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.
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.
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
.
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.
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.
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.
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.”
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 4
th
Quarter and the beginning of the 1
st
Quarter 2019.
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.
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.
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.
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.
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.
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.
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
|
|
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.
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.
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.