Item 1. Description of Business
General
American Gene Engineer Corp. (the “Company”) was incorporated in the State of Delaware on November 15, 2010. We have no full-time employees and own no real estate or personal property. We were originally formed as a vehicle to seek the acquisition of, or merger with, an existing company which provides genetic testing and diagnostic services or alternatively develop our own business in those or related market segments. In July 2016, we ceased to be a “shell company,” as defined under the Securities and Exchange Act, when we commenced our own business in the area of genetic testing and entered into contracts with two individuals in Taiwan, pursuant to which the Company will provide genetic testing of those individuals in Taiwan. Since then, the Company has entered into 27 additional contracts with individuals in Taiwan for genetic testing services. The overall business objective of the Company is to provide professional consultation services in genetic testing, pharmacogenetic testing, test result analysis, research, examination and studies.
We have a minimal amount of cash. Our financial statements for the fiscal year ended October 31, 2016, included in this report, indicates that there are a number of factors that raise substantial doubt about our ability to continue as a going concern. Such doubts include the fact (i) that we had net capital deficit at October 31, 2016 and have suffered recurring losses and expects such losses to continue through the following 12 months; and (ii) that if we are unable to obtain revenue producing contracts or financing or if the revenue or financing we do obtain is insufficient to cover any operating losses we may incur, we may substantially curtail or terminate our operations.
Our Business
Our business is to provide genetic testing services and genetic test result analysis services to individuals. Genetic tests can be performed to determine the genetic relationship of an individual to certain diseases, indicate possible future illness issues, and evaluate an individual’s response to therapy and medication. We will provide individualized RNA genetic testing for both healthy individuals and individuals with special health concerns or diseases.
Preventative Tests
For healthy individuals, the genetic test is preventative. The results of a genetic test can confirm or rule out a suspected genetic condition or help determine a person’s chance of developing or passing on a genetic disorder or disease and provide early warning for the individual’s risk of developing certain genetic diseases in the future (the “Preventative Tests”).
In the third fiscal quarter of 2016, the Company started to enter into contracts to provide Preventative Tests to individuals. Since July 2016, we have entered into contracts with 29 customers in Taiwan to provide those customers Preventative Tests. Because we currently do not have our own clinics and clinical laboratories to perform the Preventative Tests and we do not have any professionals on staff who can analyze the test results, we have entered into arrangements with entities in Taiwan to conduct the Preventative Tests. We currently have entered into an arrangement with the Li Ren Yi Shi Jian Yan Suo (“Li Ren”) in Taipei, Taiwan, pursuant to which Li Ren agreed to perform blood tests in Taipei, Taiwan. We also entered into a Service Agreement with Pharmacogenomics Lab in Taiwai (“Pharmacogenomics”), pursuant to which Pharmacogenomics agreed to conduct genetic tests on the blood samples provided by Li Ren. Once the testing is completed, Asian Pacific Genetic Engineering Corp, an affiliate of the Company, will prepare the client reports analyzing the test results. We are also currently in negotiation with selected physicians and genetic specialists to help us convey the test results to our customers. In the future, we plan to establish our own clinics and laboratories in Taiwan where the patients can have their blood drawn and tested. Currently we are planning to commence testing of client blood samples under those signed contracts in the second fiscal quarter of 2017.
Pharmacogenetic Tests
We intend to focus on individuals with health concerns. For individuals with specific diseases, the genetic tests can be used to determine the right treatment and medication (“Pharmacogenetic Tests”). Medications and treatment may be metabolized differently based on the patient’s genetic composition. Individual patient’s response to medication or treatment may also be related to variability in the drug target and the patient’s genetic composition. Pharmacogenetic Tests examine the patient’s genetic variability that causes individual responses to medication and treatment. By analyzing the genes that produce the specific drug targets or enzymes that metabolize a medication or are associated with immune response, physicians and genetic specialists may decide to raise or lower the dose or even change to a different drug and to help to maximize the benefits of their treatment and minimize the side effects of the treatment.
In 2017, the Company plans to expand its business to provide Pharmacogenetic Tests to patients suffering Alzheimer’s Disease, Parkinson, amyotrophic lateral sclerosis and AIDS. Our physician and genetic specialists or consultants will design an individualized plan for each customer. A blood test will then be performed on the customer twice a month for a period of three to nine months to monitor the changes in the customer’s genetic response due to medication treatment. Specifically, the physicians and genetic specialists will monitor and analyze the test results and produce reports for the customer to suggest alternation and changes i the patient’s treatment on an ongoing basis.
In the early stage of development and prior to the establishment of our own clinics and laboratories, we will outsource the genetic tests and the analysis thereof to third-party clinics and laboratories. In the future, we plan to establish our own clinics and clinical laboratories to conduct the genetic tests. We are currently in the process of hiring physicians and genetic specialists as employees to analyze the testing results. We also plan to expand our business by identifying potential business partners in the DNA repairing industry. Although our current operation is in Taiwan, we plan to expand our operation globally by setting up subsidiaries and/or investing in the existing business in other countries.
Marketing
The Company has not started marketing its products and services. The existing customers of the Company are the friends of the executives of the Company. In the future, the Company plans to market its services via television and magazines advertisement in the United States and in Taiwan.
Competitive Position
Currently the Company believes that there are many competitors delivering services similar to the Company’s Preventative Tests. Most of those competitors conduct their tests by examining the DNA of the individual. The Company believes, however, that its method in examining the RNA of the individuals for the risk of developing disease, and its services of providing customers access to physicians and genetic specialists in analyzing the customer’s test results are unique and can help the Company attract new customers in the market.
There are many companies in the United States performing pharmacogenetic tests but there are very few companies providing pharmacogenetic test in Taiwan. The Company believes that its services to provide pharmacogenetic test for patients with specific diseases are unique. Unlike many other pharmacogenetic testing companies that provide testing upon the request of the patient’s physician, the Company plans to hire physicians and genetic specialist to design individualized pharmacogenetic testing plans for patients with specific diseases. Physicians will provide medical advice to the customers regarding their medication and treatment choices while genetic specialists, who own doctoral degrees in genetics and genomics and have experiences in genetic research, will help to monitor the customer’s genetic response to the medication.
Customers
Currently, all of the Company’s customers are located in Taiwan. The Company’s clinic partners, laboratory partner, potential physician employees and genetic specialists employees are also located in Taiwan. In the future, the Company is planning to expand its operation to the United States.
For the Preventative Tests, the Company’s target customer base are healthy individuals between the ages of 40 and 60, who are health conscious and are seeking early warning for his or her risk of developing certain genetic diseases in the future.
For the Pharmacogenetic Tests, the Company is targeting patients suffering from Alzheimer’s Disease, Parkinson, amyotrophic lateral sclerosis and AIDS in Taiwan and potentially other countries.
