U.S. SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C. 20549

 

FORM 10

 

GENERAL FORM FOR REGISTRATION OF SECURITIES

 

Pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934

 

GRAND PERFECTA, INC.

(Exact name of registrant as specified in its charter)

 

Nevada   46-1779352
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)

 

21st Floor, South Tower, New Pier Takeshiba,    
1-16-1, Kaigan, Minato-ku, Tokyo, Japan   105-0022
(Address of principal executive offices)   (Zip/ Postal Code)

 

Registrant’s telephone number, including area code: +81-3-3436-4577

 

Facsimile number: +81-3-6403-8601

 

Copies to:

Mark E. Lehman

Nick Greenwood

Parsons Behle & Latimer

201 S. Main Street, Suite 1800

Salt Lake City, UT 84111

Tel: (801) 532-1234

Fax: (801) 536-6111

 

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

 

Securities to be registered under Section 12(g) of the Act:

 

  Common Stock, $0.001 Par Value  
  (Title of Class)  

 

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

 

Large accelerated filer ¨ Accelerated filer ¨
   
Non-accelerated filer ¨ Smaller reporting company x

 

 

 
 

 

TABLE OF CONTENTS

 

EXPLANATORY NOTE 1
USE OF TRADEMARKS AND TRADENAMES IN THIS REGISTRATION STATEMENT 1
FORWARD-LOOKING STATEMENTS 1
WHERE YOU CAN FIND MORE INFORMATION ABOUT US 1
Item 1.   Business. 2
Item 2.   Financial Information. 6
Item 3.   Properties. 14
Item 4.   Security Ownership of Certain Beneficial Owners and Management. 14
Item 5.   Directors and Executive Officers. 15
Item 6.   Executive Compensation. 16
Item 7.   Certain Relationships and Related Transactions, and Director Independence. 17
Item 8.   Legal Proceedings. 18
Item 9.   Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters. 18
Item 10.   Recent Sales of Unregistered Securities. 19
Item 11.   Description of Registrant’s Securities to be Registered. 20
Item 12.   Indemnification of Directors and Officers. 21
Item 13.   Financial Statements and Supplementary Data. 22
Item 14.   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. 22
Item 15.   Financial Statements and Exhibits. 22
SIGNATURES 23

 

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EXPLANATORY NOTE

 

Grand Perfecta, Inc., is filing this General Form for Registration of Securities on Form 10, which we refer to as the Registration Statement, to register its common stock, par value $0.001 per share, pursuant to Section 12(g) of the Securities Exchange Act of 1934, as amended, or the Exchange Act.

 

Grand Perfecta, Inc., is an “emerging growth company” and “smaller reporting company” as defined under the federal securities laws and, as such, may elect to comply with certain reduced public company reporting requirements in future reports that we file with the United States Securities and Exchange Commission, or SEC.

 

Unless the context otherwise required or otherwise noted, references in this Registration Statement to “Grand Perfecta,” the “Registrant,” the “Company,” “we,” “our” or “us” means Grand Perfecta, Inc., and our two wholly-owned subsidiaries: LinkBit Consulting Co, Ltd., or LinkBit, and Umajin Hong Kong Ltd., or Umajin HK. Our principal place of business is located at 21st Floor, So.Tower, New Pier Takeshiba, 1-16 -1, Kaigan, Minato-ku, Tokyo 105-0022. Our telephone number is +81-3-6403-8600.

 

FORWARD LOOKING STATEMENTS

 

This Registration Statement contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical fact, contained in this Registration Statement, including statements regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management, are forward-looking statements. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue,” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Although management believes that the assumptions underlying the forward looking statements included in this Registration Statement are reasonable, they do not guarantee our future performance, and actual results could differ from those contemplated by these forward looking statements. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward looking statements we make. We have included important cautionary statements in this Registration Statement that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.

 

You should read this Registration Statement and the documents that we have filed as exhibits to this Registration Statement with the understanding that our actual future results may be materially different from what we expect. The forward-looking statements contained in this Registration Statement are made as of the date of this Registration Statement, and we do not assume any obligation to update any forward-looking statements except as required by applicable law.

 

WHERE YOU CAN FIND MORE INFORMATION ABOUT US

 

When this Registration Statement becomes effective, we will begin to file reports, proxy statements, information statements and other information with the SEC. You may read and copy this information, for a copying fee, at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for more information on its Public Reference Room. Our SEC filings will also be available to the public from commercial document retrieval services, and at the website maintained by the SEC at http://www.sec.gov.

 

Our Internet website address is http://www.g-perfecta.com. Information contained on the website does not constitute part of this Registration Statement. We have included our website address in this Registration Statement solely as an inactive textual reference. When this Registration Statement is effective, we will make available, through a link to the SEC’s website, electronic copies of the materials we file with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, the Section 16 reports filed by our executive officers, directors and 10% stockholders and amendments to those reports.

 

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Item 1. Business.

 

Company Overview and History

 

Grand Perfecta, Inc., a Nevada corporation, is engaged in the business of publishing and disseminating horse racing information and other content related to horse racing in Japan and the Japanese horse racing industry. Historically our operations have been conducted in Japan through our wholly-owned subsidiary, LinkBit. In May 2013, we expanded our operations to Hong Kong through the acquisition of Umajin HK in Hong Kong as a wholly-owned subsidiary.

 

Grand Perfecta was incorporated in the State of Nevada on March 25, 2002 as STI Holdings, Inc. (“STI”). On May 12, 2012 the Company completed an Agreement and Plan of Reorganization whereby it acquired 100% of the issued and outstanding shares of LinkBit for 25,000,000 common shares in a transaction accounted for as a recapitalization of LinkBit. The shares were issued in reliance on the exemption from registration set forth in Section 4(2) of the Securities Act of 1933 and Rule 506 promulgated thereunder. Effective March 29, 2013, the Company amended its Articles of Incorporation to change its name to Grand Perfecta, Inc. On May 27, 2013 the Company issued 272,668 shares in exchange for 100% of the issued and outstanding shares of Umajin HK.

 

In June 2014, we issued 3,000,000 common shares at a price of $1.00 per share and granted an option to purchase 3,000,000 additional common shares at an exercise price of $1.00 per share exercisable over a term of five years to a single accredited investor in reliance on the exemption from registration set forth in Section 4(a)(2) of the Securities Act of 1933 and Rule 506(b) promulgated thereunder.

 

On March 5, 2015, we issued a convertible debenture in the face amount of Japanese JPY200,000,000 (approximately US$1,665,279) to a single investor in reliance on the safe harbor provided for Regulation S adopted under the Securities Act of 1933. The debenture accrues simple interest at the rate of 1% per annum and is payable annually on the anniversary date of issuance. The principal and interest on the debenture is due March 5, 2016, and may be prepaid, in whole or in part, by Grand Perfecta at any time upon 10 days advance notice. The principal and accrued interest of the debenture is convertible at the election of the holder to common stock of Grand Perfecta at the rate of one common share for JPY130.9.

 

Horse Racing in Japan

 

Horse racing in Japan is a popular equestrian sport with approximately 16,000 horse races held each year, which are predominately flat and jump races. Horse racing is organized and managed by the Japan Racing Association (JRA) and National Association of Racing (NAR), both of which are subject to the supervision of the Ministry of Agriculture, Forestry and Fisheries. This system of government supervision and administration of horse racing is unique to Japan and, we believe, one of the main reasons horse racing in Japan is considered by many the best in the world.

 

The JRA manages horse racing events at ten major race courses in metropolitan areas that are called Chuo Keiba (meaning "central horse racing"). Chuo Keiba represents some of the richest racing in the world, with 2014 purses for graded stakes races beginning at JPY53 million (about US$440,000). The Japan Cup in November each year is a 2,400 meter invitational turf race and currently the richest turf race in the world with a purse in 2014 of JPY570 million (about US$4.7 million).

 

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The NAR manages approximately 14 smaller municipal race courses operated by local racing authorities, which is called Chihou Keiba (meaning "local horse racing"). Chihou Keiba consists primarily of dirt graded events, including the international Grade 1 race, Tokyo Daishōten.

 

In 2014, there were approximately 288 JRA racing days. NAR 2014 figures are not yet available, but in 2013 there were 1,272 NAR racing days. As of the end of 2013, there were 14 race courses for NAR races, and each course held races on days ranging from 52 to 163 days during 2013. ‘Racing days’ means the total number of race days of all courses. Total prize money is not yet available for 2014 but total prize money of JRA and NAR races in 2013 was approximately JPY74.78 billion (about US$635.6 million). On track pari-mutuel betting in 2013 was JPY145.95 million (about US$1.24 million), and off-track betting was JPY 2.62 billion (about US$22.2 million). The number of spectators attending JRA races in 2013 was approximately 6.1 million and attending NAR races was approximately 3.3 million.

 

The popularity and large fan following for horse racing in Japan, which translates into a large volume of betting, creates a demand by racing enthusiasts for information on breeding, race history of horses, jockeys, and other matters that may be factors in evaluating races and how to bet the horses. Our business focuses on meeting that demand for information.

 

Our Business

 

Our primary business is the delivery to subscribers and other consumers in Japan and Hong Kong:

 

· Information on horse racing through the Internet and by phone;

 

· Horse racing email magazines and providing support for print publications; and

 

· Other public events and media programs related to the horse racing industry.

 

Internet and Phone Services

 

We typically maintain 7-10 branded websites which each have different concepts and which are operated to meet the respective preferences of horse racing fans who are our subscribers. Every 3-5 years we redesign the websites or launch new services in response to trends and changes in preference of horse racing fans and add a fresh dimension to the websites. Presently we manage through our subsidiaries nine websites used to publish racing information for our subscribers. As of March 15, 2015 these include:

 

· Ban Kisha (Specific Reporter) Co., Ltd., publishes commentary from racing reporters and in-depth behind the scenes information on stables on its website at http://www.bkisya.net.

 

· Turf Agent Co., Ltd., publishes on its website at http://turfagent.jp information collected from racehorse owners. It provides current news about horse fair, horse-breeding center, etc. Turf Agent also publishes tips to better appreciate and enjoy horse racing with articles about how to evaluate racing performance in horses or remarkable horses in each race.

 

· Real Selector Co., Ltd., publishes on its website information directed to beginners in the appreciation and betting of horse racing on its website at www.real-selector.jp.

 

· Meru Uma Co., Ltd., publishes and distributes e-mail magazines to its subscribers on its website at http://mailuma.net/. Content is generated by persons with backgrounds as racing reporters in print and television media.

 

· Tau Project Co., Ltd., publishes analytics on horses and races known as “Next-generation betting ticket purchase theory” on its website at https://to-dai.jp/.

 

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· G1 Project Co., Ltd., publishes integrated statistical information on a wide range of elements and factors pertaining to horses, jockeys, tracks, races, and other matters on its website at http://www.g1-pro.jp.

 

· Teppan Chokyo Co., Ltd. publishes on its website at http://www.chokyo.jp/ information from a biological point of view in relation to horse training. A former reporter who is well known as a "Batai Shindan shi" (a consultant/evaluator of horse physiology, performance and health) gathers information from racing stables and publishes his analysis of the horses.

 

· LinkBit operates a website called ”Yoso ou” at http://keibagod.jp/ that publishes betting lines and provides other track tips and comments to subscribers. From time to time it also publishes feature articles on upcoming races.

 

· LinkBit also owns and operates Umajin.net on http://uma-jin.net/, which is a comprehensive source of general information related to horse racing, including current news, races and events, interviews, and race videos and pictures.

 

Subscribers to our Internet and phone information services pay access fees that ranges between $4.00 and $400.00, depending on the level of information access desired by the subscriber. Subscribers access the information service purchased with a personal user name and password for the Internet and a personal PIN for telephone access.

 

We prompt consumers to register themselves as a web or phone subscriber, free of charge by advertising in a variety of public media channels, including newspapers, magazines, internet, TV, and direct mail) and including advertising in our own media, and holding events. We are currently a party to two-year advertising agreements with Nikkan Sports Shinbun Co., Ltd., and Tokyo Sports Shinbunsha Co., Ltd., which we use to promote our services and brand name.

 

When subscribers take advantage of our free content we are effectively giving them a sample of what we have to offer through our websites that they can purchase. This free content also gives us the opportunity to upsell the subscriber. When a subscriber signs on to access our free content we gather information from the subscriber and then from the subscriber’s subsequent usage that enables us to ascertain preferences and interests, which we use to make more focused service offerings directly to the subscriber through the Internet. This process enables us to pursue a continual sales process with our subscribers. Generally, we experience a conversion rate of approximately 7% of free content subscribers making a decision to purchase one or mare additional services. We focus our efforts on increasing the number of first time subscribers accessing our free content and increasing our conversion rate to paying users.

 

Our wholly-owned subsidiary Umajin HK provides information about horse racing and soccer in Hong Kong for Hong Kong residents. The horse racing information provided includes data analysis, and the soccer information includes analytical articles. People can browse the information on the website or via email by registering with Umajin HK’s internet site. Umajin HK advertises its services on internet sites and newspapers to attract customers.

 

At January 31, 2015, we had approximately 1.2 million non-paying and 83,000 paying subscribers to our Internet and phone services in Japan and approximately 950 subscribers in Hong Kong.

 

Magazines and Other Publications

 

LinkBit previously published Umajin , a horse racing magazine in Japan, but transferred that business to Umajin Co. Ltd. (referred to as Umajin Japan). LinkBit owns and operates Umajin.net, which is a publishing base for e-mail magazines. LinkBit also works with Umajin Japan with respect to its publishing business, providing services such as consulting, planning of magazines, and other collaborations. LinkBit also purchases information and interviews that Umajin Japan has collected and distributes it via Umajin.net after preparing it for publishable form. Umajin.net has approximately 480,000 non-paying subscribers.

 

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LinkBit also publishes information on Umajin.net consisting of feature stories on noteworthy events, interviews with people in the horse racing industry, such as jockeys, trainers, and others, horse racing predictions and analysis, and distributes magazines by email. In addition, LinkBit has overseen the production and management of TV shows and events in the horse racing and sports industry. LinkBit assists with the production of “Ba Kyun!” a BS Fuji TV program that airs every Saturday evening, which provides publicity to our brand and thus drives revenue for us.

 

Content

 

We have a team that focuses on establishing and maintaining relationships with horse owners, trainers, jockeys, and others, all of which are a primary source of current information on what is going on at the track that we make available to our subscribers.

 

There are approximately 470 jockeys, 730 horse trainers, and 6,900 horse owners actively working today in Japan. We have connections with almost all of the jockeys and trainers, and with many of the owners as well. In addition, we gather information from more than 70 people who were formerly employed or otherwise affiliated with the horse racing industry, such as former jockeys and horse trainers. We also purchase horse racing information collected by Umajin Japan. Using this information, we calculate what we determine to be the value and capability of race horses using techniques we developed for analyzing 10 years of data for horse racing in Japan and four years of data for horse racing in Hong Kong. We also provide the information derived from this analysis to certain of our subscribers

 

Competition

 

We believe we are the leading subscription service for horse racing information in Japan. With the popularity of horse racing in Japan and the high demand for information among enthusiasts, there are a substantial number of publications and other information sources that we compete with. We compete with these other publications and services on the basis of the content we produce, which is a result of our focus on cultivating information sources that we believe allows us to provide better information than our competitors can provide.

 

Specifically, we believe our competitive advantage is based upon:

 

· Our information-gathering ability (including the quantity and quality of information we gather);

 

· Our relationships with affiliates and industry personnel on-site;

 

· Our data analysis programs;

 

· The techniques we use to present and distribute information and analysis in a manner that is highly usable by our customers;

 

· The volume and quality of information we provide free of charge; and

 

· Our integrated approach to providing service to our customers.

 

Intellectual Property

 

We hold one Trademark: UMAJIN; which is registered in Japan, under registration number 5319066, and which was registered as of April 23, 2010.

 

Employees

 

Grand Perfecta has approximately 96 employees, including seven management level employees and seven part-time employees. Four of the employees work through our subsidiary in Hong Kong and the rest in Japan.

 

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Item 2. Financial Information.

 

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

 

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes appearing at the end of this Registration Statement. Some of the information contained in this discussion and analysis or set forth elsewhere in this Registration Statement, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. You should know that there are many factors, both within and outside our control, that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. The forward-looking statements contained in this Registration Statement are made as of the date of this Registration Statement, and we do not assume any obligation to update any forward-looking statements except as required by applicable law.

 

Organization

 

In May 2012 Grand Perfecta completed an Agreement and Plan of Reorganization whereby it acquired 100% of the issued and outstanding shares of LinkBit for 25,000,000 common shares in a transaction accounted for as a recapitalization of LinkBit. In May 2013 the Company issued 272,668 shares in exchange for 100% of the issued and outstanding shares of Umajin HK.

 

Nature of Business

 

The Company is engaged in the business of transmitting and providing horse racing information via various types of media, including the various websites owned and operated by the wholly owned subsidiaries of LinkBit and Umajin HK.

 

Critical Accounting Policies

 

Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States, which require that we make certain assumptions and estimates that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of net revenue and expenses during each reporting period.  On an ongoing basis, management evaluates its estimates, including those related to collection of receivables, impairment of goodwill, contingencies, litigation and income taxes. Management bases its estimates and judgments on historical experiences and on various other factors believed to be reasonable under the circumstances. Actual results under circumstances and conditions different than those assumed could result in material differences from the estimated amounts in the financial statements.  Our significant accounting policies are more fully described in the notes to our consolidated financial statements.

 

Basis of Presentation

 

The accompanying consolidated financial statements of the Company have been prepared in accordance with principles generally accepted in the United States of America and include the accounts of Grand Perfecta and its wholly-owned subsidiaries LinkBit and Umajin HK. All intercompany balances and transactions have been eliminated in consolidation.

 

Foreign Exchange

 

The Company’s primary operations are conducted in Japan and performed by its wholly owned subsidiaries LinkBit and Umajin HK. LinkBit’s functional currency is the Japanese Yen and Umajin HK’s functional currency is the Hong Kong Dollar.

 

The financial statements of each entity are prepared using the applicable functional currencies, and have been translated into U.S. dollars (“USD”). Assets and liabilities are translated into USD at the applicable exchange rates at period-end. Stockholders’ equity is translated using historical exchange rates. Revenue and expenses are translated at the average exchange rates for the period. Any translation adjustments are included as foreign currency translation adjustments in accumulated other comprehensive income in the Company’s stockholders’ equity.

 

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The following rates were used to translate the accounts of LinkBit and Umajin HK into USD at the following balance sheet dates.

 

    Balance Sheet Dates  
    January 31,     July 31,     July 31,  
    2015     2014     2013  
                   
Japanese Yen to USD     0.0085       0.0098       0.0102  
Hong Kong Dollars to USD     0.1290       0.1290       0.1289  

 

The following rates were used to translate the accounts of LinkBit and Umajin HK into USD for the following operating periods.

 

    For the Six Months Ended     For the Year Ended  
    January 31,     January 31,     July 31,     July 31,  
    2015     2014     2014     2013  
                         
Japanese Yen to USD     0.0090       0.0100       0.0099       0.0113  
Hong Kong Dollars to USD     0.1290       0.1290       0.1290       0.1289  

 

Intangible Assets

 

The Company’s intangible assets include goodwill, which represents the excess of purchase price over tangible and intangible assets acquired, less liabilities assumed arising from business acquisitions. Goodwill is not amortized, but is reviewed for potential impairment on an annual basis at the reporting unit level. As required by the "Intangibles - Goodwill and Other" topic of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”), the Company conducted an analysis of the goodwill on its single reporting unit using the Company. For the fiscal years ending July 31, 2014 and 2013, the assessment for impairment found that there is no impairment of goodwill. The Company has no accumulated impairment losses on goodwill.

 

Long-Lived Assets

 

In accordance with ASC 360-10, the Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that their net book value may not be recoverable. When such factors and circumstances exist, the Company compares the projected undiscounted future cash flows associated with the related asset or group of assets over their estimated useful lives against their respective carrying amount. Impairment, if any, is based on the excess of the carrying amount over the fair value, based on market value when available, or discounted expected cash flows, of those assets and is recorded in the period in which the determination is made. There was no impairment of assets identified during the year ended July 31, 2014 or 2013 or for the six months ended January 31, 2015 or 2014 (unaudited).

 

Fair Value of Financial Instruments

 

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, based on the Company’s principal or, in the absence of a principal, most advantageous market for the specific asset or liability.

 

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GAAP provides for a three-level hierarchy of inputs to valuation techniques used to measure fair value, defined as follows:

 

· Level 1 — Inputs that are quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity can access.

 

· Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability, including:

 

  Quoted prices for similar assets or liabilities in active markets

  Quoted prices for identical or similar assets or liabilities in markets that are not active

  Inputs other than quoted prices that are observable for the asset or liability

  Inputs that are derived principally from or corroborated by observable market data by correlation or other means

 

· Level 3 — Inputs that are unobservable and reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances (e.g., internally derived assumptions surrounding the timing and amount of expected cash flows). The Company did not measure any financial instruments presented on the consolidated balance sheets at fair value on a recurring basis using significantly unobservable inputs (Level 3) as of July 31, 2014 or 2013.

 

The Company has determined that the book value of its outstanding financial instruments as of January 31, 2015 (unaudited), July 31, 2014 and 2013 approximates the fair value.

 

Concentration of Credit Risk

 

Financial instruments that potentially expose the Company to concentration of credit risk include cash, accounts receivable, notes receivable, and amounts due from related parties. The Company maintains its cash in banks located in Japan and Hong Kong in financial institutions with high credit ratings. Substantially all of the Company’s revenues are generated from customers in Japan. The Company conducts periodic reviews of the financial condition and payment practices of its customers and note receivable holders. The Company has not experienced significant losses relating to these concentrations in the past.

 

Revenue Recognition

 

The Company’s revenue consists primarily of sales of comprehensive and informative horse racing literature through multiple websites focusing on all aspects of the horse racing industry in Japan. The Company recognizes revenue on arrangements in accordance with ASC 605, Revenue Recognition. Revenue is recognized only when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured. Revenues are presented net of refunds, credits and known and estimated credit card chargebacks. The Company reports revenue net of any required taxes collected from customers and remitted to government authorities, with the collected taxes recorded as current liabilities until remitted to the relevant government authority. Services purchased by customers in advance of the services being performed are recorded as deferred revenue.

 

Income Taxes

 

The Company accounts for income taxes in accordance with ASC 740, Income Taxes, using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

 

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Recent Accounting Pronouncements 

 

In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 creates a new topic in the ASC Topic 606 and establishes a new control-based revenue recognition model, changes the basis for deciding when revenue is recognized over time or at a point in time, provides new and more detailed guidance on specific topics, and expands and improves disclosures about revenue. In addition, ASU 2014-09 adds a new Subtopic to the Codification, ASC 340-40, Other Assets and Deferred Costs: Contracts with Customers, to provide guidance on costs related to obtaining a contract with a customer and costs incurred in fulfilling a contract with a customer that are not in the scope of another ASC Topic. The guidance in ASU 2014-09 is effective for public entities for annual reporting periods beginning after December 15, 2016, including interim periods therein. Early application is not permitted. Management is in the process of assessing the impact of ASU 2014-09 on the Company’s financial statements.

 

Results of Operations for the Six Months Ended January 31, 2015 and 2014

 

The following are the results of our operations for the six months ended January 31, 2015 as compared to the six months ended January 31, 2014:

 

    For the Six Months Ended        
    January 31,     January 31,        
    2015     2014     $ Change  
    (Unaudited)     (Unaudited)        
                   
Net sales   $ 9,512,086     $ 11,770,121     $ (2,258,035 )
Cost of sales     2,018,655       2,090,964       (72,309 )
Gross profit     7,493,431       9,679,157       (2,185,726 )
                         
Operating Expenses:                        
Depreciation expense   $ 56,645     $ 117,851     $ (61,206 )
Advertising     453,844       686,390       (232,546 )
Commissions     1,310,202       1,686,063       (375,861 )
Rent expense     416,658       410,102       6,556  
Salaries and wages     2,760,283       2,603,463       156,820  
Other general and administrative expenses     1,129,539       1,322,658       (193,119 )
Total operating expenses     6,127,171       6,826,527       (699,356 )
                         
Income from operations     1,366,260       2,852,630       (1,486,370 )
                         
Other Income (Expense):                        
Other income (loss)     40,080       (20,121 )     60,201  
Gain on exchange     24,590       18,271       6,319  
Interest income     7,022       9,732       (2,710 )
Interest expense     (618,387 )     (638,145 )     19,758  
Total other income (expense)     (546,695 )     (630,263 )     83,568  
                         
Net income before provision for income taxes     819,565       2,222,367       (1,402,802 )
Provision for income taxes     366,473       1,125,334       (758,861 )
Net income   $ 453,092     $ 1,097,033     $ (643,941 )

 

Net Sales

 

Our net sales consist primarily of information and other content relating to the horse racing industry in Japan sold to customers through our websites. Our net sales for the six months ended January 31, 2015 were $9,512,086, which represented a decrease of $2,258,035 from the same period in 2014. Net sales decreased in part due to an increase in the consumption tax rate, which increased from 5% as of January 31, 2014 to 8% as of January 31, 2015. In addition, we planned to start a new service in late 2014, which was delayed until February 2015. We expect this service to generate an increase in sales during future quarters.

 

9
 

 

Cost of Sales

 

Cost of sales for the six months ended January 31, 2015 decreased by $72,309 as compared to the same period in 2014. Overall, our cost of sales decreased as a result of the decrease in net sales. However, cost of sales decreased at a lower rate than the decrease in net sales for the period as many of our cost of sales, including the maintenance of websites and operation of television programs, are fixed in nature.

 

 

Operating Expenses

 

Total operating expenses for the six months ended January 31, 2015 were $6,127,171, which represented a decrease of $699,356 from the same period in 2014. Operating expenses decreased primarily due to a decrease in advertising costs of $232,546 resulting from a reduction in print advertising due to lower than expected response rates, as well as a decrease in commission expenses resulting primarily from the decrease in net sales for the period. These decreases were partially offset by an increase in salary and wages of $156,820 due to hiring of additional staff to manage expected increases in volume.

 

Other Income/ (Expenses)

 

Total other expense for the six months ended January 31, 2015 amounted to $546,695, which decreased by $83,568 as compared to the same period in 2014. Other expenses for the six months ended January 31, 2015 consisted primarily of interest expense of $618,387, which decreased by $19,758 from the same period in 2014 due to a reduction of the outstanding notes payable during the six months ended January 31, 2015. In addition, during the six months ended January 31, 2014, we also had a loss on the disposal of property and equipment of $22,759. We did not have any similar losses during the six months ended January 31, 2015.

 

Results of Operations for the Years Ended July 31, 2014 and 2013

 

The following are the results of our operations for the year ended July 31, 2014 compared to the year ended July 31, 2013:

 

    For the Year Ended        
    July 31,     July 31,        
    2014     2013     $ Change  
                   
Net sales   $ 22,233,442     $ 20,273,757     $ 1,959,685  
Cost of sales     5,049,288       3,974,192       1,075,096  
Gross profit     17,184,154       16,299,565       884,589  
                         
Operating Expenses:                        
Depreciation expense   $ 234,873     $ 466,656       (231,783 )
Advertising     1,711,855       1,562,355       149,500  
Commissions     3,319,333       3,048,506       270,827  
Rent expense     845,058       899,698       (54,640 )
Salaries and wages     5,234,053       6,324,741       (1,090,688 )
Other general and administrative expenses     2,922,637       2,851,516       71,121  
Total operating expenses     14,267,809       15,153,472       (885,663 )
                         
Income from operations     2,916,345       1,146,093       1,770,252  
                         
Other Income (Expense):                        
Other income (loss)     6,883       36,292       (29,409 )
Gain (loss) on exchange     32,116       40,824       (8,708 )
Interest income     17,785       19,524       (1,739 )
Interest expense     (1,398,742 )     (1,452,592 )     53,850  
Total other income (expense)     (1,341,958 )     (1,355,952 )     13,994  
                         
Net income (loss) before provision for income taxes     1,574,387       (209,859 )     1,784,246  
Provision for income taxes     781,889       (15,135 )     797,024  
Net income (loss)   $ 792,498     $ (194,724 )   $ 987,222  

 

10
 

 

Net Sales

 

Our net sales consist primarily of information and other content relating to the horse racing industry in Japan sold to customers through our websites. Our net sales for the year ended July 31, 2014 were $22,233,442, which represented an increase of $1,959,685 as compared to the year ended July 31, 2013. Net sales increased due to increased order volume from our websites during the year ended July 31, 2014 as compared to 2013.

 

Cost of Sales

 

Cost of sales for the year ended July 31, 2014 increased by $1,075,096 as compared to the year ended July 31, 2013. Overall, our cost of sales increased as a result of the increase in net sales. However, cost of sales increased at a higher rate than the corresponding increase to net sales primarily due to a television program started in January 2013 which resulted in an increase to cost of sales of approximately $600,000 during the year ended July 31, 2014 as compared to the year ended July 31, 2013.

 

Operating Expenses

 

Total operating expenses for the year ended July 31, 2014 were $14,267,809, which represented a decrease of $885,663 from the year ended July 31, 2013. Operating expenses decreased primarily due to a decrease in salary and wages of $1,090,668 resulting from the decrease in director salaries as a cost cutting strategy. Depreciation expense also decreased by $231,783 due to the disposal of property and equipment in prior years which reduced the future depreciation amounts. These decreases were partially offset by an increase to commission expense of $270,827 resulting from the increase in net sales for the period, as well as an increase to advertising costs of $149,500.

 

11
 

 

Other Income/ (Expenses)

 

Total other expense for the year ended July 31, 2014 amounted to $1,341,958, which decreased by $13,994 as compared to the year ended July 31, 2013. Other expenses for the year ended July 31, 2014 consisted primarily of interest expense of $1,398,742, which decreased by $54,850 from the year ended July 31, 2013 due to a reduction of the outstanding notes payable during the year.

 

Liquidity and Capital Resources

 

As of January 31, 2015, we had cash of $97,872 and a working capital deficit of $5,761,716 as compared to cash of $1,880,494 and a working capital deficit of $6,591,601 as at July 31, 2014.The decrease in cash as of January 31, 2015 was primarily the result of $2,940,000 in proceeds from sale of common stock received during the year ended July 31, 2014, of which a portion was used to fund the operating activities of the Company, as well as to pay down outstanding notes payable with higher interest rates during the six months ended January 31, 2015.

 

In March 2015, we issued a convertible debenture in the face amount of Japanese JPY200,000,000 (approximately US$1,665,279). The debenture accrues simple interest at the rate of 1% per annum and is payable annually on the anniversary date of issuance. The principal and interest on the debenture is due March 5, 2016, and may be prepaid, in whole or in part, by Grand Perfecta at any time upon 10 days advance notice. The principal and accrued interest of the debenture is convertible at the election of the holder to common stock of Grand Perfecta at the rate of one common share for JPY130.9. We intend to continue to improve our balance sheet by reducing short term liabilities and invest in promoting and expanding our services. The funds obtained through the debenture placement will facilitate that effort, but we believe that within the next 12 months we will need additional capital for pursuing our goals and funding operations. We intend to pursue additional debt or equity financings to meet our cash requirements, but there is no assurance additional capital will be available on terms acceptable to us.

 

The following is a summary of our cash flows from operating, investing and financing activities for the six months ended January 31, 2015 and 2014, as well as the years ended July 31, 2014 and 2013.

 

    Six Months Ended  
    January 31,     January 31,  
    2015     2014  
Cash flows from operating activities   $ (609,338 )   $ 1,097,942  
Cash flows from investing activities     292,968       (404,390 )
Cash flows from financing activities     (1,311,232 )     (483,787 )

 

    Year Ended  
    July 31,     July 31,  
    2014     2013  
Cash flows from operating activities   $ 650,509     $ 376,796  
Cash flows from investing activities     (886,964 )     (576,524 )
Cash flows from financing activities     1,949,719       341,405  

 

Net cash flows used in operating activities for the six months ended January 31, 2015 amounted to $609,338, compared to cash flows provided by operating activities of $1,097,942 for the six months ended January 31, 2014. Net cash flows from operating activities were lower during the six months ended January 31, 2015 due primarily to a lower net income of $453,092, compared to net income of $1,097,033 for the six months ended January 31, 2014. Net cash provided by investing activities amounted to $292,968 for the six months ended January 31, 2015, compared to net cash used in investing activities of $404,390 for the six months ended January 31, 2014. The increase in cash flows provided by investing activities during the six months ended January 31, 2015 was due primarily to increased collections of notes receivables outstanding from related parties. Net cash used in financing activities for the six months ended January 31, 2015 amounted to $1,311,232, which represented payments made on outstanding notes payable, as compared to $483,604 during the six months ended January 31, 2014. During the six months ended January 31, 2015, we paid down additional notes payable using proceeds received during the year ended July 31, 2014 from the sale of common stock.

