AF OCEAN INVESTMENT MANAGEMENT Co - FORM 10-Q - November 17, 2015

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
FORM 10-Q


[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 2015

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

Commission File Number 000-54354
 
 
AF OCEAN INVESTMENT MANAGEMENT COMPANY
 (Exact name of registrant as specified in its charter)
  

 
Florida
  
14-1877754
  
 
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No)
 
 
11015 Gatewood Drive Unit 103 Lakewood Ranch, FL  34211
(Address of principal executive offices, including zip code)
 
(212) 729-4951
(Registrant’s telephone number, including area code)
 
15500 Roosevelt Boulevard Suite 305 Clearwater, FL  33760
(Former name, former address and former fiscal year, if changed since last report) 

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  ☑  No  ☐

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 ☑ No ☐

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.☐
Accelerated filer.   ☐
Non-accelerated filer.  ☐
(Do not check if a smaller reporting company)
Smaller reporting company.  ☑

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ☑
As of November 16, 2015 there were 298,007,767 shares of common stock outstanding.
 
 
TABLE OF CONTENTS
 
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”). These forward-looking statements are generally located in the material set forth under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” but may be found in other locations as well. These forward-looking statements are subject to risks and uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from the results, performance or achievements expressed or implied by the forward-looking statements. You should not unduly rely on these statements.

We identify forward-looking statements by use of terms such as “may,” “will,” “expect,” “anticipate,” “estimate,” “hope,” “plan,” “believe,” “predict,” “envision,” “intend,” “will,” “continue,” “potential,” “should,” “confident,” “could” and similar words and expressions, although some forward-looking statements may be expressed differently. You should be aware that our actual results could differ materially from those contained in the forward-looking statements.

Forward-looking statements are based on information available at the time the statements are made and involve known and unknown risks, uncertainties and other factors that may cause our results, levels of activity, performance or achievements to be materially different from the information expressed or implied by the forward-looking statements in this report. These factors include, among others:

· our ability to raise capital;

· our ability to execute on our growth strategies;

· our ability to find partners on favorable terms;

· declines in general economic conditions in the markets where we may compete;

· our anticipated needs for working capital; and

· significant competition in the markets where we may operate.

Where we express an expectation or belief as to future events or results, such expectation or belief is expressed in good faith and believed to have a reasonable basis.

Forward-looking statements speak only as of the date of this report or the date of any document incorporated by reference in this report. Except to the extent required by applicable law or regulation, we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events.
1

PART I – FINANCIAL INFORMATION

ITEM 1.                  FINANCIAL STATEMENTS
AF OCEAN INVESTMENT MANAGEMENT COMPANY
CONSOLIDATED BALANCE SHEETS
 
   
September 30, 2015
(unaudited)
    
December 31, 2014
(audited)
  
ASSETS
        
 Current Assets
        
Cash
  
$
81,030
    
$
247,478
  
Cash Held For Related Party
    
429,702
      
837,296
  
Prepaid Expenses
    
11,016
      
12,536
  
Interest on Notes Receivable
    
311
      
-
  
Related Party Loan
    
5,500
      
-
  
Total Current Assets
    
527,559
      
1,097,310
  
Other Assets
                
Property & Equipment, Net of Depreciation of $20,549 and $16,299
    
7,948
      
12,199
  
Intangibles
    
294,193
      
294,193
  
Note Receivable – Related Party
    
9,600
      
-
  
Deposits
    
8,481
      
2,020
  
Total Other Assets
    
320,222
      
308,412
  
Total Assets
  
$
847,781
    
$
1,405,722
  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
                
 Current Liabilities
                
Accounts Payable
  
$
639
    
$
3,847
  
Accrued Expenses
    
1,500
      
10,605
  
Unearned Revenue
    
6,350
      
-
  
Cash Due to Related Party
    
429,702
      
837,296
  
Total Current Liabilities
    
438,191
      
851,748
  
Total Liabilities
    
438,191
      
851,748
  
 Stockholders’ Equity
                
Preferred Stock, no par value, 5,000,000 shares authorized, 5,000,000 shares issued and outstanding
    
750,000
      
750,000
  
Common Stock, $.01 par value, 5,000,000,000 shares authorized; 259,211,789 shares and 259,201,789 shares issued and outstanding
    
2,592,118
      
2,592,018
  
Subscription Receivable
    
-
      
(74,093
)
Additional Paid-In Capital
    
113,012
      
113,012
  
Accumulated Other Comprehensive Income
    
2,731
      
3,161
  
Accumulated Deficit
    
(3,048,271
)
    
