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 fiscal year ended: December 31, 2015
.		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from _______________ to _______________

Commission file number: 000-1380412

HK Graphene Technology Corporation

(Exact name of registrant as specified in its charter)

 

Nevada		20-5308449
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

 

800 E. Colorado Blvd., Suite 888 Pasadena, California		91101
(Address of principal executive offices)		(Postal Code)

 

Registrant’s telephone number, including area code: 626-683-9120

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

Securities registered under 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 15(d) of the Exchange Act.  

Yes      . No  X .

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  

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

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

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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 April 11, 2016, there were 538,695,519 shares of the registrant’s common stock, par value $0.001, issued and outstanding.

  

DOCUMENTS INCORPORATED BY REFERENCE

None.

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TABLE OF CONTENTS

 

Item Number and Caption			Page
Forward-Looking Statements			4
PART I			5
1.	Business		5
1A.	Risk Factors		6
1B.	Unresolved Staff Comments		6
2.	Properties		6
3.	Legal Proceedings		6
4.	Mine Safety Disclosures		6
PART II			7
5.	Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		7
6.	Selected Financial Data		8
7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		9
7A.	Quantitative and Qualitative Disclosures About Market Risk		10
8.	Financial Statements and Supplementary Data		10
9	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure		10
9A.	Controls And Procedures		10
9B.	Other Information		11
PART III			12
10.	Directors, Executive Officers, and Corporate Governance		12
11.	Executive Compensation		14
12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		15
13.	Certain Relationships and Related Transactions, and Director Independence		16
14.	Principal Accountant Fees and Services		17
PART IV			18
15.	Exhibits and Financial Statement Schedules		18
Signature			21

   

 

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FORWARD-LOOKING STATEMENTS

 

Except for historical information, this report contains forward-looking statements. Such forward-looking statements involve risks and uncertainties, including, among other things, statements regarding our business strategy, future revenues and anticipated costs and expenses. Such forward-looking statements include, among others, those statements including the words “expects,” “anticipates,” “intends,” “believes” and similar language. Our actual results may differ significantly from those projected in the forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in the sections “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” You should carefully review the risks described in this Annual Report and in other documents we file from time to time with the Securities and Exchange Commission (“SEC”). You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this report. We undertake no obligation to publicly release any revisions to the forward-looking statements or reflect events or circumstances after the date of this document.

 

Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to differ materially from such forward-looking statements.

 

All references in this Form 10-K to “HK Graphene Technology Corporation,” the “Company,” “we,” “us” or “our” are to HK Graphene Technology Corporation.

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PART I

 

ITEM 1.

BUSINESS

 

History and Overview

 

We were incorporated in the State of Nevada on June 28, 2006 under the name Loreto Corporation. The Company was formed to design, print, market and sell greeting cards, wrapping paper, stationery products and collectibles in retail locations throughout Mexico. Between 2006 and 2013 the Company underwent name changes and ultimately redirected its primary business focus to seek quality assets and investment opportunities.

 

As of 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 12,770,339,600 shares of Common Stock, representing approximately 99.0% of our common equity on an as-converted basis.

 

On March 22, 2013, we changed our name to HK International Group, Inc., and increased our number of authorized shares of capital 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.

In April 2013, the Company effectuated a reverse split of the Company’s common stock on the basis of one share for each 100 shares issued and outstanding.

 

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.

On July 12, 2013, in connection with the change of our business focus (described above), we split off our wholly-owned Peruvian subsidiary, Loreto Resources Peru S.R.L. Compania Minera (the “Subsidiary”) to Luis F. Saenz, our former sole officer and director (the “Split-Off”). In connection with the Split-Off, (1) 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; (2) we transferred all of the outstanding capital stock of the Subsidiary to Mr. Saenz; (3) Mr. Saenz agreed to indemnify us and our officers and directors against any third party claims relating to the Subsidiary; and (4) the Subsidiary and Mr. Saenz released 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 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 in the market.

On August 7, 2013, we increased our number of authorized shares of capital stock to 6,000,000,000 shares, 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.

On December 9, 2014, we closed a private placement offering, pursuant to which we sold 3,683 shares of our Series B Preferred Stock to Yunfeng Lu for an aggregate purchase price of $336,667.  The shares of Series B Preferred Stock are convertible into an aggregate of 358,278,987 shares of our Common Stock, at a rate $0.0000102796985970042 per share, beginning one year after the issuance of the Series B Preferred Stock.

On July 31, 2015, we changed our name to HK Graphene Technology Corporation.  The name change was made pursuant to Section 92A.180 of the Nevada Revised Statutes by merging a majority-owned subsidiary of the Company with and into the Company. The Company is the surviving corporation and, in connection with the merger, Article One of the Company’s Articles of Incorporation was amended to change the Company’s corporate name to HK Graphene Technology Corporation, pursuant to Articles of Merger filed with the Secretary of State of the State of Nevada. Following FINRA’s approval, the change of our trading symbol to “HKGT,” became effective in the market.

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.

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Recent Changes to Management

On February 9, 2015, Jianguo Xu resigned as the Chief Financial Officer, Treasurer and Secretary of the Company in connection with Mr. Xu’s resignation, the Board of Directors of the Company designated Chunhua Huang, Ph.D. to serve and perform the functions of Chief Financial Officer and Treasurer and Shuning Luo, to serve and perform the functions of the Secretary.

On September 28, 2015, Dr. Yunfeng Lu resigned as director of the Company.

Research and Development

 

Effective as of June 1, 2015, the Company entered into a Gift Agreement (the “Agreement”) with The Regents of the University of California (“Regents of the University”), acting through the offices of the Henry Samueli School of Engineering and Applied Science at the University of California, Los Angeles (“UCLA School of Engineering and Applied Science”), pursuant to which the Company agreed to pledge $3,500,000 over a seven (7) year period with the initial payment of $500,000 made on December 31, 2015, to the Regents of the University, in support of a research center at the UCLA School of Engineering and Applied Science.  In exchange for such payment, the University of California, Los Angeles has agreed to create the HK Graphene Technology Corporation Research Center, to be located at the UCLA School of Engineering and Applied Science.

 

Employees

 

As of the date of this report, we do not have any full time employees.

 

ITEM 1A.

RISK FACTORS

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and are not required to provide the information under this item.

 

ITEM 1B.

UNRESOLVED STAFF COMMENTS

 

On October 22, 2015, the Securities and Exchange Commission (the “SEC”) requested that we make arrangements with our auditors to revise the opinion paragraph of their audit report to also cover the Company’s balance sheet as of December 31, 2013 and the statements of operations, changes in stockholders’ deficit and cash flows for the year then ended, consistent with the first paragraph of their audit report. The SEC asked that we further amend our Form 10-K to include the auditor’s revised report. On November 3, 2015, we filed an amendment to our 10-K to include the revised audit report from our auditors in response to the SEC letter, which we believe fulfilled the SEC’s request. We have not yet received a response from the SEC.

