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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Amendment 1


(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 2012

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to _____________

Commission File No. 333- 172052


AF OCEAN INVESTMENT MANAGEMENT COMPANY

 (Exact name of small business issuer as specified in its charter)

 

 

FLORIDA

 

14-1877754

 

 

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Tax. I.D. No.)

 

 

501 Madison Ave., 14th Floor, New York, New York 10022

(Address of Principal Executive Offices)

 

(212) 729-4951

(Registrant’s Telephone Number, Including Area Code)


DINELLO RESTAURANT VENTURES, INC.

 (Registrant’s former name)

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.    Yes  þ  No  o


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 (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes o   No þ


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.


Large accelerated filer.o

Accelerated filer.   o

Non-accelerated filer.  o

(Do not check if a smaller reporting company)

Smaller reporting company.  þ


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

Yes  o  No  þ

The number of shares outstanding of each of the issuers classes of common stock as of July 30, 2012:  4,466,936




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TABLE OF CONTENTS


Part I Financial Information

Item 1.  Financial Statements

Item 2.  Management’s Discussion and Analysis and Results Of Operation

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

Item 4.  Controls and Procedures

Part II – Other Information 

Item 1.  Legal Proceedings

Item 2.  Unregistered Sales of Equity Securities And Use Of Proceeds

Item 3.  Defaults Upon Senior Securities

Item 4.  Mine Safety Disclosures

Item 5.  Other information

Item 6.  Exhibits

Signatures



XBRL EXPLANATORY NOTE


The purpose of this Amendment No. 1 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2012 is to submit Exhibit 101 in accordance with Rule 405 of Regulation S-T. Exhibit 101 consists of the Interactive Data Files relating to this Amendment No. 1 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2012.


Pursuant to Rule 406T of Regulation S-T, the XBRL files contained in Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.




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PART I – FINANCIAL INFORMATION


ITEM 1.

FINANCIAL STATEMENTS


AF Ocean Investment Management Company

BALANCE SHEET

As of June 30, 2012 (unaudited) and December 31, 2011 (audited)


 

 

 

 

 

 

 June 30, 2012

 

 December 31,  2011

 

 

 

 

 

 

(unaudited)

 

(audited)

 Assets

 

 

 

 

 

 

 

 Current assets

 

 

 

 

 

 

 

 

 Cash

 

 

 

$

30,216

$

3,361

 

 Accounts receivable

 

 

 

7000

 

 

 

 Assets of discontinued operations

 

 

 

-

 

30,851

 Total current assets

 

 

 

 

37,216

 

34,212

Total Assets

 

 

 

 

37,216

 

34,212

 

 

 

 

 

 

 

 

 

 Liabilities and stockholders' equity

 

 

 

 

 

 

 Current liabilities

 

 

 

 

 

 

 

 

Payroll liabilities

 

 

 

 

 

-

 

Accrued expenses

 

 

 

1,739

 

8,290

 

Due to related parties

 

 

 

36,572

 

-

 Total liabilities

 

 

 

 

38,312

 

8,290

 

 

 

 

 

 

 

 

 

 Stockholders’ equity

 

 

 

 

 

 

 

 

 Common Stock, $.01 par value, 500,000,000 shares authorized;    

3,466,936 shares issued and outstanding

 

34,669

 

32,381

 

 Additional paid-in capital

 

 

 

 

51,588

 

34,027

 

 Accumulated deficit  

 

 

 

 

(87,353)

 

 (40,486)

 Total stockholders’ equity

 

 

 

 

(1,096)

 

25,922

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity

 

 

 

37,216

 

34,212


See accompanying notes and accountant’s report.



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AF Ocean Investment Management Company

STATEMENT OF OPERATIONS

 (unaudited)


 

 

 

 

Six months ended June 30,

Three months ended June 30,

 

 

 

 

 2012

 

 2011

 

 2012

 

 2011

 

 

 

 

 

 

 

 

 

 

 

 Revenue

 

 

 

 

 

 

 

 

 

 

Consulting fee income

 

$

30,000

$

-

 

30,000

 

-

 

Total income

 

 

30,000

 

-

 

30,000

 

-

 

 

 

 

 

 

 

 

 

 

 

 Costs and Expenses

 

 

 

 

 

 

 

 

 

 

General and administrative

 

 

21,136

 

15,425

 

14,548

 

867

 

Payroll

 

 

15,919

 

-

 

13,919

 

 

 

Professional fees

 

 

39,812

 

 

 

6,646

 

 

 

Total costs and expenses

 

 

76,867

 

15,425

 

34,113

 

867

 

 

 

 

 

 

 

 

 

 

 

