of land in Bethel, NY which is to be developed into a hotel property. Financial statements or pro-forma financial statements have not been provided herein as B&B Inc. was formed on February 2, 2016 and has no assets or liabilities.
During the year ended September 30, 2016, the Company paid a total of refundable deposits of $340,000 towards the anticipated amounts.
On February 27, 2017, the Company entered into an agreement with B&B Inc., Fess, Basil and Barns LLC and JIF Holdings LLC, wherein the Company has been unable to provide funding as per the original Agreement, having only provided $360,000 to date, the parties agreed to allow the Company to assign its remaining funding obligations and its ownership shares to a new ownership, in consideration of $50,000 to be paid to the Company and forfeiture of the $360,000 acquisition deposit. As of February 27, 2017, the Company is no longer participating in the original Agreement, directly or through related parties. As of December 31, 2016, the Company recorded a forfeiture of the acquisition deposit of $310,000 in the accompanying statement of operations.
F-8
ALTERNATIVE INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2017
(UNAUDITED)
NOTE 7 – LOANS AND NOTES PAYABLE
Notes payable to companies consisted of the following as of:
| December 31, 2017 |
| September 30, 2017 | ||
B&B Capital (a) | $ | 50,000 |
| $ | 50,000 |
Fess Group Holdings LLC (b) |
| 35,000 |
|
| 35,000 |
Fess Group Holdings LLC (c) |
| 4,000 |
|
| 4,000 |
Fess Group Holdings LLC (d) |
| 35,000 |
|
| 35,000 |
Fess Group Holdings LLC (e) |
| 7,000 |
|
| 7,000 |
Fess Group Holdings LLC (f) |
| 5,000 |
|
| 5,000 |
JIFM LLC (g) |
| 9,000 |
|
| 9,000 |
JIFM LLC (h) |
| 17,500 |
|
| - |
Loan from individual (i) |
| 500 |
|
| - |
Total notes payable | $ | 163,000 |
| $ | 145,000 |
Less - current portion of these notes |
| (163,000) |
|
| (145,000) |
Total notes payable | $ | - |
| $ | - |
(a) On January 31, 2017, the Company entered into a six-month 8% loan agreement with Basil and Barns Capital Inc. in the amount $50,000. The loan had a maturity date of July 31, 2017. The Company is currently trying to cure the default under this note. As of December 31, 2017, this note had accrued interest of $3,660.
(b) On November 30, 2016, the Company entered into a six-month 8% loan agreement in the amount of $35,000. The loan had a maturity date of May 30, 2017. The Company is currently trying to cure the default under this note. As of December 31, 2017, this note had accrued interest of $3,038.
(c) On January 3, 2017, the Company entered into a six-month 8% loan agreement in the amount of $4,000. The loan had a maturity date of July 3, 2017. The Company is currently trying to cure the default under this note. As of December 31, 2017, this note had accrued interest of $317.
(d) On January 17, 2017, the Company entered into a six-month 8% loan agreement in the amount of $35,000. The loan had a maturity date of July 17, 2017. The Company is currently trying to cure the default under this note. As of December 31, 2017, this note had accrued interest of $2,670.
(e) On January 19, 2017, the Company entered into a six-month 8% loan agreement in the amount of $7,000. The loan had a maturity date of July 19, 2017. The Company is currently trying to cure the default under this note. As of December 31, 2017, this note had accrued interest of $531.
(f) On January 23, 2017, the Company entered into a six-month 8% loan agreement in the amount of $5,000. The loan had a maturity date of July 23, 2017. The Company is currently trying to cure the default under this note. As of December 31, 2017, this note had accrued interest of $375.
(g) On September 1, 2017, the Company entered into a loan agreement with JIFM LLC. The loans will be treated as a line of credit bearing 8% interest and each drawdown will have a one-year term. The drawdowns will carry a default interest rate of lower of 1.5% per month or the maximum interest rate allowable by law. The initial drawdown in the amount of $9,000 and was funded on September 29, 2017. At December 31, 2017, accrued interest on this note was $183.
(h) On October 30, 2017, the Company received a loan advance pursuant to a loan agreement with JIFM LLC dated September 1, 2017 (see g above). The amount of the advance was $17,500. At December 31, 2017, accrued interest was $353.