 

ITEM 2.

PROPERTIES

 

We have not owned or rented any properties during the last two fiscal years. As of the date of this filing, our executive offices are located at 800 East Colorado Boulevard, Suite 888, Pasadena, CA 91101 and cover an area of approximately 8,142 square feet.

 

ITEM 3.

LEGAL PROCEEDINGS

 

No legal or governmental proceedings are presently pending or, to our knowledge, threatened, to which we are a party.

 

ITEM 4.

MINE SAFETY DISCLOSURES

 

Not applicable.

  

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PART II

 

ITEM 5.

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

 

Our Common Stock is currently listed on OTCPink under the symbol “HKGT”.

 

For the period from January 1, 2014 through December 31, 2015, the table sets forth the high and low closing bid prices based upon information obtained from inter-dealer quotations on the OTC Bulletin Board without retail markup, markdown, or commission and may not necessarily represent actual transactions. Although our Common Stock was approved for listing on the OTC Bulletin Board on May 2, 2007, there has been minimal trading to date:

Fiscal Year Ended December 31, 2015 Quarter Ended		High Bid				Low Bid
March 31, 2015		$	0.00			$	0.00
June 30, 2015		$	0.00			$	0.00
September 30, 2015		$	0.00			$	0.00
December 31, 2015		$	0.00			$	0.00

 

Fiscal Year Ended December 31, 2014 Quarter Ended		High Bid				Low Bid
March 31, 2014		$	0.00			$	0.00
June 30, 2014		$	0.00			$	0.00
September 30, 2014		$	0.00			$	0.00
December 31, 2014		$	0.00			$	0.00

Because our Common Stock is thinly traded, bid information on our Common Stock does not necessarily represent its fair market value.

 

Holders

 

As of April 11, 2016, we had 538,695,519 shares of our Common Stock issued and outstanding held by 25 shareholders of record.

  

Dividends

 

We have never declared any cash dividends with respect to our Common Stock. Future payment of dividends is within the discretion of our Board and will depend on our earnings, capital requirements, financial condition and other relevant factors. Although there are no material restrictions limiting, or that are likely to limit, our ability to pay dividends on our Common Stock, we presently intend to retain future earnings, if any, for use in our business and have no present intention to pay cash dividends on our Common Stock.

 

Securities Authorized For Issuance Under Equity Compensation Plans

 

On July 3, 2008, our Board and stockholders adopted the 2008 Equity Incentive Plan (the “2008 Plan”) which reserves a total of 16,000,000 shares of Common Stock for issuance under the 2008 Plan.  If an incentive award granted under the 2008 Plan expires, terminates, is unexercised or is forfeited, or if any shares are surrendered to us in connection with an incentive award, the shares subject to such award and the surrendered shares will become available for further awards under the 2008 Plan. As of December 31, 2015 we have not issued any shares and there are no outstanding grants under the 2008 Plan.

 

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The following table sets forth information about the Company’s equity compensation plans as of December 31, 2015:

 

Plan Category		Number of securities to be issued upon exercise of outstanding options, warrants and rights				Weighted- average exercise price of outstanding options, warrants and rights				Number of  securities remaining available for future issuance under equity compensation plans
Equity compensation plans approved by security holders			-				-				16,000,000
Equity compensation plans not approved by security holders			-				-				-
Total			-				-				16,000,000

 

Performance Growth

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.

Recent Sales of Unregistered Securities

 

On March 8, 2013, we entered into Promissory Note Conversion Agreements (the “Conversion Agreements”) with each of the holders of all of our outstanding convertible promissory notes as of the date thereof (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 on March 8, 2013, was converted into a total of 57,405,074 shares of our Common Stock, at a conversion rate of $0.0075 per share (the “Debt Conversion Transaction”). The securities were issued in a transaction that was exempt from the registration requirements pursuant to Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder inasmuch as the securities were offered and sold solely to accredited investors and we did not engage in any form of general solicitation or general advertising in making the offering.

The Company evaluated the Conversion Agreements 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 Note conversions on March 8, 2013, and as per FASB ASC Topic 470 – 20, neither the derivative instrument nor the beneficial conversion feature need to be accounted for through the date of the promissory note conversions.

 

On March 11, 2013, we closed a private placement offering, pursuant to which we sold 1,300 shares of our Series A Preferred Stock to Commonwealth for an aggregate purchase price of $130,000. The shares of Series A Preferred Stock are convertible into an aggregate of 12,770,339,600 shares of our Common Stock, at a rate of $0.0000102826655692955 per share. The securities were issued in a transaction that was exempt from the registration requirements pursuant to Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder inasmuch as the securities were offered and sold solely to an accredited investor and we did not engage in any form of general solicitation or general advertising in making the offering.

On December 9, 2014, we closed a private placement offering, pursuant to which we sold 3,683 shares of our Series B Preferred Stock to Yunfeng Lu for an aggregate purchase price of $336,667.  The shares of Series B Preferred Stock are convertible into an aggregate of 358,278,987 shares of our Common Stock, at a rate $0.0000102796985970042 per share, beginning one year after the issuance of the Series B Preferred Stock. The securities were issued in a transaction that was exempt from the registration requirements pursuant to Section 4(a)(2) of the Securities Act inasmuch as the securities were offered and sold solely to an accredited investor and we did not engage in any form of general solicitation or general advertising in making the offering.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

None.

ITEM 6.

SELECTED FINANCIAL DATA

 

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.

 

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ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion highlights the principal factors that have affected our financial condition and results of operations as well as our liquidity and capital resources for the periods described. This discussion contains forward-looking statements. Please see “Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with these forward-looking statements.

  

Results of Operations

 

Fiscal years Ended December 31, 2015 and 2014

 

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

 

We incurred operating expenses of $1,547,243 and $1,246,105 for the years ended December 31, 2015 and 2014, respectively. These expenses consisted of general operating expenses 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 years ended December 31, 2015 and 2014 were $1,627,244 and $1,328,221, respectively.

 

Liquidity and Capital Resources

 

Our cash balance as of December 31, 2015 was $1,387,807.

  

On December 7, 2014, we sold 3,683 shares of our Series B Preferred Stock to Yunfeng Lu, for an aggregate purchase price of $336,667.  We used the net proceeds from the sale of the Series B Preferred Stock to pay outstanding obligations to advisors, service providers, research and vendors, and to pay any outstanding tax liabilities.

Working Capital Needs

 

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. At our current level of operation, we do not have sufficient cash to meet our expenses for the next twelve months. We expect that we will need to obtain additional capital in order to meet our current working capital needs, 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 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.

