10-K/A 1 atmo_10ka.htm 10-K/A

UNITED STATES

 

SECURITIES AND EXCHANGE COMMISSION

 

WASHINGTON, D.C. 20549

 

FORM 10-K/A

 

(Mark One)

 

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

 

For the fiscal year ended December 31, 2018

 

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from_________ to __________

 

 

AMERICATOWNE HOLDINGS, INC.

 

(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)

 

NEVADA   000-55699    81-3131497
         
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)   (COMMISSION FILE NO.)   (IRS EMPLOYEE IDENTIFICATION NO.)

 

 

4700 Homewood Court, Suite 100, Raleigh North Carolina 27609 USA
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

(888) 406-2713
(ISSUER TELEPHONE NUMBER)

 

Securities registered under Section 12(b) of the Exchange Act:
None.

 

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

Common Stock, $0.0001 par value per share
(Title of Class)

 

   

 

 

Check whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒ 

 

Check whether the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes ☒ No ☐

 

Check whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ 

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐  

 

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-K (§229.405 of this chapter) contained herein, and no disclosure will be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒  

 

Check whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer  ☐ Accelerated filer  ☐  
     
Non-accelerated filer ☐ Smaller reporting company  ☒  
(Do not check if a smaller reporting company)    

 

 

Check whether the issuer is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No ☒ 

 

The aggregate market value of the common stock held by non-affiliates of the issuer was $0.0001 on December 31, 2018.

 

As of the most recent practicable date, there were 200,481,796 shares of common stock issued and outstanding, with a par value $.0001. 

 

EXPLANATORY NOTE

 

The Company is filing this Amendment to its previously filed Annual Report on Form 10-K filed on April 16, 2019 to restate its financial statements on December 31, 2018. The information in the Annual Report is amended to read in its entirety as set forth in this Amendment. Except to reflect the restatement of the financial statements, the related disclosure controls and procedures matters, the information in the Annual Report and this Amendment has not been updated or otherwise changed to reflect any events, conditions or other developments that have occurred or existed since April 16, 2019, the date the Form 10-K was filed. Accordingly, except solely with regard to the restatement, the related disclosure controls and procedures matters, all information in the Transition Report and this Amendment speaks only as of April 16, 2019. References made in this Amendment to "this Form 10-K" mean this Amendment on Form 10-K/A unless the context requires otherwise.

 

 

 2 

  

TABLE OF CONTENTS

 

    Page

 

PART I 

Item 1. Business 4
Item 1A. Risk Factors 8
Item 2. Properties 8
Item 3. Legal Proceedings 8
Item 4. Mine Safety Disclosures 8
PART II 
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 9
Item 6. Selected Financial Data 10
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 10
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 14
Item 8. Financial Statements and Supplementary Data 14
Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure 14
Item 9A. Controls and Procedures 14
Item 9B. Other Information 16
PART III 
Item 10. Directors, Executive Officers and Corporate Governance 17
Item 11. Executive Compensation 20
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 21
Item 13. Certain Relationships and Related Transactions, and Director Independence 23
Item 14. Principal Accountant Fees and Services 23
PART IV
Item 15. Exhibits, Financial Statement Schedules 24

 

 3 

 

PART I

 

Special Note Regarding Forward-Looking Statements

 

Information included or incorporated by reference in this Annual Report on Form 10-K contains forward-looking statements. All forward-looking statements are inherently uncertain as they are based on current expectations and assumptions concerning future events or future performance of the Company. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. Forward-looking statements may contain the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “forecasts,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions, and are subject to numerous known and unknown risks and uncertainties. Additionally, statements relating to implementation of business strategy, future financial performance, acquisition strategies, capital raising transactions, performance of contractual obligations, and similar statements may contain forward-looking statements.  In evaluating such statements, prospective investors and shareholders should carefully review various risks and uncertainties identified in this Report, including the matters set forth under the captions “Risk Factors” and in the Company’s other SEC filings. These risks and uncertainties could cause the Company’s actual results to differ materially from those indicated in the forward-looking statements. The Company disclaims any obligation to update or publicly announce revisions to any forward-looking statements to reflect future events or developments.

 

Although forward-looking statements in this Annual Report on Form 10-K reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties, and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those specifically addressed under the heading “Risk Factors Related to Our Business” below, as well as those discussed elsewhere in this Annual Report on Form 10-K. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Annual Report on Form 10-K. We file reports with the Securities and Exchange Commission (“SEC”). You can read and copy any materials we file with the SEC at the SEC’s Public Reference Room, 100 F. Street, NE, Washington, D.C. 20549. You can obtain additional information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet site (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us.

 

We disclaim any obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this Annual Report on Form 10-K. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this Annual Report, which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.

 

Item 1.   Business

 

General Corporate History

 

AmericaTowne Holdings, Inc. is a Nevada corporation (the “Company,” “we” or “our”) formerly known as “ATI Modular Technology Corp.” The Company is the surviving entity following the merger with its subsidiary - AmericaTowne, Inc., a Delaware corporation, deemed effective on August 1, 2018, and amendment to its Articles of Incorporation changing its name to “AmericaTowne Holdings, Inc.” In addition to operating business under the name of AmericaTowne Holdings, Inc., the Company also operates under the assumed names of ATI Modular Technology Corp. (“ATI Modular”) and AmericaTowne.

 

As a result of the merger, the Company acquired all business, contracts, assets, and obligations of AmericaTowne, Inc. The Company’s shareholders received a pro rata distribution of the Company’s shares in exchange for shares owned in AmericaTowne, Inc. (the merging entity). AmericaTowne, Inc. has ceased reporting as a result of the merger. The Company will continue operating under the assumed names set forth above, and the term “Company” used in this filing may refer to the businesses of the Company, ATI Modular or AmericaTowne, in addition to its other operations set forth herein, and in prior filings with the Commission.

 

 4 

 

The Company, through ATI Modular, is engaged in the development and the exporting of modular energy efficient technology and processes that allow government and private enterprises in China and elsewhere to use US-based methods for creating modular spaces, facilities, and properties. The Company is in the business of all aspects of modular and smart construction, including but not limited to, (a) the furtherance of modular and smart construction technology, education, development and production in developed and undeveloped countries, (b) acquisition and/or installation of construction equipment, materials, furnishings, hardware, insulation, flooring, roofing, wiring, plumbing, heating and air conditioning, and landscaping, (c) solar energy, and (d) other businesses directly or tangentially related to these lines of services, including assisting businesses and entrepreneurs in securing naming, licensing or promotional rights, driving internet and media traffic, increasing visibility of product and name recognition, and other services. The Company has not earned revenues from these operations.

 

The Company, through AmericaTowne, is pursuing its objectives in providing upper and middle-income consumers in China with “Made in the USA” goods and services allowing such consumers to experience United States’ culture and lifestyle. The pursuit of these objectives will continue to be done through AmericaTowne, as an assumed name of the Company. In addition, the Company believes it has made significant progress in developing its business platform in Africa by implementing business and commerce solutions considered mainstream in America, but relatively new in these developing countries. The Company’s recent developments in Africa have been highlighted through numerous contractual disclosures on EDGAR. The Company intends on continuing to deploy resources, research and expertise in evaluating further opportunities in developing countries as part of its overall growth model. The Company has not earned revenues from these operations.

 

The Company is pursuing exportation and procurement of goods to African countries. As stated in its 2018 periodic disclosures, the Company has entered into definitive procurement agreements with the following governmental entities in Kenya, Africa pursuant to the specific bid and approval procedures set forth by the particular administrative body for the governmental entity identified: (a) Siaya, (b) Busia, (c) Turkana, (d) Vihiga, (e) Kakamega, (f) Kisumu (g) Migori, and (h) Kericho. For example, most of the agreements disclosed by the Company are defined as “tenders,” or perhaps commonly referred to as “invoicing agreements,” where the scope of services and goods to be procured are set forth in governmental approval correspondence following meeting minutes, planning orders or committee hearings. The tenders were subsequently delivered to the Company for invoicing. Following invoicing, the governmental entity has a set period of time to pay under the invoice prior to performance of services by the Company. During the invoicing period, the Company prepares its staff and independent contractors to procure the proper goods or services required under the tender. The payment terms and conditions are set forth in the specific tenders, and thus the reader is directed to the agreements enclosed in the Company’s 2018 periodic filings for review. None of the specific tenders have been paid to the Company, but the Company believes that the agreements with the governmental entities above are valid, and are in the process of payment.

 

The Company believes a material definitive agreement exists as a result of the issuance of invoices identified above. There are no pre-existing relationships between the Company (or its assumed name entities – AmericaTowne or ATI Modular, or its related company, ATI Nationwide Holding Corp.) and the governmental entity issuing the tender, unless previously disclosed. The even-numbered invoices set forth in the periodic disclosures, e.g. 1134, 1136, etc., following the preceding odd-numbered invoice have been prepared for the second required payment under the tenders, but not issued as of the date of the Company’s periodic disclosure in July of 2018. The Company has not, and cannot, guarantee the collectability of these invoices or any subsequent invoice issued against the above-referenced tenders, or any future tender or similar agreement with the same or other governmental entities. 

 

Certain aspects of the export services engaged in by the Company, such as tax incentives and tax reductions for export actions, cannot be provided by the Company because it is not an Interest Charge Domestic International Sales Corporation (“IC-DISC”). Therefore, the Company has entered into a separate agreement with AXP Holding Corporation, a IC-DISC corporation controlled by Mr. Perkins. The term of the agreement is six years and allows the Company, based on its exporting activities, to save and or reduce its tax obligations. Although other similar IC-DISC entities exist, the Company is able to obtain better terms and conditions from AXP Holding Corporation in light of Mr. Perkins’ control of AXP Holding Corporation  . 

 

 5 

 

Our principal executive offices are located at 4700 Homewood Court, Suite 100 in Raleigh, North Carolina. We are registered as a foreign business entity in the State of North Carolina. We lease the office space from Yilaime Corporation, a Nevada corporation doing business in North Carolina, and a related party to the Company, as set forth below. Our physical location for our operations in China along with a manufacturing facility is Anhui Province Jiangnan Industrial Concentration Zone New Energy Industry Park A1, A2, A5 Plant Chizhou City, Anhui Province, China. The Company registered its wholly owned subsidiary Anhui Ao De Xin Modular Building Technology Co. Ltd. in Jiangnan Industry Zone, Chizhou, China on July 17, 2017. Our physical location for operations in Kenya is 764 Milimani Estates, Kisumu, Kenya, and 108 Hilton Plaza Moi Avenue, Nairobi, Kenya. The Company registered its wholly owned subsidiary AmericaTowne Holdings Limited in Kisumu, Kenya on July 9, 2018.