(2,830,124
)
Total Stockholders’ Equity
    
409,590
      
553,974
  
                 
Total Liabilities and Stockholders’ Equity
  
$
847,781
    
$
1,405,722
  
 
 
The accompanying notes are an integral part of these consolidated financial statements.
2
AF OCEAN INVESTMENT MANAGEMENT COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
For the Nine Month Period Ended September 30, 2015 and 2014
 
   
Nine Months Ended September 30,
(unaudited)
    
Three Months Ended September 30,
(unaudited)
  
   
2015
    
2014
    
2015
    
2014
  
Revenue
                
Management Fee US – Related Party
  
$
169,355
    
$
50,800
    
$
74,961
    
$
38,100
  
Management Fee Shanghai – Related  Party
    
-
      
130,648
      
-
      
32,315
  
Total Revenue
    
169,355
      
181,448
      
74,961
      
70,415
  
                                 
Expenses
                                
Marketing Expense
    
-
      
959,098
      
-
      
959,098
  
General & Administrative
    
86,188
      
98,252
      
31,330
      
29,950
  
Payroll
    
166,996
      
159,471
      
57,411
      
50,122
  
Professional Fees
    
114,659
      
171,431
      
40,623
      
55,907
  
Value Added Tax China
    
15,926
      
-
      
-
      
-
  
Depreciation & Amortization
    
4,251
      
4,974
      
1,417
      
1,742
  
Total Operating Expenses
    
388,020
      
1,393,226
      
130,781
      
1,096,819
  
                                 
Operating (Loss) Income
    
(218,665
)
    
(1,211,778
)
    
(55,820
)
    
(1,026,404
)
                                 
Other Income (Expense)
                                
Interest Expense
    
-
      
(391
)
    
-
      
-
  
Interest income (Shanghai & US)
    
518
      
(243
)
    
207
      
(490
)
Total Other Income (Expense), net
    
518
      
(634
)
    
207
      
(490
)
                                 
Net (Loss) Income
    
(218,147
)
    
(1,212,412
)
    
(55,613
)
    
(1,026,894
)
Foreign Currency Gain (Loss)
    
(1,766
)
    
3,975
      
(1,062
)
    
5,190
  
Comprehensive Income
  
$
(219,913
)
  
$
(1,208,437
)
  
$
(56,675
)
  
$
(1,021,704
)
                                 
Earnings (loss) per share - basic and dilutive
  
$
(0.00
)
  
$
(0.017
)
  
$
(0.00
)
  
$
(0.006
)
Weighted average shares
    
259,211,240
      
68,831,601
      
259,211,789
      
163,694,995
  
 
The accompanying notes are an integral part of these consolidated financial statements.
3
AF OCEAN INVESTMENT MANAGEMENT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
   
Nine Months Ended September 30,
(unaudited)
  
   
2015
    
2014
  
Cash Flows From Operating Activities
        
Net Income (Loss)
  
$
(218,147
)
  
$
(1,212,411
)
Adjustments to reconcile net income (loss) to net cash provided by (used in)
 operating activities:
                
Stock Issued For Services
    
100
      
959,938
  
Depreciation and Amortization Expense
    
4,251
      
4,974
  
Bad Debt
    
-
      
20,000
  
Changes in Operating Assets and Liabilities:
                
    Escrow Funds held by Related Party
    
407,594
      
1,304,460
  
    Note Receivable – Related Party
    
(9,600
)
    
(137,383
)
Accounts Receivable
    
-
      
122,300
  
Accounts Payable
    
(3,208
)
    
1,165
  
Interest on Note Receivable
    
(311
)
    
-
  
Other Current Asset
    
(6,461
)
    
(2,555
)
Deferred Revenue
    
6,350
      
-
  
Cash Due To Related Party
    
(407,594
)
    
(1,304,460
)
Related Party Payable
    
-
      
8,056
  
Prepaid Expenses
    
1,520
      
9,940
  
Payroll Liabilities and Other Accrued Expenses
    
(9,105
)
    
(15,508
)
Total Adjustments
    
(16,464
)
    
970,927
  
Net cash (used in) provided by operating activities
    
(234,611
)
    
(241,484
)
                 
Cash Flows From Investing Activities
                
Purchase of property and equipment
    
-
      
(3,476
)
Net cash (used in) provided by investing activities
    
-
      
(3,476
)
                 
Cash flows from financing activities
                
(Repayments to) advances from related parties
    
(5,500
)
    
