ALCO, INC. - FORM 10-K - March 26, 2010

Attached files

file	filename
EX-31 - ALCO, INC.	exhibit311.htm
EX-31 - ALCO, INC.	exhibit312.htm
EX-32 - ALCO, INC.	exhibit321.htm
EX-32 - ALCO, INC.	exhibit322.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2009

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 000-51105

ALCO, INC.

(Exact name of registrant as specified in its charter)


Nevada	11-3644700
(State or other jurisdiction of incorporation)	(IRS Employer Identification Number)

Suite 501, Bank of America Tower
12 Harcourt Road, Central
Hong Kong

(Address of principal executive office)

Registrant’s telephone number, including area code: 852-2521-0373

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Name of each exchange on which registered
N/A	N/A

Securities to be registered under Section 12(g) of the Act:

Common Stock

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

o Yes x No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.

o Yes x No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x Yes o No

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Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, 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 file such reports).

N/A o Yes o No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

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

Accelerated filer

Non-accelerated filer

(Do not check if a smaller reporting company)

Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes o No x

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter: 0

APPLICABLE ONLY TO CORPORATE REGISTRANTS

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. As of March 25, 2010, there were 10,150,000 shares of the registrant’s common stock, $0.001 par value, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of 1933. The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 198

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INDEX

PART I

ITEM 1. BUSINESS

BACKGROUND

PRINCIPAL PRODUCTS AND SERVICES

DESCRIPTION OF INDUSTRY

GOVERNMENT REGULATION

CUSTOMERS AND MARKETING

COMPETITION

EMPLOYEES

REPORTS TO SECURITY HOLDERS

ITEM 1A. RISK FACTORS

ITEM 1B. UNRESOLVED STAFF COMMENTS

ITEM 2. PROPERTIES

ITEM 3. LEGAL PROCEEDINGS

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 9

ITEM 6. SELECTED FINANCIAL DATA

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

ITEM 8. FINANCIAL STATEMENTS

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

ITEM 9A(T). CONTROLS AND PROCEDURES

ITEM 9B. OTHER INFORMATION

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

ITEM 11. EXECUTIVE COMPENSATION

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS 37

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

PART IV

ITEM 15. EXHIBITS

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PART I

DISCLAIMER REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this report, including statements in the following discussion, are what are known as “forward-looking statements”, which are basically statements about the future. For that reason, these statements involve risk and uncertainty since no one can accurately predict the future. Words such as “plans,” “intends,” “will,” “hopes,” “seeks,” “anticipates,” “expects,” and the like, often identify such forward-looking statements, but are not the only indication that a statement is a forward-looking statement. Such forward-looking statements include statements concerning our plans and objectives with respect to the present and future operations of the Company, and statements which express or imply that such present and future operations will or may produce revenues, income or profits. Numerous factors and future events could cause the Company to change such plans and objectives, or fail to successfully implement such plans or achieve such objectives, or cause such present and future operations to fail to produce revenues, income or profits. Therefore, the reader is advised that the following discussion should be considered in light of the discussion of risks and other factors contained in this report on Form 10-K and in the Company’s other filings with the Securities and Exchange Commission. No statements contained in the following discussion should be construed as a guarantee or assurance of future performance or future results.

ITEM 1. BUSINESS

BACKGROUND

ALCO

ALCO, Inc. (“ALCO,” “we,” “us,” the “Company”) was incorporated under the laws of the State of Nevada on June 7, 1999 under the name Sea Horse, Inc. On September 20, 2004, we changed our name to Lotus Capital Corp. On February 13, 2006, we changed our name to ALCO, Inc.

ALCO was formed as a "blind pool" or "blank check" company whose business plan was to acquire one or more properties or businesses and to pursue other related activities intended to enhance shareholder value.

From the date of its incorporation until December 9, 2005, ALCO’s only business activities were organizational activities directed at developing its business plan, raising its initial capital and registering under the Securities Exchange Act of 1934. On November 22, 2005, ALCO entered into an Agreement for Share Exchange with AL Marine Holdings (BVI) Ltd (“AL Marine”) and the individual shareholders of AL Marine pursuant to which it agreed to acquire all of the issued and outstanding stock of AL Marine in exchange for the issuance of 9,766,480 shares of ALCO’s common stock. The closing under the Agreement for Share Exchange was completed on December 9, 2005, and upon completion of the closing, AL Marine became a wholly-owned subsidiary of ALCO.

AL Marine

AL Marine was incorporated under the laws of the British Virgin Islands on May 30, 2005 for the sole purpose of acting as a holding company for interests in several affiliated operating businesses. On July 15, 2005, AL Marine acquired 100% of the outstanding shares of Andrew Liu & Company Limited (“ALC”), a Hong Kong corporation, 85% of the outstanding shares of EduShip Asia, Ltd. (“ESA”), a Hong Kong corporation, and 60% of the outstanding shares of Chang An Consultants Limited (“CAC”), a Hong Kong corporation. The business of ALCO is now carried on through AL Marine and its subsidiaries.

PRINCIPAL PRODUCTS AND SERVICES

ALCO operates through its subsidiaries: ALC, CAC and ESA. These subsidiaries operate primarily in Hong Kong and China.

ALC

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ALCO is principally engaged in the marine insurance brokerage business though it’s wholly owned subsidiary, ALC, which was incorporated in 1989 as an insurance brokerage firm specializing in marine hull protection and indemnity insurance. ALC began operations in Hong Kong and moved into China in 1991. ALC expanded its operations in South Korea in 1995.

Under Hong Kong regulations, a person who acts as an insurance broker must have authorization from the Insurance Authority or be a member of a body of insurance brokers approved by the Insurance Authority. The Hong Kong Confederation of Insurance Brokers (“HKCIB”) is such a body that has been approved by the Insurance Authority. ALC became a member of the HKCIB in 1993. In order to be admitted to the Confederation, an insurance broker must meet minimum requirements in regard to qualifications and experience; capital and net assets; professional indemnity insurance; keeping of separate records; and the keeping of proper books and accounts. These requirements are determined by the Insurance Authority. If an insurance broker does not meet these standards, the Confederation can withdrawal the insurance broker’s membership.

Insurance brokers represent the insured in negotiating and placing insurance coverage with insurers, as well as handling claims when they occur. Insurance brokers generate revenue from commissions and fees on insurance premiums and earn interest on premiums held before remittance to the insurers. Brokers do not issue the policies themselves; they only find and place policies with insurance carriers on behalf of their clients and act as a liaison between the insurer and the client during the claims process.

ALC works in placing insurance coverage with both hull and machinery coverage (H&M) providers and protection and indemnity coverage (P&I) providers. H&M covers the physical loss of or damage to the vessel arising from accidents, while P&I covers liabilities, losses, expenses and costs incurred in relation to injury or death on board. Business from China-based clients accounts for 95% of the business of ALC.

While ALC deals directly with most of its clients, it also engages a sub-broker, Jiangsu Oriental Navigators Insurance Brokers, in China. The percentage of business of ALC generated by the sub-broker is approximately 0.9%. ALC does not have any written agreements with this sub-broker, and the relationship with them could be terminated at any time without cause. However, ALC could replace this sub-broker, if needed, so it would not suffer a material adverse effect if the relationship is terminated.

ALC places insurance coverages with approximately twenty different insurance providers. For P&I insurance, the company places insurance with The West of England Ship Owners Insurance Association, American P&I Club, and The South of England Protection & Indemnity Association (Bermuda) Ltd., among others. For H&M coverage, ALC places coverages with Spectrum Marine, Pierre Leblanc & Associations A.S.S., and Lloyd’s Underwriters, among others. ALC does not have any written agreements with these insurance providers.

Strike Club

In 2002, the Strike Club appointed ALC as its exclusive representative in China. The Strike Club is an international insurer that was formed to cover losses that could occur in the marine industry, such as lost profits from labor strikes, which were not typically covered by other insurance. The Strike Club is owned by its members and is a mutual insurer. The Strike Club covers vessels’ loss of work resulting from delay due to strikes or other circumstances that are outside the control of the operator. As the exclusive representative of the Strike Club in China, ALC is the only channel through which any shipowner, charterer or insurance broker in China may place insurance with the Strike Club. For each policy placed through it, ALC takes 20% of the premium as its commission. ALC cannot place any business with any other company offering the same coverage as the Strike Club during the term of the agreement. We do not pay Strike Club for this representation.

Our written contract with the Strike Club expired in 2004, and no new agreement has been created. However, we continue to operate as if the 2004 contract were still in effect. Either party may terminate the relationship at any time, without cause.

During 2009, ALC received US$112,055 (2.3% of total commission income) in commission income due to this agreement with the Strike Club.

ESA

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AL Marine owns 85% of ESA. In 2004, ESA was appointed as an exclusive agent by the Institute of Chartered Shipbrokers (UK) ("ICS") to set up ICS's first distant learning center in Shanghai, China. ICS is an internationally recognized professional body representing shipbrokers, managers, and agents throughout the world. ICS has approximately 3,500 members in over 60 countries.