 

The Company was incorporated on January 2, 1969 as United Gold & Silver Co. (“UGS”). On February 17, 1971, UGS merged with Lucky Irish Silver, Inc., a Montana corporation, and Deep Creek Mines, Inc., a Washington corporation, in which the surviving entity’s name remained USG. On November 29, 1999, USG merged with Auto America, Inc., (“Auto America”), a Delaware corporation, through the filing of Articles of Merger resulting in the surviving entity changing its name from USG to Auto America. From 2002 to 2007, the State of Washington automatically filed numerous Certificates of Administrative Dissolutions for Auto America for failure to file annual reports. On May 14, 2007, Auto America filed its final Application of Reinstatement resulting in restoring the Company to good standing. Also, on May 14, 2007, Auto America filed Amended Articles of Incorporation changing its name to Charter Equities, Inc. (“Charter Equities”). Charter Equities converted to an Arizona corporation on January 23, 2008. Shortly thereafter, the Company converted to Nevada corporation and changed its name to Global Recycle Energy, Inc. We amended our articles of incorporation on June 27, 2016, changing our name to ATI Modular Technology Corp., and in 2018, we completed the above-referenced merger with AmericaTowne, Inc. and changed our name to AmericaTowne Holdings, Inc.

 

Alton Perkins (“Mr. Perkins”) is the control person of the Company by virtue of being its sole director and officer. Mr. Perkins is also a beneficial owner or control person of the following shareholders of, or related-parties to, the Company: Yilaime Corporation, Yilaime Corporation of NC, the Alton & Xiang Mei Lin Perkins Family Trust (the “Perkins Trust”), AXP Holding Corporation, and Perkins Hsu Export Corporation. Our CIK number is 0001697426, and we have selected December 31 as our fiscal year. The Company is listed on the OTC Markets (Pink) as “ATMO” and has a caveat emptor designation.

 

Employees

 

The Company currently has 24 full-time employees.

 

 6 

 

Emerging Growth Company

 

We are an emerging growth company under the JOBS Act. We shall continue to be deemed an emerging growth company until the earliest of:

 

(a) the last day of the fiscal year of the issuer during which it had total annual gross revenues of $1,000,000,000 (as such amount is indexed for inflation every 5 years by the Commission to reflect the change in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics, setting the threshold to the nearest 1,000,000) or more;

 

(b) the last day of the fiscal year of the issuer following the fifth anniversary of the date of the first sale of common equity securities of the issuer pursuant to an effective IPO registration statement;

 

(c) the date on which such issuer has, during the previous 3-year period, issued more than $1,000,000,000 in non-convertible debt; or

 

(d) the date on which such issuer is deemed to be a ‘large accelerated filer’, as defined in section 240.12b-2 of title 17, Code of Federal Regulations, or any successor thereto.

 

As an emerging growth company we are exempt from Section 404(b) of Sarbanes Oxley. Section 404(a) requires Issuers to publish information in their annual reports concerning the scope and adequacy of the internal control structure and procedures for financial reporting. This statement shall also assess the effectiveness of such internal controls and procedures. Section 404(b) requires that the registered accounting firm shall, in the same report, attest to and report on the assessment on the effectiveness of the internal control structure and procedures for financial reporting.

 

As an emerging growth company we are also exempt from Section 14A (a) and (b) of the Securities Exchange Act of 1934 which require the shareholder approval of executive compensation and golden parachutes. We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of the Jobs Act, that allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates.

 

 7 

 

Item 1A. Risk Factors.

 

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.

 

Item 1B. Unresolved Staff Comments.

 

Not applicable.

 

Item 2.   Description of Property.

 

The Company maintains an office at 4700 Homewood Court, Suite 100 in Raleigh, North Carolina, 27609 as its headquarters. It is currently in the process of scouting and researching locations for a facility in China. The North Carolina office is leased from Yilaime Corporation, a Nevada corporation doing business in North Carolina, and a related party to the Company. The North Carolina office consists of a 2,003 square foot office space. It presently houses twelve employees of the Company located in Raleigh, NC and is being leased for $3,700 per month from Yilaime. The other location in China and two locations in Kenya are under long term leases.

 

We do not own any properties. We currently have no policy with respect to investments or interests in real estate, real estate mortgages or securities of, or interests in, persons primarily engaged in real estate activities.

 

Item 3.   Legal Proceedings.

 

On September 27, 2018, the Company filed an action against OTC Markets Group, Inc. (the “OTC”) for injunctive relief, more specifically, seeking the lifting of the caveat emptor on its stock listed on the OTC market place. This lawsuit was voluntarily dismissed in November of 2018. The Company did not pay any amounts to OTC.

 

On February 12, 2019, the Company was sued by Pacific Stock Transfer Company (“PST”) in a third-party complaint seeking indemnity and/or contribution from the Company for damages awarded, if any, to two shareholders of the Company caused by PST’s alleged failure to waive a bond requirement for lost certificates of the two shareholders. The Company is defending the claims. It is too early to evaluate the likelihood of success or the range of potential loss.

 

Item 4.   Mine Safety Disclosures.

 

Not applicable.

 

 8 

 

PART II

 

Item 5.   Market for Common Equity, Related Stockholder Matters and Small Business Issuer Purchases of Equity Securities.

 

Common Stock

 

The Company has 500,000,000 shares of authorized common stock (CUSIP# 00215H 103), of which, as of the end of its fiscal year 2018, had 200,481,796 issued and outstanding. Of the amount of issued and outstanding, the Company’s transfer agent records reflect AmericaTowne (i.e. the former AmericaTowne, Inc.) owning a total of 2,000,000 shares. These shares titled to AmericaTowne, Inc. should have been cancelled at the time of effectiveness of the merger. The Company is in the process of doing so with the transfer agent, and it is expected that this cancellation of 2,000,000 shares titled to AmericaTowne, Inc. will be completed in second quarter of 2019, and disclosed in its quarterly report accordingly.

 

Between June 13, 2016 and September 13, 2016, Mr. Perkins purchased on the open market, as trustee of the Perkins Trust, and individually, 15,964 shares and 101,629 shares, at the average per share price of $1.91 and $.89, respectively. Perkins and Perkins Trust used personal funds for the purchase. AmericaTowne, Perkins Trust and Perkins beneficially own 162,909,428 shares, or 81.3%, of the Company’s common stock. However, as stated above, this beneficial ownership will be reduced by 2,000,000 down to 160,909,428, or 80.2%, in the second quarter of 2019.

 

There is no established public trading market for the Company’s common shares. The Company’s trading symbol is ATMO, and it has been given the caveat emptor designation by OTC. The range of high and low bid information for the Company’s common shares for each full quarterly period within the two most recent fiscal years, and any subsequent interim period for which financial statements are included, or as required under Article 3 of Regulation S-X, is as follows: 

 

  1/1/17-3/31/17 4/1/17-6/30/17 7/1/17-9/30/17 10/1/17-12/31/17 1/1/18-3/31/18 4/1/18-6/30/18 7/1/18-9/30/18 10/1/18-12/31/18
High 9.39 8.25 74.99 3749.5 0.35 - 20.00 2.25
Low 5.25 0.35 0.25 305.5 1.15 - 20.00 1.31

 

As of the most recent practicable date, there are approximately 462 record holders of our common stock with an aggregate of 200,486,004 shares issued and outstanding. The Company has not paid any cash dividends to date and may consider but no final decision has been made in paying dividends in the foreseeable future. We have no securities authorized for issuance under any Equity Compensation Plans.

 

Preferred Stock

 

We do not have a class of preferred stock.

 

Dividends

 

We have not paid any dividends on our common stock to date. The payment of dividends in the future will be contingent upon our revenues and earnings, if any, capital requirements and general financial condition subsequent to completion of a business combination. The payment of any will be within the discretion of our then board of directors. It is the present intention of our board of directors to retain earnings, if any, for use in our business operations. However, the Board, anticipates declaring dividends in the foreseeable future.

 

 9 

 

Securities Authorized for Issuance under Equity Compensation Plans

 

The Company does not have any equity compensation plans or any individual compensation arrangements with respect to its common stock or preferred stock. The issuance of any of our common or preferred stock is within the discretion of our Board of Directors, which has the power to issue any or all of our authorized but unissued shares without stockholder approval. The Board anticipates implementing an Employee Benefit Plan in the 2nd Quarter of 2019.

 

Recent Sales of Unregistered Securities

 

In 2018, the Company issued 798,926 shares of unregistered securities, of which 210,000 were issued pursuant to new Employment Agreements, 300,000 were issued in order to complete the merger action disclosed above, and 288,926 were issued pursuant to private sales.

 

We believe that Section 4(a)(2) was available because neither of the issuances involved underwriters, underwriting discounts or commissions; restrictive legends had been placed on the certificates; no sales were made by general solicitation. The capital from these sales are disclosed in the financial statement and notes in this report.

 

Issuer Purchases of Equity Securities

 

None.

 

Item 6.  Selected Financial Data

 

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.

 

Item 7.   Management’s Discussion and Analysis of Financial Condition and Results of Operation.

 

You should read the following discussion of our financial condition and results of operations together with the audited financial statements and the notes to the audited financial statements included in this Annual Report on Form 10-K. This discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results may differ materially from those anticipated in these forward-looking statements.

 

We qualify as an “emerging growth company” under the JOBS Act. As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements. For so long as we are an emerging growth company, we will not be required to:

 

  • have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;
  • comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);
  • submit certain executive compensation matters to shareholder advisory votes, such as "say-on-pay" and "say-on-frequency;" and
  • disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO's compensation to median employee compensation.
 10 

 

In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.

 

The Company is in the early stages of its operations, and many of its plans and objectives are aspirational in nature, and thus might never come to fruition. The Company’s business in fiscal year 2018 is set forth above, and incorporated herein by reference.

 

Fiscal Year

 

Our fiscal year ends on December 31.

 

Results of Operations

 

We plan to raise capital following our recent change in status to an operating entity through the offering of shares of common stock or preferred stock to investors. We anticipate we will need to pursue capital to fund our operations over the next twelve months. We believe we will be able to raise the necessary capital to carry out our business plan, but there is no assurance that we will be able to do so.

 

Overview

  

In fiscal year 2018, the Company achieved $376,540 in revenue. We can make no assurances that we will find commercial success in any of our products. We also rely upon the Service Agreements with AmericaTowne, and Yilaime for revenues. We are a new company and thus have very limited experience in sales expectations and forecasting. We also have not fully discovered any seasonality to our business as we began operations for the first quarter of 2018.

 

Results of Operations for the Years Ended December 31, 2018 and 2017

 

Our operating results are summarized as follows: 

 

    Year Ended
    December 31,
    2018   2017
         
Revenues   $ 376,540     $ 1,775,003  
Costs of Revenues     287,099       303,549  
Gross Profit   $ 89,441     $ 1,471,454  
Operating Expenses   $ 2,254,830     $ 1,938,462  
Other Income   $ 12,117     2,352
Provision for Income Taxes   $ (457,105 )     (146,512 )
Net Loss   $ 1,696,167   $ 318,144

 

 11 

 

Revenues

 

For the years ended December 31, 2018 and 2017, we have revenues of $376,540 and $1,775,003, respectively. Lower revenues in 2018 is due to less revenue from trade centers.  

