UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

(Mark One)

 

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended: December 31, 2016

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ____________ to _____________

 

Commission File No. 333-192093

 

AERKOMM INC.

(Exact name of registrant as specified in its charter)

 

Nevada

 

46-3424568

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

44043 Fremont Blvd., Fremont, CA 94538

(Address of principal executive offices)

 

(877) 742-3094

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act: None

 

Securities registered pursuant to Section 12(g) of the Act: None

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes x No ¨

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 x No ¨

 

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

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not 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. x

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer

¨

Accelerated Filer

¨

Non-Accelerated Filer

¨

Smaller reporting company

x

(Do not check if a smaller reporting company)

 

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x

 

As of June 30, 2016 (the last business day of the registrant’s most recently completed second fiscal quarter), there were 8,108,500 shares of the registrant’s common stock issued and outstanding, 7,000,000 of which were held by affiliates of the registrant. The aggregate market value could not be determined because we only had nominal trading volume as of June 30, 2016.

 

There were a total of 810,850 (post- one-for-10 reverse split) shares of the registrant’s common stock outstanding as of February 10, 2017.

 

DOCUMENTS INCORPORATED BY REFERENCE

None.

 

 
 
 

Aerkomm Inc.

Annual Report on Form 10-K

Year Ended December 31, 2016

 

TABLE OF CONTENTS

 

PART I

Item 1.

Business.

4

Item 1A.

Risk Factors.

7

Item 1B.

Unresolved Staff Comments.

7

Item 2.

Properties.

7

Item 3.

Legal Proceedings.

7

Item 4.

Mine Safety Disclosures.

7

PART II

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

8

Item 6.

Selected Financial Data.

9

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

9

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.

15

Item 9B.

Other Information.

15

PART III

Item 10.

Directors, Executive Officers and Corporate Governance.

16

Item 11.

Executive Compensation.

18

Item 12.

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

18

Item 13.

Certain Relationships and Related Transactions, and Director Independence.

19

Item 14.

Principal Accounting Fees and Services.

19

PART IV

Item 15.

Exhibits, Financial Statement Schedules.

21

 

 
2
 

 

Special Note Regarding Forward Looking Statements

 

In addition to historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. We use words such as “believe,” “expect,” “anticipate,” “project,” “target,” “plan,” “optimistic,” “intend,” “aim,” “will” or similar expressions which are intended to identify forward-looking statements. Such statements include, among others, those concerning market and industry segment growth and demand and acceptance of new and existing products; any projections of sales, earnings, revenue, margins or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements regarding future economic conditions or performance; as well as all assumptions, expectations, predictions, intentions or beliefs about future events. You are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, as well as assumptions, which, if they were to ever materialize or prove incorrect, could cause the results of the Company to differ materially from those expressed or implied by such forward-looking statements.

 

Readers are urged to carefully review and consider the various disclosures made by us in this report and our other filings with the SEC. These reports attempt to advise interested parties of the risks and factors that may affect our business, financial condition and results of operations and prospects. The forward-looking statements made in this report speak only as of the date hereof and we disclaim any obligation, except as required by law, to provide updates, revisions or amendments to any forward-looking statements to reflect changes in our expectations or future events.

 

Use of Terms

 

Except as otherwise indicated by the context and for the purposes of this report only, references in this report to “our company,” “we,” “us,” or “our” are to Aerkomm Inc., a Nevada corporation (formerly Maple Tree Kids, Inc.).

 

On January 9, 2017, we completed a 1-for-10 reverse split (the “Reverse Split”) of our issued and outstanding common stock. All share and per share information in this report has been adjusted to give retroactive effect to the Reverse Split.


3
Table of Contents

 

PART I

 

ITEM 1. BUSINESS.

 

Overview

 

We are a web-based retailer of clothing, accessories and other personalized gifts for children. We offer our products through our website www.polkadotpatch.com. We do not have any stores or outlets. We were in the process of rebranding our business under the name Maple Tree Kids but have discontinued all of our efforts to rebrand our business and have discontinued our efforts to expand our business. We are no longer devoting any effort in promoting our personalized children products, creating a new logo, marketing and sales collateral, and creating a new website, www.mapletreekids.com and as a result, all corporate development efforts have been discontinued.

 

We have sold our suppliers products to approximately 4,200 customers since our inception, including our largest customer, a large credit union bank that buys gifts for their customers when they have a newborn child, whom presently constitutes approximately 72% of our current business. We have approximately 35 wholesale suppliers that we can acquire products from, all based in the United States. For the years ended December 31, 2016 and 2015, we sold a total of $6,620 and $10,052, respectively, worth of our products and generated net losses of $24,613 and $36,579, respectively.

 

We have not entered into any formal supply agreements with these vendors and our major supplier to our major customer changed their sales terms to us in November 2016, which has had a significant impact on our business, as discussed in more detail below. We are required to pay in full for products purchased from these vendors upon delivery. If the prices charged by these vendors increase and we are not able to pass on the increased price to our customers, then our margins will be reduced and this will affect our potential for future profitability.

 

Corporate History

 

We were incorporated in the State of Nevada on August 14, 2013 under the name Maple Tree Kids, Inc. At the time of our incorporation, our sole officer and director, Ms. Irina Goldman, subscribed for and purchased 100,000 (1,000,000 pre-Reverse Split) shares of our common stock at a purchase price of $0.001 per share.

 

We were incorporated in order to acquire by merger all of the limited liability company interests of Maple Tree Kids LLC, a Vermont limited liability company, or MTK LLC. Ms. Goldman had personally acquired all of the limited liability company interests of MTK LLC for a total purchase price of $8,800 on August 16, 2013. MTK LLC then merged with and into our company on September 27, 2013. Our company was the surviving company in the merger and the separate existence of MTK LLC ceased and we succeeded to all of the assets of MTK LLC as a result of the merger. At the effective time of the merger, each limited liability company percentage interest in MTK LLC held by Ms. Goldman was automatically changed and converted into one thousand shares of our common stock. Since Ms. Goldman owned 100% of the limited liability company interests in MTK LLC at the time of the merger, she received a total of 100,000 (1,000,000 pre-Reverse Split) shares of our common stock as a result of the merger. In addition, on September 26, 2013, Ms. Goldman converted $5,000 of indebtedness that our company owed to her into common shares by cancelling such debt in exchange for a total of 500,000 (5,000,000 pre-Reverse Split) shares of our common stock pursuant to a subscription agreement dated as of such date.

 

On December 28, 2016, Aircom Pacific, Inc., a California corporation, or Aircom, purchased all 700,000 (7,000,000 pre-Reverse Split) shares of our common stock held by Ms. Goldman for $320,000, pursuant to a stock purchase agreement among Aircom, Ms. Goldman and our company dated as of such date. Such shares represented approximately 86.3% of our issued and outstanding common stock as of the closing. Accordingly, as a result of the transaction, Aircom became the controlling stockholder of our company. Ms. Goldman resigned as our sole director and officer upon closing of this stock purchase transaction and appointed Mr. Jeffrey Wun as our sole director and our President, Treasurer and Secretary.

 

We expect to acquire Aircom in the first quarter of 2017 pursuant to a share exchange or similar transaction, whereby Aircom will become our wholly-owned subsidiary and the former stockholders of Aircom will become our controlling stockholders. Following the consummation of this acquisition, we expect to discontinue our business of selling infant and toddler products through the internet and instead solely engage in the business of providing in-flight entertainment and connectivity systems to commercial airlines through Aircom.

 

On January 9, 2017, we changed our name to Aerkomm Inc. in anticipation of our new business.

 

 
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Table of Contents

 

Products

 

We sell, at retail, a variety of infant and toddler products, including: infant and toddler clothing, toys, towels, backpacks, gift baskets, infant and toddler holiday items, children’s room decorative items, blankets, baby wraps and slings, gifts for mothers, and infant and toddler accessories.

 

We maintain over 500 product items in our supply chain and periodically review, add and drop products based upon the demand in the marketplace and product availability.

 

Distribution

 

We sell products through our website www.polkadotpatch.com. We do not manufacture any of our own products and did not keep any inventory of products in 2016.

