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: June 30, 2016

¨ 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

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 x 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 x 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.

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

As of August 9, 2016 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:

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.

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

AF OCEAN INVESTMENT MANAGEMENT COMPANY

CONSOLIDATED BALANCE SHEETS

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

AF OCEAN INVESTMENT MANAGEMENT COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

AF OCEAN INVESTMENT MANAGEMENT COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

AF OCEAN INVESTMENT MANAGEMENT COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Six Month Period Ended June 30, 2016 and 2015

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 six month period ended June 30, 2016 and 2015; (b) the financial position at June 30, 2016; and (c) cash flows for the six month period ended June 30, 2016 and 2015, 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 six month period ended June 30, 2016 are not necessarily indicative of the results that may be expected for the year ended December 31, 2016.

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, 2015 filed with the Securities and Exchange Commission on April 14, 2016.

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 June 30, 2016.

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 gain of $221 during the six month period ended June 30, 2016. 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 six month period ended June 30, 2016 ranging from .1530 to .1505, 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 six month period ended June 30, 2016 we had deferred income of $0.

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.

Advertising.

Our advertising expenses are recognized as incurred. There was $25 marketing expenses during the six month period ended June 30, 2016.

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 8 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 June 30, 2016, current assets exceeded current liabilities by $191,738. Total assets decreased from $876,995 at December 31, 2015 to $814,002 at June 30, 2016, and total liabilities decreased from $357,838 at December 31, 2015 to $317,674 at June 30, 2016.

We had revenue of $186,404 and a net loss of ($23,050) for the six month period ended June 30, 2016 as compared to revenue of $94,394 and a net loss of ($162,534) for the six month period ended June 30, 2015. 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.

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 six month period ended June 30, 2016, as compared to the fiscal year ended December 31, 2015.

Assets are depreciated over their useful lives when placed in service. Depreciation expense was $2,834 and $2,834 for the six month period ended June 30, 2016 and 2015, respectively.

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

As of June 30, 2016, there is an outstanding related party receivable of $1,500, compared to $5,500 at December 31, 2015. Interest accrued on the related party receivable is $714 as of June 30, 2016.

As of June 30, 2016 there is an outstanding receivable due to the Company from a related party in the amount of $11,193 to handle management and accounting related services including the bookkeeping, managing their websites, handling employee matters, and related governmental filings, processing payables and payroll.

NOTE 7. STOCKHOLDERS' EQUITY

Common Stock

As of June 30, 2016 and December 31, 2015, the Company had 298,007,767 and 298,007,767 shares of common stock issued and outstanding, respectively.

No shares were issued during the six month period ended June 30, 2016.

The Company has no options or warrants issued or outstanding.

Series A Convertible Preferred Stock

As of June 30, 2016, the Company had 5,000,000 shares of Series A Convertible Preferred Stock issued and outstanding, reflecting no change since December 31, 2015.

NOTE 8. COMMITMENTS AND CONTINGENCIES

The Subsidiary and ChinAmerica Andy Movie Entertainment Media Co. are negotiating new terms to the existing management agreement with ChinAmerica. ChinAmerica has operations' in China and receives payments 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. As of June 30, 2016, the current balance in the account held on behalf of ChinAmerica is $317,674.

Commencing May 1, 2015, the Company renewed the management services agreement with ChinAmerica and Sichuan Leaders Petrochemical Company to provide management services for an additional year to both related parties. All of the revenue received during the six month period ended June 30, 2016, totaling $186,004 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.

NOTE 9. 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 six month period ended June 30, 2016. The following are the expenses attributed to the Subsidiary for the six month period ended June 30, 2016. 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.

NOTE 10. SUBSEQUENT EVENTS

Management has evaluated subsequent events through August 5, 2016 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.

ITEM 1A. RISK FACTORS

Before you invest in our common stock, you should be aware that there are risks, as described below. You should carefully consider these risk factors together with all of the other information included in this prospectus before you decide to purchase shares of our common stock. Any of the following risks could adversely affect our business, financial condition and results of operations. We have incurred both profits and losses from inception while realizing our revenues and we may never generate substantially more revenues or be profitable in the future.

Risks Relating to Our Business

Economic events have adversely impacted our business and results of operations and may continue to do so.

Many parts of the world including the United States and China are still in recovery from the recession and we believe that these weak general economic conditions will continue through the end of 2016 and most likely beyond. The ongoing impacts of the slow growing global economy further exacerbate current economic conditions that impact our business. As the economy struggles, businesses may become more apprehensive about the economy and/or related factors, and may reduce their level of spending on retaining outside consultants. A decrease in spending due to lower business to business spending or a lack of confidence in the economy could impact the frequency with which our potential clients retain outside consultants thereby decreasing our revenues and negatively affecting our operating results. Additionally, we believe there is a risk that if the current weak economic conditions persist for a long period of time and become more pervasive, businesses might make long-lasting changes to their budgets on a more permanent basis.

