The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2018 and 2017
NOTE 1 ORGANIZATION AND DESCRIPTION OF BUSINESS
Corporate History
Alpha Investment Inc, formerly GoGo Baby, Inc. (the Company) was incorporated on February 22, 2013 under the laws of the State of Delaware to develop, create, manufacture and market, toys for small children which would be designed to attach to car seats and amuse and entertain children during a drive, without distracting the attention of the driver. The Company, however, encountered significant constraints in raising sufficient capital to fully implement its business plan.
On March 17, 2017, Omega Commercial Finance Corp. (Omega) purchased all 35,550,000 outstanding restricted shares of the Companys common stock (the Control Share Sale) from Malcolm Hargrave (35,000,000 shares), DTH International Corporation (500,000 shares) and Lisa Foster (50,000 shares) for aggregate consideration of $295,000. The Control Share Sale was consummated in a private transaction pursuant to a common stock purchase agreement entered between Omega and Mr. Hargrave, acting individually and on behalf of the other selling stockholders. Upon completion of the Control Share Sale, a Change in Control of the Company took place and the Company became a subsidiary of Omega. The Company did not elect to apply push-down accounting. In connection therewith, Mr. Hargrave resigned as the Companys sole director and officer and Omega, as the new majority stockholder of the Company, elected Timothy R. Fussell, Ph.D. as President, Chairman of the Board and a director and Todd C. Buxton, Omegas Chief Executive Officer, as Chief Executive Officer, Vice Chairman of the Board and a director.
In addition to the foregoing, new management elected to shift the focus of the Companys business to real estate and other commercial lending, which they believed offered better opportunities for shareholder growth. In connection therewith, on March 30, 2017, the Company filed a Certificate of Amendment to its Certificate of Incorporation with the Delaware Secretary of State changing its name from Gogo Baby, Inc. to Alpha Investment Inc. to better reflect the new business focus. The name change and a corresponding change in the Companys OTC markets trading symbol from GGBY to ALPC received approval from FINRA and became effective as of April 19, 2017.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain 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 revenues and expenses during the reporting periods presented. The Company is required to make judgments and estimates about the effect of matters that are inherently uncertain. The Company regularly evaluates estimates and assumptions related to the useful life and recoverability of long-lived assets, deferred income tax asset valuations and loss contingences. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. Although, we believe our judgments and estimates are appropriate, actual future results may be different; if different assumptions or conditions were to prevail, the results could be materially different from our reported results.
Cash and Cash Equivalents
Cash equivalents include short-term, highly liquid investments with maturities of three months or less at the time of acquisition.
Restricted Cash Held in Escrow
The Company has $2,500,099 of restricted cash held in escrow from the sale of commons stock to an investor that has the right to require the Company to repurchase the common stock for $2,500,000 through June 2019.
Loans Receivable, net
The Company records its investments in loans receivable at cost less unamortized costs of issuance and deferred origination fees. Origination fees collected at the time of investment are recorded against the loans receivable and amortized into net interest income over the lives of the related loans. Issuance costs incurred are capitalized along with the initial investment and amortized against net interest income over the lives of the related loans.
F-7
When a loan is placed on non-accrual status, the related interest receivable is reversed against interest income of the current period. If a non-accrual loan is returned to accrual status, the accrued interest existing at the date the residential loan is placed on non-accrual status and interest during the non-accrual period are recorded as interest income as of the date the loan no longer meets the non-accrual criteria.
Allowance for Loan Losses
The Company maintains an allowance for loan losses on its investments in real estate loans for estimated credit impairment. Managements estimate of losses is based on a number of factors including the types and dollar amounts of loans in the portfolio, adverse situations that may affect the borrowers ability to repay, prevailing economic conditions and the underlying collateral securing the loan. Additions to the allowance are provided through a charge to earnings and are based on an assessment of certain factors, which may indicate estimated losses on the loans. Actual losses on loans are recorded first as a reduction to the allowance for loan losses. Generally, subsequent recoveries of amounts previously charged off are recognized as income.