 

We currently secure our merchandise mostly on a purchase order basis from various wholesale suppliers with whom we have established relationships. We plan to maintain and foster such relationships and to establish and foster new relationships with additional wholesale suppliers. We expect to meet new suppliers through word of mouth introductions, trade shows, and through searches on the Internet. We have never experienced any significant difficulty in obtaining quality merchandise in adequate volumes and at suitable prices.

 

We acquire our products from approximately 35 wholesale vendors all located in the United States, some who will drop-ship the inventory we purchase from them to our customers. We have sold our suppliers products to approximately 4,200 customers since our inception, including our largest customer, a large credit union bank that buys gifts for their customers when they have a newborn child, which constituted approximately 72% of our business in 2016.

 

We have not entered into any formal supply agreements with these vendors and our major supplier to our major customer changed their sales terms to us in November 2016, which has had a significant impact on our business, as discussed in more detail below.

 

We are required to pay in full for products purchased from our suppliers once we order the products from them. Once we receive an order from our customers, we instruct our suppliers to drop-ship the purchased inventory directly to our customers. We require our customers to pre-pay for products purchased on our websites. The customer authorizes us to charge their credit card at the time of purchase with the understanding that their credit card would be charged upon shipment and title would pass the customer upon shipment.

 

Competition

 

We operate in the infant and toddler products industry and we specialized in the personalized baby and toddler products. We face competition from many websites that provide products and services that are similar to ours. Our strategy to attract customers to our website includes viral marketing, the practice of placing advertisements and offering giveaways on various highly rated baby weblogs or “blogs”, online journals that are updated frequently and available to the public, postings on online communities such as Facebook, MySpace, Yahoo!(R) Groups and amateur websites such as YouTube.com, and other methods of getting Internet users to refer others to our website by e-mail or word of mouth; search engine optimization, marketing our website via search engines by purchasing sponsored placement in search results; and entering into affiliate marketing relationships with website providers to increase our access to Internet consumers. We expect to rely on word of mouth marketing as the primary source of traffic to our website, with search engine optimization and affiliate marketing as secondary sources.

 

Intellectual Property

 

We own our domain names, mapletreekids.com, polkadotpatch.com and www.sunshinepolkadots.com. but do not have any trademarks or trade names or any other significant intellectual property.

 

Regulation

 

We are subject to a number of foreign and domestic laws and regulations that affect companies conducting business on the Internet. In addition, laws and regulations relating to user privacy, freedom of expression, content, advertising, information security and intellectual property rights are being debated and considered for adoption by many countries throughout the world. We face risks from some of the proposed legislation that could be passed in the future.

 

 
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Table of Contents

 

In the US, laws relating to the liability of providers of online services for activities of their users and other third parties are currently being tested by a number of claims, which include actions for libel, slander, invasion of privacy and other tort claims, unlawful activity, copyright and trademark infringement and other theories based on the nature and content of the materials searched, the ads posted or the content generated by users. Certain foreign jurisdictions are also testing the liability of providers of online services for activities of their users and other third parties. Any court ruling that imposes liability on providers of online services for activities of their users and other third parties could harm our business.

 

A range of other laws and new interpretations of existing laws could have an impact on our business. For example, the Digital Millennium Copyright Act has provisions that limit, but do not necessarily eliminate, our liability for listing, linking or hosting third-party content that includes materials that infringe copyrights. In the area of data protection, many states have passed laws requiring notification to users when there is a security breach for personal data, such as California's Information Practices Act. The costs of compliance with these laws may increase in the future as a result of changes in interpretation. Furthermore, any failure on our part to comply with these laws may subject us to significant liabilities.

 

Employees

 

During and until December 28, 2016, we had one officer, our President, Irina Goldman. Ms. Goldman was not compensated for the services she provided to our company. On December 28, 2016, (i) Ms. Goldman submitted her resignation letter pursuant to which she resigned from all offices of the Company that she held, and (ii) Mr. Jeffrey Wun was appointed to the board of the directors and was also appointed as the President, Treasurer and Secretary of the Company.

 

Emerging Growth Company Status

 

We qualify as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012, or 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.

 

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.

 

We will remain an “emerging growth company” for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our total annual gross revenues exceed $1 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.

 

 
6
Table of Contents

 

ITEM 1A. RISK FACTORS.

 

Not applicable.

 

ITEM 1B. UNRESOLVED STAFF COMMENTS.

 

Not applicable.

 

ITEM 2. PROPERTIES.

 

During 2016, our principal office address was located at 119 Rockland Center, Suite 75, Nanuet, NY 10954. Our former President, Ms. Irina Goldman, leased the premises directly from the owner of the premises. Ms. Goldman did not charge us any rent for use of her personal premises where she conducted our business. We did not have any written lease or other agreement regarding our use of these premises.

 

ITEM 3. LEGAL PROCEEDINGS.

 

From time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these, or other matters, may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.

 

ITEM 4. MINE SAFETY DISCLOSURES.

 

Not applicable.

 

 
7
Table of Contents

 

PART II

 

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

 

Market Information

 

Our common stock is currently eligible to be quoted on the OTCQB market under the symbol “MPTR.” Following our recent name change, we have applied with the Financial Industry Regulatory Authority for a new symbol and we expect to be assigned a new symbol on or about February 15, 2017. There is currently no trading market for our common stock and there is no assurance that a regular trading market will ever develop. OTCQB securities are not listed and traded on the floor of an organized national or regional stock exchange. Instead, OTCQB securities transactions are conducted through a telephone and computer network connecting dealers. OTCQB issuers are traditionally smaller companies that do not meet the financial and other listing requirements of a regional or national stock exchange.

 

Approximate Number of Holders of Our Common Stock

 

As of February 10, 2017, there were approximately 41 holders of record of our common stock. This number excludes the shares of our common stock owned by stockholders holding stock under nominee security position listings.

 

Dividend Policy

 

We have never declared or paid a cash dividend. Any future decisions regarding dividends will be made by our board of directors. We currently intend to retain and use any future earnings for the development and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future. Our board of directors has complete discretion on whether to pay dividends, subject to the approval of our stockholders. Even if our board of directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the board of directors may deem relevant.

 

Securities Authorized for Issuance under Equity Compensation Plans

 

We do not have in effect any compensation plans under which our equity securities are authorized for issuance and we do not have any outstanding stock options.

 

Recent Sales of Unregistered Securities

 

We have not sold any equity securities during the 2016 fiscal year that were not previously disclosed in a quarterly report on Form 10-Q or a current report on Form 8-K that was filed during the 2016 fiscal year.

 

Purchases of Equity Securities

 

No repurchases of our common stock were made during the fourth quarter of 2016.

 

 
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ITEM 6. SELECTED FINANCIAL DATA.

 

Not applicable.

 

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

The following management’s discussion and analysis should be read in conjunction with our financial statements and the notes thereto and the other financial information appearing elsewhere in this report. In addition to historical information, the following discussion contains certain forward-looking information. See “Special Note Regarding Forward Looking Statements” above for certain information concerning those forward looking statements. Our financial statements are prepared in U.S. dollars and in accordance with United States generally accepted accounting principles.

 

Overview

 

We are a web-based retailer of clothing, accessories and other personalized gifts for children. We offer our products through our website www.polkadotpatch.com. We do not have any stores or outlets. We were in the process of rebranding our business under the name Maple Tree Kids but have discontinued all of our efforts to rebrand our business and have discontinued our efforts to expand our business. We are no longer devoting any effort in promoting our personalized children products, creating a new logo, marketing and sales collateral, and creating a new website, www.mapletreekids.com and as a result, all corporate development efforts have been discontinued. We have also received a going concern audit opinion from our audit firm.

 

We were able to acquire our products from approximately 35 wholesale vendors all located in the United States, some who will drop-ship the inventory we purchase from them to our customers. We do not manufacture any of our own products.

 

We have not entered into any formal supply agreements with these vendors and our major supplier to our major customer changed their sales terms to us in November 2016, which has had a significant impact on our business, as discussed in more detail below. We are required to pay in full for products purchased from these vendors upon delivery. If the prices charged by these vendors increase and we are not able to pass on the increased price to our customers, then our margins will be reduced and this will affect our potential for future profitability.