(i) On December 22, 2017, a consultant deposited $500 on behalf of the Company in the Company’s main operating account. This short-term advance was treated as an interest free loan and it was paid back February 9, 2018.
F-9
ALTERNATIVE INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2017
(UNAUDITED)
NOTE 8 – INVESTMENT IN COMMERCIAL PAPER
On June 8, 2015 and July 3, 2015, respectively, the Company invested into two $100,000 two-year convertible bonds from Bullion Japan Inc. each of those two days for a total investment of $200,000. The bonds matured July 3, 2017 and June 8, 2017, respectively, earning interest at eight percent (8%) per annum paid quarterly, and are convertible into common stock of Bullion Japan Inc. at the Company’s option any time prior to the maturity date at a price of JPY ¥8,035 ($6.46) per share.
On December 15, 2017, the Company entered into a memorandum of agreement to extend maturity date of the July 3, 2015 bond to March 30, 2018. The same terms as the original agreement will prevail and the Company will continue to accrue interest. As of December 31, 2017, the Company has recorded an allowance for the unrecoverability of this investment in the amount of $100,000.
On December 28, 2017, Bullion Japan paid accrued interest through December 31, 2017 in the amount of $33,160. Bullion Japan Inc. further paid the principal of $100,000 relative to the June 8, 2015 note on that same day. Upon payment accrued interest was $28,624. As a result of this payment in excess of accrued interest the Company recorded deferred interest revenue in the amount of $4,356. At December 31, 2017, deferred interest revenue was $4,356.
NOTE 9 – STOCKHOLDERS’ DEFICIT
The Company has authorized 1,600,000,000 shares of Common Stock, $0.001 par value. As of each of the three months and year ended December 31, 2017 and September 30, 2017, the Company had 172,979 shares of Common Stock issued, and 172,775 shares outstanding.
On December 8, 2017, the Company filed for a 50:1 reverse stock split with the Secretary of State of Nevada. These presented financial statements and accompanying notes are presented reflective of this stock split as post stock-split adjusted numbers.
During the year ended September 30, 2016, the Company received $574,975 of subscriptions for the purchase of common shares. As the shares had not been issued as of December 31, 2017, the $574,975 balance is included in common stock issuable in the balance sheet at December 31, 2017.
No shares were issued during the three months ended December 31, 2017.
NOTE 10 – INCOME TAXES
No provision was made for income taxes for the three months and year ended December 31, 2017 and September 30, 2017 as the Company had incurred net losses for tax purposes of $610,083 and $233,273, respectively.
Deferred income taxes reflect the tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. The components of the net deferred income tax assets are approximately as follows:
Deferred income tax assets: | December 31, 2017 |
| September 30, 2017 | ||
Net operating loss carry forwards | $ | 283,500 |
| $ | 262,500 |
Valuation allowance |
| (283,500) |
|
| (262,500) |
Net deferred income tax assets | $ | – |
| $ | – |
The Company has established a full valuation allowance on our deferred tax asset because of a lack of sufficient positive evidence to support its realization. The valuation allowance increased by $21,000 and $123,500 for the three months and year ended December 31, 2017 and 2016, respectively.
No provision for income taxes has been provided in these financial statements due to the net loss for the three months ended December 31, 2017 and 2016. At December 31, 2017, the Company has net operating loss carry forwards of approximately $1,250,000 which expire commencing 2037. The potential tax benefit of these losses may be limited due to certain change in ownership provisions under Section 382 of the Internal Revenue Code (“IRS”) and similar state provisions.
F-10
ALTERNATIVE INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2017
(UNAUDITED)
NOTE 10 – INCOME TAXES (CONTINUED)
On December 22, 2017, Public Law 115-97, informally referred to as the Tax Cuts and Jobs Act (“the TCJA”) was enacted into law. The TCJA provides for significant changes to the U.S. Internal Revenue Code of 1986, as amended, that impact corporate taxation requirements. Effective January 1, 2018, the federal tax rate for corporations was reduced from 35% to 21% for US taxable income and requires one-time re-measurement of deferred taxes to reflect their value at a lower tax rate of 21%. Also, mandatory repatriation of untaxed foreign earnings and profits will be taxed at 15.5% to the extent the underlying assets are liquid and 8% on the remaining balance. There are other provisions to the TCJA, such as conversion of a worldwide system to a territorial system, limitations on interest expense and domestic production deductions, which will be effective in fiscal 2019. The Company anticipates its effective tax rate to be 28% to 30%, excluding the one-time impact of the TCJA for fiscal 2018 primarily due to the reduction in the federal tax rate. The Company’s actual effective tax rate for fiscal 2018 may differ from management’s estimate due to changes in interpretations and assumptions. Due to the timing of enactment and complexity of the TCJA, the Company is unable to estimate a reasonable range of the one-time impact associated with mandatory repatriation, re-measurement of deferred taxes and other provisions of the TCJA.
