UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2015

or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to ____

Commission File Number: 0-51105

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.                                      Yes x   No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).                            Yes x   No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o  No x

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

1

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.  

Yes o  No o

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.  As of August 14, 2015, there were 10,336,000 shares of the registrant’s common stock, $0.001 par value, outstanding

TABLE OF CONTENTS

2

PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

The consolidated financial statements of ALCO, Inc. and subsidiaries (collectively, the "Company"), included herein were prepared, without audit, pursuant to rules and regulations of the Securities and Exchange Commission.  Because certain information and notes normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America were condensed or omitted pursuant to such rules and regulations, these financial statements should be read in conjunction with the financial statements and notes thereto included in the audited financial statements of the Company as included in the Company's Form 10-K for the year ended December 31, 2014.

3

ALCO, INC

CONSOLIDATED BALANCE SHEETS

4

ALCO, INC

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED)

5

ALCO, INC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

6

ALCO, INC

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

7

ALCO, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 (UNAUDITED)

Note 1 – Organization and Operations

Description of Business and Basis of Presentation

ALCO, Inc. (“ALCO,” “we,” “us,” the “Company”) was incorporated under the laws of the State of Nevada on June 7, 1999 as Seahorse, Inc. and changed its name to Lotus Capital Corp. (“Lotus”) on September 20, 2004.  The Company changed its name to ALCO, Inc. on February 13, 2006.

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) for interim financial information and with the SEC instructions to Form 10-Q.  Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of only normal recurring adjustments) considered necessary for a fair presentation have been included. Results for the six-month period ended June 30, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015. For further information, refer to the consolidated financial statements and footnotes thereto included in ALCO’s Annual Report on Form 10-K for the year ended December 31, 2014.

The consolidated financial statements include the accounts of the Company and all its majority-owned subsidiaries which require consolidation.  Inter-company transactions have been eliminated in consolidation.

Note 2 – Significant Accounting Policies

For significant accounting policies, see notes to the consolidated financial statements included in the Company’s annual report of Form 10-K for the year ended December 31, 2014 filed with the SEC.

Use of Estimates

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results, when ultimately realized could differ from those estimates.

Foreign Currency and Other Comprehensive Loss

The accompanying financial statements are presented in United States (US) dollars.  The functional currency of Andrew Liu & Co Ltd (“ALC”), Chang An Consultants Ltd (“CAC”) and Edushipasia Limited (“ESA”) is the Hong Kong dollar (HK$). The financial statements are translated into US dollars from HK$ at year-end exchange rates for assets and liabilities, and weighted average exchange rates for revenues and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred.

The Hong Kong Monetary Authority (“HKMA”), Hong Kong's central bank, maintains a Linked Exchange Rate System since 1983. The HKMA operates Convertibility Undertakings on both the strong side and the weak side of the Linked Rate of US$1: HK$7.8. In fact, the exchange rate for HK$ to US dollars has varied by only 100ths during 2015 and 2014. Thus, the consistent exchange rate used has been 7.80 HK$ per each US dollar. Since there have been no greater fluctuations in the exchange rate, there is no gain or loss from foreign currency translation and no resulting other comprehensive income or loss.

Foreign currency transactions are those that required settlement in a currency other than HK$.  Gain or loss from foreign currency transactions, or exchange loss, are recognized in income in the period they occur.

8

The functional currency of Shanghai Heshili Broker Co. Limited (“SHB”) and AL Marine Consulting Services (Shanghai) Ltd (“ALM Shanghai”) is the Chinese Yuan (“CNY”). The financial statements of SHB and ALM Shanghai are translated into United States dollars in accordance with FASB Accounting Standards Codification TM (ASC) No. 830, " Foreign Currency Matters”, using year-end rates of exchange for assets and liabilities, and average rates of exchange for the period for revenues, costs, and expenses and historical rates for the equity. Translation adjustments resulting from the process of translating the local currency financial statements into US dollars are included in determining comprehensive income.