Operating Expenses

 

Our operating expenses are largely attributable to office, rent and professional fees related to our reporting requirements as a public company and implementation of our business plan. In 2018, our operating expenses were $2,254,830, compared to $1,938,462 for December 31, 2017.

 

Net Loss

As a result of our operations, for 2018, the Company reported net loss after provision for income tax of $1,696,167. For the year ended December 31, 2017, our net loss was $318,144. The increase is due to lower revenue.

 

Liquidity and Capital Resources

 

Working Capital 

 

  

December 31,

2018

 

December 31,

2017

       
Current Assets  $4,017,433   $4,255,338 
Current Liabilities  $2,396,087   $1,404,025 
Working Capital  $1,621,346   $2,851,313 

 

We have working capital of $1,621,346 on December 31, 2018. Compared to December 31, 2017, working capital of $2,851,313. The decrease is mainly due to higher deferred revenue as of December 31, 2018.

 

Cash Flow

 

    Year Ended December 31,
    2018   2017
         
Net cash used in operating activities   $ 975,180   $ 734,977
Cash used in investing activities     6,232     96,885
Cash provided by financing activities     186,339       759,015  
Decrease in cash     795,073     72,847

 

 

 12 

 

Cash Used in Operating Activities

 

Compared to 2017, increase in cash used in operating activities in 2018 is mainly due to decrease in higher net loss.

 

Cash Used in Investing Activities

 

Compared to 2017, decrease in cash used in investing activities in 2018 is mainly due to less spending on purchase of fixed assets. In addition, there was no issuance of notes receivable in 2018.  

  

Cash Provided by Financing Activities

 

Compared to 2017, our cash provided by financing activities decreased by $572,676. This decrease was due to decrease in proceeds from issuance of common stock.

 

As of December 31, 2018, the Company had enough current assets including receivables to operate its business at the current level for the next twelve months, but insufficient cash to achieve our business goals and initiatives set forth above. To address the cash situation, the Company continues to manage its cash accounts and receivables closely.

 

To date, we have been able to meet all our account payable obligations within a five to ten-day window. If required, we can extend this window to improve our cash flow position. Additionally, we have a plan to increase sales. There is no assurance that we will be able to maintain this level of operations.

 

The success of our business plan beyond the next twelve months is contingent upon us growing our business, keeping costs down, increasing revenue and obtaining additional equity and/or debt financing. We intend to fund operations through our pro-active efforts to monitor receivables, and debt and/or equity financing arrangements, which may be insufficient to fund our capital expenditures, working capital, or other cash requirements. We do have a commitment from Chizhou government to provide cash infusions and or loan guarantees as we complete our operations in China. Other than Chizhou, we do not have any formal commitments or arrangements for the sales of stock or the advancement or loan of funds at this time. There is no assurance that such additional financing will be available to us on acceptable terms, or at all or that our receivable plan will be effective in the future.

 

Plan of Operation and Cash Requirements

 

The Company anticipates that its expenses over the next twelve months will be approximately $10,000,000 as described in the table below. These estimates may change significantly depending on the nature of our business activities and our ability to raise capital from our shareholders or other sources. 

 

Description Potential Completion Date Estimated Expenses $
     
Initial Plant and Operations Set-up 12 months 2,250,000
Salaries 12 months 1,300,000
Utility expenses 12 months 50,000
Investor relations costs 12 months 50,000
Marketing expenses 12 months 100,000
Professional fees 12 months 150,000
Other administrative expenses 12 months 100,000
Equipment Purchases 12 months 6,000,000

 

 13 

 

Our other administrative expenses for the year will consist primarily of transfer agent fees, bank and interest charges and general office expenses. The professional fees are related to our regulatory filings throughout the year and include legal, accounting and auditing fees. The equipment purchases and plant set-up are related to the materially definitive agreement with Jiangnan.

 

Based on our planned expenditures, we will require approximately $10,000,000 to proceed with our business plan over the next twelve months. If we secure less than the full amount of financing that we require, we will not be able to carry out our complete business plan and we will be forced to proceed with a scaled back business plan based on our available financial resources.

 

We intend to raise the balance of our cash requirements for the next twelve months pursuant to our agreement with Jiangnan by accessing upon request bank loans, bank guarantees and equity funding. Additionally, we may have private placements, shareholder loans or possibly a registered public offering (either self-underwritten or through a broker-dealer). If we are unsuccessful in raising enough money through such efforts, we may review other financing possibilities such as bank loans. At this time, other than our agreement with Jiangnan we do not have a commitment from any third-party to provide us with financing. There is no assurance that any financing will be available to us or if available, on terms that will be acceptable to us.

 

Even though we plan to raise capital through equity or debt financing, we believe that the latter may not be a viable alternative for funding our operations, as we do not have sufficient tangible assets to secure any such financing. We anticipate that any additional funding will be in the form of equity financing from the sale of our common stock. At the close of 2018, we are considering financing arrangements for our common stock. However, the arrangements are not final and we cannot provide any assurance that we will be able to raise sufficient funds from the sale of our common stock to finance our operations. In the absence of such financing, we may be forced to abandon our business plan.

 

Off-Balance Sheet Arrangements

 

We have not entered into 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, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources and would be considered material to investors.

 

Item 7A.  Quantitative and Qualitative Disclosures about Market Risk.

 

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.

 

Item 8.   Financial Statements and Supplementary Data.

 

Please see the financial statements beginning on page F-1 located in this annual report on Form 10-K and incorporated herein by reference.

 

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

 

There are not and have not been any changes in or disagreements between the Company and its accountants on any matter of accounting principles, practices or financial statement disclosure.

 

Item 9A. Controls and Procedures.

 

The Company's Chief Executive, Alton Perkins, is responsible for establishing and maintaining disclosure controls and procedures for the Company.

 14 

 

Evaluation of Disclosure Controls and Procedures

For purposes of this Item 9A., the term disclosure controls and procedures means controls and other procedures of the Company (i) that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934, as amended (15 U.S.C. 78a et seq. and hereinafter the “Exchange Act”) is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the Securities and Exchange Commission (the “Commission”), and (ii) include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our disclosure controls and procedures do not yet comply with the requirements in (i) and (ii) above.

On December 31, 2017, Alton Perkins reviewed the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) as of the end of the period covered by this report and has concluded that (i) the Company’s disclosure controls and procedures are not effective to ensure that material information relating to the Company is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Commission due to material weaknesses identified. The material weaknesses identified relate to the lack of proper segregation of duties and the lack of sufficient qualified accounting and other finance personnel with an appropriate level of U.S. GAAP knowledge and experience.

Report of Management on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting for external purposes in accordance with accounting principles generally accepted in the United States of America. Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions; providing reasonable assurance that transactions are recorded as necessary for preparation of our financial statements; providing reasonable assurance that receipts and expenditures of Company assets are made in accordance with management authorization; and providing reasonable assurance that unauthorized acquisition, use or disposition of Company assets that could have a material effect on our financial statements would be prevented or detected on a timely basis. Because of its inherent limitations, our internal control over financial reporting does not provide assurance that a misstatement of our financial statements would be prevented or detected and is not effective.

On December 31, 2018, management conducted an evaluation of the effectiveness of our internal control over financial reporting and found it to be not effective subsequent to filing our Annual Report on Form 10-K for the year ended December 31, 2018 with the Commission. Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management has concluded that the Company’s internal controls over financial reporting are not effective. The material weaknesses identified relate to the lack of proper segregation of duties and the lack of sufficient qualified accounting and other finance personnel with an appropriate level of U.S. GAAP knowledge and experience. As we obtain additional funding and employ additional personnel, we will implement programs recommended by the Treadway Commission to remediate the material weaknesses.

Our independent public accountant, Yichien Yeh, CPA (“YY”) has not conducted an audit of our controls and procedures regarding internal control over financial reporting. Consequently, YY expresses no opinion with regards to the effectiveness or implementation of our controls and procedures with regards to internal control over financial reporting.

 

 15 

 

Changes in Internal Controls over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with our evaluation of these controls as of the end of the fiscal year, December 31, 2018 as covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 

Inherent Limitations on Effectiveness of Controls 

The Company's management does not expect that its disclosure controls or its internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

 

Item 9B. Other Information.

 

Not applicable.

 

 16 

 

PART III

 

Item 10. Directors, Executive Officers and Corporate Governance

 

(a)  Identification of Directors and Executive Officers.

 

Our officers and directors and additional information concerning them are as follows:

 

Name   Age   Position(s)
         
Alton Perkins   67   Chief Executive, Secretary, Treasurer and Director

 

Alton Perkins – Sole Director and Officer.

Mr. Perkins has been the Chairman of the Board, Chief Executive Officer, Chief Financial Officer, Treasurer and Secretary of the Company since the change in control event on June 27, 2016. Mr. Perkins serves in these same capacities for ATI, Yilaime, Yilaime NC and AXP Holding. Mr. Perkins is a former decorated Air Force Officer and Missile Launch Officer with 22 years of military service, who graduated from the University of Southern Illinois with a B.S. in Business Administration and a M.B.A. from the University of North Dakota. Between 1988 and 1997, he held CEO positions with start-up companies in the jet fuels, defense contracting, construction, business consulting and development, and real estate industries. Between 1997 and 2009, Mr. Perkins served as the CEO and Chief Technology Officer for internet, childcare operations, media, and realty development companies. From 2009 to the present, Mr. Perkins has served as Chairman of Yilaime and its related entities – former AmericaTowne, Inc. (defined as “ATI” in this section), Yilaime NC and AXP Holding. Mr. Perkins has expertise in conducting business in China. Living and working in China studying Chinese consumer habits, working with Chinese entrepreneurs and government agencies, he developed the AmericaTowne® and AmericaStreet™ concepts.

Mr. Perkins lived in China between September 1, 2010 and April 28, 2012. He worked for the Yilaime Foreign Invested Partnership in Hengshui, China between September 19, 2010 and December 30, 2012. In addition to serving as Co-Chair of Yilaime Foreign Invested Partnership in China, an entity focused on real estate development, he served as a chief consultant to a major Chinese chemical company responsible for funding and technology transfer, and coordinated business with USA based auditors, DOW Chemical and USA Exim Bank. In addition, Mr. Perkins is the recently appointed sole director and officer of ATI Nationwide Holdings Corp., a Florida corporation f/k/a EXA, Inc. (“ATIN”). The Company’s largest shareholder prior to the merger – ATI, closed on the purchase of the majority and controlling interest of ATIN on October 13, 2016. These shares in ATIN are now owned by the Company . ATIN is listed on the OTC:Pink as “ATIN.” No Company funds were used to purchase ATI’s interest in ATIN.