IRS Section 382 places limitations (the “Section 382 Limitation”) on the amount of taxable income which can be offset by net operating loss carry forwards after a change in control (generally greater than 50% change in ownership) of a loss corporation. Generally, after a change in control, a loss corporation cannot deduct operating loss carry forwards in excess of the Section 382 Limitation. Due to these “change in ownership” provisions, utilization of the net operating loss and tax credit carry forwards may be subject to an annual limitation regarding their utilization against taxable income in future periods. The Company has not concluded its analysis of Section 382 through December 31, 2017 but believes the provisions will not limit the availability of losses to offset future income.
The Company is subject to income taxes in the U.S. federal jurisdiction and the state of Nevada. The tax regulations within each jurisdiction are subject to interpretation of related tax laws and regulations and require significant judgment to apply. As of December 31, 2017, the Company has not filed any tax returns. As of December 31, 2017, tax years 2007 through 2017 remain open for IRS audit. The Company has received no notice of audit from the IRS for any of the open tax years.
NOTE 11 – SUBSEQUENT EVENTS
The Company has analyzed its operations subsequent to December 31, 2017 to the date these financial statements were issued and has found the following transactions or events requiring disclosure.
On January 24, 2018, the Company repaid $6,000 in principal on the September 1, 2017, loan agreement with JIFM LLC. The loans are treated as a line of credit bearing 8% interest (See NOTE 7).
On February 9, 2018 the Company repaid a zero interest short-term advance from December 22, 2017 (See NOTE 7).
F-11
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
SPECIAL NOTE CONCERNING FORWARD-LOOKING STATEMENTS
Certain statements made in this Form 10-Q are "forward-looking statements" (within the meaning of the Private Securities Litigation Reform Act of 1995) regarding the plans and objectives of management for future operations. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. The Company's plans and objectives are based, in part, on assumptions involving the continued expansion of business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although the Company believes its assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove to be inaccurate and, therefore, there can be no assurance the forward-looking statements included in this report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved.
The forward-looking statements included in this Form 10-Q and referred to elsewhere are related to future events or our strategies or future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may," "should," "believe," "anticipate," "future," "potential," "estimate," "encourage," "opportunity," "growth," "leader," "expect," "intend," "plan," "expand," "focus," "through," "strategy," "provide," "offer," "allow," commitment," "implement," "result," "increase," "establish," "perform," "make," "continue," "can," "ongoing," "include" or the negative of such terms or comparable terminology. All forward-looking statements included in this Form 10-Q are based on information available to us as of the filing date of this report, and the Company assumes no obligation to update any such forward-looking statements, except as required by law. Our actual results could differ materially from the forward-looking statements.
Important factors that might cause our actual results to differ materially from the results contemplated by the forward-looking statements are contained in the “Risk Factors” section of and elsewhere in our Annual Report on Form 10-K for the fiscal year ended September 30, 2017 and in our subsequent filings with the Securities and Exchange Commission
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations describes the principal factors affecting the results of operations, liquidity and capital resources of the Company and critical accounting estimates. This discussion should be read in conjunction with the accompanying quarterly unaudited Condensed Consolidated Financial Statements contained in this Form 10-Q and our Annual Report on Form 10-K, for the year ended September 30, 2017 (“Annual Report”). Our Annual Report includes additional information about our significant accounting policies, practices and the transactions that underlie our financial results, as well as a detailed discussion of the most significant risks and uncertainties associated with our financial and operating results.
Company Overview
Alternative Investment Corporation (the "Company") was incorporated in Nevada on March 26, 2007 under the name of China Digital Ventures Corporation. The principal business of the Company was its web-based telecom and IPTV businesses, both of which were disposed of during the year ended September 30, 2010. As of the date hereof, the Company has no operations.