Estimating allowances for loan losses requires significant judgment about the underlying collateral, including liquidation value, condition of the collateral, competency and cooperation of the related borrower and specific legal issues that affect loan collections or taking possession of the property. Management determined that no allowance for loan losses was necessary as of December 31, 2018.
Property and Equipment
Property and equipment are stated at cost. Equipment and fixtures are depreciated using the straight-line method over the estimated asset lives, 5 years.
Income Taxes
The Company accounts for its income taxes in accordance with FASB Accounting Standards Codification (ASC) No. 740, "Income Taxes". Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax balances. Deferred tax assets and liabilities are measured using enacted or substantially enacted tax rates expected to apply to the taxable income in the years in which those differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the date of enactment or substantive enactment.
Accounting for Uncertainty in Income Taxes
The Company applies the provisions of ASC Topic 740-10-25, Income Taxes Overall Recognition (ASC Topic 740-10-25) with respect to the accounting for uncertainty of income tax positions. ASC Topic 740-10-25 clarifies the accounting for uncertainty in income taxes recognized in a companys consolidated financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740-10-25 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. As December 31, 2018, tax years since 2013 remain open for IRS audit. The Company has received no notice of audit from the Internal Revenue Service for any of the open tax years.
Revenue Recognition and Investment Income
Origination fees collected at the time of investment are recorded against the loans receivable and amortized into net interest income over the lives of the related loans. Issuance costs incurred are capitalized along with the initial investment and amortized against net interest income over the lives of the related loans.
When a loan is placed on non-accrual status, the related interest receivable is reversed against interest income of the current period. If a non-accrual loan is returned to accrual status, the accrued interest existing at the date the residential loan is placed on non-accrual status and interest during the non-accrual period are recorded as interest income as of the date the loan no longer meets the non-accrual criteria.
The Company suspends recognizing interest income when it is probable that the Company will be unable to collect all payments according to the contractual terms of the underlying agreements. Management considers all information available in assessing collectability. Collectability is measured on a receivable-by-receivable basis by either the present value of estimated future cash flows discounted at the effective rate, the observable market price for the receivable or the fair value of the collateral if the receivable is collateral dependent. Large groups of smaller balance homogeneous receivables, such as pre-settlement funding transactions, are collectively assessed for collectability. A receivable is charged off when in the Company's judgment, the receivable or portion of the receivable is considered uncollectible.
Payments received on past due receivables and finance receivables the Company has suspended recognizing interest income on are applied first to principal and then to accrued interest. Interest income on past due receivables and finance receivables, if received, is recorded using the cash basis method of accounting. Additionally, the Company generally does not resume recognition of interest income once it has been suspended.
F-8
Variable Interest Entity
The Company holds a 10% interest in Paris Med, of which the remaining 90% interest is held by Omega. Through December 31, 2018, the Company has provided 100% of the funding to Paris Med, which has provided a construction loan to a third party. This loan receivable is the sole asset of Paris Med. The Company determined that Paris Med was a variable interest entity based on various qualitative and quantitative factors including but not limited to: 1) financing of Paris Meds sole asset was received by the Company, which is disproportionate to the Companys ownership interest and 2) the Company and Omega, a related party, organized the entity for the purpose of facilitating the Companys activities. As of December 31, 2018, the Company is considered the primary beneficiary because it has provided substantially all of its financial support and is the only party at risk. As of December 31, 2018, Paris Med has total assets of $558,000, consisting solely of advances made pursuant to its third party construction loan agreement, and had no liabilities. See Note 3. For the year ended December 31, 2018, Paris Med had no activity other than the advancement of amounts pursuant to the construction loan. The Company will evaluate its investments in Paris Med each reporting period to determine if it is still the primary beneficiary, and if no longer considered the primary beneficiary, deconsolidate Paris Med in the period in which circumstances change or events occur causing a change in its assessment. The Company has not attributed any of its net loss or equity to non-controlling interest because Paris Meds sole asset is amounts owed to the Company, which is eliminated in consolidation, and there was no material income earned or losses incurred to date by Paris Med.
