See accompanying notes to the unaudited consolidated financial statements.
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AF OCEAN INVESTMENT MANAGEMENT COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Unaudited)
| | | | | | | | | | | |
| | | Nine months ended September 30, | Three months ended September 30, |
| | | 2013 | | 2012 | | 2013 | | 2012 |
| | | | | | | | | |
Revenue | | | | | | | | | |
Consulting fee income | | $ | 450,000 | $ | 90,000 | $ | 135,000 | $ | 60,000 |
Total income | | $ | 450,000 | $ | 90,000 | $ | 35,000 | $ | 60,000 |
| | | | | | | | | |
Costs and Expenses | | | | | | | | | |
General and administrative | | $ | 178,582 | $ | 319,183 | $ | 63,903 | $ | 297,364 |
Payroll | | $ | 111,396 | $ | 42,479 | $ | 41,939 | $ | 26,707 |
Professional fees | | $ | 181,646 | $ | 94,825 | $ | 63,140 | $ | 22,414 |
Total costs and expenses | | $ | 471,624 | $ | 456,487 | $ | 168,981 | $ | 346,485 |
| | | | | | | | | |
Operating income (loss) | | $ | (21,624) | $ | (366,487) | $ | (33,981) | $ | (286,485) |
| | | | | | | | | |
Other income (expense) | | | | | | | | |
Other income | | $ | 12,984 | $ | - | $ | - | $ | - |
Interest income | | $ | 320 | $ | 142 | $ | 143 | $ | 142 |
Debt discount amortization (expense) | | $ | (27,044) | $ | (12,454) | $ | (1,068) | $ | (12,454) |
Total other income (expense) | | $ | (13,740) | $ | (12,312) | $ | (925) | $ | (12,312) |
| | | | | | | | | |
Loss before income taxes | | $ | (35,364) | $ | (378,799) | $ | (34,907) | $ | (298,797) |
| | | | | | | | | |
Income tax provision | | | - | | - | | - | | - |
| | | | | | | | | |
Net loss | | $ | (35,364) | $ | (378,799) | $ | (34,907) | $ | (298,797) |
Foreign currency gain | | $ | 188 | $ | - | $ | 55 | $ | - |
Comprehensive loss | $ | (35,176) | $ | (378,799) | $ | (34,852) | $ | (298,797) |
Earnings per share - basic and dilutive | $ | (0.00) | $ | (0.10) | $ | (0.00) | $ | (0.06) |
Weighted average shares | | | 31,164,968 | | 3,851,098 | | 78,062,163 | | 5,015,972 |
See accompanying notes to the unaudited consolidated financial statements.
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AF OCEAN INVESTMENT MANAGEMENT COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
| | | | | |
| | | Nine months ended September 30 |
| | | 2013 | | 2012 |
Operating activities | | | | |
Net income, (net loss) | $ | (35,364) | $ | (378,799) |
Adjustments to reconcile net income, (net loss) to net cash | | | | |
| provided by (used in) operating activities: | | | | |
| Depreciation | | 2,825 | | 1,329 |
| Amortization of debt discount | | 27,044 | | 12,454 |
| Stock given for services | | - | | 212,200 |
| Accounts payable | | (200) | | 15,084 |
| Accrued expenses | | 2,011 | | 1,739 |
| Deferred revenue | | (180,000) | | - |
| Assets and liabilities of discontinued operations | | - | | (3,361) |
Total adjustments | | (148,320) | | 239,445 |
Net cash used in operating activities | $ | (183,683) | $ | (139,354) |
| | | | | |
Investing activities | | | | |
| Note receivable advances | | (6,000) | | (16,000) |
| Purchase of property and equipment | | (3,752) | | (4,207) |
| Purchase of subsidiary | | - | | (299,726) |
Net cash used in investing activities | $ | (9,752) | $ | (319,933) |
| | | | | |
Financing activities | | | | |
| Payments from (to) related party | | (58,990) | | 426,224 |
| Proceeds from notes payable | | - | | 100,000 |
| Issuance of common stock | | 596,838 | | - |
| Proceeds from equity sales | | - | | 437,242 |
Net cash provided by financing activities | $ | 537,848 | $ | 963,466 |
| | | | |
Foreign currency translation | | 188 | | - |
| | | | | |
Net (decrease) increase in cash and cash equivalents | | 344,601 | | 504,179 |
| | | | | |
Cash and cash equivalents, beginning of period | | 402,510 | | 3,361 |
| | | | | |
Cash and cash equivalents, end of period | | 747,111 | | 507,540 |
| | | | | |
Supplemental disclosures of cash flow information: | | | | |
Cash paid during the year for: | | | | |
| Interest | $ | - | $ | - |
| Taxes | $ | - | $ | - |
| | | | | |
| NON-CASH DISCLOSURES | | | | |
| Non-cash financing activities | | | | |
| Common stock receivable | $ | 74,094 | $ | - |
| Shareholder loans converted into common stock | $ | 177,046 | $ | - |