Current general business economic conditions could reduce our client availability which would have an adverse effect on our revenues.

We are susceptible to economic slowdowns. In particular, our business caters primarily to businesses that have a need for outside consulting services. We believe that the majority of our revenues will be derived from businesses with the working capital to retain our services. Accordingly, we believe that our business is particularly susceptible to any factors that cause a reduction in working capital. We also believe that companies generally are more willing to make discretionary decisions, including the retention of outside consultants, during periods in which favorable economic conditions prevail. The changes in working capital, as a result of the current economic slowdown and reduction in consumer confidence will adversely affect our revenues.

The future performance of the U.S. economy and global economies are uncertain and are directly affected by numerous global and national factors, in addition to other factors that are beyond our control. These factors, which also affect discretionary consumer spending, include among other items, international, national, regional and local economic conditions, disposable consumer income, consumer confidence, terrorist attacks and the United States' participation in military actions. We believe that these factors have adversely impacted our business and, should these conditions continue, worsen or be perceived to be worsening or should similar conditions occur in the future, we would expect them to continue to adversely impact our business.

There are factors both within and without our control that can cause our results of operations to fluctuate significantly.

A number of factors have historically affected, and will continue to affect, our company's revenue including, among other factors:

Our results of operations and revenues could be adversely affected by our inability to expand our company operations.

There are factors which may impact the amount of time and money required for the expansion of our company business, including but not limited to, business working capital, include among other items, international, national, regional and local economic conditions, consumer confidence, terrorist attacks and the United States' participation in military actions.

Our growth depends on our ability to expand and operate profitably.

Our ability to expand is dependent upon a number of factors, some of which are beyond our control, including but not limited to our ability to:

Our existing personnel, management systems, financial controls, information systems and other systems and procedures may be inadequate to support any expansion, which could require us to incur substantial expenditures that could adversely affect our operating results.

Our company may not be able to compete successfully with other consulting firms and, as a result, we may not achieve our profitability.

Our industry is intensely competitive with respect to price and quality of service. We compete with national and regional firms as well as independently owned small to medium size business consulting firms. Compared to our business, our competitors may have greater financial and other resources, have been in business longer, have greater name recognition and be better established in the market where our business is located.

Our success depends in part upon the continued use of outside consulting firms by businesses.

Shifts in business preferences away from outside consulting services could materially adversely affect our operating results. The consulting industry is characterized by the continual introduction of new concepts and is subject to rapidly changing business preferences. Our success depends in part on our ability to anticipate and respond to changing business preferences.

Continued expansion by our competitors in the consulting services industry could prevent us from realizing anticipated benefits from growth in our company revenue.

Our competitors have commenced operations overseas in many of the geographical locations that we are targeting and a key element of our strategy is to expand our sales in these markets. If we overestimate demand for services or underestimate the popularity of our competitors' services, we may be unable to realize anticipated revenues from expansion into other markets. Similarly, if one or more of our competitors open new offices in our existing markets, revenues in our company may be lower than we expect. Any unanticipated slowdown in demand due to industry growth or other factors could reduce our revenue and results of operations, which could cause our revenue to decline substantially.

Material weaknesses in our financial reporting may cause us to restate our financial statements in the event we discover such weaknesses and are determined to not be acceptable to financial reporting requirements.

We have the responsibility to review the internal controls over financial accounting. During this review material we may discover material weaknesses that could cause us to have to restate our financial statements. This could cause us to expend additional funds that would have a material impact on our ability to generate profits and on the profits of past operations.

Taxing authorities may select to audit our federal, state and/or local tax returns from time to time, which may result in tax assessments and penalties that could have an adverse effect on our results of operations and financial condition.

We are subject to federal, state and local taxes in the U.S. Although we believe that our tax reporting is reasonable, if any taxing authority disagrees with the positions taken by the Company on its tax returns, we could have additional tax liabilities, including interest and penalties, which, if material, could have an adverse impact on our results of operations and financial condition.

Increases in the prices of labor could reduce our operating margins and our revenues.

We will have the need to hire additional qualified personnel in the future and the cost of these individuals may be higher than anticipated due to demand from competitors. Our labor costs will represent a large portion of our gross revenues. If the cost of labor increases in the future and we choose not to pass, or cannot pass, these increases on to our clients, our operating margins would decrease, perhaps materially.

