NOTES TO FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2018
(UNAUDITED)
NOTE 1 NATURE OF BUSINESS, PRESENTATION AND GOING CONCERN
The unaudited financial statements included herein have been prepared, without audit, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC). The financial statements and notes are presented as permitted on Form 10-Q and do not contain certain information included in the Companys annual statements and notes. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these financial statements be read in conjunction with the September 30, 2017 Form 10-K filed with the SEC, including the audited financial statements and the accompanying notes thereto. While management believes the procedures followed in preparing these financial statements are reasonable, the accuracy of the amounts is in some respects dependent upon the facts that will exist, and procedures that will be accomplished by the Company later in the year.
These unaudited financial statements reflect all adjustments, including normal recurring adjustments which, in the opinion of management, are necessary to present fairly the operations and cash flows for the periods presented.
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 Companys 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 575,000 shares of the Companys outstanding common stock for $205,750. Also, on July 23, 2010, CIL purchased 122,000 shares of the Companys outstanding common stock for $36,600 from various shareholders. As a result of the change in control, CIL owned a total of 697,000 shares of the Companys 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 600,000 shares of common stock to the Companys treasury. The Company immediately retired and canceled these shares. As a result of the contribution of shares, CIL owns a total of 97,000 shares of the Companys common stock representing 56% of the outstanding shares.
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 17,933 shares of its common stock. The 402,300 shares of TPT represent 10.1% of TPTs outstanding common stock. The agreement also provided AMSA the option to acquire an additional 22,417 shares of the Companys common stock and provided 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 114,933 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.
F-4
ALTERNATIVE INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2018
(UNAUDITED)
NOTE 1 NATURE OF BUSINESS, PRESENTATION AND GOING CONCERN (CONTINUED)
Organization (Continued)
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.
On February 27, 2017, the Company entered into an agreement with B&B Inc., Fess, Basil and Barns LLC and JIF Holdings LLC, wherein the Company has been unable to provide funding as per the original Agreement, having only provided $360,000 to date, the parties agreed to allow the Company to assign its remaining funding obligations and its ownership shares to a new ownership, in consideration of $50,000 to be paid to the Company and forfeiture of the $360,000 acquisition deposit. As of February 27, 2017, the Company is no longer participating in the original Agreement, directly or through related parties.
On November 30, 2017, Mr. Daniel Otazo, Director, Chief Executive Officer and interim Chief Financial Officer, resigned. Mr. Otazos resignation was not a result of any disagreement with the Company.
On December 1, 2017, the Shareholders of the Corporation voted to elect Mr. Antonio Treminio as Director and CEO of the Company. Mr. Treminio, 46, has over 20 years of experience in the financial markets with special focus on corporate financing for private and public companies.
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 $364,622 and $493,848 for the nine months ended June 30, 2018 and 2017, respectively, and had an accumulated deficit of $1,739,922. The Company had stockholders deficit of $549,951. At June 30, 2018. 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 ability to develop and sustain a viable business model capable of generating sufficient revenues to support ongoing operations and overhead and to continue to raise investment capital through the sale of Company stock. No assurance can be given that the Company will be successful in these efforts. 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.
F-5
ALTERNATIVE INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2018
(UNAUDITED)
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 June 30, 2018 and September 30, 2017, 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 Boards (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.
Accounts payable
The Company accounts for expenses on the accrual basis of accounting under US GAAP (Generally Accepted Accounting Principles) where expenses are recorded when incurred. Invoices for expense are recorded in the period in which they are incurred and reflected in accounts payable on the balance sheet of the Company. Often expenses should be accounted for prior to an invoice being received. These amounts are reflected in accrued expense in the Companys financial statements. At June 30, 2018, the Company has accounts payable of $155,421.
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.
F-6
ALTERNATIVE INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2018
(UNAUDITED)
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 for periods in which the Company incurs losses as their effect is anti-dilutive. For the three and nine months ended June 30, 2018 and 2017, 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.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current period presentation. The reclassifications had no effect on the net loss or cash flows of the Company.