Fair Value
The carrying amounts reported in the balance sheet for cash and accounts payable approximate their estimated fair market value based on the short-term maturity of this instrument. The carrying value of the Companys loans receivable approximate fair value because their terms approximate market rates.
Net Loss Per Share
Basic loss per share is computed by dividing the net loss available to common stockholders by the weighted average number of common shares outstanding for the year. Dilutive loss per share reflects the potential dilution of securities that could share in the losses of the Company. In addition to 166,667 shares of redeemable common stock classified as temporary equity, 350,000 shares underlying common stock warrants were excluded from the computation of diluted loss per share for the years ended December 31, 2018 and 2017, because their impact was anti-dilutive.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents and loans receivable. The Company maintains its cash in bank and financial institution deposits that at times may exceed federally insured limits. The Company has not experienced any losses in such accounts through December 31, 2018. As of December 31, 2018, 52% of the Companys net loans receivables are with related parties.
Recently Issued Accounting Pronouncements
Recent accounting pronouncements that the Company has adopted or that will be required to adopt in the future are summarized below.
On January 1, 2018, the Company adopted the Accounting Standard Update (ASU) 2014-09
Revenue From Contracts with Customers
, which did not have a significant impact on its results of operations.
The Company's revenue is mainly derived from interest income on our investments in our loan receivable portfolio, which are not impacted by this standard.
In January 2016, the FASB issued ASU No. 2016-01,
Financial Instruments - Overall (Subtopic 825- 10), Recognition and Measurement of Financial Assets and Financial Liabilities
. The provisions of the update require equity investments to be measured at fair value with changes in fair value recognized in net income. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment. The update also simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment. It also eliminates the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are not public business entities, and eliminates the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value for financial instruments measured at amortized cost on the balance sheet. ASU No. 2016-01 requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes. It also requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. The update requires separate presentation of financial assets and financial liabilities by category and form on the balance sheet or the accompanying notes to the financial statements. In addition, the update clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entitys other deferred tax assets. For an emerging growth company, the amendments in the update are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. The adoption of this ASU is not expected to have a material impact on the Companys financial statements.
F-9
In February 2016, the FASB issued ASU 2016-02,
Leases (Topic 842), Conforming Amendments Related to Leases
. This ASU amends the codification regarding leases in order to increase transparency and comparability. The ASU requires companies to recognize lease assets and liabilities on the statement of condition and disclose key information about leasing arrangements. A lessee would recognize a liability to make lease payments and a right-of-use asset representing its right to use the leased asset for the lease term. For an emerging growth company, the amendments in the update are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2029. The adoption of this ASU is not expected to have a material effect on the Companys financial statements.
In June 2016, the FASB issued ASU 2016-13,
Financial Instruments Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments
. The amendments introduce an impairment model that is based on expected credit losses (ECL), rather than incurred losses, to estimate credit losses on certain types of financial instruments (ex. loans and held to maturity securities), including certain off-balance sheet financial instruments (ex. commitments to extend credit and standby letters of credit that are not unconditionally cancellable). The ECL should consider historical information, current information, and reasonable and supportable forecasts, including estimates of prepayments, over the contractual term. An entity must use judgment in determining the relevant information and estimation methods that are appropriate in its circumstances. Financial instruments with similar risk characteristics may be grouped together when estimating the ECL. The ASU also amends the current available for sale security impairment model for debt securities whereby credit losses relating to available for sale debt securities should be recorded through an allowance for credit losses. For an emerging growth company, the amendments in the update are effective for fiscal years beginning after December 15,2020, and interim periods within fiscal years beginning after December 15, 2021. The amendments will be applied through a modified retrospective approach, resulting in a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The Company is currently planning for the implementation of this accounting standard. It is too early to assess the impact this guidance will have on the Companys financial statements.
In August 2016, the FASB issued ASU No. 2016-15,
Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments
. The amendments in this ASU clarify the proper classification for certain cash receipts and cash payments, including clarification on debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, and proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies, among others. For an emerging growth company, the amendments in the update are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. The Company is currently assessing the amendment and does not anticipate it will have a material impact on the Companys Financial Statements.