We believe that many students in China will take advantage of the ICS training being offered in their country because they will not be required to travel overseas. As the exclusive agent of ICS in China, ALCO plans to provide delivery of courses in accordance with the syllabus of ICS, promotion of membership in ICS, and management of the examination center. ICS is the only internationally recognized professional and vocational qualification in the shipping industry. Pursuant to its contract with ICS, ESA is required to provide seminars, review sessions, revision workshops and other assistance to the students who enroll in the learning center. Students will be charged GBP235 (approximately US$372), of which GBP137.5 (approximately US$218) will be paid to ICS. The fees may be revised in the future upon the agreement of both parties. ESA is responsible for paying the set up and maintenance for the center.

ESA has limited assets and its operations to date have not been significant. As of December 31, 2009, ESA had net assets of $(46,251) with a cash balance of $26,971, accounts receivable of $1500, due to related parties of $64,992 and accounts payable of $8,859.

During the 2009 fiscal year, ESA received $5,894 from enrollment fees from this arrangement. It spent approximately $16,897 setting up and maintaining the learning center.

CAC

AL Marine owns 60% of CAC which participates in a joint venture with a large state-owned shipping group in China, the China Chanjiang Shipping Corporation (the "CSC Group"). CAC, which was incorporated in Hong Kong in March 1999, acts as an in-house insurance brokerage firm and general consultant for the CSC Group. CAC looks for business opportunities for the CSC Group and uses the CSC Group’s connections in China to create business opportunities for other foreign shipping interests.

The CSC Group owns a substantial and growing fleet of ships, advertising space, and seafarers’ schools in China. The CSC Group has a large share of the market in logistics, cruising, shipbuilding and other related businesses along the Changjang region in China and has expanded its businesses all over the country. The CSC Group’s other business activities include shipbuilding, crane manufacturing, cruising, advertising, and seafarers’ training.

CAC has no formal agreement with the CSC Group. In 2009, about 6.3% of ALCO’s revenue was generated from CAC.

DESCRIPTION OF INDUSTRY

Marine Insurance Brokerage

Marine insurance is a mature industry, which is diverse in terms of types of coverage and insurers. These different options are intended to suit the risk profile and requirements of different types of vessels, voyages, shipowners, and charterers. Within marine insurance, the two most common forms of insurance are hull and machinery (H&M) and protection and indemnity (P&I). H&M covers the physical loss of or damage to the vessel arising from accidents, while P&I covers liabilities, losses, expenses and costs incurred in relation to injury or death.

Various insurers differ significantly in the coverages and options they provide. Most shipowners and charterers rely on professional insurance brokers for advice to make an informed decision on the choice of insurer and coverage that will suit their needs. Insurance brokers represent the insured in negotiating and placing insurances with the insurers. Brokers generate revenue primarily from commissions and fees on insurance calls and premiums. Revenue is also generated from interest on calls and premiums held before remittance to the insurers and on claims held before payment to the insured. Commission revenue varies based on the calls and premiums on the policies that are placed on behalf of clients. When call and premium rates in the market rise, revenue for brokers increases, and revenue declines when call and premium rates decline. The standard rate of commission for an insurance broker is approximately 10% on the call or premium of the insurance placed.

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In addition, as part of the brokerage service, the brokers have a duty to make claims for their clients. In doing so, they appraise the merits of the claim, devise a strategy for the claim and submit it to the insurer at the right place and in the correct form.

GOVERNMENT REGULATION

ALCO’s subsidiaries, ALC and CAC, as members of HKCIB, must comply with the minimum requirements specified by the Insurance Authority under Section 70(2) of the Insurance Companies Ordinance of Hong Kong. The minimum requirements specified by the Insurance Authority (“IA”) under Section 70(2) of the Insurance Companies Ordinance are:

(a)

To maintain paid up share capital or minimum net assets of HK$100,000

(b)

To maintain adequate accounting records to reflect the transactions of its business

(c)

To maintain client accounts in accordance with the minimum requirements specified by the IA under Section 70(2) of the Ordinance

(d)

To maintain a professional indemnity insurance policy in accordance with the minimum requirements specified by the IA under Section 70(2) of the ordinance.

These restrictions and other laws with which we must comply are subject to change. Any change in these laws may cause our cost of doing business to increase or cause a change in the demand for our services.

CUSTOMERS AND MARKETING

While members of the senior management regularly appear at industry-targeted functions and speak at seminars organized for the shipping industry, ALCO believes that the best marketing channel is by word-of-mouth and clients’ referrals based on quality of service and results in providing a solution to difficult claims. The very close-knit nature of the Chinese shipping community places ALCO in a good position. This strategy has so far proven to be effective.

Historically, ALCO has had a customer retention rate around 79% for 2009. We anticipate that we will maintain this retention rate in the future because we have been able to maintain this rate for the last three years. In 2009, ALCO had over 260 customers, and its customers were mainly from China. ALCO obtains new clients through the channels of existing clients or sub-broker.

COMPETITION

ALCO’s major competitors are large US insurance brokers such as Aon, Marsh and Willis, who provide a wide range of insurances and are not focused on marine insurance. These competitors are much larger than ALCO and have access to significantly more financial resources than ALCO. However, these competitors are international companies who focus on many different types of insurance. We believe that ALCO is one of the few insurance providers that specializes in the marine insurance business.

Competition for business is intense in all of ALCO’s business lines and in every insurance market, and other providers of global risk management services have substantially greater market shares than ALCO does. Competition on premium rates has also exacerbated the pressures caused by a continuing reduction in demand in some classes of business. Additional competitive pressures arise from the entry of new market participants, such as banks, accounting firms and insurance carriers themselves, offering risk management or transfer services.

EMPLOYEES

At the time of this report, ALCO had 39 employees, including 27 in operations and 12 in supporting and administrative functions. 38 employees are full time and 1 employee is part time.

REPORTS TO SECURITY HOLDERS

ALCO is subject to the reporting requirements of the Exchange Act and the rules and regulations promulgated thereunder, and, accordingly, files reports, information statements or other information with the Securities and Exchange Commission, including quarterly reports on Form 10-Q, annual reports on Form 10-K, reports of current events on Form 8-K, and proxy or

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information statements with respect to shareholder meetings. Although ALCO may not be obligated to deliver an annual report to its shareholders, we will voluntarily provide electronic or paper copies of the company’s filings free of charge upon request. The public may read and copy any materials ALCO files with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, N.W. Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address is http://www.sec.gov.

ITEM 1A. RISK FACTORS

N/A

ITEM 1B. UNRESOLVED STAFF COMMENTS

N/A

ITEM 2. PROPERTIES

ALCO rents a portion of its facilities from companies owned by the directors of ALCO and rents a portion of its facilities from third parties. As of December 31, 2009, ALCO leased approximately 6,084 square feet of office space for its operations. Its current leased properties are:


Location	Size	Description

Central, Hong Kong	4,060 sq. ft	Headquarters

Shanghai, China	2,024 sq. ft	Office

The Hong Kong office is leased from Fortune Ocean Ltd., whose directors and shareholders are Andrew Liu, John Liu, and Madam Yap. Starting from December 2007, an additional flat at the existing building of the Hong Kong Office was leased from a third party for office expansion. In December 2009, this lease was ceased and another flat in the same building is leased from a third party for further expansion. The Shanghai office has been leasing from a third party since December 2007. ALCO’s current total monthly rental payment for the facilities mentioned as above is approximately US$25,246. We intend to renew these leases upon their expiration.

ITEM 3. LEGAL PROCEEDINGS

ALCO is not a party to any pending legal proceedings, and no such proceedings are known to be contemplated. None of ALCO’s directors, officers or affiliates, and no owner of record or owner of more than five percent (5%) of its securities, or any associate of any such directors, officer or security holder is a party adverse to ALCO or has a material interest adverse to it in reference to pending litigation.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to the shareholders for a vote during the fourth quarter of the fiscal year ended December 31, 2009.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our shares are approved for trading on the OTC Bulletin Board under the symbol ALCQ, but there has been no trading activity in the shares and no trading market has been established. There is no assurance as to when, or whether, an active trading market in our shares will be established.

None of ALCO’s common equities are subject to any outstanding options, warrants to purchase, or securities convertible into, common stock. ALCO filed a registration statement on Form SB-2 to register a total of 500,000 shares for resale on behalf of certain selling shareholders. The registration statement was declared effective on November 13, 2006. Other than the 500,000 shares registered for resale on behalf of certain selling shareholders, there are no common equities of ALCO that are being, or have been proposed to be, publicly offered by ALCO, the offering of which could have a material effect on the market price of its common stock.

As of December 31, 2009, ALCO had 10,150,000 shares of common stock issued and outstanding. The shares are held by 30 stockholders of record.

ALCO currently has no securities authorized for issuance under any equity compensation plans. ALCO has never declared any cash dividends on its common stock and does not anticipate declaring dividends in the foreseeable future.

ITEM 6. SELECTED FINANCIAL DATA

N/A

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

PLAN OF OPERATIONS

Since the worldwide financial turmoil began in 2008, the volume of international trade dramatically declined, leading to declining volumes in the shipping industry. Although economic recovery began in late 2009, excess tonnage supply in the shipping market during the period of financial turmoil, led to a large volume of layup and some poorly funded owners and operators are still facing financial problems. In order to deal with this financial and shipping turmoil, our plan for 2010 is mainly the continuation of the plan for 2009. The plan consists of improvement of our cost competitiveness, and enhancement of credit control and marketing function.

