Microalliance Group Inc 8-K, filed Aug 16, 2021
Microalliance Group Inc. (MALG)
About this 8-K
Microalliance Group Inc filed this 8-K on August 16, 2021, reporting on events of June 3, 2021.
Items reported
- Item 1.01: Entered into a material agreement
- Item 2.01: Completed an acquisition or sale of assets
- Item 3.02: Unregistered sale of equity
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): June 3, 2021
Fountain Healthy Aging, Inc.
(Exact name of registrant as specified in its charter)
| Nevada | 333-123774 | 86-1098668 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) | (IRS Employer Identification No.) |
|
Room 601, Bldg. E, No. 1, Huabao Fubao China Street, Futian District Shenzhen City, Guangdong Province |
518000 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code +86 185 6676 1769
None
(Former name or former address, if changed since last report.)
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(b) under the Exchange Act (17 CFR 240.14a-12(b)) |
| ☐ | 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 ☒
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. ☐
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| N/A | N/A | N/A |
Item 1.01 Entry into a Material Definitive Agreement.
On August 16, 2021, Fountain Healthy Aging, Inc. (the “Company,” “we,” “our”) entered into a Share Exchange Agreement (the “Agreement”) with certain equity owners (the “Sellers”) of Shenzhen Nainiang Wine Industrial Co., Ltd., a company incorporated and operating in the People’s Republic of China (the “Target Company”), pursuant to which, among other things and subject to the terms and conditions contained therein, the Company issued a total of 9,281,577 shares of the Company’s common stock (the “Exchange Shares”) to the Sellers in exchange for the Sellers, on June 3, 2021 and pursuant to a separate contract described in Item 2.01 of the Current Report on Form 8-K, transferring to the Company’s wholly-owned subsiary, Shenzhen Wei Lian Jin Meng Electronic Commerce Limited (“Shenzhen Wei Lian”), 99% of the total issued and outstanding equity (the “Transferred Equity”) of Shenzhen Nainiang Wine Industrial Co., Ltd., a company incorporated and operating in the People’s Republic of China (the “Target Company”) (both the transfer of the Transferred Equity and the issuance of the Exchange Shares, the “Acquisition”).
Pursuant to the Agreement, the Company will issue the Exchange Shares to the Sellers. The Exchange Shares will be allocated among the Sellers pro-rata based on each Seller’s ownership of the Target Company prior to the Acquisition.
The Agreement contains a number of representations and warranties made by the Target Company and the Sellers, which in certain cases are subject to specified exceptions and qualifications contained in the Agreement. The representations and warranties are customary for transactions similar to the Acquisition.
The Agreement is structured with a simultaneous closing, and the Company issued the Exchange Shares on the same day as the parties to the Agreement executed the Agreement. As such, the Agreement did not include closing conditions, covenants or other protections for the Company that would otherwise be included in a transaction which included a closing period.
A copy of the Agreement is filed with this Current Report on Form 8-K as Exhibit 10.1 and is incorporated herein by reference, and the foregoing description of the Agreement is qualified in its entirety by reference thereto.
Item 2.01 Completion of Acquisition or Disposition of Assets.
On June 3, 2021, Shenzhen Wei Lian closed a transaction in which the Sellers transferred to Shenzhen Wei Lian the Transferred Equity, in exchange for the promise by Shenzhen Wei Lian to cause the Company to issue the Exchange Shares to the Sellers on a pro rata basis based on their percentage of ownership of the Transferred Equity.
The Acquisition resulted in Shenzhen Wei Lian becoming the owner of 99% of the Target Company’s total issued and outstanding equity. For federal income tax purposes, it is intended that the Acquisition qualify as a tax-free reorganization under the provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended. The Acquisition was accounted for under merger accounting under common control.
As a result of the Acquisition, the Company has now assumed the Target Company’s business operations, and the Target Company is a majority-owned subsidiary of the Company.
Among the Sellers is Ms. Zhu Hong, who is the Company’s sole executive and board member, and who in connection with the Acquisition, sold 48% of the Target Company in exchange for receiving 4,500,159 of the Exchange Shares. To determine the amount of Exchange Share to issue to the Sellers, the Company converted the net asset value of the Target Company as of June 3, 2021 to US Dollars, and then used a price per share for the Company’s common stock of US$1.10.
A copy of the agreement by which the Transferred Equity was transferred to Shenzhen Wei Lian is filed with this Current Report on Form 8-K as Exhibit 10.2 and is incorporated herein by reference, and the foregoing description of the Transaction is qualified in its entirety by reference thereto.
The disclosures set forth in Item 1.01 “Entry into a Material Definitive Agreement” are incorporated by reference into this Item 2.01.
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Item 3.02 Unregistered Sales of Equity Securities.
The disclosure in Item 1.01 and Item 2.01 of this Current Report on Form 8-K is incorporated by reference into this Item 3.02.
Item 9.01 Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired.
The financial statements required by this Item are attached hereto as Exhibits 99.1 and 99.2 and incorporated herein by reference.
(b) Pro forma financial information.
The pro forma financial information required by this Item is attached hereto as Exhibit 99.3 and incorporated herein by reference.
(d) Exhibits.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| FOUNTAIN HEALTHY AGING, INC. | ||
| By: | /s/ Zhu Hong | |
| Name: | Zhu Hong | |
| Title: | Chief Executive Officer | |
| Dated: | August 16, 2021 | |
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Exhibit 10.1
SHARE EXCHANGE AGREEMENT
by and among
Fountain Healthy Aging, Inc.,
as the Purchaser,
Shenzhen NaiNiang INDUSTRIAL Wine Co., Ltd. 深圳市乃娘酒业有限公司,
as the Company
and
The SHAREHOLDERS OF THE COMPANY NAMED HEREIN,
as the Sellers
Dated as of August 16, 2021
Table of Contents
| article I. | ||
| THE SHARE EXCHANGE | ||
| 1.1 | Purchase and Sale of Shares | 1 |
| article II. | ||
| closing | ||
| 2.1 | Closing | 2 |
| article III. | ||
| REPRESENTATIONS AND WARRANTIES OF THE COMPANY | ||
| 3.1 | Due Organization and Good Standing | 2 |
| 3.2 | Authorization; Binding Agreement | 2 |
| 3.3 | Capitalization | 2 |
| 3.4 | Subsidiaries | 3 |
| 3.5 | Governmental Approvals | 3 |
| 3.6 | No Conflict With Other Instruments | 3 |
| 3.7 | Financial Statements | 3 |
| 3.8 | Absence of Certain Changes | 4 |
| 3.9 | Compliance with Laws | 4 |
| 3.10 | Company Permits | 5 |
| 3.11 | Litigation | 5 |
| 3.12 | Material Contracts | 5 |
| 3.13 | Intellectual Property | 7 |
| 3.14 | Taxes and Returns | 8 |
| 3.15 | Real Property | 9 |
| 3.16 | Title to and Sufficiency of Assets | 9 |
| 3.17 | Employee Matters | 10 |
| 3.18 | Benefit Plans | 10 |
| 3.19 | Environmental Matters | 11 |
| 3.20 | Transactions with Related Persons | 11 |
| 3.21 | Insurance | 11 |
| 3.22 | Top Customers and Suppliers | 11 |
| 3.23 | Books and Records | 12 |
| 3.24 | Accounts Receivable | 12 |
| 3.25 | Finders and Investment Bankers | 12 |
| 3.26 | Independent Investigation | 12 |
| 3.27 | Information Supplied | 12 |
| 3.28 | Disclosure | 12 |
| article IV. | ||
| REPRESENTATIONS AND WARRANTIES OF THE SELLERS | ||
| 4.1 | Due Organization and Good Standing | 13 |
| 4.2 | Authorization; Binding Agreement | 13 |
| 4.3 | Ownership | 13 |
| 4.4 | Governmental Approvals | 13 |
| 4.5 | Non-Contravention | 13 |
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| 4.6 | No Litigation | 13 |
| 4.7 | Investment Representations | 14 |
| 4.8 | Finders and Investment Bankers | 14 |
| 4.9 | Independent Investigation | 14 |
| 4.10 | Information Supplied | 14 |
| 4.11 | Disclosure | 15 |
| article V. | ||
| SURVIVAL | ||
| 5.1 | Survival | 15 |
| article VI. | ||
| RELEASES | ||
| 6.1 | Release and Covenant Not to Sue | 15 |
| article VII. | ||
| MISCELLANEOUS | ||
| 7.1 | Notices | 16 |
| 7.2 | Binding Effect; Assignment | 16 |
| 7.3 | Third Parties | 16 |
| 7.4 | Arbitration | 16 |
| 7.5 | Governing Law | 16 |
| 7.6 | WAIVER OF JURY TRIAL | 16 |
| 7.7 | Specific Performance | 17 |
| 7.8 | Severability | 17 |
| 7.9 | Amendment | 17 |
| 7.10 | Waiver | 17 |
| 7.11 | Entire Agreement | 17 |
| 7.12 | Interpretation | 18 |
| 7.13 | Counterparts | 18 |
| article VIII. | ||
| DEFINITIONS | ||
| 8.1 | Certain Definitions | 18 |
INDEX OF ANNEXES AND EXHIBITS
| Annex | Description | |
| Annex I | List of Sellers |
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SHARE EXCHANGE AGREEMENT
This Share Exchange Agreement (this “Agreement”) is made and entered into as of August 16, 2021 by and among (i) Fountain Healthy Aging, Inc., a corporation incorporated in the State of Nevada (the “Purchaser”), (ii) Shenzhen Nainiang Wine Industrial Co., Ltd. 深圳市乃娘酒业有限公司, a company incorporated in the People’s Republic of China (“PRC”) with limited liability (the “Company”) and (iii) each of the persons named on Annex I hereto (collectively, the “Sellers” and each a “Seller”). The Purchaser, the Company and the Sellers are sometimes referred to herein individually as a “Party” and, collectively, as the “Parties”. Capitalized terms, unless otherwise defined, shall have the meanings ascribed to such terms in Article VIII hereof.
RECITALS
WHEREAS, the Purchaser is a publicly held corporation organized under the laws of the State of Nevada with shares traded over the counter on the platform maintained by the OTC Markets Group;
WHEREAS, the Company is a privately-held company organized under the laws of the PRC and with no subsidiaries;
WHEREAS, on June 2, 2021, the Company, the Sellers and Shenzhen Wei Lian Jin Meng Electronic Commerce Limited 深圳市微联金盟电子商务科技有限公司 (“PRC Sub”) signed an agreement (the “PRC Agreement”) in which the PRC Sub agreed to take possession of 99% of the total issued and outstanding equity of the Company from the Sellers (the “PRC Acquisition”), in exchange for the Purchaser transferring its common stock to the Sellers at a subsequent date;
WHEREAS, the PRC Acquisition closed on June 3, 2021, at which time the Sellers transferred 99% of the equity shares of the Company to the PRC Sub;
WHEREAS, the Sellers prior to the closing of the PRC Acquisition collectively owned all of the issued and outstanding shares of the Company representing a 100% interest in the Company;
WHEREAS, the Purchaser in this Agreement agrees to issue to the Sellers a total of 9,281,577 shares of the Purchaser’s common stock, par value $0.00001 per share (the “Common Stock”), which represents approximately 1.52% of the issued and outstanding shares of the Purchaser’s Common Stock (the “Exchange”) and on the Closing Date (as defined below), the Sellers will become stockholders of the Purchaser; and
WHEREAS, for Federal income tax purposes, it is intended that the Exchange qualify as a reorganization under the provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended;
NOW, THEREFORE, in consideration of the premises set forth above, which are incorporated in this Agreement as if fully set forth below, and the representations, warranties, covenants and agreements contained in this Agreement, and intending to be legally bound hereby, the Parties agree as follows:
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I.
THE SHARE EXCHANGE
1.1 Purchase and Sale of Shares. In exchange for the 99% of the total outstanding equity of the Company (the “Purchased Shares”) which were transferred to the PRC Sub in the PRC Acquisition, at the Closing and subject to and upon the terms and conditions of this Agreement, in full payment for the Purchased Shares, the Purchaser shall issue and deliver to the Sellers an aggregate of nine million two hundred and eighty-one thousand five hundred and seventy seven (9,281,577) shares of Common Stock (the “Exchange Shares”). Each Seller shall receive its pro rata share of the Exchange Shares based on the percentage of Purchased Shares owned by such Seller prior to the PRC Acquisition, as compared to the total number of Purchased Shares owned by all Sellers prior to the PRC Acquisition (such Seller’s “Pro Rata Share”). Each Seller’s Pro Rata Share is set forth in Annex I.
article
II.
closing
2.1 Closing. The closing of the transactions contemplated by this Agreement (“Closing”) shall occur on the Effective Date, or at such other date, time or place as the Purchaser and the Company may agree (the date of such Closing, the “Closing Date”).
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III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchaser as follows:
3.1 Due Organization and Good Standing. The Company is a business company duly organized on January 14, 2020 (the “Company Incorporation Date”), validly existing and in good standing under the Laws of the PRC and has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted. The Company is duly qualified or licensed and in good standing in the jurisdiction in which it is incorporated or registered and in each other jurisdiction where it does business or operates to the extent that the character of the property owned, or leased or operated by it or the nature of the business conducted by it makes such qualification or licensing necessary.
3.2 Authorization; Binding Agreement. The Company has all requisite corporate power and authority to execute and deliver this Agreement, to perform the Company’s obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, (a) have been duly and validly authorized by the Company’s board of directors and the Company’s shareholders to the extent required by the Company’s Organizational Documents, the PRC Act, any other applicable Law or any Contract to which the Company or any of its shareholders is a party or by which it or its securities are bound and (b) no other proceedings on the part of the Company are necessary to authorize the execution and delivery of this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by the Company and assuming the due authorization, execution and delivery of this Agreement, constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except to the extent that enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization and moratorium laws and other laws of general application affecting the enforcement of creditors’ rights generally or by any applicable statute of limitation or by any valid defense of set-off or counterclaim, and the fact that equitable remedies or relief (including the remedy of specific performance) are subject to the discretion of the court from which such relief may be sought (collectively, the “Enforceability Exceptions”).
3.3 Capitalization.
(a) Prior to the PRC Acquisition, the Sellers were the legal (registered) and beneficial owners of all of the issued and outstanding shares and other equity interests in or of the Company, with each Seller owning the shares and any other equity interests in the Company set forth on Annex I, all of which shares and other equity interests are owned free and clear of any Liens. The Purchased Shares delivered by the Sellers to the PRC Sub constitute 99% of the issued and outstanding shares and other equity interests in or of the Company. All of the outstanding shares and other equity interests in or of the Company have been duly authorized, are fully paid and non-assessable and not in violation of any purchase option, right of first refusal, preemptive right, subscription right or any similar right under any provision of the PRC Act, any other applicable Law, the Company Charter or any Contract to which the Company is a party or by which it or its securities are bound. The Company holds no shares or other equity interests in or of the Company in its treasury. None of the outstanding shares or other equity interests in or of the Company were issued in violation of any applicable securities Laws.
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(b) There are no options, warrants or other rights to subscribe for or purchase any shares or other equity interests in or of the Company or securities convertible into or exchangeable for, or that otherwise confer on the holder any right to acquire any shares or other equity interests in or of the Company, or preemptive rights or rights of first refusal or first offer, nor are there any Contracts, commitments, arrangements or restrictions to which the Company or any of its shareholders is a party or bound relating to any equity securities of the Company, whether or not outstanding. There are no outstanding or authorized equity appreciation, phantom equity or similar rights with respect to the Company. There are no voting trusts, proxies, shareholder agreements or any other agreements or understandings with respect to the voting of the Company’s shares or other equity interests. There are no outstanding contractual obligations of the Company to repurchase, redeem or otherwise acquire any shares or other equity interests or securities in or of the Company, nor has the Company granted any registration rights to any Person with respect to the Company’s equity securities. All of the Company’s securities have been granted, offered, sold and issued in compliance with all applicable securities Laws.
(c) Since the Company Incorporation Date, the Company has not declared or paid any distribution or dividend in respect of its shares or other equity interests and has not repurchased, redeemed or otherwise acquired any shares or other equity interests in or of the Company, and the board of directors of the Company has not authorized any of the foregoing.
3.4 Subsidiaries. The Company does not have any wholly- or partially-owned subsidiaries and does not own an equity interest in any other Person.
3.5 Governmental Approvals. No Consent of or with any Governmental Authority on the part of the Company is required to be obtained or made in connection with the execution, delivery or performance by the Company of this Agreement or the consummation by the Company of the transactions contemplated hereby other than such filings as contemplated by this Agreement.
3.6 No Conflict With Other Instruments. The execution and delivery by the Company of this Agreement, the consummation by the Company of the transactions contemplated hereby, and compliance by the Company with any of the provisions hereof will not result in the breach of any term or provision of, constitute a default under, or terminate, accelerate or modify the terms of, any indenture, mortgage, deed of trust, or other material agreement or instrument to which the Company is a party or to which any of its assets, properties or operations are subject, except to the extent that such breach would not reasonably be expected to have a Material Adverse Effect on the Company.
3.7 Financial Statements.
(a) As used herein, the term “Company Financials” means the (i) financial statements of the Company (including any related notes thereto), consisting of the balance sheet of the Company as of December 31, 2020, and the related income statements, changes in shareholder equity and statements of cash flows for the year then ended and (ii) the unaudited financial statements, consisting of the balance sheet of the Company as of June 30, 2021 (the “Interim Balance Sheet Date”) and the related income statement, changes in shareholder equity and statement of cash flows for the three (3) months then ended. The Company Financials (i) accurately reflect the books and records of the Company as of the times and for the periods referred to therein, (ii) were prepared in accordance with GAAP, consistently applied throughout and among the periods involved (except that the unaudited statements exclude the footnote disclosures and other presentation items required for GAAP and exclude year-end adjustments which will not be material in amount), and (iii) fairly present in all material respects the financial position of the Company as of the respective dates thereof and the results of the operations and cash flows of the Company for the periods indicated.
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(b) The Company maintains accurate books and records reflecting its assets and Liabilities and maintains proper and adequate internal accounting controls that provide reasonable assurance that (i) the Company does not maintain any off-the-book accounts and that the Company’s assets are used only in accordance with the Company’s management directives, (ii) transactions are executed with management’s authorization, (iii) transactions are recorded as necessary to permit preparation of the financial statements of the Company and to maintain accountability for the Company’s assets, (iv) access to the Company’s assets is permitted only in accordance with management’s authorization, (v) the reporting of the Company’s assets is compared with existing assets at regular intervals and verified for actual amounts and (vi) accounts, notes and other receivables are recorded accurately, and proper and adequate procedures are implemented to effect the collection of accounts, notes and other receivables on a current and timely basis. The Company has not been subject to or involved in any material fraud that involves management or other employees who have a significant role in the internal controls over financial reporting of the Company. Since the Company Incorporation Date, neither the Company nor its Representatives has received any written complaint, allegation, assertion or claim regarding the accounting or auditing practices, procedures, methodologies or methods of the Company or its internal accounting controls, including any material written complaint, allegation, assertion or claim that the Company has engaged in questionable accounting or auditing practices.
(c) All material Indebtedness of the Company is disclosed in the financial statements and related notes previously delivered to the Purchaser. No Indebtedness of the Company contains any restriction upon (i) the prepayment of any of such Indebtedness, (ii) the incurrence of Indebtedness by the Company, or (iii) the ability of the Company to grant any Lien on their respective properties or assets.
(d) The Company is not subject to any Liabilities or obligations (whether or not required to be reflected on a balance sheet prepared in accordance with GAAP), except for those that are either (i) adequately reflected or reserved on or provided for in the balance sheet of the Company as of the Interim Balance Sheet Date contained in the Company Financials or (ii) not material and that were incurred after the Interim Balance Sheet Date in the ordinary course of business consistent with past practice (other than Liabilities for breach of any Contract or violation of any Law).
(e) All financial projections with respect to the Company that were delivered by or on behalf of the Company to the Purchaser or its Representatives were prepared in good faith using assumptions that the Company believes to be reasonable.
3.8 Absence of Certain Changes. Since the Company Incorporation Date, the Company has (a) conducted its business only in the ordinary course of business consistent with past practice, and (b) not been subject to a Material Adverse Effect.
3.9 Compliance with Laws. Except for such noncompliance which would not reasonably be expected to have a Material Adverse Effect on the Purchaser, the Company has not been in material conflict or non-compliance with, or in material default or violation of, nor has the Company, since the Company Incorporation Date, received any written or, to the Knowledge of the Company, oral notice of any material conflict or non-compliance with, or material default or violation of, any applicable Laws by which it or any of its properties, assets, employees, business or operations are or were bound or affected.
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3.10 Company Permits. The Company (and its employees who are legally required to be licensed by a Governmental Authority in order to perform his or her duties with respect to his or her employment with the Company), holds all Permits necessary to lawfully conduct in all material respects its business as presently conducted and as currently contemplated to be conducted, and to own, lease and operate its assets and properties (collectively, the “Company Permits”). The Company has made available to the Purchaser true, correct and complete copies of all material Company Permits. All of the Company Permits are in full force and effect, and no suspension or cancellation of any of the Company Permits is pending or, to the Company’s Knowledge, threatened. The Company is not in violation in any material respect of the terms of any Company Permit.
3.11 Litigation. There is no (a) Action of any nature pending or, to the Company’s Knowledge, threatened, nor is there any reasonable basis for any Action to be made, or (b) Order pending now or rendered by a Governmental Authority since the Company Incorporation Date, in either case of (a) or (b) by or against the Company, its current or former directors, officers or equity holders (provided, that any litigation involving the directors, officers or equity holders of the Company must be related to the Company’s business, equity securities or assets), its business, equity securities or assets. Since the Company Incorporation Date, none of the current or former officers, senior management or directors of the Company have been charged with, indicted for, arrested for, or convicted of any felony or any crime involving fraud.