 

12
 

 

Net cash flows provided by operating activities for the year ended July 31, 2014 amounted to $650,509, as compared to $376,796 for the year ended July 31, 2013. The increase in cash provided by operating activities for the year ended July 31, 2014 was primarily due to a higher net income of $792,498, as compared to a net loss of $194,724 for the year ended July 31, 2013. Net cash used in investing activities for the year ended July 31, 2014 amounted to $886,964, compared to net cash used in investing activities of $576,524 for the year ended July 31, 2013. The increase in cash used in investing activities for the year ended July 31, 2014 was primarily the result of increased spending for notes receivable lending, net of collections made of previously outstanding balances. Net cash provided by financing activities for the year ended July 31, 2014 amounted to $1,949,719, as compared to $341,405 for the year ended July 31, 2013. During the year ended July 31, 2014, our net cash provided by financing activities consisted of proceeds of $2,940,000 from the sale of common stock, proceeds from notes payable borrowing of $2,571, less payments made on notes payable of $992,852. During the year ended July 31, 2013, we had no proceeds from the sale of stock, $1,708,084 in proceeds from notes payable borrowings, and $1,366,679 in cash used for the repayment of notes payable.

 

Description of Indebtedness

 

The following is a summary of our outstanding notes payable as of January 31, 2015, July 31, 2014 and July 31, 2013.

 

    January 31,     July 31,     July 31,  
    2015     2014     2013  
                   
Unsecured notes payable originally issued on September 30, 2009 and November 30, 2010, due in full on November 30, 2015, bearing interest at 3.5% per annum due monthly.   $ 115,039     $ 205,134     $ 442,150  
Unsecured note payable issued on December 9, 2011, due on demand, bearing interest at 8% per annum due monthly.                 90,553  
Unsecured note payable issued on December 9, 2011, due on demand, bearing interest at 1% per annum due monthly.     850,000       980,000       1,020,000  
Unsecured note payable issued on January 30, 2013, due on demand, bearing interest at 1% per annum due monthly.     425,000       490,000       510,000  
Unsecured note payable issued on July 23, 2013, due on August 5, 2016, bearing interest at 1.2% per annum due monthly.     213,860       327,712       510,000  
Unsecured note payable issued on September 30, 2013, due on September 30, 2014, bearing interest at 15% per annum due monthly.           784,000       1,020,000  
Unsecured note payable issued on December 20, 2011, due on December 20, 2014, bearing interest at 15% per annum due monthly.     1,785,000       2,058,000       2,142,000  
Unsecured note payable issued on June 28, 2013, due on October 31, 2015, bearing interest at 15% per annum due monthly.           196,000       204,000  
Unsecured note payable issued on August 2, 2010, due on July 31, 2015, bearing interest at 12% per annum due monthly.     1,232,500       1,715,000       2,040,000  
Unsecured note payable issued on January 20, 2011, due on January 31, 2015, bearing interest at 12% per annum due monthly.     1,700,000       1,960,000       2,040,000  
Unsecured note payable issued on July 20, 2011, due on July 20, 2015, bearing interest at 12% per annum due monthly.     255,000       294,000       357,000  
Unsecured notes payable, non-interest bearing, due on demand     50,641       58,527       83,097  
Total notes payable     6,627,040       9,068,373       10,458,800  
Less: current portion of notes payable     6,413,180       8,339,527       1,703,650  
Long-term portion of notes payable   $ 213,860     $ 728,846     $ 8,755,150  

 

13
 

 

Of the total debt outstanding of $6,627,040 as of January 31, 2015, $6,128,141 of the outstanding amounts are due within the next six months during the year ended July 31, 2015. The remaining amounts of $498,899 are all due during the year ended July 31, 2016.

 

Item 3. Properties.

 

Our principal business office is located at 21st Floor, South Tower, New Pier Takeshiba, 1-16 -1, Kaigan, Minato-ku, Tokyo, which we lease for a monthly lease payment of approximately JPY 5,210,230 (US$47,000). Our office in Hog Kong is located at Unit B, 19/F, Prosperous Commercial Building, 54 Jardine’s Bazaar, Causeway Bay, Hong Kong, which has a monthly lease cost of approximately HKD 6,200 (US$800).

 

Item 4. Security Ownership of Certain Beneficial Owners and Management.

 

The following table sets forth, as of March 15, 2015, the number of shares of Common Stock owned of record and beneficially by the named executive officers, directors and persons who beneficially own more than 5% of the outstanding shares of Common Stock of the Company. Unless otherwise noted below, the address of each director and executive officer of the Company is 21st Floor, South Tower, New Pier Takeshiba, 1-16-1, Kaigan, Minato-ku, Tokyo, Japan. There are no persons other than the directors and officers shown below who beneficially own more than 5% of the outstanding shares of Common Stock of the Company. The addresses for the greater than 5% stockholders are set forth in the footnotes to this table:

 

    Common Stock  
    Number of
Shares
Beneficially
Owned (1)
    Percentage
Outstanding
(2)
 
5% Beneficial Owners (other than officers and directors)                

Kazuaki Gotoh

34H One Legazpi Park

121 Rada st. Legazpi Village

Manila Philippines

    3,000,000       9.5%  
                 
Directors and Officers                
Shuya Watanabe     15,000,000  (3)     47.6%  
Takashi Ozawa     6,600,000        21.0%  
Masashi Takegaki     -0-       -0-  
Motonori Okai     1,400,000 (4)     4.6%  
Hideaki Takahashi     272,668       0.9%  
Akira Tanabe     1,250,000       4.0%  
Enrique Marchase     15,000       nil  
                 
All directors and named executive officers as a group (7 persons)     24,537,668       80.5%

 

 

 

 

(1) The Company believes that each stockholder has sole voting and investment power with respect to the shares of common stock listed, except as otherwise noted. The number of shares beneficially owned by each stockholder is determined under rules of the SEC, and the information is not necessarily indicative of ownership for any other purpose. Under these rules, beneficial ownership includes (i) any shares as to which the person has sole or shared voting power or investment power and (ii) any shares that the individual has the right to acquire within 60 days after the date of this filing through the exercise of any stock option, warrant, conversion of preferred stock or other right, but such shares are deemed to be outstanding only for the purposes of computing the percentage ownership of the person that beneficially owns such shares and not for any other person shown in the table. The inclusion herein of any shares of common stock deemed beneficially owned does not constitute an admission by such stockholder of beneficial ownership of those shares of common stock.

 

(Footnotes to table continue on next page.)

14
 

 

(2) Based on 30,500,000 shares of common stock issued and outstanding as of March 15, 2015.

 

(3) The figure for Mr. Wanatabe includes 100,000 shares of Series A Preferred Stock. Series A Preferred Stock is convertible to common stock at a rate of one for one and shares of Series A Preferred Stock vote with the common stock on all matters submitted to the stockholders, but each share of Series A Preferred Stock has the voting power of 10 common shares.

 

(4) Mr. Okai is the responsible director and sole owner of Umajin Japan, which is the holder of 1,400,000 shares of Grand Perfecta common stock. Accordingly, Mr. Okai may be deemed to hold voting and investment control with respect to those shares.

 

Item 5. Directors and Executive Officers.

 

The following table sets forth certain information about our executive officers, key employees and directors as of March 15, 2015.

 

Name   Age   Position
Shuya Watanabe   44   Chairman of the Board of Directors, Chief Executive Officer
Takashi Ozawa   43   President, Chief Operations Officer, Director
Masashi Takegaki   52   Chief Financial Officer, Secretary, Director
Motonori Okai   43   Director
Hideaki Takahashi   43   Director
Akira Tanabe   50   Director
Enrique Marchese   48   Director

 

Shuya Watanabe, Chairman of the Board of Directors of the Company, Chief Executive Officer

 

Mr. Watanabe has served as a representative director of LinkBit for over the past five years, and became Chairman of the Board and Chief Executive Officer of Grand Perfecta at the time of the business reorganization in May 2012.

 

Takashi Ozawa, President, Chief Operations Officer, Director

 

Mr. Ozawa has served as a representative director of LinkBit for over the past five years, and became President, Chief Operations Officer and a Director of Grand Perfecta at the time of the business reorganization in May 2012.

 

Masashi Takegaki, Chief Financial Officer, Secretary, Director

 

Mr. Takegaki has served as accounting section head and then accounting manager of LinkBit for over the past five years, and became a director of LinkBit in September 2013. He became Chief Financial Officer, Secretary and a Director of Grand Perfecta at the time of the business reorganization in February 2013.

 

Motonori Okai, Director

 

Mr. Okai was a director of LinkBit from March 2010 to March 2012, and he became a director of Grand Perfecta at the time of the business reorganization in May 2012. Mr. Okai has served as a representative director of Umajin Japan since April 2012, of which he is also the sole owner. Umajin Japan is engaged in the business of collecting and disseminating information about horse racing in Japan.

 

Hideaki Takahashi, Director

 

Mr. Takahashi became a director of LinkBit in March 2010, to provide Internet and web related marketing and promotional services. He has served as the sole director of Umajin HK from June 2012 to the present. He became a director of Grand Perfecta at the time of the business reorganization in May 2012.

 

15
 

 

Akira Tanabe, Director

 

Mr. Tanabe has served for over five years as the representative director of Clara Ltd., a company engaged in the restaurant business in Japan. He became a director of Grand Perfecta at the time of the business reorganization in May 2012. In December 2013 he founded Cheval Attache Co., Ltd., a company engaged in the business of offering computer content and application services.

 

Enrique Marchese, Director

 

Mr. Marchese is the founder and CEO of Lares Loreno Private Capital, a boutique merger and acquisition advisory firm that began operation in 2014. From 2009 to the formation of Lares Loreno, Mr. Marchese was an independent consultant on mergers, acquisitions, and financing. Mr. Marchese began his investment banking career at Donaldson, Lufkin & Jenrette in 1996 and subsequently held positions at Merrill Lynch and Deutsche Bank. Mr. Marchese graduated with an M.B.A. from the Booth School at the University of Chicago and holds a B.S. from the United States Naval Academy.

 

Item 6. Executive Compensation.

 

The following table sets forth the cash and other compensation paid by the Company to our named executive officers for the years ended July 31, 2014 and 2013.

 

Name and Principal Position   Year     Salary     Total  
                   
Shuya Watanabe     2014     $ 891,000     $ 891,000  
Chief Executive Officer     2013     $ 1,379,730     $ 1,379,730  
                         
Takashi Ozawa     2014     $ 772,200     $ 772,200  
Chief Operations Officer     2013     $ 1,379,730     $ 1,379,730  
                         
Masashi Takegaki     2014     $ 118,800     $ 118,800  
Chief Financial Officer     2013     $ N/A*     $ N/A*  

 

* Mr. Takegaki was engaged as a director in September 2013 for which he received no compensation during fiscal year 2013.

 

Narrative Discussion of Compensation Table

 

The board of directors of LinkBit determines directors’ and officers’ salaries annually or as circumstances may otherwise warrant, usually in the month of October each year. Compensation decisions are based on a number of considerations. Some of the relevant factors considered in any given year may include:

 

· Risk associated with serving as an officer or director;
· The budget for the next year and the portion of the budget allocated to compensation;
· Performance of the Company in the prior year, and the contribution of an officer to Company success;
· Company goals for the coming year and incentivizing officers with compensation; and
· The level of compensation customary in Japan for executives performing similar functions in companies of similar size or in the same industry.

 

Employee Benefit and Incentive Plans

 

We do not have any benefit or incentive plans for our executive officers.

 

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Director Compensation

 

The following table sets forth the cash and other compensation paid by the Company to our non-employee Directors for the years ended July 31, 2014 and 2013.

 

Name   Year     Cash Fees     Total  
                   
Motonori Okai     2014     $ -0-     $ -0-  
      2013     $ -0-     $ -0-  
                         
Hideaki Takahashi     2014     $ 118,800     $ 118,800  
      2013     $ 135,600     $ 135,600  
                         
Akira Tanabe     2014     $ -0-     $ -0-  
      2013     $ -0-     $ -0-  
                         
Enrique Marchese (1)     2014     $ 6,833     $ 6,833  
      2013     $ N/A     $ N/A  

 

(1) Mr. Marchese became a director of Grand Perfecta in May 2014. For his services as a director he is paid an annual fee of $30,000 in equal annual installments.

 

Indemnification of Officers and Directors

 

Our bylaws provide that we will indemnify our officers and directors against liability and loss suffered and expenses (including attorneys’ fees) incurred in connection with actions or proceedings brought against them by reason of their serving or having served as officers, directors or in other capacities, provided that the director or officer acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company, in an action brought by or on behalf of Grand Perfecta, a court determines to limit such indemnification. We shall be required to indemnify a director or officer in connection with an action or proceeding commenced by such director or officer only if the commencement of such action or proceeding by the director or officer was authorized in advance by the Board of Directors.

 

Item 7. Certain Relationships and Related Transactions, and Director Independence.

 

Certain Relationships and Related Transactions

 

LinkBit made advances in prior periods to Shuya Watanabe that resulted in a total obligation of JPY175,442,002 at March 2, 2015. Mr. Watanabe settled this obligation by assigning to LinkBit a note (the “Secured Note”) payable to him in the principal amount of JPY181,720,000 secured by 1,400,000 shares of Grand Perfecta common stock. LinkBit is obligated to pay to Mr. Watanabe any amount it collects in excess of excess of the JPY175,442,002. The Secured Note was issued to Mr. Watanabe by Umajin Japan, a company owned and controlled by Motonori Okai, a Director of Grand Perfecta, and is payable in three annual equal installment of principal plus accrued interest on the last day of February beginning with February 2016. Compounding interest accrues quarterly on the Secured Note at the minimum mid-term quarterly rate published from time to time by the US Internal Revenue Service.

 

Shuya Watanabe has made advances to LinkBit that totaled JPY120,000,000 at January 31, 2015. There is no stated interest on the advances and no stated maturity date.

 

LinkBit made advances in prior periods to Motonori Okai that resulted in a total obligation of JPY10,000,000 (US$83,000) at March 6, 2015, that Mr. Okai paid in full with cash at that time. Mr. Okai is the responsible director and sole owner of Umajin Japan, which received advances from LinkBit in prior periods that totaled JPY 34,404,442 (US$337,000) at July 31, 2014, and JPY 43,955,181 (US$374,000) at January 31, 2015. LinkBit’s practice is to offset service payment obligations to Umajin Japan against the amount owing to LinkBit under the advances. For the year ended July 31, 2014, the offsets totaled JPY 1,759,340 (US$17,000), and for the six-month period ended January 31, 2015 the offsets totaled JPY 1,411,037(US$13,000).

 

LinkBit made advances in prior periods to Takashi Ozawa that resulted in a total obligation of JPY 1,206,488 (US$10,000) at February 26, 2015, that Mr. Ozawa paid in full with cash at that time. Mr. Ozawa made an advance to LinkBit in the amount of JPY20,000,000 (US$170,000) on January 22, 2015. There is no stated interest on the advance and the maturity date is June 3, 2015.

 

17
 

 

Akira Tanabe is the representative director of Clara Ltd., which has made advances to LinkBit that totaled JPY150,000,000 (US$1,275,000) at January 31, 2015. The interest rate on the advances is 1% per annum, and is due upon demand.

 

LinkBit has an ongoing commercial relationship with Umajin Japan (of which Mr. Okai is a director and the sole owner), resulting in purchases by LinkBit from Umajin Japan in the amount of JPY148,571,435 in fiscal year 2013 and JPY147,467,77 in fiscal year 2014.

 

Additionally, LinkBit is a party to a services agreement with Cheval Attache Co., Ltd. (of which Mr.Tanabe is a representative director) dated August 2014. Cheval Attache delivers services relating to content and application development. LinkBit pays a monthly fee of JPY1,000,000 (approximately US$10,000) to Cheval Attache.

 

Additionally, Clara Ltd. (of which Mr.Tanabe is a representative director) has a loan to LinkBit; the outstanding principal amount thereunder is approximately JPY150,000,000 (approximately $1,500,000) and Clara received JPY1,500,000 (approximately $15,000) from LBC in the form of interest during fiscal year 2014.

 

Director Independence

 

Our Common Stock is not quoted or listed on any national exchange or interdealer quotation system with a requirement that a majority of our board of directors be independent and therefore, the Company is not subject to any director independence requirements. Under NASDAQ Rule 5605(a)(2)(A), a director is not considered to be independent if he or she also is an executive officer or employee of the corporation or if there have been certain transaction between the Company and the director or another company with which the director is affiliated. Under these standards Enrique Marchese is the only director that the Board of Directors has determined is an independent director.

 

Committees of the Board of Directors

 

Currently we do not have any standing committees of the Board of Directors. Until such time as formal committees are established, our Board of Directors will perform some of the functions associated with a nominating committee and a compensation committee, including reviewing all forms of compensation provided to our executive officers, directors, consultants and employees, including stock compensation. The Board will also perform the functions of an audit committee until we establish a formal audit committee.

 

Item 8. Legal Proceedings

 

There are presently no material pending legal proceedings to which the Company, or any of its subsidiaries, is a party or as to which any of its property is subject, and no such proceedings are known to the Company to be threatened or contemplated against it.

 

Item 9. Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters.

 

Market Information .

 

Our common stock is presently quoted on the OTC Pink Market under the symbol “GPIW.” We do not believe there was an active trading market for the shares before the fiscal quarter beginning November 1, 2013. Accordingly, we are not providing any historical market price information for periods prior to November 2013.

 

The following table sets forth for the respective periods indicated the prices of the common stock in the over-the-counter market, as reported and summarized on the OTC Bulletin Board.

18
 

 

 

Calendar Quarter Ended High ($) Low ($)
     
January 31, 2014 0.550 0.150
April 30, 2014 0.930 0.300
July 31, 2014 1.200 0.290
     
October 31, 2014 0.590 0.400
January 31, 2015 0.458 0.072

 

Holders

 

As of March 15, 2015, there were 596 record holders of an aggregate of 30,500,000 shares of Grand Perfecta common stock issued and outstanding.

 

Dividends

 

We have not paid any cash dividends to date and do not anticipate or contemplate paying dividends in the foreseeable future. It is the present intention of management to utilize all available funds for the development of our business.

 

Securities Authorized for Issuance under Equity Compensation Plans .

 

As of July 31, 2014, there were no equity securities authorized for issuance under any compensation plans.

 

Item 10. Recent Sales of Unregistered Securities

 

In May 2012, the Company completed an Agreement and Plan of Reorganization whereby it acquired 100% of the issued and outstanding shares of LinkBit for 25,000,000 common shares in a transaction accounted for as a recapitalization of LinkBit. The shares were issued to the former shareholders of LinkBit in exchange for all of the outstanding capital shares of LinkBit.

 

In May 2013, Grans Perfecta issued 227,668 shares to Mr. Hideaki Takahashi, the sole officer, director and shareholder of Umajin HK in exchange for 100% of the issued and outstanding shares of Umajin HK.

 

In June 2014, we issued 3,000,000 common shares at a price of $1.00 per share and granted an option to purchase 3,000,000 additional common shares at an exercise price of $1.00 per share exercisable over a term of five years to a single accredited investor.

 

No underwriters were involved in the foregoing issuances of securities. Each of the above transactions were exempt from the registration requirements of the Securities Act in reliance upon Section 4(a)(2) of the Securities Act or Regulation D promulgated under the Securities Act. The recipient of the securities in each of these transactions represented his, her or its intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were placed upon the stock certificates or book-entry positions representing the shares issued in each of these transactions.

 

In March 2015, we issued a convertible debenture in the face amount of Japanese JPY200,000,000 (approximately US$1,665,279) to a single investor in reliance on the safe harbor provided for Regulation S adopted under the Securities Act. The debenture accrues simple interest at the rate of 1% per annum and is payable annually on the anniversary date of issuance. The principal and interest on the debenture is due March 5, 2016, and may be prepaid, in whole or in part, by Grand Perfecta at any time upon 10 days advance notice. The principal and accrued interest of the debenture is convertible at the election of the holder to common stock of Grand Perfecta at the rate of one common share for JPY130.9.

 

19
 

 

Item 11. Description of Registrant’s Securities to be Registered

 

We are authorized to issue up to 50 million shares of common stock, par value $0.001 per share, and 10,000,000 shares of preferred stock, par value $0.001.

 

Common Stock

 

As of March 15, 2015, there were 30,500,000 shares of common stock were issued and outstanding. In addition, there was outstanding a warrant to purchase 3,000,000 share of common stock at an exercise price of $1.00, that expires in June 2019, and a debenture in the face amount of Japanese JPY200,000,000 that matures in March 2016 and is convertible to approximately 1,528,000 common shares.

 

All shares of common stock have equal rights and privileges with respect to voting, liquidation and dividend rights. Each share of common stock entitles the holder thereof to:

 

  · one non-cumulative vote for each share held of record on all matters submitted to a vote of the stockholders;
     
  · to participate equally and to receive any and all such dividends as may be declared by the board of directors, subject to any preference on outstanding shares of preferred stock; and
     
  · to participate pro rata in any distribution of assets available for distribution upon liquidation, subject to any preference on outstanding shares of preferred stock.

 

Common stockholders have no preemptive rights to acquire additional shares of common stock or any other securities and no redemption or sinking fund provisions are applicable to our common stock. Our common stock is not subject to redemption and carries no subscription or conversion rights. All outstanding shares of our common stock are fully paid and non-assessable. We have not declared any dividends and we do not plan to declare any dividends in the foreseeable future.

 

Preferred Stock

 

Grand Perfecta has only one class of preferred stock that is designated as Series A Convertible Preferred Stock. Under the rights, preferences and privileges of the Series A Convertible Preferred Stock, each share has the voting power of 10 common shares and votes with the common stock on all matters submitted to the stockholders for a vote. The Series A Convertible Preferred Stock has a $0.05 per share preference in liquidation over common stock and can be redeemed by the Company at any time, upon thirty days’ notice for $0.05 per share. Each share of Series A Convertible Preferred Stock is convertible into one share of common stock.

 

The remaining authorized and unissued shares of preferred stock may be issued from time to time in one or more series, with such distinctive serial designations as may be stated or expressed in the resolution or resolutions providing for the issue of such stock adopted from time to time by the Board of Directors; and in such resolution or resolutions providing for the issuance of shares of each particular series, the Board of Directors is also expressly authorized to fix: the right to vote, if any; the consideration for which the shares of such series are to be issued; the number of shares constituting such series, which number may be increased (except as otherwise fixed by the Board of Directors) or decreased (but not below the number of shares thereof then outstanding) from time to time by action of the Board of Directors; the rate of dividends upon which and the times at which dividends on shares of such series shall be payable and the preference, if any, which such dividends shall have relative to dividends on shares of any other class or classes or any other series of stock of the corporation; whether such dividends shall be cumulative or noncumulative, and if cumulative, the date or dates from which dividends on shares of such series shall be cumulative; the rights, if any, which the holders of shares of such series shall have in the event of any voluntary or involuntary liquidation, merger, consolidation, distribution or sale of assets, dissolution or winding up of the affairs of the corporation; the rights, if any, which the holders of shares of such series shall have to convert such shares into or exchange such shares for shares of any other class or classes or any other series of stock of the corporation or for any debt securities of the corporation and the terms and conditions, including price and rate of exchange, of such conversion or exchange; whether shares of such series shall be subject to redemption, and the redemption price or prices and other terms of redemption, if any, for shares of such series including, without limitation, a redemption price or prices payable in shares of common stock; the terms and amounts of any sinking fund for the purchase or redemption of shares of such series; and any and all other designations, preferences, and relative, participating, optional or other special rights, qualifications, limitations or restrictions thereof.

 

20
 

 

Item 12. Indemnification of Directors and Officers.

 

Nevada law provides that a Nevada corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the corporation (i.e., a “non-derivative proceeding”), by reason of the fact that he or she is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys’ fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with the action, suit or proceeding if he or she:

 

  · is not liable under Section 78.138 of the Nevada Revised Statutes for breach of his or her fiduciary duties to the corporation; or
     
  · acted in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful.

 

In addition, a Nevada corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor (i.e., a “derivative proceeding”) by reason of the fact that he or she is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses, including amounts paid in settlement and attorneys’ fees actually and reasonably incurred by him or her in connection with the defense or settlement of the action or suit if he or she:

 

· is not liable under Section 78.138 of the Nevada Revised Statute for breach of his or her fiduciary duties to the corporation; or

 

· acted in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the corporation.

 

Under Nevada law, indemnification may not be made for any claim, issue or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to the corporation or for amounts paid in settlement to the corporation, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.

 

To the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any non-derivative proceeding or any derivative proceeding, or in defense of any claim, issue or matter therein, the corporation shall indemnify him or her against expenses, including attorneys’ fees, actually and reasonably incurred in connection with the defense.

 

Further, Nevada law permits a Nevada corporation to purchase and maintain insurance or to make other financial arrangements on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise for any liability asserted against him or her and liability and expenses incurred by him or her in his or her capacity as a director, officer, employee or agent, or arising out of his or her status as such, whether or not the corporation has the authority to indemnify him or her against such liability and expenses.

 

21
 


Our bylaws provide that we will indemnify our officers and directors against liability and loss suffered and expenses (including attorneys’ fees) incurred in connection with actions or proceedings brought against them by reason of their serving or having served as officers, directors or in other capacities, provided that the director or officer acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company, unless, in an action brought by or on behalf of Grand Perfecta, a court determines to limit such indemnification. We shall be required to indemnify a director or officer in connection with an action or proceeding commenced by such director or officer only if the commencement of such action or proceeding by the director or officer was authorized in advance by the Board of Directors.

 

Item 13. Financial Statements and Supplementary Data

 

The financial statements and supplementary data are presented at the end of this registration statement starting with Index to Financial Statements on page F-1.

 

Item 14. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures

 

Not Applicable

 

Item 15. Financial Statements and Exhibits

 

Exhibit No.   Title of Document
     

2.1

 

Agreement and Plan of Reorganization dated May 12, 2012 between Grand Perfecta, Inc. (formerly known as STI Holdings, Inc.) and Link Bit Consulting Co. Ltd.

     
3.1   Articles of Incorporation of Grand Perfecta, Inc. (formerly known as STI Holdings, Inc.).
     
3.2   Bylaws of Grand Perfecta, Inc.
     
3.3  

Certificate of Amendment to Articles of Incorporation dated January 9, 2008, designating preferred stock as Series A Convertible Preferred Stock.

     
3.4  

Certificate of Amendment to Articles of Incorporation dated June 21, 2011, for Designation of Rights, Privileges, and Preferences of Series A Convertible Preferred Stock of Grand Perfecta, Inc. (formerly known as STI Holdings, Inc.).

     
3.5   Certificate of Amendment to Articles of Incorporation dated March 29, 2013, for name change of STI Holdings, Inc. to Grand Perfecta, Inc.
     

4.1

 

Convertible Debenture dated March 5, 2015 with respect to JPY200,000,000 principal amount of convertible notes bearing interest at 1.0% per annum.

     
10.1   Service Agreement dated August 1, 2014 between Link Bit Consulting Co., Ltd. and Cheval Attache Co., Ltd.
     

10.2

 

Loan Agreement dated March 26, 2012 between Clara Ltd., as lender, and Link Bit Consulting Co., Ltd., as borrower.

     
10.3   Revised Loan Agreement dated January 29, 2013 between Clara Ltd., as lender, and Link Bit Co., Ltd., as borrower.
     

10.4

 

Offshore Securities Purchase Agreement dated as of March 5, 2015 between Grand Perfecta, Inc. and Europlus International Ltd.

     
10.5   Link Bit Co., Ltd. office lease with Tokyo Teleport Center Co., Ltd. dated August 31, 2014.
     

10.6

 

Stock Purchase Agreement dated June 11, 2014 between Grand Perfecta, Inc. and Kuzuaki Goto. 

     

10.7

 

Lease (license) between Umajin Hong Kong Ltd and Apex Business Centre Limited dated as of June 25, 2014.

     

10.8

  Offer Letter between Grand Perfecta, Inc. and Enrique Marchese dated May 8, 2014..
     

21.1

  List of Subsidiaries

 

22
 

 

SIGNATURES

 

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

Date: April 15, 2015

   

GRAND PERFECTA, INC.

 

 

 

By: /s/ Shuya Watanabe                                           

Shuya Watanabe, Chief Executive Officer

 

 

 

 

 

 

 

 

 

23
 

 

Grand Perfecta, Inc.

Index to Financial Statements

 

         
    Page(s)  
Report of Independent Registered Public Accounting Firm     F-2  
Financial Statements        
Consolidated Balance Sheets     F-3  
Consolidated Statements of Operations     F-4  
Consolidated Statements of Comprehensive Income     F-5  
Consolidated Statement of Changes in Stockholders’ Equity (Deficit)     F-6  
Consolidated Statements of Cash Flows     F-7  
Notes to Consolidated Financial Statements     F-8  

 

 

 

 

 

 

F- 1
 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Board of Directors
Grand Perfecta, Inc.
Kaigan Minato-ku Tokyo Japan

We have audited the accompanying consolidated balance sheets of Grand Perfecta, Inc. and Subsidiaries as of July 31, 2014 and 2013, and the related consolidated statements of operations, stockholders' equity, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements.

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 audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Grand Perfecta, Inc. and Subsidiaries as of July 31, 2014 and 2013, and the results of their operations and their cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.


/s/ HJ & Associates, LLC

HJ & Associates, LLC
Salt Lake City, Utah
April 7, 2015

 

F- 2
 

 

GRAND PERFECTA, INC.

 

CONSOLIDATED BALANCE SHEETS

 

    January 31,     July 31,     July 31,  
    2015     2014     2013  
    (Unaudted)              
Assets                        
                         
Current assets                        
Cash   $ 97,872     $ 1,880,494     $ 160,525  
Accounts receivable, net     1,057,888       635,450       549,151  
Due from related parties     466,883       1,046,647       972,062  
Current portion of notes receivable     1,982,341       2,117,491       1,572,711  
Deferred tax assets, current portion     652,404       752,183       1,113,927  
Prepaid expenses and other current assets     73,316       66,661       78,765  
Total current assets     4,330,704       6,498,926       4,447,141  
                         
Property and equipment, net     281,313       374,257       554,305  
                         
Other assets                        
Long-term notes receivables, net of current portion     556,561       632,124       697,548  
Deferred tax assets, long-term portion     201,881       232,757       96,809  
Goodwill     6,561,188       7,549,434       7,853,432  
Other assets     534,151       610,063       510,658  
Total other assets     7,853,781       9,024,378       9,158,447  
Total assets   $ 12,465,798     $ 15,897,561     $ 14,159,893  
                         
Liabilities and Stockholders' Equity (Deficit)                        
                         
Current liabilities                        
Accounts payable and accrued expenses   $ 1,449,801     $ 2,605,935     $ 3,497,160  
Deferred revenues     1,258,006       1,390,210       1,394,982  
Current portion of notes payable     6,413,180       8,339,527       1,703,650  
Taxes payable     856,374       754,855       418,025  
Total current liabilities     9,977,361       13,090,527       7,013,817  
Long-term portion of notes payable, net of current portion     213,860       728,846       8,755,150  
Total liabilities     10,191,221       13,819,373       15,768,967  
                         
Commitments and contingencies                        
                         
Stockholders' equity (deficit)                        
Preferred stock, $0.001 par value, 100,000 shares authorized issued and outstanding as of January 31, 2015 (unaudited), July 31, 2014 and 2013     100       100       100  
Common stock, $0.001 par value, 500,000,000 shares authorized, 30,500,000, 30,500,000 and 27,500,000 shares issued and outstanding as of January 31, 2015 (unaudited), July 31, 2014 and 2013, respectively     30,500       30,500       27,500  
Additional paid-in capital     4,121,034       4,121,034       1,285,120  
Other comprehensive income     207,243       457,959       400,267  
Accumulated deficit     (2,123,444 )     (2,576,536 )     (3,369,034 )
Total GPI stockholders' equity (deficit)     2,235,433       2,033,057       (1,656,047 )
Noncontrolling interest     39,144       45,131       46,973  
Total stockholders' equity (deficit)     2,274,577       2,078,188       (1,609,074 )
Total liabilities and stockholders' equity   $ 12,465,798     $ 15,897,561     $ 14,159,893  

 

See accompanying notes to consolidated financial statements

 

F- 3
 

 

GRAND PERFECTA, INC.

 

CONSOLIDATED STATEMENTS OF OPERATIONS

 

    For the Six Months Ended     For the Year Ended  
    January 31,     January 31,     July 31,     July 31,  
    2015     2014     2014     2013  
    (Unaudited)     (Unaudited)              
                         
Net sales   $ 9,512,086     $ 11,770,121     $ 22,233,442     $ 20,273,757  
Cost of sales     2,018,655       2,090,964       5,049,288       3,974,192  
Gross profit     7,493,431       9,679,157       17,184,154       16,299,565  
                                 
Operating expenses:                                
Depreciation expense   $ 56,645     $ 117,851     $ 234,873     $ 466,656  
Advertising     453,844       686,390       1,711,855       1,562,355  
Commissions     1,310,202       1,686,063       3,319,333       3,048,506  
Rent expense     416,658       410,102       845,058       899,698  
Salaries and wages     2,760,283       2,603,463       5,234,053       6,324,741  
Other general and administrative expenses     1,129,539       1,322,658       2,922,637       2,851,516  
Total operating expenses     6,127,171       6,826,527       14,267,809       15,153,472  
                                 
Income from operations     1,366,260       2,852,630       2,916,345       1,146,093  
                                 
Other income (expense):                                
Other income (loss)     40,080       (20,121 )     6,883       36,292  
Gain (loss) on exchange     24,590       18,271       32,116       40,824  
Interest income     7,022       9,732       17,785       19,524  
Interest expense     (618,387 )     (638,145 )     (1,398,742 )     (1,452,592 )
Total other income (expense)     (546,695 )     (630,263 )     (1,341,958 )     (1,355,952 )
                                 
Net income (loss) before provision for income taxes     819,565       2,222,367       1,574,387       (209,859 )
Provision for (benefit from) income taxes     366,473       1,125,334       781,889       (15,135 )
Net income (loss)   $ 453,092     $ 1,097,033     $ 792,498     $ (194,724 )
                                 
Net income (loss) per share, basic and diluted   $ 0.01     $ 0.04     $ 0.03     $ (0.01 )
Weighted average number of common  shares outstanding, basic and diluted     30,500,000       27,500,000       27,869,863       27,275,889  

 

See accompanying notes to consolidated financial statements

 

F- 4
 

 

GRAND PERFECTA, INC.

