Atlas
Technology International, Inc.
Consolidated
Statements of Cash Flows
|
|
For
the Nine
Months
Ended
March
31,
2017
|
|
For
the Nine
Months
Ended
March
31,
2016
|
|
|
(Unaudited)
|
|
(Unaudited)
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(12,699
|
)
|
|
$
|
(31,930
|
)
|
Adjustments
to reconcile net income to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Bad
debt expense
|
|
|
25,535
|
|
|
|
—
|
|
Amortization
of debt discount
|
|
|
29,667
|
|
|
|
—
|
|
Gain
on disposal of entity
|
|
|
(12,315
|
)
|
|
|
—
|
|
Gain
on cancellation of related party debt
|
|
|
(3,030
|
)
|
|
|
—
|
|
Gain
on forgiveness of interest
|
|
|
(1
|
)
|
|
|
—
|
|
Stock
issued for services
|
|
|
108,629
|
|
|
|
—
|
|
Stock
issued to director and employee
|
|
|
36,145
|
|
|
|
—
|
|
Changes
in assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(1,701,169
|
)
|
|
|
32
|
|
Prepaid
expenses and other current assets
|
|
|
102,961
|
|
|
|
(9,317
|
)
|
Accounts
payable
|
|
|
1,093,352
|
|
|
|
—
|
|
Accrued
liabilities and other payables
|
|
|
184,269
|
|
|
|
1,055
|
|
Net
cash used in operating activities
|
|
|
(148,656
|
)
|
|
|
(40,160
|
)
|
|
|
|
|
|
|
|
|
|
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:
|
|
|
|
|
|
|
|
|
Borrowings
from related party
|
|
|
218,254
|
|
|
|
40,013
|
|
Repayment
to related party
|
|
|
(35,897
|
)
|
|
|
—
|
|
Repayment
of loans
|
|
|
(678
|
)
|
|
|
—
|
|
Net
cash provided by financing activities
|
|
|
181,679
|
|
|
|
40,013
|
|
|
|
|
|
|
|
|
|
|
EFFECT
OF EXCHANGE RATE CHANGES ON CASH
|
|
|
1
|
|
|
|
—
|
|
Net
change in cash and cash equivalents
|
|
|
32,894
|
|
|
|
(147
|
)
|
Cash
and cash equivalents, beginning of the reporting period
|
|
|
228
|
|
|
|
998
|
|
Cash
and cash equivalents, end of the reporting period
|
|
$
|
33,122
|
|
|
$
|
851
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURE OF CASH FLOWS INFORMATION:
|
|
|
—
|
|
|
|
—
|
|
Interest
paid
|
|
$
|
—
|
|
|
$
|
—
|
|
Income
taxes paid
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
NON-CASH
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Related
party advance transferred to convertible debt
|
|
$
|
40,000
|
|
|
$
|
—
|
|
Beneficial
conversion feature
|
|
$
|
40,000
|
|
|
$
|
—
|
|
Expense
paid by others
|
|
$
|
117,796
|
|
|
$
|
—
|
|
Expense
paid by related party
|
|
$
|
1,568
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to the unaudited consolidated financial statements
|
Atlas
Technology International, Inc.
March
31, 2017
Notes
to the Unaudited Consolidated Financial Statements
Note
1 - Organization and Operations
Sweets
& Treats, Inc. (“Predecessor”)
Sweets
& Treats, Inc. (“Predecessor”), a bakery out of Sylmar, California 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 and was traded as a public company under the ticker symbol “SWTS” on the OTCQB markets.
Atlas
Technology International, Inc. (“Company”)
Atlas
Technology International, Inc. (the “Company”), a high-tech touch screen company based out of Sherman Oaks, California,
was incorporated on July 7, 2014 under the laws of the State of Delaware. The Company is a rapidly growing provider of touch screen
technologies to a vertically and geographically diversified blue-chip client base. Upon formation, the Company issued 10,000,000
shares of its common stock to Ms. Aguayo (the “Founder”) 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 acquired the Predecessor through the issuance of 5,000,000 shares of the Company’s common stock
to the Founder 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 were 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.
On
March 11, 2016, the Company entered into certain Spin-Off Agreement with the Founder, 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 the Predecessor to the Founder. The Spin-Off agreement was not consummated and was replaced
by a divestment agreement executed on December 15, 2016. The founder still agreed to cancellation of her shares.