 

Recent Developments

 

On December 28, 2016, Aircom purchased 700,000 (7,000,000 pre-Reverse Split) shares of our common stock held by Ms. Irina Goldman for $320,000, pursuant to a stock purchase agreement among Aircom, Ms. Goldman and our company dated as of such date. Such shares represented approximately 86.3% of our issued and outstanding common stock as of the closing. Accordingly, as a result of the transaction, Aircom became the controlling stockholder of our company. Ms. Goldman resigned as our sole director and officer upon closing of this stock purchase transaction and appointed Mr. Jeffrey Wun as our sole director and our President, Treasurer and Secretary.

 

We expect to acquire Aircom in the first quarter of 2017 pursuant to a share exchange or similar transaction, whereby Aircom will become our wholly-owned subsidiary and the former stockholders of Aircom will become our controlling stockholders. Following the consummation of this acquisition, we expect to discontinue our business of selling infant and toddler products through the internet and instead solely engage in the business of providing in-flight entertainment and connectivity systems to commercial airlines through Aircom.

 

 
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On January 9, 2017, we changed our name to Aerkomm Inc. in anticipation of our new business.

 

Principal Factors Affecting our Prior Financial Performance

 

Our operating results were primarily affected by the following factors:

 

 

·

Our auditors have issued a going concern opinion. This means that there is substantial doubt that we can continue as an ongoing business for the next 12 months.

 

 

 

 

·

Our ability to achieve and maintain profitability and positive cash flow is dependent upon:

 

·

Our ability to develop and continually update our websites;

 

 

·

Our ability to procure and maintain on commercially reasonable terms relationships with third parties from whom we acquire inventory;

 

 

·

Our ability to identify and pursue mediums through which we will be able to market our products;

 

 

·

Our ability to attract new customers to our websites who are interested in purchasing our products; and

 

 

·

Our ability to manage our costs and maintain low overhead.

 

 

·

Based upon current plans, we have discontinued developing our Maple Tree Kids website to sell personalized children products that was to be located at www.mapletreekids.com and we are no longer working on expanding our business.

 

 

 

 

·

We were dependent upon our relationship with our major customer and this major customer is no longer profitable to us. This customer accounted for approximately 72% of our total revenues for the year ended December 31, 2016 and the year ended December 31, 2015, respectively. This major customer is not contractually obligated to purchase any minimum amount of products from us and can discontinue buying products from us at any time. If we fail to maintain this relationship, our sales will be significantly diminished. As noted in prior filings, any change in the terms of our sales to our major customer could have a material impact on our financial position and results of operations. The change in shipping terms from our major vendor supplying product to our major customer had changed in November 2016, significantly affecting the future profitability of sales to our major customer.

 

 

 

 

·

Our sales are dependent on our ability to attract retail customers to our website on cost-effective terms. Our strategy to attract customers to our website includes viral marketing, the practice of placing advertisements and offering giveaways on various highly rated baby weblogs or “blogs”, online journals that are updated frequently and available to the public, postings on online communities such as Facebook, MySpace, Yahoo!(R) Groups and amateur websites such as YouTube.com, and other methods of getting Internet users to refer others to our website by e-mail or word of mouth; search engine optimization, marketing our website via search engines by purchasing sponsored placement in search results; and entering into affiliate marketing relationships with website providers to increase our access to Internet consumers. We expect to rely on word of mouth marketing as the primary source of traffic to our website, with search engine optimization and affiliate marketing as secondary sources.

 

We will no longer continue to seek new financing or additional sources of capital over the next 12 months for this business. We have no debt or credit lines and we have financed our operations to date through the sale of our common stock and shareholder loans. We also obtained a total of $23,580 and $13,000 of shareholder advances during the years ended December 31, 2016 and 2015, respectively, which were converted to equity on December 27, 2016.

 

 
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Results of Operations for years ended December 31, 2016 and December 31, 2015

 

Revenues. We generated revenues of $6,620 for the year ended December 31, 2016 and $10,052 for the year ended December 31, 2015. This decrease in revenue in 2016 is due to a decrease in the volume of items sold through our website and a significant decrease in revenue from our major customer.

 

In November 2016, our one supplier of infant products that drop-shipped products to our major customer changed their sales terms to us whereby they will no longer drop-ship their product to our major customer. This change in sales policy has resulted in an increase in shipping costs to us, as we will now need to receive their product first into our inventory and then ship it out to our major customer, therefore making all future sales to our major customer no longer profitable.

 

Our ability to generate any future revenues to support our operations is now very uncertain, due to the above change in sales policy from our major supplier and other factors. We received a going concern opinion from our audit firm as we have now discontinued all of our efforts to sell our products into the market and rebrand our company under the name Maple Tree Kids, in order to sell more personalized children products to the market.

 

Cost of Sales. Our cost of sales was $4,567 for the year ended December 31, 2016 and $6,486 for the year ended December 31, 2015. The decrease in the cost of sales for 2016 was due to our decrease in revenue in 2016 as we sold our merchandise to fewer retail customers in 2016.

 

Gross Profit. We generated gross profit of $2,053 for the year ended December 31, 2016 and $3,566 for the year ended December 31, 2015. The decrease in the gross profit percentage from 35% in 2015 to 31% in 2016 was due a small decrease in our selling prices to retail customers due to a change in the sales product mix to our customers in 2016 and a change in sales policy from our major vendor who will no longer drop ship inventory to our major customer.

 

Operating Expenses. Our operating expenses were $26,666 for the year ended December 31, 2016 and $40,145 for the year ended December 31, 2015. The decrease in our operating expenses in 2016 was due to the decrease in professional fees related to being a public reporting company and fees associated with becoming listed on the OTCQB exchange and registering the Company’s stock with the Depository Trust Company.

 

Net Loss. Our net loss for the year ended December 31, 2016 was $24,613 and was $36,579 for the year ended December 31, 2015. The decrease in net loss in 2016 was due to the reasons stated above.

 

Impact of Potential Loss of our Major Customer on our Liquidity

 

In November 2016, our one supplier of infant products that drop-shipped products to our major customer changed their sales terms to us whereby they will no longer drop-ship their product to our major customer. This change in sales policy has resulted in an increase in shipping costs to us, as we will now need to receive their product first into our inventory and then ship it out to our major customer, therefore making all future sales to our major customer no longer profitable.

 

Sales to our major customer constituted approximately 72% of our total revenue and due to the above change in sales terms from our major vendor, we will no longer be able to sell our product to our major customer at a profit. This will result in a substantial decrease in selling our products to them that will substantially affect our operating results and liquidity in the future from this business.

 

We are no longer devoting any effort in obtaining new customers, therefore we will incur increased operating losses in this business and will need to raise additional capital to maintain our current operations. We are not presently negotiating any agreements with any new major customers.

 

Liquidity and Capital Resources

 

As of December 31, 2016, we had cash of $759, total assets of $759 and a working capital of $362 compared to $1,983 in cash, $1,983 in total assets and $24,983 in working capital deficits as of December 31, 2015.

 

 
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The following table provides detailed information about our net cash flow for all financial statement periods presented in this Report:

 

Cash Flow

 

 

 

December 31,

 

 

 

2016

 

 

2015

 

Net cash used in operating activities

 

$ (24,804 )

 

$ (37,710 )

Net cash used in investing activities

 

$ -

 

 

$ -

 

Net cash provided by financing activities

 

$ 23,580

 

 

$ 13,000

 

Net cash outflow

 

$ (1,224 )

 

$ (24,710 )

 

Operating Activities

 

Cash used in operating activities in the year ended December 31, 2016 consisted of net loss as well as the effect of changes in working capital. Cash used in operating activities in the year ended December 31, 2016 was $24,804, which consisted of a net loss of $24,613, and a decrease in accrued liabilities of $191.

 

Cash used in operating activities in the year ended December 31, 2015 consisted of net loss as well as the effect of changes in working capital. Cash used in operating activities in the year ended December 31, 2015 was $37,710, which consisted of a net loss of $36,579, and a decrease in accrued liabilities of $1,131.

 

Investing Activities

 

During the years ended December 31, 2016 and 2015 we had no investing activities.

