NOTES TO FINANCIAL STATEMENTS
March 31, 2016
(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 March 31, 2016 and 2015 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 nine months ended March 31, 2016 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
March 31, 2016
(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 nine months ended March 31, 2016, other than the addition of the policies below regarding related party debt and operating leases.
(a)
Related Party Debt
Convertible Note
The Company occasionally obtains financing from related parties in the form of notes payable which are 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.
Non-convertible Note
The Company occasionally obtains financing from related parties in the form of notes payable. The Company accounts for such notes following the guidance set forth in ASU 2015-03,
InterestImputation of Interest (Subtopic 835-30) Simplifying the Presentation of Debt Issuance Costs.
(b)
Concentrations
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents. At March 31, 2016 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.
(d)
Operating Leases
The Company accounts for operating leases in accordance with SFAS No. 13,
Accounting for Leases,
and Financial Accounting Standards Board (FASB) Technical Bulletin 88
−
1,
“
Issues Relating to Accounting for Leases.
”
Accordingly, rent expense under operating leases for the Company
’
s administrative office is recognized on a straight-line basis over the original term of each lease, inclusive of predetermined rent escalations or modifications.
5
ALADDIN INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 2016
(Unaudited)
(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 March 31, 2016 and June 30, 2015.
There were no preferred shares outstanding as of March 31, 2016.
The Company occasionally incurs expenses that are paid by related parties. When the related parties do not expect repayment these amounts are recorded as increases in additional paid-in capital. During the nine months ended March 31, 2016 related parties paid expenses totaling $1,422. Also included in additional paid in capital is $8,059 in debt discount and $4,052 of imputed interest incurred during the nine months ended March 31, 2016.
(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 (October Loan Agreement), whereby Billion Reward agreed to provide a loan in the amount of $200,000 (the October Loan) to the Company with an original maturity date of April 30, 2016 extended to January 31, 2017 and bearing no interest. Under the October 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 October 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 October Loan Agreement, Billion Reward will be entitled to convert any portion or all of the October 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 $6,755 of the discount to interest expense during the nine months ending March 31, 2016 and has a net unamortized discount of $1,304 as of March 31, 2016.
On November 5, 2015 the Company received the October Loan in the amount of $200,000; the October Loan remains outstanding as of March 31, 2016.
On January 7, 2016 the Company and Billion Reward entered into a loan agreement (January Loan Agreement), whereby Billion Reward agreed to provide a loan in the amount of $100,000 (the January Loan) to the Company with the maturity date of January 31, 2017 and bearing no interest.
On January 12, 2016 the Company received the January Loan in the amount of $100,000.
(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 and paid $116,523 to the landlord of which $63,558 is a security deposit and $52,965 for five months prepaid rent of which $17,654 has been expensed as of March 31, 2016. The sub-lease commenced on February 7, 2016. Future minimum annual lease payments under non-cancelable operating leases in effect as of March 31, 2016, are as follows:
|
|
|
|
|
Years Ending
|
|
|
|
June 30,
|
|
Amounts
|
|
2016
|
|
$
|
31,779
|
|
2017
|
|
|
127,116
|
|
2018
|
|
|
17,168
|
|
|
|
$
|
176,063
|
|
6
ALADDIN INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 2016
(Unaudited)
(5)
Subsequent Events
The Company has evaluated events subsequent to March 31, 2016 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 April 22, 2016, the Board of Directors of the Company decided to no longer pursue the previously disclosed contemplated business combination.
On April 30, 2016, the October 23, 2015 loan from Billion Reward matured without Billion Reward exercising the option to convert the note to shares of stock under the provisions of the Loan Agreement.
On May 5, 2016, the Company and Billion Reward amended the October Loan Agreement (October Loan Agreement), whereby Billion Reward agreed to make the October Loan a non-convertible loan and extend the maturity date to January 31, 2017.
(6)
Restatement of Previously Issued Condensed Financial Statements
The Company determined that a legal service fee, salaries, furniture and equipment, and the prepaid expenses were not properly recorded and the Company's previously issued financial statements needed to be restated. As such, the Company is restating in this Quarterly Report its financial statements for the quarterly period ended March 31, 2016.