 Operating income (loss)  

 

 

(46,867)

 

(15,425)   

 

(5,113)

 

(867)

 

 

 

 

 

 

 

 

 

 

 

(Income) loss from discontinued operations

 

-

 

(30,607)

 

-

 

(8,449)

 

 

 

 

 

 

 

 

 

 

 

      (Loss) income before income taxes

 

(46,867)

 

15,182   

 

(5,113)

 

7,582

 

 

 

 

 

 

 

 

 

 

Income tax provision

 

 

0

 

0

 

0

 

0

 

 

 

 

 

 

 

 

 

 

 Net income, (net loss)

 

$

(46,867)

 

15,182   

 

(5,113)

 

7,582

 

 

 

 

 

 

 

 

 

 

 

 Earnings per share - basic and dilutive

$

(0.01)

 

(0.00)

 

(0.00)

 

(0.0)

 Weighted average shares

 

 

3,379,870

 

3,238,078

 

3,309,753

 

3,238,078


See accompanying notes and accountant’s report.



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AF Ocean Investment Management Company

STATEMENT OF CASH FLOWS

 (unaudited)


 

 

 

 

 

 

Six months ended June 30,

 

 

 

 

 

 

2012

 

2011

 Operating activities

 

 

 

 

 

 

 

 Net income, (net loss)

 

 

 

$

(46,867)

$

15,182

 Adjustments to reconcile net income, (net loss) to net cash

 

 

 

 

 

 

 provided by (used in) operating activities:

 

 

 

 

 

 

 

 Depreciation and amortization

 

 

 

-

 

-

 

 Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable

 

 

(7,000)

 

-

 

 Assets and liabilities of discontinued operations

 

 

(6,551)

 

2,073

 

 Total adjustments

 

 

 

 

(13,551)

 

2,073

 Net cash provided by (used in) operating activities

 

 

(60,418)

 

17,255

 

 

 

 

 

 

 

 

 

 Investing activities

 

 

 

 

 

 

 

 

 Purchase of property and equipment

 

 

 

 

 

(12,163)   

 

 Proceeds from sale of property and equipment

 

 

 

22,818

 

 

 Net cash used in investing activities

 

 

 

22,818

 

(12,263)  

 

 

 

 

 

 

 

 

 

 Financing activities

 

 

 

 

 

 

 

 

Receipts from shareholder loans

 

 

 

 

50,700

 

-

 Net cash (used in) provided by financing activities

 

 

50,700

 

-

 

 

 

 

 

 

 

 

 

 Net increase in cash and cash equivalents

 

 

 

26,855

 

5,092

 

 

 

 

 

 

 

 

 

 Cash and cash equivalents, beginning of period

 

 

 

3,361

 

9,387

 

 

 

 

 

 

 

 

 

 Cash and cash equivalents, end of period

 

 

 

30,216

 

14,479

 

 

 

 

 

 

 

 

 

 Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 CASH PAID DURING THE YEAR FOR:

 

 

 

 

 

 

 

 

 INTEREST

 

 

 

 

 $                     -   

 

 $                     -   

 

 TAXES

 

 

 

 

 $                     -   

 

 $                     -   



See accompanying notes and accountant’s report.



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AF Ocean Investment Management Company

Notes to Financial Statements

June 30, 2012




NOTE 1.

ORGANIZATION AND DESCRIPTION BUSINESS OPERATIONS


AF Ocean Investment Management Company, formerly known as Dinello Restaurant Ventures, Inc., (the “Company”), was incorporated under the laws of the State of Florida on April 2, 2003.  After disposing of the restaurant assets (see Note 7 below), the Company changed its operations to promoting business relations and exchanges between Chinese and U.S. companies, facilitating international mergers and acquisitions, and increasing co-operation between Chinese companies and Wall Street financial institutions.  The new mission is to help Wall Street investors identify and work with respectable and reputable Chinese counterparts and companies and assist Chinese corporations to understand that the only way to benefit from the world’s biggest capital market is through strict and consistent adherence to the rules and regulations that govern companies listed on American stock exchanges.


 


NOTE 2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



Basis of Presentation and Use of Estimates.   In the opinion of management, all adjustments consisting of normal recurring adjustments necessary for a fair statement of (a) the result of operations for the six months ended June 30, 2012 and June 30, 2011; (b) the financial position at June 30, 2012 and December 31, 2011 and (c) cash flows for the six months ended June 30, 2012 and June 30, 2011 have been made.


The Company prepares its financial statements in conformity with generally accepted accounting principles in the United States of America. These principles require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management believes that these estimates are reasonable and have been discussed with the Board of Directors; however, actual results could differ from those estimates.




