Item 1. Business
General
Alternative Investment Corporation (the "Company", “AICO”, “we”, “us” or “our”) was incorporated in Nevada on March 26, 2007 under the name of China Digital Ventures Corporation (“CDVC”) and was in the web based telecom services business in China. The Company's mission was to acquire, own and manage a portfolio of "technology", "media" and "telecommunication" assets in China.
In July 2009, the Company acquired a 76.8% interest in China Integrated Media Corporation Limited ("CIMC"), a public company in Australia.
In February 2010, the Company decided to divest from its investment in CIMC due to its inability to raise the capital necessary to pursue this investment on a timely manner and concerns on its internal liquidity. On April 30, 2010 the Company disposed of CIMC for $50,000 and realized a gain on the disposal of $92,975. The proceeds from the disposal were used to pay debts of the Company.
On June 20, 2010, the Company disposed of its subsidiary company, Lead Concept Limited, which operated its web based VOIP business as the Company was no longer competitive in this market segment. After the disposal, the Company had no operations.
On July 23, 2010, the Company experienced a change in control. Canton Investments Ltd. (“CIL”) acquired a majority of the issued and outstanding common stock of the Company in accordance with stock purchase agreements by and between CIL and Wireless One International Limited (“Wireless One”), Bing HE and Ning HE, the Company’s former directors, and other various shareholders. On the closing date, July 23, 2010, pursuant to the terms of the Stock Purchase Agreement, CIL purchased from Wireless One and Bing HE and Ning HE 28,750,000 shares of the Company’s outstanding common stock for $205,750. Also on July 23, 2010, CIL purchased 6,100,000 shares of the Company’s outstanding common stock for $36,600 from various shareholders. As a result of the change in control, CIL owned a total of 34,850,000 shares of the Company’s common stock representing 91.54%.
In accordance with the change in control Mr. Bing HE resigned as the Company's President, CEO, and any other positions held by him on July 23, 2010. The resignation was not the result of any disagreement with the Company or any matter relating to the Company's operations, policies or practices. The same date Mr. Robert M. Price was named as the new Director, Chief Executive Officer and Chief Financial Officer.
On May 10, 2012, the Company filed an amendment to its Articles of Incorporation in the State of Nevada to change its name to Paradigm Resource Management Corporation.
On September 10, 2012, CIL contributed 30,000,000 shares of common stock to the Company’s treasury. The Company immediately retired and canceled these shares. As a result of the contribution of shares, CIL owns a total of 4,850,000 shares of the Company’s common stock representing 60%.
On July 24, 2013, the Company entered into an agreement with AMSA Development Technology Co Ltd (“AMSA”) to acquire 402,300 shares of TOSS Plasma Technologies Ltd. (“TPT”) previously held by AMSA in exchange for 896,667 shares of its common stock. The 402,300 shares of TPT represent 10.1% of TPT’s outstanding common stock. The agreement also provides AMSA an option to acquire an additional 1,120,833 shares of the Company’s common stock and provides the Company an option to acquire an additional 402,300 shares of TPT common stock from AMSA.
On December 4, 2013, the Company and AMSA entered into an Amendment to the Agreement dated July 24, 2013. Under the terms of the amendment, the Company had the option to acquire up to a total of 3,432,000 shares of TPT from AMSA and AMSA had the option to acquire up to a total of 5,746,667 shares of common stock of the Company. The options expired on June 2, 2014.
On September 10, 2015, the Company and AMSA entered into a Rescission Agreement to fully rescind the previous acquisition agreement of shares of TPT and returned previously issued shares of each company to each other.
On September 18, 2015, the Company filed an amendment to its Articles of Incorporation in the State of Nevada to change its name to Alternative Investment Corporation.
On April 1, 2016, the Company entered into a Shareholders’ Agreement (the “Agreement”) with Basil and Barns, Inc., a New York corporation incorporated on February 2, 2016, (“B&B Inc.”), Fess Holdings LLC, Basil and Barns LLC and JIF Holdings LLC to acquire 55% of the outstanding common shares of B&B Inc.
Management is focused on new investment opportunities in the real estate sector with primary focus on distressed real estate assets and/or alternative real estate developments.
Employees
As of September 30, 2016, the Company had one employee.
Available Information
All reports of the Company filed with the SEC are available free of charge through the SEC’s Web site at www.sec.gov. In addition, the public may read and copy materials filed by the Company at the SEC’s Public Reference Room located at 100 F Street, N.E., Washington, D.C. 20549. The public may also obtain additional information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330.
Item 1A.
Item 1A. Risk Factors
The following important factors among others, could cause our actual operating results to differ materially from those indicated or suggested by forward-looking statements made in this Form 10-K or presented elsewhere by management from time to time.
There is substantial doubt about the Company’s ability to continue as a going concern.
Our auditor's report on our 2016 financial statements expresses an opinion that substantial doubt exists as to whether we can continue as a going concern. Because our officers and directors may be unable or unwilling to loan or advance any additional capital to the Company, we may not have the funds necessary to continue our operations. See "September 30, 2016 Audited Financial Statements."
We have a limited operating history, thus we cannot predict whether we will be successful in meeting our financial obligations.
We were established in March 2007. Although we had begun the sales of telecom services by direct sales with modest revenue generated, we have disposed of those businesses and currently have no revenue stream. We currently have $47,428 in cash and are reliant upon our officers, directors, and shareholders to fund the operating expenses of the Company while we assess and evaluate our next business strategy. There is no guarantee that our officers, directors and shareholders will continue to fund these activities.
If our strategy is unsuccessful, we will not be profitable and our stockholders could lose their investment.
There is no guarantee that our strategy for obtaining or developing assets will be successful or that if successfully developed, will result in the Company becoming profitable. If our strategy is unsuccessful, we may fail to meet our objectives and not realize the revenues or profits from the business we pursue that may cause the value of the Company to decrease, thereby potentially causing our stockholders to lose their investment.
We have not paid any cash dividends in the past and have no plans to issue cash dividends in the future, which could cause the value of our common stock to have a lower value than other similar companies which do pay cash dividends.
We have not paid any cash dividends on our common stock to date and do not anticipate any cash dividends being paid to holders of our common stock in the foreseeable future. While our dividend policy will be based on the operating results and capital needs of the business, it is anticipated that any earnings will be retained to finance our future expansion. As we have no plans to issue cash dividends in the future, our common stock could be less desirable to other investors and as a result, the value of our common stock may decline, or fail to reach the valuations of other similarly situated companies who have historically paid cash dividends in the past.
It is more difficult for our shareholders to sell their shares because we are not, and may never be, eligible for NASDAQ or any national stock exchange.