 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

    For the Six Months Ended     For the Year Ended  
    January 31,     January 31,     July 31,     July 31,  
    2015     2014     2014     2013  
    (Unaudited)     (Unaudited)              
                         
Net income (loss)   $ 453,092     $ 1,097,033     $ 792,498     $ (194,724 )
Other comprehensive income (loss), net of tax:                                
Foreign currency translation adjustments     (250,716 )     38,163       57,692       410,218  
Total other comprehensive income, net of tax     (250,716 )     38,163       57,692       410,218  
Comprehensive income (loss)     202,376       1,135,196       850,190       215,494  
Comprehensive income (loss) attributable to noncontrolling interest     (5,987 )     (1,842 )     (1,842 )     (11,973 )
Comprehensive income attributable to GPI stockholders   $ 196,389     $ 1,133,354     $ 848,348     $ 203,521  

 

See accompanying notes to consolidated financial statements

 

 

 

F- 5
 

 

GRAND PERFECTA, INC.

 

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

 

    Preferred Stock     Common Stock     Additional Paid-in     Accumulated Other Comprehensive     Accumulated     Noncontrolling        
    Shares     Amount     Shares     Amount     Capital     Income     Deficit     Interest     Total  
Balance, July 31, 2012     100,000     $ 100       27,227,332     $ 27,227     $ 1,252,673     $ (9,951 )   $ (3,174,310 )   $ 58,946     $ (1,845,315 )
                                                                         
Issuance of shares for acquisition of subsidiary                 272,668       273       32,447                         32,720  
Foreign currency translation adjustment                                   410,218             (11,973 )     398,245  
Net loss                                         (194,724 )           (194,724 )
Balance, July 31, 2013     100,000       100       27,500,000       27,500       1,285,120       400,267       (3,369,034 )     46,973       (1,609,074 )
                                                                         
Stock issued for cash                 3,000,000       3,000       2,937,000                         2,940,000  
Capital withdrawal                             (101,086 )                       (101,086 )
Foreign currency translation adjustment                                   57,692             (1,842 )     55,850  
Net income                                         792,498             792,498  
Balance, July 31, 2014     100,000       100       30,500,000       30,500       4,121,034       457,959       (2,576,536 )     45,131       2,078,188  
                                                                         
Foreign currency translation adjustment (unaudited)                                   (250,716 )           (5,987 )     (256,703 )
Net income (unaudited)                                         453,092             453,092  
Balance, January 31, 2015 (unaudited)     100,000     $ 100       30,500,000     $ 30,500     $ 4,121,034     $ 207,243     $ (2,123,444 )   $ 39,144     $ 2,274,577  

 

  See accompanying notes to consolidated financial statements

 

F- 6
 

 

GRAND PERFECTA, INC.

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

    For the Six Months Ended     For the Year Ended  
    January 31,     January 31,     July 31,     July 31,  
    2015     2014     2014     2013  
    (Unaudited)     (Unaudited)              
Cash flows from operating activities                                
Net income (loss)   $ 453,092     $ 1,097,033     $ 792,498     $ (194,724 )
Adjustments to reconcile net loss to net cash used in operating activities:                                
Depreciation and amortization     56,645       117,851       234,873       466,656  
Loss (gain) on sale of property and equipment           22,759       22,531       (56,745 )
Provision for (benefit from) deferred taxes                 180,135       (262,344 )
                                 
Changes in operating assets and liabilities:                                
Accounts receivable     (536,513 )     (175,305 )     (108,931 )     5,156  
Prepaid expenses and other current assets     (15,993 )     6,383       9,216       33,200  
Other assets     (5,002 )     (73,545 )     (120,560 )     672,534  
Accounts payable and accrued expenses     (830,364 )     (958,321 )     (766,507 )     (124,095 )
Deferred revenue     55,282       196,280       50,443       (51,239 )
Taxes payable     213,515       864,807       356,811       (111,603 )
                                 
Net cash provided by (used in) operating activities     (609,338 )     1,097,942       650,509       376,796  
                                 
Cash flows from investing activities                                
Proceeds from sale of property and equipment                       177,975  
Purchase of property and equipment     (10,800 )     (72,537 )     (97,478 )     (17,240 )
Payments for lending to related parties, net     466,860       (195,036 )     (188,105 )     (260,078 )
Proceeds from collection of notes receivables     124,853       205,548       320,107       1,736,103  
Payments for notes receivable lending     (287,945 )     (342,365 )     (926,145 )     (1,890,470 )
Proceeds from acquisition of subsidiary                 4,657       4,773  
Purchase of investment units                       113  
Sale of investment units                       (327,700 )
Net cash provided by (used in) investing activities     292,968       (404,390 )     (886,964 )     (576,524 )
                                 
Cash flows from financing activities                                
Proceeds from sale of stock                 2,940,000        
Proceeds from notes payable           183       2,571       1,708,084  
Payments on note payable     (1,311,232 )     (483,787 )     (992,852 )     (1,366,679 )
                                 
Net cash provided by (used in) financing activities     (1,311,232 )     (483,604 )     1,949,719       341,405  
                                 
Effect of exchange rate fluctuations on cash     (155,020 )     (10,056 )     6,705       (20,807 )
                                 
Net change in cash     (1,782,622 )     199,892       1,719,969       120,870  
Cash, beginning of the period     1,880,494       160,525       160,525       39,655  
Cash, end of the period   $ 97,872     $ 360,417     $ 1,880,494     $ 160,525  
                                 
Supplemental disclosure of cash flow information:                                
Interest paid   $ 618,317     $ 638,145     $ 1,398,742     $ 1,452,592  
Income taxes paid   $ 152,958     $ 260,527     $ 358,812     $ 244,927  

 

See accompanying notes to consolidated financial statements

 

F- 7
 

 

GRAND PERFECTA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

1.  DESCRIPTION OF BUSINESS

 

Organization

 

Grand Perfecta, Inc. (“Grand Perfecta” or “GPI”) was incorporated in the State of Nevada on March 25, 2002, as STI Holdings, Inc. (“STI”). On May 12, 2012, the Company completed an Agreement and Plan of Reorganization whereby it acquired 100% of the issued and outstanding shares of Link Bit Consulting Co, Ltd. (“LinkBit” or the “Company”), a Japanese corporation, for 25,000,000 common shares in a transaction accounted for as a recapitalization of LinkBit. Effective March 29, 2013, STI amended its Articles of Incorporation to change its name to Grand Perfecta, Inc. On May 27, 2013, the Company issued 272,668 shares in exchange for 100% of the issued and outstanding shares of Umajin Hong Kong Ltd. (“Umajin HK”), a Hong Kong corporation that maintains an office in Hong Kong. The operations of Grand Perfecta, LinkBit and Umajin HK are collectively referred to as the “Company.”

 

Nature of Business

 

The Company is engaged in the business of transmitting and providing horse racing information via various types of media, including multiple websites owned and operated by the wholly owned subsidiaries of LinkBit and Umajin HK.

 

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The accompanying consolidated financial statements of the Company have been prepared in accordance with principles generally accepted in the United States of America (“GAAP”) and include the accounts of Grand Perfecta and its wholly-owned subsidiaries LinkBit and Umajin HK. All intercompany balances and transactions have been eliminated in consolidation.

 

In the opinion of management, the unaudited financial statements for the six-month periods ended January 31, 2015 and 2014, and accompanying notes contain all adjustments (consisting of normal recurring adjustments) necessary to present fairly the financial position and results of operations for such periods. The results of operations for the six-month period ended January 31, 2015 are not necessarily indicative of the results to be expected for the year ending July 31, 2015.

 

Use of Estimates

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported periods. Amounts could materially change in the future.

 

Foreign Exchange

 

The Company’s primary operations are conducted in Japan and performed by its wholly owned subsidiaries LinkBit and Umajin HK. LinkBit’s functional currency is the Japanese Yen and Umajin HK’s functional currency is the Hong Kong Dollar.

 

The financial statements of each entity are prepared using the applicable functional currencies, and have been translated into U.S. dollars (“USD”). Assets and liabilities are translated into USD at the applicable exchange rates at period-end. Stockholders’ equity is translated using historical exchange rates. Revenue and expenses are translated at the average exchange rates for the period. Any translation adjustments are included as foreign currency translation adjustments in accumulated other comprehensive income in the Company’s stockholders’ equity.

 

F- 8
 

 

The following rates were used to translate the accounts of LinkBit and Umajin HK into USD at the following balance sheet dates.

 

    Balance Sheet Dates  
    January 31,     July 31,     July 31,  
    2015     2014     2013  
                   
Japanese Yen to USD     0.0085       0.0098       0.0102  
Hong Kong Dollars to USD     0.1290       0.1290       0.1289  

 

The following rates were used to translate the accounts of LinkBit and Umajin HK into USD for the following operating periods.

 

    For the Six Months Ended     For the Year Ended  
    January 31,     January 31,     July 31,     July 31,  
    2015     2014     2014     2013  
                         
Japanese Yen to USD     0.0090       0.0100       0.0099       0.0113  
Hong Kong Dollars to USD     0.1290       0.1290       0.1290       0.1289  

 

Cash and Cash Equivalents

 

The Company considers all highly liquid holdings with maturities of three months or less at the time of purchase to be cash equivalents. The Company had no cash equivalents as of January 31, 2015 (unaudited), July 31, 2014 and 2013.

 

Accounts Receivable

 

Accounts receivable are carried at net realizable value, representing the outstanding balance less an allowance for doubtful accounts based on a review of all outstanding amounts. Management determines the allowance for doubtful accounts by regularly evaluating individual customer receivables and considering each customer's financial condition and credit history, as well as current economic conditions. Accounts receivable are written off when deemed uncollectible. Recoveries of accounts receivable previously written off are recorded when received. The Company had no allowance for doubtful accounts as of January 31, 2015 (unaudited), July 31, 2014 and 2013.

 

Property and Equipment

 

Property and equipment are recorded at historical cost and depreciated on a straight-line basis over their estimated useful lives once the individual assets are placed in service. Estimated useful lives for the assets are as follows.

 

Buildings and fixtures   8 - 43 years
Autos and trucks   2 - 6 years
Tools and equipment   4 - 10 years
Computer software   5 years

 

F- 9
 

 

Intangible Assets

 

The Company’s intangible assets include goodwill, which represents the excess of purchase price over tangible and intangible assets acquired, less liabilities assumed arising from business acquisitions.  Goodwill is not amortized, but is reviewed for potential impairment on an annual basis at the reporting unit level.  As required by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 350-20, the Company conducted an analysis of the goodwill on its single reporting unit using the Company. For the fiscal years ending July 31, 2014 and 2013, the assessment for impairment found that there is no impairment of goodwill. The Company has no accumulated impairment losses on goodwill.

 

Long-Lived Assets

 

In accordance with ASC 360-10, the Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that their net book value may not be recoverable. When such factors and circumstances exist, the Company compares the projected undiscounted future cash flows associated with the related asset or group of assets over their estimated useful lives against their respective carrying amount. Impairment, if any, is based on the excess of the carrying amount over the fair value, based on market value when available, or discounted expected cash flows, of those assets and is recorded in the period in which the determination is made. There was no impairment of assets identified during the year ended July 31, 2014 and 2013, or during the six months ended January 31, 2015 and 2014 (unaudited).

 

Fair Value of Financial Instruments

 

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, based on the Company’s principal or, in the absence of a principal, most advantageous market for the specific asset or liability.

 

GAAP provides for a three-level hierarchy of inputs to valuation techniques used to measure fair value, defined as follows:

 

Level 1 — Inputs that are quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity can access.

 

Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability, including:

 

  Quoted prices for similar assets or liabilities in active markets

  Quoted prices for identical or similar assets or liabilities in markets that are not active

  Inputs other than quoted prices that are observable for the asset or liability

  Inputs that are derived principally from or corroborated by observable market data by correlation or other means

 

Level 3 — Inputs that are unobservable and reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances (e.g., internally derived assumptions surrounding the timing and amount of expected cash flows).

 

The Company has determined that the book value of its outstanding financial instruments as of January 31, 2015 (unaudited), July 31, 2014 and 2013 approximates the fair value.

 

F- 10
 

 

Concentration of Credit Risk

 

Financial instruments that potentially expose the Company to concentration of credit risk include cash, accounts receivable, notes receivable, and amounts due from related parties. The Company maintains its cash in banks located in Japan and Hong Kong in financial institutions with high credit ratings. Substantially all of the Company’s revenues are generated from customers in Japan. The Company conducts periodic reviews of the financial condition and payment practices of its customers and note receivable holders. The Company has not experienced significant losses relating to these concentrations in the past.

 

Revenue Recognition

 

The Company’s revenue consists primarily of sales of comprehensive and informative horse racing content through its websites focusing on all aspects of the horse racing industry in Japan. The Company recognizes revenue on arrangements in accordance with ASC 605, Revenue Recognition. Revenue is recognized only when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured. Revenues are presented net of refunds, credits and known and estimated credit card chargebacks. The Company reports revenue net of any required taxes collected from customers and remitted to government authorities, with the collected taxes recorded as current liabilities until remitted to the relevant government authority. Rights to content purchased by customers in advance of the content being provided is recorded as deferred revenue.

 

Income Taxes

 

The Company accounts for income taxes in accordance with ASC 740, Income Taxes, using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

 

Advertising Costs

 

The Company expenses advertising costs as incurred. Advertising costs incurred amounted to $1,711,855 and $1,562,355 for the years ended July 31, 2014 and 2013, respectively. Advertising costs incurred amounted to $453,844 (unaudited) and $686,390 (unaudited) for the six months ended January 31, 2015 and 2014, respectively.

 

Basic and Diluted Earnings Per Share

 

In accordance with ASC 260, Earnings Per Share, the basic income per common share is computed by dividing the net income available to common stockholders after preferred stock dividends, by the weighted average common shares outstanding during the period.  Diluted earnings per share reflect per share amounts that would have resulted if diluted potential common stock had been converted to common stock. The Company had no common stock equivalents outstanding during the years ended July 31, 2014 or 2013, or during the six months ended January 31, 2015 (unaudited) or January 31, 2014 (unaudited). As a result, the basic and diluted earnings per share were the same for each of the periods presented.

 

Recent Accounting Pronouncements  

 

In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 creates a new topic in the ASC Topic 606 and establishes a new control-based revenue recognition model, changes the basis for deciding when revenue is recognized over time or at a point in time, provides new and more detailed guidance on specific topics, and expands and improves disclosures about revenue. In addition, ASU 2014-09 adds a new Subtopic to the Codification, ASC 340-40, Other Assets and Deferred Costs: Contracts with Customers, to provide guidance on costs related to obtaining a contract with a customer and costs incurred in fulfilling a contract with a customer that are not in the scope of another ASC Topic. The guidance in ASU 2014-09 is effective for public entities for annual reporting periods beginning after December 15, 2016, including interim periods therein. Early application is not permitted. Management is in the process of assessing the impact of ASU 2014-09 on the Company’s financial statements.

 

F- 11
 

 

3.  PROPERTY AND EQUIPMENT, NET

 

The Company’s property and equipment consisted of the following.

 

    January 31,     July 31,     July 31,  
    2015     2014     2013  
    (Unaudited)              
                         
Buildings and fixtures   $ 235,986     $ 272,079     $ 283,184  
Autos and trucks     309,057       356,324       351,346  
Tools and equipment     513,302       567,354       590,512  
Computer software     1,353,293       1,560,267       1,623,952  
Horses     24,853       41,347       30,794  
                         
      2,436,491       2,797,371       2,879,788  
                         
Less: accumulated depreciation     (2,155,178 )     (2,423,114 )     (2,325,483 )
                         
    $ 281,313     $ 374,257     $ 554,305  

 

Depreciation expense amounted to $234,873 and $466,656 for the year ended July 31, 2014 and 2013, respectively. Depreciation expense amounted to $56,645 (unaudited) and $117,851 (unaudited) for the six months ended January 31, 2015 and 2014, respectively.

 

4.  DUE FROM RELATED PARTIES

 

From time to time, the Company makes short-term revolving advances to related parties, including employees, directors and other related parties. All loans are unsecured and due within one year of the issuance date, and earn interest at rates ranging from 0% to 3% per annum. The total amounts outstanding from related parties amounted to $466,883 (unaudited), $1,046,647 and $972,062 as of January 31, 2015, July 31, 2014 and 2013, respectively. Management considers all of these outstanding advances to be fully collectible and has determined that no allowance is necessary. Subsequent to the year ended July 31, 2014, the Company settled the amounts due from related parties in full (see Note 11).

 

5.  NOTES RECEIVABLE

 

The Company’s outstanding notes receivable consist of unsecured advances, including interest ranging from 0% to 8% per annum, payable in full on dates extending through 2039. As of January 31, 2015, July 31, 2014 and 2013, the Company had total outstanding notes receivable of $2,538,902 (unaudited), $2,749,615 and $2,270,259, respectively. The portion of these outstanding notes receivables that were either due on demand or had scheduled due dates within one year amounted to $1,982,341 (unaudited), $2,117,491 and $1,572,711 as of January 31, 2015, July 31, 2014 and 2013, respectively.

 

The future scheduled maturities of outstanding notes receivables as of July 31, 2014 based on contractual due dates are as follows.

 

    Year Ended  
    July 31,  
       
2015   $ 2,117,491  
2016      
2017      
2018      
2019     13,442  
Thereafter             618,682  
Total           $ 2,749,615  

 

F- 12
 

 

6.  GOODWILL

 

The Company has recorded goodwill relating to the purchase of Media 21, Inc. in 2011, as well as the acquisition of Umajin HK on May 27, 2013. The following is a summary of the activity relating to goodwill for the years ended July 31, 2013 and 2014, as well as the six months ended January 31, 2015 (unaudited):

 

Balance as of July 31, 2012   $ 9,730,422  
Acquisition of Umajin HK     99,477  
Foreign currency translation adjustment     (1,976,467 )
Balance as of July 31, 2013     7,853,432  
Foreign currency translation adjustment     (303,998 )
Balance as of July 31, 2014     7,549,434  
Foreign currency translation adjustment     (988,246 )
Balance as of January 31, 2015 (unaudited)   $ 6,561,188  

 

The Company’s acquisition of Umajin HK on May 27, 2013 generated goodwill of $99,502 resulting from the issuance of 272,668 shares of common stock worth $32,720, as well as the assumption of $66,782 of net liabilities.

 

7.  NOTES PAYABLE

 

A summary of the Company’s outstanding notes payable is as follows:

 

    January 31,     July 31,     July 31,  
    2015     2014     2013  
    (Unaudited)              
                   
Unsecured notes payable originally issued on September 30, 2009 and November 30, 2010, due in full on November 30, 2015, bearing interest at 3.5% per annum due monthly.   $ 115,039     $ 205,134     $ 442,150  
Unsecured note payable issued on December 9, 2011, due on demand, bearing interest at 8% per annum due monthly.                 90,553  
Unsecured note payable issued on December 9, 2011, due on demand, bearing interest at 1% per annum due monthly.     850,000       980,000       1,020,000  
Unsecured note payable issued on January 30, 2013, due on demand, bearing interest at 1% per annum due monthly.     425,000       490,000       510,000  
Unsecured note payable issued on July 23, 2013, due on August 5, 2016, bearing interest at 1.2% per annum due monthly.     213,860       327,712       510,000  
Unsecured note payable issued on September 30, 2013, due on September 30, 2014, bearing interest at 15% per annum due monthly.           784,000       1,020,000  
Unsecured note payable issued on December 20, 2011, due on December 20, 2014, bearing interest at 15% per annum due monthly.     1,785,000       2,058,000       2,142,000  
Unsecured note payable issued on June 28, 2013, due on October 31, 2015, bearing interest at 15% per annum due monthly.           196,000       204,000  
Unsecured note payable issued on August 2, 2010, due on July 31, 2015, bearing interest at 12% per annum due monthly.     1,232,500       1,715,000       2,040,000  
Unsecured note payable issued on January 20, 2011, due on January 31, 2015, bearing interest at 12% per annum due monthly.     1,700,000       1,960,000       2,040,000  
Unsecured note payable issued on July 20, 2011, due on July 20, 2015, bearing interest at 12% per annum due monthly.     255,000       294,000       357,000  
Unsecured notes payable, non-interest bearing, due on demand     50,641       58,527       83,097  
Total notes payable     6,627,040       9,068,373       10,458,800  
Less: current portion of notes payable     6,413,180       8,339,527       1,703,650  
Long-term portion of notes payable   $ 213,860     $ 728,846     $ 8,755,150  

 

F- 13
 

 

Future scheduled maturities of long-term debt are as follows:

 

    Year Ended  
    July 31,  
       
2015   $ 8,339,527  
2016     728,846  
Total          $ 9,068,373  

 

8.  STOCKHOLDERS’ EQUITY

 

Preferred Stock

 

The Company is authorized to issue up to 100,000,000 shares of preferred stock with a par value of $0.001, with 100,000 shares designated as Series A Preferred Stock. The Series A Preferred Stock receive a 10 to 1 voting preference over common stock. Accordingly, for every share of Series A Preferred Stock held, the holder receives the voting rights equal to 10 shares of common stock. As such, the holders of the Series A Preferred Stock have the equivalent voting capability of 1,000,000 shares of common stock. The Series A Preferred Stock also has a $0.05 per share liquidation preference over common stock, and can be redeemed by the Company at any time, upon thirty days’ notice, for $0.05 per share.

 

The Company had 100,000 shares of Series A Preferred Stock issued and outstanding as of July 31, 2014 and 2013.

 

F- 14
 

 

Common Stock Transactions

 

During the year ended July 31, 2014, the Company sold 3,000,000 common shares of stock for cash proceeds of $2,940,000. There were no such transactions during the year ended July 31, 2013.

 

On May 27, 2013, the Company issued 272,668 common shares to Hideaki Takahashi, the sole shareholder of Umajin HK, in exchange for 100% of the issued and outstanding shares of Umajin HK, a Hong Kong corporation. Subsequent to this transaction, Umajin HK, became a wholly owned subsidiary of Grand Perfecta.

 

9.  INCOME TAXES

 

The Company records its deferred taxes under the liability method, whereby deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

 

Net deferred tax assets consisted of the following as of July 31, 2014 and 2013.

 

    July 31,     July 31,  
    2014     2013  
Deferred tax assets:                
Commission expenses   $ 285,443     $ 148,861  
Allowance for doubtful accounts     37,839       387,322  
Deposits     515,907       522,539  
Accrued salary     90,528       87,352  
Other     109,759       118,759  
                 
Deferred tax liabilities:                
Depreciation     (22,413 )     (20,543 )
Others     (1,850 )     (2,046 )
                 
Valuation allowance     (30,273 )     (31,509 )
                 
Net deferred tax assets   $ 984,940     $ 1,210,735  

 

The income tax provision differs from the amount of income tax determined by applying the Japanese income tax rate to pretax income from continuing operations for the years ended July 31, 2014 and 2013 due to the following.

 

    July 31,     July 31,  
    2014     2013  
Income tax (benefit) based on book income at Japanese statutory rate   $ 651,383     $ (75,823 )
Entertainment expense     136,953       140,820  
Additional taxes     1,611       25,414  
Tax loss carry-forwards utilized only for local tax     (53,424 )     (141,077 )
Tax rate difference between current tax and deferred tax assets     56,329       13,490  
Others     (10,963 )     22,041  
Total income tax provision (benefit)   $ 781,889     $ (15,135 )

 

F- 15
 

 

10.  COMMITMENTS AND CONTINGENCIES

 

Operating Leases

 

The Company leases its corporate headquarters in Toyko Japan, as well as the administrative offices of Umajin HK in Hong Kong under operating leases extending through August 31, 2015. The Company incurred rent expense of $845,058 and $899,698 for the years ended July 31, 2014 and 2013, respectively. The Company incurred rent expense of $416,658 (unaudited) and $410,102 (unaudited) for the six months ended January 31, 2015 and 2014, respectively.

Future minimum lease payments under non-cancelable operating leases are as follows.

 

Years ending July 31,      
       
2015   $ 465,724  
2016     38,011  
Total   $ 503,735  

 

Litigation

 

In the ordinary course of business, the Company may be or has been involved in legal proceedings from time to time. As of the date of this annual report, there have been no material legal proceedings relating to the Company.

 

11.  SUBSEQUENT EVENTS

 

In March 2015, the Company settled the entire amount of the outstanding balances due from related parties as of July 31, 2014 of $1,046,647 (see Note 4).

 

On March 5, 2015, the Company entered into a convertible note agreement for total principal borrowings of $1,680,000. The amounts are due one year after the issuance of the note on March 5, 2015, and bear interest at a rate of 1% per annum. At the option of the debt holder, beginning 40 days after the issuance of the note, the debt holder may convert the outstanding balance of the note into shares of the Company’s common stock at a conversion rate equal to one share per $1.10 of outstanding principal and accrued interest.

 

 

F- 16

Exhibit 2.1

 

AGREEMENT AND PLAN OF REORGANIZATION

 

 

 

THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made this 12th day of May 2012, by and among STI Holdings, Inc., a Nevada corporation ("STI"); Link Bit Consulting Co., Ltd., a Japanese corporation ("Link Bit"); and the persons listed in Exhibit A-1 hereof who are the owners of record of all the issued and outstanding stock of Link Bit who execute and deliver the Agreement ("Link Bit Stockholders"), based on the following:

 

Recitals

 

STI wishes to acquire all the issued and outstanding stock of Link Bit in exchange for stock of STI in a transaction intended to qualify as a tax-free exchange pursuant to section 368(a)(l)(B) of the Internal Revenue Code of 1986, as amended. The parties intend for this Agreement to represent the terms and conditions of such tax-free reorganization, which Agreement the parties hereby adopt.

 

 

Agreement

 

Based on the stated premises, which are incorporated herein by reference, and for and in consideration of the mutual covenants and agreements hereinafter set forth, the mutual benefits to the parties to be derived herefrom, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, it is hereby agreed as follows:

 

ARTICLE I

EXCHANGE OF STOCK

 

1.01 Exchange of Shares . On the terms and subject to the conditions set forth in this Agreement, on the Closing Date (as defined in Section 1.05 hereof), the Link Bit Stockholders shall assign, transfer, and deliver to STI, free and clear of all liens, pledges, encumbrances, charges, restrictions, or claims of any kind, nature, or description, all issued and outstanding shares of common stock of Link Bit (the "Link Bit Shares") held by Link Bit Stockholders which shares shall represent all issued and outstanding shares of Link Bit common stock, and STI agrees to acquire such shares on such date by issuing and delivering in exchange therefor an aggregate of 25,000,000 restricted shares of STI common stock, par value $0.001 per share, (the "STI Common Stock"). Such shares of STI Common Stock shall be issued pro rata based on the number of Link Bit Shares held and as set forth opposite the Link Bit Stockholder's respective names in Exhibit A-1. In any circumstances, the shareholders of Link Bit shall have a more than 92% equity interest including voting right in total STI shares at the time of the Closing, which includes any shares of preferred stock purchased.

 

1.02 Delivery of Certificates by Link Bit Stockholders. The transfer of Link Bit Shares by the Link Bit Stockholders shall be effected by the delivery to STI at the Closing (as set forth in Section 1.05 hereof) of certificates representing the transferred shares endorsed in blank or accompanied by stock powers executed in blank, with all signatures medallion guaranteed and with all necessary transfer taxes and other revenue stamps affixed and acquired at the Link Bit Stockholders' expense. If Link Bit has not issued physical certificates, the transfer may be accomplished by all of the shareholders of Link Bit transferring to STI one hundred percent (100%) of the shares of capital stock of Link Bit as set forth in Exhibit A attached through a resolution of the board of directors and signatures of shareholders agreeing and approving to such irrevocable transfer.

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1.03 Operation as Wholly-Owned Subsidiary. After giving effect to the transaction contemplated hereby, STI will own all the issued and outstanding shares of Link Bit and Link Bit will be a wholly-owned subsidiary of STI operating under the name Grand Perfecta.

 

1.04 Further Assurances. At the Closing and from time to time thereafter, the Link Bit Stockholders shall execute such additional instruments and take such other action as STI may reasonably request, without undue cost to the Link Bit Stockholders in order to more effectively sell, transfer, and assign clear title and ownership in the Link Bit Shares to STI.

 

1.05 Closing and Parties. The Closing contemplated hereby shall be held at a mutually agreed upon time place, or on another date to be agreed to in writing by the parties (the "Closing Date"). The Agreement may be closed at any time following approval by a majority of the stockholders of Link Bit as set forth in Section 5.02. The Closing may be accomplished by wire, express mail, overnight courier, conference telephone call or as otherwise agreed to by the respective parties or their duly authorized representatives.

 

1.06 Closing Events .

 

(a) STI Deliveries . Subject to fulfillment or waiver of the conditions set forth in Article IV , STI shall deliver to Link Bit at Closing all the following:

 

(i) A certificate of good standing from the secretary of State of Nevada, issued as of a date within five days prior to the Closing Date, certifying that STI is in good standing as a corporation in the State of Nevada;

 

(ii) Incumbency and specimen signature certificates dated the Closing Date with respect to the officers of STI executing this Agreement and any other document delivered pursuant hereto on behalf of STI;

 

(iii) Copies of the resolutions of STI's board of directors and shareholder minutes or consents authorizing the execution and performance of this Agreement and the contemplated transactions, certified by the secretary or an assistant secretary of STI as of the Closing Date;

 

(iv) The certificate contemplated by Section 4.02 , duly executed by the chief executive officer of STI;

 

(v) Certificates for 25,000,000 shares of STI Common Stock in the names of the Link Bit Stockholders and in the amounts set forth in Exhibit "A-1 ;"and

 

In addition to the above deliveries, STI shall take all steps and actions as Link Bit and Link Bit Stockholders may reasonably request or as may otherwise be reasonably necessary to consummate the transactions contemplated hereby.

 

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(b) Link Bit Deliveries . Subject to fulfillment or waiver of the conditions set forth in Article V , Link Bit and/or Link Bit Stockholder's shall deliver to STI at Closing all the following:

 

(i) A certificate of good standing from Japan, issued as of a date within five days prior to the Closing Date certifying that Link Bit is in good standing as a corporation in Japan;

 

(ii) Incumbency and specimen signature certificates dated the Closing Date with respect to the officers of Link Bit executing this Agreement and any other document delivered pursuant hereto on behalf of Link Bit;

 

(iii) Copies of resolutions of the board of directors and of the stockholders of Link Bit authorizing the execution and performance of this Agreement and the contemplated transactions, certified by the secretary or an assistant secretary of Link Bit as of the Closing Date;

 

(iv) The certificate contemplated by Section 5.03 , executed by the chief operating officer of Link Bit; and

 

(v) The certificate contemplated by Section 5.04 , dated the Closing Date, signed by the chief operating officer of Link Bit.

 

In addition to the above deliveries, Link Bit shall take all steps and actions as STI may reasonably request or as may otherwise be reasonably necessary to consummate the transactions contemplated hereby.

 

1.07. Termination .

 

(a) This Agreement may be terminated by the board of directors of either STI or Link Bit at any time prior to the Closing Date if:

 

(i) There shall be any actual or threatened action or proceeding before any court or any governmental body which shall seek to restrain, prohibit, or invalidate the transactions contemplated by this Agreement and which, in the reasonable judgment of such board of directors, made in good faith and based upon the advice of its legal counsel, makes it inadvisable to proceed with the transactions contemplated by this Agreement;

 

(ii) Any of the transactions contemplated hereby are disapproved by any regulatory authority whose approval is required to consummate such transactions or in the reasonable judgment of such board of directors, made in good faith and based on the advice of counsel, there is substantial likelihood that any such approval will not be obtained or will be obtained only on a condition or conditions which would be unduly burdensome, making it inadvisable to proceed with the exchange;

 

In the event of termination pursuant to this paragraph (a) of Section 1.07 , no obligation, right, or liability shall arise hereunder, and each party shall bear all of the expenses incurred by it in connection with the negotiation, preparation, and execution of this Agreement and the transactions contemplated hereby.

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(b) This Agreement may be terminated at any time prior to the Closing Date by action of the board of directors of STI if (i) stockholders of STI owning more than five percent (5%) of the issued and outstanding shares of STI Common Stock perfect their dissenter's rights with respect to the approval of this Agreement and the transactions contemplated hereby, (ii) Link Bit shall fail to comply in any material respect with any of its covenants or agreements contained in this Agreement or if any of the representations or warranties of Link Bit contained herein shall be inaccurate in any material respect or (iii) STI determines that there has been or is likely to be any material adverse change in the financial or legal condition of Link Bit. In the event of termination pursuant to this paragraph (b) of this Section 1.07 , no obligation, right, remedy, or liability shall arise hereunder. All parties shall bear their own costs incurred in connection with the negotiation, preparation, and execution of this Agreement and the transactions contemplated hereby, except as otherwise provided herein.