(2,400
)
Repayment of Note Payable – ICM
    
-
      
(100,000
)
Subscription receivable
    
74,093
      
-
  
Net cash (used in) provided by financing activities
    
68,593
      
(102,400
)
                 
Foreign Currency Gain (Loss)
    
(430
)
    
3,448
  
                 
Net increase (decrease) in cash
    
(166,448
)
    
(343,912
)
                 
Cash at beginning of year
    
247,478
      
569,825
  
                 
Cash at end of year
  
$
81,030
    
$
225,913
  
                 
Supplemental disclosures of cash flow information:
                
Cash paid during the year for:
                
Interest
  
$
-
    
$
-
  
NON-CASH DISCLOSURES
                
Non-cash financing activities
  
$
-
    
$
-
  
                 
 
 
The accompanying notes are an integral part of these consolidated financial statements.
 
4
AF OCEAN INVESTMENT MANAGEMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Three and Nine Month Period Ended September 30, 2015 and 2014

NOTE 1.                          NATURE OF BUSINESS
Organization.
AF Ocean Investment Management Company was incorporated under the laws of the State of Florida on April 2, 2003. We have one wholly-owned subsidiary, AF Ocean Investment Management Company (Shanghai Ltd.) (the “Subsidiary”), which we acquired as of July 6, 2012. AF Ocean Investment Management Company (together with the Subsidiary, the “Company”, “AF Ocean” “our” or “we”) promotes business relations and exchanges between Chinese and U.S. companies, facilitating international mergers and acquisitions, and increasing co-operation between Chinese companies and Wall Street financial institutions. Our 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 U.S. stock exchanges. However, we are in the process of a strategic change in operations due to our acquisition in July 2014 of non-patented technology relating to a new energy electric vehicle based on electromagnetic induction (the “Technology”). We believe that our primary business enterprise going forward will be based on the Technology.

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 three and nine month period ended September 30, 2015 and 2014; (b) the financial position at September 30, 2015; and (c) cash flows for the nine month period ended September 30, 2015 and 2014, have been made. Management believes that these estimates are reasonable and have been discussed with the Board of Directors; however, actual results could differ from those estimates. Operating results for the three and nine month period ended September 30, 2015 are not necessarily indicative of the results that may be expected for the year ended December 31, 2015.

The accompanying unaudited financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. For further information regarding the Company's significant accounting policies, refer to the audited consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2014 filed with the Securities and Exchange Commission on March 31, 2015.

Cash and Cash Equivalents.
The majority of cash for our Subsidiary is maintained with a major financial institution in Shanghai, China. There are also funds held in the United States.  Deposits with these banks 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. All amounts referenced in these financial statements and this report are in U.S. Dollars unless otherwise stated.

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 September 30, 2015.
 
5
Foreign Currency Gain (Loss).
The Company addressed the effect of the exchange rate differences resulting from the translation of the consolidated financial statements of the Subsidiary into the consolidated corporate statements on the Balance Sheet with an Exchange rate loss of ($1,062) during the three month ended September 30, 2015. The effect of the foreign currency translation is recorded in comprehensive income.  The relative value of the Chinese CNY to the United States USD remained relatively constant during the nine month period ended September 30, 2015 ranging from .1612 on July 1, 2015 to .1573 on September 30, 2015, CNY to the USD.

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 and management services is recognized according to the terms of the consulting and management services agreements. Generally, consulting and management services 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. During the nine month period ended September 30, 2015 we had deferred income of $6,350.

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 consolidated 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.

During the nine month period ended September 30, 2015, the Company issued 10,000 shares at par value in the form of share-based compensation.

Advertising.
Our advertising expenses are recognized as incurred. There were no marketing expenses during the nine month period ended September 30, 2015.
 
6
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.
Diluted income per share includes the dilutive effects of stock options, warrants, and stock equivalents.  To the extent stock options, stock equivalents and warrants are anti-dilutive; they are excluded from the calculation of diluted income per share.

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 12 for limited disclosure.

Recent Accounting Pronouncements.
The Company reviews new accounting standards as issued. No new standards had any material effect on these consolidated financial statements. The accounting pronouncements issued subsequent to the date of these consolidated 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.
NOTE 3.                          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. As of September 30, 2015, current assets exceeded current liabilities by $89,368. Total assets decreased from $1,405,722 at December 31, 2014 to $847,781 at September 30, 2015, and total liabilities decreased from $851,748 at December 31, 2014 to $438,191 at September 30, 2015.
We had revenue from management services fees of $169,355 and a net loss of ($218,147) for the nine month period ended September 30, 2015 as compared to revenue of $181,448 and a net loss of ($1,212,412) for the nine month period ended September 30, 2014. These factors raise substantial doubt about our ability to continue as a going concern for a reasonable period of time.
The consolidated 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.
7

NOTE 4.                          PROPERTY & EQUIPMENT

Fixed Assets Summary

The following table provides the fixed assets and accumulated depreciation results for the Company and the Subsidiary for the nine month period ended September 30, 2015, as compared to the fiscal year ended December 31, 2014.