Technology and Intellectual Property
The Company currently owns the registered trademark “AGE American Gene Engineering” in the United States, Taiwan and Hong Kong. We believe that innovation is one of the keys to its competitiveness and will be necessary for future sustained growth. Currently, the Company relies on the confidentiality of its operations, proprietary know-how and business secrets. In the future, when necessary, the Company will take additional steps to protect its intellectual property interests under the laws of the United States, Taiwan and the other jurisdictions in which it intends to operate. As the business develops, the Company plans to develop additional trademarks for our products and services and seek registration of those marks with government authorities for their protection. The Company does not hold any patents.
Seasonality
The Company does not expect to experience any seasonality in its operations.
Research and Development
We have no research and development activities at this time. We do believe, however, that innovation is one of the keys to our competitiveness, and innovation will be necessary for future sustained growth. To the extent it is able, given the limited financial resources at our disposal. We will invest in core technical competencies for product development and services.
Employees
At the time of this report, the Company does not have any employees. In the future, the Company expects to add physicians and genetic scientists as the Company starts to expand. The Company plans to hire generalist physicians to provide medical advice for our Preventative Test customers. The Company also plans to hire physicians who are specialized in Alzheimer’s Disease, Parkinson, amyotrophic lateral sclerosis and AIDS to provide proper medical and treatment advices to our Pharmacogenetic Tests customers. The Company plans to hire genetic specialists who are researchers with doctoral degrees in Genetics or Genomics. The genetic specialists will monitor the genetic response in our Pharmacogenetic Tests customers’ test results and collaborate with the physicians to provide treatment advice to our customers. To support our operations, we will also need to hire administrative and marketing employees in Taiwan and other countries.
Government Regulations
We are not aware of any government regulations in Taiwan. If in the future we expand our operation other jurisdictions, we will be subject to the regulations of the Food and Drug Administration, the Centers for Medicare and Medicaid Services and other federal, state and local governmental authorities.
FDA Regulations
In the United States, the Food and Drug Administration (“FDA”) has the authority to regulate genetic testing services. The FDA has the broadest authority in terms of regulating the safety and effectiveness of genetic tests as medical devices. FDA oversight also includes pharmacogenomics, which is the use of genomic information to help predict how an individual might respond to a particular drug, to identify individuals who might experience an adverse reaction to taking a drug, or to assist in selecting the optimal dosage of a drug. The degree of FDA oversight of a genetic test is based on its intended use and the risks posed by an inaccurate test result. The FDA categorizes medical devices, including genetic tests, into three separate classes, ranging from class I, for relatively low risk products, to class III, where tests are subject to the greatest level of scrutiny. Prior to conducting genetic testing in the United States, the Company may need to submit application for premarket approval or clearance of tis testing panels (as a medical device).
CMS Regulations
The Centers for Medicare and Medicaid Services (“CMS”) regulates clinical laboratories. The objective of CLIA is to certify the clinical testing quality, including verification of the procedures used and the qualifications of the technicians processing the tests. It also comprises proficiency testing for some tests. In the future, when the Company establishes laboratories in the United States, its laboratories will be subject to the regulations under CMS.
Other Regulations
A number of government authorities, both in the United States and abroad, and private parties are increasing their focus on individually identifiable health information and the use of personal information. Most states have enacted some form of health information privacy legislation, including data breach notification laws, and laws penalizing the misuse of personal information in violation of published privacy policies. Certain states have also enacted legislation requiring certain encryption technologies for the storage and transmission of personally identifiable information, and more states are considering laws for or have enacted laws about information security regulations and may require the adoption of written information security policies that are consistent with state laws if businesses have personal information of residents of their states. In the United States, the FTC has oversight of business operations concerning the use of advertising and to make sure that the genetic testing companies do not use false or misleading advertisements. We will have to review our privacy policy, our marketing strategy and our overall operations on a regular basis to assure compliance with applicable U.S. laws, Taiwan laws, and to the extent applicable, any other foreign laws. Our business could be adversely affected if new regulations or decisions regarding the genetic testing are implemented in such ways that impose new or additional technology requirements on us, limit our ability to conduct genetic testing, or if government authorities or private parties challenge our patient data storage practices that result in restrictions on us, or we experience a significant data or information breach which would require public disclosure under existing notification laws and for which we may be liable for damages or penalties.
Property
The Company currently leases a space for its executive offices and operational facilities on a month-to-month basis at 521 5th Avenue, New York, New York 10175, for a monthly rent of $2,000.
Available Information
Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to reports filed or furnished pursuant to Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are available free of charge after we electronically file or furnish it to the SEC. The public may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling 1-800-SEC-0330. The SEC also maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically. We assume no obligation to update or revise forward looking statements in this Current Report on Form 8-K, whether as a result of new information, future events or otherwise, unless we are required to do so by law.
Item 1A.
Item 1A. Risk Factors.
An investment in our securities involves a high degree of risk. You should consider carefully all of the risks described below, together with the other information contained in this Annual Report on Form 10-K before making a decision to invest in our securities. The risks described below are not the only ones facing our Company. Additional risks not presently known to us or that we presently consider immaterial may also adversely affect our Company. If any of the following risks occur, our business, financial condition and results of operations and the value of our common stock could be materially and adversely affected.
Risks Related to Our Business
We have a very limited operating history and there is no assurance that our future operations will result in revenues or profits. If we cannot generate sufficient revenues to operate profitably, then we may suspend or cease our operations and you could even lose your entire investment in our common stock.
We were incorporated on November 15, 2010, and we have generated no revenues through October 31, 2016. We also have very little operating history upon which an evaluation of our future success or failure can be made. As of October 31, 2016, we had a net loss of approximately $512,740 since our inception on November 15, 2010. The success of our future operations is dependent upon our ability to carry out our planned activities, fund our operations and compete effectively with other similar businesses. Based on our current business plan, we expect to incur operating losses during the fiscal year ending October 31, 2016. We cannot guarantee that we will ever be successful in generating revenues sufficient to cover our operating costs and overhead or achieve profitability. Our failure to achieve profitability may cause us to suspend or cease our operations.
Several factors raise doubt about our ability to continue as a going concern.
The Independent Auditor's Report to our financial statements for the year ended October 31, 2016, included in this report, indicates that there are a number of factors that raise substantial doubt about our ability to continue as a going concern. Such doubts identified in the report include the Company's losses from operations and lack of liquidity.
The Company will need a substantial amount of capital to carry out its business plan.