  

Our auditors have included an explanatory paragraph in their report on our consolidated financial statements relating to the uncertainty of our business as a going concern, due to our limited operating history, our lack of historical profitability, and our limited funds. We believe that we will be able to raise the required funds for operations and to achieve our business plan.

 

Off-Balance Sheet Arrangements

 

We are not a party to any off-balance sheet arrangements.

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ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

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 8.

FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

 

Our audited financial statements are included beginning immediately following the signature page to this report. See Item 15 for a list of the financial statements included herein.

 

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

The Company previously reported the information required by this Item 9 in its Form 8-K filed on January 24, 2014, Form 8-K filed on February 3, 2014, Form 8-K filed on February 19, 2014, Form 8-K filed on March 5, 2014 and Form 8-K filed on June 11, 2015.

 

ITEM 9A.

CONTROLS AND PROCEDURES

 

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 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.

 

Management’s Annual Report on Internal Control over Financial Reporting

 

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 Luis Saenz, our former President and Interim Chief 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 Chief Executive Officer and Chief Financial Officer concluded, as of the Evaluation Date, that our disclosure controls and procedures were not effective because of the identification of what might be deemed a material weakness 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 sole officer concluded that, during the period covered by this annual 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 December 31, 2015; however, it has identified the following deficiencies that, when aggregated, may possibly be viewed as a material weakness in our internal control over financial reporting as of that date:

 

1.

We do not have an audit committee. 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 management’s 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.

 

2.

We did not maintain proper segregation of duties for the preparation of our financial statements. We currently only have one 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.

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Attestation Report of Our Registered Public Accounting Firm

 

This Annual Report on Form 10-K (“Annual Report”) does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. We are a non-accelerated filer; therefore, management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this Annual Report.

  

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting during the year ended December 31, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

Officers’ Certifications

 

Appearing as exhibits to this Annual Report are “Certifications” of our President and Chief Executive Officer and Chief Financial Officer. The Certifications are required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (the “Section 302 Certifications”). This section of the Annual Report contains information concerning the Controls Evaluation referred to in the Section 302 Certification. This information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.

 

ITEM 9B.

OTHER INFORMATION

 

None.

 

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PART III

 

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

 

Executive Officers and Directors

 

Below are the names and certain information regarding our executive officers and directors as of December 31, 2015:

 

Name		Age		Title		Date First Appointed
Yung Yeung		58		Chairman of the Board and Director		December 19, 2014
Jianguo Xu		47		President, Chief Executive Officer and Director		July 15, 2013
Chunhua Huang		51		Chief Financial Officer, Treasurer		February 9, 2015
Shuning Luo		33		Secretary		February 9, 2015

  

Directors are elected to serve until the next annual meeting of stockholders and until their successors are elected and qualified.

 

Currently, directors are not compensated for their services, although their expenses in attending meetings may be reimbursed. Officers are elected by the Board and serve until their successors are appointed by the Board. Biographical resumes of each officer and director are set forth below.

 

Certain biographical information of our directors and officers:

Dr. Yung Yeung. Dr. Yeung, 58, has served as a director of Hybrid Kinetic Group Ltd. (the “Group”) since November 1998, and is the current chairman of the Group, the chairman of the nomination committee and a member of the remuneration committee of the Group’s Board of Directors. Dr. Yeung is also a substantial shareholder of the Group. Dr. Yeung holds a PhD Degree in Economics from the China’s Southwest University of Finance & Economics. Dr. Yeung was elected as a director of the John Hopkins University Center – Nanjing University Centre for Chinese and American Studies. Dr. Yeung was the chairman, chief executive officer and president of Brilliance China Automotive Holdings Limited and also the chairman and president of Shenyang Jinbei Passenger Vehicle Manufacture Co., Ltd. from 1992 to 2002. Dr. Yeung is a well-known, highly successful automotive industrialist with over 18 years’ experience in the automobile industry as well as a pioneering international financier from China.

Jianguo Xu. Mr. Xu, 47, has been President and Chief Executive Officer, and a member of the board of directors, of Apollo Acquisition Corporation since May 2013.  He has been Director of Hybrid Kinetic Group Limited since June 2010 and has also been serving as Vice-President for Global Sourcing for HK Motors commencing in April 2010.  Before joining HK Motors, Mr. Xu worked for Magna International Group to start his career in the automotive industry from March 2001 through March 2010.  In 2008, Mr. Xu was assigned to Magna Closures (Kunshan) Automotive Corporation as engineering manager to establish its technical center in China.  He has extensive experience in product development, engineering management, product planning, purchasing and supplier management.  Mr. Xu was involved in multiple projects for Asian and European automakers such as Nissan, Honda and Volkswagen.  From 1991 to 1999, Mr. Xu also worked for Structural Dynamics Research Corporation (SDRC) China Branch as a Computer Aided Design and Engineering Specialist, and served as the Regional Manager.  He was one of the key experts who developed the Chinese computer aided engineering industry in the 1990s.  Mr. Xu has 20 years of experience in mechanical engineering and the automotive industry, giving him an in-depth understanding of the global automotive industry, particularly the Chinese automotive industry.  Mr. Xu received his Master’s Degree in Mechanical Engineering from Shanghai Jiaotong University and his Bachelor’s Degree in Mechanical Engineering from Huazhong University of Science and Technology.

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Chunhua Huang – Dr. Huang was appointed Treasurer and Chief Financial Officer in February 2015 and has been serving as the Deputy Chairman of Hybrid Kinetic Group Limited since June 2010 and as Chief Investment Officer of Apollo Acquisition Corporation since May 2013. Dr. Huang is also the Vice-Chairman of Hybrid Kinetic Motors Corporation, a wholly-owned subsidiary of Hybrid Kinetic Group Limited, a position he has held since April 2009. Dr. Huang had been the Vice-Chairman of Hybrid Kinetic Group Limited between November 2002 and October 2007 and its Chief Financial Officer between August 2000 and September 2004. Dr. Huang has also been an independent non-executive director of China Rare Earth Holdings Ltd. since 2001. Dr. Huang was among the first generation China equity analysts with in-depth knowledge about China’s automotive and the transport infrastructure sectors, was a pioneering financier for China’s first wave of private companies going public in Hong Kong during 1999 and 2001, all of which makes him particularly well-suited to serve as a member of Company’s board of directors. Dr. Huang holds a Bachelor’s of Economics Degree from Wuhan University in China, and an MBA and Ph.D. in Marketing (focus on corporate strategy) from the University of Strathclyde in Scotland.

Shuning Luo – Mr. Luo was appointed Secretary on February 9, 2015 and has been serving as Secretary for Apollo Acquisition Corporation since May 2015. He holds a Bachelor’s Degree and a Master’s Degree from Tsinghua University, the PRC and a Master’s degree from the University of Southern California, in the United States.  Mr. Luo is currently a system analyst of Hybrid Kinetic Motors Corporation.