 

Mr. Perkins is subject to a Desist and Refrain Order dated March 21, 2008 (the “Order”) issued by the State of California’s Business, Transportation and Housing Agency, Department of Corporations (the “Department”). In 2003, Mr. Perkins had been the Chief Executive Officer of Sunburst Holding Corporation (“Sunburst”). The Department alleged that in May of 2003, Sunburst and Mr. Perkins offered and sold securities through general solicitation to finance art-related activities. The Department alleged that Sunburst and Mr. Perkins omitted material facts, and more specifically, that Mr. Perkins had pled no contest to felony counts related to an indictment for fraudulent misappropriation of funds in a fiduciary capacity in Maryland, and had received a five-year suspended sentence.

 

 17 

 

The Department was of the opinion that investments offered and sold by Sunburst and Mr. Perkins constituted securities, which were subject to qualification under the California law, and that the securities were offered without being qualified, and were not exempt, in violation of California law. The Department ordered Sunburst and Mr. Perkins to desist and refrain from the further offer or sale of securities in California unless and until qualification has been made under the law or unless exempt. The Department also ordered that Sunburst and Mr. Perkins to desist and refrain from offering or selling or buying or offering to buy securities in California, including but not limited to stock, by means of any written or oral communication which includes an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading (discussed below). Mr. Perkins did not agree with the proposed order and filed a complaint with the Department. Mr. Perkins complaint was based on the fact that the shares in question were subject to a Registration statement filed by Sunburst and the shares were not required to be qualified and or authorized by the State of California since the shares had been appropriately registered with the SEC.

 

Mr. Perkins has been in compliance with the Order since issuance. The Order is not related in any manner with respect to the Company or its related parties. To the extent the Order was entered (i.e. only copy available for inspection by management is an unsigned version), there is no restriction on Mr. Perkins from engaging in an offering in California provided he complies with the appropriate disclosures and laws. The Company is not aware of any similar orders in any other jurisdiction.

 

The Company further discloses that the aforementioned Order references the failure of Mr. Perkins to disclose his eleven (11) pleas of nolo contendere in the Circuit Court for Prince Georges County, Maryland, for fraudulent misappropriation by a fiduciary in connection with a real estate transaction unrelated to the Company or its subsidiaries. On or about March 10, 2000, Mr. Perkins had been arraigned on eleven counts of fraudulent misappropriation by a fiduciary. The alleged misappropriation occurred on or about November 24, 1999 (i.e. the date set by the Court as the offense date). Mr. Perkins pled nolo contendere on August 31, 2000 without any admission or finding of guilt. Mr. Perkins was and had been given a five-year suspended sentence, which has since expired. Mr. Perkins disclosed to the Company that he had subsequently obtained a judgment out of the Superior Court of Mecklenburg County in North Carolina in the amount of $125,000 against an individual who defamed him and published false comments related to his nolo contendere plea. The company further discloses that the state of Virginia Division of Securities conducted an investigation into the matter. After careful review of the matter and applicable law, they concluded that no action was warranted and stated that the matter is closed.

 

B. Significant Employees.

 

None

 

C. Family Relationships.

 

Mr. Perkins’ wife, Xiang Mei Lin Perkins, is a beneficiary under the Perkins Trust.

 

 18 

  

D. Involvement in Certain Legal Proceedings.

  

Except as otherwise disclosed, no officer, director, or persons nominated for such positions, promoter or significant employee has been involved in the last ten years in any of the following:

 

  • Any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
     
  • Any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
     
  • Being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; and
     
  • Being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.

 

Audit Committee

 

Alton Perkins, the Company’s sole director, acts as the Audit Committee. The Company has no separate committees. The Company has no qualified financial expert at this time because it has not been able to hire a qualified candidate. Further, the Company believes that it has inadequate financial resources at this time to hire such an expert. The Company intends to continue to search for a qualified individual for hire.

 

Code of Ethics

 

We do not currently have a code of ethics. The company is in the early stages of development and its chief executive and sole director, Mr. Perkins, has not yet developed a code of ethics. The Company intends on developing one as the Company’s business expands.

 

Prior Blank Check Company Experience

 

Mr. Perkins is the only member of management who has served as an officer or director of a prior blank check company.

 

Name  

Filing Date Registration

Statement 

  

Operating 

Status 

  

SEC File 

Number 

  

Pending Business 

Combinations 

  

Additional 

Information 

                     
AmericaTowne, Inc.   May 12, 2015   Effective  November 5, 2015   000-55206   Merger Completed   None
ATI Nationwide Holding Corp.   June 20, 2017   Shell Company   000-1591387   None   None

 

 

 19 

 

The Company is the majority and controlling shareholder of ATI Nationwide Holding Corp., a Florida corporation (“ATI Nationwide”). ATI Nationwide is formerly known as EXA, Inc. ATI Nationwide is listed on the OTC as “ATIN” with a caveat emptor designation. The Company acquired the controlling interest in ATI Nationwide through a private stock acquisition with Carson Holdings, LLC, a Utah limited liability company, and Joseph C. Passalaqua, an individual, which closed on October, 7 2016. ATI Nationwide is a blank check company; however, through ATI’s performance under the Master Joint Venture and Operational Agreement with Nationwide Microfinance Limited, a Ghanaian corporation, which has been disclosed by ATI on Form 8-K dated July 14, 2016, ATI Nationwide is in the process of taking necessary steps to cease being a blank check company; however, there is no guarantee that it will be able to cease being a blank check company.

 

Nominating Committee

 

We have not adopted any procedures by which security holders may recommend nominees to our Board of Directors.

 

Item 11.   Executive Compensation.

 

On July 1, 2016, the Company entered into an Employment Agreement with Mr. Perkins to serve as the Company’s Chairman of the Board, President, Chief Executive Officer, Chief Financial Officer, Treasurer and Secretary (the “Employment Agreement”). The term of the Employment Agreement is five years with successive one-year option terms. In consideration his services under the Employment Agreement, the Company issued 10,000,000 shares of restricted common stock to Mr. Perkin’s designee – the Perkins Trust, which is allowed for under Section 3.2 of the Employment Agreement.

  

The stock issuance is subject to certain lock-up provisions in the Employment Agreement, which are more thoroughly set forth in the enclosed exhibit. Until the Company acquires additional capital, it is not anticipated that Mr. Perkins, or any future officer or director will receive compensation from the Company other than reimbursement for out-of-pocket expenses incurred on behalf of the Company

 

Mr. Perkins, who is also a director, officer and control person of ATI, intends to devote very limited time to our affairs. Other than as set forth above, the Company has no stock option, retirement, pension, or profit sharing programs for the benefit of directors, officers or other employees, but our sole officer and director may recommend adoption of one or more such programs in the future. The Company does not have a standing compensation committee or a committee performing similar functions, since the Board of Directors has determined not to compensate the officer and director..

 

Summary Compensation Table

 

Name and Principle Position  Year  Salary  Bonus  Stock Awards  Option Awards  Nonequity Incentive Plan Compensation  Nonqualified Deferred Compensation Earnings  All Other Compensation  Total
Alton Perkins (PEO)   2018   $—     $—     $0   $—     $—     $—     $—     $—   

 

 20 

Outstanding Equity Awards at Fiscal Year-End

Name Option awards Stock awards
Number of securities underlying unexercised options 
(#) exercisable		 Number of securities 
underlying
unexercised 
options 
(#) unexercisable		 Equity 
incentive 
plan awards: Number of 
securities 
underlying 
unexercised
unearned 
options 
(#)		 Option 
exercise price 
($)		 Option expiration date Number of shares or units of stock that have not vested 
(#)		 Market value of shares of units of stock that have not vested
($)		 Equity 
incentive
plan awards: Number of 
unearned
shares, units or other rights that have not vested 
(#)		 Equity 
incentive
plan awards: Market or paysssout value of 
unearned
shares, units or other rights that have not vested 
($)
Alton Perkins 20,000,000 25,00,0000 - 1.5% of prevailing share price 12/31/2021 - - - -

 

 

Director Compensation

 

Name   Fees earned or paid in cash 
($)		    Stock awards
($)		    Option awards 
($)		    Non-equity incentive plan
compensation
($)		    Nonqualified deferred 
compensation earnings 
($)		    All other compensation
($)		    Total
($)		 
Alton Perkins  $—     $—     $—     $—     $—     $—     $—   

 

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

 

The following table sets forth the ownership of our common stock by each person known by us to be the beneficial owner of more than 5% of our outstanding common stock as a group as of December 31, 2018. There are not any pending arrangements that may cause a change in control. The information presented below has been presented in accordance with the rules of the SEC and is not necessarily indicative of ownership for any other purpose.

 

A person is deemed to be a “beneficial owner” of a security if that person has or shares the power to vote or direct the voting of the security or the power to dispose or direct the disposition of the security. A person is deemed to own beneficially any security as to which such person has the right to acquire sole or shared voting or investment power within 60 days through the conversion or exercise of any convertible security, warrant, option or other right. More than one person may be deemed to be a beneficial owner of the same securities. The percentage of beneficial ownership by any person as of a particular date is calculated by dividing the number of shares beneficially owned by such person, which includes the number of shares as to which such person has the right to acquire voting or investment power within 60 days, by the sum of the number of shares outstanding as of such date plus the number of shares as to which such person has the right to acquire voting or investment power within 60 days. Consequently, the denominator used for calculating such percentage may be different for each beneficial owner.

 

 21 

 

Name and Address(1)   Amount and Nature of 
Beneficial Ownership		   Percentage of Class (2)
   
Alton Perkins(3)     162,909,428 (4)   81.3%
AmericaTowne, Inc.   2,000,000 (5)   1.0%
Alton Perkins & Xiang Mei Lin Family Trust   103,995,756   51.9%
All Executive Officers and Directors   177,049,796   88.3%
         
  _________________  
  (1)  The address for the person named in the table above is c/o the Company.  
       
  (2) Based on 200,481,796 shares outstanding as of the date of this annual report.  
       
  (3) Alton Perkins is Chief Executive Officer, Chief Financial Officer, Secretary and Director of the Company.
             
  (4) Individually, and through Yilaime and Perkins Trust.
     
  (5)

These shares are to be cancelled in second quarter of 2019.

 

 

            

This table is based upon information derived from our stock records. We believe that each of the shareholders named in this table has sole or shared voting and investment power with respect to the shares indicated as beneficially owned.

 

Securities Authorized for Issuance Under Equity Compensation Plans

 

The Company agreed to issue Mr. Perkins, or his authorized designee, an option to purchase up to 5,000,000 shares of common stock of the Company per year at any time prior to the conclusion of the first year of the Employment Agreement, i.e. prior to 365 days after execution of the Employment Agreement, at a price of 1.5% per share of the closing price of the Company’s stock quoted on a major exchange or OTC Market one business day before purchase, and annually thereafter for a total of 5 consecutive years. The shares purchased under this option are subject to all rights and lock-up restrictions set forth in the Employment Agreement. The following chart is provided pursuant to Item 201(d) of Regulation S-K:

 

 22 

  

Plan Category  

Number of securities to be issued

upon exercise of outstanding

options, warrants, and rights

   Weighted-average exercise  price of outstanding options, warrants and rights         Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))  
             
Equity compensation plans approved by security holders     25,000,000 1.5%         0  
Equity compensation plans not approved by security holders     N/A N/A       N/A
TOTAL   25,000,000         0
                                 

Item 13. Certain Relationships and Related Transactions.