 

Financing Activities

 

During the year ended December 31, 2016, we had net cash provided by financing activities of $23,580 as compared to net cash flows provided by financing activities of $13,000 for the year ended December 31, 2015, a decrease of $10,580. This increase in cash provided by financing activities is due to the increase in short term cash advances from our principal shareholder of $10,580.

 

See Note 4 of the Notes to our Financial Statements included in this report for information regarding our shareholder advances.

 

During the year ended December 31, 2016, our total cash requirements will exceed our cash balances. Currently, we do not have sufficient cash in our bank accounts to cover our estimated expenses for the next 12 months. Based on our current cash position at December 31, 2016 and projected spending, we do not have sufficient cash on hand to fund our current operations. We anticipate meeting our future cash requirements through a combination of equity financing and debt financing from our principal shareholder to fund the costs of developing the business and being a public reporting company. Although we anticipate meeting our future cash requirements through, among other things, debt financing from our principal shareholder, we do not currently have any agreements with our principal shareholder to provide such financing, written or unwritten. We currently do not have any arrangements in place for the completion of any financings and there is no assurance that we will be successful in completing any further financings or raising any capital. There is no assurance that any financing will be available or if available, on terms that will be acceptable to us. We may not raise sufficient funds to fully carry out any business plan.

 

 
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Off-Balance Sheet Arrangements

 

As of the date of this report, we have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our stockholders.

 

Inflation

 

The effect of inflation on our revenues and operating results has not been significant.

 

Emerging Growth Company Status

 

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.

  

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.

 

We will remain an “emerging growth company” for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our total annual gross revenues exceed $1 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.

 

Critical Accounting Policies

 

Our financial statements are impacted by the accounting policies used and the estimates and assumptions made by management during their preparation. A complete listing of these policies is included in Note 2 of the notes to our financial statements for the years ended December 31, 2016 and 2015. We have identified below the accounting policies that are of particular importance in the presentation of our financial position, results of operations and cash flows, and which require the application of significant judgment by management.

 

 
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Revenue Recognition

 

Sales to consumers are recorded when goods are shipped and are reported net of allowances for estimated returns and allowances in the accompanying statements of operations. The customer authorizes us to charge their credit card at the time of purchase with the understanding their credit card will be charged upon shipment. We recognize revenue based on the below three criteria. Our policy is to allow the return of any unused merchandise purchased from us for any reason for a 15-day period after the date of sale.

 

Delivery has occurred. We have our vendors drop ship inventory to our customers and we recognize revenue when we are notified that shipment has occurred.

 

Fee is fixed or determinable. The price is deemed to be fixed and determinable based on our successful collection history and our arrangement with our customers.

 

Collectability is reasonably assured. We determine for all of our customers whether collectability is reasonably assured pursuant to our credit review policy. All credit card payments are approved and processed through our website.

 

We evaluate the criteria outlined in the Financial Accounting Standards Board (“FASB”) ASC Subtopic 605-45, Revenue Recognition—Principal Agent Considerations, in determining whether it is appropriate to record the gross amount of product sales and related costs or the net amount earned as commissions. Generally, according to this accounting principle, when we are primarily obligated in a transaction, subject to inventory risk, have latitude in establishing prices and selecting suppliers, or have several but not all of these indicators, revenue is recorded gross. If we are not primarily obligated and amounts earned are determined using a fixed percentage, a fixed-payment schedule, or a combination of the two, we generally record the net amounts as commissions earned.

 

Based on the above facts, we recognize all revenue as a Principal, not an agent.

 

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 year. Actual results could differ from those estimates.

 

Recent Accounting Pronouncements

 

Please refer to the discussion of recently adopted/issued accounting pronouncements under Note 2 (Summary of Significant Accounting Policies) to our financial statements included in this report.

 

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

Not applicable.

 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

 

The full text of our audited financial statements as of December 31, 2016 and 2015 begins on page F-1 of this report.

 

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

 

None.

 

 
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ITEM 9A. CONTROLS AND PROCEDURES.

 

Evaluation of Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial and accounting officer, as appropriate, to allow timely decisions regarding required disclosure.

 

As required by Rule 13a-15(e) of the Exchange Act, our management has carried out an evaluation, with the participation and under the supervision of Mr. Jeffrey Wun, our sole officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as of December 31, 2016. Based upon, and as of the date of this evaluation, Mr. Wun determined that our disclosure controls and procedures were effective.

 

Management’s Annual Report 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 refers to the process designed by, or under the supervision of, our principal executive officer and principal financial and accounting officer, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles, and includes those policies and procedures that:

 

 

(1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

 

 

 

 

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with the authorization of our management and directors; and

 

 

 

 

(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

 

Our management evaluated the effectiveness of our internal control over financial reporting as of December 31, 2016. In making this evaluation, management used the framework established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO. The COSO framework summarizes each of the components of a company’s internal control system, including (i) the control environment, (ii) risk assessment, (iii) control activities, (iv) information and communication, and (v) monitoring. Based on our evaluation, we determined that, as of December 31, 2016, our internal control over financial reporting was effective based on those criteria.

 

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Changes in Internal Controls over Financial Reporting

 

We regularly review our system of internal control over financial reporting and make changes to our processes and systems to improve controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, consolidating activities, and migrating processes.

 

There have been no changes in our internal control over financial reporting during the fourth quarter of fiscal year 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

ITEM 9B. OTHER INFORMATION.

 

We have no information to disclose that was required to be disclosed in a report on Form 8-K during fourth quarter of fiscal year 2016, but was not reported.

 

 
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PART III

 

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

 

Directors and Executive Officers

 

The following sets forth information about our directors and executive officers as of the date of this report:

 

Name

Age

Position

 

 

 

 

 

Jeffrey Wun

51

President, Treasurer, Secretary and Director

 

Jeffrey Wun – President, Secretary, Treasurer, and Director

 

Jeffrey Wun has served as our sole director, President, Treasurer and Secretary since December 28, 2016. Mr. Wun is a technologist who has more than 25 years experiences in the communications industry. Mr. Wun worked at Kairos System Inc. where he served as CEO from 2003 to 2010. He joined MediaTEK USA Inc. in November 2010 as professional engineer where he worked until December 2012. He then joined Samsung Electronics Co., Ltd. as Senior Staff Engineer in December 2012 where he worked until May 2015. He joined Aircom Pacific Inc as CTO in May 2015. Mr. Wun received his BS in Biochemistry and Computer Science from Chinese University of Hong Kong in 1988.

 

Directors are elected until their successors are duly elected and qualified.

 

There are no arrangements or understandings known to us pursuant to which any director was or is to be selected as a director or nominee. There are no agreements or understandings for any of our executive officers or directors to resign at the request of another person and no officer or director is acting on behalf of nor will any of them act at the direction of any other person.

 

Except as set forth in our discussion below in Item 13 “Certain Relationships and Related Transactions, and Director Independence—Transactions with Related Persons,” none of our directors, director nominees or executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the SEC.

 

Family Relationships

 

There are no family relationships among any of our officers or directors.

 

 
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Involvement in Certain Legal Proceedings

 

To the best of our knowledge, none of our directors or executive officers has, during the past ten years:

 

· been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offences);

 

 

· had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time;

 

 

· been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity;

 

 

· been found by a court of competent jurisdiction in a civil action or by the Securities and Exchange 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;

 

 

· been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

 

 

· been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

We are not subject to Section 16(a) of the Exchange Act.

 

Code of Ethics

 

We have adopted a code of ethics that applies to all of our directors, officers and employees, including our principal executive officer, principal financial officer and principal accounting officer. Such code of ethics addresses, among other things, honesty and ethical conduct, conflicts of interest, compliance with laws, regulations and policies, including disclosure requirements under the federal securities laws, and reporting of violations of the code.

 

 
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We are required to disclose any amendment to, or waiver from, a provision of our code of ethics applicable to our principal executive officer, principal financial officer, principal accounting officer, controller, or persons performing similar functions. We intend to use our website as a method of disseminating this disclosure, as permitted by applicable SEC rules. Any such disclosure will be posted to our website within four business days following the date of any such amendment to, or waiver from, a provision of our code of ethics.