Cash and Cash Equivalents.  The majority of cash is maintained with a major financial institution in the United States.  Deposits with this bank may exceed the amount of insurance provided on such deposits.  Generally, these deposits may be redeemed on demand and, therefore, bear minimal risk.  The Company considers all highly liquid investments purchased with an original maturity of six months or less to be cash equivalents.




Inventory.  Inventory is stated at the lower of cost (first in – first out) or market.  Market is generally considered to be the net realizable value.  The inventory at each year end consisted of food stuffs and supplies with a limited life.  




Property and Equipment.  Property and equipment is stated at cost.  Depreciation is computed by the straight-line method over estimated useful lives.   The carrying amount of all long-lived assets is evaluated periodically to determine if adjustment to the depreciation and amortization period or the unamortized balance is warranted. Based upon its most recent analysis, the Company believes that no impairment of property and equipment exists at June 30, 2012.




Impairment of Long-lived Assets Long-lived assets such as property, equipment and identifiable intangibles are reviewed for impairment whenever facts and circumstances indicate that the carrying value may not be recoverable.  When required impairment losses on assets to be held and used are recognized based on the fair value of the asset.  The fair value is determined based on estimates of future cash flows, market value of similar assets, if available, or independent appraisals, if required.  If the carrying amount of the long-lived asset is not recoverable from its undiscounted cash flows, an impairment loss is recognized for the difference between the carrying amount and fair value of the asset.  When fair values are not available, the Company estimates fair value using the expected future cash flows discounted at a rate commensurate with the risk associated with the recovery of the assets.  We did not recognize any impairment losses for any periods presented.



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Revenue Recognition

Sales revenues of the pizza business were recognized at the point of sale or at the time product is delivered to the customer. Delivery charges are included in the sales revenues.  Additionally, revenues are presented net of discounts and exclude all sales taxes. Typically the Company does not offer credit to its customers.  Management has determined that no allowance for expected merchandise returns is required.


Revenue from consulting agreements will be recognized according to the terms of the agreement.  Generally, consulting revenue will be recognized over the term of the agreement.  At times deposits or prepayments may result in deferred income which will be recognized into income as the services are performed.  




Share-based Compensation The Company issues stock options whereby all share-based payments to employees, including grants of employee stock options are recognized as compensation expense in the financial statements based on their fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period). The Company had no common stock options or common stock equivalents granted or outstanding for all periods presented.


The Company accounts for stock-based instruments issued to employees in accordance with ASC Topic 718.  ASC Topic 718 requires companies to recognize in the statement of operations the grant-date fair value of stock options and other equity based compensation issued to employees.  The value of the portion of an award that is ultimately expected to vest is recognized as an expense over the requisite service periods using the straight-line attribution method.  The Company accounts for non-employee share-based awards in accordance with the measurement and recognition provisions ASC Topic 505-50.  The Company estimates the fair value of stock options at the grant date by using the Black-Scholes option-pricing model.


The Company may issue restricted stock for various business and administrative services.  Cost for these transactions are measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The value of the common stock is measured at the earlier of (i) the date at which a firm commitment for performance by the counterparty to earn the equity instruments is reached or (ii) the date at which the counterparty's performance is complete.   There was no share-based compensation paid in the six months ended June 30, 2012 or the years ended December 31, 2011 or 2010.




Advertising.  The costs of advertising are expensed as incurred.  Advertising expense was $0.00 for the six months ending June 30, 2012.




Income Taxes.  The Company accounts for income taxes pursuant to the provisions of ASC 740-10, “Accounting for Income Taxes,” which requires, among other things, an asset and liability approach to calculating deferred income taxes.  The asset and liability approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities.  A valuation allowance is provided to offset any net deferred tax assets for which management believes it is more likely than not that the net deferred asset will not be realized.




Earnings per Share.  In accordance with ASC 260-10, “Earnings Per Share”, basic net earnings (loss) per common share is computed by dividing the net earnings (loss) for the period by the weighted average number of common shares outstanding during the period.  Diluted earnings (loss) per share are computed using the weighted average number of common and dilutive common stock equivalent shares outstanding during the period.  Diluted earnings (loss) per share calculations are determined by dividing net income (loss) by the weighted average number of shares plus the effect of the dilutive potential common shares outstanding during the period using the treasury stock method. There are no share equivalents for any periods presented and, thus, anti-dilution issues are not applicable.




Segment Information.  In accordance with the provisions of ASC 280-10, “Disclosures about Segments of an Enterprise and Related Information”, the Company is required to report financial and descriptive information about its reportable operating segments.  The Company does not have any operating segments as of June 30, 2012.