Impact of the Restatement March 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2016
|
|
Balance Sheet Data (unaudited):
|
|
As Previously
Reported
|
|
|
Adjustment
|
|
|
As Restated
|
|
Prepaid expenses
|
|
$
|
35,311
|
|
|
|
3,825
|
|
|
$
|
39,136
|
|
Total Current Assets
|
|
|
38,795
|
|
|
|
3,825
|
|
|
|
42,620
|
|
Furniture and Equipment, net of accumulated depreciation
|
|
|
|
|
|
|
2,192
|
|
|
|
2,192
|
|
Total Fixed Assets
|
|
|
|
|
|
|
2,192
|
|
|
|
2,192
|
|
Total Assets
|
|
|
102,353
|
|
|
|
6,017
|
|
|
|
108,370
|
|
Related party notes payable
|
|
|
100,000
|
|
|
|
(6,160
|
)
|
|
|
93,840
|
|
Total Current Liabilities
|
|
|
326,486
|
|
|
|
(6,160
|
)
|
|
|
320,326
|
|
Additional paid-in capital
|
|
|
310,195
|
|
|
|
(14,150
|
)
|
|
|
296,045
|
|
Accumulated (deficit)
|
|
|
(538,876
|
)
|
|
|
26,327
|
|
|
|
(512,549
|
)
|
Total Stockholders Equity (Deficit)
|
|
|
(224,134
|
)
|
|
|
12,178
|
|
|
|
(211,956
|
)
|
Total Stockholders Equity (Deficit)
|
|
$
|
102,353
|
|
|
|
6,017
|
|
|
$
|
108,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2016
|
|
|
Nine Months Ended March 31, 2016
|
|
Statements of Operations Data (unaudited):
|
As Previously
Reported
|
|
Adjustment
|
|
|
As Restated
|
|
|
As Previously
Reported
|
|
Adjustment
|
|
As Restated
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Professional fees
|
$
|
54,590
|
|
|
|
|
$
|
54,590
|
|
|
$
|
103,320
|
|
(6,160
|
)
|
$
|
97,160
|
|
Payroll expenses
|
|
47,041
|
|
(14,150
|
)
|
|
|
32,891
|
|
|
|
90,921
|
|
(14,150
|
)
|
|
76,771
|
|
Other
|
|
10,673
|
|
(6,018
|
)
|
|
|
4,655
|
|
|
|
17,260
|
|
(6,018
|
)
|
|
11,242
|
|
Total Operating Expenses
|
|
133,273
|
|
(20,168
|
)
|
|
|
113,105
|
|
|
|
241,820
|
|
(26,328
|
)
|
|
215,492
|
|
Net Loss
|
$
|
(139,868
|
)
|
20,168
|
|
|
$
|
(119,700
|
)
|
|
$
|
(252,622
|
)
|
26,328
|
|
$
|
(226,294
|
)
|
7
ALADDIN INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 2016
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
March 31, 2016
|
|
Cash Flows Data (unaudited):
|
|
As Previously
Reported
|
|
|
Adjustment
|
|
|
As Restated
|
|
Net (Loss)
|
|
$
|
(252,622
|
)
|
|
|
26,328
|
|
|
$
|
(226,294
|
)
|
Depreciation expenses
|
|
|
|
|
|
|
67
|
|
|
|
67
|
|
Increase in prepaid expenses and deposits
|
|
|
(98,694
|
)
|
|
|
(3,825
|
)
|
|
|
(102,519
|
)
|
Net Cash (Used in) Operating Activities
|
|
|
(313,284
|
)
|
|
|
22,570
|
|
|
|
(290,714
|
)
|
Proceeds from loans, related party
|
|
|
100,000
|
|
|
|
(6,160
|
)
|
|
|
93,840
|
|
Additional paid-in capital
|
|
|
15,572
|
|
|
|
(14,150
|
)
|
|
|
1,422
|
|
Net Cash Provided by Financing Activities
|
|
$
|
315,573
|
|
|
|
(20,310
|
)
|
|
$
|
295,262
|
|
8
ITEM 2.