 

Except as otherwise indicated herein, there have been no related party transactions, or any other transactions or relationships required to be disclosed pursuant to Item 404 of Regulation S-K.

 

Item 14.  Principal Accounting Fees and Services.

 

Yichien Yeh, CPA is the Company’s independent registered public accounting firm. Set below are aggregate fees billed by Yichien Yeh CPA for professional services rendered for the year ended December 31, 2018.

 

Audit Fees

 

The fees for the audit services billed and to be billed by Yichien Yeh, CPA for the year ended December 31, 2018 amounted to $77,500.

 

Audit-Related Fees

 

None.

 

Tax Fees

 

There were no fees billed by Yichien Yeh, CPA for professional services for tax compliance, tax advice, and tax planning for 2018.

 

All Other Fees

 

There were no fees billed by Yichien Yeh, CPA for other products and services for 2018.

 

Audit Committee’s Pre-Approval Process

 

The Board of Directors acts as the audit committee of the Company, and accordingly, all services are approved by all the members of the Board of Directors.

 

 23 

 

Item 15. Exhibits, Financial Statement Schedules.

 

(a) Exhibits:

  

Exhibit Exhibit Description Filed herewith Form Period ending Exhibit Filing date
             
3.1 Certificate of Incorporation   10-12G   3.1 8/25/17
3.4 By-Laws   10-12G   3.2 8/25/17
4.1 Specimen Stock Certificate   10-12G   4.1 8/25/17
3.1 Amended Articles   8-K   3.1 8/1/18
   Change in Shell Company Status   8-K     8/1/18
10.1 SIAYA AGREEMENT   8-K   10.1 7/5/18
10.2 BUSIA AGREEMENT   8-K     7/5/18
10.3 TURKANA AGREEMENT   8-K     7/5/18
10.4 VIHIGA AGREEMENT   8-K     7/5/18
10.5 KAKAMEGA AGREEMENT   8-K     7/5/18
10.6 KISUMU AGREEMENT   8-K     7/5/18
10.7 MIGORI AGREEMENT   8-K     7/5/18
10.8 KERICHO AGREEMENT   8-K     7/5/18
99.1 Registration Statement (Merger)   S-4     6/15/18
101.INS XBRL Instance Document X        
101.SCH XBRL Taxonomy Extension Schema Document X        
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document X        
101.LAB XBRL Taxonomy Extension Label Linkbase Document X        
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document X        
101.DEF XBRL Taxonomy Extension Definition Linkbase Definition X        

 

 

(b) The following documents are filed as part of the report:

 

1. Financial Statements: Balance Sheet, Statement of Operations, Statement of Stockholder’s Equity, Statement of Cash Flows, and Notes to Financial Statements.

 24 

 

SIGNATURES

 

In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

ATI Modular Technology Corp.

 

Dated: May 8, 2019

 

By: /s/ Alton Perkins
Alton Perkins, Chief Executive (Principal Executive and Financial Officer,) and Director

 

   

 

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

 

 Name   Title   Date  
           
By:  /s/ Alton Perkins
Alton Perkins		    Chief Executive Officer (Principal Executive and Financial Officer) and the Company’s sole Director   May 8, 2019  

 

 

 25 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

To the Board of Directors and Stockholders of AMERICATOWNE Holdings Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of AMERICATOWNE Holdings Inc. and its subsidiaries (the “Company”) as of December 31, 2018, and the related statement of operations, stockholders' equity, and cash flows for the year ended December 31, 2018, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company. as of December 31, 2018, and the results of operations and cash flows for the year ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 2 to the financial statements, the financial statements for the year ended December 31, 2018 have been restated to correct a misstatement.

 

Yichien Yeh, CPA

 

We have served as the Company’s auditor since 2016

 

Oakland Gardens, New York

May 3, 2019

 

 

 F-1 

  

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

To the Board of Directors and Stockholders of AMERICATOWNE Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of AMERICATOWNE Inc. and its subsidiaries (the “Company”) as of December 31, 2017, and the related statement of operations, stockholders' equity, and cash flows for the year ended December 31, 2017, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company. as of December 31, 2017, and the results of operations and cash flows for the year ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

Yichien Yeh, CPA

 

We have served as the Company’s auditor since 2014

 

Oakland Gardens, New York

May 17, 2018

 

 F-2 

  

AMERICATOWNE Holdings, Inc. and Subsidiaries
Consolidated Balance Sheets

 

    December 31
    2018   2017
    (Restated)    
ASSETS                
Current Assets                
Cash and cash equivalents   $ 105,095     $ 900,168  
Notes receivable - related parties     62,500       73,000  
Accounts receivable, net     567,191       764,800  
Accounts receivable, net - related parties     3,210,345       2,336,179  
Other receivables     11,246       —    
Other receivables - related parties     60,412       180,547  
Prepayment-current     644       644  
Total Current Assets     4,017,433       4,255,338  
                 
Prepayment-non current     6,232       7,035  
Property, plant and equipment, net     42,314       41,264  
Deferred tax assets     654,375       169,291  
Goodwill     40,331       40,331  
Investments     3,860       3,860  
Total Assets   $ 4,764,545     $ 4,517,119  
                 
LIABILITIES AND SHAREHOLDERS' EQUITY                
Current Liabilities                
Accounts payable and accrued expenses   $ 83,000     $ 80,611  
Deferred revenues-current     2,173,592       1,258,930  
Other payables     560       1,060  
Deposit from customers     1,469       1,469  
Due to related parties     59,143       8,646  
Income tax payable     78,323       53,309  
Total Current Liabilities     2,396,087       1,404,025  
Deferred revenues-non current     44,901       49,441  
Total Liabilities     2,440,988       1,453,466  
                 
Commitments & Contingencies                
                 
Shareholders' Equity                
Common stock, $0.0001 par value; 500,000,000  shares authorized, 198,481,796 and 48,985,026 shares issued and outstanding     198,482       4,899  
Common stock subscribed     —         87  
Additional paid-in capital     6,135,995       5,684,903  
Deferred compensation     (1,623,587 )     (2,359,220 )
Receivable for issuance of stock     (313,208 )     (90,223 )
Retained earnings     (2,050,372 )     (204,425 )
Noncontrolling interest     (23,753 )     27,632  
Shareholders' Equity     2,323,557       3,063,653  
Total Liabilities and Shareholders' Equity   $ 4,764,545     $ 4,517,119  

  

 

See Notes to Consolidated Financial Statements. 

 

 F-3 

   

AMERICATOWNE Holdings, Inc. and Subsidiaries
Consolidated Statements of Operations

 

    For the Years Ended
    December 31, 2018   December 31, 2017
    (Restated)    
Revenues                
Sales   $ 114,540     $ 478,011  
Services-related parties     262,000       1,296,992  
      376,540       1,775,003  
Cost of Revenues-Related Parties     287,099       303,549  
Gross Profit     89,441       1,471,454  
                 
Operating Expenses                
General and administrative     1,956,108       1,567,366  
Professional fees     298,722       371,096  
Total operating expenses     2,254,830       1,938,462  
Loss from operations     (2,165,389 )     (467,008 )
                 
Other Expenses (Income)     (12,117 )     (2,352 )
                 
Provision for income taxes     (457,105 )     (146,512 )
Net Loss     (1,696,167 )     (318,144 )
                 
Less: Net loss attributable to the noncontrolling interest     29,168       15,088  
                 
Net loss attributable to AMERICATOWNE, Inc common stockholders   $ (1,666,999 )   $ (303,056 )
                 
Loss per share - basic and diluted   $ (0.01 )   $ (0.01 )
                 
Weighted average shares outstanding- basic and diluted     198,225,128       35,356,412  

 

 

See Notes to Consolidated Financial Statements. 

 

 F-4 

  

AMERICATOWNE Holdings, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
For the Years Ended December 31, 2018 and 2017
(Restated)

 

        Americatowne Holdings Inc. Shareholders    
                                      Receivable  
        Preferred Stock   Common Stock   Common Stock  

Additional

Paid-In

  Retained   Deferred   for Issuance  

Non-

Controlling

    Total   Shares   Amount   Shares   Amount   Subscribed   Capital   Earnings   Compensation   of stock   Interest
                                             
Balance, December 31, 2016   $ 1,906,386       —       $ —         26,974,775     $ 2,697       90     $ 3,329,750     $ 98,631     $ (1,450,842 )   $ (65,223 )   $ (8,717 )
                                                                                         
Shares Issued for Compensation     —                         11,148,892       1,115               1,519,879               (1,520,994 )                
                                                                                         
Amortization of Deferred Compensation     612,616                                                               612,616                  
                                                                                         
Shares Issued for Proceeds     734,991                       10,861,359       1,086       (3 )     758,908                       (25,000 )        
                                                                                         
Capital Contribution     127,803                                               76,365                               51,438  
                                                                                         
Net loss for the Period     (318,144 )                                                     (303,056 )                     (15,088 )
                                                                                         
Balance, December 31, 2017     3,063,653       —       $ —         48,985,026     $ 4,899       87     $ 5,684,902     $ (204,425 )   $ (2,359,220 )   $ (90,223 )   $ 27,633  
                                                                                         
Shares Issued for Proceeds before Merger     186,339                       288,658       28       67       186,244                                  
                                                                                         
Shares Issued for Compensation     —                         210,000       21               52,479               (52,500 )                
                                                                                         
Effect of Merger     (18,401 )                     148,697,844       193,233       (154 )     196,665       (178,948 )             (206,980 )     (22,218 )
                                                                                         
Shares Issued after Merger     —                         300,268       300               15,705                       (16,005 )        
                                                                                         
Amortization of Deferred Compensation     788,133                                                               788,133                  
                                                                                         
Net loss for the Period     (1,696,167 )                                                     (1,666,999 )                     (29,168 )
                                                                                         
Balance, December 31, 2018     2,323,557       —       $ —         198,481,796     $ 198,482       —       $ 6,135,995     $ (2,050,372 )   $ (1,623,587 )   $ (313,208 )   $ (23,753 )
                                                                                         

 

See Notes to Consolidated Financial Statements. 