The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
NOTE 3 LOANS RECEIVABLE, NET
Related Parties
Loan Agreement with Partners South Holdings LLC (Revolving Line of Credit)
On August 28, 2017 the Company entered into a loan agreement with Partners South Holdings LLC (Borrower), which is owned by Timothy R. Fussell, President, Chairman of the Board and a director of the Company, for a revolving line of credit in the maximum principal sum of $3,600,000 for the purpose of financing real property construction costs and working capital needs. The loan is secured in full by a first position lien on any and all Real Property in which the Borrower has any interest in for such purposes. The maturity date of the loan is August 31, 2022 at which time the entire principal balance of the Loan plus accrued interest thereon is due and payable. The fixed interest rate on the loan is 3.5% to be paid quarterly on the 1
st
day of the fiscal quarter. As of December 31, 2018 and 2017, the amount of $477,500 had been advanced on the loan. The origination fees of $180,000 due to the Company have been added to the balance due on the loan and recorded as a discount against the loan to be amortized into income through the maturity date. As of December 31, 2018 and 2017, the gross loan receivable balance is $657,500.
Loan Agreement with Partners South Properties Corporation (Revolving Line of Credit)
On August 28, 2017 the Company entered into a loan agreement with Partners South Properties Corporation (Borrower), which is owned by Timothy R. Fussell, President, Chairman of the Board and a director of the Company, for a revolving line of credit in the maximum principal sum of $5,000,000 for the purpose of financing real property construction costs and working capital needs. The loan is secured in full by a first position lien on any and all Real Property in which the Borrower has any interest in for such purposes. The maturity date of the loan is August 31, 2022 at which time the entire principal balance of the Loan plus accrued interest thereon is due and payable. The fixed interest rate on the loan is 3.5% to be paid quarterly on the 1
st
day of the fiscal quarter. As of December 31, 2018 and 2017, the gross loan receivable balance is $250,000.
F-10
Non-Binding Memorandum with Diamond Ventures Funds Management LLC
The Company and Diamond Ventures Funds Management LLC (DVFM) have executed a non-binding Memorandum of Understanding (MOU) in connection with ongoing discussions regarding a Share Exchange & Acquisition of Membership interest into DVFM that will facilitate up to a 40% acquisition of DVFM. The terms of the exchange are not public at this time. Upon the signing of the MOU, the Company received a $25,000 advance from the Business Line of Credit to be established as part of the MOU. The funds are to be exclusively used for business purposes solely related to accounting and legal fees.
The following is a summary of mortgages receivable as of December 31, 2018 and 2017:
|
|
|
|
| |
|
December 31,
2018
|
|
December 31,
2017
|
Principal Amount Outstanding
|
$
|
932,500
|
|
$
|
932,500
|
Unaccreted Discounts
|
|
(7,322)
|
|
|
(4,658)
|
Net Carrying Value
|
$
|
925,178
|
|
$
|
927,842
|
Third Parties
On May 2, 2018, the Company and Paris Med entered into agreements, pursuant to which Paris Med agreed to provide project financing in the amount of $158,216,541, to an unrelated third party consisting of three notes as follows:
1)
Construction financing in the amount of $90,204,328, maturing in 10 years, including the construction period, and accruing interest at an annual rate of 5.5% during the construction period, and 4.5% upon conversion to a permanent loan. As of December 31, 2018, Paris Med has made $558,000 of advances pursuant to the construction loan. The Company received loan origination fees, in the amount of $92,400, which is presented net of the underlying loan advances on the accompanying consolidated balance sheets and amortized into income over the terms of the underlying loans. During the year ended December 31, 2018, the Company amortized $6,049 of the discount and the loan is carried at $471,648, net of unamortized discount of $86,351.
2)
Equipment financing note in the amount of $24,715,986, payable monthly, accruing interest at an annual rate of 5.75%, and having terms approximating the lives of the underlying equipment. As of December 31, 2018, no amounts have been advanced pursuant to the equipment financing note.
