UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K12g-3

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (date of earliest event reported): December 31, 2018

 

NOCERA, INC.

(Exact name of registrant as specified in charter)

 

Nevada

(State or other jurisdiction of incorporation)

 

000-55993   16-1626611
(Commission File Number)   (IRS Employer Identification No.)

 

 

2030 POWERS FERRY ROAD SE, SUITE #212

ATLANTA, GA 30339

(Address of principal executive offices and zip code)

 

(404) 816-8240

(Registrant’s telephone number, including area code)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of registrant under any of the following provisions:

 

[  ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

[  ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

[  ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

[  ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter)

 

Emerging Growth Company  x

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

The statements contained in this Form 8-K that are not historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These include statements about the Registrant's expectations, beliefs, intentions or strategies for the future, which are indicated by words or phrases such as “anticipate,” “expect,” “intend,” “plan,” “will,” “the Registrant believes,” “management believes” and similar words or phrases. The forward-looking statements are based on the Registrant’s current expectations and are subject to certain risks, uncertainties and assumptions. The Registrant’s actual results could differ materially from results anticipated in these forward-looking statements. All forward-looking statements included in this document are based on information available to the Registrant on the date hereof, and the Registrant assumes no obligation to update any such forward-looking statements.

 

Item 2.01 Completion of Acquisition or Disposition of Assets

 

Effective December 31, 2018, NOCERA, Inc., (the “Registrant”, the “Company”, “we”, us”, “our”) completed an Agreement and Plan of Merger (the “Agreement”), with (ⅰ) Grand Smooth Inc. Limited, a company organized under the laws of Hong Kong, China (“GSI”), (ii) GSI’s shareholders, Yin-Chieh Cheng and Bi Zhang, who together owned shares constituting 100% of the issued and outstanding ordinary shares of GSI (the “GSI Shares”) and (iii) GSI Acquisition Corp. Under the terms of the Agreement, the GSI Shareholders transferred to us all of the GSI Shares in exchange for the issuance of 10,000,000 shares (the “Shares”) of our common stock (the “Share Exchange”). As a result of the Share Exchange, we are a public company holding a subsidiary in the People’s Republic of China (the “PRC”) engaged in aquaculture consulting and management business.

 

We did not cancel or retire any shares of our issued and outstanding common stock and as a result, we have 12,349,200 shares of common stock issued and outstanding following the Share Exchange.

 

A copy of the Agreement and Plan of Merger is incorporated by reference and filed as Exhibit 2.1 of this Form 8-K. The description of the transactions contemplated by the Agreement and Plan of Merger set forth herein does not purport to be complete and is qualified in its entirety by reference to the full text of the exhibits filed herewith and incorporated by this reference.

 

As of the Effective Date of December 31, 2018 of the Agreement and Plan of Merger, we are deemed to have consummated the transactions contemplated by the Agreement, pursuant to which we acquired all of the GSI Shares in exchange for the issuance of the shares to the GSI Shareholders. As a result of the Share Exchange, we are a public company holding a subsidiary, GSI, in Hong Kong engaged in the aquaculture consulting and management business through Variable Interest Entity in PRC under legal and accounting principles.

 

Business

 

Business Overview

 

We are, through our subsidiary and its’ variable interest entity, a China based aquaculture equipment company that provides expert opinions, technology transfer, and aquaculture project management services to new and existing aquaculture projects starting in China and intend to expand into other areas of Asia and Americas. We are committed and dedicated to deliver high levels of service to every aquaculture project we may undertake.

 

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Corporate Structure

 

 

  

Company Background

 

We are incorporated in the State of Nevada. Until we consummated on the Agreement and Plan of Merger effective December 31, 2018, we were a shell company that had no or nominal operations and either no or nominal assets. Our wholly owned subsidiary, GSI, was incorporated in the Hong Kong, China on August 1, 2014. GSI is the parent holding company of Gui Zhou Grand Smooth Technology Ltd. (“GZ GST”), which was established on November 13, 2018 as a wholly foreign-owned enterprise (“WFOE”) established in the People’s Republic of China. Gui Zhou Wan Feng Hu Intelligent Aquatic Technology Co. Limited (“GZ WFH”), the Variable Interest Entity (VIE), was established on October 25, 2017, which was contractually controlled by the WOFE through VIE agreements. We will operate our business in China through both the WFOE and its’ VIE.

 

The WFOE is the primary beneficiary of the VIE – namely has the majority interest in the VIE and through execution of VIE contracts, the WFOE has contract commitments that the financial information of the VIE should be consolidated based on the Variable Interest Ownership percentage owned by the WFOE. The VIE structure was adopted mainly because the China operating company may in the future engage in business that may require special licenses in China and which can be an industry that prohibits foreign investment. The VIE structure will bypass the licensing and prohibition requirements in China.

 

VIE contracts are as follows:

 

1. Voting Rights Proxy Agreement
2. Equity Pledge Agreement
3. Exclusive Business Cooperation Agreement
4. Exclusive Call Option Agreement

 

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Services

 

We intend to provide consulting services and solutions in aquaculture projects in China to increase revenues, reduce costs, operate more efficiently, increase production, provide expertise, advise on operating more strategically with new diversified aquaculture species, and importantly, to reduce water pollution and decrease the disease problems of fisheries.

 

We believe that our offerings of Services provide the following:

 

i. Design, install, build and manage aquaculture investment and projects for qualified investors or part of an investment group whom is interested in the great potential of the aquaculture industry and whom want to develop or take part of a new commercial fish farming or shrimp farming project but lack the experience.

 

ii. A full range of pilot and management services to aquaculture companies and new aquaculture projects throughout China and potentially international. From the fish farm to the table, we intend to encourage and support clean water and clean fish products.

 

iii. We intend to offer some equipment and materials from suppliers as part of our services offerings, which we will markup a reasonable amount.

 

We believe our experience and innovation from working closely with our clients in the aquaculture industry in China gives us the competitive advantages to provide innovative aquaculture management solutions that will generate positive results for our future client companies.

 

Market Overview

 

The fish farming industry in China was predominately regulated by state and local government allowing local fish farmers to setup fish nests in public water including water dams, rivers, lakes and etc. It is the dominant source of fresh water fish for both domestic demands and exports. Since the clean water policy was implemented in China in 2017 by the central government under President Xi Jin Ping, the state and local governments are tasked with cleaning up local water sources and banning all fish nets and fish nests in public waters. The City of Xing Yi, for example, used to produce 15,000 tons of fresh water fish a year, however, that has been all banned and the government subsidy terminated so that now the 300 million pounds of fresh water fish are no longer produced.

 

This is a countrywide effort where some ponds or lakes are removed immediately and some will phase out gradually in 2 to 3 years. Nevertheless, under China’s government clean water policy of “retreating from lakes to lands” for fish farming, we believe that this presents to us a great opportunity for introducing fish farming in containers (both rectangular and cylinder) on lands. It was introduced in 2015 as a new and extremely simple way for local farmers to breed fish in China. It is also known as “container fish-farming for dummies”. Generating up to 35 times of fish harvest per square meter compared to traditional fish farms in pond, it also conserves the ecosystem of lakes, reduces local poverty, and protects the species from natural disasters.

 

Domestic demand in China is increasing the number of aquaculture projects and investment, therein. Our Aquaculture solution is innovative and environmentally friendly using a state-of-the-art water recycling and filtration system. We estimate the domestic demand in China could be over 10,000 containers, both cylinder and rectangular, in the next 5 years and globally. We believe that there could be a demand of 15,000 containers.

 

Today, China is faced with the growing challenge of reducing and controlling water pollution that present serious health risks to its population and damage the environment. We believe that our Aquaculture container fish farm represents a large-scale, environmentally friendly and economically feasible form for bringing clean fish to the table and bringing clean water back to the people. In our opinion, our service is cost competitive, reduces water pollution and recycles fish waste and will help make for a greener China and better world in the years to come.

 

 

 

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Customers

 

We have received an order to build 800 of 2 meters high by 8 meters wide cylindrical fish farming containers from Dong Guan CIMC Intelligent Technology Co. Ltd (“DG CIMC”), which holds 5% non-controlling interest of GZ WFH, and Shen Zhen CIMC Intelligent Technology Co. Ltd (“SZ CIMC”) in 2018. Both DG CIMC and SZ CIMC are subsidiaries of China International Marine Container Corporation (“CIMC”). We delivered 473 containers in fourth quarter of 2018. We intend to target customers in a variety of markets, such as individual investors, government supported or funded companies and international customers. We have received interest from countries like Japan, Taiwan, Thailand and United States. In addition, an increasing amount of Chinese state and local offices are faced with environmental challenges in public waters and are under regulatory directives and political pressure to reduce water pollution, so our potential target customers are significant.

 

Suppliers

 

We intend to purchase raw materials and electrical parts and equipment from third parties in the PRC and resell and install to customers. We are not directly involved in the production or manufacturing of this equipment and we do not take risk in the repair and maintenance of this equipment because of manufacturer’s maintenance policy but may provide maintenance personnel.

 

Competition

 

The market for aquaculture projects and services is highly competitive. Many of the producers and sellers are large entities that have significantly greater resources than we have. Therefore, we are partnering with CIMC to use their resources and hopefully gain a more competitive advantage. We also compete with small suppliers which provide smaller alternative aquaculture solutions regionally but due to the size of our projects, we believe that we should have a better price point.

 

Government Regulation

 

Our business depends in part on environmental regulations and programs in China that promote cleaner water sources to restore clean water back to people. Our customers may be encouraged with incentives by the local governments relating to aquaculture investment. The approvals of land, licenses or permits, are required from relevant central and local government authorities. In addition, from time to time, relevant government authorities may impose new regulations at a local level regulating fish farming. We believe that we have skills to help our customers obtain all necessary licenses, registrations and permits to comply with all requirements necessary to allow our customers and investors to conduct aquaculture business in the PRC.

 

Legal Proceedings

 

We are currently not a party to any legal or administrative proceedings and are not aware of any pending or threatened legal or administrative proceedings against us in all material aspects. We may from time to time become a party to various legal or administrative proceedings arising in the ordinary course of our business.

 

Property

 

Our corporate headquarters are located on a leased premise in Xing Yi City, Gui Zhou Qian Xi Nan, PRC, where we lease approximately 370 square meters with office on 2 nd floor and temporary employee dormitory on 3 rd floor. The contract will expire on May 10, 2028. We believe that our existing facilities are adequate for our current requirements and that we will be able to enter into lease arrangements on commercially reasonable terms for future expansion. We do not own any real property.

 

Employees

 

As of December 31, 2018, we have 10 full-time employees.

 

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We are compliant with local prevailing wage, contractor licensing and insurance regulations, and have good relations with our employees.

 

As required by PRC regulations, we participate in various employee benefit plans that are organized by municipal and provincial governments, including pension, work-related injury benefits, maternity insurance, medical and unemployment benefit plans. We are required under PRC laws to make contributions to the employee benefit plans at specified percentages of the salaries, bonuses and certain allowances of our employees, up to a maximum amount specified by the local government from time to time. Members of the retirement plan are entitled to a pension equal to a fixed proportion of the salary prevailing at the member’s retirement date.

 

Generally, we intend to enter into a standard employment contract with our officers and managers for a set period of years and a standard employment contract with other employees for a set period of years. According to these contract terms, all our employees are prohibited from engaging in any activities that compete with our business during the period of their employment with us.

 

Corporation Information

 

Our principal executive offices are located at 2030 Powers Ferry Road SE, Suite #212 Atlanta, GA 30339. Our telephone number at this address is (404) 816-8240.

 

Risk Factors

 

Risks Related to Our Business

 

Our operating history makes it difficult to evaluate our future business prospects and to make decisions based on our historical performance.

 

We have a very short operating history, which makes it difficult to evaluate our business on the basis of historical operations. As a consequence, it is difficult to forecast our future results based upon our limited historical data. Because of the uncertainties related to our lack of historical operations, we may be hindered in our ability to anticipate and timely adapt to increases or decreases in sales, services costs or expenses. If we make poor budgetary decisions as a result of unreliable historical data, we could incur greater losses, which may result in a negative effect to our stock price.

 

Our operating results may fluctuate, which makes our results difficult to predict and could cause our results to fall short of expectations.

 

Our operating results may fluctuate as a result of a number of factors, many outside of our control. As a result, comparing our operating results on a period-to-period basis may not be meaningful, and you should not rely on our past results as an indication of our future performance. Our quarterly, year-to-date and annual expenses as a percentage of our revenues may differ significantly from our historical or projected rates. Our operating results in future quarters may fall below expectations. Any of these events could cause our stock price to fall. Each of the risk factors listed in this section and the following factors may affect our operating results:

 

    ·          Our ability to continue to attract customers;
     
    ·          Our ability to generate revenue from the services we offer;
     
    ·          The amount and timing of operating costs and capital expenditures related to the maintenance and expansion of our businesses; and
     
    ·          Our focus on long-term goals over short-term results.

  

Because our business is changing and evolving, our historical operating results may not be useful to you in predicting our future operating results.

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We may not be successful in implementing important strategic initiatives, which may have a material adverse impact on our business and financial results.

 

There is no assurance that we will be able to implement important strategic initiatives in accordance with our expectations, which may result in a material adverse impact on our business and financial results. These strategic initiatives are designed to drive long-term shareholder value and improve our Company’s results of operations.

 

Our success depends substantially on the value of our reputation.

 

Reputation value is based in part on client perceptions as to a variety of subjective qualities. Even isolated business incidents that erode client trust, particularly if the incidents receive considerable publicity or result in litigation, can significantly reduce our reputation. Demand for our services could diminish significantly if we fail to preserve quality or fail to deliver a consistently positive client experience.

 

Effectively managing our growth into new geographic areas will be challenging.

 

Effectively managing growth can be challenging, particularly as we expand into new markets geographically where we must balance the need for flexibility and a degree of autonomy for local management against the need for consistency with our goals, philosophy and standards. Growth can make it increasingly difficult to locate and hire sufficient numbers of key employees to meet our financial targets, to maintain an effective system of internal controls, and to train employees nationally to deliver a consistently high-quality service and customer experience.

 

We face significant competition, and if we do not compete successfully against new and existing competitors, we may lose our market share, and our profitability may be adversely affected.

 

Increased competition could reduce our profitability and result in inability to achieve any market share. Some of our existing and potential competitors may have competitive advantages, such as significantly greater financial, marketing or other resources, and may successfully mimic and adopt our business models. We cannot assure you that we will be able to successfully compete against new or existing competitors.

 

Failure to manage our growth could strain our management, operational and other resources, which could materially and adversely affect our business and prospects.

 

We intend to expand our operations and plan to expand in China and outside of China. The continued growth of our business will result in, substantial demand on our management, operational and other resources. In particular, the management of our growth will require, among other things:

 

·            increased sales and sales support activities;
   
·            improved administrative and operational systems;
   
·            enhancements to our information technology system;
   
·            stringent cost controls and sufficient working capital;
   
·            strengthening of financial and management controls; and
   
·            hiring and training of new personnel.

 

As we continue this effort, we may incur substantial costs and expend substantial resources. We may not be able to manage our current or future operations effectively and efficiently or compete effectively in new markets we enter. If we are not able to manage our growth successfully, our business and prospects would be materially and adversely affected.

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  Key employees are essential to growing our business.

 

Mr. Yin-Chieh Cheng and Mr. Bi Zhang are essential to our ability to continue to grow our business. They have established relationships within the industries in which we will operate. If they were to leave us, our growth strategy might be hindered, which could limit our ability to increase revenue.

 

In addition, we face competition for attracting skilled personnel. If we fail to attract and retain qualified personnel to meet current and future needs, this could slow our ability to grow our business, which could result in a decrease in market share.

 

We may need additional capital and we may not be able to obtain it at acceptable terms, or at all, which could adversely affect our liquidity and financial position.

 

We may need additional cash resources due to changed business conditions or other future developments. If these sources are insufficient to satisfy our cash requirements, we may seek to sell additional equity or debt securities or obtain a credit facility. The occurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations and liquidity.

 

Our ability to obtain additional capital on acceptable terms is subject to a variety of uncertainties, including:

 

  ·          investors’ perception of, and demand for, our securities;
   
  ·          conditions of the U.S. and other capital markets in which we may seek to raise funds;
   
  ·          our future results of operations, financial condition and cash flow;
   
  ·          PRC governmental regulation of foreign investment in China;
   
  ·          economic, political and other conditions in China; and
   
  ·          PRC governmental policies relating to foreign currency borrowings.

 

We may be dependent on various suppliers which may be unable to supply our orders, from time to time, and which may affect our ability to complete our client contracts timely.

 

We will not obtain our raw materials and electrical equipment and parts from only one local primary supplier. Our ability to deliver the services to the end user is dependent on a sufficient supply and better price point and if we cannot obtain a sufficient supply from several sources, we may be prevented from making timely deliveries to our customers. Any failure to obtain supplies of equipment for implementation of aquaculture installations, could prevent us from delivering our services to our customers on a timely basis, or an economic basis, and could have a material adverse effect on our business and financial conditions.

 

We do not have a majority of independent directors serving on our board of directors, which could present the potential for conflicts of interest.

 

We do not have a majority of independent directors serving on our board of directors. In the absence of a majority of independent directors, our executive officers could establish policies and enter into transactions without independent review and approval thereof. This could present the potential for a conflict of interest between us and our stockholders, generally, and the controlling officers, stockholders or directors.

 

We have limited insurance coverage.

 

The insurance industry in China is still at an early stage of development. Insurance companies in China offer limited insurance services. We have determined that the risks of disruption or liability from our business, the loss or damage to our property, including our facilities, equipment and office furniture, the cost of insuring for these risks,

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and the difficulties associated with acquiring such insurance on commercially reasonable terms make it impractical for us to have such insurance. As a result, we do not have any business liability, disruption, litigation or property insurance coverage for our operations in China except for insurance on some company owned vehicles. Any uninsured occurrence of loss or damage to property, or litigation or business disruption may result in the incurrence of substantial costs and the diversion of resources, which could have an adverse effect on our operating results.

 

If we are unable to establish appropriate internal financial reporting controls and procedures, it could cause us to fail to meet our reporting obligations, result in the restatement of our financial statements, harm our operating results, subject us to regulatory scrutiny and sanction, cause investors to lose confidence in our reported financial information and have a negative effect on the market price for shares of our common stock.

 

Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. We maintain a system of internal control over financial reporting, which is defined as a process designed by, or under the supervision of, our principal executive officer and principal financial officer, or persons performing similar functions, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Since we recently completed the acquisition of GSI effective on December 31, 2018, we have not yet completed an evaluation of GSI and its consolidated subsidiaries’ internal control systems in order to allow our management to report on our internal controls on a consolidated basis as required by the requirements of SOX 404. We will be required to complete such evaluation and include a report of management in our annual report for the fiscal year ended December 31, 2018.  

 

As a public company, we will have significant additional requirements for enhanced financial reporting and internal controls. We will be required to document and test our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, which requires annual management assessments of the effectiveness of our internal controls over financial reporting and a report by our independent registered public accounting firm addressing these assessments. The process of designing and implementing effective internal controls is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a system of internal controls that is adequate to satisfy our reporting obligations as a public company.

 

We cannot assure you that we will not, in the future, identify areas requiring improvement in our internal control over financial reporting. We cannot assure you that the measures we will take to remediate any areas in need of improvement will be successful or that we will implement and maintain adequate controls over our financial processes and reporting in the future as we continue our growth. If we are unable to establish appropriate internal financial reporting controls and procedures, it could cause us to fail to meet our reporting obligations, result in the restatement of our financial statements, harm our operating results, subject us to regulatory scrutiny and sanction, cause investors to lose confidence in our reported financial information and have a negative effect on the market price for shares of our common stock.

 

Lack of experienced officers of publicly-traded companies may hinder our ability to comply with Sarbanes-Oxley Act.

 

We do not have highly experienced officers in the financial operations of publicly traded companies, and it may be time consuming, difficult and costly for us to develop and implement the internal controls and reporting procedures required by the Sarbanes-Oxley Act. We may need to hire additional financial reporting, internal controls and other finance staff or consultants in order to develop and implement appropriate internal controls and reporting procedures. If we are unable to comply with internal controls requirements, we may not be able to obtain the independent auditor certifications that the Securities Exchange Act of 1934 requires publicly-traded companies to obtain, for each fiscal year.

 

We will incur increased costs as a result of being a public company.

 

As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act, as well as new rules subsequently implemented by the Securities and Exchange Commission (the “SEC”), has required changes in corporate governance practices of public

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companies. Our foreign operations involving audits of the WOFE and the VIE will involve substantial additional time and expense, due to our being a public company. We expect these rules and regulations to increase our legal, accounting and financial compliance costs and to make public corporate activities more time-consuming and costly.

 

Risks Associated With Doing Business in China

 

Our operations and assets in China are subject to significant political and economic uncertainties.

 

Changes in PRC laws and regulations, or their interpretation, or the imposition of confiscatory taxation, restrictions on currency conversion, imports and sources of supply, devaluations of currency or the nationalization or other expropriation of private enterprises could have a material adverse effect on our business, results of operations and financial condition. Under its current leadership, the Chinese government has been pursuing economic reform policies that encourage private economic activity and greater economic decentralization. There is no assurance, however, that the Chinese government will continue to pursue these policies, or that it will not significantly alter these policies from time to time without notice. This presents a continuing potential uncertainty for our investors

 

The primary substantial portion of our revenues initially will be derived from China.

 

We anticipate that sales of our services in China will represent our primary revenues in the near future. Any significant decline in the condition of the PRC economy could adversely affect consumer demand of our services, among other things, which in turn would have a material adverse effect on our business and financial condition .

 

Currency fluctuations and restrictions on currency exchange may adversely affect our business, including limiting our ability to convert Chinese Renminbi into foreign currencies and, if Chinese Renminbi were to decline in value, reducing our revenue in U.S. dollar terms.

 

Our reporting currency is the U.S. dollar and our operations in China use their local currency as their functional currencies. Substantially, all of our revenue and expenses are in Chinese Renminbi. We are subject to the effects of exchange rate fluctuations with respect to any of these currencies. For example, the value of the Renminbi depends to a large extent on Chinese government policies and China’s domestic and international economic and political developments, as well as supply and demand in the local market. Since 1994, the official exchange rate for the conversion of Renminbi to the U.S. dollar had generally been stable and the Renminbi had appreciated slightly against the U.S. dollar. However, on July 21, 2005, the Chinese government changed its policy of pegging the value of Chinese Renminbi to the U.S. dollar. Under the new policy, Chinese Renminbi may fluctuate within a narrow and managed band against a basket of certain foreign currencies. It is possible that the Chinese government could adopt a more flexible currency policy, which could result in more significant fluctuation of Chinese Renminbi against the U.S. dollar. We can offer no assurance that Chinese Renminbi will be stable against the U.S. dollar or any other foreign currency.

 

The income statements of our operations are translated into U.S. dollars at the average exchange rates in each applicable period. To the extent the U.S. dollar strengthens against foreign currencies, the translation of these foreign currencies denominated transactions results in reduced revenue, operating expenses and net income for our international operations. Similarly, to the extent the U.S. dollar weakens against foreign currencies, the translation of these foreign currency denominated transactions results in increased revenue, operating expenses and net income for our international operations. We are also exposed to foreign exchange rate fluctuations as we convert the financial statements of our foreign subsidiaries into U.S. dollars in consolidation. If there is a change in foreign currency exchange rates, the conversion of the foreign subsidiaries’ financial statements into U.S. dollars will lead to a translation gain or loss which is recorded as a component of other comprehensive income. In addition, we have certain assets and liabilities that are denominated in currencies other than the relevant entity’s functional currency. Changes in the functional currency value of these assets and liabilities create fluctuations that will lead to a transaction gain or loss. We have not entered into agreements or purchased instruments to hedge our exchange rate risks, although we may do so in the future. The availability and effectiveness of any hedging transaction may be limited, and we may not be able to successfully hedge our exchange rate risks.

 

Although Chinese governmental policies were introduced in 1996 to allow the convertibility of Chinese Renminbi into foreign currency for current account items, conversion of Chinese Renminbi into foreign exchange for

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capital items, such as foreign direct investment, loans or securities, requires the approval of the State Administration of Foreign Exchange, or the SAFE. These approvals, however, do not guarantee the availability of foreign currency conversion. We cannot be sure that we will be able to obtain all required conversion approvals for our operations or that Chinese regulatory authorities will not impose greater restrictions on the convertibility of Chinese Renminbi in the future. Because a significant amount of our future revenue may be in the form of Chinese Renminbi, our inability to obtain the requisite approvals or any future restrictions on currency exchanges could limit our ability to utilize revenue generated in Chinese Renminbi to fund our business activities outside of China, or to repay foreign currency obligations, including our debt obligations, which would have a material adverse effect on our financial condition and results of operations.

 

We may rely on dividends and other distributions from our PRC subsidiary to fund our cash and financing requirements, and any limitation on the ability of our subsidiary to make payments to us could materially and adversely affect our ability to conduct our business.

 

As an offshore holding company (based in the USA), we will rely principally on dividends from the WFOE, our PRC subsidiary, for our cash requirements, dividends payments and other distributions to our shareholders, and to service any debt that we may incur and pay our operating expenses. The payment of dividends by entities organized in China is subject to limitations. In particular, PRC regulations permit the WFOE to pay dividends only out of its accumulated profits, if any, as determined in accordance with Chinese accounting standards and regulations. In addition, the WFOE is required each year to set aside at least 10% of its annual after-tax profits (as determined under PRC accounting standards) into its statutory reserve fund until the aggregate amount of that reserve reaches 50% of such entity’s registered capital. These reserves are not distributable as cash dividends.

 

  If the WFOE incurs debt on its own behalf, the instruments governing the debt may restrict its ability to pay dividends or make other distributions to us. Any limitation on the ability of the WFOE to distribute dividends or other payments to us could materially and adversely limit our ability to grow, make investments or acquisitions, pay dividends and otherwise fund and conduct our business.

 

We may be subject to product liability claims if people or properties are harmed by the services sold by us.

 

The products intended to be sold by us, as part of our services, are manufactured by third parties. The products may be defectively designed or manufactured. As a result, sales of the products could expose us to liability claims relating to personal injury or property damage and may require products recalls or other actions. Third parties subject to such injury or damage may bring claims or legal proceedings against us as the reseller of the products. We do not currently maintain any third-party liability insurance or products liability insurance in relation to products we intend to sell in conjunction with our services. As a result, any material products liability claim or litigation could have a material and adverse effect on our business, financial condition and results of operations. Even unsuccessful claims could result in the expenditure of funds and managerial efforts in defending them and could have a negative impact on our reputation.

 

We may have limited legal recourse under PRC laws if disputes arise under our contracts with third parties.

 

The Chinese government has enacted laws and regulations dealing with matters such as corporate organization and governance, foreign investment, commerce, taxation and trade. However, their experience in implementing, interpreting and enforcing these laws and regulations is limited, and our ability to enforce commercial claims or to resolve commercial disputes is unpredictable. If our new business ventures are unsuccessful, or other adverse circumstances arise from these transactions, we face the risk that the parties to these ventures may seek ways to terminate the transactions, or, may hinder or prevent us from accessing important information regarding the financial and business operations of these acquired companies. The resolution of these matters may be subject to the exercise of considerable discretion by agencies of the Chinese government, and forces unrelated to the legal merits of a particular matter or dispute may influence their determination. Any rights we may have to specific performance, or to seek an injunction under PRC law, in either of these cases, are severely limited, and without a means of recourse by virtue of the Chinese legal system, we may be unable to prevent these situations from occurring. The occurrence of any such events could have a material adverse effect on our business, financial condition and results of operations.

11  
 

 

We must comply with the Foreign Corrupt Practices Act.

 

We are required to comply with the United States Foreign Corrupt Practices Act, which prohibits U.S. companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. Foreign companies, including some of our competitors, are not subject to these prohibitions. Corruption, extortion, bribery, pay-offs, theft and other fraudulent practices occur from time-to-time in mainland China. If our competitors engage in these practices, they may receive preferential treatment from personnel of some companies, giving our competitors an advantage in securing business or from government officials who might give them priority in obtaining new licenses, which would put us at a disadvantage. Although we inform our personnel that such practices are illegal, we cannot assure you that our employees or other agents will not engage in such conduct for which we might be held responsible. If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties.

 

Changes in foreign exchange regulations in the PRC may affect our ability to pay dividends in foreign currency or conduct other foreign exchange business.

 

The Renminbi is not a freely convertible currency currently, and the restrictions on currency exchanges may limit our ability to use revenues generated in Renminbi to fund our business activities outside the PRC or to make dividends or other payments in United States dollars. The PRC government strictly regulates conversion of Renminbi into foreign currencies. Over the years, foreign exchange regulations in the PRC have significantly reduced the government’s control over routine foreign exchange transactions under current accounts. In the PRC, the SAFE, regulates the conversion of the Renminbi into foreign currencies. Pursuant to applicable PRC laws and regulations, foreign invested enterprises incorporated in the PRC are required to apply for foreign exchange registration. Currently, conversion within the scope of the “current account” (e.g. remittance of foreign currencies for payment of dividends, etc.) can be effected without requiring the approval of SAFE. However, conversion of currency in the “capital account” (e.g. for capital items such as direct investments, loans, securities, etc.) still requires the approval of SAFE.

 

PRC regulation of loans to and direct investments in PRC entities by offshore holding companies may delay or prevent us from using the proceeds of any offering to make loans or capital contributions to our PRC subsidiary, which could materially and adversely affect our liquidity and ability to fund and expand our business.

 

We may transfer funds to or finance the WFOE, our PRC subsidiary, by means of shareholder’s loans or capital contributions. Any loans to the WFOE, which is a foreign-invested enterprise, cannot exceed statutory limits based on the amount of our investments in the WFOE, and shall be registered with the SAFE or its local counterparts. Furthermore, any capital contributions we make to the WFOE shall be approved by the Ministry of Commerce, or the MOFCOM, or its local counterparts. We may not be able to obtain these government registrations or approvals on a timely basis, if at all. If we fail to receive such registrations or approvals, our ability to provide loans or capital contributions to the WFOE may be negatively affected, which could adversely affect our liquidity and our ability to fund and expand our business.

