UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 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

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

None

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

Common Stock, $0.01 par value

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

Yes ☐  No ☑ 

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

Yes ☐  No ☑ 

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

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

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.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ☑

On September 30, 2015, the last business day of the registrant’s most recently completed third fiscal quarter, 259,201,789 shares of its common stock (its only class of voting or non-voting common equity) were held by non-affiliates of the registrant. Because there is no “established trading market” for the registrant’s common stock, these shares have been arbitrarily valued at par value of $0.01 per share, and the aggregate market value of such shares at such date was $2,592,118.

As of April 14, 2016, there were 298,007,767 shares of common stock outstanding.

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TABLE OF CONTENTS

 

 

 

 

 

 

 

 

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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 headings “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business” and “Properties” 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 manufacturing 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.

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PART I

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.”

Our Business

(1) Principal Products or Services and Their Markets

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 American stock exchanges.

On July 24, 2014, we acquired, through the Subsidiary, intellectual property from Pilot New Energy Research Institute of Beijing in the People’s Republic of China (the “Institute”) in the form of non-patented technology relating to a new energy electric vehicle based on electromagnetic induction (the “Technology”). In exchange for the transfer of the Technology to the Subsidiary, we issued 5,000,000 shares of Series A Convertible Preferred Stock (the “Preferred Shares”) to the Institute's sole legal representative, Mr. Andy Fan, our principal shareholder and sole director. The Preferred Shares have the voting rights equivalent to 500,000,000 shares of common stock. The Preferred Shares have no par value and are convertible into 75,000,000 shares of our common stock.

The board of directors of the Company (the “Board”) believes that the Technology will be our main business enterprise going forward. After acquiring the Technology, we issued 167,012,323 shares of common stock valued at $1,670,123 to 3,160 Chinese citizens. These people will enable us to effectively market the Technology to many organizations in China that we otherwise would not have been able to reach with other marketing programs relating to the Technology.

Our services will be provided on the location of the client primarily.  Where research and the development of financial information is necessary we may perform these functions at our offices so that we may involve our full staff to provide the most complete service possible.

Clients will be able to direct where we perform our services to the extent that they are willing to pay the necessary travel and related expenses.  We anticipate that as a new business consulting firm most of our work will be performed at our client’s location initially until we have built a reputation of providing quality services to a variety of international clients.

(3) Status of Any Publicly Announced New Product or Service.

We have not developed any new or unique products or services that would make us stand above our competition. We do believe however that our ability to penetrate the Chinese market due to our extensive contacts in China may be an advantage for our company.

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(4) Competitive Business Conditions

Our competitors are all larger than we are and far more established so that barrier to entry into the international business consulting market will be a formidable one. Since 2008 we have seen major changes in our industry such as the demise of one of the largest international consulting firms. There still remain several large firms that not only serve clients internationally but also have a presence in the People’s Republic of China. The companies that are able to maintain offices in China will have a geographical advantage over us. The extent of this advantage is difficult to measure as a presence in China does not necessarily translate into more business due to how Chinese companies do business.

We do believe that our large competitors have other advantages. They have more capital and resources to advertise and to market their businesses. They have larger staffs and most likely are able to complete many tasks in a shorter period of time.  Due to their larger capital base they are able to attract staff that may be better educated and trained.

(5) Sources and Availability of Raw Materials and Names of Principal Suppliers

Because our main business is providing business consulting services, we do not use any raw materials nor have any suppliers at this time.

(6) Dependence on One or a Few Major Customers

We do not have any limitation on customers at this time. Presently we are soliciting business outside of our immediate area. We have concentrated our efforts over the last year and a half in trying to gain entry into business in Southeast Asia. Since we have modified our business plan to include working with companies anywhere in the world, we have redesigned our website to become more internationally known by companies seeking our type of consulting services.

(7) Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements or Labor Contracts

·

These agreements will not be breached;

·

We would have adequate remedies for any breach; or

·

Our proprietary trade secrets and know-how will not otherwise become known or be independently developed or discovered by competitors.

We cannot guaranty that our actions will be sufficient to prevent imitation or duplication of our products and services by others or prevent others from claiming violations of their trade secrets and proprietary rights.

