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EX-31 - EXHIBIT 31.1 / 31.2 SECTION 302 CERTIFICATIONS - HK GRAPHENE TECHNOLOGY CORPf10q033114_ex31.htm
EX-32 - EXHIBIT 32.1 / 32.2 SECTION 906 CERTIFICATIONS - HK GRAPHENE TECHNOLOGY CORPf10q033114_ex32.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q


  X .

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


For the quarterly period ended March 31, 2014


OR


      .

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


Commission File Number 333-140148


ANGSTRON HOLDINGS CORPORATION
(Exact name of registrant as specified in its charter)


Nevada

 

20-5308449

(State or other jurisdiction of incorporation or

organization)

 

(I.R.S. Employer Identification No.)


800 E. Colorado Blvd., Suite 888

Pasadena, CA 91101

(Address of principal executive offices)

(Zip Code)


(626) 683-9120

(Registrant’s telephone number, including area code)

 

________________________________________________________________

(Former name, former address and former fiscal year, if changed since last report)


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 Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period than the registrant was required to submit and post such files). Yes   X . No       .


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

 

Large accelerated filer 

      .

Accelerated filer 

      .

Non-accelerated filer 

      .

Smaller reporting company 

  X .


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


As of May 15, 2014, the registrant had 1,277,039 shares of common stock, $0.001 par value per share, issued and outstanding.




 

ANGSTRON HOLDINGS CORPORATION

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2014


TABLE OF CONTENTS


 

 

PAGE

 

 

 

 

PART I - FINANCIAL INFORMATION

3

 

 

 

Item 1.

Financial Statements (Unaudited)

3

 

 

 

Item 2.

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

11

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

13

 

 

 

Item 4.

Controls and Procedures

13

 

 

 

 

PART II - OTHER INFORMATION

15

 

 

 

Item 1.

Legal Proceedings

15

 

 

 

Item 1A.

Risk Factors

15

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

15

 

 

 

Item 3.

Defaults Upon Senior Securities

15

 

 

 

Item 4.

Mine Safety Disclosures

15

 

 

 

Item 5.

Other Information

15

 

 

 

Item 6.

Exhibits

15

 

 

 

 

SIGNATURES

16






2



PART I

FINANCIAL INFORMATION


ITEM 1. FINANCIAL STATEMENTS


The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in our Form 10-K for the fiscal year ended December 31, 2013 filed with the SEC on April 15, 2014. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the periods presented have been reflected herein. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year.


TABLE OF CONTENTS


 

PAGE

 

 

Condensed Balance Sheets as of March 31, 2014 (unaudited) and December 31, 2013

4

 

 

Condensed Statements of Operations for the three month periods ended March 31, 2014 and 2013 (unaudited) and for the period from June 28, 2006 (inception) to March 31, 2014 (unaudited)

5

 

 

Condensed Statements of Cash Flows for the three month periods ended March 31, 2014 and 2013 (unaudited) and for the period from June 28, 2006 (inception) to March 31, 2014 (unaudited)

6

 

 

Notes to the Condensed Financial Statements (unaudited)

7-10







3




Angstron Holdings Corporation

(A Development Stage Company)

Condensed Balance Sheets

Unaudited

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2013

 

 

 As of March 31, 2014

 

 

ASSETS

 

 

 

 

 

Current Assets

 

 

 

 

 

     Cash

$

500,777

 

$

1,789,961

     Due from AMI

 

10,794

 

 

65,935

 

 

 

 

 

 

Total Current Assets

 

511,571

 

 

1,855,896

 

 

 

 

 

 

Non-Current Assets

 

 

 

 

 

     Loan to ACI

 

2,943,670

 

 

1,932,115

 

 

 

 

 

 

 

 

2,943,670

 

 

1,932,115

 

 

 

 

 

 

Total Assets

$

3,455,241

 

$

3,788,011

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

 

 

 

 

 

Current Liabilities

 

 

 

 

 

     Bank overdraft

$

-

 

$

2,864

     Accounts payable

 

-

 

 

2,555

     Payable to affiliate - ACI

 

133,717

 

 

81,162

     Accrued expenses

 

40,414

 

 

23,664

      Loan from LYG

 

4,000,000

 

 

4,000,000

 

 

 

 

 

 

Total Liabilities

 

4,174,131

 

 

4,110,245

 

 

 

 

 

 

Stockholders' Deficit

 

 

 

 

 

 

 

 

 

 

 

Preferred stock, $.001 par value 1,000,000,000 shares authorized; 1,300 designated Series A Convertible shares; 1,300 designated Series A Convertible shares issued and outstanding as of  March 31, 2014 and December 31, 2013, respectively

 

1

 

 

1

    Additional paid in capital - preferred stock

 

129,999

 

 

129,999

Common stock, par value $.001; 2,000,000,000 shares authorized, 1,277,039  and 702,983 shares issued and outstanding as of March 31, 2014 and December 31, 2013

 

1,277

 

 

1,277

     Additional paid in capital - common stock

 

4,087,401

 

 

4,087,401

     Deficit accumulated during development stage

 

(4,937,568)

 

 

(4,540,912)

 

 

 

 

 

 

Total Stockholders' Deficit

 

(718,890)

 

 

(322,234)

 

 

 

 

 

 

Total Liabilities and Stockholders' Deficit

$

3,455,241

 

$

3,788,011

 

 

 

 

 

 

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



4




.

