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EX-32.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER - Moregain Pictures, Inc. | alad_ex32z1.htm |
EX-31.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER - Moregain Pictures, Inc. | alad_ex31z1.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 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 000-55297
ALADDIN INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Nevada |
| 41-1683548 |
(State or other jurisdiction of |
| (I.R.S. Employer |
incorporation or organization) |
| Identification No.) |
Unit 907, 9/F, ICBC Tower, 3 Garden Road, Central, Hong Kong
(Address of principal executive offices, including zip code)
+852 3975 0600
(Registrants telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
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 þ 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 þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See the definitions of large accelerated filer, accelerated filer, non-accelerated filer, and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer | o |
| Accelerated filer | o |
Non-accelerated filer | o |
| Smaller reporting company | þ |
(Do not check if smaller reporting company) |
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|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes þ No o
As of February 12, 2016, the registrant had 4,548,435 shares of common stock, par value $.001 per share, issued and outstanding.
TABLE OF CONTENTS
| PART I – FINANCIAL INFORMATION |
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1 | ||
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| Condensed Balance Sheets as of December 31, 2015 (Unaudited) and June 30, 2015 | 1 |
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| 2 | |
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| Condensed Statements of Cash Flows for the Six Months Ended December 31, 2015 and 2014 (Unaudited) | 3 |
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| 4 | |
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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. | 7 | |
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11 | ||
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11 | ||
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| PART II OTHER INFORMATION |
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14 | ||
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14 | ||
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UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. | 14 | |
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14 | ||
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14 | ||
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14 | ||
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14 | ||
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| 15 |
PART I FINANCIAL INFORMATION
ITEM 1.
CONDENSED BALANCE SHEETS
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| December 31, |
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| June 30, |
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| 2015 |
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| 2015 |
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| (Unaudited) |
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| (Note 1) |
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ASSETS |
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Current Assets: |
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Cash and cash equivalents |
| $ | 121,740 |
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| $ | 1,195 |
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Prepaid expenses |
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| 73,053 |
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| 175 |
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Total Current Assets |
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| 194,793 |
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| 1,370 |
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Security deposits |
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| 63,588 |
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TOTAL ASSETS |
| $ | 258,381 |
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| $ | 1,370 |
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LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) |
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Current Liabilities: |
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Accounts payable |
| $ | 35,528 |
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| $ | 566 |
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Accrued liabilities |
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| 129,053 |
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Advance from affiliates |
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| 321 |
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Related party convertible note (net) |
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| 194,813 |
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Total Current Liabilities |
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| 359,715 |
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| 566 |
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TOTAL LIABILITIES |
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| 359,715 |
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| 566 |
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Commitments and contingencies (Note 4) |
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Stockholders' Equity (Deficit) |
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Preferred stock, $.001 par value 20,000,000 shares authorized, none issued and outstanding at December 31, 2015 and June 30, 2015 |
| $ | |
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| $ | |
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Common stock, $.001 par value 780,000,000 shares authorized, 4,548,435 issued and outstanding at December 31, 2015 and June 30, 2015 |
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| 4,548 |
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| 4,548 |
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Additional paid-in capital |
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| 293,127 |
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| 282,511 |
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Accumulated deficit |
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| (399,009 | ) |
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| (286,255 | ) |
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TOTAL STOCKHOLDERS' EQUITY (DEFICIT) |
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| (101,334 | ) |
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| 804 |
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) |
| $ | 258,381 |
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| $ | 1,370 |
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The accompanying notes are an integral part of the financial statements.
1
CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
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| Three Months Ended |
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| Six Months Ended |
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| December 31, |
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| December 31, |
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| 2015 |
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| 2014 |
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| 2015 |
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| 2014 |
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| (Note 1) |
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| (Note 1) |
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Revenues |
| $ | |
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| $ | |
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| $ | |
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| $ | |
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Operating Expenses: |
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Audit fees |
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| 1,850 |
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| 2,100 |
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| 9,350 |
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| 8,700 |
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Professional fees |
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| 36,830 |
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| 11,663 |
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| 48,730 |
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| 13,496 |
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Payroll expenses |
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| 43,881 |
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| 43,881 |
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Other |
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| 4,854 |
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| 507 |
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| 6,586 |
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| 546 |
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Total Operating Expenses |
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| 87,415 |
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| 14,270 |
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| 108,547 |
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| 22,742 |
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Net Operating Loss |
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| (87,415 | ) |
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| (14,270 | ) |
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| (108,547 | ) |
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| (22,742 | ) |
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Other Expenses: |
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Interest Expense (Income), net |
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| 4,196 |
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| 4,207 |
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Total Other Expenses |
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| 4,196 |
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| 4,207 |
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Net Loss |
| $ | (91,611 | ) |
| $ | (14,270 | ) |
| $ | (112,754 | ) |
| $ | (22,742 | ) |
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Net Comprehensive Loss |
| $ | (91,611 | ) |
| $ | (14,270 | ) |
| $ | (112,754 | ) |
| $ | (22,742 | ) |
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Per Share |
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| (0.02 | ) |
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| (0.02 | ) |
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| (0.01 | ) |
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Weighted Average Shares Outstanding |
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| 4,548,435 |
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| 4,548,435 |
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| 4,548,435 |
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| 4,152,919 |
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The accompanying notes are an integral part of the financial statements.