The exchange rates used to translate amounts in CNY into US Dollars for the purposes of preparing the consolidated financial statements were as follows:  

Balance sheet items, as of year-end date:

 US$0.16032:CNY1

Amounts included in the statements of operations, statements of changes in shareholders’ equity and statements of cash flows for the year: US$0.16004:CNY1

The functional currency of ALCO Insurance Brokers Pte Limited (“ALCO Insurance”) is the Singapore Dollar (“SGD”). The financial statements of ALCO Insurance are translated into United States dollars in accordance with ASC 830, "Foreign Currency Matters”, using year-end rates of exchange for assets and liabilities, and average rates of exchange for the period for revenues, costs, and expenses and historical rates for the equity. Translation adjustments resulting from the process of translating the local currency financial statements into US dollars are included in determining comprehensive income.

The exchange rates used to translate amounts in SGD into U.S. Dollars for the purposes of preparing the consolidated financial statements were as follows:  

Balance sheet items, as of year-end date:

 US$0.73785:SGD1

Amounts included in the statements of operations, statements of changes in shareholders’ equity and statements of cash flows for the year: US$0.73620:SGD1

Earnings Per Share

Basic earnings per share is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding during the period.  Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. There were no dilutive shares for the six-month period ended June 30, 2015.

Recent Accounting Pronouncements

In February 2015, the FASB issued ASU 2015-02, “Amendments to the Consolidation Analysis”. The amendments in the ASU provide an additional requirement for a limited partnership or similar entity to qualify as a voting interest entity and also amend the criteria for consolidating such an entity. In addition, the new guidance amends the criteria for evaluating fees paid to a decision maker or service provider as a variable interest and amends the criteria for evaluating the effect of fee arrangements and related parties on a variable interest entity primary beneficiary determination. This standard is effective for interim and annual reporting periods beginning after December 15, 2015. The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial statements.

9

Note 3 – Cash

The Company established a bank guarantee of HK$45,000 (approximately $5,770) credit line with the China Construction Bank (Asia). The interest rate and charges are subject to change from time to time. The bank guarantee credit line is pledged of $6,419 fixed deposit as shown as above. On June 30, 2015, a bank guarantee of $5,541 was provided.

Cash balances are held principally at one financial institution and are not insured. The Company believes it mitigates its risk by investing in or through major financial institutions. Recoverability is dependent upon the performance of the institution. Although the cash balances are not insured, however, starting in September 2006, cash balances (except accounts with overdraft facilities) are protected by the Deposit Protection Scheme which is maintaining by the Hong Kong Deposit Protection Board, an independent statutory body established under the Deposit Protection Scheme Ordinance (Cap. 581).

Under the scheme, compensation up to a limit of HK$100,000 (approximately $12,821) per depositor would be paid from the scheme to depositor if the bank with which the depositor holds his/her eligible deposits fails.  On October 14, 2008, the Hong Kong Government announced that they would use the Exchange Fund to guarantee the repayment of all customer deposits held in authorized institutions in Hong Kong, following the principles of the Deposit Protection Scheme. This action began on October 14, 2008 and expired at the end of 2010.  Following the enactment of the Deposit Protection Scheme (Amendment) Ordinance 2010 in June 2010, the protection limit of the Deposit Protection Scheme is increased from HK$100,000 per depositor to HK$500,000 (approximately $64,103) per depositor effective from January 1, 2011.

Note 4 – Commissions Receivable

Note 5 – Fiduciary Asset

Fiduciary assets are cash balances held by a bank, mainly consisting of premiums collected from customers and payable to insurers, and claims received from insurers and payable to policyholders.

When the Company receives a premium from a customer, it debits the lump sum amount into one bank account and establishes a schedule to keep track of the amount of premium payable to the insurer.  At the monthly closing, the Company reclassifies the amount of premium payable to insurers as fiduciary assets. Also, when the Company receives a claim on behalf of a policyholder, it debits fiduciary assets and credits claims payable and other payables, if necessary. The fiduciary asset had a balance of $1,828,165 and $2,015,759 at June 30, 2015 and December 31, 2014, respectively.

10

Note 6 – Fair Value of Investments and Investment Income

The following are the Company’s investments owned and securities sold by level within the fair value hierarchy at June 30, 2015 and December 31, 2014:

The Company’s short-term investment represents the certificate of deposit with the maturity of one year with the financial institution.