Our operating results may fluctuate significantly due to economic conditions that make it more difficult for us to predict accurately and address in a timely manner factors that may have a negative impact on our business.

Our business is subject to economic fluctuations that may vary greatly depending upon the national and international business climate. These fluctuations can make it more difficult for us to predict accurately and address in a timely manner factors that may have a negative impact on our business. Accordingly, results for any one quarter are not necessarily indicative of results to be expected for any other quarter or for any year

Our results of operations are affected by a variety of factors, including decreasing stock markets and have fluctuated significantly in the past and can be expected to continue to fluctuate significantly in the future while the recession continues.

We anticipate that our results of operations will fluctuate significantly and can be expected to continue to fluctuate significantly in the future. Our results of operations are affected by a variety of factors, including:

Negative factors or publicity surrounding our business or the consulting industry generally could adversely affect business decisions, which could reduce our sales and make our brand less valuable.

It is our belief that our competitive strengths include the quality of our personnel and their skills. Therefore we believe that adverse publicity relating to our company and its personnel or other similar concerns affects us more than it would competitors that compete primarily on other factors. Any shifts in business preferences away from the kinds of services we offer would make our firm less appealing and adversely affect our revenues.

We may incur additional costs or liabilities and lose revenues impacting operating results as a result of litigation and government regulation affecting the operation of our business.

Our business is not subject to extensive federal, state, and local government regulation. To the extent that new governmental regulations impose material additional obligations on us, it could cause us to increase the fees we charge our clients.

The costs of operating our business may increase if there are changes in laws governing minimum hourly wages, working conditions, overtime, health care, workers' compensation insurance rates, unemployment tax rates, sales taxes or other laws and regulations such as those governing access for the disabled, including the Americans with Disabilities Act. If any of these costs were to increase and we were unable to offset the increase by increasing our prices or by other means, this could have a material adverse effect on our business and results of operations.

The failure to enforce and maintain our intellectual property rights could enable others to use names confusingly similar to AF Ocean Investment Management Company and other names and marks used by us, which could adversely affect the value of the Ocean's brand.

We have not registered the "AF Ocean" mark used by our company as a trade name in Florida or any state or the United States Patent and Trademark Office. The success of our business depends on our continued ability to use our existing trade name in order to increase our brand awareness. In that regard, we believe that our trade name is valuable asset that is critical to our success. The unauthorized use or other misappropriation of our trade name could diminish the value of our business and may cause a decline in our revenue.

Any new indebtedness may adversely affect our financial condition, results of operations, limit our operational and financing flexibility and negatively impact our business.

Any revolving credit facility, and other debt instruments we may enter into in the future, may have negative consequences to the Company, including but not limited to the following:

We expect that we will depend primarily upon our operations to provide funds to pay our expenses and to pay any amounts that may become due under any new credit facility and any other indebtedness we may incur. Our ability to make these payments depends on our future performance, which will be affected by various financial, business, economic and other factors, many of which we cannot control.

We depend on the services of key a key executive, the loss of whom could materially harm our business and our strategic direction if we were unable to replace them with executives of equal experience and capabilities.

Our senior executive, Andy Fan is important to our success because he is instrumental in setting our strategic direction, operating our business, identifying, recruiting and training key personnel, identifying expansion opportunities and arranging any necessary financing. Losing the services of Mr. Fan could adversely affect our business until a suitable replacement could be found. We do not maintain key person life insurance policies on any of our executives.

We expect to incur substantial expenses to meet our reporting obligations as a public company. In addition, failure to maintain adequate financial and management processes and controls could lead to errors in our financial reporting and could harm our ability to manage our expenses.

Reporting obligations as a public company are likely to place a considerable strain on our financial and management systems, processes and controls, as well as on our personnel. We estimate that it will cost approximately $106,000 annually to maintain the proper management and financial controls for our filings including the services of our auditor and counsel firms. As well as our SEC filing fees, including the listings with OTCBB, and OTC Markets In addition, as a public company we are required to document and test our internal controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, so that our management can certify as to the effectiveness of our internal controls and our independent registered public accounting firm can render an opinion on the effectiveness of our internal controls over financial reporting, which requires us to document and test the design and operating effectiveness of our internal controls over financial reporting. If our management is unable to certify the effectiveness of our internal controls or if our independent registered public accounting firm cannot render an unqualified opinion on the effectiveness of our internal controls over financial reporting, or if material weaknesses in our internal controls are identified, or if we fail to comply with other obligations imposed by the Sarbanes-Oxley Act rules relating to corporate governance matters, we could be subject to regulatory scrutiny and a loss of public confidence, which could have a material adverse effect on our business and our stock price. In addition, if we do not maintain adequate financial and management personnel, processes and controls, we may not be able to accurately report our financial performance on a timely basis, which could cause a decline in our stock price and adversely affect our ability to raise capital.