| Purchase of subsidiary | $ | - | $ | - |
| Cash acquired | | - | | 274 |
| Property and equipment | | - | | 5,533 |
| Intangible assets | | - | | 294,193 |
| Cash paid | | - | | (200,000 |
| Note payable | $ | - | $ | (100,000) |
| | | | | |
| Debt discount included in additional paid in capital | $ | - | $ | 51,953 |
See accompanying notes to the unaudited consolidated financial statements.
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AF OCEAN INVESTMENT MANAGEMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2013
NOTE 1.
BACKGROUND
AF Ocean Investment Management Company, formerly known as Dinello Restaurant Ventures, Inc., was incorporated under the laws of the State of Florida on April 2, 2003. AF Ocean Investment Management Company (together with its subsidiaries, hereinafter collectively referred to as the “Company”, “AF Ocean” or “we”) promotes business relations and exchanges between Chinese and U.S. companies, facilitating international mergers and acquisitions, and increasing co-operation between Chinese companies and Wall Street financial institutions. The mission is to help Wall Street investors identify and work with respectable and reputable Chinese counterparts and companies and assist Chinese corporations to understand that the only way to benefit from the world’s biggest capital market is through strict and consistent adherence to the rules and regulations that govern companies listed on American stock exchanges.
NOTE 2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation.
The financial statements include the accounts and activity of AF Ocean Investment Management Company and its wholly owned subsidiary, AF Ocean Investment Management (Shanghai), Co. Ltd. as of July 6, 2012, the date of acquisition. All intercompany balances and activity have been eliminated.
Basis of Presentation and Use of Estimates.
The accompanying consolidated financial statements of AF Ocean at September 30, 2013 are unaudited, but, in the opinion of management, include all adjustments necessary for a fair presentation of the results for the interim period. The unaudited consolidated interim financial statements included herein should be read in conjunction with the December 31, 2012 audit of consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K/Amendment 1 for the year ended December 31, 2012. The Company’s quarterly results are subject to fluctuation and, thus, the operating results for any quarter are not necessarily indicative of results to be expected for any future fiscal period.
The Company prepares its financial statements in conformity with generally accepted accounting principles in the United States of America.These principles require management to make 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 and the reported amounts of revenues and expenses during the reporting period. Management believes that these estimates are reasonable and have been discussed with the Board of Directors; however, actual results could differ from those estimates.
Cash and Cash Equivalents. The majority of cash is maintained with a major financial institution in the United States. Deposits with this bank may exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed on demand and, therefore, bear minimal risk. The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.
Property and Equipment. Property and equipment is stated at cost. Depreciation is computed by the straight-line method over
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estimated useful lives. The carrying amount of all long-lived assets is evaluated periodically to determine if adjustment to the depreciation and amortization period or the unamortized balance is warranted. Based upon its most recent analysis, the Company believes that no impairment of property and equipment exists at September 30, 2013.
Foreign Currency Translation. The Company addressed the effect of the exchange rate differences resulting from the translation of the financial statements of its WFOE into the consolidated corporate statements on the Balance Sheet with an Exchange rate adjustment. There was a foreign currency translation adjustment in the amount of $189 for the nine months ended September 30, 2013.