We are not presently, nor is it likely that for the foreseeable future we will be, eligible for inclusion in NASDAQ or for listing on any United States national stock exchange. To be eligible to be included in NASDAQ, a company is required to have not less than $4,000,000 in net tangible assets, a public float with a market value of not less than $5,000,000, and a minimum bid price of $4.00 per share. At the present time, we are unable to state when, if ever, we will meet the NASDAQ application standards. Unless we are able to increase our net worth and market valuation substantially, either through the accumulation of surplus out of earned income or successful capital raising financing activities, we will never be able to meet the eligibility requirements of NASDAQ. As a result, it will be more difficult for holders of our common stock to resell their shares to third parties or otherwise, which could have a material adverse effect on the liquidity and market price of our common stock.
Although our Common Stock is currently traded on the OTC Bulletin Board, there is no assurance any public market for our Common Stock will continue. There is also no assurance as to the depth or liquidity of any such market or the prices at which holders may be able to sell the Shares. An investment in these Shares may be totally illiquid and investors may not be able to liquidate their investment readily or at all when they need or desire to sell.
Volatility of stock prices
In the event a public market continues for our Common Stock, market prices will be influenced by many factors, and will be subject to significant fluctuation in response to variations in operating results of the Company and other factors such as investor perceptions of the Company, supply and demand, interest rates, general economic conditions and those specific to the industry, developments with regard to the Company's activities, future financial condition and management.
Canton Investments Ltd. owns indirectly through related parties approximately 60% of our outstanding common stock, and has significant influence over our corporate decisions, and as a result, if you invest in us, your ability to affect corporate decisions will be limited.
Canton Investments Ltd. (“CIL”) holds 4,850,000 shares of our common stock, representing approximately 60% of the outstanding shares of our common stock. Accordingly, CIL will have significant influence in determining the outcome of all corporate transactions or other matters, including mergers, consolidations and the sale of all or substantially all of our assets, and also the power to prevent or cause a change in control even after such conversion and exercise by other investors, as CIL may continue to be our largest shareholder. The interests of CIL may differ from the interests of the other stockholders and thus result in corporate decisions that are adverse to other shareholders. Additionally, potential investors should take into account the fact that any vote of shares purchased will have limited effect on the outcome of corporate decisions.
We may not be able to effectively control and manage our growth, which would negatively impact our operations.
If the Company’s business and markets grow and develop, it will be necessary for us to finance and manage expansion in an orderly fashion. We may face challenges in managing and expanding our business and in integrating any acquired businesses with our own. Such eventualities will increase demands on our existing management, workforce and facilities. Failure to satisfy increased demands could interrupt or adversely affect our operations and cause administrative inefficiencies.
We may be unable to successfully execute any of our identified business opportunities or other business opportunities that we determine to pursue.
We currently have a limited operational infrastructure. In order to pursue business opportunities, we will need to build our infrastructure and operational capabilities. Our ability to do any of these successfully could be affected by any one or more of the following factors, among others, our ability to:
·raise substantial additional capital to fund the implementation of our business plan;
·execute our business strategy;
·manage the expansion of our operations and any acquisitions we may make, which could result in increased costs, high employee turnover or damage to customer relationships;
·attract and retain qualified personnel;
·manage our third-party relationships effectively; and
·Accurately predict and respond to the rapid technological changes in our industry and the evolving demands of the markets we serve.
The Company’s failure to adequately address any one or more of the above factors could have a significant impact on its ability to implement its business plan and its ability to pursue other opportunities that arise.
Limited liability of Directors and Officers.
The Company has adopted provisions to its Articles of Incorporation and Bylaws which limit the liability of its Officers and Directors, and provide for indemnification by the Company of its Officers and Directors to the full extent permitted by Nevada corporate law, which generally provides that its officers and directors shall have no personal liability to the Company or its stockholders for monetary damages for breaches of their fiduciary duties as directors, except for breaches of their duties of loyalty, acts or omissions not in good faith or which involve intentional misconduct or knowing violation of law, acts involving unlawful payment of dividends or unlawful stock purchases or redemptions, or any transaction from which a director derives an improper personal benefit. Such provisions substantially limit the shareholder's ability to hold officers and directors liable for breaches of fiduciary duty, and may require the Company to indemnify its officers and directors.
If the Company decides to operate internationally, there are risks which could adversely affect operating results.
Currently, we have no projects, projections or foreign interest involving international operations. However, the Company may in the future, given the opportunity, decide to pursue projects, business, or otherwise conduct operations internationally. Doing business in foreign countries does subject the Company to additional risks, any of which may adversely impact future operating results, including:
·international political, economic and legal conditions;
·our ability to comply with foreign regulations and/or laws affecting operations and projects;
·difficulties in attracting and retaining staff and business partners to operate internationally;
·language and cultural barriers;
·seasonal reductions in business activities and operations in the countries where our international projects are located;
·integration of foreign operations;
·potential adverse tax consequences; and
·potential foreign currency fluctuations.
Factors beyond the control of the Company
Projects for the acquisition and development of the Company’s products are subject to many factors, which are outside our control. These factors include general economic conditions in North America and worldwide (such as recession, inflation, unemployment, and interest rates), proximities to utilities and transportation, shortages of labor and materials and skilled craftsmen and price of materials and competitive products and the regulation by federal and state governmental authorities.
Lack of diversification
Because of the limited financial resources that the Company has, we do not currently intend to diversify our operations. Our inability to diversify our activities into more than one area will subject the Company to economic fluctuations and therefore increase the risks associated with the Company’s operations.
If internal control over financial reporting becomes ineffective, our business and future prospects may suffer.
With the participation of the Chief Executive Officer and Chief Financial Officer, our management evaluated the effectiveness of the Company's internal control over financial reporting as of September 30, 2016 based upon the framework in Internal Control -Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that evaluation, our management has concluded that, as of September 30, 2016, the Company had material weaknesses in its internal control over financial reporting. Specifically, management identified the following material weaknesses at September 30, 2016.
1. Lack of oversight by independent directors in the establishment and monitoring of required internal controls and procedures;
2. Lack of functioning audit committee, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures;
3. Insufficient personnel resources within the accounting function to segregate the duties over financial transaction processing and reporting;
4. Insufficient written policies and procedures over accounting transaction processing and period end financial disclosure and reporting processes.
As a result of the material weakness described above, management has concluded that, as of September 30, 2016, we did not maintain effective internal control over financial reporting, involving the preparation and reporting of our financial statements presented in conformity with GAAP.
We understand that remediation of material weaknesses and deficiencies in internal controls is a continuing work in progress due to the issuance of new standards and promulgations. However, remediation of any known deficiency is among our highest priorities. Our management will periodically assess the progress and sufficiency of our ongoing initiatives and make adjustments as and when practical and necessary.
Future changes in financial accounting standards and other applicable regulations by various governmental regulatory agencies may cause lower than expected operating results and affect our reported results of operations.