In order to seek to improve our cost competitiveness, we are continuously reviewing our current operating processes and procedures to identify areas for improvement and to implement changes where necessary to ensure our efficiency and effectiveness. In addition, beginning in early 2009, we implemented several measures intended to tighten reduce our general and administrative expenses. The effect of these changes was noted in 2009 as our general and administrative expenses decreased 3% in 2009 as compared to 2008. We will continue to implement these measures in 2010.

For enhancement of our credit control, we are closely monitoring the aging of client premium receivables and aiming to increase the receivable turnover. In 2009, we established a marketing function, the main responsibilities of which are maintaining our existing client base and promoting the company’s business to potential new clients. Further resources will be allocated to this new function in 2010.

We do have a plan to hire additional employees in the next twelve months to enhance our operations including marketing, consultancy service and supporting functions. However, this plan will depend on the market situation and internal resources and there is no assurance that we will able to implement this plan within the foreseeable future.

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We do not have any material off-balance sheet arrangements.

RESULTS OF OPERATIONS

Year ended December 31, 2009 compared with 2008

Revenue: Revenue for the year ended December 31, 2009 was $5,041,711 as compared to $4,926,674 for the same period in 2008. The increase of $115,037 or approximately 2% was mainly due to increases of commission income fee from the existing clients. This increase was partially offset by a decrease in consulting income, website advertising, enrollment fees and other income. Commission income is based on a percentage of the premiums paid by the insured. Because of an increase in insurance call and premium rates in the market, commission income increased by $141,791 or 3%. On the other hand, consulting income for the year ended December 31, 2009 decreased to $134,882 from $146,923 in 2008. The decrease of $12,041 or 8% was because demand for consulting services decreased. Furthermore, website advertising and enrollment fees for the year ended December 31, 2009 were $14,000 and $5,894 respectively, as compared to $17,083 and $6,410 for the same period of 2008. The decreases were mainly due to decreases of customer’s demand and enrollment. In addition, other revenues for the year ended December 31, 2009 decreased to $25,463 from $36,577 in 2008. The decrease of $11,114 was due to the drop of commission from business referral.

Net Income before tax: Net income before tax for the year ended December 31, 2009 was $1,814,762 compared to $2,006,912 for the whole year of 2008. The decrease of $192,150, or approximately 10%, was mainly due to an increase of operating expenses and a decrease of other income which was partially offset by an increase in revenue during the year. The reasons for increases in revenue from operations are discussed above, while the increases of operating expense are discussed in the section below. For the other income, the decrease was mainly due to a decrease of interest income. Because of low interest rates in the market, interest income dramatically decreased by $57,930 or 92% from $63,307 in 2008 to $5,377 in 2009.

Operating expenses: Total operating expenses were $3,241,749 for year ended December 31, 2009, as compared to $2,983,423 for the same period in 2008. The increase of $258,326 or 9% was mainly due to increases in staff costs, rent, bad debt expense, depreciation, exchange loss, which was partially offset by a decrease in travel expenses and other general and administrative expenses during the year. The reasons for the changes in the major items are as follows:

Salaries – increased by $256,289 or 17% from $1,540,390 in 2008 to $1,796,679 in 2009. The increase was mainly due to increases in headcounts and pay rates during the year of 2009.

Travel expenses – decreased by $13,723 or 5% from $303,686 in 2008 to $289,963 in 2009. The decrease was mainly because of the result of the imposition of limitations on travel in order to reduce operating expenses.

Bad debt expenses – increased by $16,727 or 15% from $114,089 in 2008 to $130,816 in 2009. The increase was mainly due to an increase in the provision of doubtful debts in 2009.

Depreciation – increased by $3,241 or 10% from $31,456 in 2008 to $34,697 in 2009. The increase was primarily due to the addition of fixed assets during the second half of 2008 and the whole year of 2009.

Exchange loss –increased by $6,810 or 44% from $15,466 in 2008 to $22,276 in 2009. The increase was mainly because the exchange rate of US dollar against HK dollar in the market throughout 2009 was under HK$7.8 which is used by the company as standard rate in accounting purpose.

Other general and administrative expenses – decreased by $15,096 or 3% from $497,522 in 2008 to $482,426 in 2009. In general, the decrease was the result of tightening of expenses and the closure of the liaison office at Korea in August 2009.

LIQUIDITY AND CAPITAL RESOURCES

Cash flow

For the year ended December 31, 2009, cash provided by operating activities totaled $1,190,680 compared to $1,504,573 for the fiscal year ended December 31, 2008. The receipt of funds was primarily due to net income for the year plus increases in commission receivable, enrollment fee receivable, deposit and prepayment, other receivable and accrued expenses as well as decreases in fiduciary cash, accounts payable, claims payable, other payable and income taxes receivable.

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For the year ended December 31, 2009, cash used in investing activities amounted to $123,279 compared to $238,781 for the fiscal year ended December 31, 2008. The use of funds was for the purchase of office equipment and equity investment for long term investment purpose.

For the year ended December 31, 2009, cash used by financing activities amounted to $43,772, compared to $42,560 for the fiscal year ended December 31, 2008. The use of funds was for the repayment of obligations under finance leases, and amount due to minority shareholders and director.

Assets and liabilities

For the year ended December 31, 2009, the Group’s balance sheet reflects total current assets of $7,248,171, which increased by $1,322,468 (or 22%) as compared to $5,925,703 for the year ended December 31, 2008. Total current liabilities for the year ended December 31, 2009 were $915,069, which decreased by $937,624 (or 51%) as compared to $1,852,693 for the year ended December 31, 2008. The increase of total current assets was mainly due to increases of cash and cash equivalents, commission receivable and enrollment fees receivable. The decrease of total current liabilities was mainly due to decreases of trade accounts payable, claim payable, other payable, amount due to directors, and amount due to minority shareholders partially offset by an increase of accrued expenses and current portion of obligation from hire purchase lease.

As of December 31, 2009, commission receivable was $658,795 as compared to $360,757 for the same period in 2008, while trade accounts payable and other payable were $625,385 and $144,092 respectively, as compared to December 31, 2008 balances of $1,425,946 and $208,293. Each of these changes was due to the timing of commissions received from customers and the timing of making payments to insurers and customers in relation to the year end. In addition, because the rate of insurance premium paid by customers to insurers was raised, cash and cash equivalents, commission receivable and other receivable increased during the year ended December 31, 2009. Furthermore, because certain claims received from insurers on behalf of customers were repaid, the claim payable significantly decreased as compared to the year end of 2008. As of December 31, 2009, there was $1,917 deferred revenue included in the liabilities. This item is in relation to the income received in advance for the website advertising.

Because the interest rate is maintained at a very low level in the recent years, the company purchased publicly traded equity securities with high dividend yield since 2008 for long term investment purpose. As of December 31, 2009, the market value of the equity securities was $369,360.

The Company has bank and cash equivalents of approximately $6,587,876 as at December 31, 2009. The Company has sufficient funds to satisfy its financial commitments and working capital requirements for the next twelve months. During the year end of December 31, 2009, the Company had $0 of commitments for capital expenditures and off-balance sheet arrangements as well as lease commitments of $270,324.

CRITICAL ACCOUNTING POLICIES

Estimates And Assumptions

In preparing financial statements that conform to generally accepted accounting principles, management makes estimates and assumptions that may affect the reported amount of assets and liabilities. Actual results could differ from these estimates. Particularly, the areas requiring the use of management estimates relate to the valuation of accounts receivable and payable, equipment, accrued liabilities, and the useful lives for amortization and depreciation.

Earnings (Loss) Per Share

The Earnings/ (loss) per share is determined by dividing the net earnings (loss) by the weighted average number of outstanding shares during that period.

Currency

ALCO uses the Hong Kong dollar as its currency. The exchange rate for HK$ to US dollars has varied by very little during the period between 2002 and 2009. Thus, the consistent exchange rate used has been 7.80 HK$ per each US dollar. Since

- 11 -

there have been no greater fluctuations in the exchange rate, there is no gain or loss from foreign currency translation and no resulting other comprehensive income or loss. There were no material gains or losses recognized as a result of translating foreign currencies to the U.S. or Hong Kong dollar. No assurance can be given as to the future value of foreign currency and how fluctuations in such value could affect ALCO’s earnings.

The balance sheets of ALC and CAC were translated at year-end exchange rates. Income and expenses were translated at exchange rates in effect during the year, substantially the same as the year-end rates.

Revenue Recognition

Commission revenue is recognized as of the effective date of the insurance policy or the date the customer is billed, whichever is later. At that date, the earnings process has been completed, and the Company can reliably estimate the impact of policy cancellations based upon historical cancellation experience adjusted by known circumstances. The Company keeps a policy cancellation reserve fund to use if policies are cancelled. Subsequent commission adjustments are recognized upon notification from the insurance companies. Fee income is recognized as services are rendered.

Income Taxes

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

N/A

ITEM 8. FINANCIAL STATEMENTS

- 12 -

ALCO, INC.

FINANCIAL STATEMENTS

AT DECEMBER 31, 2009

INDEX

REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

14,15

CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2009 AND 2008

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008 17

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2009 AND 2008

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

- 13 -

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

ALCO, Inc.

Hong Kong

We have audited the accompanying consolidated balance sheet of ALCO, Inc., as of December 31, 2009 and the related statements of operations and comprehensive income, changes in stockholders’ equity and cash flows for the year then ended. 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 audit in accordance with 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 misstatements. 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 includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides 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 ALCO, Inc. as of December 31, 2009 and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

/s/ MALONEBAILEY, LLP

www.malone-bailey.com

Houston, Texas

March 25, 2010

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KEMPISTY & COMPANY

CERTIFIED PUBLIC ACCOUNTANTS, P.C.