3.12 Material Contracts.
(a) The Company has made available to the Purchaser (including written summaries of oral Contracts), true, correct and complete copies of, each Contract to which the Company is a party or by which the Company, or any of its properties or assets are bound or affected (each a “Company Material Contract”) that:
(i) contains covenants that limit the ability of the Company (A) to compete in any line of business or with any Person or in any geographic area or to sell, or provide any service or product or solicit any Person, including any non-competition covenants, employee and customer non-solicit covenants, exclusivity restrictions, rights of first refusal or most-favored pricing clauses or (B) to purchase or acquire an interest in any other Person;
(ii) involves any joint venture, profit-sharing, partnership, limited liability company or other similar agreement or arrangement relating to the formation, creation, operation, management or control of any partnership or joint venture;
(iii) involves any exchange traded, over the counter or other swap, cap, floor, collar, futures contract, forward contract, option or other derivative financial instrument or Contract, based on any commodity, security, instrument, asset, rate or index of any kind or nature whatsoever, whether tangible or intangible, including currencies, interest rates, foreign currency and indices;
(iv) evidences Indebtedness (whether incurred, assumed, guaranteed or secured by any asset) of the Company having an outstanding principal amount in excess of $20,000;
(v) involves the acquisition or disposition, directly or indirectly (by merger or otherwise), of assets with an aggregate value in excess of $20,000 (other than in the ordinary course of business consistent with past practice) or shares or other equity interests in or of another Person;
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(vi) relates to any merger, consolidation or other business combination with any other Person or the acquisition or disposition of any other entity or its business or material assets or the sale of the Company, its business or material assets;
(vii) by its terms, individually or with all related Contracts, calls for aggregate payments or receipts by the Company under such Contract or Contracts of more than $20,000 in the aggregate;
(viii) obligates the Company to provide continuing indemnification or a guarantee of obligations of a third party after the date hereof in excess of $20,000;
(ix) is between the Company and any Top Customer or Top Supplier (both as defined below) (other than in the ordinary course of business);
(x) is between the Company and any directors, officers or employees of the Company (other than at-will employment arrangements with employees entered into in the ordinary course of business consistent with past practice), including all non-competition, severance and indemnification agreements, or any Related Person;
(xi) obligates the Company to make any capital commitment or expenditure in excess of $20,000 (including pursuant to any joint venture);
(xii) relates to a material settlement entered into within two (2) years prior to the date of this Agreement or under which the Company has outstanding obligations (other than customary confidentiality obligations or in the ordinary course of business);
(xiii) provides another Person (other than any manager, director or officer of the Company) with a power of attorney;
(xiv) is otherwise material to the Company and not described in clauses (i) through (xiii) above.
(b) With respect to each Company Material Contract: (i) such Company Material Contract is valid and binding and enforceable in all respects against the Company (subject to the Enforceability Exceptions) and, to the Knowledge of the Company, each other party thereto, and is in full force and effect; (ii) neither the execution of this Agreement nor the consummation of the transactions contemplated by this Agreement will affect the validity or enforceability of any Company Material Contract; (iii) the Company is not in breach or default in any respect, and no event has occurred that with the passage of time or giving of notice or both would constitute a breach or default by the Company, or permit termination or acceleration by the other party thereto, under such Company Material Contract; (iv) to the Knowledge of the Company, no other party to such Company Material Contract is in breach or default in any respect, and no event has occurred that with the passage of time or giving of notice or both would constitute such a breach or default by such other party, or permit termination or acceleration by the Company, under such Company Material Contract; (v) the Company has not received written or, to the Knowledge of the Company, oral notice of an intention by any party to any such Company Material Contract that provides for a continuing obligation by any party thereto to terminate such Company Material Contract or amend the terms thereof, other than modifications in the ordinary course of business that do not adversely affect the Company; and (vi) the Company has not waived any rights under any such Company Material Contract.
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3.13 Intellectual Property.
(a) The Company has disclosed to the Purchaser (i) all Patents, Trademarks, Internet Assets and Copyrights owned or licensed by the Company or otherwise used or held for use by the Company in which the Company is the owner, applicant or assignee (“Company Registered IP”); (ii) all material unregistered Intellectual Property owned or purported to be owned by the Company; and (iii) all licenses, sublicenses and other agreements or permissions (“Company IP Licenses”), under which the Company is a licensee or otherwise is authorized to use or practice any Intellectual Property. The Company owns, free and clear of all Liens (other than Permitted Liens), has valid and enforceable rights in, and has the unrestricted right to use, sell, license, transfer or assign, all Intellectual Property currently used, licensed or held for use by the Company, and previously used or licensed by the Company, except for the Intellectual Property that is the subject of the Company IP Licenses. For each Patent and Patent application in the Company Registered IP, the Company has obtained valid assignments of inventions from each inventor. All Company Registered IP is owned exclusively by the Company without obligation to pay royalties, licensing fees or other fees, or otherwise account to any third party with respect to such Company Registered IP.
(b) The Company has a valid and enforceable license to use all Intellectual Property that is the subject of the Company IP Licenses applicable to the Company. The Company IP Licenses include all of the licenses, sublicenses and other agreements or permissions necessary to operate the Company as presently conducted. The Company has performed all obligations imposed on it in the Company IP Licenses, has made all payments required to date, and the Company is not, nor, to the Knowledge of the Company, is any other party thereto, in breach or default thereunder, nor has any event occurred that with notice or lapse of time or both would constitute a default thereunder. The continued use by the Company of the Intellectual Property that is the subject of the Company IP Licenses in the same manner that it is currently being used is not restricted by any applicable license of the Company. All registrations for Copyrights, Patents and Trademarks that are owned by or exclusively licensed to the Company are valid and in force, and all applications to register any Copyrights, Patents and Trademarks are pending and in good standing, all without challenge of any kind. The Company is not party to any Contract that requires the Company to assign to any Person all of its rights in any Intellectual Property developed by the Company under such Contract.
(c) The Company has disclosed to the Purchaser all licenses, sublicenses and other agreements or permissions under which the Company is the licensor (each, an “Outbound IP License”), and for each such Outbound IP License. The Company has performed all obligations imposed on it in the Outbound IP Licenses, and the Company is not, nor, to the Knowledge of the Company, is any other party thereto, in breach or default thereunder, nor has any event occurred that with notice or lapse of time or both would constitute a default thereunder.
(d) No Action is pending or, to the Company’s Knowledge, threatened that challenges the validity, enforceability, ownership, or right to use, sell, license or sublicense any Intellectual Property currently licensed, used or held for use by the Company in any material respect. The Company has not received any written or, to the Knowledge of the Company, oral notice or claim asserting or suggesting that any infringement, misappropriation, violation, dilution or unauthorized use of the Intellectual Property of any other Person is or may be occurring or has or may have occurred, as a consequence of the business activities of the Company, nor to the Knowledge of the Company is there a reasonable basis therefor. There are no Orders to which the Company is a party or is otherwise bound that (i) restrict the rights of the Company to use, transfer, license or enforce any Intellectual Property owned by the Company, (ii) restrict the conduct of the business of the Company in order to accommodate a third Person’s Intellectual Property, or (iii) grant any third Person any right with respect to any Intellectual Property owned by the Company. The Company is not currently infringing, nor has, in the past, infringed, misappropriated or violated any Intellectual Property of any other Person in any material respect in connection with the ownership, use or license of any Intellectual Property owned or purported to be owned by the Company or, to the Knowledge of the Company, otherwise in connection with the conduct of the respective businesses of the Company. To the Company’s Knowledge, no third party is infringing upon, has misappropriated or is otherwise violating any Intellectual Property owned, licensed by, licensed to, or otherwise used or held for use by the Company (“Company IP”) in any material respect.
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(e) All employees and independent contractors of the Company have assigned to the Company all Intellectual Property arising from the services performed for the Company by such Persons. No current or former officers, employees or independent contractors of the Company have claimed any ownership interest in any Intellectual Property owned by the Company. To the Knowledge of the Company, there has been no violation of the Company’s policies or practices related to protection of Company IP or any confidentiality or nondisclosure Contract relating to the Intellectual Property owned by the Company. The Company has provided the Purchaser with true and complete copies of all written Contracts referenced in subsections under which employees and independent contractors assigned their Intellectual Property to the Company.
(f) To the Knowledge of the Company, no Person has obtained unauthorized access to third party information and data in the possession of the Company, nor has there been any other compromise of the security, confidentiality or integrity of such information or data. The Company has complied with all applicable Laws relating to privacy, personal data protection, and the collection, processing and use of personal information and its own privacy policies and guidelines. The operation of the business of the Company has not and does not materially violate any right to privacy or publicity of any third person, or constitute unfair competition or trade practices under applicable Law.
(g) The consummation of any of the transactions contemplated by this Agreement will neither violate nor by their terms result in the material breach, material modification, cancellation, termination, suspension of, or acceleration of any payments with respect to, or release of source code because of (i) any Contract providing for the license or other use of Intellectual Property owned by the Company, or (ii) any Company IP License. Following the Closing, the Company shall be permitted to exercise all of the Company’s rights under such Contracts or IP Licenses described in the previous sentence to the same extent that the Company would have been able to exercise had the transactions contemplated by this Agreement not occurred, without the payment of any additional amounts or consideration other than ongoing fees, royalties or payments which the Company would otherwise be required to pay in the absence of such transactions.
3.14 Taxes and Returns.
(a) The Company has or will have timely filed, or caused to be timely filed, all Tax Returns and reports required to be filed by it (taking into account all available extensions), which Tax Returns are true, accurate, correct and complete in all material respects, and has paid, collected or withheld, or caused to be paid, collected or withheld, all Taxes required to be paid, collected or withheld, other than such Taxes for which adequate reserves in the Company Financials have been established in accordance with GAAP. The Company has complied with all applicable Laws relating to Tax.
(b) There is no current pending or, to the Knowledge of the Company, threatened Action against the Company by a Governmental Authority in a jurisdiction where the Company does not file Tax Returns that it is or may be subject to taxation by that jurisdiction.
(c) The Company is not being audited by any Tax authority nor has it been notified in writing or, to the Knowledge of the Company, orally by any Tax authority that any such audit is contemplated or pending. There are no claims, assessments, audits, examinations, investigations or other Actions pending against the Company in respect of any Tax, and the Company has not been notified in writing of any proposed Tax claims or assessments against it (other than, in each case, claims or assessments for which adequate reserves in the Company Financials have been established).
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(d) There are no Liens with respect to any Taxes upon the Company’s assets, other than Permitted Liens.
(e) The Company has collected or withheld all Taxes currently required to be collected or withheld by it, and all such Taxes have been paid to the appropriate Governmental Authorities or set aside in appropriate accounts for future payment when due.
(f) The Company does not have any outstanding waivers or extensions of any applicable statute of limitations to assess any amount of Taxes. There are no outstanding requests by the Company for any extension of time within which to file any Tax Return or within which to pay any Taxes shown to be due on any Tax Return.
(g) The Company has not made any change in accounting method or received a ruling from, or signed an agreement with, any taxing authority that would reasonably be expected to have a material impact on its Taxes following the Closing.
(h) The Company does not have any Liability for the Taxes of another Person (i) under any applicable Tax Law, (ii) as a transferee or successor, or (iii) by contract, indemnity or otherwise. The Company is not a party to or bound by any Tax indemnity agreement, Tax sharing agreement or Tax allocation agreement or similar agreement, arrangement or practice with respect to Taxes (including advance pricing agreement, closing agreement or other agreement relating to Taxes with any Governmental Authority) that will be binding on the Company or its Subsidiaries with respect to any period following the Closing Date.
(i) The Company has not requested, nor is the subject of or bound by any private letter ruling, technical advice memorandum, closing agreement or similar ruling, memorandum or agreement with any Governmental Authority with respect to any Taxes, nor is any such request outstanding.
3.15 Real Property. The Company has provided to the Purchaser a list of all premises currently leased or subleased or otherwise used or occupied by the Company for the operation of the business of the Company (the “Leased Premises”), and of all current leases, lease guarantees, agreements and documents related thereto, including all amendments, terminations and modifications thereof or waivers thereto (collectively, the “Company Real Property Leases”), as well as the current annual rent and term under each Company Real Property Lease. The Company has provided to the Purchaser a true and complete copy of each of the Company Real Property Leases, and in the case of any oral Company Real Property Lease, a written summary of the material terms of such Company Real Property Lease. The Company Real Property Leases are valid, binding and enforceable in accordance with their terms and are in full force and effect. To the Knowledge of the Company, no event has occurred which (whether with or without notice, lapse of time or both or the happening or occurrence of any other event) would constitute a default on the part of the Company or any other party under any of the Company Real Property Leases, and the Company has not received notice of any such condition. The Company does not own and has never owned any real property or any interest in real property (other than the leasehold interests in the Company Real Property Leases).
3.16 Title to and Sufficiency of Assets. The Company has good and marketable title to, or a valid leasehold interest in or right to use, all of its assets, free and clear of all Liens other than (a) Permitted Liens, (b) the rights of lessors under leasehold interests and (c) Liens specifically identified on the Company Financials. The assets (including Intellectual Property rights and contractual rights) of the Company constitute all of the assets, rights and properties that are used in the operation of the businesses of the Company as it is now conducted and presently proposed to be conducted or that are used or held by the Company for use in the operation of the businesses of the Company, and taken together, are adequate and sufficient for the operation of the businesses of the Company as currently conducted and as presently proposed to be conducted.
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3.17 Employee Matters.
(a) The Company is not a party to any collective bargaining agreement or other Contract with any group of employees, labor organization or other representative of any of the employees of the Company and the Company has no Knowledge of any activities or proceedings of any labor union or other party to organize or represent such employees. There has not occurred or, to the Knowledge of the Company, been threatened any strike, slow-down, picketing, work- stoppage, or other similar labor activity with respect to any such employees. There are no unresolved labor controversies (including unresolved grievances and age or other discrimination claims), if any, that are pending or, to the Knowledge of the Company, threatened between the Company and Persons employed by or providing services to the Company. No current officer or employee of the Company has provided the Company written or, to the Knowledge of the Company, oral notice of his or her plan to terminate his or her employment with the Company.
(b) The Company (i) is and has been in compliance in all material respects with all applicable Laws respecting employment and employment practices, terms and conditions of employment, health and safety and wages and hours, and other Laws relating to discrimination, disability, labor relations, hours of work, payment of wages and overtime wages, pay equity, immigration, workers compensation, working conditions, employee scheduling, occupational safety and health, family and medical leave, and employee terminations, and have not received written notice, or any other form of notice, that there is any pending Action involving unfair labor practices against the Company, (ii) is not liable for any material arrears of wages or any material penalty for failure to comply with any of the foregoing, and (iii) is not liable for any material payment to any Governmental Authority with respect to unemployment compensation benefits, social security or other benefits or obligations for employees, independent contractors or consultants (other than routine payments to be made in the ordinary course of business and consistent with past practice).
(c) The Company has paid in full to all employees all wages, salaries, commission, bonuses and other compensation due to its employees, including overtime compensation, and there are no severance payments which are or could become payable by the Company to any employees under the terms of any written or, to the Company’s Knowledge, oral agreement, or commitment or any Law, custom, trade or practice. Each employee has entered into the Company’s standard form of employee non-disclosure, inventions and restrictive covenants agreement with the Company (whether pursuant to a separate agreement or incorporated as part of such employee’s overall employment agreement), a copy of which has been provided to the Purchaser by the Company.
(d) Each independent contractor of the Company is a party to a written Contract with the Company. Each such independent contractor has entered into customary covenants regarding confidentiality, non-competition and assignment of inventions and copyrights in such Person’s agreement with the Company, a copy of which has been provided to the Purchaser by the Company. For the purposes of applicable Law, including the Code, all independent contractors who are currently, or since the Company Incorporation Date have been, engaged by the Company are bona fide independent contractors and not employees of the Company. Each independent contractor is terminable on fewer than thirty days’ notice, without any obligation of the Company to pay severance or a termination fee.
3.18 Benefit Plans. The Company has never maintained or contributed to (or had an obligation to contribute to) any “employee benefit plan” (as defined in Section 3(3) of ERISA) or any other benefit plan.
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3.19 Environmental Matters. The Company is and has been in compliance in all material respects with all applicable Environmental Laws, including obtaining, maintaining in good standing, and complying with all Permits required for its business and operations by Environmental Laws (“Environmental Permits”), no Action is pending or, to the Company’s Knowledge, threatened to revoke, modify, or terminate any such Environmental Permit, and, to the Company’s Knowledge, no facts, circumstances, or conditions currently exist that could adversely affect such continued compliance with Environmental Laws and Environmental Permits or require capital expenditures to achieve or maintain such continued compliance with Environmental Laws and Environmental Permits.
3.20 Transactions with Related Persons. Except as set forth in the financial statements and related notes previously delivered to the Purchaser, neither the Company nor any officer, director, manager, employee, trustee or beneficiary of the Company or any of its Affiliates, nor any immediate family member of any of the foregoing (whether directly or indirectly through an Affiliate of such Person) (each of the foregoing, a “Related Person”) is presently, or since the Company Incorporation Date has been, a party to any transaction with the Company, including any Contract or other arrangement (a) providing for the furnishing of services by (other than as officers, directors or employees of the Company), (b) providing for the rental of real property or personal property from or (c) otherwise requiring payments to (other than for services or expenses as directors, officers or employees of the Company in the ordinary course of business consistent with past practice), any Related Person or any Person in which any Related Person has an interest as an owner, officer, manager, director, trustee or partner or in which any Related Person has any direct or indirect interest (other than the ownership of securities representing no more than two percent of the outstanding voting power or economic interest of a publicly traded company). Except as set forth in the financial statements and related notes previously delivered to the Purchaser, the Company does not have outstanding any Contract or other arrangement or commitment with any Related Person, and no Related Person owns any real property or personal property, or right, tangible or intangible (including Intellectual Property) which is used in the business of the Company.
3.21 Insurance.
(a) All premiums due and payable under all insurance policies of the Company have been timely paid and the Company is otherwise in material compliance with the terms of such insurance policies. All such insurance policies are in full force and effect, and to the Knowledge of the Company, there is no threatened termination of, or material premium increase with respect to, any of such insurance policies.
(b) The Company has reported to its insurers all claims and pending circumstances that would reasonably be expected to result in a claim that could be covered by any such insurance policies, except where such failure to report such a claim would not be reasonably likely to be material to the Company. The Company has not made any claim against an insurance policy as to which the insurer is denying coverage.
3.22 Top Customers and Suppliers. The Company has disclosed to the Purchaser the key customers of the Company (the “Top Customers”) and the key suppliers of goods or services to the Company (the “Top Suppliers”). The relationships of the Company with such suppliers and customers are good commercial working relationships and (i) no Top Supplier or Top Customer within the last twelve months has cancelled or otherwise terminated, or, to the Company’s Knowledge, intends to cancel or otherwise terminate, any relationships of such Person with the Company, (ii) no Top Supplier or Top Customer has during the last twelve months decreased materially or, to the Company’s Knowledge, threatened to stop, decrease or limit materially, or intends to modify materially its relationships with the Company or intends to stop, decrease or limit materially its products or services to the Company or its usage or purchase of the products or services of the Company, (iii) to the Company’s Knowledge, no Top Supplier or Top Customer intends to refuse to pay any amount due to the Company or seek to exercise any remedy against the Company, (iv) the Company has not since the Company Incorporation Date been engaged in any material dispute with any Top Supplier or Top Customer, and (v) to the Company’s Knowledge, the consummation of the transactions contemplated in this Agreement will not affect the relationship of the Company with any Top Supplier or Top Customer.
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3.23 Books and Records. All of the financial books and records of the Company are complete and accurate in all material respects and have been maintained in the ordinary course consistent with past practice and in accordance with applicable Laws.
3.24 Accounts Receivable. All accounts, notes and other receivables, whether or not accrued, and whether or not billed, of the Company (the “Accounts Receivable”) arose from sales actually made or services actually performed and represent valid obligations to the Company. None of the Accounts Receivable are, to the Knowledge of the Company, subject to any right of recourse, defense, deduction, return of goods, counterclaim, offset, or set off on the part of the obligor in excess of any amounts reserved therefor on the Company Financials. All of the Accounts Receivable are, to the Knowledge of the Company, fully collectible according to their terms in amounts not less than the aggregate amounts thereof carried on the books of the Company (net of reserves) within ninety days.
3.25 Finders and Investment Bankers. The Company has not incurred and will not incur any Liability for any brokerage, finder’s or other fee or commission in connection with the transactions contemplated hereby.
3.26 Independent Investigation. The Company has conducted its own independent investigation, review and analysis of the business, results of operations, prospects, condition (financial or otherwise) or assets of the Purchaser, and acknowledges that it has been provided adequate access to the personnel, properties, assets, premises, books and records, and other documents and data of the Purchaser for such purpose. The Company acknowledges and agrees that: (a) in making its decision to enter into this Agreement and to consummate the transactions contemplated hereby, it has relied solely upon its own investigation; and (b) neither the Purchaser nor any of its Representatives have made any representation or warranty as to the Purchaser or this Agreement.
3.27 Information Supplied. None of the information supplied or to be supplied by the Company expressly for inclusion or incorporation by reference in any Current Report on Form 8-K, and any exhibits thereto or any other report, form, registration or other filing made with any Governmental Authority with respect to the transactions contemplated by this Agreement will, when filed, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. None of the information supplied or to be supplied by the Company expressly for inclusion or incorporation by reference in the Closing Filing will, when filed or distributed, as applicable, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. Notwithstanding the foregoing, the Company makes no representation, warranty or covenant with respect to any information supplied by or on behalf of the Purchaser or its Affiliates.
3.28 Disclosure. No representations or warranties by the Company in this Agreement, (a) contains or will contain any untrue statement of a material fact, or (b) omits or will omit to state, when read in conjunction with all of the information contained in this Agreement, any fact necessary to make the statements or facts contained therein not materially misleading.
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IV.
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
The Sellers hereby jointly and severally represent and warrant to the Purchaser as follows:
4.1 Due Organization and Good Standing. Each Seller, if not an individual person, is an entity duly organized, validly existing and in good standing under the Laws of the jurisdiction of its formation and has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted.
4.2 Authorization; Binding Agreement. Each Seller has all requisite power, authority and legal right and capacity to execute and deliver this Agreement, to perform such Seller’s obligations hereunder and to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by such Seller and assuming the due authorization, execution and delivery of this Agreement by the other parties hereto, constitutes the legal, valid and binding obligation of such Seller, enforceable against such Seller in accordance with its terms, subject to the Enforceability Exceptions.
4.3 Ownership. Immediately prior to the PRC Acquisition, the Sellers owned good, valid and marketable title to the Purchased Shares, free and clear of any and all Liens, with each Seller owning the Purchased Shares set forth on Annex I.