 

(c) This Agreement may be terminated at any time prior to the Closing Date by action of the board of directors of Link Bit if (i) stockholders of Link Bit owning more than five percent (5%) of the issued and outstanding shares of Link Bit Shares perfect their dissenter's rights with respect to the approval of this Agreement and the transactions contemplated hereby, (ii) STI shall fail to comply in any material respect with any of its covenants or agreements contained in this Agreement or if any of the representations or warranties of STI contained herein shall be inaccurate in any material respect, or (iii) Link Bit determines that there has been or is likely to be any adverse change in the financial or legal condition of STI. In the event of termination pursuant to this paragraph (c) of this Section 1.07 , no obligation, right, remedy, or liability shall arise hereunder. All parties shall each bear their own costs incurred in connection with the negotiation, preparation, and execution of this Agreement and the transactions contemplated hereby, except as otherwise provided herein.

 

ARTICLE II

REPRESENTATIONS, COVENANTS, AND WARRANTIES OF STI

 

As an inducement to, and to obtain the reliance of Link Bit, STI represents and warrants as follows:

 

2.01 Organization. STI is, and will be on the Closing Date, a corporation duly organized, validly existing, and in good standing under the laws of the State of Nevada and has the corporate power and is and will be duly authorized, qualified, franchised, and licensed under all applicable laws, regulations, ordinances, and orders of public authorities to own all of its properties and assets and to carry on its business in all material respects as it is now being conducted, and there are no other jurisdictions in which it is not so qualified in which the character and location of the assets owned by it or the nature of the material business transacted by it requires qualification, except where failure to do so would not have a material adverse effect on its business, operations, properties, assets or condition. The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated by this Agreement in accordance with the terms hereof will not, violate any provision of STI's articles of incorporation or bylaws, or other agreement to which it is a party or by which it is bound.

 

2.02 Approval of Agreement . STI has full power, authority, and legal right and has taken, or will take, all action required by law, its articles of incorporation, bylaws, and otherwise to execute and deliver this Agreement and to consummate the transactions herein contemplated. The board of directors of STI has authorized and approved the execution, delivery, and performance of this Agreement and the transactions contemplated hereby; subject to the approval of the STI stockholders and compliance with state and federal corporate and securities laws.

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2.03 Capitalization. The authorized capitalization of STI consists of 50,000,000 shares of common stock, $0.001 par value, of which 2,227,332 shares are issued and outstanding and 10,000,000 shares of preferred stock, $0.001 par value, 100,000 Series A are issued and outstanding. All issued and outstanding shares of STI are legally issued, fully paid, and nonassessable and not issued in violation of the preemptive or other right of any person. There are no dividends or other amounts due or payable with respect to any of the shares of capital stock of STI.

 

2.04 Financial Statements :

 

(a) Included in Schedule 2.04 are the Audited Financial Statements of STI as of December 31, 2011, and the related statements of operations, cash flows, and stockholders' equity for the period from inception, to December 31, 2011, including the notes thereto.

 

(b) The financial statements delivered pursuant to Section 2.04(a) have been prepared in accordance with generally accepted accounting principles consistently applied throughout the periods involved. The financial statements of STI present fairly, as of their respective dates, the financial position of STI. STI did not have, as of the date of any such balance sheets, except as and to the extent reflected or reserved against therein, any liabilities or obligations (absolute or contingent) which should be reflected in any financial statements or the notes thereto prepared in accordance with generally accepted accounting principles, and all assets reflected therein present fairly the assets of STI, in accordance with generally accepted accounting principles. The statements of revenue and expenses and cash flows present fairly the financial position and result of operations of STI as of their respective dates and for the respective periods covered thereby.

 

(c) STI has filed or will have filed as of the Closing Date all tax returns required to be filed by it from inception to the Closing Date. All such returns and reports are accurate and correct in all material respects. STI has no material liabilities with respect to the payment of any federal, state, county, local, or other taxes (including any deficiencies, interest, or penalties) accrued for or applicable to the period ended on the date of the most recent unaudited balance sheet of STI, except to the extent reflected on such balance sheet and adequately provided for, and all such dates and years and periods prior thereto and for which STI may at said date have been liable in its own right or as transferee of the assets of, or as successor to, any other corporation or entity, except for taxes accrued but not yet due and payable, and to STI's knowledge no deficiency assessment or proposed adjustment of any such tax return is pending, proposed or contemplated. Proper and accurate amounts of taxes have been withheld by or on behalf of STI with respect to all material compensation paid to employees of STI for all periods ending on or before the date hereof, and all deposits required with respect to compensation paid to such employees have been made, in complete compliance with the provisions of all applicable federal, state, and local tax and other laws. ToSTI's knowledge, none of such income tax returns has been examined or is currently being examined by the Internal Revenue Service, and no deficiency assessment or proposed adjustment of any such return is pending, proposed, or contemplated. STI has not made any election pursuant to the provisions of any applicable tax laws (other than elections that relate solely to methods of accounting, depreciation, or amortization) that would have a material adverse affect on STI, its financial condition, its business as presently conducted or proposed to be conducted, or any of its properties or material assets. There are no tax liens upon any of the assets of STI.

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There are no outstanding agreements or waivers extending the statutory period of limitation applicable to any tax return of STI.

 

(d) At Closing, STI will provide unaudited financial statements of STI for the period 1-1-2012 through of May 12, 2012, along with related workpapers and bank statements, showing no liabilities and $100,000 Cash.

 

2.04. Information . The information concerning STI set forth in this Agreement is complete and accurate in all material respects and does not contain any untrue statement of a material fact or omit to state a material fact required to make the statements made, in light of the circumstances under which they were made, not misleading. STI shall cause the schedules delivered by it pursuant hereto and the instruments delivered to Link Bit hereunder to be updated after the date hereof up to and including the Closing Date.

 

2.05 Absence of Certain Changes or Events . Except as set forth in this Agreement or the schedules hereto, since the date of the most recent STI balance sheet and included in the information referred to in Section 2.05:

 

(a) There has not been (i) any material adverse change in the business, operations, properties, level of inventory, assets, or condition of STI or (ii) any damage, destruction, or loss to STI (whether or not covered by insurance) materially and adversely affecting the business, operations, properties, assets, or conditions of STI;

 

(b) STI has not (i) amended its articles of incorporation or bylaws; (ii) declared or made, or agreed to declare or make, any payment of dividends or distributions of any assets of any kind whatsoever to stockholders or purchased or redeemed, or agreed to purchase or redeem, any of its capital stock; (iii) waived any rights of value which in the aggregate are extraordinary or material considering the business of STI; (iv) made any material change in its method of management, operation, or accounting; (v) entered into any other material transactions; (vi) made any accrual or arrangement for or payment of bonuses or special compensation of any kind or any severance or termination pay to any present or former officer or employee; (vii) increased the rate of compensation payable or to become payable by it to any of its officers or directors or any of its employees whose monthly compensation exceeds $1,000; or (viii) made any increase in any profit-sharing, bonus, deferred compensation, insurance, pension, retirement, or other employee benefit plan, payment, or arrangement made to, for, or with its officers, directors, or employees;

 

(c) STI has not (i) granted or agreed to grant any options, warrants, or other rights for its stocks, bonds, or other corporate securities calling for the issuance thereof; (ii) borrowed or agreed to borrow any funds or incurred, or become subject to, any material obligation or liability (absolute or contingent) except liabilities incurred in the ordinary course of business; (iii) paid any material obligation or liability (absolute or contingent) other than current liabilities reflected in or shown on the most recent STI balance sheet and current liabilities incurred since that date in the ordinary course of business; (iv) sold or transferred, or agreed to sell or transfer, any of its material assets, properties, or rights (except assets, properties, or rights not used or useful in its business which, in the aggregate have a value of less than $5,000 or canceled, or agreed to cancel, any debts or claims (except debts and claims which in the aggregate are of a value of less than $5,000); (v) made or permitted any amendment or termination of any contract, agreement, or license to which it is a party if such amendment or termination is material, considering the business of STI; or (vi) issued, delivered, or agreed to issue or deliver any stock, bonds, or other corporate securities including debentures (whether authorized and unissued or held as treasury stock); and

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(d) To the best knowledge of STI, it has not become subject to any law or regulation which materially and adversely affects, or in the future would be reasonably expected to adversely affect, the business, operations, properties, assets, or condition of STI.

 

2.06 Litigation and Proceedings . There are no material actions, suits, or administrative or other proceedings pending or, to the knowledge of STI, threatened by or against STI or adversely affecting STI or its properties, at law or in equity, before any court or other governmental agency or instrumentality, domestic or foreign, or before any arbitrator of any kind. STI does not have any knowledge of any default on its part with respect to any judgment, order, writ, injunction, decree, award, rule, or regulation of any court, arbitrator, or governmental agency or instrumentality.

 

2.07 Compliance With Laws and Regulations. STI has complied with all applicable statutes and regulations of any federal, state, or other governmental entity or agency thereof, except to the extent that noncompliance (i) could not materially and adversely affect the business, operations, properties, assets, or condition of STI or (ii) could not result in the occurrence of any material liability for STI. To the best knowledge of STI, the consummation of this transaction will comply with all applicable statutes and regulations, subject to the preparation and filing of any forms required by state and federal securities laws.

 

2.08 Compliance with Security Laws . STI has complied with all applicable security statutes and regulation of any federal, state or other governmental entity or agency thereof, including the filing of any required documents in regards to all sales of STI Stock. STI is not required to file reports with the Securities and Exchange Commission under section 13 or 15(d) of the Securities Exchange Act of 1934 and STI's counsel will deliver an opinion to this effect.

 

2.09 Material Contract Defaults . STI is not in default in any material respect under the terms of any outstanding contract, agreement, lease, or other commitment which is material to the business, operations, properties, assets, or condition of STI, and there is no event of default or other event which, with notice or lapse of time or both, would constitute a default in any material respect under any such contract, agreement, lease, or other commitment in respect of which STI has not taken adequate steps to prevent such a default from occurring.

 

2.10 No Conflict With Other Instruments . The execution of this Agreement and the consummation of the transactions contemplated by this Agreement will not result in the breach of any term or provision of, or constitute an event of default under, any material indenture, mortgage, deed of trust, or other material contract, agreement, or instrument to which STI is a party or to which any of its properties or operations are subject.

 

2.11 Subsidiary . STI does not own, beneficially or of record, any equity securities in any other entity.

 

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ARTICLE III

REPRESENTATIONS, COVENANTS, AND WARRANTIES OF Link Bit

 

As an inducement to, and to obtain the reliance of, STI, Link Bit represents and warrants as follows:

 

3.01 Organization . Link Bit is, and will be on the Closing Date, a corporation duly organized, validly existing, and in good standing under the laws of Japan and has the corporate power and is and will be duly authorized, qualified, franchised, and licensed under all applicable laws, regulations, ordinances, and orders of public authorities to own all of its properties and assets and to carry on its business in all material respects as it is now being conducted, and there are no other jurisdictions in which it is not so qualified in which the character and location of the assets owned by it or the nature of the material business transacted by it requires qualification, except where failure to do so would not have a material adverse effect on its business, operations, properties, assets or condition of Link Bit. The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated by this Agreement in accordance with the terms hereof will not, violate any provision of Link Bit's articles of incorporation or bylaws, or other material agreement to which it is a party or by which it is bound.

 

3.02 Approval of Agreement . Link Bit has full power, authority, and legal right and has taken, or will take, all action required by law, its articles of incorporation, bylaws, or otherwise to execute and deliver this Agreement and to consummate the transactions herein contemplated. The board of directors of Link Bit have authorized and approved the execution, delivery, and performance of this Agreement and the transactions contemplated hereby; subject to the approval of the Link Bit Stockholders and compliance with state and federal corporate and securities laws.

 

3.03 Capitalization . The authorized capitalization of Link Bit consists of 10,000 shares of common stock of which as of the date hereof 2,000 shares are issued and outstanding. All issued and outstanding shares of Link Bit are legally issued, fully paid, and nonassessable and not issued in violation of the preemptive or other right of any person. There are no dividends or other amounts due or payable with respect to any of the shares of capital stock of Link Bit.

 

3.04 Financial Statements .

 

(a) Included in Schedule 3.04 are the balance sheets of Link Bit as of December 31,2011, and the related statements of operations, cash flows, and stockholders' equity for the period from inception, to December 31, 2011, including the notes thereto.

 

(b) The financial statements delivered pursuant to Section 3.04(a) have been prepared in accordance with generally accepted accounting principles consistently applied throughout the periods involved. The financial statements of Link Bit present fairly, as of their respective dates, the financial position of Link Bit. Link Bit did not have, as of the date of any such balance sheets, except as and to the extent reflected or reserved against therein, any liabilities or obligations (absolute or contingent) which should be reflected in any financial statements or the notes thereto prepared in accordance with generally accepted accounting principles, and all assets reflected therein present fairly the assets of Link Bit, in accordance with generally accepted accounting principles. The statements of revenue and expenses and cash flows present fairly the financial position and result of operations of Link Bit as of their respective dates and for the respective periods covered thereby.

 

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(c) Link Bit has filed or will have filed as of the Closing Date all tax returns required to be filed by it from inception to the Closing Date. All such returns and reports are accurate and correct in all material respects. Link Bit has no material liabilities with respect to the payment of any federal, state, county, local, or other taxes (including any deficiencies, interest, or penalties) accrued for or applicable to the period ended on the date of the most recent unaudited balance sheet of Link Bit, except to the extent reflected on such balance sheet and adequately provided for, and all such dates and years and periods prior thereto and for which Link Bit may at said date have been liable in its own right or as transferee of the assets of, or as successor to, any other corporation or entity, except for taxes accrued but not yet due and payable, and to Link Bit's knowledge no deficiency assessment or proposed adjustment of any such tax return is pending, proposed or contemplated. Proper and accurate amounts of taxes have been withheld by or on behalf of Link Bit with respect to all material compensation paid to employees of Link Bit for all periods ending on or before the date hereof, and all deposits required with respect to compensation paid to such employees have been made, in complete compliance with the provisions of all applicable federal, state, and local tax and other laws. To Link Bit's knowledge, none of such income tax returns has been examined or is currently being examined by the Internal Revenue Service, and no deficiency assessment or proposed adjustment of any such return is pending, proposed, or contemplated. Link Bit has not made any election pursuant to the provisions of any applicable tax laws (other than elections that relate solely to methods of accounting, depreciation, or amortization) that would have a material adverse affect on Link Bit, its financial condition, its business as presently conducted or proposed to be conducted, or any of its properties or material assets. There are no tax liens upon any of the assets of Link Bit. There are no outstanding agreements or waivers extending the statutory period of limitation applicable to any tax return of Link Bit.

 

3.05 Outstanding Warrants and Options . Link Bit has no issued warrants or options, calls, or commitments of any nature relating to the authorized and unissued Link Bit Common Stock.

 

3.06 Information. The information concerning Link Bit set forth in this Agreement and in the schedules delivered by Link Bit pursuant hereto is complete and accurate in all material respects and does not contain any untrue statement of a material fact or omit to state a material fact required to make the statements made, in light of the circumstances under which they were made, not misleading. Link Bit shall cause the schedules delivered by Link Bit pursuant hereto to STI hereunder to be updated after the date hereof up to and including the Closing Date.

 

3.07 Absence of Certain Changes or Events . Except as set forth in this Agreement since the date of the most recent Link Bit balance sheet described in Section 3.04 and included in the information referred to in Section 3.06:

 

(a) There has not been (i) any material adverse change in the business, operations, properties, level of inventory, assets, or condition of Link Bit or (ii) any damage, destruction, or loss to Link Bit materially and adversely affecting the business, operations, properties, assets, or conditions of Link Bit.

 

(b) Link Bit has not (i) amended its articles of incorporation or bylaws; (ii) declared or made, or agreed to declare or make, any payment of dividends or distributions of any assets of any kind whatsoever to stockholders or purchased or redeemed, or agreed to purchase or redeem, any of its capital stock; (iii) waived any rights of value which in the aggregate are extraordinary and material considering the business of Link Bit; (iv) made any material change in its method of accounting; (v) entered into any other material transactions other than those contemplated by this Agreement; (vi) made any material accrual or material arrangement for or payment of bonuses or special compensation of any kind or any severance or termination pay to any present or former officer or employee; or (vii) made any material increase in any profit-sharing, bonus, deferred compensation, insurance, pension, retirement, or other employee benefit plan, payment, or arrangement made to, for, or with their officers, directors, or employees;

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(c) Link Bit has not (i) granted or agreed to grant any options, warrants, or other rights for its stocks, bonds, or other corporate securities calling for the issuance thereof; (ii) borrowed or agreed to borrow any funds or incurred, or become subject to, any material obligation or liability (absolute or contingent) except liabilities incurred in the ordinary course of business; (iii) paid any material obligation or liability (absolute or contingent) other than current liabilities reflected in or shown on the most recent Link Bit balance sheet and current liabilities incurred since that date in the ordinary course of business; (iv) sold or transferred, or agreed to sell or transfer, any of its material assets, properties, or rights, or agreed to cancel, any material debts or claims; (v) made or permitted any amendment or termination of any contract, agreement, or license to which it is a party if such amendment or termination is material, considering the business of Link Bit; or (vi) issued, delivered, or agreed to issue or deliver any stock, bonds, or other corporate securities including debentures (whether authorized and unissued or held as treasury stock); and

 

(d) To the best knowledge of Link Bit, it has not become subject to any law or regulation which materially and adversely affects, or in the future would be reasonably expected to adversely affect, the business, operations, properties, assets, or condition of Link Bit.

 

3.08 Title and Related Matters . Except as provided herein or disclosed in the most recent Link Bit balance sheet and the notes thereto, Link Bit has good and marketable title to all of its properties, inventory, interests in properties, technology, whether patented or un-patented, and assets, which are reflected in the most recent Link Bit balance sheet or acquired after that date (except properties, interests in properties, and assets sold or otherwise disposed of since such date in the ordinary course of business), free and clear of all mortgages, liens, pledges, charges, or encumbrances, except (i) statutory liens or claims not yet delinquent; and (ii) such imperfections of title and easements as do not, and will not, materially detract from, or interfere with, the present or proposed use of the properties subject thereto or affected thereby or otherwise materially impair present business operations on such properties. To the best knowledge of Link Bit, its technology does not infringe on the copyright, patent, trade secret, know-how, or other proprietary right of any other person or entity and comprises all such rights necessary to permit the operation of the business of Link Bit as now being conducted or as contemplated.

 

3.09 Litigation and Proceedings . Except as otherwise disclosed in Schedule 3.09 , there are no material actions, suits, or proceedings pending or, to the knowledge of Link Bit, threatened by or against Link Bit or adversely affecting Link Bit, at law or in equity, before any court or other governmental agency or instrumentality, domestic or foreign, or before any arbitrator of any kind. Link Bit does not have any knowledge of any default on its part with respect to any judgment, order, writ, injunction, decree, award, rule, or regulation of any court, arbitrator, or governmental agency or instrumentality.

 

3.10 Material Contract Defaults . Link Bit is not in default in any material respect under the terms of any outstanding contract, agreement, lease, or other commitment which is material to the business, operations, properties, assets, or condition of Link Bit, and there is no event of default or other event which, with notice or lapse of time or both, would constitute a default in any material respect under any such contract, agreement, lease, or other commitment in respect of which Link Bit has not taken adequate steps to prevent such a default from occurring.

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3.11 No Conflict With Other Instruments . The execution of this Agreement and the consummation of the transactions contemplated by this Agreement will not result in the breach of any term or provision of, or constitute an event of default under, any material indenture, mortgage, deed of trust, or other material contract, agreement, or instrument to which Link Bit is a party or to which any of its properties or operations are subject.

 

3.12 Governmental Authorizations . Link Bit has all licenses, franchises, permits, and other governmental authorizations that are legally required to enable it to conduct its business in all material respects as conducted on the date of this Agreement. Except for compliance with federal and state securities and corporation laws, as hereinafter provided, no authorization, approval, consent, or order of, or registration, declaration, or filing with, any court or other governmental body is required in connection with the execution and delivery by Link Bit of this Agreement and the consummation by Link Bit of the transactions contemplated hereby.

 

3.13 Compliance With Laws and Regulations . Link Bit has complied with all applicable statutes and regulations of any federal, state, or other governmental entity or agency thereof, except to the extent that noncompliance would not materially and adversely affect the business, operations, properties, assets, or condition of Link Bit or except to the extent that noncompliance would not result in the occurrence of any material liability for Link Bit. To the best knowledge of Link Bit, the consummation of this transaction will comply with all applicable statutes and regulations, subject to the preparation and filing of any forms required by state and federal security laws.

 

3.14 Subsidiary . Link Bit has no subsidiaries.

 

3.15 Disclosure Information. Link Bit believes it has received all the information Link Bit considers necessary or appropriate for deciding whether or not to enter into this Agreement. Link Bit further represent that it has had an opportunity to ask questions and receive answers from STI regarding the terms and conditions of STI.

 

 

 

ARTICLE IV

CONDITIONS PRECEDENT TO OBLIGATIONS OF LINK BITLINK BIT

 

The obligations of Link Bit under this Agreement are subject to the satisfaction of Link Bit, at or before the Closing Date, of the following conditions:

 

4.01 Accuracy of Representations . The representations and warranties made by STI in this Agreement were true when made and shall be true at the Closing Date with the same force and affect as if such representations and warranties were made at and as of the Closing Date (except for changes therein permitted by this Agreement), and STI shall have performed or complied with all covenants and conditions required by this Agreement to be performed or complied with by STI prior to or at the Closing. Link Bit shall be furnished with certificates, signed by duly authorized officers of STI and dated the Closing Date, to the foregoing effect.

 

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4.02 No Material Adverse Change . Prior to the Closing Date, there shall not have occurred any material adverse change in the financial condition, business, or operations of STI, nor shall any event have occurred which, with the lapse of time or the giving of notice, may cause or create any material adverse change in the financial condition, business, or operations of STI.

 

4.03 Good Standings . Link Bit shall have received a certificate of good standing from the secretary of State of Nevada, dated as of the date within five days prior to the Closing Date, certifying that STI is in good standing as a corporation in the State of Nevada.

 

4.04 Other Items . Link Bit shall have received such further documents, certificates, or instruments relating to the transactions contemplated hereby as Link Bit may reasonably request.

 

4.05 Financial Statements . Audited Financial Statements for the period ending 12-31-2011 and unaudited stub for the period 1-1-2012 through 5-12-2012, along with related work papers and bank statements showing $100,000 cash. At Closing, the control of the bank account shall be transferred to the new management of STI.

 

4.06 Proxies . STI Shareholder Proxies of not less than 600,000 votes assigned to Mr. Watanabe solely for the purpose of voting to approve this Agreement, the issuance of the shares of STI Common Stock to Link Bit Stockholders and the approval of the name change.

 

4.07 Preferred Shares . At or prior to Closing, the agreement for the sale of the 100,000 shares of the issued and outstanding shares of Preferred Stock shall have been closed.

 

ARTICLE V

CONDITIONS PRECEDENT TO OBLIGATIONS OF STI

 

The obligations of STI under this Agreement are subject to the satisfaction, at or before the Closing Date, of the following conditions:

 

5.01. Shareholder Approval . Link Bit shall call and hold a meeting of its stockholders, or obtain through a majority written consent of its stockholders, whereby the stockholders of Link Bit authorize and approve this Agreement and the transactions contemplated hereby.

 

5.02 Link Bit Stockholders. Holders of all of the issued and outstanding Link Bit Shares shall agree to this Agreement and the exchange of shares contemplated by this Agreement.

 

5.03 Accuracy of Representations . The representations and warranties made by Link Bit and the Link Bit Stockholders in this Agreement were true when made and shall be true at the Closing Date with the same force and affect as if such representations and warranties were made at and as of the Closing Date (except for changes therein permitted by this Agreement), and Link Bit shall have performed or complied with all covenants and conditions required by this Agreement to be performed or complied with by Link Bit prior to or at the Closing. STI shall be furnished with a certificate, signed by a duly authorized officer of Link Bit and dated the Closing Date, to the foregoing effect.

 

5.04 Officer's Certificates . STI shall have been furnished with certificates dated the Closing Date and signed by the duly authorized chief operating officer of Link Bit to the effect that no litigation, proceeding, investigation, or inquiry is pending or, to the best knowledge of Link Bit, threatened, which might result in an action to enjoin or prevent the consummation of the transactions contemplated by this Agreement. Furthermore, based on certificates of good standing, representations of government agencies, and Link Bit's own documents, the certificate shall represent, to the best knowledge of the officer, that:

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(a) This agreement has been duly approved by Link Bit's board of directors and stockholders and has been duly executed and delivered in the name and on behalf of Link Bit by its duly authorized officers pursuant to, and in compliance with, authority granted by the board of directors of Link Bit pursuant to a unanimous consent of its board of directors and a majority vote of its stockholders;

 

(b) Except as provided or permitted herein, there have been no material adverse changes in Link Bit up to and including the date of the certificate;

 

(c) All authorizations, consents, approvals, registrations, and/or filing with any governmental body, agency, or court required in connection with the execution and delivery of the documents by Link Bit have been obtained and are in full force and effect or, if not required to have been obtained will be in full force and effect by such time as may be required; and

 

(d) Except as otherwise disclosed in Schedule 3.09 , there is no material action, suit, proceeding, inquiry, or investigation at law or in equity by any public board or body pending or threatened against Link Bit, wherein an unfavorable decision, ruling, or finding would have an adverse affect on the financial condition of Link Bit, the operation of Link Bit, or the acquisition and reorganization contemplated herein, or any material agreement or instrument by which Link Bit is bound or would in any way contest the existence of Link Bit.

 

5.05 No Material Adverse Change . Prior to the Closing Date, there shall not have occurred any material adverse change in the financial condition, business or operations of Link Bit, nor shall any event have occurred which, with the lapse of time or the giving of notice, may cause of create any material adverse change in the financial condition, business, or operations of Link Bit.

 

5.06 Good Standing . STI shall have received a certificate of good standing from the appropriate authority in the Japan, dated as of a date with five days prior to the Closing Date, certifying that Link Bit is in good standing as a corporation in Japan.

 

5.07 Other Items. STI shall have received such further documents certificates, or instruments relating to the transactions contemplated hereby as STI may reasonably request.

 

5.08 Payment to Consultants. Link Bit shall pay six consultants it hired one hundred fifty thousand dollars ($150,000) as part of its consulting fees.

 

5.09 Additional Costs and Expenses. Link Bit shall pay up to $50,000 of additional costs and expenses of STI in completing the reorganization including payments to be used to pay all costs of the reorganization including legal and accounting fees.

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ARTICLE VI

SPECIAL COVENANTS

 

 

6.01 Activities of STI and Link Bit

 

(a) From and after the date of this Agreement until the Closing Date and except as set forth in the respective schedules to be delivered by STI and Link Bit pursuant hereto or as permitted or contemplated by this Agreement, STI and Link Bit will each:

 

(i) Carry on its business in substantially the same manner as it has heretofore;

 

(ii) Maintain in full force and effect insurance comparable in amount and in scope of coverage to that now maintained by it;

 

(iii) Perform in all material respects all of its obligations under material contracts, leases, and instruments relating to or affecting its assets, properties, and business;

 

(iv) Use its best efforts to maintain and preserve it business organization intact, to retain its key employees, and to maintain its relationships with its material suppliers and customers;

 

(v) Duly and timely file for all taxable periods ending on or prior to the Closing Date all federal, state, county, and local tax returns required to be filed by or on behalf of such entity or for which such entity may be held responsible and shall pay, or cause to pay, all taxes required to be shown as due and payable on such returns, as well as all installments of tax due and payable during the period commencing on the date of this Agreement and ending on the Closing Date; and

 

(vi) Fully comply with and perform in all material respects all obligations and duties imposed on it by all federal and state Jaws and all rules, regulations, and orders imposed by federal or state governmental authorities.

 

(b) From and after the date of this Agreement and except as provided herein until the Closing Date, STI and Link Bit will not:

 

(i) Make any change in its articles of incorporation or bylaws;

 

(ii) Enter into or amend any material contract, agreement, or other instrument of any of the types described in such party's schedules, except that a party may enter into or amend any contract, agreement, or other instrument in the ordinary course of business; and

 

(iii) Enter into any agreement for the sale of Link Bit or STI securities without the prior approval of the other party.

 

6.02 Access to Properties and Records . Until the Closing Date, Link Bit and STI will afford to the other party's officers and authorized representatives full access to the properties, books, and records of the other party in order that each party may have full opportunity to make such reasonable investigation as it shall desire to make of the affairs of Link Bit or STI and will furnish the other party with such additional financial and other information as to the business and properties of Link Bit or STI as each party shall from time to time reasonably request.

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6.03 Indemnification by Link Bi t. Link Bit will indemnify and hold harmless STI and its directors and officers, and each person, if any, who controls STI within the meaning of the Securities Act, from and against any and all losses, claims, damages, expenses, liabilities, or actions to which any of them may become subject under applicable law (including the Securities Act and the Securities Exchange Act) and will reimburse them for any legal or other expenses reasonably incurred by them in connection with investigating or defending any claims or actions, whether or not resulting in liability, insofar as such losses, claims, damages, expenses, liabilities, or actions arise out of or are based upon any untrue statement or alleged untrue statement of material fact contained in any application or statement filed with a governmental body or arising out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein, or necessary in order to make the statements therein not misleading, but only insofar as any such statement or omission was made in reliance upon and in conformity with information furnished in writing by Link Bit expressly for use therein. The indemnity agreement contained in this Section 6.03 shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of STI and shall survive the consummation of the transactions contemplated by this Agreement for a period of one year.

 

6.04. Indemnification by STI . STI will indemnify and hold harmless Link Bit, the Link Bit Stockholders, Link Bit's directors and officers, and each person, if any, who controls Link Bit within the meaning of the Securities Act, from and against any and all losses, claims, damages, expenses, liabilities, or actions to which any of them may become subject under applicable law (including the Securities Act and the Securities Exchange Act) and will reimburse them for any legal or other expenses reasonably incurred by them in connection with investigating or defending any claims or actions, whether or not resulting in liability, insofar as such losses, claims, damages, expenses, liabilities, or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in any application or statement filed with a governmental body or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein, or necessary in order to make the statements therein not misleading, but only insofar as any such statement or omission was made in reliance upon and in conformity with information furnished in writing by STI expressly for use therein. The indemnity agreement contained in this Section 6.04 shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of Link Bit and shall survive the consummation of the transactions contemplated by this Agreement for a period of one year.

 

6.05 The Acquisition of STI Common Stock . STI and Link Bit understand and agree that the consummation of this Agreement including the issuance of the STI Common Stock to Link Bit in exchange for the Link Bit Shares as contemplated hereby, constitutes the offer and sale of securities under the Securities Act and applicable laws of Japan. STI and Link Bit agree that such transactions shall be consummated in reliance on exemptions from the registration and prospectus delivery requirements of such statutes which depend, among other items, on the circumstances under which such securities are acquired.

 

(a) In order to provide documentation for reliance upon the exemptions from the registration and prospectus delivery requirements for such transactions, each shareholder of Link Bit shall execute and deliver to STI an investment representation letter in substantially the same form as that attached hereto as Exhibit "B."

 

(b) In connection with the transaction contemplated by this Agreement, Link Bit and STI shall each file, with the assistance of the other and their respective legal counsel, such notices, applications, reports, or other instruments as may be deemed by them to be necessary or appropriate in an effort to document reliance on such exemptions, and the appropriate regulatory authority in the states where the Link Bit Stockholders reside unless an exemption requiring no filing is available in such jurisdictions, all to the extent and in the manner as may be deemed by such parties to be appropriate.

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(c) In order to more fully document reliance on the exemptions as provided herein, Link Bit, the Link Bit Stockholders, and STI shall execute and deliver to the other, at or prior to the Closing, such further letters of representation, acknowledgment, suitability, or the like as STI or Link Bit and their respective counsel may reasonably request in connection with reliance on exemptions from registration under such securities laws.

 

6.06 Securities Filings. STI shall be responsible for the preparation of a Form D and its filing with the Securities and Exchange Commission and Link Bit will be responsible for any and all filings in any jurisdiction where its stockholders reside which would require a filing with a governmental agency as a result of the transactions contemplated in this Agreement.

 

6.07 Sales of Securities Under Rule 144, If Applicable.

 

(a) STI will use its best efforts to at all times satisfy the current public information requirements of rule 144 promulgated under the Securities Act so that its stockholders can sell restricted securities that have been held for one year or more or such other restricted period as required by rule 144 as it is from time to time amended.

 

(b) Upon being informed in writing by any person holding restricted stock of STI as of the date of this Agreement that such person intends to sell any shares under rule 144 promulgated under the Securities Act (including any rule adopted in substitution or replacement thereof), STI will certify in writing to such person that it is in compliance with rule 144 current public information requirement to enable such person to sell such person's restricted stock under rule 144, as may be applicable under the circumstances.

