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EX-32 - AF OCEAN INVESTMENT MANAGEMENT Coex32afan033113a.htm

 


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A


(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 2013

[ ] 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

[afan10q033113a001.jpg]

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)

 

 (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  þ  No  o


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 May 10, 2013:  7,327,720




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TABLE OF CONTENTS


Part I Financial Information

Item 1.  Consolidated Financial Statements

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

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


RESTATEMENT EXPLANATORY NOTE


The purpose of this Amendment No. 1 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2013 as originally filed with the Securities and Exchange Commission on May 15, 2012 is to correct errors in the Financial Statements.  We have made necessary conforming changes in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other text discussing the financials resulting from the corrections of this error.



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SUMMARY RESTATEMENT


AF Ocean Investment Management Company

Consolidated Financial Statement Items As Reported And Restated

As of and for the 3 months ended – March 31, 2013



 

 

Reported

 

Adjustments

 

Restated

Balance Sheet

 

 

 

 

 

 

Current assets1

$

87,418

$

272,028

$

359,446

 

 

 

 

 

 

 

Total Assets

$

437,984

$

272,028

$

710,012

 

 

 

 

 

 

 

Due to related parties2

$

62,217

$

173,819

$

236,036

Deferred revenue

$

-

$

135,000

$

135,000

Foreign currency translation

$

-

$

231

$

231

Accumulated deficit

$

(653,750)

$

(37,022)

$

(690,772)

Total Liabilities and Stockholder’s (Deficit) Equity

$

437,984

$

272,028

$

710,012

 

 


Reported

 

Adjustments

 

Restated

Statement of Cash Flows

 

 

 

 

 

 

Net income (loss)

$

20,311

$

72

$

20,383

 

 

 

 

 

 

 

Net cash used in operating activities

$

24,100

$

(64,928)

$

(40,828)

Net cash provided by investing

$

(2,236)

$

-

$

(2,236)

Net cash provided by financing activities

$

-

$

-

$

-

Net change in cash and cash equivalents

$

21,864

$

(64,928)

$

(43,064)

Cash and cash equivalent, end of period

$

87,418

$

272,028

$

359,446

1 Additional cash accounts were not included in previous 3 months filings.

2 Amount due to shareholder loan increased by $173,819 for three months ended March 31, 2013.



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PART I – FINANCIAL INFORMATION


ITEM 1.

FINANCIAL STATEMENTS


AF OCEAN INVESTMENT MANAGEMENT COMPANY

CONSOLIDATED BALANCE SHEETS

As of March 31, 2013 (Unaudited) and December 31, 2012 (Audited)


 

 

 

 March 31, 2013

(Unaudited and Restated)

 

December 31,  2012

(Audited)

ASSETS

 

 

 

 

 Current assets

 

 

 

 

 

Cash

$

359,446

$

402,510

      Prepaid Expenses

$

29,000

$

-

Total Current Assets

$

388,446

$

402,510

 

 

 

 

 

 

Other Assets

 

 

 

 

 

Property & equipment, net of depreciation of $3,985 and $3,132

$

7,373

$

5,990

 

Intangibles

$

294,193

$

294,193

 

Notes Receivable

$

20,000

$

16,000

Total other assets

$

321,566

$

316,183

Total Assets

$

710,012

$

718,693

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 Current liabilities

 

 

 

 

 

Accounts payable

$

-

$

200

 

Note Payable-ICM, less discount of  ($14,056) & (27,044)

$

85,944

$

72,956

 

Accrued expenses

$

7,284

$

4,136

 

Deferred revenue

$

135,000

$

180,000

 

Due to Related Parties

$

236,036

$

236,036

Total current liabilities

$

464,264

$

493,328

Total Liabilities

$

464,264

$

493,328

 

 

 

 

 

 

 Stockholders’ equity

 

 

 

 

 

 Common Stock, $.01 par value, 5,000,000,000 shares authorized;    7,327,720 shares issued and outstanding

$

73,277

$

73,277

 

 Additional paid-in capital

$

863,012

$

863,012

 

 Foreign currency translation

$

231

$

231

 

 Accumulated deficit  

$

(690,772)

$

(711,155)

Total stockholders’ equity

$

245,748

$

225,365

 

 

 

 

 

 

Total liabilities and stockholders’ equity

$

710,012

$

718,693


See accompanying notes and accountant’s report.



