Item
1. Financial Statements.
The
following unaudited interim financial statements of Atlas Technology International, Inc. (referred to herein as the "Company,"
"we," "us" or "our") are included in this quarterly report on Form 10-Q:
Atlas
Technology International, Inc.
Index
to the Consolidated Financial Statements (Unaudited)
Consolidated
Balance Sheets at December 31, 2016 (Unaudited) and June 30, 2016
|
F-2
|
|
|
Consolidated
Statements of Operations (Unaudited) for the Three and Six Months Ended December 31, 2016 and 2015
|
F-3
|
|
|
Consolidated
Statements of Cash Flows (Unaudited) for the Six Months Ended December 31, 2016 and 2015
|
F-4
|
|
|
Notes
to the Unaudited Consolidated Financial Statements
|
F-5
|
Atlas
Technology International, Inc.
|
Consolidated
Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31,
2016
(Unaudited)
|
|
|
|
June
30,
2016
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
47,866
|
|
|
$
|
228
|
|
Accounts
receivable, net
|
|
|
982,307
|
|
|
|
25
|
|
Prepaid
expenses
|
|
|
7,684
|
|
|
|
29,753
|
|
Inventories
|
|
|
6,243
|
|
|
|
—
|
|
Other
current assets
|
|
|
1,290
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Total
Current Assets
|
|
|
1,045,390
|
|
|
|
30,006
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$
|
1,045,390
|
|
|
$
|
30,006
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
724,747
|
|
|
$
|
8,610
|
|
Accrued
liabilities and other payables
|
|
|
37,427
|
|
|
|
444
|
|
Convertible
debt
|
|
|
19,667
|
|
|
|
—
|
|
Short
term loans
|
|
|
37,773
|
|
|
|
—
|
|
Loans
from related party
|
|
|
219,233
|
|
|
|
54,800
|
|
|
|
|
|
|
|
|
|
|
Total
Current Liabilities
|
|
|
1,038,847
|
|
|
|
63,854
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities
|
|
|
1,038,847
|
|
|
|
63,854
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS'
EQUITY (DEFICIT):
|
|
|
|
|
|
|
|
|
Common
stock par value $0.00001: 100,000,000 shares authorized; 54,416,000 and 20,900,000 shares issued and outstanding as of December
31, 2016 and June 30, 2016
|
|
|
544
|
|
|
|
209
|
|
Additional
paid-in capital
|
|
|
204,530
|
|
|
|
55,883
|
|
Accumulated
deficit
|
|
|
(198,531
|
)
|
|
|
(89,940
|
)
|
Total
Stockholders' Equity
|
|
|
6,543
|
|
|
|
(33,848
|
)
|
|
|
|
|
|
|
|
|
|
Total
Liabilities and Stockholders' Equity
|
|
$
|
1,045,390
|
|
|
$
|
30,006
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to the unaudited consolidated financial statements.
|
Atlas
Technology International, Inc.
|
Consolidated
Statements of Operations
|
|
|
For the Three
Months Ended
December 31,
2016
|
|
For the Three
Months Ended
December
31,
2015
|
|
For the Six
Months Ended
December 31,
2016
|
|
For the Six
Months Ended
December 31,
2015
|
|
(Unaudited)
|
|
(Unaudited)
|
|
(Unaudited)
|
|
(Unaudited)
|
Revenue
|
|
$
|
769,821
|
|
|
$
|
—
|
|
|
$
|
1,005,792
|
|
|
$
|
—
|
|
Cost
of goods sold
|
|
|
549,400
|
|
|
|
—
|
|
|
|
718,291
|
|
|
|
—
|
|
Gross
Profit
|
|
|
220,421
|
|
|
|
—
|
|
|
|
287,501
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development
|
|
|
95,535
|
|
|
|
—
|
|
|
|
123,264
|
|
|
|
—
|
|
Selling,
general and administrative expenses
|
|
|
124,832
|
|
|
|
3,874
|
|
|
|
266,733
|
|
|
|
20,658
|
|
Total
operating expenses
|
|
|
220,367
|
|
|
|
3,874
|
|
|
|
389,997
|
|
|
|
20,658
|
|
Gain
on disposal of subsidiary
|
|
|
(12,315
|
)
|
|
|
—
|
|
|
|
(12,315
|
)
|
|
|
—
|
|
Income
(loss) from operations
|
|
|
12,369
|
|
|
|
(3,874
|
)
|
|
|
(90,181
|
)
|
|
|
(20,658
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expenses):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expenses
|
|
|
(11,033
|
)
|
|
|
—
|
|
|
|
(21,440
|
)
|
|
|
—
|
|
Other income
|
|
|
3,030
|
|
|
|
5,000
|
|
|
|
3,030
|
|
|
|
5,000
|
|
Total
other income (expenses)
|
|
|
(8,003
|
)
|
|
|
5,000
|
|
|
|
(18,410
|
)
|
|
|
5,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income (Loss)
|
|
$
|
4,366
|
|
|
$
|
1,126
|
|
|
$
|
(108,591
|
)
|
|
$
|
(15,658
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per
common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
Diluted
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
53,442,087
|
|
|
|
244,800,000
|
|
|
|
51,469,324
|
|
|
|
244,786,957
|
|
Diluted
|
|
|
53,422,087
|
|
|
|
244,800,000
|
|
|
|
51,469,324
|
|
|
|
244,786,957
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to the unaudited consolidated financial statements.