2
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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| Six Months Ended |
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| December 31, |
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| 2015 |
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| 2014 |
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Cash Flows from Operating Activities: |
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Net loss |
| $ | (112,754 | ) |
| $ | (22,742 | ) |
Non-cash adjustments to net income: |
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Interest expense to accrete debt discount on beneficial conversion feature of related party convertible note |
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| 2,872 |
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Imputed interest on related party convertible note |
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| 1,334 |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Increase in accounts payable & accrued expenses |
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| 164,015 |
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| 4,414 |
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Decrease (increase) in pre-paid expenses & deposits |
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| (136,466 | ) |
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| 175 |
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Increase in advance from affiliates |
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| 321 |
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Decrease in option liability |
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| (10,000 | ) |
Net Cash Used in Operating Activities |
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| (80,678 | ) |
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| (28,153 | ) |
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Cash Flows from Investing Activities: |
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Net Cash Provided by Investing Activities |
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Cash Flows from Financing Activities: |
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Issuance of common stock |
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| 20,000 |
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Proceeds from convertible note |
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| 200,000 |
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Additional paid-in capital |
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| 1,223 |
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| 7,700 |
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Net Cash Provided by Financing Activities |
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| 201,223 |
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| 27,700 |
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Increase (Decrease) in Cash |
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| 120,545 |
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| (453 | ) |
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Cash and Cash Equivalents, Beginning of Period |
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| 1,195 |
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| 574 |
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Cash and Cash Equivalents, End of Period |
| $ | 121,740 |
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| $ | 121 |
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Interest Paid |
| $ | 11 |
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| $ | |
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Income Taxes Paid |
| $ | |
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| $ | |
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Supplemental Disclosure of Non-Cash Transactions: |
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Debt discount on beneficial conversion feature of related party convertible note |
| $ | 8,059 |
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| $ | |
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Conversion of advance from affiliates to additional paid in capital |
| $ | |
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| $ | 2,499 |
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The accompanying notes are an integral part of the financial statements.
3
NOTES TO FINANCIAL STATEMENTS
December 31, 2015
(Unaudited)
(1)
Basis of Presentation and Summary of Accounting Policies
Basis of Presentation
The accompanying unaudited condensed interim financial statements of Aladdin International, Inc. (the Company or Aladdin) have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position of the Company as of December 31, 2015 and 2014 and for the periods then ended have been made. 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. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Companys June 30, 2015 audited financial statements. The results of operations for these interim periods are not necessarily indicative of the results for the entire year.
The accompanying financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America, which contemplates continuation of the Company as a going concern. However, the Company has no business operations and recurring losses and has negative working capital and shareholders deficits, and due to the uncertainty of the Companys ability to meet its current operating and capital expenses, there is substantial doubt about the Companys ability to continue as a going concern, as the continuation and expansion of its business is dependent upon obtaining further financing. The Company has financed its operations primarily through the sale of stock and advances from a related party. There is no assurance that these advances will continue in the future. The condensed interim financial statements do not include any adjustments that might result from the outcome of these uncertainties.
The accompanying condensed consolidated interim financial statements should be read in conjunction with the Companys Annual Report on Form 10-K for the year ended June 30, 2015, filed on September 25, 2015 (Annual Report). Interim results for the three and six months ended December 31, 2015 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2016.
Change in Control of the Company
On July 20, 2015, Michael Friess and Sanford Schwartz (collectively, the Shareholders), majority shareholders of the Company, entered into a Securities Purchase Agreement (the Purchase Agreement) with Billion Reward Development Limited (Billion Reward), a British Virgin Islands corporation, pursuant to which the Shareholders sold to Billion Reward an aggregate of 3,638,748 shares of common stock, par value $.001 per share of the Company (the Majority Interests) for $300,000, resulting in Billion Reward owning approximately 80% of the total outstanding shares of the Company, and a change in control of the Company.