Intangible Assets. Intangible assets consist of business licenses in the Peoples’ Republic of China and goodwill acquired in an acquisition during 2012. Management believes that these assets have unlimited lives and will not be amortized.
Impairment of Long-lived Assets. Long-lived assets such as property, equipment and identifiable intangibles are reviewed for impairment whenever facts and circumstances indicate that the carrying value may not be recoverable. When required impairment losses on assets to be held and used are recognized based on the fair value of the asset. The fair value is determined based on estimates of future cash flows, market value of similar assets, if available, or independent appraisals, if required. If the carrying amount of the long-lived asset is not recoverable from its undiscounted cash flows, an impairment loss is recognized for the difference between the carrying amount and fair value of the asset. When fair values are not available, the Company estimates fair value using the expected future cash flows discounted at a rate commensurate with the risk associated with the recovery of the assets. We did not recognize any impairment losses for any periods presented.
Revenue Recognition. Revenue from consulting services is recognized according to the terms of the consulting agreement. Generally, consulting revenue will be recognized over the term of the agreement. At times deposits or prepayments may result in deferred revenue which will be recognized into income as the services are performed.
Share-based Compensation. The Company may issue stock options whereby all share-based payments to employees, including grants of employee stock options are recognized as compensation expense in the financial statements based on their fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period). The Company had no common stock options or common stock equivalents granted or outstanding for all periods presented.
The Company accounts for stock-based instruments issued to employees in accordance with ASC Topic 718. ASC Topic 718 requires companies to recognize in the statement of operations the grant-date fair value of stock options and other equity based compensation issued to employees. The value of the portion of an award that is ultimately expected to vest is recognized as an expense over the requisite service periods using the straight-line attribution method. The Company accounts for non-employee share-based awards in accordance with the measurement and recognition provisions ASC Topic 505-50. The Company estimates the fair value of stock options at the grant date by using the Black-Scholes option-pricing model.
The Company may issue restricted stock for various business and administrative services. Cost for these transactions are measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The value of the common stock is measured at the earlier of (i) the date at which a firm commitment for performance by the counterparty to earn the equity instruments is reached or (ii) the date at which the counterparty’s performance is complete. There was no share-based compensation paid in the three and nine months ended September 30, 2013 and 2012.
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Income Taxes. The Company accounts for income taxes pursuant to the provisions of ASC 740-10, “Accounting for Income Taxes,” which requires, among other things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred tax assets for which management believes it is more likely than not that the net deferred asset will not be realized.
Earnings per Share. In accordance with ASC 260-10, “Earnings Per Share”, basic net earnings (loss) per common share is computed by dividing the net earnings (loss) for the period by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share are computed using the weighted average number of common and dilutive common stock equivalent shares outstanding during the period. At September 30, 2013 and 2012 dilutive earnings per share were not calculated as the effect is anti-dilutive.
Segment Information. In accordance with the provisions of ASC 280-10, “Disclosures about Segments of an Enterprise and Related Information”, the Company is required to report financial and descriptive information about its reportable operating segments which meet the quantitative thresholds delineated. The Company has one reporting segment that does not meet any of the quantitative thresholds to require separate reporting. However, see Note 8 for limited disclosure.
Recent Accounting Pronouncements. The Company reviews new accounting standards as issued. No new standards had any material effect on these financial statements. The accounting pronouncements issued subsequent to the date of these financial statements that were considered significant by management were evaluated for the potential effect on these consolidated financial statements. Management does not believe any of the subsequent pronouncements will have a material effect on these consolidated financial statements as presented and does not anticipate the need for any future restatement of these consolidated financial statements because of the retro-active application of any accounting pronouncements issued subsequent to September 30, 2013 through the date these financial statements were issued.
NOTE 3.