 

In addition, the SAFE promulgated the Circular on the Relevant Operating Issues concerning Administration Improvement of Payment and Settlement of Foreign Currency Capital of Foreign-invested Enterprises, or SAFE Circular No. 142, on August 29, 2008. Under SAFE Circular No. 142, registered capital of a foreign invested company settled in Renminbi converted from foreign currencies may only be used within the business scope approved by the applicable governmental authority and may not be used for equity investments in the PRC, unless otherwise provided by other PRC laws or regulations. In addition, foreign-invested enterprises may not change how they use such capital without SAFE’s approval and may not in any case use such capital to repay Renminbi loans if they have not used the proceeds of such loans. SAFE further promulgated the Circular on Further Clarification and Regulation of the Issues Concerning the Administration of Certain Capital Account Foreign Exchange Businesses, or SAFE Circular No. 45, on November 16, 2011, which expressly prohibits foreign-invested enterprises from using the registered capital settled in Renminbi converted from foreign currencies to grant loans through entrustment arrangements with a bank, repay inter-company loans or repay bank loans that have been transferred to a third party. SAFE Circular No. 142 and SAFE Circular No. 45 may significantly limit our ability to transfer the net proceeds from an offshore offering to the WFOE and convert the net proceeds into Renminbi to invest in or acquire any other PRC companies, which may adversely affect our liquidity and our ability to fund and expand our business in the PRC.

 

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A failure by the beneficial owners of our shares who are PRC residents to comply with certain PRC foreign exchange regulations could restrict our ability to distribute profits, restrict our overseas and cross-border investment activities and subject us to liability under PRC law.

 

The SAFE has promulgated regulations, including the Notice on Relevant Issues Relating to Domestic Residents’ Investment and Financing and Round-Trip Investment through Special Purpose Vehicles, or SAFE Circular No. 37, effective on July 14, 2018, and its appendixes, that require PRC residents, including PRC institutions and individuals, to register with local branches of the SAFE in connection with their direct establishment or indirect control of an offshore entity, for the purpose of overseas investment and financing, with such PRC residents’ legally owned assets or equity interests in domestic enterprises or offshore assets or interests, referred to in SAFE Circular No. 37 as a “special purpose vehicle.” SAFE Circular No. 37 further requires amendment to the registration in the event of any significant changes with respect to the special purpose vehicle, such as increase or decrease of capital contributed by PRC individuals, share transfer or exchange, merger, division or other material event. In the event that a PRC shareholder holding interests in a special purpose vehicle fails to fulfill the required SAFE registration, the PRC subsidiaries of that special purpose vehicle may be prohibited from making profit distributions to the offshore parent and from carrying out subsequent cross-border foreign exchange activities, and the special purpose vehicle may be restricted in their ability to contribute additional capital into its PRC subsidiary. Further, failure to comply with the various SAFE registration requirements described above could result in liability under PRC law for foreign exchange evasion. 

 

These regulations apply to our direct and indirect shareholders who are PRC residents and may apply to any offshore acquisitions or share transfers that we make in the future if our shares are issued to PRC residents. Mr. Bi Zhang is a PRC resident, and if he is deemed to be beneficially holding interests in us without making appropriate registration pursuant to SAFE Circular No. 37, the WFOE, as our PRC subsidiary, could be subject to fines and legal penalties, and the SAFE could restrict our cross-border investment activities and our foreign exchange activities, including restricting the WFOE’s ability to distribute dividends to or obtain loans denominated in foreign currencies from us, or prevent us from paying dividends. As a result, our business operations and our profitability could be materially and adversely affected.

 

PRC regulations relating to mergers and acquisitions and overseas listings of domestic enterprises by foreign investors may increase the administrative burden we face and create regulatory uncertainties.

 

The Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rule, which became effective in September 2006 and were further amended in June 2009, requires that if an overseas company is established or controlled by PRC domestic companies or citizens intends to acquire equity interests or assets of any other PRC domestic company affiliated with the PRC domestic companies or citizens, such acquisition must be submitted to the MOFCOM, rather than local regulators, for approval. In addition, the M&A Rule requires that an overseas company controlled directly or indirectly by PRC companies or citizens and holding equity interests of PRC domestic companies needs to obtain the approval of the China Securities Regulatory Commission, or CSRC, prior to listing its securities on an overseas stock exchange. On September 21, 2006, the CSRC published a notice on its official website specifying the documents and materials required to be submitted by overseas special purpose companies seeking CSRC’s approval of their overseas listings.

 

While the application of the M&A Rule remains unclear, based on our understanding of current PRC laws, regulations, and the notice published on September 21, 2006, since the WFOE, our operating entity, was established by means of direct investment, rather than by merger or acquisition of the equity interest or assets of any “domestic company” as defined under the M&A Rules, we believe we are not required to submit an application to the MOFCOM or the CSRC for its approval for any of our transactions.

 

However, we cannot assure you that PRC governmental authorities, including the MOFCOM and the CSRC, will reach the same conclusion as us. If the MOFCOM, the CSRC and/or other PRC regulatory agencies subsequently determine that the approvals from the MOFCOM and/or CSRC and/or other PRC regulatory agencies were required, our PRC business could be challenged, and we may need to apply for a remedial approval and may be subject to certain administrative punishments or other sanctions from PRC regulatory agencies. The regulatory agencies may impose fines and penalties on our operations in the PRC, limit our operating privileges in the PRC, delay or restrict the repatriation of our foreign currency in our offshore bank accounts into the PRC, or take other actions that could

13  
 

materially and adversely affect our business, financial condition, results of operations, reputation and prospects, as well as the trading price of our ordinary shares.

 

The Chinese government exerts substantial influence over the manner in which we must conduct our business activities.

 

China only recently has permitted provincial and local economic autonomy and private economic activities, and, as a result, we are dependent on our relationship with the local government in the province in which we operate our business. Chinese government has exercised and continues to exercise substantial control over virtually every sector of the Chinese economy through regulation and state ownership. Our ability to operate in China may be harmed by changes in its laws and regulations, including those relating to taxation, product liabilities, environmental regulations, property and other matters. We believe that our operations in China are in material compliance with all applicable legal and regulatory requirements. However, the central or local governments of these jurisdictions may impose new, stricter regulations or interpretations of existing regulations that would require additional expenditures and efforts on our part to ensure our compliance with such regulations or interpretations. Accordingly, government actions in the future, including any decision not to continue to support recent economic reforms and to return to a more centrally planned economy or regional or local variations in the implementation of economic policies, could have a significant effect on economic conditions in China or particular regions thereof, and could require us to divest ourselves of any interest we then hold in PRC subsidiaries.

 

  Future inflation in China may inhibit our activity to conduct business in China.

 

In recent years, the Chinese economy has experienced periods of rapid expansion and high rates of inflation. These factors have led to the adoption by Chinese government, from time to time, of various corrective measures designed to restrict the availability of credit or regulate growth and contain inflation. High inflation may in the future cause Chinese government to impose controls on credit and/or prices, or to take other action, which could inhibit economic activity in China, and thereby harm the market for our services.

 

We may have difficulty establishing adequate management, legal and financial controls in the PRC.

 

We may have difficulty in hiring and retaining a sufficient number of qualified employees to work in the PRC. As a result of these factors, we may experience difficulty in establishing management, legal and financial controls, collecting financial data and preparing financial statements, books of account and corporate records and instituting business practices that meet Western standards. We may have difficulty establishing adequate management, legal and financial controls in the PRC.

 

We may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing original actions in China based on United States or other foreign laws against us and our management.

 

We conduct substantially all our operations in China and substantially all our assets are located in China. In addition, some of our directors and executive officers reside within China. As a result, it may not be possible to effect service of process within the United States or elsewhere outside China upon some of our directors and senior executive officers, including with respect to matters arising under U.S. federal securities laws or applicable state securities laws. It would also be difficult for investors to bring an original lawsuit against us or our directors or executive officers before a Chinese court based on U.S. federal securities laws or otherwise. Moreover, China does not have treaties with the United States or many other countries providing for the reciprocal recognition and enforcement of judgment of courts.

 

Under the EIT Law, we may be classified as a “resident enterprise” of China. Such classification will likely result in unfavorable tax consequences to us and holders of our securities.

 

Under the EIT Law, an enterprise established outside of China with its “de facto management body” in China is considered a “resident enterprise,” meaning that it can be treated the same as a Chinese enterprise for enterprise income tax purposes. The implementing rules of the EIT Law defines “de facto management body” as an organization that exercises “substantial and overall management and control over the services and operations, personnel, accounting, and properties” of an enterprise. On April 22, 2009, the SAT, issued a circular, or SAT Circular No. 82, providing

14  
 

certain specific criteria for determining whether the “de facto management body” of a PRC-controlled enterprise that is incorporated offshore is located in China, which include all of the following conditions: (a) the location where senior management members responsible for an enterprise’s daily operations discharge their duties; (b) the location where financial and human resource decisions are made or approved by organizations or persons; (c) the location where the major assets and corporate documents are kept; and (d) the location where more than half (inclusive) of all directors with voting rights or senior management have their habitual residence.

 

If the PRC tax authorities determine that we are a “resident enterprise” for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. First, we will be subject to enterprise income tax at a rate of 25% on our worldwide income as well as PRC enterprise income tax reporting obligations. This would mean that income such as interest on offering proceeds and other non-China source income would be subject to PRC enterprise income tax at a rate of 25%. Second, although under the EIT Law and its implementing rules dividends paid to us by our PRC subsidiaries would qualify as “tax-exempt income,” we cannot guarantee that such dividends will not be subject to a 10% withholding tax, as the PRC foreign exchange control authorities, which enforce the withholding tax, have not yet issued guidance with respect to the processing of outbound remittances to entities that are treated as resident enterprises for PRC enterprise income tax purposes. Finally, it is possible that a 10% withholding tax is imposed on dividends we pay to our non-PRC enterprise shareholders and with respect to gains derived by our non-PRC enterprise shareholders from transferring our shares, and a 20% withholding tax is imposed on dividends we pay to our non-PRC individual shareholders and with respect to gains derived by our non-PRC individual shareholders from transferring our shares.

 

We face uncertainties with respect to the application of the Circular on Strengthening the Administration of Enterprise Income Tax for Share Transfer by Non-PRC Resident Enterprises.

 

Pursuant to the Circular on Strengthening the Administration of Enterprise Income Tax for Share Transfers by Non-PRC Resident Enterprises, or SAT Circular No. 698, issued by the SAT in December 2009 with retroactive effect from January 1, 2008, if a non-resident enterprise indirectly transfers the equity interests of a PRC resident enterprise by transferring equity interests of an overseas holding company, or an Indirect Transfer, and such overseas holding company is located in a tax jurisdiction that: (ⅰ) has an effective tax rate of less than 12.5% or (ii) does not impose income tax on foreign income of its residents, the transferring nonresident enterprise must report this Indirect Transfer to the competent PRC tax authority of the PRC resident enterprise. The PRC tax authority will apply the “substance over form” principle, and as a result may disregard the existence of the overseas holding company if such overseas holding company lacks a reasonable commercial purpose and was established for the purpose of reducing, avoiding or deferring PRC tax. As a result, gains derived from such an Indirect Transfer may be subject to PRC withholding tax at a rate of up to 10%. SAT Circular No. 698 also provides that where a non-PRC resident enterprise transfers its equity interests in a PRC resident enterprise to its related parties at a price lower than the fair market value, the relevant tax authority has the power to make a reasonable adjustment to the taxable income of the transaction.

 

There is uncertainty as to the application of SAT Circular No. 698. While the term “Indirect Transfer” is not clearly defined, it is understood that the relevant PRC tax authorities have broad jurisdiction over requests for information regarding foreign companies having remote contact with the PRC. Moreover, the relevant authority has not yet promulgated any formal provisions or made any formal interpretation as to the procedures or format for reporting an Indirect Transfer. In addition, there have not been any formal declarations concerning how to determine whether a foreign investor has adopted an arrangement for the purpose of reducing, avoiding or deferring PRC tax. As a result, we and our non-resident investors or non-resident enterprise shareholders may be at risk of being taxed under SAT Circular No. 698 and may be required to expend valuable resources to comply with SAT Circular No. 698 or to establish that we and our non-resident enterprise investors or non-resident enterprise shareholders should not be taxed under SAT Circular No. 698, which may have a material adverse effect on our financial condition and results of operations or such non-resident investors’ or such non-resident enterprise shareholders’ investments in us.

 

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Our Chinese operating companies are obligated to withhold and pay PRC individual income tax in respect of the salaries and other income received by their employees who are subject to PRC individual income tax. If they fail to withhold or pay such individual income tax in accordance with applicable PRC regulations, they may be subject to certain sanctions and other penalties, which could have a material adverse impact on our business.

 

Under PRC laws, the WFOE will be obligated to withhold and pay individual income tax in respect of the salaries and other income received by their employees who are subject to PRC individual income tax. The WFOE may be subject to certain sanctions and other liabilities under PRC laws in case of failure to withhold and pay individual income taxes for its employees in accordance with the applicable laws.

 

In addition, the SAT has issued several circulars concerning employee stock options. Under these circulars, employees working in the PRC (which could include both PRC employees and expatriate employees subject to PRC individual income tax) are required to pay PRC individual income tax in respect of their income derived from exercising or otherwise disposing of their stock options. If we implement employee stock options plan, the WFOE will be obligated to file documents related to employee stock options with relevant tax authorities and withhold and pay individual income taxes for those employees who exercise their stock options. While tax authorities may advise us that our policy is compliant, they may change their policy, and we could be subject to sanctions.

 

The enforcement of labor contract law and increase in labor costs in the PRC may adversely affect our business and our profitability.

 

China adopted a labor contract law and its implementation rules effective on January 1, 2008 and September 18, 2008, respectively. The labor contract law was further amended on December 28, 2012. The labor contract law and its implementation rules impose more stringent requirements on employers with regard to, among others, severance payment upon permitted termination of the employment by an employer and non-fixed term employment contracts, time limits for probation period as well as the duration and the times that an employee can be placed on a fixed term employment contract. Due to the limited period of effectiveness of the labor contract law and its implementation rules, and the lack of clarity with respect to their implementation, potential penalties and fines, it is uncertain how they will impact our current employment policies and practices. Our employment policies and practices may violate the labor contract law or its implementation rules and we may be subject to related penalties, fines or legal fees. Compliance with the labor contract law and its implementation rules may increase our operating expenses, in particular our personnel expenses, as the continued success of our business depends significantly on our ability to attract and retain qualified personnel. In the event that we decide to terminate some of our employees or otherwise change our employment or labor practices, the labor contract law and its implementation rules may also limit our ability to effect those changes in a manner that we believe to be cost-effective or desirable, which could adversely affect our business and results of operations.

 

Additionally, PRC companies are subject to various laws and regulations regarding social insurance and housing funds, under which the WFOE is required to pay employees’ pension contributions, work-related injury benefits, maternity insurances, medical and unemployment benefit plans, housing funds and other welfare-oriented payments. The WFOE has not contributed social insurance premiums and housing funds for its employees in full compliance with applicable PRC laws. As such, the WFOE may be ordered to compensate the cumulative amount of the under-contributed social insurance premiums and housing fund contributions and be subject to administrative penalties, including fines, and as such our business and reputation may be adversely affected.

 

Because Chinese laws will govern almost all our business material agreements, we may not be able to enforce our rights within the PRC or elsewhere, which could result in a significant loss of business, business opportunities or capital.

 

The Chinese legal system is similar to a civil law system based on written statutes. Unlike common law systems, it is a system in which decided legal cases have little precedential value. Although legislation in the PRC over the past 25 years has significantly improved the protection afforded to various forms of foreign investment and contractual arrangements in the PRC, these laws, regulations and legal requirements are relatively new. Due to the limited volume of published judicial decisions, their non-binding nature, the short history since their enactments, the discrete understanding of the judges or government agencies of the same legal provision, inconsistent professional

16  
 

abilities of the judicators, and the inclination to protect local interest in the court rooms, interpretation and enforcement of PRC laws and regulations involve uncertainties, which could limit the legal protection available to us, and foreign investors, including you. The inability to enforce or obtain a remedy under any of our future agreements could result in a significant loss of business, business opportunities or capital and could have a material adverse impact on our business, prospects, financial condition, and results of operations. In addition, the PRC legal system is based in part on government policies and internal rules (some of which are not published on a timely basis or at all) that may have a retroactive effect. As a result, we may not be aware of our violation of these policies and rules until sometime after the violation. In addition, any litigation in the PRC, regardless of outcome, may be protracted and result in substantial costs and diversion of resources and management attention.

 

Risks Relating to Our Securities

 

Insiders have substantial control over us, and they could delay or prevent a change in our corporate control even if our other stockholders wanted it to occur.

 

Our executive officers, directors, and principal stockholders hold approximately 99% of our outstanding common stock. Accordingly, these stockholders are able to control all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. This could delay or prevent an outside party from acquiring or merging with us even if our other stockholders wanted it to occur.

 

There may not be sufficient liquidity in the market for our securities in order for investors to sell their securities.

 

There is currently only a limited public market for our common stock, which is listed on the Over-the-Counter Bulletin Board, and there can be no assurance that a trading market will develop further or be maintained in the future. During the month of November 2018, there was no trading activity in our common stock. As of December 31, 2018, the closing trade price of our common stock was $0.45 per share. As of December 31, 2018, we had approximately 433 shareholders of record of our common stock, not including shares held in street name.

 

The market price of our common stock may be volatile.

 

The market price of our common stock has been and will likely continue to be highly volatile, as is the stock market in general, and the market for OTC Bulletin Board quoted stocks in particular. Some of the factors that may materially affect the market price of our common stock are beyond our control, such as changes in financial estimates by industry and securities analysts, conditions or trends in the industry in which we operate or sales of our common stock. These factors may materially adversely affect the market price of our common stock, regardless of our performance. In addition, the public stock markets have experienced extreme price and trading volume volatility. This volatility has significantly affected the market prices of securities of many companies for reasons frequently unrelated to the operating performance of the specific companies. These broad market fluctuations may adversely affect the market price of our common stock.

 

Our common stock may be considered a “penny stock” and may be difficult to sell.

 

The SEC has adopted regulations which generally define a “penny stock” to be an equity security that has a market price of less than $5.00 per share or an exercise price of less than $5.00 per share, subject to specific exemptions. The market price of our common stock is less than $5.00 per share and, therefore, it may be designated as a “penny stock” according to SEC rules. This designation requires any broker or dealer selling these securities to disclose certain information concerning the transaction, obtain a written agreement from the purchaser and determine that the purchaser is reasonably suitable to purchase the securities. These rules may restrict the ability of brokers or dealers to sell our common stock and may affect the ability of investors to sell their shares.

 

The market for penny stocks has experienced numerous frauds and abuses, which could adversely impact investors in our stock.

 

OTCBB securities are frequent targets of fraud or market manipulation, both because of their generally low prices and because OTCBB reporting requirements are less stringent than those of the stock exchanges or NASDAQ.

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Patterns of fraud and abuse include:

 

·          Control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer;
·          Manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases;
·          “Boiler room” practices involving high pressure sales tactics and unrealistic price projections by inexperienced sales persons;
·          Excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and
·          Wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with consequent investor losses.

 

Our management is aware of the abuses that have occurred historically in the penny stock market.

 

We have not paid dividends in the past and do not expect to pay dividends in the foreseeable future and any return on investment may be limited to the value of our stock.

 

We have never paid any cash dividends on our common stock and do not anticipate paying any cash dividends on our common stock in the foreseeable future and any return on investment may be limited to the value of our stock. We plan to retain any future earnings to finance growth.

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

 

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this Current Report. Our consolidated financial statements have been prepared in accordance with U.S. GAAP. In addition, our consolidated financial statements and the financial data included in this Current Report reflect our reorganization and have been prepared as if our current corporate structure had been in place throughout the relevant periods. Actual results could differ materially from those projected in the forward-looking statements. For additional information regarding these and other risks and uncertainties, please see the items listed above under the section captioned “Risk Factors”, as well as any other cautionary language contained in this Current Report. Except as may be required by law, we undertake no obligation to update any forward-looking statement to reflect events after the date of this Current Report.

 

Plan of Operation

 

We intend to provide fish farming containers, as a part of our services offerings, and generate business revenues for our clients. Our services are intended to integrate sales, installments and maintenance aquaculture equipment.

 

Our intended budget for the next twelve months is as follows:

    January 1, 2019 - December 31, 2019
     
Accounting   $ 80,000  
Legal     20,000  
General and administrative   $ 12,000  
Miscellaneous     6,000  
         
Total Operating Expenses   $ 118,000  

 

 

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Results of Operations

 

We have not generated any income and have incurred recurring losses to date. Our general and administrative expenses was primarily related to salary, travel expense and professional fees in connection with the incorporation of the Company and its subsidiary, as well as the filing of this registration statement on Form 8-K. Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation.

 

We expect we will require additional capital to meet our long-term operating requirements. We expect to obtain financing from shareholders or raise additional capital through, among other things, the sale of equity or debt securities.

 

General and Administrative Expenses

 

The following table sets forth the main components of the Company’s general and administrative expenses for the year ended December 31, 2017 and 2016, and the nine-month period ended September 30, 2018 and 2017.

  

                                 
    For the Year Ended December 31,   For the Nine Months Ended September 30,
    2017   %   2016   %   2018   %   2017   %
Salary   $ 148       12.2 %   $ —         —   %   $ 78,110       62.7 %   $ —         —   %
Travel expense     —         —   %     —         —   %     17,754       14.2 %     —         —   %
Professional fee     —         —   %     —         —   %     17,308       13.9 %     —         —   %
Office expense     —         —   %     —         —   %     5,188       4.2 %     —         —   %
Depreciation     —         —   %     —         —   %     2,117       1.7 %     —         —   %
Registration fee     1,000       82.1 %     1,000       100.0 %     1,000       0.8 %     1,000       100.0 %
Rental expense     —         —   %     —         —   %     1,192       1.0 %     —         —   %
Others     70       5.7 %     —         —   %     1,959       1.5 %     —         —   %
Total General and Administrative Expenses   $ 1,218       100.0 %   $ 1,000       100.0 %   $ 124,628       100.0 %   $ 1,000       100.0 %

  

 

Liquidity and Capital Resources

 

As of December 31, 2017, our assets were $108,994 comprised of $107,562 in advance to supplier. Our liabilities were $113,220 comprised of $113,128 in due to shareholders. And as of December 31, 2016, our assets were nil. Our liabilities were $3,000 comprised of $3,000 in due to shareholders.

 

As of September 30, 2018, our assets were $2,578,480 comprised of $1,823,550 in inventory. Our liabilities were $2,528,259, comprised of $1,598,017 in advance from customer. Stockholders’ equity increased $59,138 from December 31, 2017 to $54,955 as of September 30, 2018.

 

The following table provides detailed information about our net cash flows for the periods indicated:

 

                 
   

For the year 

Ended

December 31,

 

For the Nine Months 

Ended
September 30,

    2017   2016   2018   2017
Net cash used in operating activities   $ (104,996 )   $ (1,000 )   $ (524,550 )   $ (1,000 )
Net cash used in investing activities     —         —         (71,339 )     —    
Net cash provided by financing activities     106,379       1,000       585,854       1,000  
Effect of exchange rate change on cash and cash equivalents     49       —         35,433       —    
Net increase in cash and cash equivalents   $ 1432     $ —       $ 25,398     $ —    

 

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Net cash used in operating activities

 

Net cash used in operating activities amounted to $104,996 for the year ended December 31, 2017. This reflected a net loss of $1,218, and the effect of changes in working capital including an increase of advance to supplier in the amount of $103,867, partially offset by an increase of $89 in other payables and accrued liabilities.

 

Net cash used in operating activities amounted to $1,000 for the year ended December 31, 2016. This reflected a net loss of $1,000 for each year.

 

Net cash used in operating activities amounted to $524,550 for the nine months ended September 30, 2018. This reflected a net loss of $95,445, as adjusted for non-cash items primarily including depreciation of 6,064 and net deferred income tax of $29,183, and the effect of changes in working capital including an increase of $1,684,750 of advance from customers, which mainly due to the Company collect amount in advance, and partially offset by an increase in inventory of $1,568,419 because the Company started operation since 2018 and an increase in prepaid expense and other assets of $671,448.

 

Net cash used in investing activities

 

Net cash used in investing activities was nil for the year ended December 31, 2017 and 2016 because the Company hasn’t started operation until 2018.

 

Net cash used in investing activities was $71,339 for the nine months ended September 30, 2018, which was primarily attributable to the purchase of office equipment.

 

Net cash provided by financing activities

 

Net cash provided by financing activities amounted to $106,379 and $1,000 for the year ended December 31, 2017 and 2016, respectively, which was attributable to the proceeds from our shareholders primarily for our daily operation. See “Related Party Transactions”.

 

Net cash provided in financing activities amounted to $584,854 for the nine months ended September 30, 2018, which was attributable to the proceeds from our shareholders of $552,295 and shareholder’s capital injection of $145,973, partially offset by repayments to our shareholder of $112,414.

 

Critical Accounting Policies

 

See Note 3 for our critical accounting policies.

 

Recent Accounting Developments

 

Please refer to Note 3 for our recent accounting development.

 

Description of Securities

 

Common Stock

 

As of effective date of the Share Exchange, we have 200,000,000 authorized shares of common stock, $0.001 par value per share, of which 12,349,200 shares of common stock are issued and outstanding. Each holder of common stock is entitled to one vote for each share owned of record on all matters voted upon by shareholders, and a majority vote is required for all actions to be taken by shareholders. In the event of a liquidation, dissolution or winding-up of the Company, the holders of common stock are entitled to share equally and ratably in the assets of the Company, if any, remaining after the payment of all debts and liabilities of the Company. The common stock has no preemptive rights, no cumulative voting rights and no redemption, sinking fund or conversion provisions.

 

20  
 

 

Preferred Stock

 

No Preferred Stock is authorized.

 

Options and Warrants

  

  Title of Class Name and Address of Beneficial Owner Amount and Nature of Beneficial Owner Exercise Price Expiry Date Terms of Exercise

 

“A” Warrants

Yin-Chieh Cheng, Chairman of the Board, Director and Chief Financial Officer (1) 5,000,000 $0.50 April 16, 2023 Cash
           
“A” Warrants Erik S. Nelson, Former Chief Executive Officer, President, and Chief Financial Officer, Current Secretary and Director (2)(4)(5) 400,000 $0.50 April 16, 2023 Cash
           
“B” Warrants Erik S. Nelson, Former Chief Executive Officer, President, and Chief Financial Officer, Current Secretary and Director (2)(4)(5) 400,000 $1.00 April 16, 2023 Cash
           
“A” Warrants

Marina S. Fiorino (3)(6)

 

250,000 $0.50 April 16, 2023 Cash
           
“B” Warrants

Marina S. Fiorino (3)(6)

 

250,000 $0.50 April 16, 2023 Cash
           
“A” Warrants Coral Investment Partners, LP (4) 150,000 $0.50 April 16, 2023 Cash
           
“B” Warrants Coral Investment Partners, LP (4) 150,000 $1.00 April 16, 2023 Cash

 

 

(1) The address of Mr. Cheng is Flat B, 6/F, Teda Building, 87 Wing Lok Street Sheung Wan, Hong Kong. This 5,000,000 Series “A” Warrants, exercisable until 2023 at $0.50, are subject to performance under Mr. Cheng’s Consulting Agreement and vest at 250,000 per quarter.
(2) The address of Mr. Nelson is c/o 2030 Powers Ferry Road SE, Suite 212, Atlanta, GA 30339.
(3) The address of Ms. Fiorino is Via La Malfa 26, San Marzano Sulsarno, Salerno, 84010 Italy
(4) Coral Investment Partners is an investment partnership. Mr. Nelson is President of the General Partner, and thus has control of the warrants owned by the partnership. The address of Coral Investment Partners is 2030 Powers Ferry Road SE, Suite 212, Atlanta, GA. 30339.
(5) Nelson Fiorino Holdings, LLC owns 1,000,000 shares of common stock, 500,000 Class “A” Warrants and 500,000 Class “B” Warrants. Mr. Nelson owns 50% of Nelson Fiorino Holdings, LLC.
(6) Nelson Fiorino Holdings, LLC owns 1,000,000 shares of common stock, 500,000 Class “A” Warrants and 500,000 Class “B” Warrants. Ms. Fiorino owns 50% of Nelson Fiorino Holdings, LLC.

 

 

 

21  
 

 

Market Price of and Dividends on Common Equity and Other Shareholder Matters.

 

There is no change in the market for our securities as a result of the Agreement. Our common stock, par value $0.001, is listed for quotation in the OTCBB under the symbol “NCRA.”

 

As of December 31, 2018, there were 433 shareholders of record of our common stock. This number does not include an indeterminate number of shareholders whose shares are held by brokers in street name.

 

The Company has not declared any dividends since inception and does not anticipate paying any dividends in the foreseeable future. The payment of dividends is within the discretion of the Board of Directors and will depend on the Company’s earnings, capital requirements, financial condition, and other relevant factors. There are no restrictions that currently limit the Company’s ability to pay dividends on its common stock other than those generally imposed by applicable state law.

 

Indemnification of Directors and Officers

 

We are a Nevada corporation. The Nevada Revised Statutes provide provisions eliminating or limiting the personal liability of a director to the corporation or its shareholders for monetary damages for breach of fiduciary duty as a director, except that any such provision may not eliminate or limit the liability of a director (ⅰ) for any breach of the director’s duty of loyalty to the corporation or its shareholders, (ii) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) any transaction from which a director directly or indirectly derived an improper personal benefit.

 

A Nevada corporation must indemnify a person who was wholly successful, on the merits or otherwise, in defense of any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative and whether formal or informal (a “Proceeding”), in which he or she was a party because the person is or was a director, against reasonable expenses incurred by him or her in connection with the Proceeding, unless such indemnity is limited by the corporation’s articles of incorporation. The Company’s articles of incorporation do not contain any such limitation.