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Recent Accounting Pronouncements.  The Company reviews new accounting standards as issued. No new standards had any material effect on these financial statements. The accounting pronouncements issued subsequent to the date of these financial statements that were considered significant by management were evaluated for the potential effect on these consolidated financial statements. Management does not believe any of the subsequent pronouncements will have a material effect on these consolidated financial statements as presented and does not anticipate the need for any future restatement of these consolidated financial statements because of the retro-active application of any accounting pronouncements issued subsequent to December 31, 2010 through the date these financial statements were issued.




Reclassification of Discontinued Operations

In accordance with the rules regarding the presentation of discontinued operations the assets, liabilities and activity of the pizza business have been reclassified as a discontinued operation for all periods presented.





NOTE 3.

GOING CONCERN

 

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  The Company has discontinued its operations and currently is evaluating its new direction (see Note 7).  The Company had $30,000 in income for the six months ended June 30, 2012 from new consulting services.  For the six months ended June 30, 2012, the Company sustained net income (losses) of ($46,867) and provided (used) cash in operating activities of ($60,418)  These factors raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period of time.  The Company’s continuation as a going concern is dependent upon its ability to generate revenues through its new business direction.  

 

The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.




NOTE 4.

RELATED PARTY TRANSACTIONS


During 2009, the sole stockholder took distributions of the S-Corporation earnings of $7,700.  On July 28, 2010, the sole stockholder sold 100% of his holdings to new stockholders.  No distributions of earnings were made in 2010.


During the last half of 2010, the major shareholder loaned the Company $26,308 in short-term non-interest bearing loans.   On December 31, 2010, she elected to convert the shareholder loans to 263,078 shares of common stock at $0.10 per share.


During the six months ended June 30, 2012, the majority shareholder loaned the Company $88,981.50.  Of this amount, $45,771.50 has been converted to  shares of common stock (a conversion price of $0.20 per share) leaving $43,210 still owed by the company. No written agreements were made for repayment.




NOTE 5.

STOCKHOLDERS’ EQUITY


During the year ended December 31, 2009, the Company had 100 shares of common stock issued and outstanding.  In July of 2010, the sole stockholder sold 100% of his shares to new owners.  The new Board of Directors with the consent of the new stockholders amended the articles of incorporation to reduce the par value from $1.00 to $0.01and to increase the authorized shares from 100 shares of common stock to 500,000,000 of common stock.  In addition the original 100 shares were split into 2,975,000 shares.  


On December 31, 2010, a loan, from a shareholder in the amount of $26,308, was converted to 263,078 shares of common stock at $0.10



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per share.


On June 4, 2012, a loan from a shareholder in the amount of $45,771.5 was converted into 228,858 shares of common stock at $0.20 per share.


The Company has no options or warrants issued or outstanding.  


No preferred shares have been authorized.  




NOTE 6.

COMMITMENTS AND CONTINGENCIES


From time to time the Company may be a party to litigation matters involving claims against the Company.  Management believes that there are no current matters that would have a material effect on the Company’s financial position or results of operations.


The Company rents office space in New York, New York and in Sarasota, Florida.  The terms for each location are month to month and were started on March 1, 2012. The monthly rent is $200 and $300, respectively.  




NOTE 7.

DISCONTINUED OPERATIONS AND CHANGE IN DIRECTION


On September 19, 2011, the Board of Directors appointed Mr. Andy Z. Fan as Director and Chairman of the Board.  On September 21, 2011, Chairman Andy Fan held a special meeting of the Board of Directors to discuss a change is business strategy and business model for the Company due to the current economic conditions.  The lack of improvement in the service industry, specifically the restaurant industry, has not provided the necessary climate for building the current business model.


The Board  believed that to continue to protect and increase shareholder value, it would be to the advantage, welfare and best interests of the shareholders for the Company to consider alternative corporate strategies to generate new business revenue for the Company.  The Board of Directors and the Shareholders approved moving in a new direction and changing the name of the Company to reflect the new direction and mission.  The approved new strategic direction of the Company will be promoting business relations and exchanges between Chinese and U.S. companies, and facilitating international mergers and acquisitions, increasing co-operation between Chinese companies and Wall Street financial institutions.  We will seek to help Wall Street investors identify and work with respectable and reputable Chinese counterparts and companies and assist Chinese corporations to understand that the only way to benefit from the world’s biggest capital market is through strict and consistent adherence to the rules and regulations that govern companies listed on American stock exchanges.  The new name approved by the Board and the Shareholders will be “AF Ocean Investment Management Company.”