 

(c) If any certificate representing any such restricted stock is presented to STI's transfer agent for registration or transfer in connection with any sales theretofore made under rule 144, provided such certificate is duly endorsed for transfer by the appropriate person(s) or accompanied by a separate stock power duly executed by the appropriate person(s) in each case with reasonable assurances that such endorsements are genuine and effective, and is accompanied by an opinion of counsel satisfactory to STI and its counsel that such transfer has complied with the requirements of rule 144, as the case may be, STI will promptly instruct its transfer agent to register such transfer and to issue one or more new certificates representing such shares to the transferee and, if appropriate under the provisions of rule 144, as the case may be, free of any stop transfer order or restrictive legend. The provisions of this Section 6.08 shall survive the Closing and the consummation of the transactions contemplated by this Agreement for a period of two years.

 

ARTICLE VII

MISCELLANEOUS

 

7.01 Brokers . STI and Link Bit agree that there were no finders or brokers involved in bringing the parties together or who were instrumental in the negotiation, execution, or consummation of this Agreement. Further, STI and Link Bit each agree to indemnify the other against any claim by any third person for any commission, brokerage, or finder's fee or other payment with respect to this Agreement or the transactions contemplated hereby based on any alleged agreement or understanding between such party and such third person, whether express or implied, from the actions of such party.

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The covenants set forth in this section shall survive the Closing Date and the consummation of the transactions herein contemplated.

 

7.02 No Representation Regarding Tax Treatment . No representation or warranty is being made by any party to any other regarding the treatment of this transaction for federal or state income taxation. Each party has relied exclusively on its own legal, accounting, and other tax adviser regarding the treatment of this transaction for federal and state income taxes and on no representation, warranty, or assurance from any other party or such other party's legal, accounting, or other adviser.

 

7.03 Governing Law . This Agreement shall be governed by, enforced and construed under and in accordance with the laws of the State of Nevada.

 

7.04 Notices . Any notices or other communications required or permitted hereunder shall be sufficiently given if personally delivered, if sent by facsimile or telecopy transmission or other electronic communication confirmed by registered or certified mail, postage prepaid, or if sent by prepaid overnight courier addressed as follows:

 

If to STI, to: Angela Ross If to Link Bit, to: LInk Bit Inc.
 

STI Holdings, Inc.

  _____________
  9160 South 300 West, Suite 101   ______________
  Sandy , Utah 84070   _______________
       

 

or such other addresses as shall be furnished in writing by any party in the manner for giving notices, hereunder, and any such notice or communication shall be deemed to have been given as of the date so delivered or sent by facsimile or telecopy transmission or other electronic communication, or one day after the date so sent by overnight courier.

 

7.05 Attorney's Fees . In the event that any party institutes any action or suit to enforce this Agreement or to secure relief from any default hereunder or breach hereof, the breaching party or parties shall reimburse the nonbreaching party or parties for all costs, including reasonable attorneys' fees, incurred in connection therewith and in enforcing or collecting any judgment rendered therein.

 

7.06 Schedules; Knowledge . Whenever in any section of this Agreement reference is made to information set forth in the schedules provided by STI or Link Bit such reference is to information specifically set forth in such schedules and clearly marked to identify the section of this Agreement to which the information relates. Whenever any representation is made to the "knowledge" of any party, it shall be deemed to be a representation that no officer or director of such party, after reasonable investigation, has any knowledge of such matters.

 

7.07 Entire Agreement . This Agreement represents the entire agreement between the parties relating to the subject matter hereof. All previous agreements between the parties, whether written or oral, have been merged into this Agreement. This Agreement alone fully and completely expresses the agreement of the parties relating to the subject matter hereof. There are no other courses of dealing, understandings, agreements, representations, or warranties, written or oral, except as set forth herein.

 

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7.08 Survival; Termination . The representations, warranties, and covenants of the respective parties shall survive the Closing Date and the consummation of the transactions herein contemplated for a period of six months from the Closing Date, unless otherwise provided herein.

 

7.09 Counterparts . This Agreement may be executed in multiple counterparts, each of which shall be deemed an original and all of which taken together shall be but a single instrument.

 

 

 

 

 

 

 

 

 

 

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7.10 Amendment or Waiver . Every right and remedy provided herein shall be cumulative with every other right and remedy, whether conferred herein, at law, or in equity, and such remedies may be enforced concurrently, and no waiver by any party of the performance of any obligation by the other shall be construed as a waiver of the same or any other default then, theretofore, or thereafter occurring or existing. At any time prior to the Closing Date, this Agreement may be amended by a writing signed by all parties hereto with respect to any of the terms contained herein, and any term or condition of this Agreement may be waived or the time for performance thereof may be extended by a writing signed by the party or parties for whose benefit the provision is intended.

 

7.11. Right to Hire Counsel. STI and Link Bit have both had the right to hire their own counsels and attorneys on this matter and both represent they they have sought independent legal advise on this Agreement, including counsel in Japan to cover all issues related to the laws of Japan, and Link Bit is represented by its own counsel.

 

IN WITNESS WHEREOF, the corporate parties hereto have caused this Agreement to be executed by their respective officers,hereunto duly authorized, as of the date first above written.

 

STI HOLDINGS, INC.   Link Bit Consulting, LTD.
a Nevada corporation   a Japanese Corporation
     
     
By: /s/ signature                                 By: /s/ Shuya Watanabe                    
        A Duly Authorized Officer            A Duly Authorized Officer

 

 

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EXHIBITS

 

 

 

Exhibit A - List of Shareholders
     
Exhibit B - Suitability Letter
     
Exhibit C - Proposed Board of Directors
     
Exhibit D - STI Financial Statements

 

 

 

 

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Exhibit A

 

Link Bit Co., Ltd.

 

List of Stockholders

 

Name of Share Holder

Number of Shares of

Link Bit Owned

 

Number of STI Shares

to be Received in Exchange

           
Shuya Watanabe 1,300   shares   14,300,000  shares
Takashi Ozawa 600     6,600,000  
Yoichi Onishi 100     1,100,000  
Total 2,000   shares      
Akira Tanabe       1,120,000  
Masayuki Tsuda       1,750,000  
25,000,000 Total       25,000,000  shares

 

 

 

21
 

Exhibit 3.1

 

ARTICLES OF INCORPORATION

OF

STI HOLDINGS, INC.

 

The undersigned incorporator being a natural person more than 18 years of age acting as the sole incorporator of the above-named corporation (the "Corporation") hereby adopts the following articles of incorporation for the Corporation:

 

ARTICLE I
NAME

 

The name of the Corporation shall be: STI Holdings, Inc.

 

ARTICLE II

PERIOD OF DURATION

 

The Corporation shall continue in existence perpetually unless sooner dissolved according to law.

 

ARTICLE HI

PURPOSES AND POWERS

 

The purpose for which the Corporation is organized is to conduct any lawful business for which a corporation may be organized under the laws of Nevada, which shall include, by way of illustration and not limitation, the following purposes:

 

(a)       To carry on any general mercantile or service business, and to purchase, sell, and deal in such goods, supplies, merchandise, equipment, or services as are necessary or desirable in connection therewith; to render any lawful service; to own and operate any lawful enterprise; and, to acquire, hold, and dispose of tangible or intangible personal property;

 

(b)       To acquire by purchase or otherwise, own, hold, lease, rent, mortgage, develop, or otherwise, to trade with and deal in real estate, lands, oil and gas leases and interests, and all other interests in lands, and all other property of every kind and nature;

 

(c)       To acquire, sell, and otherwise dispose of or deal in stock, bonds, mortgages, securities, notes, and commercial paper for corporations and individuals;

 

(d)       To borrow money and to execute notes and obligations and security contracts therefor, and to lend any of the monies or funds of the Corporation and to take evidence of indebtedness therefor, and also to negotiate loans;

 

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(e)     To guarantee the payment of dividends or interest on any other contract or obligation of any corporation whenever proper or necessary for the business of the Corporation in the judgment of its directors; and

 

(f)     To do all and everything necessary, suitable, convenient, or proper for the accomplishment of any of the purposes or the attainment of any one or more of the objects herein enumerated, or incidental to the powers therein named, or which shall at any time appear conducive or expedient for the protection or benefit of the Corporation, with all the powers hereafter conferred by the laws under which this Corporation is organized.

 

ARTICLE IV

AUTHORIZED SHARES

 

The total number of shares of all classes of capital stock which the corporation shall have authority to issue is 60,000,000 shares. Stockholders shall not have any preemptive rights, nor shall stockholders have the right to cumulative voting in the election of directors or for any other purpose. The classes and the aggregate number of shares of stock of each class which the corporation shall have authority to issue are as follows:

 

(a)       50,000,000 shares of common stock, $0.001 par value ("Common Stock");

 

(b)       10,000,000 shares of preferred stock, $0.001 par value ("Preferred Stock").

 

The Preferred Stock may be issued from time to time in one or more series, with such distinctive serial designations as may be stated or expressed in the resolution or resolutions providing for the issue of such stock adopted from time to time by the Board of Directors; and in such resolution or resolutions providing for the issuance of shares of each particular series, the Board of Directors is also expressly authorized to fix: the right to vote, if any; the consideration for which the shares of such series are to be issued; the number of shares constituting such series, which number may be increased (except as otherwise fixed by the Board of Directors) or decreased (but not below the number of shares thereof then outstanding) from time to time by action of the Board of Directors; the rate of dividends upon which and the times at which dividends on shares of such series shall be payable and the preference, if any, which such dividends shall have relative to dividends on shares of any other class or classes or any other series of stock of the corporation; whether such dividends shall be cumulative or noncumulative, and if cumulative, the date or dates from which dividends on shares of such series shall be cumulative; the rights, if any, which the holders of shares of such series shall have in the event of any voluntary or involuntary liquidation, merger, consolidation, distribution or sale of assets, dissolution or winding up of the affairs of the corporation; the rights, if any, which the holders of shares of such series shall have to convert such shares into or exchange such shares for shares of any other class or classes or any other series of stock of the corporation or for any debt securities of the corporation and the terms and conditions, including price and rate of exchange, of such conversion or exchange; whether shares of such series shall be subject to redemption, and the redemption price or prices and other terms of redemption, if any, for shares of such series including, without limitation, a redemption price or prices payable in shares of Common Stock; the terms and amounts of any sinking fund for the purchase or redemption of shares of such series; and any and all other designations, preferences, and relative, participating, optional or other special rights, qualifications, limitations or restrictions thereof pertaining to shares of such series' permitted by law.

 

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The Board of Directors of the Corporation may from time to time authorize by resolution the issuance of any or all shares of the Common Stock and the Preferred Stock herein authorized in accordance with the terms and conditions set forth in these Articles of Incorporation for such purposes, in such amounts, to such persons, corporations or entities, for such consideration, and in the case of the Preferred Stock, in one or more series, all as the Board of Directors in its discretion may determine and without any vote or other action by the stockholders, except as otherwise required by law. The capital stock, after the amount of the subscription price, or par value, has been paid in shall not be subject to assessment to pay the debts of the corporation.

 

ARTICLE V

LIMITATION ON LIABILITY

 

A director or officer of the Corporation shall have no personal liability to the Corporation or its stockholders for damages for breach of fiduciary duty as a director or officer, except for damages for breach of fiduciary duty resulting from (a) acts or omissions which involve intentional misconduct, fraud, or a knowing violation of law, or (b) the payment of dividends in violation of section 78.300 of the Nevada Revised Statutes as it may from time to time be amended or any successor provision thereto.

 

ARTICLE VI

PRINCIPAL OFFICE AND RESIDENT AGENT

 

The address of the Corporation's registered office in the state of Nevada is 3642 Boulder Highway, #387, town of Las Vegas, state of Nevada 89121. The name of its initial resident agent in the state of Nevada is P A Hartley. Either the registered office or the resident agent may be changed in the manner provided by law.

 

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ARTICLE VII

ACQUISITION OF CONTROLLING INTEREST

 

The Corporation elects not to be governed by the terms and provisions of Sections 78.378 through 78.3793, inclusive, of the Nevada Revised Statutes, as the same may be amended, superseded, or replaced by any successor section, statute, or provision. No amendment to these Articles of Incorporation, directly or indirectly, by merger or consolidation or otherwise, having the effect of amending or repealing any of the provisions of this paragraph shall apply to or have any effect on any transaction involving acquisition of control by any person or any transaction with an interested stockholder occurring prior to such amendment or repeal.

 

ARTICLE VIII

COMBINATIONS WITH INTERESTED STOCKHOLDERS

 

The Corporation elects not to be governed by the terms and provisions of Sections 78.411 through 78.444, inclusive, of the Nevada Revised Statutes, as the same may be amended, superseded, or replaced by any successor section, statute, or provision.

 

ARTICLE IX
AMENDMENTS

 

The Corporation reserves the right to amend, alter, change, or repeal all or any portion of the provisions contained in these articles of incorporation from time to time in accordance with the laws of the state of Nevada, and all rights conferred on stockholders herein are granted subject to this reservation.

 

ARTICLE X

ADOPTION AND AMENDMENT OF BYLAWS

 

The initial bylaws of the Corporation shall be adopted by the board of directors. The power to alter, amend, or repeal the bylaws or adopt new bylaws shall be vested in the board of directors, but the stockholders of the Corporation may also alter, amend, or repeal the bylaws or adopt new bylaws. The bylaws may contain any provisions for the regulation or management of the affairs of the Corporation not inconsistent with the laws of the state of Nevada now or hereafter existing.

 

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ARTICLE XI
DIRECTORS

 

The governing board of the Corporation shall be known as the board of directors. The number of directors comprising the board of directors shall be fixed and may be increased or decreased from time to time in the manner provided in the bylaws of the Corporation, except that at no time shall there be less than one nor more than fifteen directors. The initial board of directors shall consist of one person who is as follows:

 

Name   Address
     
John Chymboryk   5882 South 900 East, Suite 202
    Salt Lake City, Utah 84121

 

ARTICLE XII

INCORPORATOR

 

The name and mailing address of the incorporator signing these articles of incorporation is:

 

Name   Address
     
John Chymboryk   5882 South 900 East, Suite 202
    Salt Lake City, Utah 84121

 

The undersigned, being the incorporator of the Corporation herein before named, hereby makes and files these articles of incorporation, declaring that the facts herein are true.

 

 

DATED this 25th day of February 2002.

 

 

/s/ John Chymboryk                 

John Chymboryk

 

 

 

 

5

 

Exhibit 3.2

 

BYLAWS OF

GRAND PERFECTA, INC.

 

ARTICLE I
OFFICES

 

Section 1.     Registered Office. The registered office of the Corporation shall be located at 123 West Nye Lane, Carson City, Nevada 89706. The name of its resident agent in the state of Nevada is American Corporate Enterprises Inc.

 

Section 2.     Other Offices. Other offices may be established by the Board of Directors at any place or places, within or without the State of Nevada, as the Board of Directors may from time to time determine or the business of the Corporation may require.

 

ARTICLE II

MEETINGS OF STOCKHOLDERS

 

Section 1.     Place of Meetings. Meetings of stockholders shall be held either at the principal executive office or any other place within or without the State of Nevada which may be designated either by the Board of Directors pursuant to authority hereinafter granted to said Board, or by the written consent of all stockholders entitled to vote thereat, given either before or after the meeting and filed with the Secretary of the Corporation; provided, however, that if no place is designated or so fixed, stockholder meetings shall be held at the principal executive office of the Corporation.

 

Section 2.     Annual Meetings. The annual meetings of the stockholders shall be held each year on a date and a time designated by the Board of Directors. At the annual meeting of stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be specified in the Notice of Meeting given by or at the direction of the Board of Directors, otherwise properly brought before the meeting by or at the direction of the Board of Directors or otherwise properly brought before the meeting by a stockholder. For business to be properly brought before the annual meeting by a stockholder, including the nomination of a director, the stockholder must have given timely notice thereof in writing to the Secretary. of the Corporation. To be timely, a stockholder's notice must be delivered to, or mailed and received at, the principal executive offices of the Corporation not more than five business days after the giving of notice of the date and place of the meeting to the stockholders. A stockholder's notice to the Secretary shall inform as to each matter the stockholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and record address of the stockholder proposing such business, (iii) the class and numbers of shares of the Corporation which are beneficially owned by the stockholder and (iv) any material interest of the stockholder in such business. Notwithstanding anything in the Bylaws to the contrary, no business shall be conducted at the annual meeting except in accordance with the procedures set forth in this Section. The chairman of the annual meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section, and if he should so determine, he shall so declare to the meeting and any such business not properly before the meeting shall not be transacted.

 

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Section 3.      Special Meetings. Special meetings of the stockholders, for any purpose or purposes whatsoever, may be called at any time by the Chairman of the Board, the President or by a majority of the Board of Directors, or by such other person as the Board of Directors may designate.

 

For business to be properly brought before a special meeting by a stockholder, including the nomination of a director, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder's notice must be delivered to, or mailed and received at, the principal executive offices of the Corporation not more than five business days after the giving of notice of the date and place of the meeting to the stockholders. A stockholder's notice to the Secretary shall inform as to each matter the stockholder proposes to bring before a special meeting (i) a brief description of the business desired to be brought before the special meeting and the reasons for conducting such business at the special meeting, (ii) the name and record address of the stockholder proposing such business, (iii) the class and number of shares of the Corporation which are beneficially owned by the stockholder and (iv) any material interest of the stockholder in such business.

 

Section 4.     Notice of Stockholders' Meetings. Written notice of each annual or special meeting signed by the President or a Vice President, or the Secretary, or an Assistant Secretary, or by such other person or persons as the directors shall designate, shall be delivered personally to, or shall be mailed postage prepaid, to each stockholder of record entitled to vote at such meeting. If mailed, the notice shall be directed to the stockholder at his address as it appears upon the records of the Corporation, and service of such notice by mail shall be complete upon such mailing, and the time of the notice shall begin to run from the date it is deposited in the mail for transmission to such stockholder. Personal delivery of any such notice to any officer of a corporation or association, or to any member of a partnership, shall constitute delivery of such notice to such corporation, association or partnership. All such notices shall be delivered or sent to each stockholder entitled thereto not less than ten nor more than sixty days before each annual or special meeting, and shall specify the purpose or purposes for which the meeting is called, the place, the day and the hour of such meeting.

 

Any stockholder may waive notice of any meeting by a writing signed by him, or his duly authorized attorney, either before or after the meeting.

 

Section 5.     Voting. At all meetings of stockholders, every stockholder entitled to vote shall have the right to vote in person or by written proxy the number of shares standing in his own name on the stock records of the Corporation. There shall be no cumulative voting. Such vote may be viva voce or ballot; provided, however, that all elections for directors must be by ballot upon demand made by a stockholder at any election and before the voting begins.

 

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Section 6.     Quorum. The presence in person or by proxy of the holders of a majority of the shares entitled to vote at any meeting shall constitute a quorum for the transaction of business. The stockholders present at a duly called or held meeting at which a quorum is present may continue to do business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum.

 

Section 7.      Ratification and Approval of Actions at Meetings. Whenever the stockholders entitled to vote at any meeting consent, either by: (a) A writing on the records of the meeting or filed with the Secretary; (b) Presence at such meeting and oral consent entered on the minutes; or (c) Taking part in the deliberations at such meeting without objection; the doings of such meeting shall be as valid as if had at a meeting regularly called and noticed. At such meeting, any business may be transacted which is not excepted from the written consent or to the consideration of which no objection for want of notice is made at the time. If any meeting be irregular for want of notice or of such consent, provided a quorum was present at such meeting, the proceedings of the meeting may be ratified and approved and rendered likewise valid and the irregularity or defect therein waived by a writing signed by all parties having the right to vote at such meeting. Such consent or approval of stockholders may be by proxy or attorney, but all such proxies and powers of attorney must be in writing.

 

Section 8.     Proxies. At any meeting of the stockholders, any stockholder may be represented and vote by a proxy or proxies appointed by an instrument in writing, which instrument shall be filed with the Secretary of the Corporation. In the event that any such instrument in writing shall designate two or more persons to act as proxies, a majority of such persons present at the meetings, or, if only one shall be present, then that one shall have and may exercise all of the powers conferred by such written instrument upon all of the persons so designated unless the instrument shall otherwise provide. No such proxy shall be valid after the expiration of six months from the date of its execution, unless coupled with an interest, or unless the person executing it specifies therein the length of time for which it is to continue in force, which in no case shall exceed seven years from the date of its execution. Subject to the above, any proxy duly executed is not revoked and continues in full force and effect until an instrument revoking it or a duly executed proxy bearing a later date is filed with the Secretary of the Corporation.

 

Section 9.     Action Without a Meeting. Any action which may be taken by the vote of stockholders at a meeting, may be taken without a meeting if authorized by the written consent of stockholders holding at least a majority of the voting power; provided that if any greater proportion of voting power is required for such action at a meeting, then such greater proportion of written consents shall be required. This general provision for action by written consent shall not supersede any specific provision for action by written consent contained in the Nevada Revised Statutes. In no instance where action is authorized by written consent need a meeting of stockholders be called or noticed.

 

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ARTICLE III
DIRECTORS

 

Section 1.     Powers. Incorporation, these Bylaws, and the provisions of the Nevada Revised Statutes as to action to be authorized or approved by the stockholders, and subject to the duties of directors as prescribed by these Bylaws, all corporate powers shall be exercised by or under the authority of, and the business and affairs of the Corporation must be managed and controlled by, the Board of Directors. Without prejudice to such general powers, but subject to the same limitations, it is hereby expressly declared that the directors shall have the following powers:

 

First. To select and remove all officers, agents and employees of the Corporation, prescribe such powers and duties for them as may not be inconsistent with law, the Articles of Incorporation or the Bylaws, fix their compensation and require from them security for faithful service.

 

Second. To conduct, manage and control the affairs and business of the Corporation, and to make such rules and regulations therefor not inconsistent with law, the Articles of Incorporation or the Bylaws, as they may deem best.

 

Third. To change the registered office of the Corporation in the State of Nevada from one location to another, and the registered agent in charge thereof, as provided in Article I, Section 1, hereof; to fix and locate from time to time one or more subsidiary offices of the Corporation within or without the State of Nevada, as provided in Article I, Section 2, hereof, to designate any place within or without the State of Nevada, for the holding of any stockholders' meeting or meetings; and to adopt, make and use a corporate seal, and to prescribe the forms of certificates of stock, and to alter the form of such seal and of such certificates from time to time, as in their judgment they may deem best, provided such seal and such certificates shall at all times comply with the provisions of law.

 

Fourth. To authorize the issuance of shares of stock of the Corporation from time to time, upon such terms as may be lawful, in consideration of cash, services rendered, personal property, real property or leases thereof, or in the case of shares issued as a dividend, against amounts transferred from surplus to capital.

 

Fifth. To borrow money and incur indebtedness for the purpose of the Corporation, and to cause to be executed and delivered therefor, in the corporate name, promissory notes, bonds, debentures, deeds of trust, mortgages, pledges, hypothecations or other evidence of debt and securities therefor.

 

Sixth. To make the Bylaws of the Corporation, subject to the Bylaws, if any, adopted by the stockholders.

 

Seventh. To, by resolution or resolutions passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the directors of the Corporation, which, to the extent provided in the resolution or resolutions, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the Corporation, and may have power to authorize the seal of the Corporation to be affixed to all papers on which the Corporation desires to place a seal. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors.

 

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Section 2.     Number and Qualification of Directors. The number of directors constituting the whole Board shall be not less than one nor more than fifteen. The first Board shall consist of one director. Thereafter, within the limits above specified, the number of directors shall be determined by resolution of the Board of Directors or by the stockholders at the annual meeting. All directors must be at least 18 years of age. Unless otherwise provided in the Articles of Incorporation, directors need not be stockholders.

 

Section 3.     Election, Classification and Term of Office. Each director shall be elected at each annual meeting of stockholders by a plurality of votes cast at the election, but if for any reason the directors are not elected at the annual meeting of stockholders, each director may be elected at any special meeting of stockholders by a plurality of votes cast at the election.

 

The Board of Directors shall not be divided into classes and each director shall serve for a term ending on the date of the next annual meeting of stockholders following the meeting at which such director was elected and until his successor is elected and qualified; provided, that the Board of directors may adopt an amendment in the future dividing the Board of Directors in to two or more classes on such terms as shall be determined by resolution of the Board of Directors.

 

In the event of any decrease in the authorized number of directors, each director then serving as such shall nevertheless continue as a director until the expiration of his current term, or his earlier resignation, removal from office or death.

 

Section 4.     Vacancies. Vacancies in the Board of Directors may be filled by a majority of the remaining directors, though less than a quorum, or by a sole remaining director, and each director so elected shall hold office until his successor is elected at an annual or a special meeting of the stockholders.

 

A vacancy or vacancies in the Board of Directors shall be deemed to exist in case of the death, resignation or removal of any director, or if the authorized number of directors be increased.

 

If the Board of Directors accepts the resignation of a director tendered to take effect at a future time the Board or the stockholder shall have power to elect a successor to take office when the resignation is to become effective, and such successor shall hold office during the remainder of the resigning director's term of office.

 

Section 5.     Place of Meeting. Regular meetings of the Board of Directors shall be held at any place within or without the State of Nevada as designated from time to time by resolution of the Board or by written consent of all members of the Board. In the absence of such designation regular meetings shall be held at the principal executive office of the Corporation. Special meetings of the Board may be held either at a place so designated or at the principal executive office.

 

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Members of the Board, or any committee designated by the Board, may participate in a meeting of such Board or committee by means of a conference telephone network or a similar communications method by which all persons participating in the meeting can hear each other. Such participation shall constitute presence in person at such meeting. Each person participating in such meeting shall sign the minutes thereof, which minutes may be signed in counterparts.

 

Section 6.     Organization Meeting. Immediately following each annual meeting of stockholders, the Board of Directors shall hold a regular meeting for the purpose of organization, election of officers, and the transaction of other business. Notice of such meetings is hereby dispensed with.

 

Section 7.     Special Meetings. Special meetings of the Board of Directors for any purpose or purposes may be called at any time by the Chairman of the Board, President or by any two or more directors.

 

Written notice of the time and place of special meetings shall be delivered personally to the directors or sent to each director by mail or other form of written communication (such as by telegraph, Federal Express package, or other similar forms of written communication), charges prepaid, addressed to him at his address as it is shown upon the records of the Corporation, or if it is not so shown on such records or is not readily ascertainable, at the place in which the meetings of the directors are regularly held. In case such notice is mailed or otherwise communicated in writing, it shall be deposited in the United States mail or delivered to the appropriate delivering agent at least seventy-two hours prior to the time of the holding of the meeting. In case such notice is Personally delivered, it shall be so delivered at least twenty-four hours prior to the time of the holding of the meeting. Such mailing, personal delivery or other written communication as above provided shall be due, legal and personal notice to such director.

 

Section 8.     Notice of Adjournment. Notice of the time and place of holding an adjourned meeting need not be given to absent directors if the time and place be fixed at the meeting adjourned.

 

Section 9.     Ratification and Approval. Whenever all directors entitled to vote at any meeting consent, either by: (a) A writing on the records of the meeting or filed with the Secretary; (b) Presence at such meeting and oral consent entered on the minutes; or (c) Taking part in the deliberations at such meeting without objection; the doings of such meeting shall be as valid as if had at a meeting regularly called and noticed. At such meeting any business may be transacted which is not excepted from the written consent or to the consideration of which no objection for want of notice is made at the time.

 

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If any meeting be irregular for want of notice or of such consent, provided a quorum was present at such meeting, the proceedings of the meeting may be ratified and approved and rendered likewise valid and the irregularity or defect therein waived by a writing signed by all directors having the right to vote at such meeting.

 

Section 10.     Action Without a Meeting. Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if a written consent thereto is signed by all the members of the Board or of such committee. Such written consent shall be filed with the minutes of proceedings of the Board or committee.

 

Section 11.     Quorum. A majority of the authorized number of directors shall be necessary to constitute a quorum for the transaction of business, except to adjourn as hereinafter provided. Every act or decision done or made by a majority of the directors present at a meeting duly assembled at which a quorum is present shall be regarded as the act of the Board of Directors, unless a greater number be required by law or by the Articles of Incorporation.

 

Section 12.     Adjournment. A quorum of the directors may adjourn any directors' meeting to meet again at a stated day and hour provided, however, that in the absence of a quorum, a majority of the directors present at any directors' meeting, either regular or special, may adjourn from time to time until a quorum shall be present.

 

Section 13.     Fees and Compensation. The Board shall have the authority to fix the compensation of directors. The directors may be paid their expenses, if any, of attendance at each meeting of the Board and may be paid a fixed sum for attendance at each meeting of the Board or a stated salary as director. No such payment shall preclude any director from serving the Corporation in any other capacity as an officer, agent, employee or otherwise, and receiving the compensation therefor. Members of committees may be compensated for attending committee meetings.

 

Section 14.     Removal. Any director may be removed from office with or without cause by the vote of stockholders representing not less than two-thirds of the issued and outstanding capital stock entitled to voting power.

 

ARTICLE IV
OFFICERS

 

Section 1.     Officers. The officers of the Corporation shall be a President, a Secretary and a Treasurer. The Corporation may also have, at the discretion of the Board of Directors, one or more additional Vice Presidents, one or more Assistant Secretaries, one or more Assistant Treasurers, a Chairman of the Board, a chief executive officer, chief financial officer, and such other officers as may be appointed in accordance with the provisions of Section 3 of this Article. Officers other than the Chairman of the Board need not be directors. One person may hold two or more offices.

 

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Section 2.     Election. The officers of this Corporation, except such officers as may be appointed in accordance with the provisions of Section 3 or Section 5 of this Article, shall be chosen annually by the Board of Directors and each shall hold his office until he shall resign or shall be removed or otherwise disqualified to serve, or his successor shall be elected and qualified.

 

Section 3.     Subordinate Officers, Etc. The Board of Directors may appoint such other officers as the business of the Corporation may require, each of whom shall hold office for such period, have such authority and perform such duties as are provided in these Bylaws or as the Board of Directors may from time to time determine.

 

Section 4.     Removal and Resignation. Any officer may be removed, either with or without cause, by a majority of the directors at the time in office. Any officer may resign at any time by giving written notice to the Board of Directors, the President or the Secretary of the Corporation. Any such resignation shall take effect at the date of the receipt of such notice or at any later time specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

 

Section 5.     Vacancies. A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled in the manner prescribed in the Bylaws for regular appointments to such office.

 

Section 6.     Chairman of the Board. The Chairman of the Board, if there be such a position, shall preside at all meetings of the Board of Directors and exercise and perform such other powers and duties as may be from time to time assigned to him by the Board of Directors or prescribed by these Bylaws.

 

Section 7.     President. Subject to such supervisory powers, if any, as may be given by the Board of Directors to the Chairman of the Board, the President shall, subject to the control of the Board of Directors, have general supervision, direction and control of the business and officers of the Corporation. In the absence of the Chairman of the Board, or if there be none, he shall preside at all meetings of the stockholders and at all meetings of the Board of Directors. He shall be ex officio a member of all committees, including the executive committee, if any, and shall have the general powers and duties of management usually vested in the office of president of a corporation, and shall have such other powers and duties as may be prescribed by the Board of Directors or by these Bylaws.

 

Section 8.     Vice-President. In the absence or disability of the President, the Vice Presidents, in order of their rank as fixed by the Board of Directors, or if not ranked, the Vice President designated by the Board of Directors, shall perform all the duties of the President, and when so acting shall have all the powers of, and be subject to all the restrictions upon, the President. The Vice Presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the Board of Directors or these Bylaws.

 

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Section 9. Secretary. The Secretary shall keep, or cause to be kept, a book of minutes at the principal executive office or such other place as the Board of Directors may order, of all meetings of directors, committees and stockholders, with the time and place of holding, whether regular or special, and if special, how authorized, the notice thereof given, the names of those present at directors' and committee meetings, the number of shares present or represented at stockholders' meetings and the proceedings thereof.

 

The Secretary shall keep, or cause to be kept, at the principal executive office (1) a share register, or a duplicate share register, revised annually, showing the names of the stockholders, alphabetically arranged, and their places of residence, the number and classes of shares held by each, the number and date of certificates issued for the same, and the number and date of cancellation of every certificate surrendered for cancellation; (2) a copy of the Articles of Incorporation and all amendments thereto certified by the Secretary of State; and (3) a copy of the Bylaws and all amendments thereto certified by the Secretary.

 

The Secretary shall give, or cause to be given, notice of all the meetings of the stockholders, committees and Board of Directors required by the Bylaws or by law to be given, and he shall keep the seal of the Corporation in safe custody, and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or the Bylaws.

 

Section 10.     Treasurer. The Treasurer shall keep and maintain, or cause to be kept and maintained, adequate and correct accounts of the properties and business transactions of the Corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, surplus and shares. Any surplus, including earned surplus, paid-in surplus and surplus arising from a reduction of stated capital, shall be classified according to source and shown in a separate account. The books of account shall at all times be open to inspection by any director.

 

The Treasurer shall deposit all monies and other valuables in the name and to the credit of the Corporation with such depositories as may be designated by the Board of Directors. He shall disburse the funds of the Corporation as may be ordered by the Board of Directors, shall render to the President and directors, whenever they request it, an account of all of his transactions as Treasurer and of the financial condition of the Corporation, and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or the Bylaws.