In connection with the Purchase Agreement, on July 20, 2015, Michael Friess, the Companys Chief Executive Officer and President of the Company resigned from all of his officer positions with the Company except that his resignation as a member of the Board was not effective until the tenth day following the Companys mailing of the Information Statement on Schedule 14f-1 to its shareholders as of the record date of July 20, 2015. In addition, Sanford Schwartz, the Companys Chief Financial Officer, Secretary, Treasurer, and member of the Board resigned from all of his positions with the Company.
Also effective on July 20, 2015, Ningdi Chen was appointed as the Chief Executive Officer, Chief Financial Officer, President, Treasurer, Secretary and Director of the Board.
On October 1, 2015, Kai Ming Zhao accepted an offer letter (Offer Letter) from the Company to serve as the Chief Executive Officer of the Company. Under the Offer Letter, Mr. Zhaos total salary is $150,000 per year, with cash bonus based on performance.
On October 20, 2015, the Board of Directors of the Company accepted the resignation of Mr. Ningdi Chen as the Chief Executive Officer, Chief Financial Officer, President, Secretary, and Treasurer of the Company.
4
ALADDIN INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2015
(Unaudited)
(1)
Basis of Presentation and Summary of Accounting Policies, Continued
Also on October 20, 2015, the Board of Directors appointed Mr. Kai Ming Zhao as the Chief Executive Officer, President, Secretary, and Treasurer of the Company. Mr. Kai Ming Zhao is also the principal accounting officer of the Company.
Significant Accounting Policies
Refer to the Companys Annual Report for a summary of significant accounting policies. There have been no material changes to our significant accounting policies during the six months ended December 31, 2015, other than the addition of the policy below regarding related party convertible debt. Below are also disclosures of certain interim balances and transactions as of and for the three and six months ended December 31, 2015 and comparative amounts from the prior fiscal periods.
(a)
Related Party Convertible Note
The Company occasionally obtains financing from related parties in the form of notes payable convertible into shares of the Companys common stock. The Company accounts for convertible notes and debt issuance costs associated with convertible notes following the guidance set forth in ASC 470-20, Debt with Conversion and Other Options; ASC 480, Distinguishing Liabilities from Equity; ASC 815-40, Derivatives and Hedging Contracts in Entitys Own Equity; EITF 07-5, Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entitys Own Stock; and ASU 2015-03, InterestImputation of Interest (Subtopic 835-30) Simplifying the Presentation of Debt Issuance Costs.
The terms of such convertible notes payable are analyzed by management to determine their accounting treatment, including determining whether conversion features are required to be bifurcated and treated as a discount, allocation of fair value of the issuance to the debt instrument and any beneficial conversion features, and the applicable classification of the convertible notes payable as debt, equity or mezzanine temporary equity.
The intrinsic value of the embedded conversion feature of related party convertible notes payable are included in the discount to notes payable, which is accreted to interest expense over the expected term of the note using the effective interest method. The Companys management also estimates the total fair value of any beneficial conversion feature in allocating debt proceeds. The proceeds allocated to the beneficial conversion feature are determined by taking the estimated fair value of shares issuable under the convertible notes less the fair value of the number of shares that would be issued if the conversion rate equaled the fair value of the Companys common stock as of the date of issuance.
(b)
Concentrations
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents. At December 31, 2015 and June 30, 2015, the Company had no amounts of cash or cash equivalents in financial institutions in excess of amounts insured by agencies of the U.S. Government.
(c)
Reclassifications
Certain amounts previously reported have been reclassified to conform to current presentation.
(2)
Capital Stock
Pursuant to the Articles of Incorporation of the Company, the Company is authorized to issue 780,000,000 shares of common stock with $.001 par value and 20,000,000 shares of preferred stock with $.001 par value. There were 4,548,435 shares of common stock issued and outstanding on December 31, 2015 and June 30, 2015.
There were no preferred shares outstanding as of December 31, 2015.
5
ALADDIN INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2015
(Unaudited)
(3)
Related Party Transactions
Before July 20, 2015, the Company used the offices of its former President for its minimal office facility needs for no consideration. No provision for these costs has been provided since it has been determined that they are immaterial.