To implement the Company’s business plan, the Company needs to either establish its own clinics and laboratories or enter into strategic alliance with clinics and laboratories to conduct the genetic tests on behalf of the Company. The Company will also need to hire physicians and genetic specialists to analyze the test results of the customers. The Company’s initial capital requirements to start its operation will be significant. In addition, the Company will need to raise additional funds to continue to develop its genetic tests and analysis, as needed, obtain regulatory approvals, market and distribute its services. The Company has limited operations and few customers at this time, and, therefore, it is not currently generating significant revenues or cash flow to fund its operations. There can be no assurance that the Company will be able to generate revenues from operations in the future, which will be sufficient to fund its business activities. The Company has no current arrangements with respect to additional financing. There can be no assurance that any sources of additional financing will be available to the Company on acceptable terms, or at all.
We have a limited operating history, which makes it difficult to forecast whether or not our business will be successful.
The Company became an operating company in July 2016 when it entered into genetic testing contracts with two customers. Although the Company has subsequently entered into additional service contracts with customers, all those customers are the friends of the Company’s executives. Furthermore, the Company has not yet provided the genetic testing services to any customer and the contracts are carried as a liability under deferred revenue. Because we have a limited operating history, limited number of customers and no testing conducted, it is difficult to forecast our future operating results. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in an early stage of development and operation. There can be no assurance that we will be successful in addressing these risks and keeping pace with developments or developing a meaningful customer base, and the failure to do so could have a material adverse effect on our business, operating results and financial condition.
Genetic Testing may be subject to regulatory approval and monitoring as they are marketed, and there is no assurance that we will be able to obtain the necessary governmental approval.
When we launch our genetic testing services in jurisdictions outside of Taiwan, we may be required to be licensed under various authorities. In the United States for example, we would have to be licensed under the Food and Drug Act and the regulations of the United States Food and Drug Administration (the “FDA”) and several other state and local government authorities. There is no assurance that the necessary regulatory approval of our genetic testing services will be obtained. If obtained, the Company will have to comply with various labeling requirements and other regulation, both at the federal and state levels. If not approved, our tests and operations may have to be redesigned, if that is determined possible. The Company expects that the regulatory requirements will cause a considerable expense and obstacle to having a marketable service, and may delay the anticipated launch of our services in the United States.
We do not have prior experience in seeking or obtaining regulatory approval in any jurisdiction for genetic testing services. This lack of experience may prevent or make more expensive our obtaining any necessary regulatory approval.
We have been operating in Taiwan since inception. Our management has never sought regulatory approval before any regulatory agency having authority over the genetic testing services in Taiwan, the United States or any other jurisdiction. There is no assurance that we will be able to pursue regulatory approval or obtain the necessary licensing. We may have to engage professionals to help or take over the regulatory process, which will add expense to our operational expenses, which we cannot estimate at this time.
The strategic relationships we rely on may not be developed, and if developed, may not be successful.
Because we do not have our own clinic and laboratories, we currently rely on our strategic partners to conduct the genetic testing and analyze the testing results for us. These relationships are expected to, but may not, succeed. There can be no assurance that these relationships will develop and mature, or that any of our existing relationships will be successful or that potential competitors will not develop more substantial relationships with attractive partners. Our inability to successfully implement our strategy of building valuable strategic relationships could harm our business.
Until the Company has successfully conducted the genetic testing, there is uncertainty of market acceptance and the efficacy of the commercialization strategy.
Although the Company has entered into service contracts with individuals to provide genetic testing services, it has not yet performed any genetic tests for its customers. The existing customers are friends of the executives of the Company. Until the Company has consistent, proven sales and has successfully provide genetic testing services to the customers, there is uncertainty of the product acceptance in the intended markets and the ability of the Company to commercialize any of its services in a meaningful way. Until then, the Company believes it will have to fund its operations from capital rather than revenues. If there are no, or only low levels of, product and service acceptance and sales, the Company will have to alter its business plan. As is typical of any new business concept, demand and market acceptance for newly introduced products and services are subject to great uncertainty. Achieving market acceptance will require the Company to undertake substantial marketing efforts and to make significant expenditures to create awareness of and demand for its services. The Company has limited marketing experience and limited financial, personnel and other resources to undertake extensive marketing activities. The Company's efforts will be subject to all of the risks associated with the commercialization of new products and services, including unanticipated delays, expenses, technical problems or difficulties and technological obsolescence due to changing technology and the evolution of industry standards and government regulation. There can be no assurance that markets for the Company's products and services will not be limited, or that the Company's strategies will result in successful commercialization or an initial or continued market acceptance for genetic testing.
The market in which we participate is intensely competitive, and if we do not compete effectively, our operating results could be harmed.
There are many players in the genetic testing market in Taiwan, the United States and other jurisdictions. Our competitors are more established and may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards, customer and user requirements and trends. With the introduction of new testing technologies, the evolution of our genetic research, and new market entrants, we expect competition to intensify in the future. Some of our current and potential competitors have substantially greater financial, technical, marketing, distribution and other resources than we do. As a result, they may be able to respond more rapidly than we can to new or changing opportunities, technologies, research, regulations and patient demand. In addition, our current laboratory partners and strategic partners may become competitors in the future. Certain of our competitors may be able to negotiate alliances with strategic partners on more favorable terms than we are able to negotiate. Pricing pressures and increased competition generally could result in reduced sales, reduced margins, losses, or the failure of our platform to achieve or maintain more widespread market acceptance, any of which could adversely affect our revenues and operating results.
We may have difficulty managing our growth.
As we begin the launch of our operation, we expect to establish clinics and laboratories and hire personnel at relevant locations. This expansion is expected to place a significant strain on our management, operational and financial resources. To manage any further growth, we will be required to improve existing, and implement new, operational, and financial systems, procedures and controls and expand, train and manage our growing employee base. We also will be required to expand our finance, administrative, technical and operations staff. There can be no assurance that our current and planned personnel, systems, procedures and controls will be adequate to support our anticipated growth, that management will be able to hire, train, retain, motivate and manage required personnel or that our management will be able to successfully identify, manage and exploit existing and potential market opportunities. If we are unable to manage growth effectively, our business could be harmed.
To successfully implement our business plan, we will need to hire new personnel to establish and implement the manufacturing, marketing and sales plans for our technology.
The Company does not have any full-time employees, and the Company’s current executive officers are providing their services on a part-time, as needed basis. In the future, the Company will need to hire employees to further our new business venture. Specifically, the Company will need employees at the clinics and laboratories to help administer the genetic test. The Company also needs to hire physicians and genetic specialists to design the test plan for individual customers and help analyze the results of the tests. Additionally, we will need employees to market our products and tests and apply for necessary regulatory approval. We will need to set up offices and hire talent to implement our business plans. Our ability to identify, attract, hire, train, retain and motivate highly skilled technical, managerial, sales, marketing and customer service personnel is uncertain. Competition for such personnel is intense, and there can be no assurance that we will be able to successfully attract, assimilate or retain sufficiently qualified personnel. The failure to attract and retain necessary technical, managerial, sales, marketing and service personnel could have a material adverse effect on our business, operating results and financial condition.