 

A Nevada corporation may indemnify a person made a party to a Proceeding because the person is or was a director against any obligation incurred with respect to a Proceeding to pay a judgment, settlement, penalty, fine (including an excise tax assessed with respect to an employee benefit plan) or reasonable expenses incurred in the Proceeding if the person conducted himself or herself in good faith and the person reasonably believed, in the case of conduct in an official capacity with the corporation, that the person s conduct was in the corporation’s best interests and, in all other cases, his or her conduct was at least not opposed to the corporation’s best interests and, with respect to any criminal proceedings, the person had no reasonable cause to believe that his or her conduct was unlawful. A corporation may not indemnify a director in connection with any Proceeding by or in the right of the corporation in which the director was adjudged liable to the corporation or, in connection with any other Proceeding charging that the director derived an improper personal benefit, whether or not involving actions in an official capacity, in which Proceeding the director was judged liable on the basis that he or she derived an improper personal benefit. Any indemnification permitted in connection with a Proceeding by or in the right of the corporation is limited to reasonable expenses incurred in connection with such Proceeding.

 

Principal Stockholders

 

The following table sets forth certain information regarding beneficial ownership of our common stock as of December 31, 2018 (after giving effect to the Share Exchange, due to the Merger described in Item 2.01 of this Current Report) by (ⅰ) each person (or group of affiliated persons) who is known by us to own more than five percent of the outstanding shares of our common stock, (ii) each director, executive officer and director nominee, and (iii) all of our directors, executive officers and director nominees as a group. As of January 1, 2019, we had 12,349,200 shares of common stock issued and outstanding.

 

Beneficial ownership is determined in accordance with SEC rules and generally includes voting or investment power with respect to securities. Unless otherwise noted, the principal address of each of the stockholders, directors and officers listed below is at 2030 Powers Ferry Road SE, Suite 212, Atlanta, GA 30339.

22  
 

 

All share ownership figures include shares of our common stock issuable upon securities convertible or exchangeable into shares of our common stock within sixty (60) days of January 1, 2019, which are deemed outstanding and beneficially owned by such person for purposes of computing his or her percentage ownership, but not for purposes of computing the percentage ownership of any other person.

  

  

Name and Address of Beneficial Owner   Amount and
Nature of
Beneficial Ownership
    Percentage of Outstanding
Shares of
Common Stock
 
Yin-Chieh Cheng, Chairman of the Board, Director and CFO (1)     5,250,000    (2)   42.5 %
Kuan-Yin Cheng, CEO, President and Director Nominee (3)     -       0 %
Erik Nelson, Corporate Secretary and Director (4)     650,000       5.26 %
Bi Zhang (5)     4,750,000       38.5 %
Marina S. Fiorino (6)     1,043,600       8.4 %
                 
All Directors, Executive Officers and Director Nominees, as a group (3 persons)     5,900,000    (2)   47.76 %

 

(1) The business address of Yin-Chieh Cheng is Flat B, 6/F, Teda Building, 87 Wing Lok Street Sheung Wan, Hong Kong. Mr. Cheng, our Chairman, also serves as the general manager of GSI in Hong Kong and legal representative of the WOFE and has sole voting and investment power over the shares.
(2) Does not include up to 5,000,000 Series “A” Warrants exercisable until 2023 at $0.50 which are subject to performance under Mr. Cheng’s Consulting Agreement and vesting at 250,000 per quarter.
(3) Ms. Cheng’s address is 12772 Bradwell Road, Herndon, VA 20101.
(4) Mr. Nelson’s address is 2030 Powers Ferry Road SE, Suite 212, Atlanta, GA 30339.
(5) The business address of Mr. Zhang is Building #5 Feng Du Ban Pang Shan An Zhi Qu Xing Yi City, Gui Zhou Qian Xi Nan, China. Mr. Zhang, general manager of Gui Zhou Wan Feng Hu Intelligent Aquatic Technology Co. Limited, has sole voting and investment power over the shares.
(6) The address of Ms. Fiorino is Via La Malfa 26, San Marzano Sulsarno, Salerno, 84010 Italy

 

 

Item 3.02 Unregistered Sales of Equity Securities

 

In connection with the Merger, after the Effective Date, we issued an aggregate of 10,000,000 shares of our common stock to the GSI Shareholders. We received in exchange from the GSI Shareholders 100% of the issued and outstanding shares of GSI, which exchange resulted in GSI becoming our wholly-owned subsidiary. We relied on the status of the GSI Shareholders as either accredited investors (as defined under Regulation D under Securities Act of 1933, as amended) under Section 4(a)5 of the Securities Act and as non-US persons (as defined under Regulation S under Securities Act), in connection with an exemption from Securities Act registration.

 

 

Item 5.01 Changes in Control of Registrant

 

Effective December 31, 2018, we have consummated the transactions contemplated by the Agreement, pursuant to which we acquired 1 ordinary share of GSI, representing all of the issued and outstanding shares of GSI, in exchange for the issuance in the aggregate of 10,000,000 shares of our common stock to the shareholders of GSI, representing approximately 81% of our shares of common stock issued and outstanding. Accordingly, the Share Exchange caused a change in control.

 

Other than the transactions and agreements disclosed in this Form 8-K, we know of no other arrangements which may result in a change in control of the Company.

 

23  
 

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers

 

At the Effective Date of the Share Exchange, there was a change in our Board of Directors and executive officers. Mr. Erik Nelson, who had served as our sole executive officer and director, resigned as Chief Executive Officer, President and Chief Financial Officer effective immediately, and after appointing Mr. Yin-Chieh Cheng to serve as Chairman of the Board and Chief Financial Officer and Treasurer. Mr. Nelson remains corporate Secretary. He tendered his resignation as a director, with such resignation to be effective on the tenth day after mailing of a Schedule 14f-1 statement to our stockholders (the “Effective Date”). Our Board of Directors then appointed Kuan-Yin Cheng to serve as Chief Executive Officer and President. Also, in connection with the Share Exchange, the Board of Directors appointed Ms. Kuan-Yin Cheng serve as a director, with such appointment to be effective on the Effective Date. Yin-Chieh Cheng will serve as a director on our Board of Directors and shall hold office until the next election of directors by stockholders and until their respective successors are elected and qualified or until their earlier resignation or removal.

 

 Set forth below is information regarding our current directors, executive officers and director nominees.

 

Name   Age   Position
Yin-Chieh Cheng   40   Chairman of the Board, Chief Financial Officer and Treasurer
Kuan-Yin Cheng (1)   43   Chief Executive Officer, President and Director Nominee
Erik Nelson (2)   48   Corporate Secretary and Director

 

(1) Kuan-Yin Cheng is appointed director effective 10 days after mailing Notice to shareholders on Schedule 14(f)-1.

(2) Mr. Erik Nelson resigned as Chief Executive Officer, President and Chief Financial Officer effective immediately. He remains corporate Secretary. He tendered his resignation as a director, with such resignation to be effective on the tenth day after mailing of a Schedule 14f-1 statement to our stockholders.

 

Yin-Chieh Cheng, Chairman of the Board and Chief Financial Officer and Treasurer

 

Mr. Cheng has served as the executive officer and director of GSI since the company was formed. Prior to that role, from December 1, 2014 to present, Mr. Yin-Chieh Cheng acted as a director of Shengbo Accounting Firm in Shanghai. Mr. Yin-Chieh Cheng holds a Bachelors Degree in Accounting from George Mason University in Virginia.

 

Kuan-Yin Cheng, Chief Executive Officer, President and Director Nominee

 

Ms. Cheng has served as the US Representative and Creative Director of GSI since the company was formed. Prior to that role, from May of 2000 to May 2013, Ms. Cheng acted as Senior Graphic Designer for National Association of Secondary Principals. Ms. Cheng holds a Bachelor of Arts degree in Graphic Design from Corcoran School of Art.

 

Family Relationships

 

There are family relationships between our directors or executive officers. Mr. Yin-Chieh Cheng and Ms. Kuan-Yin Cheng are brother and sister, respectively.

 

  Compensation of Officers

 

The following table sets forth all cash compensation paid by us, as well as certain other compensation paid or accrued, in 2018, 2017 and 2016 to each of the following named executive officers.

 

24  
 

 

Summary Compensation of Named Executive Officers

 

Name and Principal Position   Fiscal Year   Salary ($)   Total ($)
             
Erik Nelson     2018     $ —       $ —    
Former CEO, CFO and President, Current Corporate Secretary     2017     $ —       $ —    
      2016     $ —       $ —    
                         
Kuan-Yin Cheng     2018     $ —       $ —    
President and Chief Executive Officer     2017     $ —       $ —    
      2016     $ —       $ —    
                         
Yin-Chieh Cheng     2018     $ (1)   $ —    
Chief Financial Officer and Treasurer     2017     $ —       $ —    
      2016     $ —       $ —    
                         
(1) Does not include warrants which may accrue to Mr. Cheng in the future subject to vesting under his Consulting Agreement.

 

Employment Agreements

 

We have entered into a consulting agreement with Mr. Yin-Chieh Cheng. Mr. Cheng will be compensated with 250,000 options vesting every Quarter for a period of 5 years.

 

Director Compensation

 

Our directors are reimbursed for expenses incurred by them in connection with attending Board of Directors’ meetings, but they do not receive any other compensation for serving on the Board of Directors.

 

Director Independence

 

We do not have any independent directors and our board of directors is in the process of searching for suitable candidates. Our board of directors does not have any committees, as companies whose securities are traded on the OTC Bulletin Board are not required to have board committees. However, at such time in the future that we appoint independent directors on our board we expect to form the appropriate board committees.

 

Certain Relationships and Related Transactions

 

Effective December 31, 2018, NOCERA, Inc., (the “Registrant”, the “Company”, “we”, us”, “our”) completed an Agreement and Plan of Merger (the ”Agreement”), with (ⅰ) Grand Smooth Inc. Limited, a company organized under the laws of Hong Kong, China (“GSI”), (ii) GSI’s shareholders, Yin-Chieh Cheng and Bi Zhang, who together owned shares constituting 100% of the issued and outstanding ordinary shares of GSI (the ”GSI Shares”) and (iii) GSI Acquisition Corp. Under the terms of the Agreement, the GSI Shareholders transferred to us all of the GSI Shares in exchange for the issuance of 10,000,000 shares (the “Shares”) of our common stock (the “Share Exchange”). Yin-Chieh Cheng and Bi Zhang became our majority shareholders and Yin-Chieh Cheng became Chairman, a director and our Chief Financial Officer.

 

Yin-Chieh Cheng has entered into a 5-year Consulting Agreement providing for vesting of 250,000 options to purchase shares each quarter at $0.50. Please see Consulting Agreement attached hereto as Exhibit 10.3.

 

25  
 

 

Item 5.06 Change in Shell Company Status

 

As described in Item 2.01 of this Form 8-K, effective December 31, 2018, we entered into the Agreement and Plan of Merger and consummated the Agreement, pursuant to which we acquired all of the issued and outstanding ordinary shares of GSI in exchange for the issuance of the shares to the shareholders of GSI.

 

As a result of the transaction, GSI became our wholly-owned operating subsidiary and, upon the issuance of the shares, the former shareholders of GSI owned in the aggregate, approximately 81% of all of our issued and outstanding common stock. We currently have a total of 12,349,200 issued and outstanding shares of common stock.

 

As the result of the consummation of the Agreement, we would not be considered a shell company as that term is defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended.

 

Item 9.01 Financial Statements and Exhibits

 

(a) Financial Statements of Business Acquired

 

Audited Financial Statements of Grand Smooth Inc. Limited as of and for the year ended December 31, 2017 and 2016 (audited), and nine months period ended September 30, 2018 (unaudited), and the notes related thereto

 

(b) Pro-forma financial Information

 

Unaudited pro-forma financial statements of NOCERA, Inc. and the notes related thereto

 

(d) Exhibits

 

Exhibit No.   Description
     
2.1   Amended Agreement and Plan of Merger, dated December 27, 2018, and effective as of December 31, 2018, by and among NOCERA, Inc., Grand Smooth Inc. Limited and GSI Acquisition Corp.
     
3.1   Certificate of Incorporation of NOCERA, Inc., as amended .*
     
3.2   Bylaws of NOCERA, Inc .*
     
3.3   Articles of Incorporation of GSI Acquisition Corp., a Colorado Corporation
     
3.4   Articles of Grand Smooth, Inc. Limited, a Hong Kong, China Corporation
     
3.5   Statement of Merger – GSI Acquisition Corp. and Grand Smooth, Inc. Limited
     
10.1   Share Exchange Agreement
     
10.2   2018 Nocera, Inc. Stock Option and Award Incentive Plan
     
10.3   Yin-Chieh Cheng Consulting Agreement **
     
23.1  

Consent of Marcum Bernstein & Pinchuk LLP

 

 * Incorporated herein by reference from the exhibits included in the Company’s Registration Statement on Form 10-12g dated October 19, 2018.

 

**Incorporated herein by reference as Exhibit “B” to Exhibit 2.1 included in this Form 8K12g-3 filing dated January 31, 2019.

26  
 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

By: /s/ Kuan-Yin Cheng  
Name: Kuan-Yin Cheng  
Title: President & Chief Executive Officer  
     
Dated:  January 31, 2019  
27  
 

 

EXHIBIT INDEX

 

Copies of the following documents are included as exhibits to this Form 8-K12g3:

 

Exhibit No.   Description
     
2.1   Amended Agreement and Plan of Merger, dated December 27, 2018, and effective as of December 31, 2018, by and among NOCERA, Inc., Grand Smooth Inc. Limited and GSI Acquisition Corp.
     
3.1   Certificate of Incorporation of NOCERA, Inc., as amended .*
     
3.2   Bylaws of NOCERA, Inc .*
     
3.3   Articles of Incorporation of GSI Acquisition Corp., a Colorado Corporation
     
3.4   Articles of Grand Smooth, Inc. Limited, a Hong Kong, China Corporation
     
3.5   Statement of Merger – GSI Acquisition Corp. and Grand Smooth, Inc. Limited
     
10.1   Share Exchange Agreement
     
10.2   2018 Nocera, Inc. Stock Option and Award Incentive Plan
     
10.3   Yin-Chieh Cheng Consulting Agreement **
     
23.1  

Consent of Marcum Bernstein & Pinchuk LLP

 

  

* Incorporated herein by reference from the exhibits included in the Company’s Registration Statement on Form 10-12g dated October 19, 2018.

 

**Incorporated herein by reference as Exhibit “B” to Exhibit 2.1 included in this Form 8K12g-3 filing dated January 31, 2019.

 

 

  

 

 

28  
 

GRAND SMOOTH INC. LIMITED

 

CONSOLIDATED FINANCIAL STATEMENTS

 

CONTENTS

 

    Pages
Consolidated Financial Statements    
Report of independent registered public accounting firm   F-2
     
Consolidated Balance Sheets as of December 31, 2017 and, 2016   F-3
     
Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2017, and 2016   F-4
     
Consolidated Statements of Changes in Stockholders’ Equity for the year ended December 31, 2017, and 2016   F-5
     
Consolidated Statements of Cash Flows for the year ended December 31, 2017, and 2016   F-6
     
Notes to the Consolidated Financial Statements for the year ended December 31, 2017 and 2016   F-7

 

 

Unaudited Interim Condensed Consolidated Financial Statements
Unaudited Condensed Consolidated Balance Sheets as of nine-month period ended September 30, 2018 and 2017   F-15
     
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the nine-month period ended September 30, 2018 and 2017   F-16
     
Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity for the nine-month period ended September 30, 2018 and 2017   F-17
     
Unaudited Condensed Consolidated Statements of Cash Flows for the nine-month period ended September 30, 2018 and 2017   F-18
     
Notes to Unaudited Condensed Consolidated Financial Statements for the nine-month period ended September 30, 2018 and 2017   F-19
F- 1  
 

 

    

F- 2  
 

 

 

  GRAND SMOOTH lNC. LIMITED

CONSOLIDATED BALANCE SHEETS

(Amounts in US$, except shares)

 

 

    December 31, 2017   December 31, 2016
ASSETS                
Current assets                
Cash and cash equivalents   $ 1,432     $ —    
Advance to supplier     107,562       —    
Total assets   $ 108,994     $ —    
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT                
Liabilities     —         —    
Current liabilities     —         —    
Other payables and accrued liabilities     92       —    
Due to shareholders     113,128       3,000  
Total liabilities     113,220       3,000  
                 
Commitments and contingencies     —         —    
                 
Stockholders' deficit                
Common stock ($0.1 par value; Authorized 1 shares at December 31, 2017 and 2016, respectively)     —         —    
Accumulated deficit     (4,175 )     (3,000 )
Accumulated other comprehensive income (loss)     (8 )     —    
Total Grand Smooth Inc.’s stockholders’ deficit     (4,183 )     (3,000 )
Non-controlling interest     (43 )     —    
Total stockholders' deficit     (4,226 )     —    
                 
Total liabilities and stockholders' deficit   $ 108,994     $ —    

 

See notes to the consolidated financial statements.

 

 

F- 3  
 

 

 

GRAND SMOOTH INC LIMITED

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Amounts in US$, except shares)

 

 

    For the years ended December 31
    2017   2016
Revenue   $ —       $ —    
                 
Operating Expenses                
General and administrative expenses     (1,218 )     (1,000 )
                 
Net loss   $ (1,218 )   $ (1,000 )
Less: Net loss attributable to non-controlling interests     (43 )     —    
                 
Net loss attributable to Grand Smooth Inc. Limited   $ (1,175 )   $ (1,000 )
                 
Net loss   $ (1,218 )   $ (1,000 )
                 
Other comprehensive income                
Foreign currency translation adjustment     (8 )     —    
Total comprehensive loss   $ (1,226 )   $ (1,000 )
                 
Loss per share                
Basic   $ (1,218 )   $ (1,000 )
Diluted   $ (1,218 )   $ (1,000 )
                 
Weighted average number of common shares outstanding                
Basic     1       1  
Diluted     1       1  

 

See notes to the consolidated financial statements.

 

 

F- 4  
 

 

 

GRAND SMOOTH INC. LIMITED

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

(Amounts in US$, except shares)

                    Accumu-    
                    lated    
                    Other    
                    Compre-
hensive
  Total
    Ordinary Shares   Non-controlling   Accumulated   Income   Stockholders
    Shares *   Amount   Interest   Deficit   Loss   Deficit
                         
Balance, January 1, 2016     1     $ —       $ —       $ (2,000 )   $ —       $ (2,000 )
Net loss             —         —         (1,000 )     —         (1,000 )
Balance, December 31, 2016     1     $ —       $ —       $ (3,000 )   $ —       $ (3,000 )
Net loss attribute to non-controlling interest     —         —         (43 )     —         —         (43 )
Net loss     —         —         —         (1,175 )     —         (1,175 )
Foreign currency translation adjustment     —         —         —         —         (8 )     (8 )
Balance, December 31, 2017     1     $ —       $ (43 )   $ (4,175 )   $ (8 )   $ (4,226 )
                                                 

 

See notes to the consolidated financial statements

F- 5  
 

 

 

 

GRAND SMOOTH INC LIMITED

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in US$)

 

 

    For the year ended December 31
    2017   2016
Cash flows from operating activities                
Net loss   $ (1,218 )   $ (1,000 )
Changes in operating assets and liabilities:                
Advance to supplier     (103,867 )     —    
Other payables and accrued liabilities     89       —    
Net cash used in operating activities     (104,996 )     (1,000 )
                 
Cash flows from investing activities   $ —       $ —    
                 
Cash flows from financing activities                
Proceeds from shareholders     106,379       1,000  
Net Cash provided by financing activities     106,379       1,000  
                 
Effect of exchange rate fluctuation on cash and cash equivalents     49       —    
                 
Net increase in cash and cash equivalents     1,432       —    
Cash and cash equivalents at beginning of period     —         —    
Cash and cash equivalents at end of period   $ 1,432     $ —    
                 
Supplement disclosure of cash flow information:                
Interest expense paid   $ —       $ —    
Income taxes paid   $ —       $ —    
                 

 

See notes to the consolidated financial statements.

 

 

 

F- 6  
 

 

GRAND SMOOTH INC LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

Note 1 ORGANIZATION

 

Grand Smooth Inc. Limited (the “Company”), through its subsidiary and variable interest entity (“VIE”), is a producer of fish farming containers, which integrates sales, installments and maintenance of aquaculture equipment, provided in the People’s Republic of China (“PRC” or “China”).

 

Grand Smooth Inc. Limited is a limited company established under the laws and regulations of Hong Kong on August 1, 2014.

 

Gui Zhou Wan Feng Hu Intelligent Aquatic Technology Co. Limited (“GZ WFH” or “VIE”) was incorporated in PRC on October 25, 2017, and is engaged in providing fish farming containers service, which integrates sales, installments and maintenance of aquaculture equipment. The registered capital of GZ WFH is RMB$ 5,000,000 (equal to USD $733,138).

 

On November 13, 2018, the Company incorporated Gui Zhou Grand Smooth Technology Ltd. (“GZ GST” or “WFOE”) in PRC. And the registered capital of GZ GST is USD $15,000.

 

Reorganization

 

In anticipation of a reverse merger, the Company undertook a reorganization and became the ultimate holding company of WFOE and GZ WFH, which were all controlled by the same shareholders before and after the Reorganization. Details of the subsidiaries and VIE of the Company are set out below:

 

Name   Date of
Incorporation
  Place of
incorporation
  Percentage of
effective
ownership
 

Principal

Activities

Wholly owned subsidiary                
Gui Zhou Grand Smooth Technology Ltd. (“GZ GST” or “WFOE”)   November 13, 2018   PRC   100%   WFOE
Variable Interest Entity (“VIE”)
Gui Zhou Wan Feng Hu Intelligent Aquatic Technology Co. Limited (“GZ WFH”)   October 25, 2017   PRC   VIE   Provide fish farming containers  service, which integrates sales, installments and maintenance of aquaculture equipment

 

Effective on December 31, 2018, shareholders of GZ WFH and WFOE entered into a series of contractual agreements ("VIE Agreements" which are described below). As a result, the Company, through WFOE, has been determined to be the primary beneficiary of GZ WFH and GZ WFH became VIE of the Company. Accordingly, the Company consolidates GZ WFH's operations, assets and liabilities.

 

Immediately before and after reorganization completed on December 31, 2018 as describe above, the Company together with WFOE and its VIE were effectively controlled by the same shareholders; therefore, the reorganization was accounted for as a recapitalization. The accompanying consolidated financial statements have been prepared as if the current corporate structure has been in existence throughout the periods presented. The consolidation of the Company and its subsidiary and VIE has been accounted for at historical cost as of the beginning of the first period presented in the accompanying financial statements.

 

The VIE Agreements

 

The VIE structure was adopted mainly because the China operating company may in the future engage in business that may require special licenses in China and which can be an industry that prohibits foreign investment. WFOE has entered into the following contractual arrangements with shareholder of GZ WFH, that enable the Company to (1) have power to direct the activities that most significantly affects the economic performance of GZ WFH, and (2) receive the economic benefits of GZ WFH that could be significant to GZ WFH. The Company is fully and exclusively responsible for the management of GZ WFH, assumes all of risk of losses of GZ WFH and has the exclusive right to exercise all voting rights of GZ WFH’s shareholder. Therefore, in accordance with ASC 810 "Consolidation", the Company is considered the primary beneficiary of GZ WFH and has consolidated GZ WFH’s assets, liabilities, results of operations, and cash flows in the accompanying consolidated financial statements.

 

(1) Voting Rights Proxy Agreement & Power of Attorney. Mr. Zhang Bi, (Existing Shareholder) hereby irrevocably undertake that he authorize the WFOE or the individual then designated by the WFOE (“Attorney”) to exercise, on his behalf , the following rights available to them in their capacity as a shareholder of the GZ WFH under the then effective articles of association of the GZ WFH (collectively, “Powers”): (a) to propose the convening of, and attend, shareholders’ meetings in accordance with the articles of association of the GZ WFH on behalf of the

F- 7  
 

Existing Shareholder; (b) to exercise voting rights on behalf of the Existing Shareholder on all matters required to be deliberated and resolved by the shareholders’ meeting, including without limitation the appointment and election of the directors and other executives to be appointed and removed by the shareholders, of the GZ WFH the sale or transfer of all or part of the equity held by shareholders in the GZ WFH; (c) to exercise other shareholders’ voting rights under the articles of association of the GZ WFH (including any other shareholders’ voting rights stipulated upon an amendment to such articles of association); (d) other voting rights that shareholders shall enjoy under the PRC laws, as amended, revised, supplemented and re-enacted, no matter whether they take effect before or after the conclusion of this Agreement. The Existing Shareholders shall not revoke the authorization and entrustment accorded to the Attorney other than in the case where the WFOE gives the Existing Shareholders a written notice requesting the replacement of the Attorney, in which event the Existing Shareholders shall immediately appoint such other person as then designated by the WFOE to exercise the foregoing Powers and such new authorization and entrustment shall supersede, immediately upon its grant, the original authorization and entrustment.

 

(2) Exclusive Business Cooperation Agreement. The WFOE agrees to provide technical consulting and services including management consulting services, general and financial advisory service and various general and administrative service, for the specific content thereof (hereinafter referred to as the “Target Business”) to the GZ WFH as the technical consulting and service provider of the GZ WFH in accordance with the conditions set forth herein during the term of this Agreement. GZ WFH agrees to accept the technical consulting and services provided by the WFOE. GZ WFH further agrees that, without prior written consent of the WFOE, during the term of this Agreement, it shall not accept any technical consulting and services identical or similar to Target Business that are provided by any third party.

 

(3) Equity Pledge Agreement. Under the Equity Interest Pledge Agreement between the WOFE and Mr. Zhang Bi, the shareholder of GZ WFH, shareholder pledged all of his equity interests in GZ WFH to WFOE to guarantee the performance of GZ WFH’s obligations under the Exclusive Business Cooperation Agreement. Under the terms of the agreement, in the event that GZ WFH or shareholders breach their respective contractual obligations under the Exclusive Business Cooperation Agreement, WFOE, as pledgee, will be entitled to certain rights, including, but not limited to, the right to collect dividends generated by the pledged equity interests. Zhang Bi also agreed that upon occurrence of any event of default, as set forth in the Equity Interest Pledge Agreement, WFOE is entitled to claim indemnity.

 

(4) Exclusive Call Option Agreement. GZ WFH and its shareholder, Mr. Zhang Bi, have entered into an Exclusive Call Option Agreement with WFOE. Under the Exclusive Call Option Agreement, the GZ WFH shareholder irrevocably granted WFOE (or its designee) an exclusive option to purchase, to the extent permitted under PRC law, part or all of their equity interests in GZ WFH. According to the Exclusive Call Option Agreement, the purchase price shall be the minimum price permitted by applicable PRC Law at the time when such share transfer occurs.

Risks in relation to the VIE structure

The Company believes that the contractual arrangements with its VIE and their respective shareholder are in compliance with PRC laws and regulations and are legally enforceable. However, uncertainties in the PRC legal system could limit the Company’s ability to enforce the contractual arrangements. If the legal structure and contractual arrangements were found to be in violation of PRC laws and regulations, the PRC government could:

 

  revoke the business and operating licenses of the Company’s PRC subsidiary and VIE;

  discontinue or restrict the operations of any related-party transactions between the Company’s PRC subsidiary and VIE;

  limit the Company’s business expansion in China by way of entering into contractual arrangements;

  impose fines or other requirements with which the Company’s PRC subsidiary and VIE may not be able to comply;

  require the Company or the Company’s PRC subsidiary and VIE to restructure the relevant ownership structure or operations; or

  restrict or prohibit the Company’s use of the proceeds of the additional public offering to finance the Company’s business and operations in China.

The Company’s ability to conduct its private equity investment management business may be negatively affected if the PRC government were to carry out of any of the aforementioned actions. As a result, the Company may not be able to consolidate its VIE in its consolidated financial statements as it may lose the ability to exert effective control over the VIE and their respective shareholders and it may lose the ability to receive economic benefits from the VIE. The Company, however, does not believe such actions would result in the liquidation or dissolution of the Company, its PRC subsidiary and VIE.

The interests of the shareholders of VIE may diverge from that of the Company and that may potentially increase the risk that they would seek to act contrary to the contractual terms. The Company cannot assure that when conflicts of interest arise, shareholders of VIE will act in the best interests of the Company or that conflicts of interests will be resolved in the Company’s favor. Currently, the Company does not have existing arrangements to address potential conflicts of interest the shareholders of VIE may encounter in its capacity as beneficial owners and directors of VIE, on the one hand, and as beneficial owners and directors of the Company, on the other hand. The Company believes the shareholders of VIE will not act contrary to any of the contractual arrangements and the exclusive option agreements provide the Company with a mechanism to remove the current shareholders of VIE should they act to the detriment of the Company. The Company relies on certain current

F- 8  
 

shareholders of VIE to fulfill their fiduciary duties and abide by laws of the PRC and act in the best interest of the Company. If the Company cannot resolve any conflicts of interest or disputes between the Company and the shareholders of VIE, the Company would have to rely on legal proceedings, which could result in disruption of its business, and there is substantial uncertainty as to the outcome of any such legal proceedings.

Total assets and liabilities presented on the Company’s consolidated balance sheets and expense, net loss presented on Consolidated Statement of Operations and Comprehensive Loss as well as the cash flow from operating and financing activities presented on the Consolidated Statement of Cash Flows are substantially the financial position, operation and cash flow of the Company’s VIE GZ WFH. The following financial statements amounts and balances of the VIE were included in the accompanying consolidated financial statements as of December 31, 2017 and for the year ended December 31, 2017. Since VIE hasn’t established in 2016, thus no financial data for 2016.