On October 23, 2015, the Company and Billion Reward entered into a Loan Agreement (Loan Agreement), whereby Billion Reward agreed to provide a loan in the amount of $200,000 (the Loan) to the Company with the maturity date of April 30, 2016 and bearing no interest. Under the Loan Agreement, if the Company conducts an offering for a total amount of $2,000,000 (the Offering) on or before February 28, 2016, the Loan will be automatically converted into shares of common stock, par value $.001 per share of the Company at the conversion price equal to the purchase price in the Offering. In addition, pursuant to the Loan Agreement, Billion Reward will be entitled to convert any portion or all of the Loan into shares of Common Stock of the Company, at the conversion price of volume weighted average price of the Common Stock as reported by Bloomberg for twenty trading days prior to such conversion. The Company has estimated the intrinsic value of this embedded conversion feature and recorded it as a discount to related party convertible debt of $8,059. The Company expensed $2,872 of the discount to interest expense during the period ending December 31, 2015 and has a net unamortized discount of $5,187 as of December 31, 2015.
On November 5, 2015 the Company received the Loan in the amount of $200,000.
(4)
Commitments and Contingencies
Operating Lease
The Company entered into a non-cancelable operating sub-lease for office space on December 22, 2015 for a term that expires August 18, 2017. The sub-lease commenced on February 7, 2016. Future minimum annual lease payments under non-cancelable operating leases in effect as of December 31, 2015, are as follows:
Years Ending |
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| |
December 31, |
| Amounts |
| |
2016 |
| $ | 116,523 |
|
2017 |
|
| 127,116 |
|
2018 |
|
| 84,744 |
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|
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|
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| $ | 328,383 |
|
(5)
Subsequent Events
The Company has evaluated events subsequent to December 31, 2015 and through the date the financial statements were available to be issued, to assess the need for potential recognition or disclosure in this report.
On January 12, 2016, Billion Reward agreed to loan the Company an additional $100,000; documentation of the second loan is in process.
6
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited condensed interim financial statements and the notes to those financial statements appearing elsewhere in this Report.
Certain statements in this Report constitute forward-looking statements. These forward-looking statements include statements, which involve risks and uncertainties, regarding, among other things, (a) our projected sales, profitability, and cash flows, (b) our growth strategy, (c) anticipated trends in our industry, (d) our future financing plans, and (e) our anticipated needs for, and use of, working capital. They are generally identifiable by use of the words may, will, should, anticipate, estimate, plan, potential, project, continuing, ongoing, expects, management believes, we believe, we intend, or the negative of these words or other variations on these words or comparable terminology. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this filing will in fact occur. You should not place undue reliance on these forward-looking statements.
The forward-looking statements speak only as of the date on which they are made, and, except to the extent required by federal securities laws, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date on which the statements are made or to reflect the occurrence of unanticipated events.
The "Company", "we," "us," and "our," refer to Aladdin International, Inc.
Overview
The Company was incorporated under the laws of the state of Minnesota on May 3, 1972. The Company was a franchisee of fast food restaurants in Milwaukee, Wisconsin until the franchised restaurants were sold in October 1998. The Company held a shareholder meeting on November 25, 2014 to reincorporate the Company in the State of Nevada through merging into Aladdin International, Inc. incorporated in Nevada and amend the Articles of Incorporation to increase the authorized capital stock of the Company to eight hundred million (800,000,000) shares. The shares of stock consist of 780,000,000 shares of common stock with full voting rights and a par value of $0.001 per share and 20,000,000 shares of preferred stock with a par value of $0.001 per share. The merger of the Minnesota company into the Nevada company was effective on December 23, 2014 and the Articles of Merger were filed on December 30, 2014.
On July 20, 2015, Michael Friess and Sanford Schwartz (collectively, the "Shareholders"), majority shareholders of the Company entered into a Securities Purchase Agreement (the "Purchase Agreement") with Billion Reward Development Limited (the "Purchaser"), a British Virgin Islands corporation, pursuant to which the Shareholders sold to the Purchaser an aggregate of 3,638,748 shares of common stock, par value $.001 per share of the Company (the "Majority Interests") for $300,000 (the "Change in Control Transaction").