 

 F-5 

 

AMERICATOWNE Holdings, Inc. and Subsidiaries
Consolidated Statements of Cash Flows

 

    For the Years Ended
    December 31, 2018   December 31, 2017
    (Restated)    
Operating Activities:                
Net loss   $ (1,696,167 )   $ (318,144 )
Adjustments to reconcile net loss to net cash provided by operations                
Depreciation     15,682       8,484  
Stock compensation     788,133       612,616  
Bad debt provision     481,683       198,443  
Changes in operating assets and liabilities:                
Accounts receivable, net     (808,597 )     (2,000,740 )
Other receivable     123,823       —    
Other receivable - related parties     (25,110 )     74,495  
Prepayment     803       640  
Deferred tax assets     (485,084 )     (158,517 )
Accounts payable and accrued expenses     (365,655 )     (159,678 )
Deferred revenues     910,122       925,460  
Other payables     (500 )     (3,956 )
Deposit from customers     —         1,469  
Due to related parties     60,673       74,114  
Income tax payable     25,014       10,337  
Net cash used in operating activities     (975,180 )     (734,977 )
                 
Investing Activities:                
Purchase of fixed assets     (16,732 )     (23,885 )
Issuance of notes receivable     —         (73,000 )
Repayment of notes receivable     10,500       —    
Net cash used in investing activities     (6,232 )     (96,885 )
                 
Financing Activities:                
Proceeds from issuance of common stock     186,339       759,015  
Net cash provided by financing activities     186,339       759,015  
                 
Increase (Decrease) in cash and cash equivalents     (795,073 )     (72,847 )
Cash and cash equivalents at beginning of period     900,168       973,015  
Cash and cash equivalents at end of period   $ 105,095       900,168  
                 
Supplemental disclosure of cash flow information     —            
Interest paid   $ —       $ —    
Income taxes paid   $ —       $ —    

 

 

See Notes to Consolidated Financial Statements. 

 

 F-6 

 

 

AmericaTowne Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements



NOTE 1. ORGANIZATION AND DESCRIPTION OF BUSINESS

AmericaTowne Holdings, Inc., f/k/a ATI Modular Technology Corp., defined above and herein as the “Company” or “ATI Modular” formerly Global Recycle Energy, Inc., was incorporated under the laws of the State of Nevada on March 7, 2008.

 

On June 23, 2017, a majority of the Company’s shareholders approved an Agreement and Plan of Merger between the Company and AmericaTowne, Inc., whereby AmericaTowne, Inc. would merge into the Company with the Company continuing on as the surviving entity (referred to herein as the “AmericaTowne Merger”). In connection with the AmericaTowne Merger, the Company filed Amended Articles of Incorporation changing its name to “AmericaTowne Holdings, Inc.,” which represents that the Company will continue implementing the business plans of both the Company and AmericaTowne. As a result of the AmericaTowne Merger, the Company acquired all of AmericaTowne’s business, contracts, assets, and obligations. The Company will continue operating under the assumed names “ATI Modular Technology Corp.” and “AmericaTowne, Inc.”

 

The AmericaTowne Merger was deemed effective on August 1, 2018, or after the period covered in this report.

 

“ATI Modular Technology Corp is engaged in the development and the exporting of modular energy efficient technology and processes that allow government and private enterprises in China and elsewhere to use US-based methods for creating modular spaces, facilities, and properties. The Company is in the business of all aspects of modular and smart construction, including but not limited to, (a) the furtherance of modular and smart construction technology, education, development and production in developed and undeveloped countries, (b) acquisition and/or installation of construction equipment, materials, furnishings, hardware, insulation, flooring, roofing, wiring, plumbing, heating and air conditioning, and landscaping, (c) solar energy, and (d) other businesses directly or tangentially related to these lines of services, including assisting businesses and entrepreneurs in securing naming, licensing or promotional rights, driving internet and media traffic, increasing visibility of product and name recognition, and other services

 

AmericaTowne, Inc. is pursuing its objectives in providing upper and middle-income consumers in China with “Made in The USA” goods and services allowing such consumers to experience United States’ culture and lifestyle. The pursuit of these objectives will continue to be done through AmericaTowne, as an assumed name of the Company. In addition, the Company believes it has made significant progress in developing its business platform in Africa by implementing business and commerce solutions considered mainstream in America, but relatively new in these developing countries. The Company’s recent developments in Africa have been highlighted through numerous contractual disclosures on EDGAR. The Company intends on continuing to deploy resources, research and expertise in evaluating further opportunities in developing countries as part of its overall growth model. Notwithstanding its recent progress and intentions, there is no guarantee that the Company will be successful. 

 

As with any business plan that is aspirational in nature, there is no assurance we will be able to accomplish all our objective or that we will be able to meet our financing needs to accomplish our objectives.

 

Our principal executive offices are located at 4700 Homewood Court, Suite 100 in Raleigh, North Carolina. We are registered as a foreign business entity in the State of North Carolina. We lease the office space from Yilaime Corporation, a Nevada corporation doing business in North Carolina, and a related party to the Company, as set forth below. Our physical location for our operations in China along with a manufacturing facility is Anhui Province Jiangnan Industrial Concentration Zone New Energy Industry Park A1, A2, A5 Plant Chizhou City, Anhui Province, China. The Company registered its wholly owned subsidiary Anhui Ao De Xin Modular Building Technology Co. Ltd. in Jiangnan Industry Zone, Chizhou, China. Our physical location for operations in Kenya is 764 Milimani Estates, Kisumu, Kenya and 108 Hilton Plaza Moi Avenue, Nairobi, Kenya. The Company registered its wholly owned subsidiary AmericaTowne Holdings Limited in Kisumu, Kenya. 

The Company entered an Investment and Cooperation Agreement with the Jiangnan Industry Zone in Anhui Province, China dated September 8, 2016 (the “Jiangnan Cooperation Agreement”). On December 28, 2016, the Company entered the definitive agreement, American ATI Modular Technology Company Project Investment Agreement (the “Investment Agreement”) with the Administrative Committee, Jiangnan Industry Zone in Anhui Province. The Investment Agreement superseded the Jiangnan Cooperation Agreement. Under the Investment Agreement, the Administrative Committee of Jiangnan Industrial Concentration Zone of Anhui Province (hereinafter, “Jiangnan”) and the Company have agreed to the construction of the Company’s green, modular building and related technology under the project name “Modular Plant Production Base.”

 

 F-7 

 

Under the Investment Agreement, the Company has agreed to manufacture and install modular buildings and provide research into the development of green building module manufacturing using US based technology. The Company has agreed to provide appropriate technology and intelligent systems in providing modular building lifecycle services. In addition, to modular and smart technology, the Company and Jiangnan has agreed to establish: 1) a modular development institute research and training center; 2) an entrepreneurial incubator; 3) an engineering technology research center; 4) an industrial design center; 5) a post-doctoral workstations and engineering laboratories; and 6) an international student intern summer work program. Where possible the Company’s aim is to increase US exports by using American based technology, equipment and services. (Strategy).

 

The Company presented to Anhui Project to United States Ex-Im Bank, which provided a Letter of Interest in providing support for the Project. Additionally, pursuant to its agreement with Chizhou government, Chizhou preliminarily agreed to provide support for EX-IM funding either by a guarantee or local bank support. Although no loan application has been submitted management is under the impression that subject to meeting Ex-Im Bank’s standard underwriting requirements, there is a possibility of loans, and other funding including working capital and insurance. Going forward, we plan on working with Ex-Im to seek insurance and funding for the Chizhou operations. There is no assurance that funding and or insurance will be obtained.

 

The Company entered the Modular Services Agreement with AmericaTowne, a related party and the majority and controlling shareholder of the Company, to support AmericaTowne’s obligations under the Shexian Agreement in designing, installing and manufacturing American modular technology for use in all government and private buildings throughout Shexian County, and elsewhere in China. The terms and conditions of the Modular Services Agreement with AmericaTowne and the Shexian Agreement are set forth above.

 

Also, the Company has entered the Yongan and Shexian Agreements to pursue the development of business opportunities involving modular technology and investments, and business development. While we plan to have robust operations in the United States and international locations, we expect the bulk of our operations and revenue will come from China.

 

China's economy and its government impact our revenues and operations. While the Company has an agreement in place with the government of Jiangnan as well as the approval by government officials in Shexian and Yongan China to operate facilities there is no assurance that we will operate the facilities successfully. Additionally, the Company will need government approval in other locations in China to operate other aspects of our business plan. There is no assurance that we will be successful in obtaining approvals from government entities in other locations to operate other aspects of our business plan. Finally, Mr. Perkins, as a control person of each entity – AmericaTowne and the Company, might elect to forego certain obligations of AmericaTowne under other Corporative Agreements currently in place or not enter more definitive agreements with Governments in China and elsewhere, which in turn, could impact the Company’s ability to meet its business plan set forth herein.

 

The Company has entered into agreements with a number of Counties in Kenya and the National Treasury of Kenya to provide various equipment pursuant to tenders awarded to the Company by the Counties and National Government. These agreements are pending, and we expect to initiate actions pursuant to tenders and invoices the end of the 4th Quarter and the beginning of the 1st Quarter 2019.

 

 F-8 

 

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

These financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP").

The Company entered into Agreement and Plan of Merger with AmericaTowne, Inc. whereas the merger was accounted under US GAAP as a business combination under common control with the Company being the acquirer as both entities were owned by the same controlling shareholders. The consolidated financial information have been presented at historical costs and on a retroactive basis of the entities.

Before the merger, the Company was the subsidiary of AmericaTowne, Inc. of which the consolidated financial statements are the combined financial statements of AmericaTowne, Inc. and the Company. For better comparison, the financial statements of prior periods presented in this filing (including balance sheet on December 31, 2017 and statements of operations as well as cash flow statements for the year ended, December 31, 2017) are financial statements of AmericaTowne, Inc.

On May 2, 2019, the Company reached a determination to restate its previously filed financial statements for the year ended. The restatement decreases net income of $51,683 for the year ended December 31, 2018. The restatement relates to correct error on amortizing stock based compensation and relevant effect on income tax.

The following summarizes the effects of restatement:

    Previously Reported   Adjustment   Restated
             
Deferred compensation:   $ 1,689,009       (65,422 )   $ 1,623,587  
                         
Deferred tax assets:   $ 640,636       13,739     $ 654,375  
                         
Retained earnings   $ 1,998,689       51,683     $ 2,050,372  
                         
General and administrative expenses   $ 1,890,686       65,422     $ 1,959,108  
                         
Provision for income taxes:   $ (443,366 )     (13,739 )   $ (457,105 )

 

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and all its majority-owned subsidiaries which require consolidation. Inter-company transactions have been eliminated in consolidation.

Accounting Method

The Company's financial statements are prepared using the accrual method of accounting. The Company has elected a fiscal year ending on December 31.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. In the opinion of management, all adjustments necessary in order to make the financial statements not misleading have been included. Actual results could differ from those estimates. 

 F-9 

 

Financial Instruments

The carrying amount reported in the balance sheet for cash, accounts receivable, accounts payable, accrued expenses, interest payable and short-term notes payable approximate fair value because of the immediate or short-term maturity of these financial instruments.

 

Cash Equivalents

The Company considers all highly liquid investments with maturity of three months or less when purchased to be cash equivalents.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to a significant concentration of credit risk consist primarily of cash and cash equivalents. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. However, management believes the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held. 