We do not have current insurance policies that may provide adequate levels of coverage against claims and we may incur losses without such insurance.

We do not maintain insurance coverage that is customary for businesses of our size and type. However, there are types of losses we may incur that cannot be insured against or that we believe are not commercially reasonable to insure. For example, we believe that insurance covering liability for violations of wage and hour laws is generally not available. These losses, if they occur, could have a material adverse effect on our business and results of operations.

Risks Relating to our Common Stock

Our future results may vary significantly in the future which may adversely affect the price of our common stock.

It is possible that our quarterly revenues and operating results may vary significantly in the future and that period-to-period comparisons of our revenues and operating results are not necessarily meaningful indicators of the future. You should not rely on the results of one quarter as an indication of our future performance. It is also possible that in some future quarters, our revenues and operating results will fall below our expectations or the expectations of market analysts and investors. If we do not meet these expectations, the price of our common stock may decline significantly.

We do not anticipate paying cash dividends for the foreseeable future, and therefore investors should not buy our stock if they wish to receive cash dividends.

No dividends have been declared in the current year as well as during 2015 and 2014.  Since our reclassification to a "C" corporation we have not paid any cash dividends or distributions on our capital stock. We currently intend to retain our future earnings to support operations and to finance expansion and therefore we do not anticipate paying any cash dividends on our common stock in the foreseeable future.

If we fail to continue to comply with the listing requirements of the OTCBB, the price of our common stock and our ability to access the capital markets could be negatively impacted.

Our common stock is currently listed on the OTCBB and the OTC Markets. We are subject to certain continued listing standards. We cannot provide any assurance that we will be able to continue to satisfy the requirements of the OTCBB's and the OTC Market's continued listing standards. A delisting of our common stock could negatively affect the price and liquidity of our common stock and could impair our ability to raise capital in the future.

Our stock price will be extremely volatile.

The trading price of our common stock will be subject to wide fluctuations in response to announcements of our business developments or those of our competitors, quarterly variations in operating results, and other events or factors. In addition, stock markets have experienced extreme price volatility in recent years. This volatility has had a substantial effect on the market prices of companies, at times for reasons unrelated to their operating performance. Such broad market fluctuations may adversely affect the price of our stock.

Because we can issue additional shares of common stock, purchasers of our common stock may incur immediate dilution and experience further dilution.

We are authorized to issue up to 500,000,000 shares of common stock, of which 298,007,767 shares of common stock are issued and outstanding as of June 30, 2016. Our board of directors has the authority to cause us to issue additional shares of common stock, and to determine the rights, preferences and privileges of such shares, without consent of any of our stockholders. Consequently, the stockholders may experience more dilution in their ownership of our stock in the future.

Since our securities are subject to penny stock rules you may have difficulty selling your shares.

Our shares of common stock are "penny stocks" and are covered by Section 12(g) of the 1934 Securities and Exchange Act which imposes additional sales practices which requires broker/dealers who sell AF Ocean Investment management Company's securities including the delivery of a standardized disclosure document; disclosure and confirmation of quotation prices; disclosure of compensation the broker/dealer receives; and furnishing monthly account statements. For sales of our securities a broker/dealer must make a special suitability determination and receive from its customer a written agreement prior to making a sale. The imposition of the foregoing additional sales practices could adversely affect a shareholder's ability to dispose of his stock.

Our Amended and Restated Articles of Incorporation provide for one class of blank check preferred stock solely at the discretion of the Board of Directors.

Our Board of Directors may, at its sole discretion, issue stock from our authorized blank check preferred class. Shareholders do not have any control regarding the issuance of any shares from this class and may be adversely affected by any such issuance or subsequent sale in the form of dilution, voting, and value of their shares. The preferred shares may also be issued with preferences or rights that may adversely affect the holders of our common stock.

At the present time the majority shareholder Mr. Andy Z. Fan provides his services with nominal pay and may not be able to continue his services without additional compensation.

Since our company is now operating with earnings and cash flows to support small officer and director salaries, our Officer is receiving nominal compensation. Our Chairman is currently compensated at the rate of $32,500 per year, which compensation will be adjusted annually based on individual performance and performance of the Company. Revenues and earnings, as well as sufficient cash flow, will be considered when determining any change in the salary available to our officer and director. Cash flows must be sufficient to meet the monthly cash needs of the business. Until then, there is a risk that our officers and directors may need to find work elsewhere to supplement their income, distracting them from company operations.