In connection with the Purchase Agreement, on July 20, 2015, Michael Friess, the Company's Chief Executive Officer, President and member of the Board of Directors (the "Board") of the Company resigned from all of his officer positions with the Company except that his resignation as a member of the Board was not effective until the tenth day following the Company's mailing of the Information Statement on Schedule 14f-1 to its shareholders as of the record date of July 20, 2015. Sanford Schwartz, the Company's Chief Financial Officer, Secretary, Treasurer, and member of the Board resigned from all of his positions with the Company. Also effective on July 20, 2015, Ningdi Chen was appointed as the Chief Executive Officer, Chief Financial Officer, President, Treasurer, Secretary and Director of the Board.
Since June 2010, the Company has had insignificant operations and assets consisting primarily of cash. As such, the Company is presently defined as a "shell" company under Rule 12b-2 of the Securities Exchange Act of 1934, as amended ("Exchange Act"). The Company has opted to become a "blank check" company and to further engage in any lawful corporate undertaking, including, but not limited to, selected mergers and acquisitions. At this time, the Company's purpose is to seek, investigate and, if such investigation warrants, acquire an interest in business opportunities presented to it by persons or firms who or which desire to seek the perceived advantages of an Exchange Act registered corporation. The Company may seek a business opportunity with entities which have recently commenced operations, or which wish to utilize the public marketplace in order to raise additional capital in order to expand into new products or markets, to develop a new product or service, or for other corporate purposes. The Company may acquire assets and establish wholly-owned subsidiaries in various businesses or acquire existing businesses as subsidiaries. However, there is no guarantee that any of such merger or acquisition will be successful.
7
The Company is planning to acquire a private company for a business combination and has had informal discussions with potential acquisition targets, including a company in the business of creating and monetizing products based on licensed film and television intellectual property. No definitive documentation has been entered into in connection with any acquisition and there can be no assurance that the Company will successfully make any acquisition. If an acquisition occurs, the Company would likely issue a substantial number of additional shares of its common stock at a price which could be substantially below the current trading price of the Companys common stock. There may be no independent valuation done of any proposed target and there can be no assurance that the value of any proposed target would approximate the value of securities of the Company to be issued in connection with such acquisition.
On October 1, 2015, Kai Ming Zhao accepted an offer prescribed in the offer letter ("Offer Letter") from the Company to serve as the Chief Executive Officer of the Company. Under the Offer Letter, Mr. Zhao's total salary is $150,000 per year, with cash bonus based on performance. On October 20, 2015, the Board of Directors of the Company accepted the resignation of Mr. Ningdi Chen as the Chief Executive Officer, Chief Financial Officer, President, Secretary, and Treasurer of the Company. Also on October 20, 2015, the Board of Directors appointed Mr. Kai Ming Zhao as the Chief Executive Officer, President, Secretary, and Treasurer of the Company. Mr. Kai Ming Zhao is also the principal accounting officer of the Company.
On October 23, 2015, the Company and Billion Reward Development Limited ("Billion Reward"), our majority shareholder which owns 80% of total issued and outstanding shares of the common stock of the Company, entered into a Loan Agreement ("Loan Agreement"), whereby Billion Reward agrees to provide a loan in the amount of $200,000 (the "Loan") to the Company with the maturity date of April 30, 2016 and bearing no interest. Under the Loan Agreement, if the Company conducts an offering for a total amount of $2,000,000 (the "Offering") on or before February 28, 2016, the Loan will be automatically converted into shares of common stock, par value $.001 per share ("Common Stock") of the Company at the conversion price equal to the purchase price in the Offering. Pursuant to the Loan Agreement, Billion Reward will be entitled to convert any portion or all of the Loan into shares of Common Stock of the Company, at the conversion price of volume weighted average price of the Common Stock as reported by Bloomberg for twenty trading days prior to such conversion. On November 5, 2015, the Company received the Loan in the amount of $200,000.
As of December 31, 2015, our accumulated deficit was ($399,009). Our stockholders' deficit as of December 31, 2015 was ($101,334). Our net loss for the three months and six months ended December 31, 2015 were ($91,611) and ($112,754), respectively. Our losses have principally been attributed to a lack of revenues while incurring operating expenses.
