UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-K

x	ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the fiscal year ended:  July 31, 2013

¨	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

333-154894  

Alternative Energy Partners, Inc.

(Exact Name of Registrant as Specified in its Charter)

Florida		26-2862564
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification Number)

 

301 Yamato Road, Boca Raton, FL 33431

 (Address of Principal Executive Offices)

 

(561)-244-2532

(Registrant’s Telephone Number, Including Area Code)

Securities registered under Section 12(b) of the Exchange Act:

    None

 

Securities registered under Section 12(g) of the Exchange Act:

Common Stock, par value $0.001 per share

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.     

     ¨ YES         x NO

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    

       ¨  YES               NO

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 past 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.    

x YES        ¨ NO

Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K            x

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “accelerated filer and large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.        

Large accelerated filer		[  ]		Accelerated filer		[  ]
Non-accelerated filer		[  ]		Smaller reporting company		[X]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act)   

YES  [  ]  NO [X]

 

The Aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter, January 31, 2013 was $324,914.

 

There were 2,165,721,003 shares of the $.001 par value common stock outstanding as of November 13, 2013.

Table of Contents

 

ALTERNATIVE ENERGY PARTNERS, INC.

FORM 10-K 

Fiscal Year Ended July 31, 2013

 

Part I					1
Item 1.		Business		1
Item 1A.		Risk Factors		3
Item 1B.		Unresolved Staff Comments		10
Item 2.		Properties		10
Item 3.		Legal Proceedings		10
Item 4.		Removed and reserved		11
Part II					11
Item 5.		Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities		11
Item 6.		Selected Financial Data		12
Item 7.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		12
Item 7A.		Quantitative and Qualitative Disclosures About Market Risk		15
Item 8.		Financial Statements and Supplementary Data		16
Item 9.		Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		17
Item 9A.		Controls and Procedures		17
Item 9B.		Other information		18
Part III					18
Item 10.		Directors, Executive Officers and Corporate Governance		18
Item 11.		Executive Compensation		18
Item 12.		Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		19
Item 13.		Certain Relationships and Related Transactions, and Director Independence		20
Item 14.		Principal Accountant Fees and Services		20
Item 15.		Exhibits and Financial Statement Schedules		21
		Signatures		21
		Certifications

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ALTERNATIVE ENERGY PARTNERS, INC.

FORWARD LOOKING STATEMENTS

This annual report on Form 10-K contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause the results of the Company to differ materially from those expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including any projections of revenue, expenses, earnings or losses from operations or investments, or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing. The risks, uncertainties and assumptions referred to above include risks that are described from time to time in our Securities and Exchange Commission, or the SEC, reports filed before this report.

The forward-looking statements included in this annual report represent our estimates as of the date of this annual report. We specifically disclaim any obligation to update these forward-looking statements in the future. Some of the statements in this annual report constitute forward-looking statements, which relate to future events or our future performance or financial condition. Such forward-looking statements contained in this annual report involve risks and uncertainties.

 

We use words such as anticipates, believes, expects, future, intends and similar expressions to identify forward-looking statements. Our actual results could differ materially from those projected in the forward-looking statements for any reason. We caution you that forward-looking statements of this type are subject to uncertainties and risks, many of which cannot be predicted or quantified.

The following analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes thereto contained elsewhere in this Form 10-K, as well as the risk factors included in this Form 10-K under Item 1A.

PART I

ITEM 1.	BUSINESS

Alternative Energy Partners, Inc. (the “Company” or “AEGY”) is a development stage company. The Company was organized under the laws of the State of Florida on April 28, 2008.  We formed our Company for the purpose of establishing renewable fuel sources initially within the State of Florida.  Ethanol was our initial intended product and we intend to establish other alternative energy products and services including, but not limited to, solar-thermal energy production, energy management controls, and more.  Our intended original products, while not technically difficult to produce, had to meet all regulatory requirements prior to being marketed. Moreover, there were a multitude of competitive products already in the market place. Due to the competitive nature of the market and our continuing capital requirements, we expanded our initial plan to include solar and thermal projects, with the acquisition of Sunarias Corporation on May 18, 2010 and Shovon, LLC on July 9, 2010, and the acquisitions of SkyNet Energy Systems, Inc. a Nevada corporation in the business of financing and establishing domestic companies’ renewable energy projects in Central and Eastern Europe.  In May, 2012, we acquired Clarrix Energy, LLC, which provided consultative and brokerage services to businesses of all sizes. The objective of those services was to decrease utility costs in as many ways as possible for every client. .  Due to limited working capital, we were unable to implement the planned activities or Shovon, SkyNet and Sunarias, and closed those operations during the quarter ended January 31, 2013 in order to concentrate our efforts and limited funds on Clarrix and the new acquisitions we have planned. In May, 2013, we also closed Clarrix Energy, Inc. due to lack of working capital and decided to change our business direction.  The closing of the subsidiaries during the fiscal year ended July 13, 2013 has been reported in the financial statements included in this Annual Report as a loss from discontinued operations.

During the fiscal year ended July 31, 2013, we changed our business focus due to difficulty in securing working capital for our energy subsidiaries, and other competitive reasons.  We are now engaged in providing support services for medical marijuana collectives based initially in California.

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Current Business of the Company

Through April 30, 2013, we were a holding company engaged through our subsidiary, Clarrix Energy, LLC, in the business of energy production and management. In May 2013, we closed Clarrix Energy, LLC and recognized a loss from our initial investment in the company in 2012, reported as a loss from discontinued operations on the financial statements included in this Annual Report on Form 10-K..

In May, 2013, we acquired the PharmaJanes^TM marketing operation and related intellectual property from iEquity Corp. and changed ours business model to focus purely in the medical marijuana marketing space.  We will be changing our name to PharmaJanes, Inc during the current fiscal year. PharmaJanes™ is currently developing a web and phone application that allows individuals to place orders for medical marijuana through a website and smart phone application anywhere such a transaction is legal in the United States.  The purpose of PharmaJanes™ is to give patients a simple ordering platform, while allowing local collectives to service the orders in compliance with state and local laws and ordinances.  PharmaJanes^TM will act solely as an expediter and processor of the orders, and the fulfillment function will be done entirely within the particular state of residence of the purchaser, by licensed collectives or other licensed medical marijuana providers in that state.

  

PharmaJanes™ currently has over $5M in annual marketing contracts in place for this service and will be the exclusive point-of sale for the collectives under contract.  ^.  Since the acquisition, we have established our new web site and ordering platform at www.pharmajanes.com, which currently is available only in California for California residents.  The acquisition of the PharmaJanes intellectual property and business was closed on May 31, 2013 in exchange for our promissory note payable to iEquity Corp. in the amount of $50,000, due in three years at 8 percent interest and convertible after six months at the election of the Holder at 50 percent of the closing market price of our common stock at the date of closing, May 31, 2013, or a conversion price of $0.00105.

We also acquired the Simple Prepay^TM merchant payment solution from iEquity Corp in May 2013.  The Simple Prepay^TM system was developed to offer dispensaries, collectives, and delivery services for medical cannabis, a convenient payment solution. Medical marijuana patients will be able to upload funds onto their Simple Prepay^TM account via a smart phone application or via a website, allowing them to purchase their medical cannabis needs with privacy and simplicity.  Our website at www.simpleprepay.com is in the development stages and is expected to go live shortly. The acquisition of the Simple Prepay^TM intellectual property and business was closed on May 31, 2013 in exchange for our promissory note payable to iEquity Corp. in the amount of $30,000, due in three years at 8 percent interest and convertible after six months at the election of the Holder at 50 percent of the closing market price of our common stock at the date of closing, May 31, 2013, or a conversion price of $0.00105.

We also have signed an agreement with SK3 Group, Inc.  to become the exclusive on-line and smart phone ordering and marketing platform for collectives managed through the SK3 Group system.  Members of the collectives managed by SK3 Group will soon be able to order their medical cannabis needs through PharmaJanes^TM    We issued a total of 100 million shares of our common stock to SKTO for this exclusive agreement, valued at $30,000 based on the closing market price for the stock on the date of the Agreement, and also undertook to register the planned distribution of the shares by SKTO to its shareholders.  We have not yet filed the agreed to registration statement due to cost factors and the need to complete the fiscal year end audit, but expect to file the registration statement as soon as this Annual Report has been completed and filed..

Combined with the PharmaJanes™ on-line and smart phone ordering platform, medical marijuana patients will be able to order, process and pay for their authorized needs, in a simple, safe and secure ordering and payment interface. Local licensed collectives or other licensed medical marijuana providers in the home state of the end user, will then fulfill the orders provided through this new system, in full compliance with state and local laws and ordinances.  We will act solely as a background ordering and payment service, and will not be cultivating, shipping, storing, delivering, or otherwise handling the medical marijuana, all of which will be handled directly by collectives or other providers licensed and authorized in the state in which the delivery is both authorized and completed, currently limited to California.

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iEquity Corp. is a Florida corporation based in California which became our controlling shareholder as of  May 1, 2013 with the purchase of our outstanding voting preferred stock from an existing shareholder.  The voting preferred stock carries a cumulative vote equal to 51 percent of all classes of stock entitled to vote on any matter submitted for vote to the shareholders.

ITEM  1A .	RISK FACTORS

 

You should carefully consider the risks described below together with all of the other information included in this report before making an investment decision with regard to our securities.  The statements contained in or incorporated herein that are not historic facts are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. If any of the following risks actually occurs, our business, financial condition or results of operations could be harmed. In that case, you may lose all or part of your investment.

Risks Relating to Our Business

 

OUR MANAGEMENT HAS LIMITED EXPERIENCE IN MANAGING AND OPERATING A PUBLIC COMPANY. ANY FAILURE TO COMPLY OR ADEQUATELY COMPLY WITH FEDERAL SECURITIES LAWS, RULES OR REGULATIONS COULD SUBJECT US TO FINES OR REGULATORY ACTIONS, WHICH MAY MATERIALLY ADVERSELY AFFECT OUR BUSINESS, RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

Our current management has limited experience managing and operating a public company and relies in many instances on the professional experience and advice of third parties including its attorneys and accountants. Failure to comply or adequately comply with any laws, rules, or regulations applicable to our business may result in fines or regulatory actions, which may materially adversely affect our business, results of operation, or financial condition and could result in delays in the development of an active and liquid trading market for our stock.