Angstron Holdings Corporation

 (A Development Stage Company)

 Condensed Statements of Operations

Unaudited

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Period From

 

 

 

 

 

 

 

 

June 28, 2006

 

 

Three months

 

 

Three months

 

 

(inception)

 

 

ended

 

 

ended

 

 

Through

 

 

March 31, 2014

 

 

March 31, 2013

 

 

 March 31, 2014

 

 

 

 

 

 

 

 

 

Operating Costs

 

 

 

 

 

 

 

 

 General and Administrative Expenses

$

408,211

 

$

20,188

 

$

4,956,403

 

 

 

 

 

 

 

 

 

 Total Operating Expenses

 

(408,211)

 

 

(20,188)

 

 

(4,956,403)

 

 

 

 

 

 

 

 

 

Other income (Expense)

 

 

 

 

 

 

 

 

       Interest income

 

11,555

 

 

-

 

 

21,613

       Interest expense

 

-

 

 

-

 

 

(88,304)

  Gain on forgiveness of debt

 

-

 

 

(7,056)

 

 

85,526

 

 

 

 

 

 

 

 

 

Total Other Income (Expense)

 

11,555

 

 

(7,056)

 

 

18,835

 

 

 

 

 

 

 

 

 

 Net Loss

$

(396,656)

 

$

(27,244)

 

$

(4,937,568)

 

 

 

 

 

 

 

 

 

Loss per share

$

(0.31)

 

$

(0.02)

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average number of common shares outstanding: basic and diluted

 

1,277,039

 

 

1,277,039

 

 

 

 

 

 

 

 

 

 

 

 

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



5




Angstron Holdings Corporation

(A Development Stage Company)

 Condensed Statements of Cash Flows

Unaudited

 

 

For three months ended March 31, 2014

 

 

For three months ended March 31, 2013

 

 

From the Period From June 28, 2006 (inception) through March 31, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

 Net loss from the period

$

(396,656)

 

$

(27,244)

 

$

(4,937,568)

     Adjustments to reconcile net loss to net cash used in operating   activities:

 

 

 

 

 

 

 

 

     Stock option expense

 

-

 

 

-

 

 

1,372,158

     Common stock issue for service

 

-

 

 

-

 

 

4,500

     Gain on forgiveness of debt

 

-

 

 

-

 

 

(85,526)

 Interest accrued on note receivable

 

(11,555)

 

 

-

 

 

(13,670)

     Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 Prepaid expense and other current assets

 

-

 

 

-

 

 

131,617

 Accounts payable and accrued expenses

 

14,195

 

 

(101,186)

 

 

99,576

 Accounts payable - related party

 

52,555

 

 

-

 

 

294,106

 Interest accrued on notes payable

 

-

 

 

7,056

 

 

65,529

 Interest accrued on notes payable - related party

 

-

 

 

-

 

 

268

 Due from related party

 

55,141

 

 

-

 

 

(10,794)

 Deposits

 

-

 

 

-

 

 

9,228

Net cash used in operating activities

 

(286,320)

 

 

(121,374)

 

 

(3,070,576)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

      Loan from stockholder

 

-

 

 

-

 

 

13,200

      Issuance of convertible preferred stock, net of offering costs

 

-

 

 

130,000

 

 

130,000

      Bank overdraft

 

(2,864)

 

 

-

 

 

-

      Loan from  LYG

 

-

 

 

-

 

 

4,000,000

      Loan to ACI

 

(1,000,000)

 

 

-

 

 

(2,930,000)

      Issuance of common stock, net of offering costs

 

-

 

 

-

 

 

2,058,313

      Repayment of insurance financing

 

-

 

 

-

 

 

(112,630)

      Proceeds from convertible notes payable

 

-

 

 

-

 

 

395,927

      Proceeds from notes payable - related party

 

-

 

 

-

 

 

16,543

Net cash provided by financing activities

 

(1,002,864)

 

 

130,000

 

 

3,571,353

 

 

 

 

 

 

 

 

 

Net Increase/(Decrease) in Cash

 

(1,289,184)

 

 

8,626

 

 

500,777

           Cash at Beginning of the Period

 

1,789,961

 