4.4 Governmental Approvals. No Consent of or with any Governmental Authority on the part of any Seller is required to be obtained or made in connection with the execution, delivery or performance by such Seller of this Agreement or the consummation by a Seller of the transactions contemplated hereby other than such filings as expressly contemplated by this Agreement.
4.5 Non-Contravention. The execution and delivery by each Seller of this Agreement, the consummation by each Seller of the transactions contemplated hereby, and compliance by each Seller with any of the provisions hereof will not result in the breach of any term or provision of, constitute a default under, or terminate, accelerate or modify the terms of, any indenture, mortgage, deed of trust, or other material agreement or instrument to which each Seller is a party or to which any of its assets, properties or operations are subject, except to the extent that such breach would not reasonably be expected to have a Material Adverse Effect on the Seller.
4.6 No Litigation. There is no Action pending or, to the Knowledge of such Seller, threatened, nor any Order is outstanding, against or involving any Seller or any of its officers, directors, managers, shareholders, properties, assets or businesses, whether at law or in equity, before or by any Governmental Authority, which would reasonably be expected to adversely affect the ability of such Seller to consummate the transactions contemplated by, and discharge its obligations under, this Agreement.
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4.7 Investment Representations. Each Seller: (a) is an “accredited investor” as such term is defined in Rule 501(a) of Regulation D under the Securities Act; (b) is acquiring its portion of the Exchange Shares for itself for investment purposes only, and not with a view towards any resale or distribution of such Exchange Shares; (c) has been advised and understands that the Exchange Shares (i) are being issued in reliance upon one or more exemptions from the registration requirements of the Securities Act and any applicable state securities Laws and (ii) have not been and shall not be registered under the Securities Act or any applicable state securities Laws and, therefore, must be held indefinitely and cannot be resold unless such Exchange Shares are registered under the Securities Act and all applicable state securities Laws, unless exemptions from registration are available; (d) is aware that an investment in the Purchaser is a speculative investment and is subject to the risk of complete loss; and (e) acknowledges that the Purchaser is under no obligation hereunder to register the Exchange Shares under the Securities Act. No Seller has any Contract with any Person to sell, transfer, or grant participations to such Person, or to any third Person, with respect to the Exchange Shares. By reason of such Seller’s business or financial experience, or by reason of the business or financial experience of such Seller’s “purchaser representatives” (as that term is defined in Rule 501(h) under the Securities Act), each Seller is capable of evaluating the risks and merits of an investment in the Purchaser and of protecting its interests in connection with this investment. Each Seller has carefully read and understands all materials provided by or on behalf of the Purchaser or its Representatives to such Seller or such Seller’s Representatives pertaining to an investment in the Purchaser and has consulted, as such Seller has deemed advisable, with its own attorneys, accountants or investment advisors with respect to the investment contemplated hereby and its suitability for such Seller. Each Seller acknowledges that the Exchange Shares are subject to dilution for events not under the control of such Seller. Each Seller has completed its independent inquiry and has relied fully upon the advice of its own legal counsel, accountant, financial and other Representatives in determining the legal, tax, financial and other consequences of this Agreement and the transactions contemplated hereby and the suitability of this Agreement and the transactions contemplated hereby for such Seller and its particular circumstances, and, except as set forth herein, has not relied upon any representations or advice by the Purchaser or its Representatives. Each Seller acknowledges and agrees that such Seller has not been guaranteed or represented to by any Person, (i) any specific amount or the event of the distribution of any cash, property or other interest in the Purchaser or (ii) the profitability or value of the Exchange Shares in any manner whatsoever. Each Seller: (A) has been represented by independent counsel (or has had the opportunity to consult with independent counsel and has declined to do so); (B) has had the full right and opportunity to consult with such Seller’s attorneys and other advisors and has availed itself of this right and opportunity; (C) has carefully read and fully understands this Agreement in its entirety and has had it fully explained to it or him by such counsel; (D) is fully aware of the contents hereof and the meaning, intent and legal effect thereof; and (E) is competent to execute this Agreement and has executed this Agreement free from coercion, duress or undue influence.
4.8 Finders and Investment Bankers. No Seller, nor any of their respective Representatives on their behalf, has employed any broker, finder or investment banker or incurred any liability for any brokerage fees, commissions, finders’ fees or similar fees in connection with the transactions contemplated by this Agreement.
4.9 Independent Investigation. Each Seller has conducted its own independent investigation, review and analysis of the business, results of operations, prospects, condition (financial or otherwise) or assets of the Purchaser, and acknowledges that it has been provided adequate access to the personnel, properties, assets, premises, books and records, and other documents and data of the Purchaser for such purpose. Each Seller acknowledges and agrees that: (a) in making its decision to enter into this Agreement and to consummate the transactions contemplated hereby, it has relied solely upon its own investigation; and (b) neither the Purchaser nor any of its Representatives have made any representation or warranty as to the Purchaser or this Agreement.
4.10 Information Supplied. None of the information supplied or to be supplied by any Seller expressly for inclusion or incorporation by reference in any Current Report on Form 8-K, and any exhibits thereto or any other report, form, registration or other filing made with any Governmental Authority with respect to the transactions contemplated by this Agreement will, when filed, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. None of the information supplied or to be supplied by any Seller expressly for inclusion or incorporation by reference in the Closing Filing will, when filed or distributed, as applicable, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. Notwithstanding the foregoing, no Seller makes any representation, warranty or covenant with respect to any information supplied by or on behalf of the Purchaser or its Affiliates.
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4.11 Disclosure. No representations or warranties by any Seller in this Agreement (a) contains or will contain any untrue statement of a material fact, or (b) omits or will omit to state, when read in conjunction with all of the information contained in this Agreement, any fact necessary to make the statements or facts contained therein not materially misleading.
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V.
SURVIVAL.
5.1 Survival. All representations and warranties of the Company and the Sellers contained in this Agreement (including all schedules and exhibits hereto and all certificates, documents, instruments and undertakings furnished pursuant to this Agreement) shall survive the Closing through and until the second anniversary of the Closing Date; provided, however, that (a) the representations and warranties contained in Sections 3.14 (Taxes and Returns), 3.18 (Benefit Plans), 3.19 (Environmental Matters), 3.27 (Information Supplied) and 4.10 (Information Supplied) shall survive until sixty days after the expiration of the applicable statute of limitations, and (b) the representations and warranties contained in Sections 3.1 (Due Organization and Good Standing), 3.2 (Authorization; Binding Agreement), 3.3 (Capitalization), 3.4 (Subsidiaries), 3.25 (Finders and Investment Bankers), 3.26 (Independent Investigation), 4.1 (Due Organization and Good Standing), 4.2 (Authorization; Binding Agreement), 4.3 (Ownership), 4.8 (Finders and Investment Bankers) and 4.9 (Independent Investigation) will survive indefinitely. Additionally, Fraud Claims against the Company or the Sellers shall survive indefinitely. If written notice of a claim for breach of any representation or warranty has been given before the applicable date when such representation or warranty no longer survives in accordance with this Section 5.1(a), then the relevant representations and warranties shall survive as to such claim, until the claim has been finally resolved. All covenants, obligations and agreements of the Company and the Sellers contained in this Agreement (including all schedules and exhibits hereto and all certificates, documents, instruments and undertakings furnished pursuant to this Agreement) shall survive the Closing and continue until fully performed in accordance with their terms.
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VI.
RELEASES.
6.1 Release and Covenant Not to Sue. Effective as of the Closing, to the fullest extent permitted by applicable Law, each Seller, on behalf of itself and its Affiliates and any Person that owns any share or other equity interest in or of such Seller (the “Releasing Persons”), hereby releases and discharges the Company from and against any and all Actions, obligations, agreements, debts and Liabilities whatsoever, whether known or unknown, both at law and in equity, which such Releasing Person now has, has ever had or may hereafter have against the Company arising on or prior to the Closing Date or on account of or arising out of any matter occurring on or prior to the Closing Date, including any rights to indemnification or reimbursement from the Company, whether pursuant to its Organizational Documents, Contract or otherwise, and whether or not relating to claims pending on, or asserted after, the Closing Date. From and after the Closing, each Releasing Person hereby irrevocably covenants to refrain from, directly or indirectly, asserting any Action, or commencing or causing to be commenced, any Action of any kind against the Company or its Affiliates, based upon any matter purported to be released hereby. Notwithstanding anything herein to the contrary, the releases and restrictions set forth herein shall not apply to any claims a Releasing Person may have against any party pursuant to the terms and conditions of this Agreement.
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article VII.
MISCELLANEOUS.
7.1 Notices. All notices, consents, waivers and other communications hereunder shall be in writing and shall be deemed to have been duly given when delivered (i) in person, (ii) by facsimile or other electronic means, with affirmative confirmation of receipt, (iii) one business day after being sent, if sent by reputable, nationally recognized overnight courier service or (iv) three business days after being mailed, if sent by registered or certified mail, pre-paid and return receipt requested, in each case to the applicable Party at the addresses located on such Party’s signature page.
7.2 Binding Effect; Assignment. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the Parties hereto and their respective successors and permitted assigns. This Agreement shall not be assigned by operation of Law or otherwise without the prior written consent of the Purchaser and the Company, and any assignment without such consent shall be null and void; provided that no such assignment shall relieve the assigning Party of its obligations hereunder.
7.3 Third Parties. Nothing contained in this Agreement or in any instrument or document executed by any party in connection with the transactions contemplated hereby shall create any rights in, or be deemed to have been executed for the benefit of, any Person that is not a Party hereto or thereto or a successor or permitted assign of such a Party.
7.4 Arbitration. Any and all disputes, controversies and claims (other than applications for a temporary restraining order, preliminary injunction, permanent injunction or other equitable relief or application for enforcement of a resolution under this Section 7.4) arising out of, related to, or in connection with this Agreement or the transactions contemplated hereby (a “Dispute”) shall be governed by this Section7.4. Any and all Disputes shall, so far as it is possible, be settled by arbitration. The arbitrator shall decide the Dispute in accordance with the substantive law of the state of Nevada. The appointing authority shall be Hong Kong International Arbitration Centre (“HKIAC”). The seat of the arbitration shall be Hong Kong. The arbitration shall be conducted in the English language. The award shall be final and binding on the parties to the arbitration. Each Party hereto hereby (a) submits to the exclusive jurisdiction of the HKIAC for the purpose of any Action arising out of or relating to this Agreement brought by any Party hereto and (b) irrevocably waives, and agrees not to assert by way of motion, defense or otherwise, in any such Action, any claim that it is not subject personally to the jurisdiction of the HKIAC, that its property is exempt or immune from attachment or execution, that the Action is brought in an inconvenient forum, that the venue of the Action is improper, or that this Agreement or the transactions contemplated hereby may not be enforced. Each Party agrees that a final judgment in any Action shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law.
7.5 Governing Law. This Agreement shall be governed by, construed and enforced in accordance with the Laws of the State of Nevada without regard to the conflict of laws principles thereof.
7.6 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY ACTION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF ANY ACTION, SEEK TO ENFORCE THAT FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 7.6.
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7.7 Specific Performance. Each Party acknowledges that the rights of each Party to consummate the transactions contemplated hereby are unique, recognizes and affirms that in the event of a breach of this Agreement by any Party, money damages may be inadequate and the non-breaching Parties may have not adequate remedy at law, and agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed by an applicable Party in accordance with their specific terms or were otherwise breached. Accordingly, each Party shall be entitled to seek an injunction or restraining order to prevent breaches of this Agreement and to seek to enforce specifically the terms and provisions hereof, without the requirement to post any bond or other security or to prove that money damages would be inadequate, this being in addition to any other right or remedy to which such Party may be entitled under this Agreement, at law or in equity.
7.8 Severability. In case any provision in this Agreement shall be held invalid, illegal or unenforceable in a jurisdiction, such provision shall be modified or deleted, as to the jurisdiction involved, only to the extent necessary to render the same valid, legal and enforceable, and the validity, legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired thereby nor shall the validity, legality or enforceability of such provision be affected thereby in any other jurisdiction. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties will substitute for any invalid, illegal or unenforceable provision a suitable and equitable provision that carries out, so far as may be valid, legal and enforceable, the intent and purpose of such invalid, illegal or unenforceable provision.
7.9 Amendment. This Agreement may be amended, supplemented or modified only by execution of a written instrument signed by the Purchaser and the Company.
7.10 Waiver. The Purchaser on behalf of itself and its Affiliates, on the one hand, and the Company on behalf of itself and its Affiliates, may in its sole discretion (i) extend the time for the performance of any obligation or other act of any other non-Affiliated Party hereto, (ii) waive any inaccuracy in the representations and warranties by such other non-Affiliated Party contained herein or in any document delivered pursuant hereto and (iii) waive compliance by such other non-Affiliated Party with any covenant or condition contained herein. Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the Party or Parties to be bound thereby. Notwithstanding the foregoing, no failure or delay by a Party in exercising any right hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise of any other right hereunder.
7.11 Entire Agreement. This Agreement and the documents or instruments referred to herein, including any exhibits, annexes and schedules attached hereto, which exhibits, annexes and schedules are incorporated herein by reference, embody the entire agreement and understanding of the Parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, representations, warranties, covenants or undertakings, other than those expressly set forth or referred to herein or the documents or instruments referred to herein, which collectively supersede all prior agreements and the understandings among the Parties with respect to the subject matter contained herein.
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7.12 Interpretation. The table of contents and the Article and Section headings contained in this Agreement are solely for the purpose of reference, are not part of the agreement of the Parties and shall not in any way affect the meaning or interpretation of this Agreement. In this Agreement, unless the context otherwise requires: (a) any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and words in the singular, including any defined terms, include the plural and vice versa; (b) reference to any Person includes such Person’s successors and assigns but, if applicable, only if such successors and assigns are permitted by this Agreement, and reference to a Person in a particular capacity excludes such Person in any other capacity; (c) any accounting term used and not otherwise defined in this Agreement has the meaning assigned to such term in accordance with GAAP; (d) “including” (and with correlative meaning “include”) means including without limiting the generality of any description preceding or succeeding such term and shall be deemed in each case to be followed by the words “without limitation”; (e) the words “herein,” “hereto,” and “hereby” and other words of similar import in this Agreement shall be deemed in each case to refer to this Agreement as a whole and not to any particular Section or other subdivision of this Agreement; (f) the word “if” and other words of similar import when used herein shall be deemed in each case to be followed by the phrase “and only if”; (g) the term “or” means “and/or”; (h) any reference to the term “ordinary course” or “ordinary course of business” shall be deemed in each case to be followed by the words “consistent with past practice”; (i) any agreement, instrument, insurance policy, Law or Order defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument, insurance policy, Law or Order as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes, regulations, rules or orders) by succession of comparable successor statutes, regulations, rules or orders and references to all attachments thereto and instruments incorporated therein; (j) except as otherwise indicated, all references in this Agreement to the words “Section,” “Article”, “Schedule”, “Exhibit” and “Annex” are intended to refer to Sections, Articles, Schedules, Exhibits and Annexes to this Agreement; and (k) the term “Dollars” or “$” means United States dollars. Any reference in this Agreement to a Person’s directors shall include any member of such Person’s governing body and any reference in this Agreement to a Person’s officers shall include any Person filling a substantially similar position for such Person. Any reference in this Agreement to a Person’s shareholders shall include any applicable owners of the equity interests of such Person, in whatever form, including with respect to the Purchaser its shareholders under the NRS or its Organizational Documents. The Parties have participated jointly in the negotiation and drafting of this Agreement. Consequently, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties hereto, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement.
7.13 Counterparts. This Agreement may be executed and delivered (including by facsimile or other electronic transmission) in one or more counterparts, and by the different Parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.
article
VIII.
DEFINITIONS.
8.1 Certain Definitions. For purpose of this Agreement, the following capitalized terms have the following meanings:
“Action” means any notice of noncompliance or violation, or any claim, demand, charge, action, suit, litigation, audit, settlement, complaint, stipulation, assessment or arbitration, or any request (including any request for information), inquiry, hearing, proceeding or investigation, by or before any Governmental Authority.
“Affiliate” means, with respect to any Person, any other Person directly or indirectly Controlling, Controlled by, or under common Control with such Person.
“Code” means the Internal Revenue Code of 1986, as amended, and any successor statute thereto, as amended. Reference to a specific section of the Code shall include such section and any valid treasury regulation promulgated thereunder.
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“Company Charter” means the memorandum of association and articles of incorporation of the Company, as amended and effective under the PRC Act.
“Consent” means any consent, approval, waiver, authorization or Permit of, or notice to or declaration or filing with any Governmental Authority or any other Person.
“Contracts” means all contracts, agreements, binding arrangements, bonds, notes, indentures, mortgages, debt instruments, purchase order, licenses (and all other contracts, agreements or binding arrangements concerning Intellectual Property), franchises, leases and other instruments or obligations of any kind, written or oral (including any amendments and other modifications thereto).
“Control” of a Person means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract, or otherwise. “Controlled”, “Controlling” and “under common Control with” have correlative meanings. Without limiting the foregoing a Person (the “Controlled Person”) shall be deemed Controlled by (a) any other Person (the “10% Owner”) (i) owning beneficially, as meant in Rule 13d-3 under the Exchange Act, securities entitling such Person to cast ten percent (10%) or more of the votes for election of directors or equivalent governing authority of the Controlled Person or (ii) entitled to be allocated or receive ten percent (10%) or more of the profits, losses, or distributions of the Controlled Person; (b) an officer, director, general partner, partner (other than a limited partner), manager, or member (other than a member having no management authority that is not a 10% Owner) of the Controlled Person; or (c) a spouse, parent, lineal descendant, sibling, aunt, uncle, niece, nephew, mother-in-law, father-in-law, sister-in-law, or brother-in-law of an Affiliate of the Controlled Person or a trust for the benefit of an Affiliate of the Controlled Person or of which an Affiliate of the Controlled Person is a trustee.
“Copyrights” means any works of authorship, mask works and all copyrights therein, including all renewals and extensions, copyright registrations and applications for registration and renewal, and non-registered copyrights.
“Environmental Law” means any Law in any way relating to (a) the protection of human health and safety, (b) the protection, preservation or restoration of the environment and natural resources (including air, water vapor, surface water, groundwater, drinking water supply, surface land, subsurface land, plant and animal life or any other natural resource), or (c) the exposure to, or the use, storage, recycling, treatment, generation, transportation, processing, handling, labeling, production, release or disposal of Hazardous Materials.
“Environmental Liabilities” means, in respect of any Person, all Liabilities, obligations, responsibilities, Remedial Actions, Losses, damages, costs, and expenses (including all reasonable fees, disbursements, and expenses of counsel, experts, and consultants and costs of investigation and feasibility studies), fines, penalties, sanctions, and interest incurred as a result of any claim or demand by any other Person or in response to any violation of Environmental Law, whether known or unknown, accrued or contingent, whether based in contract, tort, implied or express warranty, strict liability, criminal or civil statute, to the extent based upon, related to, or arising under or pursuant to any Environmental Law, Environmental Permit, Order, or Contract with any Governmental Authority or other Person, that relates to any environmental, health or safety condition, violation of Environmental Law, or a Release or threatened Release of Hazardous Materials.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
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“Fraud Claim” means any claim based in whole or in part upon fraud, willful misconduct or intentional misrepresentation.
“GAAP” means generally accepted accounting principles as in effect in the United States of America.
“Governmental Authority” means any federal, state, local, foreign or other governmental, quasi-governmental or administrative body, instrumentality, department or agency or any court, tribunal, administrative hearing body, arbitration panel, commission, or other similar dispute-resolving panel or body.
“Hazardous Material” means any waste, gas, liquid or other substance or material that is defined, listed or designated as a “hazardous substance”, “pollutant”, “contaminant”, “hazardous waste”, “regulated substance”, “hazardous chemical”, or “toxic chemical” (or by any similar term) under any Environmental Law, or any other material regulated, or that could result in the imposition of Liability or responsibility, under any Environmental Law, including petroleum and its by- products, asbestos, polychlorinated biphenyls, radon, mold, and urea formaldehyde insulation.
“Indebtedness” of any Person means (a) all indebtedness of such Person for borrowed money (including the outstanding principal and accrued but unpaid interest) or for the deferred purchase price of property or services, (b) any other indebtedness of such Person that is evidenced by a note, bond, debenture, credit agreement or similar instrument, (c) all obligations of such Person under leases that should be classified as capital leases in accordance with GAAP, (d) all obligations of such Person for the reimbursement of any obligor on any line or letter of credit, banker’s acceptance, guarantee or similar credit transaction, in each case, that has been drawn or claimed against, (e) all obligations of such Person in respect of acceptances issued or created, (f) all interest rate and currency swaps, caps, collars and similar agreements or hedging devices under which payments are obligated to be made by such Person, whether periodically or upon the happening of a contingency, (g) all obligations secured by an Lien on any property of such Person, (h) any premiums, prepayment fees or other penalties, fees, costs or expenses associated with payment of any Indebtedness of such Person and (i) all obligation described in clauses (a) through (h) above of any other Person which is directly or indirectly guaranteed by such Person or which such Person has agreed (contingently or otherwise) to purchase or otherwise acquire or in respect of which it has otherwise assured a creditor against loss.
“Intellectual Property” means all of the following as they exist in any jurisdiction throughout the world: Patents, Trademarks, Copyrights, Trade Secrets, Internet Assets, Software and other intellectual property, and all licenses, sublicenses and other agreements or permissions related to the preceding property.
“Internet Assets” means any all domain name registrations, web sites and web pages and related rights, items and documentation related thereto.
“Knowledge” means, with respect to (i) the Company, the actual knowledge of the executive officers or directors of the Company, after due inquiry or (ii) any other Party, the actual knowledge of its directors and executive officers, after due inquiry.
“Law” means any federal, state, local, municipal, foreign or other law, statute, legislation, principle of common law, ordinance, code, edict, decree, proclamation, treaty, convention, rule, regulation, directive, requirement, writ, injunction, settlement, Order or Consent that is or has been issued, enacted, adopted, passed, approved, promulgated, made, implemented or otherwise put into effect by or under the authority of any Governmental Authority.
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“Liabilities” means any and all liabilities, Indebtedness, Actions or obligations of any nature (whether absolute, accrued, contingent or otherwise, whether known or unknown, whether direct or indirect, whether matured or unmatured and whether due or to become due), including Tax liabilities due or to become due.
