Exhibit 10.1
ALPHA WISE ASSETS, LLC
FINANCIAL STATEMENTS
FEBRUARY 28, 2013 AND DECEMBER 31, 2012
CONTENTS
| Report of Independent Registered Public Accounting Firm | F-2 |
| Balance Sheets as of February 28, 2013 and December 31, 2012 | F-3 |
| Statements of Operations for the Two Months Ended February 28, 2013 and the Period from (Inception) February 23, 2012 to December 31, 2012 | F-4 |
| Statements of Stockholders’ Equity (Deficit) for the Period (Inception) February 23, 2012 to February 28, 2013 | F-5 |
| Statements of Cash Flows for the Two Months Ended February 28, 2013 and the Period from (Inception) February 23, 2012 to December 31, 2012 | F-6 |
| Notes to the Financial Statements | F-7 to F-8 |
Report of Independent Registered Public Accounting Firm
To the Members of
Alpha Wise Assets, LLC
Rockwall, Texas
We have audited the accompanying balance sheets of Alpha Wise Assets, LLC (the “Company”) as of February 28, 2013 and December 31, 2012, and the related statement of operations, stockholders' equity (deficit), and cash flows for the two months ended February 28, 2013 and the period from February 23, 2012 (Inception) to December 31, 2012. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Alpha Wise Assets, LLC as of February 28, 2013 and December 31, 2012, and the results of its operations and its cash flows for the two months ended February 28, 2013 and the period from February 23, 2012 (Inception) to December 31, 2012 in conformity with accounting principles generally accepted in the United States of America.
As discussed in Note 2 to the financial statements, the Company's losses from operations, and its need for additional financing in order to fund its projected loss in 2013 raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ MaloneBailey LLP
MaloneBailey LLP
Houston, Texas
July 31, 2013
ALPHA WISE ASSETS, LLC Balance Sheets |
| | | February 28,
2013 | | December 31,
2012 |
| | | |
| Current Assets | | | | | | | | |
| Cash and Cash Equivalents | | $ | — | | | $ | 4,773 | |
| Inventory - Work In Process | | | 197,614 | | | | 174,151 | |
| Total Current Assets | | | 197,614 | | | | 178,924 | |
| | | | | | | | | |
| | | | | | | | | |
| TOTAL ASSETS | | $ | 197,614 | | | $ | 178,924 | |
| | | | | | | | | |
| | | | | | | | | |
| Current Liabilities | | | | | | | | |
| Accounts Payable | | | 1,239 | | | | | |
| Accrued Expenses | | | 2,803 | | | $ | 3,203 | |
| Construction Loan | | | 194,037 | | | | 176,086 | |
| Total Current Liabilities | | | 198,079 | | | | 179,289 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Members’ Equity: | | | | | | | | |
| Membership Units, no par value, 3,000,000 units outstanding | | | — | | | | — | |
| Paid in capital | | | 30,000 | | | | 30,000 | |
| Accumulated deficit | | | (30,465 | ) | | | (30,365 | ) |
| Total Members’ Equity | | | (465 | ) | | | (365 | ) |
| Total Liabilities and Members’ Equity | | $ | 197,614 | | | $ | 178,924 | |
| | | | | | | | | |
The Accompanying Notes are an Integral Part of these Financial Statements.
ALPHA WISE ASSETS, LLC Statement of Operations |
| | | | | |
| | | February 28, 2013 | | February 23, 2012 (Inception) through December 31, 2012 |
| Revenue | | $ - | | $ - |
| Cost of revenue | | - | | - |
| GROSS PROFIT | | - | | - |
| OPERATING EXPENSES: | | | | |
| General and administrative | | | 100 | | | | 30,365 | |
| TOTAL OPERATING EXPENSES | | | 100 | | | | 30,365 | |
| | | | | | | | | |
| NET LOSS | | $ | (100 | ) | | $ | (30,365 | ) |
| | | | | | | | | |
| | | | | | | | | |
| Earnings per share | | | | | | | | |
| Weighted Average Shares Outstanding: | | | | | | | | |
| Basic and Diluted | | | 3,000,000 | | | | 3,000,000 | |
| Basic and Diluted Loss per unit | | $ | (0.00 | ) | | $ | (0.01 | ) |
The Accompanying Notes are an Integral Part of these Financial Statements.