On July 23, 2010, the Company experienced a change in control. Canton Investments Ltd (“CIL” or “Canton”) acquired a majority of the issued and outstanding common stock of the Company in accordance with stock purchase agreements by and between CIL and Wireless One International Limited (“Wireless One”), Bing HE and Ning HE, the Company’s former directors, and other various shareholders. On the closing date, July 23, 2010, pursuant to the terms of the Stock Purchase Agreement, CIL purchased from Wireless One and Bing HE and Ning HE 28,750,000 shares of the Company’s outstanding common stock for $205,750. Also, on July 23, 2010, CIL purchased 6,100,000 shares of the Company’s outstanding common stock for $36,600 from various shareholders. As a result of the change in control, CIL owned a total of 34,850,000 shares of the Company’s common stock representing 91.54%.
On May 10, 2012, the Company filed an amendment to its Articles of Incorporation in the State of Nevada to change its name to Paradigm Resource Management Corporation.
On September 10, 2012, CIL contributed 30,000,000 shares of common stock to the Company’s treasury. The Company immediately retired and canceled these shares. As a result of the contribution of shares, CIL owns a total of 4,850,000 shares of the Company’s common stock representing 60%.
3
On July 24, 2013, the Company entered into an agreement with AMSA Development Technology Co Ltd (“AMSA”) to acquire 402,300 shares of TOSS Plasma Technologies Ltd. (“TPT”) previously held by AMSA in exchange for 896,667 shares of its common stock. The 402,300 shares of TPT represent 10.1% of TPT’s outstanding common stock. The agreement also provides AMSA an option to acquire an additional 1,120,833 shares of the Company’s common stock and provides the Company an option to acquire an additional 402,300 shares of TPT common stock from AMSA.
On December 4, 2013, the Company and AMSA entered into an Amendment to the Agreement dated July 24, 2013. Under the terms of the amendment, the Company had the option to acquire up to a total of 3,432,000 shares of TPT from AMSA and AMSA had the option to acquire up to a total of 5,746,667 shares of common stock of the Company. The options expired on June 2, 2014.
On September 10, 2015, the Company and AMSA entered into a Rescission Agreement to fully rescind the previous acquisition agreement of shares of TPT and returned previously issued shares of each company to each other.
On September 18, 2015, the Company filed an amendment to its Articles of Incorporation in the State of Nevada to change its name to Alternative Investment Corporation.
On April 1, 2016, the Company entered into a Shareholders’ Agreement (the “Agreement”) with Basil and Barns, Inc., a New York corporation incorporated on February 2, 2016, (“B&B Inc.”), Fess Holdings LLC, Basil and Barns LLC and JIF Holdings LLC to acquire 55% of the outstanding common shares of B&B Inc.
On February 27, 2017, the Company entered into an agreement with B&B Inc., Fess, Basil and Barns LLC and JIF Holdings LLC, wherein the Company has been unable to provide funding as per the original Agreement, having only provided $360,000 to date, the parties agreed to allow the Company to assign its remaining funding obligations and its ownership shares to a new ownership, in consideration of $50,000 to be paid to the Company and forfeiture of the $360,000 acquisition deposit. As of February 27, 2017, the Company is no longer participating in the original Agreement, directly or through related parties.
On November 30, 2017, Mr. Daniel Otazo, Director, Chief Executive Officer and interim Chief Financial Officer, tendered his resignation. Mr. Otazo’s resignation was not a result of any disagreement with the Company.
On December 1, 2017, the Shareholders of the Corporation voted to elect Mr. Antonio Treminio as Director and CEO of the Company. Mr. Treminio, 46, has over 20 years of experience in the financial markets with special focus on corporate financing for private and public companies.
Management is focused on new investment opportunities in the real estate sector with primary focus on distressed real estate assets and/or alternative real estate developments.
Plan of Operation
The Company is focused on new investment opportunities in the real estate sector with primary focus on distressed real estate assets and/or alternative real estate developments.
Results of Operations
For the Three Months Ended December 31, 2017 and 2016
Revenues
The Company had no revenue for the three months ended December 31, 2017 and 2016.