 

4,965

 

 

-

           Cash at End of the Period

$

500,777

 

$

13,591

 

$

500,777

 

 

 

 

 

 

 

 

 

Supplemental cash flow information:

 

 

 

 

 

 

 

 

     Interest paid

$

-

 

$

543

 

$

2,605

     Income taxes paid

$

-

 

$

-

 

$

-

 

 

 

 

 

 

 

 

 

Non-Cash Financing Activities

 

 

 

 

 

 

 

 

          Debt forgiveness

$

-

 

$

-

 

$

173,589

          Stock issued for settlement of accounts payable

$

-

 

$

-

 

$

49,580

          Common stock issued for debt conversion

$

-

 

$

430,538

 

$

430,538

 

 

 

 

 

 

 

 

 

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




6



ANGSTRON HOLDINGS CORPORATION

(A Development Stage Company)

Notes to Condensed Consolidated Financial Statements

March 31, 2014

(Unaudited)


NOTE 1. ORGANIZATION AND DESCRIPTION OF BUSINESS


Angstron Holdings Corporation (the “Company”) was incorporated on June 28, 2006 in the state of Nevada under the name Loreto Corporation. The Company pursued its original business plan to create, market, and sell greeting cards to wholesalers and retail customers in shopping malls in its own planned retail shops. However, in 2008, the Company decided to redirect its business focus and strategy toward identifying and pursuing business opportunities in the mining sector in South America, more specifically, in Peru. The Company later changed its name to Loreto Resources Corporation, subsequently to HK International Group Inc. and then to Angstron Holdings Corporation. On July 11, 2013, the Company split off its wholly owned subsidiary Loreto Resources Peru S.R.L. Compania Minera. The Company is in the development stage in accordance with Financial Accounting Standards Board Accounting Standards Codification (“ASC”) Topic No. 915, Accounting and Reporting by Development Stage Enterprises.


NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


Basis of Presentation

 

The accompanying condensed consolidated financial statements as of March 31, 2014 and 2013 and for the years then ended have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

 

Use of Estimates and Assumptions

 

The preparation of financial statements in conformity with U.S. 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 condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

  

Cash Equivalents 

 

The Company considers all highly liquid debt instruments with original maturities of three months or less when acquired to be cash equivalents. There are no cash equivalents as of March 31, 2014.


Basic Earnings per Share 

 

Basic and diluted earnings or loss per share (“EPS”) amounts in the financial statements are computed in accordance with ASC Topic 260 – 10 “Earnings per Share,” which establishes the requirements for presenting EPS. Basic EPS is based on the weighted average number of common shares outstanding. Diluted EPS is based on the weighted average number of common shares outstanding and dilutive common stock equivalents. We didn’t calculate diluted EPS since there are anti-dilute factor such as warrants exist. Basic EPS is computed by dividing net income/loss available to common stockholders (numerator) by the weighted average number of common shares outstanding (denominator) during the period.


Fair Value of Financial Instruments

 

The Company estimates the fair value of financial instruments using the available market information and valuation methods. Considerable judgment is required in estimating fair value. Accordingly, the estimates of fair value may not be indicative of the amounts the Company could realize in a current market exchange. As of March 31, 2014 and 2013, the carrying value of the assets and liabilities approximated fair value due to the short-term nature and maturity of these instruments.


Recent Accounting Pronouncements

 

The Company does not expect that the adoption of recently issued accounting pronouncements will have a material impact on its consolidated financial position, results of operations, or cash flows.



7




NOTE 3. GOING CONCERN


During the period ended March 31, 2014, the Company has not generated any revenue and therefore has been unable to generate cash flows sufficient to support its operations and has been dependent on debt and equity financing. In addition to negative cash flow from operations, the Company has experienced recurring net losses, and has an accumulated deficit of $4,937,568 as of March 31, 2014.


These factors raise substantial doubt about the Company’s ability to continue as a going concern. The condensed financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Going forward, the Company’s plan is to acquire other assets or business operations that will increase shareholder value. In 2013, the Company has pursued a potential merger with a company that manufactures graphene products. This potential merger is currently under management’s evaluation.


NOTE 4. CONVERTIBLE PROMISSORY NOTES


On November 2, 2010 and on November 17, 2010, the Company completed closings of a private placement offering of its convertible notes (the “2010 Notes”), totaling approximately $150,000 in principal, to eight stockholders and one unaffiliated third party. The 2010 Notes bore interest of 10%, and would have matured on December 31, 2011. Both the principal and accrued interest are deemed mandatorily converted (see below) on March 15, 2011 at the price paid by investors in that offering, expressed as a percentage of the face amount of debt securities.