IF WE FAIL TO MAINTAIN AN EFFECTIVE SYSTEM OF INTERNAL CONTROL OVER FINANCIAL REPORTING, OUR ABILITY TO ACCURATELY AND TIMELY REPORT OUR FINANCIAL RESULTS OR PREVENT FRAUD MAY BE ADVERSELY AFFECTED AND INVESTOR CONFIDENCE AND THE MARKET PRICE OF OUR COMMON STOCK MAY BE ADVERSELY IMPACTED.

 

As directed by Section 404 of the Sarbanes-Oxley Act of 2002, or SOX 404, the Securities and Exchange Commission adopted rules requiring public companies to include a report of management on the company’s internal controls over financial reporting in their annual reports, including Form 10-K. Under current SEC rules, our management may conclude that our internal controls over our financial reporting are not effective.  Even if our management concludes that our internal controls over financial reporting are effective, our independent registered public accounting firm may issue a report that is qualified if it is not satisfied with our controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us.

THE LACK OF EXPERIENCED ACCOUNTING STAFF MAY LEAD TO MATERIAL WEAKNESS IN THE PREPARATION OF OUR FINANCIALS.

A material weakness may occur in the preparation of our financials due to insufficient resources in our outsourced accounting and finance department, resulting in (i) an ineffective review, monitoring and analysis of schedules, reconciliations and financial statement disclosures, and (ii) the misapplication of U.S. GAAP and SEC reporting requirements. Due to the effect of the lack of resources, including a lack of resources that are appropriately qualified in the areas of U.S. GAAP and SEC reporting, this could result in an adverse reaction in the financial marketplace due to a loss of investor confidence in the reliability of the Company’s financial information.

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THE DEVELOPMENT OF OUR PRODUCTS MAY BE SLOWER THAN PROJECTED.

The development of our products and services and the implementation of such products in customer environments may take longer than expected. The sales cycle for contemplated products is long and the adoption rates are unknown, thus it may take longer for us to achieve meaningful revenue or meet our projections.

OUR PLANNED EXPANSION COULD BE DELAYED OR ADVERSELY AFFECTED BY, AMONG OTHER THINGS, DIFFICULTIES IN OBTAINING SUFFICIENT FINANCING, TECHNICAL DIFFICULTIES, OR HUMAN OR OTHER RESOURCE CONSTRAINTS. 

Our planned expansion could be delayed or adversely affected by, among other things, difficulties in obtaining sufficient financing, technical difficulties, or human or other resource constraints. Moreover, the costs involved in these projects may exceed those originally contemplated. Costs savings and other economic benefits expected from these projects may not materialize as a result of any such project delays, cost overruns or changes in market circumstances. Failure to obtain intended economic benefits from these projects could adversely affect our business, financial condition and operating performances.

 

WE MAY ENCOUNTER SUBSTANTIAL COMPETITION IN OUR BUSINESS AND ANY FAILURE TO COMPETE EFFECTIVELY COULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.

 

For every product we sell or service we provide, we may encounter strong competitors. We anticipate that our competitors will continue to expand and seek to obtain additional market share with competitive price and performance characteristics. Aggressive expansion of our competitors or the entrance of new competitors into our markets could have a material adverse effect on our business, results of operations and financial condition.

OUR LIMITED OPERATING HISTORY MAY NOT SERVE AS AN ADEQUATE BASIS TO JUDGE OUR FUTURE PROSPECTS AND RESULTS OF OPERATIONS.

Our limited operating history may not provide a meaningful basis for evaluating our business. We only entered into our current line of business in May 2013. We cannot guarantee that we will maintain profitability or that we will not incur net losses in the future. We will continue to encounter risks and difficulties that companies at a similar stage of development frequently experience, including the potential failure to:

· obtain sufficient working capital to support our expansion;

· expand our product offerings and maintain the high quality of our products;

· manage our expanding operations and continue to fill customers’ orders on time;

· maintain adequate control of our expenses allowing us to realize anticipated income growth;

· implement our product development, sales, and acquisition strategies and adapt and modify them as needed;

· successfully integrate any future acquisitions; and

· anticipate and adapt to changing conditions in the solar and thermal power industry resulting from changes in

 government regulations, mergers and acquisitions involving our competitors, technological developments and other significant competitive and market dynamics.

If we are not successful in addressing any or all of the foregoing risks, our business may be materially and adversely affected.

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WE NEED TO MANAGE GROWTH IN OPERATIONS TO MAXIMIZE OUR POTENTIAL GROWTH AND ACHIEVE OUR EXPECTED REVENUES AND OUR FAILURE TO MANAGE GROWTH WILL CAUSE A DISRUPTION OF OUR OPERATIONS RESULTING IN THE FAILURE TO GENERATE REVENUES AT LEVELS WE EXPECT.

 

In order to maximize potential growth in our current and potential markets, we believe that we must expand our operations. This expansion will place a significant strain on our management and our operational, accounting, and information systems. We expect that we will need to continue to improve our financial controls, operating procedures, and management information systems. We will also need to effectively train, motivate, and manage our employees. Our failure to manage our growth could disrupt our operations and ultimately prevent us from generating the revenues we expect.

WE CANNOT ASSURE YOU THAT OUR GROWTH STRATEGY WILL BE SUCCESSFUL WHICH MAY RESULT IN A NEGATIVE IMPACT ON OUR GROWTH, FINANCIAL CONDITION, RESULTS OF OPERATIONS AND CASH FLOW.

 

One of our strategies is to grow through increasing our product lines. However, there are many obstacles to expand our product lines. We cannot, therefore, assure you that we will be able to successfully overcome such obstacles and establish our products in any additional markets. Our inability to implement this sustainable growth strategy successfully may have a negative impact on our growth, future financial condition, results of operations or cash flows.

IF WE NEED ADDITIONAL CAPITAL TO FUND OUR GROWING OPERATIONS, WE MAY NOT BE ABLE TO OBTAIN SUFFICIENT CAPITAL AND MAY BE FORCED TO LIMIT THE SCOPE OF OUR OPERATIONS.

 

If adequate additional financing is not available on reasonable terms, we may not be able to carry out our corporate strategy and we would be forced to modify our business plans accordingly. There is no assurance that additional financing will be available to us.

 

In connection with our growth strategies, we may experience increased capital needs and accordingly, we may not have sufficient capital to fund our future operations without additional capital investments. Our capital needs will depend on numerous factors, including (i) our profitability; (ii) the release of competitive products by our competition; (iii) the level of our investment in research and development; and (iv) the amount of our capital expenditures, including acquisitions. We cannot assure you that we will be able to obtain capital in the future to meet our needs.

In recent years, the securities markets in the United States have experienced a high level of price and volume volatility, and the market price of securities of many companies have experienced wide fluctuations that have not necessarily been related to the operations, performances, underlying asset values or prospects of such companies. For these reasons, our securities can also be expected to be subject to volatility resulting from purely market forces over which we will have no control. If we need additional funding we will, most likely, seek such funding in the United States and the market fluctuations affect on our stock price could limit our ability to obtain equity financing.

 

If we cannot obtain additional funding, we may be required to: (i) limit our expansion; (ii) limit our marketing efforts; and (iii) decrease or eliminate capital expenditures. Such reductions could materially adversely affect our business and our ability to compete.

 

Even if we do find a source of additional capital, we may not be able to negotiate terms and conditions for receiving the additional capital that are favorable to us. Any future capital investments could dilute or otherwise materially and adversely affect the holdings or rights of our existing shareholders. In addition, new equity or convertible debt securities issued by us to obtain financing could have rights, preferences and privileges senior to the Units. We cannot give you any assurance that any additional financing will be available to us, or if available, will be on terms favorable to us.

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NEED FOR ADDITIONAL EMPLOYEES.

The Company’s future success also depends upon its continuing ability to attract and retain highly qualified personnel. Expansion of the Company’s business and operation will require additional managers and employees with industry experience, and the success of the Company will be highly dependent on the Company’s ability to attract and retain skilled management personnel and other employees. There can be no assurance that the Company will be able to attract or retain highly qualified personnel. Competition for skilled personnel in the medical marijuana industry is significant. This competition may make it more difficult and expensive to attract, hire and retain qualified managers and employees.

THE LOSS OF THE SERVICES OF OUR KEY EMPLOYEES, PARTICULARLY THE SERVICES RENDERED BY OUR SOLE OFFICER AND DIRECTOR, COULD HARM OUR BUSINESS.

Our success depends to a significant degree on the services rendered to us by our key employees.  If we fail to attract, train and retain sufficient numbers of these qualified people, our prospects, business, financial condition and results of operations will be materially and adversely affected. In particular, we are heavily dependent on the continued services of our sole officer and director. The loss of any key employees, including members of our senior management team, and our inability to attract highly skilled personnel with sufficient experience in our industry could harm our business.

WE ARE HIGHLY DEPENDENT ON TECHNOLOGY.

Our business and our results of operations is highly dependent on technology. Our business faces many technology related risks.  Infringements of our intellectual property could adversely affect our ability to compete. Any patent applications we may file may be rejected in whole or in part in the United States or in other jurisdictions around the world. We may have to defend ourselves against claims of intellectual property infringement, which could be very expensive for us and harm our business and financial condition. We may be a party to lawsuits in the course of our business. Litigation can be expensive, lengthy, and disruptive to normal business operations. Moreover, the results of complex legal proceedings are difficult to predict. An unfavorable resolution of a particular lawsuit could have a material adverse effect on our business, operating results, or financial condition.

THERE IS SUBSTANTIAL COMPETITION IN THE MEDICAL MARIJUANA INDUSTRY, MANY OF WHICH ARE MORE HIGHLY CAPITALIZED THAN US, WHICH COULD LIMIT OUR ABILITY TO SUCCESSFULLY IMPLEMENT OUR BUSINESS PLAN.

There is substantial competition in the medical marijuana industry.  Existing and new competitors may continue to improve their products and to introduce new products with competitive price and performance characteristics.   Our competitors may have the advantage of established relationships within the industry and they may be more highly capitalized.  In addition, we cannot assure that additional competitors will not enter our existing markets, or that we will be able to compete successfully against existing or new competition.