3)
Operations financing, business line of credit in the amount of $23,932,625, accruing interest at an annual rate of 5.75%, maturing in 10 years. As of December 31, 2018, no amounts have been advanced pursuant to the line of credit.
4)
The notes are secured by the assignment of leases and fixed assets related to the project.
On September 26, 2018, the Company, through a newly formed, wholly-owned limited liability company, owns 100% of Jersey Walk Phase I, LLC (Jersey Walk), with all income going to the Company and has entered into a construction loan agreement with an unrelated party, CMT Developers, LLC (CMT), pursuant to which, CMT executed a promissory note in the favor of Jersey Walk in the amount of $73,496,002. This amount shall be advanced to CMT as required for the completion of the construction of and development of two multi-family residences in Lakewood, New Jersey. All amounts advanced under the construction loan agreement are secured by the construction project and due by September 30, 2028. As of December 31, 2018, $310,000 has been advanced by Jersey Walk to CMT pursuant to the construction loan agreement. Pursuant to the construction loan agreement, Jersey Walk is to receive a loan origination fee equal to 1.85% of the loan amount, or $1,259,192, of which $624,596 was received during the year ended December 31, 2018, and recorded as deferred loan origination fees to be amortized into income over the term of the loan.
The following is a summary of loans receivable as of December 31, 2018, and December 31, 2017:
|
|
|
|
| |
|
December 31,
2018
|
|
December 31,
2017
|
Principal Amount Outstanding
|
$
|
868,000
|
|
$
|
-
|
Unamortized Discounts
|
|
(694,551)
|
|
|
-
|
Net Carrying Value
|
$
|
173,449
|
|
$
|
-
|
NOTE 4 - PROVISION FOR INCOME TAXES
Realization of deferred tax assets is dependent upon sufficient future taxable income during the period that deductible temporary differences and carry-forwards are expected to be available to reduce taxable income. As the achievement of required future taxable income is uncertain, the Company recorded a valuation allowance. As of December 31, 2018 the Company had a net operating loss carry-forward of approximately $610,000.
F-11
The Company is subject to United States federal and state income taxes at an approximate rate of 34% through December 31, 2017 and 29% for the year ended December 31, 2018. Future taxable income is expected to be subject to an approximate rate of 21%. The reconciliation of the provision for income taxes at the United States federal statutory rate compared to the Companys income tax expense as reported is as follows:
|
|
|
|
| |
|
December 31,
2018
|
|
December 31,
2017
|
Statutory rates (federal and state)
|
|
29%
|
|
|
34%
|
Permanent differences
|
|
(24)%
|
|
|
(14)%
|
Valuation allowance change and change in tax rate
|
|
(5)%
|
|
|
(20)%
|
|
|
0%
|
|
|
0%
|
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred income taxes arise from temporary differences in the recognition of income and expenses for financial reporting and tax purposes. The significant components of deferred income tax assets and liabilities at December 31, 2018 and 2017 are as follows:
|
|
|
|
| |
|
December 31,
2018
|
|
December 31,
2017
|
Net operating loss carryforward
|
$
|
177,017
|
|
$
|
118,024
|
Valuation allowance
|
|
(177,017)
|
|
|
(118,024)
|
Net deferred income tax asset
|
$
|
-
|
|
$
|
-
|
The Company has recognized a valuation allowance for the deferred income tax asset since the Company cannot be assured that it is more likely than not that such benefit will be utilized in future years. The valuation allowance is reviewed annually. When circumstances change and which cause a change in managements judgment about the realizability of deferred income tax assets, the impact of the change on the valuation allowance is generally reflected in current income.
Current law limits the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs. Therefore, the amount available to offset future taxable income may be limited.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
Litigation
The Company is not presently involved in any litigation.