Fixed Assets Summary
  
September 30, 2015
(unaudited)
    
December 31, 2014
(audited)
  
   
2015
    
2014
  
U.S. Fixed Assets
  
$
19,508
    
$
19,508
  
U.S. Accumulated Depreciation
  
$
(12,344
)
  
$
(8,948
)
Total U.S. Assets
  
$
7,164
    
$
10,560
  
                 
Foreign Subsidiary Fixed Assets
  
$
8,989
    
$
8,989
  
Foreign Subsidiary Accumulated Depreciation
  
$
(8,205
)
  
$
(7,350
)
Total Foreign Subsidiary Assets
  
$
784
    
$
1,639
  
Total Combined Assets
    
7,948
      
12,199
  
Assets are depreciated over their useful lives when placed in service.  Depreciation expense was $4,251 and $4,974 for the nine month period ended September 30, 2015 and 2014, respectively.
Depreciation expense for the three month period ended September 30, 2015 and 2014 is $1,417 and $1,742.
NOTE 5.                          INTANGIBLE ASSETS

Intangible assets of $294,193 consist of business licenses in the Peoples’ Republic of China and goodwill acquired in an acquisition during 2012. Management has determined that these assets have unlimited lives and will not be amortized.  The company reviews the intangible assets for impairment at the end of each year.
 
NOTE 6.                          RELATED PARTY TRANSACTIONS

On December 23, 2013, the Subsidiary entered into a management agreement with ChinAmerica Andy Movie Entertainment Media Company, a Florida corporation (“ChinAmerica”), for the collection and maintenance of all funds received in the People's Republic of China on behalf of ChinAmerica. All deposits received in China incur a management fee of ten percent (10%) due to the Subsidiary. There were no payments received during the nine month period ended September 30, 2015. As of September 30, 2015, the current balance in the account held on behalf of ChinAmerica is $429,702.
On February 23, 2015, the related party subscription receivable due from the majority shareholder in the amount of $74,093 was paid in full and has been satisfied.
Commencing on May 1, 2015, we renewed the management services agreement with ChinAmerica and Sichuan Leaders Petrochemical Company (“Sichuan”) for an additional year. We share the same Chief Executive Officer and controlling shareholder as ChinAmerica and Sichuan. Both related parties pay the Company a monthly management fee for a combined total of $21,787 per month for access to and use of the Company’s leased office space, legal services, management and accounting related services including, without limitation, preparing periodic and other reports required to be filed under the Securities Exchange Act of 1934, preparing financial reports, bookkeeping, managing their websites, handling previous employee matters, and related governmental filings, handling advertising matters, and processing payables. (collectively, the “Services”). During the nine month period ended September 30, 2015, payments totaling $169,355 have been received from both companies for these management services.
Commencing on July 1, 2015, we entered into a management services agreement with Sarasota Pack and Ship, Inc. in the amount of $9,600 to handle management and accounting related services including the bookkeeping, managing their websites, handling employee matters, and related governmental filings, processing payables and payroll.
 
8

NOTE 7.                          STOCKHOLDERS’ EQUITY
Common Stock
On January 12, 2015, the Company issued 10,000 shares as stock based compensation @ a par value of $0.01.

As of September 30, 2015 and December 31, 2014, the Company had 259,211,789 and 259,201,789 shares of common stock issued and outstanding, respectively.

No shares were issued during the three month period ended September 30, 2015.

The Company has no options or warrants issued or outstanding.
 
Series A Convertible Preferred Stock
 
As of September 30, 2015, the Company had 5,000,000 shares of Series A Convertible Preferred Stock issued and outstanding, reflecting no change since December 31, 2014.
 
NOTE 8.                          CORRECTION AND RESTATEMENT OF QUARTER ENDING SEPTEMBER 2014 FINANCIALS
 
For presentation purposes only; the Company recategorized stock purchases from the nine month period ended September 30, 2014 by putting them in the proper period they were issued in. The sole purpose is to correct the September 30, 2014 presentation.
 
For the nine months ended September 30, 2014 marketing expense was decreased from $95,909,826 to $959,098.
 