Family Relationships

 

There are no family relationships between any director or executive officer.

Involvement in Certain Legal Proceedings.

 

There have been no events under any bankruptcy act, no criminal proceedings and no judgments, injunctions, orders or decrees material to the evaluation of the ability and integrity of any director, executive officer, promoter or control person of ours during the past five years.

 

Compliance with Section 16(a) of the Securities Exchange Act of 1934

 

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our directors, executive officers and persons who own more than 10% of our common stock to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and other of our equity securities. Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to us under Rule 16a-3(e) during the year ended December 31, 2015, Forms 5 and any amendments thereto furnished to us with respect to the year ended December 31, 2015, and the representations made by the reporting persons to us, we believe that the following person(s) who, at any time during such fiscal year, was a director, officer or beneficial owner of more than 10% of the Company’s common stock failed to comply with all Section 16(a) filing requirements during such fiscal years, each related to a system error in submission of the required Form ID applications as a result of the Merger:

 

Name		Number of Late Reports		Number of Transactions not Reported on a Timely Basis		Failure to File a Required Form
Yungfeng Lu		2		2		Form 3 Form 4
American Compass, Inc.		2		2		Form 3

Board Committees

 

The Company currently has not established any committees of the Board. Our Board may designate from among its members an executive committee and one or more other committees in the future. We do not have a nominating committee or a nominating committee charter. Further, we do not have a policy with regard to the consideration of any director candidates recommended by security holders. To date, no security holders have made any such recommendations. Our sole director performs all functions that would otherwise be performed by committees. Given the present size of our Board it is not practical for us to have committees. If we are able to grow our business and increase our operations, we intend to expand the size of our Board and allocate responsibilities accordingly.

13

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Shareholder Communications

 

Currently, we do not have a policy with regard to the consideration of any director candidates recommended by security holders. To date, no security holders have made any such recommendations.

  

Code of Ethics

 

We have adopted a written code of ethics (the “Code of Ethics”) that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions. We believe that the Code of Ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of code violations; and provide accountability for adherence to the code. To request a copy of the Code of Ethics, please make written request to our Secretary at 800 E. Colorado Blvd., Suite 888 Pasadena, CA 91101, tel. (626) 683-9120.

 

ITEM 11.

EXECUTIVE COMPENSATION

 

The following table sets forth information concerning the total compensation paid or accrued by us during the last two fiscal years ended December 31, 2015 to (i) all individuals that served as our principal executive officer or acted in a similar capacity for us at any time during the fiscal year ended December 31, 2015; (ii) all individuals that served as our principal financial officer or acted in a similar capacity for us at any time during the fiscal year ended December 31, 2014; and (iii) all individuals that served as executive officers of ours at any time during the fiscal year ended December 31, 2015 that received annual compensation during the fiscal year ended December 31, 2015 in excess of $100,000.

 

Summary Compensation Table

 

Name and principal position	Year		Salary ($)				Bonus ($)				Stock Awards ($)				Option Awards ($)				Non-Equity Incentive Plan Compensation ($)				Nonqualified Deferred Compensation Earnings ($)				All Other Compensation ($)				Total ($)
Jianguo, Xu (1)	2015			-				-				-				-				-				-				-				-
(President and Chief Executive Officer)	2014			-				-				-				-				-				-				-				-
Chunhua Huang (2)	2015			-				-				-				-				-				-				-				-
(Treasurer and Chief Financial Officer)	2014			-				-				-				-				-				-				-				-
Shuning Luo (3)	2015			-				-				-				-				-				-				-				-
(Secretary)	2014			-				-				-				-				-				-				-				-

(1)

Jianguo Xu was appointed President, Chief Executive Officer and Treasurer of the Company on July 15, 2013. On February 9, 2015, Mr. Xu resigned as Treasurer.

(2)

Chunua Huang was appointed Treasurer and Chief Financial Officer of the Company on February 9, 2015.

(3)

Shuning Luo was appointed Secretary of the Company on February 9, 2015.

Employment Agreements and Arrangements

 

We do not have formal employment agreements with any members of management.

 

Outstanding Equity Awards at Fiscal Year-End

 

There were no grants of stock options since inception to the date of this report.

We do not have any long-term incentive plans that provide compensation intended to serve as incentive for performance.

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Our board of directors has not adopted a stock option plan. We have no plans to adopt a stock option plan, but may choose to do so in the future. If such a plan is adopted, this may be administered by the board of directors or a committee appointed by the board of directors (the “Committee”). The Committee would have the power to modify, extend or renew outstanding options and to authorize the grant of new options in substitution therefore, provided that any such action may not impair any rights under any option previously granted. We may develop an incentive based stock option plan for our officer and director and may reserve up to 10% of our outstanding ordinary shares for that purpose.

Compensation of Directors

 

None of our directors receives any compensation for serving as such, for serving on committees (if any) of the Board or for special assignments. During the fiscal year ended December 31, 2015 there were no arrangements between us and our directors that resulted in our making payments to any of our directors for any services provided to us by them as directors.

 

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

The following table sets forth information with respect to the beneficial ownership of our Common Stock known by us as of April 11, 2016 by:

 

·

each person or entity known by us to be the beneficial owner of more than 5% of our common stock;

·

each of our directors;

·

each of our executive officers; and

·

all of our directors and executive officers as a group.

 

Except as otherwise indicated, the persons listed below have sole voting and investment power with respect to all shares of our common stock owned by them, except to the extent such power may be shared with a spouse.

NAME OF OWNER		TITLE OF  CLASS		NUMBER OF  SHARES OWNED (1)				PERCENTAGE OF  COMMON STOCK  (2)
Jianguo Xu		Common Stock			0				*
Yung Yeung		Common Stock			0				*
All Officers and Directors As a Group (2 persons)		Common Stock			0				*
Hybrid Kinetic (Lianyungang) New Energy Limited		Common Stock			537,418,480 (3)				52.45%
Ford Cheer International Limited		Series B Preferred Stock (4)			3,683				34.97%%(3)
American Compass Inc.		Series A Preferred Stock (5)			1,300				12.46%(4)

  

 *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. Shares of common stock subject to options or warrants currently exercisable or convertible, or exercisable or convertible within 60 days of April 11, 2016 are deemed outstanding for computing the percentage of the person holding such option or warrant but are not deemed outstanding for computing the percentage of any other person.

 

(2)

Percentage based upon 538,695,519 shares of common stock outstanding as of April 11, 2016.

 

(3)

Jianguo Xu is Chief Executive Officer of Hybrid Kinetic (Lianyungang) New Energy Limited and has voting and investment power over the shares beneficially owned by Hybrid Kinetic (Lianyungang) New Energy Limited.