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 June 30, 2016, current assets exceeded current liabilities by $191,738. Total assets decreased from $876,995 at December 31, 2015 to $814,002 at June 30, 2016, and total liabilities increased from $357,838 at December 31, 2015 to $317,674 at June 30, 2016.

We had revenue of $186,404 and a net loss of ($23,050) for the six month period ended June 30, 2016 as compared to revenue of $94,394 and a net loss of ($162,534) for the six month period ended June 30, 2015. 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

Six Month Period Ended June 30, 2016 and 2015

The following table provides a comparison of a summary of our results for six month period ended June 30, 2016 and 2015.

Revenue From Operations. For the six month period ended June 30, 2016, total revenue was $186,404 as compared to $94,394 for the six month period ended June 30, 2015. Loss from operations was ($23,581) for the six month period ended June 30, 2016 as compared to ($162,844) for the six month period ended June 30, 2015. The increase in revenue is attributable to the increase in management fees paid by ChinAmerica for management services in Shanghai during six month period ended June 30, 2016. All of our revenue for the six month period ended June 30, 2016 was from management services fees paid by ChinAmerica and Sichuan Leaders Petrochemical Company ("Sichuan") in the U.S, except $400 related to consulting fees to an Unrelated Party.

Expenses. Total expenses decreased by $47,253 to $209,985 for the six month period ended June 30, 2016 as compared to $257,238 for the six month period ended June 30, 2015.

Net Income (Loss). As a result of the increase in revenue and the decrease in operating expenses our net loss decreased to ($23,050) during the six month period ended June 30, 2016, as compared to ($162,534) for the six month period ended June 30, 2015.

Three Month Period Ended June 30, 2016 and 2015

The following table provides a comparison of a summary of our results for three month period ended June 30, 2016 and 2015.

Revenue From Operations. For the three month period ended June 30, 2016, total revenue was $118,734 as compared to $56,294 for the three month period ended June 30, 2015. Loss from operations was ($1,052) for the three month period ended June 30, 2016 as compared to ($84,255) for the three month period ended June 30, 2015. The increase in revenue is attributable to the management services agreement between the Company and ChinAmerica and Sichuan.

Expenses. Total expenses decreased by $20,763 to $119,786 for the three month period ended June 30, 2016 as compared to $140,549 for the three month period ended June 30, 2015.

Net Income (Loss). Due to the increase in revenue and the decrease in operating expenses our net loss decreased to ($704) during the six month period ended June 30, 2016, as compared to ($84,084) for the six month period ended June 30, 2015.

Liquidity and Capital Resources

General. As of June 30, 2016, we had cash and cash equivalents of $34,526 as compared to cash and cash equivalents of 154,348 during the six month period ended June 30, 2015. 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 ($30,436) for the six month period ended June 30, 2016 as compared to cash used of ($158,355) for the six month period ended June 30, 2015.

Investing Activities. Our investing activities provided cash of $0 for the six month period ended June 30, 2016, as compared to cash used of $0 for the six month period ended June 30, 2015.

Financing Activities. Our financing activities provided cash of $4,000 for the six month period ended June 30, 2016 as compared to cash used of $64,593 for the six month period ended June 30, 2015.

Cash Flow.The following table provides a summary of our cash flows for the six month period ended June 30, 2016 and 2015.

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.

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.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The company does not own any market sensitive financial instruments, subject to market risk as identified in Reg S-K, Item 305.

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.

With respect to the period ending June 30, 2016, under the supervision and with the participation of our management, we conducted an evaluation of the effectiveness of the design and operations of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934.

Based upon our evaluation regarding the period ending June 30, 2016, the Company's management, including its Principal Executive Officer and Principal Financial Officer, has concluded that its disclosure controls and procedures were not effective due to the Company's limited internal resources and lack of ability to have multiple levels of transaction review. Material weaknesses noted are lack of an audit committee, lack of a majority of outside directors on the board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; and management is dominated by two individuals, without adequate compensating controls. However, through the review process, management believes that the financial statements and other information presented herewith are materially correct.

The Company's disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives. However, the Company's management, including its Principal Executive Officer and Principal Financial Officer, does not expect that its disclosure controls and procedures will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefit of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.

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.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We were not subject to any legal proceedings during the six months ended June 30, 2016, nor to the best of our knowledge and belief are any threatened or pending.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

We did not sell any unregistered equity securities during the six months ended June 30, 2016.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

No senior securities were issued and outstanding during the six months ended June 30, 2016.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable to our Company.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

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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.