Property, Plant, and Equipment

Property, plant and equipment are initially recognized recorded at cost. Gains or losses on disposals are reflected as gain or loss in the period of disposal. The cost of improvements that extend the life of plant and equipment are capitalized. These capitalized costs may include structural improvements, equipment and fixtures. All ordinary repairs and maintenance costs are expensed as incurred.

Depreciation for financial reporting purposes is provided using the straight-line method over the estimated useful lives of the assets:

Office equipment 3-5 years

 

For the years ended December 31, 2018 and 2017, depreciation expense is $15,682 and $8,484, respectively.

Investments

Investments primarily include cost method investments. On December 31, 2018 and 2017, the carrying amount of investments was $3,860 and $3,860, respectively. There are no identified events or changes in circumstances that may have a significant adverse effect on fair value of the investment as of December 31, 2018.

Income Taxes

Income taxes are provided in accordance with Statement of Financial Accounting Standards ASC 740 Accounting for Income Taxes. A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting and net operating loss carry forwards. Deferred tax expense (benefit) results from the net change during the year of deferred tax assets and liabilities. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of all of the deferred tax assets will be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

The Company was established under the laws of the State of Delaware and is subject to U.S. federal income tax and Delaware state income tax. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts and are based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred income tax assets to the amount expected to be realized. On December 31, 2018 and 2017, there is deferred tax assets of $654,375 and $169,291, respectively. The Company had $78,323 and $53,309 of income tax liability as of December 31, 2018 and 2017, respectively.

 F-10 

 

Earnings per Share

In February 1997, the FASB issued ASC 260, "Earnings per Share", which specifies the computation, presentation and disclosure requirements for earnings (loss) per share for entities with publicly held common stock. ASC 260 supersedes the provisions of APB No. 15, and requires the presentation of basic earnings (loss) per share and diluted earnings (loss) per share. The Company has adopted the provisions of ASC 260 effective (inception).

Basic earnings (loss) per common share is computed by dividing net income (loss) available to common shareholders by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per common share is computed by dividing income available to common shareholders by the weighted-average number of shares of common stock outstanding during the period increased to include the number of additional shares of common stock that would have been outstanding if potentially dilutive securities had been issued. There were no potentially dilutive securities outstanding during the periods presented.

For the years ended December 31, 2018 and 2017, diluted earnings per share are the same as basic earnings per share due to the lack of dilutive items in the Company. 

Segment Information

The standard, "Disclosures about Segments of an Enterprise and Related Information", codified with ASC 280, requires certain financial and supplementary information to be disclosed on an annual and interim basis for each reportable segment of an enterprise. The Company believes that it operates in business segment of marketing and sales in China while the Company's general administration function is performed in the United States. On December 31, 2018, all assets and liabilities are in the United States where the income and expense has been incurred since inception to December 31, 2018.

Impact of New Accounting Standards

The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company's results of operations, financial position, or cash flow.

Pushdown Accounting and Goodwill

Pursuant to applicable rules (FASB ASC 805-50-S99) the Company used push down accounting to reflect Yilaime Corporation's purchase of 100% of the shares of the Company's common stock. Richard Chiang, the Company's prior sole shareholder entered into an agreement to sell an aggregate of 10,000,000 shares of the Company's common stock to Yilaime Corporation effective upon the closing date of the Share Purchase Agreement dated June 26, 2014. Richard Chiang executed the agreement and owned no shares of the Company's common stock. This transaction resulted in Yilaime Corporation retaining rights, title and interest to all issued and outstanding shares of common stock in the Company.

 F-11 

Revenue Recognition

The Company's revenue recognition policies comply with FASB ASC Topic 605. Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed or determinable, collectability is reasonably assured, and there are no significant subsequent obligations for the Company to assume.

Prior to an agreement, the Company assesses whether collectability from the potential customer is reasonably assured. The Company reviews the customer's financial condition, which is an indicator of both its ability to pay, and, in turn, whether or not revenue is realizable.

The ability to pay is an important criterion for entrance into an agreement with the customer. If management believes that the potential customer does not have the ability to pay, normally an agreement is not entered into with the customer.

If, at the outset an arrangement is entered into and the Company determines that the collectability of the revenue amount from the customer is questionable, management would not recognize revenue until it receives the amount due or conditions change so that collectability is reasonably assured. If collectability is reasonably assured at the outset of an arrangement, but subsequent changes in facts and circumstances indicate collection from the customer is no longer probable, the amount is recorded as bad debt expense. 

There are two primary customer agreements currently offered to the Company's customers - (a) Licensing, Lease and Use Agreement ("Licensing Agreement"), and (b) Exporter Services Agreement ("Exporter Agreement").

(a) Licensing, Lease and Use Agreement

For the License, Lease and Use Agreement, the Company reflects revenue recognition over the course of the term.

(b) Exporter Services Agreement.

For services provided in the Exporter Service Agreement, the Company has two primary types of services called the Service Fee and Transaction Fee. Additionally, under certain circumstances, the Company may charge an Extension Fee. The customer under the Exporter Services Agreement is defined in this section as the "Exporter."

The Service Fee

Upon signing the Exporters Agreement, the Exporter is provided with services consisting of eight related components including: 1) market analysis; 2) review of proposed goods and services; 3) expectations for supply and demand in the market; 4) conducting export business in China; 5) information on financing; 6) information on the export tax savings programs; 7) international trade center assistance; and 8) selecting and assigning a tax saving company. All eight components of the Service Fee are delivered as one deliverable upon the signing or shortly thereafter of the Exporter Service Agreement with the exporter. The Company completes the earnings process upon the signing the Exporter Service Agreement since the one service fee deliverable has been delivered and we have no further obligations. Revenue is not recognized until the completion of these eight components and the Company has no further obligations.

The Transaction Fee

During this process, the Exporter's goods and services are tested in the market, buyers or identified, deals or negotiated and the exporter products and services are delivered, and payment is made. The Transaction Fee is normally a percentage of each transaction.

The Transaction Fee process includes the Exporter's participation in three programs: 1) the Sample and Test Market Program; 2) Market Acceptance Program; and 3) Export Delivery Action. In the Sample and Test Market Program, an Exporter's products and services are tested in the market; sources of goods and services are confirmed; price indications are confirmed; and an Exporter and buyer match occurs. In the Market Acceptance Program, the export deal is identified and negotiated. Finally, in the Export Delivery Action, the goods are shipped and delivered and payment is made. The Company does not recognize revenue until completion of these three programs and the Company has no further obligations.

Throughout the life of the Exporter Agreement, the Company expects Exporters to complete multiple transactions. Each transaction is a separate and independent process.

 F-12 

 

The Extension Fee

The Extension Fee is an independent accounting unit. The Extension Fee is a fee charged to those Exporters who in rare cases for whatever reason fail to avail themselves of the Transaction Process. The Exporter has one-year to participate in the Sample and Test Market Program. Afterwards, provided no transaction has occurred and the Exporter agrees to pay a fee equal to 25% of the original Service fee within thirty (30) days (the "Extension Fee"), the Exporter may continue the Transaction Process. If the Extension Fee is not paid, the Exporter's participation and membership in the Sample and Test Program terminates. In the event of termination, the balance of any prior fees is still due and payable.

Provided that the Exporter agrees to pay the Extension Fee and continues with the Transaction Process, at the end of the Transaction Process and the last Transaction Fee deliverable is made, the Transaction Fee Process is completed. Upon completion, the Company has no further obligations, revenue is recognized, and the Exporter is invoiced for both the Extension Fee and the Transaction Fee. 

After the Exporter pays the Extension Fee, if no transaction has occurred for sixty (60) calendars days, the Company is exempt from any obligation to provide further Transaction Process services and it recognizes revenue of the Extension Fee.

The Company recognizes revenue on a gross basis.

We have gross presentation for services provided by Yilaime, a contractor to the Company prior to the consummation of an arrangement.

In accordance with ASC605-45-45, the gross basis to recognize revenue applies since the Company is the primary obligor in the arrangement.

The Company expects to realize revenue for export funding and support, and franchise and license fees for United States support locations, and education initiatives. Additionally, if and when the Company further develops AmericaTowne, revenues would be expected to be recognized for (a) villa sales, rentals, timeshare and leasing; (b) hotel leasing and or operational revenues and sales; (c) theme park and performing art center operations, sales and/or leasing; and (d) senior care facilities, operations and or sales.

The Company does not provide unconditional right of return, price protection or any other concessions to its customers.

Valuation of Goodwill

We assess goodwill for potential impairments at the end of each fiscal year, or during the year if an event or other circumstance indicates that we may not be able to recover the carrying amount of the asset. In evaluating goodwill for impairment, we first assess qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than 50 percent) that the fair value of a reporting unit is less than its carrying amount. If we conclude that it is not more likely than not that the fair value of a reporting unit is less than its carrying value, then no further testing of the goodwill assigned to the reporting unit is required. However, if we conclude that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then we perform a two-step goodwill impairment test to identify potential goodwill impairment and measure the amount of goodwill impairment to be recognized, if any.

 F-13 

 

In the first step of the review process, we compare the estimated fair value of the reporting unit with its carrying value. If the estimated fair value of the reporting unit exceeds its carrying amount, no further analysis is needed. If the estimated fair value of the reporting unit is less than its carrying amount, we proceed to the second step of the review process to calculate the implied fair value of the reporting unit goodwill in order to determine whether any impairment is required. We calculate the implied fair value of the reporting unit goodwill by allocating the estimated fair value of the reporting unit to all of the assets and liabilities of the reporting unit as if the reporting unit had been acquired in a business combination. If the carrying value of the reporting unit's goodwill exceeds the implied fair value of the goodwill, we recognize an impairment loss for that excess amount. In allocating the estimated fair value of the reporting unit to all of the assets and liabilities of the reporting unit, we use industry and market data, as well as knowledge of the industry and our past experiences.

We base our calculation of the estimated fair value of a reporting unit on the income approach. For the income approach, we use internally developed discounted cash flow models that include, among others, the following assumptions: projections of revenues and expenses and related cash flows based on assumed long-term growth rates and demand trends; expected future investments to grow new units; and estimated discount rates. We base these assumptions on our historical data and experience, third-party appraisals, industry projections, micro and macro general economic condition projections, and our expectations.

We have had no goodwill impairment charges for the year ended December 31, 2018. The estimated fair value of each of our reporting units exceeded its' respective carrying amount by more than 100 percent based on our models and assumptions.  

NOTE 3. NOTES RECEIVABLE – RELATED PARTIES

On July 12, 2017, the Company issued $15,000 secured promissory note to a shareholder with annual 6% interest rate. The note is due on October 30, 2017. The interest rate is 9% after the due date. The note is secured by the personal guarantee of the borrower and the borrower’s stock of the Company. The company has got repayment of $10,500 till December 31, 2018. The note is past due as of December 31, 2018

On August 31, 2017, the Company issued $58,000 secured promissory note to a shareholder with annual 3.5% interest rate. The note is due on April 1, 2018. The note is secured by the borrower’s stock of the Company. The note is past due as of December 31, 2018.