|
Atlas
Technology International, Inc.
|
Consolidated
Statements of Cash Flows
|
|
|
For the
Six
Months
Ended
December 31,
2016
|
|
For the Six
Months Ended
December 31,
2015
|
|
|
(Unaudited)
|
|
(Unaudited)
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(108,591
|
)
|
|
$
|
(15,658
|
)
|
Adjustments
to reconcile net income to net cash used in operating activities
|
|
|
|
|
|
|
|
|
Bad
debt expense
|
|
|
23,576
|
|
|
|
—
|
|
Amortization
of debt discount
|
|
|
19,667
|
|
|
|
—
|
|
Gain
on disposal of entity
|
|
|
(12,315
|
)
|
|
|
—
|
|
Gain
on cancellation of related party debt
|
|
|
(3,030
|
)
|
|
|
—
|
|
Stock
issued for service
|
|
|
85,160
|
|
|
|
—
|
|
Stock
issued to director and employee
|
|
|
23,822
|
|
|
|
—
|
|
Changes
in assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(1,005,592
|
)
|
|
|
—
|
|
Inventories
|
|
|
(6,241)
|
|
|
|
—
|
|
Prepaid
expenses and other current assets
|
|
|
20,911
|
|
|
|
(5,230
|
)
|
Accounts
payable
|
|
|
724,525
|
|
|
|
—
|
|
Accrued
liabilities and other payables
|
|
|
28,630
|
|
|
|
(1,445
|
)
|
Net
cash used in operating activities
|
|
|
(209,478
|
)
|
|
|
(22,333
|
)
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Cash
paid related to disposal of subsidiary
|
|
|
(130
|
)
|
|
|
—
|
|
Net
cash used in investing activities
|
|
|
(130
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Borrowing
from related party
|
|
|
219,473
|
|
|
|
28,659
|
|
Borrowing
from third party
|
|
|
37,773
|
|
|
|
52
|
|
Net
cash provided by financing activities
|
|
|
257,246
|
|
|
|
28,711
|
|
|
|
|
|
|
|
|
|
|
Net
change in cash and cash equivalents
|
|
|
47,638
|
|
|
|
6,378
|
|
Cash
and cash equivalents, beginning of the reporting period
|
|
|
228
|
|
|
|
998
|
|
Cash
and cash equivalents, end of the reporting period
|
|
$
|
47,866
|
|
|
$
|
7,376
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURE OF CASH FLOWS INFORMATION:
|
|
|
|
|
|
|
|
|
Interest
paid
|
|
$
|
—
|
|
|
$
|
—
|
|
Income
tax paid
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
NON-CASH
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Related
party advance transferred to convertible loan
|
|
$
|
40,000
|
|
|
$
|
—
|
|
Beneficial
conversion feature
|
|
$
|
40,000
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to the unaudited consolidated financial statements.
|
Atlas
Technology International, Inc.
December
31, 2016
Notes
to the Unaudited Consolidated Financial Statements
Note
1 - Organization and Operations
Sweets
& Treats, Inc. (“CA Corp”)
Sweets
& Treats, Inc. (“Predecessor”) was incorporated on April 13, 2011 under the laws of the State of California.
The
Predecessor is a bakery shop specializing in freshly-made cakes, cupcakes, desserts and special events catering
.
Atlas
Technology International, Inc
.(“DE Corp”)
Atlas
Technology International, Inc .(the “Company”) was incorporated on July 7, 2014 under the laws of the State of
Delaware for the sole purpose of acquiring all of the issued and outstanding capital stock of the Predecessor. Upon formation,
the Company issued 10,000,000 shares of its common stock to the President of the Company as founder’s shares valued at par
value of $0.00001 and recorded as compensation of $100.
On
July 18, 2014, the Company issued 5,000,000 shares of the newly formed corporation’s common stock to the President of the
Predecessor for all of the Predecessor’s issued and outstanding capital stock. No value was given to the common stock issued
by the newly formed corporation. Therefore, the shares were recorded to reflect the $0.00001 par value and paid in capital
was recorded as a negative amount of ($50). The acquisition process utilizes the capital structure of the Company and the assets
and liabilities of Predecessor, which are recorded at historical cost.
The
Company applied paragraph 505-10-S99-3 of the FASB Accounting Standards Codification (formerly Topic 4B of the Staff Accounting
Bulletins (“SAB”) (“SAB Topic 4B”) issued by the United States Securities and Exchange Commission (the
“SEC”), by reclassifying the Predecessor’s undistributed retained earnings of $942 at July 17, 2014 to additional
paid-in capital.
The
accompanying unaudited consolidated financial statements have been prepared as if the Company had its corporate capital structure
as of the date of the incorporation of the Predecessor.