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AF OCEAN INVESTMENT MANAGEMENT COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME


 

 

Three months ended March 31,

 

 

 

 2013

(Unaudited and Restated)

 

 2012

(Unaudited)

 

 

 

 

 

 

 Revenue

 

 

 

 

 

Consulting fee income

$

180,000

$

-

 

Total income

$

180,000

$

-

 

 

 

 

 

 

 Costs and Expenses

 

 

 

 

 

General and administrative

$

62,362

$

41,824

 

Payroll

$

32,706

$

-

 

Professional fees

$

50,403

$

-

 

Total expenses

$

145,471

$

41,824

 

 

 

 

 

 

 Loss from operations  

$

34,529

$

(41,824)

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

Interest income

$

92

$

-

 

Other (expense)

$

(14,238)

$

-

Total other income (expense), net

$

(14,146)

$

-

 

 

 

 

 

 

Net income (loss)

$

20,383

$

(41,824)

Comprehensive income

$

20,383

$

(41,824)

 

 

 

 

 

 Earnings (Loss) per share - basic and dilutive

$

0.00

$

(0.01)

 Weighted average shares

 

7,327,720

 

3,238,078


See accompanying notes and accountant’s report.



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AF OCEAN INVESTMENT MANAGEMENT COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS


 

 

 

 

 

Three months ended March 31

 

 

 

 

 

 2013

(Unaudited and Restated)

 

 2012

(Unaudited)

 Operating activities

 

 

 

 

 

 

 Net income, (net loss)

 

 

$

20,383

$

(41,824)

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

 

 

 

 

 

 provided by (used in) operating activities:

 

 

 

 

 

 

 Depreciation  

 

 

853

 

-

 

     Amortization of discount on note payable

 

 

12,988

 

-

 

 Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Prepaid and other current assets

 

(29,000)

 

-

 

Notes receivable

 

(4,000)

 

-

 

Accounts payable

 

(200)

 

2,013

 

Accrued expenses

 

3,148

 

-

 

Deferred revenue

 

(45,000)

 

-

 

Assets and liabilities of discontinued operations

 

-

 

(3,361)

 Net cash provided by (used in) operating activities

 

(40,828)

 

(43,172)

 

 

 

 

 

 

 

 

 Investing activities

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(2,236)

 

-

 Net cash used in investing activities

 

 

(2,236)

 

-

 

 

 

 

 

 

 

 

 Financing activities

 

 

 

 

 

 

 

Loans from shareholder

 

 

 

-

 

87,976

 Net cash provided by financing activities

 

-

 

87,976

 

 

 

 

 

 

 

 

Foreign currency translation

 

 

 

-

 

-

 

 

 

 

 

 

 

 

 Net increase (decrease) in cash and cash equivalents

 

 

(43,064)

 

44,804

 

 

 

 

 

 

 

 

 Cash and cash equivalents, beginning of period

 

 

402,510

 

3,361

 

 

 

 

 

 

 

 

 Cash and cash equivalents, end of period

 

 

359,446

 

48,165

 

 

 

 

 

 

 

 

 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 CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013 (Unaudited and Restated)



NOTE 1.

BACKGROUND AND BASIS OF PRESENTATION


Background.  AF Ocean Investment Management Company, formerly known as Dinello Restaurant Ventures, Inc., was incorporated under the laws of the State of Florida on April 2, 2003.  After disposing of the restaurant assets (see Note 10 below), AF Ocean Investment Management Company (together with its subsidiaries, hereinafter collectively referred to as the “Company”, “AF Ocean” or “we”) 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.