OUR FUTURE SUCCESS IS DEPENDENT ON INTELLECTUAL PROPERTY OWNED BY US.

The Company may not be able to protect unauthorized use of intellectual property held by us and take appropriate steps to enforce our rights.  Although management does not believe that its services infringes on the intellectual rights of others, there is no assurance that the Company may not be the target of infringement or other claims.  Such claims, even if not true, could result in significant legal and other costs associated and may be a

distraction to management.  We plan to rely on a combination of copyright, trade secret, trademark laws and non-disclosure and other contractual provisions to protect our proprietary rights.  Because the policing of intellectual and intangible rights may be difficult and the ideas and other aspects underlying our business model may not in all cases be protectable under intellectual property laws, there can be no assurance that we can prevent competitors from marketing the same or similar products and services.

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DIFFICULTIES IN ESTABLISHING A NEW PRODUCT

We are an early stage company, bringing to market an advanced and unproven technology. We may not be able to raise sufficient financing to effect our business plan and deliver products and services that are accepted by customers. If we cannot find adequate capital on reasonable terms, investors will face a significant risk of losing their investments in their entirety.

WE WILL INCUR SIGNIFICANT COSTS TO ENSURE COMPLIANCE WITH UNITED STATES CORPORATE GOVERNANCE AND ACCOUNTING REQUIREMENTS.

We will incur significant costs associated with our public company reporting requirements, costs associated with newly applicable corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002 and other rules implemented by the Securities and Exchange Commission. We expect all of these applicable rules and regulations to significantly increase our legal and financial compliance costs and to make some activities more time consuming and costly. We also expect that these applicable rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these newly applicable rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.

Risks Relating To Our Industry

There is substantial competition in the medical marijuana industry.  Existing and new competitors may continue to improve their products and to introduce new products with competitive price and performance characteristics.   Our competitors have the advantage of established relationships within the industry and they may be more highly capitalized.  In addition, we cannot assure that additional competitors will not enter our existing markets, or that we will be able to compete successfully against existing or new competition.

The Company may not be able to protect unauthorized use of intellectual property licensed to us and take appropriate steps to enforce its rights.  Although management does not believe that its services infringes on the intellectual rights of others, there is no assurance that the Company may not be the target of infringement or other claims.  Such claims, even if not true, could result in significant legal and other costs associated and may be a distraction to management.  We plan to rely on a combination of copyright, trade secret, trademark laws and non-disclosure and other contractual provisions to protect our proprietary rights.  Because the policing of intellectual and intangible rights may be difficult and the ideas and other aspects underlying our business model may not in all cases be protectable under intellectual property laws, there can be no assurance that we can prevent competitors from marketing the same or similar products and services.

While legalized in California and in certain other states, the sale and distribution of marijuana, even for medical use only, is not permitted under federal law and is highly regulated within each state otherwise authorizing the use of medical marijuana.  Although we currently limit our operations to California, there is no assurance that our operations will not be affected or disrupted by state or federal regulatory activities, even though we do not actually hold, sell, distribute or otherwise deal in any marijuana products and act solely as an ordering, marketing and payment support service for legal California medical marijuana collectives.

Risks Related To Our Securities

OUR COMMON STOCK IS QUOTED ON THE OTC BULLETIN BOARD WHICH MAY HAVE AN UNFAVORABLE IMPACT ON OUR STOCK PRICE AND LIQUIDITY.

Our Common Stock is quoted on the OTC Bulletin Board.  The OTC Bulletin Board is a significantly more limited market than the New York Stock Exchange or NASDAQ system.  The quotation of our shares on the OTC Bulletin

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Board may result in a less liquid market available for existing and potential stockholders to trade shares of our common stock, could depress the trading price of our common stock and could have a long-term adverse impact on

our ability to raise capital in the future.

THERE IS LIMITED LIQUIDITY ON THE OTCBB.

When fewer shares of a security are being traded on the OTCBB, volatility of prices may increase and price movement may outpace the ability to deliver accurate quote information.  Due to lower trading volumes in shares of

our Common Stock, there may be a lower likelihood of one’s orders for shares of our Common Stock being executed, and current prices may differ significantly from the price one was quoted at the time of one’s order entry.

IN ORDER TO RAISE SUFFICIENT FUNDS TO EXPAND OUR OPERATIONS, WE MAY HAVE TO ISSUE ADDITIONAL SECURITIES AT PRICES WHICH MAY RESULT IN SUBSTANTIAL DILUTION TO OUR SHAREHOLDERS.

If we raise additional funds through the sale of equity or convertible debt, our current stockholders’ percentage ownership will be reduced. In addition, these transactions may dilute the value of our common shares outstanding. We may have to issue securities that may have rights, preferences and privileges senior to our common stock. We cannot provide assurance that we will be able to raise additional funds on terms acceptable to us, if at all. If future financing is not available or is not available on acceptable terms, we may not be able to fund our future needs, which would have a material adverse effect on our business plans, prospects, results of operations and financial condition.

OUR ARTICLES OF INCORPORATION PROVIDE FOR INDEMNIFICATION OF OFFICERS AND DIRECTORS AT OUR EXPENSE AND LIMIT THEIR LIABILITY WHICH MAY RESULT IN A MAJOR COST TO US AND HURT THE INTERESTS OF OUR SHAREHOLDERS BECAUSE CORPORATE RESOURCES MAY BE EXPENDED FOR THE BENEFIT OF OFFICERS AND/OR DIRECTORS.

Our articles of incorporation and applicable Florida law provide for the indemnification of our directors, officers, employees, and agents, under certain circumstances, against attorney’s fees and other expenses incurred by them in any litigation to which they become a party arising from their association with or activities on our behalf. We will also bear the expenses of such litigation for any of our directors, officers, employees, or agents, upon such person’s written promise to repay us if it is ultimately determined that any such person shall not have been entitled to indemnification. This indemnification policy could result in substantial expenditures by us which we will be unable to recoup.

We have been advised that, in the opinion of the Securities and Exchange Commission (“SEC”), indemnification for liabilities arising under federal securities laws is against public policy as expressed in the Securities Act of 1933, as amended (the “Securities Act”), and is, therefore, unenforceable. In the event that a claim for indemnification for liabilities arising under federal securities laws, other than the payment by us of expenses incurred or paid by a director, officer or controlling person in the successful defense of any action, suit or proceeding, is asserted by a director, officer or controlling person in connection with the securities being registered, we will (unless in the opinion of our counsel, the matter has been settled by controlling precedent) submit to a court of appropriate jurisdiction, the question whether indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. The legal process relating to this matter if it were to occur is likely to be very costly and may result in us receiving negative publicity, either of which factors is likely to materially reduce the market and price for our shares, if such a market ever develops.    

CURRENTLY, THERE IS A LIMITED PUBLIC MARKET FOR OUR SECURITIES, AND THERE CAN BE NO ASSURANCES THAT ANY SIGNIFICANT PUBLIC MARKET WILL EVER DEVELOP OR THAT OUR COMMON STOCK WILL NOT BE SUBJECT TO SIGNIFICANT PRICE FLUCTUATIONS.

We have a trading symbol for our common stock, AEGY, which permits our shares to be quoted on the OTCBB. However, our stock has been thinly traded since approval of our quotation on the over-the-counter bulletin board by FINRA in September, 2008. Consequently, there can be no assurances as to whether:

8

· any significant market for our shares will develop;

·

the prices at which our common stock will trade; or

· the extent to which investor interest in us will lead to the development of an active, liquid trading market.  Active trading markets generally result in lower price volatility and more efficient execution of buy and sell orders for investors.

In addition, our common stock is unlikely to be followed by any market analysts, and there may be few institutions acting as market makers for our common stock. Either of these factors could adversely affect the liquidity and trading price of our common stock. Until our common stock is fully distributed and an orderly market develops in our common stock, if ever, the price at which it trades is likely to fluctuate significantly. Prices for our common stock will be determined in the marketplace and may be influenced by many factors, including the depth and liquidity of the market for shares of our common stock, developments affecting our business, including the impact of the factors referred to elsewhere in these risk factors, investor perception of us and general economic and market conditions.  No assurances can be given that an orderly or liquid market will ever develop for the shares of our common stock.

WE ARE NOT LIKELY TO PAY CASH DIVIDENDS IN THE FORESEEABLE FUTURE.

 

We currently intend to retain any future earnings for use in the operation and expansion of our business. Accordingly, we do not expect to pay any cash dividends in the foreseeable future, but will review this policy as circumstances dictate.

WE MAY NOT BE ABLE TO EFFECTIVELY CONTROL AND MANAGE OUR GROWTH.

If our business and markets grow and develop as we expect, it may be necessary for us to finance and manage expansion in an orderly fashion. In addition, we may face challenges in managing expanding product offerings. Such eventualities will increase demands on our existing management and facilities. Failure to manage this growth and expansion could interrupt or adversely affect our operations and cause production backlogs, longer product development time frames and administrative inefficiencies.

WE ARE SUBJECT TO THE PENNY STOCK RULES WHICH WILL MAKE OUR SECURITIES MORE DIFFICULT TO SELL.

We may be subject in the future to the SEC’s “penny stock” rules if our securities sell below $5.00 per share. Penny stocks generally are equity securities with a price of less than $5.00. The penny stock rules require broker-dealers to deliver a standardized risk disclosure document prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson, and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information must be given to the customer orally or in writing prior to completing the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction; the broker dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. The penny stock rules are burdensome and may reduce purchases of any offerings and reduce the trading activity for our securities. As long as our securities are subject to the penny stock rules, the holders of such securities may find it more difficult to sell their securities.

9

A DEPOSITORY “CHILL” HAS BEEN PLACED ON OUR COMMON SHARES WHICH WILL SUBSTANTIALLY REDUCE THE LIQUISITY OF OUR STOCK

We have been advised by the Depository Trust Company that it has placed a “chill” on the electronic holding and trading of our common shares, which will result in increased difficulty in depositing our common stock for trading and in the actual trading of our common shares, which will have to be cleared manually as a result of the chill. While we are working with legal counsel to remove this chill, there is no assurance if we will be able to do so, and no estimate if and when the chill might be removed.