On
March 11, 2016, the Company entered into certain Spin-Off Agreement with Ms. Aguayo, the majority shareholder, pursuant to
which the Shareholder agreed to cancel 14,000,000 pre-split shares of Company's Common stock in exchange for the consummation
and execution of the Spin Off agreement and sale of CA Corp to Ms. Aguayo. The Spin-Off agreement was not consummated
and was replaced by a divestment agreement executed on December 15, 2016. Ms. Aguayo still agreed to cancellation of her shares.
On July 5,
2016, Ms. Aguayo, the majority shareholder, owning approximately 76.9% of the total issued and outstanding shares of the Company,
entered into two separate Stock Purchase Agreements for the sale of 13,000,000 and 3,000,000 shares of the Company common
stock equivalent to her complete ownership of the Company with Ying-Chien Lin and Lynx Consulting Group Ltd
(“LCG”), respectively. Pursuant to the execution of the Stock Purchase Agreements, Mr. Lin and LCG owned
approximately 62.5% and 14.4% of the total voting rights of the Company, respectively.
On
July 19, 2016, the Company filed with the Secretary of State of Delaware, amending its Articles of Incorporation by changing the
name of the Company to “Atlas Technology International, Inc.”
On
August 23, 2016, the Company filed with the Secretary of State of Delaware an Amended and Restated Certificate of Incorporation
in which the Company confirmed its name change to Atlas Technology International, Inc. and set forth therein the designations
for the Series A, B and C Preferred Stock.
Atlas
Tech Trading Limited (“HK Corp”)
Atlas
Tech Trading Limited, a wholly-owned subsidiary of the Company, was incorporated on August 18, 2016 under the laws of Hong Kong
for the purpose of facilitating business executed in Eastern Asia. 10,000,000 shares of capital stock of the HK Corp were authorized
and issued exclusively in exchange for the investment and incorporation of the HK Corp by the DE Corp . The HK Corp
focuses on the touchscreen business. The Company designs the touchscreens, sources manufacturers for the production of the designed
touchscreens, inspects the quality of the products manufactured by the manufacturers, purchases the qualified finished-goods and
then sells and delivers the touchscreens to their corporate clients.
Fiscal
year
On
August 10, 2016, the Company changed its fiscal year end from July 31 to June 30. As a result of this change, our fiscal year
2016 was an 11-month transition period ending on June 30
,
2016. We reported our quarterly results in our Quarterly Reports on Form 10-Q based on our new fiscal calendar. Accordingly, we
reported the second quarter of fiscal year 2017 as the three and six month period ended December 31, 2016, which included the
results of October 2016, the last months of our previously reported first quarter for three month period ended October 31, 2016
.
Disposal
of CA Corp
On
December 15, 2016, the Company entered into a Divestment Agreement with Ms. Aguayo
,
the Company’s former Chief Executive Officer, pursuant to which Ms. Aguayo agreed to cancel all amounts due to
her by CA Corp in exchange for the acquisition and purchase of all of CA Corp’s business.
The transaction was closed
on December 15, 2016. The Company determined that disposal of CA Corp, the Predecessor, did not constitute a discontinued operation
as it did not represent a strategic shift of the Company’s business.
Note
2 - Significant and Critical Accounting Policies and Practices
The
Management of the Company is responsible for the selection and use of appropriate accounting policies and the appropriateness
of accounting policies and their application. Critical accounting policies and practices are those that are both most important
to the portrayal of the Company’s financial condition and results and require management’s most difficult, subjective,
or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain.
The Company’s significant and critical accounting policies and practices are disclosed below as required by generally accepted
accounting principles.
Basis
of Presentation
The
accompanying unaudited interim financial statements have been prepared in accordance with accounting principles
generally accepted in the United States for interim financial statements. Accordingly, such interim financial statements do
not include all the information and footnotes required by accounting principles generally accepted in the United States for
complete annual financial statements. The information furnished reflects all adjustments, consisting only of normal recurring
items which are, in the opinion of management, necessary in order to make the financial statements not misleading. The
consolidated balance sheet as of June 30, 2016 has been derived from the Company’s Annual Report on Form 10-K for the
eleven months ended June 30, 2016. The consolidated financial statements included in this Quarterly Report should be read in
conjunction with the financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K
for the eleven months ended June 30, 2016 filed with the SEC on September 27, 2016 .
Use
of Estimates
The
preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and assumptions that affect 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. The Company believes the estimates and assumptions utilized are reasonable;
however actual results could differ from those estimates.
Stock-based
Compensation
We account
for the grant of stock options, warrants and restricted stock awards in accordance with ASC 718, "Compensation-Stock Compensation".
ASC 718 requires companies to recognize in the statement of operations the grant-date fair value of stock options and other equity
based compensation. Pursuant to ASC Topic 505-50, for share-based payments to consultants and other third-parties, compensation
expense is determined at the "measurement date". The expense is recognized over the vesting period of the award. Until
the measurement date is reached, the total amount of compensation expense remains uncertain. The Company records compensation
expense based on the fair value of the award at the reporting date. The awards to consultants and other third-parties are then
revalued, or the total compensation is recalculated, based on the then current fair value, at each subsequent reporting date.