The following table provides selected condensed interim financial data about our company for the periods ended December 31, 2015 and the year ended June 30, 2015. For detailed financial information, see the condensed interim financial statements included elsewhere herein.
|
| December 31, |
|
| June 30, |
| ||
Balance Sheet Data |
| 2015 |
|
| 2015 |
| ||
Cash |
| $ | 121,740 |
|
| $ | 1,195 |
|
Total assets |
|
| 258,381 |
|
|
| 1,370 |
|
Total liabilities |
|
| 359,715 |
|
|
| 566 |
|
Shareholders' equity (deficit) |
|
| (101,334 | ) |
|
| 804 |
|
Results of Operations
For the three and six months ended December 31, 2015 compared to the three and six months ended December 31, 2014
The following summary of our results of operations should be read in conjunction with our unaudited condensed interim financial statements included herein. Our unaudited operating results for the periods ended December 31, 2015 and 2014 are summarized as follows:
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| December 31, |
|
| December 31, |
| ||||||||||
|
| 2015 |
|
| 2014 |
|
| 2015 |
|
| 2014 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Revenues |
| $ | |
|
| $ | |
|
| $ | |
|
| $ | |
|
Operating Expenses |
|
| 87,415 |
|
|
| 14,270 |
|
|
| 108,547 |
|
|
| 22,742 |
|
Net Loss |
|
| (91,611 | ) |
|
| (14,270 | ) |
|
| (112,754 | ) |
|
| (22,742 | ) |
8
Revenues
We did not earn any revenues for the three and six month periods ended December 31, 2015. We are presently in the development stage of our business and we can provide no assurance that we will begin earning revenues.
Operating Expenses
Our operating expenses for the three and six month periods ended December 31, 2015 and 2014 (unaudited) are outlined in the table below:
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| December 31, |
|
| December 31, |
| ||||||||||
|
| 2015 |
|
| 2014 |
|
| 2015 |
|
| 2014 |
| ||||
Operating Expenses: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Audit fees |
| $ | 1,850 |
|
| $ | 2,100 |
|
| $ | 9,350 |
|
| $ | 8,700 |
|
Professional fees |
|
| 36,830 |
|
|
| 11,663 |
|
|
| 48,730 |
|
|
| 13,496 |
|
Payroll expenses |
|
| 43,881 |
|
|
| 0 |
|
|
| 43,881 |
|
|
| 0 |
|
Other |
|
| 4,854 |
|
|
| 507 |
|
|
| 6,586 |
|
|
| 546 |
|
Total Expenses |
| $ | 87,415 |
|
| $ | 14,270 |
|
| $ | 108,547 |
|
| $ | 22,742 |
|
Operating expenses are comprised of audit, professional fees, payroll and other general and administrative expenses. Operating expenses increased by $73,145, or 512.6%, from $14,270 during the three months ended December 31, 2014 to $87,415 during the three months ended December 31, 2015. Also, operating expenses increased by $85,805, or 377.3%, from $22,742 during the six months ended December 31, 2014 to $108,547 during the six months ended December 31, 2015. These increases are primarily due to payroll expenses associated with a new executive officer and assistant hired in fiscal 2016 and legal services associated with potential debt and equity financings and potential business combination.
Net Loss
The net losses for the three month periods ended December 31, 2015 and 2014 were ($91,611), and ($14,270), respectively, and for the six month periods ended December 31, 2015 and 2014 were ($112,754) and ($22,742), respectively. The increased net losses are primarily due to increased operating expenses as discussed above.
Cash Flow
Our cash flows for the six month periods ended December 31, 2015 and 2014 (unaudited) are outlined in the table below:
|
| Six Months Ended |
| |||||
|
| December 31, |
| |||||
|
| 2015 |
|
| 2014 |
| ||
Cash Flows from Operating Activities: |
|
|
|
|
|
| ||
Net loss |
| $ | (112,754 | ) |
| $ | (22,742 | ) |
Non-cash adjustments to net income: |
|
|
|
|
|
|
|
|
Interest expense to accrete debt discount |
|
| 2,872 |
|
|
| |
|
Imputed interest expense on related party convertible note |
|
| 1,334 |
|
|
| |
|
Increase in accounts payable & accrued expenses |
|
| 164,015 |
|
|
| 4,414 |
|
Decrease (increase) in pre-paid expenses & deposits |
|
| (136,466 | ) |
|
| 175 |
|
Increase in advance from affiliates |
|
| 321 |
|
|
| |
|
Decrease in option liability |
|
| |
|
|
| (10,000 | ) |
Net Cash Used in Operating Activities |
|
| (80,678 | ) |
|
| (28,153 | ) |
Net Cash Provided by Investing Activities |
|
| |
|
|
| |
|
Cash Flows from Financing Activities: |
|
|
|
|
|
|
|
|
Issuance of common stock |
|
| |
|
|
| 20,000 |
|
Proceeds from convertible note |
|
| 200,000 |
|
|
| |
|
Additional paid-in capital |
|
| 1,223 |
|
|
| 7,700 |
|
Net Cash Provided by Financing Activities |
|
| 201,223 |
|
|
| 27,700 |
|
Increase (Decrease) in Cash |
| $ | 120,545 |
|
| $ | (453 | ) |
9
Total cash flows increased by $120,998, or 26,710.4% from ($453) for the six months ended December 31, 2014 to $120,545 for the six months ended December 31, 2015. The increase was due to an increase in cash flows from financing activities offsetting a decrease in cash flows from operating activities.
