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)   

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  .

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 : 

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.

An analysis of the allowance for doubtful accounts for the six months ended December 31, 2016 and December 31, 2015 is as follow:

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.