Changes in accounting standards and their application may have a significant effect on our reported results on a going forward basis and may also affect the recording and disclosure of previously reported transactions. New standards have occurred and will continue to occur in the future. For example, in December 2004, the Financial Accounting Standards Board issued SFAS No. 123 (revised 2004), as amended, “Share Based Payment” (“SFAS No. 123R”), which requires us to expense stock options at fair value effective January 1, 2006. Under SFAS No. 123R, the recognition of compensation expense for the fair value of stock options reduces our reported net income and net income per share subsequent to implementation; however, this accounting change will not have any impact on the cash flows of our business. Under the prior rules, expensing of the fair value of the stock options was not required. Any future issuances of stock options will cause additional compensation expense to be recognized. As of September 30, 2016, there are no outstanding stock options.
The Sarbanes-Oxley Act of 2002 and various new rules subsequently implemented by the Securities and Exchange Commission (“SEC”) and the NASDAQ National Market have imposed additional reporting and corporate governance practices on public companies.
In addition, if we do not adequately continue to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in the future, we may not be able to accurately report our financial results or prevent error or fraud, which may result in sanctions or investigation by regulatory authorities, such as the SEC. Any such action could harm our business, financial results or investors’ confidence in our Company, and could cause our stock price to fall.
Item 1B.
Item 1B. Unresolved Staff Comments
None.
Item 2.
Item 2. Properties
The Company maintains a correspondence office as its principal executive office, which is located at 1900 South Norfolk Street, Suite 350, San Mateo, California 94403. The Company believes that the current facilities are suitable for its current needs.
Item 3.
Item 3. Legal Proceedings
None.
Item 4.
Item 4. Mine Safety Disclosures
Not applicable
PART II
Item 5.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
As the Company is a “smaller reporting company,” it is not required to provide the performance graph required in paragraph (e) of Item 201.
We have one class of securities, Common Voting Equity Shares ("Common Stock"). Our common stock is quoted on the OTC Markets Bulletin Board (“OTCBB”) under the symbol "PRDC.QB". As of September 30, 2016, the Company’s common stock was held by 28 shareholders of record, which does not include shares that are held in street or nominee name.
The closing share prices presented below represent prices between broker-dealers and do not include retail mark-ups and mark-downs or any commission to the dealer. The following chart is indicative of the fluctuations in the stock prices:
Our authorized capital stock consists of 1,600,000,000 shares of common stock, par value $0.001 per share. The holders of our common stock:
* have equal ratable rights to dividends from funds legally available if and when declared by our board of directors;
* are entitled to share ratably in all of our assets available for distribution to holders of common stock upon liquidation, dissolution or winding up of our affairs;
* do not have preemptive, subscription or conversion rights and there are no redemption or sinking fund provisions or rights; and
* are entitled to one non-cumulative vote per share on all matters on which stockholders may vote.
We refer you to our Articles of Incorporation, Bylaws and the applicable statutes of the State of Nevada for a more complete description of the rights and liabilities of holders of our securities.
The Company’s transfer agent is Nevada Agency & Trust Co. of Reno, Nevada.
Dividend Distributions
We have not historically and do not intend to distribute dividends to stockholders in the foreseeable future.
Securities authorized for issuance under equity compensation plans
The Company does not have any equity compensation plans.
Penny Stock
Our common stock is considered "penny stock" under the rules of the Securities and Exchange Commission (the "SEC") under the Securities Exchange Act of 1934. The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ Stock Market System, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or quotation system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the Commission, that:
- contains a description of the nature and level of risks in the market for penny stocks in both public offerings and secondary trading;
- contains a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to a violation to such duties or other requirements of Securities' laws; contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price;
- contains a toll-free telephone number for inquiries on disciplinary actions;
- defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and
- contains such other information and is in such form, including language, type, size and format, as the Commission shall require by rule or regulation.
The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with:
- bid and offer quotations for the penny stock;
- the compensation of the broker-dealer and its salesperson in the transaction;
- the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the marker for such stock; and
- monthly account statements showing the market value of each penny stock held in the customer's account.
In addition, the penny stock rules that require that prior to a transaction in a penny stock not otherwise exempt from those 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 acknowledgement of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written suitably statement.
These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our stock.
Related Stockholder Matters
None.
Purchase of Equity Securities
None.
Item 6.
Item 6. Selected Financial Data.
As the Company is a “smaller reporting company,” this item is inapplicable.
Item 7.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation.
You should read the following discussion of our results of operations and financial condition with the audited financial statements and related notes included elsewhere in this report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs, and that involve numerous risks and uncertainties, including, but not limited to, those described in the “Risk Factors” section of this report. Actual results may differ materially from those contained in any forward-looking statements. See “Cautionary Statement Concerning Forward-Looking Statements.”
Plan of Operation
Management is focused on new investment opportunities in the real estate sector with primary focus on distressed real estate assets and/or alternative real estate developments.
Results of Operations
For the Years Ended September 30, 2016 and 2015
Revenues
The Company had no revenue for the years ended September 30, 2016 and 2015.
Operating Expenses
For the year ended September 30, 2016, our total operating expenses were $238,371, all of which were selling, general and administrative expenses. We incurred $11,954 of interest expense, of which $2,157 was the accretion of the beneficial conversion feature on a convertible promissory note. We earned $17,052 of interest income for the year ended September 30, 2016. Our net loss to our shareholders for the year ended September 30, 2016 was $233,273.
For the year ended September 30, 2015, our total operating expenses were $69,270, all of which were selling, general and administrative expenses. We incurred $12,233 of interest expense, of which $10,015 was the accretion of the beneficial conversion feature on a convertible promissory note. We earned $4,450 of interest income for the year ended September 30, 2015. Our net loss to our shareholders for the year ended September 30, 2015 was $77,053.
Liquidity and Capital Resources
At September 30, 2016, we had cash of $47,428 and a deficit in working capital of $58,063. We used cash in operating activities of $225,555 and $56,547 for the years ended September 30, 2016, and 2015, respectively. The principal elements of cash flow used in operations for the year ended September 30, 2016 included a net loss of $233,273, increased by the reduction in interest accrued on note payable of $3,465, accretion of beneficial conversion feature as interest of $2,157, accretion of interest on a loan of $9,369, decreases in accounts payable of $10,137, an increase in interest receivable of $5,204, increase in amounts due to Fingi, Inc. (“Fingi”), a related party, of $6,502, all offset by an increase of $21,500 in accrued expenses. The principal elements of cash flow used in operations for the year ended September 30, 2015 included a net loss of $77,053, offset by interest accrued on note payable of $2,218, accretion of beneficial conversion feature as interest of $10,015, and increases in accounts payable of $12,723, offset by an increase in interest receivable of $4,450.
For the year ended September 30, 2016, we had $50,000 of cash used in investing activities for a loan extended to Fingi. Additionally, $340,000 of cash was used as an acquisition deposit in the purchase of Basil & Barnes, Inc. For the year ended September 30, 2015, $200,000 of cash was used in investing activities for the purchases of commercial paper.
Cash generated in our financing activities was $538,453 and $381,078 for the years ended September 30, 2016 and 2015, respectively. The financing activities for the year ended September 30, 2016 consisted of $37,039 in payments of notes payable, offset by $517 in expenses paid by shareholders, and $574,975 of proceeds from the sale of common stock, while the financing activities for the year ended September 30, 2015 consisted of $37,039 of proceeds from the issuances of notes payable and $364,000 of proceeds from the sale of common stock, offset by the payment of $19,961 of a note payable.