On March 15, 2011, the Company completed closings of a private placement offering of its convertible promissory notes (the “March 2011 Notes”), totaling approximately $90,000 in principal, to eight stockholders and one unaffiliated third party. As of March 1, 2011, the Company deemed the notes from the 2010 offering, along with accrued but unpaid interest, to have been converted, on a mandatory basis, into new notes on the same terms as the subsequent notes. The subsequent notes bear interest of 10%, matured on March 31, 2012, and both the principal and accrued interest will be mandatorily converted at a price equal to either (a) the price per share of stock (or unit of stock and other securities) paid by investors in the next securities offering or other financing by the Company, if the financing is an issuance of stock (or unit of stock and other securities), or (b) the price paid by investors in the next securities offering or other financing by the Company, expressed as a percentage of the face amount of debt securities, if the financing is an issuance of debt securities (or units of debt securities and other securities) (including debt securities convertible into stock), upon the closing of, and into the securities issued in, the next financing in which the Company sells at least $1,000,000 of its securities.


On October 10, 2011, the Company closed a private placement offering (the “October 2011 Offering”) of its 10% convertible promissory notes (the “October 2011 Notes”). In the October 2011 Offering, the Company sold $52,500 in principal amount of the October 2011 Notes to an existing investor.


The October 2011 Notes bear interest of 10%, mature on April 9, 2013, and both the principal and accrued interest will be mandatorily converted at a price equal to either (a) the price per share of stock (or unit of stock and other securities) paid by investors in the next securities offering or other financing, if the financing is an issuance of stock (or unit of stock and other securities), or (b) the price paid by investors in the next securities offering or other financing by the Company, expressed as a percentage of the face amount of debt securities, if the financing is an issuance of debt securities (or units of debt securities and other securities) (including debt securities convertible into stock), upon the closing of, and into the securities issued in, the next financing in which the Company sells at least $1,000,000 of its securities.


On March 31, 2012, the 2010 Notes and the March 2011 Notes were amended, and the maturity dates were extended to September 30, 2013. In addition, the mandatory conversion terms for the aforementioned notes were amended to require conversion only if the minimum $1,000,000 financing closes concurrent with the closing of a related merger or other acquisition transaction. As of the report date, no financing activities occurred so the Notes were not convert.


On February 1, 2012, the Company closed a private placement offering (the “February 2012 Offering”) of its 10% convertible promissory notes (the “February 2012 Notes”). In the February 2012 Offering, the Company sold $50,000 in principal amount of the February 2012 Notes to one existing investor. The February 2012 Notes mature on July 31, 2013 and will be automatically converted at the initial closing of the Company’s next private placement in which it sells at least $1,000,000 of its securities, so long as such offering closes concurrent with the closing of a related merger or other acquisition transaction. As of the report date, no financing activities occurred so the notes were not convert.



8




On July 25, 2012, the Company closed a private placement offering (the “July 2012 Offering”) of its 10% convertible promissory notes (the “July 2012 Notes”). In the July 2012 Offering, the Company sold $70,000 in principal amount of the July 2012 Notes to one existing investor. The July 2012 Notes mature on January 24, 2014 and will be automatically converted at the initial closing of the Company’s next private placement in which it sells at least $1,000,000 of its securities, so long as such offering closes concurrent with the closing of a related merger or other acquisition transaction.


On March 8, 2013, the Company entered into Promissory Note Conversion Agreements (the “Conversion Agreements”) with each of the holders (the “Noteholders”) of the Company’s outstanding convertible promissory notes (the “Notes”), to convert an aggregate of $430,538 of principal and accrued but unpaid interest due under the Notes, representing all of the Company’s outstanding indebtedness for money borrowed at March 8, 2013, was converted into a total of 57,405,074 shares (pre-reverse stock split) (the “Note Conversion Shares”) of the Corporation’s common stock, $0.001 par value per share (“Common Stock”), at a conversion rate of $0.0075 per share (the “Debt Conversion Transaction”).


The Company evaluated the conversion options under FASB ASC Topic 815 – 40 for derivative treatment and determined that the conversion options are required to be accounted for as a derivative upon the aforementioned closing of the next private placement offering. As the closing had not occurred prior to the aforementioned promissory note conversions on March 8, 2013, and as per FASB ASC Topic 470 – 20, the derivative instrument nor the beneficial conversion feature need not be accounted for through the date of the promissory note conversions.


As of March 31, 2014, all of the notes have been converted by the Noteholders.


NOTE 5. STOCK HOLDER’S EQUITY


On October 3, 2006, the Company issued 400,000 common shares to a director for $10,000.


On February 23, 2007, the Company issued 360,000 common shares to 36 non-affiliated stockholders for a total of $18,000.


On July 2, 2007, the Company issued 240,000 common shares to Magdalena Cruz, then President and CEO, in exchange for her services valued at $4,500.