 

ARTICLE V

MISCELLANEOUS

 

Section 1.     Record Date and Closing Stock Books. The Board of Directors may fix a day, not more than sixty (60) days prior to the holding of any meeting of stockholders, and not exceeding thirty (30) days preceding the date fixed for the payment of any dividend or distribution or for the allotment of rights, or when any change or conversion or exchange of shares shall go into effect, as a record date for the determination of the stockholders entitled to notice of and to vote at any such meeting, or entitled to receive any such dividend or distribution, or any such allotment of rights, or to exercise the rights in respect to any such change, conversion or exchange of shares, and in such case only stockholders of record on the date so fixed shall be entitled to notice of and to vote at such meetings, or to receive such dividend, distribution or allotment of rights, or to exercise such rights, as the case may be, notwithstanding any transfer of any shares on the books of the Corporation after any record date is fixed as aforesaid. The Board of Directors may close the books of the Corporation against transfers of shares during the whole or any part of any such period.

 

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Section 2.     Inspection of Corporate Records. Stockholders shall have the right to inspect such corporate records at such times and based upon such limitations of such rights as may be set forth in the Nevada Revised Statutes from time to time.

 

Section 3.     Checks, Drafts, Etc. All checks, drafts or other orders for payment of money, notes or other evidences of indebtedness, issued in the name of or payable to the Corporation, shall be signed or endorsed by such person or persons and in such manner as, from time to time, shall be determined by resolution of the Board of Directors.

 

Section 4.     Contract, Etc., How Executed. The Board of Directors, except as otherwise provided in these Bylaws may authorize any officer or officers, agent or agents to enter into any contract, deed or lease or execute any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances; and unless so authorized by the Board of Directors, no officer, agent or employee shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit to render it liable for any purpose or to any amount.

 

Section 5.     Certificates of Stock. A certificate or certificates for certificated shares of the capital stock of the Corporation shall be issued to each stockholder when any such shares are fully paid up. All such certificates shall be signed by the Chairman of the Board, President or a Vice President, and may be signed by the Treasurer, Secretary or an Assistant Secretary, or be authenticated by facsimiles of their respective signatures; provided, however, that every certificate authenticated by a facsimile of a signature must be countersigned by a transfer agent or transfer clerk, and by a registrar, which registrar cannot be the Corporation itself.

 

Certificates for certificated shares may be issued prior to full payment under such restrictions and for such purposes as the Board of Directors or the Bylaws may provide; provided, however, that any such certificate so issued prior to full payment shall state the amount remaining unpaid and the terms of payment thereof.

 

The Board of Directors is hereby authorized, pursuant to the provisions of Nevada Revised Statutes Section 78.235, to issue uncertificated shares of some or all of the shares of any or all of its classes or series.

 

Section 6.     Representation of the Shares of Other Corporation. The President or any Vice President, and the Secretary or Assistant Secretary, of this Corporation are authorized to vote, represent and exercise on behalf of this Corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of this Corporation. The authority herein granted to said officers to vote or represent on behalf of this Corporation any and all shares held by this Corporation in any other corporation or corporations may be exercised either by such officers in person or by any person authorized so to do by proxy or power of attorney duly executed by said officers.

 

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ARTICLE VI
AMENDMENTS

 

Section 1.     Power of Stockholders. New Bylaws may be adopted or these Bylaws may be amended or repealed by the vote of stockholders entitled to exercise a majority of the voting power of the Corporation or by the written assent of such stockholders.

 

Section 2.     Power of Directors. Subject to the right of stockholders as provided in Section 1 of this Article VI to adopt, amend or repeal Bylaws, Bylaws may be adopted, amended or repealed by the Board of Directors.

 

ARTICLE VII

TRANSACTIONS INVOLVING DIRECTORS AND OFFICERS

 

Section 1.     Validity of Contracts and Transactions. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, firm, association, or other organization in which one or more of its directors or officers are directors or officers or are financially interested, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee that authorizes or approves the contract or transaction, or because their votes are counted for such purpose, provided that:

 

(a)                   the material facts as to his, her, or their relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee and noted in the minutes, and the Board of Directors or committee, in good faith, authorizes the contract or transaction in good faith by the affirmative vote of a majority of disinterested directors, even though the disinterested directors are less than a quorum;

(b)                   the material facts as to his, her, or their relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved or ratified in good faith by the majority of shares entitled to vote, counting the votes of the common or interested directors or officers; or

 

(c)                   the contract or transaction is fair as to the Corporation as of the time it is authorized or approved.

 

Section 2.     Determining Quorum. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the board of directors or of a committee which authorizes, approves or ratifies the contract or transaction.

 

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ARTICLE VIII

INSURANCE AND OTHER FINANCIAL ARRANGEMENTS

 

The Corporation may purchase and maintain insurance or make other financial arrangements on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise for any liability asserted against him and liability and expenses incurred by him in his capacity as a director, officer, employee or agent, or arising out of his status as such, whether or not the Corporation has the authority to indemnify him against such liability and expenses. The insurance or other financial arrangements may be provided by the Corporation or by any other person or entity approved by the Board of Directors including a subsidiary of the corporation.

 

Such other financial arrangements made by the Corporation may include the following:

 

(a)                 The creation of a trust fund;

 

(b)                The establishment of a program of self-insurance;

 

(c)                 The securing of its obligation of indemnification by granting a security interest or other lien on any assets of the Corporation; or

 

(d)                The establishment of a letter of credit, guaranty or surety. No financial arrangement may provide protection for a person adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable for intentional misconduct, fraud or a knowing violation of law, except with respect to the advancement of expenses or indemnification ordered by a court as provided in Article IX hereof.

 

ARTICLE IX

INDEMNIFICATION

 

Section 1.     Action Not By Or On Behalf Of Corporation. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), fees, judgments, fines, and amounts paid in settlement, actually and reasonably incurred by him in connection with the action, suit or proceeding if he acted in good faith and in a manner reasonably believed to be in or not opposed to the best interests of the Corporation, and with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent does not, of itself, create an presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful.

 

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Section 2.     Action By Or On Behalf Of Corporation. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, or other enterprise against expenses, including amounts paid in settlement and attorneys' fees actually and reasonably incurred by him in connection with the defense or settlement of the action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, except that indemnification may not be made for any claim, issue or matter as to which such a person shall have been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to the Corporation or for amounts paid in settlement to the Corporation, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all of the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.

 

Section 3.     Successful Defense. To the extent that a director, officer, employee oragent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Section 1 or 2 of this Article IX, or in defense of any claim, issue or matter therein, he must be indemnified by the Corporation against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense.

 

Section 4.     Determination Of Right To Indemnification In Certain Circumstances. Any indemnification under Section I or 2 of this Article IX, unless ordered by a court or advanced pursuant to this Article IX, must be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances. The determination must be made by the Stockholders, the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to the act, suit or proceeding, or if a majority vote of a quorum of directors who were not parties to the act, suit or proceeding so orders, by independent legal counsel in a written opinion, or if a quorum consisting of directors who were not parties to the act, suit or proceeding cannot be obtained, by independent legal counsel in a written opinion.

 

Section 5.     Advance Payment of Expenses. Expenses of officers and directors incurred in defending a civil or criminal action, suit or proceeding must be paid by the Corporation as they are incurred and in advance of the final disposition of the action, suit or proceeding upon receipt of an undertaking by or on behalf of the director or officer to repay the amount if it is ultimately determined by a court of competent jurisdiction that he is not entitled to be indemnified by the Corporation as authorized in this Article. The provisions of this subsection (5) of this Article IX shall not affect any rights to advancement of expenses to which corporate personnel other than directors or officers may be entitled under any contract or otherwise by law.

 

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Section 6.     Not Exclusive.

 

(a)     The indemnification and advancement of expenses authorized in or ordered by a court pursuant to any other section of this Article IX or any provision of law:

 

(i)        does not exclude any other rights to which a person seeking indemnification or advancement of expenses may be entitled under the Articles of Incorporation or any statute, bylaw, agreement, vote of stockholders or disinterested directors or otherwise, for either an action in his official capacity or an action in another capacity while holding his office, except that indemnification, unless ordered by a court pursuant to subsection 2 of this Article IX or for the advancement of expenses made pursuant to this Article IX may not be made to or on behalf of any director or officer if a final adjudication establishes that his acts or omissions involved intentional misconduct, fraud or a knowing violation of the law and was material to the cause of action; and

 

(ii)       continues for a person who has ceased to be a director, officer, employee or agent and inures to the benefit of the heirs, executors and administrators of such a person.

 

(b)     Without limiting the foregoing, the Corporation is authorized to enter into an agreement with any director, officer, employee or agent of the Corporation providing indemnification for such person against expenses, including attorneys' fees, judgments, fines and amounts paid in settlement that result from any threatened, pending or completed action, suit, or proceeding, whether civil, criminal, administrative or investigative, including any action by or in the right of the Corporation, that arises by reason of the fact that such person is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, to the full extent allowed by law, except that no such agreement shall provide for indemnification for any actions that constitute intentional misconduct, fraud, or a knowing violation of law and was material to the cause of action.

 

Section 7.     Certain Definitions. For the purposes of this Article IX, (a) any director, officer, employee or agent of the Corporation who shall serve as a director, officer, employee or agent of any other corporation, joint venture, trust or other enterprise of which the Corporation, directly or indirectly, is or was a stockholder or creditor, or in which the Corporation is or was in any way interested, or (b) any director, officer, employee or agent of any subsidiary corporation, joint venture, trust or other enterprise wholly owned by the Corporation, shall be deemed to be serving as such director, officer, employee or agent at the request of the Corporation, unless the Board of Directors of the Corporation shall determine otherwise. In all other instances where any person shall serve as director, officer, employee or agent of another corporation, joint venture, trust or other enterprise of which the Corporation is or was a stockholder or creditor, or in which it is or was otherwise interested, if it is not otherwise established that such person is or was serving as such director, officer, employee or agent at the request of the Corporation, the Board of Directors of the Corporation may determine whether such service is or was at the request of the Corporation, and it shall not be necessary to show any actual or prior request for such service. For purposes of this Article IX references to a corporation include all constituent corporations absorbed in a consolidation or merger as well as the resulting or surviving corporation so that any person who is or was a director, officer, employee or agent of such a constituent corporation or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, joint venture, trust or other enterprise shall stand in the same position under the provisions of this Article IX with respect to the resulting or surviving corporation as he would if he had served the resulting or surviving corporation in the same capacity. For purposes of this Article IX, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the corporation" shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Corporation" as referred to in this Article IX.

 

14

 

Exhibit 3.3

 

 

     

ROSS MILLER

Secretary of State

204 North Carson Street, Suite 1

Carson City, Nevada 89701-4520

(775) 684-5708

 

Filed in the office of

Ross Miller

Ross Miller

Secretary of State

State of Nevada

Document Number
20080016136-47
Filing Date and Time
01/09/2008   8:35AM
Entity Number
C7233-2002
  Website: www.nvsos.gov      
         
       
Certificate of Amendment      
(PURSUANT TO NRS 78.385 AND 78.390)      
       
         
USE BLACK INK ONLY - DO NOT HIGHLIGHT ABOVE SPACE IS FOR OFFICE USE ONLY

 

Certificate of Amendment to Articles of Incorporation
For Nevada Profit Corporations

(Pursuant to NRS 78.385 and 78.390 - After Issuance of Stock)

1.   Name of corporation:

 

STI Holdings, Inc.

 

2. The articles have been amended as follows: (provide article numbers, if available)

 

The Board of directors has designated 100,000 shares of preferred stock, par value $0.0001, as Series A Convertible Preferred Stock having the voting powers, designations, preferences, limitations, restrictions and relative rights set forth in Exhibit A attached hereto and incorporated herein by reference.

 

3.   The vote by which the stockholders holding shares in the corporation entitling them to exercise a least a majority of the voting power, or such greater proportion of the voting power as may be required in the case of a vote by classes or series, or as may be required by the provisions of the articles of incorporation* have voted in favor of the amendment is:

 

4.   Effective date of filing: (optional)

(must not be later than 90 days after the certificate is filed)

 

5.   Signature: (required)

x       /s/ signature                      

Signature of Officer

 

*If any proposed amendment would alter or change any preference or any relative or other right given to any class or series of outstanding shares, then the amendment must be approved by the vote, in addition to the affirmative vote otherwise required, of the holders of shares representing a majority of the voting power of each class or series affected by the amendment regardless to limitations or restrictions on the voting power thereof.

 

IMPORTANT: Failure to include any of the above information and submit with the proper fees may cause this filing to be rejected.

 

 

1
 

 

STI HOLDINGS, INC.

 

DESIGNATION OF RIGHTS, PRIVILEGES, AND PREFERENCES OF
SERIES A CONVERTIBLE PREFERRED STOCK
AS AMENDED

 

STI Holdings, Inc., a Nevada corporation (the "Corporation") has adopted the following Designation of Rights, Privileges, and Preferences of Series A Convertible Preferred Stock (the "Designation"):

 

FIRST:         The name of the Corporation is STI HOLDINGS, INC.

 

SECOND:         The following resolution establishing a series of convertible preferred stock designated as the “Series A Convertible Preferred Stock” consisting of 100,000 shares of the Corporation’s preferred stock, par value $0.001, was duly adopted by the board of directors of the Corporation on October 1, 2007, in accordance with the articles of incorporation of the Corporation and the corporation laws of the State of Nevada:

 

 

RESOLVED, there is hereby created a series of preferred stock of the Corporation to be designated as the “Series A Convertible Preferred Stock”consisting of 100,000 shares, par value $0.001, with the following powers, preferences, rights, qualifications, limitations, and restrictions:

 

1.       Liquidation.

 

1.01     In the event of any involuntary liquidation (whether complete or partial), dissolution, or winding up of the Corporation, the holders of the Series A Convertible Preferred Stock shall be entitled to be paid out of the assets of the Corporation available for distribution to its shareholders, whether from capital, surplus, or earnings, an amount in cash equal to $0.05 per share plus all unpaid dividends previously declared thereon to the date of final distribution. No distribution shall be made on any common stock or other series of preferred stock of the Corporation by reason of any voluntary or involuntary liquidation (whether complete or partial), dissolution, or winding up of the Corporation unless each holder of any Series A Convertible Preferred Stock shall have received all amounts to which such holder shall be entitled under this subsection.

 

1.02     In the event of any voluntary liquidation (whether complete or partial), dissolution, or winding up of the Corporation, the holders of the Series A Convertible Preferred Stock shall be entitled to be paid out of the assets of the Corporation available for distribution to its shareholders, whether from capital, surplus, or earnings, an amount in cash equal to $0.05 per share. No distribution shall be made on any common stock or other series of preferred stock of the Corporation by reason of any voluntary or involuntary liquidation (whether complete or partial), dissolution, or winding up of the Corporation unless each holder of any Series A Convertible Preferred Stock shall have received all amounts to which such holder shall be entitled under this subsection.

 

1.03     If on any liquidation (whether complete or partial), dissolution, or winding, up of the Corporation, the assets of the Corporation available for distribution to holders of Series A Convertible Preferred Stock shall be insufficient to pay the holders of outstanding Series A Convertible Preferred Stock the full amounts to which they otherwise would be entitled under the Nevada Revised Business Corporation Act, the assets of the Corporation available for distribution to holders of the Series A Convertible Preferred Stock shall be distributed to them pro rata on the basis of the number of shares of Series A Convertible Preferred Stock held by each such holder.

 

2.      Voting Rights. The Series A Convertible Preferred Stock shall be entitled to vote as a separate class and as a single class with the Common Stock of the Corporation, with each share of Series A Convertible Preferred Stock equal to 10 shares of Common Stock for voting purposes. Except to the extent that the consent of the holders of the Series A Convertible Preferred Stock, voting as a class, is specifically required by the provisions of the corporate law of the state of Nevada, as now existing or as hereafter amended, the Series A Convertible Preferred Stock shall vote as a class with the Common Stock; as such, each share of Series A Convertible Preferred Stock shall be counted, for voting purposes, as 10 votes of Common Stock.

 

2
 

 

3.      Subordination. Any payment of any dividends or any redemption hereunder shall be subordinated to payment in full of all Senior Debt as defined herein. "Senior Debt" shall mean the principal of and premium, if any, and interest on all indebtedness of the Corporation to any financial institution, including, but not limited to, (i) banks whether currently outstanding or hereinafter created and whether or not such loans are secured or unsecured; (ii) any other indebtedness, liability, obligation, contingent or otherwise of the Corporation to guarantee endorsement of the contingent obligation with respect to any indebtedness, liability, or obligation whether created, assumed, or occurred by the Corporation and after the date of the creation of the Series A Convertible Preferred Stock, which is, when created, specifically designated by the Corporation as Senior Debt; and (iii) any refunding, renewals, or extensions of any indebtedness or similar obligations described as Senior Debt in subparagraphs (i) and (ii) above.

 

4.      Redemption

 

4.01     Subject to the requirements and limitations of the corporation laws of the state of Nevada, the Corporation shall have the right to redeem shares of the Series A Convertible Preferred Stock on the following terms and conditions.

 

4.02     The shares of the Series A Convertible Preferred Stock are subject to redemption by the Corporation at any time after issuance pursuant to written notice of redemption given to the holders thereof on not less than 30 days, specifying the date on which the Series A Convertible Preferred Stock shall be redeemed (the "Redemption Date").

 

4.03     The redemption price for each share of Series A Convertible Preferred Stock shall be $0.05 per share; plus any unpaid dividends, if applicable, on such share as of the Redemption Date (the "Redemption Price").

 

4.04     Redemption of the Series A Convertible Preferred Stock shall be made in the following manner:

 

(a)     At least ten (10) days prior to the date that written notice of redemption is given to the holders of the Series A Convertible Preferred Stock, the Corporation shall make appropriate arrangements with the Transfer Agent for the delivery of funds and/or Common Stock necessary to make payment of the Redemption Price for all shares of the Series A Convertible Preferred Stock redeemed by the Corporation.

 

(b)     The holder of any shares of Series A Convertible Preferred Stock so redeemed shall be required to tender the certificates representing such shares, duly endorsed, to the Company in exchange for payment of the Redemption Price and reissuance of the balance of the Series A Convertible Preferred Stock not otherwise redeemed. On such surrender, the Company shall cause to be issued and delivered a check, with all reasonable dispatch to the holder and such name or names as the holder may designate.

 

(c)     The Corporation may redeem a portion or all of the issued and outstanding shares of the Series A Convertible Preferred Stock; provided, that in the event that less than all of the outstanding shares of the Series A Convertible Preferred Stock are redeemed, such redemption shall be pro rata determined on the basis of the number of shares of the Series A Convertible Preferred Stock held by each holder reflected on the stock records and the total number of shares of Series A Convertible Preferred Stock outstanding.

 

3
 

 

5.      Additional Provisions

 

5.01     No change in the provisions of the Series A Convertible Preferred Stock set forth in this Designation affecting any interests of the holders of any shares of Series A Convertible Preferred Stock shall be binding or effective unless such change shall have been approved or consented to by the holders of Series A Convertible Preferred Stock in the manner provided in the corporation laws of the state of Nevada, as the same may be amended from time to time.

 

5.02     The shares of Series A Convertible Preferred Stock shall be transferable only on the books of the Corporation maintained at its principal office, on delivery thereof duly endorsed by the holder or by his duly authorized attorney or representative or accompanied by proper evidence of succession, assignment, or authority to transfer. In all cases of transfer by an attorney, the original letter of attorney, duly approved, or an official copy thereof, duly certified, shall be deposited and remain with the Corporation. In case of transfer by executors, administrators, guardians, or other legal representatives, duly authenticated evidence of their authority shall be produced and may be required to be deposited and remain with the new certificate representing the share of Series A Convertible Preferred Stock so transferred to the person entitled thereto.

 

5.03     The Corporation shall not be required to issue any fractional shares of Common Stock on the conversion or redemption of any share of Series A Convertible Preferred Stock.

 

5.04     Any notice required or permitted to be given to the holders of the Series A Convertible Preferred Stock under this Designation shall be deemed to have been duly given if mailed by first class mail, postage prepared to such holders at their respective addresses appearing on the stock records maintained by or for the Corporation and shall be deemed to have been given as of the date deposited in the United States mail.

 

 

4
 

 

IN WITNESS WHEREOF, the foregoing Designation of Rights, Privileges, and Preferences of Series A Convertible Preferred Stock of the Corporation has been executed this 18th day of December, 2007.

 

ATTEST   STI HOLDINGS,INC.
     
/s/ signature   By: /s/ Kip Eardley
signature illegible, Secretary   Kip Eardley, President
     

 

 

STATE OF UTAH

C OUNTY OF SALT LAKE

 

On 12-18, 2007 before me the undersigned, a notary public in and for the above county and state, personally appeared __________________ and ____________, who being by me duly sworn, did state, each for himself, that he, _______________, is the president, and that he, ______________, is the secretary, of __________________, a Nevada corporation, and that the foregoing Designation, Rights, and Preferences of Series A Convertible Preferred Stock of ___________________, was signed on behalf of such corporation by authority of a resolution of its boards of directors, and that the statements contained therein are true.

 

 

 

WITNESS MY HAND AND OFFICIAL SEAL.

 

/s/ Michelle Stott

Notary Public

My commission expires 10/01/2008

Exhibit 3.4

 

     

ROSS MILLER

Secretary of State

204 North Carson Street, Suite 1

Carson City, Nevada 89701-4520

(775) 684-5708

 

Filed in the office of

Ross Miller

Ross Miller

Secretary of State

State of Nevada

Document Number
20110459221-37
Filing Date and Time
06/21/2011   4:39PM
Entity Number
C7233-2002
  Website: www.nvsos.gov      
         
       
Certificate of Amendment      
(PURSUANT TO NRS 78.385 AND 78.390)      
       
         
USE BLACK INK ONLY - DO NOT HIGHLIGHT ABOVE SPACE IS FOR OFFICE USE ONLY

 

Certificate of Amendment to Articles of Incorporation
For Nevada Profit Corporations

(Pursuant to NRS 78.385 and 78.390 - After Issuance of Stock)

1.   Name of corporation:

STI Holdings, Inc.

 

2. The articles have been amended as follows: (provide article numbers, if available)

 

STI HOLDINGS, INC.

 

DESIGNATION OF RIGHTS, PRIVILEGES, AND PREFERENCES OF

SERIES A CONVERTIBLE PREFERRED STOCK

AS AMENDED

 

STI Holdings, Inc., a Nevada corporation (the "Corporation") has adopted the following Designation of Rights, Privileges, and Preferences of Series A Convertible Preferred Stock (the "Designation"): (See ATTACHED)

 

3.   The vote by which the stockholders holding shares in the corporation entitling them to exercise a least a majority of the voting power, or such greater proportion of the voting power as may be required in the case of a vote by classes or series, or as may be required by the provisions of the articles of incorporation* have voted in favor of the amendment is:

 

4.   Effective date of filing: (optional)

(must not be later than 90 days after the certificate is filed)

 

5.   Signature: (required)

x       /s/ Angela Ross                      

Signature of Officer

 

*If any proposed amendment would alter or change any preference or any relative or other right given to any class or series of outstanding shares, then the amendment must be approved by the vote, in addition to the affirmative vote otherwise required, of the holders of shares representing a majority of the voting power of each class or series affected by the amendment regardless to limitations or restrictions on the voting power thereof.

 

IMPORTANT: Failure to include any of the above information and submit with the proper fees may cause this filing to be rejected.

Nevada Secretary of State Amend Profit-After

Revised: 3-6-09

This form must be accompanied by appropriate fees.

 

1
 

 

STI HOLDINGS, INC.

 

DESIGNATION OF RIGHTS, PRIVILEGES, AND PREFERENCES OF
SERIES A CONVERTIBLE PREFERRED STOCK
AS AMENDED

 

STI Holdings, Inc., a Nevada corporation (the "Corporation") has adopted the following Designation of Rights, Privileges, and Preferences of Series A Convertible Preferred Stock (the "Designation"):

 

1.       Liquidation.

 

1.01     In the event of any involuntary liquidation (whether complete or partial), dissolution, or winding up of the Corporation, the holders of the Series A Convertible Preferred Stock shall be entitled to be paid out of the assets of the Corporation available for distribution to its shareholders, whether from capital, surplus, or earnings, an amount in cash equal to $0.05 per share plus all unpaid dividends previously declared thereon to the date of final distribution. No distribution shall be made on any common stock or other series of preferred stock of the Corporation by reason of any voluntary or involuntary liquidation (whether complete or partial), dissolution, or winding up of the Corporation unless each holder of any Series A Convertible Preferred Stock shall have received all amounts to which such holder shall be entitled under this subsection.

 

1.02     In the event of any voluntary liquidation (whether complete or partial), dissolution, or winding up of the Corporation, the holders of the Series A Convertible Preferred Stock shall be entitled to be paid out of the assets of the Corporation available for distribution to its shareholders, whether from capital, surplus, or earnings, an amount in cash equal to $0.05 per share. No distribution shall be made on any common stock or other series of preferred stock of the Corporation by reason of any voluntary or involuntary liquidation (whether complete or partial), dissolution, or winding up of the Corporation unless each holder of any Series A Convertible Preferred Stock shall have received all amounts to which such holder shall be entitled under this subsection.

 

1.03     If on any liquidation (whether complete or partial), dissolution, or winding, up of the Corporation, the assets of the Corporation available for distribution to holders of Series A Convertible Preferred Stock shall be insufficient to pay the holders of outstanding Series A Convertible Preferred Stock the full amounts to which they otherwise would be entitled under the Nevada Revised Business Corporation Act, the assets of the Corporation available for distribution to holders of the Series A Convertible Preferred Stock shall be distributed to them pro rata on the basis of the number of shares of Series A Convertible Preferred Stock held by each such holder.

 

2.      Voting Rights. The Series A Convertible Preferred Stock shall be entitled to vote as a separate class and as a single class with the Common Stock of the Corporation, with each share of Series A Convertible Preferred Stock equal to 10 shares of Common Stock for voting purposes. Except to the extent that the consent of the holders of the Series A Convertible Preferred Stock, voting as a class, is specifically required by the provisions of the corporate law of the state of Nevada, as now existing or as hereafter amended, the Series A Convertible Preferred Stock shall vote as a class with the Common Stock; as such, each share of Series A Convertible Preferred Stock shall be counted, for voting purposes, as 10 votes of Common Stock.

 

2
 

 

3.      Subordination. Any payment of any dividends or any redemption hereunder shall be subordinated to payment in full of all Senior Debt as defined herein. "Senior Debt" shall mean the principal of and premium, if any, and interest on all indebtedness of the Corporation to any financial institution, including, but not limited to, (i) banks whether currently outstanding or hereinafter created and whether or not such loans are secured or unsecured; (ii) any other indebtedness, liability, obligation, contingent or otherwise of the Corporation to guarantee endorsement of the contingent obligation with respect to any indebtedness, liability, or obligation whether created, assumed, or occurred by the Corporation and after the date of the creation of the Series A Convertible Preferred Stock, which is, when created, specifically designated by the Corporation as Senior Debt; and (iii) any refunding, renewals, or extensions of any indebtedness or similar obligations described as Senior Debt in subparagraphs (i) and (ii) above.

 

4.      Redemption

 

4.01     Subject to the requirements and limitations of the corporation laws of the state of Nevada, the Corporation shall have the right to redeem shares of the Series A Convertible Preferred Stock on the following terms and conditions.

 

4.02     The shares of the Series A Convertible Preferred Stock are subject to redemption by the Corporation at any time after issuance pursuant to written notice of redemption given to the holders thereof on not less than 30 days, specifying the date on which the Series A Convertible Preferred Stock shall be redeemed (the "Redemption Date").

 

4.03     The redemption price for each share of Series A Convertible Preferred Stock shall be $0.05 per share; plus any unpaid dividends, if applicable, on such share as of the Redemption Date (the "Redemption Price").

 

4.04     Redemption of the Series A Convertible Preferred Stock shall be made in the following manner:

 

(a)     At least ten (10) days prior to the date that written notice of redemption is given to the holders of the Series A Convertible Preferred Stock, the Corporation shall make appropriate arrangements with the Transfer Agent for the delivery of funds and/or Common Stock necessary to make payment of the Redemption Price for all shares of the Series A Convertible Preferred Stock redeemed by the Corporation.

 

(b)     The holder of any shares of Series A Convertible Preferred Stock so redeemed shall be required to tender the certificates representing such shares, duly endorsed, to the Company in exchange for payment of the Redemption Price and reissuance of the balance of the Series A Convertible Preferred Stock not otherwise redeemed. On such surrender, the Company shall cause to be issued and delivered a check, with all reasonable dispatch to the holder and such name or names as the holder may designate.

 

(c)     The Corporation may redeem a portion or all of the issued and outstanding shares of the Series A Convertible Preferred Stock; provided, that in the event that less than all of the outstanding shares of the Series A Convertible Preferred Stock are redeemed, such redemption shall be pro rata determined on the basis of the number of shares of the Series A Convertible Preferred Stock held by each holder reflected on the stock records and the total number of shares of Series A Convertible Preferred Stock outstanding.

 

3
 

 

5.      Conversion to Common

 

5.01     At the option of the holder of the Series A Convertible Preferred Stock the holder may convert any portion on the 100,000 Series A Convertible Preferred Stock in his possession by notifying the Corporation in writing 10 days prior to the date of conversion. The holder must present the original Series A Convertible Preferred Stock certificate in order for the corporation to honor the request to convert to common stock. The Series A Convertible Preferred Stock converts at a ratio of one to one into common shares of the Corporation.

 

6.      Additional Provisions

 

6.01     No change in the provisions of the Series A Convertible Preferred Stock set forth in this Designation affecting any interests of the holders of any shares of Series A Convertible Preferred Stock shall be binding or effective unless such change shall have been approved or consented to by the holders of Series A Convertible Preferred Stock in the manner provided in the corporation laws of the state of Nevada, as the same may be amended from time to time.

 

6.02     The shares of Series A Convertible Preferred Stock shall be transferable only on the books of the Corporation maintained at its principal office, on delivery thereof duly endorsed by the holder or by his duly authorized attorney or representative or accompanied by proper evidence of succession, assignment, or authority to transfer. In all cases of transfer by an attorney, the original letter of attorney, duly approved, or an official copy thereof, duly certified, shall be deposited and remain with the Corporation. In case of transfer by executors, administrators, guardians, or other legal representatives, duly authenticated evidence of their authority shall be produced and may be required to be deposited and remain with the new certificate representing the share of Series A Convertible Preferred Stock so transferred to the person entitled thereto.

 

6.03     The Corporation shall not be required to issue any fractional shares of Common Stock on the conversion or redemption of any share of Series A Convertible Preferred Stock.

 

6.04     Any notice required or permitted to be given to the holders of the Series A Convertible Preferred Stock under this Designation shall be deemed to have been duly given if mailed by first class mail, postage prepared to such holders at their respective addresses appearing on the stock records maintained by or for the Corporation and shall be deemed to have been given as of the date deposited in the United States mail.

 

 

4

 

Exhibit 3.5

 

 

     

ROSS MILLER

Secretary of State

204 North Carson Street, Suite 1

Carson City, Nevada 89701-4520

(775) 684-5708

 

Filed in the office of

Ross Miller

Ross Miller

Secretary of State

State of Nevada

Document Number
20130218497-97
Filing Date and Time
03/29/2013   2:30PM
Entity Number
C7233-2002
  Website: www.nvsos.gov      
         
       
Certificate of Amendment      
(PURSUANT TO NRS 78.385 AND 78.390)      
       
         
USE BLACK INK ONLY - DO NOT HIGHLIGHT ABOVE SPACE IS FOR OFFICE USE ONLY

 

Certificate of Amendment to Articles of Incorporation
For Nevada Profit Corporations

(Pursuant to NRS 78.385 and 78.390 - After Issuance of Stock)

1.   Name of corporation:

 

STI Holdings, Inc.

 

2. The articles have been amended as follows: (provide article numbers, if available)

 

Article I shall be amended to change the name of the Corporation to Grand Perfecta, Inc. Article Four of the Articles of Incorporation shall be amended to increase the authorized capital to 600,000,000 shares, par value $0.001 per share with 100,000,000 shares designated as preferred stock, par value $0.001 per share, and 500,000,000 shares designated as common stock, par value $0.001 per share all as set forth on the attached certificate of amended.

 

3.   The vote by which the stockholders holding shares in the corporation entitling them to exercise a least a majority of the voting power, or such greater proportion of the voting power as may be required in the case of a vote by classes or series, or as may be required by the provisions of the articles of incorporation* have voted in favor of the amendment is: 88.2%

 

4.   Effective date of filing: (optional) Date: April 16, 2013 Time: _______________

(must not be later than 90 days after the certificate is filed)

 

5.   Signature: (required)

x       /s/ Shuya Watanabe                    

Signature of Officer

 

*If any proposed amendment would alter or change any preference or any relative or other right given to any class or series of outstanding shares, then the amendment must be approved by the vote, in addition to the affirmative vote otherwise required, of the holders of shares representing a majority of the voting power of each class or series affected by the amendment regardless to limitations or restrictions on the voting power thereof.

 

IMPORTANT: Failure to include any of the above information and submit with the proper fees may cause this filing to be rejected.

 

1
 

 

CERTIFICATE OF AMENDMENT

TO THE ARTICLES OF INCORPORATION

OF

STI HOLDINGS, INC.