15

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(4)

Ford Cheer International Limited, a company organized under the laws of the British Virgin Islands, holds 3,683 shares of our Series B Preferred Stock, which are convertible into an aggregate of 358,278,987 shares of our Common Stock, representing approximately 73.53% of our common equity on an as-converted basis. Huang Hua is the Manager of Ford Cheer International Limited and has voting and investment power over the shares beneficially owned by Ford Cheer International Limited.

(5)

American Compass, Inc. holds 1,300 shares of our Series A Preferred Stock, which are convertible into an aggregate of 127,703,396 shares of our Common Stock, representing approximately 26.21% of our common equity on an as-converted basis. Jimmy Wang is the President and Chief Executive Officer of American Compass, Inc. and has voting and investment power over the shares beneficially owned by American Compass, Inc.

Securities Authorized for Issuance Under Equity Compensation Plans

 

On July 3, 2008, our Board and stockholders adopted the 2008 Plan which reserves a total of 16,000,000 shares of Common Stock for issuance under the 2008 Plan.  If an incentive award granted under the 2008 Plan expires, terminates, is unexercised or is forfeited, or if any shares are surrendered to us in connection with an incentive award, the shares subject to such award and the surrendered shares will become available for further awards under the 2008 Plan. As of the date hereof, we have not issued any shares under the 2008 Plan and we do not have any outstanding options or other awards under the 2008 Plan.

 

We have not issued any stock options or maintained any stock option or other incentive plans other than our 2008 Plan (See “Item 5. Market for Common Equity and Related Stockholder Matters – Securities Authorized for Issuance Under Equity Compensation Plans” above.) We have no other plans in place and have never maintained any plans that provide for the payment of retirement benefits or benefits that will be paid primarily following retirement including, but not limited to, tax qualified deferred benefit plans, supplemental executive retirement plans, tax-qualified deferred contribution plans and nonqualified deferred contribution plans.

 

The following table sets forth information about the Company’s equity compensation plans as of December 31, 2015:

Plan Category

Number of securities  to be issued upon exercise of outstanding options,  warrants and rights

Weighted- average exercise  price of  outstanding options, warrants and rights

Number of  securities remaining  available for future issuance under  equity compensation  plans

Equity compensation plans approved by security holders

-

-

-

Equity compensation plans not approved by security holders

-

-

-

Total

-

-

-

 

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

 

On December 7, 2014, we entered into a Cooperation Agreement with Yunfeng Lu, as amended by that certain Cooperation and Consulting Services Agreement dated January 14, 2015, whereby Mr. Lu, who, at the time of entering into the Cooperation Agreement, was the beneficial owner of 3,683 shares of our Series B Preferred Stock (which was convertible into an aggregate of 358,278,987 shares of our Common Stock, representing approximately 73.53% of the Company’s common equity on an as-converted basis) received consideration of $150,000 per annum to develop certain know-how, technology and/or patents related to the production and manufacturing of nanographene and battery materials for the Company, as more fully described in the Current Report on Form 8-K filed on January 15, 2015. As of October 1, 2015, the Cooperation Agreement was terminated and Mr. Lu sold one hundred percent (100%) of his shares in the Company.

 

Director Independence

 

We are not currently subject to listing requirements of any national securities exchange or inter-dealer quotation system which has requirements that a majority of the Board be “independent” and, as a result, we are not at this time required to (and we do not) have our Board comprised of a majority of “Independent Directors.”

 

Our Board has considered the independence of its directors in reference to the definition of “independent director” established by the Nasdaq Marketplace Rule 5605(a)(2). In doing so, the Board has reviewed all commercial and other relationships of each director in making its determination as to the independence of its directors. After such review, the Board has determined that neither of our current directors qualifies as independent under the requirements of the Nasdaq listing standards.

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ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

 

Audit Fees.

 

The aggregate fees billed to us by our principal accountant for services rendered during the fiscal years ended December 31, 2015 and 2014 are set forth in the table below:

  

Fee Category		Fiscal year ended December 31, 2015				Fiscal year ended December 31, 2014
Audit fees (1)		$	30,250			$	5,500
Audit-related fees (2)			-				-
Tax fees (3)			-				-
All other fees (4)			-				-
Total fees		$	30,250			$	5,500

   

(1)

Audit fees consists of fees incurred for professional services rendered for the audit of consolidated financial statements, for reviews of our interim consolidated financial statements included in our quarterly reports on Form 10-Q and for services that are normally provided in connection with statutory or regulatory filings or engagements.

 

(2)

Audit-related fees consist of fees billed for professional services that are reasonably related to the performance of the audit or review of our consolidated financial statements, but are not reported under “Audit fees.”

 

(3)

Tax fees consist of fees billed for professional services relating to tax compliance, tax planning, and tax advice.

 

(4)

All other fees consist of fees billed for all other services.

 

Audit Committee’s Pre-Approval Practice.

 

We do not have an audit committee. Our Board performs the function of an audit committee. Section 10A(i) of the Securities Exchange Act of 1934, as amended, prohibits our auditors from performing audit services for us as well as any services not considered to be audit services unless such services are pre-approved by our audit committee or, in cases where no such committee exists, by our Board (in lieu of an audit committee) or unless the services meet certain de minimus standards.

  

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PART IV

 

ITEM 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

 

Financial Statement Schedules

 

The financial statements of HK Graphene Technology Corporation are listed on the Index to the Financial Statements on this annual report on Form 10-K beginning on page F-1.

 

Exhibits

 

The following Exhibits are being filed with this Annual Report on Form 10-K:

 