On February 7, 2008, the Company issued 20,000 common shares to Milestone Enhanced Fund Ltd. for $50,000.


On July 18, 2008, 400,000 common shares held by Magdalena Cruz, the director in 2008, were cancelled.


On July 18, 2008, January 15, 2009, and January 15, 2010, the Company declared two for one (2-for-1) forward stock splits on each common share. All share and per share amounts have been adjusted retroactively from inception to reflect these splits.


In September 2008, the Company issued 81,000 shares through a private placement to various individuals and entities at the price of $0.25 per share. Total proceeds were $1,980,313 net of offering costs of $44,687.


Each forward split entitled each Loreto shareholder of record on the specified dates to receive one additional common share for each one share owned. The stock split did not affect the amount of common stock authorized for issuance.


On November 11, 2010, the Company reached a settlement agreement with its legal counsel, whereby the legal counsel agreed to forego payment of $49,580 in legal fees due for the 2009 fiscal year upon delivery of 198,322 restricted shares of the Company’s common stock. The restricted shares were valued at $0.25 per share


Debt Conversion Transaction


On March 8, 2013, the Company entered into Promissory Note Conversion Agreements (the “Conversion Agreements”) with each of the holders (the “Note holders”) of the Company’s outstanding convertible promissory notes (the “Notes”), to convert an aggregate of $430,538 of principal and accrued but unpaid interest due under the Notes, representing all of the Company’s outstanding indebtedness for money borrowed at March 8, 2013, was converted into a total of 57,405,074 shares (pre-reverse stock split) (the “Note Conversion Shares”) of the Corporation’s common stock, $0.001 par value per share (“Common Stock”), at a conversion rate of $0.0075 per share (the “Debt Conversion Transaction”). (See Note 4)



9




Series A Preferred Stock Issuance


On March 8, 2013, the Company entered into a Series A Preferred Stock Purchase Agreement (the “Purchase Agreement”) with a California limited liability company (the “Purchaser”), pursuant to which, among other items, on March 11, 2013 (the “Closing Date”), the Company sold to the Purchaser, and the Purchaser purchased from the Company, 1,300 shares of the Company’s Series A Preferred Stock, at the price of $100 per share, for an aggregate purchase price of $130,000, with offering costs of $37,500. This Series A Preferred Stock is a convertible stock and can be convert into an aggregate of 127,703,396 shares (post-reverse stock split) of the Company’s Common Stock (the “Series A Transaction”).


Effective April 16, 2013, the Company’s board of directors approved a reverse split of the Company’s common stock on the basis of one share for each 100 shares issued and outstanding (1:100 reverse stock split). The total number of authorized shares was also changed. The Company increased its number of authorized shares from 310,000,000 shares, consisting of 300,000,000 shares of common stock and 10,000,000 shares of preferred stock, 1,300 shares of which have been designated as Series A Preferred Stock, to 3,000,000,000 shares, consisting of 2,000,000,000 shares of common stock and 1,000,000,000 shares of preferred stock, 1,300 shares of which have previously been designated as Series A Preferred Stock.


All common shares presented in these financial statements and accompany notes have been retroactively adjusted to reflect the reverse stock split effective on April 16, 2013.


NOTE 6. RELATED PARTY


Through 2013, ACI, an affiliate and controlling stockholder of the Company, paid the Company’s operating expense including legal fee, filing fee and auditing fee. As of December 31, 2013, the balance of accounts payable to ACI totaled $81,162.


During the period ended March 31, 2014, ACI has continued to pay the Company’s operating expenses. The expenses paid by ACI during the period ended March 31, 2014 totaled $52,555. As of March 31, 2014, the balance of accounts payable to ACI totaled $133,717.


NOTE 7. LOAN FROM LYG


On September 30, 2013, Lianyungang Hybrid Kinetic New Energy Co., Ltd. made a loan in the amount of $4,000,000 to the Company. This is an unsecured, no interest bearing loan due upon request.


As of March 31, 2014, the loan balance is $4,000,000.


NOTE 8. LOAN TO ACI


On December 11, 2013, the company made a loan in the amount of $1,930,000 to ACI an affiliate and controlling stockholder of the Company. This is an unsecured loan, with an interest rate of 2% and the note is due upon request.


On February 24, 2014, the Company made additional loan of $1,000,000 to ACI. This is an unsecured loan, with an interest rate of 2% and the note is due upon request.


 As of March 31, 2014 the total balance for all loans to ACI was $2,930,000. On May 16, 2014, ACI repaid the December 11, 2013 and February 24, 2014 notes, and the balance of all loans to ACI was zero as of such date.


NOTE 9. SUBSEQUENT EVENT


On May 16, 2014, ACI repaid certain promissory notes to the Company representing a total of $2,930,000 in principal and accrued interest.