Unrealized loss of $19,363 and $27,139 for the investments in stock were recognized in the other comprehensive income for the six months ended June 30, 2015 and 2014, respectively. All these losses are related to the investments listed in the Hong Kong Stock Exchange.

Income from investments in stock consists of the following:

Note 7 – Due to Directors

Due to director represents loans payable that are unsecured, non-interest bearing and have no fixed terms of repayment, therefore, deemed payable on demand.

Note 8 – Stock-based Compensation

During the six months ended June 30, 2015 and 2014, the Company recognized $3,093 and $3,712 of stock-based compensation expense, respectively.

Note 9 – Related Party Transaction

The Company rents quarters for directors in Hong Kong and Shanghai from companies owned by directors of the Company. The relevant rent expenses consist of following:

Note 10 – Income Taxes

The Company's effective tax rate for the six months ended June 30, 2015 and 2014 was -10.82% and -6.02%, respectively. The

11

provisions for income taxes for the periods ended June 30, 2015 and 2014 are summarized as follows:

A reconciliation between the income tax computed at the US statutory rate and the Company’s provision for income tax is as follows:

Note 11 – Loans Receivable

On August 4, 2011, the Company’s subsidiary, ALC, entered into a loan agreement with its clients, Jian Mao International Shipping Co Ltd (“JMISCL”) and Jian Xing Intl Shipping Co Ltd (“JXISCL”). Under the loan agreement, ALC will make available to JMISCL and JXISCL an on demand loan facility in the principal amount of up to $3,000,000. The loan is interest free and secured by the claim proceeds under a claim filed by JMISCL and JXISCL under the terms an existing Hull & Machinery insurance policy insuring a vessel owned and managed by JMISCL and JXISCL respectively. The loan is payable upon demand at any time following settlement of the claim if the claim proceeds are not adequate to cover the loan in full, and in any event is due and payable in full on or before August 4, 2012. As of August 4, 2012, the balance of the loan is $1,912,000.

On August 4, 2012, 2013, 2014 and 2015, ALC entered into loan extension agreements with JMISCL and JXISCL, respectively. Under the four extension agreements, the payable due date is extended to August 4, 2016. All terms and conditions of the loan agreement and the balance of the loan remain unchanged.

Note 12 – Long-term Loans

On June 12, 2014, the Company’s subsidiary, ALC, entered into a loan agreement with Hitachi Credit (HK) Ltd in relation to the acquisition of a motor vehicle, which was pledged to secure the loan. The total amount of the loan obtained is $32,036, bearing annual interest rate of 2.28% for 48 months.

On June 22, 2015, the Company’s subsidiary, KIM, entered into a loan agreement with DBS Bank Ltd in relation to the acquisition of a new motor vehicle, which was pledged to secure the loan. The total amount of the loan obtained is $60,000, bearing annual interest rate of 2.28% for 60 months.

The principal of the loans due within one year is classified as current liability and included in “long-term loan, current” as of balance sheet date.

Note 13 –Noncontrolling Interest

On March 13, 2015, the Company’s subsidiary, Chang An Consultants Ltd., declared dividends of HK$2,550,000, or $326,923. The Company has paid 40% of the dividends or $130,769 to the noncontrolling shareholders.

12

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

DISCLAIMER REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this report, including statements in the following discussion, are what are known as “forward-looking statements”, which are basically statements about the future.  For that reason, these statements involve risk and uncertainty since no one can accurately predict the future. Words such as “plans,” “intends,” “will,” “hopes,” “seeks,” “anticipates,” “expects,” and the like, often identify such forward-looking statements, but are not the only indication that a statement is a forward-looking statement. Such forward-looking statements include statements concerning our plans and objectives with respect to the present and future operations of the Company, and statements which express or imply that such present and future operations will or may produce revenues, income or profits.  Numerous factors and future events could cause the Company to change such plans and objectives, or fail to successfully implement such plans or achieve such objectives, or cause such present and future operations to fail to produce revenues, income or profits.  Therefore, the reader is advised that the following discussion should be considered in light of the discussion of risks and other factors contained in this report on Form 10-K and in the Company’s other filings with the Securities and Exchange Commission. No statements contained in the following discussion should be construed as a guarantee or assurance of future performance or future results.