15 MAIDEN LANE – SUITE 1003 – NEW YORK, NY 10038 – TEL (212) 406-7272 – FAX (212) 513-1930

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors

ALCO, Inc.

We have audited the accompanying consolidated balance sheets of ALCO, Inc. as of December 31, 2008 and 2007, and the related statements of operations, changes in stockholders’ equity and comprehensive income, and cash flows for each of the years in the two years ended December 31, 2008. 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 ALCO, Inc. at December 31, 2008 and 2007, and the results of its operations and cash flows for each of the years in the two years ended December 31, 2008 in conformity with accounting principles generally accepted in the United States of America.

[f10kfinal001.jpg]

Kempisty & Company

Certified Public Accountants, P.C.

New York, New York

March 2, 2009

- 15 -

ALCO, INC

CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2009 AND 2008


		December 31, 2009		December 31, 2008
ASSETS
Current Assets:
Cash and cash equivalents	$	6,587,876	$	5,564,247
Commissions receivable, net		658,795		360,757
Enrolment fee receivable		1,500		699
Total current assets		7,248,171		5,925,703

Property, plant and equipment, net		117,815		128,934

Other assets:
Deposit and prepayments		106,139		71,046
Income tax refundable		12,253
Fiduciary assets		504,791		1,444,178
Investment in available for sale securities		369,360		143,621
Other receivable		476,955		436,840
Total other assets		1,469,498		2,095,685

Total Assets	$	8,835,484	$	8,150,322

LIABILITIES
Current Liabilities:
Trade accounts payable	$	625,385	$	1,425,946
Claim payable		48,504		99,652
Other payable		144,092		208,293
Accrued expenses		77,481		58,427
Due to directors		15,091		15,496
Due to Minority shareholders		-		41,025
Deferred revenue		1,917		1,917
Current portion of obligation from Hire Purchase lease		2,599		2,342
Total Current Liabilities		915,069		1,853,098

Long term portion of obligation from hire purchases lease		685		3,284
Commitments and contingencies		-		-

Total Liabilities	$	915,754	$	1,856,382

EQUITY
ALCO, Inc. shareholders' equity:
Preferred stock, par value $0.01, 5,000,000 shares authorized;
no shares issued and outstanding	$	-	$	-
Common stock, par value $0.001, 50,000,000 shares authorized;
10,150,000 shares issued and outstanding		10,150		10,150
Additional Paid-in capital		60,363		60,363
Accumulated other comprehensive income		120,213		(5,943)
Retained earnings		7,623,855		6,200,607
Total ALCO, Inc. shareholders' equity		7,814,581		6,265,177

Noncontrolling interest		105,149		28,763

Total equity		7,919,730		6,293,940

Total Liabilities and Equity	$	8,835,484	$	8,150,322

See Notes to Consolidated Financial Statements

- 16 -

ALCO, INC

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME FOR THE

YEARS ENDED DECEMBER 31, 2009 AND 2008


		Year Ended December 31,
		2009		2008
Revenues
Commission income	$	4,861,472	$	4,719,681
Consulting income		134,882		146,923
Website advertising		14,000		17,083
Enrollment fee income		5,894		6,410
Other revenues		25,463		36,577
Total revenues		5,041,711		4,926,674

Operating Expenses
Salaries		1,796,679		1,540,390
Travel expenses		289,963		303,686
Rents		484,892		480,814
Bad debt expenses		130,816		114,089
Depreciation		34,697		31,456
Exchange loss		22,276		15,466
Other general and administrative		482,426		497,522
Total Operating Expenses		3,241,749		2,983,423

Income from Operations		1,799,962		1,943,251

Other Income (Expense)
Interest income		5,377		63,307
Investment income		9,820		1,008
Interest expense		(397)		(654)
Total Other Income		14,800		63,661

Income before provision for Income Taxes		1,814,762		2,006,912
Provision for Income Taxes		315,128		321,113
Net Income		1,499,634		1,685,799

Less: Net income attributable to the noncontrolling interest		(76,386)		(57,216)
Net Income attributable to ALCO, Inc.	$	1,423,248	$	1,628,583

Comprehensive Income:
Net income		1,499,634		1,685,799
Other Comprehensive Income (loss) - marketable securities		126,156		(5,943)
Comprehensive Income	$	1,625,790	$	1,679,856

Less: comprehensive loss attributable to non-controlling interest		(76,386)		(57,216)
Comprehensive Income attributable to ALCO. Inc.		1,549,404		1,622,640

Basic and Fully Diluted Earnings per Share
Net income attributable to ALCO, Inc common shareholders	$	0.14	$	0.16

Weighted average shares outstanding		10,150,000		10,150,000

See Notes to Consolidated Financial Statements

- 17 -

ALCO, INC

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008


		For the Year Ended
		December 31,
		2009		2008
Operating Activities
Net income	$	1,499,634	$	1,685,799
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation		34,697		31,456
Bad debt		130,816		114,089
Fixed asset written off		118		64
Changes in operating assets and liabilities:
Increase in commission receivable		(428,854)		(197,716)
(Increase)/Decrease in fiduciary assets		939,387		(957,961)
(Increase)/Decrease in enrolment fee receivable		(801)		2,055
(Increase)/Decrease in deposit and prepayment		(35,093)		13,591
Increase in other receivable		(40,115)		(411,973)
Increase/(Decrease) in accounts payable		(800,561)		1,147,724
Increase/(Decrease) in claims payable		(51,148)		9,320
Increase/(Decrease) in other payable		(64,201)		75,573
Increase in accrued expenses		19,459		11,140
Increase in deferred income		-		1,917
Decrease in income tax prepaid / payable		(12,658)		(20,505)
Net cash provided by operating activities		1,190,680		1,504,573

Investing Activities
Purchase of fixed assets		(23,696)		(89,217)
Purchase of available for sale securities		(99,583)		(149,564)
Net cash (used) by investing activities		(123,279)		(238,781)

Financing Activities
Repayment of obligations under finance leases		(2,342)		(2,085)
Repayment of amount due to minority shareholders		(41,025)		(41,025)
Borrowings on related party debt		3,326		4,217
Principal payments on related party debt		(3,731)		(3,667)
Net cash (used) by financing activities		(43,772)		(42,560)

Increase in cash		1,023,629		1,223,232

Cash at beginning of period		5,564,247		4,341,015
Cash at end of period	$	6,587,876	$	5,564,247

Supplemental Disclosures of Cash Flow Information:
Cash paid / (receive) during year for:
Interest	$	397	$	654
Income taxes	$	327,786	$	341,618

Non-Cash Transactions
Change in fair value for Available-for-sale securities	$	126,156	$	(5,943)

See Notes to Consolidated Financial Statements

- 18 -

ALCO, INC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008


	ALCO, Inc Shareholders
	Common Stock				Additional Paid-in Capital		Accumulated Other Comprehensive Income (loss)		Retained Earnings		Total Stockholders' Equity		Non-controlling Interest		Total Equity
	Shares		Par Value		Additional Paid-in Capital		Accumulated Other Comprehensive Income (loss)		Retained Earnings		Total Stockholders' Equity		Non-controlling Interest		Total Equity


Balance, January 1, 2008	10,150,000	$	10,150	$	60,363	$	-	$	4,572,02	$	4,642,537	$	12,572	$	4,655,109

Unrealized loss on marketable securities							(5,943)				(5,943)				(5,943)

Net Income									1,628,583		1,628,583		57,216		1,685,799

Dividend paid													(41,025)		(41,025)
Balance, December 31, 2008	10,150,000		10,150		60,363		(5,943)		6,200,607		6,265,177		28,763		6,293,940


Unrealized gain on marketable securities							126,156				126,156				126,156

Net Income									1,423,248		1,423,248		76,386		1,499,634

Balance, December 31, 2009	10,150,000	$	10,150	$	60,363	$	120,213	$	7,623,855	$	7,814,581	$	105,149	$	7,919,730


See Notes to Consolidated Financial Statements

- 19 -

ALCO, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009

Note 1 – ORGANIZATION AND OPERATIONS

Description of Business

ALCO, Inc. (“ALCO,” “we,” “us,” the “Company”) was incorporated under the laws of the State of Nevada on June 7, 1999 as Seahorse, Inc. and changed its name to Lotus Capital Corp. (“Lotus”) on September 20, 2004. The Company changed its name to ALCO, Inc. on February 13, 2006.

The Company is principally engaged in the marine insurance brokerage business in the Asia Pacific region, through its wholly owned subsidiary, AL Marine Holdings (BVI), Ltd., a British Virgin Islands corporation ("AL Marine").

Under the terms of the Agreement for the Share Exchange, Lotus has agreed to acquire all of the issued and outstanding stock of AL Marine and $50,000 in a share exchange transaction, in return for the issuance of 9,766,480 shares of stock of Lotus. Upon closing under the Agreement for Share Exchange, AL Marine would become a wholly-owned subsidiary of Lotus.

