Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. ALPHA WASTEWATER, INC. (1093928) 10-K published on Apr 16, 2012 at 1:34 pm
Reporting Period: Dec 30, 2011
Many of these factors are beyond our control and may decrease the market price of our common shares, regardless of our operating performance. We cannot make any predictions or projections as to what the prevailing market price for our common shares will be at any time, including as to whether our common shares will sustain their current market prices, or as to what effect that the sale of shares or the availability of common shares for sale at any time will have on the prevailing market price.
Shareholders should be aware that, according to SEC Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include (1) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (2) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (3) boiler room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (4) excessive and undisclosed bid-ask differential and markups by selling broker-dealers; and (5) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with consequent investor losses. Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behaviour of the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to our securities. The occurrence of these patterns or practices could increase the volatility of our share price.
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of it financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported as charges or credits to income. For option-based derivative financial instruments, The Company uses the Black-Scholes option-pricing model to value the derivative instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.
The Company analyzed the conversion option for derivative accounting consideration under ASC 815-15 and determined that the instrument qualified as a derivative liability due to there being no explicit limit on the number of shares to be delivered upon settlement of the conversion options. The instrument is measured at fair value at the end of each reporting period or termination of the instrument with the change in fair value recorded to earnings. The fair value of the embedded conversion option resulted in a full discount to the note on October 28, 2011 of $42,500. The discount is being amortized over the term of the note to interest expense. During 2011, the Company recorded amortization expense of $9,444 on the convertible note. See Note 10 for additional information on the derivative liability.
On November 9, 2010, Silicon South completed a share exchange agreement with China Wastewater, Inc., a technology company formed in Nevada. Pursuant to the share exchange agreement, China Wastewater assumed Silicon’s outstanding debt of $130,000 at November 9, 2010 and Silicon issued 40,000,000 common shares in exchange for all of outstanding shares of China Wastewater, which shares represented 84.54 percent of the combined company’s outstanding common stock after the transaction. As the result of the transaction, China Wastewater obtained control of Silicon, thereby is the accounting acquirer in the transaction, and the transaction was recognized as the reverse acquisition of Silicon by China Wastewater. On November 9, 2010, the effective date of the share exchange agreement, Silicon had 7,315,500 shares of its common stock issued and outstanding. Upon completion of the share exchange agreement Silicon issued 40,000,000 shares of restricted common stock in exchange for all of China’s 40,000,000 shares issued and outstanding. The Company’s name was changed from “Silicon South, Inc.” to “Alpha Wastewater, Inc.” on August 15, 2011.
Weibiao Xu, Director (appointed on July 15, 2011) Mr. Xu earned his Bachelor of Civil Engineering Degree in 1990 from Nanchang University, China and his Masters Degree in Monetary Banking in 1999 from Shanghai University of Finance and Economics, China. In 1990, Mr. Xu started his career with the China Construction Bank as an economist; from 1993 to 2005, he served as a branch director, a deputy director and the director of the China Construction Bank in the City of Kunshan. Since 2005, Mr. Xu’s substantial investment and management experience led him to work for private investment firms, acting as the CEO of Kunshan Jiahong Investment and Guaranty Co., Ltd. of China from 2005 to 2006 and as President of Kunshan Jiahong Investment & Guaranty Co., Ltd. of China from, 2006 to 2010. From 2010 to the present, Mr. Xu has been the Director of Weibiao Xu and Associates, a People’s Republic of China Funding Group (“CFG”). Mr. Xu was appointed as a director because of his knowledge as an economist, and his knowledge and understanding of the investment market especially his experiences in the Chinese finance and investment community.