NOTE 4. ACCOUNTS RECEIVABLE

The nature of the net accounts receivable for December 31, 2018, in the amount of $4,681,987 are for Export Service Agreements. The Company's allowance for bad debt is $904,451 which provides a net receivable balance of $3,777,536.

Accounts' receivable is stated at the amount management expects to collect from outstanding balances. Management provides for probable uncollected amounts through a charge to earnings and a credit to an allowance for bad debts based on its assessment of the current status of individual accounts. Balances that are still outstanding after management has used reasonable collection efforts are written off through a charge to the allowance for bad debts and a credit to accounts receivable.

 F-14 

 

Accounts receivable consist of the following:

   December 31,
   2018  2017
       
Accounts receivable  $1,090,087   $1,045,412 
Accounts receivable- related parties   3,591,900    2,459,135 
Less: Allowance for doubtful accounts   (904,451)   (403,568)
Accounts receivable, net  $3,777,536   $3,100,979 

 

Bad debt expense was $481,683 and $198,443 for the years ended December 31, 2018 and 2017, respectively.

Allowance for bad debt policy

Our bad debt policy is determined by the Company's periodic review of each account receivable for reasonable assurance of collection. Factors considered are the exporter's financial condition, past payment history if any, any conversations with the exporter about the exporter's financial conditions and any other extenuating circumstances. Based upon the above factors the Company makes a determination whether the receivable are reasonable assured of collection. Based upon our review if required we adjust the allowance for bad debt. 

NOTE 5. SHAREHOLDER'S EQUITY

The Company incorporates by reference all prior disclosures for the period identified herein. See Part II, Item 6. The stockholders' equity section of the Company contains the following classes of capital stock as of December 31, 2018:

  • Common stock, $ 0.0001 par value: 500,000,000 shares authorized; 198,481,796 shares issued and outstanding

NOTE 6. DEFFERED REVENUE

The Company receives quarterly fee from Yilaime for Sales and Support Services Agreement. In accordance with ASC 605-50-45, the Company defers and recognizes as a reduction to the future costs for quarterly fee. For the years ended December 31, 2018, $950,000 fee from exclusive agreement incurred; $2,169,050 is booked deferred revenue as current liability on December 31, 2018 and $35,338 went against cost charged by Yilaime.

NOTE 7. STOCK BASED COMPENSATION

For the years ended December 31, 2018 and 2017, $788,133 and $612,616 of stock compensation were charged to operating expenses, respectively. $1,623,587 and $2,359,220 were recorded as deferred compensation on December 31, 2018 and 2017, respectively.

NOTE 8. INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The cumulative tax effect of significant items comprising the net deferred tax amount is at December 31, 2018 and 2017 as follows:

    2018   2017
Deferred tax assets:                
Net operating losses   $ 904,103     $ 419,019  
                 
Total deferred tax assets     904,103       419,019  
Less: valuation allowance     (249,728 )     (249,728 )
                 
Deferred tax assets, net   $ 654,375     $ 169,291  

 

 F-15 

 

As of December 31, 2018, for U.S. federal income tax reporting purposes, the Company has approximately $3,530,479 of unused net operating losses (“NOLs”) available for carry forward to future years. Because United States tax laws limit the time during which NOL carry forwards may be applied against future taxable income, the Company may be unable to take full advantage of its NOLs for federal income tax purposes should the Company generate taxable income. Further, the benefit from utilization of NOL carry forwards could be subject to limitations due to material ownership changes that could occur in the Company as it continues to raise additional capital. Based on such limitations, the Company has significant NOLs for which realization of tax benefits is uncertain.

Significant components of income tax expense for the years ended December 31, 2018 and 2017 are as follows

    2018   2017
Current tax expense   $ 27,979     $ 12,005  
Benefits of operating loss carryforwards     (485,084 )     (158,517 )
Tax expense (benefit)   $ (457,105 )   $ (146,512 )

 

The Company had $78,323 and $53,309 of income tax liability as of December 31, 2018 and 2017 respectively. 

Reconciliation of Effective Income Tax Expense is as follows

    2017   2017
Statutory U.S. tax   $ (460,070 )   $ (158,517 )
Adjustment of tax in prior years     2,965       12,005  
Tax expense (benefit)   $ (457,105 )   $ (146,512 )

 

NOTE 9. RELATED PARTY TRANSACTIONS

Yilaime Corporation, a Nevada corporation ("Yilaime") and Yilaime Corporation of NC ("Yilaime NC") are related parties to the Company. Yilaime is a "Control Party" to AmericaTowne because it has title to greater than 50% of the issued and outstanding shares of common stock in the Company. Alton Perkins is the majority shareholder and controlling principal of Yilaime, Yilaime NC, Perkins DISC and the Company. Additionally, for those “trade centers” set forth below, Mr. Perkins directs all major activities and operating policies of each entity. The common control may result in operating results or a financial position significantly different from that, which would have been obtained if the enterprises were autonomous. Further, pursuant to ASC 850-10-50-6 the Company lists and provides details for all material Related Party transactions so that readers of the financial statements can better assess and predict the possible impact on performance.

Nature of Related Parties' Relationship

On October 8, 2014, the Company entered into the Stock Exchange Agreement with Yilaime NC. Pursuant to the terms of the Stock Exchange Agreement, in consideration for the issuance of 3,616,059 shares of common stock in the Company to Yilaime NC, Yilaime NC conveyed 10,848,178 shares of its restricted common stock to the Company. The intent of the parties in executing and performing under the Stock Exchange Agreement is to effectuate tax-free reorganization under Section 368 of the Internal Revenue Code of 1986. The Company issued the 3,616,059 shares of common stock to Yilaime NC on May 14, 2015. As result of receiving 10,848,178 shares of issued and outstanding common stock in Yilaime (4.5% of issued and outstanding), the Company recorded a $3,860 investment in use of Cost Method.

The Company authorized Yilaime NC to transfer 3,616,059 of these shares pursuant to the Company's effective registration statement on Form S-1/A on November 5, 2015.

The Company entered into a Service Provider Agreement with Yilaime on October 27, 2014 (the "Service Agreement") wherein certain "Export Funding and Support Services" and "Occupancy Services," as defined therein, are provided to the Company in consideration for a fee. In addition to these fees, Yilaime has to pay an Operations Fee to the Company for exclusive rights. Mr. Perkins is the Chief Executive Officer of the Company and is the majority shareholder and controlling person of Yilaime.

 F-16 

 

The Company also leased office space from Yilaime NC for $3,516 per month.

On June 27, 2016, ATI Modular entered into a Sales and Support Services Agreement with Yilaime. Under the Services Agreement, Yilaime will provide ATI Modular with marketing, sales and support services in the ATI Modular’s pursuit of ATI Modular business in China in consideration of a commission equal to 10% of the gross amount of monies procured for ATI Modular through Yilaime’s services. In consideration of the right to receive this commission, Yilaime has agreed to pay ATI Modular a quarterly fee of $250,000 starting on July 1, 2016. The Services Agreement is set to expire on June 10, 2020, absent early termination for breach thereof by either party. Yilaime retains an option to extend the term under its sole discretion until June 10, 2025 by providing written notice to ATI Modular by March 10, 2019. Yilaime has agreed to be ATI Modular’s exclusive independent contractor in providing the services in the Services Agreement, and has agreed to a non-compete and non-circumvent agreement.

 

Yilaime is obligated to provide support services only in a manner that is deemed commercially acceptable by Yilaime and Yilaime has the sole right to determine the means, manner and method by which services will be provided and at the time and location of its choosing. Furthermore, as the control person of Yilaime, Mr. Perkins might make decisions he deems are in the best interests of Yilaime, which might be to the detriment of the goals and objectives of ATI Modular. 

 

On October 3, 2016, the Company purchased the majority and controlling interest in ATI Nationwide Holding Corp (“ATI Nationwide”), formerly EXA, Inc. OTC:Pinks (EXAI) through the acquisition of 65,000,000 shares (65.5%) shares of restricted common stock. The Stock Purchase and Sale Agreement dated October 3, 2016 (the “SPA EXAI”) closed on October 10, 2016 with the $175,000 payment of the purchase price to Joseph C. Passalaqua, prior shareholder and director and officer of ATI Nationwide.

Pursuant to ASC 850-10-50-6, the Company makes the following transaction disclosures for three months ending March 31,

Consolidated Operating Statement Related Party Transactions (for years ending December 31, 2018 and 2017).

(a) $262,000 and $1,066,750 in Trade Center Service Agreement Revenue;

(b) $790,922 and $823,836 for general and administrative expenses for commissions and fees.

(c) For the year ended, December 31, 2018, $42,480 for general and administrative expenses for rent expenses AmericaTowne, Inc. paid to Yilaime towards its lease agreement; For the year ended, December 31, 2018, $30,000 for general and administrative expenses for rent expenses ATI Modular paid to Yilaime towards its lease agreement. For the year ended, December 31, 2018, $30,000 for general and administrative expenses for rent expenses ATI Nationwide paid to Yilaime towards its lease agreement.

For the year ended, December 31, 2017, $42,594 for general and administrative expenses for rent expenses AmericaTowne, Inc. paid to Yilaime towards its lease agreement; $30,000 for general and administrative expenses for rent expenses ATI Modular paid to Yilaime towards its lease agreement; $30,000 for general and administrative expenses for rent expenses ATI Nationwide Holding Corp paid to Yilaime towards its lease agreement

(d) $788,133 and $612,616 for general and administrative operating expenses recorded as stock compensation for respective employment agreements.

 F-17 

 

Consolidated Balance Sheet Related Party Transactions (on December 31, 2018 and December 31, 2017)

(a) $62,500 and $73,000 notes receivable to shareholders;

(b) $1,994,827 and $1,128,033 net account receivables Yilaime owes to the Company;

(c) $1,215,518 and $1,208,146 Trade Center receivables owed to the Company;

(d) On December 31, 2018, other receivables include $60,412 owed by Perkins Hsu Export Corporation.

(e) On December 31, 2017, other receivables include $165,870 owed by Perkins Hsu Export Corporation and $14,677 purchase mining equipment and advances for Yilaime Nairobi Ltd.

(f) On December 31, 2018, due to related parties include $36,644 payable to Perkins Hsu Export Corporation and $22,500 payable to Yilaime.

(g) $2,169,050 and $1,254,387 deferred revenue-Yilaime;

(h) $13,712 and 23,712 as accounts payable to Anhui Ao De Xin Modular Construction Technology Co., Ltd.  

NOTE 10 – CONTINGENCIES

On February 12, 2019, the Company was sued by its transfer agent in a third-party complaint seeking indemnity and/or contribution from the Company for damage awarded, if any, to two shareholders of the Company caused by the transfer agent’s failure to life a restrictive legend on their stock certificates. The Company is defending the claims. It is too early to evaluate the likelihood of success or the range of potential loss, especially considering the claims of the two shareholders cannot be quantified at this time.

 F-18