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. and Subsidiaries
Index
to the Consolidated Financial Statements
Contents
|
Page
|
Consolidated Balance Sheets at September
30, 2016 (Unaudited) and June 30, 2016
|
F-2
|
|
|
Consolidated Statements of Operations
(Unaudited) for the Three Months Ended September 30, 2016 and October 31, 2015
|
F-3
|
|
|
Consolidated Statements of Changes
in Stockholders’ Equity (Deficit) for the Three Months Ended September 30, 2016
|
F-4
|
|
|
Consolidated Statements of Cash
Flows (Unaudited) for the Three Months Ended September 30, 2016 and October 31, 2015
|
F-5
|
|
|
Notes to the Consolidated (Unaudited)
Financial Statements
|
F-6
|
Atlas
Technology International, Inc and Subsidiaries
|
(fka
Sweets & Treats, Inc.)
|
Consolidated
Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September
30,
2016
|
|
June
30,
2016
|
|
|
(Unaudited)
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
3,494
|
|
|
$
|
228
|
|
Accounts
receivable
|
|
|
236,038
|
|
|
|
25
|
|
Deposit
|
|
|
5,158
|
|
|
|
—
|
|
Prepaid
expenses
|
|
|
21,361
|
|
|
|
29,753
|
|
Other
Receivables
|
|
|
1,290
|
|
|
|
—
|
|
Total
Current Assets
|
|
|
267,341
|
|
|
|
30,006
|
|
Total
Assets
|
|
$
|
267,341
|
|
|
$
|
30,006
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
183,210
|
|
|
$
|
8,610
|
|
Accrued
expenses
|
|
|
30,940
|
|
|
|
444
|
|
Short
term convertible debt, net of $30,333 debt discount
|
|
|
9,667
|
|
|
|
—
|
|
Short
term debt from related party
|
|
|
41,007
|
|
|
|
54,800
|
|
Short
term debt
|
|
|
23,095
|
|
|
|
—
|
|
Total
Current Liabilities
|
|
|
287,919
|
|
|
|
63,854
|
|
Total
Liabilities
|
|
|
287,919
|
|
|
|
63,854
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS'
DEFICIT:
|
|
|
|
|
|
|
|
|
Preferred
stock par value $0.00001: 1,000,000 shares authorized; none issued or outstanding
|
|
|
—
|
|
|
|
—
|
|
Common
stock par value $0.00001: 100,000,000 shares authorized; 53,400,000 and 20,900,000 shares issued or outstanding
|
|
|
534
|
|
|
|
209
|
|
Additional
paid-in capital
|
|
|
181,785
|
|
|
|
55,883
|
|
Accumulated
deficit
|
|
|
(202,897
|
)
|
|
|
(89,940
|
)
|
Total
Stockholders' Deficit
|
|
|
(20,578
|
)
|
|
|
(33,848
|
)
|
Total
Liabilities and Stockholders' Deficit
|
|
$
|
267,341
|
|
|
$
|
30,006
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to the consolidated financial statements.
|
Atlas
Technology International, Inc and Subsidiaries
|
Consolidated
Statements of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
the Three Months
|
|
For
the Three Months
|
|
|
Ended
|
|
Ended
|
|
|
September
30,
2016
|
|
October
31,
2015
|
|
|
(Unaudited)
|
|
(Unaudited)
|
Revenue
|
|
$
|
235,971
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Cost of Goods
Sold:
|
|
|
|
|
|
|
|
|
Cost
of goods sold
|
|
|
168,891
|
|
|
|
—
|
|
Total
cost of goods sold
|
|
|
168,891
|
|
|
|
—
|
|
Gross
Profit
|
|
|
67,080
|
|
|
|
—
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
Research
and Development
|
|
|
27,729
|
|
|
|
—
|
|
General
and administrative expenses
|
|
|
141,901
|
|
|
|
2,065
|
|
Total
operating expenses
|
|
|
169,630
|
|
|
|
2,065
|
|
Other expense
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(10,407
|
)
|
|
|
—
|
|
Loss before Income
Tax Provision
|
|
$
|
(112,957
|
)
|
|
$
|
(2,065
|
)
|
Net
Loss
|
|
$
|
(112,957
|
)
|
|
$
|
(2,065
|
)
|
Earnings
per share - basic and diluted
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding - basic and diluted
|
|
|
49,514,000
|
|
|
|
244,800,000
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to the consolidated financial statements.