To facilitate this new direction, the Board agreed to the sale of the assets and liabilities of the pizza business as of September 30, 2011. The disposal of the restaurant assets to Caramello’s Pizzeria, LLC, a Florida Limited Liability Company, was approved by Shareholders representing 87% of the shares issued and outstanding.  


Summary Of Results Of Discontinued Operations



 

 

December 31, 2011

 

December 31, 2010

Revenue

$

340,136

$

418,063

Operating expenses

 

319,420

 

426,978

Net operating income (loss)

 

20,716

 

(8,915)

Forgiveness of debt

 

-

 

(5,022)

Gain to be recognized from discontinued operations

 

17,439

 

-

Income tax expense

 

(291)

 

-

Income (loss) from discontinued operations net of tax

$

37,864

$

(13,937)

 

 

 

 

 

 

 

 

Inventory

$

3,840

$

4,915

Fixed assets, net of depreciation

 

27,011

 

18,378

Total assets

$

30,851

$

23,293

Accounts payable

$

-

$

 3,304

Accrued liabilities

 

8,290

 

23,982

Total liabilities

$

8,290

$

27,286



There were no discontinued operations during the six months ended June 30, 2012.




NOTE 8.

SUBSEQUENT EVENTS


On July 6, 2012, the Company completed the acquisition of Endeavour (Shanghai) Business Services Co., Ltd., a wholly foreign-owned enterprise (“Endeavour”) in Shanghai.  Pursuant to the terms of the Equity and Capital Contribution Transfer Agreement, which was executed on May 4, 2012, the Company acquired all of the interest in Endeavour from Island Capital Management, LLC, a Florida limited liability company, in exchange for $200,000 plus a $100,000 Promissory Note convertible into 150,000 shares of the common stock of the Company.  The acquisition was approved by Shanghai Government; Certificate of Approval as well as Business License were issued to the Company accordingly.  Chairman & President Andy Fan was in Shanghai to witness and celebrate the smooth transfer.  Following the consummation of the transaction, Endeavour (Shanghai) Business Services Co., Ltd. became a wholly-owned subsidiary of the Company in China.  Andy Fan personally contributed the $200,000 on behalf of the Company and on July 9, 2012, the Company issued 1,000,000 shares of stock to Mr. Fan in exchange for cancelling the $200,000 debt.


AF Ocean anticipates that Endeavour (Shanghai) Business Services Co., Ltd. will greatly facilitate the Company’s mission of promoting business relations and exchanges between Chinese and U.S. companies, facilitating international mergers and acquisitions, and increasing co-operation between Chinese companies and Wall Street financial institutions.




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ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATION


The following discussion should be read in conjunction with our financial statements and the notes thereto.


Forward-Looking Statements


This quarterly report contains forward-looking statements relating to us that are based on the beliefs of our management as well as assumptions made by, and information currently available to, our management. When used in this Report, the words “anticipate”, “believe”, “estimate”, “expect”, “intend”, “plan” and similar expressions, as they relate to us or our management, are intended to identify forward-looking statements. These statements reflect management’s current view of us concerning future events and are subject to certain risks, uncertainties and assumptions, including among many others: our potential inability to raise additional capital, the possibility that third parties hold proprietary rights that preclude us from marketing our products, the emergence of additional competing technologies, changes in domestic and foreign laws, regulations and taxes, changes in economic conditions, a general economic downturn, a downturn in the securities markets, Securities and Exchange Commission regulations which affect trading in the securities of “penny stocks,” and other risks and uncertainties. Should any of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this Report as anticipated, estimated or expected.


Use of Certain Defined Terms


Except as otherwise indicated by the context, references in this report to "AF Ocean" "we," "us," or "our" and the "Company" are references to the business of AF Ocean Investment Management Company.   


Use of GAAP Financial Measures


We use GAAP financial measures in the section of this quarterly report captioned “Management’s Discussion and Analysis and Results of Operation.” All of the GAAP financial measures used by us in this report relate to the inclusion of financial information.


Overview


This subsection of MD&A is an overview of the important factors that management focuses on in evaluating our businesses, financial condition and operating performance, our overall business strategy and our earnings for the periods covered.


General

We are an operating company in the business consulting services. We have an operating history from our prior restaurant business and have generated revenues from our prior business model activities that have produced both net incomes and losses in the periods in which we have been fully operational.   We have a limited operating history form our current consulting service business and only just begun generating revenue.

Our Board of Directors believes that we can operate as a business consulting firm during the next twelve months.  A change in the strategic business direction of the company may take years to complete and future cash flows, if any, are impossible to predict at this time. The realization value from any strategic change in operations is largely dependent on factors beyond our control such as the market for our services.   We may raise cash from sources other than our operations. Our only other source for cash at this time is investment by others in the Company.