For the nine months ended September 30, 2014 general and administrative expense was decreased from $186,386 to $98,252.
 
For the three months ended September 30, 2014 marketing expense was decreased from $95,909,826 to $959,098.
 
For the three months ended September 30, 2014 general and administrative was decreased from $75,245 to $29,950.
 
As of nine months ended September 30, 2014 net loss was decreased from $96,242,325 to $1,212,412.
 
For the three months ended September 30, 2014 net loss was decreased from $96,020,647 to $1,026,894.

NOTE 9.                          RECLASSIFICATION
 
Certain items have been reclassified during the nine month period ended September 30, 2014 for presentation purposes.
 
NOTE 10.                      VALUE ADDED TAXES

During the nine month period ended September 30, 2015, the Subsidiary incurred $15,926 in value added tax at a rate of 25% paid to the Chinese government.
9
NOTE 11.                      COMMITMENTS AND CONTINGENCIES
 
On December 23, 2013, the Subsidiary entered into a management agreement with ChinAmerica.  ChinAmerica has operations' in China and will be receiving payment for such operations in China. Because China employs strict currency regulations that are designed to prevent large amounts of currency moving out of the country, ChinAmerica retained the Subsidiary to manage the money it receives from its Chinese operations. All deposits received in China incur a management fee of ten percent (10%) due to the Subsidiary. As of September 30, 2015, the current balance in the account held on behalf of ChinAmerica is $429,702.

Commencing May 1, 2015, the Company renewed the management services agreement with ChinAmerica and Sichuan to provide management services for an additional year to both related parties. All of the revenue received during the nine month period ended September 30, 2015, totaling $169,355 was from management services fees paid by ChinAmerica and Sichuan.

The amounts and terms of the above transaction may not necessarily be indicative of the amounts and terms that would have been incurred had comparable transactions been entered into with independent third parties.
 
Commencing on July 1, 2015, we entered into a management services agreement with Sarasota Pack and Ship, Inc. in the amount of $9,600 to handle management and accounting related services including the bookkeeping, managing their websites, handling employee matters, and related governmental filings, processing payables and payroll.
 

10

NOTE 12.                      SEGMENT REPORTING
The Company acquired one operating segment, the Subsidiary, during the third quarter of 2012. We intend to develop a provider of business services to Chinese individuals who have investments in U.S. companies. There was no revenue during the nine month period ended September 30, 2015. The following are the expenses attributed to the Subsidiary for the nine month period ended September 30, 2015. 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 useful to readers of the consolidated financial statements.

AF Ocean Investment Management Company (Shanghai Ltd.) Segment
  
September 30, 2015 (unaudited)
  
Net income, (net loss)
  
$ 
(126,803
)
Total Assets
  
$
8,989
  

NOTE 13.                      SUBSEQUENT EVENTS

On November 9, 2015, the Company issued 38,795,978 shares of common stock to 987 people, all of whom are residents of China, in connection with various promotions in China regarding the Technology.  The forgoing 38,795,978 shares are referred to as the “Promotional Shares.” Because there is no “established trading market” for our common stock, the Promotional Shares were valued at par value of $0.01 per share. The aggregate value of the Promotional Shares is $38,795.98. We did not receive any cash consideration in connection with the issuance of the Promotional Shares. The offering and issuance of the Promotional Shares were not registered under the Securities Act, but were made in reliance upon the exemptions from the registration requirements of the Securities Act set forth in Section 4(2) and Rule 903 of Regulation S promulgated thereunder, insofar as the Promotional Shares were offered and sold in an "offshore transaction" and there were no "directed selling efforts" in or into the United States of the Promotional Shares, all within the meaning of Rule 902 of Regulation S. Furthermore, no recipient of the Promotional Shares is a United States citizen; nor did any recipient acquire the Promotional Shares for the account or benefit of a United States citizen; and the Promotional Shares are restricted pursuant to Rule 144 under the Securities Act. Management has evaluated subsequent events through October 31, 2015, the date the consolidated financial statements were available to be issued. Management is not aware of any other significant events that occurred subsequent to the balance sheet date that would have a material effect on the consolidated financial statements thereby requiring adjustment or disclosure.
 
11
ITEM 2.                          MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND  RESULTS OF OPERATIONS
The following discussion and analysis of financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this report. This discussion contains forward-looking statements that involve risks, uncertainties and assumptions. See “Cautionary Note Regarding Forward-Looking Statements.” Our actual results could differ materially from those anticipated in the forward-looking statements as a result of certain factors discussed elsewhere in this report.