(8) Need for Government Approval of Principal Products or Services

None of the services we offer require specific government approval. Local government rules may dictate the need for a business license.

Exchange Act Reporting Requirements

We are subject to the reporting requirements of Section 13 of the Exchange Act, and the disclosure requirements of Regulation S-K. However, as a “smaller reporting company,” we are permitted to omit certain disclosures or provide less disclosure regarding certain information required to be disclosed under Regulation S-K as compared to companies that are not a “smaller reporting company.”

We are required to file Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q with the SEC on a regular basis, and are required to timely disclose certain material events (e.g., changes in corporate control; acquisitions or dispositions of a significant amount of assets other than in the ordinary course of business; and bankruptcy) in a Current Report on Form 8-K.

Section 14(a) of the Exchange Act requires all companies with securities registered pursuant to Section 12(g) of the Exchange Act to comply with the rules and regulations of the SEC regarding proxy solicitations, as outlined in Regulation 14A. Matters submitted to shareholders of the Company at a special or annual meeting thereof or pursuant to a written consent will require the Company to provide the Company’s shareholders with the information outlined in Schedules 14A or 14C of Regulation 14; preliminary copies of this information must be submitted to the SEC at least ten days prior to the date that definitive copies of this information are forwarded to the Company’s shareholders.

The costs of preparing and filing annual and quarterly reports, proxy statements and other information with the SEC and furnishing audited reports to shareholders will cause our expenses to be significantly higher than they would be if we were a privately-held company.

Sarbanes-Oxley Act

We are also subject to the Sarbanes-Oxley Act of 2002.  The Sarbanes-Oxley Act created a strong and independent accounting oversight board to oversee the conduct of auditors of public companies and strengthen auditor independence.  It also requires steps to enhance the direct responsibility of senior members of management for financial reporting and for the quality of financial disclosures made by public companies; establishes clear statutory rules to limit, and to expose to public view, possible conflicts of interest affecting securities analysts; creates guidelines for audit committee members’ appointment, compensation and oversight of the work of public companies’ auditors; management assessment of our internal controls; auditor attestation to management’s conclusions about internal controls (this is not applicable to “non-accelerated filers” and “smaller reporting companies”); prohibits certain insider trading during pension fund blackout periods; requires companies and auditors to evaluate internal controls and procedures; and establishes a federal crime of securities fraud, among other provisions. Compliance with the requirements of the Sarbanes-Oxley Act will substantially increase our legal and accounting costs.

Foreign Corrupt Practices Act

We are required to comply with the United States Foreign Corrupt Practices Act, which prohibits U.S. companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. Foreign companies, including some of our competitors, are not subject to these prohibitions. Corruption, extortion, bribery, pay-offs, theft and other fraudulent practices occur from time-to-time in mainland China. If our competitors engage in these practices, they may receive preferential treatment from personnel of some companies, giving our competitors an advantage in securing business or from government officials who might give them priority in obtaining new licenses, which would put us at a disadvantage. If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties.

State and Local Regulations

There are no state or local regulations that require us to obtain a special business license for our business, however the City of Sarasota requires us to maintain a yearly business license and the State of Florida requires us to file an Annual Report. We are not required as a company to maintain Worker’s Compensation Insurance and pay into the Florida Unemployment Compensation Fund since we have no employees. When we retain new officers and begin to pay salaries we will then have to apply for Workers Compensation Insurance and pay into the Florida Unemployment Compensation Fund.

(10) Amount Spent on Research and Development During Each of the Last Two Fiscal Years

The cost of our research and development is limited and we do not feel the cost of developing additional services will have any significant impact on our profitability.

In addition to researching new business services to offer our potential clients, we are continually researching small changes to our business model.  This would include pursuing clients internationally as well contracting our services to our larger competitors.

(11) Cost and Effects of Compliance with Environmental Laws

We have not incurred costs or encountered adverse effects of a material nature in connection with compliance to all applicable federal, state and local environmental laws.  

As of December 31, 2015 there were six (6) full-time paid employees. Our President, Andy Z. Fan, the majority shareholder in AF Ocean, devotes a minimum of 20 hours per week to the Company. As the business increases, he will delegate more of his work to new employees yet to be hired.