On
July 5, 2016, the Founder, 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 (“Atlas Trading”)
Atlas
Tech Trading Limited (“Atlas Trading”), a wholly-owned subsidiary of the Company, was incorporated on August 18, 2016
under the laws of Hong Kong for the purpose of facilitating the Company’s business growth strategy across Eastern Asia.
10,000,000 shares of capital stock of Atlas Trading were authorized and issued exclusively in exchange for the investment and
incorporation of Atlas Trading by the Company. Atlas Trading uses the Company’s proprietary touch screen technologies to
design touch screen solutions for its growing global client base. The Company’s primary business activities are to design
touchscreens, source manufacturers for the production of the designed touchscreens, inspects and ensures the quality of the products
made by the manufacturers, purchases the qualified finished-goods and then sells and delivers the touchscreens to their corporate
clients.
Atlas
Technology Shenzhen Trading Co., Ltd. (“Atlas China”)
Atlas
Technology Shenzhen Trading Co., Ltd. (“Atlas China”), a wholly-owned subsidiary of Atlas Trading, was incorporated
under the laws of China for the purposes of facilitating the Company’s expansion into China’s untapped market, decreasing
the Company’s dependency on existing exporters/distributors and improving margins.
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, our results for the nine-month period ended March 31, 2017 included the
results of July 2016, the last month of our previously reported fiscal year 2016.
Disposal
of Predecessor
On
December 15, 2016, the Company entered into a Divestment Agreement with the Founder, who was then the Company’s Chief Executive
Officer, pursuant to which the Founder agreed to cancel all amounts due to her by the Predecessor in exchange for the acquisition
and purchase of all of the Predecessor’s business. The transaction was closed on December 15, 2016. The Company determined
that disposal of 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.
Research
and development
Research
and development costs are charged to expense as incurred. Research and development costs for the nine months ended March 31, 2017
and 2016 were $283,302 and $0, respectively.
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.
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
subsidiaries as of March 31, 2017
:
Name
of consolidated subsidiary
|
|
State
or other jurisdiction of incorporation or organization
|
|
Date
of incorporation or formation (date of acquisition, if applicable)
|
|
Attributable
interest
|
Atlas Tech
Trading Limited
(subsidiary)
|
|
Hong
Kong
|
|
August
18, 2016
|
|
|
100%
|
|
|
|
|
|
|
|
|
|
|
Atlas Technology Shenzhen
Trading Co., Ltd.
(subsidiary)
|
|
Shenzhen,
China
|
|
March
23, 2017
|
|
|
100%
|
|
The
unaudited consolidated financial statements include all accounts of the Company and its subsidiaries 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 Atlas Trading, 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.
Foreign
Currency Translation
The
accompanying consolidated financial statement are presented in United States dollar (“$”), which is the reporting
currency of the Company. The functional currency of the Company is United States dollar, the functional currency of Atlas Trading
located in Hong Kong is Hong Kong Dollars (“HKD”), and the functional currency of Atlas China located in China is
Renminbi (“RMB”). For Atlas Trading, financial positions and the results of operations and the statement of cash flows
are translated at a fix exchange rate due the period and at the end of period, as HKD is being pegged to the U.S. Dollar. For
Atlas China, the results of operations and the statement of cash flows are translated at the average exchange rates during the
period, assets and liabilities are translated at the unified exchange rates at the end of period, and equity denominated in the
functional currency is translated at historical exchange rates. The resulting translation adjustments are included in determining
other comprehensive income. Transaction gains and losses are reflected in the consolidated statements of income.
Income
taxes
Income
taxes are determined in accordance with the provisions of ASC Topic 740, “Income Taxes” (“ASC 740”). Under
this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets
and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Any 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.
ASC
740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements
uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized
in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities.
Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that is more likely than not
to be realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts.
The
Company conducts businesses in Hong Kong through Atlas Trading and China through Atlas China, and is subject to tax in the subsidiaries
own jurisdictions. As a result of its business activities, the Company files tax returns that are subject to examination by the
local tax authority.
The
Company has not recognized any income tax expenses and a provision for income tax, as the profit of the Atlas Trading are derived
from outside of Hong Kong and as such does not qualify as assessable profit for taxation.
The
Company has not recognized any income tax expenses and a provision for income tax, as Atlas China did not engage in any business
activities during the period from inception to March 31, 2017.
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 is 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.