We do not have sufficient resources to effectuate our business. As of September 30, 2016, we had cash of $47,428. We expect to incur a minimum of $1,600,000 in expenses and acquisitions during the next twelve months of operations.
We will have to raise funds to pay for our expenses. We may have to borrow money from shareholders or issue debt or equity or enter into a strategic arrangement with a third party. There can be no assurance that additional capital will be available to us. We currently have no arrangements or understandings with any person to obtain funds through bank loans, lines of credit or any other sources. Since we have no such arrangements or plans currently in effect, our inability to raise funds for our operations will have a severe negative impact on our ability to remain a viable company.
On November 2, 2015, the Company paid in full a note payable to Antonio Treminio in the amount of $5,039, plus $654 of accrued interest due thereon.
On November 2, 2015, the Company paid in full a note payable to South Riverside Group, Inc. in the amount of $22,000, plus $2,739 of accrued interest due thereon.
On November 2, 2015, the Company paid in full a note payable to Antonio Treminio in the amount of $10,000, plus $501 of accrued interest due thereon.
On November 18, 2015, the Company received $25,000 from an investor for a subscription of 1,562,500 shares of its common stock at a price of $0.016 per share.
Going Concern
Our independent auditors included an explanatory paragraph in their report on the accompanying financial statements regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred a net loss of $233,273 for the year ended September 30, 2016, has incurred cumulative losses since inception of $765,217, and has a stockholders’ equity of $281,937 at September 30, 2016. These factors raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period of time. The Company is highly dependent on its ability to continue to obtain investment capital and loans from an affiliate and shareholder in order to fund the current and planned operating levels. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s continuation as a going concern is dependent upon its ability to bring in income generating activities and its ability to continue receiving investment capital and loans from an affiliate and shareholder to sustain its current level of operations. No assurance can be given that the Company will be successful in these efforts.
Critical Accounting Policies and Estimates
Our significant accounting policies are described in Note 2 of the audited financial statements included elsewhere in this report. The preparation of the financial statements in accordance with U.S. GAAP requires management to make significant judgments and estimates. Some accounting policies have a significant impact on amounts reported in these financial statements. Our financial position and results of operations may be materially different when reported under different conditions or when using different assumptions in the application of such policies. In the event estimates or assumptions prove to be different from actual amounts, adjustments are made in subsequent periods to reflect more current information. Significant accounting policies, including areas of critical management judgments and estimates, include the following:
Impairment or Disposal of Long-Lived Assets
The Company accounts for the impairment or disposal of long-lived assets according to the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 360 “Property, Plant and Equipment”. ASC 360 clarifies the accounting for the impairment of long-lived assets and for long-lived assets to be disposed of, including the disposal of business segments and major lines of business. Long-lived assets are reviewed when facts and circumstances indicate that the carrying value of the asset may not be recoverable. When necessary, impaired assets are written down to estimated fair value based on the best information available. Estimated fair value is generally based on either appraised value or measured by discounting estimated future cash flows. Considerable management judgment is necessary to estimate discounted future cash flows. Accordingly, actual results could vary significantly from such estimates.
Stock Based Compensation
The Company accounts for Stock-Based Compensation under ASC Topic 718-10 (“ASC 718-10”), which addresses the accounting for transactions in which an entity exchanges its equity instruments for goods or services, with a primary focus on transactions in which an entity obtains employee services in share-based payment transactions. ASC 718-10 is a revision to SFAS No. 123, "Accounting for Stock-Based Compensation," and supersedes Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,” and its related implementation guidance. ASC 718-10 requires measurement of the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). Incremental compensation costs arising from subsequent modifications of awards after the grant date must be recognized. The Company has not adopted a stock option plan and has not granted any stock options.
Off-Balance Sheet Arrangements
We currently have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
As the Company is a “smaller reporting company,” this item is inapplicable.
Item 8.
Item 8. Financial Statements and Supplementary Data.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
Alternative Investment Corp
We have audited the accompanying balance sheets of Alternative Investment Corp as of September 30, 2016 and 2015, and the related statement of operations, stockholders’ deficiency, and cash flows for the years then ended September 30, 2016. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Alternative Investment Corp as of September 30, 2016 and 2015, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the accompanying financial statements, the Company has significant net losses and cash flow deficiencies. Those conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans regarding those matters are described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Green & Company, CPAs
Green & Company, CPAs
Temple Terrace, Florida
January 13, 2017
ALTERNATIVE INVESTMENT CORPORATION
(F/K/A Paradigm Resource Management Corporation)
Balance Sheets
See accompanying notes to financial statements.
ALTERNATIVE INVESTMENT CORPORATION
(F/K/A Paradigm Resource Management Corporation)
Statements of Operations
See accompanying notes to financial statements.
ALTERNATIVE INVESTMENT CORPORATION
(F/K/A Paradigm Resource Management Corporation)
Statements of Cash Flows
See accompanying notes to financial statements.
ALTERNATIVE INVESTMENT CORPORATION
(F/K/A Paradigm Resource Management Corporation)
Statements of Stockholders' Deficit
See accompanying notes to financial statements.
ALTERNATIVE INVESTMENT CORPORATION
(f/k/a Paradigm Resource Management Corporation)
Notes to Financial Statements
September 30, 2016
Note 1 - Nature of Business, Presentation and Going Concern
Organization
Alternative Investment Corporation (the "Company") was incorporated in Nevada on March 26, 2007 under the name of China Digital Ventures Corporation. The principal business of the Company was its web based telecom and IPTV businesses, both of which were disposed of during the year ended September 30, 2010. As of the date hereof, the Company has no operations.
On July 23, 2010, the Company experienced a change in control. Canton Investments Ltd (“CIL” or “Canton”) acquired a majority of the issued and outstanding common stock of the Company in accordance with stock purchase agreements by and between CIL and Wireless One International Limited (“Wireless One”), Bing HE and Ning HE, the Company’s former directors, and other various shareholders. On the closing date, July 23, 2010, pursuant to the terms of the Stock Purchase Agreement, CIL purchased from Wireless One and Bing HE and Ning HE 28,750,000 shares of the Company’s outstanding common stock for $205,750. Also on July 23, 2010, CIL purchased 6,100,000 shares of the Company’s outstanding common stock for $36,600 from various shareholders. As a result of the change in control, CIL owned a total of 34,850,000 shares of the Company’s common stock representing 91.54%.
On May 10, 2012, the Company filed an amendment to its Articles of Incorporation in the State of Nevada to change its name to Paradigm Resource Management Corporation.
On September 10, 2012, CIL contributed 30,000,000 shares of common stock to the Company’s treasury. The Company immediately retired and canceled these shares. As a result of the contribution of shares, CIL owns a total of 4,850,000 shares of the Company’s common stock representing 60%.