    December 31, 2017
Cash and cash equivalent   $ 1,432  
Total assets   $ 108,994  
Total liabilities   $ 109,220  

 

    For the year ended December 31, 2017
Revenue   $ —    
Net loss   $ (218 )
Net cash used in operating activities   $ (218 )
Net cash provided by investing activities   $ —    
Net cash provided by financing activities   $ 105,379  

 

Note 2 GOING CONCERN

 

The Company has suffered recurring losses from operations and operating cash outflows. The Company has incurred a net loss of $1,218 and had operating cash outflow of $104,996 during the year ended December 31, 2017. As of December 31, 2017 the Company had accumulated deficit of $4,175. Working capital deficit (current liabilities less current assets) increased from $3,000 at December 31, 2016 to $4,226 at December 31, 2017.

 

These factors disclosed in these financial statements raise substantial doubt as to the Company’s ability to continue as a going concern. Management believes that it has developed a liquidity plan, as summarized below, that, if executed successfully, would enable to meet presently anticipated cash needs for at least the next 12 months after the date that the financial statements are issued and it has prepared the consolidated financial statements on a going concern basis.

 

a) The Company started its business operation in 2018 and is continuing to focus on its business development and ultimately to attain profitable operations. It received sales orders amounting to approximately $5.9 million, and it delivered the goods to customers continuously after September 30, 2018.
b) The Company will enhance operation efficiency to be cost-effective.

 

However, the Company continues to have ongoing obligations and it expects that it will require additional capital in order to execute its longer-term business plan. If the Company encounters unforeseen circumstances that place constraints on its capital resources, management will be required to take various measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing the Company’s business development activities, suspending the pursuit of its business plan, controlling overhead expenses and seeking to further dispose of non-core assets. Management cannot provide any assurance that we will raise additional capital if needed.

 

Note 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICY

 

Basic of Consolidation


The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”).

 

The consolidated financial statements included the financial statements of all subsidiary and VIE of the Company. All transactions and balances between the Company and its subsidiary and VIE have been eliminated upon consolidation.

 

Use of Estimates

 

The preparation of financial statements in conformity with US 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 revenue and expenses during the reporting period. Management makes these estimates using the best information available at the time the estimates are made; however actual results could differ from those estimates.

F- 9  
 

Fair Value Measurement

The Company applies ASC Topic 820, Fair Value Measurements and Disclosures which defines fair value, establishes a framework for measuring fair value and expands financial statement disclosure requirements for fair value measurements.

 

ASC Topic 820 defines fair value as the price that would be received from the sale of an asset or paid to transfer a liability (an exit price) on the measurement date in an orderly transaction between market participants in the principal or most advantageous market for the asset or liability.

ASC Topic 820 specifies a hierarchy of valuation techniques, which is based on whether the inputs into the valuation technique are observable or unobservable. The hierarchy is as follows:

Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.

Level 3 inputs to the valuation methodology are unobservable and significant to the fair value. Unobservable inputs are valuation technique inputs that reflect the Company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

Management of the Company is responsible for determining the assets acquired, liabilities assumed and intangibles identified as of the acquisition date and considered a number of factors including valuations from independent appraiser.

When available, the Company uses quoted market prices to determine the fair value of an asset or liability. If quoted market prices are not available, the Company measures fair value using valuation techniques that use, when possible, current market-based or independently sourced market parameters, such as interest rates and currency rates.

As of December 31, 2017 and 2016, there are no assets or liabilities that are measured and reported at fair value on a recurring basis.

 

Cash and Cash Equivalents

 

Cash and cash equivalents include all cash on hand and cash in bank with no restrictions. The balance of cash and cash equivalent as of December 31, 2017 and 2016 were $1,432 and nil, respectively.

 

Advance to Supplier

 

Advance to supplier represents the advanced amount due to the material suppliers. Management reviews its receivable balance each reporting period to determine if an allowance for doubtful accounts is required. An allowance for doubtful account is recorded in the period in which loss is determined to be probable based on assessment of specific evidence indicating doubtful collection, historical experience, account balance aging and prevailing economic conditions. Bad debts are written off against the allowance after all collection efforts have ceased.

 

Advance to supplier were $107,562 and $ nil as of December 31, 2017 and 2016, respectively. Based on management’s assessment, no allowance was deemed necessary as of December 31, 2017 and 2016.

 

Revenue Recognition

 

The Company has early adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606) and all subsequent ASUs that modified ASC 606 on January 1, 2017 and has elected to apply it retrospectively for the year ended December 31, 2016.

 

The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, the Company applies the following steps:

 

Ÿ Step 1: Identify the contract (s) with a customer

Ÿ Step 2: Identify the performance obligations in the contract

Ÿ Step 3: Determine the transaction price

Ÿ Step 4: Allocate the transaction prince to the performance obligation in the contract

Ÿ Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation

 

F- 10  
 

The Company considered revenue is recognized when (or as) the Company satisfies performance obligations by transferring a promised goods and provide maintenance service to a customer. Revenue is measured at the transaction price which is based on the amount of consideration that the Company expects to receive in exchange for transferring the promised goods and providing maintenance service to the customer. Contracts with customers are comprised of customer purchase orders, invoices and written contracts.

 

The Company does not have arrangements for returns from customers and does not have any future obligations directly or indirectly related to services resale by customers. The Company has no sales incentive programs.

 

Since the operation of the Company was started from March 2018, there is no revenue recognized for the year ended December 31 2017 and 2016.

 

Cost of Sales

 

Cost of sales consists primarily of material costs, labor costs, depreciation and related expenses, which are directly attributable to the production of product. Write-down of inventories to lower of cost or net realizable value is also recorded in cost of sales.

 

Income Taxes

 

The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates, applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

 

Uncertain Tax Positions

 

The Company accounts for uncertainty in income taxes using a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. Interest and penalties related to uncertain tax positions are recognized and recorded as necessary in the provision for income taxes. According to the PRC Tax Administration and Collection Law, the statute of limitations is three years if the underpayment of taxes is due to computational errors made by the taxpayer or the withholding agent. The statute of limitations is extended to five years under special circumstances, where the underpayment of taxes is more than RMB 100,000. In the case of transfer pricing issues, the statute of limitation is ten years. There is no statute of limitation in the case of tax evasion. There were no uncertain tax positions as of December 31, 2017 and 2016 and the Company does not believe that its unrecognized tax benefits will change over the next twelve months.

 

Comprehensive Loss

 

Comprehensive loss is comprised of the Company’s net loss and other comprehensive income or loss. The component of other comprehensive income or loss is consisted solely of foreign currency translation adjustments, net of the income tax effect.

 

Foreign Currency Translation and Transactions

 

The Company’s reporting currency is the U.S. dollar (“US$”). The functional currency of the Company’s subsidiary and the consolidated VIE is RMB. In the consolidated financial statements, the financial information of the Company’s subsidiary and the consolidated BIE has been translated into US$. Assets and liabilities are translated at the exchange rates on the balance sheet date, equity amounts are translated at historical exchange rates, except for changes in accumulated deficit during the year which is the result of income statement translation process, and revenue, expense, gains of losses are translated using the average exchange rate during the year. Translation adjustments are reported as foreign currency translation adjustments and are shown as a separate component of other comprehensive income or loss in the consolidated statements of changes in equity and comprehensive income (loss). The exchange rates as of December 31, 2017 and 2016 are 6.5079 and 6.9498, respectively. The annual average exchange rates for the year ended December 31, 2017 and 2016 are 6.7394 and 6.6541, respectively..

 

Loss per Share

 

Basic loss per share are computed by dividing net income attributable to holders of common shares by the weighted average number of common shares outstanding during the year. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common shares were exercised or converted into common shares. There is no dilutive effect.

 

Recent Accounting Developments

 

In August 2016, the FASB issued ASU No. 2016 15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, to provide guidance on the presentation and classification of certain cash receipts and cash payments on the statement of cash flows.

F- 11  
 

The guidance specifically addresses cash flow issues with the objective of reducing the diversity in practice. The guidance will be effective for the Company in fiscal year 2018, but early adoption is permitted. The Company is currently evaluating the impact of this new standard on its consolidated financial statements and related disclosures.

 

Other accounting pronouncements that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s consolidated financial statements upon adoption.

 

Note 4 TAXATION

 

The Company and its subsidiary, and the consolidated VIE file tax returns separately.

 

1) Value added tax (“VAT”)

 

Pursuant to the Provisional Regulation of the PRC on VAT and the related implementing rules, WOFE and the consolidated VIE services are subject to 3% because they are small-scale taxpayer of VAT.

 

2) Income tax

 

Hong Kong

 

Under the current laws of Hong Kong, the Company is subject to a corporate income tax rate of 16.5%. 

 

PRC

 

WFOE and the consolidated VIE established in the PRC are subject to the PRC statutory income tax rate of 25%, according to the PRC Enterprise Income Tax (“EIT”) law.

 

The components of the income tax provision are:

      For the year ended December 31,  
      2017       2016  
Current   $ —       $ —    
Deferred     —         —    
Total income tax provision   $ —       $ —    

 

The reconciliation of income taxes expenses computed at the PRC statutory tax rate applicable to income tax expense is as follows:

    For the year ended December 31,
    2017   2016
PRC income tax statutory rate     25.00 %     25.00 %
Impact of different tax rates in other jurisdictions     (6.99 %)     (8.50 %)
Changes in valuation allowance     (18.01 %)     (16.50 %)
Effective tax rate   $ —       $ —    

 

3) Deferred tax assets, net

 

The tax effects of temporary differences representing deferred income tax assets result principally from the following:

 

    December 31, 2017   December 31, 2016
Deferred tax assets                
Tax loss carried forward   $ 716     $ 495  
Total deferred tax assets, gross     716       495  
Valuation allowance     (716 )     (495 )
Total deferred tax assets, net     —         —    

 

As of December 31, 2017 and 2016, the Company had no operating loss carry-forwards.

 

Valuation allowance was provided against deferred tax assets in entities where it was determined, it was more likely than not that the benefits of the deferred tax assets will not be realized. The Company had deferred tax assets which generated from tax loss carry-forwards, which can be carried forward to offset future taxable income. The management determines it is more likely than not that part of deferred tax assets could not be utilized, so allowance was provided as of December 31, 2017 and 2016.

F- 12  
 

 

PRC Withholding Tax on Dividends

The current PRC Enterprise Income Tax Law imposes a 10% withholding income tax for dividends distributed by foreign invested enterprises to their immediate holding companies outside the PRC. A lower withholding tax rate will be applied if there is a tax treaty arrangement between the PRC and the jurisdiction of the foreign holding company. Distributions to holding companies in Hong Kong that satisfy certain requirements specified by PRC tax authorities, for example, will be subject to a 5% withholding tax rate.

As of December 31, 2017 and 2016, the Company had not recorded any withholding tax on the retained earnings of its foreign invested enterprises in the PRC, since the Company intends to reinvest its earnings to further expand its business in mainland China, and its foreign invested enterprises do not intend to declare dividends to their immediate foreign holding companies.

 

Note 5 RELATED PARTIES BALANCES AND TRANSACTIONS

 

Due to shareholders

 

The balance due to shareholders was as following:

 

    December 31, 2017   December 31, 2016
Mr. Zhang Bi (1)   $ 109,127     $ —    
Mr. Cheng Yin-Chieh (2)     4,000       3,000  
Total   $ 113,127     $ 3,000  
                 

Note:

 

(1) Mr. Zhang Bi is the chief executive officer of GZ WFH, and he holds 50% equity interest of GSI, the balance represented the advanced payment on behalf of the Company for material purchase.

 

(2) Mr. Cheng Yin-Chieh holds 50% equity interest of GSI, the balance represented the advanced payment on behalf of the Company for operation purpose.

 

Related party transactions

 

The details of the related party transactions were as follows:

 

    For the year ended December 31,
    2017   2016
Mr. Zhang Bi (1)   $ 105,379     $ -  
Mr. Cheng Yin-Chieh (1)     1,000       1,000  
                 

 

Note:

 

(1) The transactions represent the amount paid by Mr. Zhang Bi and Mr. Cheng Yin-Chieh on behalf of the Company for its daily operation.

 

Note 6 NON-CONTROLLING INTEREST

 

As of December 31, 2017, the Company recognized a non-controlling interest in the consolidated statements of operations and other comprehensive income (loss) to reflect the 19.7% economic interest in GZ WFH or VIE, that is attributable to the shareholders other than the Company. As of December 31, 2017, non-controlling interest related to the 19.7% equity interest in GZ WFH in the consolidated balance sheet was $43.

 

For the years ended December 31, 2017 and 2016, non-controlling interest related to GZ WFH in the consolidated statements of operations was loss of $43 and nil, respectively.

 

Note 7 COMMITMENTS & CONTINGENCIES

 

Operating leases commitments

 

There are no non-cancelable operating lease agreements as of December 31, 2017 and 2016.

 

F- 13  
 

 

Capital commitments

 

As of December 31, 2017 and 2016, the Company’s capital commitments contracted but not yet reflected in the consolidated financial statements were both $nil.

 

Contingencies

 

In the ordinary course of business, the Company may be subject to legal proceeding regarding contractual and employment relationships and a variety of other matters. The Company records contingent liabilities resulting from such claims, when a loss is assessed to be probable and the amount of the loss is reasonably estimable.

 

Note 8 SUBSEQUENT EVENT

 

The Company entered into an Agreement and Plan of Merger (“the Agreement”), which was amended with minor corrections, with (ⅰ) NOCERA, Inc., (“NOCERA”), (ii) the Company’s shareholders, Cheng Yin-Chieh and Zhangbi, (iii) GSI Acquisition Corp., a newly-formed wholly-owned subsidiary of NOCERA. Under the terms of the Agreement, our shareholders transferred all of the GSI Shares to Nocera in exchange for the issuance of 10,000,000 shares (the “Shares”) of Nocera’s common stock (the”Share Exchange”) with an effective date on December 31, 2018. As a result of the Share Exchange, NOCERA has 12,349,200 shares of common stock issued and outstanding following the Share Exchange. All administrative requirements of the Agreement, as amended, have been completed as of January 20, 2019.

 

As a result of the closing, the Company became a wholly-owned subsidiary of NOCERA. The share exchange transaction with the Company was treated as a reverse acquisition, with the Company as accounting acquirer and NOCERA, as the acquired party.

 

The Company has evaluated subsequent events through the issuance of the consolidated financial statements and no other subsequent event is identified that would have required adjustment or disclosure in the consolidated financial statements.

F- 14  
 

 

 

 

GRAND SMOOTH lNC. LIMITED

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in US$, except shares)

 

    September 30, 2018   December 31, 2017
    (Unaudited)    
ASSETS                
Current assets                
Cash and cash equivalents   $ 26,830     $ 1,432  
Inventory     1,823,550       —    
Advance to supplier     1,624       107,562  
Prepaid expenses and other assets     636,881       —    
Total current assets     2,488,885       108,994  
                 
Property and equipment, net     61,914       —    
Deferred tax assets, net     27,681       —    
Total assets   $ 2,578,480     $ 108,994  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
                 
Liabilities                
Current liabilities                
Accounts payable     248,865       —    
Advance from customers     1,598,017       —    
Other payables and accrued liabilities     38,043       92  
Due to shareholders     643,333       113,128  
Total liabilities     2,528,258       113,220  
                 
Commitments and contingencies     —         —    
                 
Stockholders' equity                
Common stock ($0.1 par value; Authorized 1 shares at September 30, 2018 and December 31, 2017, respectively)     —         —    
Additional paid in capital     145,941       —    
Accumulated deficit     (94,898 )     (4,175 )
Accumulated other comprehensive income (loss)     3,912       (8 )
Total Grand Smooth Inc.’s stockholders’ equity     54,955       (4,183 )
Non-controlling interest     (4,733 )     (43 )
Total stockholders' equity     50,222       (4,226 )
                 
Total liabilities and stockholders' equity   $ 2,578,480     $ 108,994  

 

 

See notes to the unaudited condensed consolidated financial statements.

 

 

F- 15  
 

 

 

 

GRAND SMOOTH INC LIMITED

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Amounts in US$, except shares)

 

    For the nine months ended September 30
    2018   2017
Revenue   $ —       $ —    
                 
Operating expenses                
General and administrative expenses   $ (124,628 )   $ (1,000 )
Total operating expenses     (124,628 )     (1,000 )
                 
Income tax benefit     29,183       —    
                 
Net loss     (95,445 )     (1,000 )
Less: Net loss attributable to non-controlling interests     (4,722 )     —    
                 
Net loss attributable to Grand Smooth Inc. Limited     (90,723 )     (1,000 )
                 
Net loss     (95,445 )     (1,000 )
                 
Other comprehensive income                
Foreign currency translation adjustment     3,920       —    
Total comprehensive loss   $ (91,525 )   $ (1,000 )
                 
Loss per share                
Basic   $ (95,445 )   $ (1,000 )
Diluted     (95,445 )     (1,000 )
                 
Weighted average number of common shares outstanding                
Basic     1       1  
Diluted     1       1  

 

 

See notes to the unaudited condensed consolidated financial statements.

 

 

F- 16  
 

 

 

 

GRAND SMOOTH INC LIMITED

UNAUDITED (except December 31, 2017 balances) CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Amounts in US$, except shares)

 

                        Accumu-
                        lated
                      Other
                Additional       Compre-
hensive
  Total
    Ordinary Shares   Non-controlling   Paid   Accumulated   Income   Stockholders’
    Shares *   Amount   Interest   In capital   Deficit   Loss   Equity
                         
Balance as of December 31, 2017     1     $ —       $ (43 )           $ (4,175 )   $ (8 )   $(4,226)
Net loss attribute to non-controlling interest     —         —         (4,722 )     —         —         —       (4,722)
Capital contribution     —         —         —         145,973       —         —       145,973
Purchase of non-controlling interest     —         —         32       (32 )     —         —       -
Net loss     —         —         —         —         (90,723 )     —       (90,723)
Foreign currency translation adjustment     —         —         —         —         —         3,920     3,920
Balance as of September 30, 2018     1     $ —       $ (4,733 )   $ 145,941     $ (94,898 )   $ 3,912     $50,222
                                                 

 

See notes to the unaudited condensed consolidated financial statements

F- 17  
 

 

 

GRAND SMOOTH INC LIMITED

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in US$)

 

    For nine months ended September 30
    2018   2017
Cash flows from operating activities                
Net loss   $ (95,445 )   $ (1,000 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Depreciation expenses     6,064       —    
Deferred income tax, net     (29,183 )     —    
Changes in operating assets and liabilities                
Prepaid expense and other assets     (671,448 )     —    
Inventory     (1,568,419 )     —    
Advance to supplier     109,117       —    
Advance from customer     1,684,750       —    
Other payables and accrued liabilities     40,014       —    
Net cash used in operating activities     (524,550 )     (1,000 )
                 
Cash flow from investing activities                
Purchase of property and equipment     (71,339 )     —    
Net cash used in investing activities     (71,339 )     —    
                 
Cash flows from financing activities                
Capital contribution of shareholders     145,973       —    
Repayment to shareholder     (112,414 )        
Proceeds from shareholders     552,295       1,000  
Net Cash provided by financing activities     585,854       1,000  
                 
Effect of exchange rate fluctuation on cash and cash equivalents     35,433       —    
                 
Net increase in cash and cash equivalents     25,398       —    
Cash and cash equivalents at beginning of period     1,432       —    
Cash and cash equivalents at end of period   $ 26,830     $ —    
                 
Supplement disclosure of cash flow information:                
Interest expense paid   $ —       $ —    
Income taxes paid   $ —       $ —    
                 
Supplement disclosure of non-cash operating activities:                
Purchase of inventory by accounts payable   $ 262,371     $ —    
Purchase of non-controlling interest by payable   $ 0.2     $ —    

 

 

See notes to the unaudited condensed consolidated financial statements.

 

F- 18  
 

 

GRAND SMOOTH INC LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

 

Note 1 ORGANIZATION

 

Grand Smooth Inc. Limited (the “Company”), through its subsidiary and variable interest entity (“VIE”), is a producer of fish farming containers, which integrates sales, installments and maintenance of aquaculture equipment, in the People’s Republic of China (“PRC” or “China”).

 

Grand Smooth Inc. Limited is a limited company established under the laws and regulations of Hong Kong on August 1, 2014.

 

Gui Zhou Wan Feng Hu Intelligent Aquatic Technology Co. Limited (“GZ WFH” or “VIE”) was incorporated in PRC on October 25, 2017, and is engaged in providing fish farming containers service, which integrates sales, installments and maintenance of aquaculture equipment. The registered capital of GZ WFH is RMB$ 5,000,000 (equal to USD $733,138).

 

On November 13, 2018, the Company incorporated Gui Zhou Grand Smooth Technology Ltd. (“GZ GST” or “WFOE”) in PRC. And the registered capital of GZ GST is USD $15,000.

 

Reorganization

 

In anticipation of a reverse merger, the Company undertook a reorganization and became the ultimate holding company of WFOE and GZ WFH, which were all controlled by the same shareholders before and after the Reorganization. Details of the subsidiaries and VIE of the Company are set out below:

 

Name   Date of
Incorporation
  Place of
incorporation
  Percentage of
effective
ownership
 

Principal

Activities

Wholly owned subsidiary                
Gui Zhou Grand Smooth Technology Ltd. (“GZ GST” or “WFOE”)   November 13, 2018   PRC   100%   WFOE
Variable Interest Entity (“VIE”)
Gui Zhou Wan Feng Hu Intelligent Aquatic Technology Co. Limited (“GZ WFH”)   October 25, 2017   PRC   VIE   Provide fish farming containers service, which integrates sales, installments and maintenance of aquaculture equipment

 

Effective on December 31, 2018, shareholders of GZ WFH and WFOE entered into a series of contractual agreements ("VIE Agreements" which are described below). As a result, the Company, through WFOE, has been determined to be the primary beneficiary of GZ WFH and GZ WFH became VIE of the Company. Accordingly, the Company consolidates GZ WFH's operations, assets and liabilities.

 

Immediatelybefore and after reorganization on December 31, 2018 as describe above, the Company together with WFOE and its VIE were effectively controlled by the same shareholders; therefore, the reorganization was accounted for as a recapitalization. The accompanying consolidated financial statements have been prepared as if the current corporate structure has been in existence throughout the periods presented. The consolidation of the Company and its subsidiary and VIE has been accounted for at historical cost as of the beginning of the first period presented in the accompanying financial statements.

 

The VIE Agreements

 

The VIE structure was adopted mainly because the China operating company may in the future engage in business that may require special licenses in China and which can be an industry that prohibits foreign investment. WFOE has entered into the following contractual arrangements with shareholders of GZ WFH, that enable the Company to (1) have power to direct the activities that most significantly affects the economic performance of GZ WFH, and (2) receive the economic benefits of GZ WFH that could be significant to GZ WFH. The Company is fully and exclusively responsible for the management of GZ WFH, assumes all of risk of losses of GZ WFH and has the exclusive right to exercise all voting rights of GZ WFH’s shareholder. Therefore, in accordance with ASC 810 "Consolidation", the Company is considered the primary beneficiary of GZ WFH and has consolidated GZ WFH’s assets, liabilities, results of operations, and cash flows in the accompanying consolidated financial statements.

 

(1) Voting Rights Proxy Agreement & Power of Attorney. Mr. Zhang Bi (“Existing Shareholder”) hereby irrevocably undertake that he authorize the WFOE or the individual then designated by the WFOE (“Attorney”) to exercise, on his behalf , the following rights available to them in their capacity as a shareholder of the GZ WFH under the then effective articles of association of the GZ WFH (collectively, “Powers”): (a) to

F- 19  
 

propose the convening of, and attend, shareholders’ meetings in accordance with the articles of association of the GZ WFH on behalf of the Existing Shareholder; (b) to exercise voting rights on behalf of the Existing Shareholder on all matters required to be deliberated and resolved by the shareholders’ meeting, including without limitation the appointment and election of the directors and other executives to be appointed and removed by the shareholders, of the GZ WFH, the sale or transfer of all or part of the equity held by shareholders in the GZ WFH; (c) to exercise other shareholders’ voting rights under the articles of association of the GZ WFH (including any other shareholders’ voting rights stipulated upon an amendment to such articles of association); (d) other voting rights that shareholders shall enjoy under the PRC laws, as amended, revised, supplemented and re-enacted, no matter whether they take effect before or after the conclusion of this Agreement. The Existing Shareholders shall not revoke the authorization and entrustment accorded to the Attorney other than in the case where the WFOE gives the Existing Shareholders a written notice requesting the replacement of the Attorney, in which event the Existing Shareholders shall immediately appoint such other person as then designated by the WFOE to exercise the foregoing Powers and such new authorization and entrustment shall supersede, immediately upon its grant, the original authorization and entrustment.

 

(2) Exclusive Business Cooperation Agreement. The WFOE agrees to provide technical consulting and services including management consulting services, general and financial advisory service and various general and administrative service, for the specific content thereof (hereinafter referred to as the “Target Business”) to the GZ WFH as the technical consulting and service provider of the GZ WFH in accordance with the conditions set forth herein during the term of this Agreement. GZ WFH agrees to accept the technical consulting and services provided by the WFOE. GZ WFH further agrees that, without prior written consent of the WFOE, during the term of this Agreement, it shall not accept any technical consulting and services identical or similar to Target Business that are provided by any third party.

 

(3) Equity Pledge Agreement. Under the Equity Interest Pledge Agreement between the WOFE and Mr. Zhang Bi, the shareholder of GZ WFH, shareholder pledged all of his equity interests in GZ WFH to WFOE to guarantee the performance of GZ WFH’s obligations under the Exclusive Business Cooperation Agreement. Under the terms of the agreement, in the event that GZ WFH or shareholder breach their respective contractual obligations under the Exclusive Business Cooperation Agreement, WFOE, as pledgee, will be entitled to certain rights, including, but not limited to, the right to collect dividends generated by the pledged equity interests. Shareholders also agreed that upon occurrence of any event of default, as set forth in the Equity Interest Pledge Agreement, WFOE is entitled to claim indemnity.

 

(4) Exclusive Call Option Agreement. GZ WFH and its shareholders, Mr. Zhang Bi , have entered into an Exclusive Call Option Agreement with WFOE. Under the Exclusive Call Option Agreement, the GZ WFH shareholders irrevocably granted WFOE (or its designee) an exclusive option to purchase, to the extent permitted under PRC law, part or all of their equity interests in GZ WFH. According to the Exclusive Call Option Agreement, the purchase price shall be the minimum price permitted by applicable PRC Law at the time when such share transfer occurs.

Risks in relation to the VIE structure

The Company believes that the contractual arrangements with its VIE and their respective shareholder are in compliance with PRC laws and regulations and are legally enforceable. However, uncertainties in the PRC legal system could limit the Company’s ability to enforce the contractual arrangements. If the legal structure and contractual arrangements were found to be in violation of PRC laws and regulations, the PRC government could:

 

  revoke the business and operating licenses of the Company’s PRC subsidiary and VIE;

  discontinue or restrict the operations of any related-party transactions between the Company’s PRC subsidiary and VIE;

  limit the Company’s business expansion in China by way of entering into contractual arrangements;

  impose fines or other requirements with which the Company’s PRC subsidiary and VIE may not be able to comply;

  require the Company or the Company’s PRC subsidiary and VIE to restructure the relevant ownership structure or operations; or

  restrict or prohibit the Company’s use of the proceeds of the additional public offering to finance the Company’s business and operations in China.

The Company’s ability to conduct its private equity investment management business may be negatively affected if the PRC government were to carry out of any of the aforementioned actions. As a result, the Company may not be able to consolidate its VIE in its consolidated financial statements as it may lose the ability to exert effective control over the VIE and their respective shareholders and it may lose the ability to receive economic benefits from the VIE. The Company, however, does not believe such actions would result in the liquidation or dissolution of the Company, its PRC subsidiary and VIE.

The interests of the shareholders of VIE may diverge from that of the Company and that may potentially increase the risk that they would seek to act contrary to the contractual terms. The Company cannot assure that when conflicts of interest arise, shareholders of VIE will act in the best interests of the Company or that conflicts of interests will be resolved in the Company’s favor. Currently, the Company does not have existing arrangements to address potential conflicts of interest the shareholders of VIE may encounter in its capacity as beneficial owners and directors of VIE, on the one hand, and as beneficial owners and directors of the Company, on the other hand. The Company believes the shareholders of VIE will not act contrary to any of the contractual arrangements and the exclusive option agreements provide the Company with

F- 20  
 

a mechanism to remove the current shareholders of VIE should they act to the detriment of the Company. The Company relies on certain current shareholders of VIE to fulfill their fiduciary duties and abide by laws of the PRC and act in the best interest of the Company. If the Company cannot resolve any conflicts of interest or disputes between the Company and the shareholders of VIE, the Company would have to rely on legal proceedings, which could result in disruption of its business, and there is substantial uncertainty as to the outcome of any such legal proceedings.

Total assets and liabilities presented on the Company’s consolidated balance sheets and expense, net loss presented on Consolidated Statement of Operations and Comprehensive Loss as well as the cash flow from operating and financing activities presented on the Consolidated Statement of Cash Flows are substantially the financial position, operation and cash flow of the Company’s VIE GZ WFH. The following financial statements amounts and balances of the VIE were included in the accompanying consolidated financial statements as of September 30, 2018 and for nine months ended September 30, 2018. Since VIE was set up in October 2017, thus no financial data as of September 30, 2017 and for nine months ended September 30, 2017.

    September 30, 2018
    (Unaudited)
Cash and cash equivalent   $ 26,830  
Total assets   $ 2,027,185  
Total liabilities   $ 1,971,963  

 

    For nine months ended September 30, 2018
    (Unaudited)
Revenue   $ —    
Net loss   $ (94,445 )
Net cash used in operating activities   $ (524,550 )
Net cash used in investing activities   $ (71,339 )
Net cash provided by financing activities   $ 584,854  

 

Note 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation and Consolidation

 

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”).

 

The consolidated financial statements included the financial statements of all subsidiary and VIE of the company. All transactions and balances between the Company and its subsidiaries and VIE have been eliminated upon consolidation.

 

Use of Estimates  

 

The preparation of financial statements in conformity with US 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 revenue and expenses during the reporting period. Management makes these estimates using the best information available at the time the estimates are made, however actual results could differ from those estimates.