OUR CONTROLLING SHAREHOLDER MAY TAKE ACTIONS THAT CONFLICT WITH YOUR INTERESTS.

iEquity Corp. holds all of the issued shares of Series A Convertible Preferred Stock, which carries voting power equal to 51 percent of the total voting power of all classes of voting stock. In this case, all of our officers and directors may be elected by iEquity Corp. which will be able to exercise control over all

matters requiring shareholder approval, including the election of directors, amendment of our certificate of incorporation and approval of significant corporate transactions, and they will have significant control over our management and policies. The directors elected by this shareholder will be able to significantly influence decisions affecting our capital structure. This control may have the effect of delaying or preventing changes in control or changes in management, or limiting the ability of our other shareholders to approve transactions that they may deem to be in their best interest. For example, our controlling shareholder will be able to control the sale or other disposition of our operating businesses and subsidiaries to another entity.

ITEM 1B.	UNRESOLVED STAFF COMMENTS

 

None.

ITEM 2.	PROPERTIES

We use a corporate office located at 301 Yamato Road, Boca Raton, FL 33431 for administrative services and our telephone number there is (305) 244-2532.  There are currently no proposed programs for the renovation, improvement or development of the facilities currently used.

We do not currently have policies regarding the acquisition or sale of real estate assets primarily for possible capital gain or primarily for income.  We do not presently hold any investments or interests in real estate, investments in real estate mortgages or securities of or interests in persons primarily engaged in real estate activities.

ITEM 3 .	LEGAL PROCEEDINGS

As of the date of this Report, neither we nor any of our officers or directors are involved in any litigation either as plaintiffs or defendants. As of this date, there is not any threatened or pending litigation against us or any of our officers or directors.

10

ITEM 4.	REMOVED AND RESERVED

PART II

 

ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES

The Company’s common stock has traded in the over-the-counter market on the OTC Bulletin Board system (“OTCBB”) under the symbol “AEGY.OB” The following table sets forth the range of high and low closing prices of the Common Stock as reported by the OTCBB for each fiscal quarter since trading commenced. 

	Closing Prices
	High	Low
FISCAL 2013
First Quarter (August 1, 2012 through October 31, 2012)	$0.0011	$0.0003
Second Quarter (November 1, 2012 through January 31, 2013)	$0.0013	$0.0003
Third Quarter (February 1, 2013 through April 30, 2013)	$0.0008	$0.0003
Fourth Quarter (May 1, 2013 through July 31, 2013)	$0.0050	$0.0002
FISCAL 2012
First Quarter (August 1, 2011 through October 31, 2011)	$0.0400	$0.0075
Second Quarter (November 1, 2011 through January 31, 2012)	$0.0180	$0.0015
Third Quarter (February 1, 2012 through April 30, 2012)	$0.0032	$0.0012
Fourth Quarter (May 1, 2012 through July 31, 2012)	$0.0020	$0.0010

 

On July 31, 2013, the closing price of the Company’s Common Stock as reported by the OTCBB was $0.0032 and there were approximately 136 shareholders of record.

Dividends

 

We have not paid any cash dividends on our common stock and do not anticipate paying any such cash dividend in the foreseeable future. Earnings, if any, will be retained to finance future growth. We may issue shares of our

common stock in private or public offerings to obtain financing, capital or to acquire other businesses that can improve our performance and growth. Issuance and/or sales of substantial amounts of common stock could adversely affect prevailing market prices in our common stock.

In May, 2013, we entered into a marketing agreement with SK3 Group, Inc. (OTC Pink SKTO) and issued 100 million shares of our common stock, valued at $30,000 to SKTO under this agreement. SKTO intends to distribute these shares to its shareholders as a dividend, and we have agreed to register the shares for this distribution as soon as our financial statements have been audited for the year ended July 31, 2013 and this Annual Report on Form 10-K has been filed.

 

Common Stock

 

At July 31, 2013, there were 2,500,000,000 shares of our common stock, par value $0.001, authorized, and 826,402,041 common shares issued and outstanding, held by 136 active shareholders.

As of November 13, 2013, there were approximately 140 beneficial owners of our common stock with 2,165,721,003 shares issued and outstanding.

11

ITEM 6.	SELECTED FINANCIAL DATA

 

Not required.

 

ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion includes certain forward-looking statements within the meaning of the safe harbor protections of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements that include words such as “believe,” “expect,” “should,” “intend,” “may,” “anticipate,” “likely,” “contingent,” “could,” “may,” or other future-oriented statements, are forward-looking statements. Such forward-looking statements include, but are not limited to, statements regarding our business plans, strategies and objectives, and, in particular, statements referring to our expectations regarding our ability to continue as a going concern, generate increased market awareness of, and demand for, our current products, realize profitability and positive cash flow, and timely obtain required financing. These forward-looking statements involve risks and uncertainties that could cause actual results to differ from anticipated results. The forward-looking statements are based on our current expectations and what we believe are reasonable assumptions given our knowledge of the markets; however, our actual performance, results and achievements could differ materially from those expressed in, or implied by, these forward-looking statements. Factors within and beyond our control that could cause or contribute to such differences include, among others, our critical capital raising efforts in an uncertain and volatile economical environment, our ability to maintain relationship with strategic companies, our cash preservation and cost containment efforts, our ability to retain key management personnel, our relative inexperience with advertising, our competition and the potential impact of technological advancements thereon, the impact of changing economic, political, and geo-political environments on our business, as well as those factors discussed elsewhere in this Form 10-K and in “Item 1 - Our Business”.

Readers are urged to carefully review and consider the various disclosures made by us in this report and those detailed from time to time in our reports and filings with the United States Securities and Exchange Commission that attempt to advise interested parties of the risks and factors that are likely to affect our business.

Our Business

 

Alternative Energy Partners, Inc. (the “Company” or “AEGY”) was organized under the laws of the State of Florida on April 28, 2008. We formed our Company for the purpose of establishing renewable fuel sources initially within the State of Florida. Ethanol was our initial intended product and we intend to establish other alternative energy products and services including, but not limited to, solar-thermal energy production, energy management controls, and more. Our intended original products, while not technically difficult to produce, must meet all regulatory

requirements prior to being marketed. Moreover, there are a multitude of competitive products already in the market place. Due to the competitive nature of the market and our continuing capital requirements, we expanded our initial plan to include solar and thermal projects, with the acquisition of Sunarias Corporation on May 18, 2010 and Shovon, LLC on July 9, 2010, and the later acquisition of Clarrix Energy, LLC.

Due to limited working capital, we were unable to implement the planned activities or Shovon, SkyNet and Sunarias, and closed those operations during the quarter ended January 31, 2013in order to concentrate our efforts and limited funds on Clarrix and the new acquisitions we have planned. In May, 2013, we also closed Clarrix Energy, Inc. due to lack of working capital and decided to change our business direction.  The closing of the subsidiaries during the fiscal year ended July 13, 2013 has been reported in the financial statements included in this Annual Report as a loss from discontinued operations.

During the fiscal year ended July 31, 2013, we changed our business focus due to difficulty in securing working capital for our energy subsidiaries, and other competitive reasons.  We are now engaged in providing support services for medical marijuana collectives based initially in California.

12

Current Business of the Company

Through April 30, 2013, we were a holding company engaged through our subsidiary, Clarrix Energy, LLC, in the business of energy production and management. In May 2013, we closed Clarrix Energy, LLC and recognized a loss from our initial investment in the company in 2012, reported as a loss from discontinued operations on the financial statements included in this Annual Report on Form 10-K..

In May, 2013, we acquired the PharmaJanes^TM (a development stage company) marketing list and related intellectual property from iEquity Corp. and changed the business model to focus purely in the medical marijuana marketing space.  We will be changing our name to PharmaJanes, Inc during the current fiscal year. PharmaJanes™ is currently developing a web and phone application that allows individuals to place orders for medical marijuana through a website and smart phone application anywhere such a transaction is legal in the United States.  The purpose of PharmaJanes™ is to give patients a simple ordering platform, while allowing local collectives to service the orders in compliance with state and local laws and ordinances.  PharmaJanes^TM will act solely as an expediter and processor of the orders, and the fulfillment function will be done entirely within the particular state of residence of the purchaser, by licensed collectives or other licensed medical marijuana providers in that state.

  

PharmaJanes™ currently has over $5M in annual marketing contracts in place for this service and will be the exclusive point-of sale for the collectives under contract.  ^.  Since the acquisition, we have established our new web site and ordering platform at www.pharmajanes.com, which currently is available only in California for California residents.  The acquisition of the PharmaJanes intellectual property and business was closed on May 31, 2013 in exchange for our promissory note payable to iEquity Corp. in the amount of $50,000, due in three years at 8 percent interest and convertible after six months at the election of the Holder at 50 percent of the closing market price of our common stock at the date of closing, May 31, 2013, or a conversion price of $0.00105.

We also acquired the Simple Prepay^TM merchant payment solution from iEquity Corp in May 2013.  The Simple Prepay^TM system was developed to offer dispensaries, collectives, and delivery services for medical cannabis, a convenient payment solution. Medical marijuana patients will be able to upload funds onto their Simple Prepay^TM account via a smart phone application or via a website, allowing them to purchase their medical cannabis needs with privacy and simplicity.  Our website at www.simpleprepay.com is in the development stages and is expected to go live shortly. The acquisition of the Simple Prepay^TM intellectual property and business was closed on May 31, 2013 in exchange for our promissory note payable to iEquity Corp. in the amount of $30,000, due in three years at 8 percent interest and convertible after six months at the election of the Holder at 50 percent of the closing market price of our common stock at the date of closing, May 31, 2013, or a conversion price of $0.00105.

We also have signed an agreement with SK3 Group, Inc.  to become the exclusive on-line and smart phone ordering and marketing platform for collectives managed through the SK3 Group system.  Members of the collectives managed by SK3 Group will soon be able to order their medical cannabis needs through PharmaJanes^TM    We issued a total of 100 million shares of our common stock to SKTO for this exclusive agreement, valued at $30,000 based on the closing market price for the stock on the date of the Agreement, and also undertook to register the planned distribution of the shares by SKTO to its shareholders.  We have not yet filed the agreed to registration statement due to cost factors and the need to complete the fiscal year end audit, but expect to file the registration statement as soon as this Annual Report has been completed and filed.