Employees


As of June 30, 2012, there were two (2) full time employees.  This does not include the two (2) officers and directors who run the corporation.


Critical Accounting Policies


The preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.  Our actual results could differ from those estimates.  To be as accurate with our estimates as possible, we use our historical data to forecast our future results.  Deviations from our projections are addressed when our financials are reviewed on a monthly basis.  This allows us to be proactive in our approach to managing our business.  It also allows us to rely on proven data rather than having to make assumptions regarding our estimates.




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Management does not believe that our actual results are related to any sensitivity in estimates made by management.  The year-end consistency of our results has shown that our prior year’s historical data is the best projector of our future results.


Income Taxes


We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.


We record net deferred tax assets to the extent we believe these assets will more likely than not be realized. In making such determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. In the event we were to determine that we would be able to realize our deferred income tax assets in the future in excess of their net recorded amount, we would make an adjustment to the valuation allowance, which would reduce the provision for income taxes.


In July 2006, the Financial Accounting Standards Board (“FASB”) issued Financial Interpretation (“FIN”) 48, “Accounting for Uncertainty in Income Taxes” (codified primarily in FASB ASC Topic 740, Income Taxes) which clarifies the accounting for uncertainty in income taxes recognized in the financial statements in accordance with Statement of Financial Accounting Standards (“SFAS”) 109, “Accounting for Income Taxes” (codified primarily in FASB ASC Topic 740, Income Taxes). FIN 48 provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits.  Income tax positions must meet a more-likely-than-not recognition threshold at the effective date to be recognized upon the adoption of FIN 48 and in subsequent periods. This interpretation also provides guidance on measurement, derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. We adopted FIN 48 effective January 1, 2007.  As a result of the implementation of FIN 48, the Company recognized no increase in the liability for unrecognized tax benefits.


Impairment of Long-Lived Assets


The Statement of Financial Accounting Standards (SFAS) No. 144 requires that long-lived assets and certain identifiable intangibles held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  We assess the potential impairment of long-lived assets, principally property and equipment, whenever events or changes in circumstances indicate that the carrying value may not be recoverable. We determine if there is impairment by comparing undiscounted future cash flows from the related long-lived assets with their respective carrying values. In determining future cash flows, significant estimates are made by us with respect to future operating results of the restaurant over its remaining lease term. If assets are determined to be impaired, the impairment charge is measured by calculating the amount by which the asset carrying amount exceeds its fair value. This process of assessing fair values requires the use of estimates and assumptions, which are subject to a high degree of judgment. The adoption of SFAS No. 144 has not materially affected the Company’s reported earnings, financial condition or cash flows.


Results of Operations


The following table provides a summary of the results of operations for our last two full fiscal years.


Table 2.0 Summary of Results of Operations


PERIOD

 

(LOSS) INCOME FROM OPERATIONS

 

TOTAL OTHER (INCOME) EXPENSE

 

NET INCOME (LOSS)

June 30, 2012

$

(46,867)

$

-

$

(46,867)

June 30, 2011

$

(15,425)

$

(30,607)

$

15,182

December 31, 2011

$

(17,318)

$

37,846

$

20,528

December 31, 2010

$

(3,399)

$

(13,977)

$

(17,376)



Liquidity and Capital Resources


As of June 30, 2012, we had cash and cash equivalents of $37,216.  




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Between April 2003 and September 19, 2011, the Company concentrated its efforts in the pizza restaurant industry.  At the time, our management believed we could capitalize on the quality of the restaurant offerings to increase business.


We changed to our current business model on September 19, 2011.  Since then, we incurred additional liabilities that made our company illiquid at times. 


In the event we are unable to generate sufficient funds to continue our business efforts or if the company is pursued by a larger company for a business combination we will analyze all strategies to continue the company and maintain or increase shareholder value.  Under these circumstances we would consider a merger, acquisition, joint venture, strategic alliance, a roll-up, or other business combination for the purposes of continuing the business and maintaining or increasing shareholder value.  Management believes its responsibility to maintain shareholder value is of paramount importance, which means the Company should consider the aforementioned alternatives in the event funding is not available on favorable terms to the Company when needed.


Results of Discontinued Operations for the six months ended June 30, 2012 and 2011


The following tables set forth key components of our results of operations and revenue for the periods indicated in dollars.