On July 24, 2013, the Company entered into an agreement with AMSA Development Technology Co Ltd (“AMSA”) to acquire 402,300 shares of TOSS Plasma Technologies Ltd. (“TPT”) previously held by AMSA in exchange for 896,667 shares of its common stock. The 402,300 shares of TPT represent 10.1% of TPT’s outstanding common stock. The agreement also provides AMSA an option to acquire an additional 1,120,833 shares of the Company’s common stock and provides the Company an option to acquire an additional 402,300 shares of TPT common stock from AMSA.
On December 4, 2013, the Company and AMSA entered into an Amendment to the Agreement dated July 24, 2013. Under the terms of the amendment, the Company had the option to acquire up to a total of 3,432,000 shares of TPT from AMSA and AMSA had the option to acquire up to a total of 5,746,667 shares of common stock of the Company. The options expired on June 2, 2014.
On September 10, 2015, the Company and AMSA entered into a Rescission Agreement to fully rescind the previous acquisition agreement of shares of TPT and returned previously issued shares of each company to each other.
On September 18, 2015, the Company filed an amendment to its Articles of Incorporation in the State of Nevada to change its name to Alternative Investment Corporation.
On April 1, 2016, the Company entered into a Shareholders’ Agreement (the “Agreement”) with Basil and Barns, Inc., a New York corporation incorporated on February 2, 2016, (“B&B Inc.”), Fess Holdings LLC, Basil and Barns LLC and JIF Holdings LLC to acquire 55% of the outstanding common shares of B&B Inc.
The Company is focused on new investment opportunities in the real estate sector with primary focus on distressed real estate assets and/or alternative real estate developments.
Basis of Presentation
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in The United States of America and the rules and regulations of the Securities and Exchange Commission (“SEC”).
Going Concern
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred net losses of $233,273 and $77,053 for the years ended September 30, 2016 and 2015, respectively, and has incurred cumulative losses since inception of $765,217. The Company had stockholders’ equity of $281,937 at September 30, 2016. These conditions raise substantial doubt about the ability of the Company to continue as a going concern.
The ability of the Company to continue as a going concern is dependent upon its abilities to generate revenues, to continue to raise investment capital, and develop and implement its business plan. No assurance can be given that the Company will be successful in these efforts.
ALTERNATIVE INVESTMENT CORPORATION
(f/k/a Paradigm Resource Management Corporation)
Notes to Financial Statements
September 30, 2016
Note 1 - Nature of Business, Presentation and Going Concern (Continued)
The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. Management believes that actions presently being taken to obtain additional funding and implement its strategic plans provide the opportunity for the Company to continue as a going concern. No assurance can be given that the Company will be successful in these efforts.
Note 2 - Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates in the accompanying financial statements include the valuation of share-based payments and the valuation allowance on deferred tax assets.
Cash and Cash Equivalents
The Company considers all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents. At September 30, 2016 and 2015, respectively, the Company had no cash equivalents.
Fair Value of Financial Instruments
ASC 825 "Financial Instruments" codified Statement of Financial Accounting Standard No. 107, Disclosures about fair value of financial instruments, requires that the Company disclose estimated fair values of financial instruments. Unless otherwise indicated, the fair values of all reported assets and liabilities, which represent financial instruments, none of which are held for trading purposes, approximate the carrying values of such amounts.
Impairment or Disposal of Long-Lived Assets
The Company accounts for the impairment or disposal of long-lived assets according to the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 360 “Property, Plant and Equipment”. ASC 360 clarifies the accounting for the impairment of long-lived assets and for long-lived assets to be disposed of, including the disposal of business segments and major lines of business. Long-lived assets are reviewed when facts and circumstances indicate that the carrying value of the asset may not be recoverable. When necessary, impaired assets are written down to estimated fair value based on the best information available. Estimated fair value is generally based on either appraised value or measured by discounting estimated future cash flows. Considerable management judgment is necessary to estimate discounted future cash flows. Accordingly, actual results could vary significantly from such estimates.
Income Taxes
The Company accounts for income taxes under ASC Topic 740-10-25 (“ASC 740-10-25”). Under ASC 740-10-25, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740-10-25, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations.
ALTERNATIVE INVESTMENT CORPORATION
(f/k/a Paradigm Resource Management Corporation)
Notes to Financial Statements
September 30, 2016
Note 2 - Summary of Significant Accounting Policies (Continued)
Stock Based Compensation
The Company accounts for Stock-Based Compensation under ASC Topic 718-10 (“ASC 718-10”), which addresses the accounting for transactions in which an entity exchanges its equity instruments for goods or services, with a primary focus on transactions in which an entity obtains employee services in share-based payment transactions. ASC 718-10 is a revision to SFAS No. 123, "Accounting for Stock-Based Compensation," and supersedes Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,” and its related implementation guidance. ASC 718-10 requires measurement of the cost of employee services received in exchange for an award of equity instruments based on the grant-date fari value of the award (with limited exceptions). Incremental compensation costs arising from subsequent modifications of awards after the grant date must be recognized. The Company has not adopted a stock option plan and has not granted any stock options.
Issuance of Shares for Services
The Company accounts for the issuance of equity instruments to acquire goods and services based on the fair value of the goods and services or the fair value of the equity instrument at the time of issuance, whichever is more reliably measurable.
Earnings (Loss) Per Share
The Company computes income (loss) per share in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) ASC Topic 260, “Earnings Per Share", which requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the statement of operations. Basic EPS is computed by dividing income (loss) available to common shareholders by the weighted average number of shares outstanding during the period. Diluted EPS gives effect to all dilutive potential shares of common stock outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. As of September 30, 2016 and 2015, respectively, there were no common share equivalents outstanding which would be deemed as dilutive.
Dividends
The Company has not yet adopted any policy regarding payment of dividends. No dividends have been paid during the periods shown.
Segment Information
In accordance with the provisions of ASC 280-10, “Disclosures about Segments of an Enterprise and Related Information”, the Company is required to report financial and descriptive information about its reportable operating segments. The Company does not have any operating segments as of September 30, 2016 and 2015.
Accounting Standards Codification
The FASB’s Accounting Standards Codification (“ASC”) became effective on September 15, 2009. At that date, the ASC became the FASB’s officially recognized source of authoritative generally accepted accounting principles (“GAAP”) applicable to all public and non-public non-governmental entities, superseding existing FASB, American Institute of Certified Public Accountants (“AICPA”), Emerging Issues Task Force (“EITF”) and related literature. All other accounting literature is considered non-authoritative. The switch to the ASC affects the way companies refer to U.S. GAAP in financial statements and accounting policies. Citing particular content in the ASC involves specifying the unique numeric path to the content through the Topic, Subtopic, Section and Paragraph structure.