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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


This report contains forward-looking statements. All statements other than statements of historical facts included in this Quarterly Report on Form 10-Q, including without limitation, statements in this Management’s Discussion and Analysis of Financial Condition and Results of Operations regarding our financial position, estimated working capital, business strategy, the plans and objectives of our management for future operations and those statements preceded by, followed by or that otherwise include the words “believe,” “expects,” “anticipates,” “intends,” “estimates,” “projects,” “target,” “goal,” “plans,” “objective,” “should,” or similar expressions or variations on such expressions are forward-looking statements. We can give no assurances that the assumptions upon which the forward-looking statements are based will prove to be correct. Because forward-looking statements are subject to risks and uncertainties including those related to changes in economic conditions, new business opportunities and general financial and business conditions, actual results may differ materially from those expressed or implied by the forward-looking statements.


Readers are cautioned not to place undue reliance on the forward-looking statements contained herein, which speak only as of the date hereof. We believe the information contained in this Form 10-Q to be accurate as of the date hereof. Changes may occur after that date. We will not update that information except as required by law in the normal course of its public disclosure practices.


Additionally, the following discussion regarding our financial condition and results of operations should be read in conjunction with the financial statements and accompanying notes included in Item 1 of Part I of this Quarterly Report on Form 10-Q and with the Management’s Discussion and Analysis of Financial Condition and Results of Operations and the financial statements and accompanying notes included our Annual Report on Form 10-K for the fiscal year ended December 31, 2013, filed with the SEC.


Unless the context otherwise requires, the terms “the Company,” “we,” “us” and “our” refer to Angstron Holdings Corporation.


OVERVIEW AND RECENT DEVELOPMENTS


We are a development stage company, and historically our business involved the acquisition, development and production of base and precious metals deposits.


We intended to pursue the acquisition of one or more mining properties in Peru and other South American countries and, to that end, we had opened an office in Lima, Peru. Because we decided not to pursue any of those opportunities, during the quarter ended September 30, 2010, we closed our office in Peru.


Since that time, we have begun identifying and investigating investment opportunities, but we have not yet finalized decisions to pursue any particular project.


On March 8, 2013, we entered into Promissory Note Conversion Agreements (the “Conversion Agreements”) with the holders of all of our outstanding convertible promissory notes (collectively, the “Notes”), pursuant to which, among other things, an aggregate of $430,538 of principal and accrued and unpaid interest due under the Notes, representing all of our outstanding indebtedness for money borrowed at March 8, 2013, was converted into a total of 57,405,074 shares (pre-Reverse Stock Split, as described below) of our common stock, $0.001 par value per share (“Common Stock”), at a conversion rate of $0.0075 per share.


In addition, on March 8, 2013, holders of 72,123,396 shares (pre-Reverse Stock Split, as described below) of our Common Stock, (representing approximately 56.5% of our common equity at that time), consented to a proposed 1:100 reverse split of our Common Stock (the “Reverse Stock Split”), as previously authorized by our board of directors (“Board”). Following FINRA’s approval, the Reverse Stock Split became effective in the marketplace as of April 16, 2013 (the “Effective Date”). As a result, we now have 1,277,039 shares of Common Stock issued and outstanding.


On March 11, 2013, we sold 1,300 shares of our Series A convertible preferred stock, $0.001 par value per share (“Series A Preferred Stock”), to Commonwealth Investments, LLC, a California limited liability company (“Commonwealth”). These shares of Series A Preferred Stock are convertible into an aggregate of 127,703,396 shares (post-Reverse Stock Split) of our Common Stock, representing approximately 99.0% of our common equity on an as-converted basis. Commonwealth has advised us that it plans to appoint new members to our Board in the near future, and to make other changes to our management and operations.



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On March 22, 2013, we changed our name to HK International Group, Inc., and increased our number of authorized shares from 310,000,000 shares consisting of (i) 300,000,000 shares of Common Stock, and (ii) 10,000,000 shares of “blank check” preferred stock, par value $0.001 per share (“Preferred Stock”), 1,300 shares of which have been designated as Series A Preferred Stock, to 3,000,000,000 shares, consisting of (i) 2,000,000,000 shares of Common Stock, and (ii) 1,000,000,000 shares of Preferred Stock, 1,300 shares of which have previously been designated as Series A Preferred Stock. Following FINRA’s approval, the name change became effective on the Effective Date. Our trading symbol changed from “LRTC” to “HKIG” on May 13, 2013, which was twenty (20) business days from the Effective Date.


On June 21, 2013, we changed our name to Hygeialand Biomedical Corporation.  Following FINRA’s approval, on July 11, 2013, the name change, and the change of our trading symbol to “HBMC,” became effective in the market.