Operating Expenses
For the three months ended December 31, 2017 total operating expenses were $58,904 compared to $107,296 for the three months ended December 31, 2016 resulting in a decrease of $48,392. The decrease in operating expense is primarily a result of a decrease of consulting fees related to the advisory of management.
Professional fees
For the three months ended December 31, 2017 total professional fees were $18,000 compared to $6,500 for the three months ended December 31, 2016 resulting in an increase of $11,500. The increase in professional fees primarily relates to increases in legal and accounting fees.
4
Other income (expense)
For the three months ended December 31, 2017 total other expense was $930 compared to $307,874 for the same period in the prior year. The large other expense in the prior year was due to an expense for a forfeiture of an acquisition deposit of $310,000 related to an Agreement with B&B Inc., Fess Holdings LLC, Basil and Barns LLC and JIF Holdings LLC, offset by $3,210 less interest expense for the three months ended December 31, 2016
Net loss
Our net loss to shareholders for the three months ended December 31, 2017 and 2016 was $77,834 and $421,670, respectively. The large decrease in net loss was due to a large other expense in the prior year was due to an expense for a forfeiture of an acquisition deposit of $310,000 related to an Agreement with B&B Inc., Fess Holdings LLC, Basil and Barns LLC and JIF Holdings LLC as well as a decrease in contractor fees slightly offset by higher legal and accounting fees.
Liquidity and Capital Resources
Overview
As of December 31, 2017 and September 30, 2017, the Company cash of $109,199 and $10,396 and a deficit in working capital of $405,980 and $328,146, respectively. Historically, our operating expenses have been funded and paid by CIL and by the issuance of notes payable and sale of our common stock.
We do not have sufficient resources to effectuate our business plan. We expect to incur a minimum of $1,600,000 in expenses and acquisitions during the next twelve months of operations.
Liquidity and Capital Resources during the Three Months Ended December 31, 2017 compared to the Three Months ended December 31, 2016
We used cash for operating activities of $47,821 and $48,715 for the three months ended December 31, 2017, and 2016, respectively. The elements of cash flow used in operations for the three months ended December 31, 2017 included a net loss of $77,834, increase in interest and miscellaneous receivables of $18,467, offset by an increase in accounts payable and other accruals of $43,538, an increase in deferred revenue $4,536 as well as a reduction in prepaid expenses in the amount of $406. The elements of cash flow used in operations for the three months ended December 31, 2016 included a net loss of $421,670, forfeiture of an acquisition deposit of $310,000, increase in interest receivable of 4,544, offset by an increase in accounts payable of 22,336, an increase in credit card payable of 10,043, an increase in amounts due to related parties of 35,120.
We received principal re-payment of $100,000 and accrued interest re-payment of $28,624 from the investment in commercial paper during the three months ended December 31, 2017. We used cash in investing activities of $20,000 for a deposit on a potential acquisition during the three months ended December 31, 2016, offset by a decrease in the amount due from Fingi of 12,450.
Cash provided by financing activities was $18,000 from the issuance of a note payable for the three months ended December 31, 2017 compared to $12,341 provided for the same period in the previous year. The financing activities for the three months ended December 31, 2016 consisted of $2,341 in interest accrued on notes payable in addition to an increase of $10,000 due to shareholders.
We will have to raise funds to pay for our expenses. We may have to borrow money from shareholders or issue debt or equity or enter into a strategic arrangement with a third party. There can be no assurance that additional capital will be available to us. We currently only have one small arrangements with JIFM LLC as way to obtain any operating capital. We have no other arrangements or understandings to obtain funds through bank loans, lines of credit or any other sources. Since we have no other arrangements or plans currently in effect, our inability to raise funds for our operations will have a severe negative impact on our ability to remain a viable company.
Going Concern
Due to the uncertainty of our ability to meet our current operating and capital expenses, our independent auditors included an explanatory paragraph in their report on the audited financial statements for the year ended September 30, 2017 regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.
Our unaudited financial statements have been prepared on a going concern basis, which assumes the realization of assets and settlement of liabilities in the normal course of business. Our ability to continue as a going concern is dependent upon our ability to generate profitable operations in the future and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they become due. The outcome of these matters cannot be predicted with any certainty at this time and raise substantial doubt that we will be able to continue as a going concern. Our unaudited financial statements do not include any adjustments to the amount and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern.