Overview and Going Concern

AF Ocean Investment Management Company was incorporated under the laws of the State of Florida on April 2, 2003. We have one wholly-owned subsidiary, AF Ocean Investment Management Company (Shanghai Ltd.) (the “Subsidiary”), which we acquired as of July 6, 2012. AF Ocean Investment Management Company and the Subsidiary are hereinafter collectively referred to as the “Company”, “we” or “our.” We promote 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.  Our 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 U.S. stock exchanges. We believe we can and will continue to do so during the next twelve months. However, we are in the process of a strategic change in operations due to our acquisition in July 2014 of non-patented technology relating to a new energy electric vehicle based on electromagnetic induction (the “Technology”). We believe that our primary business enterprise going forward will be based on this Technology.

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. As of September 30, 2015, current assets exceeded current liabilities by $89,368. Total assets decreased from $1,405,722 at December 31, 2014 to $847,781 at September 30, 2015, and total liabilities decreased from $851,748 at December 31, 2014 to $438,191 at September 30, 2015.

We had revenue from management services fees of $169,355 and a net loss of ($218,147) for the nine month period ended September 30, 2015 as compared to revenue of $181,448 and a net loss of ($1,212,412) for the nine month period ended September 30, 2014. These factors raise substantial doubt about our ability to continue as a going concern for a reasonable period of time.

The ability to continue as a going concern is dependent upon us generating profitable operations in the future and/or obtaining the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. No assurance can be given that we will be successful in these efforts.
In the event we are unable to generate sufficient funds to continue our business efforts or if we are 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 we should consider the aforementioned alternatives in the event funding is not available on favorable terms to us when needed.
 
12
Results of Operations

Nine Month Period Ended September 30, 2015 and 2014

The following table provides a comparison of a summary of our results for nine month period ended September 30, 2015 and 2014.

   
Nine Months Ended September 30,
(unaudited)
      
   
2015
    
2014
    
% Change
  
Revenue From Operations
   $           $    
Management Fee U.S. – Related Party
    
169,355
      
50,800
      
234
%
Management Fee Shanghai – Related Party
    
-
      
130,648
      
100
%
Total Revenue
    
169,355
      
181,448
      
7
%
                         
Expenses
                        
Marketing Expense
    
-
      
959,098
      
100
%
General and Administrative Expenses
  
$
86,188
    
$
98,252
      
13
%
Payroll
    
166,996
      
159,471
      
-5
%
Professional Fees
    
114,659
      
171,431
      
34
%
Value Added Tax China
    
15,926
      
-
      
100
%
Depreciation and amortization
  
$
4,251
    
$
-
      
100
%
Total Expenses
    
388,020
      
1,393,226
      
76
%
                         
Income (Loss) From Operations
  
$
(218,665
)
  
$
(1,211,778
)
    
82
%
                         
Other Income (Expense)
                        
Interest Payable Expense
  
$
-
    
$
-
          
Interest Expense
  
$
-
    
$
(391
)
    
100
%
Interest Income  (Shanghai & US)
  
$
518
    
$
(243
)
    
314
%
Total Other Income (Expense), net
  
$
518
    
$
(634
)
    
182
%
                         
Net Income (Loss)
    
(218,147
)
    
(1,212,412
)
    
82
%
                         
Foreign Currency Gain (Loss)
  
$
(1,766
)
  
$
3,975
      
145
%
                         
Comprehensive Income
  
$
(219,913
)
  
$
(1,208,437
)
    
19
%
Income (Loss) Per Share: Basic and Diluted
  
$
(0.00
)
  
$
(0.00
)
        

Revenue From Operations. For the nine month period ended September 30, 2015, total revenue was $169,355 as compared to $181,448 for the nine month period ended September 30, 2014. Loss from operations was ($218,665) for the nine month period ended September 30, 2015 as compared to ($1,211,778) for the nine month period ended September 30, 2014. The decrease in revenue is attributable to a loss of management fee income the Company receives when a deposit is received on behalf of ChinAmerica Andy Movie Entertainment Media Company (“ChinAmerica”), All of our revenue for the nine month period ended September 30, 2015 was from management services fees paid by ChinAmerica and Sichuan Leaders Petrochemical Company (“Sichuan”) in the U.S. We received the $169,355 from ChinAmerica and Sichuan in connection with management services agreements.

Expenses. Total expenses decreased by $1,005,206 to $388,020 for the nine month period ended September 30, 2015 as compared to $1,393,226 for the nine month period ended September 30, 2014. The decrease was directly attributable to the marketing expense that was recorded to account for the promotional shares issued on July 28, 2014.