PLAN OF OPERATIONS

To cope with the difficult shipping market in 2014, there were several tasks in the management’s plan of operations for 2014.  The first task was tightening control measures to monitor and reduce operating expenses. Management believes that this task was successfully completed as other general and administrative expense decreased 10% in 2014 when compared to 2013.  Although salaries and travel expenses increased 6% and 7% respectively, it was because the level of marketing activities increased in 2014. The second task was enhancing our credit controls to improve the average collection period for outstanding receivables.  Management believes that the enhancement was successful although the average collection period increased from 34 days in 2013 to 35 days in 2014. The third task was carrying out an audit review for our Singapore subsidiary.  This task was completed and no significant finding was noticed during the audit. The fourth task was organizing marketing activities with our business partners and putting more effort into acquiring new clients. We believe that this task was successfully achieved as our client retention rate increased by 1 point to 78% and 68 new clients were acquired during 2014.

Management believes that the 2015 fiscal year will still be a difficult year even though the shipping market is expected to be improved to some extent. However, many companies, including us, have been facing pressures from increasing operating costs such as salaries and rent. Therefore, the Company plans to continue to tighten control measures in order to monitor and reduce operating expenses. Meanwhile, we will maintain the current level of marketing activities to promote the Company to new clients and to strengthen our relationship with our existing clients. In addition, because current market conditions are still bad, with many shipping companies facing liquidity problems, we will maintain our credit controls to retain, or further reduce, the average collection period for outstanding receivables.   

We believe the plans mentioned above will help to turn the Company back to profitability. However, implementation of the plans will depend on the market situation, associated risk factors and our internal resources. There is no assurance that we will be able to implement these plans within the foreseeable future.

We do not have any material off-balance sheet arrangements.

RESULTS OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 2015 COMPARED WITH SIX MONTHS ENDED JUNE 30, 2014

Revenue

Six-month end:

13

Revenue for the six months ended June 30, 2015 was $2,459,165, as compared to $2,369,937 for the same period of 2014. The increase of $89,228 or approximately 4% was mainly due to increases of commission income, consulting income, and enrollment fee income which partially offset with a decrease of website advertising.

Commission income is based on a percentage of the premiums paid by the insured, and increased by $86,962 or 4% when compared to the same period in last year. The increase was mainly contributed by ALC and ALCO Insurance which was partially offset by a decrease of CAC, and SHB. If the contributions from SHB and ALCO Insurance are excluded, commission income of the group for the same period of 2014 increased by $113,747 or 5% as compared to the same period of 2014.  The factors which resulted in the increase of commission income attributable to ALC and ALCO Insurance were an increase of 6% in average commission earned per client, partially offset by a decrease of 3% in number of clients.

Some clients sold their vessels as scrap during the period because of the poor shipping market. Such sales result in lowered demand for insurance. However, the Company’s average commission earned per client still increased during the period because of our marketing activities. During the period of 2015, total commission income contributed by ALC, CAC, SHB and ALCO Insurance was 83%, 8%, 1% and 8% respectively.

Consulting income for the six months period ended June 30, 2015 was $14,384 as compared to $12,000 for the comparable period of 2014. The increase of $2,384 or approximately 20% was mainly due to the fact that demand for the services increased. Enrollment fee for the six months period ended June 30, 2015 were $2,483 as compared to $1,934 for the same period of 2014. The increase was mainly due to the increase of enrollment during the period.  

Three-month end:

Revenue for the three months ended June 30, 2015 was $1,217,305, as compared to $1,213,045 for the same period of 2014. The increase of $4,260 or approximately 0.4% was mainly due to increases of commission income and consulting income which partially offset with a decrease of enrollment fee income.  

Commission income for the three months period ended June 30, 2015 was $1,211,025 as compared to $1,206,502 for the same period of 2014. The increase of $4,523 or approximately 0.4% was mainly due to the reasons stated in the Six-month end paragraph above. Consulting income for the three months period ended June 30, 2015 was $6,006 compared to $6,000 for the comparable period of 2014.  No change is due to the service demand remained the same. Enrollment fee for the three months period ended June 30, 2015 were $274 as compared to $543 for the same period of 2014. The decrease was mainly due to the decrease of enrollment during the period.  