|
Consolidated
Statement of Changes in Stockholders' Equity (Deficit)
|
For
the three months ended September 30, 2016
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock, $0.00001 Par Value
|
|
|
|
|
|
|
|
|
Number
of Shares
|
|
Amount
|
|
Additional
Paid-in Capital
|
|
Retained
Earnings (Accumulated Deficit)
|
|
Total
Stockholders’ Equity (Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
June 30, 2016
|
|
|
20,900,000
|
|
|
$
|
209
|
|
|
$
|
55,883
|
|
|
$
|
(89,940
|
)
|
|
$
|
(33,848
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued to Directors and Employees
|
|
|
25,000,000
|
|
|
|
250
|
|
|
|
10,977
|
|
|
|
|
|
|
|
11,227
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for service
|
|
|
7,500,000
|
|
|
|
75
|
|
|
|
74,925
|
|
|
|
|
|
|
|
75,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial
Conversion Feature
|
|
|
|
|
|
|
|
|
|
|
40,000
|
|
|
|
|
|
|
|
40,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(112,957
|
)
|
|
|
(112,957
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
September 30, 2016
|
|
|
53,400,000
|
|
|
$
|
534
|
|
|
$
|
181,785
|
|
|
$
|
(202,897
|
)
|
|
$
|
(20,578
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to the consolidated financial statements.
|
Atlas
Technology International, Inc and Subsidiaries
|
Consolidated
Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
the Three Months
|
|
For
the Three Months
|
|
|
ended
|
|
ended
|
|
|
September
30,
2016
|
|
October
31,
2015
|
|
|
(Unaudited)
|
|
(Unaudited)
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(112,957
|
)
|
|
$
|
(2,065
|
)
|
Adjustments
to reconcile net loss to net cash used in operating activities
|
|
|
|
|
|
|
|
|
Common
shares issued for consulting
|
|
|
92,575
|
|
|
|
—
|
|
Amortization
of debt discount
|
|
|
9,667
|
|
|
|
—
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(236,013
|
)
|
|
|
4
|
|
Deposit
|
|
|
(5,158
|
)
|
|
|
|
|
Prepaid
expenses
|
|
|
2,044
|
|
|
|
(5,253
|
)
|
Accounts
payable
|
|
|
174,600
|
|
|
|
(11,500
|
)
|
Accrued
expenses
|
|
|
30,496
|
|
|
|
108
|
|
Other
receivables
|
|
|
(1,290
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in operating activities
|
|
|
(46,036
|
)
|
|
|
(18,706
|
)
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds
from short term debt from related party
|
|
|
26,207
|
|
|
|
18,659
|
|
Proceeds
from short term debt
|
|
|
23,095
|
|
|
|
—
|
|
Net
cash provided by financing activities
|
|
|
49,302
|
|
|
|
18,659
|
|
|
|
|
|
|
|
|
|
|
Net
change in cash
|
|
|
3,266
|
|
|
|
(47
|
)
|
|
|
|
|
|
|
|
|
|
Cash
at beginning of the reporting period
|
|
|
228
|
|
|
|
531
|
|
|
|
|
|
|
|
|
|
|
Cash
at end of the reporting period
|
|
$
|
3,494
|
|
|
$
|
484
|
|
|
|
|
|
|
|
|
|
|
NON-CASH
TRANSACTIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial
Conversion Feature
|
|
|
40,000
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURE OF CASH FLOWS INFORMATION:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
paid
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
Income
tax paid
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to the consolidated financial statements.
|
Atlas
Technology International, Inc and Subsidiaries
(fka
Sweets & Treats, Inc.)
September
30, 2016
Notes
to the 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. (fka Sweets & Treats, Inc.) (“DE Corp”)
Atlas
Technology International, Inc. (fka Sweets & Treats, 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 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 Tiffany 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 Sweets & Treats, Inc., a CA Corporation and a wholly-owned subsidiary
of the Company to Ms. Aguayo. The transaction has not been consummated as of the date hereof but Ms. Aguayo still agreed to the
cancellation of her shares.