Net Income (Loss). As a result of the decrease in marketing expenses as explained above, our net loss decreased by $994,265 to ($218,147) for the nine month period ended September 30, 2015 as compared to ($1,212,412) for the nine month period ended September 30, 2014.
 
13
Three Month Period Ended September 30, 2015 and 2014

The following table provides a comparison of a summary of our results for three month period ended September 30, 2015 and 2014.

   
Three Months Ended September 30,
(unaudited)
      
   
2015
    
2014
    
% Change
  
Revenue From Operations
            
Management Fee US – Related Party
  
$
74,961
    
$
38,100
      
-97
%
Management Fee Shanghai – Related Party
    
-
      
32,315
      
100
%
Total Revenue
    
74,961
      
70,415
      
-7
%
                         
Expenses
                        
Marketing Expense
    
-
      
959,098
      
100
%
General and Administrative Expenses
    
31,330
      
29,950
      
59
%
Payroll
    
57,411
      
50,122
      
-15
%
Professional Fees
    
40,623
      
55,907
      
28
%
Depreciation and amortization
    
1,417
      
-
      
100
%
Total Expenses
    
130,781
      
1,096,819
      
88
%
                         
Income (Loss) From Operations
  
$
(55,820
)
  
$
(1,026,404
)
    
95
%
                         
Other Income (Expense)
                        
Interest Income  (Shanghai & US)
    
207
      
(490
)
    
143
%
Total Other Income (Expense), net
    
207
      
(490
)
    
143
%
                         
Net Income (Loss)
  
$
(55,613
)
  
$
(1,026,894
)
    
95
%
                         
Foreign Currency Gain (Loss)
    
(1,062
)
    
5,190
      
121
%
                         
Comprehensive Income
  
$
(56,675
)
  
$
(1,021,704
)
    
95
%
Income (Loss) Per Share: Basic and Diluted
  
$
(0.00
)
  
$
(0.00
)
        


Revenue From Operations. For the three month period ended September 30, 2015, total revenue was $74,961 as compared to $70,415 for the three month period ended September 30, 2014. Loss from operations was ($55,820) for the three month period ended September 30, 2015 as compared to ($1,026,404) for the three month period ended September 30, 2014. The slight increase in revenue is attributable to the combination of the management services agreement between the Company and ChinAmerica and Sichuan as well as the lack of management income for Shanghai during the three month ended September 30, 2015.

Expenses. Total expenses decreased by $966,038 to $130,781 for the three month period ended September 30, 2015 as compared to $1,096,819 for the three month period ended September 30, 2014. The decrease is directly attributable to the marketing expense that was recorded to account for the promotional shares issued on July 28, 2014.

Net Income (Loss). As a result of the decrease in expenses as explained above, our net loss decreased by $971,281 to ($55,613) for the three month period ended September 30, 2015 as compared to ($1,026,894) for the three month period ended September 30, 2014.
14
Liquidity and Capital Resources

General. As of September 30, 2015, we had cash and cash equivalents of $81,030 as compared to cash and cash equivalents of $225,913 as of September 30, 2014. We have met our cash needs through consulting and management services fees. Our cash requirements are generally for professional services and general and administrative activities. We do not believe that our cash balance and expected consulting and management services fees are sufficient to finance our cash requirements for expected operational activities going forward, and therefore we will require additional funding through either loans or the sale of equity, or both.

Operating Activities. Our operating activities used cash of ($234,611) for the nine month period ended September 30, 2015 as compared to cash used of ($241,484) for the nine month period ended September 30, 2014.

Investing Activities. Our investing activities provided cash of $0 for the nine month period ended September 30, 2015, as compared to cash used of ($3,476) for the nine month period ended September 30, 2014.

Financing Activities. Our financing activities provided cash of $68,593 for the nine month period ended September 30, 2015 as compared to cash used of ($102,400) for the nine month period ended September 30, 2014.

Cash Flow. The following table provides a summary of our cash flows for the nine month period ended September 30, 2015 and 2014.
 
   
Nine Month Ended September 30,
(unaudited)
  
         
   
2015
    
2014
  
Cash used in operating activities
  
$
(234,611
)
  
$
(241,484
)
Cash used in investing activities
    
-
      
(3,476
)
Cash (used in) provided by financing activities
    
68,593
      
(102,400
)
Foreign currency (loss) gain
    
(430
)
    
3,448
  
Net increase (decrease) in cash
  
$
(166,448
)
  
$
(343,912
)
 
Value Added Taxes

Annual charge levied on both earned income and unearned income. In addition to financing a government’s operations, progressive income taxation is designed to distribute wealth more evenly in a population, and to serve as automatic fiscal stabilizer to cushion the effects of economic cycles. Presence of tax loopholes whose number increases in direct proportion to the complexity of tax code may allow some wealthy persons to escape higher taxes without violating the letter of the tax laws. During the nine month period ended September 30, 2015 The Subsidiary incurred $15,926 in value added tax at a rate of 25%.