 

 

Pursuant to the provisions of Section 78.385, et seq., of the Nevada Revised Statutes, STI Holdings, Inc., a Nevada corporation, hereafter referred to as the “Corporation.” hereby adopts the following Certificate of Amendment to its Articles of Incorporation:

 

FIRST: The name of the Corporation is STI Holdings, INc.

 

SECOND: Article I shall be amended to change the name of the Corporation to Grand Perfecta, Inc.
THIRD: Article Four of the Articles of Incorporation shall be amended to read as follows:

 

ARTICLE FOUR

AUTHORIZED SHARES

 

 

The Corporation is authorized to issue a total of 600,000,000 shares, consisting of 100,000,000 shares of preferred stock having a par value of $0.001 per share (hereinafter referred to as “Preferred Stock”) and 500,000,000 shares of common stock having a par value $0.001 per share (hereinafter referred to as “Common Stock”). Shares of any class of stock may be issued, without shareholder action, from time to time in one or more series as may from time to time be determined by the board of directors. The board of directors of this Corporation is hereby expressly granted authority, without shareholder action, and with the limits set forth in the Nevada Revised Statutes, to:

 

(a) designate in whole or in part, the powers, preferences, limitations, and relative rights, of any class of shares before the issuance of any shares of that class;

 

(b) create one or more series within a class of shares, fix the number of shares of each such series, and designate, in whole or part, the powers, preferences, limitations, and relative rights of the series, all before the issuance of any shares of that series;

 

(c) alter or revoke the powers, preferences, limitations, and relative rights granted to or imposed upon any wholly unissued class of shares or any wholly unissued series of any class of shares; or

 

(d) increase or decrease the number of shares constituting any series, the number of shares of which was originally fixed by the board of directors, either before or after the issuance of shares of the series, provided that, the number may not be decreased below the number of shares of the series then outstanding, or increased above the total number of authorized shares of the applicable class of shares available for designation as a part of the series.

 

The allocation between the classes, or among the series of each class, of unlimited voting rights and the right to receive the net assets of the Corporation upon dissolution, shall be as designated by the board of directors. All rights accruing to the outstanding shares of the Corporation not expressly provided for to the contrary herein or in the Corporation’s bylaws or in any amendment hereto or thereto shall be vested in the Common Stock. Accordingly, unless and until otherwise designated by the board of directors of the Corporation, and subject to any superior rights as so designated, the Common Stock shall have unlimited voting rights and be entitled to receive the net assets of the Corporation upon dissolution.

 

 

2
 

 

 

FOURTH:      By executing these Certificate of Amendment to the Articles of Incorporation, the president and secretary of the Corporation do hereby certify that on March 22, 2013, the foregoing amendment to the Articles of Incorporation of STI Holdings, Inc., was authorized and approved pursuant to Section 78.390 of the Nevada Revised Statutes by the consent of the majority of the Corporation’s shareholders. The number of issued and outstanding shares entitled to vote on the foregoing amendment tot he Articles of Incorporation was 28,227,332 of which 34,900,000 shares voted for, and no shares voted against and no shares abstained from the foregoing amendment to the Articles of Incorporation. No other class of shares was entitled to vote thereon as a class.

 

DATED this 22nd day of March, 2013.

 

 

  /s/ Shuya Watanabe
  Shuya Watanabe, CEO

 

 

 

 

 

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Exhibit 4.1

 

Date: March 5th, 2015 Amount: ¥200,000,000

 

GRAND PERFECTA, INC.

CONVERTIBLE DEBENTURE

BEARING INTEREST AT 1% PER ANNUM

 

 

THIS DEBENTURE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE TRANSFERRED OR SOLD IN THE ABSENCE OF AN EFFECTIVE REGISTRATION OR OTHER COMPLIANCE UNDER THE SECURITIES ACT OR THE LAWS OF THE APPLICABLE STATE OR A "NO-ACTION" OR INTERPRETIVE OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER AND ITS COUNSEL TO THE EFFECT THAT THE SALE OR TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT AND SUCH STATE STATUTES.

 

 

 

GRAND PERFECTA, INC., a corporation duly organized and existing under the laws of the State of Nevada (hereinafter referred to as the "Company"), for value received, hereby promises to pay to PURCHASER, the registered holder hereof, the principal sum of Two hundred million Japanese Yen (¥200,000,000) one (1) year from the date hereof, upon presentation and surrender of this Debenture (the "Debenture") at the offices of the Company, in such lawful money of Japan as at the time of payment shall be legal tender for the payment of public and private debt, until the principal hereof is paid or made available for payment as herein provided.

 

This Debenture is subject to the following further terms and material provisions:

 

1.      Series . This Debenture is one of a duly authorized series of Debentures of the Company totaling Two hundred million Japanese Yen (¥200,000,000) (the “Debentures”).

 

2.      Term and Interest . The date of maturity of the Debenture shall be one (1) year from the date of issuance, subject to prepayment as set forth in paragraph 3 hereof. The Debenture shall bear simple interest at the rate of one percent (1%) per annum. The principal on the Debenture is payable on the maturity date, subject to prepayment as set forth in paragraph 3 hereof, and will be paid at the office of the Company, maintained for such purposes, to the registered holder of the Debenture on the books and records of the Company. Accrued interest on the Debenture will be payable annually, on the anniversary date of the Debenture, and will be paid at the office of the Company, maintained for such purposes, to the registered holder of the Debenture on the books and records of the Company.

 

3.      Prepayment . This Debenture is subject to prepayment, in whole or in part, at the election of the Company at any time, upon not less than 10 days notice. Prepayment shall be effected by paying the amount equal to the outstanding principal amount of the Debenture and accrued interest at the date of prepayment. On the date fixed for prepayment by the Company, the amount of principal shall be paid in cash or certified funds. Any Debenture which is prepaid only in part shall be presented for notation thereon by the Company of such partial prepayment. If less than all the Debenture principal amount and interest is to be prepaid, notice of the proposed prepayment shall be sent to the registered holder of the Debenture and such prepayment shall be made.

 

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4.      Satisfaction and Discharge of Debenture . This Debenture shall cease to be of further effect (except as to any surviving rights of transfer, or exchange of Debentures herein expressly provided for) when:

 

(a)     The Company has paid or caused to be paid all sums payable hereunder by the Company, including all principal and interest amounts under the Debenture or the conversion of the Debenture as provided herein; and

 

(b)     All the conditions precedent herein provided for relating to the satisfaction and discharge of this Debenture have been met.

 

5.      Events of Default . "Events of Default," when used herein, whatever the reason for such event of default and whether it shall be voluntary or involuntary or be effected by operation of law pursuant to any judgment, decree, or order of any court or any order, rule, or regulation of any administrative or government body or be caused by the provisions of any paragraph herein means any one of the following events:

 

(a)     Default in the payment of the principal of the Debenture, when due, whether at maturity, or otherwise; or

 

(b)     Default in the performance or breach of any covenant or warranty of the Company in this Debenture (other than a covenant or warranty, the breach or default in performance of which is elsewhere in this section specifically dealt with), and continuation of such default or breach for a period of 30 days after there has been given to the Company by registered or certified mail, by the holders of a majority in principal amount of the outstanding Debenture, a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a notice of default hereunder; or

 

(c)     The entry of a decree or order by a court having jurisdiction in the premises adjudging the Company a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment, or composition of or in respect of the Company under the Federal Bankruptcy Act or any other applicable federal or state law, or appointing a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Company or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuation of any such decree or order unstayed and in effect for a period of 30 consecutive days; or

 

(d)     The institution by the Company of proceedings to be adjudicated a bankrupt or insolvent, or the consent by it to the institution of bankruptcy or insolvency proceedings against it, or a filing by it of a petition or answer or consent seeking reorganization or relief under the Federal Bankruptcy Act or any other applicable federal or state law; or

 

(e)     The consent by the Company to the filing of any such petition or the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Company or of any substantial part of its property), or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Company in furtherance of any such action.

 

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6.      Acceleration of Maturity . If an event of default occurs and is continuing then, in every such case, the holder of a majority in principal amount of the outstanding Debentures, may declare the principal of the Debentures to be due and payable immediately, by a notice in writing to the Company of such default, and upon any such declaration, such principal shall become immediately due and payable. At any time after such declaration of acceleration has been made, and before a judgment or decree for payment of money due has been obtained by the holders, the holders of a majority of the principal of the outstanding Debentures, by written notice to the Company, may rescind and annul such declaration and its consequences, if all events of default, other than the nonpayment of the principal of the Debentures which has become due solely by such acceleration, has been cured or waived. No such recession shall affect any subsequent default or impair any right contingent thereon.

 

7.      Conversion . Subject to, and in compliance with, the provisions contained herein, the Holder of this Debenture is entitled, at its or his option, at any time from the date that is 40 days from the date of issuance of this Debenture and prior to maturity or payment, or in case this Debenture or some portion hereof shall have been called for prepayment or considered in default under paragraph 5 hereof, then, in respect of this Debenture or such portion hereof, to convert this Debenture (or any portion of the principal amount hereof), into validly issued, fully paid and nonassessable shares (calculated as to each conversion to the nearest share) of common stock, par value $0.001 per share of the Company, (the “Common Stock” or “Shares”) at the rate of one Share for each one point one dollar ($1.10 or 130.9) of principal and accrued but unpaid interest of the Debenture, subject to such adjustment in such conversion price, if any, as may be required by the provisions of this Debenture, by surrender of this Debenture, duly endorsed (if so required by the Company) or assigned to the Company or in blank, to the Company at its offices, accompanied by written notice to the Company, that the Holder hereof elects to convert this Debenture or, if less than the entire principal amount hereof is to be converted, the portion hereof to be converted. On conversion, no adjustment for interest is to be made, but if any Holder surrenders this Debenture for conversion between the record date for the payment of any installment of interest and the next interest payment date, the holder of such Debenture when surrendered for conversion shall be entitled to payment of the interest thereon from the last preceding record date for interest through the date of conversion which the registered holder is entitled to receive on such conversion date. No fraction of Shares will be issued on conversion, but instead of any fractional interest, the Company will pay cash adjustments as provided herein. Following receipt of the written notice of intention to convert the Debenture, the Company shall take such steps as it deems appropriate to permit conversion of the Debenture as specified herein without registration or qualification under applicable federal and state securities laws.

 

8.      Suits for Enforcement . If an event of default occurs and is continuing, the holder of a majority in principal amount of the outstanding Debenture may, in their discretion, proceed to protect and enforce their rights by such appropriate judicial proceedings as the holders shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement under this Debenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy.

 

9.      Limitation on Suits . No holder of any Debenture shall have any right to institute any proceedings, judicial or otherwise, with respect to this Debenture, or for the appointment of a receiver or trustee, or for any remedy hereunder, unless such holder has previously given written notice to the Company of a continuing event of default as provided above; it being understood and intended that no one or more holders of this Debenture shall have any right in any manner whatever by virtue of, or by availing of, any provisions of this Debenture to effect, disturb or prejudice the right of any other holders of Debentures, or to obtain or to seek to obtain priority or preference over any other holders or to enforce any right under this Debenture, except in the manner herein provided and for the equal and ratable benefit of all the holders of the Debenture.

 

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10.      Acts of Holders . Any request, demand, authorization, direction, notice, consent, waiver, or other action provided by this Debenture to be given or taken by the holder hereof or by the holders of the Debentures may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such holders in person or by their agent or attorney-in-fact, duly appointed in writing; and, except as otherwise expressly provided herein, such action shall become effective when such instrument or instruments are delivered to the Company in the manner provided for giving notices herein. Such instrument or instruments, and the action embodied therein or evidenced thereby, are herein sometimes referred to as the “act” of the holders signing such instrument or instruments. Proof of execution of any such instrument or of writing appointing any such agent shall be sufficient for any purpose of this Debenture if the fact and date of execution by any person of any purpose of the Debenture if the fact and date of execution by any person of any such instrument or writing is verified by the affidavit of a witness of such execution or by the request, demand, authorization, direction, notice, consent, waiver, or other action by the holder of this Debenture shall bind every Debenture holder of the same Debenture and the holder of every Debenture issued upon the transfer thereof or in exchange therefor or in lieu thereof in respect of anything done or suffered to be done by any person in reliance thereon, whether or not notation of such action is made upon such Debenture.

 

11.      Notices to Holders; Waiver . Where this Debenture provides for notice to holders of any event, such notice shall be sufficiently given if in writing and sent by courier providing for delivery within 72 hours or mailed, registered, postage prepaid, to each holder affected by such event, at his address as it appears in the Debenture register maintained by the Company, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. Where the Debenture provides for notice to the Company, such notice shall be sufficiently given if in writing and mailed, registered, postage prepaid, to the Company at its address set forth above (or at such other address as shall be provided to the holder of this Debenture in the manner for giving notices set forth herein), not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. Where this Debenture provides for notice in any manner, such notice may be waived in writing by the person entitled to receive such notice, whether before or after the event, any such waiver shall be equivalent of such notice.

 

12.      Restrictions . The holder of this Debenture, by acceptance hereof, represents and warrants as follows:

 

(a)     The Debenture is being acquired for the holder's own account to be held for investment purposes only and not with a view to, or for, resale in connection with any distribution of such Debenture or any interest therein without registration or other compliance under the Securities Act and applicable state securities laws, and the holder hereof has no direct or indirect participation in any such undertaking or in underwriting such an undertaking.

 

(b)     The holder hereof has been advised and understands that the Debenture has not been registered under the Securities Act and the Debenture must be held and may not be sold, transferred, or otherwise disposed of for value unless it is subsequently registered under the Securities Act or an exemption from such registration is available; except as set forth herein, the Company is under no obligation to register the Debenture under the Securities Act; in the absence of such registration, sale of the Debenture may be impracticable; the Company will maintain stop-transfer orders against registration of transfer of the Debenture. The Company may refuse to transfer the Debenture unless the holder thereof provides an opinion of legal counsel reasonably satisfactory to the Company or a "no-action" or interpretive response from the Securities and Exchange Commission to the effect that the transfer is proper; further, unless such letter or opinion states that the Debenture are free from any restrictions under the Securities Act, the Company may refuse to transfer the Debenture to any transferee who does not furnish in writing to the Company the same representations and agree to the same conditions with respect to such Debenture if any set forth herein. The Company may also refuse to transfer the Debenture if any circumstance is present reasonably indicating that the transferee's representations are not accurate.

 

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13.      Lock Up . All shares of Common Stock issued on conversion of this Debenture are subject to a restriction on the sale of such shares so that upon conversion of the Debenture, the shares of Common Stock received on such conversion shall not be available for resale for six months after the Conversion of the Debenture unless i) the board of directors of the Company in their sole discretion waive such provision or ii) the volume weighted average price “VWAP” of the shares of Common Stock is $2.00 per share or higher where the VWAP means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted for trading as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)); (b)  if the OTC Bulletin Board is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin Board; (c) if the Common Stock is not then quoted for trading on the OTC Bulletin Board and if prices for the Common Stock are then reported in the “Pink Sheets” published by Pink Sheets, LLC (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported; or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Holder and reasonably acceptable to the Company. Additionally, all shares of Common Stock issued on conversion of this Debenture are subject to a restriction on the sale of such shares if a managing underwriter of an offering of the Company’s securities, determines the sale of the shares of Common Stock would be detrimental to a proposed offering by the Company, and in such case, the underwriter can require the shares be locked up for up to three months following the date of conversion.

 

14.      Severability . In case any provision in this Debenture shall be invalid, illegal, or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

 

15.      Governing Law . This Debenture shall be governed by and construed and interpreted in accordance with the laws of the State of Nevada.

 

16.      Legal Holidays . In any case where any date provided herein shall not be a business day, then (notwithstanding any other provision of this Debenture) the event required or permitted on such date shall be required or permitted, as the case may be, on the next succeeding business day with the same force and effect as if made on the date upon which such event was required or permitted pursuant hereto.

 

17.      Delay or Omission; No Waiver . No delay or omission of any holder of the Debenture to exercise any right or remedy accruing upon any event of default shall impair any such right or remedy or constitute a waiver of any such event or default or any acquiescence therein. Every right or remedy given hereby or by law may be from time to time, and as often as may be deemed expedient.

 

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18.      Miscellaneous . This Debenture is subject to the following additional terms and conditions:

 

(a)     If this Debenture is placed with any attorney for collection, or if suit be instituted for collection, or if any other remedy provided by law is pursued by the registered holder hereof, because of any default in the terms and conditions herein, then in either event, the undersigned agrees to pay reasonable attorneys' fees, costs, and other expenses incurred by the registered holder hereof in so doing.

 

(b)     None of the rights and remedies of the registered holder hereof shall be waived or affected by failure or delay to exercise them. All remedies conferred on the registered holder of this Debenture shall be cumulated and none is exclusive. Such remedies may be exercised concurrently or consecutively at the registered holder's option.

 

(c)     This Debenture is negotiable and transferable, subject to compliance with the provisions of paragraph 12 hereof.

 

(d)     The makers, guarantors, and endorsers hereof severally waive presentment for payment, protest, and notice of protest, and of nonpayment of this Debenture.

 

(e)     This Debenture may not be sold to any US Person and is to be sold only to persons not domiciled in or located within the United States.

 

DATED effective as of the ___ day of March 2015.

 

GRAND PERFECTA, INC.

 

 

 

By: Shuya Watanabe

       A Duly Authorized Officer

       Shuya Watanabe, CEO

 

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Exhibit 10.1

 

Service Agreement

 

This Service Agreement (this “Agreement”) has been made and entered into by and between Link Bit Consulting Co., Ltd. (the “Customer”), and Cheval Attache Co., Ltd. (the “Service Provider”), as follows.

 

Article 1.     Entrustment of Services

The Customer entrusts the Service Provider with the following services and the Service Provider accepts the entrustment.

(1) Planning, producing, distributing, marketing and consulting relating to digital contents.
(2) Planning, producing, distributing, marketing and consulting relating to smartphone application software.
(3) Other services relating to the forgoing

 

Article 2.     Service Fees

The service fees shall be 1million yen per month (exclusive of consumption tax). The Customer shall pay the fees for each month by the end of the current month by remittance to the account designated by the Service Provider.

 

Article 3.     Confidentiality

The Service provider may not use or divulge to any third party any confidential information of the Customer that comes to its knowledge including the Customer’s client information and management methods through the execution and performance of this Agreement.

 

Article 4.     Reporting

If the Customer requests, the Service Provider shall promptly report information on the entrusted matters.

 

Article 5.     Term

The effective term of this Agreement shall be from August 1, 2014 to July 31, 2015. If neither party expresses a specific intention at least three months prior to the expiration of the term, this Agreement shall be extended for an additional one-year period with the same conditions, and the same shall apply thereafter.

 

Article 6.     Consultation

Any matters not stipulated hereunder or any questions about the interpretation of this Agreement shall be resolved upon consultation between the parties hereto in good faith.

 

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IN WITNESS WHEREOF, both parties hereto have executed this Agreement in duplicate with their signatures and seals, and each party shall retain one copy.

 

 

August 1, 2014

 

Customer:

1-16-1 Kaigan, Minato-ku, Tokyo, Japan

Link Bit Consulting Co., Ltd.

Takashi Ozawa, Representative Director

 

Service Provider:

2-10-1 Azabujuban , Minato-ku, Tokyo, Japan

Sheval Attache Co., Ltd.

Akira Tanabe, Representative Director

 

 

 

 

 

 

2

 

Exhibit 10.2

 

LOAN AGREEMENT

 

THIS LOAN AGREEMENT is made by and between Clara Ltd. as lender (the "Lender") and Link Bit Consulting Co., Ltd. as borrower (the "Borrower") as follows:

 

Article 1. (Loam)

 

The Lender hereby made a loan 100,000,000JPY to the Borrower (the "Loan") through a bank transfer to the following account and the Borrower received the Loan today.

Tokyo-Mitsubishi UFJ bank, Kojimachi Branch

Ordinary account 4524647

Link Bit Consulting Co., Ltd

Representative director Takashi OZAWA

 

Article 2. (Interest)

No interest.

 

Article 3. (Repayment method)

Divided payment starting from the end of January 2013 to the end of October 2013.

The Borrower shall pay 10,000,000JPY at the end of each month during the above period to the bank account which the Lender indicates.

 

Article 4. (Default Interest)

In the event the Borrower fails to make repayment of its obligations on the due date, the Borrower shall pay to the Lender default interest on the overdue amount, at the rate of 19% per annum.

 

Article 5. (Event of Default)

In case any of the following events with respect to the Borrower shall have occurred, all obligations of the Borrower to the Lender hereunder shall immediately become due and payable without any notice or demand from the Lender and the Borrower shall pay all obligations immediately.

 

1. Any petition for compulsory execution, compulsory auction, bankruptcy, the commencement of composition, arrangement proceedings, or reorganization proceedings that incurred due to other liability is issued to the Borrower.

2. A part of a claim of the Borrower has been seized or has been subjected to execution of a provisional seizure. Any petition for compulsory execution or compulsory auction incurred due to other liability, bankruptcy, the commencement of composition, and arrangement proceedings or reorganization proceedings is issued.

3.The Borrower defaults in the due performance or observance of any provision under this Agreement.

4. In addition to those listed in the preceding four items, any reasonable and probable cause that need to preserve the obligatory right of the Lender occurs.

 

Article 6. (Joint and several obligation)

The joint surety shall undertake the obligation of the Borrower jointly with the Borrower.

 

Article 7. (Security)

In order to secure the obligation under this agreement, the Borrower hereby deposit the following.

Common share of Bankisha net Co., Ltd, wholly owned by the Borrower.

(200 shares, 1 piece, numbered 1)

 

Article 8. (Jurisdiction)

In the event of any disputes arising out, the Lender and the Borrower shall submit to the jurisdiction of the Tokyo District Court.

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in one copy, affixing the respective name and seal, and the Lender retains the original and the Borrower and the joint surety retain its copy.

 

March 26, 2012

 

 

The Lender: 1-5-3 Sumiyoshi Hakata-ku Fukuoka-shi

Clara Ltd.

Representative director Akira TANABE

 

The Borrower: 1-16-1 Kaigan Minato-ku Tokyo

Link Bit Consulting Co., Ltd.

Representative director Takashi OZAWA

 

The joint surety: 1-12 Tsutsujigaoka Aoba-ku Yokohama-shi Kanagawa,

Shuya WATANABE

 

2413, 3-5-3 Nishikanda Chiyoda-ku Tokyo

Takashi OZAWA

 

 

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Exhibit 10.3

 

Loan Agreement(revised ver.)

 

THIS LOAN AGREEMENT is made by and between Clara Ltd as lender (the "Lender") and Link Bit Co., Ltd. as borrower (the "Borrower") as follows in re changes to the “Loan Agreement” dated on 26 th March 2012 :

 

Article 1. (Loan) The Lender and the borrower hereby agrees that the Loan was made in the below schedule.

26 March 2012 100,000,000JPY  
29 November 2012 14,000,000JPY  
26 December 2012 18,000,000JPY  
30 January 2013 18,000,000JPY Total amount : 150,000,000JPY.

 

Article 2.(Interest rate)

The interest of 1 % per annum.

 

Article 3.(Repayment method)

Divided payment starting from the end of January 2015.

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in one copy, affixing the respective name and seal, and the Lender retains the original and the Borrower and the joint surety retain its copy.

 

January 29 2013

 

 

The Lender: 1-5-3 Sumiyoshi Hakata-ku Fukupka-shi

Clara Ltd.

Representative director Akira TANABE

 

 

The Borrower: New Pier Takeshiba South Tower 21f, 1-16-1 Kaigan Minato-ku Tokyo

Link Bit Consulting Co., Ltd.

Representative director Shuya WATANABE

Representative director Takashi OZAWA

 

The joint surety 1-12 Tsutsujigaoka Aoba-ku Yokohama-shi Kanagawa

Shuya WATANABE

 

2413, 3-5-3 Nishikanda Chiyoda-ku Tokyo

Takashi OZAWA

 

 

 

 

Exhibit 10.4

 

OFFSHORE SECURITIES PURCHASE AGREEMENT

 

THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES OR TO U.S. PERSONS (OTHER THAN DISTRIBUTORS) UNLESS THE SECURITIES ARE REGISTERED UNDER THE SECURITIES ACT OF 1933, OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933 IS AVAILABLE.

 

This Offshore Securities Purchase Agreement (this “ Agreement ”) is made by Grand Perfecta, Inc., a Nevada corporation operating in Japan (the “ Company ”), and the purchaser identified on the signature page hereto, including its successors and assigns, (the “ Buyer ”); and

 

WHEREAS, this Agreement is executed in reliance upon the transaction exemption afforded by Regulation S (“Regulation S”) as promulgated by the Securities and Exchange Commission (“SEC”), under the Securities Act of 1933, as amended, (the “1933 Act”),

 

NOW, THEREFORE, in consideration of the foregoing recitals and the terms and conditions hereinafter set forth the parties hereto agree as follows:

 

1.            PURCHASE

 

(a)            The Buyer hereby subscribes for and purchases an unsecured convertible debenture in the original principal amount of Two hundred million Japanese Yen (¥200,000,000), the form of which is attached hereto as Exhibit A (the “Securities.”)

 

(b)            Buyer has made payment of the purchase price of the Securities in the amount indicated above, the receipt of which is acknowledged by the Company. Upon execution and delivery of this Agreement by the Company and Buyer, the Company shall promptly cause to be issued to the Buyer the Securities.

 

2.            BUYER’S REPRESENTATIONS. Buyer represents and warrants to the Company as follows:

 

(a)            Buyer is not a U.S. Person, as defined in Regulation S, and Buyer was not formed for the purpose of investing in the Securities, which have not been registered under the 1933 Act in reliance upon Regulation S. Buyer is not purchasing the Securities by or for the benefit of a U.S. Person.

 

(b)            At the time the offer to purchase the Debenture was made, Buyer was outside the United States.

 

(c)            No offer to sell or purchase the Securities was made in the United States.

 

(d)            Buyer has not engaged in nor will engage in any “Directed Selling Efforts,” i.e., any activity undertaken for the purpose of, or that could reasonably be expected to have the effect of, conditioning the market in the United States for any of the Securities being purchased by the Buyer.

 

(e)            Buyer is purchasing the Securities for its own account and for investment purposes and not with the view towards distribution or for the account of a U.S. Person.

 

(f)            All subsequent offers and sales of the Securities shall be made in compliance with Regulation S and/or pursuant to registration of the Securities under the 1933 Act or pursuant to an exemption from registration under the 1933 Act. Unless registered for sale under the 1933 Act, the Securities will not be resold to U.S. Persons or within the United States until after the end of a one year restricted period commencing on the date of closing of the purchase of the Securities and otherwise in compliance with Rule 904 of Regulation S.

 

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(g)            The Securities are being offered and sold to Buyer in reliance on Regulation S and the Company is relying upon the truth and accuracy of Buyer’s representations and warranties in order to justify such reliance in connection with the sale of the Securities to Buyer.

 

(h)            Buyer is sophisticated and capable of evaluating the risks presented by making an investment in the Securities.

 

(i)            Buyer has had an opportunity to ask questions of and receive information from the Company and its executive officers and has availed itself of such opportunity to the fullest extent desired by Buyer.

 

3            COMPANY REPRESENTATIONS. The Company represents and warrants to Buyer as follows:

 

(a)            The Company is incorporated in the state of Nevada, United States of America and is in good standing as of the date of this Agreement.

 

(b)            The Company has not offered the Securities that are the subject of this transaction to any person in the United States, any identifiable groups of U.S. citizens abroad, or to any U.S. Person, as that term is defined in Regulation S.

 

(c)            At the time the offer to purchase the Securities was made by Buyer, the Company and/or its agents reasonably believed Buyer was outside of the United States and was not a U.S. Person.

 

(d)            The Company and/or its agents reasonably believe that the transaction has not been pre-arranged with a buyer in the United States.

 

(e)            The Company has not engaged in nor will engage in any “Directed Selling Efforts,” i.e., any activity undertaken for the purpose of, or that could reasonably be expected to have the effect of, conditioning the market in the United States for any of the Securities being purchased by the Buyer.

 

(f)            The Securities when issued and delivered will be duly and validly authorized and issued, fully paid and non-assessable and will not subject the holders thereof to personal liability by reason of being such holders. The Securities are free and clear of any security interest, liens, claims, or other encumbrances.

 

(g)            The Agreement has been duly authorized, validly executed and delivered on behalf of the Company and is a valid and binding agreement in accordance with its terms, subject to general principles of equity and to bankruptcy or other laws affecting the enforcement of creditors’ rights generally.

 

(h)            The Company has not, directly or indirectly, solicited offers for or offered or sold the Securities in any manner involving a public offering with the meaning of Section 4(a)(2) of the Securities Act.

 

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4.            EXEMPTION; RELIANCE ON REPRESENTATION.

 

(a)            Buyer understands that the offer and sale of the Securities (including the common stock issuable on conversion of the Debenture) is not being registered under the 1933 Act. The Company is relying on the rules governing offers and sales made outside the United States pursuant to Regulation S as an exemption from registration for this transaction between the Company and the Buyer. Buyer agrees that the Securities (including the common stock issuable on conversion of the Debenture) cannot be sold except in accordance with the provisions of Regulation S, pursuant to registration under the 1933 Act, or pursuant to an available exemption from registration; and agrees not to engage in hedging transactions with regard to the Securities unless in compliance with the 1933 Act.

 

(b)            Buyer agrees that the Securities (including the common stock issuable on conversion of the Debenture) are “restricted securities” as defined in SEC Rule 144(a)(3). The Company is bound by this Agreement to refuse to register any transfer of the foregoing not made in accordance with the provisions of Regulation S, pursuant to registration under the 1933 Act, or pursuant to an available exemption from registration.

 

(c)            All certificates and instruments shall bear appropriate restrictive legends to the effect that no transfer of the Securities (including the common stock issuable on conversion of the Debenture) may be made except in compliance with the provisions of Regulation S. The Company and Buyer agree that the Company’s transfer agent is hereby directed and authorized to refuse to register any transfer of the Securities that is not made in accordance with the provisions of Regulation S.

 

5.            GOVERNING LAW.

 

This Agreement shall be governed by and interpreted in accordance with the laws of the State of Nevada, United States of America. A facsimile transmission of this signed agreement shall be legal and binding to all parties hereto.

 

6.            MODIFICATION.

 

This Agreement and the exhibits hereto sets forth the entire understanding of the parties with respect to the subject matter hereof, supersede all existing agreements among them concerning such subject matter, and may be modified only by a written instrument duly executed by each party with the approval of their respective boards of directors.

 

7.            NON-ASSIGNABLE.

 

This Agreement is not assignable or transferable to any other party.

 

 

[Signature Page Follows.]

 

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IN WITNESS WHEREOF, this Offshore Securities Purchase Agreement was duly executed on the date first written below.

 

Dated this 5th day of the month of March 2015.

 

Buyer:

 

EUROPLUSE INTERNATIONAL Ltd.

 

By: Ayako Noda

       Ayako Noda

       Representative Director

 

3-5-2 Jingumae Shibuya-ku

Tokyo

JAPAN

 

 

Accepted this 5th day of the month of March 2015.

 

GRAND PERFECTA, INC.

 

 

 

By: Shuya Watanabe

       Duly Authorized Officer

       Shuya Watanabe, CEO

 

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Exhibit 10.5

 

Tokyo Teleport Fixed Term Building Lease Agreement

<Agreement conditions>

Lender Tokyo Teleport Center Co., Ltd.      
Borrower Link Bit Consulting Co.,Ltd.      
Building Name New Pier TAKESHIBA South Tower    
Location 1-16-1 Kaigan Minato-ku Tokyo    
Structure/ Number of stories Above-ground part :steel structure, underground part: SRC
21 stories above ground, three stories below ground, 1 penthouse floor.
Room for rent 21st floor 906.60㎡  
Purpose of use Office        
Rental period 1 September, 2014 - 31 August, 2015      
Rent fee Floor Square measure(㎡) price per square meter Monthly Fee (Yen) Consumption Tax/Local Consumption Tax (Yen) Monthly Fee consumption tax included
21st Floor 906.60 4,235 3,839,451 307,156 4,146,607
Total                      906,60 *** 3,839,451 307,156 4,146,607
Common Service Fee Floor Square measure(㎡) price per square meter Monthly Fee (Yen) Consumption Tax/Local Consumption Tax (Yen) Monthly Fee consumption tax included
21st Floor 906.60 1,512 1,370,779 109,662 1,480,441
Total 906.60 *** 1,370,779 109,662 1,480,441
Deposit Floor Square measure(㎡) price per square meter Total Amount (Yen) ***
21st Floor 906.60 42,350 38,394,510
Total 906.60 *** 38,394,510
Remarks Has Provision of contract.        
             
For the room mentioned  above,  the office lease agreement under the provision of Article 38 Act on Land and Building Leases has been made and entered into by and between the lender and theborrower.
 
IN WITNESS WHEREOF, both parties hereto have executed this Agreement in duplicate with their signatures and seals, and each party shall retain one copy.
             