On
July 5, 2016, Tiffany Aguayo, the majority shareholder, owning approximately 76.9% of the total issued and outstanding shares
of SWTS, entered into two separate Stock Purchase Agreements for the sale of 13,000,000 and 3,000,000 shares of SWTS common stock
equivalent to her complete ownership of SWTS with Ying-Chien Lin and Lynx Consulting Group Ltd (“Lynx”), respectively.
Pursuant to the execution of the Stock Purchase Agreements, Mr. Lin and Lynx owned approximately 62.5% and 14.4% of the total
voting rights of SWTS, 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. The HK Corp focuses on the touchscreen business, through designing,
sourcing manufacturers, quality inspecting and delivering the touchscreens to their clients.
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 balance sheet as of June 30, 2016 has been derived from
the Company’s annual financial statements that were audited by an independent registered public accounting firm, but does
not include all of the information and footnotes required for complete annual financial statements. The 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.
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
:
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%
|
|
|
|
|
Sweets
& Treats, Inc.
|
The
State of California
|
April
13, 2011
|
100%
|
|
|
|
|
Atlas
Tech Trading Limited
|
Hong
Kong
|
August
18, 2016
|
100%
|
The
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 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.
The
Company has incurred approximately $236,000 revenue for the three months ended September 2016, and they were all from one customer.
Note
3 – Going Concern
The
Company has elected to adopt early application of Accounting Standards Update No. 2014-15,
“Presentation of Financial
Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a
Going Concern (“ASU 2014-15”)
.
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 at September 30, 2016,
a net loss and net cash used in operating activities for the reporting period then ended. 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)
Shares
Authorized
Upon
formation, the total number of shares of all classes of stock which the Company is authorized to issue is One Hundred and one
Million (101,000,000) shares of which One Million (1,000,000) shares shall be Preferred Stock, par value $0.00001 per share, and
One Hundred Million (100,000,000) shares shall be Common Stock, par value $0.00001 per share.
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
one years. As of September 30, 2016, $6,348 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 September 30, 2016, $6,736 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 September 30, 2016, $4,491 stock based compensation expense has been recognized.
On
July 14, 2016, the Company entered into a consulting agreement with Chronos Investments Ltd for the term of twelve months. 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 for the term of twelve months. 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 for the term of twelve months. 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.
Note
5 – Related Party Transactions
Related
Parties
Related
parties with whom the Company had transactions are:
Related
Parties
|
Relationship
|
Related
Party Transactions
|
Business
Purpose of transactions
|
Management
and significant stockholders
|
|
|
Tiffany
Aguayo
|
President,
CEO and Significant shareholder (Until July 5, 2016)
|
(i)
Advances to the Company,
(ii)
Office space at no cost
|
(i)
Working capital,
(ii)
Cost is nominal.
|
|
|
|
|
Ming-Shu
Tsai
|
CEO,
Director and Significant shareholder
|
Advances
to the Company
|
Working
capital
|
|
|
|
|
Ying-Chien
Lin
|
Chairman
and Director
|
Office
space at approximately $1,300 per month
|
Office
space
|
Advances
from Related-Parties
From
time to time, the stockholder of the Company advances funds to the Company for working capital purpose.
The
former president, Co-CEO and significant stockholder of the Company, Tiffany Aguayo, was due $15,216 and $54,800 as of September
30, 2016 and June 30, 2016 from advances made on behalf of the Company. During the three months ended September 30, 2016, the
Company borrowed additional $416 from her, and assigned $40,000 of the debt due to her to Growth Point Advisor, an unrelated third
party, leaving the ending balance as of September 30, 2016 to be $15,216.
The
current CEO and significant stockholder of the Company, Ming-Shu Tsai has advanced the Company $25,791 as of September 30, 2016.
The note was denominated in Hong Kong dollar for 200,000.
The
above advances from both Co-CEOs are 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 space agreement was entered into by the Company’s Chairman for the Company at a rate of approximately $1,300 per
month.