Income Taxes

At this time there is not an income tax expense to report. However, at the end of each fiscal quarter we evaluate income tax liability 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 consolidated financial statements. Under this method, deferred tax assets and liabilities are determined based on temporary differences between the consolidated 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.
 
15
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, we estimate 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.

Inflation  

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

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Critical Accounting Policies

We prepare our consolidated financial statements in accordance with generally accepted accounting principles of the United States (“GAAP”). GAAP represents a comprehensive set of accounting and disclosure rules and requirements. The preparation of our consolidated 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 consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Our actual results could differ from those estimates. We use historical data to assist in the forecast of 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.

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.

Recent Accounting Pronouncements

We have reviewed all the recently issued, but not yet effective, accounting pronouncements and we do not believe any of these pronouncements will have a material impact on our consolidated financial statements.
 
16
ITEM 3.                          QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a “smaller reporting company” as defined by Item 10(f)(1) of Regulation S-K, and as such are not required to provide the information contained in this item pursuant to Item 305 of Regulation S-K.


ITEM 4.                          CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act 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 our management, as appropriate, to allow timely decisions regarding required disclosure.

Our management has evaluated the effectiveness of our 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, our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during our most recently completed fiscal quarter that has materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
17
PART II – OTHER INFORMATION

ITEM 5.                          OTHER INFORMATION

On November 9, 2015, the Company issued 38,795,978 shares of common stock to 987 people, all of whom are residents of China, in connection with various promotions in China regarding the Technology. The forgoing 38,795,978 shares are referred to as the “Promotional Shares.” Because there is no “established trading market” for our common stock, the Promotional Shares were valued at par value of $0.01 per share. The aggregate value of the Promotional Shares is $38,795.98. We did not receive any cash consideration in connection with the issuance of the Promotional Shares. The offering and issuance of the Promotional Shares were not registered under the Securities Act, but were made in reliance upon the exemptions from the registration requirements of the Securities Act set forth in Section 4(2) and Rule 903 of Regulation S promulgated thereunder, insofar as the Promotional Shares were offered and sold in an "offshore transaction" and there were no "directed selling efforts" in or into the United States of the Promotional Shares, all within the meaning of Rule 902 of Regulation S. Furthermore, no recipient of the Promotional Shares is a United States citizen; nor did any recipient acquire the Promotional Shares for the account or benefit of a United States citizen; and the Promotional Shares are restricted pursuant to Rule 144 under the Securities Act.

ITEM 6.                          EXHIBITS

Exhibit No.
        Description
3.1
Amended and Restated Articles of Incorporation *
   
3.2
Articles of Amendment to Articles of Incorporation **
   
3.3
Articles of Amendment to Articles of Incorporation ***
   
3.4
Articles of Amendment to Articles of Incorporation ****
   
3.5
Bylaws *
   
31
   
32
   
101
Consolidated financial statements for the quarterly report on Form 10-Q of AF Ocean Investment Management Company for the fiscal quarter ended September 30, 2015, formatted in XBRL: (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Operations and Comprehensive Income; (iii) the Consolidated Statements of Cash Flows; and (iv) the Notes to Consolidated Financial Statements Filed herewith

*            Incorporated herein by reference to AF Ocean Investment Management Company’s Registration Statement  on  Form S-1 filed with the SEC on February 4, 2011.

**            Incorporated herein by reference to AF Ocean Investment Management Company’s Current Report on
Form 8-K filed with the SEC on October 5, 2011.

***            Incorporated herein by reference to AF Ocean Investment Management Company’s Quarterly Report on
Form 10-Q filed with the SEC on November 14, 2012.

****            Incorporated herein by reference to AF Ocean Investment Management Company’s Current Report on
Form 8-K filed with the SEC on July 24, 2014.
18
SIGNATURES


  
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
     
     
   
AF OCEAN INVESTMENT MANAGEMENT COMPANY
     
     
Dated: November 17, 2015
By:
/s/ Andy Fan
   
Andy Z. Fan
Chief Executive Officer
   
(Principal Executive Officer)
     


 
 



19

AF OCEAN INVESTMENT MANAGEMENT Co Reports