5
There is no assurance that our operations will be profitable. Our continued existence and plans for future growth depend on our ability to obtain the additional capital necessary to operate either through the generation of revenue or the issuance of additional debt or equity.
Off-Balance Sheet Arrangements
We currently have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make a number of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Such estimates and assumptions affect the reported amounts of revenues and expenses during the reporting period. We base our estimates on historical experiences 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 and conditions. We continue to monitor significant estimates made during the preparation of our financial statements. On an ongoing basis, we evaluate estimates and assumptions based upon historical experience and various other factors and circumstances. We believe our estimates and assumptions are reasonable in the circumstances; however, actual results may differ from these estimates under different future conditions.
See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 2, “Summary of Significant Accounting Policies” in our audited financial statements for the year ended September 30, 2017, included in our Annual Report on Form 10-K as filed on January 11, 2018, for a discussion of our critical accounting policies and estimates.
Contractual Obligations
The Company is party to a long-term sub-lease agreement relative to its current office space in New York, NY. The current agreement expires March 31, 2021. Average monthly base-rent under this agreement is $6,005. Total expense for base rent through the remainder of the contract is $234,180 plus utilities and other shared expenses.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The disclosure required under this item is not required to be reported by smaller reporting companies; as such term is defined by Item 503(e) of Regulation S-K.
Item 4. Controls and Procedures.
(a)
Evaluation of Disclosure Controls and Procedures
In connection with the preparation of this Quarterly Report on Form 10-Q, an evaluation was carried out by the Company's management, with the participation of the principal executive officer and the principal financial officer, of the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 ("Exchange Act")) as of December 31, 2017. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to management, including the chief executive officer and the chief financial officer, to allow timely decisions regarding required disclosures.
Based on that evaluation, the Company's management concluded, as of the end of the period covered by this report, that the Company's disclosure controls and procedures were not effective in recording, processing, summarizing, and reporting information required to be disclosed, within the time periods specified in the Commission's rules and forms, and that such information was accumulated and communicated to management, including the principal executive officer and the principal financial officer, to allow timely decisions regarding required disclosures.
(b)
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
6
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. As of February 19, 2018, there is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company, threatened against or affecting our company or our common stock in which an adverse decision could have a material adverse effect.
Item 1A. Risk Factors
The disclosure required under this item is not required to be reported by smaller reporting companies; as such term is defined by Item 503(e) of Regulation S-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
There were no unregistered sales of equity securities during the quarter ended December 31, 2017.
Item 3. Defaults Upon Senior Securities.
On January 31, 2017, the Company entered into a six-month 8% loan agreement with Basil and Barns Capital Inc. in the amount $50,000. The loan had a maturity date of July 31, 2017. Since this note is still outstanding, it is currently in default. The Company is currently trying to cure the default under this note.
On November 30, 2016, the Company entered into a six-month 8% loan agreement in the amount of $35,000. The loan had a maturity date of May 30, 2017. Since this note is still outstanding, it is currently in default. The Company is currently trying to cure the default under this note.
On January 3, 2017, the Company entered into a six-month 8% loan agreement in the amount of $4,000. The loan had a maturity date of July 3, 2017. Since this note is still outstanding, it is currently in default. The Company is currently trying to cure the default under this note.
On January 17, 2017, the Company entered into a six-month 8% loan agreement in the amount of $35,000. The loan had a maturity date of July 17, 2017. Since this note is still outstanding, it is currently in default. The Company is currently trying to cure the default under this note.
On January 19, 2017, the Company entered into a six-month 8% loan agreement in the amount of $7,000. The loan had a maturity date of July 19, 2017. Since this note is still outstanding, it is currently in default. The Company is currently trying to cure the default under this note.
On January 23, 2017, the Company entered into a six-month 8% loan agreement in the amount of $5,000. The loan had a maturity date of July 23, 2017. Since this note is still outstanding, it is currently in default. The Company is currently trying to cure the default under this note.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information.
None.
7
Item 6. Exhibits
|
|
101.INS | XBRL Instance Document |
101.SCH | XBRL Taxonomy Extension Schema Document |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
8
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: February 20, 2018 | By: | /s/ Antonio Treminio |
|
| Antonio Treminio |
|
| Interim Chief Executive Officer Chief Financial Officer (Principal Executive and Financial Officer) |
9