Operating expenses

Operating expenses for the six months ended June 30, 2015 were $2,858,782, as compared to $2,957,279 for the same period of 2014. The decrease of $98,497 or approximately 3% was mainly due to the goodwill impairment charge of $222,110 made in 2014 and decreases of bad debt expenses which were partially offset by increases in salary, travel, rent, depreciation and amortization expense and other general & administrative. If the impairment charge is excluded, the operating expenses increased 5%.

Operating expenses for the three months ended June 30, 2014 were $1,429,891, as compared to $1,699,530 for the same period of 2014. The decrease of $269,639 or approximately 16% was mainly due to the goodwill impairment charge of $222,110 in 2014, and decreases in salary, travel, bad debt expenses, which were partially offset by increases in rent, depreciation and amortization expense, and other general & administrative. If the impairment charge is excluded, the operating expenses decreased 3% only.

The reasons for the increases and decreases in the major items of operating expense in 2015, as compared to the same period of 2014, are as follows:

·

Salaries – increased $135,877 or 8% for the six months ended and decreased $14,885 or 2% for the three months ended June 30, 2015 as compared to the same period of 2014.  The increase in the six months ended was mainly due to in

14

creases in pay rates and headcounts.  The decrease in the three months ended was mainly due to the bonus paid for directors was reduced in 2015.

·

Travel Expenses – increased $10,708 or 6% for the six months ended and decreased $12,191 or 11% for the three months ended June 30, 2015 as compared to the same period of 2014.  The increase in the six months ended was because more business trips were taken during the first quarter of 2015 to establish relationship with new and existing clients.  The decrease in the three months ended was due to the effort of expense control.

·

Rent – increased $11,596 or 3% for the six months ended and $13,619 or 8% the three months ended June 30, 2015 as compared to the same period of last year.  The increase was mainly due to the new office space rent for Shanghai office and rental rates increased.

·

Bad debt expenses – decreased $44,018 or 112% for the six months ended and $47,989 or 161% for the three months ended June 30, 2015 as compared to the same period of last year.  The decrease was mainly due to the provision of doubtful debts decreased during the period.  

·

Depreciation and amortization – increased $5,672 or 7% for the six months ended and $4,279 or 11% for the three months ended June 30, 2015 as compared to the same period of last year.  Because the real property located in United States purchased in July 2014, depreciation of the buildings started to charge at that time.  During the six months ended June 30, 2015, depreciation for fixed assets was $78,763, an increase of $6,074, or 8%, from $72,689 in the comparable period of 2014, which was caused by the reason stated as above.  Regarding the amortization charged for intangible asset, it was $5,599 for the six months ended June 30, 2015, a decrease of $402 or 7% as compared to the same period of 2014.

·

Other general & administrative expenses – increased $3,778 or 1% for the six months ended and $9,638 or 4% the three months ended June 30, 2015 as compared to the same period of last year.  The increase was due to general inflation and employee related expenses increased.

Net loss before tax and noncontrolling interest

Six-month end:

Net loss before tax and noncontrolling interest for the six months ended June 30, 2015 was $290,709 compared to net income before tax and noncontrolling interest of $513,172 for the six months period ended June 30, 2014.  The decrease of $222,463 was mainly because the 4% increase in revenues and 3% decrease in operating expenses during the period. Causes for the revenue decrease were discussed in the section of Revenue above, while causes for the operating expense decrease were discussed in the section of Operating expenses above.

In addition, the decrease in operating expenses was mainly because the goodwill impairment charge of $222,110 was made during the six months period ended June 30, 2014.  If the impairment charge is excluded, the operating expenses increased 5%.

Other income increased to $108,908 for the six months ended June 30, 2015 from $74,170 for the same period of 2014.  The increase of $34,738 or approximately 47% was mainly due to the increase in investment income and other revenue which was partially offset by the decreases in interest income and gain on disposal of fixed assets. Interest income decreased by 89% to $1,723 during the period. The decrease was due to the loans made to third party in 2014 but no such income in 2015. Investment income increased by 9% to $12,071 for the six months ended June 30, 2015 as compared to $11,112 in the comparable period of 2014. It was mainly as a result of an increase in dividend income received from publicly traded equity securities owned by the Company.  