ALPHA WISE ASSETS, LLC Statement of Stockholders' Equity (Deficit) For the Period February 23, 2012 (Inception) to February 28, 2013 |
| | | | | | | Additional | | | | | |
| | | | Membership Units | | | Paid-In | | | | Accumulated | |
| | | | Units | | | | Par Value | | | | Capital | | | | Deficit | | | | Totals | |
| | | | | | | | | | | | | | | | | | | | | |
| February 23, 2012 | | | | | | | | | | | | | | | | | | | | |
| (Inception) | | | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | |
| Issuance of Membership Units for Services | | | 3,000,000 | | | | — | | | | 30,000 | | | | — | | | | 30,000 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net Loss | | | — | | | | — | | | | — | | | | (30,365 | ) | | | (30,365 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Balance, | | | | | | | | | | | | | | | | | | | | |
| December 31, 2012 | | | 3,000,000 | | | $ | — | | | $ | 30,000 | | | $ | (30,365 | ) | | $ | (365 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Net Loss | | | | | | | | | | | | | | | (100 | ) | | | (100 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Balance, | | | | | | | | | | | | | | | | | | | | |
| February 28, 2013 | | | 3,000,000 | | | $ | — | | | $ | 30,000 | | | $ | (30,465 | ) | | $ | (465 | ) |
The Accompanying Notes are an Integral Part of these Financial Statements.
ALPHA WISE ASSETS, LLC Statement of Cash Flows |
| | February 28, 2013 | | February 23, 2012 (Inception) through December 31, 2012 |
| CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | | | |
| Net loss | | $ | (100 | ) | | $ | (30,365 | ) |
| | | | | | | | | |
Adjustments to reconcile net loss to cash used
by operating activities: | | | | | | | | |
| Issuance of membership units for services | | | — | | | | 30,000 | |
| Change in Assets and Liabilities: | | | | | | | | |
| | | | | | | | | |
| Inventory | | | (23,463 | ) | | | (174,151 | ) |
| Accounts payable | | | 1,239 | | | | — | |
| Net Cash Used in Operating Activities | �� | | (22,324 | ) | | | (174,516 | ) |
| | | | | | | | | |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | | | |
| Advances on construction loan | | | 17,951 | | | | 176,086 | |
| Payment to related party | | | (500 | ) | | | (4,500 | ) |
| Borrowings from related party | | | 100 | | | | 7,703 | |
| Net Cash Provided by Financing Activities | | | 17,551 | | | | 179,289 | |
| | | | | | | | | |
| NET CHANGE IN CASH AND CASH EQUIVALENTS | | | (4,773 | ) | | | 4,773 | |
| | | | | | | | | |
| CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR | | | 4,773 | | | | — | |
| CASH AND CASH EQUIVALENTS AT END OF YEAR | | $ | — | | | $ | 4,773 | |
| | | | | | | | | |
| SUPPLEMENTAL DISCLOSURES | | | | | | | | |
| Interest paid | | | $ | | | $ | — | |
| Income taxes paid | | | $ | | | $ | — | |
The Accompanying Notes are an Integral Part of these Financial Statements.
ALPHA WISE ASSETS, LLC Notes to the Financial Statements |
NOTE 1 – NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Activities, History and Organization:
ALPHA WISE ASSETS, LLC (“ALPHA”, the “Company”) was organized as a limited liability company under the laws of the State of Texas on February 23, 2012. The Company is engaged in the home building and remodeling business.