Combined with the PharmaJanes™ on-line and smart phone ordering platform, medical marijuana patients will be able to order, process and pay for their authorized needs, in a simple, safe and secure ordering and payment interface. Local licensed collectives or other licensed medical marijuana providers in the home state of the end user, will then fulfill the orders provided through this new system, in full compliance with state and local laws and ordinances.  We will act solely as a background ordering and payment service, and will not be cultivating, shipping, storing, delivering, or otherwise handling the medical marijuana, all of which will be handled directly by collectives or other providers licensed and authorized in the state in which the delivery is both authorized and completed, currently limited to California.

13

Despite the recent acquisition of the assets of the PharmaJanes™ on-line and smart phone ordering platform and the Simple Prepay^TM merchant payment solution for a total of $80,000, paid for by promissory notes, we have reported an impairment loss of the full amount of the acquisition cost  for the fiscal year ended July 31, 2013, because we did not obtain an independent valuation of the intellectual property and intangible assets acquired and because we have not yet generated any revenues from these assets. While we believe this is the correct accounting treatment of these assets, we still plan to develop the underlying business using the intangible assets and intellectual property and still believe the business opportunity is substantial.

Employees

As of May 17, 2013, Mario Barrera has been our Chairman, President and CEO and sole officer and director.  He is not an employee of the company and is not paid as an employee.  Our former sole officer and director, Michael Gelmon, resigned for personal reasons effective May 1, 2013.  He was also not an employee of the Company and was not paid as an employee.

Currently, we have no paid employees, full or part-time, and rely on paid consultants to provide necessary services.

Acquisitions

We are pursuing acquisitions of other companies compatible with our current business model, but have not identified any target acquisitions as of the date of this report.

Results of Operations for the Years Ended July 31, 2013 and 2012.

 

For the years ended July 31, 2013 and 2012, the Company had minimal revenues.  Since inception, the Company has incurred cumulative net losses of $10,743,287.  For the years ended July 31, 2013 and 2012, the Company had net losses of $3,617,969 and $794,300, respectively.  Our activities have been attributed primarily to start up and business development.

 

For the years ended July 31, 2013 and 2012, we incurred operating expenses of $676,659 and $438,847, respectively.  The increases relate primarily to consulting expenses, impairment loss, and administrative fees.

Liquidity and Capital Resources

 

As shown in the accompanying financial statements, for the years ended July 31, 2013 and 2012 and since April 28, 2008 (date of inception) through July 31, 2013, the Company has had net losses of $3,617,969, $794,300 and $10,743,287, respectively. As of July 31, 2013, the Company had not emerged from the development stage. In view of these matters, the Company’s ability to continue as a going concern is dependent upon the Company’s ability to begin operations and to achieve a level of profitability. Since inception, the Company has financed its activities principally from issuances of convertible notes payable and the sale of public equity securities. The Company intends on financing its future development activities and its working capital needs largely from the sale of public equity securities with some additional funding from other traditional financing sources.

 

As previously mentioned, since inception, we have financed our operations largely from the sale of common stock and issuance of convertible notes. From inception through July 31, 2013we raised cash of $114,450 through private placements of common stock financings. During November 2008, our Form S-1 Registration Statement became effective and we raised $100,000 through common stock sales. The proceeds from the sale of this common stock have been used for general and administrative expenses. In addition, since inception of the Company, we have received $459,550 in proceeds from issuances of convertible notes.

We have incurred significant net losses and negative cash flows from operations since our inception.  As of July 31, 2013, we had an accumulated deficit of $10,743,287 and a working capital deficit of $2,841,151.

 

We anticipate that cash used in product development and operations, especially in the marketing, production and sale of our products, will increase significantly in the future.

14

If we are unable to secure additional financing to cover our operating losses until breakeven operations can be achieved, there is no assurance that we will be able to continue as a going concern.

Off-Balance Sheet Arrangements

We currently do not have any off-balance sheet arrangements.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make 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 period. Actual results could differ from those estimates.  We believe that the following critical policies affect our more significant judgments and estimates used in preparation of our financial statements.

The Company has incurred deferred offering costs in connection with raising additional capital through the sale of its common stock. These costs are capitalized and charged against additional paid-in capital when common stock is issued. If there is no issuance of common stock, the costs incurred are charged to operations.

 

Research and development costs are charged to operations when incurred and are included in operating expenses.

Contractual Obligations

The Company had consulting agreements with companies for various advisement services. Crystal Falls Investments, LLC has provided acquisition and related services under an agreement calling for payment of $10,000 per month for a 24 month period ended September 30, 2012. As of July 31, 2012, a total of $70,000 in accounts payable was accrued under this agreement, and the balance was converted to convertible promissory notes.

The Company also has entered into a consulting agreement with Novation Services, Inc., a financial and legal consulting firm, to provide financial, accounting, legal, administrative, HR, supply chain management, corporate governance, SEC compliance and similar services to the Company for a monthly fee of $10,000. Novation Services, Inc., also provides contract principal accounting officer and corporate counsel services to the Company under its agreement and also provides access to software and servers owned by it, and related office support.  We have also entered into a consulting arrangement with iEquity Corp. effective July 31, 2013 for marketing and development services to be provided in connection with our on-line and mobile ordering systems, payable at the rate of $50,000 per month.

Recent Accounting Pronouncements:

There are no recently issued accounting pronouncements or standards updates that we have yet to adopt that are expected to have a material effect on our financial position, results of operations, or cash flows.

ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCOLSURES ABOUT MARKET RISK

 

Not applicable.

 

15

ITEM 8.	FINANCIAL STATEMENTS

Alternative Energy Partners, Inc.

(A Development Stage Company)

Financial Statements

July 31, 2013 and 2012

CONTENTS

	Page(s)
Report of Independent Registered Certified Public Accounting Firm for the year Ended July 31, 2013	F-1
Report of Independent Registered Certified Public Accounting Firm for the year Ended July 31, 2012	F-2
Consolidated Balance Sheets - As of July 31, 2013 and 2012	F-3
Consolidated Statements of Operations -	F-4
For the years ended July 31, 2013 and 2012 and the period from
April 28, 2008 (inception) through July 31, 2013
Consolidated Statements of Changes in Stockholders’ Deficit	F-5
For the period from April 28, 2008 (inception) to July 31, 2013
Consolidated Statements of Cash Flows -	F-7
For the years ended July 31, 2013 and 2012 and for the period from
April 28, 2008 (inception) to July 31, 2013
Notes to Consolidated Financial Statements	F-8

16

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

Alternative Energy Partners, Inc. (a development stage company)

We have audited the accompanying consolidated balance sheet of Alternative Energy Partners, Inc. (the "Company", “AEGY”) (a development stage company) as of July 31, 2013, and the related statements of operations, stockholders’ deficit and cash flows for the year then ended and for the period from April 28, 2008 (Inception) through July 31, 2013. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. The consolidated financial statements of the Company as of July 31, 2012 was audited by other auditors, whose report dated February 11, 2013, expressed an audit opinion on those financial statements and included an explanatory paragraph regarding the Company’s ability to continue as a going concern.

We conducted our audit in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company was not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of July 31, 2013, and the results of its operations and its cash flows for the year then ended and for the period from April 28, 2008 (Inception) through July 31, 2013, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has had no revenues and income since inception. These conditions, among others, raise substantial doubt about the Company’s ability to continue as a going concern. Management's plans concerning these matters are also described in Note 1, which includes the raising of additional equity financing or merger with another entity. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Anton & Chia, LLP

Newport Beach, CA

November 13, 2013

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Alternative Energy Partners, Inc.

We have audited the accompanying consolidated balance sheet of Alternative Energy Partners, Inc. and subsidiaries (a development stage company) as of July 31, 2012 and the related consolidated statements of operations, stockholders’ equity, and cash flows for the year then ended and for the period from April 28, 2008, inception, to July 31, 2012. Alternative Energy Partners, Inc.’s management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Alternative Energy Partners, Inc. and subsidiaries as of July 31, 2012, and the results of their operations and their cash flows for the year then ended and for the period from April 28, 2008, inception, to July 31, 2012, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the company is in the development stage, has had minimal operations to date, has an accumulated deficit, and negative working capital. These conditions raise substantial doubt about its ability to continue as a going concern. Management’s plans regarding these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Moss, Krusick & Associates, LLC

Winter Park, Florida

December 6, 2012

 

F-2

The accompanying notes are an integral part of these consolidated financial statements.

F-3

The accompanying notes are an integral part of these consolidated financial statements.

F-4

The accompanying notes are an integral part of these consolidated financial statements.

F-6

The accompanying notes are an integral part of these consolidated financial statements.

F-7

Alternative Energy Partners, Inc. and Subsidiaries

(A development stage company)

Notes to Consolidated Financial Statements

July 31, 2013 and 2012

Note 1 Nature of Operations and Summary of Significant Accounting Policies

Nature of Operations

Alternative Energy Partners, Inc. (the “Company”) was incorporated in the State of Florida on April 28, 2008.

The Company is involved in the medical marijuana support market In addition to its existing operations, the Company is searching to acquire emerging growth companies to meet growing demands worldwide in the same sector.

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) as promulgated in the United States of America.

Principles of Consolidation

The accompanying consolidated financial statements include Alternative Energy Partners, Inc. and its wholly-owned subsidiaries, Sunarias Corporation, Shovan, LLC, and Clarrix, Energy, LLC for the period ended July 31, 2012. All intercompany balances and transactions were eliminated in that consolidation.  During the year ended July 31, 2013, the Company closed all of its subsidiaries and discontinued there operations.  The resulting loss is reported as a Loss for Discontinued Operations.  For the year ended July 31, 2103, the results of operations and other financial results are reported for the Company only, without subsidiaries.

Development Stage

The Company has complied with Financial Accounting Standards (“ASC”) 915 and Securities Exchange Commission Guide 7 for its characterization of the Company as a development stage company. The Company has generated minimal revenues since inception.