NOTE 6 GOING CONCERN
Future issuances of the Companys equity or debt securities will be required in order for the Company to continue to finance its operations and continue as a going concern. The Companys present revenues are insufficient to meet operating expenses. The financial statement of the Company have been prepared assuming that the Company will continue as a going concern, which contemplates, among other things, the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has an accumulated deficit of approximately $2.3 million as of December 31, 2018 and requires capital for its contemplated operational and marketing activities to take place. The Company's ability to raise additional capital through the future issuances of common stock is unknown. Securing additional financing, the successful development of the Company's contemplated plan of operations, and its transition, ultimately, to the attainment of profitable operations are necessary for the Company to continue operations. The ability to successfully resolve these factors raise substantial doubt about the Company's ability to continue as a going concern. The consolidated financial statements of the Company do not include any adjustments that may result from the outcome of these aforementioned uncertainties.
NOTE 7 RELATED PARTY TRANSACTIONS
1.
Related Party Loan
Since inception the Company received cash totaling $52,500 from Malcolm Hargrave, the previous director, in the form of a promissory note. The loan accrued interest at an annual rate of 4%. On March 17, 2017, Malcolm Hargrave signed an agreement to forgive all debt, including unpaid interest, totaling $55,715, which was recorded as a capital contribution during 2017.
F-12
2.
Consulting revenue
On May 1, 2017 the company billed
Omega Commercial Finance Corp., the 88.00% shareholder, $12,000 for consulting services in capital markets activities rendered, such as defining appropriate capital raising mechanisms and types of Offerings to utilize what best benefits the Companys verticals overall strategies to implement within the capital markets for growth and increased shareholder value, effective means to create relationships within the commercial real estate sector for target mergers and acquisitions, loan financing requests, distressed commercial real estate portfolios. There were no such billings during the year ended December 31, 2018.
3.
Broker fee
On August 28, 2017 the Company entered into a loan agreement with Partners South Holdings LLC (Borrower), which is owned by Timothy R. Fussell, President, Chairman of the Board and a director of the Company, for a revolving line of credit in the maximum principal sum of $3,600,000 for the purpose of financing real property construction costs and working capital needs. A broker fee was paid to Omega Commercial Finance Corp. in the amount of $170,000.
On August 28, 2017 the Company entered into a loan agreement with Partners South Properties Corporation (Borrower), which is owned by Timothy R. Fussell, President, Chairman of the Board and a director of the Company, for a revolving line of credit in the maximum principal sum of $5,000,000 for the purpose of financing real property construction costs and working capital needs. A broker fee was paid to Omega Commercial Finance Corp. in the amount of $250,000.
The Company did not earn any broker fees from related parties during the year ended December 31, 2018.
4.
Management Fee
During the year ended December 31, 2017, Omega Commercial Finance Corp was paid $150,000 in management fees pursuant to a corporate governance management agreement executed on June 1, 2017. Omega is to provide services related to facilitating the introduction of potential investors for compensation of no less than $150,000 per year, not to exceed $300,000 per year. Effective January 1, 2018, the Management Fee of $150,000 was waived by Omega Commercial Finance Corporation. The agreement remains in effect until cancelled by Omega. There were no such fees incurred for the year ended December 31, 2018.
5.
Loans receivable
The Company has extended lines of credit and loans to related parties. See Note 3.
6.
Investment in Paris MED CP, LLC
During the year ended December 31, 2018, the Company acquired a 10% interest in Paris MED CP, LLC, which is a commonly owned entity, for cash consideration of $100, and established a loan agreement to finance the construction of a medical park. On May 2, 2018, the Company and Paris Med entered into agreements, pursuant to which Paris Med agreed to provide project financing in the amount of $158,216,541, to an unrelated third party. See Note 3.
NOTE 8 STOCKHOLDERS EQUITY (DEFICIT)
Incentive Plan
The Companys Incentive Plan provides for equity incentives to be granted to its employees, executive officers or directors or to key advisers or consultants. Equity incentives may be in the form of stock options with an exercise price not less than the fair market value of the underlying Shares as determined pursuant to the Incentive Plan, restricted stock awards, other stock-based awards, or any combination of the foregoing. The Incentive Plan is administered by the board of directors, and 5,000,000 Shares are reserved for issuance pursuant to the exercise of awards under the Incentive Plan. The number of shares so reserved automatically adjusts upward on January 1 of each year, so that the number of shares covered by the Incentive Plan is equal to 15% of our issued and outstanding common stock. During the year ended December 31, 2017, the Company granted restricted stock awards of 3,625,000 shares to six consultants. As of December 31, 2018, there are 1,375,000 shares available for issuance under the plan.