In connection with the change of our business focus (described above), we split off (the “Split-Off”) our wholly-owned Peruvian subsidiary, Loreto Resources Peru S.R.L. Compania Minera (the “Subsidiary”), which is in the process of being dissolved, to Luis F. Saenz, our former sole officer and director. We entered into a Split-Off Agreement (the “Split-Off Agreement”) with Mr. Saenz (as discussed below) to effect the Split-Off, dated as of July 12, 2013 (the “ Split-Off Closing Date”), and the Split-Off has been completed.


Pursuant to the Split-Off Agreement, as of the Split-Off Closing Date:


·

we contributed, assigned, conveyed and transferred all of our assets and property, and all of our debts, adverse claims, liabilities, judgments and obligations relating to the Subsidiary, whether accrued, contingent or otherwise and whether known or unknown, to Mr. Saenz;


·

we transferred all of the outstanding capital stock of the Subsidiary to Mr. Saenz;


·

Mr. Saenz agreed to indemnify us and our officers and directors against any third party claims relating to the Subsidiary; and


·

the Subsidiary and Mr. Saenz pledged not to sue us and forever release us and our present and former officers, directors, stockholders, employees, agents, attorneys and representatives from any and all claims, actions, obligations, liabilities and the like, incurred or suffered by the Subsidiary or Mr. Saenz arising from, relating to, or in any way connected with, any fact, event, transaction, action or omission that occurred or failed to occur on or prior to the Split-Off Closing Date and related to the Subsidiary.


On July 23, 2013, we changed our name to Angstron Holdings Corporation.  Following FINRA’s approval, on August 19, 2013, the name change, and the change of our trading symbol to “ANGP” became effective.


On August 7, 2013, we increased our number of authorized shares from 3,000,000,000 shares of capital stock, consisting of (i) 2,000,000,000 shares of Common Stock, and (ii) 1,000,000,000 shares of Preferred Stock, 1,300 shares of which have been designated as Series A Preferred Stock, to 6,000,000,000 shares of capital stock, consisting of (i) 5,000,000,000 shares of Common Stock, and (ii) 1,000,000,000 shares of Preferred Stock, 1,300 shares of which have previously been designated as Series A Preferred Stock.


Going forward, our plan is to acquire other assets or business operations that will maximize shareholder value. However, no specific assets or businesses have been definitively identified and there is no certainty that any such assets or business will be identified or any transactions will be consummated.


Going Concern


During the three month period ended March 31, 2014, we did not generate any revenue. Because we have been unable to generate cash flows sufficient to support our operations, we have been dependent on debt financing from certain of our existing stockholders. In order to pay our debts, we must develop or acquire an income-producing business. If we fail to do so, we may be unable to repay our current debts. In addition to negative cash flow from operations, we have experienced recurring net losses, and have an accumulated deficit as of March 31, 2014 of $4,937,568. These factors raise substantial doubt about our ability to continue as a going concern. Our consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.



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RESULTS OF OPERATIONS


Three Months Ended March 31, 2014 and Three Months Ended March 31, 2013


We are still in our development stage and have generated no revenues to date.


We incurred general and administrative expenses of $388,211 and $20,188 for the three months ended March 31, 2014 and 2013, respectively. These expenses consisted of legal and other professional fees and operating costs incurred in connection with the day to day operation of our business and the preparation and filing of our periodic reports.


Our net losses for the three months ended March 31, 2014 and 2013 were $376,656 and $27,244, respectively. The increase in net loss from the 2013 to the 2014 three-month period is primarily attributable to general and administrative expenses.


We have generated no revenues and our net operating loss from inception through March 31, 2014 was $4,917,568.


LIQUIDITY AND CAPITAL RESOURCES


Our cash and cash equivalents balance at March 31, 2014 was $500,777 as compared to $1,789,961 at December 31, 2013.


On March 8, 2013, an aggregate of $430,538 of principal and accrued and unpaid interest due under our outstanding notes, representing all of our outstanding indebtedness for money borrowed at March 8, 2013, was converted into a total of 57,405,074 shares (pre-Reverse Stock Split) of our Common Stock.


On March 11, 2013, we sold 1,300 shares of our Series A Preferred Stock to Commonwealth Investment LLC for an aggregate purchase price of $130,000. We used the net proceeds from the sale of the Series A Preferred Stock to pay outstanding obligations to advisors, service providers and vendors, and to pay any outstanding tax liabilities. In addition, the purchaser of the Series A Preferred Stock paid $37,500 of our legal fees incurred in connection with the transaction.


