10-K: Alpha Investment Inc. Reports Losses in 2023, Cites Ongoing Concerns About Financial Stability

Alpha Investment Inc.'s 2023 10-K filing reveals continued net losses and substantial doubt about the company's ability to continue as a going concern.

Summary

• Alpha Investment Inc. reported net losses of $(536,666) for the year ended December 31, 2023, compared to $(3,123,461) in 2022.
• The company's accumulated deficit as of December 31, 2023, was $10,935,082.
• There is substantial doubt about the company's ability to continue as a going concern due to significant operating losses.
• The company plans to raise capital through private or public offerings of equity, debt, or joint venture partnerships.
• As of March 31, 2024, the company had 11,224,401 shares of common stock outstanding.
• The company intends to provide capital directly to borrowers seeking financing for commercial real estate properties.
• The company's strategy is to seek low leveraged first lien senior debt mortgage loans and high debt service structured financing programs.
• The company currently has no employees other than its executive officers and intends to rely on third parties for services such as loan origination and underwriting.
• The company has material weaknesses in its internal control over financial reporting.
• The company is involved in ongoing legal proceedings, including breach of contract matters and collection efforts.

Sentiment

Score: 3

Explanation: The document presents a negative outlook due to the company's net losses, accumulated deficit, and concerns about its ability to continue as a going concern. Material weaknesses in internal controls further contribute to the negative sentiment.

Positives

• The net loss decreased from $(3,123,461) in 2022 to $(536,666) in 2023, indicating a potential improvement in financial performance.
• The company is actively seeking to raise capital through various means, including equity, debt, and joint ventures.
• The company has access to a database of top commercial real estate mortgage bankers nationwide through organizations such as Strategic Alliance Mortgage, LLC (SAM).

Negatives

• The company has a significant accumulated deficit of $10,935,082.
• The report indicates substantial doubt about the company's ability to continue as a going concern.
• The company has material weaknesses in its internal control over financial reporting.
• The company is involved in ongoing legal proceedings, including matters with default judgments against the defendants.
• The company currently has no employees other than its executive officers.

Risks

• The company's ability to raise sufficient capital is uncertain, which could force it to curtail operations.
• The commercial real estate lending market is subject to volatility and may be adversely affected by economic conditions and other factors.
• The company faces competition from larger, more established commercial real estate lenders.
• The company's reliance on third-party service providers exposes it to risks related to their performance and expertise.
• The material weaknesses in internal control over financial reporting could lead to misstatements in the financial statements.
• Ongoing legal proceedings could result in significant financial liabilities.

Future Outlook

The company expects to offer financing across a broad-spectrum of asset backed and commercial real asset type collateral of any property type such as office, retail, industrial, multi-family, and hospitality and plans to raise capital through private or public offerings of equity, debt or other securities or through joint venture partnerships.

Management Comments

• Management believes the market for commercial mortgage loans will offer opportunities for the deployment of capital we raise.
• Management believes that our proposed business model is comparable to that currently being used by some of the top-level commercial real estate lender industry professionals.

Industry Context

The commercial real estate (CRE) industry has been facing headwinds since the onset of the COVID-19 pandemic, and many of the persistent challenges being endured by this important part of the U.S. economy will continue throughout 2024. There are bright spots in the CRE outlook mostly in the strong demand for multi-family (apartments), the digital economy (cell towers and server farms) and industrial (warehouse) property but a comprehensive re-assessment and revitalization of the CRE industry is needed.

Comparison to Industry Standards

• The company aims to compete with larger commercial real estate lenders like JP Morgan Chase, Bank of America, Goldman Sachs, and Apollo Commercial Real Estate.
• Unlike these larger institutions, Alpha Investment Inc. is not a banking institution and is not regulated like the larger banks or typical CMBS lenders in that we are not pigeon-holed into securitizing our assets.
• The company plans to develop a proprietary pricing and lending model for the commercial real estate finance debt and equity markets to gain a competitive advantage.

Legal Proceedings

• The company is currently involved in legal proceedings, including Steven T. Matthiesen and Joanna K. Matthiesen, jointly and severally v. Tmothy Fussell et al. and Fusion Lodgings LLC v. PLC et al.
• These cases involve breach of contract matters and collection efforts.

Related Party Transactions

• The Company has extended lines of credit and loans to related parties.
• Omega Commercial Finance Corp was accrued $150,000 in management fees pursuant to a corporate governance management agreement executed on June 1, 2017.
• During the year ended December 31, 2023, Omega International, a related party, purchased 1,500,000 shares of common stock for $1,500 or $.0001/share.

Stakeholder Impact

• Shareholders face the risk of further losses and potential dilution if the company raises capital through equity offerings.
• Employees (currently only executive officers) face uncertainty due to the company's financial instability.
• Customers (borrowers) may be affected by the company's ability to provide financing.
• Suppliers and creditors face the risk of non-payment if the company's financial situation does not improve.

Next Steps

• The company plans to raise capital through private or public offerings of equity, debt, or joint venture partnerships.
• The company intends to strengthen its internal control over financial reporting.
• The company intends to retain or use seasoned commercial real estate independent specialists to coordinate our loan underwriting model centered on mitigating loan-loss risks and to perform all other related and required third party due diligence.

Key Dates