Other revenue for the six months period ended June 30, 2015 was $95,885 compared to $42,192 for the comparable period of 2014. The increase of $53,693 or approximately 127% mainly due to increased commissions from business referral and other business services we provided to clients, and the receipt of allowance from government in relation to the Company joined an employment programme organized by the government, and a receipt of cash refund from the provident fund scheme.

Three-month end:

Net loss before tax and noncontrolling interest for the three months ended June 30, 2015 was $140,837 as compared to the net income before tax and noncontrolling interest of $441,179 for the three months period ended June 30, 2014. The decrease of $300,342 was mainly due to the causes stated in the Six months end paragraph above.

15

Net income and loss

The Company incurred a net loss of $378,848 during the six months period ended June 30, 2015. In order to return the company to profitability, we will continue to implement our operations plan which is stated in the “PLAN OF OPERATIONS” section above. In accordance with our operations plan, we will continue to put efforts into establishment of new clients, credit control and control on expenses.

LIQUIDITY AND CAPITAL RESOURCES

Cash flow

For the six months ended June 30, 2015, cash used in operating activities totaled $394,507.  This was primarily due to the net loss during the period plus a decrease in commission receivable, enrollment fees, fiduciary assets, other receivable, accounts payable, and accrued expenses, which was partially offset by an increase in deposit and prepayment, claims payable, and other payable.

Net loss after adjustments of non-cash activities for the six months ended June 30, 2015 decreased by $34,982, or 8% as compared to the same period of 2014. The changes in operating assets and liabilities for the six months ending June 30, 2015 increased $1,972 or 1% as compared to the same period of 2014.  As a result, net cash used in operating activities for the six months ended June 30, 2015 increased by $33,010 or approximately 9% as compared to the same period of last year.

For the six months ended June 30, 2015, cash used in investing activities amounted to $179,142 as compared to cash provided by investing activities with $595,088 for the same period of last year.  For 2015, the fund was mainly used for the purchase of fixed assets.  For 2014, loan repaid from third party was $2,380,000 and sales proceed for disposal of fixed assets was $16,367, which was partially offset by the loan made to third parties totaled $1,580,000, prepayment for asset acquisition amounted to $184,650, and the purchase of fixed assets totaled $36,354.

For the six months ended June 30, 2015 and 2014, cash used in finance activities totaled $134,620 and $146,223 respectively. For 2015 and 2014, the funds were mainly used for the dividend payment to minority shareholders, repayment of obligations under long-term loans and principal payments on related party debt, which was partially offset by the borrowings on related party debt.

Assets and liabilities

For the six months ended June 30 , 2015, the Group’s balance sheet reflects total assets of $12,664,250 and total liabilities of $2,768,418.  Total assets decreased by $595,240, or approximately 4%, and total liabilities decreased by $103,053, or approximately 4%, when compared to the year ended December 31, 2014.  The decrease of total assets was mainly due to decreases of cash and cash equivalents, short-term investment, enrolment fee receivable, fiduciary asset, goodwill, intangible asset, and marketable securities, which was partially offset by increases of commission receivable, property, plant and equipment, deposit and prepayment, and other receivable.  In addition, the decrease of total liabilities was mainly due to decreases of trade accounts payable and accrued expenses, which were partially offset by increasses of claim payable, other payable, tax payable, due to directors and long-term loans.

As at June 30, 2015, commission receivable was $480,350 as compared to $322,589 as at December 31, 2014, while trade accounts payable was $2,269,139 as compared to December 31, 2014 balance of $2,376,271.  Each of these changes was due to the timing of commissions received from customers and the timing of making payments to insurers in relation to the period end.  In addition, because marine insurance usually renews in late February every year, and the average collection period increased during the period, commission receivable as at June 30, 2015 increased by $157,761 or 49% as compared to December 31, 2014 balance.  In addition, because certain advances on behalf of customers were paid, other receivable increased by $1,146 or 1% as compared to the year end of 2014.  Furthermore, because certain fund received on behalf of customers had been received during the period, the other payable increased $17,233 or 8% as compared to the year end of 2014.  On the other hand, certain claim proceeds received on behalf of customers had been received, the claim payable increased by $2,185 or 3% as compared to the

16

year end of 2014.