 

Inventory

 

Inventories are stated at lower of cost or net realizable value. Cost is determined using the weighted average method. Inventories include raw materials, work in progress and finished goods. The variable production overhead is allocated to each unit of product on the basis of the actual use of the production facilities. The allocation of fixed production overhead to the costs of conversion is based on the normal capacity of the production facilities.

 

Where there is evidence that the utility of inventories, in their disposal in the ordinary course of business, will be less than cost, whether due to physical deterioration, obsolescence, changes in price levels, or other causes, the inventories are written down to net realizable value. There are no inventory wrote down as of September 30, 2018 and December 31, 2017.

 

Property and Equipment

 

Property and equipment are stated at cost less accumulated depreciation. Cost represents the purchase price of the asset and other costs incurred to bring the asset into its existing use. Maintenance, repairs and betterments, including replacement of minor items, are charged to expense; major additions to physical properties are capitalized.

 

Depreciation of property and equipment is provided using the straight-line method over their estimated useful lives, which are shown as follows.

F- 21  
 

 

  Useful life
Leasehold improvements Shorter of the remaining lease terms and estimated useful lives
Furniture and fixture 5 years
Equipment 3 years
Vehicle 5 years

 

Upon sale or disposal, the applicable amounts of asset cost and accumulated depreciation are removed from the accounts and the net amount less proceeds from disposal is charged or credited to income.

 

Impairment of Long-lived Assets

 

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may no longer be recoverable. When these events occur, the Company measures impairment by comparing the carrying value of the long-lived assets to the estimated undiscounted future cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flow is less than the carrying amount of the assets, the Company would recognize an impairment loss, which is the excess of carrying amount over the fair value of the assets, using the expected future discounted cash flows.

 

Commitments and Contingencies

 

I n the normal course of business, the Company is subject to contingencies, including legal proceedings and claims arising out of its business that relate to a wide range of matters, such as government investigations and tax matters. The Company recognizes a liability for such contingency if it determines it is probable that a loss has occurred and a reasonable estimate of the loss can be made. The Company may consider many factors in making these assessments including historical and the specific facts and circumstances of each matter.

 

Revenue Recognition

 

The Company has early adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606) and all subsequent ASUs that modified ASC 606 on January 1, 2017 and has elected to apply it retrospectively for the year ended December 31, 2016.

 

The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, the Company applies the following steps:

 

Ÿ Step 1: Identify the contract (s) with a customer

Ÿ Step 2: Identify the performance obligations in the contract

Ÿ Step 3: Determine the transaction price

Ÿ Step 4: Allocate the transaction prince to the performance obligation in the contract

Ÿ Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation

 

The Company considered revenue is recognized when (or as) the Company satisfies performance obligations by transferring a promised goods and provide maintenance service to a customer. Revenue is measured at the transaction price which is based on the amount of consideration that the Company expects to receive in exchange for transferring the promised goods and providing maintenance service to the customer. Contracts with customers are comprised of customer purchase orders, invoices and written contracts.

 

The Company does not have arrangements for returns from customers and does not have any future obligations directly or indirectly related to services resale by customers. The Company has no sales incentive programs.

 

Income Taxes

 

The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates, applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

 

Uncertain Tax Positions

 

The Company accounts for uncertainty in income taxes using a two-step approach to recognizing and measuring uncertain tax positions. The

F- 22  
 

first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. Interest and penalties related to uncertain tax positions are recognized and recorded as necessary in the provision for income taxes. According to the PRC Tax Administration and Collection Law, the statute of limitations is three years if the underpayment of taxes is due to computational errors made by the taxpayer or the withholding agent. The statute of limitations is extended to five years under special circumstances, where the underpayment of taxes is more than RMB 100,000. In the case of transfer pricing issues, the statute of limitation is ten years. There is no statute of limitation in the case of tax evasion. There were no uncertain tax positions as of September 30, 2018 and December 31, 2017 and the Company does not believe that its unrecognized tax benefits will change over the next twelve months.

 

Comprehensive Loss

 

Comprehensive loss is comprised of the Company’s net loss and other comprehensive income or loss. The component of other comprehensive income or loss is consisted solely of foreign currency translation adjustments, net of the income tax effect.

 

Foreign Currency Translation and Transactions

 

The Company’s reporting currency is the U.S. dollar (“US$”). The functional currency of the Company’s subsidiary and the consolidated VIE is RMB. In the consolidated financial statements, the financial information of the Company’s subsidiary and the consolidated VIE has been translated into US$. Assets and liabilities are translated at the exchange rates on the balance sheet date, equity amounts are translated at historical exchange rates, except for changes in accumulated deficit during the year which is the result of income statement translation process, and revenue, expense, gains of losses are translated using the average exchange rate during the year. Translation adjustments are reported as foreign currency translation adjustments and are shown as a separate component of other comprehensive income or loss in the consolidated statements of changes in equity and comprehensive income (loss). The exchange rates as of September 30, 2018 and December 31, 2017 is 6.8957 and 6.5079, respectively. The average exchange rates for the nine months ended September 30, 2018 and 2017 is 6.5407 and 6.7920, respectively.

 

Loss per Share

 

Basic loss per share are computed by dividing net loss attributable to holders of common shares by the weighted average number of common shares outstanding during the year. Diluted loss per share reflects the potential dilution that could occur if securities or other contracts to issue common shares were exercised or converted into common shares. There is no dilutive effect.

 

Recent Accounting Developments

 

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The guidance supersedes existing guidance on accounting for leases with the main difference being that operating leases are to be recorded in the statement of financial position as right-of-use assets and lease liabilities, initially measured at the present value of the lease payments. For operating leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election not to recognize lease assets and liabilities. For public business entities, the guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application of the guidance is permitted. In transition, entities are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. In July 2018, the FASB issued ASU No. 2018-10 and No. 2018-11, Leases (ASC 842). ASU 2018-10 provides narrow amendments that clarify how to apply certain aspects of the guidance in ASU 2016-02. ASU 2018-11 provides entities with an option of an additional transition method, by allowing entities to initially apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption It also provides lessors an option to not separate lease and non-lease components when certain criteria are met. The Company is in the process of evaluating the impact that this guidance will have on its consolidated financial statements.

 

In August 2016, the FASB issued ASU No. 2016 15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, to provide guidance on the presentation and classification of certain cash receipts and cash payments on the statement of cash flows. The guidance specifically addresses cash flow issues with the objective of reducing the diversity in practice. The guidance will be effective for the Company in fiscal year 2018, but early adoption is permitted. The Company is currently evaluating the impact of this new standard on its consolidated financial statements and related disclosures.

 

Other accounting pronouncements that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s consolidated financial statements upon adoption.

 

F- 23  
 

 

Note 4 PREPAID EXPENSES AND OTHER ASSETS

    September 30, 2018   December 31, 2017
    Unaudited    
Prepaid sponsor fee (1)   $ 551,295     $ —    
VAT prepayment     54,516       —    
Other receivables from third party (2)     15,458          
Prepaid rent expense     4,593       —    
Others     11,019       —    
Total   $ 636,881     $ —    

 

(1) The balance as of September 30, 2018 represented the sponsor fee prepaid to Cosmos Innovation Co., Ltd, which held a concert in Taiwan in November 2018, to enhance the popularity of the Company.

(2) The balance as of September 30, 2018 comprised of the unsecured and no interest loan provided to Shenzhen Zhongji Intelligent Technology Co., Ltd.

 

Note 5 PROPERTY AND EQUIPMENT, NET

 

As of September 30, 2018 and December 31, 2017, property and equipment consisted of the following:

 

    September 30, 2018   December 31, 2017
    (Unaudited)    
Furniture and fixtures   $ 3,767     $ —    
Equipment     12,525       —    
Leasehold improvement     9,996       —    
Vehicle     41,378       —    
Total property and equipment     67,666       —    
Accumulated depreciation     (5,752 )     —    
Property and equipment, net   $ 61,914     $ —    

 

Depreciation expense for nine months ended September 30, 2018 and 2017 were $6,064 and nil, respectively.

 

Note 6 INVENTORY

 

As of September 30, 2018 and December 31, 2017, inventory consisted of the following:

 

    September 30, 2018   December 31, 2017
    (Unaudited)    
Raw materials   $ 123,845     $ —    
Work in progress     1,529,234       —    
Finished goods     170,470       —    
Total   $ 1,823,549     $ —    

 

Note 7 OTHER PAYABLES AND ACCURED LIABILITY

 

    September 30, 2018   December 31, 2017
    (Unaudited)    
Salary payable   $ 37,807     $ 92  
Other tax payable     238       —    
Total   $ 38,044     $ 92  

 

Note 8 TAXATION

 

The Company and its subsidiary, and the consolidated VIE file tax returns separately.

 

1) Value added tax (“VAT”)

 

Pursuant to the Provisional Regulation of the PRC on VAT and the related implementing rules, GZ WFH is subject to 17% since March 2018 because it has obtained the certificate of general taxpayer of VAT, and it subject to 16% since May 2018 because of tax reform. Grand Smooth Technology is subject to 3% because it is a small-scale taxpayer of VAT.

F- 24  
 

 

2) Income tax

 

Hong Kong

 

Under the current laws of Hong Kong, the Company is subject to a corporate income tax rate of 16.5%. 

 

PRC

 

WOFE and the consolidated VIE established in the PRC are subject to the PRC statutory income tax rate of 25%, according to the PRC Enterprise Income Tax (“EIT”) law.

 

The components of the income tax benefit are: 

    For nine months ended September 30,
    2018   2017
    (Unaudited)   (Unaudited)
Current   $ —       $ —    
Deferred     (29,183 )     —    
Total income tax benefit   $ (29,183 )   $ —    

 

The reconciliation of income taxes expenses computed at the PRC statutory tax rate applicable to income tax expense is as follows: 

    For nine months ended September 30,
    2018   2017
    (Unaudited)   (Unaudited)
PRC income tax statutory rate     25.00 %     25.00 %
Tax effect of non-deductible entertainment     (1.38 %)     (8.50 %)
Tax effect of different tax rates in other jurisdictions     (0.07 %)     —    
Changes in valuation allowance     (0.13 %)     (16.50 %)
Effective tax rate   $ 23.42 %   $ —    

 

3) Deferred tax assets, net

 

The tax effects of temporary differences representing deferred income tax assets result principally from the following:

 

    September 30, 2018   December 31, 2017
      (Unaudited)          
Deferred tax assets                
Advance from customer   $ 245,882     $ —    
Tax loss carried forward     104,466       716  
Total deferred tax assets, gross     350,348       716  
Valuation allowance     (878 )     (716 )
Total deferred tax assets, net     349,470       —    
                 
Deferred tax liabilities                
Inventory     (306,311 )     —    
P roperty and equipment, difference in depreciation     (15,478 )     —    
Total deferred tax liabilities     (321,789 )     —    
              —    
Deferred tax asset, net   $ 27,681       —    
                 

As of September 30, 2018, the Company had operating loss carry-forwards in PRC of $414,349 that expire through December 31, 2022.

 

Valuation allowance was provided against deferred tax assets in entities where it was determined, it was more likely than not that the benefits of the deferred tax assets will not be realized. The Company had deferred tax assets which generated from tax loss carry-forwards, which can be carried forward to offset future taxable income. The management determines the tax loss generated before 2018 is more likely than not that part of deferred tax assets could not be utilized, so allowance was provided as of September 30, 2018 and December 31, 2017.

 

F- 25  
 

 

PRC Withholding Tax on Dividends

The current PRC Enterprise Income Tax Law imposes a 10% withholding income tax for dividends distributed by foreign invested enterprises to their immediate holding companies outside the PRC. A lower withholding tax rate will be applied if there is a tax treaty arrangement between the PRC and the jurisdiction of the foreign holding company. Distributions to holding companies in Hong Kong that satisfy certain requirements specified by PRC tax authorities, for example, will be subject to a 5% withholding tax rate.

As of September 30, 2018 and December 31, 2017, the Company had not recorded any withholding tax on the retained earnings of its foreign invested enterprises in the PRC, since the Company intends to reinvest its earnings to further expand its business in mainland China, and its foreign invested enterprises do not intend to declare dividends to their immediate foreign holding companies.

 

Note 9 RELATED PARTIES BALANCES AND TRANSACTIONS

 

Due to shareholders

 

The balance due to shareholders was as following:

    September 30, 2018   December 31, 2017
      (Unaudited)          
Mr. Zhang Bi (1)   $ 87,038     $ 109,127  
Mr. Cheng Yin-Chieh (2)     556,295       4,000  
Total   $ 643,333     $ 113,127  
                 

Note:

 

(1) Mr. Zhang Bi is the chief executive officer of GZ WFH, and he holds 50% equity interest of GSI, the balance represented the advanced payment on behalf of the Company for material purchase.

 

(2) Mr. Zhang Bi holds 50% e quity interest of GSI, the balance represented the advanced payment on behalf of the Company for operation purpose.

 

Related party transactions

 

The details of the related party transactions were as follows:

 

    For nine months ended September 30,
    2018   2017
    (Unaudited)   (Unaudited)
Mr. Zhang Bi (1)   $ 168,178     $ —    
Mr. Cheng Yin-Chieh (2)     552,295       1,000  

 

Note:

 

(1) The transaction represent the inventory purchased by company from Mr. Zhang Bi with a fair price.

(2) The transactions r epresent the amount paid by Mr. Cheng Yin-Chieh on behalf of the Company for its daily operation.

 

Note 10 NON-CONTROLLING INTEREST

 

As of September 30, 2018, the Company recognized a non-controlling interest in the consolidated statements of operations and other comprehensive income (loss) to reflect the 5% economic interest in GZ WFH or VIE, that is attributable to the shareholders other than the Company.

 

During the nine month ended September 31, 2018, the 14.7% economic interest in GZ WFH or VIE was derecognized because the minority shareholder sold his non-controlling interests to the Company. The total consideration for buy-out such non-controlling interests was RMB 1 and the difference between the consideration and the carrying amount of non-controlling interest derecognized was recorded as an adjustment to additional paid-in capital.

 

As of September 30, 2018 and December 31, 2017, non-controlling interest related to the 5% and 19.7% equity interest in GZ WFH in the consolidated balance sheet was $4,733 and $43, respectively.

 

F- 26  
 

For the nine months ended September 30, 2018 and 2017, non-controlling interest related to GZ WFH in the consolidated statements of operations was loss of $4,722 and nil, respectively.

 

Note 11 ADDITIONAL PAID-IN CAPITAL

 

As of September 30, 2018, additional paid-in capital in the consolidated balance sheet represented the combined contribution capital of the Company’s VIE. One shareholder of the Company made capital contribution of $145,940 to GZ WFH during the nine months ended September 30, 2018.

 

Note 12 COMMITMENTS & CONTINGENCIES

 

Operating leases commitments

 

Minimum future commitments under non-cancelable operating lease agreements as of September 30, 2018 are follows:

 

Years ended December 31,   Lease Commitment
Remaining 2018 $ -
2019   -
2020   1,934
2021   2,900
2022 and thereafter   18,369
Total $ 23,203

 

Rent and property management expense was $1,019 and nil for the nine months ended September 30, 2018 and 2017, respectively.

 

Capital commitments

 

As of September 30, 2018 and December 31, 2017, the Company’s capital commitments contracted but not yet reflected in the consolidated financial statements amounted to $nil.

 

Contingencies

 

In the ordinary course of business, the Company may be subject to legal proceeding regarding contractual and employment relationships and a variety of other matters. The Company records contingent liabilities resulting from such claims, when a loss is assessed to be probable and the amount of the loss is reasonably estimable.

 

Note 13 SUBSEQUENT EVENT

 

The Company entered into an Agreement and Plan of Merger (“the Agreement”), which was amended with minor corrections, with (i) NOCERA, Inc., (“NOCERA”), (ii) the Company’s shareholders, Cheng Yin-Chieh and Zhangbi, (iii) GSI Acquisition Corp., a newly-formed wholly-owned subsidiary of NOCERA. Under the terms of the Agreement, our shareholders transferred all of the GSI Shares to Nocera in exchange for the issuance of 10,000,000 shares (the “Shares”) of Nocera’s common stock (the”Share Exchange”) with an effective date on December 31, 2018. As a result of the Share Exchange, NOCERA had 12,349,200 shares of common stock issued and outstanding following the Share Exchange. All administrative requirements of the Agreement, as amended, have been completed as of January 20, 2019.

 

As a result of the closing, the Company became a wholly-owned subsidiary of NOCERA. The share exchange transaction with the Company was treated as a reverse acquisition, with the Company as accounting acquirer and NOCERA, as the acquired party.

 

The Company has evaluated subsequent events through the issuance of the consolidated financial statements and no other subsequent event is identified that would have required adjustment or disclosure in the consolidated financial statements.

 

 

 

F- 27  
 

 

 

Pro Forma Condensed Consolidated Financial Statements

 

The following unaudited pro forma condensed consolidated financial statements has been derived from the consolidated financial statements of Grand Smooth Inc. Limited (“GSI”) as of September 30, 2018 (unaudited) and for nine months ended September 30, 2018, and for the years ended December 31, 2017 and adjusts such information to give the effect of the acquisition of the company by NOCERA, Inc. (“Nocera”). The consolidated financial statements reflect all predecessor statements of operations and include the accounts of GSI and its subsidiaries. GSI (and its historical financial statements) is the continuing entity for financial reporting purposes.

 

The following unaudited pro forma combined balance sheet represents the combined financial position of GSI and its subsidiaries as of September 30, 2018, as if the reverse acquisition occurred on September 30, 2018. The unaudited pro forma loss per share present the accounts of Nocera and GSI including its subsidiaries, for the nine months ended September 30, 2018, and for the years ended December 31, 2017, as if the reverse acquisition occurred on January 1, 2017, for the purpose of the statements of operations, respectively.

 

The unaudited pro forma combined financial information is presented for illustrative purposes only and is not necessarily indicative of the operating results that would have been achieved if the reverse acquisition of GSI had been consummated as of the beginning of the period indicated, nor is necessarily indicative of the resulted of future operations.

 

 

F- 28  
 

 

 

PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

(Unaudited)

 

    Grand Smooth
Inc. Limited
  NOCERA, Inc.        
    September 30, 2018   September 30, 2018   Adjustments   Pro-forma
    (US $)   (US $)        
    (Unaudited)   (Unaudited)        
ASSETS                                
Current assets:                                
Cash and cash equivalents   $ 26,830     $ 10,483     $ —       $ 37,313  
Inventory     1,823,550       —         —         1,823,550  
Advance to supplier     1,624       —                 1,624  
Prepaid expenses and other assets     636,881       —         —         636,881  
Total current assets     2,488,885       10,483               2,499,368  
                                 
Plant and equipment, net     61,914       —         —         61,914-  
Deferred tax assets     27,681       —         —         27,681  
Total assets   $ 2,578,480     $ 10,483     $ —       $ 2,588,963  
                                 
LIABILITIES AND SHAREHOLDER’S EQUITY                                
Liabilities                                
Current Liabilities:                                
Accounts payable   $ 248,865     $ —       $ —       $ 248,865  
Other payables and accrued liabilities     38,043       —                 38,043  
Advance from customer     1,598,017       —         —         1,598,017  
Convertible note -     —         1,802               1,802  
Due to shareholders     643,333       11,029       —         654,362  
Total Liabilities     2,528,258       12,831       —         2,541,089  
                                 
Stockholders’ equity                                
Common stock     —         2,349       10,000       12,349  
Additional paid in capital     145,941       1,083,507       (1,098,204 )     131,244  
Accumulated deficit     (94,898 )     (1,088,204 )     1,088,204       (94,898 )
Accumulated other comprehensive income     3,912       —                 3,912  
Total stockholders’ equity     54,955       (2,348 )     —         52,607  
Non-controlling interest     (4,733 )     —         —         (4,733 )
Total shareholder’s equity     50,222       (2,348 )             47,874  
Total liabilities and stockholders’ equity   $ 2,578,480     $ 10,483     $ —       $ 2,588,963  

 

 

See notes to pro-forma combined financial statements.

 

 

F- 29  
 

 

 

 

PRO FORMA LOSS PER SHARE (UNAUDITED)

 

    Consolidated   Pro-forma
    December 31, 2017   Nine Months ended
September 30, 2018
    (Audited)   (unaudited)
Net loss   $ (6,317 )   $ (124,903 )
Other comprehensive loss                
Foreign currency translation (loss )gain     (8 )     3,920  
Comprehensive loss   $ (6,325 )     (120,983 )
                 
Net loss per Share Basic and diluted     0.003       0.010  
Weighted average shares outstanding Basic and diluted     2,199,200       12,349,200  

 

 

See notes to pro forma combined financial statements.

 

 

F- 30  
 

 

 

 

Unaudited Notes to Pro Forma Condensed Consolidated Financial Statements

 

On December 27, 2018 (the “Effective Date”), NOCERA, Inc., (the “Registrant”, the “Company”, “we”, “us”, “our”) entered into an Agreement and Plan of Merger (the ”Merger Agreement”) which was amended thereafter, with (ⅰ) Grand Smooth Inc. Limited, a company organized under the laws of Hong Kong, China (“GSI”), and (ii) GSI’s shareholders, Cheng Yin-Chieh and Zhang Bi, who together owned shares constituting 100% of the issued and outstanding ordinary shares of GSI (the ”GSI Shares”) . Pursuant to the terms of the Merger Agreement, the GSI Shareholders transferred to us all of the GSI Shares in exchange for the issuance of 10,000,000 shares (the “Shares”) of our common stock (the “Share Exchange”). As a result of the Merger, effective December 31, 2018, we are engaged in aquaculture consulting and management business, in the People’s Republic of China.

 

As a result of the Share Exchange, Nocera had 12,349,200 shares of common stock issued and outstanding following the Share Exchange.

  

As a result of the transactions described above, we became the record and beneficial owner of 100% of the share capital of Grand Smooth Inc. Limited and therefore own 100% of the share capital of its subsidiaries indirectly.

 

As of September 30, 2018, we have common stock, $0.001 par value; 200,000,000 shares authorized; 2,349,200 shares issued and outstanding. As a result of the share exchange, we will have 200,000,000 shares of common stock authorized, 12,349,200 shares of common stock issued and outstanding.

 

Pursuant to the terms of the Exchange Agreement, Grand Smooth Inc. Limited’s officers and directors were appointed as our officers and directors, and Erik Nelson resigned as our President, CEO and sole director. However, the change in our board of directors will not be effective until 10 days after the mailing of a Schedule 14F Information Statement to our shareholders, which we expect to do promptly after the closing of the Share Exchange.

 

The transaction was account for a reverse acquisition whereby Grand Smooth Inc. Limited was considered to be the accounting acquirer as it retained control of NOCERA after the Share Exchange.

 

Grand Smooth Inc. Limited was incorporated in Hong Kong, China on August 1, 2018. On December 31, 2018, Grand Smooth Inc. Limited became the parent holding company of a group of companies comprised of Gui Zhou Grand Smooth Technology Ltd., a wholly foreign owned enterprise established in the People’s Republic of China company, which established and is the parent company of Gui Zhou Wan Feng Hu GZ WFH Company Limited, a Variable Interest Entity in China.

 

Assumptions and Adjustment:

 

(A) Elimination of NOCERA’s capital accounts and accumulated deficit as result of recapitalization. In addition, reflects payments of all liabilities of NOCERA prior to the closing of the Share Exchange.
F- 31  

 

EXHIBIT 2.1

AMENDED AGREEMENT AND PLAN OF MERGER

(AMENDMENT NO. 1)

This Agreement and Plan of Merger (“ Agreement ”) is made and entered into as of December 27, 2018 with an effective date of December 31, 2018 (the “ Effective Date ”), by and among Nocera, Inc., a Nevada corporation, with its principal office at 2030 Powers Ferry Road SE, Suite # 212, Atlanta, GA. 30339 (“ NOCERA ”), Grand Smooth Inc Limited., a Hong Kong corporation (“GSI”), with its principal office at Flat B, 6 th Floor, Teda Building, 87 th Wing Lok Street, Sheung Wan, Hong Kong (“ GSI ”), and GSI Acquisition Corp., a newly-formed wholly-owned subsidiary of NOCERA, domiciled in Colorado (“ Acquisition Sub ”). Each of NOCERA, GSI and Acquisition Sub is referred to herein individually as a “ Party ,” or collectively as the “ Parties .”

RECITALS

A.       NOCERA and GSI intend to effect a merger, pursuant to which Acquisition Sub will merge with and into GSI and GSI will survive, as a result of which the entire issued share capital of GSI (the “ GSI Shares”) will be deemed for all purposes to represent shares of common stock of NOCERA upon the terms and subject to the conditions set forth in this Agreement.

B.        The Parties intend that the Merger contemplated by this Agreement will qualify as a tax-free reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder (the “ Tax Code ”).

NOW, THEREFORE, in consideration of the foregoing and the representations, warranties and mutual covenants herein made, the parties hereby agree to the foregoing and as follows:

Section 1.                Definitions. Capitalized terms not otherwise defined herein have the meanings set forth in the attached Schedule 1 .

Section 2.                The Merger.

(a)                Effecting the Merger . Upon the terms and subject to the conditions contained in this Agreement, at the Effective Time (as hereinafter defined), (i) Acquisition Sub shall be merged with and into GSI (the “ Merger ”); (ii) the separate corporate existence of Acquisition Sub shall thereupon cease and GSI will continue as the surviving corporation in the Merger and wholly-owned subsidiary of NOCERA (sometimes referred to herein as the “Surviving Subsidiary”), (iii) all the properties, rights and privileges, and power of GSI, shall vest in the Surviving Subsidiary, and all debts, liabilities and duties of GSI shall become the debts, liabilities and duties of the Surviving Subsidiary, and (iv) each share of common stock of Acquisition Sub issued and outstanding immediately prior to the Effective Time will be converted into and exchange for one validly issued, fully paid and non-assessable share of the Surviving Subsidiary’s common stock.

(b)                Effect on Capital Stock .

Conversion of GSI Shares . At the Effective Time, each GSI Share issued and outstanding on the Closing Date (as defined in Section 3, below) shall, by virtue of the Merger and without any action on the part of GSI, NOCERA, Acquisition Sub, or the holders of the GSI Shares as of the Closing Date (the “ Original Holders ”), be converted into and will become one share of

1  
 

validly issued, fully paid and non-assessable common stock of NOCERA (the “ Share Ratio ”) such that the Original Holders will be issued a total of 10,000,000 shares of NOCERA (the “ NOCERA Common Stock ”) following the conversion. All shares of NOCERA Common Stock issued upon the surrender for exchange of GSI Shares in accordance with the terms hereof shall (i) contain a restricted securities legend in compliance with the Securities Act and (ii) be deemed to have been issued in full satisfaction of all rights pertaining to such GSI Shares. There shall be no further registration of transfers on the stock transfer books of GSI of the GSI Shares that were outstanding immediately prior to the Effective Time.

Fractional Shares. No fractional shares will be issued in connection with the conversion of GSI Shares into NOCERA Common Stock, and any right to receive a fractional share will be rounded-up to the nearest whole share.

Cancellation of GSI Shares . At the Effective Time, the GSI Shares will be deemed canceled and retired and will cease to exist, and each holder of a certificate for GSI Shares will cease to have any rights with respect thereto; provided , however , that, following the Closing Date, upon surrender of an original stock certificate representing GSI Shares, NOCERA will deliver a stock certificate for shares of NOCERA Common Stock to which such person is entitled pursuant to the Share Ratio, bearing any necessary or appropriate restrictive legend. The effect of the Merger shall be as provided in the applicable provisions of Nevada Law.

Lost, Stolen or Destroyed Certificates . If any certificate evidencing GSI Shares shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate to be lost, stolen or destroyed and, if required by NOCERA, the posting of an indemnity bond, in such reasonable amount as NOCERA or the transfer agent may direct, as collateral security against any claim that may be made with respect to the certificate, NOCERA will issue in exchange for the lost, stolen or destroyed certificate the applicable number of shares of NOCERA Common Stock.

At the Effective Time, each share of common stock of Acquisition Sub (“ Acquisition Sub Stock ”) issued and outstanding immediately prior to the Effective Time shall be converted into and exchanged for one validly issued, fully paid, nonassessable share of common stock of the Surviving Subsidiary. Each stock certificate evidencing ownership of any shares of Acquisition Sub Stock shall, at the Effective Time, evidence ownership of such shares of capital stock of the Surviving Subsidiary.

(c)                Reorganization . The Parties intend to adopt this Agreement and the Merger as a plan of reorganization under Section 368(a) of the Tax Code. The shares of NOCERA Common Stock issued in the Merger will be issued solely in exchange for GSI Shares, and no other transaction other than the Merger represents, provides for or is intended to be an adjustment to the consideration paid for the GSI Shares. No consideration that could constitute “other property” within the meaning of Section 356(b) of the Tax Code is being transferred by NOCERA for GSI Shares in the Merger. The parties shall not take a position on any tax return inconsistent with this Section 2(c).

(d)                Further Actions . If at any time after the Effective Time, NOCERA or GSI reasonably determines that any deeds, assignments, or instruments, or conformations of transfer are necessary or desirable to carry out the purposes of this Agreement, the officers and directors of NOCERA and GSI are fully authorized in the name of their respective corporations or otherwise to take, and will take, all such lawful and necessary or desirable actions.

2  
 

(e)             Lock-up Shares . The shares of NOCERA Common Stock issued to the GSI Inside Shareholders (as defined below) shall be locked up for twelve (12) months after the Closing Date pursuant to the terms of the lock-up agreement which shall be substantially in the form of Exhibit A attached hereto (“ Lock-Up Agreement ”). Such Lock-Up Agreement shall provide that the GSI Inside Shareholders may sell twenty-five percent (25%) of the shares of NOCERA Common Stock after six (6) months from the Closing Date and and seventy-five percent (75%) of the shares of NOCERA Common Stock after twenty four (24) months from the Closing Date. “GSI Inside Shareholders” shall be defined as GSI’s officers, directors, employees, five percent (5%) shareholders and any affiliates of each of those parties.