During the past several years we have conducted a number of small private offerings of our convertible promissory notes, the proceeds from which we used to fund our operations. We presently do not have any available credit, bank financing or other external sources of liquidity. Due to our brief history and historical operating losses, our operations have not been a source of liquidity. We expect that we will need to obtain additional capital in order to maintain our public company regulatory requirements and execute our business plan, build our operations and become profitable. In order to obtain capital, we may need to sell additional shares of our common stock or debt securities, or borrow funds from private lenders or banking institutions. We have not made any decisions with respect to any such additional financing. There can be no assurance that we will be successful in obtaining additional funding in amounts or on terms acceptable to us, if at all. If we are unable to raise additional funding as necessary, we may have to suspend our operations temporarily or cease operations entirely.


OFF-BALANCE SHEET ARRANGEMENTS


We have no off-balance sheet arrangements.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


Not applicable.


ITEM 4. CONTROLS AND PROCEDURES


Evaluation of Disclosure Controls and Procedures


Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act of 1934 (the “Exchange Act”) is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.



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Our management is responsible for establishing and maintaining an adequate system of internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Under the supervision and with the participation of our senior management, consisting of Jianguo Xu, our President, Chief Executive Officer and Treasurer (Principal Executive Officer and Principal Financial Officer), we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by this report (the “Evaluation Date”). Based on this evaluation, our Principal Executive Officer and Principal Financial Officer concluded, as of the Evaluation Date, that our disclosure controls and procedures were not effective because of material weaknesses in our internal control over financial reporting which is identified below.


Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes of accounting principles generally accepted in the United States. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives. In evaluating the effectiveness of our internal control over financial reporting, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework. Based on this evaluation, our Principal Executive Officer and Principal Financial Officer concluded that, during the period covered by this quarterly report, our internal controls over financial reporting were not operating effectively. Management did not identify any material weaknesses in our internal control over financial reporting as of March 31, 2014; however, it has identified the following deficiencies that would be considered material weaknesses in our internal control over financial reporting as of that date:



 

We do not have an audit committee. While we are not currently obligated to have an audit committee, including a member who is an audit committee financial expert, as defined in Item 407 of Regulation S-K, under applicable regulations or listing standards; however, it is managements view that such a committee is an important internal control over financial reporting, the lack of which may result in ineffective oversight in the establishment and monitoring of internal controls and procedures.

 

 

 


 

We did not maintain proper segregation of duties for the preparation of our financial statements. We currently have one interim financial officer overseeing all transactions. This has resulted in several deficiencies including the lack of control over preparation of financial statements, and proper application of accounting policies.


Management believes that the material weaknesses set forth above did not have an effect on our financial results. However, management believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our Board results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.


Management's Remediation Initiatives


In an effort to remediate the identified material weaknesses and other deficiencies and enhance our internal controls, we plan to initiate the following series of measures once we have the financial resources to do so:


At such time that the board deems appropriate, we will create a position to segregate duties consistent with control objectives and will increase our personnel resources and technical accounting expertise within the accounting function when funds are available to us. We also plan to appoint one or more outside directors to our Board who shall be appointed to an audit committee resulting in a fully functioning audit committee who will undertake the oversight in the establishment and monitoring of required internal controls and procedures such as reviewing and approving estimates and assumptions made by management when funds are available to us.


Management believes that the appointment of one or more outside directors, who shall be appointed to a fully functioning audit committee, would remedy the lack of a functioning audit committee and a lack of a majority of outside directors on our Board.


Changes in Internal Controls over Financial Reporting


There was no change in our internal controls over financial reporting that occurred during the period covered by this report, which has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.






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PART II

OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS


We know of no material, existing or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which our director, officer or any affiliates, or any registered or beneficial stockholder, is an adverse party or has a material interest adverse to our interest.


ITEM 1A. RISK FACTORS


We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.


ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS


We did not sell any unregistered securities during the three month period ended March 31, 2014, or subsequent period through the date hereof.


ITEM 3. DEFAULTS UPON SENIOR SECURITIES


None.


ITEM 4. MINE SAFETY DISCLOSURES


Not applicable.


ITEM 5. OTHER INFORMATION


None.


ITEM 6. EXHIBITS


The following exhibits are included with this quarterly report.


Exhibit
No.

 

SEC Report
Reference Number

 

Description

 

 

 

 

 

31.1/31.2

 

*

 

Certification of Principal Executive Officer and Principal Financial Officer, pursuant to SEC Rules 13a-14(a) and 15d-14(a), adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002**

32.1/32.2

 

*

 

Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, adopted 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***


* Filed herewith.


** This certification is being furnished and shall not be deemed “filed” with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.


*** Pursuant to Rule 406T of Regulation S-T, this XBRL related information shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be deemed part of a registration statement, prospectus or other document filed under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filings.



15



SIGNATURES


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


 

ANGSTRON HOLDINGS CORPORATION

 

 



Date: May 20, 2014

By:

/s/ Jianguo Xu

 

 

Jianguo Xu

 

 

President, Chief Executive Officer and Treasurer

 

 

(principal executive officer and principal financial officer)










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