Risks and Uncertainties

The Company operates in an industry that is subject to rapid technological change and significant government regulation. The Company's operations will be subject to significant risk and uncertainties including financial, operational, technological, regulatory and other risks associated with a development stage company, including the potential risk of business failure.

Use of Estimates

 

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. A significant estimate in 2013 and 2012 included a 100% valuation allowance for deferred tax assets arising from net operating losses incurred since inception.

Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ materially from estimates.

F-8

Alternative Energy Partners, Inc. and Subsidiaries

(A development stage company)

Notes to Consolidated Financial Statements

July 31, 2013 and 2012

Note 1 Nature of Operations and Summary of Significant Accounting Policies (continued)

Cash and Cash Equivalents

The Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents.  At July 31, 2013 and 2012, respectively, the Company had no cash equivalents.

Note 1 Nature of Operations and Summary of Significant Accounting Policies (continued)

The Company minimizes its credit risk associated with cash by periodically evaluating the credit quality of its primary financial institution. The balance at times may exceed federally insured limits.  At July 31, 2013 and 2012, respectively, there were no balances that exceeded the federally insured limit.

Earnings per Share

In accordance with accounting guidance now codified as Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)Topic 260, “Earnings per Share,”  Basic earnings per share (“EPS”) is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period, excluding the effects of any potentially dilutive securities. Diluted EPS gives effect to all dilutive potential of shares of common stock outstanding during the period including stock options or warrants, using the treasury stock method (by using the average stock price for the period to determine the number of shares assumed to be purchased from the exercise of stock options or warrants), and convertible debt or convertible preferred stock, using the if-converted method. Diluted EPS excludes all dilutive potential of shares of common stock if their effect is anti-dilutive. The computation of basic and diluted loss per share for the period from April 28, 2008 (inception) to July 31, 2013 is equivalent since the Company has had continuing losses. The Company also has no common stock equivalents.

Stock-Based Compensation

Generally, all forms of share-based payments, including stock option grants, restricted stock grants and stock appreciation rights, are measured at their fair value on the awards’ grant date, and based on the estimated number of awards that are ultimately expected to vest. The expense resulting from share-based payments is recorded as a component of consulting and general and administrative expense.  The Company has not issued any stock-based compensation during the year ended July 31, 2013.

Non-Employee Stock Based Compensation

Share-based payment awards issued to non-employees for services rendered are recorded at either the fair value of the services rendered or the fair value of the share-based payment, whichever is more readily determinable. The Company has not issued any non-employee stock-based compensation during the year ended July 31, 2013.

Impairment of Long-Lived Assets

 

The Company reviews its long-lived assets for impairment when events or changes in circumstances indicate that the book value of an asset may not be recoverable. The Company evaluates, at each balance sheet date, whether events and circumstances have occurred which indicate possible impairment. The Company uses an estimate of future undiscounted net cash flows of the related asset or group of assets over the estimated remaining life in measuring whether the assets are recoverable. If it is determined that an impairment loss has occurred based on expected cash flows, such loss is recognized in the statement of operations.

F-9

Alternative Energy Partners, Inc. and Subsidiaries

(A development stage company)

Notes to Consolidated Financial Statements

July 31, 2013 and 2012

Note 1 Nature of Operations and Summary of Significant Accounting Policies (continued)

Income Taxes

The Company accounts for income taxes under the FASB ASC No. 740, Income Taxes. 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 bases and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which these temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some or all of the deferred tax assets may not be realized.

The Company records and reviews quarterly its uncertain tax positions. The Company recognizes the financial statement effects of a tax position when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. The Company measures a tax position that meets the more-likely-than-not recognition threshold as the largest amount of tax benefit that is greater than 50 percent likely of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. In its measurement of a tax position that meets the more-likely-than-not recognition threshold, the Company considers the amounts and probabilities of the outcomes that could be realized upon settlement using the facts and circumstances and information available at the reporting date.

Intangible Asset

As part of the acquisition of Sunarias Corporation on May 18, 2010, the Company acquired a solar generation technology asset which was identified as a definite-lived intangible asset. The Company recorded this technology asset as an allocation of purchase price based on the fair value. The intangible asset is amortized on a straight-line basis over an estimated 10 year life. The Company evaluates for impairment when events and circumstances warrant in accordance with ASC Topic 350-30, Intangibles: Goodwill and Other, and an impairment loss will be recognized if the carrying amount of an intangible asset is not recoverable and its carrying amount exceeds its fair value. After an impairment loss is recognized, the adjusted carrying amount of the intangible asset will be its new accounting basis. The Company performed its impairment test as of 7/31/12 and determined that the remaining amortized cost as of 7/31/12 was impaired and should be written off. The balance of the intangible asset, net of accumulated amortization of $12,500, was $85,000 at July 31, 2011. Amortization expense was zero and $10,000 for each of the years ended July 31, 2013 and 2012, respectively.

Goodwill

Goodwill represents the excess of the cost of an acquired business over the net amounts assigned to assets acquired and liabilities assumed. The Company recorded goodwill in conjunction with its acquisitions of Shovon, LLC in July 2010, SkyNet Energy Systems in October 2010, and Clarrix Energy, LLC in May 2012. As required, the Company performs its goodwill impairment test at least annually or more frequently if there is an indication of impairment. The Company expected to perform its first goodwill impairment test in July 2013 for the Clarrix Energy, LLC acquisition.   During the year ended July 31, 2013, the Company closed all of its existing subsidiary operations and changed its corporate business direction, as a result of which, it has recorded a loss from discontinued operations as of July 31, 2013, including all of the recorded good will.

F-10

Alternative Energy Partners, Inc. and Subsidiaries

(A development stage company)

Notes to Consolidated Financial Statements

July 31, 2013 and 2012

Note 1 Nature of Operations and Summary of Significant Accounting Policies (continued)

In September 2011, the Financial Accounting Standards Board (“FASB”) issued updated accounting guidance amending the method an entity uses to test its goodwill for impairment, Accounting Standards Update (“ASU”) 2011-08, Intangibles-Goodwill and Other (Topic 350) Testing Goodwill for Impairment . In accordance with ASU 2011-08, the Company will first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The qualitative factors include macroeconomic conditions, industry and market considerations, overall financial performance, cost factors, and entity-specific events such as changes in strategy, management, key personnel, or customers. If the Company determines it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then it performs the two-step impairment test. Under ASU 2011-08, the Company has an option to bypass the qualitative assessment described above for any reporting unit in any period and proceed directly to performing the first step of the goodwill impairment test.

In the first step, the fair value of each reporting unit is compared to its carrying value. If the fair value of a reporting unit exceeds the carrying value of that unit, goodwill is not impaired and no further testing is required. If the carrying value of the reporting unit exceeds the fair value of that unit, then a second step must be performed to determine the implied fair value of the reporting entity’s goodwill. The second step of the goodwill impairment analysis requires the allocation of the fair value of the reporting unit to all of the assets and liabilities of that reporting unit as if the reporting unit had been acquired in a business combination. If the carrying value of a reporting unit’s goodwill exceeds its implied fair value, then an impairment loss equal to the difference is recorded as a separate line item within income from operations. Significant estimates and judgments are involved in this assessment and include the use of valuation methods for determining the fair value of goodwill assigned to each of the reporting units and the applicable assumptions included in those valuation methods such as financial projections, discount rates, tax rates and other related assumptions.

Fair Value of Financial Instruments

All financial instruments, including derivatives, are to be recognized on the balance sheet initially at fair value. Subsequent measurement of all financial assets and liabilities except those held-for-trading and available for sale are measured at amortized cost determined using the effective interest rate method. Held-for-trading financial assets are measured at fair value with changes in fair value recognized in earnings. Available-for-sale financial assets are measured at fair value with changes in fair value recognized in comprehensive income and reclassified to earnings when derecognized or impaired.

 

The carrying amounts of the Company’s other short-term financial instruments, including accounts payable and accrued liabilities, approximate fair value due to the relatively short period to maturity for these instruments. The Company does not utilize financial derivatives or other contracts to manage commodity price risks. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price).

 

The fair value of the Company's financial assets and liabilities reflects the Company's estimate of amounts that it would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from sources independent from the Company) and to minimize the use of unobservable inputs (the Company's assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:

F-11

Alternative Energy Partners, Inc. and Subsidiaries

(A development stage company)

Notes to Consolidated Financial Statements

July 31, 2013 and 2012

Note 1 Nature of Operations and Summary of Significant Accounting Policies (continued)

Level 1 - Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

 

Level 2 - Pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the reported date and includes those financial instruments that are valued using models or other valuation methodologies.

 

Level 3 - Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.

Derivatives

The Company evaluates embedded conversion features within convertible debt under ASC 815 “Derivatives and Hedging” to determine whether the embedded conversion feature should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings. The Company uses a Binomial pricing model to estimate the fair value of convertible debt conversion features at the end of each applicable reporting period. Changes in the fair value of these derivatives during each reporting period are included in the consolidated statement of operation. Inputs into the Binomial pricing model require estimates, including such items as estimated volatility of the Company’s stock, risk-free interest rate and the estimated life of the financial instruments being fair valued.

If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated under ASC 470-20 “Debt with Conversion and Other Options” for consideration of any beneficial conversion features.

Recently Issued Accounting Pronouncements

There are no recently issued accounting pronouncements or standards updates that we have yet to adopt that are expected to have a material effect on our financial position, results of operations, or cash flows.

F-12

Alternative Energy Partners, Inc. and Subsidiaries

(A development stage company)

Notes to Consolidated Financial Statements

July 31, 2013 and 2012

Note 2 Going Concern

As reflected in the accompanying financial statements, the Company has not yet emerged from the development stage, has a net loss of $3,617,969 and net cash used in operations of $47,342 for the year ended July 31, 2013; and negative working capital of $2,841,151 and an accumulated deficit of $10,743,287 at July 31, 2013.

These factors, among others, raise doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments related to recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern.