 

Material Changes to Director Nomination Procedures

 

There have been no material changes to the procedures by which stockholders may recommend nominees to our board of directors since such procedures were last disclosed.

 

Audit Committee and Audit Committee Financial Expert

 

We do not have an audit committee or an audit committee financial expert serving on the audit committee. Our entire board of directors currently is responsible for the functions that would otherwise be handled by an audit committee. However, we intend to establish an audit committee in the near future. We envision that the audit committee will be primarily responsible for reviewing the services performed by our independent auditors, evaluating our accounting policies and our system of internal controls. Upon the establishment of an audit committee, the board will determine whether any of the directors qualify as an audit committee financial expert.

 

ITEM 11. EXECUTIVE COMPENSATION.

 

No salaries or other compensation were paid in cash, or otherwise, to any officers or directors for services performed during the years ended December 31, 2016 and 2015. We have no employment agreements with our officers for the fiscal year ended December 31, 2016. For the year ended December 31, 2016, no director or executive officer has received compensation from us pursuant to any compensatory or benefit plan. There was no plan or understanding, express or implied, to pay any compensation to any director or executive officer pursuant to any compensatory or benefit plan.

 

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

 

Security Ownership of Certain Beneficial Owners and Management

 

The following table sets forth information regarding beneficial ownership of our common stock as of February 10, 2017 (i) by each person who is known by us to beneficially own more than 5% of our common stock; (ii) by each of our officers and directors; and (iii) by all of our officers and directors as a group. Unless otherwise specified, the address of each of the persons set forth below is in care of the Company, 44043 Fremont Blvd., Fremont, CA 94538.

 

Name and Address of Beneficial Owner

 

Title of Class

 

Amount and Nature of Beneficial Ownership(1)

 

 

Percent of Class(2)

 

Jeffrey Wun, President, Treasurer, Secretary and Director

 

Common Stock

 

 

0

 

 

*

 

All officers and directors as a group (1 person named above)

 

Common Stock

 

 

0

 

 

*

 

Aircom Pacific, Inc.(3)

 

Common Stock

 

 

700,000

 

 

 

86.33 %

_______ 

* Less than 1%

 

(1) Beneficial Ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Each of the beneficial owners listed above has direct ownership of and sole voting power and investment power with respect to the shares of our common stock.

 

 

(2) A total of 810,850 shares of our common stock are considered to be outstanding pursuant to SEC Rule 13d-3(d)(1) as of February 10, 2017. For each beneficial owner above, any options exercisable within 60 days have been included in the denominator.

 

 

(3) Mr. Jan Yung-Lin is the Chief Executive Officer of Aircom Pacific, Inc. and has voting and investment power over the securities held by it. Mr. Lin disclaims beneficial ownership of the shares held by Aircom Pacific, Inc.

 

 
18
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Changes in Control

 

We do not currently have any arrangements which if consummated may result in a change of control of our company.

 

Securities Authorized for Issuance Under Equity Compensation Plans

 

We do not have any compensation plans in effect under which our equity securities are authorized for issuance.

 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

 

Transactions with Related Persons

 

The following includes a summary of transactions since the beginning of the 2015 fiscal year, or any currently proposed transaction, in which we were or are to be a participant and the amount involved exceeded or exceeds the lesser of $120,000 or one percent of the average of our total assets at year end for the last two completed fiscal years, and in which any related person had or will have a direct or indirect material interest (other than compensation described under Item 11 “Executive Compensation”). We believe the terms obtained or consideration that we paid or received, as applicable, in connection with the transactions described below were comparable to terms available or the amounts that would be paid or received, as applicable, in arm's-length transactions.

 

· On December 28, 2016, we entered into a stock purchase agreement with Ms. Irina Goldman, our sole director and officer and principal stockholder at such time, and Aircom, pursuant to which Aircom purchased all 700,000 (7,000,000 pre-Reverse Split) shares of our common stock held by Ms. Goldman for $320,000.

 

 

· On December 27, 2016, Ms. Goldman agreed to convert her total shareholder advances of $49,958 to equity and this total amount was recorded as additional paid in capital. The total balance due to Ms. Goldman was $0 and $26,378 as of December 31, 2016 and 2015, respectively.

 

Director Independence

 

We currently do not have any independent directors, as the term “independent” is defined by the rules of the Nasdaq Stock Market.

 

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

 

Independent Auditors’ Fees

 

The following is a summary of the fees billed to the Company for professional services rendered for the fiscal years ended December 31, 2016 and 2015:

 

 

 

Year Ended December 31,

 

 

 

2016

 

 

2015

 

Audit Fees

 

$ 10,300

 

 

$ 9,300

 

Audit-Related Fees

 

 

-

 

 

 

-

 

Tax Fees

 

 

-

 

 

 

-

 

All Other Fees

 

 

-

 

 

 

-

 

TOTAL

 

$ 10,300

 

 

$ 9,300

 

 

 
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“Audit Fees” consisted of fees billed for professional services rendered by the principal accountant for the audit of our annual financial statements and review of the financial statements included in our Form 10-K and 10-Q or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements.

 

“Audit-Related Fees” consisted of fees billed for assurance and related services by the principal accountant that were reasonably related to the performance of the audit or review of our financial statements and are not reported under the paragraph captioned “Audit Fees” above.

 

“Tax Fees” consisted of fees billed for professional services rendered by the principal accountant for tax returns preparation.

 

“All Other Fees” consisted of fees billed for products and services provided by the principal accountant, other than the services reported above under other captions of this Item 14.

 

Pre-Approval Policies and Procedures

 

Under the Sarbanes-Oxley Act of 2002, all audit and non-audit services performed by our auditors must be approved in advance by our board of directors to assure that such services do not impair the auditors’ independence from us. In accordance with its policies and procedures, our board of directors pre-approved the audit service performed by ZBS Group LLP for our financial statements as of and for the year ended December 31, 2016.

 

 
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PART IV

 

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

 

Financial Statements and Schedules

 

The financial statements are set forth under Item 8 of this annual report on Form 10-K. Financial statement schedules have been omitted since they are either not required, not applicable, or the information is otherwise included.

 

Exhibit List

 

The list of exhibits in the Exhibit Index to this Report is incorporated herein by reference.

 

 
21

 

INDEX TO FINANCIAL STATEMENTS

 

Page

Independent Auditors Report

F-2

Balance Sheets

F-3

Statements of Operations

F-4

Statement of Changes in Stockholders’ Equity (Deficiency)

F-5

Statements of Cash Flows

F-6

Notes to Financial Statements

F-7

 

 
F-1
 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Stockholders of 

Aerkomm Inc. 

(formerly Maple Tree Kids, Inc.)

 

We have audited the accompanying balance sheets of Aerkomm Inc. (formerly Maple Tree Kids, Inc.) as of December 31, 2016 and 2015, and the related statements of operations, stockholders’ equity and cash flows for each of the years in the two -year period ended December 31, 2016. Aerkomm Inc.’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, 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. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Aerkomm Inc. (formerly Maple Tree Kids Inc.) as of December 31, 2016 and 2015, and the results of its operations and its cash flows for each of the years in the two- year period ended December 31, 2016, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has negative cash flows from operations and recurring losses. These factors, among others, raise substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

/s/ ZBS Group LLP                     

 

Plainview, New York

 

February 9, 2017

 

255 Executive Drive, Suite 400 Plainview, New York 11803

Tel: (516) 394-3344 Fax: (516) 342-6273

www.zbscpas.com

 

F-2
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AERKOMM INC.

(formerly MAPLE TREE KIDS, INC.)