In
January 2017, the FASB issued ASU 2017-03, “Accounting Changes and Error Corrections (Topic 250) and Investments - Equity
Method and Joint Ventures (Topic 323)”. This pronouncement amends the SEC’s reporting requirements for public filers
in regard to new accounting pronouncements or existing pronouncements that have not yet been adopted. Companies are to provide
qualitative disclosures if they have not yet implemented an accounting standards update. Companies should disclose if they are
unable to estimate the impact of a specific pronouncement, and provide disclosures including a description of the effect on accounting
policies that the registrant expects to apply. These provisions apply to all pronouncements that have not yet been implemented
by registrants. There are additional provisions that relate to corrections to several other prior FASB pronouncements. The Company
has incorporated language into other recently issued accounting pronouncement notes, where relevant for the corrections in FASB
ASU 2017-03. The Company is implementing the updated SEC requirements on not yet adopted accounting pronouncements with these
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 $102,639 and net cash
flows used in operating activities of $148,656 for the nine months ended March 31, 2017. The Company also had a net loss of $12,699
for the nine months ended March 31, 2017. 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.
Note
4 – Stockholders' Equity (Deficit)
Common
Stock
On
June 24, 2016, the Company entered into a consulting agreement with Bright Light Marketing for various public relations and business
development services in exchange for 100,000 shares of its common stock valued at $25,000. The total value of shares issued will
be recognized over a period of one year. As of March 31, 2017, $18,906 stock based compensation expense had been recognized.
On
July 10, 2016, the Company issued 15,000,000 shares of its common stock to Mr. Ying-Chien Lin for his services as the Company’s
Chairman of the Board valued at $150,000. The total value of the shares issued will be recognized over a period of five years.
As of March 31, 2017, $21,687 stock based compensation expense had been recognized.
On
July 10, 2016, the Company issued 10,000,000 shares of its common stock to Mr. Ming-Shu Tsai (“Matthew Tsai”) for
his services as the Company’s Chief Executive Officer and as a Board Member valued at $100,000. The total value of the shares
issued will be recognized over a period of five years. As of March 31, 2017, $14,458 stock based compensation expense has been
recognized.
On
July 14, 2016, the Company entered into a consulting agreement with Chronos Investments Ltd. for various services including, but
not limited to, strategic mergers and decisions related to the Company’s corporate performance, strategies related to macro
and micro economical forces, development of new revenue channels, and the overall creation of shareholder value. Under the terms
of this agreement, the Company issued 2,500,000 shares of its common stock in exchange for services valued at $25,000, which was
recognized as stock based compensation upon its issuance.
On
July 14, 2016, the Company entered into a consulting agreement with Cygnus Management Ltd. for various services including, but
not limited to, the pursuit of strategic mergers and acquisitions and/or partnerships, and improvement of financial efficiencies.
Under the terms of this agreement, the Company issued 2,500,000 shares of its common stock in exchange for services valued at
$25,000, which was recognized as stock based compensation upon its issuance.
On
July 15, 2016, the Company entered into a consulting agreement with Silverciti Group Ltd. for various asset management services.
Under the terms of this agreement, the Company issued 2,500,000 shares of its common stock in exchange for services valued at
$25,000, which was recognized as stock based compensation upon its issuance.
On
November 28, 2016, the Company entered into consulting agreements with two individual consultants for a new strategic marketing
development. On December 29, 2016, the Company issued 1,016,000 shares of its common stock in exchange for services valued
at $10,160 in strategic marketing development. On, March 17, 2017, the Company further issued 92,084 shares of its common stock
in exchange for services valued at $22,099 in strategic marketing development. The aggregate amount of $32,259 shares issued was
recognized as stock based compensation upon its issuance.
On
December 28, 2016, the Company entered into a consulting agreement with an individual consultant for analytic services in exchange
for 37,000 shares of its common stock valued at $370, which was recognized as stock based compensation upon its issuance on January
12, 2017.
On
January 3, 2017, the Company entered into a consulting agreement with an individual consultant for financial analysis services
in exchange for 100,000 shares of its common stock valued at $1,000 in financial analysis, which was recognized as stock based
compensation upon its issuance on January 13, 2017.