Accounting Standards Codification
The FASBs Accounting Standards Codification (ASC) became effective on September 15, 2009. At that date, the ASC became the FASBs 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
In June 2018, the FASB issued ASU No. 2018-07, CompensationStock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting which addresses accounting for issuance of all share-based payments on the same accounting model. Previously, accounting for share-based payments to employees was covered by ASC Topic 718 while accounting for such payments to non-employees was covered by ASC Subtopic 505-50. As it considered recently issued updates to ASC 718, the FASB, as part of its simplification initiatives, decided to replace ASC Subtopic 505-50 with Topic 718 as the guidance for non-employee share-based awards. Under this new guidance, both sets of awards, for employees and non-employees, will essentially follow the same model, with small variations related to determining the term assumption when valuing a non-employee award as well as a different expense attribution model for non-employee awards as opposed to employee awards. The ASU is effective for public business entities beginning in 2019 calendar years and one year later for non-public business entities. The Company is assessing the impact, if any, of implementing this guidance on its financial position and results of operations.
F-7
ALTERNATIVE INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2018
(UNAUDITED)
NOTE 3 RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)
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. The Company is currently party to a long-term lease that is being considered relative to the adoption of this standard (See NOTE 5).
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 condensed consolidated unaudited financial statements as of June 30, 2018.
NOTE 4 LOAN RECEIVABLE
On January 18, 2017, the Company issued a loan to B&B Inc. in the amount of $11,000 at annual rate of eight percent (8%) and is due on July 18, 2018. Accrued interest at June 30, 2018 and September 30, 2017 was $1,275 and $615, respectively. As of June 30, 2018 and September 30, 2017, the Company has fully reserved this loan and accrued interest as doubtful to be collected.
NOTE 5 RELATED PARTIES
As of June 30, 2018 and September 30, 2017, $231,973 and $311,973, respectively, was due to Canton. This is an unsecured loan, non-interest bearing and there is no repayment date. Interest has been calculated at an imputed interest rate of 3% and reflected as interest expense and as an increase to additional paid in capital in the amount of $6,379 and $9,304 for the nine months and year ended June 30, 2018 and September 30, 2017, respectively. On April 1, 2018, Canton elected to convert $80,000 of the amount due into 94,118 common restricted shares of the Company ($0.85 per share). As of June 30, 2018, these shares were not issued and were reflected as common stock issuable in the Companys financial statements.
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. Additionally, Fingi Inc. had net related advances to the Company in the amount of $6,509 at June 30, 2018. The note remained in default until November 8, 2017, when the Company entered into an amendment agreement on this note to extend the maturity date to June 30, 2018. At June 30, 2018 and September 30, 2017, accrued interest receivable was $4,508 and $3,008. The Company does not believe that it will be able to recover these amounts due and they have been fully reserved for uncollectability and recorded as a capital distribution.
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 three and nine months ended June 30, 2018, amount due for rent was $5,684 per month. Total rent and utilities expenses amounted to $18,481 and $54,421. The rent due under expense sharing agreement for future periods is as follows:
|
| |
For the fiscal year ended September 30,
|
|
2018
|
$
|
17,562
|
2019
|
|
71,302
|
2020
|
|
73,441
|
2021
|
|
37,263
|
Total
|
$
|
199,568
|
Related party transactions are not necessarily indicative of an arms length transaction or comparable to a transaction that had been entered into with independent parties.
As of June 30, 2018 and September 30, 2017, the Company had a liability due to its Chief Executive and Chief Financial Officer, Daniel Otazo in the amount of $2,000 and $6,000, respectively. The amount was reflected in accounts payable on the Companys financial statements. Amounts are due under a compensation for services provided agreement. Mr. Otazo resigned from the Company in all official capacities on November 30, 2017.
F-8
ALTERNATIVE INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2018
(UNAUDITED)
NOTE 5 RELATED PARTIES (CONTINUED)
On February 28, 2018, the noteholder, JIFM LLC., entered into a settlement agreement with Basil and Barnes Holding LLC. Under terms of the settlement all outstanding loans with were transferred to Canton Investments, Ltd. (See NOTE 7).
NOTE 6 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 was 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 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.
On February 27, 2017, the Company entered into an agreement with B&B Inc., Fess, Basil and Barns LLC and JIF Holdings LLC, wherein the Company has been unable to provide funding as per the original Agreement, having only provided $360,000 to date, the parties agreed to allow the Company to assign its remaining funding obligations and its ownership shares to a new ownership, in consideration of $50,000 to be paid to the Company and forfeiture of the $360,000 acquisition deposit. As of February 27, 2017, the Company is no longer participating in the original Agreement, directly or through related parties. As of December 31, 2016, the Company recorded a forfeiture of the acquisition deposit of $310,000 in the accompanying statement of operations.