On July 6, 2012, the Company completed the acquisition of Endeavour (Shanghai) Business Services Co., Ltd., a wholly foreign-owned enterprise (“WFOE” or “Endeavour (Shanghai)”) 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 (Shanghai) 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 AF Ocean.  The acquisition was approved by Shanghai Government; accordingly, a Certificate of Approval and a Business License were issued to AF Ocean.  AF Ocean 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 AF Ocean in China which we believe furthers the Company’s mission of increasing cooperation between Chinese and U.S. companies.  In the first quarter of 2013, the WFOE’s name was changed to AF Ocean Investment Consultancy Company.


President Fan personally contributed the $200,000 lump sum payment on behalf of the Company and on July 9, 2012, in exchange for cancelling the $200,000 debt, the Company issued 1,000,000 shares of stock to Mr. Fan (a stock value of $0.20 per share).




NOTE 2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


Basis of Consolidation.   The financial statements include the accounts and activity of AF Ocean Investment Management Company and its wholly owned subsidiary, AF Ocean Investment Consultancy Company as of July 6, 2012, the date of acquisition.  All intercompany balances and activity have been eliminated.  



Basis of Presentation and Use of Estimates.   The accompanying consolidated the financial statements of AF Ocean at March 31, 2013 are unaudited, but, in the opinion of management, include all adjustments necessary for a fair presentation of the results for the interim period. The unaudited consolidated interim financial statements included herein should be read in conjunction with the December 31, 2012 audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012. The Company’s quarterly results are subject to fluctuation and, thus, the operating results for any quarter are not necessarily indicative of results to be expected for any future fiscal period.


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




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




Property and Equipment.  Property and equipment is stated at cost.  Depreciation is computed by the straight-line method over 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 March 31, 2013.



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Foreign Currency Translation.  The Company addressed the effect of the exchange rate differences resulting from the translation of the financial statements of its WFOE into the consolidated corporate statements on the Balance Sheet with an Exchange rate adjustment of ($231) at December 31, 2012.  The effect of the foreign currency translation, if any, was recorded in comprehensive income.  The relative value of the Chinese CNY to the U.S. Dollar remained relatively constant during the three months ended March 31, 2013 ranging from 6.215 to 6.25 Dollar to the CNY; no adjustment for translation was made during the current period.




Intangible Assets.   Intangible assets consist of business licenses in the Peoples’ Republic of China and goodwill acquired in an acquisition during 2012.  Management believes that these assets have unlimited lives and will not be amortized.  




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




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




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


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


The Company may issue restricted stock for various business and administrative services.  Cost for these transactions are measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The value of the common stock is measured at the earlier of (i) the date at which a firm commitment for performance by the counterparty to earn the equity instruments is reached or (ii) the date at which the counterparty’s performance is complete.   There was no share-based compensation paid in the three months ended March 31, 2013 and 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 are computed using the weighted average number of common and dilutive common stock equivalent shares outstanding during the period.  At March 31, 2013 and 2012 dilutive earnings per share were not calculated as the effect is anti-dilutive.




Segment Information.  In accordance with the provisions of ASC 280-10, “Disclosures about Segments of an Enterprise and Related Information”, the Company is required to report financial and descriptive information about its reportable operating segments which meet the quantitative thresholds delineated.  The Company has one reporting segment that does not meet any of the quantitative thresholds to require separate reporting.   However, see Note 8 for limited disclosure.




Recent Accounting Pronouncements.  The Company reviews new accounting standards as issued. No new standards had any



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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 March 31, 2013 through the date these financial statements were issued.





NOTE 3.

GOING CONCERN

 

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  The Company had $180,000 in revenue for the three months ended March 31, 2013 from consulting services.  During that same period, the Company had a net income of $20,383 and used cash in operating activities of ($40,828).  These factors indicate the Company is generating revenue; however, there is still substantial doubt about the ability of the Company to continue as a going concern for a reasonable period of time.  The Company’s continuation as a going concern is dependent upon its ability to generate revenues through its new business direction.  

 

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




NOTE 4.