 

 

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 the requirements under Form 10-K.

 

None.

On July 1, 2015, we moved our corporate office from the office space we were occupying at 15500 Roosevelt Boulevard, Suite 305, Clearwater, Florida 33760 (“Suite 305”) to 11015 Gatewood Drive, Suite 103, Lakewood Ranch, Florida 34211. We entered into a lease with 6843 Windslow, LLC for Suite 103, and we share Suite 103 with two related parties, Sichuan Leaders Petrochemical Company (“Sichuan”) and ChinAmerica Andy Movie Entertainment Media Co (“ChinAmerica”). The lease for Suite 103 is for a term of two years commencing July 1, 2015, and the monthly rent is $1,810. We did not enter into a sub-lease with Sichuan or ChinAmerica for use of Suite 103. Instead, their use of Suite 103 is included as part of the services provided by us to Sichuan and ChinAmerica under the management agreements. We consider our current office space arrangement adequate and will reassess our needs based upon our future growth.

The Subsidiary leases office space for three people located at Room 1122, 11^th floor, No. 99, Fucheng Road, Pudong New Area, Shanghai City, China. The lease is a year-to-year agreement commencing on October 1 of each year and expiring on September 30 of the following year. The monthly rent is $3,383.

We are not currently involved in any legal proceedings and we are not aware of any pending or potential legal actions required to be disclosed by Item 103 of Regulation S-K.

Not applicable.

 

PART II

Market Information

Our common stock is traded over-the-counter and quoted on the OTCQB marketplace under the symbol “AFAN.” Historically, there have been few trades and there currently is no “established trading market” for our shares of common stock. No assurance can be given that any market for our common stock will develop or be maintained.

The limited nature of the trading market can create the potential for significant changes in the trading price for our common stock as a result of relatively minor changes in the supply and demand for shares and perhaps without regard to our business activities. Because of the lack of specific transaction information and our belief that quotations during the below periods were particularly sensitive to actual or anticipated volume of supply and demand, we do not believe that such quotations during this period are reliable indicators of a trading market for our common stock.

The following table sets forth the high and low bid prices of our common stock for the periods noted. These bid prices were obtained from OTC Markets Inc. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.

		High				Low
Fiscal Year Ended December 31, 2015
First Quarter		$	1.50			$	1.01
Second Quarter		$	3.00			$	1.65
Third Quarter		$	2.00			$	2.00
Fourth Quarter		$	2.00			$	1.65

		High				Low
Fiscal Year ended December 31, 2014
First Quarter		$	1.02			$	.20
Second Quarter		$	1.02			$	.20
Third Quarter		$	1.05			$	.20
Fourth Quarter		$	1.52			$	0.15

 

The SEC generally defines what is referred to as “penny stock” to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. Our common stock is a penny stock and as such is covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and accredited investors. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer's account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer's confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our common stock. We believe that the penny stock rules may discourage investor interest in, and limit the marketability of, our common stock.

Holders

As of the close of business on March 31, 2016, there were approximately 4,397 holders of record of our common stock.

Dividends

We have not declared any cash dividends on our common stock during our two most recent fiscal years. In the near future, we intend to retain any earnings to finance the development and expansion of our business. We do not anticipate declaring or paying any cash dividends on our common stock in the foreseeable future. The declaration and payment of cash dividends by us are subject to the discretion of the Board. Any future determination to pay cash dividends will depend on our results of operations, financial condition, capital requirements, contractual restrictions and other factors deemed relevant at the time by the Board. We are not currently subject to any contractual arrangements that restrict our ability to pay cash dividends.

Securities Authorized for Issuance Under Equity Compensation Plans

As of December 31, 2015, there are no compensation plans under which our equity securities are authorized for issuance.

Recent Sales of Unregistered Securities

On November 24, 2014, we issued 2,011,000 shares of common stock to 192 people, all of whom are residents of China, in connection with various promotions in China regarding the Technology. The forgoing 2,011,000 shares are referred to as the “Promotional Shares.” We did not receive any cash consideration in connection with the issuance of the Promotional Shares. The offering and issuance of these 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.