In response to these problems, management has taken the following actions:

 

·

the Company is seeking third party debt and/or equity financing;

·

the Company is cutting operating costs, and

·

as described in Notes 6 and 7, the Company has been involved in numerous acquisitions with the intent of beginning operations and achieving a level of profitability

Note 3 Income Taxes

The Company recognized deferred tax assets and liabilities for both the expected impact of differences between the financial statements and the tax basis of assets and liabilities, and for the expected future tax benefit to be derived from tax losses and tax credit carry-forwards.  The Company will establish a valuation allowance to reflect the likelihood of realization of deferred tax assets. The Company has a net operating loss carryforward for tax purposes totaling approximately $10,743,287 at July 31, 2013, expiring through 2029. There is a limitation on the amount of taxable income that can be offset by carryforwards after a change in control (generally greater than a 50% change in ownership).  Temporary differences, which give rise to a net deferred tax asset, are as follows:

 

Significant deferred tax assets at July 31, 2013 and 2012 are as follows:

		2013				2012
Gross deferred tax assets:
Net operating loss carryforwards		$	(10,743,287	)		$	(7,125,318	)
Total deferred tax assets			4,039,476				2,681,257
Less: valuation allowance			(4,039,476	)			(2,681,257	)
Net deferred tax asset recorded		$	-			$	-

The valuation allowance at July 31, 2012 was approximately $2,681,257. The net change in valuation allowance during the year ended July 31, 2013 was an increase of approximately $1,358,219.  In assessing the reliability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized.  The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.  Management considers the scheduled reversal of deferred income tax liabilities, projected future taxable income, and tax planning strategies in making this assessment.   Based on consideration of these items, management has determined that enough uncertainty exists relative to the realization of the deferred income tax asset balances to warrant the application of a full valuation allowance as of July 31, 2013.

The actual tax benefit differs from the expected tax benefit for the periods ended July 31, 2013 and 2012 (computed by applying the U.S. Federal Corporate tax rate of 34% to income before taxes and 5.5% for State income taxes, a blended rate of 37.63%) as follows:

F-13

Alternative Energy Partners, Inc. and Subsidiaries

(A development stage company)

Notes to Consolidated Financial Statements

July 31, 2013 and 2012

Note 3 Income Taxes (Continued)

		2013				2012
Expected tax expense (benefit) – Federal		$	(1,230,109	)		$	(269,967	)
Expected tax expense (benefit) – State			(198,988	)			(28,928	)
Change in Valuation Allowance			1,429,097				298,895
Actual tax expense (benefit)		$	-			$	-

Note 4 Loans Payable to Affiliates

During the quarter ended April 30, 2010, the Company recorded two separate loans payable to an affiliate, McDowell, LLC, totaling $12,500, and both remained payable as of July 31, 2013 and 2012.  The managing member of McDowell, LLC is Jack Stapleton, who was also sole officer and director of the Company at the time the two promissory notes were executed. The loans are represented by two promissory notes signed by Mr. Stapleton, bear interest at 8% per annum with principal and interest and are due on demand by the holder of the notes. As of July 31, 2013 and 2012, accrued interest payable was $3,425 and $2,425, respectively. On December 3, 2010, Mr. Stapleton, as Managing Member of McDowell, LLC, issued a written demand for payment of the notes and subsequently filed suit to collect on the two notes. A judgment has been entered in favor of McDowell, LLC.

Note 5 Lease Agreement

The Company currently occupies office space in Boca Raton, Florida leased from a commercial landlord unaffiliated with the Company.

Note 6 Asset Purchases

In May, 2013, the Company acquired the PharmaJanes^TM (a development stage company) marketing operation and related intellectual property from iEquity Corp. and changed its business model to focus purely in the medical marijuana marketing space.  The Company will be changing its name to PharmaJanes, Inc. during the current fiscal year. PharmaJanes™ is currently developing a web and phone application that allows individuals to place orders for medical marijuana through a website and smart phone application anywhere such a transaction is legal in the United States.  The purpose of PharmaJanes™ is to give patients a simple ordering platform, while allowing local collectives to service the orders in compliance with state and local laws and ordinances.  PharmaJanes^TM will act solely as an expediter and processor of the orders, and the fulfillment function will be done entirely within the particular state of residence of the purchaser, by licensed collectives or other licensed medical marijuana providers in that state. The acquisition of the PharmaJanes intellectual property was closed on May 31, 2013 in exchange for a promissory note payable to iEquity Corp., our controlling shareholder, in the amount of $50,000, due in three years at 8 percent interest and convertible after six months at the election of the Holder at 50 percent of the closing market price of our common stock at the date of closing, May 31, 2013, or a conversion price of $0.00105.

In May, 2013, the Company also acquired the Simple Prepay^TM merchant payment solution from iEquity Corp.  The Simple Prepay^TM system was developed to offer dispensaries, collectives, and delivery services for medical cannabis, a convenient payment solution. Medical marijuana patients will be able to upload funds onto their Simple Prepay^TM account via a smart phone application or via a website, allowing them to purchase their medical cannabis needs with privacy and simplicity.  The acquisition of the Simple Prepay^TM intellectual property and business was closed on May 31, 2013 in exchange for a promissory note payable to iEquity Corp. in the amount of $30,000, due in three years at 8 percent interest and convertible after six months at the election of the Holder at 50 percent of the closing market price of our common stock at the date of closing, May 31, 2013, or a conversion price of $0.00105.

F-14

Alternative Energy Partners, Inc. and Subsidiaries

(A development stage company)

Notes to Consolidated Financial Statements

July 31, 2013 and 2012

Note 6 Asset Purchases (Continued)

The Company also signed an agreement with SK3 Group, Inc. to be the exclusive on-line and smart phone ordering and marketing platform for collectives managed through the SK3 Group system.  Members of the collectives managed by SK3 Group will be able to order their medical cannabis needs through PharmaJanes^TM    We issued a total of 100 million shares of our common stock to SKTO for this exclusive agreement, valued at $30,000 based on the closing market price for the stock on the date of the Agreement, and also undertook to register the planned distribution of the shares by SKTO to its shareholders. We have not yet filed the agreed to registration statement due to due to cost factors and the need to complete the fiscal year end audit, but expect to file the registration statement as soon as this Annual Report has been completed and filed.

Despite the recent acquisition of the assets of the PharmaJanes™ on-line and smart phone ordering platform and the Simple Prepay^TM merchant payment solution for a total of $80,000, paid for by promissory notes, we have reported an impairment loss of the full amount of the acquisition cost  for the fiscal year ended July 31, 2013, because we did not obtain an independent valuation of the intellectual property and intangible assets acquired and because we have not yet generated any revenues from these assets. While we believe this is the correct accounting treatment of these assets, we still plan to develop the underlying business using the intangible assets and intellectual property and still believe the business opportunity is substantial.

Note 7 Stockholders’ Deficit

In August 2012, the Company converted $2,600 of notes into 8,125,000 shares of Common Stock (See Note 8).

In September 2012, the Company converted $2,200 of notes into 8,148,148 shares of Common Stock (See Note 8).

In October 2012, the Company converted $3,400 of notes into 15,594,203 shares of Common Stock (See Note 8).

In February 2013, the Company converted $10,200 of notes into 39,629,629 shares of Common Stock (See Note 8).

In March 2013, the Company converted $3,000 of notes into 9,375,000 shares of Common Stock (See Note 8).

In April 2013, the Company converted $5,250 of notes into 16,333,333 shares of Common Stock (See Note 8).

In April 2013, the Company retired 40,000,000 shares of Common Stock.

In May 2013, the Company converted $75,624 of notes into 336,096,369 shares of Common Stock (See Note 8).

In June 2013, the Company converted $69,410 of notes into 140,542,833 shares of Common Stock (See Note 8).

In July 2013, the Company converted $33,090 of notes into 104,805,237 shares of Common Stock (See Note 8).

As a result of these transactions, there were 826,402,041 common shares issued and outstanding and 5,000,000 preferred shares issued and outstanding at July 31, 2013.

F-15

Alternative Energy Partners, Inc. and Subsidiaries

(A development stage company)

Notes to Consolidated Financial Statements

July 31, 2013 and 2012

Note 8 Notes Payable

The following details the significant terms and balances of convertible notes payable, net of debt discounts:

	July 31, 2013	July 31, 2012
Convertible promissory note dated February 7, 2012, bearing interest at a rate of 8% per annum, maturing May 9, 2013, convertible at a 55% discount to the average of the three lowest ten-day trading prices at date of conversion.	-	32,500
Convertible promissory note dated March 8, 2012, bearing interest at a rate of 8% per annum, maturing September 12, 2013 convertible at a 55% discount to the average of the three lowest ten-day trading prices at date of conversion.	-	32,500
Convertible promissory note dated April 26, 2012, bearing interest at a rate of 8% per annum, maturing October 26, 2013 convertible at a 55% discount to the average of the three lowest ten-day trading prices at date of conversion.	-	32,500
Convertible promissory note dated May 9, 2013, bearing interest at a rate of 8% per annum, maturing February 13, 2014 convertible after 6 months at a 55% discount to the average of the three lowest ten-day trading prices at date of conversion.	27,140	-
Judgment payable dated July 2010, bearing interest at a rate of 8% per annum	12,500	12,500
Convertible promissory note dated March 15, 2013, bearing interest at a rate of 8% per annum, maturing February 13, 2014 convertible at a 50% discount of the lowest twenty-day trading prices at date of conversion. The carrying amount of the debt discount was $83,868 and $0, respectively.	63,896	-
Convertible promissory notes, bearing interest at a rate of 8% per annum, convertible at a 55% discount of the lowest twenty-day trading prices at date of conversion. These notes are fully converted at July 31, 2013	-	109,339
Total short term notes payable	103,536	219,339

F-16

Alternative Energy Partners, Inc. and Subsidiaries

(A development stage company)

Notes to Consolidated Financial Statements

July 31, 2013 and 2012

Note 8 Notes Payable (continued)