Balance Sheets

 

 

 

December 31,

2016

 

 

December 31,

2015

 

 

 

 

ASSETS

Current assets:

 

 

 

 

 

 

Cash

 

$ 759

 

 

$ 1,983

 

Total Assets

 

$ 759

 

 

$ 1,983

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIENCY)

Current liabilities:

 

 

 

 

 

 

 

 

Accrued liabilities

 

$ 397

 

 

$ 588

 

Shareholder’s advances

 

 

-

 

 

 

26,378

 

Total current liabilities

 

 

397

 

 

 

26,966

 

 

 

 

 

 

 

 

 

 

Stockholders’ Deficiency:

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value, 50,000,000 authorized, 0 shares issued and outstanding at December 31, 2016 and 2015

 

 

-

 

 

 

-

 

Common stock, $0.001 par value, 450,000,000 authorized, 810,850 shares issued and outstanding at December 31, 2016 and 2015

 

 

811

 

 

 

811

 

Additional paid-in capital

 

 

10,875

 

 

 

(39,083 )

Retained earnings (Accumulated deficits)

 

 

(11,324 )

 

 

13,289

 

Total Stockholders’ Equity (Deficiency)

 

 

362

 

 

 

(24,983 )

Total Liabilities and Stockholders’ Equity (Deficiency)

 

$ 759

 

 

$ 1,983

 

 

The accompanying notes are an integral part of these financial statements.

 

 
F-3
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AERKOMM INC.

(formerly MAPLE TREE KIDS, INC.)

Statements of Operations

 

 

 

Year Ended

December 31,

 

 

 

2016

 

 

2015

 

 

 

 

 

 

 

 

Sales

 

$ 6,620

 

 

$ 10,052

 

Cost of sales

 

 

4,567

 

 

 

6,486

 

Gross margin

 

 

2,053

 

 

 

3,566

 

 

 

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

 

 

 

Filing fees

 

 

10,000

 

 

 

24,880

 

Legal and professional fees

 

 

10,300

 

 

 

10,094

 

Selling and other general and administrative expenses

 

 

6,366

 

 

 

5,171

 

Total operating expenses

 

 

26,666

 

 

 

40,145

 

 

 

 

 

 

 

 

 

 

Net operating loss

 

 

(24,613 )

 

 

(36,579 )

Income tax expense

 

 

-

 

 

 

-

 

Net loss

 

$ (24,613 )

 

$ (36,579 )

 

 

 

 

 

 

 

 

 

Net Loss Per Common Share, Basic and diluted

 

$ (0.03 )

 

$ (0.05 )

 

 

 

 

 

 

 

 

 

Weighted Average Number of shares outstanding

 

 

810,850

 

 

 

810,850

 

 

The accompanying notes are an integral part of these financial statements.

 

 
F-4
Table of Contents

 

AERKOMM INC.

(formerly MAPLE TREE KIDS, INC.)

Statement of Changes in Stockholders’ Deficiency

Years Ended December 31, 2015 and 2016

 

 

 

Common Stock

 

 

Additional

 

 

 

 

Total

 

 

 

Shares

 

 

ParValue

$0.001

 

 

Paid-In

Capital

 

 

Accumulated

Deficits

 

 

Stockholders’

Deficiency

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2014

 

 

810,850

 

 

$ 811

 

 

$ (39,083 )

 

$ 49,868

 

 

$ 11,596

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss – 2015

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(36,579 )

 

 

(36,579 )

Balance, December 31, 2015

 

 

810,850

 

 

$ 811

 

 

$ (39,083 )

 

$ 13,289

 

 

$ (24,983 )

Conversion of shareholder’s advances to equity

 

 

-

 

 

 

-

 

 

 

49,958

 

 

 

-

 

 

 

49,958

 

Net loss – 2016

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(24,613 )

 

 

(24,613 )

Balance, December 31, 2016

 

 

810,850

 

 

$ 811

 

 

$ 10,875

 

 

$ (11,324 )

 

$ 362

 

 

On January 9, 2017, the Company completed a 1-for-10 reverse split (the “Reverse Split”) of its issued and outstanding common stock. All share and per share information set forth above has been adjusted to give retroactive effect to the Reverse Split.

 

The accompanying notes are an integral part of these financial statements.

 

 
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AERKOMM INC.

(formerly MAPLE TREE KIDS, INC.)

Statements of Cash Flows

 

 

 

Year Ended

December 31,

 

 

 

2016

 

 

2015

 

 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$ (24,613 )

 

$ (36,579 )

 

 

 

 

 

 

 

 

 

Changes in Assets and Liabilities:

 

 

 

 

 

 

 

 

Decrease in accrued liabilities

 

 

(191 )

 

 

(1,131 )

Net cash used in operating activities

 

 

(24,804 )

 

 

(37,710 )

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from shareholder’s advances

 

 

23,580

 

 

 

13,000

 

Net cash flows provided by financing activities

 

 

23,580

 

 

 

13,000

 

 

 

 

 

 

 

 

 

 

Net decrease in cash

 

 

(1,224 )

 

 

(24,710 )

 

 

 

 

 

 

 

 

 

Cash, beginning of year

 

 

1,983

 

 

 

26,693

 

 

 

 

 

 

 

 

 

 

Cash, end of year

 

$ 759

 

 

$ 1,983

 

 

 

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

 

 

$

 

Cash paid for income taxes

 

$

 

 

$

 

Supplemental schedule of non-cash activity:

 

 

 

 

 

 

 

 

Conversion of shareholder’s advances to equity

 

$ 49,958

 

 

$ -

 

Inventory expenditure included in shareholder advances

 

$

 

 

$ -

 

 

The accompanying notes are an integral part of these financial statements.

 

 
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AERKOMM INC.

(formerly MAPLE TREE KIDS, INC.)

Notes to Financial Statements

December 31, 2016

 

Note 1 – Description of the Business, Merger and Going Concern

 

Aerkomm Inc. (formerly Maple Tree Kids Inc.) (“the Company,” “we,” “us” or “our”) was incorporated on August 14, 2013 in the State of Nevada. At the time of our incorporation, our president and sole stockholder subscribed for and purchased 100,000 shares of our common stock at a purchase price of $0.001 per share for an aggregate purchase price of $100. The Company is a retail distribution company selling all of its products over the internet in the United States, operating in the infant and toddler products business market. The Company’s products consist of personalized infant and toddler clothing, toys, towels, wash clothes, bibs, disposable products, blankets, baby wraps and slings, wet bags and other accessories.

 

Predecessor Business - Maple Tree Kids LLC:

 

Maple Tree Kids LLC, a Vermont limited liability company, was formed on August 12, 2005 under State of Vermont statutes. Maple Tree Kids LLC had one member at who owned 100% of its equity interest.

 

Sale of Member’s LLC Interest:

 

On August 16, 2013, the former single member of Maple Tree Kids LLC sold 100% of her interest to our president and sole stockholder for $8,800. All cash, inventory and equipment were distributed to the prior member at the closing and the URL websites, customer list and vendor list were retained by Maple Tree Kids LLC and the new sole member. The prior member assumed all liabilities of Maple Tree Kids LLC at closing.

 

Merger Agreement

 

On September 27, 2013, Maple Tree Kids LLC, pursuant to an agreement and plan of merger, merged into the Company and ceased to exist as a Vermont limited liability company as of the date of this merger. Our principal shareholder, who was the sole member of Maple Tree Kids LLC at the time of the merger, received 100,000 shares of the Company pursuant to the plan of merger, resulting in her owning a total of 200,000 shares of the Company after the merger and continuing to be the sole shareholder of the Company. The Company had assets consisting of cash of $1,000 and stockholders’ equity of $1,000 with no revenue or expenses incurred since its date of incorporation to the time of this merger.

 

Financial Reporting – Reorganization

 

For financial reporting purposes, this merger transaction was recorded as a reorganization of Maple Tree Kids LLC whereby Maple Tree Kids LLC is deemed to be the continuing, surviving entity for accounting purposes, but through this merger, has deemed to have adopted the capital structure and now operates under the name of Maple Tree Kids, Inc., who became the surviving entity for legal purposes. Accordingly, all references to the former member’s initial capital contribution in Maple Tree Kids LLC been restated to reflect the equivalent number of Company common shares outstanding at the merger date and subsequent capital contributions and capital withdrawals from Maple Tree Kids LLC have been recorded as changes to additional paid-in capital. In other words, the $3,075 of the initial capital contribution made to Maple Tree Kids LLC by the former member of the LLC at August 12, 2005 (date of inception of Maple Tree Kids LLC) has been restated to 200,000 common shares outstanding, or $2,000, and the remaining $1,075 capital contributed recorded as additional paid-in capital, as of August 12, 2005. Subsequent member capital contributions and withdrawals made from member’s equity have been recorded as increases and decreases to additional paid-in capital.