Note
5 – Accounts Receivable, Net
|
|
As
of
|
|
|
March
31,
2017
|
|
June
30,
2016
|
Trade
receivable
|
|
$
|
1,701,169
|
|
|
$
|
25
|
|
Allowance
for doubtful accounts
|
|
|
(25,535
|
)
|
|
|
—
|
|
Accounts
receivable, net
|
|
$
|
1,675,634
|
|
|
$
|
25
|
|
An
analysis of the allowance for doubtful accounts for the nine months ended March 31, 2017 and March 31, 2016 is as follow:
|
|
For
the nine months ended
|
|
|
March
31,
2017
|
|
March
31,
2016
|
Beginning
balance
|
|
$
|
—
|
|
|
$
|
—
|
|
Addition
of bad debt expense, net
|
|
|
25,535
|
|
|
|
—
|
|
Ending
balance
|
|
$
|
25,535
|
|
|
$
|
—
|
|
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
|
Tiffany
Aguayo
|
|
Founder,
Former President and Former CEO
(Until September 30, 2016)
|
|
Divestiture
of Predecessor
|
|
Disposal
of non-operating business
|
|
|
|
|
|
|
|
Ming-Shu
Tsai
|
|
Chief
Executive Officer, Board member, 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
|
Sale
of Shares and Change of Ownership
On
July 5, 2016, Ms. Aguayo, 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.
Ms.
Aguayo advanced $305 to the Company in October, 2016, the advance was non-interest bearing and due on demand.
On
December 15, 2016, the Company entered into a Divestment Agreement with Ms. Aguayo, pursuant to which Ms. Aguayo agreed to cancel
all amounts due to her by the Company in exchange for the acquisition and purchase of all of the Predecessor’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 nine-month period ended March 31, 2017.
Advances
from Related-Parties
From
time to time, certain officers of the Company advances funds to the Company for working capital purpose.
Ming-Shu
Tsai, Chief Executive Officer and significant shareholder, advanced Atlas Trading a total of $217,949 and paid $1,568 operating
expense on behalf of Atlas China for the nine-month period ending March 31, 2017. Both amounts are non-interest bearing and due
on demand. As of March 31, 2017, $35,898 of the advance was repaid. The balance of advance was $182,051 included in loans from
related parties, and balance of $1,567 was included in due to related party.
Office
Space
One
of the Company’s office is located at 1/F No. 103 Xin Yi Road, Lu Zhou District, Xin Bei, Taiwan. The office is rented from
Jin-Xia Wu, a family member of Ming-Shu Tsai, for approximately $1,300 per month ($10,000 Hong Kong dollars). The space of the
office is 90 square meters, and the purpose of this office is to continue to focus on the Company’s research and development
efforts.
Note
7 – Concentration
During
the period from July 1, 2016 to March 31, 2017, the Company purchased all of its inventory from one vendor.
During
the period from July 1, 2016 to March 31, 2017, the Company sold a significant amount of products to two significant clients that
accounted for 85.1% and 12.0% individually and an aggregate of 97.1% 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 analyzed 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 the nine-month
period is $29,667. The aggregate amount of interest due on the principal amount is $2,336.
Short
Term Loans
For
the nine-month period ended March 31, 2017,
The Company obtained short-term loans
from six creditors for total amount of $117,796, of which were all paid directly to vendors. The Company repaid $678 in the same
period ended March 31, 2017. The loans bear interest rate of 6% APR compounded monthly. A summary of balance of loans as of March
31, 2017 is presented below:
Creditors
|
|
Due
Dates
|
|
Balance
|
Arc
Capital Ltd.
|
|
From
November 1, 2017 to February 28, 2018
|
|
$
|
75,013
|
|
Growth
Point Advisors Ltd.
|
|
November
1, 2017
|
|
|
6,530
|
|
Chronos
Investments Limited
|
|
November
1, 2017
|
|
|
575
|
|
Lynx
Consulting Group Ltd.
|
|
From
January 31, 2018 to February 28, 2018
|
|
|
35,000
|
|
|
|
|
|
$
|
117,118
|
|
For
the nine-months ended March 31, 2017, the Company recognized interest expense incurred from these loans for the amount of $3,511.
As a result of loan repayments, the Company also recognized a gain on forgiveness of interest of $1, included in other income.
As of March 31, 2017, interest payable of $3,510 was included in Accrued liabilities and other payables.
Note
9 – Subsequent Events
ARC
Capital Ltd. has advanced the Company a total of $1,244 in May 2017. The Company has not entered into a written agreement with
ARC Capital Ltd. relating to this advance and plans to do so on May 31, 2017.
Cygnus
Management Ltd. has advanced the Company a total of $6,875 on April 18, 2017. This loan bears interest rate of 6% APR compounded
monthly, beginning on May 1, 2017 and due on May 1, 2018.