We do not have an independent audit or compensation committee, the absence of which could lead to conflicts of interest of our officers and directors and work as a detriment to our stockholders.
We do not have an independent audit or compensation committee. The absence of an independent audit and compensation committee could lead to conflicts of interest of our officers and directors, which could work as a detriment to our stockholders.
There may be conflicts of interest between our management and our non-management stockholders.
Conflicts of interest create the risk that management may have an incentive to act adversely to the interests of other investors. A conflict of interest may arise between our management's personal pecuniary interest and its fiduciary duty to our stockholders. Further, our management's own pecuniary interest may at some point compromise its fiduciary duty to our stockholders.
We depend heavily on management team and consultants and the loss of any of our executive officers could significantly weaken our management expertise and ability to run our business.
Our business strategy and success is dependent on the skills and knowledge of our management team consisting of our CEO, CFO, and consultants. We have no other officers or directors and rely on third party consultants to assist with management and, therefore, have little backup capability for their activities. The loss of services of any of our officers could weaken significantly our management expertise and our ability to efficiently run our business. We do not maintain key man life insurance policies on our officers.
Risks Related to an Investment in Our Securities
Our common stock is not currently traded on any stock exchange or quoted on the over-the-counter bulletin board or the pink sheets. when and if traded, our common stock will likely be considered to be a “penny stock” and, as such, the market for our common stock may be limited by certain SEC rules applicable to penny stocks.
As long as the price of our common stock remains below $5.00 per share, our shares of common stock are likely to be subject to certain “penny stock” rules promulgated by the SEC. Those rules impose certain sales practice requirements on brokers who sell penny stock to persons other than established customers and accredited investors (generally, an institution with assets in excess of $5,000,000 or an individual with a net worth in excess of $1,000,000). For transactions covered by the penny stock rules, the broker must make a special suitability determination for the purchaser and receive the purchaser’s written consent to the transaction prior to the sale. Furthermore, the penny stock rules generally require, among other things, that brokers engaged in secondary trading of penny stocks provide customers with written disclosure documents, monthly statements of the market value of penny stocks, disclosure of the bid and asked prices of penny stocks and disclosure of the compensation to the brokerage firm and disclosure of the sales person working for the brokerage firm. These rules and regulations make it more difficult for brokers to sell shares of our common stock and limit the liquidity of our shares.
Trading in our securities could be subject to extreme price fluctuations that could adversely affect your investment.
Historically speaking, the market prices for securities of small publicly traded companies have been highly volatile. Publicized events and announcements may have a significant impact on the market price of our common stock. In addition, the stock market from time to time experiences extreme price and volume fluctuations that particularly affect the market prices for small publicly traded companies and which are often unrelated to the operating performance of the affected companies.
There is currently no trading market for our common stock, and liquidity of shares of our common stock is limited.
Our shares of common stock are not registered under the securities laws of any state or other jurisdiction, and accordingly there is no public trading market for our common stock. Further, no public trading market is expected to develop in the foreseeable future unless and until the Company completes a business combination with an operating business and the Company thereafter files a registration statement under the Securities Act. Therefore, outstanding shares of our common stock cannot be offered, sold, pledged or otherwise transferred unless subsequently registered pursuant to, or exempt from registration under, the Securities Act and any other applicable federal or state securities laws or regulations. Shares of our common stock cannot be sold under the exemptions from registration provided by Rule 144 under or Section 4(1) of the Securities Act (“Rule 144”), in accordance with the letter from Richard K. Wulff, Chief of the Office of Small Business Policy of the Securities and Exchange Commission’s Division of Corporation Finance, to Ken Worm of NASD Regulation, dated January 21, 2000 (“Wulff Letter”). In 2007, the SEC announced that it is changing certain aspects of the Wulff Letter, and such changes shall apply retroactively to our stockholders. Effective February 15, 2008, all holders of shares of common stock of a “shell company” will be permitted to sell their shares of common stock under Rule 144, subject to certain restrictions, starting one year after (i) the completion of a business combination with a private company in a reverse merger or reverse takeover transaction after which the company would cease to be a “shell company” (as defined in Rule 12b-2 under the Exchange Act) and (ii) the disclosure of certain information on a Current Report on Form 8-K within four business days thereafter. Compliance with the criteria for securing exemptions under federal securities laws and the securities laws of the various states is extremely complex, especially in respect of those exemptions affording flexibility and the elimination of trading restrictions in respect of securities received in exempt transactions and subsequently disposed of without registration under the Securities Act or state securities laws.
Substantial sales of our common stock may impact the market price of our common stock.
Future sales of substantial amounts of our common stock, including shares that we may issue upon exercise of options and warrants, and the resale of shares by investors who have registration rights, could adversely affect the market price of our common stock. Furthermore, if we raise additional funds through the issuance of common stock or securities convertible into our common stock, the percentage ownership of our stockholders will be reduced and the price of our common stock may fall.
We do not expect to pay dividends for the foreseeable future.
We will use any earnings generated from our operations to finance our business and will not pay any cash dividends to our stockholders in the foreseeable future.
As an “emerging growth company” under the jobs act, we are permitted to rely on exemptions from certain disclosure requirements.
We qualify as an “emerging growth company” under the JOBS Act. As a result, we are permitted to and may rely on exemptions from certain disclosure requirements. For so long as we are an emerging growth company, we will not be required to:
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have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;
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comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);
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submit certain executive compensation matters to shareholder advisory votes, such as “say-on-pay”, “say-on-frequency” and “say-on-golden parachute;” and
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disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the Chief Executive’s compensation to median employee compensation.
In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We are not choosing to “opt out” of this provision. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.
We will remain an “emerging growth company” until the last day of our fiscal year following the fifth anniversary of the date of our first sale of common equity securities pursuant to an effective registration under the Securities Act, or until the earliest of (i) the last day of the first fiscal year in which our total annual gross revenues exceed $1 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, which would occur if the market value of our ordinary shares that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.
Until such time, however, we cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
We will be subject to the periodic reporting requirements of the securities exchange act of 1934 which will require us to incur audit fees and legal fees in connection with the preparation of such reports. These costs could reduce or eliminate our ability to earn a profit.