Accounts
Receivable, Net
Accounts
receivable are customer obligations due under normal trade terms. In the ordinary course of business, the Company extends unsecured
credit to its customers based on their credit-worthiness and history with the Company. The Company performs continuing credit
evaluations of its customers’ financial condition and generally does not require collateral.
The
Company carries its accounts receivable at cost and uses the allowance method to estimate uncollectible accounts receivable when
necessary. Management reviews accounts receivable on a regular basis to determine if any receivables will be uncollectible
.
Inventories
Inventories
are stated at cost (first-in, first-out). The component of inventories are as follows:
|
|
As
of
|
|
|
December
31,
2016
|
|
June 30,
2016
|
Finished
goods
|
|
$
|
6,243
|
|
|
$
|
—
|
|
The
Company does not provide for estimated obsolescence on unmarketable inventory based upon assumptions about future demand and market
conditions. If actual demand and market conditions are less favorable than those projected by management, inventory write-downs
may be required. Inventory, once written down, is not subsequently written back up, as these adjustments are considered permanent
adjustments to the carrying value of the inventory.
Principles
of Consolidation
The
Company applies the guidance of Topic 810
“Consolidation”
of the FASB Accounting Standards Codification ("ASC")
to determine whether and how to consolidate another entity.
Pursuant to ASC Paragraph 810-10-15-10
all majority-owned subsidiaries—all entities in which a parent has a controlling financial
interest—shall be consolidated except (1) when control does not rest with the parent, the majority owner; (2) if the parent
is a broker-dealer within the scope of Topic 940 and control is likely to be temporary; (3) consolidation by an investment company
within the scope of Topic 946 of a non-investment-company investee.
Pursuant to ASC Paragraph 810-10-15-8
the
usual condition for a controlling financial interest is ownership of a majority voting interest, and, therefore, as a general
rule ownership by one reporting entity, directly or indirectly, of more than 50 percent of the outstanding voting shares of another
entity is a condition pointing toward consolidation. The power to control may also exist with a lesser percentage of ownership,
for example, by contract, lease, agreement with other stockholders, or by court decree
. The Company consolidates
all
less-than-majority-owned subsidiaries, if any, in which the parent’s power to control exists.
The
Company consolidates the following
entities as of December 31, 2016
:
Name
of consolidated subsidiary or entity
|
|
State
or other jurisdiction of incorporation or organization
|
|
Date
of incorporation or formation (date of acquisition, if applicable)
|
|
Attributable
interest
|
Atlas
Technology International, Inc.
|
|
The
State of Delaware
|
|
July
7, 2014
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
Atlas
Tech Trading Limited
|
|
Hong
Kong
|
|
August
18, 2016
|
|
|
100
|
%
|
The
unaudited consolidated financial statements include all accounts of the Company and the subsidiary as of reporting period dates
and for the reporting periods then ended. All inter-company balances and transactions have been eliminated.
Revenue
Recognition
The
Company follows paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes
revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all
of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the
services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably
assured. The Company’s business is mainly operated through the HK entity, and operates on a FOB destination model, where
sale is recognized once the products have been delivered to the customer.
The
Company also follows Section 606-10-55 of the FASB Accounting Standards Codification relating to revenue from contracts with customers
for revenue recognition. The Company recognizes gross revenue when the Company: (i) is the primary obligor, (ii) have general
inventory risk, (iii) has discretion in establishing the price for the specified products, (iv) changes the product or performs
part of the service, (iv) has discretion in supplier selection, (v) is involved in the determination of product specifications,
(vi) bears physical loss inventory risk, and (vii) has credit risk. The number of the above criteria met and to which extent shall
determine whether the Company considers the revenue to be reported as gross or net .
Recently
Issued Accounting Pronouncements
In
August 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update ("ASU")
No. 2016-15, “Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments”
.
The main objective of this update is to reduce the diversity in practice in how certain cash receipts and cash payments are presented
and classified in the statement of cash flows under Topic 230, Statement of Cash Flows, and other Topics. This update addresses
eight specific cash flow issues with the objective of reducing the existing diversity in practice. The eight cash flow updates
relate to the following issues: 1) debt prepayment or debt extinguishment costs; 2) settlement of zero-coupon debt instruments
or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the
borrowing; 3) contingent consideration payments made after a business combination; 4) proceeds from the settlement of insurance
claims; 5) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies;
6) distributions received from equity method investees; 7) beneficial interest in securitization transactions; and 8) separately
identifiable cash flows and application of the predominance principle. The amendments in this update are effective for public
business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The adoption
of ASU 2016-15 is not expected to have a material impact on the Company’s consolidated financial statements.
On
November 17, the
FASB issued ASU 2016-18, Statement
of Cash Flows (Topic 230): Restricted Cash
. It is intended to reduce diversity
in the presentation of restricted cash and restricted cash equivalents in the statement. The statement requires that restricted
cash and restricted cash equivalents be included as components of total cash and cash equivalents as presented on the statement
of cash flows. This pronouncement goes into effect for periods beginning after December 15, 2017. The adoption of ASU 2016-18
is not expected to have a material impact on the Company’s consolidated financial statements.