31 August, 2014            
             
Lender   2-5-10 Aomi Koutou-ku Tokyo      
    Tokyo Teleport Center Co., Ltd.      
    Representative director Teruo Tazaki      
             
Borrower   1-16-1 Kaigan Minato-ku Tokyo      
    New Pier TAKESHIBA South Tower 21F      
    Link Bit Consulting Co.,Ltd.      
    Representative director Takashi Ozawa      

 

 

Exhibit 10.6

 

STOCK PURCHASE AGREEMENT

 

THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into this 11 day of June , 2014, by and among Grand Perfecta, Inc., a Nevada corporation (hereinafter referred to as the "Company") and Kazuaki Goto, (hereinafter referred to as the "Buyer"), on the following:

 

Premises

 

A.            Buyer has engaged in preliminary discussions with the Company regarding the purchase of the shares of the Company's restricted common stock being newly issued (the "Common Stock").

 

B.             The Company and Buyer want to set forth their understanding as to the terms and conditions of the purchase of the "Common Stock" by Buyer as below described

 

Agreement

 

BASED, upon the foregoing premises, which are incorporated herein by this reference, and for and in consideration of the mutual promises and covenants hereinafter set forth, and other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, it is agreed as follows:

 

ARTICLE I

PURCHASE OF COMMON STOCK

 

1.01      Purchase and Sale of Common Stock. Buyer agrees to purchase from the Company and the Company agrees to sell to Buyer three million (3,000,000) shares of the Company's common stock (hereinafter the "Shares") for a purchase price of three hundred million YEN (Y300,000,000).

 

The purchase price shall be fully paid by June 17, 2014 to the Company with the bank designated by the Company as below indicated.

 

Name of the Bank: The Bank of Tokyo - Mitsubishi UFJ Ltd. Kojimachi Branch

Name of the account: Link Bit Consulting Co., Ltd.

The account number: 4524647

Kind of the account ; ordinary account

 

1.02      Option of Purchase and Sale of Common Stock

In addition to its purchase of the shares of common stock as described above 1.01, the Company grants such a right to the Buyer that the Buyer can buy 3,000,000 of the shares of common stock for a purchase price of three million US dollars($3,000,000) at any time for five years effectively from the date of this agreement.

 

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ARTICLE II

REPRESENTATIONS, COVENANTS, AND WARRANTIES
OF THE COMPANY

 

As an inducement to, and to obtain the reliance of Buyer in connection with its purchase of the shares of Common Stock, the Company represents and warrants as follows:

 

2.01      Private Offering. The offer, offer for sale, and sale of the Shares have not been registered

with the Securities and Exchange Commission (the "Commission"). The Shares shall be offered for sale and sold pursuant to the exemptions from the registration requirements of Section 5 of the United States Securities Act of 1933, as amended, and as such, will be deemed "restricted securities" limiting the Shares ability to be resold. The Shares are being acquired for investment and may not be sold or transferred without complying with rule 144 or are part of an effective registration or other compliance under the securities act.

 

2.02      Approval of Agreement. The Company has full corporate power, authority, and legal right and has taken, or will take, all action required by Iaw, its articles of incorporation, bylaws, and otherwise to execute and deliver this Agreement and to consummate the transactions herein contemplated including the issuance of the Shares. The board of directors of the Company has authorized and approved the execution, delivery, and performance of this Agreement and the transactions contemplated hereby including the issuance of the Shares.

 

2.03      Legal Right. The performance of this Agreement and the consummation of the transactions herein contemplated will not result in a material breach or violation of any of the terms and provisions of, or constitute a default under, any statute (except federal and state securities laws, compliance with which is elsewhere provided for in particular detail), indenture, mortgage or other agreement or instrument to which the Company is a party or by which it is bound by any order, rule or regulation directed to the Company or its affiliates by any court or governmental agency or body having jurisdiction over them; and no other consent, approval, authorization or action is required for the consummation of the transactions herein contemplated other than such as have been obtained.

 

2.04      Validly Issued. The Shares, when issued, will be duly authorized, validly and legally issued, and non-assessable.

 

2.05      Organization. The Company has been duly organized and is now, and always during the period of the offer and sale will be, a validly existing corporation under the laws of the state of Nevada lawfully qualified to conduct the business for which it was organized and which it proposes to conduct. The Company will always during the period of the offer and sale of the Shares be qualified to conduct business as a foreign corporation in each jurisdiction where the nature of its business requires such qualification.

 

ARTICLE III

REPRESENTATIONS, COVENANTS, AND WARRANTIES
OF THE BUYER

 

As an inducement to, and to obtain the reliance of the Company in connection with its purchase of the Shares, Buyer represents and warrants as follows:

 

3.01      Standing and Authority of Buyer. Buyer has all requisite power and authority to execute and deliver this Agreement, to perform Buyer's obligations hereunder and to consummate the transactions contemplated hereby.

 

3.02      Execution and Delivery; No Conflict.

 

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(a)                 This Agreement has been duly executed and delivered by the Buyer and constitute the valid and binding obligation of Buyer, enforceable against Buyer in accordance with the terms herein, except as the same may be limited by: (i) bankruptcy, insolvency, reorganization, moratorium or other laws affecting generally the enforcement of creditors' rights; (ii) equitable principles; and (iii) public policies with respect to the enforcement of indemnification agreements.

 

(b)                 The execution, delivery and performance of this Agreement by Buyer and the consummation of the transactions contemplated hereby: (i) have been duly and validly authorized by all necessary action on the part of Buyer; and (ii) are not prohibited by, do not violate any provision of, and will not result in the breach of or accelerate or permit the acceleration of, the performance required by the terms of any applicable law, rule regulation, judgment, decree, order, or other requirement of the United States or any state of the United States, or any court, authority, department, commission, board, bureau, agency, or instrumentality of either thereof in a manner which would have a material adverse affect on the Buyer, or any material contract, indenture, agreement or commitment, to which the Buyer is a party or bound.

 

3.03      Consents and Approvals. The execution, delivery, and performance by Buyer of this Agreement and the consummation by Buyer of the transactions contemplated hereby do not require the Buyer to obtain any consent, approval or action of, or give any notice to, any corporation, person, firm, or judicial authority except: (i) such as have been duly obtained or made, as the case may be, and are in full force and effect on the date hereof; and (ii) those which the failure to obtain would have no material adverse affect on the transactions contemplated hereby.

 

3.04      Securities Representations. Buyer understands and agrees that the consummation of this Agreement including the issuance of the Shares, as contemplated herein, constitutes the offer and sale of securities under the Securities Act. Buyer agrees that such transactions shall be consummated in reliance on exemptions from the registration and prospectus delivery requirements of such statutes which depend, among other items, on the circumstances under which such securities are acquired. In order to provide documentation for reliance upon exemptions from the registration and prospectus delivery requirements for such transactions Buyer agrees that it will sign appropriate representations and warranties related to its suitability to invest in the Company, including an investment letter and suitability questionnaire which are contained in the "suitability letter" attached hereto as exhibit "A." Buyer understands that the Shares have not been registered under the Securities Act and must be held indefinitely without any transfer, sale, or other disposition unless such shares are subsequently registered under the Securities Act or registration is not required under the Securities Act in reliance on an available exemption. The Shares to be acquired by the Buyer under the terms of this Agreement will be acquired for the Buyer's own account, for investment, and not with the present intention of resale or distribution of all or any part of the securities. Buyer agrees that he will refrain from transferring or otherwise disposing of any of the Shares, or any interest therein, in such manner as to violate the Securities Act or any applicable state securities law regulating the disposition thereof. Buyer is an "accredited investor" within the meaning of Regulation D promulgated under the Securities Act and has adequate means for providing for his current needs and possible personal contingencies and has no need now and anticipates no need in the foreseeable future to sell the Shares which Buyer is purchasing hereby. Buyer understands that the Shares being sold pursuant to this Agreement are being offered and sold in reliance on specific exemptions from the registration requirements of Federal and state securities laws and that the Company is relying upon the truth and accuracy of Buyer's representations, warranties, agreements, and understandings set forth herein to determine Buyer's suitability to acquire the Shares.

 

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3.05      Disclosure Information. Buyer believes Buyer has received all the information Buyer considers necessary or appropriate for deciding whether or not to purchase the Shares. Buyer further represents that he has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Shares. The foregoing, however, does not limit or modify the representations and warranties of the Company in Article 2 of this Agreement or the right of Buyer to rely thereon.

 

3.06      Investment Experience. Buyer is an investor in securities of companies and acknowledges that he is able to fend for himself, can bear the economic risk of his investment and has such knowledge and experience in financial or business matters that he is capable of evaluating the merits and risks of the investment in the Shares.

 

3.07      Acknowledgment. Buyer acknowledges that the Company is a development stage corporation with a limited history of operations, that its operations are subject to the risks inherent in the establishment of a new business enterprise, and that there can be no assurance that the Company will ever achieve profitability or that, if achieved, such profitability could be sustained. Buyer further acknowledges that an investment in the Shares involves substantial risk.

 

3.08      Knowledge of Company. Buyer is aware, through his own extensive due diligence of all material information respecting the past, present and proposed business operations of the Company, including, but not limited to, its technology, its management, its financial position, or otherwise; understands that there is no "established trading market" for the Common Stock, that the Company is uncertain, at this time, whether there're will be any future "established trading market" for the Common Stock; and that the purchase price being paid for the Common Stock bears no relationship to assets, book value or other established criteria of value. Buyer has conducted his own investigation of the risks and merits of an investment in the Company, and to the extent desired, including, but not limited to a review of the company's books and records, financial and Buyer has had the opportunity to discuss this documentation with the directors and executive officers of the Company; to ask questions of these directors and executive officers; and that to the extent requested, all such questions have been answered to his satisfaction.

ARTICLE IV

SPECIAL COVENANTS

 

4.01      Use of Proceeds. Funds received through the purchase of the Shares shall be used to repay high interest loans and as working capital.

 

4.02      Activities of the Company.

 

(a) From and after the date of this Agreement until the closing date and except as set forth herein or as permitted or contemplated by this Agreement, the Company will:

 

(i)     Carry on its business in substantially the same manner as it has heretofore;

 

(ii)    Maintain in full force and effect insurance comparable in amount and in scope of coverage to that now maintained by it;

 

(iii)   Perform in all material respects all of its obligations under material contracts, leases, and instruments relating to or affecting its assets, properties, and business;

 

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(iv)    Use its best efforts to maintain and preserve it business organization intact, to retain its key employees, and to maintain its relationships with its material suppliers and customers;

 

(v)     to the extent that non compliance is not material or adverse to the Company, duly and timely file for all taxable periods ending on or prior to the closing date all federal, state, county, and local tax returns required to be filed by or on behalf of such entity or for which such entity may be held responsible and shall pay, or cause to pay, all taxes required to be shown as due and payable on such returns, as well as all installments of tax due and payable during the period commencing on the date of this Agreement and ending on the closing date; and

 

(vi)    Fully comply with and perform in all material respects all obligations and duties imposed on it by all federal and state laws and all rules, regulations, and orders imposed by federal or state governmental authorities.

 

(b)     From and after the date of this Agreement and except as provided herein until the closing date, the Company will:

 

(i)     Not amend or change its articles of incorporation or bylaws without first notifying the Buyer; and

 

(ii)    Continue to operate and manage the Company in the ordinary course of business.

 

(iii)   Offer 'Piggyback Registration Rights' to the Buyer and include the Buyer in any future registrations of its securities.

 

4.03 Access to Books and Records. Until the closing date, the Company will afford to Buyer and its authorized representatives full access to the properties, books, and records of the Company in order that Buyer may have full opportunity to make such reasonable investigation as it shall desire to make of the affairs of the Company and will furnish the Buyer with such additional financial and other information as to the business and properties of the Company as Buyer shall from time to time reasonably request.

 

4.04 Purchase of the Shares. The Company and Buyer agree and understand that the consummation of this Agreement including the sale of the Shares to Buyer, as contemplated herein, constitutes the offer and sale of securities under the Securities Act and applicable state statutes. The Company and Buyer agree such transactions shall be consummated in reliance on exemptions from the registration and prospectus delivery requirements of such statutes which depend, among other items, on the circumstances under which such securities are acquired.

 

(a)     In order to provide documentation for reliance upon exemptions from the registration and prospectus delivery requirements for such transactions, the signing of this Agreement and the delivery of appropriate separate representations, including the "suitability letter" attached hereto as exhibit "A" shall constitute the parties acceptance of, and concurrence in, the following representations and warranties:

 

5
 

 

(i)       Buyer acknowledges that neither the SEC nor the securities commission of any state or other federal agency has made any determination as to the merits of acquiring the Shares, and that this transaction involves certain risks.

 

(ii)      Buyer has received and read the Agreement and understand the risks related to the consummation of the transactions herein contemplated.

 

(iii)   Buyer has such knowledge and experience in business and financial matters that he is capable of evaluating each business.

 

(iv)   Buyer has been provided with copies of all materials and information requested by Buyer or their representatives, including any information requested to verify any information furnished (to the extent such information is available or can be obtained without unreasonable effort or expense), and the parties have been provided the opportunity for direct communication regarding the transactions contemplated hereby.

 

(v)     All information which Buyer has provided to the Company or their representatives concerning their suitability and intent to hold Shares following the transactions contemplated hereby is complete, accurate, and correct.

 

(vi)    Buyer has not offered or sold any securities of the Company or interest in this Agreement and has no present intention of dividing the Shares to be received or the rights under this Agreement with others or of reselling or otherwise disposing of any portion of such stock or rights, either currently or after the passage of a fixed or determinable period of time or on the occurrence or nonoccurrence of any predetermined event or circumstance.

 

(vii)   Buyer understand that the Shares have not been registered, but is being acquired by reason of a specific exemption under the Securities Act as well as under certain state statutes for transactions not involving any public offering and that any disposition of the Shares may, under certain circumstances, be inconsistent with this exemption and may make Buyer an "underwriter," within the meaning of the Securities Act. It is understood that the definition of "underwriter" focuses upon the concept of "distribution" and that any subsequent disposition of the Shares can only be effected in transactions which are not considered distributions. Generally, the term "distribution" is considered synonymous with "public offering" or any other offer or sale involving general solicitation or general advertising. Under present law, in determining whether a distribution occurs when securities are sold into the public market, under certain circumstances one must consider the availability of public information regarding the issuer, a holding period for the securities sufficient to assure that the persons desiring to sell the securities without registration first bear the economic risk of their investment, and a limitation on the number of securities which the stockholder is permitted to sell and on the manner of sale, thereby reducing the potential impact of the sale on the trading markets. These criteria are set forth specifically in rule 144 promulgated under the Securities Act.

 

(viii)  Buyer acknowledges that the Shares must be held and may not be sold, transferred, or otherwise disposed of for value unless they are subsequently registered under the Securities Act or an exemption from such registration is available. The Company is not under any obligation to register the Shares under the Securities Act, except as set forth in this Agreement. The Company is not under any obligation to make rule 144 available, except as may be expressly agreed to by it in writing in this Agreement, and in the event rule 144 is not available, or some other disclosure exemption may be required before Buyer can sell, transfer, or otherwise dispose of such Shares without registration under the Securities Act. The Company's registrar and transfer agent will maintain a stop transfer order against the registration or transfer of the Shares, and the certificates representing the Shares will bear a legend in substantially the following form so restricting the sale of such securities:

 

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THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND ARE "RESTRICTED SECURITIES" WITHIN THE MEANING OF RULE 144 PROMULGATED UNDER THE SECURITIES ACT. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED WITHOUT COMPLYING WITH RULE 144 IN THE ABSENCE OF AN EFFECTIVE REGISTRATION OR OTHER COMPLIANCE UNDER THE SECURITIES ACT.

 

(ix)    The Company may refuse to register further transfers or resales of the Shares in the absence of compliance with rule 144 unless the Buyer furnish the Company with a "no-action" or interpretive letter from the SEC or an opinion of counsel reasonably acceptable to the Company stating that the transfer is proper. Further, unless such letter or opinion states that the Shares are free of any restrictions under the Securities Act, the Company may refuse to transfer the securities to any transferee who does not furnish in writing to the Company the same representations and agree to the same conditions with respect to such Shares as set forth herein. The Company may also refuse to transfer the Shares if any circumstances are present reasonably indicating that the transferee's representations are not accurate.

 

(b)       In connection with the transaction contemplated by this Agreement, the Company and Buyer shall each file, with the assistance of the other and their respective legal counsel, such notices, applications, reports, or other instruments as may be deemed by them to be necessary or appropriate in an effort to document reliance on such exemptions, and the appropriate regulatory authority in the states where Buyer reside unless an exemption requiring no filing is available in such jurisdictions, all to the extent and in the manner as may be deemed by such parties to be appropriate.

 

(c)     In order to more fully document reliance on the exemptions as provided herein, the Company and Buyer shall execute and deliver to the other, at or prior to the closing, such further letters of representation, acknowledgment, suitability, or the like as the Company or Buyer and its counsel may reasonably request in connection with reliance on exemptions from registration under such securities laws including but not limited to an investment letter.

 

(d)     The Company and Buyer acknowledge that the basis for relying on exemptions from registration or qualifications are factual, depending on the conduct of the various parties, and that no legal opinion or other assurance will be required or given to the effect that the transactions contemplated hereby are in fact exempt from registration or qualification.

 

4.05      Expenses of Sale. The Company will pay all expenses incident to the performance of its obligations hereunder, including but not limited to the fees and expenses of its counsel and accountants, and the cost of qualifying the offer and sale of the Shares in various states or obtaining an exemption from state registration requirements.

 

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4.06      Company's Indemnification. The Company will indemnify and hold harmless Buyer from and against any and all losses, claims, damages, expenses, liabilities, or actions to which any of them may become subject under applicable law (including the Securities Act and the Securities Exchange Act) and will reimburse them for any legal or other expenses reasonably incurred by them in connection with investigating or defending any claims or actions, whether or not resulting in liability, insofar as such losses, claims, damages, expenses, liabilities, or actions arise out of or are based upon any untrue statement or alleged untrue statement of material fact contained in any application or statement filed with a governmental body or arising out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein, or necessary in order to make the statements therein not misleading, but only insofar as any such statement or omission was made in reliance upon and in conformity with information furnished in writing by the Company expressly for use therein. The indemnity agreement contained herein shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of Buyer and shall survive the consummation of the transactions contemplated by this Agreement.

 

4.07      Buyer Indemnification. Buyer will indemnify and hold harmless the Company and its directors and officers, and each person, if any, who controls the Company within the meaning of the Securities Act, from and against any and all losses, claims, damages, expenses, liabilities, or actions to which any of them may become subject under applicable law (including the Securities Act and the Securities Exchange Act) and will reimburse them for any legal or other expenses reasonably incurred by them in connection with investigating or defending any claims or actions, whether or not resulting in liability, insofar as such losses, claims, damages, expenses, liabilities, or actions arise out of or are based upon any untrue statement or alleged untrue statement of material fact contained in any application or statement filed with a governmental body or arising out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein, or necessary in order to make the statements therein not misleading, but only insofar as any such statement or omission was made in reliance upon and in conformity with information furnished in writing by BH expressly for use therein. The indemnity agreement contained herein shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of the Company and shall survive the consummation of the transactions contemplated by this Agreement.

 

ARTICLE V

MISCELLANEOUS

 

5.01      Attorney's Fees. In the event that any party institutes any action or suit to enforce this Agreement or to secure relief from any default hereunder or breach hereof, the breaching party or parties shall reimburse the nonbreaching party or parties for all costs, including reasonable attorneys' fees, incurred in connection therewith and in enforcing or collecting any judgment rendered therein.

 

5.02      Entire Agreement. This Agreement represents the entire agreement between the parties relating to the subject matter hereof. All previous agreements between the parties, whether written or oral, have been merged into this Agreement. This Agreement alone fully and completely expresses the agreement of the parties relating to the subject matter hereof. There are no other courses of dealing, understandings, agreements, representations, or warranties, written or oral, except as set forth herein.

 

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5.03      Survival; Termination. The representations, warranties, and covenants of the respective parties shall survive the closing and the consummation of the transactions herein contemplated for a period of six months from the closing, unless otherwise provided herein.

 

5.04      Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original and all of which taken together shall be but a single instrument.

 

5.05      Amendment or Waiver. Every right and remedy provided herein shall be cumulative with every other right and remedy, whether conferred herein, at law, or in equity, and such remedies may be enforced concurrently, and no waiver by any party of the performance of any obligation by the other shall be construed as a waiver of the same or any other default then, theretofore, or thereafter occurring or existing. At any time prior to the closing, this Agreement may be amended by a writing signed by all parties hereto, with respect to any of the terms contained herein, and any term or condition of this Agreement may be waived or the time for performance thereof may be extended by a writing signed by the party or parties for whose benefit the provision is intended.

 

5.06      Binding Effect. This Agreement shall inure to the benefit of and be binding upon the Company and Buyer and their successors. Nothing expressed in this Agreement is intended to give any person other than the persons mentioned in the preceding sentence any legal or equitable right, remedy or claim under this Agreement.

 

5.07      Severability. Every provision of this Agreement is intended to be severable. If any term or provision hereof is illegal or invalid for any reason whatsoever, such illegality or invalidity shall not affect the validity of the remainder hereof.

 

5.08      Captions. The captions or headings in this Agreement are inserted for convenience and identification only and are not intended to describe, interpret, define, or limit the scope, extent, or intent of this Agreement or any provisions hereof.

 

5.09      Applicable Law. The Company and Buyer hereby agree that all negotiations and contact have been in Japan, and accordingly, this Agreement shall be governed by and construed and enforced under and in accordance with the laws of the Country of Japan, except to the extent any law, rule or regulation of the State of Nevada may be applicable as to corporate law, in which case such law, rule or regulation shall control.

 

IN WITNESS WHEREOF, the corporate parties hereto have caused this Agreement to be executed by their respective officers, hereunto duly authorized, as of the date first above written.

 

THE COMPANY:   THE BUYER:
Grand Perfecta, Inc. Nevada Corporation    
     
     
By: /s/ Shuya Watanabe   /s/ Kazuaki Goto
Shuya Watanabe   Kazuaki Goto
Chairman of the Board, Chief Executive Officer    
     

 

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Exhibit A

 

SUITABILITY LETTER

 

TO: Grand Perfecta, Inc.

 

I make the following representations with the intent, in determining my suitability as a purchaser of securities of the Company (the "Shares").

 

1.       I have had the opportunity to ask questions of, and receive answers and information, from the officers of the Company and I deemed such information sufficient to make an investment decision on the Company.

 

2.       1 have such knowledge and experience in business and financial matters that I am capable of evaluating the Company, its business activities, and the risks and merits of this prospective investment, and I am not utilizing a purchaser representative (as defined in regulation D) in connection with the evaluation of such risks and merits, except the following:

 

3.       I shall provide a separate written statement from each purchaser representative on the Purchaser Representative Acknowledgment form available from the Company in which is disclosed (i) the relationship of the purchaser representative with the Company, if any, which has existed at any time during the previous two years, and compensation received or to be received as a result of such relationship, and (ii) the education, experience, and knowledge in financial and business matters which enables the purchaser representative to evaluate the relative merits and risks of an investment in the Company.

 

4.       The undersigned and the purchaser representatives listed above together have such knowledge and experience in financial and business matters that they are capable of evaluating the Company and the proposed activities thereof and the merits and risks of this prospective investment.

 

5.       1 have adequate means of providing for my current needs and possible personal contingencies and have no need in the foreseeable future for liquidity of an investment in the Company.

 

6.       Instructions: Complete either (a) or (b) below, as applicable:

 

(a)      FOR ACCREDITED INVESTORS. I confirm that I am an "accredited investor" as defined under rule 501 of regulation D promulgated under the Securities Act of 1933, as amended (the "Securities Act"), as checked below:

 

(i)     Any bank as defined in section 3(a)(2) of the Securities Act or any savings and loan association or other institution as defined in section 3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary capacity; any broker or dealer registered pursuant to section 15 of the Securities Exchange Act of 1934; any insurance company as defined in section 2(13) of the Securities Act; any investment company registered under the Investment Company Act of 1940 or a business development company as defined in section 2(a)(48) of that Act; any small business investment company licensed by the U. S. Small Business Administration under section 301(c) or (d) of the Small Business Investment Act of 1958; any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000; any employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, if the investment decision is made by a plan fiduciary, as defined in section 3(21) of such Act, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decisions made solely by persons that are accredited investors;

 

[  ]Yes [X] No

 

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(ii)     Any private business development company as defined in section 302(a)(22) of the Investment Advisers Act of 1940;

 

[  ]Yes [X] No

 

(iii)    Any organization described in section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000;

 

[  ]Yes [X] No

 

(iv)    Any director, executive officer, or general partner of the issuer of the securities being offered or sold, or any director, executive officer, or general partner of a general partner of that issuer;

 

[  ]Yes [X] No

 

(v)       Any natural person whose individual net worth, or joint net worth with that person's spouse, at the time of his or her purchase exceeds $1,000,000;

 

[X]Yes [  ] No

 

For purposes of category (v), the term "net worth" means the excess of total assets over total liabilities. In computing net worth for the purposes of category (v) above, the undersigned's principal residence must be valued either at (A) cost, including the cost of improvements, net of current encumbrances upon the property or (B) the appraised value of the property as determined upon a written appraisal used by an institutional lender making a loan to the individual secured by the property, including the cost of subsequent improvements, net of current encumbrances upon the property.

 

(vi)      Any natural person who had an individual income in excess of $300,000 in each of the two most recent years or joint income with that person's spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year;[X]

 

[X]Yes [  ] No

 

In determining income, the undersigned should add to his or her adjusted gross income any amounts attributable to tax exempt income received, losses claimed as a limited partner in any limited partnership, deductions claimed for depletion, contributions to an IRA or Keogh retirement plan, alimony payments, and any amount by which income from long-term capital gains has been reduced in arriving at adjusted gross income.

 

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(vii)   Any trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person as described in section 230.506(b)(2)(ii); and

 

[  ]Yes [X] No

 

(viii) Any entity in which all of the equity owners are accredited investors.

 

[X]Yes [  ] No

 

(b)      FOR NONACCREDITED INVESTORS. I am not an accredited investor.

 

The following information is being provided here in lieu of furnishing a personal financial statement.

 

(i)       My net worth excluding principal residence, furnishings, and automobiles is at least____ times the total investment I intend to make in the Company;

 

(ii)      My annual disposable income, after excluding all of my personal and family living expenses and other cash requirements for current obligations, is such that the loss of my entire investment in the Company would not materially alter my standard of living;

 

[  ]Yes [  ] No

 

(iii)   Considering the foregoing and all other relevant factors in my financial and personal circumstances, I am able to bear the economic risk of an investment in the Company.

 

[  ]Yes [  ] No

 

7.       1 have previously been advised that I would have an opportunity to review all the pertinent facts concerning the Company, and to obtain any additional information which I might request, to the extent possible or obtainable, without unreasonable effort and expense, in order to verify the accuracy of the information provided me.

 

8.       I have personally communicated or been offered the opportunity to communicate with executive officers of the Company to discuss the business and financial affairs of the Company, its products and activities, and its plans for the future. I acknowledge that if I would like to further avail myself of the opportunity to ask additional questions of the Company, the Company will make arrangements for such an opportunity on request.

 

9.       I have been advised that no accountant or attorney engaged by the Company is acting as my representative, accountant, or attorney.

 

12
 

 

10.    I will hold title to my interest as follows:

 

[  ] Community Property [  ] Separate Property
[  ] Joint Tenants, with Right of Survivorship [  ] Tenants in Common
  [X] Other (Single Person, Trust, Etc., Please Indicate.)
         Individually - own

 

11.     I am a bona fide citizen of Japan and maintain my full time domicile in Japan. The address below is my true and correct principal residence.

 

DATED this 11 day of June, 2014,

 

Kazuaki Goto    
Name (Please Print)   Name of Joint Subscriber, If Any
     
/s/ Kazuaki Goto    
Signature   Signature
     
34H One Legazpi Park, 121 Rada st. Legazpi Village    
Street Address   Street Address
     
Manila Philippines    
City, Country   City, Country
     

 

13

 

Exhibit 10.7

 

 

License Agreement - Umajin Hong Kong Limited Corp Mr. Hideaki Takahashi The License Fee Hong Kong Dollars $6200 the Deposit Two month’s license fee (HK $ 17000 3 access card(s) (HK$100/A) Total Hong Kong Dollars $17375.00 Apex Business Centre Limited Mr. Alfred Weng, 25 June 2014, Unajin Hong Kong Limited 25 June 2014

Exhibit 10.8

 

 

 

 

May 08, 2014

 

Mr. Enrique Marchese

emarchese@gmail.com

 

Re: Board of Directors - Offer Letter

 

Dear Rick:

 

We are very pleased to offer you a position as a member of the Board of Directors (the "Board") of Grand Perfecta, Inc. (the "Company"). This offer, which is subject to the approval of each of the current members of our Board, is based on the following terms and conditions:

 

Term: Your appointment will be effective as of May I, 2014.   Your term as a director shall continue until your successor is duly elected and qualified. The position shall be up for re-election each year at the annual shareholder's meeting and upon re-election, the terms and provisions of this letter shall remain in full force and effect unless otherwise revised on such terms mutually agreed upon to by you and the Company.
   
Responsibilities: As a director of the Company, your duties and responsibilities will be those reasonably and customarily associated with such position.  Every year, the Board shall hold such number of meetings at such times and locations as determined by the Chairman of the Board. Upon the reasonable request of the Chairman, you will agree to attend one or more board meetings via teleconference, videoconference or in person.
   
Services for Others: You will be free to represent or perform services for other persons and/or companies during the term of this agreement. However, you agree that you do not presently perform and do not intend to perform, during the term of this agreement, similar duties, consulting or other services for companies whose businesses are, in any way, competitive with the Company (except for companies previously disclosed by you to the Company in writing). Should you propose to perform similar duties, consulting or other services for any such company, you agree to notify the Company in writing in advance (specifying the name of the organization for whom you propose to perform such services) and to provide information to the Company sufficient to allow it to determine if the performance of such services would conflict with areas of interest to the Company.
   

 

 

 

 

1
 

 

   
Compensation: In consideration for your service as a member of the Board, the Company agrees to pay you an annual cash compensation of US$30,000 for so long as you remain a member of the Board. The annual compensation shall be paid to you in equal monthly installments of US$2,500 throughout the year, consistent with the normal payroll practices of the Company.  In addition, the annual compensation will be pro-rated daily (based on a 360-day year) for any portion of the year during which you serve as a director.
   
Expenses: If the Chairman requests your presence at a board meeting, the Company agrees to reimburse all of your travel and other reasonable out-of-pocket expenses, including, without limitation, meals and lodging, related to the board meeting. In addition, the Company agrees to reimburse you for reasonable expenses that you incur in connection with the performance of your duties as a director of the Company.
   
Confidentiality: As a condition of this offer, you will be required to preserve the Company's proprietary and confidential information and you must comply with the Company's policies and procedures.
   
Indemnification: The Company shall indemnify, defend and hold you harmless if you are, were or become a party, or are threatened to be made a party, to any action or proceeding, whether civil, criminal, administrative or investigative, by reason of
   
  i.     the fact that you are or were a director, member of any committee of the Board, officer, employee or agent of the Company, or any subsidiary of the Company,
   
  ii.      your action or inaction while an officer or director, or
   
  iii.     the fact that you are or  were serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually incurred by you in connection with such action or proceeding.
   
  Condition to Indemnification Obligations .  As a condition precedent to the indemnification obligations of the Company with respect to a particular claim, you shall (i) give prompt notice to the Company of such claim, and (ii) take all reasonable actions requested by the Company to cause the insurers to pay, on your behalf, all amounts payable as a result of such claim in accordance with the terms of a D&O Insurance policy (or any other applicable insurance policy)
   

 

 

 

 

2
 

 

   
   
   
Independent Contractor: In  performing your services on the Board, you will be an independent contractor and not an employee of the Company. Except as set forth in this agreement, you will not be entitled to any additional compensation  or participate in any benefit plans of the Company in connection with your services on the Board.

 

This offer to serve as a member of the Board shall be at the will of the Board, which means that either party can terminate this relationship at any time. Upon accepting our offer to join the Board, you agree we will have the right to mention your name and other customary information in documents we file with the Securities and Exchange Commission, press releases and other business documentation as appropriate, including, inclusion of such information in our registration statement and the related prospectus naming you as a person about to become a member of the Board and such other information regarding you as is required to be included therein under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

To accept this offer, please sign the acknowledgment at the end of this letter acknowledging and agreeing to the terms and conditions of your service as a member of the Board of the Company.

 

Please contact me with any questions regarding the foregoing.

 

 

Sincerely,

 

 

By: /s/ Shuya Watanabe                       

Shuya Watanabe

Grand Perfecta, Inc. Chairman of the Board

 

 

ACKNOWLEDGED AND AGREED TO BY:

 

/s/ signature                             

 

Date: May 8, 2014

 

Exhibit 21.1

 

 

SUBSIDIARIES OF GRAND PERFECTA, INC.

Name of Entity Jurisdiction
Link Bit Consulting Co. Ltd. Japan
Umajin Hong Kong Ltd. Hong Kong
Ban Kisha Net Co., Ltd. Japan
Turf Agent Co., Ltd. Japan
Meru Uma Co. Ltd. Japan
Tau Project Co. Ltd. Japan
G1 Project Co. Ltd. Japan
Real Selector Co. Ltd. Japan
Teppan Chokyo Co. Ltd. Japan