Cash flows from operating activities were mainly comprised of the operating loss and increase in pre-paid expenses and security deposits offset by the increase in accounts payable and accrued liabilities. These cash flows decreased by $52,525, or 186.6% from ($28,153) for the six months ended December 31, 2014 to ($80,678) for the six months ended December 31, 2015. The decrease was due to increases in the operating loss of $90,012, or 395.8%, as discussed above, and prepaid expenses and deposits of $136,641, or 78,080.7%, being partially offset by increased accrued liabilities of $160,935, or 3,646%, from $4,414 to $164,015 for the six months ended December 31, 2014 and 2015, respectively. The changes in prepaid expenses, deposits and accrued liabilities mainly resulted from the operating lease of office space (refer to Note 4).
Financing cash flows increased by $173,523, or 626.4%, from $27,700 for the six months ended December 31, 2014 to $201,223 for the six months ended December 31, 2015. These changes were primarily the result of the $200,000 related party convertible note (refer to Note 3).
Liquidity and Capital Resources
As of December 31, 2015, the Company has limited capital with which to pay these anticipated expenses. It is the intent of management to provide the working capital necessary to support and preserve the integrity of the Company but there is no legal obligation for management to provide any additional funding to the Company.
In connection with the aforementioned proposed acquisition, it is expected that the Company would issue an additional up to $2.0 million worth of its common stock at a price substantially below the current trading price of the Companys common stock. Such purchasers would include Billion Rewards and as a result the holdings of Billion Reward in the Company would substantially increase.
If the proposed acquisition is not consummated, it is anticipated that the Company will require approximately $200,000 during the next 12 months to implement its business plan. As of December 31, 2015, there is substantial doubt about the Company's ability to continue as a going concern.
Critical Accounting Policies and Estimates
Management's discussion and analysis of financial condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, (U.S. GAAP), on the basis that the Company will continue as a going concern. Due to the uncertainty of the Companys ability to meet its current operating and capital expenses, there is substantial doubt about the Companys ability to continue as a going concern, as the continuation and expansion of our business is dependent upon obtaining further financing. Our condensed interim financial statements do not include any adjustments that might result from the outcome of these uncertainties.
The preparation of these condensed interim financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses. On an ongoing basis, we evaluate these estimates and judgments, including those described below. We base our estimates on our historical experience and on various other assumptions that we believe to be reasonable under the present circumstances. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates.
While our significant accounting policies are more fully described in Note 1 to our financial statements included in our Annual Report on Form 10-K for the year ended June 30, 2015, filed on September 25, 2015 (Annual Report), we believe that the following accounting policies are the most critical to assist you in fully understanding and evaluating our reported financial results and affect the more significant judgments and estimates that we use in the preparation of our financial statements.
(a)
Related Party Convertible Note
Occasionally, we obtain financing from related parties in the form of notes payable convertible into shares of our common stock. We analyze the terms of such convertible notes payable to determine their accounting treatment, including determining whether conversion features are required to be bifurcated and treated as a discount, allocation of fair value of the issuance to the debt instrument and any beneficial conversion features, and the applicable classification of the convertible notes payable and warrants as debt, equity or mezzanine temporary equity.
10
We include the intrinsic value of the embedded conversion feature of convertible notes payable in the discount to notes payable, which is accreted to interest expense over the expected term of the note using the effective interest method. We also estimate the total fair value of any beneficial conversion feature in allocating debt proceeds. The proceeds allocated to the beneficial conversion feature are determined by taking the estimated fair value of shares issuable under the convertible notes less the fair value of the number of shares that would be issued if the conversion rate equaled the fair value of our common stock as of the date of issuance.
Convertible notes to related parties are separately identified in our financial statements. We also disclose significant terms of all transactions with related parties.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Going Concern
The accompanying financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America, which contemplates continuation of the Company as a going concern. However, the Company has no business operations and has recurring losses and has negative working capital and shareholders' deficits, which raise substantial doubt about its ability to continue as a going concern.