Sale
of Shares and Change of Control
On
July 5, 2016, Tiffany Aguayo, the majority shareholder, owning approximately 76.9% of the total issued and outstanding shares
of SWTS, entered into two separate Stock Purchase Agreements for the sale of 13,000,000 and 3,000,000 shares of SWTS common stock
equivalent to her complete ownership of SWTS with Ying-Chien Lin and Lynx Consulting Group Ltd (“Lynx”), respectively.
Pursuant to the execution of the Stock Purchase Agreements, Mr. Lin and Lynx owned approximately 62.5% and 14.4% of the total
voting rights of SWTS, respectively.
Note
6 - Debt
Convertible
Short Term Debt
On
July 5, 2016, Tiffany 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 this period is $9,667.
Short
Term Debt
Arc
Capital Ltd. has advanced the Company a total of $15,990 for the period from July 1, 2016 to September 30, 2016. This loan currently
bears no interest and is due upon demand. The Company is currently under negotiations with Arc Capital Ltd. to determine the terms
of this loan that shall be effective once it has been documented and signed by both Arc Capital Ltd. and the Company.
Growth
Point Advisors Ltd. has advanced the Company a total of $6,530 for the period from July 1, 2016 to September 30, 2016. This loan
currently bears no interest and is due upon demand. The Company is currently under negotiations with Growth Point Advisors Ltd.
to determine the terms of this loan that shall be effective once it has been documented and signed by both Growth Point Advisors
Ltd. and the Company.
Chronos
Investments Ltd. has advanced the Company a total of $575 for the period from July 1, 2016 to September 30, 2016. This loan currently
bears no interest and is due upon demand. The Company is currently under negotiations with Chronos Investments Ltd. to determine
the terms of this loan that shall be effective once it has been documented and signed by both Chronos Investments Ltd. and the
Company.
Note
7 – Subsequent Event
On
November 2, 2016, the Company entered into a Debt Agreement with Arc Capital Ltd. for a total amount of $15,900 that was advanced
on behalf of the Company by Arc Capital Ltd. for the period from July 1, 2016 to September 30, 2016. The Debt Agreement bears
an interest rate of 6% per annum and is due on November 1, 2017.
On
November 2, 2016, the Company entered into a Debt Agreement with Growth Point Advisors Ltd. for a total amount of $6,530 that
was advanced on behalf of the Company by Growth Point Advisors Ltd. for the period from July 1, 2016 to September 30, 2016. The
Debt Agreement bears an interest rate of 6% per annum and is due on November 1, 2017.
On
November 2, 2016, the Company entered into a Debt Agreement with Chronos Investments Ltd. for a total amount of $575 that was
advanced on behalf of the Company by Chronos Investments Ltd. for the period from July 1, 2016 to September 30, 2016. The Debt
Agreement bears an interest rate of 6% per annum and is due on November 1, 2017.
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) expected changes in our revenue and profitability, (ii) prospective business opportunities and (iii)
our strategy for financing our business. 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 plans, liquidity, ability to complete
financing and purchase capital expenditures, growth of our business including entering into future agreements with companies,
and plans to successfully develop and obtain approval to market our product. 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 needs.
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 or any other
person 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
revenues and results of operations could differ materially from those projected in the forward-looking statements as a result
of numerous factors, including, but not limited to, the following: the risk of significant natural disaster, the inability of
our company to insure against certain risks, 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.
US
Dollars are denoted herein by “USD”, "$" and "dollars".
Overview
The
Company is engaged in the touchscreen industry through its Hong Kong subsidiary, incorporated on August 18, 2016, specializing
in the design and trading of touchscreen products and services. We also operate a bakery based in California, specializing in
freshly-made cakes and cupcakes and also offering other baked goods, as well as hot and cold beverages. On July 18, 2014, we completed
a share exchange whereby we acquired all of the issued and outstanding shares of common stock of Sweets & Treats CA. Sweets
& Treats CA became our wholly-owned subsidiary and we have operated our business through Sweets & Treats CA since the
Share Exchange.