NOTE 7 LOANS AND NOTES PAYABLE
Notes payable to companies consisted of the following as of:
|
|
|
|
| |
|
June 30, 2018
|
|
September 30, 2017
|
Alternative Strategy Partners (a)
|
$
|
50,000
|
|
$
|
50,000
|
Canton Investments, Ltd. (b)
|
|
35,000
|
|
|
35,000
|
Canton Investments, Ltd. (c)
|
|
4,000
|
|
|
4,000
|
Canton Investments, Ltd. (d)
|
|
35,000
|
|
|
35,000
|
Canton Investments, Ltd. (e)
|
|
7,000
|
|
|
7,000
|
Canton Investments, Ltd. (f)
|
|
5,000
|
|
|
5,000
|
JIFM LLC (g)
|
|
-
|
|
|
9,000
|
JIFM LLC (h)
|
|
-
|
|
|
-
|
Loan from individual (i)
|
|
-
|
|
|
-
|
Total notes payable
|
$
|
136,000
|
|
$
|
145,000
|
Less - current portion of these notes
|
|
(136,000)
|
|
|
(145,000)
|
Total notes payable
|
$
|
-
|
|
$
|
-
|
(a) On January 31, 2017, the Company entered into a six-month 8% loan agreement with Basil and Barns Capital Inc. in the amount $50,000. The note had a maturity date of July 31, 2017. The Company is currently trying to cure the default under this note. As of June 30, 2018, this note had accrued interest of $5,644. On June 15, 2018, Basil and Barns Capital Inc. assigned this note to Alternative Strategy Partners Pte. Ltd.
F-9
ALTERNATIVE INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2018
(UNAUDITED)
NOTE 7 LOANS AND NOTES PAYABLE (CONTINUED)
(b) On November 30, 2016, the Company entered into a six-month 8% loan agreement in the amount of $35,000. The note had a maturity date of May 30, 2017. The Company is currently trying to cure the default under this note. On February 28, 2018, the noteholder, JIFM LLC., entered into a settlement agreement with Basil and Barnes Holding LLC. Under terms of the settlement all outstanding notes were transferred to Canton Investments, Ltd. As of June 30, 2018, this note had accrued interest of $4,426.
(c) On January 3, 2017, the Company entered into a six-month 8% loan agreement in the amount of $4,000. The note had a maturity date of July 3, 2017. The Company is currently trying to cure the default under this note. On February 28, 2018, the noteholder, JIFM LLC., entered into a settlement agreement with Basil and Barnes Holding LLC. Under terms of the settlement all outstanding notes were transferred to Canton Investments, Ltd. As of June 30, 2018, this note had accrued interest of $476.
(d) On January 17, 2017, the Company entered into a six-month 8% loan agreement in the amount of $35,000. The note had a maturity date of July 17, 2017. The Company is currently trying to cure the default under this note. On February 28, 2018, the noteholder, JIFM LLC., entered into a settlement agreement with Basil and Barnes Holding LLC. Under terms of the settlement all outstanding notes were transferred to Canton Investments, Ltd. As of June 30, 2018, this note had accrued interest of $4,058.
(e) On January 19, 2017, the Company entered into a six-month 8% loan agreement in the amount of $7,000. The note had a maturity date of July 19, 2017. The Company is currently trying to cure the default under this note. On February 28, 2018, the noteholder, JIFM LLC., entered into a settlement agreement with Basil and Barnes Holding LLC. Under terms of the settlement all outstanding notes were transferred to Canton Investments, Ltd. As of June 30, 2018, this note had accrued interest of $809.
(f) On January 23, 2017, the Company entered into a six-month 8% loan agreement in the amount of $5,000. The notes had a maturity date of July 23, 2017. The Company is currently trying to cure the default under this note. On February 28, 2018, the noteholder, JIFM LLC., entered into a settlement agreement with Basil and Barnes Holding LLC. Under terms of the settlement all outstanding notes were transferred to Canton Investments, Ltd. As of June 30, 2018, this note had accrued interest of $573.