RELATED PARTY TRANSACTIONS


During the three months ended March 31, 2013, there were no related party transactions.


During the year ended December 31, 2012, the majority shareholder advanced the Company $673,278, of which $437,242 was converted to 2,186,212shares of common stock (a conversion price of $0.20 per share).  The remaining $236,036 is treated as a loan from the majority shareholder, although no repayment terms have been established.  In addition, the Company issued 1,032,200 shares to its directors for services rendered and a signing bonus. (the stock was valued at $0.20 per share).




NOTE 5

NOTE PAYABLE


On July 6, 2012 AF Ocean signed a convertible promissory Note to Island Capital Management, in the amount of $100,000, with stated interest of 5% and a one year maturity date of July 6, 2013, convertible into 150,000 shares of stock. The accrued interest on the note is recorded in accrued expenses.  The debt discount associated with the conversion to stock at a stated rate was $51,593 and has been amortized from July 6, 2012 to March 31, 2013. The balance of the discount at March 31, 2013 is $14,056.  Amortization expense of $12,988 was recorded for the three months ended March 31, 2013.




NOTE 6.

STOCKHOLDERS’ EQUITY


On August 27, 2012, the Board of Directors proposed and the stockholders approved amending the articles of incorporation to increase the authorized shares from 500,000,000 shares of common stock to 5,000,000,000 shares of common stock.  The amendment also allowed for one class of blank check preferred stock to be issued at the discretion of the board of Directors.


No preferred or common stock was issued for the three months ended March 31, 2013 and 2012.  


 


NOTE 7.

COMMITMENTS AND CONTINGENCIES


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


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




NOTE 8.  

SEGMENT REPORTING


In the third quarter of 2012, we acquired one operating segment, AF Ocean Investment Consultancy Company, (“AFOIC”) formerly known as Endeavour (Shanghai) Business Services Co., Ltd., in Shanghai, China, which we intend to develop as a provider of business services to Chinese individuals who have investments in U.S. companies.  There was no revenue during the year ending December 31, 2012, due primarily to the change in ownership.  The following are the expenses attributed to AFOIC for the three months ended March 31, 2013.  At this time, the operating segment does not meet any of the quantitative thresholds which would require separate reporting of its operations, however, management believes that the following information about the segment would be



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useful to readers of the financial statements.



Schedule of Segment Reporting Information by Segment


AF Ocean Investment Management (Shanghai) Co., Ltd. Segment

 

March 31, 2013

 

December 31, 2012

Segment net income, (net loss)

$

84,932

$

(106,682)

Segment total assets

$

309,753

$

325,642





NOTE 9.

ACQUISITION OF SUBSIDIARY


On July 6, 2012, the Company acquired 100% of the membership interest in AFOIC for cash and stock.  The assets acquired were as follows:


Schedule of Assets Acquired



Assets Acquired

 

July 6, 2012

  Cash acquired

$

274

  Property and equipment

$

5,533

  Intangible assets

$

294,193

  Cash paid

$

(200,000)

  Note payable to seller

$

(100,000)



The pro-forma results of the combined entity as if the acquisition occurred on January 1, 2012 are as follows:


Pro Forma Results Assuming a January 1, 2012 acquisition



  Profit Loss

 

March 31, 2012

Revenues

$

-

Net loss

$

(63,174)





NOTE 10.

SUBSEQUENT EVENTS


Management has evaluated subsequent events through October 4th, 2013, the date the financial statements were available to be issued. Management is not aware of any significant events that occurred subsequent to the balance sheet date that would have a material effect on the financial statements thereby requiring adjustment or disclosure.




NOTE 11.

RESTATEMENT


The Chairman of the Board added three (3) bank accounts to the balance sheet that were not disclosed with the internet banking access.  The accounts were not discovered by our Chief Financial Officer prior to the original filing for the quarter ended March 31, 2013.  Once we discovered the omission, we immediately determined that we would have to amend the financial statements.