AL Marine is the 100% owner of Andrew Liu and Co., Ltd., a corporation principally engaged in the business of marine insurance brokerage in Asia. AL Marine owns 60% of Chang An Consultants Ltd., a joint venture with China Changjiang National Shipping Corporation (“CSC Group”) that serves as a vehicle for the provision of marine insurance brokerage and other marine business services by AL Marine. AL Marine owns 85% of EdushipAsia Ltd. In 2005 and 2004, EdushipAsia Ltd was appointed as an exclusive agent by the Institute of Chartered Shipbrokers (UK) (“ICS”) to set up ICS’s first distant learning centre in Shanghai, PRC.

As a result of the Agreement, the transaction was treated for accounting purposes as a capital transaction and reverse merger by the accounting acquirer (AL Marine) and as a reorganization of the accounting acquiree (Lotus). Accordingly, the financial statements include the following:

The balance sheet consists of the net assets of the acquirer at historical cost and the net assets of the acquiree at historical cost; and

The statements of operations include the operations of the acquirer for the years presented and the operations of the acquiree from the date of the merger.

ALCO, Inc. and AL Marine are hereafter referred to as the Company.

Control by Principal Stockholders

The directors, executive officers, their affiliates and related parties own, beneficially and in the aggregate, the majority of the voting power of the outstanding share capital of the Company. Accordingly, directors, executive officers and their affiliates, if they voted their shares uniformly, would have the ability to control the approval of most corporate actions, including approving significant expenses, increasing the authorized capital stock and the dissolution, merger or sale of the Company's assets.

Reclassification

Certain prior year amounts have been reclassified to conform with the current year presentation.

- 20 -

ALCO, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2008

Note 2 – SIGNIFICANT ACCOUNTING POLICIES

Economic and Political Risks

The Company faces a number of risks and challenges since its assets are located in Hong Kong, a Special Administrative Region of the People's Republic of China ("PRC"), and its revenues are derived from its operations therein. The PRC is a developing country with an early stage market economic system, overshadowed by the state. Its political and economic systems are very different from the more developed countries and are in a state of change. The PRC also faces many social, economic and political challenges that may produce major shocks and instabilities and even crises, in both its domestic arena and in its relationships with other countries, including the United States. Such shocks, instabilities and crises may in turn significantly and negatively affect the Company's performance.

Basis of Presentation

The consolidated financial statements include the accounts of the Company and all its majority-owned subsidiaries which require consolidation. Inter-company transactions have been eliminated in consolidation.

The consolidated financial statements have been prepared in accordance with US GAAP and the instructions to Form 10-K and Regulation S-K. In the opinion of management, all adjustments (which include normal recurring adjustments) considered necessary to present fairly the financial position, results of operations and cash flows at December 31, 2009 and 2008 for all periods presented have been made.

Certain accounting principles, which are stipulated by US GAAP, are not applicable in the HKAS. The difference between HKAS accounts of the Company and its US GAAP financial statements is immaterial.

The Company maintains its books and accounting records in Hong Kong dollar ("HK$"), which is determined as the functional currency. Assets and liabilities of the Company are translated at the prevailing exchange rate at each year end. Contributed capital accounts are translated using the historical rate of exchange when capital is injected. Income statement accounts are translated at the average rate of exchange during the year. Translation adjustments arising from the use of different exchange rates from period to period are included in the cumulative translation adjustment account in shareholders' equity. Gain and losses resulting from foreign currency transactions are included in operations.

- 21 -

ALCO, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009

Note 2 – SIGNIFICANT ACCOUNTING POLICIES (continued)

Concentration of Credit Risk

Financial instruments which subject the Company to concentrations of credit risk consist principally of accounts receivable and cash. Exposure to losses on receivables is dependent on each customer's financial condition. The Company controls its exposure to credit risk through a process of credit approvals, credit limits and monitoring procedures, establishing allowances for anticipated losses.

Use of Estimates

The preparation of financial statements in conformity with US GAAP requires 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 revenue and expenses during the reporting period. Actual results, when ultimately realized could differ from those estimates.

Significant Estimates

Several areas require significant management estimates relating to uncertainties for which it is reasonably possible that there will be a material change in the near term. The more significant areas requiring the use of management estimates relate to the valuation of accounts receivable and payable, equipment, accrued liabilities, and the useful lives for amortization and depreciation.

Revenue Recognition

Commission revenue is recognized as of the effective date of the insurance policy or the date the customer is billed, whichever is later. At that date, the earnings process has been completed and the Company can reliably estimate the impact of policy cancellations based upon historical cancellation experience adjusted by known circumstances. The policy cancellation reserve is periodically evaluated and adjusted as necessary. Subsequent commission adjustments are recognized upon notification from the insurance companies. Commission revenues are reported net of commissions paid to sub-brokers. Fee income is recognized as services are rendered.

Cash and Cash Equivalents

The Company invests idle cash primarily in money market accounts, certificates of deposit and short-term commercial paper. Money market funds and all highly liquid debt instruments with an original maturity of three months or less are considered cash equivalents.

- 22 -

ALCO, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009

Note 2 – SIGNIFICANT ACCOUNTING POLICIES (continued)

Commissions and Other Receivables

Commissions and other receivables are recognized and carried at original invoice amount less an allowance for any uncollectible amounts. An estimate for doubtful accounts is made when collection of the full amount becomes questionable.

We made allowance for doubtful accounts based on a review of all outstanding amounts on a monthly basis. We analyze the aging of receivable balances, historical bad debts, customer concentrations, customer credit-worthiness, current economic trends and changes in our customer payment terms. Significant changes in customer concentration or payment terms, deterioration of customer credit-worthiness or weakening in economics trends could have a significant impact on the collectibility of receivables and the allowance. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances will be made.

Allowances are applied to commissions and other receivables where events or changes in circumstance indicate that the balances may not be collectible. The identification of doubtful debts requires the use of judgment and estimates as mentioned above. Where the expectation on or the actual recoverability of commissions and other receivables is different from the original estimate, such difference will impact the carrying value of commissions and other receivables and doubtful debts expenses in the periods in which such estimate is changed or the receivable are collected.

Property, Plant and Equipment

Property, plant and equipment are carried at cost. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in the income statement in the year of disposition.

Depreciation is calculated on a straight-line basis over the estimated useful life of the assets. The annual percentages applied are:

Motor vehicles

20%

Furniture and fixtures

15%

Office equipment

15%

Leasehold improvements

20%

Accounts Payable and Claims Payable

In its capacity as an insurance agent or broker, the Company collects premiums from customers and, after deducting its commissions, remits the premiums to the respective insurers; the Company also collects claims or refunds from insurers on behalf of customers. Unremitted insurance premiums and claims are held in a fiduciary capacity. The obligation to remit premiums is recorded as accounts payable and the obligation to remit claims and refunds is recorded as claims payable on the balance sheet.

- 23 -

ALCO, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009

Note 2 – SIGNIFICANT ACCOUNTING POLICIES (continued)

Pension Costs

Mandatory contributions are made to the Hong Kong's Mandatory Provident Fund (MPF), based on a percentage of the employees' basic salaries. The cost of these payments are charged to the profit and loss accounts as they become payable in accordance with the rule of the MPF Scheme. The employer contributions vest fully with the employees when contributed into the MPF Scheme.

Income Taxes

Income tax expense is based on reported income before income taxes. Deferred income taxes reflect the effect of temporary differences between assets and liabilities that are recognized for financial reporting purposes and the amounts that are recognized for income tax purposes. In accordance with FASB Accounting Standards Codification TM (ASC) No. 740, " Income Taxes”, these deferred taxes are measured by applying currently enacted tax laws. The Company's effective tax rate for the year ended December 31, 2009 and 2008 was 17.36 and 16.00%, respectively. The Company did not provide any current or deferred income tax provision or benefit for any period presented to date because book income is substantially equal to taxable income, with only minor timing differences with regard to the depreciation of fixed assets. Management has determined that any deferred tax asset or liability is inconsequential, and not material to the financial statements.

Fair Value of Measurements

The Company adopted Statement of ASC No. 820, “Fair Value Measurements and Disclosures” (“ASC 820”), effective January 1, 2008. The provisions of ASC 820 are to be applied prospectively.

ASC 820 clarifies that fair value is an estimate of the exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants (i.e., the exit price at the measurement date). Under ASC 820, fair value measurements are not adjusted for transaction cost. ASC 820 provides for use of a fair value hierarchy that prioritizes inputs to valuation techniques used to measure fair value into three levels:

Level 1:

Unadjusted quoted prices in active markets for identical assets or liabilities

Level 2:

Input other than quoted market prices that are observable, either directly or indirectly, and reasonably available. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the Company.

Level 3:

Unobservable inputs. Unobservable inputs reflect the assumptions that the Company develops based on available information about what market participants would use in valuing the asset or liability.

An asset or liability’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Availability of observable inputs can vary and is affected by a variety of factors. The Company uses judgment in determining fair value of assets and liabilities and Level 3 assets and liabilities involve greater judgment than Level 1 and Level 2 assets or liabilities.

- 24 -

ALCO, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009

Note 2 – SIGNIFICANT ACCOUNTING POLICIES (continued)

Valuation of Long-Lived assets

The Company accounts for impairment of plant and equipment and amortizable intangible assets in accordance with ASC No. 360, “Property, Plant, and Equipment”, which requires the Company to evaluate a long-lived asset for recoverability when there is event or circumstance that indicate the carrying value of the asset may not be recoverable. An impairment loss is recognized when the carrying amount of a long-lived asset or asset group is not recoverable (when carrying amount exceeds the gross, undiscounted cash flows from use and disposition) and is measured as the excess of the carrying amount over the asset’s (or asset group’s) fair value.