“Lien” means any mortgage, pledge, security interest, attachment, right of first refusal, option, proxy, voting trust, encumbrance, lien or charge of any kind (including any conditional sale or other title retention agreement or lease in the nature thereof), restriction (whether on voting, sale, transfer, disposition or otherwise), any subordination arrangement in favor of another Person, any filing or agreement to file a financing statement as debtor under the Uniform Commercial Code or any similar Law.
“Material Adverse Effect” means, with respect to any specified Person, any fact, event, occurrence, change or effect that has had, or would reasonably be expected to have, individually or in the aggregate, a material adverse effect upon (a) the business, assets, Liabilities, results of operations, prospects or condition (financial or otherwise) of such Person, taken as a whole, or (b) the ability of such Person on a timely basis to consummate the transactions contemplated by this Agreement or to perform its obligations hereunder; provided, however, that any changes or effects directly or indirectly attributable to, resulting from, relating to or arising out of the following (by themselves or when aggregated with any other, changes or effects) shall not be deemed to be, constitute, or be taken into account when determining whether there has or may, would or could have occurred a Material Adverse Effect: (i) general changes in the financial or securities markets or general economic or political conditions in the country or region in which such Person does business; (ii) changes, conditions or effects that generally affect the industries in which such Person principally operates; (iii) changes in GAAP or other applicable accounting principles or mandatory changes in the regulatory accounting requirements applicable to any industry in which such Person principally operates; (iv) conditions caused by acts of God, terrorism, war (whether or not declared) or natural disaster; (v) any failure in and of itself by such Person to meet any internal or published budgets, projections, forecasts or predictions of financial performance for any period (provided that the underlying cause of any such failure may be considered in determining whether a Material Adverse Effect has occurred or would reasonably be expected to occur to the extent not excluded by another exception herein); provided further, however, that any event, occurrence, fact, condition, or change referred to in clauses (i)–(iv) immediately above shall be taken into account in determining whether a Material Adverse Effect has occurred or could reasonably be expected to occur to the extent that such event, occurrence, fact, condition, or change has a disproportionate effect on such Person compared to other participants in the industries in which such Person primarily conducts its businesses.
“NRS” means Nevada Revised Statutes, as amended.
“OTC Markets Group” means OTC Markets Group, Inc.
“Organizational Documents” means, (i) with respect to the Purchaser, the Purchaser Charter, (ii) with respect to the Company, the Company Charter, and (iii) with respect to any other Party, its Certificate of Incorporation and Bylaws or similar organizational documents, in each case, as amended.
“Order” means any order, decree, ruling, judgment, injunction, writ, determination, binding decision, verdict, judicial award or other action that is or has been made, entered, rendered, or otherwise put into effect by or under the authority of any Governmental Authority.
“Patents” means any patents, patent applications and the inventions, designs and improvements described and claimed therein, patentable inventions, and other patent rights (including any divisionals, provisionals, continuations, continuations-in-part, substitutions, or reissues thereof, whether or not patents are issued on any such applications and whether or not any such applications are amended, modified, withdrawn, or refiled).
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“Permits” means all federal, state, local or foreign or other third-party permits, grants, easements, consents, approvals, authorizations, exemptions, licenses, franchises, concessions, ratifications, permissions, clearances, confirmations, endorsements, waivers, certifications, designations, ratings, registrations, qualifications or orders of any Governmental Authority or any other Person.
“Permitted Liens” means (a) Liens for Taxes or assessments and similar governmental charges or levies, which either are (i) not delinquent or (ii) being contested in good faith and by appropriate proceedings, and adequate reserves have been established with respect thereto, (b) other Liens imposed by operation of Law arising in the ordinary course of business for amounts which are not due and payable and as would not in the aggregate materially adversely affect the value of, or materially adversely interfere with the use of, the property subject thereto, (c) Liens incurred or deposits made in the ordinary course of business in connection with social security, (d) Liens on goods in transit incurred pursuant to documentary letters of credit, in each case arising in the ordinary course of business, or (v) Liens arising under this Agreement.
“Person” means an individual, corporation, partnership (including a general partnership, limited partnership or limited liability partnership), limited liability company, association, trust or other entity or organization, including a government, domestic or foreign, or political subdivision thereof, or an agency or instrumentality thereof.
“Purchaser Charter” means the articles of incorporation of the Purchaser, as amended and effective under the NRS.
“Release” means any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, or leaching into the indoor or outdoor environment, or into or out of any property.
“Remedial Action” means all actions to (i) clean up, remove, treat, or in any other way address any Hazardous Material, (ii) prevent the Release of any Hazardous Material so it does not endanger or threaten to endanger public health or welfare or the indoor or outdoor environment, (iii) perform pre-remedial studies and investigations or post-remedial monitoring and care, or (iv) correct a condition of noncompliance with Environmental Laws.
“Representative” means, as to any Person, such Person’s Affiliates and its and their managers, directors, officers, employees, agents and advisors (including financial advisors, counsel and accountants).
“PRC Act” means the laws and regulations of the PRC which govern the business conduct of the Company.
“SEC” means the Securities and Exchange Commission (or any successor Governmental Authority).
“Securities Act” means the Securities Act of 1933, as amended.
“Software” means any computer software programs, including all source code, object code, and documentation related thereto and all software modules, tools and databases.
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“Tax Return” means any return, declaration, report, claim for refund, information return or other documents (including any related or supporting schedules, statements or information) filed or required to be filed in connection with the determination, assessment or collection of any Taxes or the administration of any Laws or administrative requirements relating to any Taxes.
“Taxes” means (a) all direct or indirect federal, state, local, foreign and other net income, gross income, gross receipts, sales, use, value-added, ad valorem, transfer, franchise, profits, license, lease, service, service use, withholding, payroll, employment, social security and related contributions due in relation to the payment of compensation to employees, excise, severance, stamp, occupation, premium, property, windfall profits, alternative minimum, estimated, customs, duties or other taxes, fees, assessments or charges of any kind whatsoever, together with any interest and any penalties, additions to tax or additional amounts with respect thereto, (b) any Liability for payment of amounts described in clause (a) whether as a result of being a member of an affiliated, consolidated, combined or unitary group for any period or otherwise through operation of law and (c) any Liability for the payment of amounts described in clauses (a) or (b) as a result of any tax sharing, tax group, tax indemnity or tax allocation agreement with, or any other express or implied agreement to indemnify, any other Person.
“Trade Secrets” means any trade secrets, confidential business information, concepts, ideas, designs, research or development information, processes, procedures, techniques, technical information, specifications, operating and maintenance manuals, engineering drawings, methods, knowhow, data, mask works, discoveries, inventions, modifications, extensions, improvements, and other proprietary rights (whether or not patentable or subject to copyright, trademark, or trade secret protection).
“Trademarks” means any trademarks, service marks, trade dress, trade names, brand names, internet domain names, designs, logos, or corporate names (including, in each case, the goodwill associated therewith), whether registered or unregistered, and all registrations and applications for registration and renewal thereof.
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IN WITNESS WHEREOF, each Party hereto has caused this Agreement to be signed and delivered by its respective duly authorized officer as of the date first written above.
| The Purchaser: | ||
| Fountain Healthy Aging, Inc., | ||
| a Nevada corporation | ||
| By: | ||
| Name: | Ms. Zhu Hong | |
| Title: | CEO | |
| Address: | ||
[Redacted] | ||
[Signature page to Share Exchange Agreement]
| The Company: | ||
| Shenzhen Nainiang
Wine Industrial Co., Ltd. 深圳市乃娘酒业有限公司, | ||
| a PRC company | ||
| By: | ||
| Name: | Ms. Zhu Hong | |
| Title: | Director | |
| Address: | ||
[Redacted] | ||
[Signature page to Share Exchange Agreement]
| The Sellers: | ||
| Ms. Zhu Hong | ||
| Address: | ||
[Redacted] | ||
| Century Zongheng Investment Holding (Shenzhen) Co., Ltd. 世纪纵横投资控股（深圳）有限公司, | |||
| a PRC company | |||
| By: | |||
| Name: | Huang Shaoxuan | ||
| Title: | Legal Representative | ||
| Address: | ||
[Redacted] | ||
[Signature page to Share Exchange Agreement]
ANNEX I
| Seller Name | Percentage
of Purchased Shares Held by Seller Prior to the PRC Acquisition | Percentage of Purchased | Pro
Rata Exchange Shares | |||||||||
| Ms. Zhu Hong | 49 | % | 48 | % | 4,500,159 | |||||||
| Century
Zongheng Investment Holding (Shenzhen) Co., Ltd. 世纪纵横投资控股（深圳）有限公司 | 51 | % | 51 | % | 4,781,418 | |||||||
| Total: | 100 | % | 99 | % | 9,281,577 | |||||||
Exhibit 10.2
编号：ZGJYSZ2021-WL-004
File No：ZGJYSZ2021-WL-004
股权并购协议书
Equity Acquisition Agreement
受让方：深圳市微联金盟电子商务科技有限公司
Transferee: Shenzhen Wei Lian Jin Meng Electronic Commerce Limited
出让方一：世纪纵横投资控股（深圳）有限公司
Transferor 1: Century Zongheng Investment Holding (Shenzhen) Co., Ltd.
出让方二：朱虹(身份证号码341021199312171944)
Transferor 2： Zhu Hong (ID No. 341021199312171944)
目标公司：深圳市乃娘酒业有限公司
Target Company: Shenzhen Nainiang Wine Industrial Co., Ltd.
签订日期：2021年6月2日
Date
of Signing：June 2nd，2021
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关于深圳市乃娘酒业有限公司的股权并购协议书
Re:【Shenzhen Nainiang Wine Industrial Co., Ltd.】
Equity Acquisition Agreement
本协议由以下各方于2021年6月2日签署于广东省深圳市：
This agreement is signed by the following parties on June 2nd ,2021, in Shenzhen City of Guangdong Province:
受让方：深圳市微联金盟电子商务科技有限公司
Transferee：Shenzhen Wei Lian Jin Meng Electronic Commerce Limited
法定代表人：朱虹
Legal Representative：Zhu Hong
住所：[Redacted]
Address: [Redacted
出让方：
Transferors:
出让方一： 世纪纵横投资控股（深圳）有限公司
Transferor 1: Century Zongheng Investment Holding (Shenzhen) Co. , Ltd.
法定代表人：黄少旋
Legal Representative: Huang Shaoxuan
住所：[Redacted]
Address: [Redacted
2 / 27
出让方二：朱虹
Transferor 2: Zhu Hong
住所：[Redacted]
Address: [Redacted
身份证号：[Redacted]
ID Number: [Redacted]
目标公司：深圳市乃娘酒业有限公司 (以下简称“目标公司”)
Target Company: Shenzhen Nainiang Wine Industrial Co., Ltd. (hereinafter referred to as "the Target Company")
法定代表人：朱虹
Legal Representative：Zhu Hong
住所：[Redacted]
Address: [Redacted
在本协议中，受让方、转让方和目标公司合称“各方”，单独称“一方”。
In this agreement, the Transferee, the Transferors and the Target Company are collectively referred to as "parties" and individually as "party".
鉴于：Whereas:
| 1. | 目标公司—深圳市乃娘酒业有限公司是一家依法设立并有效存续的有限责任公司，经营范围为电子商务平台系统的技术开发；经营电子商务；酒类技术咨询、商务信息咨询（以上均不含限制项目）；文化交流活动策划；经营进出口业务。，许可经营项目是：酒类、饮料、预包装食品（不含复热）的批发、零售。 |
The Target Company, Shenzhen Nainiang Wine Industrial Co., Ltd. is a limited liability company established and effectively existing, with a business scope of technology development of e-commerce platform system; operating e-commerce; alcohol technology consulting and business information consulting (excluding restricted items above); cultural exchange activities planning and import and export business. The licensed business items are: wine, drinks, pre-packaged food (excluding compound heat) wholesale and retail.
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| 2. | 出让方一持有目标公司51%的股权，出让方二持有目标公司49%的股权；截至本协议签署之日，目标公司在工商部门登记的注册资本为人民币5000万元。 |
Transferor 1 holds 51% of the equity of the Target Company, Transferor 2 holds 49% of the equity of the Target Company. As of the signing date of this Agreement, the share capital of the Target Company registered in the industrial and commercial department is RMB50,000,000.
| 3. | 各方经协商一致，受让方收购出让方一所持目标公司51%股权以及出让方二所持目标公司48%股权，合计收购目标公司99%的股权。 |
The parties reached a consensus through the negotiation, Transferee acquired a 51% stake in the Target Company held by Transferor 1, as well as a 48% stake in the Target Company held by Transferor 2, the acquisition of the Target Company 99% equity in total.
| 4. | 受让方是Fountain Healthy Aging, Inc.（简称“FHAI”）公司的全属子公司，FHAI注册于美国特拉华州，并在美国OTC粉单市场公开交易。受让方购买目标公司股权的交易对价，将采取受让方请求FHAI发行新普通股的方式向出让方支付。 |
The Transferee is a wholly-owned subsidiary of Fountain Healthy Aging, Inc., a Nevada (USA)-registered company that is publicly traded on the OTC Markets Group pink sheets (“FHAI”), and as consideration for the purchase of the Target Company’s equity from the Transferors, the Transferee intends to cause FHAI to issue shares of its common stock to the Transferors, as described below.
为此，各方通过友好协商，就受让方本次购买目标公司99%股权的具体事宜，以下述条款及条件签署本协议，以兹各方恪守。
For this purpose, through friendly negotiation, all parties have signed this Agreement on the following terms and conditions regarding the specific matters of Transferee's purchase of the Target Company's 99% equity.
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第一条 定义
Article 1 Definition
| 1.1 | 为表述方便，在本协议中，除非另有说明，以下左栏所列词语具有该词语相应右栏所作表述的定义： |
For the convenience of expression, in this agreement, unless otherwise stated, the words listed in the left column below shall have the same definitions as those in the corresponding right column of such words:
标的股权
Subject equity
|
指
:
|
受让方拟受让的目标公司99%的股权。
Transferee intends to purchase 99% equity of the Target Company.
|
本次交易
Transaction
|
指
:
|
受让方以股权购买标的股权，并请求FHAI向出让方发行新普通股以支付股权转让对价。
Transferee purchases the underlying equity and causes FHAI to issue its own shares of common stock as consideration.
|
先决条件
Precondition
|
指
:
|
本协议第3.1条约定的本协议生效需要满足的条件。
Conditions to be met for the effectiveness of this Agreement, as stipulated in the Article 3.1 of this Agreement.
|
过渡期
Transition period
|
指
:
|
自本协议签署之日至标的股权对应的股东变更为受让方的变更登记手续办理完毕之日止。
From the date of signing this agreement to the date when the registration procedures for the change of the shareholder corresponding to the subject equity to the Transferee are completed.
|
标的股权交割
Delivery of underlying equity |
指
:
|
办理标的股权对应的股东变更为受让方的变更登记手续。
Handle the registration procedures for the change of the shareholder corresponding to the subject equity to the Transferee. |
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股权交割日
Equity delivery date
|
指
:
|
在本协议约定的条件满足后，标的股权对应的股东变更为受让方的变更登记手续办理完毕之日。
After the conditions specified in this Agreement are met, the date when the registration procedures for the change of the shareholder corresponding to the subject equity to the Transferee are completed.
|
资产净值
Net Asset Value
|
指
:
|
在特定日期，目标公司的总资产减去总负债，最终归属于股东的净资产。
Net Asset Value means the value of the total assets of the Target Company less the value of the total liabilities, other than net assets attributable to shareholders, of the Target Company, as at a specific date.
|
净利润
Net profit
|
指
:
|
按照中国企业会计准则编制的且经具有证券、期货业务资格的会计师事务所审计的合并报表中归属于母公司股东的扣除非经常性损益后的税后净利润。
Net profit after tax after deducting non recurring profits and losses attributable to the shareholders of the parent company in the consolidated statements prepared in accordance with Chinese accounting standards for business enterprises and audited by accounting firms qualified for securities and futures business.
|
税费
Taxes and administrative charges
|
指
: |
任何及一切应缴纳的税费，包括但不限于征收、收取或摊派的任何增值税、所得税、营业税、印花税、契税或其他适用税种，或政府有关部门征收的费用。
Any and all taxes payable, including but not limited to any value-added tax, income tax, business tax, stamp tax, deed tax or other applicable taxes collected, collected or apportioned, or fees collected by relevant government departments.
|
美元对人民币汇率中间价
USD/CNY central parity rate |
指
: |
中国人民银行授权中国外汇交易中心公布的，当天银行间外汇市场美元对人民币汇率中间价。
The USD/CNY central parity rate on the interbank foreign exchange market announced by the China Foreign Exchange Trade System Under the authorization of the People’s Bank of China. |
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法律
Law
|
指
:
|
中国现行有效的法律、法规、规章或其他规范性文件，包括其不时的修改、修正、补充、解释或重新制定。
The current laws, regulations, rules or other normative documents in force in China, including its modification, amendment, supplement, interpretation or re formulation from time to time.
|
工作日
Weekdays
|
指
: |
除法定节假日以外的中国法定工作时间。
China's legal working hours except legal holidays.
|
元
Yuan |
指
: |
人民币元。
CNY. |
| 1.2 | 本协议各条款的标题仅为方便查阅之用，不得影响本协议的解释。 |
The headings of each clause of this Agreement are for convenience only and shall not affect the interpretation of this agreement.
| 1.3 | 对本协议或任何协议的提及应解释为包括可能经修订、变更或更新后的有关协议。 |
References to this agreement or any agreement shall be construed as including the relevant agreement as may be amended, varied or renewed.
第二条 本次交易的方案
Article 2 Scheme of this transaction
第一条
第二条
| 2.1 | 本次交易的对价：受让方将以价值人民币65,110,542.5223元（¥65,110,542.5223）的Fountain Healthy Aging, Inc. 公司新发行的普通股为对价收购目标公司99%股权，具体为： |
The consideration of the transaction: The Transferee will acquire 99% of the Target Company with ordinary shares to be issued by Fountain Healthy Aging, Inc., which is equivalent to RMB65,110,542.5223 , specifically：
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| 2.1.1 | 受让方以价值人民币33,541,794.6327元（RMB33,541,794.6327）的Fountain Healthy Aging, Inc. 公司新发行的普通股为对价受让出让方一所持目标公司51%的股权；以价值人民币31,568,747.8896元（RMB31,568,747.8896）的Fountain Healthy Aging, Inc. 公司新发行的普通股为对价受让出让方二所持目标公司48%的股权，前述对价的支付安排如下： |
The Transferee shall purchase the 51% equity of the Target Company held by the Transferor 1 with ordinary shares to be issued by Fountain Healthy Aging, Inc., which is equivalent to RMB33,541,794.6327, and purchase the 48% equity of the Target Company held by the Transferor 2 with ordinary shares to be issued by Fountain Healthy Aging, Inc., which is equivalent to RMB31,568,747.8896. The payment arrangements for the aforementioned consideration are as follows：
| 2.1.1.1 | 价值人民币33,541,794.6327元的普通股由将由Fountain Healthy Aging, Inc.公司向出让方一定向发行； |
Ordinary shares equivalent to RM33,541,794.6327 will be issued by Fountain Healthy Aging, Inc. directly to the Transferor 1；
| 2.1.1.2 | 价值人民币31,568,747.8896元的普通股由将由Fountain Healthy Aging, Inc.公司向出让方二定向发行； |
Ordinary shares equivalent to RMB31,568,747.8896 will be issued by Fountain Healthy Aging, Inc. directly to the Transferor 2；
| 2.2 | 新发行普通股价格的确定：Fountain Healthy Aging, Inc.公司向乙方新发行普通股的价格为股权交割日前最近一次交易的价格。 |
Determine of the price of ordinary shares to be issued to the Transferors : The price of ordinary shares to be issued to the Transferors by Fountain Healthy Aging, Inc. will be the last trading price prior to the equity delivery date.
| 2.3 | 美元对人民币汇率的确定：股权交割日前一个交易日的美元对人民币汇率中间价。 |
Determine of the USD/CNY parity rate: The USD/CNY central parity rate on the last weekday prior to the equity delivery date.
| 2.4 | 本次交易实施完成后，受让方持有目标公司99%股权。 |
After the implementation of the transaction is completed, the Transferee will hold 99% equity of the Target Company.
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第三条 本次交易实施的条件
Article 3 Conditions for the implementation of this Transaction
| 3.1 | 各方同意本次交易自下列先决条件全部满足之日起实施： |
The parties agree that this transaction shall take effect from the date on which all of the following prerequisites are met：
| 3.1.1 | 受让方股东会审议通过本次交易； |
The Transferee's Shareholders ' meeting to consider and approve the transaction；
| 3.1.2 | 目标公司股东审议通过本次交易； |
Consideration and approval of this transaction by shareholders of the Target Company；
| 3.1.3 | 如本次交易实施前，本次交易适用的法律、法规予以修订，提出其他强制性审批要求或豁免部分行政许可事项的，则以届时生效的法律、法规为准调整本次交易实施的先决条件。 |
If, prior to the implementation of this transaction, the applicable laws and regulations of this transaction are amended, other mandatory approval requirements or exemptions from part of the administrative license matters, the laws and regulations in force at that time shall prevail in adjusting the prerequisites for the implementation of this transaction.
第四条 本次交易的相关安排
Article 4 Arrangements relating to the transaction
| 4.1 | 受让方受让出让方所持目标公司99%股权的转让对价将由FHAI向出让方发行普通股的方式支付，出让方一和出让方二内部按照其各自转股比例取得转让对价，具体为： |
Transferee shall cause FHAI to issue its own shares of common stock to the Transferors as consideration of acquisition of the 99% shares of the Target Company，and Transferor 1 and Transferor 2 internally obtain transfer consideration in accordance with their respective share-to-share ratio, in particular：
第一条
第二条
第三条
第四条
4.1
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| 4.1.1 | 在满足本协议第3.1条规定的先决条件，乙方以书面形式确认以下条件全部满足/成就，且99%标的股权交割完成之日起90个工作日内，受让方根据本协议约定，向出让方一和出让方二交付本协议约定的Fountain Healthy Aging, Inc.公司的普通股： |
After meeting the preconditions specified in Article 3.1 of this agreement, the Transferors confirms in writing that all the following conditions have been met/achieved, and within 90 working days from the date of the completion of the delivery of 99% of the underlying equity, in accordance with this agreement, the Transferee shall cause FHAI deliver to Transferors the designated ordinary shares：
| 4.1.1.1 | 目标公司将其与乙方及其关联方之间的往来款项清理完毕，不存在乙方及其关联方占用目标公司款项的情形； |
The Target Company cleans up the current funds between it and the Transferors and its related parties, and there is no case where the Transferors and its related parties occupy the funds of the Target Company；
| 4.1.1.2 | 目标公司取得当地税务主管部门出具的目标公司完税证明。 |
The Target Company obtains the tax payment certificate of the Target Company issued by the local tax authority.