 

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

We did not, nor did anyone on our behalf or any “affiliated purchaser” as defined in Rule 10b-18(a)(3) of the Exchange Act, repurchase any outstanding shares of our common stock during any month within the fourth quarter of our fiscal year ended December 31, 2015.

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 301 of Regulation S-K.

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 annual 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 annual report.

Overview and Going Concern

We currently provide business consulting and management services, and we believe we can and will continue to do so during the next twelve months. We are in the process of a strategic change in operations due to our acquisition of the Technology. We believe that our primary business enterprise going forward will be based on the 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 December 31, 2015, current assets exceeded current liabilities by $78,431. Total assets decreased from $1,576,222 at December 31, 2014 to $876,995 at December 31, 2015, and total liabilities decreased from $851,748 at December 31, 2014 to $357,838 at December 31, 2015.

We had revenue from consulting and management services fees of $270,516 and a net loss of ($316,877) for the fiscal year ended December 31, 2015 as compared to revenue of $389,048 and a net loss of ($2,035,543) for the fiscal year ended December 31, 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.

Results of Operations

The following table provides a comparison of a summary of our results for the fiscal years ended December 31, 2015 and 2014.

 

		Fiscal Years Ended December 31,
		2015				2014			% Change
Revenue:		$	270,516			$	389,048				-31	%
General and administrative expenses		$	582,435			$	2,248,288				74	%
Depreciation and amortization		$	5,668			$	8,896				36	%
Loss from operations		$	(317,587	)		$	(1,868,136	)			83	%
Other income (expense):
Interest expense		$	-			$	(391	)			100	%
Interest income		$	710			$	540				-32	%
Other		$	-			$	-		%
Total other income (expense), net		$	710			$	149				377	%
Net income (loss)		$	(316,877	)		$	(1,867,987	)			83	%
Foreign currency translation		$	(1,429	)		$	2,634				155	%
Comprehensive (loss)		$	(318,306	)		$	(1,865,353	)			83	%
Income (loss) per share: basic and diluted		$	(0.00	)		$	(0.01	)

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Loss from Operations. For the fiscal year ended December 31, 2015, total revenue was $270,516 as compared to $389,048 for the fiscal year ended December 31, 2014. Loss from operations was ($317,587) for the fiscal year ended December 31, 2015 as compared to ($1,868,136) for the fiscal year ended December 31, 2014. The increase in revenue is attributable to increased management fees.  All of our revenue for the fiscal year ended December 31, 2015 was from management services fees paid by two companies affiliated with our sole officer and director, Andy Fan. We received $35,000 from ChinAmerica in connection with managing funds earned by and paid to ChinAmerica in China, and the remaining $235,516 from ChinAmerica and Sichuan in connection with management services agreements.

General and Administrative and Marketing Expenses. General and administrative expenses decreased by $1,704,831 to $582,435 for the fiscal year ended December 31, 2015 as compared to $2,248,288 for the fiscal year ended December 31, 2014. The decrease is attributable to $1,670,123 in common stock issued to 3,160 Chinese citizens for marketing services in China related to the Technology that occurred in 2014.  Comparably, in the year ended December 31, 2015 $38,796 of marketing expense was incurred.

Net Income (Loss). As a result of the decrease in expenses and increase in revenue discussed above, our net loss decreased by ($1,551,110) to ($316,877) for the fiscal year ended December 31, 2015 as compared to ($1,867,987) for the fiscal year ended December 31, 2014.

Liquidity and Capital Resources

General. As of December 31, 2015, we had cash and cash equivalents of $60,741 as compared to cash and cash equivalents of $247,478 as of December 31, 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 $95,263 for the fiscal year ended December 31, 2015 as compared to $(204,927) for the fiscal year ended December 31, 2014.

Investing Activities. Our investing activities used cash of $0 for the fiscal year ended December 31, 2015 as compared to $(3,477) for the fiscal year ended December 31, 2014.

Financing Activities. Our financing activities provided cash of $(280,571) for the fiscal year ended December 31, 2015 as compared to cash used of $(116,577) for the fiscal year ended December 31, 2014.

Cash Flow. The following table provides a summary of our cash flows for the fiscal years ended December 31, 2015 and 2014.

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Income Taxes

At this time there is not an income tax expense to report. However at the end of each fiscal quarter the Company evaluates the 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.