18

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	(1)	Filed with the SEC on July 10, 2008 as an exhibit, numbered as indicated above, to the Registrant’s current report on Form 8-K, which exhibit is incorporated herein by reference.
	(2)	Filed with the SEC on January 23, 2007 as an exhibit, numbered as indicated above, to the Registrant’s registration statement (SEC File No. 333-140148) on Form SB-2, which exhibit is incorporated herein by reference.
	(3)	Filed with the SEC on April 12, 2011 as an exhibit, numbered as indicated above, to the Registrant’s annual report on Form 10-K, which exhibit is incorporated herein by reference.
	(4)	Filed with the SEC on April 14, 2009 as an exhibit, numbered as indicated above, to the Registrant’s annual report on Form 10-K, which exhibit is incorporated herein by reference.
	(5)	Filed with the SEC on March 31, 2008 as an exhibit, numbered as indicated above, to the Registrant’s annual report on Form 10-KSB, which exhibit is incorporated herein by reference.
	(6)	Filed with the SEC on April 16, 2012 as an exhibit, numbered as indicated above, to the Registrant’s annual report on Form 10-K, which exhibit is incorporated herein by reference.
	(7)	Filed with the SEC on March 14, 2013 as an exhibit, numbered as indicated above, to the Registrant’s current report on Form 8-K, which exhibit is incorporated herein by reference.
	(8)	Filed with the SEC on March 25, 2013 as an exhibit, numbered as indicated above, to the Registrant’s current report on Form 8-K, which exhibit is incorporated herein by reference.
	(9)	Filed with the SEC on June 27, 2013 as an exhibit, numbered as indicated above, to the Registrant’s current report on Form 8-K, which exhibit is incorporated herein by reference.
	(10)	Filed with the SEC on July 29, 2013 as an exhibit, numbered as indicated above, to the Registrant’s current report on Form 8-K, which exhibit is incorporated herein by reference.
	(11)	Filed with the SEC on August 13, 2013 as an exhibit, numbered as indicated above, to the Registrant’s current report on Form 8-K, which exhibit is incorporated herein by reference.
	(12)	Filed with the SEC on July 18, 2013 as an exhibit, numbered as indicated above, to the Registrant’s current report on Form 8-K, which exhibit is incorporated herein by reference.
	(13)	Filed with the SEC on December 3, 2014 as an exhibit, numbered as indicated above, to the Registrant’s current report on Form 8-K, which exhibit is incorporated herein by reference.
	(14)	Filed with the SEC on December 9, 2014 as an exhibit, numbered as indicated above, to the Registrant’s current report on Form 8-K, which exhibit is incorporated herein by reference.
	(15)	Filed with the SEC on August 6, 2015 as an exhibit, numbered as indicated above, to the Registrant’s current report on Form 8-K, which exhibit is incorporated herein by reference.

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____________________

* Filed herewith.

 

** Furnished herewith.  Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of any registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, and otherwise are not subject to liability under those sections.

 

In reviewing the agreements included as exhibits and incorporated by reference to this Annual Report, please remember that they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about the Company or the other parties to the agreements. The agreements may contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the parties to the applicable agreement and:

  

•

should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;

 

•

have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;

 

•

may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and

 

•

were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.

 

Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. Additional information about the Company may be found elsewhere in this Annual Report and our other public filings, which are available without charge through the SEC’s website at http://www.sec.gov.

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SIGNATURES

 

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

 

	HK GRAPHENE TECHNOLOGY CORPORATION
Dated:  April 14, 2016	By:	/s/ Jianguo Xu
		Jianguo Xu
		President, Chief Executive Officer

 

Dated:  April 14, 2016	By:	/s/ Chunhua Huang
		Chunhua Huang
		Chief Financial Officer, Treasurer and Secretary

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant in the capacities and on the dates indicated.

 

	Signature		Title		Date
	*		President, Chief Executive Officer and Director
	(Jianguo Xu)		(Principal Executive Officer)		April 14, 2016
	*		Treasurer and Chief Financial Officer
	(Chunhua Huang)		(Principal Financial and Accounting Officer)		April 14, 2016
	*
	(Shuning Luo)		Secretary		April 14, 2016
	*
	(Yung Yeung)		Chairman of the Board		April 14, 2016

 

* Jianguo Xu, by signing her name hereto, does hereby sign this report on behalf of the officers and directors of the Registrant above whose typed names appear, pursuant to powers of the attorney executed by such directors and filed with the Securities and Exchange Commission.

 

By: /s/ Jianguo Xu       

       Jianguo Xu, Attorney-in-Fact

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PART IV – FINANCIAL INFORMATION

 

ITEM 15. FINANCIAL STATEMENTS

 

	Page
Reports of Independent Registered Public Accounting Firms	F-2
Balance Sheets as of December 31, 2015	F-5
Statements of Operations for the years ended December 31, 2015	F-6
Statements of Changes in Stockholders’ Deficit for the year ended December 31, 2015	F-7
Statements of Cash Flows for the years ended December 31, 2015	F-8
Notes to Financial Statements	F-9

 

 

F-1

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F-2

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F-3

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F-4

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HK Graphene Technology Corporation

Balance Sheets

		As of December 31, 2015		As of December 31, 2014
ASSETS
Current assets
Cash	$	1,387,807	$	2,929,764
Due from AMI		-		-
Total current assets		1,387,807		2,929,764
Non-current assets
Note receivable - Related Party		-		-
Total non-current assets		-		-
Total assets	$	1,387,807	$	2,929,764
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Bank overdraft	$	-	$	-
Accounts payable		-		-
Due to related party		148,424		143,136
Accrued expenses		180,416		100,416
Loan payable		4,000,000		4,000,000
Total liabilities		4,328,840		4,243,552
Shareholders' 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, 3,683 designated Series B Convertible shares issued, and outstanding as of December 31, 2015 and December 31, 2014		5		5
Additional paid in capital - prefer stock		466,662		466,662
Common stock, par value $.001; 5,000,000,000 shares authorized, 1,277,039  shares issued and outstanding as of December 31, 2015 and December 31, 2014		1,277		1,277
Additional paid in capital - common stock		4,087,401		4,087,401
Accumulated deficit		(7,496,378)		(5,869,134)
Total stockholders' deficit		(2,941,033)		(1,313,789)
Total liabilities and stockholders' deficit	$	1,387,807	$	2,929,764

The accompanying notes are an integral part of these financial statements

F-5

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HK Graphene Technology Corporation

Statement of Operations

		Year ended		Year ended
		December 31, 2015		December 31, 2014
Operating Costs
Research and development expenses	$	150,000		75,000
General and administrative expenses		1,397,243	$	1,171,105
Total operating expenses		(1,547,243)		(1,246,105)
Other income (Expense)
Interest income		-		31,617
Interest expense		(80,000)		(80,002)
Forgiveness of related party payable		-		33,732
Total other income (expense)		(80,000)		(82,117)
(Net loss)	$	(1,627,244)		(1,328,222)
Loss per share	$	(1.33)		(1.08)
Weighted-average number of common shares outstanding: basic and diluted		1,227,039	$	1,227,039

The accompanying notes are an integral part of these financial statements

F-6

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F-7

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HK Graphene Technology Corporation

Statements of Cash Flows

		For year ended December 31, 2015		For year ended December 31, 2014
Operating activities
Net loss	$	(1,627,244)	$	(1,328,222)
Adjustments to reconcile net loss to net cash used in operating   activities:
Interest income on notes receivable - related party		-		(31,617)
Loss on forgiveness of related party payable		-		33,732
Accounts payable and accrued expenses		80,000		74,197
Accounts payable to ACI - related party		5,287		61,974
Interest accrued on notes payable		-		-
Due from AMI		-		65,935
Net cash used in operating activities		(1,541,956)		(1,124,000)
Investing activities
Advances to related party - ACI		-		(3,000,000)
Proceeds from related party note receivable - ACI		-		4,930,000
Net cash provided by financing activities		-		1,930,000
Financing activities
Issuance of convertible preferred stock, net of offering costs		-		336,667
Loan from LYG		-		-
Bank overdraft		-		(2,864)
Net cash (used in) provided by financing activities		-		333,803
Net Increase in Cash		(1,541,956)		1,139,803
Cash at Beginning of the Period		2,929,764		1,789,961
Cash at End of the Period	$	1,387,807	$	2,929,764
Supplemental cash flow information:
Interest paid	$	-	$	-
Income taxes paid	$	-	$	-