We will be required to file periodic reports with the Securities and Exchange Commission pursuant to the Securities Exchange Act and the rules and regulations promulgated thereunder. In order to comply with these regulations, our independent registered public accounting firm must review our financial statements on a quarterly basis and audit our financial statements on an annual basis. Moreover, our legal counsel has to review and assist in the preparation of such reports. The costs charged by these professionals for such services cannot be accurately predicted at this time because of factors such as the number and type of transactions that we engage in and the complexity of our reports cannot be determined at this time and will have a major effect on the amount of time to be spent by our auditors and attorneys.
However, the incurrence of such costs will obviously be an expense to our future operations and could have a negative effect on our ability to meet our overhead requirements and earn a profit. If we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial information and the trading price of our common stock could drop significantly.
Stockholders may be diluted significantly through our efforts to obtain financing and satisfy obligations through issuance of additional shares of our common stock.
We have no committed source of financing. Wherever possible, our board of directors will attempt to use non-cash consideration to satisfy obligations. In many instances, we believe that the non-cash consideration will consist of restricted shares of our common stock. Our board of directors has authority, without action or vote of the stockholders, to issue all or part of the 100,000,000 authorized, but unissued, shares of our common stock. Future issuances of shares of our common stock will result in dilution of the ownership interests of existing stockholders, may further dilute common stock book value and that dilution may be material.
Our certificate of incorporation provides for indemnification of officers and directors at our expense and limit their liability, which may result in a major cost to us and hurt the interests of our stockholders because corporate resources may be expended for the benefits of officers and/or directors.
Our bylaws and applicable Delaware laws provide for the indemnification of our directors, officers, employees and agents under certain circumstances, against attorney’s fees and other expenses incurred by them in any litigation to which they become a party arising from their association with or activities on our behalf. We will also bear the expenses of such litigation for any of our directors, officers, employees or agents, upon such person’s written promise to repay us therefor, even if it is ultimately determined that any such person shall not have been entitled to indemnification. This indemnification policy could result in substantial expenditures by us that we may be unable to recoup.
We have been advised that, in the opinion of the Securities and Exchange Commission, indemnification for liabilities arising under federal securities laws is against public policy and is, therefore, unenforceable. In the event that a claim for indemnification for liabilities arising under federal securities laws, other than the payment by us of expenses incurred or paid by a director, officer or controlling person in the successful defense of any action, suit or proceeding, is asserted by a director, officer or controlling person in connection with the securities being registered, we will (unless in the opinion of our counsel, the matter has been settled by controlling precedent) submit to a court of appropriate jurisdiction, the question of whether indemnification by us is against public policy as expressed by the Securities and Exchange Commission and will be governed by the final adjudication of such issue. The legal process relating to this matter, if it were to occur, is likely to be very costly and may result is us receiving negative publicity, either of which factors is likely to materially reduce the market price for our shares, if such a market ever develops.
There are risks associated with forward looking statements.
This report contains certain forward looking statements regarding management’s plans and objectives for future operations including plans and objectives relating to our planned marketing efforts and future economic performance. The forward looking statements and associated risks set forth in this report include or relate to, among other things, (a) our projected sales and profitability, (b) our growth strategies, (c) anticipated trends in our industry, (d) our ability to obtain and retain sufficient capital for future operations, and (e) our anticipated needs for working capital. These statements may be found under “Management's Discussion and Analysis of Financial Condition and Results of Operations” and “Description of Business,” in this report, as well as in this report, generally. Actual events or results may differ materially from those discussed in forward looking statements as a result of various factors, including, without limitation, the risks outlined under “Risk Factors” and matters described in this report, generally. In light of these risks and uncertainties, there can be no assurance that the forward looking statements contained in this report will, in fact, occur.
Item 1B.
Item 1B. Unresolved Staff Comments
Not Applicable.
Item 2.
Item 2. Properties.
The Company currently does not own any real properties. Our principal executive offices are located 521 Fifth Avenue, Suite 1718, New York, New York 10175. We lease our office from Prime Office Centers 521, LLC for $2,000 per month and our lease is currently on a month-to-month basis.
Item 3.
Item 3. Legal Proceedings.
We are not a party to any legal proceedings and are not aware of any threatened litigation.
Item 4.
Item 4. Mine Safety Disclosures.
Not Applicable.
PART II
Item 5.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
As of February 10, 2017, we had 100,000,000 shares of common stock issued and outstanding.
There currently exists no public trading market for our common stock. There can be no assurance that a public trading market will develop at this time or be sustained in the future. Without an active public trading market, investors may be unable to liquidate their shares of our common stock without considerable delay, if at all. If a market does develop, the price for our shares may be highly volatile and may bear no relationship to our actual financial condition or results of operations. Factors we discuss in this report, including the many risks factors associated with an investment in our Company, may have a significant impact on the market price of our common stock. Also, because of the relatively low price at which our common stock will likely trade, many brokerage firms may not effect transactions in our common stock.
As of February 10, 2017, there were 138 stockholders of record of our common stock.
Dividends
We have not paid cash dividends on any class of common equity since formation and we do not anticipate paying any dividends on our outstanding common stock in the foreseeable future. There are no material restrictions limiting or that are likely to limit our ability to pay dividends on its outstanding securities.
Repurchases of Equity Securities
None.
Recent Sales of Unregistered Securities
None.
Item 6.
Item 6. Selected Financial Data.
The information to be furnished under this Item 6 is not required of smaller reporting companies.
Item 7.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our financial statements and notes thereto. The following discussion and analysis contains forward-looking statements which involve risks and uncertainties. Our actual results may differ significantly from the results expectations and plans discussed in these forward-looking statements.
Overview
American Gene Engineer Corp. was incorporated in the State of Delaware on November 15, 2010. We have no full-time employees and own no real estate or personal property. We were originally formed as a vehicle to seek the acquisition of, or merger with, an existing company which provides genetic testing and diagnostic services or alternatively develop our own business in those or related market segments. In July 2016, we ceased to be a “shell company,” as defined under the Securities and Exchange Act, when we commenced our own business in the area of genetic testing and entered into contracts with two individuals in Taiwan, pursuant to which the Company will provide genetic testing of those individuals in Taiwan. Since then, the Company has entered into 27 additional contracts with individuals in Taiwan for genetic testing services. The overall business objective of the Company is to provide professional consultation services in genetic testing, pharmacogenetic testing, test result analysis, research, examination and studies. The Company has no full-time employees and owns no real estate or personal property. We have a minimal amount of cash.
Our financial statements for the fiscal year ended October 31, 2016, included in this report, indicate that there are a number of factors that raise substantial doubt about our ability to continue as a going concern. Such doubts include the fact (i) that we had net capital deficit at October 31, 2016 and have suffered recurring losses and expects such losses to continue through the following 12 months; and (ii) that if we are unable to obtain revenue producing contracts or financing or if the revenue or financing we do obtain is insufficient to cover any operating losses we may incur, we may substantially curtail or terminate our operations.