In view of these matters, realization of certain of the assets in the accompanying balance sheet is dependent upon continued operations of the Company, which in turn is dependent upon the Company's ability to meet its financial requirements, raise additional capital, and the success of its future operations. The financial statements do not include any adjustments relative to the recoverability of assets and classification of liabilities that might be necessary should the company be able to continue as a going concern. The Company has financed its operations primarily through the sale of stock and advances from a related party. There is no assurance there will be future sales of stock or that these advances will continue in the future.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a smaller reporting company, as defined by Rule 229.10(f)(1).
ITEM 4.
Disclosures Control and Procedures
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, the companys principal executive and principal financial officers and effected by the companys board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that:
·
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;
·
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and
·
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the companys assets that could have a material effect on the financial statements.
11
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
As of December 31, 2015, our CEO evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by this Quarterly Report on Form 10-Q. Disclosure controls and procedure include, without limitations, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Companys management as appropriate to allow timely decisions regarding required disclosure. Our Management is responsible for monitoring the process pursuant to which information is gathered and analyze such information to determine the extent to which such information requires disclosure in the reports filed with the Securities and Exchange Commission. Based on such evaluation, our CEO has concluded that as of December 31, 2015, the disclosure controls and procedure of the Company were effective.
As of December 31, 2015, management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in by the Committee of Sponsoring Organizations of the Treadway Commissions 2013 Internal Control - Integrated Framework and SEC guidance on conducting such assessments. Based on that evaluation, they concluded that, during the period covered by this report, such internal controls and procedures were not effective to detect the inappropriate application of US GAAP rules as more fully described below. This was due to deficiencies that existed in the design or operation of our internal controls over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses.
The matters involving internal controls and procedures that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: (1) lack of a functioning audit committee due to a lack of a majority of independent members and a lack of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (2) inadequate segregation of duties consistent with control objectives; and (3) ineffective controls over period end financial disclosure and reporting processes. The aforementioned material weaknesses were identified by our Chief Executive Officer in connection with the review of our financial statements as of December 31, 2015.
Management believes that the material weaknesses set forth in items (1), (2) and (3) above did not have an effect on our financial results. However, management believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our board of directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.
Managements Remediation Initiatives
In an effort to remediate the identified material weaknesses and other deficiencies and enhance our internal controls, we have initiated, or plan to initiate, the following series of measures:
We will create a position to segregate duties consistent with control objectives and will increase our personnel resources and technical accounting expertise within the accounting function when funds are available to us. And, we plan to appoint one or more outside directors to our board of directors who shall be appointed to an audit committee resulting in a fully functioning audit committee who will undertake the oversight in the establishment and monitoring of required internal controls and procedures such as reviewing and approving estimates and assumptions made by management when funds are available to us.
Management believes that the appointment of one or more outside directors, who shall be appointed to a fully functioning audit committee, will remedy the lack of a functioning audit committee and a lack of a majority of outside directors on our Board.
We anticipate that these initiatives will be at least partially, if not fully, implemented by the end of fiscal year 2016. Additionally, we plan to test our updated controls and remediate our deficiencies in year 2016.
12
Changes in internal controls over financial reporting
On October 20, 2015, the Board of Directors of the Company accepted the resignation of Mr. Ningdi Chen as the Chief Executive Officer, Chief Financial Officer, President, Secretary, and Treasurer of the Company. Also on October 20, 2015, the Board of Directors appointed Mr. Kai Ming Zhao as the Chief Executive Officer, President, Secretary, and Treasurer of the Company. Mr. Kai Ming Zhao is also the principal accounting officer of the Company.
Except the above, there was no change in our internal controls over financial reporting that occurred during the period covered by this Report, which has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
13
PART II OTHER INFORMATION
ITEM 1.
None.
ITEM 1A.
Not applicable to a smaller reporting company.
ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3.
DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4.
Not Applicable.
ITEM 5.
None
ITEM 6.
Exhibit |
| Description of Exhibit |
| Rule 13(a)-14(a)/15(d)-14(a) Certification of principal executive and financial officer | |
| Section 1350 Certification of principal executive officer and principal financial and accounting officer | |
101 |
| XBRL data files of Financial Statements and Notes contained in this Quarterly Report on Form 10-Q. |
14
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.
| Aladdin International, Inc. | |
|
|
|
|
|
|
Date: February 12, 2016 | By | /s/ Kai Ming Zhao |
|
| Name: Kai Ming Zhao |
|
| Title: Chief Executive Officer, President, Treasurer, Secretary |
15