The accompanying notes are an integral part of these financial statements

F-8

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HK GRAPHENE TECHNOLOGY CORPORATION

Notes to Financial Statements

December 31, 2015

 

NOTE 1. ORGANIZATION AND DESCRIPTION OF BUSINESS

HK Graphene Technology Corp., formerly known as 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, and specifically, in Peru. The Company later changed its name to Loreto Resources Corporation, and subsequently to HK International Group Inc., and subsequently to Angstron Holdings Corporation. On July 31, 2015 the Company changed its name to HK Graphene Technology Corporation. As of December 31, 2015, American Compass, Inc. owned 99.9% of the company.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying financial statements as of December 31, 2015 and 2014 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 financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash

Cash equivalents are comprised of certain highly liquid investments with maturities of three months or less when purchased. The Company's cash are with local and national banking institutions and subjected to current FDIC insurance limits of $250,000 per banking institution. As of December 31, 2015 and December 31, 2014, the Company bank balances in these bank accounts exceeded the insured amount by $1,137,807 and $2,679,764, respectively. The Company has not experienced any losses related to this concentration of risk. There are no cash equivalents as of December 31, 2015 and 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. 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. Weighted average number of shares used to calculate basic and diluted loss per share is considered the same as the effect of dilutive shares is anti-dilutive.

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 December 31, 2015 and December 31, 2014, carrying value of assets and liabilities approximated fair value due to the short-term nature and maturity of these instruments.

F-9

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Recent Accounting Pronouncements

In June 2014, the FASB issued ASU 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements. ASU 2014-10 eliminates the distinction of a development stage entity and certain related disclosure requirements, including the elimination of inception-to-date information on the statements of operations, cash flows and stockholders' equity. The amendments in ASU 2014-10 will be effective prospectively for annual reporting periods beginning after December 15, 2014, and interim periods within those annual periods, however early adoption is permitted. The Company adopted ASU 2014-10 during the quarter ended September 30, 2014, thereby no longer presenting or disclosing any information required by Topic 915.

Income Taxes

We account for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their perspective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the 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. Valuation allowances are recorded, when necessary, to reduce deferred tax assets to the amount expected to be realized.

As a result of the implementation of certain provisions of ASC 740, Income Taxes (“ASC 740”), which clarifies the accounting and disclosure for uncertainty in tax position, as defined, ASC 740 seeks to reduce the diversity in practice associated with certain aspect of the recognition and measurement related to accounting for income taxes. We adopted the provisions of ASC 740 as of June 28, 2006, and have analyzed filing positions in each of the federal and state jurisdictions where we are required to file income tax returns, as well as open tax years in these jurisdictions. We have identified the U.S. federal and Nevada as our “major” tax jurisdictions and generally, we remain subject to Internal Revenue Service examination of our 2007 through 2014 U.S. federal income tax returns. However, we have certain tax attribute carryforwards which will remain subject to review and adjustment by the relevant tax authorities until the statute of limitations closes with respect to the year in which such attributes are utilized.

We believe that our income tax filing positions and deductions will be sustained on audit and do not anticipate any adjustments that will result in a material change to our financial position. Therefore, no reserves for uncertain income tax positions have been recorded pursuant to ASC 740. In addition, we did not record a cumulative effect adjustment related to the adoption of ASC 740. Our policy for recording interest and penalties associated with income-based tax audits is to record such items as a component of income taxes. We have no interest or penalties as of December 31, 2015 and 2014.

NOTE 3. GOING CONCERN

During the period ended December 31, 2015, 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 $7,496,378 as of December 31, 2015.

These factors raise substantial doubt about the Company’s ability to continue as a going concern. The 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 maximize shareholder value.

 

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NOTE 4. STOCK TRANSACTIONS

Debt Conversion Transaction

On March 8, 2013, the Company entered into Promissory Note Conversion Agreements with each of the 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, into a total of 57,405,074 shares (pre-Reverse Stock Split) of the Corporation’s common stock, $0.001 par value per share (“Common Stock”), at a conversion rate of $0.0075 per share.

Series A Preferred Stock Issuance

On March 8, 2013, the Company entered into a Series A Preferred Stock Purchase Agreement with Commonwealth Investments, LLC, a California limited liability company (the “Series A Purchaser”), pursuant to which, among other items, on March 11, 2013, the Company sold to the Series A Purchaser, and the Series A 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 total offering costs of $37,500. The Series A Preferred Stock is convertible into an aggregate of 127,703,396 shares (post-Reverse Stock Split) of the Company’s Common Stock.

Series B Preferred Stock Issuance

On December 7, 2014, the Company entered into a Series B Preferred Stock Purchase Agreement with an accredited investor, Yunfeng Lu (the “Series B Purchaser”), pursuant to which, among other items, on December 19. 2014, the Company sold to the Series B Purchaser, and the Series B Purchaser purchased from the Company, 3,683 shares of the Company’s Series B Preferred Stock, at the price of $91.41 per share, for an aggregate purchase price of $336,667. The Series B Preferred Stock is convertible into Common Stock as of December 7, 2015.

On October 1, 2015, in accordance with the Purchase Agreement between Yunfeng Lu (the “Seller”), and American Compass Inc., a California corporation (the “Purchaser”), Seller sold to the Purchaser 3,683 shares of the Company’s Series B Convertible Preferred Stock (the “Transaction”) for an aggregate purchase price of $336,667.  As a result of the closing of the Transaction, the Purchaser became the beneficial owner of approximately 99.9% of the Company’s issued and outstanding capital stock on a fully-diluted as-converted basis.

Reverse Stock Split

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 (the “Reverse Stock Split”). The total number of authorized shares was also increased 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 shares of Common Stock presented in these financial statements and accompany notes have been retroactively adjusted to reflect the Reverse Stock Split.

NOTE 5. DUE TO RELATED PARTY

During the year ended December 31, 2014, the affiliate company, American Compass, Inc. (“ACI”) has paid the Company’s operating expenses, including legal fees, filing fees and auditing fees. The expenses paid by ACI during the period ended December 31, 2014 totaled $61,974. As of December 31, 2014, the balance of accounts payable to ACI totaled $143,136.