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. Occasionally, deposits or prepayments may result in deferred income which will be recognized into income as the services are performed.

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.

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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.

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.

Our audited consolidated financial statements as of and for the fiscal years ended December 31, 2015 and 2014 are included beginning on Page F-1 immediately following the signature page to this annual report. See Item 15 for a list of the consolidated financial statements included herein.

On June 29, 2015, the Board of Directors of AF Ocean Investment Management Company (the “Company”) approved the withdrawal of DKM Certified Public Accountants (“DKM”) as the Company’s independent registered public accounting firm, effective as of June 29, 2015.

On July 1, 2015, the Board of Directors of the Company approved the engagement of Stevenson & Company CPAS LLC as the Company’s new independent registered public accounting firm, effective as of June 29, 2015. Stevenson & Company CPAS LLC conducted the review engagement on the Company's quarterly Financial Statements commencing with the June 30, 2015 quarterly review.

For more information regarding our change in accountants, see our Current Report on Form 8-K dated and filed with the SEC on July 1, 2015.

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 annual report. Based upon that evaluation, management has concluded that, as of the end of the period covered by this annual report, our disclosure controls and procedures were not effective.

Management Report on Internal Control Over Financial Reporting

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

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

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2015. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control - Integrated Framework - Guidance for Smaller Public Companies (the COSO criteria). Based on our assessment, management identified material weaknesses related to: (i) our internal audit functions; and (ii) a lack of segregation of duties within accounting functions. Based on this evaluation, our management concluded that as of December 31, 2015, we did not maintain effective internal control over financial reporting.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with any policies and procedures may deteriorate. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. To the extent possible, we will implement procedures to assure that the initiation of transactions, the custody of assets and the recording of transactions will be performed by separate individuals. With proper funding we plan on remediating the significant deficiencies identified above, and we will continue to monitor the effectiveness of these steps and make any changes that our management deems appropriate.

A material weakness is a control deficiency (within the meaning of Public Company Accounting Oversight Board Auditing Standard No. 5) or combination of control deficiencies, that results in a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

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.

There is no information required to be disclosed in a report on Form 8-K during the fourth quarter of the fiscal year ended December 31, 2015 but not reported, whether or not otherwise required by this Form 10-K.

 

PART III

Directors and Executive Officers

The following table sets forth the name and age of our sole director and executive officer. Our By-Laws provide for not less than one and not more than fifteen directors. Directors are elected annually by the shareholders to serve until the next annual meeting of the shareholders and until their successors are duly elected and qualified.

 

Background and of Directors and Executive Officers

Andy Z. Fan was appointed as a director and Chairman of the Board on September 15, 2011. He was subsequently appointed as Chief Executive Officer and President on October 7, 2011, and Chief Financial Officer and Treasurer on July 9, 2013. Mr. Fan is a prominent Chinese-American businessman with outstanding connections within the Chinese government, long standing relationships with the Chinese media and a strong following in China where he has appeared in various forms of media. He once served as the interpreter for China's Head of State - Prime Minister Li Peng in 1987, was awarded a full scholarship thereafter for graduate study in the U.S., where he was introduced to former U.S. President William Clinton by the University President and subsequently served as former President Clinton's Chinese interpreter.

Mr. Fan has written 15 books since 2004, including one describing his experience serving as President Clinton's Chinese interpreter titled “Clinton and My Life,” which became the No. 1 best seller in China in June 2011. His 15 books are popular in China and have made him a well-respected and sought-after public speaker, as well as a frequent guest on Chinese television programs. He has also been featured in numerous Chinese magazines, including “Chinese Business Leader,” “China Celebrity,” “China Private Capital,” “World Chinese Businessman,” “Discovery,” “Commerce” and “The View,” among others. Due to his achievements and notoriety in China, he has been invited as the guest of honor and/or speaker by many prominent organizations, such as being invited to the Nobel Laureates Beijing Forum and Forbes China City Investment Forum in 2006. In 2009, in celebration of the 60^th anniversary of the founding of the People’s Republic of China, Mr. Fan was chosen to be one of “China’s 60 Role Models in 60 Years,” and his portrait was printed on a Chinese Postage Stamp that same year.