	July 31, 2013	July 31, 2012
Note payable bearing interest at a rate of 5% per annum and maturing December 31, 2014 convertible at a 50% discount to the average closing prices for the 5 trading days prior to the date of conversion. The carrying amount of the debt discount was $7,699 and $0, respectively.	4,056	-
Note payable bearing interest at a rate of 5% per annum and maturing December 31, 2014 convertible at a 50% discount to the average closing prices for the 5 trading days prior to the date of conversion. The carrying amount of the debt discount was $55,850 and $0, respectively.	14,650	-
Convertible promissory note dated May 1, 2013, bearing interest at a rate of 6% per annum, maturing May 1, 2014 convertible at a 50% discount to the average closing prices for the 5 trading days prior to the date of conversion The carrying amount of the debt discount was $33,945 and $0, respectively..	8,905	-
Convertible promissory note dated May 5, 2013, bearing interest at a rate of 8% per annum, maturing May 5, 2014 convertible at a fixed price of $0.00015.	41,137	-
Convertible promissory note dated May 5, 2013, bearing interest at a rate of 8% per annum, maturing May 5, 2014 convertible at a fixed price of $0.00015.	41,137	-
Convertible promissory note dated May 5, 2013, bearing interest at a rate of 8% per annum, maturing May 5, 2014 convertible at a fixed price of $0.00015.	41,137	-
Convertible promissory note dated May 5, 2013, bearing interest at a rate of 8% per annum, maturing May 5, 2014 convertible at a fixed price of $0.00015.	41,137	-
Convertible promissory note dated May 1, 2013, bearing interest at a rate of 6% per annum, maturing May 1, 2014 convertible at a 50% discount to the average closing prices for the 5 trading days prior to the date of conversion.	40,000	-
3-year note to acquire Pharmajanes	50,000	-
3-year note to acquire Smartpay	30,000	-
Total long-term notes payable	$      312,159	$                 -
Total notes payable	$      415,695	$     219,339

F-17

Alternative Energy Partners, Inc. and Subsidiaries

(A development stage company)

Notes to Consolidated Financial Statements

July 31, 2013 and 2012

Note 9 Derivative Liabilities

The Company has various convertible instruments outstanding more fully described in Note 8. Due to an amendment effective on May 9, 2013 increasing the authorized number of common shares to 2.5 billion, the Company has determined that it will have sufficient authorized common shares at a given date to settle any other of its share-settleable instruments.

As a result of conversion of notes payable described in Note 8, the Company reclassified $410,037 of derivative liabilities to equity and the change in fair value of derivatives was $2,182,805.

As of July 31, 2013, the fair value of the Company’s derivative liabilities was $2,643,904 and $2,205,740 was recognized as a gain on derivatives due to change in fair value of the liability during the year ended July 31, 2013.

The following table summarizes the derivative liabilities included in the consolidated balance sheet:

		Fair Value  Measurements Using Significant  Unobservable  Inputs (Level 3)
Derivative Liabilities:
Balance at July 31, 2012		$	—
ASC 815-15 additions			1,048,097
Change in fair value			2,182,805
ASC 815-15 deletions			(586,998)
Balance at July 31, 2013		$	2,643,904

The following table summarizes the derivative gain or loss recorded as a result of the derivative liabilities above:

		Included in Other Income (Expense) on Consolidated Statement of Operations
Gain/(Loss) on Derivative Liability:
Change in fair value of derivatives		$	(2,182,805)
Loss on discount			(22,937)
Derivative expense			(554,795)
Balance for year ended July 31, 2013		$	(2,760,537)

The fair values of derivative instruments were estimated using the Binomial pricing model based on the following weighted-average assumptions: 

		Convertible Debt Instruments
Risk-free rate			0.21% - 0.25%
Expected volatility			100% - 700%
Expected life			9 months

Note 10. Subsequent Events

As previously reported in the 8-K filed November 5, 2013, the Company converted $339,597 of notes into 1,339,318,962 shares. As a result of these transactions, there were 2,165,721,003 common shares issued and outstanding and 5,000,000 preferred shares issued and outstanding at November 13, 2013.

F-18

ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

During the fiscal year ended July 31, 2013, as previously reported on Form 8-K, we terminated our relationship with Moss-Krusick & Associates and retained L.L. Bradford & Company as our independent accountants.  In October, 2013, as previously reported on Form 8-K, L.L. Bradford resigned and we appointed Anton & Chia, LLP of Newport Beach, CA as our independent auditors.  There have been no disagreements with any of our former or current auditors.

ITEM 9A,	CONTROLS AND PROCEDURES

 

The Company’s Chief Executive Officer and consulting principal accounting officer have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the fiscal year ending July 31, 2013 covered by this Annual Report on Form 10-K. Based upon such evaluation, the Chief Executive Officer and consulting principal accounting officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures were not effective as required under Rules 13a-15(e) and 15d-15(e) under the Exchange Act.

 

Management’s Report on Internal Control Over Financial Reporting

 

Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) of the Company. Internal control over financial reporting is a process designed 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.

 

The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) 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 (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, 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 and procedures may deteriorate.

 

Management, under the supervision of the Company’s Chief Executive Officer and consulting principal accounting officer, conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that the Company’s internal control over financial reporting was not effective as of July 31, 2013 under the criteria set forth in the Internal Control—Integrated Framework.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management has determined that material weaknesses exist due to the lack of an independent Audit Committee Chair, as well as a lack of segregation of duties, inadequate staffing with our accounting department, lack of consistent accounting policies and procedures, inadequate monitoring of controls, and lack of staff with SEC reporting experience all resulting from the Company’s limited resources.

17

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the SEC that permit us to provide only management’s report in this Annual Report on Form 10-K.

Changes in Internal Control Over Financial Reporting

 

No change in the Company’s internal control over financial reporting occurred during the year ended July 31, 2013, that materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

ITEM 9B	OTHER INFORMATION

 

None

PART III

 

ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

Set forth below is certain information concerning the directors and executive officers of the Company as of July 31, 2013:

Name		Age		Position
Mario Barrera		36		President, Chief Executive Officer and Chairman of the Board (Principal Executive Officer)

John Burke serves as Principal Accounting Officer under a Consulting Agreement with Novation Consulting Services, Inc., but is not an elected officer or an employee of the Company.

  AUDIT COMMITTEE

 

The Company has not, as of the date of this Report, assembled an Audit Committee because of its current status. The Company at an appropriate time will institute an Audit Committee.

 

CODE OF ETHICS

 

We have adopted a code of ethics meeting the requirements of Section 406 of the Sarbanes-Oxley Act of 2002. We believe our code of ethics is reasonably designed to deter wrong doing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of violations; and provide accountability for adherence to the provisions of the code of ethic.

ITEM 11.	EXECUTIVE C OM PENSATION

 

The following table sets forth information concerning the aggregate compensation paid or to be paid by the Company to its executive officers.

18

 

SUMMARY COMPENSATION TABLE  

 

OUTSTANDING EQUITY AWARDS AT JULY 31, 2013

None

DIRECTOR COMPENSATION

 

Directors receive no compensation for serving on the Board.

 

The following table summarizes compensation paid to all of our non-employee directors:

  

Name

Fees Earned or Paid in Cash ($)

Stock Awards ($)

Option Awards ($)

Non-Equity Incentive Plan Compensation ($)

Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)

All Other Compensation ($)

Total ($)

not applicable

ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

The following table sets forth certain information as of July 31, 2013, with respect to the beneficial ownership of our common stock by each beneficial owner of more than 5% of the outstanding shares of common stock of the Company, each director, each executive officer named in the “Summary Compensation Table” and all executive officers and directors of the Company as a group, and sets forth the number of shares of common stock owned by each such person and group. Unless otherwise indicated, the owners have sole voting and investment power with respect to their respective shares.

Name of Beneficial Owner	Number of Shares Beneficially Owned		Percentage of Outstanding Common Stock Owned
Mario Barrera, CEO	-		--	%
Hong-Shin Pan, former CEO	-		-
All Directors and executive officers as a group (1 person)	-		-	%
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iEquity Corp1)	-		-	%

(1)

iEquity Corp. holds 5 million shares of preferred stock having voting power equal to 51 percent of the total voting power of all classes of stock entitled to vote and therefore may be considered to be in control of the Company. It holds no common shares.

ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

 

None

 

ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES

In October, 2013, we retained the firm of Anton & Chia, LP of Newport Beach, CA as our independent, PCAOB qualified accountants.  Prior to that date, we had paid no fees to them and they had performed no services for us.

 

Audit Fees

 

During the year ended, July 31, 2012 and through March, 2013, we were billed by our then independent registered public accounting firm, Moss, Krusick and Associates, LLC, approximately $24,500 and $32,580 for audit and review fees associated with our 10-K and 10-Q filings.

During the years ended, July 31, 2013, we were billed by our interim independent registered public accounting firm, L.L. Bradford & Company, LP, approximately $24,500 for audit and review fees associated with our 10-Q filings.

Tax Fees

 

During the year ended, July 31, 2012 and through March 2013, our then independent registered public accounting firm, Moss, Krusick and Associates, LLC, did not perform any tax services for the Company.

During the year ended, July 31, 2013, our interim independent registered public accounting firm, L.L. Bradford & Company, LP, did not perform any tax services for the Company.

 

All Other Fees

 

During the year ended, July 31, 2012 and through March, 2013, our then independent registered public accounting firm, Moss, Krusick and Associates, LLC, did not perform any other work.

 

During the year ended, July 31, 2013, our interim independent registered public accounting firm, L.L. Bradford & Company, LP, did not perform any other work.

 

Board of Directors Pre-Approval Process, Policies and Procedures

 

Our principal auditors have performed their audit procedures in accordance with pre-approved policies and procedures established by our Board of Directors. Our principal auditors have informed our Board of Directors of the scope and nature of each service provided. With respect to the provisions of services other than audit, review, or attest services, our principal accountants brought such services to the attention of our Board of Directors prior to commencing such services.

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ITEM 15.		EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Regulation Number		Exhibit
3		Articles of Amendment dated October 31, 2013
3
31.1 31.1		Rule 13a-14(a) Certification of Chief Executive Officer
31.2		Rule 13a-14(a) Certification of Principal Accounting Officer
32.1 32		Certifications Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Chief Executive Officer and Principal Accounting Officer

 

SIGNATURES  

 Pursuant to the requirements of Section 13 or 15(d) 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.

 

		ALTERNATIVE ENERGY PARTNERS, INC.
Dated: November 13, 2013		By:		/s/ Mario Barrera
				Chief Executive Officer and Chairman of the Board (Principal Executive Officer and Sole Director)
Dated: November 13, 2013		By:		/s/ John Burke
				Principal Accounting Officer

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