The Company operates on a calendar year-end. The Company operates in only one business segment.
Basis of Accounting and Consolidation:
The Company prepares its financial statements on the accrual basis of accounting.
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States.
Significant Accounting Policies:
The Company’s management selects accounting principles generally accepted in the United States of America and adopts methods for their application. The application of accounting principles requires the estimating, matching and timing of revenue and expense.
The financial statements and notes are representations of the Company’s management which is responsible for their integrity and objectivity. Management further acknowledges that it is solely responsible for adopting sound accounting practices, establishing and maintaining a system of internal accounting control and preventing and detecting fraud. The Company's system of internal accounting control is designed to assure, among other items, that 1) recorded transactions are valid; 2) valid transactions are recorded; and 3) transactions are recorded in the proper period in a timely manner to produce financial statements which present fairly the financial condition, results of operations and cash flows of the Company for the respective periods being presented.
Use of Estimates:
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
Cash and Cash Equivalents:
Cash and cash equivalents include cash and all highly liquid financial instruments with original maturities of three months or less at the date of purchase and are stated at cost which approximates market value, which in the opinion of management, are subject to an insignificant risk of loss in value.
Fair Value of Financial Instruments:
In accordance with the reporting requirements of ASC 820, “Fair Value Measurements”, the Company calculates the fair value of its assets and liabilities which qualify as financial instruments under this statement and includes this additional information in the notes to the financial statements when the fair value is different than the carrying value of those financial instruments.
The carrying amounts of cash, cash equivalents, accounts receivable, accounts payable and notes payable approximate their fair values due to the short-term maturities of these instruments.
Inventory:
Inventories are stated at the lower of cost or market. Accumulated cost includes all costs associated with land acquisition and home construction, including interest and taxes are recorded as inventory until the home is sold when those costs are expensed. The Company records these amounts as work in process. The Company uses the specific identification method for inventory tracking and valuation.
Equity Based Compensation
Equity based compensation expense is recorded for membership units and unit options awarded in return for services rendered. The expense is measured at the grant-date fair value of the award and recognized as compensation expense on a straight-line basis over the service period, which is the vesting period. The Company estimates forfeitures that it expects will occur and records expense based upon the number of awards expected to vest. The Company has no outstanding options.
Income Taxes:
Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.
Earnings per Share:
Earnings per share (basic) are calculated by dividing the net income (loss) by the weighted average number of common shares outstanding for the period covered. As the Company has no potentially dilutive securities, fully diluted earnings per share is equal to earnings per share (basic).
Recent Accounting Pronouncements:
Management does not expect the future adoption of any recently issued accounting pronouncement to have a significant impact on its financial position, results of operations, or cash flows.
NOTE 2 –GOING CONCERN
The Company has an accumulated deficit through February 28, 2013 totaling $(30,465).
The Company has experienced no loan defaults, labor stoppages, legal proceedings or any other operating interruption in 2012. Therefore, these items will not factor into whether the business continues as a going concern, and accordingly, management has not made any plans to dispose of assets or factor receivables to assist in generating working capital.
Management believes that the efforts it has made to build and hold home(s) for sale will result in sales in 2013. However, to date the Company has incurred losses and has had no revenue. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
NOTE 3 – LOAN PAYABLE
The Company has a construction loan with a financial institution. The loan has a $208,500 credit limit, and bears an interest rate of 5.25% per annum, due June 2, 2013. As of February 28, 2013, the amount outstanding under this loan was $194,037
The Company has pledged the land and building that it is in process of building as collateral against this loan. The loan has no financial covenants. The loan is guaranteed by Charles Smith, CFO.
NOTE 4 – MEMBER’S EQUITY
The Company is authorized to issue membership units without limit at no par value. The membership units have full voting rights. There were 3,000,000 membership units issued and outstanding as of February 28, 2013.
The Company does not have any equity option plans or equity warrants outstanding.