第五条 滚存未分配利润
Article 5 Rollover of Unallocated Profits
| 5.1 | 各方经协商一致，同意股权交割日之前目标公司的滚存未分配利润（最终以受让方委任的审计机构确认为准）由本次交易实施后的各股东按股权比例享有，但该等滚存未分配利润的分配实施应当以不影响目标公司正常经营（受让方不再提供对目标公司的经营性借款）为前提。 |
The parties agree, by consensus, that the rolling unallocated profits of the Target Company (subject to the confirmation of the audit body appointed by Transferee) after the implementation of the transaction, all shareholders shall enjoy the share proportion, but the distribution of such rolling unallocated profits shall be carried out on the premise that the normal operation of the Target Company shall not be affected.
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第六条 期间损益
Article 6 Profit and Loss during the period
| 6.1 | 各方经协商一致，同意自本协议签署之日起至股权交割日止，目标公司在此期间产生的收益或因其他原因而增加的净资产部分由受让方和出让方一、出让方二按标的股权交割后的股权比例享有；目标公司在此期间产生的亏损或因其他原因而减少的净资产部分由目标公司股东按标的股权交割后的股权比例以现金补足。 |
The parties agree, by consensus, that from the date of signing this agreement to the date of equity settlement, part of the net assets generated by the Target Company during this period or increased due to other reasons shall be enjoyed by the Transferee and the Transferors in accordance with the proportion of the equity after the closing of the underlying equity; part of the net assets generated by the Target Company during this period or reduced due to other reasons shall be made up by the shareholders of the Target Company in accordance with the proportion of the equity after the closing of the underlying equity.
第一条
第二条
第三条
第四条
第五条
第六条
第七条
7.1
7.2
7.3
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第七条 过渡期相关安排
Article 7 Arrangements relating to the Transition Period
| 7.1 | 过渡期内，除非本协议另有约定或受让方书面同意，乙方保证： |
During the transition period, unless otherwise agreed in this Agreement or agreed in writing by the Transferee, each Transferor represents and warrants：
| 7.1.1 | 不会改变目标公司的经营状况，并保证目标公司在过渡期内资产状况的完整性； |
That it will not change the operating condition of the Target Company, and that it guarantees the integrity of the asset condition of the Target Company during the transition period.
| 7.1.2 | 以正常方式经营运作目标公司，保持目标公司处于良好的经营运行状态，保持目标公司现有的结构，未经受让方书面同意不得擅自变动中层以上管理人员（相关人员自行离职的除外），以保证目标公司的经营不受到重大不利影响； |
To operate the Target Company in a normal manner, to maintain the Target Company in a good operating state, to maintain the existing structure of the Target Company, without the written consent of the Transferee may not change the middle-level or above management personnel (except for the relevant personnel who leave their posts on their own), in order to ensure that the operation of the Target Company is not subject to significant adverse effects.
| 7.1.3 | 目标公司不进行任何正常经营活动以外的异常交易或引致异常债务，不进行日常经营外的其他任何形式的担保、增加重大债务、进行重大资产处置、重组、合并或收购交易； |
The Target Company does not carry out any abnormal transactions or cause abnormal debts other than normal business activities, and does not carry out any other forms of guarantee, increase major debts, carry out major asset disposal, reorganization, merger or acquisition transactions other than daily business activities;
| 7.1.4 | 及时将有关对目标公司造成或可能造成重大不利变化或导致不利于交割的任何时间、事实、条件、变化或其他情况书面通知受让方。 |
Promptly notify the Transferee in writing of any time, fact, condition, change or other circumstances that cause or may cause material adverse change to the Target Company or result in adverse delivery.
| 7.2 | 过渡期内，乙方名下的标的股权的股东权益受如下限制： |
During the transition period, the shareholders rights and interests of the underlying equity under each Transferor's respective names are subject to the following restrictions:
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| 7.2.1 | 未经受让方书面同意，不得进行股权转让； |
No equity transfer shall be made without the written consent of the Transferee;
| 7.2.2 | 未经受让方书面同意，不得以增资或其他形式引入其他投资者； |
It is not allowed to introduce other investors in the form of capital increase or other forms without the written consent of the Transferee;
| 7.2.3 | 未经受让方书面同意，不得在标的股权上设置抵押、质押、托管或设置其它负担； |
Without the written consent of the Transferee, no mortgage, pledge, trusteeship or other burden shall be set on the subject equity;
| 7.2.4 | 未经受让方书面同意，不得提议及同意修改目标公司章程； |
It is not allowed to propose and agree to amend the articles of association of the Target Company without the written consent of the Transferee.
| 7.2.5 | 在过渡期内，不得协商或签订与标的股权转让相冲突、或包含禁止或限制标的股权转让条款的合同或备忘录等各种形式的法律文件。 |
During the transitional period, it is not allowed to negotiate or sign various forms of legal documents such as contracts or memoranda that conflict with the transfer of the subject equity, or contain provisions prohibiting or restricting the transfer of the subject equity.
| 7.3 | 过渡期内，受让方名下的标的股权的股东权益受如下限制： |
During the transitional period, the shareholders' equity of the underlying equity under the name of the Transferee is subject to the following restrictions:
| 7.3.1 | 未经乙方书面同意，不得进行股权转让； |
Without the written consent of the Transferors, the equity shall not be transferred;
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| 7.3.2 | 未经乙方书面同意，不得以增资或其他形式引入其他投资者； |
Without the written consent of the Transferors, it is not allowed to introduce other investors in the form of capital increase or other forms;
| 7.3.3 | 未经乙方书面同意，不得在标的股权上设置抵押、质押、托管或设置其它负担； |
Without the written consent of Transferors, no mortgage, pledge, trusteeship or other burden shall be set on the subject equity;
| 7.3.4 | 未经乙方书面同意，不得提议及同意修改目标公司章程； |
Without the written consent of the Transferors, the Transferors shall not propose or agree to amend the articles of association of the Target Company;
| 7.3.5 | 在过渡期内，不得协商或签订与标的股权转让相冲突、或包含禁止或限制标的股权转让条款的合同或备忘录等各种形式的法律文件； |
During the transitional period, it is not allowed to negotiate or sign various forms of legal documents such as contracts or memoranda that conflict with the transfer of the subject equity, or contain provisions prohibiting or restricting the transfer of the subject equity.
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第八条 标的股权交割及其后的整合
Article 8 The settlement of the underlying equity and its integration
| 8.1 | 自本协议签订生效，且标的股权变更至受让方名下的变更登记手续办理完毕之日起，基于标的股权的一切权利义务由受让方享有和承担。 |
All rights and obligations based on the subject equity shall be enjoyed and undertaken by the Transferee from the date when this agreement is signed and comes into effect and the registration procedures for the change of the subject equity in the name of the Transferee are completed.
| 8.2 | 各方同意，标的股权应在本协议生效后按本协议第四条之约定完成交割。 |
The parties agree that the delivery of the subject equity shall be completed in accordance with Article 4 of this agreement after this agreement takes effect.
| 8.3 | 各方同意，标的股权交割同时，乙方应在包括但不限于工商行政主管部门等主管部门将目标公司的出资人登记为受让方和乙方，在所涉标的股权全部交割完毕后，同时于上述主管部门登记受让方在目标公司所持股权比例为99%。 |
All Parties agree, at the same time as the delivery of the underlying equity of the Target Company, each Transferor shall, including but not limited to the competent departments of industrial and commercial administration and other competent departments to register the Transferee of the Target Company as the ransferee and each Transferor, after the delivery of all the 99% equity involved, shall also register with the above competent authorities that the proportion of equity held by the Transferee in the target company is 99%.
| 8.4 | 各方同意，标的股权交割手续由乙方和目标公司负责办理，受让方应就办理标的股权交割提供必要的协助。 |
The parties agree that the Transferors and the Target Company shall be responsible for the delivery of the subject equity, and the Transferee shall provide necessary assistance for the delivery of the subject equity
| 8.5 | 各方同意，股权交割之日起1个月内，目标公司应经股东会决议完成目标公司章程的修改事宜。 |
The parties agree that within one month from the date of equity delivery, the Target Company shall complete the amendment of the articles of association of the Target Company through the resolution of the shareholders' meeting with reference to the “Subsidiary Management Regulations” formulated by the Transferee.
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| 8.6 | 各方同意，标的股权交割后，目标公司设立董事会，董事会成员由5名董事构成，受让方委派3名董事，出让方一、出让方二各委派1名董事，目标公司财务负责人由受让方委派，委派人员负责协助目标公司按照上市公司要求规范财务管理和业务管理。各方同意，在业绩承诺期内由受让方委派的董事担任目标公司董事长，负责目标公司的全面日常经营管理。 |
The Parties agree that after the delivery of the Subject equity, the Target Company shall set up a board of directors, which shall be composed of five directors. The Transferee shall appoint three directors and each Transferor shall appoint one director. The financial principal of the Target Company shall be appointed by the Transferee, and the appointed personnel shall be responsible for assisting the Target Company to standardize its financial management and business management. All Parties agree that during the performance commitment period, the director appointed by the Transferee shall act as the chairman of the Target Company and be responsible for the overall daily operation and management of the Target Company. At any point after the effective date of the transfer of the Target Company equity to the Transferee, the new management of the Target Company may choose, in their sole discretion, to manage the Target Company in any manner they wish.
| 8.7 | 各方同意，标的股权交割后，乙方若在目标公司所在地开展与目标公司存在同业竞争或潜在同业竞争的业务，须事先与受让方协商并经其书面同意，否则，乙方应赔偿由此给受让方和目标公司造成的一切损失。 |
All parties agree, after the settlement of the underlying equity, if the Transferors carries out business with the Target Company in the location of the Target Company there is competition or potential competition with the Target Company, the Transferors must consult with the Transferee in advance and with its written consent, otherwise, the Transferors shall compensate all losses caused to the Transferee and the Target Company.
| 8.8 | 各方同意，目标公司应根据股东的决定以及公司的管理情况进行分红。 |
The Target Company may pay dividends as determined by the shareholders and management of the Target Company.
| 8.9 | 各方同意，受让方可向向目标公司提供贷款，但贷款年化利息不高于6%。 |
The Transferee may make loans to the Target Company and agrees that the annualized interest rate on such loans shall not exceed 6%.
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第九条 档案资料及印鉴保管
Article 9 Storage of Archives and Seal
| 9.1 | 标的股权交割后，目标公司作为依法设立并有效存续、具有独立法人主体资格的性质未发生任何改变。因此，目标公司的所有档案资料及印鉴仍由其自行保管，但应符合受让方关于子公司档案资料和印鉴管理的相关规定。 |
After the delivery of the underlying equity, the nature of the Target Company as a legally established and effective surviving entity with the qualification of an independent legal person has not changed. Therefore, all file information and seal of the Target Company shall remain in its own custody, but shall comply with the Transferee's relevant requirements for the management of the subsidiary's file information and seal of the Transferee.
| 9.2 | 标的股权交割后，目标公司应根据受让方的要求向其提供所有档案资料以供其查阅。 |
Upon the delivery of the underlying equity, the Target Company shall provide all file information to the Transferee for its inspection at the request of the Transferee.
| 9.3 | 股权交割日后，保证定期提供财务报表予受让方，并配合受让方的要求查询会计账簿、凭证。 |
After the settlement of the shares, ensure that the financial statements are provided to the Transferee on a regular basis, and in line with the requirements of the Transferee to query the accounting books and certificates.
第十条 债权债务及人员安排
Article 10 Creditor's Rights and Liabilities and Personnel Arrangements
| 10.1 | 标的股权交割后，目标公司的独立法人地位未发生任何改变，因此，除本协议另有约定外，目标公司仍将独立享有和承担其自身的债权和债务。 |
After the delivery of the underlying equity, the independent legal personality of the Target Company has not changed, so, except as otherwise agreed in this agreement, the Target Company will continue to independently enjoy and bear its own claims and debts.
| 10.2 | 标的股权交割后，目标公司现有员工仍与其保持劳动关系，并不因本次交易而发生变更、解除或终止。目标公司的现有员工于股权交割日之后的工资、社保费用、福利费等员工薪酬费用仍由目标公司自行承担。 |
Upon the delivery of the underlying equity and for a reasonable period of time thereafter, the existing employees of the Target Company remain in labor relations with them and will not be changed, terminated or terminated as a result of this Transaction. The salary, social security expenses, welfare expenses and other employee compensation expenses of the existing employees of the Target Company after the equity settlement date are still borne by the Target Company.
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第十一条 关于或有事项的约定
Article 11 Agreement on Contingent Matters
| 11.1 | 各方同意，目标公司改制问题，乙方承诺：若因目标公司改制存在任何争议或法律瑕疵给受让方和目标公司造成损失的，由其向受让方和目标公司作出相应补偿。 |
The parties agree that the Target Company restructuring problem, the Transferors undertakes: if there is any dispute or legal defects due to the Target Company restructuring to the Transferee and the Target Company caused losses, it will make appropriate compensation to the Transferee and the Target Company.
| 11.2 | 各方同意，就股权交割日前目标公司超出经营范围开展经营活动的问题，乙方承诺：若因股权交割日前目标公司的超范围经营问题给受让方和目标公司造成损失的，由其向受让方和目标公司作出相应补偿。 |
The parties agree that on the issue of the Target Company's business activities beyond the scope of operation before the equity delivery date, the Transferors undertakes: if the Transferee and the Target Company cause losses due to the outside-scope business problems of the Target Company before the equity delivery date, it shall make corresponding compensation to the Transferee and the Target Company.
| 11.3 | 就股权交割日前目标公司建设项目未履行环评手续和竣工验收手续的问题，乙方承诺：若因股权交割日前目标公司的环保问题给受让方和目标公司造成损失的，由其向受让方和目标公司作出相应补偿。 |
the Transferors undertakes to compensate the Transferee and the Target Company accordingly if the environmental protection problems of the Target Company cause losses to the Transferee and the Target Company due to the environmental protection problems of the Target Company before the equity delivery date.
| 11.4 | 各方同意，就股权交割日前目标公司缴纳企业所得税的问题，乙方承诺：若因有关税务问题给受让方和目标公司造成损失的，由其向受让方和目标公司作出相应补偿。 |
The parties agree that in respect of the issue of the payment of corporate income tax by the Target Company before the equity delivery date, the Transferors undertakes: if the loss is caused to the Transferee and the Target Company due to the relevant tax issues, it shall make corresponding compensation to the Transferee and the Target Company.
| 11.5 | 各方同意，就标的股权交割前目标公司未与全体员工订立劳动合同、未为全体员工足额缴纳社会保险和住房公积金问题，乙方承诺：若因前述有关劳动人事问题给受让方和目标公司造成损失的，由其向受让方和目标公司作出相应补偿。 |
The parties agree that in respect of the failure of the Target Company to enter into a labor contract with all employees and to pay full social insurance and housing provident fund for all employees before the delivery of the underlying equity, the Transferors undertakes: if the aforementioned labor and personnel problems cause losses to the Transferee and the Target Company, it shall make corresponding compensation to the Transferee and the Target Company.
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第十二条 陈述、保证与承诺
Article 12 Representations, Warranties and Undertakings
| 12.1 | 乙方、目标公司在本协议签署日就本协议的签署及履行作出陈述、保证与承诺如下：The Transferors and the Target Company make representations, warranties and undertakings regarding the signing and performance of this Agreement on the date of signing of this Agreement as follows: |
| 12.1.1 | 乙方系根据中国法律依法设立并有效存续的公司法人或自然人，目标公司系根据中国法律依法设立并有效存续的有限责任公司，均有权签订并履行本协议； |
Each Transferor is a corporate person or natural person established and effective existence in accordance with Chinese law, and the Target Company is a limited liability company established and effective existence in accordance with Chinese law.
| 12.1.2 | 乙方、目标公司保证其向受让方及其聘请的中介机构提供的资料、文件及数据均是真实、准确、完整的，并无任何隐瞒、遗漏、虚假或误导之处； |
Each Transferor and the Target Company guarantee that the information, documents and data provided to the Transferee and its hired intermediaries are true, accurate and complete, and there is no concealment, omission, false or misleading.
| 12.1.3 | 乙方保证标的股权不存在任何权属纠纷或潜在权属纠纷，标的股权上不存在其他任何质押、查封、冻结或其他任何限制转让的情形； |
Each Transferor guarantees that there is no ownership dispute or potential ownership dispute on the underlying equity, and that there is no other pledge, seal, freeze or any other restriction on the transfer of the underlying equity.
| 12.1.4 | 乙方保证，不存在任何以委托持股、信托持股或其他类似的方式为他人代持目标公司股权的情形； |
Each Transferor warrants that there is no case of holding shares in the Target Company on behalf of others by entrusting shares, trust shares or other similar means.
| 12.1.5 | 乙方保证，除本协议第12条约定的或有事项外，目标公司已取得开展经营所必需的全部经营资质，若因目标公司在股权交割日前经营合规性方面存在瑕疵导致本次交易终止或标的股权交割后导致目标公司受到行政处罚并因此给受让方和目标公司造成任何损失的，乙方应向受让方和目标公司进行补偿； |
Each Transferor warrants that, in addition to the contingent items specified in Clause 12 of this Agreement, the Target Company has obtained all the operating qualifications necessary to carry out business, if the Target Company due to defects in the operational compliance of the equity delivery date leads to the termination of this Transaction or after the delivery of the underlying equity leads to the Target Company subjected to administrative penalties and thus cause any losses to the assignee and the Target Company, each Transferor shall compensate the assignee and the Target Company.
| 12.1.6 | 乙方保证，若因目标公司股权交割日前资产方面存在瑕疵或发生任何权属纠纷导致受让方和目标公司遭受损失的，乙方应向受让方和目标公司进行补偿； |
Each Transferor warrants that if the Transferee or the Target Company suffer losses due to defects in the assets of the Target Company or any ownership dispute before the delivery date of the equity of the Target Company, each Transferor shall compensate the Transferee or the Target Company for any and all losses.
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| 12.1.7 | 乙方保证，目标公司自成立以来未受到税务、国土、房产、卫生、环保、劳动与社会保障等行政主管部门的其他行政处罚，目标公司也不存在因税务、国土、房产、卫生、环保、劳动与社会保障等原因而应承担其他法律责任的情形；如因存在上述问题，相应的责任和后果全部由乙方承担，并保证受让方和目标公司不因此遭受损失； |
Each Transferor guarantees that the Target Company has not been subject to other administrative penalties by the administrative departments such as tax, land, real estate, health, environmental protection, labor and social security since its inception, and that the Target Company does not have other legal responsibilities due to tax, land, real estate, health, environmental protection, labor and social security and other reasons; if the above-mentioned problems exist, the corresponding responsibilities and consequences shall be borne by each Transferor jointly and severally, and ensure that the assignee and the Target Company.
| 12.1.8 | 乙方保证，已向受让方全面、真实披露目标公司负债、或有负债情况，除此之外，目标公司存在其他债务、或有负债的，由乙方承担一切法律责任，其中包括补偿受让方和目标公司因此遭受的损失； |
Each Transferor warrants that the Target Company's liabilities and contingent liabilities have been fully and truthfully disclosed to the Transferee. In addition, if the Target Company has other debts and contingent liabilities, the Transferors shall bear all legal responsibilities, including compensating the Transferee and the Target Company for the losses suffered as a result；
| 12.1.9 | 乙方保证，目标公司不存在尚未了结的诉讼、仲裁、行政处罚或者任何纠纷； |
Each Transferor warrants that there are no pending litigation, arbitration, administrative penalties or any disputes with the Target Company.
| 12.1.10 | 乙方保证，目标公司在本协议签署日不存在其他任何正在执行或尚未执行的合作、承包、出租及托管协议； |
Each Transferor warrants that the Target Company does not have any other cooperation, contracting, leasing and escrow agreements that are being executed or have not yet been executed at the date of signing this Agreement；
| 12.1.11 | 乙方保证，目标公司不存在对外担保情形； |
Each Transferor guarantees that there is no external guarantee for the Target Company；
| 12.1.12 | 在标的股权交割之后任何时间，若因股权交割日之前既存的事实或状态导致目标公司出现诉讼、任何债务、或有债务、应付税款、行政处罚、违约责任、侵权责任及其他责任或损失、或上述情形虽发生在股权交割日前但延续至股权交割日之后，均由乙方在接到受让方书面通知后负责处理，若因此给受让方、目标公司造成任何损失，乙方应向受让方、目标公司作出全额补偿，补偿范围包括但不限于受让方、目标公司直接经济损失（罚金、违约金、补缴款项等）及受让方、目标公司为维护权益支付的律师费、公证费等所有合理费用； |
At any time after the delivery of the underlying equity, if any litigation, any debt, contingent debt, taxes payable, administrative penalties, liability for breach of contract, tort liability and other liability or loss due to the facts or state existing before the delivery date of the underlying equity, or the above circumstances, although occurred before the delivery date of the underlying equity, but extended to the delivery date of the underlying equity, Each Transferor shall be responsible for processing after receiving the written notice of the Transferee, Each Transferor shall make full compensation to the Transferee, the Target Company, including but not limited to Direct economic losses (fines, liquidated damages, compensations, etc.) and all reasonable costs such as attorney's fees and notary fees paid by the Transferee and the Target Company for the protection of rights and interests.