F-13
Temporary Equity
On September 20, 2017, 166,667 shares of common stock were issued at a value of $15.00 per share to one company in exchange for cash of $2,500,000. Pursuant to the subscription agreement the investor has the right to require the Company to repurchase the shares for $2.5 million at anytime through December 2017. Accordingly, the amounts received are presented as a temporary equity as of December 31, 2018. In December 2017, the Company negotiated and amended its agreement with the investor to extend this right through May 15, 2018. As part of this extension, the investor was granted warrants to purchase 170,000 shares of common stock for an exercise price of $15.00 per share over a five-year term. Because the shares are classified as a temporary equity, and the investors rights to require repurchase of the shares initially expired in 2017 the Company recorded the fair value of these warrants were recorded as a discount against the proceeds to be amortized as interest expense through February 2018, the initial extension date. In March 2018, the Company entered into a third amendment to the subscription agreement, extending the option period to May 15, 2018. The option was further extended in May and June 2018. As consideration for the extensions, the Companys parent company, Omega Commercial Finance Corporation, agreed to issue to the investor, 65,000 shares of its Series Z preferred stock, and the Company agreed to reimburse the investor for $21,894 of legal fees incurred related to the extension. The Company estimated the fair value of the Series Z preferred stock based on recent sales for cash, and recorded additional discounts of $184,394, including the accrued legal fees, against the common stock to be amortized into interest expense through the extended expiration of the option in May 2018. In October 2018, the option period was further extended to November 19, 2018. As consideration for the extension, the Company agreed to allow the investor to direct the investment of the restricted cash into one more investment types, such stock, money market accounts or similar investments. The investor was also granted the right to withdrawal any restricted cash in excess of $2.5 million. In November 2018, the option was further extended to January 12, 2019. In March 2019, the option period was extended to June 2019. During the year ended December 31, 2018 and 2017, the Company amortized $1,104,724 and $240,427, respectively, of the discount. The cash, as of December 31, 2018 and 2017, is held in an escrow account and, as of December 31, 2017, the shares are carried at $1,575,281, net of unamortized discount of $924,719. There is no remaining unamortized discount as of December 31, 2018.
On November 27, 2017, 16,667 shares of Series 2018 Convertible Preferred stock were issued at a value of $15.00 per share to one entity in exchange for cash of $250,000. The shares have 350,000 warrants attached, each warrant entitling the holder to one additional share with an exercise date of up to 5 years from the issuance date of the shares. The preferred stock is mandatorily redeemable 10 years after issuance. The Company allocated $236,897 the proceeds from the sale of the preferred stock to the warrants, which was recorded as a discount against the preferred stock and is to be amortized as a deemed dividend through the 10-year redemption date. The balance of the preferred stock reflected in temporary equity as of December 31, 2018, was $39,346, net of unamortized discount of $211,233.
In November 2017, The Company also issued to the investor, 7,333 shares of Series 2018 Convertible Preferred Stock pursuant to the subscription agreement. As of December 31, 2018, the Company has yet to receive the proceeds for these shares as presents the par value of these shares as subscription receivable.
During the year ended December 31, 2018, the Company issued 20,000 shares of Series 2018 Convertible Preferred Stock to its chief executive officer as compensation for services provided. The Company estimated the fair value of the shares, based on recent sales for cash, of $300,000, as compensation expense for the year ended December 31, 2018.
Common Stock
On June 21, 2017 the company filed an S-8 with the SEC to register an additional 5,000,000 shares of common stock with a par value of $0.0001.
On June 22, 2017 3,625,000 shares of common stock were issued at a value of $0.004 per share to various individuals in exchange for consulting services. The fair value of the shares was based on the last quoted price on the Over-the-Counter Bulletin Board.
On September 5, 2017 56,667 shares of common stock were issued at a value of $15.00 per share to one individual in exchange for cash of $850,000.