 

 

 

 

 

 

 

 

 

Restated

 

As Originally Filed

 

As Restated

 

Net Effect

Net Loss from Operations

$

50,311

$

34,529

$

15,782

Other income (expenses)

$

(30,000)

$

(14,146)

$

(15,854)

Net income (loss)

$

20,311

$

20,383

$

72

 

 

 

 

 

 

 

Basic and Diluted Net Earnings Per Share

 

0.00

 

0.00

 

0.00





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ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION


The following discussion should be read in conjunction with 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 March 31, 2013, there were four (4) full time employees (one (1) in Shanghai for AF Ocean Investment Consultancy Company, formerly known as Endeavour (Shanghai) Business Services, Ltd. and three (3) in Florida for AF Ocean).  This does not include the three (3) officers and directors who manage 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.


The Company has adopted the provisions of  FASB ASC Topic 740, Income Taxes which clarifies the accounting for uncertainty in income taxes recognized in the financial statements. ASC 740 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 ASC 740 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 ASC 740 effective January 1, 2007.  As a result of the implementation of ASC 740, the Company recognized no increase in the liability for unrecognized tax benefits.


Impairment of Long-Lived Assets


Generally accepted accounting principles in the United States require that long-lived assets and certain identifiable intangibles held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  We assess the potential impairment of long-lived assets, principally property and equipment, whenever events or changes in circumstances indicate that the carrying value may not be recoverable. We determine if there is impairment by comparing undiscounted future cash flows from the related long-lived assets with their respective carrying values. In determining future cash flows, significant estimates are made by us with respect to future operating results of the restaurant over its remaining lease term. If assets are determined to be impaired, the impairment charge is measured by calculating the amount by which the asset carrying amount exceeds its fair value. This process of assessing fair values requires the use of estimates and assumptions, which are subject to a high degree of judgment. The adoption of  FASB ASC 360 has not materially affected the Company’s reported earnings, financial condition or cash flows.


Results of Operations


The following table provides a summary of the results of operations for the three month period ended March 31, 2013 and 2012 as well as our last two full fiscal years.


Summary of Results of Operations


PERIOD

 

(LOSS) INCOME FROM OPERATIONS

 

TOTAL OTHER INCOME

(EXPENSE)

 

NET INCOME (LOSS)

March 31, 2013

$

34,529

$

(14,146)

$

20,383

March 31, 2012

$

(41,824)

$

0

$

(41,824)

December 31, 2012

$

(625,522)

$

(19,225)

$

(644,747)

December 31, 2011

$

(17,318)

$

37,846

$

20,528



Liquidity and Capital Resources


As of March 31, 2013, we had cash and cash equivalents of $359,446.  




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


Results of Operations for the three months ended March 31, 2013 and 2012


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 Three Months Ended March 31,


 

 

2013

 

2012

 

 

%Change

Revenues:

$

180,000

$

-

 

 

100%

Expenses:

$

145,471

$

41,824

 

 

248%

Income (loss) from operations

$

34,529

$

(41,824)

 

 

183%

Other (expense)

$

(14,238)

$

0

 

 

-100%

Interest income

$

92

$

0

 

 

100%

Net income (loss)

$

20,383

$

(41,824)

 

 

149%

Income (loss) per share: basic and diluted

$

0.00

$

(0.01)

 

 

 


Revenues. For the three months ended March 31, 2013, we recognized $180,000 in revenue from our business consulting services in China.  In the first quarter of 2012, we were still transitioning into the new direction of the Company from the pizza operations and thus had no revenue.


Income (Loss). For the three months ended March 31, 2013, total income (loss) from operations was $34,529 compared to ($41,824) for the three months ended March 31, 2012. The income generated in the current period was directly attributable to $180,000 revenue from the new direction of the company.   


Operating Expenses. The increase in expenses is due to the addition of one employee, travel expenses for investigating candidate Chinese companies, and professional services necessary for the new operations and (2) the acquisition of AF Ocean Investment Consultancy Company, formerly known as Endeavour (Shanghai) Business Services, Ltd., in the third quarter of 2012 and its additional employee, professional services expense, and new office rent.