On
December 27, 2016, the FASB issued
ASU
2016-20
, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers”. The
amendments in ASU 2016-20 affect narrow aspects of the guidance issued in ASU 2014-09 including Loan Guarantee Fees, Contract
Costs, Provisions for Losses on Construction-Type and Production-Type Contracts, Disclosure of Remaining Performance Obligations,
Disclosure of Prior Period Performance Obligations, Contract Modifications, Contract Asset vs. Receivable, Refund Liability, Advertising
Costs, Fixed Odds Wagering Contracts in the Casino Industry, and Costs Capitalized for Advisors to Private Funds and Public Funds.
The effective date of these amendments are at the same date that Topic 606 is effective. Topic 606 is effective for public entities
for annual reporting periods beginning after December 15, 2017, including interim reporting periods therein. The Company
is currently in the process of evaluating the impact of the adoption on its consolidated financial statements.
Note
3 – Going Concern
The
Company’s consolidated financial statements have been prepared assuming that it will continue as a going concern, which
contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.
As
reflected in the accompanying consolidated financial statements, the Company had an accumulated deficit of $198,531 and net cash
used in operating activities as $209,478 for the six months ended December 31, 2016. The Company also had a net loss of $108,591
for the six month period ending December 31, 2016. These factors raise substantial doubt about the Company’s ability to
continue as a going concern.
The
Company is attempting to generate sufficient revenue; however, its cash position may not be sufficient to support its daily operations.
While the Company believes in the viability of its strategy to generate sufficient revenues and in its ability to raise additional
funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon
the Company’s ability to further implement its business plan, generate sufficient revenue and in its ability to raise additional
funds.
The
consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded
asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue
as a going concern.
Note
4 – Stockholders' Equity (Deficit
)
Common
Stock
On
June 24, 2016, the Company entered into a consulting agreement with Bright Light Marketing and issued 100,000 shares of its common
stock in exchange for services valued at $25,000. The total value of shares issued is going to be recognized over the period of
five years. As of December 31, 2016, $12,696 stock based compensation expense has been recognized.
On
July 10, 2016, the Company issued 15,000,000 shares of its common stock to Mr. Ying-Chien Lin for services of being a Director
and Chairman of the Board valued at $150,000. The total value of shares issued is going to be recognized over the period of five
years. As of December 31, 2016, $14,293 stock based compensation expense has been recognized.
On
July 10, 2016, the Company issued 10,000,000 shares of its common stock to Mr. Ming-Shu Tsai for services of being a Director
of the Board valued at $100,000. The total value of shares issued is going to be recognized over the period of five years. As
of December 31, 2016, $9,529 stock based compensation expense has been recognized.
On
July 14, 2016, the Company entered into a consulting agreement with Chronos Investments Ltd. Under the Agreement, the Company
issued 2,500,000 shares of its common stock in exchange for services valued at $25,000 to make better strategic decisions in corporate
performance, value creating, macro economical forces and global & local markets. The $25,000 shares issued is recognized as
stock based compensation upon issuance.
On
July 14, 2016, the Company entered into a consulting agreement with Cygnus Management Ltd. Under the Agreement, the Company issued
2,500,000 shares of its common stock in exchange for services valued at $25,000 in assisting clients to best benefit from M&A
or improving operating and financial efficiency. The $25,000 shares issued is recognized as stock based compensation upon issuance.
On
July 15, 2016, the Company entered into a consulting agreement with Silverciti Group Ltd. Under the Agreement, the Company issued
2,500,000 shares of its common stock in exchange for services valued at $25,000 in asset management. The $25,000 shares issued
is recognized as stock based compensation upon issuance.
On November
28, 2016, the Company entered into a consulting agreement with 2 individual consultants. The Company issued 1,016,000 shares of
its common stock in exchange for services valued at $10,160 in strategic marketing development. The $10,160 shares issued is recognized
as stock based compensation upon issuance.
Note
5 – Accounts Receivable, Net
|
|
As of
|
|
|
December 31,
2016
|
|
June
30,
2016
|
Trade
receivable
|
|
$
|
1,005,883
|
|
|
$
|
25
|
|
Allowance
for doubtful accounts
|
|
|
(23,576
|
)
|
|
|
—
|
|
Accounts
receivable, net
|
|
$
|
982,307
|
|
|
$
|
25
|
|
An
analysis of the allowance for doubtful accounts for the six months ended December 31, 2016 and December 31, 2015 is as follow:
|
|
For
six months ended
|
|
|
December 31,
2016
|
|
December 31,
2015
|
Beginning balance
|
|
$
|
—
|
|
|
$
|
—
|
|
Addition
(recovery) of bad debt expense, net
|
|
|
23,576
|
|
|
|
—
|
|
Ending balance
|
|
$
|
23,576
|
|
|
$
|
—
|
|
Note
6 – Related Party Transactions
Related
Parties
Related
parties with whom the Company had transactions are:
Related
Parties
|
Relationship
|
Related
Party Transactions
|
Business
Purpose of transactions
|
|
|
|
|
Ms.