As at June 30, 2015, loan receivable was $1,912,000 which remained unchanged during the period.  Accrued expenses of $63,395 as at June 30, 2015, reduced by $106,805 or approximately 63% from $170,200 as at December 31, 2014.  The reduction was mainly due to the payment of accrued expenses which were provided for the year of 2014.  

Because the interest rate is maintained at a very low level in the recent years, since 2008, the Company has purchased publicly traded equity securities with high dividend yields for long term investment purpose.  As of June 30, 2015, the market value of the equity securities was $369,861, which represents a decrease of $11,343 or approximately 3% as compared to the market value of $381,204 for the last year.  The decrease was due to the change of fair values between June 30, 2015 and December 31, 2014.

As at June 30, 2015, property, plant and equipment were $4,134,910 as compared to $4,035,084 as at December 31, 2014. The increase of $99,826 or approximately 2.5% was mainly due to acquisition of vehicle and office equipment.  Due to the fact that the Company acquired a subsidiary in 2012, certain assets such as customer list and goodwill were recognized in the same year. As of June 30, 2015, the carrying value of customer lists was $2,806 and the carrying value of goodwill was $72,548.

The Company has bank and cash equivalents of approximately $3,389,328 as at June 30, 2015.  The Company has sufficient funds to satisfy its financial commitments and working capital requirements for the next twelve months.  As of June 30, 2015, the Company had $0 of commitments for capital expenditures and off-balance sheet arrangements. The company has lease commitments of $968,923.

OFF BALANCE SHEET ARRANGEMENTS

We do not have any material off-balance sheet arrangements.

RECENT ACCOUNTING PRONOUNCEMENTS

For information about new accounting pronouncements and the potential impact on our Consolidated Financial Statements, see Note 2 of the Notes to Consolidated Financial Statements in this Form 10-Q and Note 2 of the Notes to Consolidated Financial Statements in our 2014 Form 10-K.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4(T). 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 principal executive and principal 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

17

that information required to be disclosed is accumulated and communicated to principal executive and principal financial officers to allow timely decisions regarding disclosure.

As of the end of the period covered by this report, the Company's management, with the participation of the chief executive officer and the chief financial officer, carried out an evaluation of the effectiveness of the design and operation of the Company's "disclosure, controls and procedures" (as defined in the Exchange Act Rules 13a-15(3) and 15-d-15(3) as of the end of the period covered by this annual report (the "Evaluation Date").  Based on that evaluation, the chief executive officer and the chief financial officer concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures are designed to provide reasonable assurance of achieving the objectives of timely alerting them to material information required to be included in our periodic SEC reports and of ensuring that such information is recorded, processed, summarized and reported with the time periods specified.  Our chief executive officer and chief financial officer also concluded that our disclosure controls and procedures were effective as of June 30, 2015 to provide reasonable assurance of the achievement of these objectives.

Changes in Internal Controls Over Financial Reporting

There have not been any changes in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) or any other factors during the six months ended June 30, 2015, that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 1A. RISK FACTORS

Not applicable.

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

 Not Applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

18

ITEM 6. EXHIBITS

The following exhibits are filed herewith:

31.1

Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2

Certification of 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 Schema Document

101

CAL XBRL Taxonomy Extension Calculation Linkbase Document

101

LAB XBRL Taxonomy Extension Label Linkbase Document

101

PRE XBRL Taxonomy Extension Presentation Linkbase Document

101

DEF XBRL Taxonomy Extension Definition Linkbase Document

19

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

ALCO, INC.

(Registrant)

By: /s/ Andrew Liu, CEO and Chairman

Date:  August 14, 2015

By: /s/ John Liu, Director

Date:  August 14, 2015

By: /s/ Colman Au, Chief Financial Officer

Date:  August 14, 2015

20