Plan of Operations
Our business plan is to provide professional consultation services in genetic testing, pharmacogenetic testing, test result analysis, research, examination and studies. Our principal activity for the next 18 months and thereafter will be launching our genetic testing services in in Taiwan. We had $308,541 in cash as of October 31, 2016. Our current cash assets are not sufficient to cover our current and expected expenses and therefore, we will need to obtain further financing, without which we will not be able to execute our business plan.
Assuming that we are able to obtain operational funding, in addition to any funding necessary to maintain our status as an SEC reporting company subject to regular review and additional assessment of requirements, currently we anticipate that we will incur the expenses over the twelve (12) month period following funding in connection with our operating business and planned expansion. Additional unknown expenses may arise from time to time, which we cannot currently identify or determine a possible expense. We will need additional funding to cover our anticipated expenses mentioned above over the longer term, and for future development and implementation of our business plan.
Results of Operations
Year Ended October 31, 2016 as Compared to Year Ended October 31, 2015
We have not generated any revenue since inception. We collected $456,000 (net of customer referral fees) which has been deferred until such time as the services are provided.
For the year ended October 31, 2016, we incurred $240,000 in operating expenses as compared to $108,214 for the same period in 2015, an increase of 122%. All of our operating expenses are for general and administrative purposes such as accounting and audit fees. The increase was mainly due to $112,000 of customer referral fees paid on fees collected for future services during the year ended October 31, 2016.
For the years ended October 31, 2016 and 2015, we had net losses of $240,000 and $108,214 due to the payment of expenses as described above.
As of October 31, 2016, we have $0 sales income. There is substantial doubt regarding the Company’s ability to continue as a going concern.
Liquidity and Capital Resources
As of October 31, 2016, we have not generated any revenues from our business operations and had $308,541 cash. We collected a total of $456,000 (net of customer referral fees) to provide future genetic services which has been deferred until such time as the services are provided. Although we have minimal liabilities, our inability to generate a recurring source of revenue raises a substantial doubt regarding the Company’s ability to continue as a going concern.
We anticipate that in order to fund our ongoing working capital requirements, we will need to use all of the remaining cash funds as well as seeking other sources of funding. We may need to raise additional capital through loans or additional investments from our initial shareholders, officers, directors, or third parties. None of the initial shareholders, officers or directors is under any obligation to advance funds or invest in, us. Accordingly, we may not be able to obtain additional financing. If we are unable to raise additional capital, we may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of our business plan, and controlling overhead expenses. We cannot provide any assurance that new financing will be available to us on commercially acceptable terms, if at all. These factors raise substantial doubt about our ability to continue as a going concern.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements, financings or other relationships with entities or other persons, also known as “special purpose entities.”
Critical Accounting Estimates
The preparation of our financial statements in conformity with accounting principles generally accepted in the United States of America requires our management to make certain 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. As such, in accordance with the use of accounting principles generally accepted in the United States of America, our actual realized results may differ from management’s initial estimates as reported. A summary of our significant accounting policies are detailed in the notes to the financial statements, which are an integral component of this analysis.
Significant Accounting Policies
The Company has defined a significant accounting policy as one that is both important to the portrayal of the Company’s financial condition and results of operations and requires management of the Company to make difficult, subjective or complex judgments. Estimates and assumptions about future events and their effects cannot be predicted with certainty. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments. These estimates may change as new events occur, as more experience is acquired, as additional information is obtained and as the Company’s operating environment changes.
We have identified the policies set forth in Note 1 to our financial statements as significant to our business operations and the understanding of our results of operations. The impact and any associated risks related to these policies on our business operations is discussed throughout Management’s Discussion and Analysis of Results of Operations and Financial Condition, where such policies affect our reported and expected financial results. In the ordinary course of business, we have made a number of estimates and assumptions relating to the reporting of results of operations and financial condition in the preparation of our financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ significantly from those estimates under different assumptions and conditions. We believe that the discussion set forth in Note 2 to our consolidated financial statements addresses our most significant accounting policies, which are those that are most important to the portrayal of our financial condition and results of operations and require our most difficult, subjective and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
The information to be furnished under this Item 7A is not required of smaller reporting companies.
Item 8.
Item 8. Financial Statements and Supplementary Data.
See financial statements beginning on page.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
There are not and have not been any disagreements between us and our accountants on any matter of accounting principles, since our formation and there are no disagreements with accountants on accounting or financial disclosure matters.
Item 9A.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act of 1934) are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Our disclosure controls and procedures are also designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officer, to allow timely decisions regarding required disclosure. Our chief executive officer and chief financial officer have reviewed the effectiveness of our disclosure controls and procedures as of October 31, 2016 and, based on his evaluation, have concluded that the disclosure controls and procedures were not effective.
Management’s assessment identified several material weaknesses in our internal control over financial reporting. A “material weakness” is defined under SEC rules as a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis by the company’s internal controls.
Our management concluded that we had material weaknesses in our control environment and financial reporting process consisting of the following as of the Evaluation Date:
1.
lack of design and implementation of a system of internal controls over financial reporting.
2.
lack of a functioning audit committee due to a lack of a majority of independent members and a lack of a majority of outside directors on our Board of Directors, resulting in ineffective oversight in the establishment and monitoring of required internal control and procedures;
3.
inadequate segregation of duties consistent with control objectives;
4.
ineffective controls over period end financial disclosure and reporting processes; and
5.
lack of accounting personnel with adequate experience and training.
Management’s Annual Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. 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 in accordance with generally accepted accounting principles in the United States, or GAAP. A company’s internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projection of any evaluation of effectiveness to future periods is subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of our internal control over financial reporting as of the end of the period covered by this report using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013). Based on this evaluation, management concluded that there is a reasonable possibility that a material misstatement as of October 31, 2016, the Company’s annual or interim financial statements will not be prevented or detected on a timely basis by the Company’s internal control.
This Annual Report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this Annual Report.
Changes in Internal Control over Financial Reporting
During the three months ended October 31, 2016, there were no changes in our internal control over financial reporting identified in connection with the evaluation performed during the fiscal quarter covered by this report that has materially affected, or is reasonably likely to materially affect our internal control over financial reporting.
Item 9B.
Item 9B. Other Information.
None.
PART III
Item 10.
Item 10. Directors, Executive Officers and Corporate Governance.