Aguayo
|
Former
President, Former CEO and Significant shareholder (Until September 30, 2016)
|
Divestment
of CA entity
|
Disposal
of non-operating business
|
|
|
|
|
Ming-Shu
Tsai
|
CEO,
Director and Significant shareholder
|
Advances
to the Company
|
Working
capital funding
|
|
|
|
|
Jin-Xia
Wu
|
Family
member of Ming-Shu Tsai
|
Office
space at approximately $1,300 per month
|
Providing
Office space in Taiwan
|
Advances
from Related-Parties
From
time to time, the stockholder of the Company advances funds to the Company for working capital purpose.
The
current CEO and significant stockholder of the Company, Ming-Shu Tsai has advanced the Company $219,233 as of December 31, 2016.
The note was denominated in Hong Kong dollar for 1,700,000.
The
above advances from the CEO is unsecured, non-interest bearing and due on demand.
Office
Space
Our
principal place of business and corporate offices are located at 1/F No. 103 Xin Yi Road, Lu Zhou District, Xin Bei, Taiwan. The
office is 90 square meters and was rented from Jin-Xia Wu, family member of Ming-Shu Tsai , CEO of the Company, for an approximate
amount of $1,300 per month ($10,000 Hong Kong dollars) for the purpose of carrying out research and development operations.
Sale
of Shares and Change of Control
On
July 5, 2016, Ms. Aguayo, the majority shareholder, owning approximately 76.9% of the total issued and outstanding shares
of the Company, entered into two separate Stock Purchase Agreements for the sale of 13,000,000 and 3,000,000 shares of
the Company’s common stock equivalent to her complete ownership of the Company with Ying-Chien Lin and LCG,
respectively. Pursuant to the execution of the Stock Purchase Agreements, Mr. Lin and LCG owned approximately 62.5% and 14.4%
of the total voting rights of the Company, respectively.
On December
15, 2016, the Company entered into a Divestment Agreement with Ms. Aguayo
, the Company’s
former Chief Executive Officer, pursuant to which Ms. Aguayo agreed to cancel all amounts due to her by CA Corp in exchange
for the acquisition and purchase of all of CA Corp’s business.
The transaction was closed on December 15, 2016. The
Company recorded a gain on disposal of subsidiary of $12,315, and a gain on cancellation of debt of $3,030, for the six month period
ended December 31, 2016.
Note
7 – Concentration
During
the period from July 1, 2016 to December 31, 2016, the Company purchased all of its inventory from one vendor.
During
the period from July 1, 2016 to December 31, 2016, the Company sold a significant amount of products and services to one significant
client that accounted for 99% of the total sales of the company.
The
Company continually evaluates the credit worthiness of its vendor and customers’ financial condition and has policies to
minimize any potential risk
Note
8
– Debt
Convertible
Debt
On
July 5, 2016, Ms. Aguayo, owning approximately 85.8% of the total liabilities as of June 30, 2016, entered into a Debt Assignment
Agreement and sold $40,000 of the outstanding debt from advances made on behalf of the Company to Growth Point Advisors Ltd. Pursuant
to this Agreement, the Company entered into a Convertible Promissory Note (the “Note”) with Growth Point Advisors
Ltd. to replace the Debt Assignment Agreement. The Note bears an interest rate of 8% per annum, due on July 4
th
2017,
and has a conversion feature allowing conversion by giving five days’ notice to the Company to convert the debt into the
Company’s common shares at a rate of $0.002 per share.
As part of the modification, the Company analysed the note
and determined that the change in term did qualify as a debt extinguishment under ASC 470-50.
Therefore
a Beneficial Conversion Feature value of this convertible promissory note has been calculated to be $40,000 and the amortization
of the debt discount for this period is $19,667.
Short
Term Loans
Arc
Capital Ltd. has advanced the Company a total of $30,515 for the six month period ended December 31, 2016. The loans bear interest
rate of 6%. $15,990 is due on November 1, 2017 and $14,525 is due on December 30, 2017.
Growth
Point Advisors Ltd. has advanced the Company a total of $6,530 for the period from July 1, 2016 to December 31, 2016. This loan
bears interest rate of 6% starting from November 2, 2016 and is due on November 1, 2017.
Chronos
Investments Limited has advanced the Company a total of $575 for the period from July 1, 2016 to December 31, 2016. This
loan bears interest rate of 6% starting from November 2, 2016 and is due on November 1, 2017.
Miss
C. Zhang has advanced the Company a total of $153 for the period from July 1, 2016 to December 31, 2016. This loan bears
interest rate of 6% starting from December 31, 2016 and is due on December 30, 2017.