Other Directorships Held in Companies Subject to the Exchange Act Reporting Requirements

Mr. Fan is currently the sole director and executive officer of Sichuan Leaders Petrochemical Company. Its common stock is quoted on the OTCQB marketplace under the symbol “SLPC.”

Mr. Fan is currently the sole director and executive officer of ChinAmerica Andy Movie Entertainment Media Co. Its common stock is quoted on the OTCQB marketplace under the symbol “CAME.”

Involvement in Certain Legal Proceedings

To the best of our knowledge, during the past ten years, none of the following occurred with respect to Mr. Fan: (1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of any competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; (4) being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodity Futures Trading Commission to have violated a Federal or State securities or commodities law, and the judgment has not been reversed, suspended or vacated; (5) being subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of any Federal or State securities or commodities law or regulation or any law or regulation respecting financial institutions or insurance companies or prohibiting mail or wire fraud or fraud in connection with any business entity; or (6) being subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization, any registered entity of the Commodity Exchange Act, or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

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Section 16(a) Beneficial Ownership Reporting Compliance

Our shares of common stock are registered under the Exchange Act, and therefore our officers, directors and holders of more than 10% of our outstanding shares (“Section 16(a) Reporting Persons”) are subject to the provisions of Section 16(a) which requires them to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and our other equity securities. Section 16(a) Reporting Persons are required by SEC regulations to furnish us with copies of all Section 16(a) reports they file. Based solely upon our review of reports submitted to us during the fiscal year ended December 31, 2015, other than discussed below, all Forms 3, 4 and 5 showing ownership of and changes of ownership in our capital stock during the fiscal year ended December 31, 2015 were timely filed by Section 16(a) Reporting Persons with the SEC.

Andy Z. Fan, officer, director and greater than 10% shareholder, did not timely file a Form 4 in connection with one transaction that occurred on July 24, 2014 regarding the acquisition of 5,000,000 Series A Preferred shares. Mr. Fan reported this transaction on a Form 4 filed with the SEC on January 6, 2015.

Code of Ethics

We have adopted a Code of Business Conduct and Ethics that applies to all of our employees, officers and directors. In addition to the Code of Business Conduct and Ethics, our principal executive officer, principal financial officer and principal accounting officer are also subject to written policies and standards that are reasonably designed to deter wrongdoing and to promote: honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; full, fair, accurate, timely and understandable disclosure in reports and documents that are filed with, or submitted to the SEC and in other public communications made by us; compliance with applicable government laws, rules and regulations; the prompt internal reporting of violations of the code to an appropriate person or persons identified in the code; and accountability for adherence to the code.

Corporate Governance

Nominating Committee

We have neither a nominating committee for persons to be proposed as directors for election to the Board nor a formal method or procedures for shareholders to recommend nominees to the Board, because we have limited operations and have only one director. We also do not have any restrictions on shareholder nominations under our articles of incorporation or by-laws. Our sole director, who is also our sole executive officer, the beneficial owner of approximately 37% of our issued and outstanding common shares on a fully diluted basis and the holder of a majority of outstanding voting rights, is able to effectively manage the issues typically considered by a nominating committee. If we do establish a nominating committee or adopt procedures by which shareholders may recommend nominees to the Board, we will disclose this change to our procedures in recommending nominees to the Board.

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Audit Committee and Audit Committee Financial Expert

We have not established an audit committee, nor any other designated committee of the Board, because we have limited operations and have only one director. Our sole director, Andy Z. Fan, functions as and performs the duties and responsibilities typically carried out separately by an audit committee: such as recommending a firm of independent certified public accountants to audit the financial statements, reviewing the auditors’ independence, the financial statements and their audit report, and reviewing management’s administration of the system of internal accounting controls. We do not have a written audit committee charter or similar document.

We do not have an “audit committee financial expert.” We believe the cost related to retaining a financial expert at this time is prohibitive.

Summary Compensation Table

The following table sets forth certain information concerning the compensation for services rendered in all capacities to us for the fiscal years ended December 31, 2015 and 2014 by our chief executive officer (principal executive officer) and our most highly compensated executive officers other than the chief executive officer whose total annual compensation was at least $100,000, who are referred to in this section as the named executive officers.