(g) On September 1, 2017, the Company entered into a loan agreement with JIFM LLC. The loans will be treated as a line of credit bearing 8% interest and each drawdown will have a one-year term. The drawdowns will carry a default interest rate of lower of 1.5% per month or the maximum interest rate allowable by law. The initial drawdown in the amount of $9,000 and was funded on September 29, 2017. During the six months ended March 31, 2018, the Company repaid the $9,000 advance.
(h) On October 30, 2017, the Company received a loan advance pursuant to a loan agreement with JIFM LLC dated September 1, 2017 (see g above). The amount of the advance was $17,500. During the nine months ended June 30, 2018, the Company repaid the $17,500 balance of this loan.
(i) On December 22, 2017, a consultant deposited $500 on behalf of the Company in the Companys main operating account. This short-term advance was treated as an interest free loan and it was paid back February 9, 2018.
NOTE 8 INVESTMENT IN COMMERCIAL PAPER
On June 8, 2015 and July 3, 2015, respectively, the Company invested into two $100,000 two-year convertible bonds from Bullion Japan Inc. each of those two days for a total investment of $200,000. The bonds matured July 3, 2017 and June 8, 2017, respectively, earning interest at eight percent (8%) per annum paid quarterly, and are convertible into common stock of Bullion Japan Inc. at the Companys option any time prior to the maturity date at a price of JPY ¥8,035 ($6.46) per share.
On December 15, 2017, the Company entered into a memorandum of agreement to extend maturity date of the July 3, 2015 bond to March 30, 2018. The same terms as the original agreement will prevail and the Company will continue to accrue interest. As of June 30, 2018, the Company has recorded an allowance for the unrecoverability of this investment in the amount of $100,000.
On December 28, 2017, Bullion Japan paid accrued interest through April 2018 in the amount of $33,160. Bullion Japan Inc. further paid the principal of $100,000 relative to the June 8, 2015 note on that same day. Upon payment accrued interest was $28,624. As a result of this payment in excess of accrued interest the Company recorded deferred interest revenue in the amount of $4,356. At June 30, 2018 all deferred revenue was recognized.
F-10
ALTERNATIVE INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2018
(UNAUDITED)
NOTE 9 STOCKHOLDERS DEFICIT
The Company has authorized 1,600,000,000 shares of Common Stock, $0.001 par value. As of each of the nine months and year ended June 30, 2018 and September 30, 2017, the Company had 173,058 shares of Common Stock issued, and 172,857 shares outstanding.
On December 8, 2017, the Company filed for a 50:1 reverse stock split with the Secretary of State of Nevada. These presented financial statements and accompanying notes are presented reflective of this stock split as post stock-split adjusted numbers.
During the year ended September 30, 2016, the Company received $574,975 of subscriptions for the purchase of common shares. As the shares had not been issued as of June 30, 2018, the $574,975 balance is included in the total common stock issuable of $785,225 on the balance sheet at June 30, 2018.
Fiscal year 2017
No shares were issued during the year ended September 30, 2017.
Fiscal year 2018
During the nine months ended June 30, 2018, the Company received a conversion notice pursuant to an unsecured, non-interest bearing loan with no repayment date whereby the noteholder elected to convert $80,000 of the amount due into 94,118 common shares of the Companys restricted stock ($0.85 per share). As of June 30, 2018 these shares were not issued and were reflected as common stock issuable in the Companys financial statements.
During the nine months ended June 30, 2018, the Company received a conversion notice pursuant to a direct payment, non-interest bearing arrangement with no repayment date, recorded in accounts payable on the Companys condensed balance sheet, whereby the noteholder elected to convert $75,000 of the of the amount due into 88,235 common shares of the Companys restricted stock ($0.85 per share). As of June 30, 2018, these shares were not issued and were reflected as common stock issuable in the Companys financial statements.
During the nine months ended June 30, 2018, the Company entered into or amended compensation agreements with two consultants and one employee to issue 65,000 common restricted shares of Company stock at a value of $55,250 ($0.85 per share). As of June 30, 2018 these shares were not issued and were reflected as common stock issuable in the Companys financial statements.
NOTE 10 INCOME TAXES
No provision was made for income taxes for the nine months and year ended June 30, 2018 and September 30, 2017 as the Company had incurred net losses for tax purposes of $272,878 and $610,083, respectively.