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 discontinued its restaurant operations in 2011 and is continuing to evaluate its new direction. The Company had $450,000 in consulting fee income for the nine months ended September 30, 2013. During that same period, the Company had net loss of $35,364. These factors indicate the Company is generating revenues; however, there is still substantial doubt about the ability of the Company to continue as a going concern for a reasonable period of time. The Company’s continuation as a going concern is dependent upon its ability to generate revenues through its new business direction.
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.
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NOTE 4.
RELATED PARTY TRANSACTIONS
During the year ended December 31, 2012, the majority shareholder advanced $673,281 to the Company. Of this amount $437,244 was converted to shares of stock during 2012. For the nine months ended September 30, 2013, the shareholder was repaid $58,992. There is currently a balance due from the majority shareholder in the amount of $74,094 at September 30, 2013. On July 9, 2013, the Company issued 28,000,000 shares of stock to the majority shareholder for a promise to pay $280,000 pursuant to an executed subscription agreement. As of September 30, 2013, only $205,906 has been received. The balance of $74,094 is recorded as a subscription receivable on the balance sheet. The Company anticipates the balance due will be received during the fourth quarter of 2013.
NOTE 5
NOTE PAYABLE
On July 6, 2012, AF Ocean signed a promissory note to Island Capital Management, in the amount of $100,000, with stated interest of 5% and a one year maturity date of July 6, 2013. The accrued interest on the note is recorded as an expense. The debt discount associated with the conversion to stock at a stated rate was $51,953. It has been fully amortized from July 6, 2012for the term of the original note. The balance of the discount at September 30, 2013 is $0. On August 6, 2013 the Company and Island Capital Management executed an amendment to the convertible promissory note extending the due date to January 6, 2014.
NOTE 6.
STOCKHOLDERS’ EQUITY
As of September 30, 2013 and December 31, 2012, the Company had 92,105,466 and 7,327,720 shares of common stock issued and outstanding, respectively.
Stock issuance / cancellation during the third fiscal quarter ended September 30, 201, were as follows:
The Company has no options or warrants issued or outstanding.
NOTE 7.
COMMITMENTS AND CONTINGENCIES
From time to time the Company may be a party to litigation matters involving claims against the Company. Management believes that there are no current matters that would have a material effect on the Company’s financial position or results of operations.
The Company rents office space in New York, New York, Shanghai, China, and Sarasota, Florida. The terms for each location are month to month and were started on March 1, 2012. The monthly rent is approximately $200, $3,600, and $300, respectively.
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NOTE 8.
SEGMENT REPORTING
In the third quarter of 2012, we acquired one operating segment,AF Ocean Investment Management (Shanghai) Co., Ltd., in Shanghai, China, which we intend to develop as a provider of business services to Chinese individuals who have investments in U.S. companies. There was no revenue during the nine months ended September 30, 2012, due primarily to the change in ownership.
In the third quarter of 2013, we acquired another operating segment,Andy Ocean Investment Management Limited, in Hong Kong. Andy Ocean (Hong Kong) has never generated any revenue, but the Company acquired $500,000 in cash assets.
The following are the expenses attributed to AF Ocean (Shanghai) and Andy Ocean (Hong Kong) for the nine months ended September 30, 2013. At this time, neither operating segment meets any of the quantitative thresholds which would require separate reporting of its operations, however, management believes that the following information about the segment would be useful to readers of the financial statements.
Schedule of Segment Reporting Information by Segment
| | | | |
| | September 30, 2013 | | December 31, 2012 |
AF Ocean Investment Management (Shanghai) Co., Ltd. Segment: | | | | |
Net income (net loss) | $ | 33,341 | $ | (106,682) |
Total Assets | $ | 307,355 | $ | 325,642 |
Andy Ocean Investment Management Limited, Segment: | | | | |
Net income | $ | 0 | $ | 0 |
Total Assets | $ | 0 | $ | 500,000 |
NOTE 9.
ACQUISITION OF SUBSIDIARY
On July 9, 2013, the Company acquired 100% of the membership interest in Andy Ocean Investment Management Limited for stock. The pro-forma results of the combined entity as if the acquisition occurred on January 1, 2013 are as follows:
Pro Forma Results Assuming a January 1, 2013 acquisition
| | |
Profit Loss | | September 30, 2013 |
Revenues | $ | 450,000 |
Net loss | $ | (46,625) |
NOTE 10.