Directors and Executive Officers
Our executive officers are elected by the board of directors and serve at the discretion of the board. All of the current directors serve until the next annual stockholders’ meeting or until their successors have been duly elected and qualified. The following table sets forth certain information regarding our current directors and executive officers:
BACKGROUND OF OFFICERS AND DIRECTORS
Ming Lin was appointed our Chief Executive Officer in January 2014. He has vast experience in the biotechnology industry and is currently the president of the following companies: American Life Prolong Technology Organization Inc. (since January 2005); American Harvard Gene Chip Biotechnology Inc. (since April 2006); and New York Creative Capital Inc. (since March 2007). Mr. Lin received his high school diploma from Kai Young High School in Taiwan.
Han-Chen Lin was appointed as our Chief Financial Officer in January 2014. She currently works as a public relations specialist for the Taiwan branch of AMD Far East Ltd. and has held that position since May 2012. Prior to her position at AMD, Ms. Lin has interned at the global benefits division of Wellington Management and the accounting and finance department of CSN Stores in Boston, Massachusetts. She received her BS in Business Administration in May 2011 from Northeastern University in Boston, Massachusetts.
Directorships
None of our directors or persons nominated or chosen to become directors hold any other directorship in any company with a class of securities registered pursuant to Section 12 of the 1934 Act or subject to the requirements of Section 15(d) of such Act or any other company registered as an investment company under the Investment Company Act of 1940.
Family Relationship
Our CEO, Ming Lin is the father of our CFO Han-Chen Lin.
Audit Committee
The Board of Directors acts as the Audit Committee and the Board has no separate committees. We also do not have an audit committee financial expert. We believe the cost related to retaining a financial expert at this time is prohibitive. Further, because we have no substantive operations, at the present time, we believe the services of a financial expert are not warranted.
Conflict of Interest
The only conflict that we foresee is that our officers and directors will devote time to projects that do not involve us.
Section 16 Compliance
Section 16(a) of the Exchange Act requires officers, directors and persons who own more than 10% of a registered class of our equity securities of a company that has a class of common stock registered under the Exchange Act to file reports of ownership and changes in ownership with the Securities and Exchange Commission and to furnish us with copies of all forms filed pursuant to Section 16(a).
Based solely on a review of the copies of such reports furnished to us, we believe that officers and directors and our principal stockholders who are required to file reports pursuant to Section 16(a) of the Exchange Act complied with all of the Section 16(a) filing requirements applicable to them with respect to the last fiscal year, except that our Chief Executive Officer, our Chief Financial Officer and Tzu-Yun Chang each failed to file a Form 3 after we registered our common stock under Section 12(g) of the Securities Exchange Act.
Code of Ethics
The Company has not adopted a code of ethics. Given the nature of the Company’s business, its limited stockholder base and current composition of management, the board of directors does not believe that the Company requires a code of ethics at this time.
Stockholder Communications.
The board of directors has not adopted a process for security holders to send communications to the board of directors. Given the nature of the Company’s business, its limited stockholder base and current composition of management, the board of directors does not believe that the Company requires a process for security holders to send communications to the board of directors at this time.
Item 11.
Item 11. Executive Compensation.
Executive Compensation
We appointed our Chief Executive Officer on January 29, 2014 and our Chief Financial Officer on January 10, 2014. Currently our CFO does not receive any compensation for her services in her role. For the years ended October 31, 2016 and 2015, salary expense for our CEO was $8,000 and $2,500, respectively.
We have no stock option plan, retirement, pension, or profit sharing plans for the benefit of our officers and directors.
Compensation of Directors
The members of our board of directors are not compensated for their services as a director. The board has not implemented a plan to award options to any directors. There are no contractual arrangements with any member of the board of directors. We have no director's service contracts.
We do not have any long-term incentive plans that provide compensation intended to serve as incentive for performance.
Employment Agreements
We have no employment agreements with our officers and directors. We do not contemplate entering into any employment agreement in the foreseeable future.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth, as of the date of February 10, 2017, the total number of shares owned beneficially by our directors, officers and key employees, individually and as a group, and the present owners of 5% or more of our total outstanding shares. The stockholder listed below has direct ownership of their shares and possesses sole voting and dispositive power with respect to the shares.
(1) All stockholders listed have direct ownership of their shares and possess sole voting and dispositive power with respect to the shares.
(2) Applicable percentage ownership is based on 100,000,000 shares of common stock outstanding as of February 10, 2017. The Company has no convertible securities outstanding.
(3) Han-Chen Lin is the daughter of our CEO, Ming Lin.
(4) Tzu-Yun Chang is the spouse of our CEO, Ming Lin.
Item 13.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Related Party Transactions.
Although we have not adopted formal procedures for the review, approval or ratification of transactions with related persons, we adhere to a general policy that such transactions should only be entered into if they are on terms that, on the whole, are no more favorable, or no less favorable, than those available from unaffiliated third parties and their approval is in accordance with applicable law. Such transactions require the approval of our board of directors.
On October 31, 2016, we entered into a service agreement with Asian Pacific Genetic Engineering Corp., a company owned by our CEO (“APG”). Pursuant to the service agreement, APG agreed to provide consulting services and genetic test result analysis services to our customers. The APG Agreement has a term of one-year and we agreed to pay an annual fee of $200,000 to APG for its services.
Except as otherwise indicated herein, there have been no related party transactions, or any other transactions or relationships required to be disclosed pursuant to Item 404 of Regulation S-K.
Director Independence.
None of our directors are “independent” as defined in the listing standards for NASDAQ.
Item 14.
Item 14. Principal Accounting Fees and Services
GBH CPAs, PC is the Company’s independent registered public accounting firm.
AUDIT FEES. The aggregate fees billed for professional services rendered by GBH CPAs, PC for the audit of the Company’s annual financial statements and the reviews of the financial statements included in the Company’s Quarterly Reports on Form 10-Q for the fiscal year ended October 31, 2016 were $20,523 and for the fiscal year ended October 31, 2015 were $21,700.
AUDIT-RELATED FEES. None
TAX FEES. None.
ALL OTHER FEES. None
PRE-APPROVAL POLICY. The Company has not established an audit committee nor adopted an audit committee charter. Rather, it is the responsibility of the entire board of directors to serve the functions of an audit committee and to pre-approve all audit and permitted non-audit services to be performed by the independent auditors, such approval to take place in advance of such services when required by law, regulation, or rule, subject to the de minimus exceptions for non-audit services described in Section 10A(i)(1)(B) of the Exchange Act that are approved by the board prior to completion of the audit.
PART IV
Item 15.
Item 15. Exhibits, Financial Statement Schedules.
(a) Financial Statements
The following financial statements are filed as part of this report:
(b) Exhibits.
The following are filed as exhibits to this report:
1.
Incorporated by reference to the Company’s Registration Statement on Form 10 as filed with the SEC on June 13, 2014.
2.
Incorporated by reference to the Company’s Amendment No. 1 to Registration Statement on Form 10 as filed with the SEC on August 11, 2014.