Table 3.0 Comparison of our Statement of Operations for the Six months Ended June 30,


 

 

 

 

 

 

 

 

 

 

2012

 

2011

 

 

%Change

Revenues:

$

30,000

$

-

 

 

100%

Expenses:

 

76,867

 

15,425

 

 

398%

Income (loss) from operations

 

(46,867)

 

(15,425)

 

 

204%

(Income) loss from discontinued operations

 

 

 

(30,607)

 

 

-100%

Net income (loss)

$

 (46,867)

$

15,182

 

 

-409%

Income (loss) per share: basic and diluted

$

(0.01)

$

0.00

 

 

 


Income (Loss). For the six months ended June 30, 2012, total loss from operations was ($46,867) compared to ($15,478) for the six months ended June 30, 2011. The loss generated in the current period was directly attributable to the discontinued operations of the pizza business and the start-up operations of the new business.   In the second quarter of 2012, we received our first revenue from the new direction of the Company in the amount of $30,000.00.   


Operating Expenses. The increase in expenses is due to the addition of two employees, travel expenses for investigating candidate Chinese companies, and professional services necessary for the new operations.


Net Income (Loss). As a result of the factors described above, net income decreased from $ 15,182 for the six months ended June 30, 2011 of the discontinued operations to ($46,867) for the six months ended June 30, 2012.


Liquidity and Capital Resources


General. At June 30, 2012, we had cash and cash equivalents of $37,216. We have historically met our cash needs through shareholder loans. Our cash requirements are generally for profession services and general and administrative activities. We believe that our cash balance is not sufficient to finance our cash requirements for expected operational activities, capital improvements, and partial repayment of debt through the next 12 months.

 

Our operating activities used cash of $76,867 for the six months ended June 30, 2012.  Discontinued operations used $14,452 for the six months ended June 30, 2011. With only $30,000 in revenue for the six months ended June 30, 2012, our operations are continuing to be supported through loans from the majority shareholder.


Cash generated in our financing activities was $50,700 for the six months ended June 30, 2012, compared to $0 during the comparable period in 2011.


As of June 30, 2012, current liabilities exceeded current assets.




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Going Concern


The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  The Company had revenue of $30,000 and net loss of ($46,867) for the six months ended June 30, 2012 compared to revenue of $0 and net income of $15,182 for the six months ended June 30, 2011. These factors raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period of time. The Company is highly dependent on its ability to obtain clients and investment capital from future funding opportunities to fund the current and planned operating levels.  The Company’s continuation as a going concern is dependent upon its ability to bring in income generating activities and its ability to continue receiving investment capital from future funding opportunities. No assurance can be given that the Company will be successful in these efforts.


Inflation  


Inflation does not materially affect our business or the results of our operations.


Recent Accounting Pronouncements


The Company has carefully considered the new pronouncements that altered generally accepted accounting principles.  The Company does not believe that any new or modified principles will have a material impact on the Company’s reported financial position or operations in the near term, other than the following as reported in our financial statements:


In June 2009, the FASB issued Accounting Standards Update (“ASU”) No. 2009-01, Topic 105 — Generally Accepted Accounting Principles — amendments based on Statement of Financial Accounting Standards No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles.  This ASU reflected the issuance of FASB Statement No. 168.  This Accounting Standards Update amends the FASB Accounting Standards Codification for the issuance of FASB Statement No. 168, The FASB Accounting Standards Codification TM and the Hierarchy of Generally Accepted Accounting Principles.  This Accounting Standards Update includes Statement 168 in its entirety, including the accounting standards update instructions contained in Appendix B of the Statement.  The Codification does not change current U.S. GAAP, but is intended to simplify user access to all authoritative U.S. GAAP by providing all the authoritative literature related to a particular topic in one place.  The Codification is effective for interim and annual periods ending after September 15, 2009, and as of the effective date, all existing accounting standard documents will be superseded.   

In February 2010, the FASB issued authoritative guidance on subsequent events. The guidance requires an SEC filer to evaluate subsequent events through the date the financial statements are issued but no longer requires an SEC filer to disclose the date through which the subsequent event evaluation occurred. The guidance became effective for the Company upon issuance and had no impact on the Company’s results of operations or financial position.


Off-Balance Sheet Arrangements


We do not have any off-balance arrangements.



ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


The following discussion about the Company’s market rate risk involves forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements.


In general, business enterprises can be exposed to market risks, including fluctuation in commodity and raw material prices, foreign currency exchange rates, and interest rates that can adversely affect the cost and results of operating, investing, and financing. In seeking to minimize the risks and/or costs associated with such activities, the Company manages exposure to changes in commodities and raw material prices, interest rates and foreign currency exchange rates through its regular operating and financing activities. The Company does not utilize financial instruments for trading or other speculative purposes, nor does the Company utilize leveraged financial instruments or other derivatives.