During the year ended December 31, 2015, ACI has continued to pay the Company’s operating expenses. The expenses paid by ACI during the period ended December 31, 2015 totaled $5,287. As of December 31, 2015, the balance due to ACI totaled $148,424.

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NOTE 6. LOAN PAYABLE – RELATED PARTY

On September 30, 2013, Lianyungang Hybrid Kinetic New Energy Co., Ltd. (“LYG”), a related party, made a loan to the Company in the amount of $4,000,000. This is an unsecured, 2% interest bearing loan due on October 1, 2016. The Company intends to use the proceeds from the loan for the development of grapheme production technology.

On February 25, 2015, the Company entered into an Investment Agreement (the “Investment Agreement”) with Lianyungang Hybrid Kinetic New Energy Limited, Inc. (“LYG Inc.”), a related party, pursuant to which the Company agreed to (a) issue to LYG Inc. 537,418,480 shares of the Company’s Common Stock at a per share price of $0.0186 in exchange for $10,000,000, payable by (a) a cash payment of $6,000,000 and (b) the cancellation a certain promissory note issued by the Company to LYG Inc. with a principal amount of $4,000,000, as more fully described in the Current Report on Form 8-K filed on February 27, 2015. The transaction was consummated on April 6, 2016, on which date the Company issued to LYG Inc. 537,418,480 shares of Common Stock in exchange for a cash payment of $6,000,000 the cancellation of the $4,000,000 note. Immediately following the transaction, LYG Inc. owned 99.8% of the issued and outstanding Common Stock of the Company.

NOTE 7. LOANS TO RELATED PARTY

On December 11, 2013, the Company made a loan in the amount of $1,930,000 to ACI (related party) in the form of an unsecured promissory note (“2013 Note”), with an interest rate equal to 2%, payable upon request. As of May 31, 2014, the accrued interest on the 2013 Note totaled $16,641.95.

On February 24, 2014, the Company made an additional loan in the amount of $1,000,000 to ACI in the form of an unsecured promissory note (“February 2014 Note”), with an interest rate equal to 2%, payable upon request. As of May 31, 2014, the accrued interest on the February 2014 Note totaled $4,431.64.

As of April 11, 2014 the total balance of all loans made to ACI was $2,930,000. On May 16, 2014, ACI repaid the outstanding balances on the 2013 Note and February 2014 Note, resulting in a zero balance of all loans made to ACI as of such date.

On June 10, 2014, the Company entered into an agreement, forgiving a total of $21,073 in interest payments owed to the Company by ACI.

On August 8, 2014, the Company made a loan in the amount of $1,000,000 to ACI in the form of an unsecured promissory note (“August 2014 Note”), with an interest rate equal to 3%, payable on February 23, 2017.

On November 26, 2014, the Company made a loan in the amount of $1,000,000 to ACI in the form of an unsecured promissory note (“November 2014 Note”), with an interest rate equal to 3%, payable on November 25, 2017.

On December 18, 2014, ACI repaid the August 2014 Note and the November 2014 Note. Both promissory notes bear no interest so long as they are paid in full on or before their respective maturity dates. As result, the Company forgave a total of $12,659 in interest payments owed.

As of December 31, 2015, the total balance for all loans made to ACI was $0 and the accrued interest totaled $0.

NOTE 8. RESEARCH AND DEVELOPMENT

 

On November 3, 2014, the Company assumed all rights and duties under that certain Sponsored Research Agreement No. 20150727 entered into between Hybrid Kinetic Motors Corporation, a Delaware Corporation (“HKMC”), and The Regents of the University of California (the “University”), pursuant to which HKMC agreed to sponsor the development of advance energy storage devices for EV and REEV (the “Research”). The Research commenced on October 1, 2014 and will continue for a period of three (3) years through September 30, 2017. The cost to the Company for the University’s performance thereunder will be $150,000 per year, for a total of $450,000.  

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NOTE 9. CONTRIBUTION EXPENSES

Effective as of June 1, 2015, the Company entered into a Gift Agreement (the “Agreement”) with The Regents of the University of California (“Regents of the University”), acting through the offices of the Henry Samueli School of Engineering and Applied Science at the University of California, Los Angeles (“UCLA School of Engineering and Applied Science”), pursuant to which the Company agreed to pledge $3,500,000 over a seven (7) year period with the initial payment of $500,000 made on December 31, 2015, to the Regents of the University, in support of a research center at the UCLA School of Engineering and Applied Science.  In exchange for such payment, the University of California, Los Angeles has agreed to create the HK Graphene Technology Corporation Research Center, to be located at the UCLA School of Engineering and Applied Science.

Pursuant to substantially similar agreements, the Company contributed $10,000 to Rice University and $250,000 to John Hopkins University as of December 31, 2015.

NOTE 10. TAXES

Net deferred tax assets consist of the following components as of December 31, 2015 and 2014:

		2015		2014
Deferred tax assets:
NOL carryover	$	2,347,654	$	1,816,365
Valuation allowance		(2,347,654)		(1,816,365)
Net deferred tax asset	$	-	$	-

The income tax provision is summarized as follows:

		2015		2014
Income tax benefit at statutory rate	$	(531,289)	$	(141,117)
Valuation allowance		531,289		141,117
Net deferred tax asset	$	-	$	-

At December 31, 2015, the Company had net operating loss carry forwards of approximately $5.9 million that may be offset against future taxable income through 2035. No tax benefit has been reported in the December 31, 2015 and 2014 financial statements since the potential tax benefit is offset by a valuation allowance of the same amount.

NOTE 11. SUBSEQUENT EVENTS

On March 28, 2016, the parties to the Investment Agreement consummated the transactions contemplated thereunder, including the Company’s issuance of 537,418,480 shares of Common Stock to LYG Inc. in exchange for $10,000,000, of which (a) $6,000,000 was paid in cash, and (b) $4,000,000 was paid in the form of the cancellation of a promissory note. Immediately following the transaction, LYG Inc. owned 99.8% of the issued and outstanding Common Stock of the Company.

On December 22, 2015, American Compass, Inc., a California corporation (the “Seller”), and Ford Cheer International Limited, a company organized and existing under the laws of the British Virgin Islands (the “Purchaser”), entered into a Securities Purchase Agreement (the “Purchase Agreement”) pursuant to which the Seller agreed to sell to the Purchaser and the Purchaser agreed to purchase from the Seller, 3,683 shares of the Company’s Series B Preferred Stock, for an aggregate purchase price of $336,667 (the “Transaction”). Upon the consummation of the Transaction on January 3, 2016, the Purchaser was the beneficial owner of approximately 73.5% of the Company’s issued and outstanding capital stock, on a fully-diluted basis, representing a change of control of the Company.

These financial statements were approved by management and available for issuance on April 7, 2016. Subsequent events have been evaluated through this date.

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