 

The Company’s business activities are focused on developing a market for selling personalized children products and rebranding its name to “Maple Tree Kids”, for selling these personalized baby and toddler products and other products to customers through its new website that is currently under construction, mapletreekids.com. Its current business activities include working with new vendors to bring to market more personalized baby products. The Company will be attracting customers to its websites by viral marketing, including placing advertisements and offering promotions on various baby weblogs or “blogs”, online journals that are updated frequently and postings to other online communities. There can be no assurance that the Company will be successful in distributing personalized baby products through its Maple Tree Kids website into the retail market.

 

 
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Sales of the Company’s products are made to retail consumers. The Company buys all of its products from various manufacturers located in the United States and all products are marketed and sold under these manufacturers’ trademarks. The Company presently sells all of its products over the internet through its website, polkadotpatch.com.

 

The Company’s product sales into the infant and toddler retail market are subject to numerous contingencies, some of which are beyond management’s control. These contingencies include general and regional economic conditions, prices for the Company’s products, competition, and changes in regulation, various additional political, economic, and other uncertainties.

 

Going Concern

 

The Company generated a net loss of $24,613 for the year ended December 31, 2016 and expects to generate losses over the next 12 months, due to an anticipated increase in its general and administrative expenses due to the above mentioned business activities and not having sufficient cash to fund its current and future operations. Therefore there is no assurance that future operations will result in any profit. If the Company cannot generate sufficient revenues to operate profitably in 2017, the Company may need to cease its operations in 2017. If the business operations expand, operating expenses will increase and the profit margins may not be able to cover this increase, and as a result the Company may not be able to develop into a profitable business in the future.

 

Management’s plans for the Company include raising additional capital through either debt or equity issuances. Management estimates the minimum amount of additional funding necessary to enable the Company to remain viable and continue its operations for at least the twelve months following the date of the financial statements is approximately $20,000. In September 2014 and October 2014 we raised $22,170 in our registered offering. This registered offering was closed on November 7, 2014. We also obtained a total of $23,580 and $13,000 of shareholder’s advances during the years ended December 31, 2016 and 2015, respectively.

 

No assurance can be given that management will be successful in its efforts to raise additional capital from present or future shareholders or from its principal shareholder. The failure to raise additional capital needed to achieve its business plans will have a material adverse effect on the Company’s financial position, results of operations, and ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

Note 2 – Summary of Significant Accounting Policies

 

Fiscal Year: The Company’s fiscal year ends December 31.

 

Cash and Cash equivalents: We classify all highly liquid investments with stated maturities of three months or less from date of purchase as cash equivalents and all highly liquid investments with stated maturities of greater than three months as marketable securities.

 

Use of Estimates: The preparation of financial statements in conformity with GAAP 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 balance sheets and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates. There were no significant estimates at December 31, 2016 and December 31, 2015.

 

Fair Value of Financial Instruments:

 

The book values of cash, prepaid expenses, and accounts payable approximate their respective fair values due to the short-term nature of these instruments. The fair value hierarchy under GAAP distinguishes between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable inputs).

 

 
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Table of Contents

 

The hierarchy consists of three levels:

 

· Level one — Quoted market prices in active markets for identical assets or liabilities;

 

 

· Level two — Inputs other than level one inputs that are either directly or indirectly observable; and

 

 

· Level three — Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use.

 

Determining which category an asset or liability falls within the hierarchy requires significant judgment. We evaluate our hierarchy disclosures each quarter.

 

Segments and Related Information: The Company operates primarily in one principal business segment, infant and toddler products.

 

Amortization of Website: The accompanying balance sheet reflects our websites at cost less accumulated amortization. The estimated useful life is 5 years and these websites were developed in 2005 and amortized using the straight line method over its useful life. Our website is www.polkadotpatch.com. The cost and accumulated amortization of the websites for the years ended December 31, 2016 and December 31, 2015 were both $5,435 as these websites were fully amortized at December 31, 2016 and December 31, 2015.

 

Revenue Recognition: Sales to consumers are recorded when the price is fixed or determinable and goods are shipped to the customers. Sales are reported net of allowances for estimated returns and allowances in the accompanying statements of income. Allowances for returns are estimated based on historical customer return rates. Customers pre-pay for orders through our website with their credit cards prior to the shipment of the goods, which takes place within a few days after the order is placed. The Company does not carry inventory and all orders are drop-shipped by our vendors and shipped directly by them to our customers.

 

The Company evaluates the criteria outlined in FASB ASC Subtopic 605-45, Revenue Recognition—Principal Agent Considerations , in determining whether it is appropriate to record the gross amount of product sales and related costs or the net amount earned as commissions. Generally, when the Company is primarily obligated in a transaction, is subject to inventory risk, has latitude in establishing prices and selecting suppliers, or has several but not all of these indicators, revenue is recorded gross. If the Company is not primarily obligated and amounts earned are determined using a fixed percentage, a fixed-payment schedule, or a combination of the two, the Company generally records the net amounts as commissions earned. The Company records revenue as a principal pursuant to above mentioned factors establishing that the revenue be recorded as a principal.

 

Allowances Against Accounts Receivable: The Company did not have any accounts receivable at December 31, 2016 and 2015. The Company will record allowances against accounts receivable based upon contractually agreed-upon deductions for items such as customer returns. These deductions are recorded throughout the year commensurate with sales activity and historical product returns. All such allowances are recorded as direct offsets to sales. The Company gives all its customers a 14 day product return policy on all sales; the allowances are reduced to reflect such payments or credits issued against the customer’s account balance. After 14 days there are no returns but the Company may issue an optional store credit to the customer for up to 25% of the sale amount. There are no returns for sales of products that are personalized for its customers. The Company analyzes the components of the allowances for customer deductions monthly and adjusts the allowances to the appropriate levels. There was no sales returns allowance recorded at December 31, 2016 and December 31, 2015. The historical sales return rate for the Company in relation to its total sales have not been significant.

 

Income Taxes: Income taxes are accounted for under the asset and liability method in accordance with United States generally accepted accounting principles. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial carrying amounts of existing assets and liabilities and their respective tax bases as well as operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance to the extent that the recoverability of the asset is unlikely to be recognized. We did not provide any current or deferred income tax provision or benefit for any periods presented to date because we have continued to experience a net operating loss since inception and therefore provide a 100% valuation allowance against all of our deferred tax assets.

 

 
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The Company adopted the FASB ASC accounting guidance for recognizing and measuring uncertain tax positions, as defined in the FASB ASC Topic “Income Taxes”. This guidance prescribes a threshold condition that a tax position must meet for any of the benefits of the uncertain tax position to be recognized in the financial statements. This guidance also provides accounting guidance on derecognizing, classification and disclosure of these uncertain tax positions. The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. The Company has not recognized any interest and penalties in 2016 or 2015.

 

The company has no deferred tax assets or deferred tax liabilities. They have a net operating loss carry-forward for federal and state tax purposes of approximately $11,000 at December 31, 2016, that is available to offset future taxable income, which will begin to expire in the year 2028. The Company took a 100% valuation allowance against the net operating loss deferred tax asset.

 

Earnings Per Share: Basic and diluted earnings per share are computed based on the weighted-average common shares and common share equivalents outstanding during the period. The merger with Maple Tree Kids LLC took place on September 27, 2013 and prior periods have been restated to reflect the change in the capitalization of the Company at the merger date.

 

Advertising Costs: Advertising costs are expensed as incurred. Advertising costs for the years ended December 31, 2016 and 2015 were $- and $- respectively These expenses are recorded under general and administrative expenses.

 

Shipping and Handling Fees Charged to Customers and Reported as Revenue: Shipping and handling fees billed to customers are classified on the Statements of Income under the caption selling, general and administrative expenses.

 

Gift Cards: The Company will collect the proceeds from gift cards issued and record a liability for the full amount sold. This liability will be reduced when the Company honors redemptions of the gift cards as a form of tender. As a result, the Company will maintain a liability equivalent to 100% of the proceeds from unredeemed gift cards, less estimated unredeemed gift cards. For the years ended December 31, 2016 and 2015 there were no significant gift cards sales, therefore the “unredeemed gift certificates” liability was $0 at December 31, 2016 and December 31, 2015.