Our operations are conducted primarily in the United States and are not subject to foreign currency exchange rate risk. Some of our products are sourced internationally and may fluctuate in cost as a result of foreign currency swings, however, we believe these fluctuations have not been significant.



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ITEM 4.

CONTROLS AND PROCEDURES

 

Disclosure Controls and Procedures.

 

The management of the Corporation is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system is a process designed to provide reasonable assurance to management and to the board of directors regarding the preparation and fair presentation of published financial statements.


Our internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; provide reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles and that receipts and expenditures are being made only in accordance with authorizations of management and the directors of the Corporation; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Corporation’s assets that could have a material effect on our financial statements.


All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. 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.


Management assessed the effectiveness of the Corporation’s internal control over financial reporting as of June 30, 2012. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework. Based on our assessment management believes that, as of June 30, 2012, the Corporation’s internal control over financial reporting is effective based on those criteria.


Changes in Internal Controls over Financial Reporting.

 

We had no significant changes in our internal controls during the six months ended June 30, 2012.  Management concluded that there has been no change in our internal control over financial reporting during the period ended June 30, 2012, that has materially affected or is reasonably likely to affect our internal control over financial reporting.

 



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PART II – OTHER INFORMATION


ITEM 1.

LEGAL PROCEEDINGS


None

 

ITEM 2

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

On June 4, 2012, loans from the majority shareholder totaling $45,771.5 were converted into 228,858 shares of common stock at $0.20 per share.


ITEM 3.  

DEFAULTS UPON SENIOR SECURITIES


None


ITEM 4.  

MINE SAFTEY DISCLOSURES


Not applicable


ITEM 5.  

OTHER INFORMATION


None


ITEM 6

EXHIBITS


Exhibit No.

Description

3.1

Articles of Incorporation

Filed on February 3, 2011 as Exhibit 3.1 to the issuer’s Registration Statement on Form S-1 (File No. 333-172052) and incorporated herein by reference.

3.2

Amended and Restated Articles of Incorporation

Filed on February 3, 2011 as Exhibit 3.2 to the issuer’s Registration Statement on Form S-1 (File No. 333-172052) and incorporated herein by reference.

3.3

By-Laws

Filed on February 3, 2011 as Exhibit 3.3 to the issuer’s Registration Statement on Form S-1 (File No. 333-172052) and incorporated herein by reference.

5

Opinion Regarding Legality and Consent of Counsel by Harrison Law, P.A.

Filed on February 3, 2011 as Exhibit 5 to the issuer’s Registration Statement on Form S-1 (File No. 333-172052) and incorporated herein by reference.

14

Code of Ethics

Filed on February 3, 2011 as Exhibit 14 to the issuer’s Registration Statement on Form S-1 (File No. 333-172052) and incorporated herein by reference.

23.1

Consent of Experts and Counsel: Independent Auditor's Consent by Randall N. Drake, C.P.A.

Filed on May 6, 2011 as Exhibit 23.1 to the issuer’s Registration Statement on Form S-1 (File No. 333-172052) and incorporated herein by reference.

23.2

Consent of Experts and Counsel:  Counsel’s Consent, by Harrison Law, P.A., included in Exhibit 5

Filed on May 6, 2011 as Exhibit 23.2 to the issuer’s Registration Statement on Form S-1 (File No. 333-172052) and incorporated herein by reference.

31.1

Certification of Chief Executive Officer  filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Filed on August 13, 2012 as Exhibit 31.1 to the issuer’s Form 10-Q for the period ended June 30, 2012 and incorporated herein by reference.

31.2

Certification of Chief Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Filed on August 13, 2012 as Exhibit 31.2 to the issuer’s Form 10-Q for the period ended June 30, 2012 and incorporated herein by reference.

32

Certification of Chief Executive Officer and Chief Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Filed on August 13, 2012 as Exhibit 32 to the issuer’s Form 10-Q for the period ended June 30, 2012 and incorporated herein by reference.

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101

Financial statements from the quarterly report on Form 10-Q of AF Ocean Investment Management Company for the quarter ended June 30, 2012, formatted in XBRL: (i) the Balance Sheet, (ii) the Statement of Income, (iii) the Statement of Cash Flows and (iv) the Notes to the Financial Statements.

Filed herewith


SIGNATURES


 

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

AF OCEAN INVESTMENT MANAGEMENT COMPANY

 

 

 

 

Dated:  September 12, 2012

/s/ ANDY Z. FAN

 

Andy Z. Fan

 

President, Chief Executive Officer, and Chairman of the Board

 

 

Dated:  September 12 , 2012

/s/ DIANE J. HARRISON

 

Diane J. Harrison

 

Secretary, Treasurer, Chief Financial Officer, and Director


  

 





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