Related Party Transactions

The captions "Due from directors" and "Due from related companies" represent loans receivable that are unsecured, non-interest bearing and have no fixed terms of repayment, and therefore are not considered current assets. The related companies are owned by directors of the Company. The captions "Due to director" and "Due to related company" represent loans payable that are unsecured, non-interest bearing and have no fixed terms of repayment, therefore, deemed payable on demand. The related company is a development company owned by directors of the Company.

The Company rents office space in Hong Kong and quarter in Shanghai from a company owned by directors of the Company.

Foreign Currency and Other Comprehensive Income

The accompanying financial statements are presented in United States (US) dollars. The functional currency is the Hong Kong dollar (HK$). The financial statements are translated into US dollars from HK$ at year-end exchange rates for assets and liabilities, and weighted average exchange rates for revenues and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred.

The Hong Kong Monetary Authority (“HKMA”), Hong Kong's central bank, maintains a Linked Exchange Rate System since 1983. The HKMA operates Convertibility Undertakings on both the strong side and the weak side of the Linked Rate of US$1: HK$7.8. In fact, the exchange rate for HK$ to US dollars has varied by only 100ths during 2009 and 2008. Thus, the consistent exchange rate used has been 7.80 HK$ per each US dollar. Since there have been no greater fluctuations in the exchange rate, there is no gain or loss from foreign currency translation and no resulting other comprehensive income or loss.

Foreign currency transactions are those that required settlement in a currency other than HK$. Gain or loss from foreign currency transactions, or exchange loss, are recognized in income in the period they occur.

Earnings (Loss) Per Share

Basic earnings (loss) per share is computed by dividing income (loss) available to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. Since the Company’s common stock currently does not trade, the dilutive effect of any warrants or convertible notes outstanding cannot be determined.

- 25 -

ALCO, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009

Note 2 – SIGNIFICANT ACCOUNTING POLICIES (continued)

Recent Accounting Pronouncements

In June 2009, the FASB issued guidance amending current principles related to the transfers of financial assets and VIEs. This guidance eliminates the concept of a qualifying special-purpose entity ("QSPE"), creates more stringent conditions for reporting the transfer of a portion of a financial asset as a sale, clarifies other sale-accounting criteria, and changes the initial measurement of a transferor's interest in transferred financial assets. Former QSPEs will be evaluated for consolidation based on the updated VIE guidance. There are also changes to the approach a company must take in determining a VIE's primary beneficiary and requires companies to more frequently reassess whether they must consolidate VIEs. Additional year-end and interim period disclosures will also be required. These changes will be effective for us beginning in the first quarter of 2010. The Company believes that the adoption of this guidance will not have a material impact on the Company's consolidated financial statements.

In September 2009, the FASB issued guidance updating current principles related to revenue recognition when there are multiple-element arrangements. This revised guidance relates to the determination of when the individual deliverables included in a multiple-element arrangement may be treated as separate units of accounting and modifies the manner in which the transaction consideration is allocated across the separately identifiable deliverables. The guidance also expands the disclosures required for multiple-element revenue arrangements. These changes will be effective for us beginning in the first quarter of 2011, and may be applied retrospectively for all periods presented or prospectively to arrangements entered into or modified after the adoption date. Early adoption is permitted. The Company believes that the adoption of this guidance will not have a material impact on the Company's consolidated financial statements.

In January 2010, the FASB issued guidance requiring additional disclosures regarding fair value measurements. The amended guidance requires entities to disclose additional information regarding assets and liabilities that are transferred between levels of the fair value hierarchy. This guidance also clarifies existing guidance pertaining to the level of disaggregation at which fair value disclosures should be made and the requirements to disclose information about the valuation techniques and inputs used in estimating Level 2 and Level 3 fair value measurements. These disclosures will be effective for us beginning in the first quarter of 2010. The guidance also requires entities to disclose information in the Level 3 rollforward about purchases, sales, issuances and settlements on a gross basis. These disclosures will be effective for us beginning in the first quarter of 2011. The Company is currently evaluating this guidance to determine additional disclosures, if any, that will be required.

In May 2009, the FASB issued a new accounting standard regarding subsequent events. This standard incorporates into authoritative accounting literature certain guidance that already existed within generally accepted auditing standards, with the requirements concerning recognition and disclosure of subsequent events remaining essentially unchanged. This guidance addresses events which occur after the balance sheet date but before the issuance of financial statements. Under the new standard, as under previous practice, an entity must record the effects of subsequent events that provide evidence about conditions that existed at the balance sheet date and must disclose but not record the effects of subsequent events which provide evidence about conditions that did not exist at the balance sheet date. This standard added an additional required disclosure relative to the date through which subsequent events have been evaluated and whether that is the date on which the financial statements were issued. For the Company, this standard was effective beginning April 1, 2009.

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ALCO, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009

Note 3 – CASH


		December 31,		December 31,
Cash consist of the following:		2009		2008

Cash in hand	$	8,153	$	6,991
Cash in bank - Saving & Checking
China Construction Bank (Asia) (formerly known as Bank of America (Asia))		4,035,514		3,014,960
United Overseas Bank		5,580		5,657
Bank of China		4,253		5,254
Sun Hung Kei Financial		33		-
Cash in bank - Fixed Deposit		2,534,343		2,531,385
	$	6,587,876	$	5,564,247

Cash balances are held principally at one financial institution and are not insured. The Company believes it mitigates its risk by investing in or through major financial institutions. Recoverability is dependent upon the performance of the institution.

Although the cash balances are not insured, however, starting in September 2006, cash balances (except accounts with overdraft facilities) are protected by the Deposit Protection Scheme which is maintaining by the Hong Kong Deposit Protection Board, an independent statutory body established under the Deposit Protection Scheme Ordinance (Cap. 581).

Under the scheme, compensation up to a limit of HK$100,000 (approximately US$12,821) will be paid from the scheme to depositor if the bank with which the depositor holds his/her eligible deposits fails. In addition, on October 14, 2008, the Hong Kong Government announced that they would use the Exchange Fund to guarantee the repayment of all customer deposits held in authorized institutions in Hong Kong, following the principles of the Deposit Protection Scheme. This action began on October 14, 2008 and will remain in force until the end of 2010.

Note 4 – FIDUCIARY ASSET

Fiduciary asset is cash balances held by a bank, mainly consisting of premiums collected from customers and payable to insurers, and claims received from insurers and payable to policyholders.

When the Company receives a premium from a customer, it debits the lump sum amount into one bank account and establishes a schedule to keep track of the amount of premium payable to the insurer. At the monthly closing, the Company reclassifies the amount of premium payable to insurers as fiduciary asset. Also, when the Company receives a claim on behalf of a policyholder, it debits fiduciary asset and credits claims payable and other payables, if necessary. The fiduciary asset balance for December 31, 2009 and 2008 are as follows:


		December 31,		December 31,
		2009		2008

Fiduciary asset	$	504,791	$	1,444,178

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ALCO, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009

Note 5 – COMMISSIONS RECEIVABLE


		December 31,		December 31,
Commissions receivable consist of the following:		2009		2008

Commissions receivable	$	1,093,893	$	663,649
Less: allowances for doubtful accounts		435,098		302,892
	$	658,795	$	360,757

Note 6 – PROPERTY, PLANT AND EQUIPMENT


		December 31,		December 31,
Property, Plant and Equipment consists of the following:		2009		2008

Furniture and fixtures	$	164,605	$	164,403
Office equipment		160,649		153,803
Leasehold improvements		99,196		97,595
Motor Vehicle		41,787		41,787
		466,237		457,588
Less: Accumulated depreciation		348,422		328,654
	$	117,815	$	128,934

Depreciation expense for the years ended December 31, 2009 and 2008 was $34,697 and $31,456 respectively.

Note 7 – FAIR VALUE OF AVAILABLE FOR SALE MARKETABLE SECURITIES INVESTMENTS AND INVESTMENT INCOME

The following are the Company’s investments owned and securities sold short by level within the fair value hierarchy at December 31, 2009 and 2008 are as follows:


Assets		Fair value			Fair value Hierarchy
		December 31, 2009		December 31, 2008

Stocks	$	369,360	$	143,621	Level 1

Unrealized gain of $126,156 and loss of $5,943 for the investments were recognized in the other comprehensive income for the year ended December 31, 2009 and 2008 respectively. All these gain and loss are related to the investments listed in the Hong Kong Stock Exchange.


		December 31,		December 31,
Investment Income		2009		2008

Dividend from the publicly traded equity securities	$	9,820	$	1,008

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ALCO, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009

Note 8 – DUE TO MINORITY SHAREHOLDERS


		December 31,		December 31,
Due to shareholders consist of the following:		2009		2008

CSC Enterprises Development (HK) Co Ltd	$	-	$	41,025

Note 9 – DUE TO DIRECTORS


		December 31,		December 31,
Due to directors consist of the following:		2009		2008

Andrew Liu Fu Kang	$	15,091	$	15,496

Note 10 – CAPITAL LEASE

On April 27, 2006, the Company entered into a lease agreement with Hitachi Credit (HK) Ltd. The lease agreement will expire in March, 2011. The related contractual obligations are summarized as follows:


		2010		2011		Total

Payment Due	$	2,738	$	685	$	3,423
Less: Interest		139		0		139

Principle	$	2,599	$	685	$	3,284

The term of the lease is 60 months with $228 as its monthly payment. The leased property was capitalized as office equipment in 2006 by the amount of the total principal, $10,739 and the related depreciation expense in 2009 is $1,611 with the same amount in 2008. The principal due within one year is the current portion of long term debt and classified as current liability.