On October 21, 2017, 4,333 shares of common stock were issued at a value of $15.00 per share to one individual in exchange for cash of $65,000.
On November 8, 2017, 3,333 shares of common stock were issued at a value of $15.00 per share to one individual in exchange for cash of $50,000.
Preferred Stock
In November 2017, the Companys board of directors authorized the issuance of 100,000 shares of Series A Convertible Preferred Stock, which have a par value of $15.00, provides its holders with no voting rights or dividends, entitles its holders to a liquidation preference over common stockholders equal to its par value, and allow for conversion into 2 shares of common stock per one share of 2018 Convertible Preferred Stock at the option of the holder for a period of one-year from issuance at the option of the holder.
On December 6, 2017, 167 shares of Series A Convertible Preferred Stock were issued at a value of $15.00 per share to one entity in exchange for cash of $2,500.
F-14
During the year ended December 31, 2018, the Company sold 1,000 shares of Series A Convertible Preferred Stock for cash consideration of $15,000.
Capital Contributions
On March 17, 2017, Malcolm Hargrave signed an agreement to forgive all debt, including unpaid interest, amounting $ 55,715, due to him from the Company. This was classified as capital contribution and recorded in additional paid -in capital.
On March 29, 2017, shareholders made a cash contribution to the Company of $10,000. This was classified as capital contribution and recorded in additional paid-in capital.
On September 28, 2017, Omega Commercial Finance Corp made a cash contribution to the company of $25,000. This was classified as capital contribution and recorded in additional paid-in capital.
During the year ended December 31, 2018, Omega Commercial Finance Corp, 80% parent company, made capital contributions to the Company totalling $320,990.
Common Stock Warrants
During the year ended December 31, 2017, in connection with the issuance of preferred stock, the Company issued warrants to purchase 350,000 shares for an exercise price of $15.00 over five years.
During the year ended December 31, 2017, in connection with the issuance of common stock, the Company issued warrants to purchase 170,000 shares for an exercise price of $15.00 over five years.
The fair value of the warrants issued during the year ended December 31, 2017 was estimated using the Black Scholes Method and the following assumptions: volatility 128% - 130%; expected term 5 Years; risk free rate 2.06% - 2.16%; dividend rate 0.0%
NOTE 9 SUBSEQUENT EVENTS
On January 31, 2019, the Company, through Jersey Walk Phase I, LLC, entered into a Sale of Membership Interest Agreement (the Purchase Agreement) with CMT Developers LLC (CMT). Pursuant to the Purchase Agreement, the Company acquired 100% of CMTs membership interests, in exchange for the issuance to CMT of 3,000,000 shares of common stock. Through its ownership of CMT, the Company now holds title to an approximately six-acre parcel of land in Elizabeth, New Jersey, on which 274 luxury apartments are under construction in Phase 1 of the development with an additional 400 units to be added in Phase II of the development. Furthermore, the property has a September 20, 2018 MAI As Is appraised value of $44,800,000. Moreover, the Company intends to complete a new appraisal for GAAP reporting requirements as a public company.
On March 11, 2019, the Company, through a newly formed LLC or Special Purpose Vehicle SPV called Alpha Mortgage Notes I, LLC executed an operating agreement with Alameda Partners LLC. Alameda Partners is a Utah Limited Liability Company that contributed $1,000,000 for 10% ownership of the SPV, and will be the managing member. The capital shall be used to implement the strategy of acquiring commercial real estate performing notes and support other related growth initiatives and assets acquisitions for the Company of which is positioning for its up-listing to the NYSE. The Members of Alameda Partners LLC have decades of experiences in the commercial real estate industry as property developers, owners, and managers and currently holds over $50-million in commercial real estate assets. They have been appointed as the Managing Members of the SPV, while ALPC controls and holds 90% ownership. The special purpose vehicle was organized to acquire the membership interests, develop, own, hold, sell, lease, transfer, exchange, re-lend, manage and operate the underlying assets and conduct activities related thereto the ownership of commercial real estate mortgage notes and REOs.
F-15