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| 12.1.13 | 乙方内部之间就乙方在本协议项下的承诺、保证及义务互负连带保证责任； |
Each Transferor shall be jointly and severally liable for Each Transferor's commitments, guarantees and obligations under this Agreement.
| 12.1.14 | 乙方保证，目标公司截止本协议签署之日登记的股东与其原股东之间不存在任何权属纠纷，目标公司的所有资产均系由乙方投入或目标公司自身经营产生，不存在任何第三方对目标公司的股权或资产享有任何权益或权利；如有任何第三方对目标公司的股权或资产主张权益并由此给受让方、目标公司造成任何损失，乙方应向受让方、目标公司作出全额补偿，补偿范围包括但不限于受让方、目标公司直接经济损失及受让方、目标公司为维护权益支付的律师费、公证费等所有合理费用； |
Each Transferor warrants that there is no ownership dispute between the shareholders registered at the date of signing of this agreement between the Target Company and its original shareholders, all assets of the Target Company are invested by Each Transferor or the Target Company's own business, there is no third party to enjoy any rights or rights to the equity or assets of the Target Company; if any third the Target Company claims rights and interests in the equity or assets of the Target Company and Legal fees, notary fees and other reasonable fees paid by the rights and interests.
| 12.1.15 | 乙方确认，目标公司经营所需的生产设备、办公设备等所有资产均来自于目标公司。乙方保证，目标公司已经支付了购买该等生产设备、办公设备等所有资产的对价，该等生产设备、办公设备等所有资产均已合法归属于目标公司所有并交付给目标公司使用，目标公司无需向出资人/举办人支付任何费用，不存在任何第三方对该等生产设备、办公设备等所有资产享有权益和权利；如有任何第三方对目标公司的生产设备、办公设备等所有资产主张权益并由此给受让方、目标公司造成任何损失，乙方应向受让方、目标公司作出全额补偿，补偿范围包括但不限于受让方、目标公司直接经济损失及受让方、目标公司为维护权益支付的律师费、公证费等所有合理费用； |
Each Transferor confirmed that all assets such as production equipment and office equipment required for the operation of the Target Company came from the Target Company. Each Transferor warrants that the Target Company has paid the consideration for the purchase of all assets such as production equipment, office equipment, etc., all assets such as production equipment, office equipment, etc. have been legally owned by the Target Company and delivered to the Target Company for use, the Target Company does not need to pay any fees to the funder/organizer, there is no third party to enjoy the rights and interests of all assets such as production equipment, office equipment, etc. The scope of compensation includes, but is not limited to, the direct economic losses of the Transferee, the Target Company and all reasonable costs such as attorney's fees, notary fees paid by the Transferee and the Target Company for the protection of rights and interests.
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| 12.1.16 | [Section intentionally left blank.] |
| 12.1.17 | 乙方、目标公司承诺，如果知悉发生任何情况致使任何其作出的陈述和保证在任何方面变得不真实、不完整、不准确或具误导性，其将立即以书面形式通知受让方。 |
Each Transferor and the Target Company undertake to inform the Transferee in writing immediately if they know of any situation that makes any statement and guarantee made by them untrue, incomplete, inaccurate or misleading in any respect.
| 12.2 | 受让方就本协议的履行作出陈述、保证与承诺如下： |
The Transferee represents, warrants and undertakes to perform this Agreement as follows:
| 12.2.1 | 受让方是一家根据中国法律依法设立并有效存续的公司，有权签订并履行本协议； |
The Transferee is a company established and existing in accordance with the laws of China and has the right to sign and perform this agreement;
| 12.2.2 | 向乙方、目标公司提供的资料、文件及数据均是真实、准确、完整的，并无任何隐瞒、遗漏、虚假或误导之处； |
The materials, documents and data provided to the Transferors and the Target Company are true, accurate and complete without any concealment, omission, falsehood or misleading;
| 12.2.3 | 依照本协议约定按期足额支付股权交易对价； |
In accordance with the provisions of this Agreement, the consideration of the equity transaction shall be paid in full and on time;
| 12.2.4 | 如果知悉发生任何情况致使任何其作出的陈述和保证在任何方面变得不真实、不完整、不准确或具误导性，其将立即以书面形式通知乙方、目标公司。 |
If it is aware of any situation that makes any statement and guarantee made by it untrue, incomplete, inaccurate or misleading in any respect, it will immediately notify the Transferors and the Target Company in writing.
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第十三条 税费
Article 13 Taxes and administrative charges
| 13.1 | 因本次交易产生的各种税费，由各方依据相关法律法规及政策性规定各自承担和缴纳。 |
All taxes and fees arising from this transaction shall be borne and paid by each party in accordance with relevant laws, regulations and policy provisions.
第十四条 保密
Article 14 Secrecy
| 14.1 | 各方确认，对本次交易采取严格的保密措施，除非根据法律、法规的规定或者履行本次交易所必需，不得向任何其他第三方披露本次交易的情况。 |
All parties confirm that they shall take strict confidentiality measures for this transaction, and shall not disclose this transaction to any other third party except in accordance with the provisions of laws and regulations or as necessary for the performance of this exchange.
| 14.2 | 各方确认，本次交易过程中知悉的有关对方的商业秘密应采取严格的保密措施。All parties confirm that strict confidentiality measures shall be taken for the trade secrets of the other party known in the course of this transaction. |
第十五条 违约责任
Article 15 Liability for breach of contract
| 15.1 | 本协议签订后，除不可抗力原因以外，任何一方不履行或不及时、不适当履行本协议项下其应履行的任何义务，或违反其在本协议项下作出的任何陈述、保证或承诺，应按照法律规定承担相应法律责任。 |
After the signing of this agreement, except for force majeure, any party who fails to perform or fails to timely and properly perform any of its obligations under this agreement, or violates any of its representations, guarantees or commitments under this Agreement shall bear corresponding legal liabilities in accordance with the law.
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| 15.2 | 如果因法律法规或政策限制，或其他因本协议任何一方不能控制的原因，导致标的股权不能按本协议的约定转让的，不视为任何一方违约。 |
If the subject equity cannot be transferred according to the agreement due to the limitation of laws, regulations or policies, or other reasons beyond the control of either party, it shall not be deemed as any party's breach of contract.
| 15.3 | 如因任何一方不履行或不及时履行、不适当履行本协议项下其应履行的任何义务，导致本协议目的无法达成的，守约方有权解除本合同，违约方给其他各方造成损失的，应足额赔偿损失金额(包括但不限于律师费、诉讼费及调查取证费等)。 |
If the purpose of this agreement cannot be achieved due to either party's failure to perform or timely or improper performance of any of its obligations under this agreement, the observant party shall have the right to terminate this contract. If the breaching party causes losses to other parties, it shall make full compensation for the amount of losses (including but not limited to attorney's fees, litigation fees, investigation and evidence collection fees, etc.)
| 15.4 | 本次交易实施的先决条件满足后，受让方及其指定的主体未能按照本协议约定支付交易对价的，每逾期一日，应当以本次交易的标的股权的评估值(65,110,542.5223元)为基数，按照本协议签订之日全国银行间贷款市场公布的同期一年期贷款市场报价利率（LPR）上浮10%计算违约金支付给乙方(但由于乙方或目标公司的原因导致逾期付款的除外)。 |
After the preconditions for the implementation of this transaction are met, if the Transferee and its designated entity fail to pay the transaction consideration in accordance with this agreement, the assessed value of the subject equity of this transaction(RMB65,110,542.5223) shall be taken as the base for each overdue day, the penalty shall be paid to the Transferors in accordance with the 10% increase in the quoted interest rate(LPR) of the one-year loan market published by the National Interbank Loan Market on the date of signing of this Agreement (except for late payments due to the Transferors or the Target Company).
| 15.5 | 本次交易实施的先决条件满足后，乙方违反本协议的约定，未能按照本协议约定的期限办理完毕标的股权交割，每逾期一日，应当以本次交易的标的股权的评估值(76539435.49元)为基数，按照本协议签订之日全国银行间贷款市场公布的同期一年期贷款市场报价利率（LPR）上浮10%计算违约金支付给受让方(但由于受让方或主管部门的原因导致逾期办理标的股权交割的除外)。 |
After the preconditions for the implementation of this transaction are met, If the Transferors violates this Agreement and fails to complete the delivery of the target equity within the time limit specified in this agreement, the assessed value of the target equity of this transaction (76539435.49 yuan) shall be taken as the base for each overdue day, the penalty shall be calculated and paid to the Transferee in accordance with the 10% increase in the quoted interest rate(LPR) of the one-year loan market published by the National Interbank Loan Market on the date of signing of this Agreement (except for the late delivery of the subject equity due to the reason of the Transferee or the competent department).
| 15.6 | 除本协议另有约定外，协议任何一方违反本协议中约定的承诺与保证的，应当赔偿守约方全部损失(包括但不限于合理的律师费、诉讼费及调查取证费等)。Unless otherwise agreed in this agreement, if any party violates the promise and guarantee agreed in this agreement, it shall compensate the observant party for all losses (including but not limited to reasonable lawyer's fees, litigation costs, investigation and evidence collection fees, etc.) |
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第十六条 协议生效及排他性
Article 16 Effectiveness and exclusivity of the agreement
| 16.1 | 本协议经各方签字盖章后成立，并在满足本协议第3.1条约定的本次交易实施的先决条件后即时生效。 |
This Agreement shall be established after being signed and sealed by all parties, and shall take effect immediately after meeting the preconditions for the implementation of this transaction as stipulated in Article 3.1 of this agreement.
| 16.2 | 各方同意，如本协议任何条款所约定的权利或义务仅涉及本协议的部分主体的，经该等条款所涉及的主体书面签署同意，可对该等条款作出修订，该等条款未涉及的其他主体对此无异议。 |
The parties agree that if the rights or obligations stipulated in any clause of this agreement only involve part of the main body of this agreement, such clause can be amended with the written signed consent of the main body involved in such clause, and other parties not involved in such clause have no objection.
| 16.3 | 除本协议另有约定外，各方经协商一致，可以书面形式解除本协议。 |
Unless otherwise agreed in this agreement, the parties may terminate this agreement in writing by consensus.
| 16.4 | 过渡期内，如受让方发现目标公司存在未披露重大事项或存在未披露重大或有风险，导致目标公司的经营发生重大不利变化的，受让方有权单方解除本协议终止本次交易，并根据本协议的约定追究违约责任，要求赔偿包括但不限于为筹划本次交易发生的中介机构服务费、差旅费等实际经济损失。 |
During the transitional period, if the Transferee finds that the Target Company has not disclosed major events or has not disclosed major or potential risks, which leads to significant adverse changes in the operation of the Target Company, the Transferee has the right to unilaterally terminate this agreement, terminate this transaction, and investigate the liability for breach of contract according to the agreement, and claim compensation, including but not limited to the intermediary service fee, service fee and compensation for the planning of this transaction Travel expenses and other actual economic losses.
25 / 27
第十七条 其他
Article 17 Miscellaneous
| 17.1 | 凡因本协议所发生的或与本协议有关的任何争议，各方应争取以友好协商方式迅速解决。若协商未能解决时，提交深圳国际仲裁院依据该院届时现行有效的仲裁规则仲裁解决，裁决为终局，对双方均有约束力。仲裁费用由败诉方承担。 |
Any dispute arising out of or in connection with this Agreement shall be resolved promptly by friendly negotiation. If the negotiation fails to resolve, it shall be submitted to the Shenzhen International Arbitration Court (SIAC) for arbitration, in accordance with the arbitration rules in force at that time, and the award shall be final and binding on both parties. The costs of arbitration shall be borne by the losing party.
| 17.2 | 本协议一式五份，受让方、出让方一、出让方二、目标公司各执一份，剩余一份用于办理有关手续，每份具有同等法律效力。 |
This agreement is made in quintuplicate, with the Transferee, the Transferor 1, the Transferor 2 and the Target Company holding one copy respectively. The remaining one copy is used for handling relevant procedures, and each copy has the same legal effect.
| 17.3 | 各方同意，本协议签订生效后，因实际需要而修改的公司章程、为办理工商登记手续而签署的简版股权转让协议（如有）及其他相关文件与本协议相关条款不一致的，以本协议为准，除非本协议当事人另行签订补充协议. |
All parties agree that after this agreement is signed and comes into effect, if the articles of association, the simplified equity transfer agreement (if any) and other relevant documents amended due to actual needs are inconsistent with the relevant provisions of this agreement, this Agreement shall prevail, unless the parties to this agreement sign a supplementary agreement.
26 / 27
（本页无正文，为协议签署页）
(There is no text on this page, which is the signing page of the agreement)
受让方(the Transferee)：
深圳市微联金盟电子商务科技有限公司Shenzhen Wei Lian Jin Meng Electronic Commerce Limited
法定代表人或授权代表(签字)
( Legal representative or authorized representative (signature)：
出让方一(the Transferor 1)：
世纪纵横投资控股（深圳）有限公司Century Zongheng Investment Holding (Shenzhen) Co. , Ltd.
法定代表人或授权代表(签字)
( Legal representative or authorized representative (signature)：
出让方二(签字) (the Transferor 2(signature)：朱虹【Zhu Hong】
目标公司(the Target Company)：
深圳市乃娘酒业有限公司Shenzhen Nainiang Wine Industrial Co., Ltd.
法定代表人或授权代表(签字)
( Legal representative or authorized representative (signature)：
27 / 27
Exhibit 99.1
SHENZHEN NAINIANG WINE INDUSTRIAL CO., LTD.
FINANCIAL STATEMENTS
FOR THE YEAR ENDED
DECEMBER 31, 2020
SHENZHEN NAINIANG WINE INDUSTRIAL CO., LTD.
TABLE OF CONTENTS
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Shenzhen Nainiang Wine Industrial Co., Ltd :
Opinion on the Financial Statements
We have audited the accompanying balance sheet of Shenzhen Nainiang Wine Industrial Co., Ltd (“the Company”) as of December 31, 2020, and the related statements of income and comprehensive income, stockholders’ equity, and cash flows for the period from inception (January 14, 2020) to December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020, and the results of its operations and its cash flows for the period from inception (January 14, 2020) to December 31, 2020, in conformity with accounting principles generally accepted in the United States.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
Emphasis of Matter
The Company has significant transactions with related parties, which are described in Note 7 to the financial statements. Transactions involving related parties cannot be presumed to be carried out on an arm’s length basis, as the requisite conditions of competitive, free market dealings may not exist.
/s/ Audit Alliance LLP
We have served as the Company’s auditor since 2021.
Singapore
August 16, 2021
F-2
SHENZHEN NAINIANG WINE INDUSTRIAL CO., LTD.
BALANCE SHEETS
(In U.S. Dollars, except share data or otherwise stated)
AS OF DECEMBER 31, 2020 (Audited)
| 2020 | ||||
| US$ | ||||
| ASSETS | ||||
| Current assets: | ||||
| Cash and cash equivalents | 2,191 | |||
| Accounts receivables | 212,664 | |||
| Amount due from related parties | 611,064 | |||
| Total current assets | 825,919 | |||
| Non-current assets: | ||||
| Property, plant and equipment, net | 340,286 | |||
| Total non-current assets | 340,286 | |||
| Total assets | 1,166,205 | |||
| LIABILITIES AND EQUITY | ||||
| Current liabilities: | ||||
| Accounts payable | 77,332 | |||
| Income tax payables | 170,516 | |||
| Other payables and accruals | 61,852 | |||
| Deferred revenue | 95,316 | |||
| Amount due to related parties | 35,842 | |||
| Total current liabilities | 440,858 | |||
| Non-current liabilities: | ||||
| Deferred revenue | 94,254 | |||
| Total non-current liabilities | 94,254 | |||
| Total liabilities | 535,112 | |||
| COMMITMENTS AND CONTINGENCIES | ||||
| EQUITY | ||||
| Share capital (Registered capital of RMB50,000,000, of which nil was paid up as of December 31, 2020) | - | |||
| Foreign currency translation reserves | 33,826 | |||
| Statutory reserves | 94,664 | |||
| Retained earnings | 502,603 | |||
| Total equity | 631,093 | |||
| Total liabilities and equity | 1,166,205 | |||
The accompanying notes are an integral part of the financial statements.
F-3
SHENZHEN NAINIANG WINE INDUSTRIAL CO., LTD.
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(In U.S. Dollars, except share data or otherwise stated)
FOR THE YEAR ENDED DECEMBER 31, 2020 (Audited)
| 2020 | ||||
| US$ | ||||
| Revenue | 1,861,039 | |||
| Cost of revenue | (864,243 | ) | ||
| Gross profit | 996,796 | |||
| Selling and marketing expenses | (135,778 | ) | ||
| General and administrative expense | (63,891 | ) | ||
| Total operating expenses | (199,669 | ) | ||
| Income from operations | 797,127 | |||
| Other expenses | (332 | ) | ||
| Income before income tax | 796,795 | |||
| Income taxes | (199,528 | ) | ||
| Net income for the year | 597,267 | |||
| Foreign currency translation differences | 33,826 | |||
| Total comprehensive income for the year | 631,093 | |||
The accompanying notes are an integral part of the financial statements.
F-4
SHENZHEN NAINIANG WINE INDUSTRIAL CO., LTD.
STATEMENTS OF CHANGES IN EQUITY
(In U.S. Dollars, except share data or otherwise stated)
FOR THE YEARS ENDED DECEMBER 31, 2020 (Audited)
| Foreign Currency | Retained earnings | |||||||||||||||||||
| Share
Capital | Translation Reserve | Unrestricted | Statutory Reserve | Total Equity | ||||||||||||||||
| US$ | US$ | US$ | US$ | US$ | ||||||||||||||||
| Balance at January 14, 2020 (i) | - | - | - | - | - | |||||||||||||||
| Net income for the year | - | - | 502,603 | 94,664 | 597,267 | |||||||||||||||
| Other comprehensive income | - | 33,826 | - | - | 33,826 | |||||||||||||||
| Balance at December 31, 2020 | - | 33,826 | 502,603 | 94,664 | 631,093 | |||||||||||||||
| (i) | Shenzhen Nainiang Wine Industrial Co., Ltd. was incorporated on January 14, 2020. |
The accompanying notes are an integral part of the financial statements.
F-5
SHENZHEN NAINIANG WINE INDUSTRIAL CO., LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In U.S. Dollars, except share data or otherwise stated)
FOR THE YEARS ENDED DECEMBER 31, 2020 (Audited)
| 2020 | ||||
| US$ | ||||
| Cash flows from operating activities: | ||||
| Net income | 597,267 | |||
| Adjustments for: | ||||
| Depreciation and amortization | 34,270 | |||
| Changes in: | ||||
| Accounts receivables | (201,266 | ) | ||
| Accounts payable | 73,187 | |||
| Income tax payables | 161,377 | |||
| Other payables and accruals | 58,537 | |||
| Deferred revenue | 179,409 | |||
| Amount due from related parties | (544,391 | ) | ||
| Net cash provided by operating activities | 358,390 | |||
| Cash flows from investing activities: | ||||
| Additions to property, plant and equipment | (355,865 | ) | ||
| Cash used in investing activities | (355,865 | ) | ||
| Effect of exchange rate changes on cash and cash equivalents | (334 | ) | ||
| Net increase in cash and cash equivalents | 2,191 | |||
| Cash and cash equivalents at the beginning of year | - | |||
| Cash and cash equivalents at the end of the year | 2,191 | |||
| Supplemental cash flow information: | ||||
| Income taxes paid, net | 38,151 | |||
The accompanying notes are an integral part of the financial statements.
F-6
SHENZHEN NAINIANG WINE INDUSTRIAL CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2020 (Audited)
| 1. | DESCRIPTION OF BUSINESS |
Shenzhen Nainiang Wine Industrial Co. Ltd. (“Nainiang Wine” or the “Company”) was incorporated in the People’s Republic of China (“PRC”) on January 14, 2020 with registered capital of Renminbi (“RMB”) 50,000,000 (approximately $7,221,100). The paid-in capital was nil.
The principal activities of the Company is trading of wine products and providing pre-opening assistance to retail partners to operate wine stores in the People’s Public of China (“PRC” or “China”).
On June 2, 2021, Fountain Healthy Aging, Inc. (“FHAI”) and FHAI’s subsidiary Shenzhen Wei Lian Jin Meng Electronic Commerce Limited entered into an equity transfer agreement with the Ms. Zhu Hong, who is the majority shareholder of FHAI and the sole owner of Shenzhen Nainiang Wine Industrial Co. Ltd. directly and indirectly, under which the FHAI group agreed to acquire 99% ownership of Shenzhen Nainiang Wine Industrial Co. Ltd.. The financial statements included herein present the financial condition, results of operations and cash flows of Nainiang Wine for the year ended December 31, 2020.
FHAI agreed to issue 9,281,577 number of ordinary shares in exchange for 99% ownership of Nainiang Wine, and the shares is scheduled to be issued in the third quarter of 2021.
The operational control of Nainiang Wine passed to FHAI and all assets of Nainiang Wine were acquired by FHAI effective June 3, 2021.
| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
| (a) | Basis of Presentation |
The accompanying financial statements include the balances and results of operations of the Company have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchanges Commission (“SEC”) and in conformity with generally accepted accounting principles in the U.S. (“US GAAP”).
The accompanying financial statements are presented on the basis that the Company is a going concern. The going concern assumption contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
| (b) | Economic and Political Risks |
The Company’s operations are conducted in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC economy.
The Company’s operations in the PRC are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange. The Company’s results may be adversely affected by changes in the political and social conditions in the PRC, and by changes in government policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation.
| (c) | 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, related disclosures of contingent liabilities at the balance sheet date, and revenue and expenses in the financial statements and accompanying notes. Significant accounting estimates reflected in the Company’s financial statements include economic lives and impairment of property, plant and equipment and allowance for doubtful accounts. Actual results could differ from those estimates and such differences could affect the results of operations reported in future periods.
F-7
| (d) | Cash and Cash Equivalents |
The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. All cash and cash equivalents relate to cash on hand and cash at bank at December 31, 2020.
The Renminbi is not freely convertible into foreign currencies. Under the PRC Foreign Exchange Control Regulations and Administration of Settlement, Sales and Payment of Foreign Exchange Regulations, the Company is permitted to exchange Renminbi for foreign currencies through banks that are authorized to conduct foreign exchange business.
| (e) | Accounts receivables |
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of accounts receivable. The Company assesses the probability of collection from each customer at the outset of the arrangement based on a number of factors, including the customer’s payment history and its current creditworthiness. If in management’s judgment collection is not probable, the Company does not record revenue until the uncertainty is removed.
Management performs ongoing credit evaluations, and the Company maintains an allowance for potential credit losses based upon its loss history and its aging analysis. The allowance for doubtful accounts is the Company’s best estimate of the amount of credit losses in existing accounts receivable. Management reviews the allowance for doubtful accounts each reporting period based on a detailed analysis of trade receivables. In the analysis, management primarily considers the age of the customer’s receivable, and also considers the creditworthiness of the customer, the economic conditions of the customer’s industry, general economic conditions and trends, and the business relationship and history with its customers, among other factors. If any of these factors change, the Company may also change its original estimates, which could impact the level of the Company’s future allowance for doubtful accounts. If judgments regarding the collectability of receivables were incorrect, adjustments to the allowance may be required, which would reduce profitability.