Note 3 - Recent Accounting Pronouncements
The amendment eliminating the exception to the sufficiency-of-equity-at-risk criterion for development stage entities in paragraph 810-10-15-16 should be applied retrospectively for annual reporting periods beginning after December 15, 2015 and interim periods therein. Early application of each of the amendments is permitted for any annual reporting period or interim period for which the entity’s financial statements have not yet been issued. The Company has adopted ASU 2014-10 in the third quarter of 2014 and does not expect this adoption to have a material impact on its consolidated financial condition, results of operations or cash flows.
ALTERNATIVE INVESTMENT CORPORATION
(f/k/a Paradigm Resource Management Corporation)
Notes to Financial Statements
September 30, 2016
Note 3 - Recent Accounting Pronouncements (continued)
In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements-Going Concern (Subtopic 205-40), Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. The objective of the amendments in this Update is to provide guidance on determining when and how to disclose going-concern uncertainties in the financial statements. The new standard requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued. An entity must provide certain disclosures if “conditions or events raise substantial doubt about the entity’s ability to continue as a going concern.” The ASU applies to all entities and is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. The Company is evaluating the impact of ASU 2014-15 on its consolidated financial condition, results of operations and cash flows.
In February 2016, the FASB issued ASU 2016-02, "Leases." ASU 2016-02 significantly changes the accounting for leases by requiring lessees to recognize assets and liabilities for leases greater than 12 months on their balance sheet. The lessor model stays substantially the same; however, there were modifications to conform lessor accounting with the lessee model, eliminate real estate specific guidance, further define certain lease and non-lease components, and change the definition of initial direct costs of leases requiring significantly more leasing related costs to be expensed upfront. ASU 2016-02 is effective for the Company in the first quarter of fiscal 2020, and we are currently assessing the impact this standard will have on the Company's financial statements.
In March 2016, the FASB issued ASU 2016-09, "Compensation - Stock Compensation." ASU 2016-09 simplifies the accounting for share-based payment transactions, including a policy election option with respect to accounting for forfeitures either as they occur or estimating forfeitures (as is currently required), as well as increasing the amount an employer can withhold to cover income taxes on equity awards. ASU 2016-09 is effective for us in the first quarter of fiscal 2018, and we are currently assessing the impact this standard will have on the Company's consolidated financial statements.
The Company has evaluated all other new ASU's issued by FASB, and has concluded that these updates do not have a material effect on the Company's consolidated financial statements as of September 30, 2016.
Note 4 - Related Parties
As of September 30, 2016 and September 30, 2015, $312,490 and $311,973 was due to Canton respectively. The loan is unsecured, non-interest bearing and there is no repayment date. Interest has been calculated at imputed interest rate of 3% and amounted to $9,369 in the year ended September 30, 2016.
On April 1, 2016 the Company issued a loan to Fingi Inc., a company of which Canton may be deemed a controlling person, in the amount of $50,000. The terms include no monthly payments with interest compounding monthly at an annual rate of four percent (4%). The entirety of the accrued interest and principal were originally due on December 31, 2016. The Company is currently in negotiations to extend the loan agreement through June 30, 2017, as such an allowance for the $50,000 loan balance has not been recorded and is deemed collectible. For the year ended September 30, 2016, $1,008 has been recognized as interest income and included in the condensed statements of operations, respectively.
On February 2, 2016, the Company entered into an expense sharing agreement with Fingi Inc. Under the expense sharing agreement, the Company shares the rent and utility expenses incurred in connection with occupancy of office space that is being leased by Fingi Inc. During the year ended September 30, 2016, amount due for rent was $3,679 per month. Total rent and utilities expenses amounted to $25,476. The rent due under expense sharing agreement for future periods is as follows:
Related party transactions are not necessarily indicative of an arm’s length transaction or comparable to a transaction that had been entered into with independent parties.
Note 5 - Acquisition Deposit
Effective April 1, 2016, the Company entered into a Shareholders’ Agreement (the “Agreement”) with Basil and Barns, Inc., a New York corporation incorporated on February 2, 2016, (“B&B Inc.”), Fess Holdings LLC, Basil and Barns LLC and JIF Holdings LLC to acquire 55% of the outstanding common shares of B&B Inc. Under the Agreement, the Company is to invest $1,400,000 including a $600,000 capital contribution for its 55% interest in B&B Inc., a $500,000 3 year loan at 7% interest per annum, and $300,000 line of credit. The Company has also agreed to provide up to an additional $1,800,000 of asset based loans for purchases of new assets as required. B&B Inc. is to acquire 110 acres of land in Bethel, NY which is to be developed into a hotel property. Financial statements or pro-forma financial statements have not been provided herein as B&B Inc. was formed on February 2, 2016 and has no assets or liabilities.
During the year ended September 30, 2016, the Company paid a total of refundable deposits of $340,000 towards the anticipated amounts.
Note 6 - Investment in Commercial Paper
During the year ended September 30, 2015, the Company invested in two $100,000 convertible bonds from Bullion Japan Inc. for a total investment of $200,000. The bonds mature July 3, 2017 and June 8, 2017, respectively, earn interest at eight percent (8%) per annum paid quarterly, and are convertible into common stock of Bullion Japan Inc. at the Company’s option any time prior to the maturity date at a price of JPY ¥8,035 ($6.46) per share. During the year ended September 30, 2016, $16,043 of interest has been accrued and included in the statement of operations as interest income.
ALTERNATIVE INVESTMENT CORPORATION
(f/k/a Paradigm Resource Management Corporation)
Notes to Financial Statements
September 30, 2016
Note 7 - Notes Payable
Notes payable consisted of the following at September 30, 2016 and 2015:
As of September 30, 2016 and 2015, accrued interest on the above loans was $0 and $3,465, respectively. Interest expense was $9,797 and $312,233 (including accretion of beneficial conversion feature of $2,157 and $10,015) for the year ended September 30, 2016 and 2015, respectively.
Note 8 - Stockholders’ Deficit
The Company has authorized 1,600,000,000 shares of Common Stock, $0.001 par value. As of each of the years ended September 30, 2016 and 2015, the Company had 8,648,808 shares of Common Stock issued, and 8,638,750 shares outstanding.
During the year ended September 30, 2016, the Company received $574,975 of subscriptions for the purchase of 15,761,500 shares. As the shares had not been issued as of September 30, 2016, the $574,975 balance is included in common stock issuable in the balance sheet at September 30, 2016.
ALTERNATIVE INVESTMENT CORPORATION
(f/k/a Paradigm Resource Management Corporation)
Notes to Financial Statements
September 30, 2016
Note 9 - Income Taxes
No provision was made for income taxes for the years ended September 30, 2016 and 2015 as the Company had incurred net losses for tax purposes of $233,273 and $77,053, respectively.
The income tax expense (benefit) differs from the amount computed by applying the United States Statutory corporate income tax rate as follows:
Deferred income taxes reflect the tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. The components of the net deferred income tax assets are approximately as follows:
The Company has established a full valuation allowance on our deferred tax asset because of a lack of sufficient positive evidence to support its realization. The valuation allowance increased by $79,310 and $26,200 for the years ended September 30, 2016 and 2015, respectively.