 

In recognizing the unredeemed gift card income above, the Company considered the guidance under ASC 405-20-40, Liabilities-Extinguishments of Liabilities-Derecognition paragraph 40-1 that states “A debtor shall derecognize a liability if and only if it has been extinguished. A liability under this standard has been extinguished if either of the following conditions is met: (a) the debtor pays the creditor and is relieved of its obligation for the liability or (b) the debtor is legally released from being the primary obligor under the liability either judicially or by the creditor.” The recognition of unredeemed gift card income is not expected to be material in future reporting periods. If we have future sales of gift cards, we will review historical gift card redemption information at each reporting period to assess the continued appropriateness of the gift card breakage rates and pattern of redemption.

 

Contingencies: Certain conditions may exist which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company, or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

 

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed.

 

Loss contingencies considered remote are generally not disclosed unless they arise from guarantees, in which case the guarantees would be disclosed.

 

Recently-Issued Accounting Standards:

 

Recently-Issued Accounting Standards: Management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.

 

 
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Table of Contents

 

Going Concern

 

ASU 2014-15 – “Presentation of Financial Statements—Going Concern—Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”).” In August 2014, the FASB issued ASU 2014-15 requiring management to assess an entity’s ability to continue as a going concern, and to provide related footnote disclosures in certain circumstances. ASU 2014-15 is effective for annual periods, and interim periods within those annual periods, starting December 15, 2016. Management adopted this guidance for the year ended December 31, 2016.

 

Financial Instruments

 

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”), which updates certain aspects of recognition, measurement, presentation and disclosure of financial instruments. ASU 2016-01 will be effective for the Company beginning in its first quarter of 2019. The Company does not believe the adoption of ASU 2016-01 will have a material impact on its consolidated financial statements.

 

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which modifies the measurement of expected credit losses of certain financial instruments. ASU 2016-13 will be effective for the Company beginning in its first quarter of 2021 and early adoption is permitted. The Company does not believe the adoption of ASU 2016-13 will have a material impact on its consolidated financial statements.

 

Leases

 

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), which modified lease accounting for both lessees and lessors to increase transparency and comparability by recognizing lease assets and lease liabilities by lessees for those leases classified as operating leases under previous accounting standards and disclosing key information about leasing arrangements. ASU 2016-02 will be effective for the Company beginning in its first quarter of 2020, and early adoption is permitted. The Company is currently evaluating the timing of its adoption and the impact of adopting ASU 2016-02 on its consolidated financial statements.

 

Stock Compensation

 

In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”), which simplified certain aspects of the accounting for share-based payment transactions, including income taxes, classification of awards and classification on the statement of cash flows. ASU 2016-09 will be effective for the Company beginning in its first quarter of 2018. The Company is currently evaluating the impact of adopting ASU 2016-09 on its consolidated financial statements.

 

Income Taxes

 

In October 2016, FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfer of Assets Other than Inventory (“ASU 2016-16”), which requires the recognition of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. ASU 2016-06 will be effective for the Company in its first quarter of 2019. The Company is currently evaluating the impact of adopting ASU 2016-16 on its consolidated financial statements.

 

Revenue Recognition

 

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which amends the existing accounting standards for revenue recognition. ASU 2014-09 is based on principles that govern the recognition of revenue at an amount an entity expects to be entitled when products are transferred to customers. ASU 2014-09 will be effective for the Company beginning in its first quarter of 2019, and early adoption is permitted.

 

Subsequently, the FASB has issued the following standards related to ASU 2014-09: ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (“ASU 2016-08”); ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing (“ASU 2016-10”); and ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients (“ASU 2016-12”). The Company must adopt ASU 2016-08, ASU 2016-10 and ASU 2016-12 with ASU 2014-09 (collectively, the “new revenue standards”).

 

 
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Table of Contents

 

The new revenue standards may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. The Company currently expects to adopt the new revenue standards in its first quarter of 2018 utilizing the full retrospective transition method. The Company does not expect adoption of the new revenue standards to have a material impact on its consolidated financial statements.

 

Note 3 – Major Customer

 

The Company has one major customer, which represents approximately 72% of total sales for the years ended December 31, 2016 and 2015, respectively.

 

Note 4 – Shareholder Advances and Related Party Transactions

 

The principal shareholder of the Company through December 28, 2016 advanced $23,580 and $13,000 as a non-interest bearing loan, unsecured and payable on demand for the years ended December 31, 2016 and 2015, respectively. This shareholder was also the President, Principal Accounting Officer, Secretary and Sole Director of the Company in 2015 and until December 28, 2016

 

On December 27, 2016, this principal shareholder agreed to convert her total shareholder advances of $49,958 to equity and this total amount was recorded as additional paid in capital. The total balance due to this principal shareholder was $0 and $26,378 as of December 31, 2016 and 2015, respectively.

 

Note 5 – Shareholders’ Equity

 

On December 28, 2016, the Company entered into and closed the transactions contemplated by a stock purchase agreement between the Company, Aircom Pacific, Inc., a California corporation (“Aircom”), and Irina Goldman, the sole director, President, Treasurer, Secretary and controlling shareholder of the Company. Pursuant to the stock purchase agreement, Aircom purchased 700,000 (7,000,000 pre-Reverse Split) shares of the Company’s common stock from Irina Goldman. Such shares represented approximately 86.3% of the Company’s issued and outstanding common stock as of the closing. Accordingly, as a result of the transaction, Aircom became the controlling shareholder of the Company. Irina Goldman resigned as the Company’s President, Treasurer Secretary and Director and Jeffrey Wun was appointed to those positions.

 

Note 6 – Subsequent Events

 

On January 9, 2017, the Company filed an amendment to its Articles of Incorporation to (i) change the name of the Company to Aerkomm Inc. and (ii) effectuate a one for ten reverse split of the Company’s outstanding common stock. All share and per share information has been adjusted to give retroactive effect to such reverse split. As a result, the number of common shares issued and outstanding at December 31, 2016 and 2015 decreased from 8,108,500 shares to 810,850 shares. The par value was not adjusted as a result of the one for ten reverse stock split.

 

F-12
Table of Contents

 

SIGNATURES

 

Pursuant to the requirements of section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

AERKOMM INC.

Date: February 13, 2017

By:

/s/ Jeffrey Wun

Name:

Jeffrey Wun

Title:

President

 

Pursuant to the requirements 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.

 

 

Signature

Title

Date

/s/ Jeffrey Wun

President, Treasurer, Secretary and Director

February 13, 2017

Jeffrey Wun

(Principal Executive Officer and Principal Financial and Accounting Officer)

 

 
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Table of Contents

 

EXHIBIT INDEX

 

Exhibit No.

Description

 

 

 

2.1

Agreement and Plan of Merger, dated September 26, 2013, between the Company and Maple Tree Kids LLC (incorporated by reference to Exhibit 2.1 to the Company’s Registration Statement on Form S-1 filed on November 5, 2013)

 

 

 

3.1

Articles of Incorporation of the Company, as amended to date

 

 

 

3.2

Bylaws of the Company, as amended to date (incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1 filed on November 5, 2013)

 

 

 

10.1

Stock Purchase Agreement, dated as of December 28, 2016, by and among Irina Goldman, Aircom Pacific, Inc. and the Company (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 29, 2016)

 

 

 

14.1

Code of Ethics of the Company (incorporated by reference to Exhibit 14.1 to the Company’s Annual Report on Form 10-K filed on March 14, 2014)

 

 

 

31.1

Certifications of Principal Executive Officer and Principal Financial and Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

 

32.1

Certification of Principal Executive Officer and Principal Financial and Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

 

101.INS *

XBRL Instance Document

 

 

 

101.SCH *

XBRL Taxonomy Extension Schema Document

 

 

 

101.CAL *

XBRL Taxonomy Extension Calculation Linkbase Document

 

 

 

101.DEF *

XBRL Taxonomy Extension Definition Linkbase Document

 

 

 

101.LAB *

XBRL Taxonomy Extension Label Linkbase Document

 

 

 

101.PRE *

XBRL Taxonomy Extension Presentation Linkbase Document

_________ 

*XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a report for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

 

 

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