SUBSEQUENT EVENTS
Management has evaluated subsequent events through November 13, 2013, the date the financial statements were available to be issued. Management is not aware of any significant events that occurred subsequent to the balance sheet date that would have a material effect on the financial statements thereby requiring adjustment or disclosure.
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ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
The following discussion should be read in conjunction with ourfinancial statements and the notes thereto.
Forward-Looking Statements
This quarterly report contains forward-looking statements relating to us that are based on the beliefs of our management as well as assumptions made by, and information currently available to, our management. When used in this Report, the words “anticipate”, “believe”, “estimate”, “expect”, “intend”, “plan” and similar expressions, as they relate to us or our management, are intended to identify forward-looking statements. These statements reflect management’s current view of us concerning future events and are subject to certain risks, uncertainties and assumptions, including among many others: our potential inability to raise additional capital, the possibility that third parties hold proprietary rights that preclude us from marketing our products, the emergence of additional competing technologies, changes in domestic and foreign laws, regulations and taxes, changes in economic conditions, a general economic downturn, a downturn in the securities markets, Securities and Exchange Commission regulations which affect trading in the securities of “penny stocks,” and other risks and uncertainties. Should any of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this Report as anticipated, estimated or expected.
Use of Certain Defined Terms
Except as otherwise indicated by the context, references in this report to "AF Ocean" "we," "us," or "our" and the "Company" are references to the business of AF Ocean Investment Management Company.
Use of GAAP Financial Measures
We use GAAP financial measures in the section of this quarterly report captioned “Management’s Discussion and Analysis and Results of Operation.” All of the GAAP financial measures used by us in this report relate to the inclusion of financial information.
Overview
This subsection of MD&A is an overview of the important factors that management focuses on in evaluating our businesses, financial condition and operating performance, our overall business strategy and our earnings for the periods covered.
General
We are an operating company in the business consulting services. We have an operating history from our prior restaurant business and have generated revenues from our prior business model activities that have produced both net incomes and losses in the periods in which we have been fully operational. We have a limited operating history form our current consulting service business and only just begun generating revenue.
Our Board of Directors believes that we can operate as a business consulting firm during the next twelve months. A change in the strategic business direction of the company may take years to complete and future cash flows, if any, are impossible to predict at this time. The realization value from any strategic change in operations is largely dependent on factors beyond our control such as the market for our services. We may raise cash from sources other than our operations. Our only other source for cash at this time is investment by others in the Company.
Employees
As of September 30, 2013, there were five (5) full time employees (two (2) in Shanghai, China, and three (3) in Florida). This does not include the one (1) officer and director who manages the corporation.
Critical Accounting Policies
The preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, 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. Our actual results could differ from those estimates. To be as accurate with our estimates as possible, we use our historical data to forecast our future results. Deviations from our projections are addressed when our financials are reviewed on a monthly basis. This allows us to be proactive in our approach to managing our business. It also allows us to rely on proven data rather than having to make assumptions regarding our estimates.
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Management does not believe that our actual results are related to any sensitivity in estimates made by management. The year-end consistency of our results has shown that our prior year’s historical data is the best projector of our future results.
Income Taxes
We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.
We record net deferred tax assets to the extent we believe these assets will more likely than not be realized. In making such determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. In the event we were to determine that we would be able to realize our deferred income tax assets in the future in excess of their net recorded amount, we would make an adjustment to the valuation allowance, which would reduce the provision for income taxes.
Impairment of Long-Lived Assets
FASB ASC 360 requires that long-lived assets and certain identifiable intangibles held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. We assess the potential impairment of long-lived assets, principally property and equipment, whenever events or changes in circumstances indicate that the carrying value may not be recoverable. We determine if there is impairment by comparing undiscounted future cash flows from the related long-lived assets with their respective carrying values. In determining future cash flows, significant estimates are made by us with respect to future operating results of the restaurant over its remaining lease term. If assets are determined to be impaired, the impairment charge is measured by calculating the amount by which the asset carrying amount exceeds its fair value. This process of assessing fair values requires the use of estimates and assumptions, which are subject to a high degree of judgment. The adoption of FASB ASC 360 has not materially affected the Company’s reported earnings, financial condition or cash flows.