(f)                 Employment Agreement . GSI shall take all actions necessary or appropriate to execute and deliver to NOCERA and Jeff Cheng contemporaneously with the Closing an employment agreement which shall be substantially in the form of Exhibit B attached hereto (“ Employment Agreement ”).

(g)             Piggy-Back Registration Rights .

 

(i)                  In the event NOCERA proposes to file a registration statement with the SEC pursuant to the Securities Act covering the public offering of any of its stock (other than a registration relating solely to the issuance of securities by NOCERA pursuant to a stock option, stock purchase or similar benefit plan or an SEC Rule 145 transaction), NOCERA shall promptly give each Original Holder written notice of such registration. NOCERA shall use all reasonable efforts to cause to be registered all of the shares of NOCERA Common Stock that each such Original Holder has requested to be included in such registration. Notwithstanding any other provision of this Agreement and regardless of the registration of any shares of NOCERA Common Stock, the shares of NOCERA Common Stock will continue to be subject the lock up provisions specified in Section 2(e).

(ii)               NOCERA shall have the right to terminate or withdraw any registration initiated by it under this Section 2(g) before the effective date of such registration, whether or not any Original Holder has elected to include shares of NOCERA Common Stock in such registration.

(iii)             All expenses (other than underwriting discounts and commissions and stock transfer taxes and fees) incurred in connection with a registration pursuant to Sections 2(g) including, without limitation, registration, filing and qualification fees, printers’ and accounting fees, fees and disbursements of counsel for NOCERA shall be borne by NOCERA.

(iv)              If a registration of which NOCERA gives notice under this Section 2(g) is for an underwritten offering, then NOCERA shall so advise the Original Holders. In such event, the right of any Original Holder to include such Original Holder’s shares of NOCERA Common Stock in such registration shall be conditioned upon such Original Holder’s participation in such underwriting and the inclusion of such Original Holder’s shares of NOCERA Common Stock in the underwriting to the extent provided herein. All Original Holders proposing to distribute their shares of NOCERA Common Stock through such underwriting shall enter into an underwriting agreement in customary form with the managing underwriters selected for such underwriting. Notwithstanding any other provision of this Agreement, if the managing underwriters advise NOCERA that marketing factors require a limitation of the number of shares of NOCERA Common Stock to be underwritten or exclusion of the shares of NOCERA Common Stock, then the managing underwriters may exclude the shares of NOCERA Common Stock from the registration and the underwriting. If any Original Holder disapproves of the terms of any such

3  
 

underwriting, such Original Holder may elect to withdraw therefrom by written notice to NOCERA and the managing underwriters. Any shares of NOCERA Common Stock excluded or withdrawn from such underwriting shall be excluded and withdrawn from the registration.

(h)                The covenants contained in (i) above shall survive the closing and shall be enforceable whether or not contained in a separate agreement.

Section 3.                Closing.

(a)                Closing Date . On the terms and subject to the conditions of this Agreement, the closing of the Merger (the “ Closing ”) shall be effective as soon as all of the conditions hereof are met and any document deliveries take place at the offices of Mountain Share Transfer, Inc on or before January 31, 2019 at 10:00 a.m. PT, or such other time, date or place as NOCERA and GSI may otherwise agree (the “Closing Date”).

(b)                Documents to be Delivered by NOCERA . On or before the Closing, NOCERA will deliver or cause to be delivered to GSI:

(i)                  all consents or approvals required to be obtained by NOCERA for the purposes of completing the Merger;

(ii)               a certified copy of a resolution of the directors of NOCERA dated as of the Closing Date appointing Jeff Cheng to the board of directors of NOCERA;

(iii)             certified copies of such resolutions of the directors of NOCERA as are required to be passed to authorize the execution, delivery and implementation of this Agreement;

Section 4.                Directors and Officers of NOCERA. Effective as of the Closing, (a) the current directors of NOCERA shall appoint Jeff Cheng as a designee of GSI, and if necessary, shall increase the size of the board of directors of NOCERA to create one vacancy and appoint Jeff Cheng to fill that vacancy as a director of NOCERA and (b) the current officers of NOCERA shall remain in their current officer positions with NOCERA, except that Jeff Cheung shall be the Chief Executive Officer and Chairman of the Board of NOCERA after the Closing Date.

Section 5.                GSI’s Representations and Warranties. GSI represents and warrants to NOCERA that the statements contained in this Section are true and correct as of the Effective Date and will be true and correct as of the Closing Date, as set forth herein and in the disclosure schedule delivered by GSI to NOCERA (the “ GSI Schedule ”), arranged in sections corresponding to the paragraphs in this Section; the disclosure in any section or paragraph will qualify other paragraphs in this Section to the extent that it is reasonably apparent from a reading of the disclosure that it also qualifies or applies to such other paragraphs.

Organization . GSI is a corporation validly existing and in good standing under the laws of the State of Hong Kong and has all requisite power and authority and possesses all necessary governmental approvals necessary to own, lease and operate its properties, to carry on its business as now being conducted, to execute and deliver this Agreement and the agreements contemplated herein, and to consummate the transactions contemplated hereby and thereby. GSI is duly qualified to do business and is in good standing in all jurisdictions in which its ownership of property or the character of its business requires such qualification, except where the failure to be so qualified would not reasonably be expected to have an Adverse Effect. Certified copies of the Certificate of

4  
 

Incorporation of GSI, as amended to date, each as currently in effect, have been made available to NOCERA, are complete and correct, and no amendments have been made thereto or have been authorized since the date thereof. GSI is not in violation of any of the provisions of its Certificate of Incorporation or Bylaws.

Capitalization .

GSI’s authorized capital ownership interests consists solely of 1,000,000 GSI Shares, as of date hereof.

There are 1,000,000 GSI Shares outstanding and no other authorized or issued GSI Shares or other measure of capital ownership of GSI. There are no agreements, arrangements or understandings to which GSI is a party (written or oral) to issue any other GSI Shares or other measures of capital ownership of GSI. All of the outstanding GSI Shares were duly and validly issued and fully paid, are non-assessable and free of preemptive rights, and were issued in compliance with all applicable state and federal securities laws.

Except as provided in the GSI Schedule, there are no outstanding (A) options, warrants, or other rights to purchase from GSI any GSI Shares or other measures of capital ownership of GSI; (B) debt securities or instruments convertible into or exchangeable for GSI Shares or other measures of capital ownership of GSI; or (C) commitments of any kind for the issuance of additional GSI Shares or options, warrants or other securities of GSI.

There are no options or other rights to acquire such Shares or other measures of capital ownership and there are no preemptive rights or agreements, arrangements or understandings to issue preemptive rights with respect to the issuance or sale of any GSI Shares or other measures of capital ownership of GSI created by statute, the Certificate of Incorporation or Bylaws, or any agreement or other arrangement to which GSI is a party or to which it is bound and there are no agreements, arrangements or understandings to which GSI is a party (written or oral) pursuant to which GSI has the right to elect to satisfy any liability by issuing any GSI Shares or other measures of capital ownership of GSI.

Other than the Bylaws, GSI is not a party or subject to any agreement or understanding, and, to GSI's knowledge, there is no agreement, arrangement or understanding between or among any persons which affects, restricts or relates to voting, giving of written consents, distributions, allocation of profits and losses, or transferability of Shares or other measures of capital ownership of GSI, including any voting trust agreement or proxy.

Subsidiaries . GSI has one subsidiary, Gui Zhou Grand Smooth Technology Ltd.

Authorization . GSI has all requisite power and authority to execute and deliver this Agreement, to perform its obligations hereunder, and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by GSI and the consummation by GSI of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate and/or stockholder action by GSI and no other corporate proceedings on the part of GSI and no other stockholder vote or consent is necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by GSI. This Agreement and all other agreements and obligations entered into and undertaken in connection with the transactions contemplated hereby to which GSI is a party constitute the valid and legally binding obligations of GSI, enforceable

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against GSI in accordance with their respective terms, except as may be limited by principles of equity or applicable bankruptcy, reorganization, insolvency, moratorium, fraudulent conveyance or other similar laws relating to or affecting the rights and remedies of creditors generally. The execution, delivery and performance by GSI of this Agreement and the agreements provided for herein, and the consummation by GSI of the transactions contemplated hereby and thereby, will not, with or without the giving of notice or the passage of time or both, violate the provisions of the Certificate of Incorporation or Bylaws of GSI, or (i) violate any judgment, decree, order or award of any court, governmental body or arbitrator; (ii) conflict with or result in the breach or termination of any term or provision of, or constitute a default under, or cause any acceleration under, or cause the creation of any lien, charge or encumbrance upon the properties or assets of GSI pursuant to, any indenture, mortgage, deed of trust or other instrument or agreement to which GSI is a party or by which GSI or any of its properties is or may be bound; or (iii) to GSI’s Knowledge, violate the provisions of any law, rule or regulation applicable to GSI, except where such violation would not reasonably be expected to have an Adverse Effect.

No Conflict . The execution and delivery of this Agreement by GSI does not require any consent or approval under, result in any breach of, result in any loss of any benefit under, or constitute a change of control or default (or an event which with notice or lapse of time or both would become a default) under; give to others any right of termination, vesting, amendment, acceleration or cancellation of; or result in the creation of any lien or encumbrance on any property or asset of GSI pursuant to; any material agreement of GSI or other instrument or obligation of GSI.

Litigation . There is no action, suit, legal or administrative proceeding or investigation pending or, to GSI’s Knowledge, threatened against or involving GSI (either as a plaintiff or defendant) before any court or governmental agency, authority, body or arbitrator. There is not in existence on the date hereof any order, judgment or decree of any court, tribunal or agency to GSI’s Knowledge enjoining or requiring GSI to take any action of any kind with respect to its business, assets or properties.

Insurance . The GSI Schedule contains a listing of all current GSI insurance policies. To GSI’s Knowledge, all current insurance policies are in full force and effect, are in amounts of a nature that are adequate and customary for GSI’s business, and to GSI’s Knowledge are sufficient for compliance with all legal requirements and agreements to which it is a party or by which it is bound. All premiums due on current policies or renewals have been paid, and there is no material default under any of the policies.

Personal Property . GSI has good and marketable title to all of its tangible personal property free and clear of all liens, leases, encumbrances, claims under bailment and storage agreements, equities, conditional sales contracts, security interests, charges, and restrictions, except for liens, if any, for personal property taxes not due. Such property is used by GSI in the ordinary course of its business and is sufficient for continued conduct of GSI’s business after the Closing Date in substantially the same manner as conducted prior to the Closing Date. Such property is in good operating condition and repair, normal wear and tear excepted, and normal maintenance has been performed.

Intangible Property . GSI owns, or possesses, adequate licenses or other valid rights to use all existing United States and foreign patents, trade names, service marks, copyrights, trade secrets, and applications therefor listed in the GSI Schedule, which are material to its business as currently conducted (the “ GSI Intellectual Property Rights ”), except where the failure to have

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such GSI Intellectual Property Rights would not reasonably be expected to have an Adverse Effect. GSI has the right and authority to use, and to continue to use such GSI Intellectual Property Rights after the Closing Date, such property in connection with the conduct of its business in the manner presently conducted, and to its Knowledge such use or continuing use does not and will not materially infringe upon or violate any rights of any other person, subject to the outcome of the GSI Litigation.

Real Property . Except as specified on the GSI Schedule, GSI is not a party to any material lease agreements and does not have any interests in any parcel of real property, improved or otherwise.

Tax Matters . Within the times and in the manner prescribed by law, GSI has filed, or will have filed, all federal, state and local tax returns and all tax returns for other governing bodies having jurisdiction to levy taxes upon it that are required to be filed. GSI has paid all taxes, interest, penalties, assessments and deficiencies that have become due, including without limitation income, franchise, real estate, and sales and withholding taxes. No examinations of the federal, state or local tax returns of GSI are currently in progress or threatened and no deficiencies have been asserted or to GSI’s Knowledge assessed against GSI as a result of any audit by the Internal Revenue Service or any state or local taxing authority and no such deficiency has been proposed or threatened.

Books and Records . The general ledger and books of account of GSI, all minute books of GSI, all federal, state and local income, franchise, property and other tax returns filed by GSI, all of which have been made available to NOCERA, are in all material respects complete and correct and have been maintained in accordance with good business practice and in accordance with all applicable procedures required by laws and regulations, except as would reasonably be expected to have an Adverse Effect.

Contracts and Commitments . The GSI Schedule lists all material contracts and agreements to which GSI is a party, whether written or oral, other than those between GSI and NOCERA. Each such contract is a valid and binding agreement of GSI, enforceable against GSI in accordance with its terms, is in full force and effect and represents the material terms of the agreement between the respective parties. GSI has materially complied with all obligations required pursuant to such contracts to have been performed by GSI on its part and neither GSI nor, to GSI’s Knowledge, any other party to such contract is in breach of or default in any material respect under any such contract.

Compliance with Laws . GSI has all requisite licenses, permits and certificates, including environmental, health and safety permits, from federal, state and local authorities necessary to conduct its business as currently conducted and own and operate its assets, except where the failure to have such permits would not reasonably be expected to have an Adverse Effect. To GSI’s Knowledge, GSI is not in violation of any federal, state or local law, regulation or ordinance (including, without limitation, laws, regulations or ordinances relating to building, zoning, environmental, disposal of hazardous waste, land use or similar matters) relating to its business or its properties.

Employee Benefit Plans . Except as specified on the GSI Schedule, GSI has no (A) employee benefit plans as defined in ERISA Section 3(3), (B) bonus, stock option, stock purchase, incentive, deferred compensation, supplemental retirement, severance or other similar employee

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benefit plans, or (C) material unexpired severance agreements with any current or former employee of NOCERA.

Indebtedness to and from Affiliates . GSI is not indebted, directly or to GSI’s Knowledge indirectly, to any officer, director or 10% stockholder of GSI in any amount other than for salaries for services rendered or reimbursable business expenses, and no such person is indebted to GSI except for advances made to employees of GSI in the ordinary course of business to meet reimbursable business expenses.

Regulatory Approvals . All consents, approvals, authorizations or other requirements prescribed by any law, rule or regulation that must be obtained or satisfied by GSI and that are necessary for the execution and delivery by GSI of this Agreement or any documents to be executed and delivered by GSI in connection therewith have been, or prior to the Closing Date will be, obtained and satisfied.

No Brokers . No broker or finder has acted for GSI in connection with this Agreement or the transactions contemplated hereby, and no broker or finder is entitled to any brokerage or finder’s fee or other commissions in respect of such transactions based upon agreements, arrangements, or understandings made by or on behalf of GSI.

Disclosure . The information concerning GSI set forth in this Agreement, the exhibits and schedules hereto, and any document, statement or certificate furnished or to be furnished in connection herewith does not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated herein or therein or necessary to make the statements and facts contained herein or therein, in light of the circumstances in which they are made, not false or misleading.

Tax Treatment . Neither GSI nor, to the Knowledge of GSI, any of its Affiliates has taken or agreed to take action that would prevent the Merger from constituting a reorganization qualifying under the provisions of Section 368 of the Tax Code.

Absence of Liabilities . Except as set forth on GSI’s audited balance sheet dated __________________, 2018, GSI does not have any liability or obligation, secured or unsecured, whether accrued, absolute, contingent, unasserted or otherwise, that exceeds an aggregate of $10,000.

Section 6.                NOCERA’s, Acquisition Sub’s Representations and Warranties. Each of NOCERA, Acquisition Sub represents and warrants to GSI and the surviving corporation that the statements contained in this Section are true and correct as of the Effective Date and will be true and correct as of the Closing Date, as set forth herein and in the disclosure schedule delivered by NOCERA, Acquisition Sub to GSI (the “ NOCERA Schedule ”), arranged in sections corresponding to the paragraphs in this Section to the extent that it is reasonably apparent from a reading of the disclosure that it also qualifies or applies to such other paragraphs.

Organization .

(ii)         NOCERA is a corporation validly existing and in good standing under the laws of the State of Nevada and has all requisite power and authority and possesses all necessary governmental approvals necessary to own, lease and operate its properties, to carry on its business as now being conducted, to execute and deliver this Agreement and the agreements contemplated

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herein, and to consummate the transactions contemplated hereby and thereby. NOCERA is duly qualified to do business and is in good standing in all jurisdictions in which its ownership of property or the character of its business requires such qualification, except where the failure to be so qualified would not reasonably be expected to have an Adverse Effect. Certified copies of its Articles of Incorporation and Bylaws, as amended to date, have been made available to GSI, are complete and correct, and no amendments have been made thereto or have been authorized since the date thereof. NOCERA is not in violation of any of the provisions of its Articles of Incorporation or Bylaws.

(iii)       Acquisition Sub is a corporation validly existing and in good standing under the laws of the State of Nevada and has all requisite power and authority and possesses all necessary governmental approvals necessary to own, lease and operate its properties, to carry on its business as now being conducted, to execute and deliver this Agreement and the agreements contemplated herein, and to consummate the transactions contemplated hereby and thereby. Certified copies of its Certificate of Incorporation and Bylaws have been made available to GSI, are complete and correct, and no amendments have been made thereto or have been authorized since the date thereof. Acquisition Sub is not in violation of any of the provisions of its Certificate of Incorporation or Bylaws.

Capitalization .

NOCERA’s authorized capital stock consists of 200,000,000 shares of common stock, and no shares of preferred stock.

There are 2,349,200 shares of common stock issued and outstanding, no shares of preferred stock are issued and outstanding, and no shares of common stock of NOCERA are held in the treasury of NOCERA. All of the issued and outstanding shares of common stock of NOCERA were duly and validly issued and fully paid, are non-assessable and free of preemptive rights, and were issued in compliance with all applicable state and federal securities laws.

Except as provided in the NOCERA Schedule, there are no outstanding (A) options, warrants, or other rights to purchase from NOCERA any capital stock of NOCERA or Acquisition Sub; (B) debt securities or instruments convertible into or exchangeable for shares of such stock; or (C) commitments of any kind for the issuance of additional shares of capital stock or options, warrants or other securities of NOCERA or Acquisition Sub.

NOCERA owns all of the outstanding capital stock of Acquisition Sub, free and clear of all liens or other encumbrances.

No Subsidiaries . Except for Acquisition Sub and as provided in the NOCERA Schedule, NOCERA does not own any capital stock or other equity interest in any corporation, partnership, joint venture or other entity.

Authorization . Each of NOCERA and Acquisition Sub has all requisite power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by NOCERA and Acquisition Sub and the consummation by NOCERA and Acquisition Sub of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action by NOCERA or Acquisition Sub, respectively, and no other corporate proceedings on the part of NOCERA or Acquisition Sub, respectively, and no stockholder vote

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or consent is necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by NOCERA and Acquisition Sub. This Agreement and all other agreements and obligations entered into and undertaken in connection with the transactions contemplated hereby to which NOCERA or Acquisition Sub is a party constitute the valid and legally binding obligations of NOCERA and Acquisition Sub, respectively, enforceable against NOCERA and Acquisition Sub, respectively, in accordance with their terms, except as may be limited by principles of equity or applicable bankruptcy, reorganization, insolvency, moratorium, fraudulent conveyance or other similar laws relating to or affecting the rights and remedies of creditors generally. The execution, delivery and performance by NOCERA and Acquisition Sub of this Agreement and the agreements provided for herein, and the consummation by NOCERA and Acquisition Sub of the transactions contemplated hereby and thereby, will not, with or without the giving of notice or the passage of time or both, violate the provisions of the Articles of Incorporation or Bylaws of NOCERA, the Certificate of Incorporation or Bylaws of Acquisition Sub, or (i) violate any judgment, decree, order or award of any court, governmental body or arbitrator; (ii) conflict with or result in the breach or termination of any term or provision of, or constitute a default under, or cause any acceleration under, or cause the creation of any lien, charge or encumbrance upon the properties or assets of NOCERA or Acquisition Sub pursuant to, any indenture, mortgage, deed of trust or other instrument or agreement to which NOCERA or Acquisition Sub is a party or by which NOCERA Acquisition Sub or any of their respective properties is or may be bound; or (iii) to NOCERA’s or Acquisition Sub’s ’s Knowledge, violate the provisions of any law, rule or regulation applicable to NOCERA or Acquisition Sub, except where such violation would not reasonably be expected to have an Adverse Effect.

No Conflict . The execution and delivery of this Agreement by NOCERA or Acquisition Sub does not require any consent or approval under, result in any breach of, any loss of any benefit under or constitute a change of control or default (or an event which with notice or lapse of time or both would become a default) under, or give to others any right of termination, vesting, amendment, acceleration or cancellation of, or result in the creation of any lien or encumbrance on any property or asset of NOCERA or Acquisition Sub pursuant to any material agreement of NOCERA or Acquisition Sub or other instrument or obligation of NOCERA or Acquisition Sub .

Absence of Liabilities . Except as set forth on NOCERA’s balance sheet dated Sept. 30, 2018, as set forth in NOCERA’s Form 10, Amendment # 3, as filed with the SEC, NOCERA does not have any liability or obligation, secured or unsecured, whether accrued, absolute, contingent, unasserted or otherwise, except the management expenses incurred in filing its Form 10 and the negotiation of this agreement which will be paid at closing in the form of cash in the amount of $250,000, $175,000 of which to be disbursed by the Board to Nelson Fiorino Holdings, LLC. at closing, and the balance of $75,000 shall be held in escrow, pending the settlement of any tax issues relating to foreign ownership reporting, and clearance thereof from the IRS, after which time it shall be released to Nelson Fiorino Holdings, LLC. Acquisition Sub has no liabilities or obligations.

Litigation . Except as specified in the NOCERA Schedule, there is no action, suit, legal or administrative proceeding or investigation pending or, to NOCERA’s Knowledge, threatened against or involving NOCERA or Acquisition Sub (either as a plaintiff or defendant) before any court or governmental agency, authority, body or arbitrator. There is not in existence on the date hereof any order, judgment or decree of any court, tribunal or agency to NOCERA’s Knowledge

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enjoining or requiring NOCERA or Acquisition Sub to take any action of any kind with respect to its business, assets or properties.

Tax Matters . Except as specified in the NOCERA Schedule, NOCERA has filed all federal, state and local tax returns and all tax returns for other governing bodies having jurisdiction to levy taxes upon it which are required to be filed. NOCERA has paid all taxes, interest, penalties, assessments, and deficiencies which have become due, including without limitation income, franchise, real estate, and sales and withholding taxes. No examinations of the federal, state or local tax returns of NOCERA are currently in progress nor threatened and no deficiencies have been asserted or to its Knowledge assessed against NOCERA as a result of any audit by the Internal Revenue Service or any state or local taxing authority and no such deficiency has been proposed or threatened.

Books and Records . The general ledger and books of account of NOCERA, all minute books of NOCERA, all federal, state and local income, franchise, property and other tax returns filed by NOCERA, all reports and filings with the SEC by NOCERA, all of which have been made available to GSI, are in all material respects complete and correct and have been maintained in accordance with good business practice and in accordance with all applicable procedures required by laws and regulations.

Contracts and Commitments . There are no material contracts to which NOCERA is a party other than those specified in its filings with the SEC. Neither Acquisition Sub n is a party to any contract.

Compliance with Laws . NOCERA has all requisite licenses, permits and certificates, including environmental, health and safety permits, from federal, state and local authorities necessary to conduct its business as currently conducted and own and operate its assets, except where the failure to have such permits would not reasonably be expected to have an Adverse Effect. NOCERA is not in violation of any federal, state or local law, regulation or ordinance (including, without limitation, laws, regulations or ordinances relating to building, zoning, environmental, disposal of hazardous waste, land use or similar matters) relating to its business or its properties.

Employee Benefit Plans . Except as disclosed in its filings with the SEC, NOCERA has no (A) employee benefit plans as defined in ERISA Section 3(3), (B) bonus, stock option, stock purchase, incentive, deferred compensation, supplemental retirement, severance or other similar employee benefit plans, or (C) material unexpired severance agreements with any current or former employee of NOCERA. With respect to such plans, individually and in the aggregate, no event has occurred and, to NOCERA’s Knowledge, there exists no condition or set of circumstances in connection with which NOCERA could be subject to any liability that is reasonably likely to have an Adverse Effect under ERISA, the Tax Code or any other applicable law.

Indebtedness to and from Affiliates . Except as shown on the attached Schedule 6.0, as of the Closing Date, NOCERA is not indebted, directly or to its Knowledge indirectly, to any officer, director or 10% stockholder of NOCERA in any amount, and no such person is indebted to NOCERA except for advances made in the ordinary course of business to meet reimbursable business expenses.

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Regulatory Approvals . All consents, approvals, authorizations or other requirements prescribed by any law, rule or regulation that must be obtained or satisfied by NOCERA or Acquisition Sub and that are necessary for the execution and delivery by NOCERA or Acquisition Sub of this Agreement or any documents to be executed and delivered by NOCERA or Acquisition Sub in connection therewith have been obtained and satisfied.

No Brokers . No broker or finder has acted for NOCERA or Acquisition Sub in connection with this Agreement or the transactions contemplated hereby, and no broker or finder is entitled to any brokerage or finder’s fee or other commissions in respect of such transactions based upon agreements, arrangements or understandings made by or on behalf of NOCERA or Acquisition Sub.

Disclosure . The information concerning each of NOCERA or Acquisition Sub set forth in its reports and filings with the SEC, this Agreement, the exhibits and schedules hereto, and any document, statement or certificate furnished or to be furnished in connection herewith (as applicable) does not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated herein or therein or necessary to make the statements and facts contained herein or therein, in light of the circumstances in which they are made, not false or misleading.

SEC Filings .

Except as disclosed on the NOCERA Schedule, NOCERA has filed all forms, reports and documents required to be filed with the SEC since it first became a public reporting company. At the time filed or, with respect to registration statements filed with the SEC under the Securities Act, as of the effective date thereof, all such filings (A) complied in all material respects with the applicable requirements of the Securities Act and the Exchange Act, as the case may be, and (B) did not at the time they were filed (or if amended or superseded by a filing prior to the date of this Agreement, then on the date of such filing) contain any untrue statement of a material fact or omit to state a material fact required to be stated in such filings or necessary in order to make the statements in such filings, in the light of the circumstances under which they were made, not misleading.

Each of the financial statements (including, in each case, any related notes) contained in NOCERA’s SEC filings complied as to form in all material respects with the applicable rules and regulations with respect thereto, was prepared in accordance with GAAP applied on a consistent basis throughout the periods involved (except as may be indicated in the notes to such financial statements or, in the case of unaudited statements, as permitted by Form 10-Q of the SEC) and fairly presented the financial position of NOCERA as of the dates and the results of its operations and cash flows for the periods indicated, except that the unaudited interim financial statements were or are subject to normal and recurring year-end adjustments which were not or are not expected to be material in amount.

Tax Treatment . Neither NOCERA nor, to the Knowledge of NOCERA, any of its Affiliates has taken or agreed to take action that would prevent the Merger from constituting a reorganization qualifying under the provisions of Section 368 of the Tax Code.

Certificates . The certificates representing the shares of NOCERA to be delivered pursuant to this Agreement are subject to certain trading restrictions imposed by the Securities Act and applicable state securities or “blue sky” laws.

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Investment Company . NOCERA is not, and is not an Affiliate of, and immediately following the Closing will not have become, an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

Section 7.                Covenants of NOCERA.

Conduct of Business of NOCERA . Except as contemplated by this Agreement, during the period from the date hereof to the Effective Time, NOCERA will conduct its operations in the ordinary course of business consistent with past practice and, to the extent consistent therewith, with no less diligence and effort than would be applied in the absence of this Agreement, seek to preserve intact its current business organization. Except as otherwise expressly provided in this Agreement or in the NOCERA Disclosure Schedule, prior to the Effective Time, NOCERA shall not, without the prior written consent of GSI:

amend its Articles of Incorporation or Bylaws (or other similar governing instrument);

authorize for issuance, issue, sell, deliver or agree or commit to issue, sell or deliver (whether through the issuance or granting of options, warrants, commitments, subscriptions, rights to purchase or otherwise) any stock of any class or any other securities (except bank loans) or equity equivalents (including, without limitation, any stock options or stock appreciation rights;

split, combine or reclassify any shares of its capital stock, declare, set aside or pay any dividend or other distribution (whether in cash, stock or property or any combination thereof) in respect of its capital stock, make any other actual, constructive or deemed distribution in respect of its capital stock or otherwise make any payments to stockholders in their capacity as such, or redeem or otherwise acquire any of its securities;

adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of NOCERA (other than the Merger);

(i) incur or assume any long-term or short-term debt or issue any debt securities; (ii) assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other person; (iii) make any loans, advances or capital contributions to, or investments in, any other person; (iv) pledge or otherwise encumber shares of capital stock of NOCERA; or (v) mortgage or pledge any of its material assets, or create or suffer to exist any material lien thereupon (other than tax Liens for taxes not yet due);

except as contemplated in this Agreement and Asset Purchase Agreement, acquire, sell, lease or dispose of any assets in any single transaction or series of related transactions (other than in the ordinary course of business);

except as may be required as a result of a change in law or in generally accepted accounting principles, change any of the accounting principles or practices used by it;

(i) acquire (by merger, consolidation, or acquisition of stock or assets) any corporation, partnership or other business organization or division thereof or any equity interest therein; (ii) enter into any contract or agreement other than in the ordinary course of business consistent with past practice; (iii) except as shown in Schedule 6.0, attached hereto, authorize any

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new capital expenditure or expenditures which, individually is in excess of $1,000 or, in the aggregate, are in excess of $5,000;

make any tax election or settle or compromise any income tax liability material to NOCERA;

settle or compromise any pending or threatened suit, action or claim which (i) relates to the transactions contemplated hereby or (ii) the settlement or compromise of which could have an Adverse Effect on NOCERA; or

take, or agree in writing or otherwise to take, any of the actions described in Sections 7(a)(i) through (xi) or any action which would make any of the representations or warranties of contained in this Agreement untrue or incorrect.

Section 8.                Covenants of GSI.