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:
|
|
|
|
| |
Deferred income tax assets:
|
30-Jun-18
|
|
30-Sep-17
|
Net operating loss carry forwards
|
$
|
344,000
|
|
$
|
425,000
|
TCJA Adjustment
|
|
|
|
|
(162,500)
|
Valuation allowance
|
|
(344,000)
|
|
|
(262,500)
|
Net deferred income tax assets
|
$
|
|
|
$
|
|
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 $81,500 and $123,500 for the nine months and year ended June 30, 2018 and September 30, 2017, respectively.
F-11
ALTERNATIVE INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2018
(UNAUDITED)
NOTE 10 INCOME TAXES (CONTINUED)
No provision for income taxes has been provided in these financial statements due to the net loss for the three and nine months ended June 30, 2018 and 2017. At June 30, 2018, the Company has net operating loss carry forwards of approximately $1,800,000 which will fully expire with the tax year ending September 30, 2037. For tax years beginning after December 31, 2017, the carry-back option is no longer available and carry forward provisions are limited to eighty percent of taxable income but do not expire. 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.
On December 22, 2017, Public Law 115-97, informally referred to as the Tax Cuts and Jobs Act (the TCJA) was enacted into law. The TCJA provides for significant changes to the U.S. Internal Revenue Code of 1986, as amended, that impact corporate taxation requirements. Effective January 1, 2018, the federal tax rate for corporations was reduced from 35% to 21% for US taxable income and requires one-time re-measurement of deferred taxes to reflect their value at a lower tax rate of 21%. Also, mandatory repatriation of untaxed foreign earnings and profits will be taxed at 15.5% to the extent the underlying assets are liquid and 8% on the remaining balance. There are other provisions to the TCJA, such as conversion of a worldwide system to a territorial system, limitations on interest expense and domestic production deductions, which will be effective in fiscal 2019. The Company anticipates its effective tax rate to be 28% to 30%, excluding the one-time impact of the TCJA for fiscal 2018 primarily due to the reduction in the federal tax rate. The Companys actual effective tax rate for fiscal 2018 may differ from managements estimate due to changes in interpretations and assumptions. Due to the timing of enactment and complexity of the TCJA, the Company is unable to estimate a reasonable range of the one-time impact associated with mandatory repatriation, re-measurement of deferred taxes and other provisions of the TCJA.
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 March 31, 2018 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 June 30, 2018, the Company has not filed any tax returns. As of June 30, 2018, tax years 2007 through 2017 remain open for IRS audit. The Company has received no notice of audit from the IRS for any of the open tax years.
NOTE 11 SUBSEQUENT EVENTS
Subsequent to June 30, 2018, the Company issued 11,781 shares of its restricted common stock under previous securities purchase agreements, 65,000 having a value of $55,250 ($0.85 per share) to one employee and two key consultants and 94,118 were issued to its largest shareholder to convert $80,000 of debt ($0.85 per share) and 88,235 shares were issued to convert $75,000 of accounts payable ($0.85 per share).
On July 17, 2018, the Company entered into a binding Term Sheet (the Agreement) with Anew Biotechnology Inc., a private company (ANEW) to formulate a merger between the two. Under the terms of the Agreement, the parties shall enter into a merger agreement by way of share exchange or asset purchase whereby ANEW would be merged into a newly-formed subsidiary of the Company. The newly configured entity shall bear the name Anew Biotechnology Inc.. Upon execution of a definitive agreement, Dr. Joseph Sinkule the CEO of ANEW, shall be appointed as CEO, and ANEW shall appoint all other directors to the board.
Per the Agreement, the Companys total outstanding debt will be converted into shares of common stock of the newly formed entity at a 33.33% discount of the new entitys valuation. Should the Company file an S-1 Registration, (which is not obligatory) all newly issued shares of both entities, including the debt conversion shares and any transaction fee shares shall be included in said S-1.
The Agreement has certain conditions precedent to an executed Definitive Agreement, including satisfactory completion of due diligence within 45 days; absence of material adverse change in either partys businesses, satisfactory completion of a contemplated capital raise; and obtaining any necessary regulatory approvals. If either party elects not to complete the proposed transaction, (outside of the conditions precedent) they must pay a cash penalty payment of $150,000.00 to the party opposite.
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