Results of Operations
The following table provides a summary of the results of operations for the periods ended September 30, 2013 and 2012 and for the last two full fiscal years.
Summary of Results of Operations
| | | | | | |
PERIOD | | INCOME (LOSS) FROM OPERATIONS | | TOTAL OTHER (INCOME) EXPENSE | | NET INCOME (LOSS) |
Nine months ended September 30, 2013 | $ | (21,624) | $ | (13,741) | $ | (35,364) |
Nine months ended September 30, 2012 | $ | (366,487) | $ | (12,312) | $ | (378,799) |
December 31, 2012 | $ | (627,917) | $ | (16,829) | $ | (644,746) |
December 31, 2011 | $ | (17,318) | $ | 37,846 | $ | 20,528 |
Liquidity and Capital Resources
As of September 30, 2013, we had cash and cash equivalents of $747,111.
In the event we are unable to generate sufficient funds to continue our business efforts or if the company is pursued by a larger company for a business combination we will analyze all strategies to continue the company and maintain or increase shareholder value. Under these circumstances we would consider a merger, acquisition, joint venture, strategic alliance, a roll-up, or other business combination for the purposes of continuing the business and maintaining or increasing shareholder value. Management believes its responsibility to maintain shareholder value is of paramount importance, which means the Company should consider the aforementioned alternatives in the event funding is not available on favorable terms to the Company when needed.
Results of Operations for the nine and three months ended September 30, 2013 and 2012
The following tables set forth key components of our results of operations and revenue for the periods indicated in dollars.
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Table 3.0 Comparison of our Consolidated Statement of Operations for the Nine and Three Months Ended September 30, 2013 and 2012
| | | | | | | |
| | | | | | | |
Nine months ended September 30, 2013 and 2012 | | 2013 | | 2012 | | Change | %Change |
Revenues: | $ | 450,000 | $ | 90,000 | | 360,000 | 400% |
Expenses: | | 471,624 | | 456,487 | | 15,137 | 3% |
Income (loss) from operations | | (21,624) | | (366,487) | | 344,863 | 94% |
Other income | | 13,304 | | 142 | | 13,162 | 9269% |
Other (expense) | | (27,044) | | (12,454) | | (14,590) | -117% |
Net income (loss) | $ | (35,364) | $ | (378,799) | | 343,435 | 91% |
Income (loss) per share: basic and diluted | $ | (0.00) | $ | (0.10) | | | |
| | | | | | | |
Three months ended September 30, 2013 and 2012 | | 2013 | | 2012 | | Change | %Change |
Revenues: | $ | 135,000 | $ | 60,000 | | 75,000 | 125% |
Expenses: | | 168,981 | | 346,485 | | (177,504) | 51% |
Income (loss) from operations | | (33,981) | | (286,485) | | 252,504 | 88% |
Other income (expense) | | 143 | | 142 | | 1 | 0% |
Interest income (expense) | | (1,068) | | (12,454) | | 11,386 | 91% |
Net income (loss) | $ | (34,907) | $ | (298,797) | | 263,890 | 88% |
Income (loss) per share: basic and diluted | $ | (0.00) | $ | (0.06) | | | |
Income (Loss). For the nine and three months ended September 30, 2013, total income (loss) from operations was ($21,624) and $(33,981), respectively, compared to ($366,487) and ($286,485) for the nine and three months ended September 30, 2012, respectively. The income generated in the current period was directly attributable to $450,000 in revenue from the new direction of the company.
Operating Expenses.The increase in expenses for the nine months ended September 30, 2013 compared to the nine months ended September 30, 2012 is due primarily to the addition of three employees, travel expenses for investigating candidate Chinese companies, and professional services necessary for the operations.