Conduct of Business of GSI . Except as contemplated by this Agreement, including as described in the GSI Disclosure Schedule, during the period from the date hereof to the Effective Time, GSI will conduct its operations in the ordinary course of business consistent with past practice and, to the extent consistent therewith, with no less diligence and effort than would be applied in the absence of this Agreement, seek to preserve intact its current business organization, and keep available the service of its current officers and employees. Without limiting the generality of the foregoing, except as otherwise expressly provided in this Agreement or as described in the GSI Disclosure Schedule, prior to the Effective Time, GSI shall not, without the prior written consent of NOCERA:

adopt a plan of complete or partial liquidation, dissolution, merger consolidation, restructuring, recapitalization or other reorganization of GSI (other than the Merger);

(i) incur or assume any long-term or short-term debt or issue any debt securities; (ii) assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other person; (iii) make any loans, advances or capital contributions to, or investments in, any other person; (iv) pledge or otherwise encumber shares of capital stock of GSI; or (v) mortgage or pledge any of its material assets, or create or suffer to exist any material lien thereupon (other than tax Liens for taxes not yet due); or

take, or agree in writing or otherwise to take, any action which would make any of the representations or warranties of the GSI contained in this Agreement untrue or incorrect.

Section 9.                Other Covenants and Agreements of the Parties.

a) Acquisition Sub Meeting of Stockholders . Acquisition Sub shall take all action necessary, in accordance with the General Corporation Law of the State of Nevada, and its Certificate of Incorporation and Bylaws, to duly call, give notice of, convene and hold a meeting of its stockholders as promptly as practicable, to consider and vote upon the adoption and approval of this Agreement and the transactions contemplated hereby.

b) GSI Meeting of Shareholders . GSI shall take all action necessary, in accordance with the General Corporation Law of the State of Nevada, and its Certificate of Incorporation and Bylaws, to obtain written consent of at least 80% of its shareholders, in lieu of a shareholder

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meeting to approve the adoption and approval of this Agreement and the transactions contemplated hereby.

c) NOCERA Common Stock . At the Effective Time, NOCERA shall not have issued and outstanding more than 2,354,200 shares of NOCERA Common Stock.

d) Cash contribution to capital . GSI shall contribute to Nocera at closing, cash in the amount of $250,000, $175,000 of which to be disbursed by the Board to Nelson Fiorino Holdings, LLC. at closing, and the balance of $75,000 shall be held in escrow, pending the settlement of any tax issues relating to foreign ownership reporting, and clearance thereof from the IRS, and payment of any costs and assessments therefrom, after which time any balance left shall be released to Nelson Fiorino Holdings, LLC, as compensation for managing the process.

e) Access to Information . Between the date hereof and the Effective Time, NOCERA will give GSI and its authorized representatives reasonable access to its facilities and to all books and records of itself, will permit GSI to make such inspections as GSI may reasonably require and will cause its officers to furnish GSI with such financial and operating data and other information with respect to the business and properties of itself as GSI may from time to time reasonably request. Each of the Parties hereto will hold and will cause its consultants and advisers to hold in confidence g) all documents and information furnished to it in connection with the transactions contemplated by this Agreement.

f) Additional Agreements, Reasonable Efforts . Subject to the terms and conditions herein provided, each of the Parties hereto agrees to use all reasonable efforts to take, or cause to be taken, all action, and to do, or cause to be done, all things reasonably necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement, including, without limitation, (i) cooperating in the preparation of a Form 8-K to be filed with the SEC in connection with this Agreement, (ii) obtaining consents of all third parties and governmental entities necessary, proper or advisable for the consummation of the transactions contemplated by this Agreement; and (iii) the execution of any additional instruments necessary to consummate the transactions contemplated hereby.

g) Press Releases . GSI and NOCERA will consult with each other before issuing press releases, and will provide each other the opportunity to review and comment upon, any press release or other public statements with respect to the transactions contemplated by this Agreement and shall not issue any such press release or make any such public statement prior to such consultation, except as may be required by applicable law or court process. The Parties agree that the initial press release or releases to be issued with respect to the transactions contemplated by this Agreement shall be mutually agreed upon prior to the issuance thereof.

h) Other Filings . At all times from and after the date hereto until the Effective Time, NOCERA covenants and agrees to make all filings it is required to make pursuant to the Exchange Act on a timely basis.

Section 10.            GSI’s Conditions to the Merger. The obligation of GSI to effect the Merger shall be subject to the fulfillment at or prior to the Closing Date of the following conditions, unless waived by GSI:

(a)                Each of the representations and warranties of NOCERA and Acquisition Sub contained in this Agreement shall be true and correct as of the date of this Agreement, except to

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the extent that any changes, circumstances, or events making such representations and warranties not true or correct would not, individually or in the aggregate, constitute an Adverse Effect and at the Closing each of NOCERA and Acquisition Sub shall have delivered to GSI a certificate to that effect;

(b)                Any governmental or third party approvals required to effect the Merger shall have been obtained;

(c)                Each of NOCERA and Acquisition Sub shall have performed or complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by it on or prior to the Effective Time and at the Closing NOCERA shall have delivered to GSI a certificate to that effect;

(d)                From the date of this Agreement through the Effective Time, there shall not have occurred any change, circumstance or event concerning NOCERA or Acquisition Sub that has had or could be reasonably likely to have an Adverse Effect;

(e)                NOCERA shall have delivered to GSI a complete and accurate NOCERA Schedule and such schedule shall have been approved by GSI;

(f)                 The Asset Purchase Agreement shall have been entered into by NOCERA and the third party;

(g)             The nominee of GSI shall have been appointed as a member of the board of directors and as officers of NOCERA;

(h)             GSI shall have received a resolution from NOCERA’s Board of Directors, a resolution from its Series B Preferred stockholders (if applicable) and resolutions from its holder of NOCERA Common Stock (if applicable) approving the Merger and authorizing the issuances of the shares of NOCERA Common Stock hereto; and

(i)               The stockholders of Acquisition Sub and the stockholders of GSI shall have approved the principal terms of this Agreement, the Merger and the transactions contemplated herein in accordance with applicable law and their Certificate of Incorporation and Bylaws.

Section 11.            NOCERA’s, Acquisition Sub’s Conditions to the Merger. The obligations of NOCERA and Acquisition Sub to effect the Merger shall be subject to the fulfillment at or prior to the Closing Date of the following conditions, unless waived by NOCERA:

(a)                Each of the representations and warranties of GSI contained in this Agreement shall be true and correct as of the date of this Agreement, except to the extent that any changes, circumstances or events making such representations and warranties not true or correct would not, individually or in the aggregate, constitute an Adverse Effect and at the Closing GSI shall have delivered to NOCERA a certificate to that effect;

(b)                GSI shall have performed or complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by it on or prior to the Effective Time and at the Closing GSI shall have delivered to NOCERA a certificate to that effect;

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(c)                From the date of this Agreement through the Effective Time, there shall not have occurred any change, circumstance, or event concerning GSI that has had or could be reasonably likely to have an Adverse Effect;

(d)                GSI shall have delivered to NOCERA a complete and accurate GSI Schedule and such schedule shall have been approved by NOCERA;

(e)                GSI shall have delivered to NOCERA audited balance sheets of GSI as of Sept. 30, 2018, and the related statements of operations, changes in shareholders’ equity and cash flows for the period from inception to Sept. 30, 2018;

(f)                 GSI shall have delivered to NOCERA an executed copy of the Lock-Up Agreement, duly executed by NOCERA and each of the GSI Original Holders; and

(g)                GSI shall provide the Employment Agreement, for Jeff Cheung, with Options, duly executed by GSI and Jeff Cheng.

Section 12.            Indemnification of Directors and Officers. All rights to indemnification by GSI and NOCERA existing in favor of each individual who is an officer or director of GSI or NOCERA of the date of this Agreement (each such individual, an “ Indemnified Person ”) for his acts and omissions as a director or officer of GSI or NOCERA occurring prior to the Effective Time, as provided in GSI’s Certificate of Incorporation or Bylaws (as in effect as of the date of this Agreement) or NOCERA’s Articles of Incorporation or Bylaws (as in effect as of the date of this Agreement) shall survive the Merger and shall continue in full force and effect (to the fullest extent such rights to indemnification are available under and are consistent with applicable law) for a period of six years from the Closing Date.

Section 13.            Confidentiality. Each Party shall ensure that any nonpublic information provided to it by any other Party in confidence shall be treated as strictly confidential and that all such confidential information that each Party or any of its respective officers, directors, employees, attorneys, agents, investment bankers, or accountants may now possess or may hereinafter create or obtain relating to the financial condition, results of operations, businesses, properties, assets, liabilities, or future prospects of the other such parties, any affiliate thereof, or any customer or supplier thereof shall not be published, disclosed, or made accessible by any of them to any other person at any time or used by any of them, in each case without the prior written consent of the other Party; provided , however , that the restrictions of this Section shall not apply (a) as may otherwise be required by law, (b) as may be necessary or appropriate in connection with the enforcement of this Agreement, or (c) to the extent such information was in the public domain when received or thereafter enters the public domain other than because of disclosures by the receiving Party. Each such Party shall, and shall cause all of such other persons who received confidential information, from time to time to deliver to the disclosing party all tangible evidence of such confidential information to which the restrictions of this Section apply upon written request.

Section 14.            Termination

(a)                This Agreement may be terminated and abandoned at any time prior to the Effective Time of the Merger:

(i)                  by mutual written consent of NOCERA and GSI;

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(ii)               by either NOCERA or GSI if any governmental entity shall have issued an order, decree or ruling or taken any other action permanently enjoining, restraining or otherwise prohibiting the Merger and such order, decree, ruling or other action shall have become final and nonappealable;

(iii)             by either NOCERA or GSI, so long as such Party is not in breach hereunder, if the Merger shall not have been consummated on or before Jan 20, 2019 (other than as a result of the failure of the party seeking to terminate this Agreement to perform its obligations under this Agreement required to be performed at, or prior to, the Effective Time of the Merger, in which event such party may not terminate this Agreement pursuant to this provision for a period of ten days following such party’s cure of such failure); provided , however , that if either NOCERA or GSI requests an extension of the Closing after this date and the other Party consents in writing, then neither Party may terminate this Agreement under this provision until the expiration of such extension period;

(iv)              by NOCERA, if there has been a material breach of this Agreement on the part of GSI of its obligations hereunder or if any of its representations or warranties contained herein shall be materially inaccurate and such breach or inaccuracy is not curable or, if curable, is not cured within ten (10) days after written notice of such breach is given by NOCERA to GSI; or

(v)                by GSI, if there has been a material breach of this Agreement on the part of NOCERA of its obligations hereunder or if any of its representations or warranties contained herein shall be materially inaccurate and such breach or inaccuracy is not curable or, if curable, is not cured within ten (10) days after written notice of such breach is given by GSI to NOCERA.

(b)                In the event of termination of this Agreement by either GSI or NOCERA provided in this Section 14 , this Agreement shall forthwith become void and have no effect, without any liability or obligation on the part of NOCERA or GSI, other than the provisions of the last sentence of Section 13 and this Section 14 . Nothing contained in this Section 14 shall relieve any Party for any breach of the representations, warranties, covenants or agreements set forth in this Agreement.

Section 15.            Miscellaneous.

Survival. The representations and warranties of the Parties will terminate at the Effective Time and only those covenants that by their terms survive the Effective Time shall survive the Effective Time. This Section 15 shall survive the Effective Time.

Press Releases and Public Announcements . No Party will issue any press release or make any public announcement relating to the subject matter of this Agreement without the prior written approval of the other Parties; provided , however , that any Party may make any public disclosure it believes in good faith is required by applicable law or any listing requirement or trading agreement.

No Third-Party Beneficiaries . This Agreement will not confer any rights or remedies upon any person other than the Parties and their respective successors and permitted assigns.

Notices . All notices required or permitted under this Agreement will be in writing and will be given by certified or regular mail or by any other reasonable means (including personal delivery, facsimile, or reputable express courier) to the Party to receive notice at the following addresses or at such other address as any Party may, by notice, direct:

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To NOCERA & Nocera, Inc.
Acquisition Sub: Acquisition Sub

 

 

With a copy to:

 

To GSI: GSI Inc.

 

 

With a copy to: Michael A. Littman
(which will not Attorney at Law
constitute notice)  

 

All notices given by certified mail will be deemed as given on the delivery date shown on the return mail receipt, and all notices given in any other manner will be deemed as given when received.

Waiver . The rights and remedies of the Parties to this Agreement are cumulative and not alternative. Neither the failure nor any delay by any Party in exercising any right, power, or privilege under this Agreement or the documents referred to in this Agreement will operate as a waiver of such right, power, or privilege, and no single or partial exercise of any right, power, or privilege will preclude any other or further exercise of such right, power, or privilege or the exercise of any other right, power, or privilege. To the maximum extent permitted by applicable law, (a) no claim or right arising from this Agreement or the documents referred to in this Agreement can be discharged by one Party, in whole or in part, by a waiver or renunciation of the claim or right unless in writing signed by the waiving Party, (b) no waiver that may be given by a Party will be applicable except in the specific instance for which it is given, and (c) no notice to or demand on one Party will be deemed to be a waiver of any obligation of such Party or of the right of the Party giving such notice or demand to take further action without notice or demand as provided in this Agreement or the documents referred to in this Agreement.

Further Assurances . The Parties agree (a) to furnish upon request to each other such further information, (b) to execute and deliver to each other such other documents, and (c) to do such other acts and things, all as the other Parties may reasonably request for the purpose of carrying out the intent of this Agreement and of the documents referred to in this Agreement.

Successors and Assigns . This Agreement will be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns. No Party may assign either this Agreement or any of its rights, interests, or obligations hereunder without the prior written approval of the other Parties, which may be granted or withheld at the sole discretion of such other Parties. Any unauthorized assignment is void.

Severability . Any provision of this Agreement that is invalid, illegal or unenforceable in any jurisdiction will, as to that jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability, without affecting in any way the remaining provisions hereof in such jurisdiction or rendering that or any other provision of this Agreement invalid, illegal or unenforceable in any other jurisdiction.

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Expenses . Each Party will pay all fees and expenses (including, without limitation, legal and accounting fees and expenses) incurred by such Party in connection with the transactions contemplated by this Agreement.

Governing Law . This Agreement will be governed by and construed in accordance with the laws of the State of Georgia, without giving effect to principles of conflicts of laws.

Counterparts; Signatures . This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original, but all of which will be one and the same document. Facsimiles and electronic copies in portable document format (“ PDF ”) containing original signatures shall be deemed for all purposes to be originally signed copies of the documents that are the subject of such facsimiles or PDF versions.

Entire Agreement . This Agreement, the schedules and exhibits hereto, and the agreements and instruments to be delivered by the Parties on Closing represent the entire understanding and agreement between the Parties and supersede all prior oral and written and all contemporaneous oral negotiations, commitments and understandings.

Amendment . This Agreement may be amended by the Parties hereto by action taken by or on behalf of their respective Boards of Directors at any time prior to the Effective Time. This Agreement may not be amended by the Parties hereto except by execution of an instrument in writing signed on behalf of each of NOCERA, GSI, and Acquisition Sub.

[Signature page to follow]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement and Plan of Merger as of the date first above written.

 

NOCERA, INC.

 

 

 

By: /s/ Erik S. Nelson

_____________________________

 

Its: Chief Executive Officer

 

GSI ACQUISITION CORP.

 

 

 

By: /s/ Erik S. Nelson

_____________________________

Its:       President

 

 

 

 

Grand Smooth Inc Limited.

 

 

 

By: /s/ Yin-Chieh Cheng

_____________________________

Name:

Its:       President

 

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Schedule 1

Definitions

Accredited Investors ” has the meaning set forth in Rule 501(a) under the Securities Act.

 

Adverse Effect ” means, with respect to each Party, any effect or change that would have a material adverse effect on the results of operations, financial condition, assets, properties or business of the party, taken as a whole, or on the ability of the Party to consummate timely the transactions contemplated hereby.

Affiliate ” has the meaning set forth in Exchange Act Rule 12b-2.

ERISA ” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder.

Effective Time ” means the time of acceptance for recording of Articles of Merger effectuating the Merger by the Secretary of State of the State of Nevada in accordance with the General Corporation Law of the State of Nevada (but not earlier than the Closing Date) or at such later time that the parties hereto shall have agreed upon and designated in such filing in accordance with applicable law as the effective time of the Merger.

Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

GAAP ” means United States generally accepted accounting principles as in effect from time to time, consistently applied.

Knowledge ” means the actual knowledge of the executive officers of a Party, without independent investigation.

Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

SEC ” means the Securities and Exchange Commission.

 

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Schedule 6.0

Warrants Issued & Outstanding

· Class A Warrants 650,000
· Class B Warrants 650,000.

 

Share Issuance - Upcoming

· Agreement to issue William Hall Five Thousand (5,000) shares at $0.05/share for an aggregate price of $250.00

 

Nocera - Litigation

 

There is no known pending or threatened litigation concerning Nocera, Inc. at this point in time.

 

Payments to be made

· Mountain Share Transfer, LLC. $ 6,623.99
· Coral Capital Partners, Inc. $10,518.18
· Coral Investment Partners, LP. $10,612.08
Total Disbursements $27,754.25

 

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EXHIBIT “A”

 

LOCK-UP/LEAK-OUT AGREEMENT

 

THIS LOCK-UP/LEAK-OUT AGREEMENT (the "Agreement") is made and entered into as of the 28th day of December, 2018, between Nocera, Inc., a Nevada corporation (" Nocera "), Grand Smooth Inc Ltd. (“ GSI ”) a Hong Corporation, and Yin-Chieh Cheng (“ Cheng ”) a principal shareholder of GSI; collectively GSI and Cheng shall be considered a shareholder of Nocera, referred to herein as the "Cheng".

 

WHEREAS , Cheng shall serve Nocera in the capacity of an Officer of the Company and a member of the Board of Directors.

 

WHEREAS , the basic terms of the Lock-Up/Leak-Out Agreement are that Cheng will not sell shares of Nocera’s common stock during the 1 st six (6) months of ownership, and an amount not to exceed 25% of his ownership during months seven (7) to twenty-four (24) and 75% following month twenty-five (25).

 

NOW, THEREFORE , in consideration of the foregoing premises and the mutual covenants contained herein, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

1. Notwithstanding anything contained in this Agreement, a Cheng may transfer his/her/its shares of Common Stock to his/her/its affiliates, partners in a partnership, subsidiaries and trusts, or spouses and lineal descendants for estate planning purposes provided that the transferee (or the legal representative of the transferee) executes an agreement to be bound by all of the terms and conditions of this Agreement.

 

2. Except as otherwise expressly provided herein, and except as each Cheng may be otherwise restricted from selling shares of Common Stock, each Cheng may only sell Common Stock subject to the following conditions for the twenty-four (24) month period from the date of this Agreement (the " Lock-Up/Leak-Out Period "):

 

2.1 Except as otherwise provided herein, all Common Stock shall be sold in " broker's transactions " as that term is defined in Rule 144 of the Securities and Exchange Commission during the Lock-Up/Leak-Out Period.

 

2.2 The Cheng agree that they will not engage in any short selling of the Common Stock during the Lock-Up/Leak-Out Period.
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2.3 During the Lock-Up/Leak/Out Period, Nocera shall use its best efforts to become and maintain fully "reporting" status with the Securities and Exchange Commission; file all reports that are required to be filed by it during such period; and use its "best efforts" to ensure that the Common Stock is continually quoted for public trading on a nationally recognized medium of no less significance than the OTC Market, the NASDAQ Small Cap or a recognized national stock exchange.

 

3. Lock Up / Leak Out Period. The Lock Up / Leak Out period shall allow for the following sales of shares of Nocera, Inc.’s common stock.

 

3.1 Months one (1) through six (6): No shares of Nocera may be sold.

 

3.2 Months seven (7) through twenty-four (24): Cheng may sell an amount of Nocera shares equal to twenty-five percent (25%) of his total ownership of Nocera, Inc. shares.

 

4. This section has been deleted.

 

5. In the event of a tender offer to purchase all or substantially all of Nocera's issued and outstanding securities, or a merger, consolidation or other reorganization with or into an unaffiliated entity, and if the requisite number of the record and beneficial owners of Nocera securities then outstanding are voted in favor of such tender offer, merger, consolidation or reorganization, and such tender offer, merger, consolidation or reorganization is completed, this Agreement shall terminate as of the closing of such event and the Common Stock restricted pursuant hereto shall be released from such restrictions.

 

6. Except as otherwise provided in this Agreement or any other agreements between the parties, the Cheng shall be entitled to their respective beneficial rights of ownership of the Common Stock, including the right to vote the Common Stock for any and all purposes.

 

7. The Common Stock and per share price restrictions covered by this Agreement shall be appropriately adjusted should Nocera make a dividend or distribution, undergo a forward split or a reverse split or otherwise reclassify its shares of Common Stock.

 

8. No transfer of any of the shares of Common Stock that are subject to this Agreement shall be made in any transaction other than a " broker's transaction " unless the transferee executes and delivers a copy of this Agreement prior to the transfer of any stock certificate representing any of the Common Stock so transferred.

 

9. This Agreement may be executed in any number of counterparts with the same force and effect as if all parties had executed the same document.

 

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10. All notices, instructions or other communications required or permitted to be given pursuant to this Agreement shall be given in writing and delivered by certified mail, return receipt requested, overnight delivery or hand-delivered to all parties to this Agreement, to Nocera, at 2030 Powers Ferry Road SE, Suite # 212, Atlanta, GA. 30339, and to Cheng at the addresses in the Signature Page. All notices shall be deemed to be given on the same day if delivered by hand or on the following business day if sent by overnight delivery or the second business day following the date of mailing.

 

11. The resale restrictions on the Common Stock set forth in this Agreement shall be in addition to all other restrictions on transfer imposed by applicable United States and state securities laws, rules and regulations.

 

12. Nocera or each Cheng who fails to fully adhere to the terms and conditions of this Agreement shall be liable to every other party for any damages suffered by any party by reason of any such breach of the terms and conditions hereof. Each Cheng agrees that in the event of a breach of any of the terms and conditions of this Agreement by any such Cheng, that in addition to all other remedies that may be available in law or in equity to the non-defaulting parties, a preliminary and permanent injunction, without bond or surety, and an order of a court requiring such defaulting Cheng to cease and desist from violating the terms and conditions of this Agreement and specifically requiring such Cheng to perform his/her/its obligations hereunder is fair and reasonable by reason of the inability of the parties to this Agreement to presently determine the type, extent or amount of damages that Nocera or the non-defaulting Cheng may suffer as a result of any breach or continuation thereof.

 

13. This Agreement sets forth the entire understanding of the parties hereto with respect to the subject matter hereof, and may not be amended except by a written instrument executed by the parties hereto.

 

14. This Agreement shall be governed by and construed in accordance with the laws of the State of Georgia applicable to contracts entered into and to be performed wholly within said State; and Nocera and the Cheng agree that any action based upon this Agreement may be brought in the United States and state courts of Georgia only, and each submits himself/herself/itself to the jurisdiction of such courts for all purposes hereunder.

 

14.1 Nocera shall be entitled to recover from Cheng any reasonable expenses incurred in enforcing the performance by Cheng of any obligations arising hereunder, including, but not limited to, reasonable attorney's fees.
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15. In the event of default hereunder, the non-defaulting parties shall be entitled to recover reasonable attorney's fees incurred in the enforcement of this Agreement.

 

IN WITNESS WHEREOF , the undersigned have duly executed and delivered this Agreement as of the day and year first above written.

 

Agreed to & Accepted Agreed to & Accepted
This 28 th day of December, 2018: This 28 th day of December, 2018:

 

/s/Erik S. Nelson /s/ Yin-Chieh Cheng

 

_____________________________ ______________________________

Erik S. Nelson, CEO Yin-Chieh Cheng
Nocera, Inc. (an individual)

 

 

Agreed to & Accepted

This 28 th day of December, 2018

On Behalf of Grand Smooth Inc Ltd.

 

/s/ Cheng Yin Chieh

______________________________

Cheng Yin Chieh

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EXHIIBT “B”

 

CONSULTING AGREEMENT

 

This is a Consulting Agreement (“Agreement”) between Nocera, Inc. , a Nevada corporation with offices in Atlanta, Georgia, (“NOCERA”) on the one hand, and Yin-Chieh Cheng, an individual (“Consultant”) on the other hand. NOCERA and Consultant may be referred to herein separately as “Party” and jointly as “Parties." This Agreement shall be effective as of the date of the last Party to sign (“Effective Date”).

 

1.        Basic Agreement

 

1.1      Services . Consultant agrees to provide the services to NOCERA described on Schedule 1 hereto (“Services”), for the compensation set forth on Schedules 1 and 2. If the Parties later enter into additional schedules, and any such schedules shall be deemed to be incorporated into and part of this Agreement.

 

1.2      Compensation . The fees specified on the Schedules hereto will be Consultant’s sole compensation for the Services described thereon. Consultant is to invoice NOCERA for work done by emailing invoices to the NOCERA Contact person listed on the applicable Schedule or otherwise identified as the contact person by NOCERA. NOCERA will pay all invoices within 30 days of receipt of each invoice.

 

1.3      Additional Services. If NOCERA asks Consultant to perform services that are not specifically listed herein and that are above and beyond that which is reasonable and customary under the circumstances, Consultant will submit a written change order to NOCERA describing (i) the additional services to be performed; and (ii) the proposed additional fees, if any, associated with such services. Consultant will not perform or receive payments for any service not authorized by NOCERA in an approved change order.

 

2.        Working Relationship

 

2.1      Method of Work . Consultant will perform the Services in a timely and professional manner consistent with industry standards. Consultant will have sole discretion over, and sole responsibility for, the planning, method, means, sequencing, time, and place of the work he performs in connection with the Services. Consultant will provide his own equipment, tools, and materials, if any are necessary.

 

2.2      Access to NOCERA’s Property . If necessary, to perform the Services, NOCERA will make its facilities and equipment available to Consultant in accordance with NOCERA’s access, hours of operation, and security policies, unless otherwise agreed given the nature of the Services. NOCERA will retain sole ownership of all documents, records, equipment, and other physical or intellectual property that it makes available to Consultant. At NOCERA’s request, and upon termination of this Agreement, Consultant will promptly return to NOCERA any of this property in Consultant’s possession.

 

2.3      Ownership of Work Product . Consultant and NOCERA intend that NOCERA will have full and exclusive ownership of and all right, title, and interest in and to any work product, including, without limitation, the deliverables set forth on Schedule 1 and to all research, analyses, presentations and reports prepared by Consultant and any intellectual property (including, without limitation, any trade secret, copyright, patent or trademark) that Consultant creates or helps create in performing the Services under this Agreement. Consultant will assist NOCERA in obtaining and enforcing these rights in the work product. Notwithstanding the foregoing, NOCERA acknowledges that, with its prior written

1  
 

consent, Consultant may use certain third-party materials in connection with its performance of the Services, and that all intellectual property in any such third-party materials incorporated into any work product will remain with the relevant third party proprietors.

 

2.4      Confidentiality . Consultant will use Confidential Information (defined below) only in connection with the Services under this Agreement and will keep the same confidential, using at least the same degree of care as Consultant uses to prevent the unauthorized use or disclosure of his own confidential information, but in no case less than a reasonable degree of care. “Confidential Information” means information from or relating to NOCERA which is furnished by NOCERA to Consultant during the course of providing the Services, and does not include information which: (i) is or becomes generally available to the public other than as a result of a disclosure by Consultant or its agent or a party acting on his behalf; (ii) was known by Consultant prior to its being furnished to Consultant by NOCERA; or (iii) is or becomes available to Consultant on a non-confidential basis from a source other than NOCERA. All Confidential Information furnished by NOCERA under this Agreement is and will remain the property of NOCERA. In the event that Consultant is required by operation of law, rule, regulation or legal process or any governmental agency, to disclose any Confidential Information, Consultant will promptly notify NOCERA so that Consultant may seek an appropriate protective order, and Consultant will provide commercially reasonable cooperation with any such efforts. If in the absence, or prior to the delivery, of such protective order Consultant is required to disclose any such Confidential Information, Consultant may make such disclosure without liability under this Agreement.

 

2.5      Relationship . Consultant is and will be an independent contractor. Nothing in this Agreement creates an employment, partnership, joint venture, fiduciary, or similar relationship between Consultant and NOCERA for any purpose. NOCERA understands that Consultant is entering into this Agreement on his own behalf and not on behalf of any other person or entity, and that his obligations hereunder are his and his alone. Consultant will not be entitled to or eligible for any benefits that NOCERA makes available to its employees, including, without limitation, coverage under any NOCERA medical, dental, liability, automobile or other insurance policies. Consultant waives any rights or claims to those benefits.

 

2.6      Availability of NOCERA Content . NOCERA agrees to provide any data, analysis, text, photos, graphics, recordings, software, documentation, images, or other content or materials of any kind or nature made necessary in order for Consultant to provide the Services.

 

3.        Indemnification

 

3.1      Indemnification . The parties will each defend, indemnify and hold the other party and his or its directors, officers, employees, agents, and assigns (collectively, the “Indemnified Parties”) harmless against all third-party claims, liabilities, losses, damages, and expenses which the Indemnified Parties may suffer and which arise directly or indirectly from (i) the other party’s performance or breach under this Agreement, or (ii) an assertion that the other party infringed upon third-party intellectual property rights.

                    

3.2      Limitation of Remedies and Damages . THE LIABILITY OF CONSULTANT TO NOCERA ARISING HEREUNDER WILL BE LIMITED TO FEES PAID BY NOCERA HEREUNDER. CONSULTANT SHALL NOT BE LIABLE FOR ANY CONSEQUENTIAL, INCIDENTAL, OR INDIRECT DAMAGES, INCLUDING WITHOUT LIMITATION DAMAGES FOR LOSS OF BUSINESS, PROFITS, BUSINESS INTERRUPTION, DOWNTIME, OR COST OF COVER, WHETHER FORESEEABLE OR NOT, AND WHETHER ARISING IN CONTRACT, TORT, OR NEGLIGENCE, EVEN IF A REPRESENTATIVE OF CONSULTANT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THESE LIMITATIONS SHALL APPLY NOTWITHSTANDING ANY FAILURE OF THE

2  
 

ESSENTIAL PURPOSE OF ANY LIMITED REMEDY. THE FOREGOING LIMITATIONS AND EXCLUSIONS ARE AN ESSENTIAL PART OF THE CONSIDERATION UNDER THE TERMS OF THIS AGREEMENT AND SHALL TAKE EFFECT TO THE FULLEST EXTENT PERMITTED BY LAW.