We
currently market our touchscreen products primarily through personal referrals, and the baking products primarily through our
website, social media and personal referrals. Our plan for the next twelve months calls for reviewing the company’s bakery
business and development of the touchscreen business. We anticipate that the cost for developing our touchscreen business will
be approximately $250,000. Despite our plan, we currently have no commitments for any financing and cannot provide assurance that
we will realize this goal.
Recent
Development
On
July 5, 2016, Tiffany Aguayo, the majority shareholder, owning approximately 76.9% of the total issued and outstanding shares
of SWTS, entered into two separate Stock Purchase Agreements for the sale of 13,000,000 and 3,000,000 shares of SWTS common stock
equivalent to her complete ownership of SWTS with Ying-Chien Lin and Lynx Consulting Group Ltd (“Lynx”), respectively.
Pursuant to the execution of the Stock Purchase Agreements, Mr. Lin and Lynx owned approximately 62.5% and 14.4% of the total
voting rights of SWTS, 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 with Tiffany
Aguayo.
On
August 10, 2016, the Company's Board of Directors approved a change in its Fiscal Year from July 31 to June 30 to be more efficient
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 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 (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, Tiffany Aguayo resigned from all of her positions with the 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 operation, 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 Finance Officer and Chief
Technology Officer, respectively.
Plan
of Operations
Our
goal is to maintain the quality of our products and to build a sufficient customer base for the design and selling of touchscreen
products. We anticipate the cost for developing our touchscreen business will be approximately $500,000 within the next 12 months.
We have not 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 raise money.
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 private placements, but there is no assurance that we will be able to achieve any capital-raising. If we need
additional cash but are unable to raise it, we will either suspend marketing operations until we do raise the cash, or cease operations
entirely. Other than as described in this paragraph, we have no other financing plans.
Results
of Operations - Three Months Ended September 30, 2016 Compared to Three Months Ended October 31, 2015
We
generated revenue of $235,971 and $0 for the three months ended September 30, 2016 and October 31, 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 one (1) customer for the production of touchscreens per their requirements. The Company designed, located manufacturer
and supplier of raw materials, quality checked the products and arranged the delivery of the touchscreen products to the customers.
Cost of sales were related mainly to the raw material cost and the manufacturing fees of the touchscreens. We incurred operating
expenses of $169,630 and $2,065 for the three months ended September 30, 2016 and October 31, 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 R&D expenses of $27,729 and $0 for the three months ended September 30, 2016 and October 31, 2015, respectively.
The increase is due to the Company’s entry into the touchscreen industry to develop touchscreens that meet client requirements.
We incurred interest expense of $10,407 and $0 for the three months ended September 30, 2016 and October 31, 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 interest with the new debt holder which has beneficial conversion feature.
We had a net loss of $103,290 and $2,065 for the three months ended September 30, 2016 and October 31, 2015, respectively.
Liquidity
and Capital Resources
As
of September 30, 2016, we had total assets of $267,341, mainly in accounts receivable. Our liabilities as of September 30, 2016
were $318,252, which comprised of $183,210 in accounts payable, $30,940 in accrued expenses and $73,769 in loans. As of September
30, 2016, we had a working capital deficit of $20,578.
The
following is a summary of our cash flows provided by (used in) operating, investing, and financing activities for the three months
ended September 30, 2016:
September
30, 2016
|
|
|
For
the Three Months Ended
|
|
Net
Cash (Used in) Operating Activities
|
|
$
|
(46,036
|
)
|
Net
Cash used in Investing Activities
|
|
|
—
|
|
Net
Cash Provided by Financing Activities
|
|
|
49,302
|
|
Net
(Decrease) Increase in Cash and Cash Equivalents
|
|
|
3,266
|
|
For
the three months ended September 30, 2016, we had used $46,036 for operating activities and financing activities provided $49,302.
We had a net increase of $3,266 for the three months ended September 30, 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.
Going
Concern
Our
consolidated financial statements have been prepared assuming that we 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, we had an accumulated deficit at September 30, 2016, a net loss
and net cash received in operating activities for the reporting period then ended. These factors raise substantial doubt from
our auditor about our ability to continue as a going concern.
We
are attempting to generate sufficient revenue; however, its cash position may not be sufficient to support our daily operations.