Accounts receivable are recognized and carried at the original invoice amount less an allowance for any uncollectible amounts. An estimate for doubtful accounts receivable is made when collection of the full amount is no longer probable. Bad debts are written off as incurred. No allowance for doubtful accounts was made for the year ended December 31, 2020.
The following customers had an accounts receivable balance greater than 10% of total accounts receivable at December 31, 2020.
| Amount | % | |||||||
| Customer A | 108,415 | 51 | % | |||||
| Customer B | 104,249 | 49 | % | |||||
| 212,664 | 100 | % | ||||||
| (f) | Property, plant and Equipment |
An item of property, plant and equipment is stated at cost less any accumulated depreciation and any accumulated allowance for decrease in value (if any).
The cost of an item of property, plant and equipment comprises its purchase price, import duties and non-refundable purchase taxes (after deducting trade discounts and rebates) and any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. These can include the initial estimate of costs of dismantling and removing the item, and restoring the site on which it is located, the obligation for which an entity incurs either when the item is acquired or as a consequence of having used the item during a particular period.
F-8
The cost of replacing part of property, plant and equipment is included in the carrying amount of the asset when it is probable that future economic benefits will flow to the Company and the carrying amount of those replaced parts is derecognized. Repairs and maintenance are charged to the statement of income during the financial period in which they are incurred.
Depreciation is calculated on the straight-line basis to write off the cost of each asset to its residual value over the estimated useful life as follows:
| Office equipment | 5 years | |
| Computer equipment and software | 3 years | |
| Motor vehicle | 4 years |
The assets’ residual value, useful lives, and depreciation method are regularly reviewed.
| (g) | 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. Whenever there is an indication showing a permanent decrease in the amount of property, plant and equipment; such as an evidence of obsolescence or physical damage of an asset, significant changes in the manner in which an asset is used or is expected to be used, the Company shall recognize loss on decrease in value of leasehold improvement and equipment in the statement of income where the carrying amount of asset is higher than the recoverable amount. 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 based on the fair value of the assets. There was no impairment of long-lived assets as of December 31, 2020.
| (h) | Revenue Recognition |
The Company’s revenues primarily include Company sales, franchise fees and income and revenues from transactions with franchisees.
Company sales
Company sales represents sale of wine products. Such revenue is recognized net of value-added taxes, upon delivery at such time title passes to the customers.
Franchise fees and income
Franchise fees and income primarily include upfront franchise fees, such as initial fees, pre-opening assistance to operate wine stores, subsequent training provided to franchisees and renewal fees. The Company has determined that the services provided in exchange for upfront franchise fees are highly interrelated with the franchise right. The franchise rights are accounted for as rights to access the Company’s symbolic intellectual property in accordance with ASC 606 and the Company recognize upfront franchise fees received from a franchisee as revenue when performance obligation is satisfied in accordance with the franchise agreement or the renewal agreement. The franchise agreement term is generally 3 years.
F-9
Revenues from transactions with franchisees
Revenues from transactions with franchisees consist primarily of sales of wine products. The Company sells and delivers wine products to the franchisees. The performance obligation arising from such transactions is considered distinct from the franchise agreement as it is not highly dependent on the franchise agreement and the customer can benefit from the procurement service on its own. Revenue is recognized upon transfer of control over ordered items, generally upon delivery to the franchisees.
In determining the amount and timing of revenue from contracts with customers, the Company exercises significant judgment with respect to collectability of the amount; however, the timing of recognition does not require significant judgment as it is based on either the franchise term or the date of product shipment, none of which require estimation.
The Company does not incur a significant amount of contract acquisition costs in conducting its franchising activities. The Company believes its franchising arrangements do not contain a significant financing component.
The Company’s revenue recognition policy is compliant with ASC 606, Revenue from Contracts with Customers that revenue is recognized when a customer obtains control of promised goods and is recognized in an amount that reflects the consideration that the Company expects to receive in exchange for those goods. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amount of revenue that is recorded reflects the consideration that the Company expects to receive in exchange for those goods. The Company applies the following five-step model in order to determine this amount:
| (i) | identification of the goods and services in the contract; |
| (ii) | determination of whether the goods and services are performance obligations, including whether they are distinct in the context of the contract; |
| (iii) | measurement of the transaction price, including the constraint on variable consideration; |
| (iv) | allocation of the transaction price to the performance obligations; and |
| (v) | recognition of revenue when (or as) the Company satisfies each performance obligation. |
The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. Once a contract is determined to be within the scope of ASC 606 at contract inception, the Company reviews the contract to determine which performance obligations the Company must deliver and which of these performance obligations are distinct. The Company recognizes as revenues the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied or as it is satisfied. Generally, the Company’s performance obligations are transferred to customers at a point in time, typically upon delivery or service being rendered.
For all reporting periods, the Company has not disclosed the value of unsatisfied performance obligations for all product revenue contracts with an original expected length of one year or less, which is an optional exemption that is permitted under the adopted rules.
| (i) | Foreign Currency Translation |
The Company’s reporting currency is the U.S. dollar and the functional currency is the Chinese Renminbi (“RMB”). All assets and liabilities are translated at exchange rates at the balance sheet date and revenue and expenses are translated at the average yearly exchange rates and equity is translated at historical exchange rates. Any translation adjustments resulting are not included in determining net income but are included in foreign exchange adjustment to other comprehensive income, a component of equity.
F-10
Transactions in currencies other than the functional currencies during the year are converted into the applicable functional currencies at the applicable rates of exchange prevailing at the dates of the transactions. Exchange gains and losses are recognized in the statements of operations.
The exchange rates utilized as follows:
| 2020 | ||||
| Year-end RMB exchange rate | 6.53 | |||
| Annual average RMB exchange rate | 6.90 | |||
No representation is made that the RMB amounts could have been, or could be, converted into U.S. dollars at the rates used in translation.
| (j) | Foreign Currency Risk |
The RMB is not a freely convertible currency. The State Administration for Foreign Exchange, under the authority of the People’s Bank of China, controls the conversion of the RMB into other currencies. The value of the RMB is subject to changes in central government policies and to international economic and political developments affecting supply and demand in the China Foreign Exchange Trading System market. All the Company’s cash and cash equivalents are in RMB.
| (k) | Fair Value |
Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when valuing the asset or liability. Authoritative literature provides a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The level in the hierarchy within which the fair value measurement in its entirety falls is based upon the lowest level of input that is significant to the fair value measurement as follows:
Level 1
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices included within Level 1 that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
F-11
Level 3
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
| (l) | Fair Value of financial instruments |
The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivables, accounts payable, other payables and advance from customers. The carrying amounts of these balances approximate their fair values due to the short-term maturities of these instruments.
| (m) | Income Taxes |
Income tax expense comprises current and deferred taxation and is recognized in profit or loss except to the extent that it relates to items recognized directly in other comprehensive income or equity, in which case it is recognized directly in other comprehensive income or equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable with respect to previous periods.
The Company accounts for income taxes using the asset and liability approach. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax basis of assets and liabilities, net of operating loss carry forwards and credits, by applying enacted tax rates that will be in effect for the period in which the differences are expected to reverse. The effect on deferred taxes of a change in tax rates is recognized in the statements of operations in the period of change.
The Company accounts for uncertain tax positions by reporting a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. Tax benefits are recognized from uncertain tax positions when the Company believes that it is more likely than not that the tax position will be sustained on examination by the tax authorities based on the technical merits of the position. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expenses.
| (n) | Comprehensive income |
Comprehensive income includes net income and foreign currency translation adjustments. Comprehensive income is reported in the statements of comprehensive income.
| (o) | Concentration of credit risk |
Financial instruments that potentially expose the Company to significant concentration of credit risk consist primarily of cash and cash equivalents and accounts receivables. As of December 31, 2020, substantially all of the Company’s cash and cash equivalents were deposited with financial institutions with high-credit ratings and quality. The Company did not have any customers constituting 10% or more of the net revenues in the year of 2020.
| (p) | Recent accounting pronouncements |
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments.” This pronouncement, along with subsequent ASUs issued to clarify provisions of ASU 2016-13, changes the impairment model for most financial assets and will require the use of an “expected loss” model for instruments measured at amortized cost. Under this model, entities will be required to estimate the lifetime expected credit loss on such instruments and record an allowance to offset the amortized cost basis of the financial asset, resulting in a net presentation of the amount expected to be collected on the financial asset. In developing the estimate for lifetime expected credit loss, entities must incorporate historical experience, current conditions, and reasonable and supportable forecasts. This pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019. On November 19, 2019, the FASB issued ASU No. 2019-10, Financial Instruments—Credit Losses (Topic 326), finalized various effective date delays for private companies, not-for-profit organizations, and certain smaller reporting companies applying the credit losses (CECL). The revised effective date is January 2023.
F-12
In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistency among reporting entities. ASU 2019-12 is effective for fiscal years beginning after December 15, 2021. Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The Company is currently evaluating the impacts of the provisions of ASU 2019-12 on its financial condition, results of operations, and cash flows.
| 3. | REVENUE |
| Revenue | 2020 | |||
| Company sales | $ | 204,850 | ||
| Franchise fees and income | 315,572 | |||
| Revenues from transactions with franchisees | 1,340,617 | |||
| $ | 1,861,039 | |||
| Contract liabilities | 2020 | |||
| Deferred revenue related to prepaid wine products | $ | 24,787 | ||
| Deferred revenue related to upfront franchise fees | 164,783 | |||
| $ | 189,570 | |||
Contract liabilities primarily consist of deferred revenue related to prepaid wine products and upfront franchise fees. Deferred revenue related to prepaid wine products represents advance from franchisees for future supply of products which is expected to recognize as revenue in the next 12 months. Deferred revenue related to upfront franchise fees represents the training service to be delivered over the term of franchise agreement that the Company expects to recognize as revenue of $70,529 within the next 12 months and of $94,254 over 12 months.
The Company has elected, as a practical expedient, not to disclose the value of remaining performance obligations associated with the franchise agreement in exchange for franchise right and related training services. The remaining duration of the performance obligation is the remaining contractual term of each franchise agreement. Revenue from training services provided to franchisees is recognized upon the conduct and delivery of training.
F-13
| 4. | PROPERTY, PLANT AND EQUIPMENT, NET |
| 2020 | ||||
| Equipment | 4,059 | |||
| Computer equipment and software | 3,446 | |||
| Motor vehicle | 368,991 | |||
| $ | 376,496 | |||
| Less: accumulated depreciation | (36,210 | ) | ||
| $ | 340,286 | |||
Depreciation expense for the year ended December 31, 2020 was $34,270.
| 5. | ACCOUNTS PAYABLE, OTHER PAYABLES AND ACCRUALS |
| 2020 | ||||
| Accounts payable | $ | 77,332 | ||
| Accrued payroll and welfare payable | 25,783 | |||
| VAT and other taxes payable | 36,069 | |||
| $ | 61,852 | |||
| 6. | INCOME TAXES |
| (a) | Enterprise Income Tax (“EIT”) |
The Company is governed by the Enterprise Income Tax laws of the PRC. The PRC statutory tax rate is 25%.
The reconciliation of income taxes computed at the PRC statutory tax rate applicable to the PRC, to income tax expense is as follows:
| 2020 | ||||
| Income before tax | $ | 796,795 | ||
| Tax benefit calculated at statutory tax rate | 25 | % | ||
| Computed expected benefits | 199,199 | |||
| Others | 329 | |||
| $ | 199,528 | |||
The Company has no material deferred tax assets or liabilities as of December 31, 2020.
| (b) | Value Added Tax (“VAT”) |
In accordance with the relevant taxation laws in the PRC, the normal VAT rate for domestic sales is 3% and the Company was eligible for VAT concession to reduce the rate to 1%, which is levied on the invoiced value of sales and is payable by the purchaser. The Company is required to remit the VAT it collects to the relevant tax authority.
F-14
| 7. | RELATED PARTIES TRANSACTIONS |
The Company had the following balances with related parties:
| (a) | Amount due from related parties |
| Relationship | 2020 | |||||
| Zhu Hong | Shareholder of the Company | 587,430 | ||||
| Shenzhen Wei Lian Jin Meng Electronic Commerce Limited | Zhu Hong is the shareholder of its holding company | 23,634 | ||||
| Total | $ | 611,064 | ||||
Amount due from related parties represents cash advance to the related parties. The balances are unsecured, non-interest bearing and repayable on demand. Balance with Ms. Zhu Hong amounting to $582,054 (RMB3,800,000) represents advance for deposits paid to suppliers and the balance amount to $5,377 (RMB35,103) represents advance for miscellaneous business operations expenses. The balance with Ms. Zhu Hong relating to advance for deposits to suppliers was reclassed to advances to suppliers in January 2021 subsequent to the signing of secured supplies agreements with the three suppliers as disclosed in Subsequent Events note.
| (b) | Amount due to related parties |
| Relationship | 2020 | |||||
| Shenzhen Weilian Jin Meng Culture Spreading Limited | Zhu Hong is the shareholder | 22,976 | ||||
| Shenzhen Nainiang Coffee Art Museum Limited | Zhu Hong is the shareholder of its holding company | 12,866 | ||||
| Total | $ | 35,842 | ||||
The balances represent cash advances to related parties. The balances are unsecured, non-interest bearing and repayable on demand.
| (c) | Transactions |
| Cash advance to related parties for business operations | 2020 | |||
| Zhu Hong | 592,185 | |||
| Shenzhen Wei Lian Jin Meng Electronic Commerce Limited | 66,683 | |||
| Total | $ | 658,868 | ||
| Cash repayment from related parties | 2020 | |||
| Zhu Hong | 36,241 | |||
| Shenzhen Wei Lian Jin Meng Electronic Commerce Limited | 44,315 | |||
| Total | $ | 80,556 | ||
| Cash advance from related parties | 2020 | |||
| Shenzhen Weilian Jin Meng Culture Spreading Limited | 12,177 | |||
| Shenzhen Nainiang Coffee Art Museum Limited | 72,481 | |||
| Total | $ | 84,658 | ||
| Cash repayment to related parties for business operations | 2020 | |||
| Shenzhen Nainiang Coffee Art Museum Limited | 50,737 | |||
| Total | $ | 50,737 | ||
F-15
| 8. | RESERVES |
| (a) | Legal reserve |
Pursuant to the laws applicable to the PRC’s Foreign Investment Enterprises, the Company must make appropriations from after-tax profit to non-distributable reserve funds. Subject to certain cumulative limits, the general reserve requires annual appropriations of 10% of after-tax profits as determined under the PRC laws and regulations at each year-end until the balance reaches 50% of the PRC entity registered capital; the other reserve appropriations are at the Company’s discretion. These reserves can only be used for specific purposes of enterprise expansion and are not distributable as cash dividends. At December 31, 2020, the paid-up statutory reserve was $94,664.
| (b) | Currency translation reserve |
The currency translation reserve represents translation differences arising from translation of foreign currency financial statements into the Company’s reporting currency.
| 9. | SUBSEQUENT EVENTS |
In January 2021, the Company signed the secured supplies agreements with three suppliers respectively, which the Company agreed to pay the refundable deposits in aggregate of approximately $8.6 million (RMB56,000,000) to the suppliers in exchange for the timely and sufficient supplies of products.
F-16
Exhibit 99.2
SHENZHEN NAINIANG WINE INDUSTRIAL CO., LTD.
CONDENSED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED
JUNE 30, 2021 AND 2020 (UNAUDITED)
SHENZHEN NAINIANG WINE INDUSTRIAL CO., LTD.
TABLE OF CONTENTS
F-1
SHENZHEN NAINIANG WINE INDUSTRIAL CO., LTD.
CONDENSED BALANCE SHEETS
(In U.S. Dollars, except share data or otherwise stated)
AS OF JUNE 30, 2021 (UNAUDITED) AND
DECEMBER 31, 2020 (Audited)
| June 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| US$ | US$ | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | 320,022 | 2,191 | ||||||
| Accounts receivables | 1,553,582 | 212,664 | ||||||
| Advance to suppliers | 8,634,009 | - | ||||||
| Inventory | 4,598,540 | - | ||||||
| Amount due from related parties | 39,374 | 611,064 | ||||||
| Total current assets | 15,145,527 | 825,919 | ||||||
| Non-current assets: | ||||||||
| Property, plant and equipment, net | 298,742 | 340,286 | ||||||
| Total non-current assets | 298,742 | 340,286 | ||||||
| Total assets | 15,444,269 | 1,166,205 | ||||||
| LIABILITIES AND EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | 343,518 | 77,332 | ||||||
| Income tax payables | 2,048,803 | 170,516 | ||||||
| Other payables and accruals | 243,018 | 61,852 | ||||||
| Deferred revenue | 277,854 | 95,316 | ||||||
| Amount due to related parties | 32,862 | 35,842 | ||||||
| Total current liabilities | 2,946,055 | 440,858 | ||||||
| Non-current liabilities: | ||||||||
| Deferred revenue | 129,899 | 94,254 | ||||||
| Total non-current liabilities | 129,899 | 94,254 | ||||||
| Total liabilities | 3,075,954 | 535,112 | ||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| EQUITY | ||||||||
| Share capital (Registered capital of RMB50,000,000, of which nil was paid up as of June 30, 2021 and December 31, 2020) | - | - | ||||||
| Foreign currency translation reserves | 64,799 | 33,826 | ||||||
| Statutory reserves | 94,664 | 94,664 | ||||||
| Retained earnings | 12,208,852 | 502,603 | ||||||
| Total equity | 12,368,315 | 631,093 | ||||||
| Total liabilities and equity | 15,444,269 | 1,166,205 | ||||||
The accompanying notes are an integral part of the condensed financial statements.
F-2
SHENZHEN NAINIANG WINE INDUSTRIAL CO., LTD.
CONDENSED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(In U.S. Dollars, except share data or otherwise stated)
FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020 (Unaudited)
| 2021 | 2020 | |||||||
| US$ | US$ | |||||||
| Revenue | 25,683,136 | 320,698 | ||||||
| Cost of revenue | (9,765,823 | ) | (72,798 | ) | ||||
| Gross profit | 15,917,313 | 247,900 | ||||||
| Selling and marketing expenses | (231,051 | ) | (29,095 | ) | ||||
| General and administrative expense | (80,627 | ) | (7,599 | ) | ||||
| Total operating expenses | (311,678 | ) | (36,694 | ) | ||||
| Income from operations | 15,605,635 | 211,206 | ||||||
| Other income, net | 2,697 | 3,253 | ||||||
| Income before income tax | 15,608,332 | 214,459 | ||||||
| Income taxes | (3,902,083 | ) | (53,615 | ) | ||||
| Net income for the year | 11,706,249 | 160,844 | ||||||
| Foreign currency translation differences | 30,973 | (745 | ) | |||||
| Total comprehensive income for the year | 11,737,222 | 160,099 | ||||||
The accompanying notes are an integral part of the condensed financial statements.
F-3
SHENZHEN NAINIANG WINE INDUSTRIAL CO., LTD.
CONDENSED STATEMENTS OF CHANGES IN EQUITY
(In U.S. Dollars, except share data or otherwise stated)
FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2021 (Unaudited)
| Retained earnings | ||||||||||||||||||||
| Share Capital | Foreign Currency Translation Reserve | Unrestricted | Statutory Reserve | Total Equity | ||||||||||||||||
| US$ | US$ | US$ | US$ | US$ | ||||||||||||||||
| Balance at (i) January 14, 2020 | - | - | - | - | - | |||||||||||||||
| Net income for the period | - | - | 160,844 | - | 160,844 | |||||||||||||||
| Other comprehensive income | - | (745 | ) | - | - | (745 | ) | |||||||||||||
| Balance at June 30, 2020 | - | (745 | ) | 160,844 | - | 160,099 | ||||||||||||||
| (i) | Shenzhen Nainiang Wine Industrial Co., Ltd. was incorporated on January 14, 2020. |
| Retained earnings | ||||||||||||||||||||
| Share Capital |
Foreign Currency Translation Reserve |
Unrestricted | Statutory Reserve |
Total Equity | ||||||||||||||||
| US$ | US$ | US$ | US$ | US$ | ||||||||||||||||
| Balance at January 1, 2021 | - | 33,826 | 502,603 | 94,664 | 631,093 | |||||||||||||||
| Net income for the period | - | - | 11,706,249 | - | 11,706,249 | |||||||||||||||
| Other comprehensive income | - | 30,973 | - | - | 30,973 | |||||||||||||||
| Balance at June 30, 2021 | - | 64,799 | 12,208,852 | 94,664 | 12,368,315 | |||||||||||||||
The accompanying notes are an integral part of the condensed financial statements.
F-4
SHENZHEN NAINIANG WINE INDUSTRIAL CO., LTD.
CONDENSED STATEMENTS OF CASH FLOWS
(In U.S. Dollars, except share data or otherwise stated)
FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020 (Unaudited)
| 2021 | 2020 | |||||||
| US$ | US$ | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | 11,706,249 | 160,844 | ||||||
| Adjustments for: | ||||||||
| Depreciation and amortization | 45,141 | 5,386 | ||||||
| Changes in: | ||||||||
| Accounts receivables | (1,335,858 | ) | (22,311 | ) | ||||
| Advance to suppliers | (8,023,669 | ) | - | |||||
| Inventory | (4,589,081 | ) | - | |||||
| Accounts payable | 264,800 | 38,474 | ||||||
| Income tax payables | 1,872,577 | 53,097 | ||||||
| Other payables and accruals | 180,124 | 8,328 | ||||||
| Deferred revenue | 215,683 | - | ||||||
| Amount due from related parties | (18,813 | ) | (19,610 | ) | ||||
| Net cash provided by operating activities | 317,153 | 224,208 | ||||||
| Cash flows from investing activities: | ||||||||
| Additions to property, plant and equipment | - | (132,105 | ) | |||||
| Cash used in investing activities | - | (132,105 | ) | |||||
| Effect of exchange rate changes on cash and cash equivalents | 678 | (426 | ) | |||||
| Net increase in cash and cash equivalents | 317,831 | 91,677 | ||||||
| Cash and cash equivalents at the beginning of period | 2,191 | - | ||||||
| Cash and cash equivalents at the end of the period | 320,022 | 91,677 | ||||||
| Supplemental cash flow information: | ||||||||
| Income taxes paid, net | 2,029,506 | 518 | ||||||
The accompanying notes are an integral part of the condensed financial statements.