 

4.        Disclaimer of warranties. EXCEPT FOR THE WARRANTIES EXPLICITLY SET FORTH IN THIS AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND, WHETHER ORAL OR WRITTEN, WHETHER EXPRESS, IMPLIED, OR ARISING BY STATUTE, CUSTOM, COURSE OF DEALING OR TRADE USAGE, WITH RESPECT TO THE SUBJECT MATTER HEREOF IN CONNECTION WITH THIS AGREEMENT. EACH PARTY SPECIFICALLY DISCLAIMS ANY AND ALL IMPLIED WARRANTIES OR CONDITIONS OF TITLE, SATISFACTORY QUALITY, ACCEPTABLE QUALITY, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, COMPLIANCE WITH DESCRIPTION AND NON-INFRINGEMENT. NOTHING IN THIS SECTION 4 SHALL BE CONSTRUED TO RELIEVE CONSULTANT FROM ITS OBLIGATIONS SET FORTH ELSEWHERE IN THIS AGREEMENT OR IN THE SCHEDULE(S) INCORPORATED HEREIN.

 

5.        Term, Payment, and Termination

 

5.1      Term . This Agreement shall commence on the Commencement Date and shall terminate on the Completion Date listed on Schedule 1.

 

5 .2      Termination . Notwithstanding Section 5.1 above: Either party may immediately terminate this Agreement upon a material breach by the other party that has not been cured to the terminating party’s satisfaction within 30 days following written notice of said breach; Consultant may terminate this Agreement on 30 days written notice for NOCERA’ uncured failure to meet its payment obligations hereunder within 30 days of receiving written notice of such failure from Consultant.

 

5.3      Consequences of Termination . If this Agreement is terminated before all the Services described on Schedule 1 have been fully performed by Consultant, NOCERA will pay for work completed as of the date of such termination. NOCERA will pay undisputed fees within 30 days after the later of receiving Consultant’s invoice or the effective date of termination. Upon termination of this Agreement, Consultant will promptly return all NOCERA property. The provisions of Sections 2, 3, 4, 5 and 6 will remain effective after termination. All of the Parties’ rights, powers, and remedies under this Agreement are cumulative and not alternative and will be in addition to all rights, powers, and remedies given to the Parties at law or in equity. The exercise of one or more of these rights or remedies will not impair the Parties’ right to exercise any other right or remedy.

 

6.        General Provisions

 

6.1      Entire Agreement; Amendment . This Agreement, together with any agreed-upon schedules, is the entire agreement between the Parties and supersedes prior or contemporaneous written and oral agreements, negotiations, correspondence, course of dealing and communications between the Parties relating to the same subject matter. This Agreement may be amended only as stated in a writing signed by both Parties that recites that it is an amendment to this Agreement. The schedule(s) may be amended only as stated in a writing signed by both Parties that recites that it is an addendum thereto.

 

6.2      Severability . If any provision in this Agreement is held invalid or unenforceable, the other provisions will remain enforceable, and the invalid or unenforceable provision will be considered modified so that it is valid and enforceable to the maximum extent permitted by law.

 

6.3      Assignment and Successors . NOCERA may not make any assignment of this Agreement

3  
 

without Consultant’s written consent, which consent shall not be unreasonably withheld. Consultant will not make any assignment of this Agreement without the consent of Superior’s or Superior’s Successor’s written consent, which consent shall not be unreasonably withheld. This Agreement shall be binding upon and inure to the benefit of the successors and permitted assignees of the parties hereto, and the non-assigning party shall be considered a third-party beneficiary of any agreement between the assigning party and the assignee.

    

6.4      Waiver . Any waiver under this Agreement must be in writing and signed by the party granting the waiver. Waiver of any breach or provision of this Agreement will not be considered a waiver of any later breach or of the right to enforce any provision of this Agreement. MILE

                  

6..5      No Third Party Beneficiaries . This Agreement is for the exclusive benefit of Consultant and NOCERA and not for the benefit of any third party including, without limitation, any employee, affiliate, or agent of the parties.

 

6.6      Notices . Notices and consents under this Agreement must be in writing and delivered by email to the designated contact persons identified on the schedule(s) or otherwise by the parties.

 

6.7      Governing Law . This Agreement is governed by Georgia law.

                 

6.8 Arbitration . The parties agree that any and all disputes relating to this Agreement will be resolved by binding arbitration before and under the rules of the American Arbitration Association. Such arbitration will be conducted in Fulton County, Georgia. Each party will bear his or its own fees and costs relating to such arbitration.

 

6.9 Counterparts . This Agreement may be executed in one or more counterparts, each of which will be deemed an original and all of which will be taken together and deemed to be one instrument. Transmission by fax or PDF of executed counterparts constitutes effective delivery.

 

Accepted and Agreed:

Dated: __December 27, 2018______________________

 

 

 

S i gne d b y /s/ Yin-Chieh Cheng

_________Yin-Chieh Cheng, on his own behalf

 

 

Dated: December 27. 2018

 

Nocera, Inc.

 

 

S i gne d b y /s/ Erik S. Nelson

Title: CEO

4  
 

SCHEDULE 1 TO CONSULTING AGREEMENT

 

This Schedule sets forth additional terms of the Consulting Agreement. The terms of this Schedule 1 are deemed incorporated in full into the Consulting Agreement.

 

Name of Consultant : Yin-Chieh Cheng

 

Commencement Date: December 27, 2018

 

Completion Date: December 27, 2023

 

Description of Services, including activities, expected work product, and timetable :

 

Services

 

(1) Chairman of the Board and Director

 

Fees

Consultant’s compensation for the Services shall be comprised of two elements:

(1) to be paid as follows:

 

$____0__________ due each Month

Consultant will invoice NOCERA for each of these payments.

 

(2) Warrants : As set forth in Schedule 2 to this Agreement.

 

Accepted and Agreed:

 

Dated: December 27, 2018

 

 

 

S i gne d b y /s/ Yin-Chieh Cheng

_________Yin-Chieh Cheng, on his own behalf

 

 

 

Dated: December 27, 2018

 

Nocera, Inc.

 

 

S i gne d b y /s/ Erik S. Nelson

Title: CEO

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SCHEDULE 2 TO CONSULTING AGREEMENT

 

WARRANT AGREEMENT

 

 

This Schedule sets forth additional terms of the Consulting Agreement. The terms of this Schedule 2 are deemed incorporated in full into the Consulting Agreement.

 

Warrant Agreement

 

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ ACT ”), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AS SET FORTH IN SECTIONS 5.3 AND 5.4 BELOW, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND LAWS OR IN FORM AND SUBSTANCE SATISFACTORY TO THE COMPANY, SUCH OFFER, SALE, PLEDGE OR OTHER TRANSFER IS EXEMPT FROM SUCH REGISTRATION.

 

WARRANT TO PURCHASE STOCK

 

Company: NOCERA, INC. - Stock symbol NCRA

 

Number of Shares: 5,000,000 (See section 1.1 below)

 

Type/Series of Stock: Common Stock

 

Warrant Price: $0.50 /share

 

Expiration Date:   December 27, 2023

 

THIS WARRANT CERTIFIES THAT, for good and valuable consideration, Yin-Chieh Cheng (“ Holder ”) is entitled to purchase the number of fully paid and non-assessable shares (the “ Shares ”) of the above-stated Type/Series of Stock (the “ Class ”) of the above-named company (the “ Company ”) at the above-stated Warrant Price, all as set forth above and as adjusted pursuant to Section 2 of this Warrant, subject to the provisions and upon the terms and conditions set forth in this Warrant. In the event that the name of the Company and/or the stock symbol for the company

 

SECTION 1. EXERCISE .

 

1.1          Quarterly Option Awards.

 

Holder shall be granted quarterly option awards of 250,000 Series “A” Warrants for 20 quarters (5 years) for a total of 5,000,000 Series “A” Warrants, subject to continued employment for services as Chairman of the Board and a Director.

 

1.2          Method of Exercise . Holder may at any time and from time to time exercise this Warrant, in whole or in part, by delivering to the Company the original of this Warrant together with a duly executed Notice of Exercise in substantially the form attached hereto as Appendix 1 and, unless Holder is exercising this Warrant pursuant to a cashless exercise set forth in Section 1.3, a check, wire transfer of same-day funds (to an account designated by the Company), or other form of payment acceptable to the Company for the aggregate Warrant Price for the Shares being purchased.

 

1.2          Cashless Exercise . On any exercise of this Warrant, in lieu of payment of the aggregate Warrant Price in the manner as specified in Section 1.1 above, but otherwise in accordance with the requirements of Section 1.1, Holder may elect to receive Shares equal to the value of this Warrant, or portion hereof as to which this Warrant is being exercised. Thereupon, the Company shall issue to the Holder such number of fully paid and non-assessable Shares as are computed using the following formula:

1  
 

 

 

X = Y(A-B)/A

 

where:

 

X =                              the number of Shares to be issued to the Holder;

 

Y =                              the number of Shares with respect to which this Warrant is being exercised (inclusive of the Shares surrendered to the Company in payment of the aggregate Warrant Price);

 

A =                              the Fair Market Value (as determined pursuant to Section 1.3 below) of one Share; and

 

B =                              the Warrant Price.

 

1.3          Fair Market Value . If the Company’s common stock is then traded or quoted on a nationally recognized securities exchange, inter-dealer quotation system or over-the-counter market (a “ Trading Market ”) and the Class is common stock, the fair market value of a Share shall be the closing price or last sale price of a share of common stock reported for the Business Day immediately before the date on which Holder delivers this Warrant together with its Notice of Exercise to the Company. If the Company’s common stock is then traded in a Trading Market and the Class is a series of the Company’s convertible preferred stock, the fair market value of a Share shall be the closing price or last sale price of a share of the Company’s common stock reported for the Business Day immediately before the date on which Holder delivers this Warrant together with its Notice of Exercise to the Company multiplied by the number of shares of the Company’s common stock into which a Share is then convertible. If the Company’s common stock is not traded in a Trading Market, the Board of Directors of the Company shall determine the fair market value of a Share in its reasonable good faith judgment.

 

1.4          Delivery of Certificate and New Warrant . Within a reasonable time after Holder exercises this Warrant in the manner set forth in Section 1.1 or 1.2 above, the Company shall deliver to Holder a certificate representing the Shares issued to Holder upon such exercise and, if this Warrant has not been fully exercised and has not expired, a new warrant of like tenor representing the Shares not so acquired.

 

1.5          Replacement of Warrant . On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form, substance and amount to the Company or, in the case of mutilation, on surrender of this Warrant to the Company for cancellation, the Company shall, within a reasonable time, execute and deliver to Holder, in lieu of this Warrant, a new warrant of like tenor and amount.

 

1.6          Treatment of Warrant Upon Acquisition of Company .

 

(a)           Acquisition . For the purpose of this Warrant, “ Acquisition ” means any transaction or series of related transactions involving: (i) the sale, lease, exclusive license, or other disposition of all or substantially all of the assets of the Company; (ii) any merger or consolidation of the Company into or with another person or entity (other than a merger or consolidation effected exclusively to change the Company’s domicile), or any other corporate reorganization, in which the stockholders of the Company in their capacity as such immediately prior to such merger, consolidation or reorganization, own less than a majority of the Company’s (or the surviving or successor entity’s) outstanding voting power immediately after such merger, consolidation or reorganization; or (iii) any sale or other transfer by the stockholders of the Company to a person or “group” (as defined under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”)) of shares representing at least a majority of the Company’s then-total outstanding combined voting power.

 

(b)           Treatment of Warrant at Acquisition . In the event of an Acquisition in which the consideration to be received by the Company’s stockholders consists solely of cash, solely of Marketable Securities or a combination of cash and Marketable Securities (a “ Cash/Public Acquisition ”) , either (i) Holder shall exercise this Warrant pursuant to Section 1.1 and/or 1.2 and such exercise will be deemed effective immediately prior to and contingent upon the consummation of such Acquisition or (ii) if Holder elects not to exercise the Warrant, this Warrant will expire immediately prior to the consummation of such Acquisition.

 

2  
 

(c)           The Company shall provide Holder with written notice of its request relating to the Cash/Public Acquisition (together with such reasonable information as Holder may reasonably require regarding the treatment of this Warrant in connection with such contemplated Cash/Public Acquisition giving rise to such notice), which is to be delivered to Holder not less than seven (7) Business Days prior to the closing of the proposed Cash/Public Acquisition. In the event the Company does not provide such notice, then if, immediately prior to the Cash/Public Acquisition, the fair market value of one Share (or other security issuable upon the exercise hereof) as determined in accordance with Section 1.3 above would be greater than the Warrant Price in effect on such date, then this Warrant shall automatically be deemed on and as of such date to be exercised pursuant to Section 1.2 above as to all Shares (or such other securities) for which it shall not previously have been exercised, and the Company shall promptly notify the Holder of the number of Shares (or such other securities) issued upon such exercise to the Holder and Holder shall be deemed to have restated each of the representations and warranties in Section 4 of the Warrant as the date thereof.

 

(d)           Upon the closing of any Acquisition other than a Cash/Public Acquisition defined above, the acquiring, surviving or successor entity shall assume the obligations of this Warrant, and this Warrant shall thereafter be exercisable for the same securities and/or other property as would have been paid for the Shares issuable upon exercise of the unexercised portion of this Warrant as if such Shares were outstanding on and as of the closing of such Acquisition, subject to further adjustment from time to time in accordance with the provisions of this Warrant.

 

(e)           As used in this Warrant, “ Marketable Securities ” means securities meeting all of the following requirements: (i) the issuer thereof is then subject to the reporting requirements of Section 13 or Section 15(d) of the Exchange Act, and is then current in its filing of all required reports and other information under the Act and the Exchange Act; (ii) the class and series of shares or other security of the issuer that would be received by Holder in connection with the Acquisition were Holder to exercise this Warrant on or prior to the closing thereof is then traded in Trading Market, and (iii) following the closing of such Acquisition, Holder would not be restricted from publicly re-selling all of the issuer’s shares and/or other securities that would be received by Holder in such Acquisition were Holder to exercise or convert this Warrant in full on or prior to the closing of such Acquisition, except to the extent that any such restriction (x) arises solely under federal or state securities laws, rules or regulations, and (y) does not extend beyond six (6) months from the closing of such Acquisition.

 

 

SECTION 2. ADJUSTMENTS TO THE SHARES AND WARRANT PRICE .

 

2.1          Stock Dividends, Splits, Etc . If the Company declares or pays a dividend or distribution on the outstanding shares of the Class payable in common stock or other securities or property (other than cash), then upon exercise of this Warrant, for each Share acquired, Holder shall receive, without additional cost to Holder, the total number and kind of securities and property which Holder would have received had Holder owned the Shares of record as of the date the dividend or distribution occurred. If the Company subdivides the outstanding shares of the Class by reclassification or otherwise into a greater number of shares, the number of Shares purchasable hereunder shall be proportionately increased and the Warrant Price shall be proportionately decreased. If the outstanding shares of the Class are combined or consolidated, by reclassification or otherwise, into a lesser number of shares, the Warrant Price shall be proportionately increased and the number of Shares shall be proportionately decreased.

 

2.2          Reclassification, Exchange, Combinations or Substitution . Upon any event whereby all of the outstanding shares of the Class are reclassified, exchanged, combined, substituted, or replaced for, into, with or by Company securities of a different class and/or series, then from and after the consummation of such event, this Warrant will be exercisable for the number, class and series of Company securities that Holder would have received had the Shares been outstanding on and as of the consummation of such event, and subject to further adjustment thereafter from time to time in accordance with the provisions of this Warrant. The provisions of this Section 2.2 shall similarly apply to successive reclassifications, exchanges, combinations substitutions, replacements or other similar events.

 

2.3          Conversion of Preferred Stock . If the Class is a class and series of the Company’s convertible preferred stock, in the event that all outstanding shares of the Class are converted, automatically or by action of the holders thereof, into common stock pursuant to the provisions of the Company’s Certificate of Incorporation, as such may be amended from time to time (the “ Certificate of Incorporation ”) including, without limitation, in connection with the Company’s initial, underwritten public offering and sale of its common stock

3  
 

pursuant to an effective registration statement under the Act (the “ IPO ”), then from and after the date on which all outstanding shares of the Class have been so converted, this Warrant shall be exercisable for such number of shares of common stock into which the Shares would have been converted had the Shares been outstanding on the date of such conversion, and the Warrant Price shall equal the Warrant Price in effect as of immediately prior to such conversion divided by the number of shares of common stock into which one Share would have been converted, all subject to further adjustment thereafter from time to time in accordance with the provisions of this Warrant.

 

2.4          Adjustments for Diluting Issuances . Without duplication of any adjustment otherwise provided for in this Section 2, the number of shares of common stock issuable upon conversion of the Shares shall be subject to anti-dilution adjustment from time to time in the manner set forth in the Company’s Certificate of Incorporation as if the Shares were issued and outstanding on and as of the date of any such required adjustment.

 

2.6          Notice/Certificate as to Adjustments . Upon each adjustment of the Warrant Price, Class and/or number of Shares, the Company, at the Company’s expense, shall notify Holder in writing within a reasonable time setting forth the adjustments to the Warrant Price, Class and/or number of Shares and facts upon which such adjustment is based. The Company shall, upon written request from Holder, furnish Holder with a certificate of its Chief Financial Officer, including computations of such adjustment and the Warrant Price, Class and number of Shares in effect upon the date of such adjustment.

 

SECTION 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY .

 

3.1          Representations and Warranties . The Company represents and warrants to, and agrees with, the Holder as follows:

 

(a)           The initial Warrant Price referenced on the first page of this Warrant is not greater than the price per share at which shares of the Class were last sold and issued prior to the Issue Date hereof in an arms-length transaction in which at least $500,000 of such shares were sold.

 

(b)           All Shares which may be issued upon the exercise of this Warrant, and all securities, if any, issuable upon conversion of the Shares, shall, upon issuance, be duly authorized, validly issued, fully paid and non-assessable, and free of any liens and encumbrances except for restrictions on transfer provided for herein or under applicable federal and state securities laws. The Company covenants that it shall at all times cause to be reserved and kept available out of its authorized and unissued capital stock such number of shares of the Class, common stock and other securities as will be sufficient to permit the exercise in full of this Warrant and the conversion of the Shares into common stock or such other securities.

 

3.2          Notice of Certain Events . If the Company proposes at any time to:

 

(a) declare any dividend or distribution upon the outstanding shares of the Class or common stock, whether in cash, property, stock, or other securities and whether or not a regular cash dividend;

 

(b) offer for subscription or sale pro rata to the holders of the outstanding shares of the Class any additional shares of any class or series of the Company’s stock (other than pursuant to contractual pre-emptive rights);

 

(c) effect any reclassification, exchange, combination, substitution, reorganization or recapitalization of the outstanding shares of the Class;

 

(d) effect an Acquisition or to liquidate, dissolve or wind up; or then, in connection with each such event, the Company shall give Holder:

 

(1) at least seven (7) Business Days prior written notice of the date on which a record will be taken for such dividend, distribution, or subscription rights (and specifying the date on which the holders of outstanding shares of the Class will be entitled thereto) or for determining rights to vote, if any, in respect of the matters referred to in (a) and (b) above;

 

(2) in the case of the matters referred to in (c) and (d) above at least seven (7) Business Days prior written notice of the date when the same will take place (and specifying the date on

4  
 

which the holders of outstanding shares of the Class will be entitled to exchange their shares for the securities or other property deliverable upon the occurrence of such event); and

 

SECTION 4. REPRESENTATIONS, WARRANTIES OF THE HOLDER .

 

The Holder represents and warrants to the Company as follows:

 

4.1          Purchase for Own Account . This Warrant and the securities to be acquired upon exercise of this Warrant by Holder are being acquired for investment for Holder’s account, not as a nominee or agent, and not with a view to the public resale or distribution within the meaning of the Act. Holder also represents that it has not been formed for the specific purpose of acquiring this Warrant or the Shares.

 

4.2          Disclosure of Information . Holder is aware of the Company’s business affairs and financial condition and has received or has had full access to all the information it considers necessary or appropriate to make an informed investment decision with respect to the acquisition of this Warrant and its underlying securities. Holder further has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of this Warrant and its underlying securities and to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify any information furnished to Holder or to which Holder has access.

 

4.3          Investment Experience . Holder understands that the purchase of this Warrant and its underlying securities involves substantial risk. Holder has experience as an investor in securities of companies in the development stage and acknowledges that Holder can bear the economic risk of such Holder’s investment in this Warrant and its underlying securities and has such knowledge and experience in financial or business matters that Holder is capable of evaluating the merits and risks of its investment in this Warrant and its underlying securities and/or has a preexisting personal or business relationship with the Company and certain of its officers, directors or controlling persons of a nature and duration that enables Holder to be aware of the character, business acumen and financial circumstances of such persons.

 

4.4          Accredited Investor Status . Holder is an “accredited investor” within the meaning of Regulation D promulgated under the Act.

 

4.5          The Act . Holder understands that this Warrant and the Shares issuable upon exercise hereof have not been registered under the Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of the Holder’s investment intent as expressed herein. Holder understands that this Warrant and the Shares issued upon any exercise hereof must be held indefinitely unless subsequently registered under the Act and qualified under applicable state securities laws, or unless exemption from such registration and qualification are otherwise available. Holder is aware of the provisions of Rule 144 promulgated under the Act.

 

4.6          No Voting Rights . Holder, as a Holder of this Warrant, will not have any voting rights until the exercise of this Warrant.

 

5  
 

SECTION 5. MISCELLANEOUS .

 

5.1          Term and Automatic Cashless Exercise Upon Expiration .

 

(a)           Term . Subject to the provisions of Section 1.6 above, this Warrant is exercisable in whole or in part at any time and from time to time on or before 6:00 PM, Pacific time, on the Expiration Date and shall be void thereafter.

 

(b)           Automatic Cashless Exercise upon Expiration . In the event that, upon the Expiration Date, the fair market value of one Share (or other security issuable upon the exercise hereof) as determined in accordance with Section 1.3 above is greater than the Warrant Price in effect on such date, then this Warrant shall automatically be deemed on and as of such date to be exercised pursuant to Section 1.2 above as to all Shares (or such other securities) for which it shall not previously have been exercised, and the Company shall, within a reasonable time, deliver a certificate representing the Shares (or such other securities) issued upon such exercise to Holder.

 

5.2          Legends . Each certificate representing the Shares (and each certificate representing the securities issued upon conversion of any Shares, if any) shall be imprinted with a legend in substantially the following form:

 

THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ ACT ”), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AS SET FORTH IN THAT CERTAIN WARRANT TO PURCHASE STOCK ISSUED BY THE ISSUER TO _____________________________ DATED _____________, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND LAWS OR IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER, SUCH OFFER, SALE, PLEDGE OR OTHER TRANSFER IS EXEMPT FROM SUCH REGISTRATION.

 

5.3          Notices . All notices and other communications hereunder from the Company to the Holder, or vice versa, shall be deemed delivered and effective (i) when given personally, (ii) on the third (3rd) Business Day after being mailed by first-class registered or certified mail, postage prepaid, (iii) upon actual receipt if given by facsimile or electronic mail and such receipt is confirmed in writing by the recipient, or (iv) on the first Business Day following delivery to a reliable overnight courier service, courier fee prepaid, in any case at such address as may have been furnished to the Company or Holder, as the case may be, in writing by the Company or such Holder from time to time in accordance with the provisions of this Section 5.5. All notices to Holder shall be addressed as follows until the Company receives notice of a change of address in connection with a transfer or otherwise:

 

5.4          Waiver . This Warrant and any term hereof may be changed, waived, discharged or terminated (either generally or in a particular instance and either retroactively or prospectively) only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.

 

5.5          Attorneys’ Fees . In the event of any dispute between the parties concerning the terms and provisions of this Warrant, the party prevailing in such dispute shall be entitled to collect from the other party all costs incurred in such dispute, including reasonable attorneys’ fees.

 

5.6          Counterparts; Facsimile/Electronic Signatures . This Warrant may be executed in counterparts, all of which together shall constitute one and the same agreement. Any signature page delivered electronically or by facsimile shall be binding to the same extent as an original signature page with regards to any agreement subject to the terms hereof or any amendment thereto.

 

5.7          Governing Law . This Warrant shall be governed by and construed in accordance with the laws of the State of Georgia, without giving effect to its principles regarding conflicts of law.

 

5.8        Headings . The headings in this Warrant are for purposes of reference only and shall not limit or otherwise affect the meaning of any provision of this Warrant.

 

6  
 

5.9        Business Days . “ Business Day ” is any day that is not a Saturday, Sunday or a holiday.

 

IN WITNESS WHEREOF, the parties have caused this Warrant to Purchase Stock to be executed by their duly authorized representatives effective as of the Issue Date written above.

 

 

ACCEPTED AND AGREED

 

 

 

“COMPANY”

 

NOCERA, INC.

 

 

 

Dated: December 27, 2018

 

 

By: /s/ Erik S. Nelson    
       
Name: Erik S. Nelson    
  (Print)    
Title: CEO    
       
     
“HOLDER”    
     

Yin-Chieh Cheng

 

Dated: December 27, 2018

   
       
       
By: /s/ Yin-Chieh Cheng    
       
Name: Yin-Chieh Cheng    
  Yin-Chieh Cheng, Consultant    
       

 

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SCHEDULE 2 - APPENDIX 1

 

NOTICE OF EXERCISE

 

1.        The undersigned Holder hereby exercises its right to purchase __________________                    shares of NOCERA, INC. (the “ Company ”) in accordance with the attached Warrant To Purchase Stock, and tenders payment of the aggregate Warrant Price for such shares as follows:

 

 

☐                    Cashless Exercise pursuant to Section 1.2 of the Warrant

 

 

2.        Please issue a certificate or certificates representing the Shares in the name specified below:

 

 

     
  Holder’s Name  
     
     
     
  (Address)  

 

3.             By its execution below and for the benefit of the Company, Holder hereby restates each of the representations and warranties in Section 4 of the Warrant to Purchase Stock as of the date hereof.

 

  HOLDER:
   
   
     
  By:  
     
  Name:  
     
  Title:  
     
  (Date):  

 

 

 

EXHIBIT 3.3

 

ARTICLES OF INCORPORATION

OF

GSI ACQUISITION CORP., A COLORADO CORPORATION

 
 

 

 
 

 

 
 

 

EXHIBIT 3.4

 

 

ARTICLES OF INCORPORATION

OF

GRAND SMOOTH, INC. LIMITED, A HONG KONG CORPORATION

 
 

 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 

EXHIBIT 3.5

 

 

STATEMENT OF MERGER

 

GSI ACQUISITION CORP., A COLORADO CORPORATION

AND

GRAND SMOOTH, INC. LIMITED, A HONG KONG CORPORATION

 
 

 

 
 

 
 

 
 

 
 

 

 

EXHIBIT 10.1

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EXHIBIT 10.2

 

 

 

2018 NOCERA, INC.

 

STOCK OPTION AND AWARD INCENTIVE PLAN

 

 
 

SECTION 1: GENERAL PURPOSE OF PLAN

 

The name of this plan is the NOCERA, INC. STOCK OPTION AND AWARD INCENTIVE PLAN (the "Plan"). The purpose of the Plan is to enable NOCERA, INC., a Nevada corporation (the "Company"), and any Parent or any Subsidiary to obtain and retain the services of the types of Employees, Consultants and Directors who will contribute to the Company's long range success and to provide incentives which are linked directly to increases in share value which will inure to the benefit of all stockholders of the Company.

 

SECTION 2: DEFINITIONS

 

For purposes of the Plan, the following terms shall be defined as set forth below:

 

"Administrator" shall have the meaning as set forth in Section 3, hereof.

 

"Board" means the Board of Directors of the Company.

 

"Cause" means (i) failure by an Eligible Person to substantially perform his or her duties and obligations to the Company (other than any such failure resulting from his or her incapacity due to physical or mental illness); (ii) engaging in misconduct or a fiduciary breach which is or potentially is materially injurious to the Company or its stockholders; (iii) commission of a felony; (iv) the commission of a crime against the Company which is or potentially is materially injurious to the Company; or (v) as otherwise provided in the Stock Option Agreement or Stock Purchase Agreement. For purposes of this Plan, the existence of Cause shall be determined by the Administrator in its sole discretion.

 

"Change in Control" shall mean:

 

The consummation of a merger or consolidation of the Company with or into another entity or any other corporate reorganization, if more than 50% of the combined voting power (which voting power shall be calculated by assuming the conversion of all equity securities convertible (immediately or at some future time) into shares entitled to vote, but not assuming the exercise of any warrant or right to subscribe to or purchase those shares) of the continuing or Surviving Entity's securities outstanding immediately after such merger, consolidation or other reorganization is owned, directly or indirectly, by persons who were not stockholders of the Company immediately prior to such merger, consolidation or other reorganization; provided, however, that in making the determination of ownership by the stockholders of the Company, immediately after the reorganization, equity securities which persons own immediately before the reorganization as stockholders of another party to the transaction shall be disregarded; or

 

The sale, transfer or other disposition of all or substantially all of the Company's assets.

 

A transaction shall not constitute a Change in Control if its sole purpose is to change the state of the Company's incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held the Company's securities immediately before such transaction.

 

 

 

1  
 

"Code" means the Internal Revenue Code of 1986, as amended from time to time.

 

"Committee" means a committee of the Board designated by the Board to administer the Plan.

 

"Company" means NOCERA, INC., a corp