Net Income (Loss). As a result of the factors described above, net income increased from a net loss of $41,824 for the three months ended March 31, 2012 to a net income of $20,383 for the three months ended March 31, 2013.


Liquidity and Capital Resources


General. At March 31, 2013, we had cash and cash equivalents of $359,446. We have historically met our cash needs through shareholder loans, however, since 2012; we have generated enough revenue through our consulting services to cover our expenses, which are generally fees for professional services and general and administrative activities. Nonetheless, we believe that our cash balance is not yet sufficient to finance our cash requirements for expected operational activities, capital improvements, and repayment of debt through the next 12 months.

 

Our operating activities used cash of $40,828 for the three months ended March 31, 2013.  Operations used cash of $43,172 for the three months ended March 31, 2012. With $180,000 in revenue for the three months ended March 31, 2013, our operations are not being supported through loans from the majority shareholder.


Our investing activities used cash of $2,236 during the three months ended March 31, 2013, compared to no cash provided or used during the comparable period in 2012.


We had no cash provided by (used in) our financing activities in the three months ended March 31, 2013, compared to $87,976 during the comparable period in 2012.


As of March 31, 2013, our current liabilities exceed our 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 $180,000 and net income of only $20,383 for the three months ended March 31, 2013 compared to revenue of $0 and net loss of ($41,824) for the three months ended March 31, 2012. These factors indicate the Company is generating revenue; however, there is still substantial doubt about the ability of the Company to continue as a going concern for a reasonable period of time.  The Company is highly dependent on its ability to obtain clients and investment capital from future funding opportunities to fund the current and planned operating levels.  The Company’s continuation as a going concern is dependent upon its ability to bring in income generating activities and its ability to continue receiving investment capital from future funding opportunities. No assurance can be given that the Company will be successful in these efforts.


Inflation  


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


Recent Accounting Pronouncements


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


Off-Balance Sheet Arrangements


We do not have any off-balance arrangements.



ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


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


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


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


ITEM 4.

CONTROLS AND PROCEDURES

 

Disclosure Controls and Procedures.

 

The Company maintains disclosure controls and procedures (as defined in Rule

13a-15(e) under the Securities Exchange Act of 1934, as amended) that are designed to ensure that information required to be disclosed in the Company's Securities Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to the Company's management, as appropriate, to allow timely decisions regarding required disclosure.


The Company's management has evaluated the effectiveness of the Company's disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, management has concluded that, as of the end of the period covered by this report, the Company's disclosure controls and procedures were not effective.


Changes in Internal Controls over Financial Reporting.

 



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We had no significant changes in our internal controls during the three months ended March 31, 2013.  Management concluded that there has been no change in our internal control over financial reporting during the period ended March 31, 2013, that has materially affected or is reasonably likely to affect our internal control over financial reporting.

 



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PART II – OTHER INFORMATION


ITEM 1.

LEGAL PROCEEDINGS


None

 

ITEM 2

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

None


ITEM 3.  

DEFAULTS UPON SENIOR SECURITIES


None


ITEM 4.  

MINE SAFTEY DISCLOSURES


Not applicable


ITEM 5.  

OTHER INFORMATION


None


ITEM 6.

EXHIBITS


Exhibit No.

Description

3.4

Articles of Amendment to Articles of Incorporation

Filed on November 14, 2012 as Exhibit 3.4 to the issuer’s Quarterly Report on Form 10-Q 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 herewith.

31.2

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

Filed herewith.

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 herewith.

101*

Financial statements from the quarterly report on Form 10-Q of AF Ocean Investment Management Company for the quarter ended March 31, 2013, 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


*Pursuant to Rule 406T of Regulation S-T, the interactive XBRL files contained in Exhibit 101 hereto 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 that section.



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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:  October 15, 2013

/s/ ANDY Z. FAN

 

Andy Z. Fan

 

President, Chief Executive Officer, and Chairman of the Board

 

 


  

 





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