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ALCO, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009

Note 11 – RELATED PARTY TRANSACTION

The Company rents office space in Hong Kong and Shanghai from companies owned by directors of the Company. The relevant rent expenses consist of following:


			December 31,		December 31,
			2009		2008
Location	Landlord

HK Office Room 501 & 502A	Fortune Ocean Ltd	$	143,077	$	143,077
HK Office Room 502B	Fortune Ocean Ltd		46,154		46,154
Shanghai Quarter	Fortune Ocean and Andrew Liu Fu Kang		30,769		30,769
Director (Andrew) Quarter	First Pacific Development Ltd		20,000		20,000
		$	240,000	$	240,000

Note 12 – INCOME TAXES

The Company's effective tax rate for the year ended December 31, 2009 and 2008 was 17.36 and 16.00%, respectively. The provisions for income taxes for the year ended December 31, 2009 and 2008 are summarized as follows:


Hong Kong only:		2009		2008

Current	$	315,128	$	321,113
Deferred		-		-
	$	315,128	$	321,113

A reconciliation between the income tax computed at the U.S. statutory rate and the Company’s provision for income tax is as follows:


	2009	2008

U.S. statutory rate	34.0%	34.0%

Foreign income not recognized in the U.S.	-34.0%	-34.0%
Miscellaneous permanent differences	0.86%	-0.5%
Hong Kong income tax rate	16.5%	16.5%
Provision for income tax	17.36%	16.00%

There were no significant permanent or temporary differences.

Accounting for Uncertainty in Income Taxes

The Company adopted the provisions of Accounting for Uncertainty in Income Taxes on January 1, 2007. The provisions clarify the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with the standard “Accounting for Income Taxes,” and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax

- 30 -

position taken or expected to be taken in a tax return. The provisions of Accounting for Uncertainty in Income Taxes also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

Based on the Company’s evaluation, the Company has concluded that there are no significant uncertain tax positions requiring recognition in its financial statements.

The Company may from time to time be assessed interest or penalties by major tax jurisdictions. In the event it receives an assessment for interest and/or penalties, it will be classified in the financial statements as tax expense.

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ALCO, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009

Note 13 – OPERATION LEASE

Future minimum lease payments for operating leases for the succeeding years consists of following:


		2010		2011		Total

Carmel Hill, Hong Kong (Director Quarter)	$	80,770	$	-	$	80,770
Union Building, Shanghai, China (Shanghai Office)		31,517		23,637		55,154
Room 505, Bank of America Tower, Hong Kong (Hong Kong Office)		70,400		64,000		134,400
	$	182,687	$	87,637	$	270,324

The Company has three material operating lease commitments for its facilities. The initial term of the lease arrangement for Director Quarter is two years beginning July 19, 2008 with a minimum lease commitment of $207,693. For the Shanghai Office, the initial term of the lease is two years beginning July 3, 2007 with a minimum lease commitment of $18,462. All the lease arrangements mentioned above have no renewal option and rent holiday. For the Hong Kong Office of Room 505, Bank of America Tower, the initial term of the lease is two years beginning November 15, 2009 with a minimum lease commitment of $134,400. This lease arrangement has a three-month rent free period from November 15, 2009 to February 14 2010. In addition, when the lease is ended in 2011, the company has an option to renew the lease for two years (from November 15, 2011 to November 14, 2013) at the prevailing market rent.

Note 14 – COMMON STOCK

During the year ended December, 2007, the Company issued 150,000 shares of common stock in reliance upon exemptions from registration under the Securities Act of 1933. The shares were issued to the Brean Murray, Carret & Co. on or about October 23, 2007, for total consideration of $50,000, or $0.33 per share. The consideration was made for payment of services valued at $50,000 in conjunction with developing with the Company a program to introduce the Company to institutional investors, providing general financial advice and undertaking specific investment banking transactions and/or advisory assignment. The shares were issued in reliance upon an exemption from registration provided by Section 4(2) under the Securities Act of 1933.

Note 15 – COMMITMENTS AND CONTINGENCIES

The Company's business operations exist solely in the PRC and are subject to significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environments and foreign currency limitations.

The Company's results may thus be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies, laws, regulations, anti-inflationary measures, currency conversion and remittance limitation, and rates and methods of taxation, among other things.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A(T). CONTROLS AND PROCEDURES

Management's Annual Report on Internal Control over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. The Company’s internal control over financial reporting is designed to provide reasonable assurance for the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Because of its inherent limitations (further discussed in next paragraphs below), internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2009. In this assessment, the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework were used. Based on our assessment, management believes that the Company maintained effective internal control over financial reporting as of December 31, 2009.

Inherent Limitations in Control Systems

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. As a result, our management, including the Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures, or our internal control over financial reporting, will prevent all error and all fraud.

Evaluation of Disclosure on Controls and Procedures

The Company's management, with the participation of the chief executive officer and the chief financial officer, carried out an evaluation of the effectiveness of the design and operation of the Company's "disclosure, controls and procedures" (as defined in the Exchange Act Rules 13a-15(3) and 15-d-15(3) as of the end of the period covered by this annual report (the "Evaluation Date"). Based upon that evaluation, the chief executive officer and the chief financial officer concluded that, as of the Evaluation Date, the Company's disclosure controls and procedures are designed to provide reasonable assurance of achieving the

- 33 -

objectives of timely alerting them to material information required to be included in our periodic SEC reports and of ensuring that such information is recorded, processed, summarized and reported within the time periods specified. Our chief executive officer and chief financial officer also concluded that our disclosure controls and procedures were effective as of December 31, 2009 to provide reasonable assurance of the achievement of these objectives.

This annual report does not include an attestation report of the company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only management's report in this annual report.

Changes in Internal Control over Financial Reporting

There have not been any changes in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) or any other factors during the quarter of the fiscal year ended December 31, 2009, that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

DIRECTORS AND OFFICERS

The directors and executive officers currently serving ALCO are as follows:


Name	Age	Position	Director/Officer Since
Andrew Liu Fu Kang	49	President and Chairman of the Board	2005
John Liu Shou Kang	50	Director	2005
Colman Au Kwok Wai	45	Chief Financial Officer, Secretary	2008

BIOGRAPHICAL INFORMATION

Mr. Andrew Liu Fu Kang, is the founder and Chairman of AL Marine and has been the Chairman and Chief Executive Officer of the Company since December 9, 2005. He is responsible for the overall management, development, and strategic planning of AL Marine. He also oversees certain key client accounts and is frequently consulted on insurance claims of a more complex nature. Before establishing AL Marine, he worked for Richard Hogg International Adjusters in London and Stevens Elmslie & Co. in Hong Kong for a total of 6 years handling all aspects of shipowners’ rights under the hull policy and vis-a-vis third parties, such as general average and salvage, legal defense work and arbitrations. He was awarded an honors degree in Naval Architecture & Shipbuilding from the University of Newcastle Upon Tyne, U.K, a Master’s degree in Marine Law from Cardiff

- 34 -

University, U.K and a Diploma in International Trade Law from the City of London Polytechnic. He passed the Common Professional Exams in Law from Manchester Polytechnic. He is a member of the Chartered Insurance Institute and the Chartered Institute of Shipbrokers. He is the brother of John Liu Shou Kang.

Mr. John Liu Shou Kang is a Director of AL Marine and has been a Director and Vice President of the Company since December 9, 2005. He is responsible for the overall management of AL Marine, in particular, human resources and operational activities. Prior to joining AL Marine in 1990, he worked in Sembawang Shipyard, Singapore for 2 years and was in charge of the supervision of all aspects of ship repairs including, design, conversion and costing. He later worked in Sembawang Shipping Co., Singapore for another 4 years as manager in charge of operations including charter parties, litigation and Hull and P&I claims. He was awarded an honors degree in Naval Architecture & Shipbuilding from the University of Newcastle Upon Tyne, U.K and a Masters degree in International Shipping from Plymouth University, U.K. He is the brother of Andrew Liu Fu Kang.

Mr. Colman Au Kwok Wai is the Financial Controller of AL Marine and has been the Chief Financial Officer and Secretary of the Company since January 7, 2008. He has worked for an accounting firm and a number of listed companies and multi-national corporations in Hong Kong and China and has over 15 years' experience in internal auditing, statutory auditing and accounting. From September 2002 to November 2004, he was the Internal Audit Manager of Huawei Technology Co., Ltd, a China based multi-national corporation specializing in development, production and sales of communication equipment and solutions for telecom carriers, where he was responsible for performing risk assessments, preparing audit plans and conducing audit reviews on the operations of Huawei in China, Hong Kong and overseas. From November 2004 to January 2008, he was the Senior Internal Audit Manager of Esquel Enterprises Limited, a Hong Kong based multi-national corporation with production facilities in China, Hong Kong and overseas producing premium cotton shirts for high-end brand names, where he was responsible for overseeing the internal audit function of the operations of Esquel in China and Hong Kong. He obtained a Bachelor of Commerce degree in Accounting from the Curtin University of Technology in 1999 and a Master degree in Professional Accounting from the Hong Kong Polytechnic University in 2002. He is a fellow member of the Association of Chartered Certified Accountants, a member of Hong Kong Institute of Certified Public Accountants, a certified information system auditor (“CISA”) of the Information Systems Audit and Control Association and a certified internal auditor (“CIA”) of the Institute of Internal Auditors.