While we believe in the viability of our strategy to generate sufficient revenues and in our ability to raise additional funds,
there can be no assurances to that effect. The ability of our company to continue as a going concern is dependent upon our ability
to further implement its business plan, generate sufficient revenue and in our ability to raise additional funds.
Critical
Accounting Policies and Estimates
Basis
of Presentation
Our
financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America
(“U.S. GAAP”) for the interim financial information, and with the rules and regulations of the United States Securities
and Exchange Commission (“SEC”) to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim financial statements
furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary
to a fair statement of the results for the interim period presented. Unaudited interim results are not necessarily indicative
of the results for the full fiscal year. These financial statements should be read in conjunction with the audited financial statements
of our company for the reporting period ended June 30, 2016 and notes thereto contained in our Registration Statement on Form
S-1, of which was declared effective on June 5, 2015.
Use
of Estimates and Assumptions and Critical Accounting Estimates and Assumptions
The
preparation of our financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date(s) of the financial statements and the reported amounts of revenues and expenses
during the reporting period(s).
Critical
accounting estimates are estimates for which (a) the nature of the estimate is material due to the levels of subjectivity and
judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change and (b) the impact
of the estimate on financial condition or operating performance is material. Our critical accounting estimates and assumptions
affecting the financial statements were:
|
(iv)
|
Assumption
as a going concern
: Management assumes that the Company will continue as a going
concern, which contemplates continuity of operations, realization of assets, and liquidation
of liabilities in the normal course of business.
|
|
(v)
|
Allowance
for doubtful accounts
: Management’s estimate of the allowance for doubtful
accounts is based on historical sales, historical loss levels, and an analysis of the
collectability of individual accounts; and general economic conditions that may affect
a client’s ability to pay. The Company evaluated the key factors and assumptions
used to develop the allowance in determining that it is reasonable in relation to the
financial statements taken as a whole.
|
|
(vi)
|
Valuation
allowance for deferred tax assets
: Management assumes that the realization of the
Company’s net deferred tax assets resulting from its net operating loss (“NOL”)
carry–forwards for Federal income tax purposes that may be offset against future
taxable income was not considered more likely than not and accordingly, the potential
tax benefits of the net loss carry-forwards are offset by a full valuation allowance.
Management made this assumption based on (a) the Company has incurred recurring losses,
(b) general economic conditions, and (c) its ability to raise additional funds to support
its daily operations by way of a public or private offering, among other factors.
|
These
significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached
to these estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.
Management
bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the
financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from other sources.
Management
regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes
in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those
estimates are adjusted accordingly.
Actual
results could differ from those estimates.
Cash
Equivalents
We
consider all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents.
Revenue
Recognition
We
recognize revenue when it is realized or realizable and earned. We consider 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.
Fair
Value of Financial Instruments
We
follow paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial
instruments and paragraph 82010-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to
measure the fair value of its financial instruments. Paragraph 820-10-3537 establishes a framework for measuring fair value in
generally accepted accounting principles (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency
and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy
which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy
gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest
priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described
below:
Level
1
|
Quoted
market prices available in active markets for identical assets or liabilities as of the reporting date.
|
|
|
Level
2
|
Pricing
inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable
as of the reporting date.
|
|
|
Level
3
|
Pricing
inputs that are generally observable inputs and not corroborated by market data.
|
Financial
assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or
similar techniques and at least one significant model assumption or input is unobservable.
The
fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities
and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within
more than one level described above, the categorization is based on the lowest level input that is significant to the fair value
measurement of the instrument.
The
carrying amounts of our financial assets and liabilities, such as cash, accounts receivable, prepaid professional fees, accounts
payable, accrued expenses, and customer deposits approximate their fair values because of the short maturity of these instruments.
Transactions
involving related parties cannot be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive,
free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the
related party transactions were consummated on terms equivalent to those that prevail in arm's-length transactions unless such
representations can be substantiated.
Off
Balance Sheet Arrangements
We
do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, sales or expenses, results of operations, liquidity or capital expenditures, or capital
resources that are material to an investment in our securities.