Note
9 – Subsequent Events
The Company entered into a consulting agreement
with 2 consultants. On January 12 and 13, 2017, the Company issued 137,000 shares of its common stock in exchange for services
valued at $1,370 in financial analysis services and analytical services. The $1,370 shares issued are recognized as stock based
compensation upon issuance.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The information
set forth in this Management's Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)
contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as
amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995,
including, among others (i) changes in our revenues, gross margins, earnings and new contracts , (ii) prospective strategic expansion
opportunities for the company touch screen technologies (iii) our ability to create and protect new patents and intellectual property
rights around our touch screen technology (iv) our ability to continue to finance our business should we begin to incur losses
and (v) our ability to attract top high level talent in the touch screen and/or high technology industry. Forward-looking statements
are statements other than historical information or statements of current condition. Some forward-looking statements may be identified
by use of terms such as “believes”, “anticipates”, “intends” or “expects”. These
forward-looking statements relate to our strategic global expansion plans, strength of our balance sheet, ability to complete
financing at favorable terms generate a positive return on our capital expenditures growth of our business including entering
into partnerships with strategic players in the industry, and plans to launch a successful marketing, advertising and awareness
campaign for our next generation touchscreen technologies. . We have based these forward-looking statements largely on our current
expectations and projections about future events and financial trends that we believe may affect our financial condition, results
of operations, business strategy and financial requirements.
Although
we believe that our expectations with respect to the forward-looking statements are based upon reasonable assumptions within the
bounds of our knowledge of our business and operations, in light of the risks and uncertainties inherent in all future projections,
the inclusion of forward-looking statements in this Quarterly Report should not be regarded as a representation by us, any other
person or entity that our objectives or plans will be achieved.
We assume no obligation
to update these forward-looking statements to reflect actual results or changes in factors or assumptions affecting forward-looking
statements.
Our financial
results could differ materially from those projected in any forward-looking statements as a result of numerous factors, including,
but not limited to, the following: the risk of other competitors infringing on our patents or proprietary technologies, the inability
of our management team to adapt to changes in the industry , inability to maintain and/or capture additional market share of the
global touchscreen technology industry, inflationary and deflationary conditions and cycles, currency exchange rates, and changing
government regulations domestically and internationally affecting our products and businesses.
You should
read the following discussion and analysis in conjunction with the Financial Statements and Notes attached hereto, and the other
financial data appearing elsewhere in this Quarterly Report.
Overview
The Company
develops, designs and distributes its touchscreen-technology. On July 18, 2014, completed a reverse merger with Sweets & Treats,
in which Atlas Technology International, Inc. became the surviving entity. On December 15, 2016, the Company sold, assigned, transferred
conveyed and delivered the Predecessor to Ms. Aguayo. Ms. Aguayo agreed to forgive all debt owed to her by the Company in consideration
for the Predecessor.
Historically,
the Company marketed its touchscreen products primarily through a broad distribution network exclusive to the Company’s
senior management team. Our plan for the next twelve months calls for the further development of the Company’s touchscreen
business. We anticipate that the cost for the further development, expansion and launch of our touchscreen business will be approximately
$1,000,000. Despite our plan, we currently have no firm commitments for additional financing and cannot provide assurance that
we will realize this goal.
The Company is now
in the development stage, its ability to continue as a going concern is dependent upon its ability to obtain additional financing
and/or achieve a sustainable profitable level of operations.
Recent Development
On July
5, 2016, Ms. Aguayo, the majority shareholder, owning approximately 76.9% of the total issued and outstanding shares of the Company,
entered into two separate Stock Purchase Agreements for the sale of 13,000,000 and 3,000,000 shares of the Company’s common stock
equivalent to her complete ownership of the Company with Ying-Chien Lin and LCG directly, respectively.
Pursuant to the execution of the Stock Purchase Agreements, Mr. Lin and LCG owned approximately 62.5% and 14.4% of the total voting
rights of the Company, respectively.
On July
7, 2016, Mr. Lin was elected as Chairman and director, and Mr. Ming-Shu Tsai was elected as director and Co-CEO, overseeing the
Company’s operations with Ms. Aguayo.
On August
10, 2016, the Company's Board of Directors approved a change in its Fiscal Year from July 31 to June 30 for administrative purposes. The
change in fiscal year became effective for the Company's 2016 fiscal year which began July 1, 2015 and ended June 30, 2016.
On
August 23, 2016, the Company filed an Amended and Restated Certificate of Incorporation with the Secretary of State of Delaware
in which the Company confirmed its name change to Atlas Technology International, Inc. and set forth therein the designations
for the Series A, B and C Preferred Stock (the bylaws of the Company were not amended to reflect the Certificate of Designations
for the Series A, B and C Preferred Stock).
On September
30, 2016, Ms. Aguayo resigned from all of her positions with Atlas Technology International, Inc. (the "Company"); namely:
Co-Chief Executive Officer; Chief Financial Officer; President and Director. Ms. Aguayo’s resignation is based solely on
personal reasons and is not the result of any disagreement with the Company on any matter relating to its operations, policies
(including accounting or financial policies) or practices. The Board of Directors is now comprised of the two remaining members. Concurrent
with Ms. Aguayo’s resignation, the Board of Directors appointed Jing Zhou and Yi An Chen as Chief Financial Officer and
Chief Technology Officer, respectively.