*
Filed herewith.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of American Gene Engineer Corp.
New York, New York
We have audited the accompanying balance sheets of American Gene Engineer Corp. as of October 31, 2016 and 2015, and the related statements of operations, stockholders’ equity (deficit), and cash flows for each of the years then ended. American Gene Engineer Corp.’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of American Gene Engineer Corp. as of October 31, 2016 and 2015, and the results of its operations and its cash flows for each of the years then ended in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that American Gene Engineer Corp. will continue as a going concern. As discussed in Note 3 to the financial statements, American Gene Engineer Corp. has suffered recurring losses from operations and has a net working capital deficit that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ GBH CPAs, PC
GBH CPAs, PC
www.gbhcpas.com
Houston, Texas
February 15, 2017
American Gene Engineer Corp.
Balance Sheets
See accompanying notes to the financial statements.
American Gene Engineer Corp.
Statements of Operations
See accompanying notes to the financial statements.
American Gene Engineer Corp.
Statement of Changes in Equity (Deficit)
See accompanying notes to the financial statements.
American Gene Engineer Corp.
Statements of Cash Flows
See accompanying notes to the financial statements.
American Gene Engineer Corp.
Notes to Financial Statements
NOTE 1 - ORGANIZATION
American Gene Engineer Corp. (the "Company") was incorporated in Delaware on November 15, 2010. The Company was established to provide professional consultation for gene development, research, examination and studies.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING
BASIS OF PRESENTATION
The financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America.
ESTIMATES AND ASSUMPTIONS
Preparing financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. Actual results and outcomes may differ from management’s estimates and assumptions.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid short-term investments purchased with an original maturity of three months or less to be cash equivalents. These investments are carried at cost, which approximates fair value.
INCOME TAXES
An asset and liability approach is used for financial accounting and reporting for income taxes. Deferred income taxes arise from temporary differences between income tax and financial reporting and principally relate to recognition of revenue and expenses in different periods for financial and tax accounting purposes and are measured using currently enacted tax rates and laws. In addition, a deferred tax asset can be generated by net operating loss carryforwards (“NOLs”). If it is more likely than not that some portion or all of a deferred tax asset will not be realized, a valuation allowance is recognized.
In the event the Company is charged interest or penalties related to income tax matters, the Company would record such interest as interest expense and would record such penalties as other expense in the statement of operations. No such charges have been incurred by the Company. As of October 31, 2016, the Company has no accrued interest related to uncertain tax positions.
REVENUE RECOGNITION
The Company recognizes revenue only when (1) there is persuasive evidence of an arrangement with the customer; (2) delivery has occurred or services have been rendered; (3) amount due to the customer is fixed or determinable; and (4) collectability is reasonably assured. Advance payments from customers are deferred and recorded in deferred revenue. During the year ended October 31, 2016, the Company received $568,000 from customers for gene analysis reports to be provided by the Company. Revenue will be recorded by the Company when the report is delivered.
EARNINGS PER COMMON SHARE
Basic net earnings (loss) per common share are computed by dividing net earnings (loss) available to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted net earnings (loss) per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents. In periods when losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive.
SUBSEQUENT EVENTS
The Company has evaluated all transactions from October 31, 2016 through the financial statement issuance date for subsequent event disclosure consideration.
NEW ACCOUNTING PRONOUNCEMENTS
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers.” The guidance requires a company to recognize revenue when it transfers promised services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those services and requires enhanced disclosures. The new guidance is effective for annual and interim periods beginning after December 15, 2016, and early adoption is not permitted. On July 9, 2015, the FASB approved the deferral of the effective date of the new revenue guidance by one year to annual reporting periods beginning after December 15, 2017, with early adoption being permitted for annual periods beginning after December 15, 2016. The Company is currently evaluating the new guidance.
NOTE 3 - GOING CONCERN
At October 31, 2016, the Company had a net working capital deficit of $167,102. The Company has suffered recurring losses and expects such losses to continue through at least fiscal year 2017. The Company expects to finance its operations primarily through contributions from its Chief Executive Officer and receipts from customer contracts. The Chief Executive Officer is not legally obligated to provide any financing.
There is no assurance that the Company will be able to obtain such additional capital. Additionally, no assurance can be given that any such financing, if obtained, will be adequate to meet the Company’s ultimate capital needs and to support our growth. If adequate capital cannot be obtained on a timely basis and on satisfactory terms, the Company’s operations would be materially negatively impacted.
As a result of the above discussed conditions, there exists substantial doubt about the Company’s ability to continue as a going concern. The Company’s financial statements are presented on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The financial statements do not include any adjustments relating to the recoverability of the recorded assets or the classification of liabilities that may be necessary should it be determined that the Company is unable to continue as a going concern.
NOTE 4- RELATED PARTY TRANSACTION
As of October 31, 2016 and 2015, salary payable to the Company’s Chief Executive Officer was $2,858 and $1,394, respectively.
See Note 6 for contributions made by the Company’s Chief Executive Officer and Note 7 for an agreement entered with a company controlled by the Company’s Chief Executive Officer.
NOTE 5 - INCOME TAXES
At October 31, 2016, we had federal income tax net operating loss (“NOL”) carryforwards of approximately $513,000. The NOL carryforwards expire from fiscal year 2032 through 2036. The value of these carryforwards depends on our ability to generate taxable income. A change in ownership, as defined by federal income tax regulations, could significantly limit our ability to utilize our net operating loss carryforwards. Additionally, because federal tax laws limit the time during which the net operating loss carryforwards may be applied against future taxes, if we fail to generate taxable income prior to the expiration dates we may not be able to fully utilize the net operating loss carryforwards to reduce future income taxes. We have had cumulative losses and there is no assurance of future taxable income, therefore, valuation allowances have been recorded to fully offset the deferred tax asset at October 31, 2016 and 2015.
NOTE 6- EQUITY
During the years ended October 30, 2016 and 2015, the Company’s president contributed cash of $50,485 and $88,847, respectively, to the Company.
NOTE 7- SUBSEQUENT EVENT
On November 1, 2016, the Company entered into a service agreement with Asia Pacific Gene Engineering Co., an affiliated company. Pursuant to the agreement, Asia Pacific Gene Engineering Co. will provide the Company gene analysis service for one year for a $200,000 service fee. The Company paid the $200,000 service fee on January 26, 2017.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on February 15, 2017.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
SIGNATURE
TITLE
DATE
/s/ Ming Lin
President and Chief Executive Officer and
Director
February 15, 2017
Ming Lin
(Principal Executive Officer)
/s/ Han-Chen Li
Chairman, Chief Financing Officer and
Director
February 15, 2017
Han-Chen Li
(Principal Financial Officer and
Principal Accounting Officer)