No provision for income taxes has been provided in these financial statements due to the net loss for the years ended September 30, 2016 and 2015. At September 30, 2016, the Company has net operating loss carry forwards of approximately $661,000 which expire commencing 2030. The potential tax benefit of these losses may be limited due to certain change in ownership provisions under Section 382 of the Internal Revenue Code (“IRS”) and similar state provisions.
IRS Section 382 places limitations (the “Section 382 Limitation”) on the amount of taxable income which can be offset by net operating loss carry forwards after a change in control (generally greater than 50% change in ownership) of a loss corporation. Generally, after a change in control, a loss corporation cannot deduct operating loss carry forwards in excess of the Section 382 Limitation. Due to these “change in ownership” provisions, utilization of the net operating loss and tax credit carry forwards may be subject to an annual limitation regarding their utilization against taxable income in future periods. The Company has not concluded its analysis of Section 382 through September 30, 2016, but believes the provisions will not limit the availability of losses to offset future income.
The Company is subject to income taxes in the U.S. federal jurisdiction and the state of Nevada. The tax regulations within each jurisdiction are subject to interpretation of related tax laws and regulations and require significant judgment to apply. As of September 30, 2016, the Company has not filed any tax returns. As of September 30, 2016, tax years 2007 through 2016 remain open for IRS audit. The Company has received no notice of audit from the IRS for any of the open tax years.
Note 10 - Subsequent Events
The Company has evaluated subsequent events through the date the financial statements were issued and filed with the Securities and Exchange Commission. Except for the subsequent event disclosed in Note 4, the Company has determined that there are no other subsequent events that warrant disclosure or recognition in the condensed financial statements.
Item 9.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None.
Item 9A.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
The Securities and Exchange Commission defines the term “disclosure controls and procedures” to mean a company's controls and other procedures of an issuer that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the issuer’s management, including its chief executive and chief financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The Company maintains such a system of controls and procedures in an effort to ensure that all information which it is required to disclose in the reports it files under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified under the SEC's rules and forms and that information required to be disclosed is accumulated and communicated to chief executive and chief financial officers to allow timely decisions regarding disclosure.
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are not effective as of such date.
Management’s Annual Report on Internal Control over Financial Reporting
The management of the Company is responsible for the preparation of the financial statements and related financial information appearing in this Annual Report on Form 10-K. The financial statements and notes have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The management of the Company is also responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. A company's internal control over financial reporting is defined as a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:
·
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and dispositions of our assets;
·
Provide reasonable assurance that our transactions are recorded as necessary to permit preparation of our financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and 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 financial statements.
Management, including the Chief Executive Officer and Chief Financial Officer, does not expect that the Company's disclosure controls and internal controls will prevent all error and all fraud. Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable, not absolute, assurance that the objectives of the control system are met and may not prevent or detect misstatements. Further, over time, control may become inadequate because of changes in conditions or the degree of compliance with the policies or procedures may deteriorate.
With the participation of the Chief Executive Officer and Chief Financial Officer, our management evaluated the effectiveness of the Company's internal control over financial reporting as of September 30, 2016 based upon the framework in Internal Control -Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that evaluation, our management has concluded that, as of September 30, 2016, the Company had material weaknesses in its internal control over financial reporting. Specifically, management identified the following material weaknesses at September 30, 2016.
1. Lack of oversight by independent directors in the establishment and monitoring of required internal controls and procedures;
2. Lack of functioning audit committee, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures;
3. Insufficient personnel resources within the accounting function to segregate the duties over financial transaction processing and reporting;
4. Insufficient written policies and procedures over accounting transaction processing and period end financial disclosure and reporting processes.
As a result of the material weakness described above, management has concluded that, as of September 30, 2016, we did not maintain effective internal control over financial reporting, involving the preparation and reporting of our financial statements presented in conformity with GAAP.
We understand that remediation of material weaknesses and deficiencies in internal controls is a continuing work in progress due to the issuance of new standards and promulgations. However, remediation of any known deficiency is among our highest priorities. Our management will periodically assess the progress and sufficiency of our ongoing initiatives and make adjustments as and when practical and necessary.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to the rules of the SEC that permit us to provide only management’s report in this annual report.
Changes in Internal Control over Financial Reporting
Other than items noted above, there were no other changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B.
Item 9B. Other Information.
None.
PART III
Item 10.
Item 10. Directors, Executive Officers and Corporate Governance.
The following table sets forth information with respect to persons who are serving as directors and officers of the Company. Each director holds office until the next annual meeting of shareholders or until his successor has been elected and qualified.
Biography of Directors and Officers
Mr. Daniel Otazo was appointed as a Director, Interim Chief Executive Officer, and Chief Financial Officer of the Company on September 11, 2015. Mr. Otazo held various top executive positions in the financial services industry in Europe and in Latin America, including CEO at ProCredit Bank Nicaragua, and Chief Risk Officer and Vice President of Financial Planning and Controlling at at ProCredit Bank Bolivia. He also worked for many years as a Senior Consultant at PriceWaterhouseCoopers in Germany, Switzerland and Spain, where he was in charge of account management of major clients in the field of Asset Management and Private Banking. He has a degree in engineering from the University of Applied Sciences Konstanz, Germany, an MBA from the University of Edinburgh, United Kingdom, and earned the CFA Charter in 2004.
Mr. Shuichi Uda was appointed as a Director of the Company on August 21, 2015. Mr. Uda is the founder & CEO of Dragoon Capital Inc., a full service investment-banking firm (Japanese Financial Service Agency License No. 1032). Mr. Uda has also held executive positions at Silvertail in London and as Chief Consultant for Funai Consulting Co., Ltd. prior to founding Dragoon Capital in Tokyo. Mr. Uda holds a BA in Industrial Design from the Kobe Design University.
Mr. David E. Price was appointed as Secretary of the Company on July 23, 2010 Mr. Price was born in the District of Columbia and was admitted to the Bar in 1996. David has held positions in the Diplomatic Corps of the Israeli Foreign Office as well as a Congressional Aide on Capitol Hill, and General Counsel to consultants at the World Bank as well as the IDB and IMF in Washington, DC. He worked for 10 years as a corporate attorney at the International Law Firm in Washington DC before becoming a solo attorney in 2005. He is a member of the Maryland Bar, United States District Court (District of Maryland); Court of Appeals, District of Columbia; United States District Court for the District of Columbia; United States Court of Appeals, 4th Circuit; Supreme Court of the United States. He is also a member of the Corporate Lawyer’s Association; Euro-American Lawyers Group; Association of US Securities Attorneys; American Bar Association.
Our directors are elected at the annual meeting of the shareholders, with vacancies filled by the Board of Directors, and serve until their successors are elected and qualified, or their earlier resignation or removal. Officers are appointed by the board of directors and serve at the discretion of the board of directors or until their earlier resignation or removal. Any action required can be taken at any annual or special meeting of stockholders of the corporation which may be taken without a meeting, without prior notice and without a vote, if consent of consents in writing setting forth the action so taken, shall be signed by the holders of the outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the corporation by delivery to its registered office, its principle place of business, or an officer or agent of the corporation having custody of the book in which the proceedings of meetings are recorded.