On
December 15, 2016, the Company sold, assigned, transferred, conveyed and delivered Sweets & Treats of the State of California
(S&T (CA)) to Ms. Aguayo. Ms. Aguayo accepted and purchased all of the business and assets outstanding, totaling $265; assumed,
and agreed to perform, and otherwise pay, satisfy and discharge all existing and future liabilities and obligations of S&T
(CA) business, totaling $499. Ms. Aguayo agreed to forgive all debt owned by the Company to Ms. Aguayo, totaling $15,105. As more
particularly set forth in the Divestment Agreement, filed as an Exhibit of the Current Report 8-K filed on December 19, 2016.
Plan of
Operations
Our goal
is to further enhance our proprietary touchscreen technology to a level where we believe, due primarily to its technological advantages,
it will be able to rapidly capture and expand its market share of the global touchscreen industry following its official global
launch. Following its global launch, the Company will seek to build a global reputation for its touchscreen products while developing
a blue-chip, global client base. We anticipate the cost for developing our touchscreen business will be approximately $1,000,000
within the next 12 months. We have no commitments for any financing and cannot provide assurance that we will realize this goal.
If we are
unable to build a sustainable customer base, we will cease our development and/or marketing operations until we able to raise
sufficient capital to continue as an ongoing concern. Attempting to raise capital after failing in any phase of our development
plan could be difficult. As such, if we cannot secure additional proceeds we will have to cease operations and investors would
lose their entire investment. We intend to raise additional capital through various financial mechanisms, including both debt
and equity instruments, but there is no assurance that we will be able to raise any capital. If we require additional cash but
are unable to raise it, we will either suspend our marketing operations until we are able to raise the necessary capital, or cease
operations entirely. Other than as described in this paragraph, we have no other financing plans.
Results of Operations
- Three and Six Months Ended December 31, 2016 Compared to Three and Six Months Ended December 31, 2015
We generated
revenue of $769,821 and $0, and $1,005,792 and $0 for the three and six months ended December 31, 2016 and 2015, respectively.
The increase in revenue is mainly attributed to the Company’s entry into the touchscreen industry business. The Company has
received orders from three (3) customers for the production of touchscreens per their requirements. The Company designs the touchscreens,
source manufacturers for the production of the designed touchscreens, inspects the quality of the products manufactured by the
manufacturers, purchases the qualified finished-goods and then sells and delivers the touchscreens to their corporate clients.
We incurred
cost of goods sold as $549,400 and $0, and $718,291 and $0 for the three and six months ended December 31, 2016 and 2015, respectively.
Cost of goods sold were related mainly to the touchscreen products purchased from sourced manufacturers for sale.
We incurred
operating expenses of $220,367 and $3,874, and $389,997 and $20,658 for the three and six months ended December 31, 2016 and 2015,
respectively. The increase is mainly due to the engagement of consultants for services to be provided, engagement of employees,
and professional services provided.
We incurred
interest expense of $11,033 and $0, and $21,440 and $0 for the three and six months ended December 31, 2016 and 2015, respectively.
The increase is due to the assignment of non-interest bearing debt from a related party and pursuant to that assignment the Company
entered into a convertible promissory note bearing an interest rate of 8% per year with the new debt holder which has beneficial
conversion feature
as well as
a number of non-convertible debt with third
parties the Company had entered into and outstanding for six months ended December 31, 2016 of $37,773 and bear an interest rate
of 6%.
We had a
net income of $4,366 and $1,126, and loss of $108,591 and $15,658 for the three and six months ended December 31, 2016 and 2015,
respectively.
Liquidity and Capital
Resources
As of December
31, 2016, we had total assets of $1,045,390, mainly in accounts receivable. Our liabilities as of December 31, 2016 were $1,038,847,
which comprised of $724,747 in accounts payable, $37,427 in accrued liabilities and other payables, $37,773 in short term loans,
$19,667 in convertible loans and $219,233 in loans from related parties. As of December 31, 2016, we had a working capital of $6,543.
The
following is a summary of our cash flows provided by (used in) operating, investing, and financing activities for the six months
ended December 31, 2016:
|
|
|
For
the Six Months
Ended
December
31,
2016
|
|
Net
cash used in operating activities
|
|
$
|
(209,478
|
)
|
Net
cash used in investing activities
|
|
|
(130
|
)
|
Net
cash provided by financing activities
|
|
|
257,246
|
|
Net
(decrease) increase in cash and cash equivalents
|
|
|
47,638
|
|
For
the six months ended December 31, 2016, we had used $209,478
for operating activities,
used $130 for investing activities and financing activities provided $257,246 cash flow to us.
We
had a net increase of $47,638 for the six months ended December 31, 2016.
We
are dependent on the receipt of capital investment or other financing to fund our ongoing operations and to execute our business
plan. If we are unable to raise additional cash, we will either have to suspend or cease our expansion plans entirely. If we are
not successful in generating sufficient revenue and cannot raise sufficient funds, we may be forced to cease operations. If that
is the case, we will look for possible merger candidate or another suitable company to possibly acquire us.