F-5
SHENZHEN NAINIANG WINE INDUSTRIAL CO., LTD.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020 (Unaudited)
| 1. | DESCRIPTION OF BUSINESS |
Shenzhen Nainiang Wine Industrial Co. Ltd. (“Nainiang Wine” or the “Company”) was incorporated in the People’s Republic of China (“PRC”) on January 14, 2020 with registered capital of Renminbi (“RMB”) 50,000,000 (approximately $7,221,100). The paid-in capital was nil.
The principal activities of the Company is trading of wine products and providing pre-opening assistance to retail partners to operate wine stores in the People’s Public of China (“PRC” or “China”).
On June 2, 2021, Fountain Healthy Aging, Inc. (“FHAI”) and FHAI’s subsidiary Shenzhen Wei Lian Jin Meng Electronic Commerce Limited entered into an equity transfer agreement with the Ms. Zhu Hong, who is the majority shareholder of FHAI and the sole owner of Shenzhen Nainiang Wine Industrial Co. Ltd. directly and indirectly, under which the FHAI group agreed to acquire 99% ownership of Shenzhen Nainiang Wine Industrial Co. Ltd.. The condensed financial statements included herein present the financial condition, results of operations and cash flows of Nainiang Wine for the year ended December 31, 2020.
FHAI agreed to issue 9,281,577 number of ordinary shares in exchange for 99% ownership of Nainiang Wine, and the shares is scheduled to be issued in the third quarter of 2021. FHAI does not account for the remaining 1% non-controlling interest held by Ms. Zhu Hong as Ms. Zhu Hong is the common controlling shareholder for both the acquirer and the acquiree.
The operational control of Nainiang Wine passed to FHAI and all assets of Nainiang Wine were acquired by FHAI effective June 3, 2021.
| 2. | BASIS OF PRESENTATION |
The Company uses the same accounting policies in preparing interim and annual financial statements. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted. These unaudited condensed financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto for the year ended December 31, 2020.
| 3. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
| (a) | Economic and Political Risks |
The Company’s operations are conducted in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC economy.
The Company’s operations in the PRC are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange. The Company’s results may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation.
| (b) | Use of estimates |
The preparation of condensed financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, related disclosures of contingent liabilities at the balance sheet date, and revenue and expenses in the condensed financial statements and accompanying notes. Significant accounting estimates reflected in the Company’s condensed financial statements include economic lives and impairment of property, plant and equipment and allowance for doubtful accounts and etc.. Actual results could differ from those estimates and such differences could affect the results of operations reported in future periods.
There is no change on the accounting policies from the year ended December 31, 2020.
F-6
| (c) | Accounts receivables |
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of accounts receivable. The Company assesses the probability of collection from each customer at the outset of the arrangement based on a number of factors, including the customer’s payment history and its current creditworthiness. If in management’s judgment collection is not probable, the Company does not record revenue until the uncertainty is removed.
Management performs ongoing credit evaluations, and the Company maintains an allowance for potential credit losses based upon its loss history and its aging analysis. The allowance for doubtful accounts is the Company’s best estimate of the amount of credit losses in existing accounts receivable. Management reviews the allowance for doubtful accounts each reporting period based on a detailed analysis of trade receivables. In the analysis, management primarily considers the age of the customer’s receivable, and also considers the creditworthiness of the customer, the economic conditions of the customer’s industry, general economic conditions and trends, and the business relationship and history with its customers, among other factors. If any of these factors change, the Company may also change its original estimates, which could impact the level of the Company’s future allowance for doubtful accounts. If judgments regarding the collectability of receivables were incorrect, adjustments to the allowance may be required, which would reduce profitability.
Accounts receivable are recognized and carried at the original invoice amount less an allowance for any uncollectible amounts. An estimate for doubtful accounts receivable is made when collection of the full amount is no longer probable. Bad debts are written off as incurred. No allowance for doubtful accounts was made for the six months ended June 30, 2021 and 2020.
The following customers had an accounts receivable balance greater than 10% of total accounts receivable at June 30, 2021.
| As of June 30, 2021 | Amount | % | ||||||
| Customer A | 749,902 | 48 | % | |||||
| Customer B | 546,379 | 35 | % | |||||
| Customer C | 183,503 | 12 | % | |||||
| 1,479,784 | 95 | % | ||||||
| As of December 31, 2020 | Amount | % | ||||||
| Customer A | 108,415 | 51 | % | |||||
| Customer B | 104,249 | 49 | % | |||||
| 212,664 | 100 | % | ||||||
| (d) | Advance to suppliers |
Advance to suppliers relate to refundable deposits paid to suppliers under secured supplies agreements in exchange for timely and sufficient supplies of products.
| (e) | Inventories |
Inventory is stated at the lower of cost or net realizable value, cost being determined on a weighted average cost basis, and market being determined as the lower of cost or net realizable value. The Company records write-downs of inventory that is obsolete or in excess of anticipated demand or market value based on consideration of product lifecycle stage, technology trends, product development plans and assumptions about future demand and market conditions. Actual demand may differ from forecasted demand, and such differences may have a material effect on recorded inventory values. Inventory write-downs are charged to cost of revenue and establish a new cost basis for the inventory. No inventory write down was made for the six months ended June 30, 2021 and 2020.
F-7
| (f) | Recent accounting pronouncements |
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments.” This pronouncement, along with subsequent ASUs issued to clarify provisions of ASU 2016-13, changes the impairment model for most financial assets and will require the use of an “expected loss” model for instruments measured at amortized cost. Under this model, entities will be required to estimate the lifetime expected credit loss on such instruments and record an allowance to offset the amortized cost basis of the financial asset, resulting in a net presentation of the amount expected to be collected on the financial asset. In developing the estimate for lifetime expected credit loss, entities must incorporate historical experience, current conditions, and reasonable and supportable forecasts. This pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019. On November 19, 2019, the FASB issued ASU No. 2019-10, Financial Instruments—Credit Losses (Topic 326), finalized various effective date delays for private companies, not-for-profit organizations, and certain smaller reporting companies applying the credit losses (CECL), the revised effective date is January 2023.
In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistency among reporting entities. ASU 2019-12 is effective for fiscal years beginning after December 15, 2021. Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The Company is currently evaluating the impacts of the provisions of ASU 2019-12 on its financial condition, results of operations, and cash flows.
| (g) | Foreign Currency Translation |
The Company’s reporting currency is the U.S. dollar and the functional currency is the Chinese Renminbi (“RMB”). All assets and liabilities are translated at exchange rates at the balance sheet date and revenue and expenses are translated at the average yearly exchange rates and equity is translated at historical exchange rates. Any translation adjustments resulting are not included in determining net income but are included in foreign exchange adjustment to other comprehensive income, a component of equity.
Transactions in currencies other than the functional currencies during the year are converted into the applicable functional currencies at the applicable rates of exchange prevailing at the dates of the transactions. Exchange gains and losses are recognized in the statements of operations.
| (h) | Concentration of credit risk |
Financial instruments that potentially expose the Company to significant concentration of credit risk consist primarily of cash and cash equivalents and accounts receivables. As of June 30, 2021, substantially all of the Company’s cash and cash equivalents were deposited with financial institutions with high-credit ratings and quality. The Company did not have any customers constituting 10% or more of the net revenues in the six-month periods ended June 30, 2021 and 2020.
F-8
| 4. | REVENUE |
| Revenue | For the Six months ended June 30, | |||||||
| 2021 | 2020 | |||||||
| Company sales | $ | 1,462,119 | $ | 22,311 | ||||
| Franchise fees and income | 181,195 | 117,083 | ||||||
| Revenues from transactions with franchisees | 24,039,822 | 181,304 | ||||||
| $ | 25,683,136 | $ | 320,698 | |||||
| As of June 30, | As of December 31, | |||||||
| Contract liabilities | 2021 | 2020 | ||||||
| Deferred revenue related to prepaid wine products | $ | 163,408 | $ | 24,787 | ||||
| Deferred revenue related to upfront franchise fees | 244,345 | 164,783 | ||||||
| $ | 407,753 | $ | 189,570 | |||||
Contract liabilities primarily consist of deferred revenue related to prepaid wine products and upfront franchise fees. Deferred revenue related to prepaid wine products represents advance from franchisees for future supply of products which is expected to recognize as revenue in the next 12 months. Deferred revenue related to upfront franchise fees represents the training service to be delivered over the term of franchise agreement that as of June 30, 2021, the Company expects to recognize as revenue of $114,446 within the next 12 months and of $129,899 over 12 months.
The Company has elected, as a practical expedient, not to disclose the value of remaining performance obligations associated with the franchise agreement in exchange for franchise right and related training services. The remaining duration of the performance obligation is the remaining contractual term of each franchise agreement. Revenue from training services provided to franchisees is recognized upon the conduct and delivery of training.
F-9
| 5. | PROPERTY, PLANT AND EQUIPMENT, NET |
| As of June 30, | As of December 31, | |||||||
| 2021 | 2020 | |||||||
| Equipment | 4,103 | 4,059 | ||||||
| Computer equipment and software | 3,484 | 3,446 | ||||||
| Motor vehicle | 372,993 | 368,991 | ||||||
| $ | 380,580 | $ | 376,496 | |||||
| Less: accumulated depreciation | (81,838 | ) | (36,210 | ) | ||||
| $ | 298,742 | $ | 340,286 | |||||
Depreciation expense for the six months ended June 30 2021 and 2020 were $45,141 and $5,386, respectively.
| 6. | ACCOUNTS PAYABLE, OTHER PAYABLES AND ACCRUALS |
| As of June 30, | As of December 31, | |||||||
| 2021 | 2020 | |||||||
| Accounts payable | $ | 343,518 | $ | 77,332 | ||||
| Accrued payroll and welfare payable | 28,356 | 25,783 | ||||||
| VAT and other taxes payable | 214,662 | 36,069 | ||||||
| $ | 243,018 | $ | 61,852 | |||||
| 7. | INCOME TAXES |
(a) Enterprise Income Tax (“EIT”)
The Company is governed by the Enterprise Income Tax laws of the PRC. The PRC statutory tax rate is 25%.
The reconciliation of income taxes for the six months ended June 30, 2021 and 2020 computed at the PRC statutory tax rate applicable to the PRC, to income tax expense is as follows:
| For the six months ended June 30, | ||||||||
| 2021 | 2020 | |||||||
| Income before tax | $ | 15,608,332 | $ | 214,459 | ||||
| Tax benefit calculated at statutory tax rate | 25 | % | 25 | % | ||||
| Computed expected benefits | $ | 3,902,083 | $ | 53,615 | ||||
The Company has no material deferred tax assets or liabilities as of June 30, 2021.
(b) Value Added Tax (“VAT”)
In accordance with the relevant taxation laws in the PRC, the normal VAT rate for domestic sales is 3% and the Company was eligible for VAT concession to reduce the rate to 1%, which is levied on the invoiced value of sales and is payable by the purchaser. The Company is required to remit the VAT it collects to the relevant tax authority.
F-10
| 8. | RELATED PARTIES TRANSACTIONS |
As of June 30, 2021, the Company had the following balances with related parties:
| (a) | Amount due from related parties |
| As of June 30, | As of December 31, | |||||||||
| Relationship | 2021 | 2020 | ||||||||
| Zhu Hong | Shareholder of the Company | $ | - | $ | 587,430 | |||||
| Shenzhen Wei Lian Jin Meng Electronic Commerce Limited | Zhu Hong is the shareholder of its holding company | 39,374 | 23,634 | |||||||
| Total | $ | 39,374 | $ | 611,064 | ||||||
Amount due from related parties represents cash advance to the related parties. The balances are unsecured, non-interest bearing and repayable on demand.
| (b) | Amount due to related parties |
| As of June 30, | As of December 31, | |||||||||
| Relationship | 2021 | 2020 | ||||||||
| Shenzhen Weilian Jin Meng Culture Spreading Limited | Zhu Hong is the shareholder | $ | 23,225 | $ | 22,976 | |||||
| Shenzhen Nainiang Coffee Art Museum Limited | Zhu Hong is the shareholder of its holding company | 9,637 | 12,866 | |||||||
| Total | $ | 32,862 | $ | 35,842 | ||||||
The balances represent cash advances to related parties. The balances are unsecured, non-interest bearing and repayable on demand.
| 9. | RESERVES |
| (a) | Legal reserve |
Pursuant to the laws applicable to the PRC’s Foreign Investment Enterprises, the Company must make appropriations from after-tax profit to non-distributable reserve funds. Subject to certain cumulative limits, the general reserve requires annual appropriations of 10% of after-tax profits as determined under the PRC laws and regulations at each year-end until the balance reaches 50% of the PRC entity registered capital; the other reserve appropriations are at the Company’s discretion. These reserves can only be used for specific purposes of enterprise expansion and are not distributable as cash dividends. At June 30, 2021, the paid-up statutory reserve was $94,664.
| (b) | Currency translation reserve |
The currency translation reserve represents translation differences arising from translation of foreign currency financial statements into the Company’s reporting currency.
| 10. | SUBSEQUENT EVENTS |
No significant subsequent events have occurred that would require recognition or disclosure in the condensed financial statements.
F-11
Exhibit 99.3
FOUNTAIN HEALTHY AGING, INC.
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2020
On June 2, 2021, Fountain Healthy Aging, Inc. (“FHAI”) and FHAI’s subsidiary Shenzhen Wei Lian Jin Meng Electronic Commerce Limited entered into an equity transfer agreement with the Ms. Zhu Hong, who is the majority shareholder of FHAI and the sole owner of Shenzhen Nainiang Wine Industrial Co. Ltd. (“Nainiang Wine”) directly and indirectly, under which the FHAI group agreed to acquire 99% ownership of Shenzhen Nainiang Wine Industrial Co. Ltd.. The financial statements included herein present the financial position, results of operations and cash flows of Nainiang Wine for the year ended December 31, 2020.
FHAI agreed to issue 9,281,577 ordinary shares in exchange for 99% ownership of Nainiang Wine, and the shares is scheduled to be issued in the third quarter of 2021.
The operational control of Nainiang Wine passed to FHAI and all assets of Nainiang Wine were acquired by FHAI effective June 3, 2021. FHAI does not account for the remaining 1% non-controlling interest held by Ms. Zhu Hong as Ms. Zhu Hong is the common controlling shareholder for both the acquirer and the acquiree.
There were no significant accounting policy differences or other items which required adjustment in the accompanying unaudited pro forma combined financial statements.
The accompanying unaudited pro forma combined balance sheet gives effect to the acquisition as if it had been consummated on December 31, 2020. The accompanying unaudited pro forma combined statements of income for the year ended December 31, 2020, give effect to the acquisition as if it had been consummated on January 1, 2020.
The unaudited pro forma combined financial statements should be read in conjunction with the historical financial statements of Nainiang Wine (included herein) as well as those of FHAI. The unaudited pro forma combined financial statements do not purport to be indicative of the financial position or results of operations that would have actually been obtained had such transactions been completed as of the assumed dates and for the periods presented, or which may be obtained in the future. The pro forma adjustments are described in the accompanying notes and are based upon available information and certain assumptions that FHAI believes are reasonable.
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FOUNTAIN HEALTHY AGING, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF DECEMBER 31, 2020
| FHAI | Nainiang Wine | Pro Forma Adjustments | Notes | Pro Forma | ||||||||||||||
| ASSETS | ||||||||||||||||||
| Current assets: | ||||||||||||||||||
| Cash and cash equivalents | $ | 61,517 | $ | 2,191 | $ | $ | 63,708 | |||||||||||
| Accounts receivables | - | 212,664 | 212,664 | |||||||||||||||
| Other receivables | 101,432 | - | 101,432 | |||||||||||||||
| Inventory | 66,037 | - | 66,037 | |||||||||||||||
| Prepayment | 133,646 | - | 133,646 | |||||||||||||||
| Amount due from related parties | 142,450 | 611,064 | (10,768 | ) | (b) | 742,746 | ||||||||||||
| Total current assets | 505,082 | 825,919 | 1,320,233 | |||||||||||||||
| Non-current assets: | ||||||||||||||||||
| Property, plant and equipment, net | $ | 87,333 | $ | 340,286 | $ | $ | 427,619 | |||||||||||
| Operating lease right-of-use assets | 383,203 | - | 383,203 | |||||||||||||||
| Total non-current assets | 470,536 | 340,286 | 810,822 | |||||||||||||||
| Total assets | 975,618 | 1,166,205 | 2,131,055 | |||||||||||||||
| LIABILITIES AND EQUITY | ||||||||||||||||||
| Current liabilities: | ||||||||||||||||||
| Accounts payable | $ | 134,842 | $ | 77,332 | $ | $ | 212,174 | |||||||||||
| Income tax payables | 31,774 | 170,516 | 202,290 | |||||||||||||||
| Other payables and accruals | 336,604 | 61,852 | 398,456 | |||||||||||||||
| Deferred revenue | 27,648 | 95,316 | 122,964 | |||||||||||||||
| Amount due to related parties | 1,097,152 | 35,842 | (10,768 | ) | (b) | 1,122,226 | ||||||||||||
| Current operating lease liabilities | 319,697 | - | 319,697 | |||||||||||||||
| Total current liabilities | 1,947,717 | 440,858 | 2,377,807 | |||||||||||||||
| Non-current liabilities: | ||||||||||||||||||
| Deferred revenue | - | 94,254 | 94,254 | |||||||||||||||
| Non-current operating lease liabilities | 63,506 | - | 63,506 | |||||||||||||||
| Total non-current liabilities | 63,506 | 94,254 | 157,760 | |||||||||||||||
| Total liabilities | 2,011,223 | 535,112 | 2,535,567 | |||||||||||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||||||||||||
| EQUITY (DEFICIT) | ||||||||||||||||||
| Series A preferred Stock | $ | 1,000 | $ | - | $ | $ | 1,000 | |||||||||||
| Common stock | 6,000 | - | 93 | (a) | 6,093 | |||||||||||||
| Additional paid-in capital | (15,146 | ) | - | 631,000 | (a) | 615,854 | ||||||||||||
| Foreign currency translation reserves | (54,091 | ) | 33,826 | (33,826 | ) | (a) | (54,091 | ) | ||||||||||
| Statutory reserves | - | 94,664 | (94,664 | ) | (a) | - | ||||||||||||
| Retained earnings | (973,368 | ) | 502,603 | (502,603 | ) | (a) | (973,368 | ) | ||||||||||
| Total equity (deficit) | (1,035,605 | ) | 631,093 | (404,512 | ) | |||||||||||||
| Total liabilities and equity | 975,618 | 1,166,205 | 2,131,055 | |||||||||||||||
See accompanying notes to unaudited pro forma combined financial statements.
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FOUNTAIN HEALTHY AGING, INC.
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2020
| FHAI | Nainiang Wine | Pro Forma Adjustments | Notes | Pro Forma | ||||||||||||||||
| REVENUES | $ | 1,194,427 | $ | 1,861,039 | $ | $ | 3,055,466 | |||||||||||||
| COST OF REVENUES | (176,393 | ) | (864,243 | ) | (1,040,636 | ) | ||||||||||||||
| GROSS PROFIT | 1,018,034 | 996,796 | 2,014,830 | |||||||||||||||||
| Selling and marketing | (108,364 | ) | (135,778 | ) | (244,142 | ) | ||||||||||||||
| General and administrative | (1,519,552 | ) | (63,891 | ) | (1,583,443 | ) | ||||||||||||||
| Total operating expenses | (1,627,916 | ) | (199,669 | ) | (1,827,585 | ) | ||||||||||||||
| INCOME (LOSS) FROM OPERATIONS | (609,882 | ) | 797,127 | 187,245 | ||||||||||||||||
| OTHER INCOME (EXPENSES), NET | 1,705 | (332 | ) | 1,373 | ||||||||||||||||
| INCOME (LOSS) BEFRE INCOME TAXES | (608,177 | ) | 796,795 | 188,618 | ||||||||||||||||
| INCOME TAXES | (19,693 | ) | (199,528 | ) | (219,221 | ) | ||||||||||||||
| NET INCOME (LOSS) | (627,870 | ) | 597,267 | (30,603 | ) | |||||||||||||||
| Foreign currency translation difference | (58,638 | ) | 33,826 | (24,812 | ) | |||||||||||||||
| TOTAL COMPREHENSIVE INCOME (LOSS) | (686,508 | ) | 631,093 | (55,415 | ) | |||||||||||||||
| NET LOSS PER SHARE | ||||||||||||||||||||
| BASIC | $ | (0.001 | ) | $ | (0.000 | ) | ||||||||||||||
| DILUTED | $ | (0.001 | ) | $ | (0.000 | ) | ||||||||||||||
| WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING | ||||||||||||||||||||
| BASIC | 600,034,500 | 9,281,577 | 609,316,077 | |||||||||||||||||
| DILUTED | 600,034,500 | 9,281,577 | 609,316,077 | |||||||||||||||||
See accompanying notes to unaudited pro forma combined financial statements.
4
FOUNTAIN HEALTHY AGING, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
| 1. | BASIS OF PRESENTATION |
The historical consolidated financial statements have been adjusted in the pro forma combined financial statements to give effect to pro forma events that are (1) directly attributable to the business combination, (2) factually supportable and (3) with respect to the pro forma combined statements of operations, expected to have a continuing impact on the combined results following the business combination. The business combination was accounted for under common control in accordance with ASC Topic 805, Business Combinations. The pro forma combined financial statements do not necessarily reflect what the combined financial condition or results of operations would have been had the acquisition occurred on the dates indicated. They also may not be useful in predicting the future financial condition and results of operations of the combined company. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors.
| 2. | PRO FORMA ADJUSTMENTS AND ASSUMPTIONS |
The pro forma adjustments are based on management preliminary estimates and assumptions that are subject to change.
| (a) | To record the share consideration to be paid for the acquisition of 99% of the equity of Nainiang Wine. |
| (b) | To eliminate the balances between FHAI and Nainiang Wine. |
| 3. | EARNINGS PER SHARE |
The following table illustrates the calculation of pro forma earnings per share:
| Year ended December 31, 2020 | ||||
| Pro forma net loss | $ | 30,603 | ||
| Weighted-average shares outstanding: | ||||
| Pro forma shares | 609,316,077 | |||
| Earnings per share | ||||
| Basic and diluted | $ | 0.000 | ||
5