Net Income (Loss). As a result of the increase in income, we suffered a loss of only ($35,364) for the nine months ended September 30, 2013 compared to the loss of (378,799) for the nine months ended September 30, 2012.
Liquidity and Capital Resources
General. At September 30, 2013, we had cash and cash equivalents of $747,111. We have historically met our cash needs through shareholder loans, however, in 2013 we have generated enough revenue through our consulting services to cover our expenses, which are generally fees for professional services and general and administrative activities. Nonetheless, we believe that our cash balance is not yet sufficient to finance our cash requirements for expected operational activities, capital improvements, and repayment of debt through the next 12 months.
Our operating activities used cash of $183,483 for the nine months ended September 30, 2013 versus $139,354 for the nine months ended September 30, 2012. With a net loss of ($35,363) for the nine months ended September 30, 2013, our operations are still supported by loans from the majority shareholder or equity purchases.
Net cash of $9,752 was used in investing activities for the nine months ended September 30, 2013 compared to $319,933 used in the nine months ended September 30, 2012. This was due primarily to the purchase of our Shanghai subsidiary.
Financing activities provided $537,648 in the nine months ended September 30, 2013, compared to $963,466 during the comparable period in 2012, which was due primarily to payments from our majority shareholder.
As of September 30, 2013, assets exceed our liabilities by $963,874.
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Going Concern
The accompanying consolidated 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 had consulting fee income of $450,000 and a net loss of ($35,364) for the nine months ended September 30, 2013 compared to revenue of $90,000 and net loss of ($378,799) for the nine months ended September 30, 2012. These factors indicate the Company is generating revenues; however, there is still substantial doubt about the ability of the Company to continue as a going concern for a reasonable period of time. The Company is highly dependent on its ability to obtain clients and investment capital from future funding opportunities to fund the current and planned operating levels. The Company’s continuation as a going concern is dependent upon its ability to bring in income generating activities and its ability to continue receiving investment capital from future funding opportunities. No assurance can be given that the Company will be successful in these efforts.
Inflation
Inflation does not materially affect our business or the results of our operations.
Recent Accounting Pronouncements
The Company has carefully considered the new pronouncements that altered generally accepted accounting principles. The Company does not believe that any new or modified principles will have a material impact on the Company’s reported financial position or operations in the near term.
Off-Balance Sheet Arrangements
We do not have any off-balance arrangements.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following discussion about the Company’s market rate risk involves forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements.
In general, business enterprises can be exposed to market risks, including fluctuation in commodity and raw material prices, foreign currency exchange rates, and interest rates that can adversely affect the cost and results of operating, investing, and financing. In seeking to minimize the risks and/or costs associated with such activities, the Company manages exposure to changes in commodities and raw material prices, interest rates and foreign currency exchange rates through its regular operating and financing activities. The Company does not utilize financial instruments for trading or other speculative purposes, nor does the Company utilize leveraged financial instruments or other derivatives.
Our operations are conducted primarily in the United States and are not subject to foreign currency exchange rate risk. Some of our products are sourced internationally and may fluctuate in cost as a result of foreign currency swings, however, we believe these fluctuations have not been significant.
ITEM 4.
CONTROLS AND PROCEDURES
Disclosure Controls and Procedures.
The Company maintains disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) that are designed to ensure that information required to be disclosed in the Company’s Securities Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to the Company’s management, as appropriate, to allow timely decisions regarding required disclosure.
The Company’s management has evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, management has concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were not effective.
Changes in Internal Controls over Financial Reporting.
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We had no significant changes in our internal controls during the nine months ended September 30, 2013. Management concluded that there has been no change in our internal control over financial reporting during the period ended September 30, 2013, that has materially affected or is reasonably likely to affect our internal control over financial reporting.
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PART II – OTHER INFORMATION
ITEM 1.
LEGAL PROCEEDINGS
None
ITEM 2
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None
ITEM 3.
DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4.
MINE SAFTEY DISCLOSURES
Not applicable
ITEM 5.
OTHER INFORMATION
None
ITEM 6
EXHIBITS
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