Indemnification of Directors and Officers
Nevada Corporation Law allows for the indemnification of officers, directors, and any corporate agents in terms sufficiently broad to indemnify such persons under certain circumstances for liabilities, including reimbursement for expenses, incurred arising under the 1933 Act. The Bylaws of the Company provide that the Company will indemnify its directors and officers to the fullest extent authorized or permitted by law and such right to indemnification will continue as to a person who has ceased to be a director or officer of the Company and will inure to the benefit of his or her heirs, executors and Consultants; provided, however, that, except for proceedings to enforce rights to indemnification, the Company will not be obligated to indemnify any director or officer in connection with a proceeding (or part thereof) initiated by such person unless such proceeding (or part thereof) was authorized by the Board of Directors. The right to indemnification conferred will include the right to be paid by the Company the expenses (including attorney’s fees) incurred in defending any such proceeding in advance of its final disposition.
The Company may, to the extent authorized from time to time by the Board of Directors, provide rights to indemnification and to the advancement of expenses to employees and agents of the Company similar to those conferred to directors and officers of the Company. The rights to indemnification and to the advancement of expenses are subject to the requirements of the 1940 Act to the extent applicable.
Furthermore, the Company may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Company or another company against any expense, liability or loss, whether or not the Company would have the power to indemnify such person against such expense, liability or loss under the Nevada General Corporation Law.
Committees of the Board of Directors
None.
Auditors
Our independent registered public accounting firm is Green & Company CPAs.
Code of Ethics
We do not currently have a Code of Ethics because we have limited business operations and only two officers/directors on the Board. We believe a code of ethics would have limited utility at this stage. We intend to adopt such code of ethics that would cover our business as soon as possible.
Item 11.
Item 11. Executive Compensation.
Our directors do not receive any stated salary for their services as directors or members of committees of the board of directors, but by resolution of the board, a fixed fee may be allowed for attendance at each meeting. Directors may also serve the company in other capacities as an officer, agent or otherwise, and may receive compensation for their services in such other capacity. No such fees have been paid to any director since incorporation. Reasonable travel expenses are reimbursed.
The following tables set forth information concerning all cash compensation awarded to, earned by or paid to all individuals serving as the Company’s principal executive officers during the last two completed fiscal years, and all non-cash compensation awarded to those same individuals as of September 30, 2016.
(1)Mr. Daniel Otazo was appointed as Interim Chief Executive Officer, Chief Financial Officer and Director on September 11, 2015. His other compensation consists of consulting fees paid.
(2)Mr. Suichi Uda was appointed as a Director on August 21, 2015.
(3)Mr. David E. Price was appointed Secretary on July 23, 2010.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table shows the number and percentage of shares of the Company’s common stock owned of record and beneficially by each director and each officer of the Company, and by each person beneficially owning more than five (5%) percent of any class of the common stock, as of September 30, 2016. Except as otherwise noted, the address of the referenced individual is c/o Alternative Investment Corporation, 1900 South Norfolk Street, Suite 350, San Mateo, CA 94403.
As used in the table below, the term “ beneficial ownership ” means the sole or shared power to vote or direct the voting, or to dispose or direct the disposition, of any security. A person is deemed as of any date to have beneficial ownership of any security that such person has a right to acquire within 60 days after such date. Except as otherwise indicated, the stockholders listed below have sole voting and investment powers with respect to the shares indicated.
_____________
(1)
Canton Investments Ltd. ("CIL") is a company incorporated in Hong Kong having its offices at Corner Hutson & Eyre Streets, Blake Bld. #302, Belize City, Belize.
(2)
Tidwell Limited is a company incorporated in Hong Kong having its offices at 78 Des Voeux Rd., Hong Hong
(3)
Indicates director.
(4)
Indicates officer.
(5)
The percentage of common stock is calculated based upon 8,638,750 shares outstanding as of September 30, 2016.
Item 13.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The Company has no formal written employment agreement or other contracts with our current Interim Chief Executive and Chief Financial Officers, and there is no assurance that the services to be provided by them will be available for any specific length of time in the future. Mr. Daniel Otazo anticipates initially devoting at a minimum of twelve to fifteen hours per month of his available time to the Company’s affairs. If and when the business operations increase and a more extensive time commitment is needed, Mr. Otazo is prepared to devote more time to the Company’s affairs, in the event that becomes necessary. The amounts of compensation and other terms of any full time employment arrangements would be determined, if and when, such arrangements become necessary.
Item 14.
Item 14. Principal Accounting Fees and Services.
Audit Fees
Audit Fees consist of assurance and related services that are reasonably related to the performance of the audit or review of our financial statements. This category includes fees related to the performance of audits and attest services not required by statute or regulations, and accounting consultations regarding the application of GAAP to proposed transactions. The aggregate Audit Fees billed for the fiscal years ended September 30, 2016 and 2015 were $10,685 and $9,500, respectively.
Audit-Related Fees
For the years ended September 30, 2016 and 2015, our principal accountants did not render any audit-related services.
Tax Fees
For the fiscal years ended September 30, 2016 and 2015, our principal accountants did not render any services for tax compliance, tax advice, or tax planning work.
All Other Fees
The Company has no other related fees.
Audit Committee Pre-Approval Policies and Procedures
Effective May 6, 2003, the SEC adopted rules that require that before our auditor is engaged by us to render any auditing or permitted non-audit related service, the engagement be:
· approved by our audit committee; or
· entered into pursuant to pre-approval policies and procedures established by the audit committee, provided the policies and procedures are detailed as to the particular service, the audit committee is informed of each service, and such policies and procedures do not include delegation of the audit committee's responsibilities to management.
We do not have an audit committee. Our entire board of directors pre-approves all services provided by our independent auditors.
PART IV
Item 15.
Item 15. Exhibits, Financial Statement Schedules
Financial Statements
See Item 8. Financial Statements and Supplementary Data
Exhibits
Exhibit 31.1 Rule 13a-14(a) Certification by the Chief Executive Officer *
Exhibit 31.2 Rule 13a-14(a) Certification by the Chief Financial Officer *
Exhibit 32.1 Certification by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *
Exhibit 32.2 Certification by the Interim Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *
101.INS XBRL Instance Document **
101.SCH XBRL Taxonomy Extension Schema Document **
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document **
101.DEF XBRL Taxonomy Extension Definition Linkbase Document **
101.LAB XBRL Taxonomy Extension Label Linkbase Document **
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document **
* Filed herewith.
** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
/s/ Daniel Otazo
January 13,
Daniel Otazo, Interim Chief Executive Officer
Date
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.
/s/ Daniel Otazo
January 13, 2017
Daniel Otazo, Director
Date
/s/ Shuichi Uda
January 13, 2017
Shuichi Uda, Director
Date