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Employment Agreements

We entered into an employment agreement with Andy Z. Fan on September 30, 2013, retroactive to September 1, 2013, for his services as President and Chief Executive Officer.  The agreement is for a term of five years unless terminated earlier, by either party, upon 30 days prior written notice. Further, if a change of control occurs during the employment period, the employment agreement shall continue in effect for a period of 12 months beyond the month in which such change of control occurred. The agreement provides for a nominal base salary of $30,000 per year.

Outstanding Equity Awards at Fiscal Year-End

No individual grants of stock, options to purchase stock or other equity incentive awards have been made to any executive officer during the fiscal year ended December 31, 2015, although we may choose to adopt a plan for equity awards in the future.

Director Compensation

We do not currently have an established policy to provide any type of compensation (cash, equity, incentive, deferred or otherwise) to our sole director for his services in that capacity during the fiscal year ended December 31, 2015, although we may choose to adopt a policy in the future.

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following tables set forth information with respect to the beneficial ownership of our outstanding common stock as of March 26, 2015 by: (1) each director; (2) each named executive officer; (3) all of our director and executive officers as a group, and (4) each shareholder identified as beneficially owning greater than 5% of our outstanding shares of common stock. Beneficial ownership means sole or shared voting power or investment power with respect to a security. We have been informed that all shares shown are held of record with sole voting and investment power. To our knowledge, none of the shares reported below are pledged as security.

The percentage of outstanding common shares has been calculated based upon 298,007,767 shares of common stock and 5,000,000 shares of Series A Convertible Preferred Stock outstanding on April 14, 2016. Each share of Series A Convertible Preferred Stock is convertible into 15 shares of common stock at the holder’s option. There are no stock options, warrants and/or other convertible or exercisable securities outstanding as of April 14, 2016.

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(1)            Includes 5,000,000 shares of Series A Convertible Preferred Stock held by Mr. Fan that are convertible into 75,000,000 shares of our common stock at Mr. Fan’s option. Each share of Series A Convertible Preferred Stock entitles the holder to cast 100 votes on all matters submitted for a vote of holders of our common stock. Each share of Series A Convertible Preferred Stock has a liquidation preference of $15.00.

Transactions with Related Persons

Except as described below, no director, executive officer, shareholder holding at least 5% of shares of our common stock, or any family member thereof, had any material interest, direct or indirect, in any transaction, or proposed transaction during the last two fiscal years in which the amount involved in the transaction exceeded or exceeds the lesser of $120,000 or one percent of the average of our total assets at year-end for the last two completed fiscal years.

Commencing on May 1, 2015, we renewed the  Management Services Agreement with Sichuan and ChinAmerica to provide management and accounting related services, including, without limitation, preparing periodic and other reports required to be filed under the Exchange Act, preparing financial reports, bookkeeping, managing its website, processing payables to it and providing it with its current office space. The agreement with Sichuan is for one year, and automatically renews for another year unless Sichuan provides written notice of cancellation at least 60 days prior to the expiration of the initial term or any renewal term. Sichuan pays us a management fee of $1,307 per month. ChinAmerica pays the Company a management fee of $20,480 per month. Our sole officer and director, Andy Z. Fan, is the sole officer, director and majority shareholder of Sichuan and ChinAmerica.

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PART IV

The following documents are filed as part of this annual report:

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Report of Independent Registered Public Accounting Firm

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Consolidated Balance Sheets at December 31, 2015 and December 31, 2014

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Consolidated Statements of Operations and Comprehensive Income for the years ended December 31, 2015 and December 31, 2014

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Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2015 and December 31, 2014

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Consolidated Statements of Cash Flows for the years ended December 31, 2015 and December 31, 2014

·

Notes to the Consolidated Financial Statements

All schedules are omitted because they are not applicable, or not required, or because the required  information is included in the consolidated financial statements or notes thereto.

Form 10-K filed with the SEC on April 4, 2014.

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SIGNATURES
 

Pursuant to the requirements of Section 13 or 15(d) 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.

 

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

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AF OCEAN INVESTMENT MANAGEMENT COMPANY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(All amounts shown in U.S. Dollars)

 

The accompanying notes are an integral part of these financial statements.

 

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