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires each of our officers and directors and each person who owns more than 10% of a registered class of our equity securities to file with the SEC an initial report of ownership and subsequent reports of changes in such ownership. Such persons are further required by SEC regulation to furnish us with copies of all Section 16(a) forms (including Forms 3, 4 and 5) that they file. Based solely on our review of the copies of such forms received by us with respect to fiscal year 2009, or written representations from certain reporting persons, we believe all of our directors and executive officers met all applicable filing requirements.

ITEM 11. EXECUTIVE COMPENSATION

The following table provides summary information concerning compensation awarded to, earned by, or paid to any of ALCO’s officers and directors for all services rendered to ALCO and its consolidated subsidiaries, in all capacities for the fiscal years ended December 31, 2007, 2008 and 2009.

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Name and Principal Position	Year	Salary ($)	Bonus ($)	Stock Awards ($)	Option Awards ($)	Non-equity Incentive Plan Compensation ($)	Change in Pension Value and Nonqualified Deferred Compensation Earnings	All Other Compensation ($)	Total Compensation ($)
Andrew Liu, CEO	2007	$169,488	$39,103	--	--	--	--	$52,099 (1)	$260,690
	2008	$207,194	$47,976	--	--	--	--	$55,948 (2)	$311,118
	2009	$215,058	$48,974	--	--	--	--	$80,055 (3)	$344,087
Yip Kam Ming, ex-CFO	2007	$75,692	$6,564	--	--	--	--	$18,153 (4)	$100,409
	2008	--	--	--	--	--	--	--	--
	2009	--	--	--	--	--	--	--	--
Colman Au, CFO	2007	--	--	--	--	--	--	--	--
	2008	$90,947	$7,566	--	--	--	--	$1,538 (5)	$100,051
	2009	$102,692	$8,846	--	--	--	--	$1,538 (6)	$113,076

(1)

Includes expense reimbursement of $50,561 and Mandatory Provident Fund contributions of $1,538.

(2)

Includes expense reimbursement of $54,410 and Mandatory Provident Fund contributions of $1,538.

(3)

Includes expense reimbursement of $78,517 and Mandatory Provident Fund contributions of $1,538.

(4)

Includes expense reimbursement of $16,615 and Mandatory Provident Fund contributions of $1,538.

(5)

Being Mandatory Provident Fund contributions of $1,538.

(6)

Being Mandatory Provident Fund contributions of $1,538.

The Mandatory Provident Fund is a compulsory savings/retirement scheme for the residents of Hong Kong. Most employees and employers are required to contribute monthly to schemes provided by government approved private organizations. Contributions are based on a percentage of an employee’s salaries. The contribution vests fully with the employee immediately upon payment into the scheme.

Director Compensation

The following table provides summary information concerning compensation awarded to, earned by, or paid to any of our directors for all services rendered to the Company in all capacities for the fiscal year ended December 31, 2009.


*Name*	*Salary/Fees Earned or Paid in Cash ($)*	*Stock Awards ($)*	*Option Awards ($)*	*Non-Equity Incentive Plan Compensation ($)*	*Change in Pension Value and Nonqualified Deferred Compensation Earnings*	*All Other Compensation ($)*	*Total Compensation*

Andrew Liu	$264,032	--	--	--	--	$80,055	$344,087
John Liu	$170,924	--	--	--	--	$ 51,228 (1)	$222,152

(1)

Includes expense reimbursement of $49,690 and Mandatory Provident Fund contributions of $1,538

Our subsidiary, Andrew Liu & Company, has entered into written employment agreements with Andrew Liu and John Liu. The agreements remain in effect until terminated by either party with three (3) months notice. The agreement sets out the duties of the officers, their compensation (as stated above), and their benefits (20 days of vacation time, health insurance, 2 days of sick time per month, etc.). Pursuant to the agreement, the officers cannot conduct marine insurance brokering or any other

- 36 -

business conducted by the Company in the Hong Kong area for a period of two years after the termination of the employment agreement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth, as of the date of this report, the stock ownership of each executive officer of ALCO, of all the executive officers and directors of ALCO as a group, and of each person known by ALCO to be a beneficial owner of 5% or more of its Common Stock. Except as otherwise noted, each person listed below is the sole beneficial owner of the shares and has sole investment and voting power as to such shares. No person listed below has any options, warrant or other right to acquire additional securities of ALCO, except as may be otherwise noted.


Name	No. of shares	Percent of Class
Andrew Liu, President and Chairman (1) Flat 3, 24/F., Blk A, Viking Garden 42 Hing Fat Street, Hong Kong	6,203,668	61.12%
John Liu, Director (1) House No. 12, Carmel Hill, Stanley, Hong Kong	2,553,935	25.16%
Colman Au, Chief Financial Officer, Secretary (1) Room 1618A, Bank of America Tower 12 Harcourt Road, Central, Hong Kong	0	0%
All Officers and Directors as a group (3 in number)	8,757,603	86.28%

(1)

The person named is an officer, director, or both.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Other than the related transactions mentioned in the Note 11 of the Notes to Consolidated Financial Statements, no officer, director, promoter, or affiliate of ALCO has, or proposes to have, any transactions and any direct or indirect material interest in any asset proposed to be acquired by ALCO through security holdings, contracts, options, or otherwise.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Audit-Related Fees

(1) The aggregate fee billed by MaloneBailey, LLP (the newly appointed auditor) for audit of the Company’s annual financial statements was $39,000 for the fiscal year ended December 31, 2009. The aggregate fee billed by Kempisty & Co, CPA (former auditor of the company) for audit of the Company’s annual financial statements was $40,000 for the fiscal year ended December 31, 2008. The aggregate fees billed by Kempisty & Co, CPA for the reviews of the Company’s financial statements included in its quarterly reports on Form 10-Q during 2009 and 2008 were $12,000 and $11,700 respectively.

(2) MaloneBailey, LLP and Kempisty & Co, CPA did not bill the Company any amounts for assurance and related services that were related to its audit or review of the Company’s financial statements during the fiscal years ending 2009.

Tax Fees

(3) The aggregate fees billed by Kempisty & Co, CPA for tax compliance, tax advice and tax planning were $2,500 for the fiscal year ended December 31, 2008. The aggregate fees accrued but not yet billed by MaloneBailey, LLP were $2,500 for the fiscal year ended December 31, 2009.

All Other Fees

(4) MaloneBailey, LLP and Kempisty & Co, CPA did not bill the Company for any products and services other than the foregoing during the fiscal year ended December 31, 2009.

Audit Committee’s Pre-approval policies and procedures

(5) ALCO, which is not yet publicly traded, does not have an audit committee. The current board of directors functions as the audit committee.

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PART IV

ITEM 15. EXHIBITS

The Exhibits listed below are filed as part of this Annual Report.

2.1

Agreement for Share Exchange dated November 22, 2005, by and among LOTUS CAPITAL CORP., a Nevada corporation, AL MARINE HOLDINGS LTD., a British Virgin Islands corporation, and the Shareholders of AL MARINE (herein incorporated by reference from report on Form 8-K for report dated November 22, 2005 and filed with the Securities and Exchange Commission on December 9, 2005).

3.1

Articles of Incorporation (herein incorporated by reference from Registration Statement on Form 10-SB filed with the Securities and Exchange Commission on January 6, 2005).

3.2

Bylaws (herein incorporated by reference from Registration Statement on Form 10-SB filed with the Securities and Exchange Commission on January 6, 2005).

10.1

Exclusive representative agreement between ALC and The Strike Club (herein incorporated by reference from the Registration Statement on Form SB-2 filed with the Securities and Exchange Commission on June 5, 2006).

10.2

Agreement between EduShipAsia Ltd. and the Institute of Chartered Shipbrokers appointing EduShipAsia Ltd. as ICS’s exclusive agent in China (herein incorporated by reference from the Registration Statement on Form SB-2 filed with the Securities and Exchange Commission on June 5, 2006).

10.3

Employment Agreement between Andrew Liu & Company, Ltd. and Andrew Liu. (herein incorporated by reference from the Registration Statement on Form SB-2 filed with the Securities and Exchange Commission on September 14, 2006)

10.4

Employment Agreement between Andrew Liu & Company, Ltd. and John Liu. (herein incorporated by reference from the Registration Statement on Form SB-2 filed with the Securities and Exchange Commission on September 14, 2006)

31.1

Certification pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended.

31.2

Certification pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended.

32.1

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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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.

ALCO, INC.
(Registrant)

By: /s/ Andrew Liu, CEO and Chairman

Date: March 25, 2010

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By: /s/ Andrew Liu, CEO and Chairman

Date: March 25, 2010

By: /s/ Colman Au, Chief Financial Officer

Date: March 25, 2010

By: /s/ John Liu, Director

Date: March 25, 2010

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ALCO, INC. Reports

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